Climate change is impacting how food is grown and will change our business in the years to come. Ahold Delhaize is committed to supporting the well-being of the communities we serve and enabling a healthy, low-carbon food system that secures healthy and sustainable diets for future generations. In line with the latest climate science to limit global warming, we are committed to reducing carbon emissions across our value chain.As the pace of climate change speeds up, the next decade is critical to ensuring a healthy future. So, we need to challenge assumptions in our current food system, such as the practice of providing large quantities and a great variety of products all year round that, in turn, wastes valuable food and energy. We face the dilemma of meeting customer expectations on variety and availability of food while reducing the cost to the planet. To address this challenge, we are accelerating our actions to engage customers and incentivize them to adopt healthier and more sustainable diets, reduce climate emissions across the entire value chain, promote biodiversity and reduce waste.
In line with the latest climate science on limiting global warming, we are committed to reducing carbon emissions in our own operations and across our value chain. We believe it is imperative that we achieve decarbonization of our business and partners to enable a 1.5°C-future. In November 2021, we updated our net-zero ambition and made a public commitment to reach net-zero carbon emissions.
The updated commitment by Ahold Delhaize and the local brands is to reach net-zero carbon emissions across all operations by 2040 (scope 1 and 2) and to become net-zero businesses across the brands’ entire supply chains, products and services no later than 2050 (scope 3). We have set these updated commitments in accordance with the SBTi’s Net Zero Standard requirements.
Based on our initial assessments of available data and competitive positioning, we have focused our efforts on developing economic pathways to net zero, initially within scope 1 and 2, in which emissions come mainly from electricity and refrigeration (approximately 85%). Based on our analysis, we believe it is possible for us to reduce emissions by approximately 60% at neutral cost (over the depreciation cycle of the capital expenditure investment). However, initiatives like replacing refrigeration systems and transforming our brands’ transport fleets are more expensive and will require significant capital expenditure at an earlier stage than initially planned, based on the current replacement cycle. Some initiatives might also result in cost savings, such as the implementation of more energy-efficient equipment, leading to less electricity usage, as well as the use of renewable energy sources.
IN ORDER TO REDUCE CO2 EMISSIONS IN OUR OWN OPERATIONS, WE HAVE IDENTIFIED THE FOLLOWING ACTIONS:
We are accelerating the switch to renewable power, with a number of our brands planning to use 100% renewable electricity by 2023. This will reduce up to 100% of carbon emissions relating to electric energy consumption and be achieved through renewable energy certificates (RECs) and power purchase agreements (PPAs).
When it comes to energy efficiency, it is crucial to build and remodel stores in the most energy-efficient way. Our brands could achieve this by installing energy-efficient equipment, such as LED lights, doors on cabinets, heat recuperation, heat pumps, CO2 refrigeration systems (which not only reduce emissions, but are more energy efficient than conventional refrigerators) and improved insulation.
While our brands have already started to execute a long list of energy efficiency measures to reduce emissions from their facilities, we are not forgetting the impact of owned transportation and our ability to drive change internally. That is why our brands are converting both their light and heavy transportation fleets to zero-carbon alternatives, including battery electric vehicles (BEV); leveraging route optimization technology; and improving fill mechanism to reduce overall energy use. The costs for this will be impacted by the ratio of how our brands will make use of short-range trucks (electric) vs. long-range (hydrogen fuel cell) trucks.
Since 2021, we have also applied an internal carbon price model to investment proposals from the local brands. Going forward, we continue to fine-tune the model and further develop climate criteria for capex proposals.
We are installing natural and/or hybrid refrigeration systems (e.g., new CO2 systems) and retrofitting existing systems with more ecofriendly refrigerant alternatives. We are also working to further control and reduce refrigerant leakages from all our systems. These three actions have the potential of reducing carbon emissions from our refrigeration equipment by up to 95%.
Moving toward low-carbon distribution and logistics, our brands will further modernize the fleet and opt for ecofriendly fuels.
