More annual reports from Natura &Co Holding S.A.:
2023 ReportNatura Brasil Indústria e Comércio de Cosméticos Natura Ltda. Rod. Anhanguera, km 30,5 - s/nº CEP 07750 000 - Cajamar - SP Tel. (55 11) 4446 2000 Fax (55 11) 4446 2093 Natura Cosméticos S.A. Rod. Régis Bittencourt, km 293 - s/nº CEP 06882 700 - Itapecerica da Serra - SP Tel. (55 11) 4147 8300 Fax (55 11) 4147 8636 Centro de Distribuição - Matias Barbosa Rodovia BR 040, km 800, Lote 5 Bairro Empresarial Parque Sul CEP 36120 000 - Matias Barbosa - MG Tel./Fax (55 32) 3273 2766 bemestarbemestarbem Centro de Distribuição - Uberlândia Rua Ignês Favato, 301, Distrito Industrial CEP 38402 340 - Uberlândia - MG Tel. (55 34) 3222 8202 Fax (55 34) 3232 2126 Natura Argentina Av. del Libertador, 1295 - 1º piso Vicente López (1638) Capital Federal - Argentina Tel. (54 11) 4837 6100 Fax (54 11) 4837 6005 Natura Chile Ricardo Lyon, 222 of 201 Providencia - Santiago - Chile Tel. (56 2) 620 9200 Fax (56 2) 620 9230 Natura Peru Av. Del Ejército, 801 Miraflores - Lima 18 - Peru Tel. (511) 440 1362 Fax (511) 440 1362 ex. 275 Natura Europa 2, carrefour de La Croix-Rouge Saint Germain de Prés 75006 - Paris - France Tel. 33 (0) 1 42 22 12 59 Fax 33 (0) 1 45 48 45 54 Teresa Testino Maria Aparecida Sousa Ladilas Robert Verónica Saez Cybele Amado Delbanor Mello Viana Fernanda Inouye Miura 12 18 26 32 38 48 64 bemestarbemestarbem bemestarbemestarbem 4 0 0 2 t r o p e r l a u n n a a r u t a n bem estar bem www.natura.net 4 0 0 2 t r o p e r l a u n n a a r u t a n Message from the Board 2 Reason for Being 8 Vision and Beliefs 10 Company Profile 14 Methodology and Main Indicators 20 Corporate governance and Capital Markets 28 Risk Management 34 Economic and Financial, Social and Environmental Results 40 Quality of Relationships 50 Highlights of Investments in Corporate Responsibility 66 Economic, Environmental and Social Indicators – GRI 76 Index – GRI 106 Financial Statements 108 Teresa Testino Maria Aparecida Sousa Ladilas Robert Verónica Saez Cybele Amado Delbanor Mello Viana Fernanda Inouye Miura 12 18 26 32 38 48 64 Statement from Natura 2 Reason for Being 8 Vision and Beliefs 10 Company Profile 14 Methodology and Main Indicators 20 Corporate Governance and Capital Markets 28 Risk Management 34 Economic and Financial, Social and Environmental Results 40 Quality of Relationships 50 Highlights of Investments in Corporate Responsibility 66 Economic, Environmental and Social Indicators – GRI 76 Index – GRI 106 Financial Statements 108 2004naturaannualreport A company is a set of relationships.To develop it means to take care of these relationships and to improve them – with respect, transparency and by sharing values and passions. During its 35 years of existence, Natura has sought to establish quality relationships with those that are part of its network: customers, employees, Sales Representatives, suppliers and many other partners. It is in recognition of these people that Natura has chosen relationships as a concept of the 2004 Annual Report. In the following pages, there are statements from people who, each in his or her own way, have helped and continue to help establishing Natura’s path, in Brazil and abroad.The task of hearing and portraying their stories was of the Museu da Pessoa and the Brazilian photographer Eduardo Simões. For the graphic design, the designer Wilson Spinardi Junior searched for scenes of the daily lives of the people from the Natura community to develop prints using the monotype technique. With these people, we want to share the belief that we nurture the web of life by taking care of relationships. statement from natura The year of the 35th anniversary of Natura was rich in achievements that bring, at this moment of retrospection, a most sincere feeling of joy. One of these achievements, the company’s initial public offering on May 26th, merits attention. With this, we completed a project that began around seven years ago, with important measures for the institutionalization of Natura.The success achieved with this initiative, evidenced not only by the participation of over 5,000 investors but also by the subsequent evolution of the shares, was altogether surprising. The company’s initial public offering in a period of adverse international circumstances started to be seen as a paradigm of a new moment on the Brazilian capital markets. We have experienced this surprise with great joy but also with a related sense of responsibility. We believe that this recognition represents an unequivocal demonstration of trust in the company’s management and its capability to continuously generate value. It also shows a strong affinity by investors to the worldview, the beliefs and the values that have been guiding us. And that will guide us in the development of our company, our brand, our country and our world. Pedro Luiz Barreiros Passos, Guilherme Peirão Leal and Antonio Luiz da Cunha Seabra 4 0 0 2 t r o p e r l a u n n a a r u t a n 2 From an operational point of view, the reasons for enthusiasm were also strong. In 2004, sales showed growth of 33%, totaling 117% over the past three years. Net income, of R$ 300.3 million, represented 17% of net revenues. Operations in Latin America also increased consistently with a growth, in US dollars, of 52% in the year and 107% over the past three years. One of the reasons for this strength was the increase of 15.6% in the number of independent Sales Representatives, totaling 407,000 in Brazil and 26,000 abroad. With these particular stakeholders, who are so vital for our operations, we