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KeySTAR™ Corporate Social Responsibility Report 2010

UNDERSTANDCOLLABORATE

ACHIEVE

KEySTONE FOODS CORpORATE SOCIAL RESpONSIBILITy REpORT 2010II

Our headquarters are located in West Conshohocken, Pennsylvania (US), and we operate through four divisions:

US pROTEINS

Manufacturing and processing operations composed of three integrated poultry facilities, five poultry processing plants, a beef processing plant,

and a fish processing plant.

US DISTRIBUTION

Distribution and logistics services composed of four distribution centers primarily designed to meet the needs of the restaurant industry.

EUROpE

Distribution and processing division composed of 12 distribution centers and a beef processing plant focusing on markets in the

United Kingdom and France.

ApMEA

Distribution and processing division composed of 12 distribution centers, six mixed-use processing plants and one bakery throughout Asia Pacific,

Middle East and Africa including significant Australian operations.

These operations are supported by additional corporate offices and a global research

and development center.

KeySTAR™: Keystone Foods’ CSR program is known to the organization and its stakeholders as KeySTAR™.

KeySTAR™ is described in full on page 8

KEySTONE FOODS AT A gLANCE

WE ARE A gLOBAL SUppLIER OF pROTEIN pRODUCTS AND LOgISTICS SERVICES

FOR THE FOOD INDUSTRy.

Defining what matters mostWe consider the issues addressed in this report to be material to our company. These topics were chosen because of their potential to positively or negatively impact our business and to engage

the interest of our stakeholders. Within each section, we describe the effects, risks, and opportunities associated with each of these issues. Defining a more robust materiality process

– that is, deciding what is most relevant – is a priority for 2010.

01KEySTONE FOODS CORpORATE SOCIAL RESpONSIBILITy REpORT 2010

In these difficult economic times, I’m often asked whether CSR is really necessary. I firmly believe that it is. Quite simply, CSR is the right thing to do – for our customers, for our employees, and for the communities in which we operate. And ultimately, all of these things will help us to deliver our financial vision: long-term, sustainable growth.

Recently the Marfrig Group, a global food producer and distributor based in São Paulo, Brazil, acquired Keystone Foods. We are pleased with our newly formed relationship and expect tremendous opportunities for growth. By leveraging our strengths, we will be able to share in each other’s success and prosper in sound economic,environmental and employee development.

Since formally establishing KeySTAR™ in 2007, we have captured the imagination and spirit of our employees around the world. We have implemented a number of great CSR initiatives as seen in this review. We realize that as a socially and environmentally responsible business there is still much more to do.

By continuously collaborating with customers, industry experts, our people, suppliers, and communities, we can make meaningful progress on our KeySTAR™ CSR goals and we can secure our position as an industry leader on CSR. We will keep this collaborative approach at the center of our program in order to strengthen our business’ commitment to doing the right thing.

To achieve these goals:

We will work with our network of global employees to ensure that relevant CSR issues are addressed.

We will offer our customers leadership on CSR through continued delivery of innovative solutions and technical excellence.

We will communicate with internal and external stakeholders, share successes and progress, and bring best practices into our business.

This approach works well for us. By clearly defining our CSR philosophy at the corporate level and empowering our teams to execute these principles, we can leverage our strengths as a company – namely our commitment to the customer, our global capabilities, and our people’s expertise.

If you have any feedback or questions, please feel free to contact us using the details on the back cover.

Jerry DeanCEO & President, Keystone Foods

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Product responsibilitySocial responsibility

Environmental responsibility

01 Introduction03 Innovating for performance04 Partnering with customers

and suppliers06 Communicating for change

08 Our approach to CSR10 Stakeholder engagement11 Improving performance

through collaboration

12 Food safety13 Responsible farming

and production

14 Customers14 Employees16 Suppliers17 Community

18 Our approach to environmental management

19 Climate change and energy

20 Water21 Waste

KEy FACTS ABOUT KEySTONE FOODS

Our 54 facilities employ

12,900 people in 14 countries in the USA, Europe,

Middle East, Asia Pacific, and Africa.

Globally, we process more than

1.8 BILLION pounds of poultry, 427 million

pounds of beef, and 28.6 million pounds of fish annually.

Our manufacturing facilities supply more than

30,000 restaurants worldwide and many

National Industrial Customers.

Annually, Keystone’s logistics services deliver over

197 MILLION cases of product to its worldwide customers.

“WELCOME TO OUR 2010 KEySTAR™ CSR REVIEW, WHICH

pROVIDES AN UpDATE ON pROgRESS AND pERFORMANCE SINCE pRODUCINg OUR FIRST

REpORT IN 2009.”

Keystone Foods LLC is proud to be a division of the Marfrig Group

KEySTONE FOODS CORpORATE SOCIAL RESpONSIBILITy REpORT 2010

02

KeySTAR™ reflects our commitment to CSR and provides our worldwide business with clear goals and objectives as well as the framework in which to achieve them. Our diverse culture, which encourages empowerment and doing the right thing, enables our employees around the world to explore environmental and social challenges and develop solutions that are relevant at the local level. As a result, we have delivered innovative solutions on a number of issues including reducing carbon emissions and waste, reaching out to communities, and improving health and safety performance.

IN THIS REVIEWRead about how our new Gadsden, Alabama facility put food safety at the heart of its design to create an industry-leading, award-winning plant. see page 13

Discover how our US Poultry Division significantly improved the welfare of birds during the delivery process. see page 13

Find out how our Australian business adapted existing machinery to reduce waste and generate savings of approximately $180,000 per year. see page 21

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INNOVATINg FOR

pERFORMANCE

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03

KEySTAR™ MEANS

‘‘KeySTAR™ demonstrates to our employees that we’re committed to being a great business.”

70%waste reduction from the Keystone beef patty manufacturing facility in Coominya, Australia

500Kgallons of water saved per day in Equity Georgia

Ed DelateVP Engineering and Corporate Social Responsibility

pARTNERINg WITH

CUSTOMERS AND SUppLIERS


04

KEySTAR™ MEANS

By working in collaboration with both customers and suppliers, we are able to share our own successes and learn from best practices that exist elsewhere in our supply chain. We have helped customers on a number of key issues, especially with industry-leading food safety standards and reductions in landfilled waste. These partnerships not only help improve our CSR performance, but they also support our partners’ organizations. In turn, we are cementing our relationships for long-term success and socially responsible growth.

