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Combined Annual Report and Sustainability Report 2018

Transparency in the supply chain

Stakeholders such as customers, consumers and the general public are attaching increasingly high priority to a high degree of transparency and consideration of sustainability aspects in the supply chain. DMK has addressed this development with a variety of measures and appropriate principles, including actions taken in the period under review.

Compliance management system implemented

DMK launched the implementation of a compliance management system in 2018. With this system, the company counteracts compliance risks such as infringements of competition law, corruption, money laundering, and violations of international trade law. A whistle-blower system with an outside lawyer as an ombudsman is available to employees and business partners wishing to refer information about legal infringements. The DMK Group protects the informant rigorously from all forms of influence. Training courses in competition law were held for sales staff in the reporting period. In the current fiscal year, the company is developing a comprehensive, target group-oriented compliance training concept which will cover such areas as economic sanctions, the prevention of corruption and money laundering in addition to general compliance topics.

Responsible procurement

DMK considers responsible procurement to be very important and controls the milk production supply chain through its own Agricultural Affairs department with the Milkmaster Programme and through Corporate Procurement for its external suppliers. Around 98 percent of direct DMK suppliers in the two main product groups of ingredients and packaging come from Germany and the rest of Europe and have high social standards at their production sites.

Specific Supplier Code of Conduct

In harmony with the core values “entrepreneurial”, “fair” and “innovative”, DMK is an active champion of integrity, compliance with the law and fair competition both at home and abroad.

In the year under review, the Corporate Procurement department, in addition to raising internal and external customers’ awareness of sustainability topics, gave close attention to developing a specific Code of Conduct for suppliers. The company performed a detailed analysis of the requirements of internal and external stakeholders and also identified the sustainability risks in its own supply chains for this purpose. With the Code, DMK can provide business partners in the supply chain with suggestions on addressing the topic of sustainable procurement and can strengthen their collaboration through a partnership-based approach. The code embraces both social and ecological aspects. DMK suppliers undertake to comply with these by signing the terms and conditions of procurement, which therefore form the basis of our collaboration with all suppliers.

Building on the Supplier Code of Conduct, DMK will develop a management system as the central component of sustainable supplier management and implement it together with an IT solution which will enable the company to record compliance with the sustainability requirements imposed on suppliers.

 

Sustainability along the supply chain

This commitment exemplifies the fact that DMK is facing up to the challenge of embedding sustainability in the supply chain despite the complex demands. With the Milkmaster Programme, the DMK 2020 sustainability strategy and the key topics anchored in the specialist departments, the company is pursuing a holistic approach and addressing material topics in the supply chain such as animal health, climate protection, sustainable feedstuffs and basic raw materials. In this context, DMK will continue in the future to drive forward its collaboration with customers, associations and other stakeholders on a basis of partnership and implementation orientation.

Value chain DMK Group

1

Milk production

6.182¹ active dairy farmers all over Germany deliver their milk to DMK.

2

Milk collection

180 milk collection vehicles take the milk to factories in 10 German regions (inbound logistics).

3

Milk processing

DMK processes the milk further at specialised factories to make a variety of products.³

4

Transport

The products are delivered from the DMK factories to manufacturers and retailers (outbound logistics).

5

Manufacturing and retailing

DMK products are to be found in retail outlets, hotels, restaurants and other catering facilities, pharmacies and manufacturing companies.

6

Consumption and waste management

The products are sold and consumed. Most packaging can be recycled via the Dual System waste management system or waste paper collection.

Authentically certified raw materials

DMK has been using UTZ-certified cocoa and palm oil certified in accordance with the standard of the Roundtable on Sustainable Palm Oil (RSPO) at all its sites and at wholly owned subsidiaries since 2016, and has now reached a level of over 99 percent for both products. Several DMK sites are UTZ and RSPO certified.

When using palm oil, DMK uses the certified palm oil in accordance with the mass balance method as the minimum criterion. The Business Unit Baby uses palm oil of “segregated” quality. The Business Unit Ice Cream went over to 100 percent segregated quality at the end of the period under review. For those quantities of palm oil that are not yet certified, DMK acquired 200 “Book & Claim” certificates from RSPO in 2018. These ensure that, for every certificate purchased, one tonne of palm oil is grown according to the RSPO standard.

DMK implements all customer requirements in accordance with the standards of the Forest Stewardship Council (FSC) or the Programme for the Endorsement of Forest Certification (PEFC) scheme on sustainable forestry. When putting this policy in place, DMK converted all wood-based materials to one of these standards. For primary and secondary packaging and ice lolly sticks, around 74 percent of all convertible materials had been converted to FSC by December 2018. If the secondary packaging only is considered, the conversion rate is just under 90 percent.

Distinctions as a sustainable supplier

DMK’s commitment to the supply chain and sustainability management is also perceived and rewarded beyond the company’s boundaries: EcoVadis is the recognised international platform for sustainability in global supply chains and honoured DMK’s achievements in 2018 with the “Gold” quality label for the second time in succession. In the EcoVadis study of corporate social responsibility, the DMK Group received 74 out of 100 points and is therefore overall among the five percent of top performers rated by EcoVadis - within the industry, it was actually in the top one percent. The average of all large German companies assessed was around 46.4 out of 100 points.

Unilever recognised DMK as a Sustainable Supplier for the third time in a row in the period under review on the basis of the DMK 2020 sustainability strategy and the progress achieved to date in the Milkmaster Programme. According to Unilever, DMK’s holistic methods enabled it to meet the high requirements of the review, which focuses on such topics as biodiversity, sustainable feed and the eco-balance, or life cycle analysis.

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