seek to increasingly strengthen our relationship and offer comprehensive personal and professional development opportunities. To this community, an estimated income of R$ 1 billion was generated this year. In 2004, 63% of the company’s billings originated from products launched or relaunched over the past two years. We invested 2.7% of the net income in research and development and, over the coming years, we intend to maintain this ratio higher than 3%. We will also maintain our innovation strategy 4 0 0 2 t r o p e r l a u n n a a r u t a n 4 in its many dimensions: in the sustainable use of raw materials from Brazilian biodiversity, in technological developments, in the communication of our concepts and in the strengthening of our relationships. In the ongoing process of incorporating the sustainable development principles into the company’s daily routine, significant progress was made in the environmental management and corporate responsibility principles. We defined the strategic priorities of Natura based on the economic and financial, social and environmental aspects, culminating with the structuring of action plans for the whole company. Significant developments were the NBR ISO 14001 certification and the enhancement of the products’ lifecycle assessment. Firm steps were also taken in the relationships with the communities that supply raw materials from biodiversity and in the relationships with neighboring communities, particularly the active participation of Natura, in partnership with local government and civil society, in actions for the implementation of Agenda 21 in Cajamar. The universality of our beliefs, values and Reason For Being is the basis for the growing recognition that we have received in the development of the Natura brand, both in Brazil and abroad.This recognition makes us confident about the possibility of an accelerated international expansion over the coming years.We will seek new markets in Latin America, where we have already established the direct sales model, and we will study new formulas to take Natura’s value proposal to other regions. In this direction, the main challenge we face is to develop entrepreneurial leaders that can identify with our values. Internationalization also translates into a more complex operation, showing the need to combine growth with the maintenance of the strategic discipline, the culture and the management style that are characteristic of Natura. Another important challenge is the one we will face to continuously strengthen our relationship with traditional communities. The decision to contribute to the creation of a development model that combines economic prosperity, social justice and environmental preservation will continue to demand a great learning and innovation effort. From this standpoint, we have the strong conviction that the role of companies in the shaping of a better world will be increasingly associated with the evidence that we are all – individuals, companies, NGOs and governments – co-responsible for the quality of life, present and future, on Earth. In this context, we reaffirm our support to the Global Compact and the effort to promote the principles proposed by the United Nations. We express our gratitude and recognition to all of those who have contributed to the development of Natura.To our customers, who privilege us with their choices. To our Sales Representatives, who share their beliefs, passions and causes with us. To our employees, who are examples of the fact that continuous improvement transforms both individuals and organizations.To our suppliers, with whom we share the challenge of creating value for customers and society.To all our other partners from civil society and government who are aware that our relationship networks strengthen the network of life.To all, our deep gratitude for all we have achieved and celebrate today, with the vigorous disposition to embrace, more and more, our beliefs, passions and responsibilities.They are the seeds of Natura that is growing and of the world of which we have always dreamt. Antonio Luiz da Cunha Seabra Cochairman of the Board – Founder Guilherme Peirão Leal Cochairman of the Board Pedro Luiz Barreiros Passos Chief Executive Officer 4 0 0 2 t r o p e r l a u n n a a r u t a n 5 Flávia Azevedo, a Natura customer Espaço Natura (Natura Space) Cajamar, São Paulo Marina Sanvicente, a Natura customer, and her daughter Luna reason for being well-being is the harmonious, pleasant relationship of a person with oneself, with one’s body. Our Reason for Being is to create and sell products and services that promote well-being/being well. being well is the empathetic, successful, and gratifying relationship of a person with others, with Nature and with the whole. beliefs Life is a chain of relationships. Nothing in the universe exists alone. Everything is interdependent. It is our belief that the appreciation of the importance of relationships is the foundation of an enormous human revolution in the search for peace, solidarity and life in all of its manifestations. The continuous search for improvement promotes the development of individuals, organizations, and society. Commitment to the truth is the route to perfecting the quality of relationships. The greater the diversity, the greater the wealth and vitality of whole system. The search for beauty, which is the genuine aspiration of every human being, must be free of preconceived ideas and manipulation. The company, a living organism, is a dynamic set of relationships. Its value and longevity are connected