ICA Gruppen AB

Does the company agree that protein diversification is a material issue for its business? 9/9 - Pioneer ICA Gruppen publicly recognises the materiality of protein diversification for its business and has disclosed its Board-endorsed strategy to help consumers and suppliers' transition towards lower-impact protein sources. The company released in 2021 a forward-looking report in Swedish, which translates to; “Växa Together, The Consumer & Plant-Based Food 2025”. The report is based on consumer insights and discusses how to increase the consumption of local plant-based foods. This report together with its 2020 report “Food Revolution – A sustainable food system for future generations”, has formed the basis for the company's Växa (Grow) initiative, which encompasses ICA's approach to protein diversification. ICA explicitly states in its public disclosures that increasing local plant-based food consumption is one of the key focus areas supporting a transition towards a sustainable and healthy food-system. During an interview published on the company's website, the CEO discussed openly ICA's role in enabling consumers to make low-carbon food choices, for example with its food carbon footprint tracking app “My Climate Target” (Mitt klimatmål) where customers can also offset their purchases. ICA's protein diversification strategy will be reviewed annually at the Board level. During the meeting with FAIRR and investors, ICA stated that the process of setting the sustainability agenda first involved consultations with operating companies across the group, then discussions with the ICA Gruppen Management Team, and finally with the Board which was involved throughout the process and in the final approval stages. The implementation of the strategy is led by the Sustainability Committee, which includes the CEO and the Chief Corporate Responsibility Officer. Does the company plan or has carried out TCFD-linked scenario analysis? 2/9 - Reactive In its response to FAIRR and investors, the company stated it is assessing whether it will be undertaking TCFD-aligned scenario analysis. However, as part of its risk management framework, ICA Gruppen has identified climate-related regulatory and transition risks as material. The company also highlights sustainability-related reputational risks as material. Further, its internal analysis has pointed to the increase of Swedish produced plant-based offerings as the most relevant area of focus for addressing climate-related impacts.

Does the company have goals/ targets to shift to diversified protein sources? 6/9 - Proactive Sustainable sourcing: ICA Gruppen is engaging with its suppliers on sustainability topics, evidenced by its target to have 70% of its suppliers adhering to a science-based GHG emission target, as well as its supplier criteria which monitors impacts on land use, ecosystems, including biodiversity and deforestation. The company continues to highlight its strategy of sourcing and producing locally, in Sweden, in order to reduce environmental impacts and increase resilience. It is worth noting that ICA disclosed to FAIRR that within its approach in the long-term it will look to increase local supply of animal protein sources and decrease exports. We assume these initiatives cover their animal-protein suppliers, but it is unclear to what extent given there is no reported progress on its sustainable sourcing programmes for dairy, eggs, poultry, pork and beef. What is clear is that ICA is shifting its product assortment and improving production methods, aiming to reduce Scope 3 emissions. ICA Sweden (73% total revenues as of FY20) abides by the WWF seafood guide and has sustainable sourcing programs in place for some of its seafood (fish and shellfish) supply chains. Since 2020, Rimi Baltic (13% total revenues as of FY20) adheres to the Baltic Countries' fish guide prohibiting any purchase of species in the Red List. Moreover, ICA's collaboration with Swedish food-tech company, Nutrient, is developing a circular model for fish using insects as feed, which at the same time are fed with waste from potato production. The company continues to sit on the Round Table on Responsible Soy (RTRS), providing evidence on initiatives for sustainable soy sourcing. Targets: The company has made commitments to increase its customers' consumption of fruits and vegetables to 500 grams a day per person, by 2025 at latest. During the meeting with FAIRR and investors, the company indicated that it has set internal category-level sales targets for its plant-based expansion and is exploring the potential of public-facing targets. However, it is unlikely the company will publicly announce these in the short to medium-term. Nonetheless, the company has set an aggregate level target focused on reducing the average basket impact of consumers by 2030, from 1.79kg CO2e/ kg of sold food in 2020, to 0.895kg CO2e/kg of food sold in 2030. Currently, this is focused on ICA Sweden only, but it will be extended to include Rimi Baltic. This target will guide the company's innovation within plant-based and sustainability efforts at the category level. This includes decreasing its exposure to products with high climate risk, including imported meat and dairy, and switching to more locally produced protein sourced (animal and plant-based). We would encourage ICA Gruppen to consider disclosing category-level targets, specifically for high-impact categories like meat and dairy and report on progress against these in future reporting. Note: The company aligns its definition of healthy diet to the official Nordic dietary guidelines and nutritional recommendations. Does the company have Scope 3 emissions targets? 9/9 - Pioneer At the end of April 2020, ICA Gruppen released its new climate ambition which commits the company to halving the climate impacts of consumer grocery purchases by 2030. This will cover the period of 2021-2030. ICA Gruppen has an earlier target of ensuring that suppliers representing 70% of its upstream climate impact set individual science-based targets by 2025. This covers food and non-food, likely including the meat and dairy supply chains. For 2019, the company reported that 24% of suppliers had established a science-based target. The company also announced a net-zero target by 2030 that addresses its Scope 1 and 2 emissions only, in line with a 1.5 degree trajectory. Further, the company confirmed to FAIRR that it is working towards setting a Scope 3 emissions reduction targets in line with SBTi. This will be in addition to its existing supplier engagement target. We encourage the company to set a target consistent with reductions required to keep warming to 1.5°C.

