UNLOCKING THE FULL POTENTIAL OF IN-STORE
SHOPPING JOURNEYS IN A SUSTAINABLE WAY

OUR COMMITMENT TO PROGRESS IN THE FIELD OF SUSTAINABLE RETAIL INNOVATION

I’m pleased to present you with an overview of Cust2Mate’s commitment to sustainability within the retail grocery sector.

Designed to address the dual challenge of reducing food waste and adapting to changing consumer preferences, Cust2Mate leverages innovative technology to enhance the grocery shopping experience. By merging shopping list data with a smart shopping cart, we aim to redefine the way people shop, making the process more efficient, accessible, economical and environmental for both customers and retailers.

Cust2Mate is a leading provider of smart-cart platforms that unlock the full potential of every in-store shopping journey, through digitalization and personalization. We deliver superior shopper experiences, streamline store operations, and connect the online world with the physical store.

Our solutions are adapting to changing consumers needs and preferences We drive optimization of store operations, saving resources and time, while striving to minimize food waste.

In 2023, we made significant progress in advancing our groundbreaking Cust2Mate smart cart solution in new markets, growing our potential to serve a rapidly growing user base. In response to increasing demand, we successfully launched Cust2Mate in the United States and made significant inroads into Europe and Asia, aligned with our goal to meet evolving market needs with our advanced solution.

Our commitment to sustainability is a cornerstone of our approach and will perpetually be central to the way we do business. We aim to focus our impact on allowing our customers to reduce food waste, which accounts for 6% of global greenhouse gas emissions, while enabling them to optimize their resource use, save space and capital, and free up employees to other value-adding positions.  We also aim to improve the accessibility and enjoyability of the shopping experience, providing the shopper with the means to make more educated and relevant purchases, thereby promoting a more sustainable retail experience.  At the company level, we intend to focus our efforts on building a diverse and inclusive workforce, assessing our environmental impacts, and building a resilient and compliant supply chain.

As our first environment, social and governance (ESG) update, we intend to consistently expand our related disclosures on progress and initiatives, with the goal of demonstrating our strong commitment to sustainable business practices. Furthermore, we believe that this level of transparency is essential to conducting an ethical, fair and morally solid business.

Overall, this report is a testament to our belief that the Cust2Mate smart cart is not just a step towards making shopping better; it’s a pragmatic solution contributing to a more sustainable future for retail.

Sincerely,

Guy Mordoch, CEO, Cust2Mate

ABOUT CUST2MATE

Cust2Mate, a subsidiary of A2Z Smart Technologies Corp. (NASDAQ: AZ; TSXV: AZ), is a global leader in the smart cart industry. Our company’s headquarters are in Tel Aviv, Israel, with operations in the United States.

We deliver a solution designed to transform any traditional shopping cart into a smart cart. Our approach centers on a modular kit featuring an attachable panel that seamlessly retrofits onto any shopping cart. Local installation at the store ensures a smooth and efficient upgrade process. The key to our solution lies in true sensor fusion, incorporating AI, Scanner, Security Scale, RFID, and Anomaly Detection for an unparalleled level of accuracy and security.

With over 5,000 carts deployed and ordered, we’ve positioned ourselves as a leading developer and provider of smart shopping cart solutions.

OUR SMART CART

Cust2Mate’s Smart Cart is a secure, data-driven solution designed to enhance shopper engagement, streamline store operations, and bridge the gap between online and physical retail, enabling a more sustainable shopping experience.

Our smart cart:

• Minimizes friction in the shopping experience.
• Delivers personalized shopper interactions to maximize economic, social and environmental value for customers and retailers.
• Reduces shrinkage to the minimum.
• Automates in-store processes for efficiency and labor repurposing.
• Generates new revenue streams.
• Brings the online experience to the physical store.
• Optimizes overall store operations, including environmental and cost-saving benefits.
• Provides broad Business Insights based on shoppers’ behaviors.

2023 ECONOMIC PERFORMANCE

A2Z Cust2Mate has demonstrated strong financial performance and a positive growth trajectory. With its innovative technology and strategic partnerships, the company has experienced significant revenue growth in recent years. Furthermore, A2Z Cust2Mate’s expansion plans, market opportunities, and commitment to innovation position it for continued growth and value creation for investors. The company’s financial statements, performance metrics and disclosures are accessible in the Investors Page on our website: www.cust2mate.com/investors

OUR STRATEGY & MISSION

Our mission is to be the global leading provider of smart-cart platforms that unlock the full potential of every in-store shopping journey, through digitalization and personalization.

Delivering superior shopper experiences, streamlining store operations, and connecting the online world with the physical store, is what we do.

Furthermore, as its subsidiary, Cust2Mate shares A2Z’s vision of providing innovative and user-friendly technology solutions that enhance people’s lives and improve business efficiency.