to its ability to contribute to the evolution of society and its sustainable development. vision Because of its corporate behavior, the quality of the relationships it establishes and the quality of its products and services, Natura will be an international brand, identified with the community of people who are committed to the construction of a better world, based on a better relationship with themselves, with others, with nature of which they are part, with the whole. In the first Natura’s sales campaign in which she took part in 1995, Peruvian Sales Representative Teresa Testino was the third best. Not bad for someone who had never sold beauty products and had spent a good part of her life working in the office of an electricity company in Lima. In the fourth campaign, in August of the same year, she came first in the ranking. “I joined Natura to have some space in my life,” she says. “I started selling, started to enjoy it, joined the company and grew.” Today, she has around 200 clients, of all ages, who she attracted with effort and dedication. “My working routine consists of leaving every day in the morning. At 8 o’clock in the morning, I’m out in the streets.” For Teresa, the work she does is nice, feminine, and the secret is that she believes in the products she is selling. “I’m personally convinced that Natura’s products are the best. This is what I try to make my clients realize.” Teresa is proud of the prizes she has received. “I won them all: necklace, bracelet... I had a ball.” And she came to Brazil, in 1998, to receive the award for Best Sales Representative in Peru. A party for someone who claims to love Brazil and, particularly, Rio de Janeiro. Teresa says that she has, over these past ten years, learned to see Natura with her heart. “What I love the most about this job is working with people, establishing relationships.” Teresa Testino, a Natura Sales Representative, at the Pachacamac sanctuary, Lima, Peru Paula Camargo, a Natura customer company profile A listed company since May 2004, when it turned 35 years old, Natura enjoys a leadership position on the Brazilian CF&T (cosmetics, fragrances and toiletries) market. The company concentrates its production, logistics and research in Cajamar, State of São Paulo, in a complex with 81,500 square meters of site area and 643,000 square meters of land area. In the Itapecerica da Serra unit, also in the State of São Paulo, the commercial and marketing activities are developed. Controlled by Brazilian investors, Natura had, at the end of 2004, 3,177 employees in Brazil and 378 abroad – in Argentina, Chile and Peru. The embryo of what is today one of the largest groups in Brazil, with gross sales of R$ 2.5 billion in 2004, was once a small shop and a laboratory created in 1969 on Rua Oscar Freire in the city of São Paulo. Born from two passions – for cosmetics, as a means for promotion of self- knowledge, and for human relations – Natura opted, 30 years ago, for the direct selling system supported by the work of independent resellers, the Natura Sales Representatives. The increasingly stronger relationship with the Sales Representatives has established a solid grounding for the expansion of Natura’s business in Brazil and Latin America. 4 0 0 2 t r o p e r l a u n n a a r u t a n 4 1 Over time, Natura has developed a strong brand, which is today among the three most highly valued brands in Brazil (see Brand on page 47). It has also developed a portfolio of quality products, which meet the needs of a large group of customers. Currently, this portfolio is made up of around 600 products – in the areas of make-up, fragrances, bathing, hair, facial and body treatment, oral hygiene, sun protection, among others. In 2004, 177 million units(1) were sold in Brazil and abroad. Profile of Employees Age Up to 25 (18%) Between 26 and 39 (60%) Over 40 (22%) Sex Male (38%) Female (62%) Length of Service with the Company Up to 2 years (30%) From 2 to 5 years (22%) From 5 to 10 years (29%) 1. Units resold by Sales Representatives (does not include samples, gifts and resale support material). Over 10 years (18%) 4 0 0 2 t r o p e r l a u n n a a r u t a n 5 1 1979 New companies join the group and form the Natura System. Business volume: US$ 5 million. 1989 Merger of the companies that formed the Natura System. Business volume: US$ 170 million. 1969 Natura is born in São Paulo. 1992 Start of operations in Argentina and Peru. 2001 Integrated with the company’s values, the Espaço Natura is inaugurated in Cajamar, State of São Paulo. 2003 Natura is elected The Best Company for Women to Work for by Exame magazine and Great Place to Work Institute. 1999 Business volume: US$ 657 million. 2000 Natura starts to use Brazilian biodiversity as a technological platform with the launch of the Ekos line. It is the first Brazilian company to adopt the recommendations of the GRI in its Annual Report. 2004 Natura obtains the NBR ISO 14001 certification. Initial Public Offering on the São Paulo Stock Exchange (Bovespa). Signing of the cooperation agreement for the implementation of Agenda 21 in Cajamar. Natura is elected the Most Highly Regarded Company in Brazil by CartaCapital magazine and InterScience. Business volume: US$ 1.2 billion. 1995 Natura creates the Crer para Ver Program in partnership with the Fundação Abrinq. 1996 Inspired by the belief that beauty must be free of stereotypes, the Truly Beautiful Women concept is established. 1998 Creation of the Board of Directors. 1993 Launch of the Mamãe e Bebê line, which highlights the importance of the bond between mother and child. 