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Ahold Responsible Retailing: good story, but data poses a challenge

By Nick de Ruiter (Sustainalize) on July 12, 2013 at 11:04am.
Company:

Ahold is an international retailing group based in the Netherlands with strong local consumer brands in Europe and the United States. Ahold operates its businesses from two continental platforms: Ahold Europe and Ahold USA. Ahold Europe comprises Albert Heijn in the Netherlands, Belgium and Germany; Bol.com in the Netherlands and Belgium; Etos, Gall & Gall, and albert.nl in the Netherlands; and Albert/Hypernova in the Czech Republic and Slovakia. Ahold USA is organized into four retail divisions: Giant Carlisle, Giant Landover, Stop & Shop New England, and Stop & Shop New York Metro. The Peapod online business is also part of Ahold USA. In 2012, Ahold operated 3,704 stores, employed on average 225,000 employees, and served around 80 million customers.

Content:

Ahold has published CR/RR (responsible retailing) reports since 1999 and can be considered a very experienced and mature reporter. This is clearly reflected in this report, which looks perfect and seems transparent and complete. I especially favor the scorecard overviews, the amount of data provided and the cases included in the report.

Most of the usual topics are included. However, I personally would have liked to read more about the efforts concerning organic products and local sourcing, and about Ahold’s responsibilities during the user phase of a product (in other words: the complete value chain). If I perform a media search on Ahold and its brands, it becomes clear that the media as well as Ahold employees have voiced several concerns. Because of this, I would have liked to read how Ahold is dealing with the obvious challenge of trying to please consumers looking for bargains while still realizing its RR ambitions (which could increase the costs for consumers). A bigger issue reported on by media sources is the relationship between Albert Heijn and its suppliers. In several instances, products were taken off the shelves, or did not even make it onto the shelves, because of a conflict. Furthermore, some employees have taken the opportunity to voice their concerns on dedicated websites (perhaps in part in response to the labor strikes that occurred in March 2013). The report would be an ideal platform to reflect on these issues and to disclose the company view, or – maybe even better – to let stakeholders reflect on them. Sometimes you see some sort of dilemma sharing in a report. The above issues would lend themselves perfectly for this.

Ahold (unlike many other reporters and companies) has a clear strategy, and it is made fairly clear what its targets are, by including its achievements and the measures Ahold has taken to reach its targets. The strategic ambitions are clearly the framework Ahold reports against, which is perfect. This enables Ahold to keep the report concise and to the point, and it increases the readability of the report significantly. It is good to see that Ahold is trying to integrate CR/RR into its conventional strategy. Almost every company seems to be struggling with this aspect, and I should say Ahold is on the right track. However, I would like to highlight one minor consideration in this respect. In my opinion, it would be even better to see how the strategic pillars, the values, vision, promises and the business model are linked. Currently, the disclosed overview does not provide this information to readers. The overview states that the Responsible Retailing strategy enables growth. More information could be provided, however, on how exactly responsible retailing is enabling growth, and on how the selected topics and corresponding indicators help measure and steer the performance. Secondly, the link to megatrends such as food scarcity, water scarcity and overpopulation is touched upon, but these trends are not explicitly linked to the RR strategy. Thirdly, it is unclear to me to what extent the current strategy (and thereby the report) answers questions and concerns stakeholders may have. It is said in the report that stakeholders have been engaged for this purpose, but the outcomes of the dialogues are not disclosed. Ideally, both the strategy and the report are assessed by stakeholders, resulting in a so-called materiality matrix. A materiality matrix would plot the importance of topics to stakeholders and to Ahold, resulting in a list of topics that should be included both in the strategy and in the report.

The report is rich in quantitative information, and the use of scorecards and dedicated chapters makes it easy to determine the performance. The scope of the information provided, however, varies greatly; more on this can be found in the ‘Credibility’ section. Furthermore, Ahold is quite transparent, providing all the data, even if targets have not been met. Most, but not all, of the trends are explained.