IN THIS REVIEWDiscover what we learned from our first corporate level supplier engagement survey, and how we plan to improve CSR performance as a result. see page 17

Explore how our APMEA and US businesses joined forces to reduce waste from our fish processing operations, improving efficiency for our customers in the process. see page 20

Read about how empty trucks are being used to help to reduce volumes of waste to landfill through our Reverse Logistics plan. see page 21

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‘‘As an example of our continued success, Keystone Foods received the US Supply Chain Sustainability Award at the 2009 McDonald’s Supplier Summit for “leadership in Sustainability, Vision, and Results.”

75%landfill waste reduction in Equity Ohio

1.4Mgallons of cooking oil recycled in Keystone Distribution UK

John VantineVP Global Risk Management

COMMUNICATINg FOR CHANgE


06

KEySTAR™ MEANS

Clearly communicating expectations has helped bring KeySTAR™ to the forefront of our corporate culture. We understand the need to invest in sustained dialogue about CSR to maintain our leadership position in this field. So beyond defining our approach and celebrating successes within the organization, we value continuous communication with external stakeholders and collaborate with government, academic, and industry experts to develop KeySTAR™ initiatives and further improve our performance.

IN THIS REVIEWRead about our first KeySTAR™ Awards, which recognized our global CSR achievements, and enabled us to share best practices with colleagues around the world. see page 11

Find out how we are partnering with the French National Institute of Agronomic Research to understand the potential to reduce the carbon impact of beef products. see page 19

Discover how our Keystone Women’s Inclusion Network has established chapters around the world through mentoring and communication. see page 15

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‘‘KeySTARTM is a truly global platform. With multiple cultures and languages spoken across the areas of the world in which we operate, the program has provided us a universal tool to embrace Corporate Social Responsibility.”

Nicol HingstAustralian Food Corporation, APMEA

42high caliber project applications for KeySTAR™ awards

$1.6Min potential savings from K-WIN suggestion program


08

MANAgEMENT & gOVERNANCE

A ROBUST ENgAgEMENT IN CSR

While CSR has always been part of Keystone Foods’ culture, we believe strong management support and local facility team commitment are essential to KeySTAR™’s success and development. To continue succeeding, we need to keep listening to our stakeholders. ACHIEVEMENTS 2009/10

Enhanced and improved Ethics & Compliance Hotline in US

Launched internal KeySTAR™ Awards

Formally reviewed our corporate values to reinforce core business behaviors

Launched our Stakeholder Forum in Europe following success in the US

Established quantifiable goals and KPIs for Sustainability and established baseline Social Responsibility KPIs

Developed integrated CSR Scorecard for 2010 performance

FOCUS FOR 2010/11Implement Enterprise Risk Management program

Perform semi-annual CSR business unit reviews

Establish three major project milestones for each business unit

Review CSR strategy to reflect evolution, and changing expectations for the future

Develop a material analysis structured approach

KEySTAR™: OUR AppROACH TO CSROur CSR program has its origins in Keystone’s tradition of customer satisfaction and pursuing excellence in workplace safety, food safety, and quality. We recognize that we have a strong obligation to protect our natural resources and the communities in which we operate for future generations.

To drive our vision of a more sustainable global enterprise, we created and integrated the principles and goals of KeySTAR™ into our overall business strategy. We balance environmental stewardship, social responsibility, and profitable growth.

We measure our progress and develop strategic stretch goals to ensure KeySTAR™ remains relevant to all stakeholders. Through this effort, KeySTAR™ has become a defining part of Keystone’s global culture and will remain so as we continue to grow.

Governance processesOverall responsibility for CSR governance issues rests with the Board of Keystone Foods LLC, who receive regular updates through Keystone Foods’ CEO and President, Jerry Dean and Keystone’s executive leadership team.

Central direction on CSR issues sits with our KeySTAR™ core team composed of

Ed Delate, Corporate Engineering and CSR (co-chair)John Vantine, Global Risk Management (co-chair)Don Adams, Global Sustainability & TechnologyMark Hatherill, Corporate Social ResponsibilityStephanie Horwath, Global Safety & Security

This team facilitates decision making across the business and provides guidance to the CSR Steering Committee, a group of senior managers, and our four divisional vice presidents. The committee was created in 2009 to ensure widespread executive support and engagement on CSR issues.

At our inaugural KeySTAR™ awards ceremony, we honor our winners.‘‘We believe in maintaining a sustainable business – for our children and future generations. To achieve our goals, it begins with KeySTARTM and doing what’s right.”

Ken Opengart, US Proteins

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Leveraging the strengths of local teamsIn each of our divisions, local team representatives are responsible for promoting CSR issues and delivering corporate priorities to their facilities. In addition, these teams are empowered to address local CSR issues and priorities that impact their results, stakeholders, and communities. For example, in our APMEA division, our Australian business has historically focused on overcoming water scarcity while our China facility has focused on energy savings and waste reductions.

Corporate priorities are communicated to local KeySTAR™ representatives through webinars and conference calls to bring these geographically remote teams together.

Some employees within each division have roles that are aligned with areas of our CSR program – for example, Health & Safety or Quality Assurance. These individuals take the lead in tracking KPI data and management information. In addition, many of our employees have also made CSR innovation and activity part of their broader role in the company.

We recognize that everyone in our operations has contributed to the success of KeySTAR™ and this support is crucial for our business as well as the wider communities and environments in which we operate.

CSR strategyIn 2010, we formally reviewed our CSR focus areas in order to continuously improve our programs. As a result of this work we defined four main priorities:

The core team shares best practices, supports regional representatives, and coordinates data management across Keystone Foods’ operations:

During 2010, we aim to more closely align our Sustainability and Social Responsibility management structures to ensure we deliver holistic responses to the issues in each area.

