Corporate Social Responsibility at zooplus
For zooplus, a successful business does not stop with the achievement of financial performance targets but also
encompasses a firm commitment to society and the environment. Our understanding of sustainability is based on the conviction that we can best achieve our economic goals and consistently grow profitably by doing our part to be environmentally and socially responsible. The company therefore welcomes the European Directive 2014 / 95 / EU regarding “Disclosure of non-financial and diversity information by certain large undertakings and groups” as an important step toward the greater integration of sustainability and Corporate Social Responsibility (CSR) issues in group reporting and management across Europe.
In the following, we provide information on sustainability issues that will help better understand our business performance and the future development of our company. The separate combined non-financial report published here meets the requirements of the German CSR Directive Implementation Act (CSR RLUG) in accordance with Sections 289b (3) and 315b (3) of the German Commercial Code (HGB). The report explains the issues in the 2019 financial year in the areas of the environment, society, diversity, responsible corporate action and animal welfare that are important not only to our external target groups but also from a corporate perspective.
Key Facts and Reporting Limits
The CSR Directive Implementation Act principally requires the presentation of the implications, management concepts, results, key performance indicators and significant risks concerning at least five aspects: environmental issues, employee concerns, social concerns, respect for human rights and the fight against bribery and corruption. In the “Animal Welfare” section, zooplus AG reports on a sixth aspect, as the protection of animal rights is a major concern of zooplus customers and, at the same time, a decisive non-financial factor influencing the company’s success.
Within the scope of a materiality analysis conducted during the 2018 financial year, an independent evaluation was prepared describing all of the relevant non-financial aspects for zooplus AG that are essential for sustainable business development from both a Group perspective and the perspective of the respective external target groups (customers, business partners, employees, shareholders, suppliers and the general public). The Management Board and the responsible departments took part in this evaluation. The impact of our business activities and the impact on our business performance are presented in the diagram below and also continue to fully apply to the year 2019:
The materiality analysis and the corresponding risk assessment were prepared in compliance with the requirements of the CSR Directive Implementation Act (CSR-RLUG).
The standards of the Global Reporting Initiative (GRI) served as a guideline in selecting the key figures but were not used in providing further details. This pertains to the information on working conditions, diversity and equal opportunity, among others.
The concepts presented pertaining to the handling of the non-financial issues labeled as key issues apply to the Group and zooplus AG equally. Any divergent information is indicated. The Group includes the parent company zooplus AG, as well as all domestic and foreign companies included in zooplus AG’s scope of consolidation in accordance with IFRS 10. References to information outside of the group management report are made to provide additional information and are not part of the non-financial report.
The non-financial report for the 2019 financial year was reviewed by the zooplus AG Supervisory Board. On behalf of the Supervisory Board, the auditing company PricewaterhouseCoopers GmbH WPG audited this non-financial report in accordance with the ISAE 3000 (Revised) audit standard with limited assurance. For more information, please refer to the audit opinion starting on page 34 of the Annual Report.
For the presentation of the material risks required by the CSR Directive Implementation Act, a mixed analysis of gross and net risks was chosen. To the extent that they are material, the potential negative effects of zooplus AG’s business activities on non-financial matters (gross risks) are explained for each situation. The approach pursued and presented here by zooplus AG for avoiding and minimizing these effects has led to the conclusion that there were no non-financial (net) risks for the company during the course of the 2019 financial year as defined by the CSR Directive Implementation Act.
zooplus AG is Europe’s largest specialized online retailer of pet supplies in terms of sales and by far the market leader in its segment. The company’s product range of approximately 8,000 items specializes in pet food and accessories in all of the major pet segments.
For a more detailed description of the business model, please refer to the section entitled “Group business model” beginning on page 36 of this Annual Report.
Environmental Standards Within the Supply Chain
The cultivation and further processing of raw materials for animal feed and pet accessories can be linked, in some cases, to major environmental burdens. Soil degradation, climate damage and loss of biodiversity can all result from a lack of environmental standards in the production or extraction of raw materials for products sold by zooplus.
The raw material palm oil is used as a high-quality fat source for the production of animal feed. The share of palm oil from sustainable cultivation in the animal feed sector has increased from 15 % in 2015 to 26 % in 2017.1 The excessive catching of fish – a common ingredient in pet food – has also been connected with a long-term adverse effect on ecosystems. The same applies to the raw material wood, which is processed primarily for pet accessories. In light of this, we have made it our goal to contribute to the conservation of resources by procuring our materials responsibly.