Communication:

Both the website and the report are perfectly designed for easy navigation. The report has links throughout the text, and navigation buttons are included at the top of the page. In addition, the download center on the ‘A year in review’ website offers the possibility to download just the performance data, which I regard a big plus. The design of the report is nice, with a different color per topic and including enough visuals, such as tables and diagrams. The scorecards in the beginning of the report are a good way to provide a quick overview of the performance per material topic. Mainly due to these scorecards and the chapters being organized per topic, the report reads as a true progress report. A progress report that lets its readers determine whether Ahold is fulfilling its strategic ambitions. It is a big plus that Ahold reports in line with Global Compact and GRI at application level B+. I would never advise companies to increase the application level to A+ for no particular reason, as an A+ report is not necessarily better than a B+ report (only bigger). Another reason not to strive for an A+ report is that the new G4 guidelines do not use different levels of application. The hyperlinks included in the GRI-table are again helpful in the navigation. Ahold claims that the report was drafted in accordance with GRI 3.0, but I suspect that actually version 3.1 was used (just a minor difference, however).

The improvements I would like to suggest are relatively small. For instance, I would like to note that not all definitions or criteria are disclosed. Regarding the healthy products, for instance, it is currently unclear what would be regarded a ‘healthy product’ (and therefore which products are deemed to be less healthy). A solution could be to refer to the relevant information in the report through hyperlinks and/or QR-codes. Another observation is that the report is not integrated yet. Nowadays, more and more sustainability reports are being integrated with the annual report. Integration would do more than merely combine the two reports; it would mean that Ahold reports, in an integrated manner, all financial and non-financial information stakeholders require in order to understand to what extent Ahold is fulfilling its strategic ambitions. I would say that Ahold’s strategic ambitions are perfectly suited to be reported upon in an integrated manner (disclosing both financial and non-financial information). Another observation is that there does not seem to be a Dutch version of the report. As many of the stakeholders are Dutch (Albert Heijn customers and employees, for instance), I would expect a Dutch version to be published. I know that Albert Heijn (its Dutch operations) publishes its own reports, but perhaps stakeholders are also interested in the listed parent company.

Credibility:

To make the report more credible, it is essential to have some sort of external assurance provided by a dedicated expert and/or an accountant. Ahold has decided to engage Deloitte in providing limited assurance on the information in the report. However, I personally prefer assurance statements that also disclose the findings and recommendations (as is the case with AA1000AS and sometimes Big4 statements).

If we look into the data disclosed, most trends appear plausible. On the downside, I can see that not all historical data is recorded and that a lot of footnotes are included, which makes assessing the performance difficult. On top of that, it is noted that data integrity cannot be confirmed for several indicators, such as healthy sales, donations, and GFSI-audited own-brand product suppliers. I can understand that this must be a huge challenge for a company the size of Ahold. For the waste data, an extrapolation has been performed, but the basis of the extrapolation is unclear. Also, closer examination reveals that not all brands are included in the data (only 3-6 of the 10 brands are included). Probably, these entities are not included because they are small compared to Ahold USA and Ahold in the Netherlands, but it would be most helpful to read what proportion of the company is covered in terms of FTEs and/or revenue per topic. Furthermore, sometimes anecdotal information about entities is included that relates to a certain topic, while the same entity is not included in the reported data regarding that topic. Examples of this can be found for the Etos and Gall & Gall brands in the environmental section, and Peapod (please also refer to the figure on page 24) and Albert/Hypernova in relation to community well-being. Ahold reporting all the disclaimers, changing data scopes and footnotes is both transparent and confusing at the same time. It is transparent because it tells the reader exactly what the limitations in the data are. Most other companies have to deal with the same limitations, but refuse to be transparent about it. That demands courage! On the other hand, you have to be a very experienced reader to understand how to evaluate Ahold’s performance taking into account the limitations disclosed.

Concluding, I would say that the narrative and form of the report are above average. I would recommend Ahold to focus its energy mostly on data and data management. Perhaps by focusing on this, the level of assurance could be increased to reasonable assurance (perhaps just for the most material indicators).

Recommendations:
  1. Try to minimize the limitations in the data and maximize the scope of the data by focusing on data quality, data management and data validation;
  2. Once the above recommendation has been implemented, I would like to recommend to explore the possibilities for increasing the level of assurance;
  3. Try to get stakeholders more actively involved in the report by assessing their needs and plotting those against the company priorities in a materiality matrix. The outcomes of this assessment should also help in fine-tuning the Responsible Retailing strategy and determining the boundaries of the report;
  4. Provide a stronger and clearer link between the business model, values, strategic ambitions, selection of indicators, megatrends and stakeholder needs.

Nick de Ruiter is a partner at Sustainalize (www.sustainalize.nl), a global CSR consulting firm that specializes in CSR, CSR reporting, CSR strategy, performance monitoring and external AA1000 assurance.