PJSC Magnit : Magnit PJSC 2021 sustainability report

Part of the

Neighbourhood

2021 Sustainability Report

ПЛАСТИК

БУМАГА

Contents

About the Report

We are happy to present Magnit's third Sustainability Report.. Each year, we strive to enhance the quality of our non-financial reporting by demonstrating our commitment to sustainable development across all our business processes..

Corporate Relations and Sustainability Director's		Chapter 5. Climate change and environmental
statement. . . . . . . . . . . . . . . . . . . . . .	. . . . . . . . . . . . . .4. . .stewardship. .	. . . . . . . . . .	. . . . . . . .	. .72
Chapter 1. About the Company	. . . . . . . . . . . 8	Approach to management. . .	. . . .	. . . . .	. . . . . . . 76. . . . . . .
Climate change	and energy efficiency. .	. . . . . . . . . . .78. .
Our mission and values. . . .	. . . .	. . . . . . . . . . . . . 9. . . . . . . . .				. . . . . 82. . . . . .
2021 highlights .. . . . . . . . . . . .					Fleet transformation. . . . . . . .	. . . .	. . . .
. . . . .	. . . . . . . . . .10. . . . . . .						. . . . .	. 84. . . . .	. . . .
Business Model.. . . . . . . . . . . . . . . . . . . . . .	. . . . .12	Energy generation. . . . . . . . . .	. . . .	. . . .
. . . . . . . .						. . . .	. .86. . . . . . . . .
Retail with purpose: Magnit Sustainability Strategy ..	.14	Energy consumption. . . . . . . .	. . . .	. . . .
Waste management		. . . . . . . .88. . . . . . . . .
					. . . . .
Chapter 2. Sustainability management. .	. . . . . 16	Water resources. . . . . . . . . . . . . . .	. . .	. . . . . . . . .92. . . . . . .
Our approach to management.	. . . . . . . . . .	. . . . . . 20. . . . .Green Office. . .	. . . . . . . . . . . .	. . . .	. . . . . . . .93. . . . . .
UN Global Compact. . . . . . . . . . . . . . .	. . . . . . . . .24. .	. . . . . Chapter 6. Sustainable sourcing	. . . . . . . . . 94
Contribution to the Sustainable Development Goals	. . 25
Sustainable supply chain. . . . . . .	. . . . . .	. . . . . . . . . .96. . . .
Stakeholder engagement.. .	. . . .	. . . . . . . . . . . . . .30. . . . . .			and safety .			. . . . . . .	.102. . . . .
Human rights . . . . . . . . . . . .		. . . . . . .	. . .		Product quality	. . . .	. . . . .
. . . .	. 35. . . . . . . . . .			. . . . . . . 108. . . . . . .
Our approach to management				Own production. . . . . . . . . . . .	. . . .
. . . . . . . . . .	. . . . 36. . . . . . .						. . . . . . . .114. . . . . .
Economic impact . . . . . . . . .		. . . . . . . .			Responsible marketing practices. . . . . .
. . . .	. . . . .37. . . . . . . .
Chapter 3. Our employees . .	. . . . . . . . . . 38	Chapter 7. Health and well-being	. . . . . . . . .	118
Our approach to management. . .	. . . . .	. . . . . . . 122. . . . . .
Our employees. . . . . . . . . . .	. . . .	. . . . . .	. . . . . 40. . . . . . . . . .	.	. . . . . . . . . . . . .123 . .
Our approach to management				Healthy food basket. . . . . . . . . . . .
. . . . . . . . . .	. . . . 42. . . . . . .					. . . . . . . . . . . . 125. .
Personnel structure. . . . . . . .		. . . . . . . . .43	Promoting healthy lifestyles. .	. . . . . . .
. . . . . .
Staff turnover . . . . . . . . . . . . . . . . . .	. .	. . . . . . . . .44. .	. .Chapter. . . 8. Communities . .	. .	. . . . . . . . . 128
Recruitment practices...............	. . . . . . . . . .. . .47.	Our approach. .	. . . . . . . . . . . .	. . . .	. . . . . . . . .	. 132. . . . . . .
Incentive system. . . . . . . . . . . . . . . . . .	. . . . . . . . . . 49. .	. . .Key. social projects.. . . . . . . . . . . . . .	. . . . . . . .	. 134. . . . . . . .
Inclusion and ethical corporate culture . . . .	. . . . .	.50.	. . Corporate. volunteering . . . . . . . . . . . . .	. . . . . . . . .137. . . .
Employee engagement. . . .	. . . .	. . . . . . . . .	. . . . .53. . . . . . .	Corporate governance	. . . . . .	140
Training and development					Chapter 9.
. . . .	. . . . . . . . . . . . .55. . . . . . . .				.	. . . . . . . . .	.142. . .
Social support.. . . . . . . . . . . . . . . . . .	. . . . . . . . . .57	Risk management and internal control
. . . . . . .			. . . . . . .144. . . . . . .
					Tax Policy. .	. . . .	. . . . . . . . . . . .	. . .
Chapter 4. Safe working environment. . . . . . .	60	Business ethics and anti-corruption . . .	. . . . . . . .	.148. . . .
Our approach to management.	. . . . . . . . . .	. . . . 64. . . .Information. . .	security .. . . . . . . .	. . . .	. . . . . . . .	. 151. . . . . . . . .
Training and communication. . .	. . . . . . . . . . . . . 69.	. . .Protection. . . . of personal data. . . . . . .	. . . . .	. . . . . . .154. . . .
Anti-COVID-19 measures. .	. . . .	. . . . . . . . . . . . .71. . . . . . . . .			. . . . . . . .	. 156
					Appendices .	. . . . . . . . .