As an online retailer, zooplus itself does not manufacture any pet food or accessories but, instead, purchases them directly from international brand manufacturers. zooplus AG’s private label brands and those of its subsidiaries are also manufactured by contract manufacturers. To ensure that all suppliers minimize the potentially negative environmental impact of the commercial products they manufacture as much as possible, the Group requires suppliers to commit to the zooplus Supplier Code of Conduct, which applies to suppliers, manufacturers and their approved subcontractors.
The Code of Conduct requires that suppliers and service providers adhere to the high ethical, moral and social values of zooplus; otherwise, zooplus reserves the right to end the business relationship. In the interest of protecting the environment and ecosystems, the Code of Conduct requires suppliers to comply with all applicable regional and national environmental protection laws without exception and to strive for the fulfillment of international environmental standards. The purchasing and legal departments, which report directly to the Management Board of zooplus AG, are responsible for the integration of the Supplier Code of Conduct into the supplier contracts. The compliance with the Supplier Code of Conduct at suppliers is regularly reviewed by zooplus AG.
To ensure that the timber products marketed by zooplus on the European Single Market for the first time have been legally sourced, the company complies with the due diligence requirements defined by the EU Timber Regulation by requiring clear evidence from suppliers of the entire procurement path. zooplus AG works together with external experts for the implementation.
In the 2019 financial year, the Supplier Code of Conduct was a component of all supplier contracts concluded with direct domestic and international suppliers. About 95 % of the procurement volume stems from Europe. Other sourcing countries include mainly Canada, China and Thailand.
Environmentally Friendly Logistics
zooplus generally assumes that online retailing with a low return rate has ecological advantages compared to purchases made in bricks-and-mortar stores (2). These advantages stem from concentrating the stock of goods in central warehouses and pooling the transportation of goods to the end-user, which avoids much of the traffic in cities and municipalities. The majority of greenhouse gas emissions directly generated by online retailing arise in the logistics processes – in other words, during the transportation from the manufacturer to the logistics centers and the shipping to the customer. The transportation sector as a whole accounts for about a quarter of the world’s energy-related CO2 emissions.3 In view of the expected growth rates in online retailing, our goal is the environmentally friendly design of logistics processes as our contribution to the global fight against climate change.
For this reason, and for reasons of cost efficiency, zooplus employs its own team exclusively for the coordination and further development of the logistics and distribution structure. To minimize procurement channels and reduce the associated CO2 emissions, zooplus has launched a pilot project to develop direct procurement methods together with a few selected suppliers. In the 2019 financial year, about one-third of the goods were procured from the suppliers participating in this pilot project, resulting in shorter transport distances and lower greenhouse gas emissions. zooplus plans to continue expanding this project in the years ahead. The optimal flow of goods and speed of delivery are decisive in improving process efficiency and increasing customer satisfaction, which also makes them critical drivers of business success. Merchandise management and inventory management are both handled by the company’s own proprietary systems. The European-wide dispatch to the customer takes place over domestic and international parcel services. zooplus does not utilize its own infrastructure to deliver packages to customers but instead works together with relevant service providers. Together with these services providers, zooplus works to continually maximize the efficiency of its logistics centers and improve the flow of goods.
zooplus delivers to customers in 30 European countries overall. Roughly 29 % of the deliveries to customers take place in German-speaking countries. In addition, through the establishment of fulfillment centers in the most important international markets (including the Netherlands, Belgium, France, Spain, Poland, Italy and Great Britain), we have optimized the transportation routes to the end customer in various European countries. zooplus has been using so-called “parcel routing” since 2012. It is an algorithm-based concept that ensures that logistical routes within the zooplus logistics network are optimized and customer orders are sent, for example, using a method that avoids unnecessarily dividing the shipment into several packages to avoid additional transportation.
In order to maximize the capacity utilization of the individual parcels and, in turn, the delivery vehicles, zooplus has also developed a system called “parcel builder”. This system is a proprietary system for selecting suitable packaging sizes and formats and ensures that parcel service providers can take as many parcels as possible in one trip. This also reduces packaging waste and empty volume in packages is avoided as much as possible.