Sustainability

Areas of focus: Environmental issues

Health and safety Risk management

Food quality

Social Responsibility

Areas of focus: Food safety Community

and citizenship Governance Employees

Communication

Areas of focus: Communicating

progress and reporting Customer

engagement Internal engagement

Keystone Board of Directors

Keystone Leadership Team

KeySTAR™ CSR Steering Committee

Local Teams

Employees

Building a sustainable culture

Engagement of internal stakeholdersDeployment of strategy through communication

Creating value for stakeholders

Connecting innovation, sustainability, and businessContinuous improvement through sharing and acquiring best practices

Continually developing KPIs and stretch goalsMotivating teams to drive performance

Sharing our successes with external stakeholders through new communicationsMaking Keystone the preferred partner of choiceDifferentiating our business with CSR leadership

Delivering progress

Sharing results

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MANAgEMENT & gOVERNANCECONTINUED

ETHICS AND VALUES:At Keystone, we demonstrate uncompromising integrity and ethics in our decision making and behavior. Our Code of Conduct articulates our global policies and principles on employment practices, customer and supplier standards, compliance standards (including anti-corruption measures), political contributions, environmental stewardship, and many other business conduct policies. Members of the management team are required annually to certify that their behavior is compliant with the Code of Conduct and our new Mission, Vision, and Core values.

gOVERNMENT BODIES

Channels of engagement: Face-to-face meetings

Actions taken:

SmartWay Program (EPA)

INDUSTRy gROUpS

Channels of engagement: Face-to-face meetings

Actions taken: Instructional poultry video for

animal welfare Sustainability Solutions Roundtable

EMpLOyEES

Channels of engagement: Employee surveys

Ethics helpline Newsletters

Face-to-face briefings Actions taken:

Local team meetings

ACADEMIA

Channels of engagement: Face-to-face dialogue

Fund studies Actions taken:

Implemented industry-leading standards for food safety; improved waste management performance

STAKEHOLDER ENgAgEMENT

Keystone Foods is committed to working collaboratively with all stakeholders to achieve the best results for customers, our people, suppliers

and the communities in which we operate.The illustration below demonstrates the depth and breadth

of our stakeholder engagement activity.

FOCUSINg ON: ENSURINg ETHICAL CONDUCT

In order to maintain high ethical standards across the enterprise, we established a confidential ethics and compliance reporting system for our US employees in 2009.

This “hotline” is administered by an independent third party. All calls are investigated and reviewed by a corporate committee represented by the Risk Management, Human Resources, and our Internal Auditing Departments.

We plan to implement the ethics and compliance system globally in 2011 with a user-friendly, web-based, and multi-lingual system.

US DIVISIONS

CUSTOMERS

Channels of engagement:Active exchanges

Customer CSR summit contributions

Actions taken:Summit participation and

presentations

SUppLIERS

Channels of engagement:Supplier survey

Actions taken:

Keystone learned from suppliers best practices, Supporting suppliers

Members of Keystone’s Women’s Inclusion Network (K-WIN) engaging in discussion.

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IMpROVINg pERFORMANCE THROUgH COLLABORATION CorporateIn 2008, Keystone sought a unique opportunity to develop a CSR Benchmarking partnership with other top performing US companies. Keystone’s vision was to create an ongoing process based on open communication and transparency for sharing successes and failures. We intended to share with well-established and leading CSR programs for mutual benefit. Defined areas for discussion were:

Employee engagementInternal and external program communicationsGovernance of sustainability and CSRProgram themesTypical KPIs and goals

The following organizations are current members of the Keystone Sustainability Roundtable Forum:

Cornell University (Education) East Balt (Bakery)Air Products (Gases) Shop Rite (Grocery Chain)ITT (Water Systems) Exelon (Power Utility)Praxair (Gases) Ralcorp (Bakery) Estee Lauder (Cosmetics) O’Brien & Gere (Environmental Consulting)

Since its inception, the forum has met four times – most recently in April 2010. All participants are pleased with the open and honest sharing of CSR successes, failures, and challenges. The dialogue has been progressively more transparent. Keystone has benefited in many ways, including:

Establishing the internal KeySTAR™ Awards Program, which was developed from other successful rewards programsComparing Governance Structures and adding a CSR Steering Committee comprised of key executivesEstablishing Key Contacts who are sustainability experts and willing to share

Following the success of this model developed in the US, Keystone in 2010 launched a similar Sustainability Roundtable Forum in Europe with three Charter Members.

FOCUSINg ON: RECOgNIzINg SUCCESS

gLOBAL

Keystone Foods recently honored four of its facilities during the inaugural KeySTAR™ Awards

Ceremony on March 3, 2010. The awards, recognizing excellence in sustainability and social

responsibility, were presented by Jerry Dean, Keystone’s President and CEO.

Four winners chosen from more than 40 impressive applications from our global facilities. These applications represented sustainable wins for Keystone and all of its stakeholders.

Several of these stories are reflected elsewhere in this KeySTAR™ CSR review.

THE WINNERSThe President’s Award, recognizing the team or group who most effectively utilized innovation to influence sustainable practices and social accountability, went to Keystone Distribution UK for their work in advancing the use of biodiesel fuel

The President’s Silver Award is presented to the group that significantly reduced raw material waste in the manufacturing process through in-house modifications of the beef patty forming equipment, Formax, which goes to Australia Food Corporation (AFC)

The Facility Award, established to honor the team or group whose innovation, hard work, and commitment to sustainable growth embody the ideals of KeySTAR™, was presented to McKey China for their exceptional reductions in energy, waste streams, and water use

The Silver Facility Award presented to this group whose extensive work in water savings programs and leadership in sustainable project tracking goes to Equity Group Georgia

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Keystone employees constantly pursue excellence through partnerships and teamwork. We pride ourselves on our ability to work together.

12 KEySTONE FOODS CORpORATE SOCIAL RESpONSIBILITy REpORT 2010

pRODUCT RESpONSIBILITy

SAFEgUARDINg qUALITy pRODUCTS

Our customers trust us to consistently deliver quality products. Furthermore, the food industry has been asked increasingly difficult questions in recent years over issues such as animal welfare. Keystone is an industry leader in responding to the challenges of responsible food manufacturing and delivery.