. . . .

. . . . .

. . . .

.

. . . . .

In the reporting year, we introduced an overview of the progress towards our goals under our Strategy 2025 broken down by priority area.. Our reporting now covers our management approach to a wider range of topics, including health and safety, information security and human rights..

In our reporting, we aspire to expand

the scope of applicable standards, disclosing SASB industry metrics and taking into account the TCFD recommendations.. In 2021, we focused on analysing our contribution to

the UN Sustainable Development Goals and scrutinised all our projects and initiatives for their compliance with each SDG target..

As at the date of publication, we are witnessing growing geopolitical and economic risks that may have an impact on the business of Magnit and its suppliers.. The supply of food, hygiene products and home essentials for the needs of consumers has always been and will be our top priority.. We will do everything in our power to keep the supply chain resilient and support our suppliers, including a significant number of local producers.. Our long track record in the market proves that we remain a reliable employer and business partner in the most challenging situations thanks to the existing infrastructure and resources, responsible business practices and robust corporate governance..

The Report should be read as a whole taking into account the content of all sections

as well as the notes and the explanations herein, including the information set forth in the Disclaimer (see below in the Appendicies to the Report)..

				Climate change and
About the Company	Sustainability management	Our employees	Safe working environment	environmental stewardship	Sustainable sourcing	Health and well-being	Communities	Corporate governance	Appendices

Corporate Relations

and Sustainability Director's statement

Dear Reader,

I am pleased to present to you Magnit's Sustainability Report for 2021, which summarises the Company's performance and targets in ESG. In the reporting year, we concentrated on delivering against our Sustainability Strategy approved in 2020, and I am very pleased with the progress we have achieved. We have remained Russia's largest private employer and the only vertically integrated retailer operating food production assets, and one that has firmly integrated ESG practices into all of its business processes.

Magnit made a big leap forward in 2021, growing significantly through an acquisition of a major player, opening stores, launching new formats and building up the e-commerce business. At the heart of this is our strong commitment to sustainable development principles. In 2021, despite the persisting uncertainty around the COVID-19 pandemic, we made great headway and facilitated a return to normal for our customers and employees.

Halfway through the year, we completed the acquisition of the DIXY retail chain, adding 2,477 stores to the Magnit network (predominantly in the Moscow and St Petersburg areas). The purchase is strategically important,

strengthening our competitive position in the Russian market and increasing our footprint in important regions. It brings far- reaching synergies in the supply chain, procurement, category management and business processes, which will add value for our shareholders and offer new benefits to our customers and other stakeholders. For the purposes of this report,

the non-financial data for DIXY and Magnit are disclosed separately while we are completing our work to align our respective sustainability strategies and data gathering methodologies. We will continue consolidating Magnit and DIXY sustainability data going forward.

	4	2021	magnit.com	5

				Climate change and
About the Company	Sustainability management	Our employees	Safe working environment	environmental stewardship	Sustainable sourcing	Health and well-being	Communities	Corporate governance	Appendices

Corporate Relations

and Sustainability Director's statement

(continued)

By approving the Sustainability Strategy in 2020, we prepared fertile ground for our sustainable development efforts, and are now taking a deep dive into each specific area.

We realise the importance of the climate change agenda and the role big businesses can play in minimising climate risks. That is why we continue working on a number of pilot projects aimed at finding ways of increasing energy efficiency and cutting down carbon emissions. Our goal is to reduce the direct carbon footprint of logistics and delivery through fleet renewal and gradual transition to hybrid engines and more eco-friendly fuels. We have been implementing measures to reduce energy consumption

for refrigeration equipment and lighting devices and thus cut indirect GHG emissions. We have ambitious plans to measure indirect emissions throughout Magnit's entire value chain, develop a Climate Strategy, and perform

a detailed financial assessment of climate risks.

Another important area of our focus is waste management.

In 2021, we launched a big project to analyse the composition of municipal solid waste at stores and distribution centres. The project will let us sort out recyclable waste and identify patterns of food waste generation, affording us better control over its volumes.

