Sustainability Policy

Purpose

The purpose of this sustainability policy is to serve as a roadmap for more sustainable operations for the Festi Group and its subsidiaries (N1, Kronan, ELKO, Bakkinn vöruhótel and Festi fasteignir). The policy covers the most important environmental and climate impacts, social aspects and governance relevant to the Group at any given time and also includes key indicators and time-bound measurable targets. Nasdaq's internationally accepted environmental, social and governance (ESG) criteria form the basis of the strategy.

The policy forms the basis for the Group's vision and strategic focus to guide sustainability in decision-making when it comes to its future growth. In addition, the policy supports the UN Sustainable Development Goals (SDGs) that Festi emphasizes: gender equality (5), good employment and growth (8), increased equality (10), responsible consumption and production (12) and climate action (13).

The Group publishes annual sustainability results and reports in accordance with the Annual Accounts Act that builds on the foundations set out in this policy.

Responsibility

The Board of Directors and Executive Management team of Festi approves this policy which applies to the whole Group. The CEO of Festi is the owner of, and responsible for the policy and entrusts the Head of Strategy with the implementation of the policy in collaboration with key managers. This policy and objectives are reviewed annually, published on Festi's website and presented to all management and employees.

Environment

Festi and its subsidiaries are aware of the impact of their operations on the environment and seek to minimise its negative impacts as much as possible. The Group intends to do so first and foremost via:

• Responsible resource use.

• Mapping and setting clear targets for reducing greenhouse gas emissions (GHGs) – for both direct and indirect emissions (Scope 1, 2 and 3).

• Reducing purchases of packaging products, reduce waste emissions and increase efficiency in sorting recycling materials in a measurable manner.

• Looking for ways to minimize waste of products with limited shelf time.

• Supporting the circular economy and increasing recovery rates.

• Striving to offer customers more environmentally friendly products and services and increasing their share as much as possible.

• Mapping key sustainability risks from climate change and other related sustainability factors.

• Leveraging the power of the company's size to try to influence the supply chain to conduct even more responsible and sustainable production and business.

In addition to minimising impacts on the environment from direct operations, the company is working on a project in certified afforestation according to the quality requirements of Skógarkolefni.

Festi and its subsidiaries have signed the Climate Declaration of Festa and the City of Reykjavík and dedicated themselves to its objectives with clear actions. Festi measures and publishes the Group's carbon footprint in an annual report, which also reviews progress achieved during the year and next steps. The Group aims to achieve net zero emissions by 2040, which supports Iceland's goal of becoming carbon neutral the same year.

Social

It is important for Festi and its subsidiaries to be desirable workplaces that attract and retain qualified and reliable employees. It is assessed as the role of the Group and its management to:

• Promote equality in the workplace.

• Support management and staff to communicate fairly and objectively.

• Take into account different perspectives and allow each person's talents to be enjoyed.

• Not tolerate any form of bullying, violence or harassment.

• Endeavour to ensure the satisfaction, safety and well-being of employees with good working conditions as well as regular education and training.

To support this, the Group uses the following working tools, rules, policies and certifications:

• Festi and its subsidiaries are certified according to ÍST 85:2015 on equal pay and have a clear human resources policy, gender equality policy and equal pay policy.

• Workplace analyses are carried out regularly to measure well-being in the workplace.

• Regular conversations take place between staff and supervisors, to help increase transparency and improve communication.

• A zero-accident policy is run which states that no accidents are acceptable and safety and occupational safety courses are offered annually.

• The welfare of employees is supported by a welfare package that includes professional welfare services and grants with the aim of improving the quality of life for employees and contributing to improved mental and physical health.

The Group support‘s and respect the protection of international human rights in accordance with domestic law as well as the Universal Declaration of Human Rights in all its operations. The group respects the UN Convention on the Rights of the Child and rejects all human rights violations such as forced labour, including child labour. If a supplier, service provider or partner is found to have violated human rights, Festi and its subsidiaries reserve the right to terminate the business relationship immediately.

Governance

Festi and its subsidiaries are aware of the impact they have on society as a whole through their operations and place great emphasis on conducting healthy business practices in all respects. The customers are of paramount importance to the company and every effort is made to provide them with excellent service and products at the most affordable price. The Group likewise strives to build trusting relationships with suppliers and service providers and appreciates their role in the value chain. A special code of conduct for suppliers and service providers has been established to outline the Group's main expectations towards its suppliers and service providers.

Festi is a public limited liability company listed on the Iceland Stock Exchange and follows recognized guidelines on corporate governance issued by the Icelandic Chamber of Commerce, Nasdaq OMX Iceland hf. and the Confederation of Icelandic Employers. Festi complies with International Financial Reporting Standards (IFRS). Code of Conduct of Festi hf. apply to all operations of Festi and its subsidiaries, all employees as well as contractors who perform tasks for the Group.

Through good corporate governance, the Group provides a foundation for sound relations with stakeholders and promote objectivity, integrity, transparency and accountability in management. The Group's main stakeholders are:

• Festi shareholders.

• Customers.

• Staff.

• Suppliers and service providers.

• Society as a whole, especially communities in the vicinity of sales and service points of the management companies.

Other stakeholders include key regulators, legislators, investors, interest groups, the media and financial companies.

Festi and its subsidiaries are members of Festa, Centre for Sustainability and Corporate Social Responsibility. The companies manage their commitments and disseminate information on their progress through annual reports according to Nasdaq's ESG criteria in their annual accounts and social reports.