ACHIEVEMENTS 2009/10Improved processes for poultry transportation

Sought innovative ways to better define the impact of our product

Opened our award-winning Gadsden, Alabama facility, which puts food safety at the heart of our operations

FOCUS 2010Finalize our central management approach to food safety

Continuously improve standards for animal welfare

FOOD SAFETyOur food production and distribution activities are undertaken with the utmost commitment to quality, safety, and global regulations. Given the profile of our customers and the scale of our operations, we constantly innovate to eliminate any risk of product contamination. In 2009, there were no significant food safety incidents in our business.

We view exemplary performance in this area as crucial to our license to operate, and our Vice President of Quality Assurance and Food Safety sits on the executive leadership team.

Keystone maintains a strong central food protection plan, which focuses on the prevention of unintentional contamination. Risk Management leads our Food Defense program to guard against intentional contamination. In addition, local teams are trained to uphold and respond to regional legislation. All local businesses are required to engage third party auditors to ensure performance.

To guarantee our global responsiveness meets expectations at a corporate level and to standardize food safety processes, we are working towards mandating that our businesses follow a common process for food safety management. Key elements of this program, which we aim to have embedded by the end of 2010, include:

Having a uniform, facility-specific food defense planConducting facility, security, and food defense self-assessmentsContinuing vulnerability assessments performed by outside expertsRaising food defense awareness by offering further training to our employees

Stakeholder engagement and Food Safety leadership are crucial to our success in this area. We openly share our knowledge on CSR issues with customers, suppliers, and other partners. In many cases, these external stakeholders have adopted Keystone policies as they recognize the leading position developed by our business. Our supplier survey (see page 17) demonstrated engaging suppliers on this priority issue.

We also engage with US government agencies. As a result of our membership in the US Food Security & Defense Advisory Council, Keystone is already likely to be compliant with the probable introduction of US legislation on food safety. Moreover we engage with the US government and our industry peers by participating both in information exchange and exercises designed to enhance the protection of the food supply chain. We also partner closely with the National Center for Food Protection and Defense, a Department of Homeland Security Center of Excellence.

‘‘A sustainable business is a profitable one, achieving the best possible balance between social responsibility, environmental protection and economy. KeySTAR™ reaffirms our commitment to carefully watch those three pillars day after day.”

Jean-Francois Legrand, LR Services, Europe

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Social responsibilityEnvironm

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CORpORATE SOCIAL RESpONSIBILITy REpORT 2010

RESpONSIBLE FARMINg AND pRODUCTIONKeystone Foods employs some of the world’s leading experts in beef, fish and poultry. This case study on poultry production as well as the methane study on page 19 demonstrate our commitment to minimizing the negative impacts of our industry.

Beyond our own operations, we have a number of policies in place to manage our suppliers on these issues including:

Supplier Agreements for Food Safety and Sustainable Fisheries, which cover sustainable sourcing (including sourcing from Marine Stewardship Council certified fisheries), fish safety to protect product integrity, and quality specifications

Beef Safety Agreement, which specifies raw material standards, animal welfare, and feed compliance, and prohibits beef sourced from companies that do not engage in sustainable rain forestry

FOCUSINg ON: pLANT OF THE yEAR FOR FOOD SAFETy

Keystone’s new 200,000 sq ft facility in Gadsden, Alabama (US), opened in 2009 at a cost of $118 million. The innovative poultry plant was designed to put food safety first and has a number of features specifically introduced to improve the quality of the products that are manufactured there.

Each production line has its own independent electric, air and water systems to minimize the risks of cross-contamination, particularly between raw and cooked products. Poultry is processed on one of three entirely separate lines, which means that the Gadsden plant brings together three separate processing facilities on a single site. In addition, the plants walls are clad with stainless steel panels making the rigorous washing and sterilization processes more sanitary and efficient.

Keystone innovated further by separating workers between raw and cooked areas, installing separate entrances, break rooms, and washrooms. Uniforms and paint choices which are color-coded and separate maintenance crews serve raw and cooked areas with a common parts room in the middle.

This innovation and commitment was recognized in 2010 by Food Engineering, which named Gadsden as the 2010 Plant of the Year.

US pROTEINS

FOCUSINg ON: BETTER pOULTRy TRANSpORTATION

Keystone Foods Proteins Division is dedicated to continually improving animal welfare. An example of our commitment is to constantly seek innovative methods to create better transport conditions for our birds. Quality management is essential for their health and welfare.

During times of extreme seasonal temperature, transportation can be a challenge. We have significantly improved the health and welfare of birds during transport (% Live on Arrival).

In our Kentucky division, trucks transport birds approximately 50 miles from the farms to the processing plant. To improve conditions for birds, transportation cages are now wrapped using polyethylene stretch film during the winter to substantially reduce wind chill.

To combat summer heat, we utilize a flatbed trailer equipped with water tanks, fans, and misting equipment. This process cools the birds with a combination of wind chill and water mist while the birds are loaded onto trucks.

Each year the standard operating procedures are reviewed to assess if we can make further improvement. As a result of this approach, the division has substantially improved the health and welfare of our birds since 1999.

US pROTEINS

Keystone Foods Proteins Division is committed to improving animal welfare and operating under strict animal care guidelines.

Keystone Foods LLCLive on Arrival % by Year

100%

99.8%

99.6%

99.4%

99.2%

99.0%

98.8%

98.6%

98.4%

98.2%1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

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SOCIAL RESpONSIBILITy

INVESTINg IN RELATIONSHIpS

Partnerships and collaboration are central to the success of our business. To this end, we invest significantly in growing our business’ social capital through productive relationships. We focus on engaging our talented workforce, strong relationships with our suppliers, and building links to our local communities. Culturally, these qualities are strengths for Keystone, and we will continue to build on the opportunities for deepening relationships to meet new and emerging global challenges.

