2025 Climate-related Financial Disclosures Report

2025 Climate-related Financial Disclosures Report

Taking real steps to tackle climate change is a priority for Empire and Sobeys Inc. We are making progress in implementing our Climate Action Plan, which includes science-based emissions reduction targets, demonstrating our commitment to support Canada's transition to a low-carbon economy.

In year two of our Climate Action Plan: Phase 1, which runs from fiscal 2024 to fiscal 2026, we continued our focus on reducing Scope 1 and 2 emissions associated with refrigeration in our stores and warehouses. In total, we have invested approximately $91 million in more than 655 carbon-reduction projects across 155 company sites, including:

• Eliminating ozone-depleting refrigerants in our corporate locations;

• Upgrading to high-efficiency HVAC systems;

• Installing artificial intelligence systems to monitor energy performance; and

• Adding solar panels on selected offices.

The scale of decarbonizing our business and value chain is significant and will require transformational change. While our commitment is strong, our Climate Action Plan is dependent on geopolitical, economic, supply, regulatory, and other factors beyond the control of our business. We know we cannot achieve our Scope 3 emissions reductions alone. Collaboration, partnership, and action from suppliers, industry, government, and customers are needed to achieve a more sustainable and low-carbon future.

To learn more about how our Climate Action Plan connects with our broader sustainability strategy and approach,

please read our Fiscal 2025 Sustainable Business Report.

This climate scenario analysis included in this report covers Empire and Sobeys Inc. grocery and related business banners including corporate and franchise sites, excluding Farm Boy and Longo's. Greenhouse gas emission (GHG) data in this report is inclusive of all Empire and Sobeys Inc. grocery and related business banners¹. Data reflects our fiscal 2025, from May 5, 2024, to May 3, 2024, unless otherwise stated. All data has been reviewed internally but has not been externally assured. Future state, we intend to engage a third-party provider to obtain limited assurance relating to our Scope 1 and 2 emissions to increase the credibility of our disclosed data, including completing an assessment readiness process as an initial step.

This report includes disclosures aligned with and informed by the International Financial Reporting Standards (IFRS) S1 and S2, and the Task Force on Climate-Related Disclosures (TCFD). The regulatory landscape related to ESG disclosures continues to evolve, and we monitor these changes to ensure alignment with the standards issued by the International Sustainability Standards Board (ISSB). Empire intends to align with the recently released integrated Climate-related Disclosure Standards (CSDS 2) developed by the Canadian Sustainability Standards Board (CSSB). CSDS 2 largely adopts the International Sustainability Standards Board (ISSB) standards with minor modifications for the Canadian market. These standards remain voluntary for all Canadian companies, as of this report's publication. We will continue to update our risk assessment and reporting in line with evolving standards and requirements.

1. Site level gross square footage is from our 2021 carbon inventory (calendar year) and ther efore excludes new and rebranded locations. Sales data is sourced from the fiscal 2022 annual grocery sales with the caveat that the majority of blank values stem from "related businesses" (convenience, drug, fuel, liquor, support) and not all grocery categories. Total Insured Value was provided in May 2022, and is valid for 12 months. Analysis included in tr ansition risk assessment is based on the 2021 carbon inventor y (calendar year). The Metrics & Targets section in this report i s based on calendar year 2023 updates.

   
   
   Our Approach to Addressing Climate Change Governance

   • Assisting the board in fulfilling its responsibilities as they relate to corporate governance and social responsibility

   • Receiving and reviewing periodic reports on Empire's policies, activities, and progress pertaining to social responsibility

     initiatives, including sustainability, as well as updates on regulatory and general market developments relating to such matt ers

   • Providing oversight over material ESG issues, including climate change

    Frequency: Quarterly updates from the Senior Vice President, Legal and Sustainability

   • Assisting the board with oversight of policies and practices relating to integrity of financial and regulatory reporting and the

     enterprise risk management (ERM) framework and process

   • Reviewing the applicable metrics and information contained in the Sustainable Business Report, including climate-related data

   • Reviewing the status and adequacy of Empire's efforts to ensure our businesses are conducted and facilities operating in an

   ethical, legally compliant and socially responsible way

    Frequency: This Committee reviews all material ESG metrics, including our greenhouse gas emissions, once per year

   Audit Committee

Board Oversight

Our Sustainability Governance structure embeds climate leadership and accountability in our organization at both the board and management levels. This oversight spans all our operations, involving many leaders in initiative-based working groups and functional teams as summarized in the table below.

