More sustainable packaging, waste management and circularity

The 'Resource use and circular economy' topic is material for Royal A-ware through the topics of 'More sustainable packaging' and 'Circularity and waste management'. These are topics that play a role in the day-to-day operations of our dairy business. This chapter therefore focuses only on dairy activities.

Royal A-ware strives to use natural raw materials as efficiently as possible and waste as little as possible in the production process. We also work reduce the use of packaging materials and their recyclability.

Why is this important to us?

We consider the transition to the fullest possible circular economy important because it lays the foundation for a more sustainable use of raw materials. We want to preserve the value of raw materials for as long as possible. We do this by:

• Using raw materials as efficiently as possible

• Avoiding waste

• Using renewable raw materials

• Upcycling waste streams

This also contributes to reducing the impact of our activities on the environment and to the long-term availability of our raw materials.

What are the risks and opportunities?

Impacts and risks

Our production sites face the following challenges associated with material use, waste disposal and circularity:

• The availability and affordability of raw materials, such as packaging materials, may come under pressure.

• Rising costs due to disposal of waste streams and procurement of more sustainable packaging materials, among others.

• Not every circular solution is possible because food safety is paramount and we do not compromise on it. This applies, for example, to the processing of residual and side streams of cheese into new products and to the packaging that is essential to ensure food safety, as well as taste.

• We have to contend with laws and regulations that are not uniform in different European countries. Packaging that is recyclable in one country might be non-recyclable in another.

Opportunities

Royal A-ware has the following opportunities associated with material use, waste disposal and circularity:

• Royal A-ware has state-of-the-art production sites. We use raw materials as efficiently as possible, resulting in fewer losses, less waste and cost savings. As we work with the latest packaging lines, we can use more sustainable and/or recyclable packaging materials.

• By separating waste better, upcycling becomes possible. This way, we can more effectively valorise waste.

• Both reducing losses and upcycling of waste contribute to reducing GHG emissions in scope 3.

Approach and policy

Material flows

The main material flows at Royal A-ware's production sites can be divided into inflows and outflows.

Inflow:

• Milk

• Cheese

• High-risk raw materials

Outflow:

• End products: cheese and dairy products destined for our retail, industrial and food service customers.

• Whey: a by-product released during cheese production. Whey has several uses, depending on its quality:
  
  

• • Food: raw material for baby food and sports nutrition, among others.

  • Feed: feed for animals.

  • If an application as food or feed is not possible, the whey is fermented for energy production.

• Packaging materials: wherever possible, packaging is made of recycle-ready material to enable recycling.

• Waste: by separating waste, it can be upcycled where possible. If this is not possible, it will be burnt.

Determining substantive material flows

To identify and assess substantive material flows, we followed a structured step-by-step approach:

1. Identification of High-Priority Commodities

The process began with an evaluation based on the high priority commodity list developed by the Circular Transition Indicators (CTI). This list includes key categories such as animal products, crops and rare earth elements. As a result of this assessment, milk, cheese, and plastic were identified as substantive material streams. This determination was subsequently reviewed and validated by the Sustainability Steering Group and the ESG team.

Additionally, due diligence under the IMVO Food Covenant highlighted a number of high-risk raw materials, including soy, palm oil, cocoa, coconut, citrus, hazelnuts, cane sugar, rice, and spices.

2. Economic Value Assessment

In the next phase, we quantified the economic significance of each material stream by analysing total procurement expenditure by category. We then calculated the percentage of total procurement expenditure attributable to each material stream. This analysis reaffirmed that milk, cheese, and plastic constitute substantive material flows. While high-risk raw materials represent a relatively small share of procurement expenditure, they remain an integral part of our due diligence processes.

3. Carbon Footprint Contribution Analysis

To validate our findings, we further assessed the contribution of each material stream to our overall carbon footprint. These calculations are based on previously established emissions data, which formed the foundation of our Science Based Targets initiative (SBTi) commitment, validated in September 2024 for our dairy operations. This analysis further confirmed that cheese, milk, and packaging are the most substantive material streams within our supply chain.

Substantive material inflows and outflows (and the associated risks and negative impacts) are concentrated in the upstream and downstream value chain.

Use of raw materials

Our policy on the use of raw materials and waste has three components:

• Prevention: We use raw materials to the maximum to avoid waste and minimise waste.

• Reduction: We reduce the use of raw materials by adjusting recipes and using thinner packaging materials, for example.

• More sustainable sources/materials: We choose more sustainable alternatives where possible and depending on customer choice. This may also mean using fewer materials not previously used (virgin) and more recycled materials. When it comes to waste, we try to upcycle as much as possible.

This policy applies to all production sites where Royal A-ware has operational control and has been formally adopted by management following preparation by the Sustainability Steering Group. While significant progress has already been made at certain locations, the raw materials and waste policy for the organisation as a whole remains in its early stages. The 2024 inventory will primarily serve as a foundation for further developing policies, defining objectives, and establishing potential measures in the near future.

In 2024, we formulated policies regarding the sourcing of high-risk raw materials (see Upstream Activities) and have conducted an initial risk analysis for selected key raw materials. Specifically concerning soy, one of the identified high-risk commodities used as a component in cattle feed, the Dutch dairy farming sector collectively committed in 2015 to sourcing sustainable soy through the Round Table on Responsible Soy (RTRS). In Belgium, only sustainable soy is used in animal feed.

For further details, please refer to the Due Diligence chapter.