KEy ACHIEVEMENTS 2009/10:Global implementation of GPS Performance management system

Sustained health and safety performance in our employees

Rollout of major supplier questionnaire on CSR

Global expansion of Keystone Women’s Inclusion Network (K-WIN)

NExT STEpS 2010 AND BEyOND:Develop CSR engagement process for tier 1 suppliers

Extend K-WIN across all businesses by end of 2010

Baseline social KPIs on global health and safety, community contributions and training

Biannual Employee Survey

Employee Development Programs

CUSTOMERSWe have grown in partnership over many years with our largest customer, McDonald’s. As we diversify our business through new global markets, we are also growing our customer base. This growth requires us to innovate with local customers in order to meet the needs of their own consumers and stakeholders.

Collaboration with customers is part of Keystone Foods’ heritage; since the 1970s, we have partnered with customers to help them grow their businesses with product innovations that include the frozen beef patty and the chicken nugget.

In recent years, pressure has grown on the quick service food industry to become more accountable in a number of ways. For example, consumers care more about food quality; questions have been asked about the welfare of animals bred for food; and the threat of climate change has influenced stakeholder expectations about how we should operate.

As a leading supplier, Keystone Foods helps customers understand and respond to these challenges. We partner with our customers on a number of initiatives such as providing advice on food defense, carbon reduction, animal welfare,and employee diversity.

Our commitment to sustainability has been recognized on numerous occasions in the past, but in 2009, we were proud to be the recipient of McDonald’s Supply Chain Sustainability Award.

EMpLOyEESKeystone is proud of its people and recognizes they are the source of our success. Our reputation is built on a tradition of excellence in attracting and retaining the best talent in our industry. We have a renewed commitment to employee development at all levels to sustain our future growth through on-the-job and challenge assignments as well as enterprise talent management strategies. We practice the highest level of internationally recognized human rights standards across all regions where we operate without exception. Our employee benefits are among the best in the industry.

Our global workforce

Our global workforce highlights:

12,900 employees worldwide20% salaried/management and 80% hourly0 human rights incidents in 2009

Members of Keystone’s global community meet to discuss and share best practices.‘‘KeySTAR™ is ingrained in our culture. We believe it is essential to incorporate Corporate Social Responsibility in any successful business.”

Seth Wright, US Distribution

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Supporting Local EconomiesWe support local hiring practices with embedded human resources teams in every business. 77% of employees live within 30 miles of the facilities where they are employed. In some areas, Keystone is the major employer in the local communities where we have production and distribution facilities.

Employees by regions of the worldSalaried

managementHourly-paid

operativeRegional

total

US (Proteins and Distribution) 1,156 6,733 7,889Europe 681 1,079 1,760APMEA 790 2,471 3,261Totals 2,627 10,283 12,910

Multicultural diversity and inclusionKeystone’s commitment to strong business performance for our customers, employees, and shareholders is directly dependent on our ability to maintain a working environment that promotes diversity inclusion. We are moving from awareness to action by:

Connecting with customersAttracting the best talent from diverse backgroundsDiversifying our suppliers strategicallyDetermining best practicesLiving what we value

Gender diversity within Keystone’s management is a strategic focus with 63% male and 37% female as of 2009. Multicultural and gender inclusion education, combined with active recruiting and internal development processes, are key approaches to balance the gender gap. Keystone’s Women’s Inclusion Network is a global initiative that supports women’s professional development (see inset).

Professional and career developmentIn 2009 Keystone implemented a new performance management process designed to encourage coaching on the continuous improvement of performance. The new process is supported by a significant investment in integrated talent management software to enable real-time talent management decisions.

2,300 managers and employees engaged in GPS (Goals, Performance & Succession)Keystone has identified global core competencies across five Key Performance Drivers of business successEvery participant has an individualized development plan annuallyEvery participant receives a mid year coaching session with their managerTalent information is available in real-time reports with analyses of trends

The GPS process is strategically focusing Keystone on utilization of our best talent, prioritization of education and training decisions and identification of key challenges in the retention of core skills. By tracking productivity, performance, and development in these ways we plan to achieve benchmark excellence in People practices by 2012.

Employee engagementKeystone conducts an employee survey bi-annually of the entire workforce with 90% participation. Results are used to identify enterprise as well as local action plans to ensure we have done our part to fully engage our people with Keystone’s goals and culture.

70% of our hourly employees are currently members of collective bargaining associations. Each of our collective bargaining agreements, agreed upon locally, has stated notification periods for operational changes. In the US, we are committed to a minimum 60 day notification period under the Warren Act.

FOCUSINg ON: ESTABLISHINg KEySTONE WOMEN’S INCLUSION NETWORK

gLOBAL INITIATIVE

The Keystone Women’s Inclusion Network was established by women management employees

in the United States in 2007. Since then the network has reached global participation in every area of the world

where Keystone operates with full support by Senior Management.

K-WIN’s mission is to contribute to Keystone Foods’ business goals by supporting the professional development of women within the organization.

We accomplish this by:

Providing women with leadership and networking opportunities

Helping all employees to embrace diversity and inclusion in our business

Supporting women to develop their business skills for Keystone Foods LLC

Highlights:

Cost savings suggestions program in the US with potential savings of $1.6 million

Diversity and gender education program held jointly with a major customer and attended by senior management in the US

K-WIN Conference in APMEA held jointly with customer’s women leaders

Newsletter “L’News” in France to kick off membership in K-WIN

Education programs across the world to deliver needed business skills for all employees

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Health and safetyCommitment and convictionKeystone Foods is committed to providing a safe and healthful work environment for its employees. Our consistent record of reducing injuries has been achieved by our management’s commitment to safety excellence, the involvement of employees in safety planning, and challenging the entire workforce to take responsibility for themselves and their fellow workers.

CollaborationWhile the Corporate office provides safety leadership and guidance, local supervision closely collaborates with team members to safely execute work functions. Broad-based safety committees meet regularly to discuss and solve safety challenges. Some examples of these committees include:

Ergonomics Audits and InspectionsEmergency Preparedness New and Altered Equipment ReviewHealth and Wellness Rules, Policies, and ProceduresOn the Job Safety SustainabilityOff the Job Safety Transportation SafetyAccident Investigation

Continuous improvementIn order to foster the continuous improvement of our safety systems and reduce hazards and risks we have embedded the following procedures across our business:

Facility level safety performance goals and incentives are regularly established and benchmarked

Performance data is trended and published

Comprehensive workforce training on how to recognize, avoid and report workplace hazards

Incidents and near misses are thoroughly investigated to reduce the likelihood of recurrence

SUppLIERSJust as we are influenced by our customers, we feel it is necessary to engage with our own suppliers on CSR issues with the aim of improving the security of our own supply chain and extending the good practices we nurture as part of the KeySTAR™ program.