SUSTAINABLE SHOPPING STARTS HERE

Cust2Mate actively promotes sustainability in the retail grocery supply chain through our platform. By working to optimize food supply chains and reduce waste, our smart carts enable retailers to enhance profitability while minimizing environmental impacts, for instance, by incorporating solutions in the cart to read expiration codes in real time to eliminate unnecessary waste. In addition, we seek to maximize economic benefits to the shopper by granting them full transparency into transactional data in real-time, putting them in control and granting them the ability to make smarter choices. In addition, the smart cart’s social impact is to empower shoppers to make healthier, informed and environmentally conscious decisions regarding their purchases by scanning QR codes on items to provide nutritional, specific dietary, and manufacturing-related information. Furthermore, we cut shipping emissions on the purchase of new shopping carts by deploying modular carts, which are designed to retrofit existing shopping carts in-store.

At the company level, we are committed to promoting a diverse, fair, and inclusive workplace and to improving our environmental actions in the office.

To ensure that the topic of sustainability is integrated into every aspect of the way we do business at Cust2Mate, we have appointed our VP of Product Management as a subject-matter expert and champion, who is responsible for overseeing and shaping our strategy and initiatives on the topic.

OUR AREAS OF IMPACT 

We believe that we have the greatest potential impact on the following material topics, forming the basis for our corporate ESG framework and ensuring the continued success of our business:

Sustainable Manufacturing/Circularity: This involves the use of recycled materials, reducing energy consumption, and minimizing waste in the production of smart carts.

Empowering Sustainable Retail Tech Solutions: Our modular cart kits retrofit any existing shopping carts, eliminating the emissions and costs incurred from shipping carts directly to customers.

Promoting Sustainable Food Systems: Smart carts should be designed to promote sustainability in the retail grocery supply chain, reducing food waste, allowing shoppers to make conscious choices by providing additional data on the items, and increasing operational efficiency,

Social Impact: This includes the impact of the smart carts on the overall shopping experience, customer convenience, and accessibility for all customers, including economic accessibility.

CUST2MATES’S CORE COMPANY VALUES

1. 1. Customer-centricity – We know and understand our customers and always have our customers and their business needs in mind in everything we develop, build, and deliver.
2. Excellence – We always strive for professionalism and excellence. Keeping an open mind, challenging assumptions, aiming for continuous improvement, and aspiring for the highest quality are at the heart of everything we do.
3. Innovation – We strive for breakthrough ideas to develop unique and creative solutions to complex challenges, while challenging the norm, and taking calculated risks to drive change and measurable impact.
4. Passion – We are passionate, enthusiastic, and proud of what we do and believe that it is the only way to go. We encourage and value the “can-do” approach, as individuals and as a team.
5. Collaboration – We believe in the power of trust, complementing and supporting each other, and working towards common goals – this is what makes us a winning team.
6. Inclusion and Diversity – We value what makes each member of our team unique and distinctive.
7. Integrity – We treat our employees, customers, partners and shareholders with great respect, integrity, and good faith.

ENVIRONMENT

As we continue to develop our smart cart solution, we have several key environmental benefits in mind that we have set our sights on delivering to both our customers and shoppers at large. Some of those environmental benefits include:

• Removing the need to purchase new carts to embrace novel retail tech solutions: Cust2Mate’s smart cart solution can be retrofitted onto any cart as it is an attachable panel that can be clipped-on to existing carts. Furthermore, the ability to locally retrofit existing carts with modular parts makes mass production faster and more efficient, while reducing shipping emissions and keeping production close to the source.
• Advancing carbon footprint reduction for customers and shoppers: Encouraging local shopping through smart label promotions; promoting cashless transactions and .
• Minimizing food waste and maximizing in-store operational efficiency: Data-driven insights about shopping patterns can help retailers minimize waste and unnecessary inventory orders, while maximizing their understanding of shopper preferences, and enabling optimized offerings based on available stock. In addition, dynamic pricing based on unique data provided by the scanned barcode can promote products nearing their expiration dates.
  • According to 2023 statistics, approximately 30 percent of food in American grocery stores is thrown away, with retail stores generating about 16 billion pounds of food waste every year. Wasted food from the retail sector is valued at about twice the amount of profit from food sales.
• Promoting circularity: The intention is that all the components of our smart cart will be recyclable. We purchase durable materials to manufacture resilient products with long-use phases in their lifecycle.