1974 Option for the direct sales system. 1983 Natura is a pioneer in the launch of products with refills. 1990 Natura expresses its Reason for Being and beliefs. our history The smell emanating from a wood stove conjures up distant memories for Maria Aparecida de Sousa, or Cida, as she is called. When her family was gathered with her mother telling stories, the young Cida was overwhelmed by smell of popcorn and baked corn. From the same house in Ruy Barbosa, State of Bahia, she guards the memory of the smell of the burnt sugar and cinnamon that her grandmother, Bilia, used to cook pastries with unforgettable taste.The same sweet taste that reminds her of her father, who was a truck driver, and of her happy childhood. “He was the kind of father who would sit me on his lap and always have his pockets full of candies,” she says. During her youth, in São Paulo, Cida continued to live guided by smells. First, in her job as a maid in the house of a family whose father would give off Natura’s “Sr. N” perfume. Afterwards, when she lived near the L’Arc en Ciel factory – at the time, one of Natura’s companies –, which would cover the region with the smell of the Musc perfume. It seemed to be her fate. Cida, who wanted a job at L’Arc en Ciel, went for an interview and ended up at the very plant she dreamt of. “Luck had traced a path for me,” she says. She started in the perfume line.Today, she is a leader in the make-up factory. “I enjoy working in a place with so many different people who get along so well,” Cida says. “Natura is a company that wants to see you well – with yourself and with others. It’s a place where I learn everyday.” Maria Aparecida Sousa, Natura’s employee, at the Espaço Natura, Cajamar, São Paulo. methodology and main indicators Natura’s Annual Report gathers the economic, social and environmental results of the company, so as to properly reflect the search for balance in these three dimensions of sustainability in the business development. To report its activities, Natura uses the practices recommended by distinguished specialized entities. In the case of the economic performance, Natura follows the guidelines of the Associação dos Analistas e Profissionais de Investimento do Mercado de Capitais (Association of Capital Markets Investment Analysts and Professionals), Apimec, and of the Associação Brasileira das Companhias Abertas (Brazilian Association of Publicly Traded Companies), Abrasca, and includes information about risk management and corporate governance. Abrasca, founded in 1971, has its activities guided by the enhancement of corporate policy and management practices, with an emphasis on mechanisms and processes that allow for a constant and qualified expansion of the capital markets. For the information on social and environmental performance, Natura adopts the guidelines of the Instituto Ethos de Empresas e Responsabilidade Social (Ethos Institute of Companies and Social Responsibility) and adopts the model of the Global Reporting Initiative, GRI.The main objective of the Instituto Ethos, founded in 1998, is to mobilize and support companies to conduct their business in a socially responsible manner, thus contributing to the dissemination of corporate social responsibility practice.The GRI, an organization created in 1997, is the result of the effort of multilateral institutions to develop a structure for voluntary reports 4 0 0 2 t r o p e r l a u n n a a r u t a n 0 2 on the economic, social and environmental impact of a company’s activities. As a member of the Associação Brasileira de Comunicação Empresarial (Brazilian Association of Corporate Communication), Aberje, Natura adopts practices of transparent communication and is involved with the development of indicators that measure these practices, a process which started in 2004. The 2002 Natura Annual Report was nominated as the 16th best report by SustainAbility, according to a survey conducted by this international consultancy together with the ratings agency Standard & Poor’s and the United Nations Environment Programme. In the survey, 350 reports of companies from several countries were analyzed. Main economic indicators (consolidated) Evolution of Gross Sales (in millions of reais) 2002 2003 2004 1,411.2 1,910.1 2,539.7 Evolution of the Adjusted EBITDA(1) (in millions of reais) 2002 2003 2004 199.2 295.7 431.7 1. Excludes the participation of subordinated debentures. Evolution of Costs and Expenses (% of net sales) Cost of products sold Selling expenses Administrative and general expenses(1) Other 2002 2003 2004 34.8 34.5 32.5 32.4 30.3 30.3 14.7 1.4 13.6 2.0 11.7 2.5 83.3 80.4 77.0 1. For 2004 only, the administrative and general expenses exclude 9.2 million of reais in expenses related to the IPO. 4 0 0 2 t r o p e r l a u n n a a r u t a n 1 2 Financial Performance(1) (in millions of reais) Domestic gross sales International gross sales(2) Other sales Gross operating revenues Net operating revenues EBITDA(3) Operating income(4) Net income Investments Financial income Total assets Shareholders’ equity and profit-sharing debenture(5) Net indebtedness(6) 2002 1,375.2 35.0 1.0 1,411.2 993.1 199.2 121.1 21.7 25.2 (44.3) 646.6 225.9 119.1 2003 1,860.3 47.9 2.0 1,910.1 1,328.9 295.7 230.4 63.9 23.9 (30.1) 723,9 354.2 (19.0) 2004 2,472.0 66.8 0.8 2,539.7 1,769.7 431.7 395.4 300.3 83.1 (2.8) 1.016,4 436.1 (91.1) 1. Operations in Brazil, Argentina, Chile and Peru, and exports to Bolivia. 2. Operations in Argentina, Chile and Peru and exports to Bolivia. 