DANONE Responsible Sourcing Program RESPECT Improving Knowledge & Capabilities

AIM Progress Meeting Amadeo ADELL,Global SSD Indirect Spend Director October 19th, Morristown

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AGENDA

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Company Presentation

Our dual Economic & Social Business Approach

RESPECT Program

Process

Organizational structure

Building Internal & External Awareness & Knowledge

DANONE unique Mission

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For All

Nature

Health

People

Portfolio focusing on food categories that are good for health

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Consuming yoghurts is at the heart of nutritional recommendations and contributes to a balanced diet

Infant nutrition provides specialized products to meet the specific nutritional needs of babies from 0-3

Medical Nutrition products provide solutions to fight against malnutrition in the elderly

Water is the only drink essential to human life

A global presence with strong market positions

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101,885 employees worldwide - 186 plants

SALES by BUSINESS LINE

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€3.7 Billion +10.7%* growth in 2011

No. 2 worldwide Baby Nutrition

€3.2 Billion +15.7%* growth in 2011

No. 2 worldwide (by volume)

Waters

€1.2 Billion +9.4%* growth in 2011

No. 1 in Europe Medical Nutrition

*Like-for-like sales growth by division

19% 17%

6%

58%

€19,3 bln

€11.2 Billion +4.6%* growth in 2011

No. 1 worldwide Fresh Dairy Products

Economic & Social Dual Business Approach

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“Corporate responsibility does not end at the factory gate or at the office door. The jobs we

create are essential to people’s lives. The energy and raw materials we consume change

the shape of our planet.

Public opinion is there to remind us of our responsibility in the industrial world of today”.

Antoine Riboud, 1972 Marseille Speech Danone’ Former CEO

Corporate programm Leading and managing sustainable development across Danone and all country business units

RESPONSIBLE SOURCING MILESTONES

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Dual Economic and Social Project

Franck Riboud, CEO: “This "dual project" was born of a simple fact that remains just as true today: a company cannot succeed in the long run if it turns its back on the society it is a part of, if it only looks to its short-term economic gain.”

2001

Launch of DANONE Way

Definition of the Fundamental Social Principles

2003

DANONE joins UN Global Compact Sustainable Agriculture Initiative

2002

Global Supplier Risk Identification policy

2006

Operational launch of RESPECT Program DANONE Dairy & Waters

2005

Pilot phase of RESPECT Program

2007

DANONE co-created AIM-Progress

2008

DIALERT available to DANONE suppliers

40 external social audits

First suppliers registered on the SEDEX platform

2009

Deployment of RESPECT Program by Baby & Medical

2005 – 2007 :

* Total of 250 suppliers on Supplier Risk Mapping Scope for DANONE Dairy & Waters

*50 external social audits

2010

Common cross-divisional scope criteria (Dairy, Waters, Baby&Medical)

1317 suppliers on Sedex scope

90 external audits

2012

3500 suppliers to be evaluated on Sedex

115 external social audits

Business Integrity Benchmark within

AIM-Progress

2011

2850 suppliers on Sedex scope

95 external social audits

Child &Forced Labor audit NCs become critical for DANONE

Participation in AIM Progress Mutual Recognition

Introduction of : - New Environmental component (Fundamental Environmental Principles) - New Ethical component (Principles of Business Ethics)

95 suppliers registered on Sedex

57 external social audits

DANONE WAY: 16 fundamentals for a SUSTAINABLE BUSINESS

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Equal Opportunity & Diversity

Safety, Health & Working Conditions

Employees Involvement & Social Dialogue

Working Time & Organisation

Human Rights

Human Relations

Pre-requisite: minimum working age and no forced labor

Learning

Individual Development

Business Ethics

Suppliers & Business Partners CSR

Shared Value Creation through Community Involvement Governance

Environmental Footprint

Environmental Risks

Raw Material Production/Supply

Packaging Impact Environment

Quality Management

Nutrition & Health Standards for products

Standards on Nutrition & Health Marketing & Communication Consumers

Suppliers & Business Partners CSR

Responsible Sourcing Program

Dedicated Management Tools: Internal Audits for CBUs

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Danone Way is audited every year in CBUs by the Internal audit service and action plan is required at GM’s level to upgrade the level

Level

and pointsLevel Definition

level 1

0 pointsThe CBU EXCO is aware of RESPECT approach

level 2

10 points

The CBU identifies the suppliers that are at risk

regarding CSR issues

level 3

20 points

The CBU leads necessary actions to put suppliers CSR

related risks under control

level 4

30 points

The CBU continuously manages RESPECT approach

and builds common initiatives with its Dan'affiliates to

leverage CSR principles

The risk mapping of all scoped suppliers is done via Sedex Risk Assessment platform. It is

provided by the CBU RESPECT coordinator, previously trained to Sedex Risk Assessment

through dedicated Sedex training session.

For suppliers that are part of the "watch list" as agreed with WWBU RESPECT coordinator,

external SMETA audits (including follow-up audits) are done and necessary action plans are

implemented within the timing agreed with the supplier.

All new suppliers, matching scope rules, are evaluated through the Sedex Risk Assessment

platform before signature of contract.

The CBU continuously manages all steps of previous levels. Sedex Risk Assessment, audits

planning and actions plans are managed on-going.

The CBU manages its Dan'affiliates (raw milk, wall to wall, exclusive or dependant suppliers)

through dedicated projects to continuoulsy improve their safety, working conditions, employability

and economical durability.