In 2009, we sent out a questionnaire to a sample of thirty US suppliers representing a cross-section of the major purchases in our US division. The purpose was to engage and analyze potential best practices with 21 responses recorded.

As a result of the survey we have resolved to improve our own practices in a number of areas. We recognize the need, for example, to engage with community investment activities more thoroughly at a corporate level and appreciate that there is good practice within our supplier organizations .0

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Employees per yearOccupational Injuries per 100

1.91 1.692.41 2.20

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Employees per yearLost work days per 100

10.85

120.43

2.29 7.90 9.92

112.09 113.44

87.01

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SOCIAL RESpONSIBILITyCONTINUED

FOCUSINg ON: MINIMIzINg THE DISRUpTION TO COMMUNITIES IN OUR OpERATIONS

EUROpE DIVISION

In our distribution businesses, complaints about noise are common where we deliver to restaurants in residential areas – and in France legislation prohibits deliveries in residential areas between 10:30 pm and 7:30 am due to excessive noise pollution. In response to this challenge, which can render our distribution services less effective, Keystone Foods’ LR Services division devised a plan to reduce the noise from delivery trucks in order to gain access to these areas without causing a disturbance.

The innovative PIEK truck (pictured left) was developed as a solution to the noise problems. The technology in the truck never exceeds 60 decibels (dB) which is lower than a normal human conversation. Other noise reducing solutions included rubber stops for partitions and powered door systems.

The truck is currently being piloted in Paris, France with favorable results to be expected.

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In turn we can provide support and guidance on CSR activity to our suppliers and hope they may be able to learn from our experiences on issues such as reporting.

We will refine and repeat our survey in 2011 and continue to share our findings through future reports.

Supplier survey highlights

100% of respondents have a Health and Safety policy95% of suppliers have a formal code of ethics76% have a system in place for managing sustainability/ environmental impacts

COMMUNITyWe can make our business better by investing in communities. By sharing our skills and our insight, we can strengthen the local communities where our employees live while also providing invaluable development and learning opportunities. Being a caring and considerate neighbor in our operations also helps our customers to protect their own reputations – reinforcing our position as a supplier of choice.

Community investmentMany Keystone facilities actively engage with our local community.

Relay for Life: Fighting for a CauseKeystone is passionate about supporting organizations across its entire supply chain. In the United States, we are proud to reach out to charity groups such as the American Cancer Society. In 2009, we committed to raising awareness and fighting against cancer through Relay for Life, the American Cancer Society’s key fundraising event.

Through our participation, we raised over $107,000, which will help continue to fund cancer research Keystone is looking forward to next year’s event.

Community accountability in our distribution businessesWe distribute 190 million cases of product to our customers worldwide. While all our drivers are required to undertake significant training, these vehicles can still have a significant impact on communities. Explored in the case study on this page (see below and opposite left) are some of the ways we mitigate these impacts in our distribution business.

Social responsibility

The Hemel Hempstead distribution center in the UK has established relationships with a number of local schools to promote the importance of road safety. Groups of employees take one of our heavy goods vehicles to groups of 7 to 11-year-old students. The children have the opportunity to sit in the vehicles and better understand what a driver typically sees on the road. Here, they have the opportunity to have fun while learning important lessons which we hope will lead to a reduction in the number of children injured on local roads.

The initiative has developed since 2008 and now includes talks from the emergency services, and ten schools are now involved with the initiative. In 2009, the initiative was presented to the Heywood police service, who have shown enthusiasm for the project. We expect to continue to deliver similar awareness events in the Heywood community throughout 2010 and beyond.

FOCUSINg ON: ROAD SAFETy IN THE LOCAL COMMUNITy

EUROpE DIVISION


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Keystone employees participated in Ronald McDonald House Charities’ telethon to help raise money and support a worthy cause.

In 2009, McKey China donated 40 computers to Sichuan Industry & Commerce Professional Technology Institute for school rebuilding efforts after the town’s terrible earthquake. Donations amounted to 180,000 RMB ($26,392 USD).

Employees from US Proteins participate in Relay for Life to help support and raise awareness for the American Cancer Society.


OUR AppROACH TO ENVIRONMENTAL MANAgEMENTWhile centrally agreed targets and measures are defined by the KeySTAR™ team, a great deal of responsibility for driving resource efficiency sits with those people in each division with CSR responsibilities.

This approach is consistent with our decentralized method for business and allows our various divisions to identify opportunities that work best for their operations and customers. For example, water scarcity is a more significant issue in our APMEA division than it is currently in our US or Europe divisions. It has prompted increased innovation in water efficiency in Australia and, consequently, a 52% reduction in the volume of water used there since 2007.

This decentralization and the differing regulatory requirements of different regions also make it difficult to recommend a single approach to accreditation to environmental management standards. Most APMEA and Europe businesses are now accredited with ISO 14001 certification. We believe that similar legislative requirements cover our US operations which will help establish our global Environmental Management System.

Our 2012 stretch goals:We are aiming for reduction by 2012 against our 2008 baseline levels in:

Total energy: 7% reductionTotal water use: 8% reductionWaste to landfill: 11% reduction

Detail on scope of environmental data collection is available in our 2009 CSR report; to obtain this report, please contact us using the details on the back of this report.

