Climate Related Financial Disclosures
Introduction
The Save Mart Companies 2024 Task Force on Climate-Related Financial Disclosures (TCFD)-aligned report outlines our inaugural assessment of climate-related risks and opportunities across our operations and value chain. This disclosure has been produced in good faith, in accordance with the disclosure requirements of Section 38533 of the California Health and Safety Code, as amended by California Senate Bill 261.
With over 194 grocery stores across the West Coast, the Save Mart Companies is made up of our Save Mart, Lucky, FoodMaxx, Roth’s and Chuck’s retail stores. We enjoy deep rooted relationships with local farmers and producers to ensure fresh and local products for customers.
At the time of publishing, The Save Mart Companies is actively measuring Scope 1 and 2 Greenhouse Gas Emissions (“GHG) across our operations, which will help management better assess emissions related risks and opportunities going forward. This disclosure is aligned with the Final Report of Recommendations of the Task Force on Climate-related Financial Disclosures (June, 2017) and the Implementation Recommendations (October, 2021) and has been prepared in good faith based on the most readily available guidance provided by the California Air Resources Board (“CARB”). Our 2025 GHG emissions are omitted from this report and will be included in a separate disclosure.
Governance
Our Board of Directors has ultimate responsibility for the oversight of climate-related risks and opportunities; They oversee the management of the company, including reviewing policies and practices with respect to risk assessment and risk management. As we move forward our Board will be responsible for reviewing and actioning any findings from our climate risk assessment and carefully considering how to integrate climate risks and opportunities into our broader corporate strategy.
Led by our Chief Executive Officer (CEO), our existing risk management process allows material risks to be identified and appropriately escalated. The governance structure of the ERM process ensures a regular review of relevant risks, which are evaluated by our Design, Construction, and Facilities Group and escalated to the CEO and Executive Leadership team as required. This is repeated on an annual basis and can also be updated aftershocks such as extreme weather events. Following the completion of The Save Mart Companies’ baseline Scope 1 and 2 emissions, priority areas and risks can be updated.
Strategy
Physical Risk
The Save Mart Companies defines our time horizons as follows for business planning purposes: Short- (0-1 year) and long-term (1-10 years).
We recognize that some of our risks play out across longer time horizons, and we deploy forward-looking thinking beyond our business planning horizons where relevant.
The Save Mart Companies has segmented physical risks into two categories: our own operations (Offices and Stores) across the West Coast and broader climate-related risks related to our supply chain. We face the following risks across these two types of business operations:
Our Operations: Increasing extreme precipitation, heatwaves, and other severe weather impacts will disrupt operations across our operations and increase our operational costs as utility costs increase from climate-related shocks and stresses. Damages as a result of acute weather can also impact the wider community and increase insurance premiums.
Supply Chain: Rising average temperatures, higher levels of water stress and extreme weather events can result in a supply chain disruption. Changing weather patterns can reduce the yields of produce, which might reduce consumer choice, increase costs and impact our revenue.
More detail on specific physical risks is in the table below:
| Category | Risk | Description | Time Horizons |
|---|---|---|---|
| Operations and Supply Chain |
Acute: Extreme weather events |
Operations are vulnerable to Extreme Weather events, such as Riverine flooding, Wildfires, Heatwaves and Storms. An increased intensity and frequency of extreme weather events can disrupt our supply chains (by decreasing crop yields and the production capacity), impact our distribution network and cause damages or wider community impacts at our store locations, impacting operating costs. |
Short term |
| Operations and Supply Chain |
Chronic: Water Stress and Groundwater table decline |
Exposure to high levels or water stress and groundwater table decline can increase utility costs and restrict water-intensive operations. Heightened water stress across the West Coast can also impact our water dependent supply chain. |
Long term |
| Operations and Supply Chain |
Chronic: Water Stress and Groundwater table decline |
Exposure to high levels or water stress and groundwater table decline can increase utility costs and restrict water-intensive operations. Heightened water stress across the West Coast can also impact our water dependent supply chain. |
|
| Operations and Supply Chain |
Chronic: Average temperature Rise |
Rising temperature and changing weather patterns can change the production capacity and predictability of our supply chain, impacting our operating costs. It can also increase our demand for refrigeration and associated utilities. |
Long term |
| Theme |
Risk |
Description of Existing Risk |
Time Horizons |
|---|---|---|---|
| Policy |
HFC refrigerant replacement mandates |
Replacement of HFC-based refrigerants imposes significant capital cost burden on businesses with large physical footprints. |
Short term |
| Market |
Availability and/or increased cost of raw materials |
Emerging regulation may increase costs throughout our supply chain resulting in challenges in procuring products such as raw materials. |
Medium term |
| Technology |
Transition to low-carbon technologies |
Decarbonisation initiatives and the transition to lower-emission technology and energy sources could increase operating costs |
Long term |
Transition Risks
With operations across the West Coast, The Save Mart Companies might be exposed to shifts in policy, technology and markets.