A major driver of the CO2 intensity in the mail-order business tends to be the high proportion of returned goods that need to be transported from the customer back to the retailers’ logistics centers. Unlike online retailers in other segments, however, zooplus AG is hardly affected by returns due to its product mix. Size and the individual tastes of customers play a minor role in the purchase of pet food and pet supplies. In the 2019 financial year, as in previous years, the return rate at zooplus was at a very low level of 1 %.
As an innovative and disruptive company, zooplus strives to reduce its CO2 emissions and to help customers do the same by purchasing the goods at zooplus rather than purchasing through traditional procurement channels. For this purpose, a team of employees from various departments was formed in 2018 to develop a Carbon Footprint Action Plan that includes short-, medium- and long-term measures for recognizing and reducing CO2 emissions. As part of this project, it was determined that the internationally recognized Greenhouse Gas Protocol would be the method used to record the carbon footprint along the zooplus value chain. A particular focus of this project team over the past financial year was the recording of greenhouse gas emissions caused by inbound and outbound logistics, as well as the processing of parcels in the logistics centers. Alongside optimizing the variables we can influence, we also communicate actively with our existing service providers. When selecting new service providers, we pay explicit attention to their approaches to climate-friendly logistics.
Alongside the growing “humanization” of pets, one issue gaining in importance is the quality and safety of pet food and accessories. Pets are often given the same status as other family members, and similarly, their health depends on a balanced diet free from residues and contaminants. It is our aim to ensure our products undergo quality assurance checks to confirm that pet food is not contaminated as a result of unsuitable preservatives, heavy metals, microorganisms or toxins. The same applies to accessories lacking product safety standards, which can have serious implications for animal welfare.
In order to prevent this, manufacturers carry out their own corresponding product safety tests as part of their respective nationally applicable due diligence obligations, or they commission specialized laboratories. Corresponding certificates or proof must be provided by the zooplus suppliers. We comply with legal obligations by making the safety data sheets available. For our private label brands and direct purchases, we routinely request to see the audits and certificates of our suppliers. zooplus is also currently working together with a variety of institutes to further ensure product safety. Pet food testing is carried out primarily by Intertek. Specifically when importing goods from China, Intertek China is commissioned to conduct pre-shipment tests in cooperation with Intertek Germany. zooplus plans to commission an additional testing institute in the upcoming financial year.
zooplus uses its own employees to mitigate any product safety risks that can arise from improper storage, packaging or shipping. These employees are posted at the service operators’ fulfillment centers to ensure that all quality assurance standards are complied with. These standards are laid out in the contracts we have with our logistics partners. zooplus has also set up clearly defined recall procedures when product safety risks are discovered in products already in circulation. In the 2019 financial year, there were no recall campaigns of our private label products. Supplier-initiated product recalls from well-known brand manufacturers are managed in accordance with processes defined by zooplus.
At zooplus, animal welfare also includes the support of selected animal welfare organizations and animal protection organizations. zooplus enables its customers to donate the bonus points acquired for their zooplus purchases to selected animal organizations. In 2019, approx. 330 thousand customers took part in this campaign and donated a total of more than 40 million bonus points to a number of different organizations. zooplus also sells a special private label under the name “zoolove,” where 10 % of sales are donated to selected animal welfare organizations. Within the scope of the 2019 Christmas campaign, fundraising was expanded to include other zooplus private labels. zooplus highlights different animal welfare organizations in different countries regularly giving zooplus customers an opportunity to vote for their favorites. In 2019, the zooplus charity brand donated over EUR 430,000 to several animal welfare organizations. In honor of the company’s 20-year anniversary, zooplus also donated an additional EUR 150,000 to a selected international animal protection organization.
In the next several years, zooplus will continue to expand its “zoolove” private label and, as a result of the company’s overall growth, it will continue to make substantial donations to selected animal welfare organizations as yet another way to promote general animal welfare.
Next to product safety aspects, the manufacturing conditions, origin and transparency of product ingredients play an increasingly important role for zooplus customers. Increasingly, product-specific information, such as the effect of ingredients on animal welfare or environmental production conditions, is a part of the purchasing decision. The technological possibilities to provide extensive product information in online retailing can make a particularly important contribution to promoting sustainable and responsible consumption.