3. Earnings before financial income, profit-sharing debentures, income tax, depreciation and amortization. 4. Operating income after financial income. 5. Total shareholders’ equity and profit-sharing debentures. 6. Excludes profit-sharing debentures. Business performance Consolidated business volume(1) (in millions of reais) Consolidated business volume per Sales Representative(2) (in reais per Sales Representative/year) Number of products launched 2002 1,951.7 8,875 91 2003 2,652.5 10,283 117 2004 3,531.1 11,277 182 % Change 04/03 32.9% 39.5% (58.6)% 33.0% 33.2% 46.0% 71.6% 369.9% 247.7% (90.7)% 40.4% 23.1% 379.5% % Change 04/03 33.1% 9.7% 55.6% 1. Business volume is the estimated amount of total billing by the Natura Sales Representatives based on the estimated profit margin of these Sales Representatives, excluding the revenues from the supporting material that is provided to them. It includes Argentina, Chile and Peru.The 2002 and 2003 amounts differ from those previously disclosed because they have been aligned with the criteria of the Associação Brasileira de Empresas de Venda Direta (Brazilian Association of Direct Selling Companies) – ABEVD. 2. Considers the average number of active Sales Representatives – those who made at least one purchase order during a marketing cycle. Each marketing cycle lasts three weeks. It includes Argentina, Chile and Peru.The 2003 report used the average number of available Sales Representatives (those Sales Representatives who placed an order during the last four marketing cycles).This change was made in order to align this indicator with the ABEVD criteria. Main Environmental Indicators Use of Natural Resources Water Use per Unit Sold(1) (liters/unit) 2002 2003 2004 1.22 0.87 0.67 1. Units resold by Sales Representatives (does not include samples, gifts, resale support material, products from the Crer para Ver line, among others). Water Reuse (% of total water treated at the Effluent Treatment Station) 2002 2003 2004 16 29 39.5 Target for 2005 To consumption of water. reduce by 1% the relative Target for 2005 Increase the percentage of treated water reused from 39.5% to 49%. 4 0 0 2 t r o p e r l a u n n a a r u t a n 2 2 Energy Use Total Energy Use (Energy Matrix)(1) per Unit Sold (kjoules/unit sold) 2002 2003 2004 1,025.7 785.2 603.7 1. The energy matrix is made up of the total energy that Natura uses that comes from various sources (electricity, diesel and LPG). Generation of Waste per Unit Sold (grams/units) 2002 2003 2004 2.99 2.92 2.56 Target for 2005 To reduce the generation of waste per unit sold from 2.56 grams to 2.38 grams. Target for 2005 To reduce by 5.5% the relative consumption of energy. Environmental Management Life Cycle Assessment NBR ISO 14.001 Certification (% of implementation) In 2004, Natura made a life cycle assessment, LCA, on the packages of all products launched, systematically taking into account environmental aspects in the design of its packages. It also makes an LCA on all products in its portfolio, including those launched in previous years. Target for 2005 a) Ensure that all products launched have their packages analyzed by the life cycle assessment (LCA) tool. b) Reduce by 2%, in relation to 2004, the weighted average of the environmental impact of the packages of Natura products. c) Determine environmental performance indicators for the products and add information on these indicators on the labels. d) As there is no available model for the life cycle assessment of raw materials in the cosmetics industry, Natura will develop a model in 2005. It will be applied on the Ekos shampoo line and subject to international analysis. Waste Generation of Waste – Destination (%) 2002 2003 2004 Incinerated Disposed of in landfill sites Recycled 5.52 6.40 5.43 31.91 24.40 21.20 62.58 69.20 73.41 2002 2003 2004 30 92 100 Environmental Evaluation of Suppliers (% of response to the environmental evaluation questionnaire) 2003 2004 Delivered the whole environmental documentation Delivered part of the environmental documentation Did not deliver the environmental documentation 3 67 35 34 30 31 Environmental Evaluation of Suppliers (%) Suppliers evaluated as A(1) Suppliers evaluated as A/B(2) Suppliers evaluated as B(3) 2004 19 24 29 1. Meet between 90% and 100% of requirements. 2. Meet between 80% and 89% of requirements. 3. Meet between 60% and 79% of requirements. Target for 2005 a) Disclose and apply the quality system procedures established with suppliers. b) Evaluate 100% of the documentation of all environmentally critical suppliers and new suppliers. c) Of the suppliers evaluated in 2004, to increase by 30% those classified as A. 4 0 0 2 t r o p e r l a u n n a a r u t a n 3 2 Sector-specific Indicator Animal Testing (number of tests) Cosmetics Phytotherapeutic products 2002 2003 2004 308 200 66 249 266 1,263 557 reduce by 25% the number of tests of raw materials on animals for cosmetic products – was surpassed. This reduction reached 78.5%. As required by the proper authorities, such as the Agência Nacional de Vigilância Sanitária (Brazilian Agency for Sanitary Inspection), Anvisa, Natura performs tests on animals to verify the safety and efficiency of phytotherapeutic products. 