How we promote circularity

As indicated earlier, the transition to as fully circular an economy as possible is important because it allows us to minimise the use of natural resources and reuse materials. Although the broader policy is only in its infancy, Royal A-ware is already well advanced when it comes to circularity.

Countering food waste

A great example of circularity is the maximum use of side streams in cheese production. Cheese rinds are not considered waste, but valuable material for other food products, such as processed cheese. Only the remaining coating is eventually considered waste and thus disposed of. This method of production contributes to better use of the materials milk and cheese, it minimises food waste and helps reduce the impact of our activities on the environment.

As the example shows, we consider all products that we cannot dispose as feed for humans or animals as losses. This is in line with the European definition of food waste. To stay focused on minimising food waste, Royal A-ware has also set an objective for this. (see objectives and achievements)

We distinguish between biological and technical materials. This distinction is based on the Ellen MacArthur Foundation's model (the butterfly model). It was further refined by the World Business Council for Sustainable Development (WBCSD) while developing the Circular Transition Indicators (CTI). This model makes an additional distinction within biological materials: edible and non-edible streams. This makes it more suitable for food businesses. The classification allows us to categorise the various (waste) streams within the company, thus increasing the degree of circularity.

Recycling waste

Another way to promote circularity is to reuse as many residual streams and waste as possible.

Based on the definition from the European Waste Directive, we use the following approach to define the scope of waste:

• It is not considered waste as long as a product remains in some form within Royal A-ware's operations.

• Any product leaving our organisation that is not a finished product but has an application as food or feed material is not considered waste.

• Waste must be classified according to the national BAL codes or Eural codes. It is important to understand what happens to the waste and how it is processed. This final step is crucial in determining the extent to which Royal A-ware's waste products are circular.

Renewable packaging

Royal A-ware is committed to using renewable packaging materials for consumer packaging. This means that packaging must be recyclable.

Recycling does not stand alone but is part of a chain approach. Currently, there is insufficient capacity at waste processors to collect recyclable materials. As a result, it is not yet possible for us to move towards 100 percent recyclability. Our focus is to offer only recycle-ready solutions.  

Objectives and achievements

The objective on recycle-ready packaging aligns with the material outflow of packaging and increases the share of use of circular materials. The objective regarding losses is in line with the substantive material inflows of cheese and milk. An objective on loss has been set for material outflow of waste. It is thus part of the recent policy to upcycle waste as much as possible or find new uses for waste and side streams. In doing so, our objectives contribute to better waste management. Recycle-ready packaging can be recycled into useful applications. And by reducing shrinkage, less waste needs to be collected, transported and processed.

For the year 2024, we are not yet able to report on the percentage of recyclable packaging. This is due to a lack of clarity around dates and differences in the applicable laws and regulations in European countries.

The use of recycle-ready packaging is essential to improve the circularity of raw materials and materials. Of our more than 80 packaging lines, a large portion is already capable of handling recycle-ready packaging. This makes achieving the 2025 target realistic.

The above purposes are voluntary and not prescribed by law. The objective on the material inflow high-risk raw materials (see due diligence) is, however, prescribed by law (EU regulation against deforestation).

We place great importance on reducing waste in the production process. Thanks to our efficient approach, our waste rate is low. While we have not yet reached our self-imposed target, it remains within reach.

How did our waste streams look in 2024?

Measures and actions: how we achieve our goals

General measures

To optimise the use of raw materials and minimise waste, we have taken the following measures:

• We are working to reduce and upcycle our waste streams. We want to separate waste better and work with waste service providers to see how waste can be upcycled. In doing so, we contribute to maximum resource utilisation. Also, upcycling waste streams can lead to a lower carbon footprint of waste streams, reducing our scope 3 greenhouse gas emissions.

• To use as little packaging material as possible, packaging is made smaller and foils thinner wherever possible. Or different packaging is chosen. For example, some packaging for slices of cheese has been replaced by a thinner film or by another type of packaging that requires less film.

• For decades, we have been striving to reduce food waste. We use as many side streams as possible to make a new product. This includes cheese left over after slicing and dicing, for example. All these side streams are checked manually to see if they meet the strict food safety requirements. These side streams are used for grated or melted cheese.

Actions in 2024

• We have accurately mapped our waste streams. This way, we have better insight and can take further steps to minimise and/or upcycle waste streams (e.g. chickpea moisture is no longer burned, but disposed of as raw material for animal feed).

• By 2024, the first packaging lines have been validated where consumer products are packaged with recycle-ready packaging.

• We applied a new method of keeping crates on pallets together. Previously, pallets were wrapped in wrapping film that was discarded after use. In 2024 we introduced an alternative in a thin plastic strap.

• We are working on a system that will give us a more detailed insight into loss of our cheese and white dairy.

How do we engage our stakeholders?

Employees from different divisions with knowledge of packaging were consulted for setting up the policy around packaging. The Sustainability Steering Group was also involved.

Environmental coordinators, waste service providers, the Procurement department and plant managers were involved in understanding the waste streams and the first steps towards a group-level policy.

For high-risk raw materials, see Due Diligence chapter.

Other information

• Consultation of (potentially) affected communities involved in raw material sourcing (upstream value chain) is part of the due diligence policy. (Potentially) affected communities in the downstream value chain were not consulted. The views of NGOs in this have been used as outcomes of the consultation.

• There is no overlap between reuse and recycled. Substantiation to avoid double counting is therefore not necessary.