Converting both our light and heavy transportation fleet to zero-carbon alternatives, including battery electric vehicles (BEV), leveraging route optimization technology and improving fill mechanism to reduce overall energy use. The costs for this will be impacted by the ratio of how our brands will make use of short-range trucks (electric) vs. long-range (hydrogen fuel cell) trucks.
We have split our total scope 3 footprint into three subcategories, each of which combines several smaller emission categories: purchased goods and services (88%), use of sold products (5%) and other (7%). The “other” subcategory includes fuel- and energy-related activities, upstream transportation and distribution, waste generated in operations, business travel, employee commuting, end-of-life treatment of sold products, franchises, and investments.
As most of the greenhouse gas emissions from our value chain are embedded in the products our brands sell, engaging with suppliers to reduce their emissions is where we can have the biggest impact. The food industry is already taking action to reduce emissions, and some of the world’s largest food manufacturers within our brands’ value chains have adopted science-based emission reduction targets. With the announcement of targets for 2030, our brands are continuing the journey to engage with their key suppliers and support them in their transition to less carbon-intensive production. Our value chain decarbonization approach has three phases:
Our brands have a further opportunity to reduce scope 3 carbon emissions in agriculture, through their focus on partnering with farmers in the transition to low-carbon products. For example, Albert Heijn incentivizes sustainable change through longer term contracts including premium pricing and with concrete environmental requirements and co-investments on farms.
Customer demand for healthy, low-carbon diets, including plant-based proteins, is on the rise in many of our brands’ markets. Building on a history of product innovation, our brands continue to increase the number of low-carbon products in their assortments and, together with suppliers, bring new alternatives to the market. Our brands can help people further understand the impact of their buying decisions and make choices that fit their needs, their tastes and their values. To achieve this, our brands use technologies such as blockchain and artificial intelligence to bring customers more transparency – starting with fresh fruits and vegetables and then moving to the seafood and meat supply chains. By giving customers access to personalized information – for example, through loyalty apps or online advice – our brands empower and enable customers to make better choices.
Our brands are making efforts to further reduce emissions within the lower emitting categories, mainly in the areas of waste management and all outsourced transportation (goods and business travel). Having recycling targets for waste in operations and specific food waste reduction targets is helping them reduce the amount of disposed waste and lower emissions. Our brands are working with transportation partners to optimize logistics and switch to less emitting fuel types, decreasing emissions further.
We are currently working on a more detailed plan for scope 3, which we will share in November 2022.
Climate change is making it more difficult to farm, fish and raise livestock; it’s changing what and how we can feed ourselves – at a time when our global population is growing. Climate change will have an impact on Ahold Delhaize with the potential to disrupt our business model.
In 2020, Ahold Delhaize conducted its first global analysis – in line with TCFD recommendations – of climate-related risks and potential material impacts on our business. The TCFD provides a framework to improve the disclosure of consistent, comparable, reliable and clear climate-related financial information to help investors make better capital allocation decisions in support of the transition to a low-carbon economy. We have adopted the TCFD’s recommendations and are reporting in line with its recommendations, where possible. We took fresh products as the scope for this first assessment, given their vulnerability and relatively short supply chains, and looked at our major markets in the United States and Europe.
Leveraging existing climate modeling, we developed two climate scenarios in line with two degree and four-degree Celsius trajectories based on RCP 2.6, RCP 6, IEA Sustainable Development Scenarios, IEA NPS, Irena and message-globiom assessing political, economic, social, environmental, and technological trends.
17 vulnerabilities applicable to Ahold Delhaize were identified, including physical, regulatory, technological, market, reputational and social risks. For example, we identified a vulnerability to a changing regulatory environment in which we could see the introduction of labeling or carbon taxation. We applied a regional lens to the possible financial impact these risks could have on Ahold Delhaize.
The next steps we will take include further analyzing the results in order to more narrowly define the scope of risks and perform more detailed assessments at brand level. We will also start integrating climate risk assessments and monitoring into our business operations at brand level.