118 1,381 Natura reaffirms its position against the performance of laboratory animal testing but performs those that are required by law. For over six years, the company has been seeking alternatives to reduce these tests while also ensuring the safety of the products. Since 2003, Natura has totally abolished the use of animals in tests of finished cosmetic products.The target for 2004 – to Target for 2005 To keep the number of animals used in tests of raw materials for cosmetic products below 170 (which represents a reduction of 32% in relation to the target for 2004).This means an increase of 158% in the number of tests performed in 2004.This increase is due to the fact that some tests scheduled for 2004 were not performed and will be performed in 2005. Main social indicators Added Value Destination of Funds per Type of Stakeholder (in millions of reais) Shareholders Natura Sales Representatives(1) Government Employees Shareholders 2002 2003 2004 679.3 585.5 380.0 155.1 97.6 942.2 795.8 1,365.9 1,059.3 502.1 177.8 191.6 547.8 247.3 307.5 1. The 2002 and 2003 figures were changed for them to be aligned with Associação Brasileira de Empresas de Venda Direta (Brazilian Association of Direct Selling Companies), ABEVD criteria. Creation of Jobs and Generation of Income Employees, Outsourced Employees and Temporary Workers(1) 2003 769 802 1,051 2002 Outsourced employees assigned to the company’s units Temporary workers Employees 88 230 259 1. Includes Brazil and international operations. 2004 2,884 2,986 3,555 Natura Sales Representatives(1) (in thousands) 2002 2003 2004 1. Includes Brazil and international operations. 322 375 433 Relationship Satisfaction (favorability in %) 2002 2003 Supliers(1)(3) Consumers(1)(3) Sales Representatives(1)(3) Employees(2) N.A. N.A. N.A. 93 95 96 88 87 2004 78 70 76 73 1. Surveys conducted by the Indicator GfK do Brasil Institute. 2. Organizational climate survey developed by the consultancy Hay Group do Brasil. 3. The results of the customer, supplier and Sale Representative satisfaction surveys were not available on the closing date of this report, therefore the figures related to 2004 will be available in the online version (www.natura.net). Investments in Corporate Responsibility During the last decade, Natura has been enhancing the responsible social and environmental management of its business, based on the establishment of quality relationships with its many stakeholders and of corporate targets that are increasingly compatible with sustainable development. These ethical principles have started to permeate the many initiatives of the company 4 0 0 2 t r o p e r l a u n n a a r u t a n 4 2 in all areas. The option for the sustainable use of raw materials from Brazilian biodiversity as a technological platform, the adoption of a social and environmental supplier evaluation process and the development of packages that have less of an environmental impact are results of this movement. The objective of the Annual Report is to present the whole of this strategy. To focus its attention on the critical issues of this strategy, Natura created a management support tool that helps managers plan and visualize specific actions aimed at each type of stakeholder: the Corporate Responsibility Matrix, a management tool.This tool does not reflect all the efforts of Natura regarding the promotion of socially responsible management. It does intend, however, to show the investments made in the most critical aspects of this management.These are: Corporate Responsibility Matrix (amounts in thousands of reais) • The monitoring of the quality of Natura’s relationship with its stakeholders regarding ethics, transparency and the efficiency of the dialogue channel, including themes that are not directly related to the business (“fundamentals” line). • The promotion of sustainable development – whether local, in a specific region, or promoting diversity, education, quality of life and culture (“social and economic” line). • Protection of the environment (“environmental” line). The amounts stated are those invested in addition to those required by law(1). 1. In addition to expenses related to the operation in Brazil, there are also investments in social initiatives in the other countries in which Natura operates. In these projects, 28,405.00 reais were invested in 2004 (see indicator 73, page 100). Natura’s Funds Fundamentals Economic and Social Environmental Subtotals Management Expenses Funds Generated by Sales Representatives Net Funds raised by the Crer para Ver Program Natura’s Stakeholders Employees, families and third parties 176.1 6,032.0 40.5 6,248.6 Sales Represent- atives 170.9 - - 170.9 Supplier Communities - 745.0 - 745.0 Cajamar and Itapecerica da Serra - 440.2 9.0 449.2 Suppliers 102.1 - - 102.1 Customers - - - - Government and Society 1,466.4 445.2 536.6 2,448.2 Shareholders - - - - TOTAL 1,915.6 7,662.4 586.1 10,164.1 All Stakeholders 2,277.0 Total Natura’s Funds % of net sales TOTAL 2,277.0 12,441.1 0.7 Employees, families and third parties Sales Represent- atives Supplier Communities Natura’s Stakeholders Cajamar and Itapecerica da Serra Suppliers Customers Government and Society Shareholders TOTAL N/A N/A N/A N/A N/A N/A 2,971.8 N/A 2,971.8 Total Funds Generated by Sales Representatives 2.971,8 Tax Funds Tax Incentives(1) Employees, families and third parties - Sales Represent- atives - Supplier Communities - Natura’s Stakeholders Cajamar and Itapecerica da Serra 347.0 Total Tax Incentives GRAND TOTAL Consumidores - Suppliers - Government and Society 1,591.2 Shareholders - TOTAL 1,938.2 1,938.2 17,351,041 1. Tax incentives: destination of 1% of the income tax due to the municipal councils for the rights of the children and adolescents of Cajamar and Itapecerica da Serra and projects supported by the Rouanet Law. Note: N/A = Not applicable. 