SOCIAL

Providing shoppers with technologies to make their experience more enjoyable, accessible, and universal is how Cust2Mate expresses its social impact. Currently, some of the main areas of social impact that we’ve identified include:

• Easier, more accessible shopping: Customers can process payments directly on- cart, eliminating long checkout lines, and making their shopping experience seamless. In addition, several accessibility features are integrated into the cart’s interface, such as a large screen and font options for easier reading, sound feedback and various color contrast options for optimal viewing.
• Encouraging better, more economical shopping decisions: Our smart carts are a retail media platform. Based on shoppers’ profiles, purchase history, real-time activity, and in-store location, we enable the retailer to tailor and provide personalized promotions, discounts, and coupons, making shopping more affordable and rewarding. With a user-friendly interface, including a loyalty club connection, tailored shopping lists, transaction management, information services, and more, shopping becomes frictionless, more efficient, and less stressful.
• Putting health first: Cust2Mate smart carts provide instant and detailed information on products by scanning QR codes, including allergen warnings, ingredients, nutritional value, and sourcing data. This can help shoppers make better choices, good for their health and their wallet.

OUR CUSTOMERS

We are committed to encouraging accessibility to our solution for retailers by offering comfortable subscription and leasing-based usage models to our customers. According to this framework, Cust2Mate retains ownership of the cart. We have a revenue share model on retail media, coupons, and incremental value generated by the Cust2Mate smart cart. We enable our customers to access upselling opportunities by monetizing unique data collected by the Cust2Mate smart cart system, which is then transformed into actionable insights and intelligence and leveraged to provide targeted and personalized offerings.

Our smart carts are already deployed in the market globally and bring impact to our customers:

• Serving thousands of shoppers every day, and scaling fast.
• Additional stores can be implemented in 1 day.
• 75% returning customers (shoppers).
• Average basket size up-to 75% bigger than regular carts & Self-Checkout.
• In our pilot: Up-to 5 cashier lines were removed.
• Average items in the cart ~43.
• Shoppers satisfaction achieving a 4.3 out 5 rating.

OPEN API

Cust2Mate offers an open API, providing opportunities for creative solutions and new experiences for shoppers. Retailers can enhance the shopper experience by integrating third party apps to generate valuable data insights and incremental revenue. This allows developers to integrate and extend the capabilities of Cust2Mate’s solution, suiting it to the specific needs of the business. Seamlessly integrate our smart shopping cart technology with your applications, opening a world of possibilities for innovation, customization and personalized engagement.

SECURE SOLUTION FOR SHRINKAGE

Retail shrinkage is a huge and growing problem for retailers. Cust2Mate provides the most comprehensive security solution to battle shrinkage. Our solution consists of 5 elements: Barcode scanner, Computer vision, Security scale, RFID reader and anomaly detection for suspicious activities, which each complement each other to create an all round solution to shoplifting and fraud. This approach lends to a reduction in retail shrinkage without compromising on the overall the shopping experience.

OUR EMPLOYEES

As of 2023, Cust2Mate has 32 employees, with 30 based in Israel and 2 in the U.S.

We work towards the promotion of equal female employment and representation in the company. This is a key priority for our business and is clearly expressed in our hiring and employment practices. As such, 35% of our employees are women, and they account for 37.5% of management positions. In addition, 3% of women in the company are among the highest earners .

Furthermore, we seek to hire and foster professional capabilities for a diverse and inclusive workforce. Of our 30 employees in Israel, 13% are from Ultra-Orthodox Jewish communities that are underrepresented in the professional and high-tech sectors.

In terms of the benefits and conditions of employment, each of our employees is provided with a labor contract that details their working conditions and individual terms of employment. A formal written follow-up is provided to detail their expected working hours and leave days. The company provides employees with a range of employment benefits, including consultation for pension planning. 

 COMMITMENT TO ANTI-HARASSMENT

The company strongly prohibits all acts of harassment and discrimination, including sexual harassment. We uphold a strict Sexual Harassment Policy, and employees are encouraged to submit any harassment-related claims or concerns directly to our HR manager.

HEALTH & SAFETY

There is an appointed health & safety officer, and the company upholds a safety policy. 

GOVERNANCE

CODE OF BUSINESS CONDUCT & ETHICS

Cust2Mate’s parent company, A2Z, upholds a Code of Business Conduct and Ethics that applies to the company and is publicly accessible on Cust2Mate’s website. The goal of the Code is to guide company directors, officers, and employees’ ethical and legal decision-making as it relates to the company’s business.

The board of directors and its committees are responsible for overarching oversight and administration of the Code, while ongoing responsibility for its implementation is assigned to the Chief Financial Officer and/or a compliance officer.

According to the Code, the company’s ethical commitments include the following areas:

• Compliance with laws, rules, and regulations
• Conflicts of interest
• Insider trading
• Confidentiality
• Honest and ethical conduct and fair dealing
• Protection and proper use of corporate assets
• Corporate opportunities
• Political contributions/gifts
• Bribes, kickback, and other improper payments
• Accuracy of records
• Quality of public disclosures

The Code is communicated to directors, officers, and employees when they begin their term with the company, and periodically, as necessary, they must sign off on their acknowledgment of its contents.