All suppliers contracts signed before January 2010 include the Fundamental Social Principles

and all suppliers contracts signed from January 2010 include the Fundamental Sustainability

Principles (Social + Environmental + Business Ethics).

SSD manager in charge of coordinating and reporting RESPECT approach among SSD team is

identified (CBU RESPECT coordinator)

The suppliers to be registered on Sedex Risk Assessment platform, following SSD WWBU

scope rules, are identified and their registration/evaluation is on going.

Risks of Child Labor or Forced Labor, when suspected by Sedex Risk Assessment, are put

under control

Description

The EXCO knows about RESPECT approach : principles, risks associated to suppliers CSR

issues, added value and overall process (EXCO presentation, toolkit)

Among Sustainable Leaders in Food & Beverage sector

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Danone has been part of the DJSI since the index creation in 1999

Confirmation of strong increase since 2 years despite a more demanding referential

86

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DANONE DJSI scores by Economic criteria 2012

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76 76

50

62

7771 74

7986

90 9097 98 97

90 92100

90

100 100 97

0

20

40

60

80

100

120

Lowest score

Danone's score

Best score

2012 Best Improvements vs 2011:

• Best in class for Supply Chain management (RESPECT Responsible Sourcing Program)

• Health and Nutrition (2nd year in a row)

• Innovation Management (2nd year in a row)

• Emerging markets

2013 Challenge : • Codes of Conduct/Corruption/Bribery

/Compliance

RESPECT PROCESS & Scope

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RISKY SUPPLIERS: 1. Overall High Risk Rating on Sedex 2. High risk rating in the Labor Section of SAQ 3. Buyer perception (based on internal criteria)

Category Scope Criteria

Raws & Packs (excluding Raw milk) TO > 50 k€

CAPEX , Logistics Suppliers TO > 500 K€ OR a multi-annual contract

Promotional Items All

Suppliers operating in Danone’s buildings All

Suppliers with high identification with Danone All

Other Indirect Materials suppliers TO > 500 K€ AND a multi-annual contract

SSD Board Strong Involvement in RESPECT Program

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Sourcing & Supplier Development (SSD) Board is strongly committed to Responsible Sourcing

RESPECT Program is the first point of the agenda of every SSD Board Meeting done every 6 weeks, to follow the progress

SSD Dairy Mision : Around the world, we are a team of business developers trusted for creating

distinctive and sustainable sourcing models by connecting

suppliers, Danone & our consumers to maximize value.

Results driven by TOP Management Involvement and networking animation

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3 Divisional Coordinators

Quarterly RESPECT Committee

VP SSD Divisions VP HR

Logistics

Functional Ing.

Services

Milk ingredients

Sugar & Texturing

Capex

Packaging Fruits

35 Respect Champions CBUs

11 Respect Champions Categories

Improving Knowledge & Capabilities: Animation of RESPECT

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Knowledge & Capabilities for our WW structure:

Buyer onboarding: Respect Introductory training

Sedex trainings, including:

Site Administrator Training Risk Assessment Training Reporting Training

Regular ‘custom made’ internal trainings (ex.SMETA audits)

Attendance of Maplecroft webinars for building overall awareness on non-financial risks (Human rights, Industry risks, etc.)

Monthly reports driving attention to results

Risk monitoring status Audit status/issues/action plans Best Practices in CBU/Categories/WW Category/CBU Respect Champion of the Month

Monthly Confcalls, allowing issue discussion

RESPECT Community on Danone Social Network

The place where we share ideas

RESPECT VIDEO: to empower and motivate Danoners

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Improving Knowledge & Capabilities: Animation of RESPECT

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Knowledge & Capabilities for our Suppliers:

Building supplier awareness before contracting Fundamental Sustainable Principles Respect Program presentation Sedex registration for all new suppliers

Regular invitations to participate in events organized by Sedex & AIM Progress

Supplier Confcalls dedicated to RESPECT Program

Special RESPECT Days organized locally by CBUs

Improving Knowledge & Capabilities: Supplier DAYS

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Supplier Empowerment Events organized WW:

Supplier Days organized in Indonesia: RESPECT+WISE : building awareness by our own example

Dedicated SEDEX Days in Japan

RESPECT Program Supplier Confcalls in USA & Canada

SMETA Audit Days : building awareness, negotiating audit prices, encouraging suppliers to directly book their audits

RESPECT days in Mexico : strong Supplier involvement leading to sustainable relationships

OUR AMBITIONS

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Social

Environmental Economic

Strenghten the 3 pillars together with our suppliers

And stay on the podium !

Economic

Key learning / Sucess factors

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• Embed Responsible Sourcing in a company initiative

First invest in your Buyers population they are the ambassadors in front of suppliers !

Carefully frame the approach taking into account business risk & ressources you will put behind (otherwise don’t start!)

Follow the programm at high level in your Purchasing organisation

Communicate frequenly (Newsletters,Webinar,Reward )

Make it funny !!!

Danone is far to be perfect can you help us ??

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• Who is already in DJSI ? How do you managed the new questionnaire concerning Supply Chain Management part?

Does your Program for Sustainable sourcing cover all of your suppliers, or you limit risk monitoring by certain scope criteria?

How do you manage audit process? What is your procedure for deciding on which suppliers to be audited?

How do you manage supplier capability building through audit results (ex. encouraging suppliers to implement action plans, verifying non-compliances,remediation, etc.)

THANK YOU FOR YOUR ATTENTION!

Q & A

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