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2012 STRETCH GOAL

Keystone Foods LLCLandfill Intensity: Kilogram/Metric Ton WASTE TO LANDFILL REDUCED 11%

* Exceeded stretch goal prior to 2010 Green represents actual performance Light Green represents expected goals Blue represents stretch goal

ENVIRONMENTAL RESpONSIBILITy

REDUCINg ENVIRONMENTAL IMpACTS

Efficient use of natural resources is imperative to our business. With mounting legislative and social pressures to minimize environmental impact through prudent resource use and reductions in waste and emissions, we aim to make our business fit for sustainable growth. In addition, efficiency in our business makes us a better choice for our customers enabling us to provide more value to products and services. KEy ACHIEVEMENTS 2009/10:

Strong performance against targets for the year

Considerably reduced our waste to landfill intensity

Employed a new system for removing nutrients from wastewater

NExT STEpS 2010 AND BEyOND:Aim to achieve stretch goals for reductions in energy, water use and waste to landfill by 2012

Develop a CSR Facilities Engineering Standard for future building design commitment and policy

Implement ISO 14001 (US Beef)

Establish Sustainability bi-monthly project reports

‘‘Our CSR activities have become a powerful tool to engage our employees and drive improvement.”

Mark Hatherill, Corporate Engineering & CSR

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FOCUSINg ON: UNDERSTANDINg CATTLE EMISSIONS

Analysis by Keystone Foods’ McKey France revealed that internal operations produced 0.14 kg of carbon equivalent for every 1 kg of frozen patty. However, a life cycle analysis brought the figure up to almost 15 kg of carbon equivalent for every kilogram of patty produced.

To better understand the role of cattle in greenhouse gas emissions McKey partnered with the French National Institute of Agronomic Research (INRA) to study the impact of changing cattle feed on young bulls to reduce methane emissions. By varying the feed levels and composition, methane levels are currently tracked during the beginning, middle, and end of animal growth with the help of a tracer gas.

Intermediate results have given Keystone promising information. The study will help define the right feeding to limit cattle impact on greenhouse gas emissions.

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Keystone employees from Australian Food Corporation celebrating Earth Day by planting new trees.

Our distribution centers continuously seek to improve our greenhouse gas emissions.

CLIMATE CHANgE AND ENERgyReducing the amount of energy we use not only reduces costs but also demonstrates responsiveness towards the increasing numbers of stakeholders concerned about climate change. Here we briefly explore how we’re managing our energy and looking for innovative ways to reduce our greenhouse gas emissions.

Energy consumption 2009In 2009, a continued focus on energy reduction resulted in exceeding our planned performance in terms of energy consumption intensity. Progress has been more difficult so far in 2010, though we remain committed to our goal of reducing energy consumption intensity to 831 megajoules/metric ton by 2012, which would represent a reduction of 7% on our 2008 baseline levels.

2012 STRETCH GOAL

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Keystone Foods LLCEnergy Intensity: Megajoules/Metric Ton REDUCTION IN ENERGY USE

Green represents actual performanceLight Green represents expected goalsBlue represents stretch goal

Greenhouse gas emissions

Greenhouse gas emissions intensity also reduced during 2009. We exceeded our previous years’ performance, as well as our targets, producing 119 kilogram (kg) of CO2 per metric ton of product, down from 135 in 2008.


ENVIRONMENTAL RESpONSIBILITyCONTINUED

WATERGood water management remains a key priority for our business and requires careful balance; while we aim to use water prudently, we cannot compromise standards of hygiene or food safety.

While the challenge of water scarcity is currently more acute in some regions, for example APMEA, we believe that water usage will become increasingly regulated and costly around the world. To ensure that we’re well-prepared for tomorrow, we’re seeking out and implementing best practice solutions for water management today.

Performance in the calendar year 2009 was positive: not only did we reduce our water consumption intensity, but we exceeded our own target for the year. In 2010, we aim to further reduce our water intensity to 485 gallons/metric ton of production. This performance already exceeds our original 2012 goals, which aimed for an 8% reduction in water intensity over 2008 levels.

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Keystone Foods LLCWater Intensity: Gallons/Metric Ton

* Exceeded stretchgoal prior to 2010 Green represents actual performance Light Green represents expected goals Blue represents stretch goal

2012 STRETCH GOAL

Conserving water US ProteinsBy investing in innovative wastewater treatment techniques, the facilities in Camilla, Georgia made monumental changes in water use during 2009. On recognizing the potential for efficiencies, they formed a water conservation team that examined major areas of waste, focusing on best management practices. Various projects, including low-capital investments, were created in an effort to reduce the volume of water wasted. In 2009, over 126 million gallons of water were conserved through these initiatives.

ApMEA DIVISION, US pROTEINS

FOCUSINg ON: EFFICIENT FISH pROCESSINg

The origins of the Optimized Fish Block Project lie in the combined thinking of two Keystone Foods operations, LD Foods and McKey China. Completed in 2009, the project has resulted in broken or uneven pieces of fish that would have previously been treated as waste from LD Foods’ production plant being converted into raw materials for McKey China’s Filet-O-Fish. The project helped to reduce fish waste by 475,632 pounds a year and secured a source of raw materials for our products.

The project generated yearly cost-savings for the customer ($1.8 million USD) and for McKey China ($908,000 USD), while LD Foods also benefited by creating a market for a product that was once considered waste. In addition, the project improved our customer’s operational efficiency, and preparation efficiency improved from 25 min/pc to 12 min/pc. The project was recognized by McDonald’s with an ‘Innovation Contribution Award’ in 2009.

ApMEA DIVISION

LIST OF AWARDS & GLOBAL RECOGNITION IN 2009

GlobalMcDonald’s Global Best of Green and Sustainable Supply Awards 7 submissions which can be found at http://best practices.mcdonalds.com/

USMcDonald’s US Supply Chain Sustainability Award – 2009 “This award is given to the supplier who has demonstrated the most significant and measurable results to the McDonald’s System in the area of sustainability.” (US Supply Chain)

Silliker Audit Platinum Award – 2009 “This award is presented annually to 10 companies who achieve the highest scores in Distribution Center Audits conducted by Silliker certified auditors during the previous calendar year.” Keystone was awarded 2 out of 10 awards. (M&M St. Johns & M&M Springfield)

American Meat 2009 Institute Environmental Achievement Awards – (Equity Group Ohio Division) has been chosen for the Second Place – Pollution Prevention award and (Equity Group Georgia Division) has been chosen for the Second Place – Resource Conservation award

National Safety Council Occupational Excellence Achievement Award and Joint Poultry Industry Safety and Health Council Awards of Distinction, Award of Honor, Award of Merit