4 0 0 2 t r o p e r l a u n n a a r u t a n 5 2 A doctor in medicine and sciences, Ladilas Robert was born in Budapest, Hungry, and considers himself a survivor of the horrors of World War II.Today, at 80 years of age, he does not like to talk about the conflict that could have taken his young life away, but he does get excited when talking about his decision to dedicate his studies and research to increase people’s longevity. In thirty years of work for the Paris V University and in the hospital L’Hôtel-Dieu, in France, Ladilas specialized in connective tissues. He wrote six books on this topic and two of them were translated into Portuguese. With aging, he said, the human skin undergoes many changes: it loses from 7% to 10% of its thickness every ten years. “We have identified the substances that delay this reduction in thickness,” he said. “When a person takes care of him or herself, this aging of the skin is much slower.” The researcher – who developed Elastinol, used in the Chronos line – really enjoyed to visit, in Brazil, Natura’s facilities. He particularly liked the temperament of Brazilians. “What moved me when I visited Natura for the first time was that people were serious like the Anglo-Saxons, only they were always smiling.” Natura’s new shop in Paris excites him. “The French people know all about the beauty of Brazilian women and that will be used as a means for them to become interested in Brazilian beauty products.” Ladilas also believes in the quality of Natura’s products to gain the European market. “Natura has a very special cosmetic philosophy. In my opinion, it will be a great success.” Ladilas Robert, Researcher at the Paris V University, and Natura’s partner, in the hospital L’Hôtel-Dieu, Paris, France. corporate governance and capital markets Natura has been improving its corporate governance since the mid 90s when it included new executives in strategic positions, privileging professional management. This process evolved with the creation of the Board of Directors in 1998 – followed by the Audit and Risk Management and Human Resources committees – and peaked with the company’s initial public offering on May 26, 2004. Companies in the Novo Mercado can only issue voting common shares. Additionally, at least 25% of these shares must be outstanding. The companies also undertake to extend to minority shareholders the same conditions offered to majority shareholders in the event of a transfer of the controlling interest. And they assume the obligation to accept the mediation of the Market Arbitration House to settle possible disputes. When it went public, Natura opted for listing its shares in the Novo Mercado segment of the São Paulo Stock Exchange (Bovespa) in which companies undertake to adopt stricter corporate governance practices than those required by law. Board of Directors – It is made up of five members, and two of which are external members. The Board of Directors, which convened 12 times in 2004, has two auxiliary committees: Audit and Risk Management, and Human Resources. 4 0 0 2 t r o p e r l a u n n a a r u t a n 8 2 1 2 3 4 5 Board of Directors in December of 2004: 1. Pedro Luiz Barreiros Passos, Member of the Board; 2. Guilherme Peirão Leal, Cochairman of the Board; 3. Antonio Luiz da Cunha Seabra, Cochairman of the Board – Founder; 4. José Guimarães Monforte, Member of the Board, Coordinator of the Audit Committee; y 5. Edson Vaz Musa, Member of the Board, Coordinator of the Human Resources Committee Audit and Risk Management Committee – The Audit Committee is made up of one external director and one independent member. This committee is responsible for the review and recommendation of the financial statements and for the analysis and review of the most important procedures related to the business management. Human Resources Committee – It is responsible for the definition of the employee development strategies. It supports the Board of Directors in evaluating the performance of the officers, as well as in recommending their remunerations. Investor Relations After it went public, Natura set up a department specifically to serve investors, shareholders and capital market analysts. In addition to holding individual meetings with analysts and investors and to participating in local and international road shows and conferences, the Investor Relations Department also holds quarterly teleconferences and webcasts to inform the market of the results for the period.The calendar of events is available for all those interested on the Natura’s investor relations Website (www.naturanet/investor) and on the São Paulo Stock Exchange (www.bovespa.com.br) Website. Contacts Helmut Bossert Ricardo Capella Sandra Matsumoto helmutbossert@natura.net ricardocapella@natura.net sandramatsumoto@natura.net 4 0 0 2 t r o p e r l a u n n a a r u t a n 9 2 Officers in December of 2004: 1. Pedro Luiz Barreiros Passos, Chief Executive Officer; 6. Rodolfo Witzig Guttilla, Executive Director – Corporate Affairs and Government Relations; 7. Andrea Rodrigues Sanches, Executive Director – Relationship Marketing; 8. Roberto Zardo, Executive Director – Quality; 9. Itamar Correia da Silva, Senior Executive – Operations and Logistics; 10. Antonio Carlos Siqueira da Silva, Executive Director – Legal Affairs; 11. Philippe Joseph Pommez, Senior Executive – Internationalization; 12. Claudia Falcão da Motta, Executive Director – Human Resources; 13. Eduardo Luppi Júnior, Executive Director – Innovation; 14. Joël Ponte, Executive Director – Natura Europe; 15. José David Vilela Uba, Senior Executive – Finance and Investor Relations; 16.Alessandro Giuseppe Carlucci, Senior