As the largest retail chain in Russia, we recognise that we can do even more by working together with other companies to achieve our goals. In 2021, we joined forces with eight of the largest international FMCG producers in the United for a Healthier Future initiative. It aims to improve the quality of life for consumers and local communities by promoting healthy lifestyles and environmental care. We have committed to raising awareness of customers, making sustainable goods and services more available, cooperating with other organisations, and conducting relevant research. The first projects under the initiative

are already underway, including a collaboration with Nestlé on an

education programme to instil the basic principles of sustainable consumption and healthy eating in schoolchildren.

We have received wide recognition for our sustainability efforts.

In 2021 Russia's National Rating Agency (NRA) placed Magnit among the Top 3 Russian public companies in its ESG ranking and affirmed our leadership among Russian nonfinancial public companies

in retailThe impressive progress in sustainable development that we have achieved would not have been possible without the hard work and engagement of Magnit employees. I would like to extend deep gratitude to the team for their ESG efforts, commitment to sustainable development, and help in driving the Company's initiatives forward.

Our goal now is to maintain

the lead in sustainable development among Russian retailers for

years to come, and we continue to look for meaningful ways to

promote healthy lifestyles, reduce carbon emissions and waste, and strengthen the sustainability of our supply chain.

Despite the heightened geopolitical and economic risks in early 2022, our top priority remains the same - to provide people with food and non-food essentials. We will do everything in our power to keep the supply chain resilient and support our suppliers, including

a significant number of local producers. Our long track record in the market shows that we remain a reliable employer and business partner in the most challenging situations thanks to the existing infrastructure and resources, responsible business practices, and robust corporate governance...

Anna Meleshina

Corporate Relations and

Sustainability Director

	6	2021	magnit.com	7

				Climate change and
About the Company	Sustainability management	Our employees	Safe working environment	environmental stewardship	Sustainable sourcing	Health and well-being	Communities	Corporate governance	Appendices

About the Company

GRI 2-1,2-6

The Magnit Group1 (hereinafter, "Magnit", the "Company" or the "Group") is one of the largest retail chains with a multiformat offering in Russia by number of stores and geographic coverage. Our goal is to become Russia's No. 1 responsible retailer..

Magnit is one of the largest retail chains with

a multiformat offering in Russia by number ofKey facts: stores and geographic coverage.. Our goal is to

become Russia's No.. 1 responsible retailer..

Our mission and values

Our mission is to become the store of choice for every russian family

Our values

We have stores in all densely populated Russian regions, with over 26,077 outlets nationwide.. The Company operates a multiformat and omnichannel model that includes convenience and drogerie stores, as well as supermarkets and pharmacies under the Magnit and DIXY brands..

Magnit has three key business segments.. In addition to its retail operations, the Company owns 13 food production sites and runs four agricultural facilities.. Magnit's extensive logistics infrastructure includes 45 distribution centres and more than 5,000 trucks, making it one of the largest logistics operators in Russia..

As Russia's only vertically integrated federal chain with its own production facilities, we contribute to the creation of sustainable food production systems and provide tangible support to food and processed food markets.. We ensure timely access to information about our food reserves in the regions of operation and take all possible steps to curb excessive food price volatility, particularly for socially important product categories.. Additionally, we implement agricultural practices that increase

No. 1 food retail chain by number of stores and geographic coverage

No. 1 food importer in Russia

The only vertically integrated retailer with own food production and agricultural facilities

A responsible partner to local producers

and foreign companies

A multiformat and omnichannel retail chain

with a cross-format loyalty programme 15 million in daily footfall

One of the largest private employers in Russia

One of Russia's largest logistics operators

Everywhere for our customers

We build long-lasting connections with our customers.. Our team members have a perfect understanding of customer needs because they also shop at Magnit..

Stronger together

We achieve our goals through joint effort and consider our employees' input when making decisions..

Achieving results

We always accomplish our goals and strive to do so in the most efficient manner..

Taking responsibility

We know what we stand for and we take responsibility for our decisions..

yields while preserving ecosystems..

DIXY integration

On 22 July 2021, Magnit completed the acquisition of the DIXY retail chain.. The transaction covered 2,438 DIXY convenience stores, 39 Megamart and Minimart superstores, and five distribution centres..

The acquisition boosted our market share in Moscow and St Petersburg, where our penetration had historically been weak, bringing it to 8..2% in Moscow and the Moscow region and to 17..2% in St Petersburg and

the Leningrad region.. Magnit's enhanced standing in the two largest Russian cities also provides a shot in the arm for our e-commerce initiatives..

The Company managed to negotiate better pricing terms with suppliers for DIXY, which in turn increased the profitability of the acquired stores.. We also revised DIXY's remuneration terms and significantly reduced staff turnover..

1  For the purpose of this Report, the Magnit Group includes companies listed in the Appendix 3 below. The information herein is based on the reporting perimeter established therein.

	8	2021	magnit.com	9