Climate-Related Opportunities
The Save Mart Companies has a proud legacy of making life better for people in the communities we serve and is dedicated to reducing our carbon footprint, conserving water, and optimizing energy use through responsible business practices. Whilst high level climate-related opportunities are outlined below, The Save Mart Companies is in the process of measuring our GHG emissions across Scope 1 and 2, which will help us better understand our emissions-related risks and opportunities going forward.
| Theme |
Opportunity |
Description of Existing Opportunity |
Time Horizons |
|---|---|---|---|
| Market |
Changing customer behavior |
Consumer preferences to prioritize local and low emission products could increase potential revenues for The Save Mart Companies who have established relationships with local suppliers and farmers. |
Medium term |
| Technology |
Transition to low-carbon technologies |
Transitioning to renewable and clean energy sources could result in cost savings through increased efficiencies through LED retrofits and water metering. |
Long term |
| Technology |
Transition to low-carbon technologies |
Decarbonisation initiatives and the transition to lower-emission technology and energy sources could increase operating costs |
Long term |
Identified climate-related risks and opportunities will be assessed by our Director of Design, Facilities, and Engineering and integrated into our existing risk management process and eventually, our business strategy. The risk that has most impacted our strategy and financial planning is the required phase out of HFC refrigerants at our stores across California. The capital costs associated with cooling system replacements and upgrades has placed a significant burden upon our industry, with high levels of same store profitability needed to justify continued operations. This can be particularly challenging in areas where our stores are essential to community well-being.
With an existing commitment to reduce our carbon footprint, the measurement of our 2025 GHG Emissions will help us better understand our emissions-related risks and target actionable decarbonisation levers to mitigate our risks.
Physical Risk Scenario Analysis
The Save Mart Companies evaluated physical risks from WRI’s Aqueduct tool against three Intergovernmental Panel on Climate Change (IPCC) Representative Concentration Pathway (RCP) scenarios:
RCP 2.6: Depicting an optimistic scenario where society decarbonizes quickly and global warming is limited
RCP 7.0: a “business as usual” (“BAU”) scenario where current policies are implemented and global warming is accelerated
RCP 8.5: a pessimistic scenario where emissions continue to increase, leading to very high levels of warming.
In BAU and Pessimistic scenarios, our exposure and vulnerability to water stress increases, impacting our operations and supply chain.
Transition risk scenario analysis
The Save Mart Companies is considering the potential impacts associated with the International Energy Agency (IEA’s) scenarios, including:
Net zero by 2050 scenario, in which major economies and industries decarbonize at a pace sufficient to keep global warming below 1.5C above preindustrial levels by 2100
Announced pledges scenario, in which countries ratify and pass laws to support the achievement of their Nationally Defined Contributions (NDCs) from the 2016 Paris Agreement
Stated policies scenario, in which all laws in place today remain (this is the most pessimistic scenario evaluated)
The Save Mart Companies does not currently have climate-related targets that are aligned with a scenario. We are currently developing a GHG footprint for our own operations to assess alignment with IEA’s Net Zero scenario and better understand our emissions-related risks.
Risk Management
Physical risks
The Save Mart Companies used WRI’s Aqueduct Water Risk Atlas, Climate Central’s Coastal Risk Screening Tool, Environmental Protection Agency Heat Wave Map, California Department of Forestry and Fire Protection Fire Hazard Severity Zone Map and San Francisco PUC’s Flood Risk Maps to assess operations for physical risk exposure, along with data from past facility and supplier interruptions.
Transition risks
We conducted a qualitative evaluation of transition risks and are developing a Scope 1-2 GHG footprint to support a broader evaluation of transition risks against those commonly cited across our industry, particularly on the West Coast. We also evaluate industry peer disclosures and trends to surface additional transition risks for evaluation and management.
Physical risk mitigation
In line with our existing ERM process, our office of Design, Facilities, and Engineering is primarily responsible for developing mitigation strategies to respond to material physical risks. Examples include screening new store locations for potential climate related risks and creating emergency contingency plans, where appropriate, in the event of shocks like extreme weather events.
Transition Risk Mitigation
The measurement of our 2025 GHG Emissions will help us better understand our emissions-related risks and opportunities. This will allow us to identify appropriate mitigation measures and implement them across our value chain, as required.
The Save Mart Companies will conduct an updated climate risk assessment biennially, in line with CARB’s disclosure requirements, to assess new locations and operations against climate-related risks. Our CEO’s team and the Board will review findings and incorporate them into The Save Mart Companies’ risk register.
Metrics and Targets
While The Save Mart Companies has not yet established formal GHG reduction targets, we commit to:
Completing baseline GHG inventory
Reporting scope 1 and 2 emissions annually on progress starting in 2026, on 2025 data