As a grievance mechanism for concerns or questions regarding the Code and its implementation, employees can submit anonymous claims  according to a designated whistleblower procedure. Furthermore, we strictly forbid retaliation against any employee who submits suspected violations or concerns in good faith.

During their orientation, new employees are provided guidance on our ethical expectations and the Code of Conduct. In addition, employees have access to enrichment lectures on the Code, and ethical aspects are addressed in feedback and evaluation conversations with employees.

BOARD GOVERNANCE

Cust2Mate’s board governance is characterized by a commitment to transparency, accountability, and oversight. Our leadership seeks to foster an environment that encourages diverse perspectives, ensuring robust decision-making processes that align with the company’s long-term vision and values.

BOARD OF DIRECTORS COMMITTEES

Cust2Mate’s board of directors is made up of three members.

• Bentsur Joseph – Chairman. Also, Chairman of A2Z
• Gadi Graus – President. Also, President of A2Z
• Ron Kohanov – Representative of Buchwalter who owns ~20% of Cust2Mate.

There is a separation between the positions of CEO and chairman of the board, and these individuals are not related. In addition, all members of the board satisfy the requirement of independence in not having to report to the company CEO. The chairman of the board does not serve in any other position in the company and does not participate in company management.

More than half of the directors possess an education, expertise and/or skills that are directly related to the company’s core business areas.

Cust2Mate also has an advisory board of 2 members:

• Steve Robinson – With over 30 years of experience in supply chain and operations, Steve brings a deep understanding of the retail industry from his roles at Walmart and Starbucks
• Scott Ukrop – Scott brings 35 years of extensive experience in grocery retail, consumer packaged goods, venture capital, and strategic advisory services.

Corporate governance committees include:

• Nominating and Corporate Governance Committee: The Nominating Committee selects qualified candidates for A2Z’s board of directors, ensuring a diverse and effective leadership team.
• Compensation Committee: The Compensation Committee at A2Z oversees executive compensation, ensuring alignment with company goals and industry benchmarks to attract, retain, and motivate top talent.
• Audit Committee: Oversees financial reporting, risk management, and compliance to maintain the highest standards of financial integrity and transparency at A2Z.

The effectiveness of the board of directors is examined through structured annual evaluations and reviews, based on the directors’ achievement of certain performance goals and key performance indicators.

BOARD DIVERSITY

Currently, no women serve on the board of directors.

However, the Nominating Committee Charter outlines the responsibilities and processes for selecting qualified candidates for A2Z’s board of directors, working to ensure a diverse and effective leadership team.

COMPANY LEADERSHIP

Details on Cust2Mate Leadership team can be found on the company’s website: www.cust2mate.com/Company

SUPPLY CHAIN

Cust2Mate aims to adopt a proactive and sustainable approach to supply chain management, prioritizing close collaboration with our suppliers. By ensuring a resilient supply chain, Cust2Mate ensures the timely delivery of innovative smart cart solutions.

Cust2Mate relies on third-party manufacturers for its components and manufacturing processes. We are currently working on developing supply chain policies to govern our relationships with suppliers, including regarding ESG aspects. For instance, we expect our suppliers to have ISO 9001 certification for quality standards and we are working to develop a supplier sustainability questionnaire to gauge and audit the performance of our suppliers.

Furthermore, when purchasing hardware items, we carefully select materials that are not scarce and are available in lasting supply to ensure our business continuity and economic accessibility, while minimizing volatility in production costs. Furthermore, we are working to improve the environmental sustainability of our technology when it nears the end of life.

PRIVACY & CYBERSECURITY

Privacy and cybersecurity are very important to us at Cust2Mate, and we implement robust measures to safeguard customer data and ensure a secure shopping experience. We have adopted a comprehensive approach based  on industry best practices, reflecting our commitment to maintaining the highest standards of data security and privacy protection.

The company has implemented security measures to protect customer data from unauthorized access or breaches. Additionally, Cust2Mate complies with industry regulations and standards to maintain the confidentiality and integrity of customer information. We continuously invest in advanced technologies and protocols to ensure the highest level of data protection.

Cust2Mate’s smart cart doesn’t save any personal or sensitive information about shoppers. We are committed to meeting the industry standard of data security and we are in the process of meeting the requirements of ISO 27001.

Cust2Mate believes that it demonstrates greater privacy with its advanced smart cart technology for retailers looking to enhance their customer experience and increase revenue.

A2Z upholds a Privacy Policy that is publicly available.

ABOUT THIS ESG UPDATE

This is Cust2Mate’s first ESG update covering its activities for 2023. We aim to continuously improve our ESG updates to reflect relevant data on our performance and commit to openly and transparently sharing these reports with our stakeholders. As our ESG program grows, we plan to continuously improve our level of disclosure.

For questions, concerns, or inquiries regarding this update, please contact: Gal Gonen, VP of Product and ESG Champion gal.g@cust2mate.com