This is why zooplus attaches significant importance to providing its customers with the most complete product information possible. Providing this information occurs to a far greater extent with an online shop than is possible in bricks-and-mortar retail, where only product packaging serves this purpose. Interested customers can find information on any type of organic certification and an indication of source for each product including a complete list of ingredients on the zooplus website. The scope and specific content of this information are prescribed not only by law but are also a requirement in our contracts with suppliers. In addition to this information, zooplus also shares nutritional tips for pets with its customers, including responsible consumption and facilitates a transparent exchange of customer ratings for individual products.
zooplus believes that customer satisfaction and retention in the future will be even more dependent on the preparation and provision of product-related information including information on sustainability issues and animal welfare, among others. Over and above the legal requirements, customer satisfaction surveys conducted at least once per year are increasingly asking for customer opinions about this issue in order to be able to provide customers with even more guidance and product information in the future. zooplus therefore expects the information provided by online services to continue to improve over the next few years.
The number of employees has risen steadily in the past several years. In the 2019 financial year, an average of 713 employees worked directly for zooplus. The number of employees has increased on average by around 20 % annually since 2012. zooplus’ business success largely depends on the commitment, knowledge and performance of its employees. zooplus invests in a work environment that promotes innovation, team spirit, commitment and motivation so that it is able to attract and retain qualified employees. This also benefits the employees themselves in that they can personally develop their skills at zooplus through individual advanced training courses and participate in the company’s success through variable salary components.
The employees of zooplus’ logistics partners, who are sometimes exposed to greater physical strain, also make an important contribution to the business success. These include, for example, packaging and the lifting of heavy goods. The fulfillment centers operated by zooplus’ partners employed roughly 2,700 employees in the 2019 financial year. In contrast to the employees directly employed by zooplus, these employees are typically in the low-wage segment. The same applies to the employees of logistics service providers. In order to ensure the best possible working conditions for the employees of logistics partners within the scope of zooplus’ power, the company works with these service providers on the basis of long-term contracts with minimum employment-related requirements. In addition to occupational health and safety regulations, these requirements also include the payment of the country’s respective minimum wage. The quality managers in the fulfillment centers employed by zooplus are also asked to pay particular attention to the occupational health and safety of the local employees. To make heavy physical work easier, zooplus and its partners in the fulfillment centers regularly test the introduction of digital and mechanical work facilitation for lifting heavy goods, among others.
The human resource department at zooplus supports the company’s organizational strategies with specially designed personnel tools and measures. In a highly competitive environment for excellent employees in all areas, zooplus AG always pays market salaries. Employee compensation consists of fixed and variable salary components, as well as intangible benefits, which may vary according to country-specific standards.
zooplus has invested in the expansion and modernization of its office facilities to create a work environment that is just as employee-friendly as it is performance-oriented. In addition to leasing additional office space with state-of-the-art equipment, the acoustics and visual design of existing premises were also improved. To promote the health of the employees, zooplus takes preventive measures by offering flu shots, eye examinations, and ergonomic office equipment, as well as access to fitness centers for all employees, which is largely subsidized by the company. The management tools at zooplus combine the general performance evaluation with the personal target assessment and include the employee’s progress in his / her current position. These individual discussions between the manager and the employee take place at least once or twice a year. These evaluations are intended to support the company’s claim to having a performance-oriented corporate culture while at the same time supporting the employee individually and optimally with regard to personal challenges.
Part of the zooplus DNA and the company’s pet policy is to provide employees with certain opportunities to bring their dogs to work. Employees also benefit from in-house discounts when purchasing zooplus products.
The employee turnover rate at zooplus in the past financial year was 16.4 %, three percentage points lower than in the prior year.
zooplus also welcomes employee initiatives and provides the necessary flexibility for employees, including meet-ups for networking across sectors within the IT community and the internal “Go Green” initiative that promotes environmentally friendly design in everyday settings. Integrating voluntary activities during team events, for example, is also important
Diversity and Equal Opportunity
zooplus saw the importance of diversity within the scope of human resources as a key success factor very early and, consequently, defined strong company diversity as one of its objectives. The interaction of people with different ideas, strengths, skills and cultural backgrounds leads to the best possible solutions to future challenges. As of December 31, 2019, zooplus had 56 different nationalities across all locations. With an average age of 35 years (as of December 31, 2019), zooplus employees tend to be younger than employees at other traditional retailers.
