Carrefour - 2017 Registration Document

4 MANAGEMENT’S DISCUSSION AND ANALYSIS AS OF DECEMBER 31, 2017 Risk management CARREFOUR | 2017 REGISTRATION DOCUMENT 195 Corporate social responsibility Looking beyond regulatory compliance, given consumers’ growing concerns about responsible and sustainable retailing and the nature and reality of commitments, corporate social responsibility (CSR) policies and actions may impact the Group’s reputation and its financial performance. For a number of years, the Group has maintained a proactive CSR policy, described in Chapter 2 of the Registration Document, with a wide range of concrete initiatives and the involvement of all countries where the Group operates. The assessment of environmental, labour and societal risks is an essential component in developing and updating the Group’s CSR approach. Carrefour has long fostered a risk-aware culture embracing the issues of human rights and fundamental freedoms, health and safety, and the environment, which are the areas addressed by France’s duty of care law passed on March 27, 2017. The duty of care plan described in Section 2.6 of the Registration Document sets out the formal processes and methods embedded in Carrefour’s social responsibility approach and the additional measures taken under the duty of care plan. The Group is among the top five global retailers in terms of CSR and is the only French company among the 12 leaders in the Food & Staples Retailing sector of the Dow Jones Sustainability Index World (DJSI). Environment In the scope of its activities, the Group may be exposed to a wide range of environmental risks (water, air, ground, noise or visual pollution) mainly with respect to its large number of operated sites. While environmental regulations are tightening in many countries and consumers are becoming increasingly aware of the need to protect the environment, certain activities and processes are particularly sensitive (waste treatment, recycling of own-brand product packaging, consumption of refrigerants and energy, explosive atmospheres, fuel, alternative transport, etc.) and particular attention is paid to natural resource management (water, fishery resources, wood, etc.). Environmental protection and preservation is considered by the Group, along with industrial risks, with a focus on prevention through study and analysis, but also through the operational implementation of prevention or treatment systems, such as for risks related to the fuel business. All initiatives intended to reduce the environmental footprint of our business activities and measures taken to mitigate the impacts of climate change are presented in the Registration Document in Section 2 on Corporate Social Responsibility. Assessment of environmental risks and issues aims to improve our knowledge and understanding of the related challenges and to enable the Group to better address risks in order to protect its business and employees. Disputes and litigation In the scope of its normal activities, the Group is involved in various legal and administrative proceedings and is subject to administrative audits, whose outcomes are uncertain with potentially material impacts on its financial position or reputation. The Group’s exposure to any material litigation is described in Note 9.2 to the Consolidated Financial Statements. The relevant departments manage and oversee disputes at the country and Group levels. Provisions are also recorded in the financial statements for disputes and litigation when an obligation to a third party exists at the period-end. To the Group’s knowledge, other than the proceedings described in Notes 9.2 and 9.3 to the Consolidated Financial Statements, there are no other ongoing governmental, legal or arbitration proceedings to which the Group may be a party that are likely to have, or have had during the last 12 months, a material impact on the Group’s financial position. Operations 4.7.1.3 Relevance and performance of economic and business models In a highly competitive environment with very unstable markets, the relevance of economic and business models and their rapid adjustment to changing consumption habits and patterns, as well as efficient and effective purchasing, can have a material impact on the Group’s operational and financial performance, in terms of the structure and design of such models and the ability to deploy them instore. Adapting business models to customer expectations is a major challenge for the development and design teams, which is why the Group leverages a forward-looking approach and constant monitoring. All factors and effects that may have an impact on the preparation of economic models are carefully monitored and subject to numerous pre-deployment tests. Operational and financial control of growth and expansion In a highly competitive environment with cost pressure and increasingly scarce high-quality locations in certain countries, the Group may be unable or find it difficult to identify, obtain or develop the best sites, in line with its strategy of always seeking to increase profitability based on valid and reliable assumptions while taking into account all risk factors. This may impact its financial performance and ability to fulfil its objectives and lead it to inadequately identify, assess and integrate new assets or companies. All of these factors are considered in the proposals analysed by the country-level Finance departments, in connection with the Development department and, where applicable, the Carrefour Property teams. The most significant proposals are reviewed and first approved by the Group Investment Committee (CIG).