Sustainable Business Council

Consisting of our CEO and senior executives, the Executive Leadership Team provides strategic input, oversight and approval on

ESG issues, including climate change

 Frequency: Received updates from the Senior Vice President, Legal and Sustainability at least twice per year

Management

Oversight

Consisting of functional group senior business leaders with sustainability mandates. The purpose of the Council is to foster

collaboration on sustainability commitments, key initiatives, and reporting and disclosures by:

Functional Teams

We have established two working groups that advance initiatives and cross-functional collaboration to help achieve our Climate Action Plan and all sustainability related objectives.

 Frequency: Groups meet bimonthly to coordinate collaborative efforts on sustainability initiatives, providing updates to the Sustainable Business Council for appropriate action.

To learn more about our overall sustainability governance at Empire, please read our Fiscal 2025 Sustainable Business Report, which includes specific information on governance for related areas, including plastics and packaging, food waste, environmental management, and customer experience.

Climate change is one of the top priorities in our most recent materiality assessment, which informs our understanding of the environmental, social, and governance (ESG) issues that are most important to our stakeholders and will influence business success. In particular, stakeholders are interested in the steps we are taking to prepare for, adapt to, and mitigate against climate-related risks.

In our Climate Action Plan we have validated science-based targets, in line with the internationally recognized Science Based Targets initiative (SBTi) requirements, to significantly reduce our carbon footprint and align with the 2015 Paris Agreement goal of limiting global warming to 1.5°C by 2050. We plan to achieve net-zero by 2040 with approved science-based targets for our Scope 1 and 2 emissions and net-zero by 2050 for Scope 3 emissions, and we've set interim goals to make progress and drive continuous improvement. Our progress towards these goals is summarized in Metrics and Targets below.

We will explore ways to update the climate risk assessment for our operations in fiscal 2026. Our most recent assessment,

conducted in 2022, involved three key steps2:

As part of the assessment, we developed an initial inventory of climate-related risks and opportunities based on historical events that impacted our business, forward-looking trends, government policies, business strategy, and stakeholder interviews. We also surveyed stakeholders and held internal workshops. Based on this engagement, five physical risks and four transition risks and opportunities were prioritized and selected for scenario analysis. These risks are further described in the table Physical Risks, Potential Business Impacts, and Mitigation and Adaptation Approaches below. We assessed these impacts in alignment with our Enterprise Risk Management (ERM) framework.

We utilized scenario analysis as a tool in our climate risk assessment to understand the potential impacts of climate-related physical risks, transition risks, and opportunities on our operations3. The analysis was grounded in various scenarios that are standard in the industry and defined by the Representative Concentration Pathways (RCPs) and Shared Socioeconomic Pathways (SSPs) adopted by the IPCC4. Through the climate risk assessment, we identified a range of physical risks facing our business, including extreme heat, extreme weather events, and wildfires. We also identified transition risks related to refrigerants, renewable energy, food waste and climate integration and reporting. See the sections Scenario Analysis: Physical Risk, and Scenario Analysis: Transition Risks and Opportunities, below, for more information on our findings and actions to mitigate and adapt.

This scenario analysis process is iterative and will be revisited in alignment with our business planning cycles. We will continue to use the outcomes of this analysis to inform our financial planning and decision-making and have developed strategies to mitigate risks and impacts based on current and proposed initiatives. In our Climate Action Plan we focus on four mitigation areas most closely associated with emissions output: real estate, supply chain and logistics, sourcing and merchandising, and fuel sales. Additionally, we focus on climate integration and reporting spanning all areas. We discuss these mitigation areas in more detail in relation to transition risks and opportunities below.

1. Note that the transitional risk assessment referenced in this report included a full business assessment, encompassing our operations and value chain, but the physical risk

   assessment looked at our operations only.

2. Medium (5 to 10 years) and long-term (10 to 30 years) t ime horizons were considered for the physical and transitional ri sk assessment.

3. The RCPs and SSPs used for understanding changes in physical climate risks stem from the Intergovernmental Panel on Climat e Change's Fifth Assessment Report published in 2012

(IPCC AR5) and their Sixth Assessment Reports published in 2021 (IPCC AR6).