Diversity is an integral part of zooplus’ corporate culture and has been incorporated into all personnel development and recruitment measures as a priority of the company’s personnel strategy. The fair balance of female and male employees has thus far made the formulation of definite quota targets seem unnecessary. Despite this, the company has stated in its Code of Conduct that any form of employee or occupational discrimination will not be accepted. Instead, recruitment and promotion decisions are based solely on an individual’s abilities and not on personal characteristics such as gender, race, religion or belief. zooplus employees also address a variety of diversity areas within the scope of their own initiatives. As part of the company’s “Culture Days”, intercultural exchange is promoted to encourage cooperation. In the IT community, zooplus employees also work to increase the share of female IT specialists in the industry by getting involved in campaigns related to the topic of “women in IT”.
The proportion of female employees in the company was 45 % as of December 31, 2019. In keeping with the guiding principle of diversity, the company will continue to focus on ensuring that women are represented as equally as possible in management positions in the future. As of December 31, 2019, at zooplus AG and across all zooplus companies the proportion of female employees in management positions below the Management Board averaged 33 %.
Respect for Human Rights
The cultivation and further processing of raw materials for pet food and pet accessories may not only be accompanied by ecological burdens but also inadequate labor and social standards. For example, the production of intermediate meat and fish products in Southeast Asia, as well as accessories with textile components may be associated with human rights violations. Specific forms of forced labor and child labor in the countries of origin of the intermediate products of the goods sold by zooplus have been repeatedly discussed in the media. Although zooplus has not been linked to these types of human rights violations, the company is aware of its responsibility to respect human rights along its entire value chain.
The most important tool for preventing human rights abuses is the Code of Conduct. It obliges zooplus, its suppliers and their contractors to unconditionally comply with international human and labor law requirements. Compliance with the Code of Conduct is ensured through social audits as part of the due diligence and the clearance of business partners.
In the years ahead, the company plans to increase its attention on the issue of social audits and involve external partners in the process.
Combating Bribery and Corruption
Corruption and Price Fixing
The extensive network of supply chains and the global sales markets give rise to the risk of unfair agreements in retailing. Corruption and antitrust incidents can distort market conditions and thereby hinder fair competition, which impacts the individual consumer as well as economic performance as a whole. The detection of such incidents can sometimes lead to high fines and a significant loss of reputation. zooplus counters this danger through responsible and lawful corporate governance.
The responsibility for preventing corruption and avoiding price fixing lies with the legal department, which reports directly to the Chief Financial Officer. A clear definition of what is and what is not allowed provides a transparent framework. This is the reason binding principles are laid down in zooplus’ Code of Conduct, which serves as a model for not only suppliers but also for all employees. This Code of Conduct is augmented by annual training courses for the relevant employee groups to ensure that these groups are sufficiently aware of corruption and price fixing risks. In addition, the principle of double checking also applies to the procurement department. A supplier is always looked after by at least two employees. Employees in the purchasing department are also assigned to other suppliers in a cycle determined individually. In the event of a violation, all zooplus employees can contact the whistleblower hotline anonymously. The violation is then immediately analyzed and its causes eliminated.
No lawsuits against zooplus for unfair behavior existed in the financial year. In addition, there were no reports of suspicion to the whistleblower hotline. zooplus intends to ensure that this behavior continues going forward by holding regular compliance awareness campaigns.
As an online retailer, zooplus receives vast customer data as part of the business process. Insecure data storage and processing may violate the right to informational autonomy and the protection of personal rights and privacy. The numerous data scandals of well-known companies in the past have increasingly focused public attention on how companies handle their data. The publication of incidents can lead to huge losses in sales and sustainably harm consumer confidence. Protecting personal data is therefore a top priority at zooplus and the reason it carries out penetration tests with its external partners at set intervals.
Legal compliance with data protection regulations, directives and procedural instructions is ensured using a dual approach consisting of an internal data protection manager, as well as an external data protection officer. In the course of fully implementing the General Data Protection Regulation (GDPR) in 2018, zooplus made it a priority to optimize internal structures and revise the zooplus data protection directive, which must be followed by all employees. Our external data protection officer is also obliged to train employees at regular intervals. When an incident occurs, it is carefully investigated. zooplus is also supported by external service providers who securely manage the payment data and have the corresponding PCI conformity certifications.
In 2019, no formal proceedings by the data protection authorities against zooplus were initiated, and requests from data protection authorities could be answered by statements and possible adjustments. With the introduction of the GDPR in 2018, zooplus, together with an external partner, had its data protection processes audited to ensure that the processes continue to meet all of the relevant requirements for protecting data as best as possible.