Does the company demonstrate evidence of the following: (i) internal R&D, (ii) cross-sector collaboration, (iii) reformulation programmes, (iv) expanded product offerings, (v) venture investments or acquisitions? 8/18 Active R&D and internal resourcing: Given protein diversification is a core part of its efforts to reduce the climate impact of customers' food purchases in half by 2030, the company is looking to scale-up local plant-based ingredients and products by collaborating with start-ups and scientists in Sweden. The company has a dedicated innovation hub called ICAx, which was launched in 2017 and is focused on driving dialogue and scaling innovative start-ups. For example, ICA Gruppen announced a partnership with Swedish-based mycoprotein food-tech company called Mycorena to test-launch its products in-store. It has also partnered with Swedish food-tech company Nutrient to explore the use of insect protein in fish feed for artic char sold under its private label. The company is also working with RISE (Research Institute of Sweden) and the research foundation Mistra to conduct research supporting a dietary transition. Reformulation: With the purpose of promoting healthier lives, the company plans to reduce the sugar content of own-labels however, FAIRR did not find any evidence that demonstrated the company is reformulating existing products to reduce or eliminate animal-based ingredients such as dairy. Product portfolio expansion: The company has expanded its external brand offerings through its partnership with Mycorena to launch fungal-based protein products within ICA stores. In its response to FAIRR and investors, the company stated that for ICA Sweden, it increased its plant-based product assortment by 25%, and sales within the fresh and frozen category were up by 20% in 2020 compared to the previous year. The largest increase in sales was from the chilled section (35% growth in 2020). When compared to ICA Sweden's total sales growth for 2020 of high single digits (8%); the plant-based foods categories are outperforming total retail operations.

Is there a defined strategy on (i) promotions and communications, (ii) consumer interface, and (iii) labelling and product placement? 12/18 - Proactive In order to meet its commitment to halve the climate impact of consumer grocery purchases by 2030, ICA Gruppen is using a wide range of interventions focused on encouraging consumer behavioural change that support increased consumption of lower-impact protein sources. Specifically, fruit, vegetable, meat alternatives, and whole food proteins consumption. These include: • Working in collaboration with the RISE (Research Institute of Sweden) and research foundation Mistra to carry out in-depth research on how best to increase the proportion of and promote the consumption of locally sourced plant-based foods. The company stated in its meeting with FAIRR and investors that it is also working with behaviour analytics and psychological teams, to inform its consumer engagement strategy. • Driving increases in fresh seasonal produce (fruit and vegetables) through in-store 'playful' displays, signage and promotional activity. For example, marketing cauliflower as zombie brains and blue potatoes as spider torsos during the Halloween period. • Using a “Klimat” (Climate) and “Vego” (lacto-ovo) meal kit concept to promote meat-free cooking alongside organic ingredients at home. The meal kits use RISE's (Research Institutes of Sweden) climate database to calculate the carbon foot-printing of the meals being promoted and the recipes and portions are inspired by WWF's “One Planet Plate” initiative. These recipes include a strong focus on whole food proteins such as green peas, chickpeas, quinoa and seeds. • Enabling consumers to track the climate impact of their grocery purchases through the 'My Climate Target' app where consumers can track their carbon footprint on a monthly basis. The app will also make suggestions for reducing environmental impact through ingredient substitution and climate-aligned recipes (currently more than 2,000 recipes are available). ICA Gruppen indicated that consumer use is limited, and it is exploring ways to expand the number of users across all demographics. • Launched a 3-episode podcast series, spotlighting findings of its Future of Food Report to promote greater awareness and drive consumer need to accelerate a dietary transition. It is also a platform for showcasing its collaboration with local plant-based food start-ups e.g. “Peas of Heaven”. • Labelling products as smart green choices.

Tracking and measuring protein transitions 7/9 - Proactive The company has increased its disclosure on environmental metrics. In 1Q21, ICA Gruppen reported its current carbon intensity per kg of food sold (1.78 kg CO2e/kg sold food), which is a total aggregate of all food categories including meat and dairy. It also reported the average daily produce consumption (fruit and vegetable) at 357 grams per customer per day. In its written response to FAIRR and investors, the company shared sales data for ICA Sweden's plant-based offerings, which increased by 25% in 2020. Sales within fresh and frozen increased by 20%, and sales within the chilled assortment, grew faster at 35%. In its introductory message during 1Q21 earnings call Per Strömberg, CEO of the company highlighted that “the number of meat-eaters dropped from 65% last year, to 52% this year. Driven mainly by women and younger people.” Data on Scope 3 emissions linked to animal agriculture 5/9 - Active As stated in its annual report, 79% of total emissions fall within the Scope 3 emissions category which currently only includes business travel, third-party-owned ICA Sweden stores, transport between warehouses and those related to e-commerce. Emissions related to agriculture, including animal agriculture, continue to be excluded. Moreover, the company does not disclose any data to CDP. However, in its response to FAIRR and investors, the company confirmed it has a model to calculate Scope 3 emissions and uses it to track suppliers' progress towards setting individual science-based targets by 2025. ICA Gruppen expects to publish an updated Scope 3 emissions breakdown later this year, in the context of the TCFD framework.

Level of engagement with investor coalition 9/10 - Pioneer ICA Gruppen responded to the investor letter, agreed to a dialogue with investors and met with the coalition. The company acknowledged the final FAIRR assessment however did not provide feedback, context nor reflection on the company's perspective on the engagement process and its value.