EuropeChartered Institute of Personnel and Development awarded (Keystone Distribution UK) a People Management Award for Employee Engagement

Keystone Distribution UK received ISO 14001 certification in 2009 from International Standards Organization

APMEAMcDonald’s People First Award –2009 –“This award recognizes suppliers and their executives who demonstrate outstanding commitment to their people who support McDonald’s business.” (APMEA Division)

McDonald’s Leadership Award – 2009 “This award recognizes significant leadership by supplier executives on projects that have produced significant benefit for McDonald’s System.” (Keystone APMEA Employees)

McDonald’s Global Target Supplier Award – 2009 “This award recognizes those companies who hold the global target designation for the products they produce.” (Australian Food Corp and Korea Food Service Corp)

McDonald’s APMEA Target Supplier Award – 2009 “This award recognizes those companies who hold the APMEA (Asia, Pacific, Middle East and Africa) target designation for the product they produce.” (Presented to McKey China)

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WASTEWe are constantly seeking to eliminate waste from our processes and help our customers remove their waste. In doing this, we are not only able to reduce our costs, but in some instances, we achieve the additional wins of deepening relationships with our customers and generating revenue.

Our approach to waste managementWe have demonstrated excellent progress in this area, with significant reductions in the volume of waste sent to landfill each year. In 2009, our landfill waste intensity measure dropped from 5.49 kg/metric ton of product to 3.61, far exceeding our 5.45 target.

In the future, we will seek to find new ways to work with customers in order to help improve their recycling rates and reduce the percentage of waste that is sent to landfill.

Closing the loop with Reverse Logistics Europe DivisionThe Reverse Logistics initiative, established in Keystone Foods’ European Distribution Centers, looked at ways to collect waste cardboard and plastic, as well as used cooking oil from restaurants using empty vehicles returning from deliveries. The resulting collected waste is then sold for recycling, creating revenue for our business.

The initiative was implemented through a combination of training and communication: delivery drivers were briefed on the process while restaurants are supplied with materials to remind their employees about the program.

Results in the UK and France have been particularly positive. The pilot test that began with 28 restaurants in 2008 now encompasses over 1,200 restaurants and is implemented nationally. At least 400 metric tons of cardboard are collected from McDonald’s every week into Keystone’s UK Distribution Centers where it is recycled, diverting at least 20,000 metric tons of cardboard from landfill each year.

In addition, this year trucks have been retrofitted with tanks that are used to collect used cooking oil, which is then returned to our three UK distribution centers. From here, local biodiesel companies come and collect the oil, which is then converted in to some of the fuel that powers our trucks (which yields CO2 savings of 2,452 metric tons per year alone).

Costs associated with transportation of landfill, landfill tax, and gate fees have dramatically decreased through this project. GHG emissions from excess transportation of recycling have significantly reduced as well, and we are able to better meet the needs of our customers in an innovative way.

FOCUSINg ON: REFITTINg MACHINERy FOR EFFICIENCy

Keystone’s Australian operations saw potential efficiency improvements by re-engineering our beef patty forming machines, the Formax, to reduce the amount of inedible beef during the manufacturing process.

The modification cost for each machine was minimal, but reduced inedible waste by approximately 70% per Formax per day, resulting in approximate savings of $200,000 AUD ($180,000 USD) per year.

Workers also benefited since inedible tubs were lighter to lift therefore reducing the risk of injury. The cleanliness of the interior of the Formax also proved to have a microbiological benefit. Furthermore, cleanup time and water and chemical use greatly reduced.

ApMEA DIVISION

McDonald’s Appreciation Award – 2009 “This award recognizes those companies who provide quarterly on site QA training for McDonald’s and Suppliers’ QA/Purchasing Managers in APMEA.” (Presented to McKey China)

McDonald’s Best Practices Award – 2009 “This award was selected by the supplier community and recognizes those suppliers who have established the most important practices. (Presented to McKey Korea)

McDonald’s Korea Supplier of the Year – 2009 Korea Food Services Corporation

Shenzhen Municipal Bureau of Labor and Social Security rewarded McKey China as the Top Enterprise in Work Injury Prevention in July 2009.

Shenzhen Municipal Bureau of Labor and Social Security and Shenzhen Federation of Labor Union presented McKey China the honor of “Enterprise of Harmonious Labor Relationship” in June 2009.

“Leading Professional Women’s Award” by Shenzhen General Trade Unions on March 2009.

ISO 14001 Certification – Australian Food Corp

ISO 14001 Certification – McKey China

ISO 14001 Certification – McKey Korea

ISO 14001 Certification – MacFood Malaysia

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This copyrighted material represents the proprietary work product of Keystone Foods LLC. No other use, reproduction, or distribution of this material or the approaches it contains is authorized without the prior express written consent of Keystone Foods LLC. Copyright 2010 Keystone Foods.

Edited, designed and produced by Radley Yeldar, London.

Contact usIf you have any feedback or questions as a result of reading this review, please contact us:

Specific contact detailsKeystone Foods LLC Five Tower Bridge 300 Barr Harbor Drive, Suite 600 West Conshohocken, PA 19428-2998

[email protected]

ABOUT THIS REVIEW

While we have produced an abridged document this year, we consider this review to be a continuation of the reporting journey we started in 2009 (when our first report was published).

This review covers our global operations unless otherwise stated; data corresponds to the calendar year January 1 – December 29, 2009 while some achievements (where stated) are from the first six months of 2010. Consistent with GRI G3 protocol, this report presents performance data for entities over which the company has direct control. These entities consist of manufacturing and distribution operations, which Keystone owns, and leased operations, which Keystone controls.

We consider the data presented in this report to be Key Performance Indicators (KPIs); additional layers of management information sit behind these figures. There are no restatements from previous publications; there are no significant changes in scope, boundary or measurement methods of our report.

We do not currently have a process in place for report assurance.

GRI Compliance

Due to the short format of our 2010 reporting, we have not included a GRI content index in this report. It was, however, produced within the spirit of the GRI G3 Guidelines.

keystone corporate social responsibility report 2010 · keystone foods 01 corporate social...

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