Executive – Business Development; 17. Denise Lyra de Figueiredo, Executive Director – Business Unit; 18.Vicente Pinho de Mello, Executive Director – Flora Medicinal; 19. Mário de Oliveira, Executive Director – Industry; 20. Pedro Cruz Villares, Executive Director – Sales Brazil; 21. Italo Gennaro Flammia, Executive Director – Information and Technology; 22. Márcio Ramy Mansur, Executive Director – Integrated Logistics; y 23. Maurício Bellora, Executive Director – Latin America 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 6 7 8 Capital Markets Natura’s initial public offering was a success, demonstrating the market’s confidence in the company’s economic and financial results and its capability to continuously generate value.The demand for the shares at the initial offering was expressly higher than the offer. Institutional investors represented around 80% of the final allocation and around 4,700 individuals invested in Natura. Between the offering and the end of 2004, the company’s share value rose 117%, compared with a rise of 39% in the Bovespa Index (Ibovespa) over the period.The average daily business volume was R$ 7 million, ensuring a significant liquidity of the investment. Natura Appreciation (Natu3) vs. Ibovespa – 2004 Base 100 (5/25/2004) NATU3 IBOV +117% +39% Remuneration to shareholders – During the year, the company distributed R$ 143.5 million in dividends and interest on own capital, of which R$ 56.7 million referred to 2003 and R$ 86.8 million to the first half of 2004. Regarding the results of the second half of 2004, the Board of Directors approved the proposal for the distribution of R$ 129.6 million as dividends and interest, totaling R$ 216.3 million referring to the full year of 2004.The new shareholders, since the initial offering in May 2004, have fully participated in the distribution of the dividends for the year. Capital structure – Natura’s capital stock is made up of 84.8 million common shares – in addition to 651,849 kept in treasury – of which 26.1% are outstanding. Capital Structure Shareholders Majority Shareholders Outstanding Total shares* Number of shares 62,637,886 22,148,876 84,786,762 Percentage 73.9% 26.1% 100% May Jun Jul Aug Sep Oct Nov Dec * Does not include 651,849 treasury shares. 4 0 0 2 t r o p e r l a u n n a a r u t a n 0 3 4 0 0 2 t r o p e r l a u n n a a r u t a n 1 3 Verónica Saez, a Natura customer, in Buenos Aires, Argentina When she first discovered Natura’s products, Argentine advertising agent Verónica Saez was not the kind of woman to dress up too much – particularly because she was used to working with inks and oils that would stain her clothes in the school of arts. She kept her contact with colors when she became a teacher of arts in an elementary school in Buenos Aires, where she was born and still lives today. But, at 36, when she was chosen to work as a model in a Natura commercial, she was thrilled with the possibilities offered by the products of this Brazilian company. “I decided to get to know the company and to find out where I could buy the products,” she says.Verónica contacted a Sales Representative and, from then on, she became a customer of Natura. “I like the Chronos line and the Erva Doce line, which has a texture and a perfume that please me.” Later, she discovered the Ekos line and started to feel “natural” when she realized that Natura uses raw materials purchased from traditional Brazilian communities. All this helped increase her interest in visiting the country and even the manufacturing process of the products she uses. “I would really like to see how they make the soaps, how they extract the raw materials,” she says. As a Natura customer,Verónica found out more about the particularities of her skin and learned, as she puts it, “to better communicate with her own body”.Today, she believes that a truly beautiful woman is one who knows how to appreciate and enjoy what she has. risk management Natura’s risk management system is specifically aimed at the following risks: financial, product, information security and technology, environment and consistency between values and practice. Some of the main objectives of this system are to reinforce the infrastructure of internal controls, facilitate the identification and evaluation of risks and implement procedures that enable their control.The issues related to auditing are managed by a specific committee, following the adopted corporate governance model. At the end of 2004, Natura started a project to consolidate risk management and expand its scope with the monitoring of the results of the company’s critical processes. Financial – The company hedges the debts contracted in foreign currency and, therefore, the foreign exchange rate variations do not have a significant impact on the financial results. Regarding the influence of exchange rates on operations, Natura uses raw materials that are imported or whose prices are pegged to a hard currency. In order to minimize the effects of the variation of the Brazilian real on costs, the company monitors trends and, when necessary, contracts the purchase of foreign currency on the Futures and Commodities Exchange (BM&F). Natura does not carry out transactions on the BM&F for speculative purposes. Products – The Product Safety Committee, composed by the executive director for research and development, scientists, doctors 4 0 0 2 t r o p e r l a u n n a a r u t a n 4 3 and specialized consultants, establishes policies related to the security of products for customers and supervises the toxicological evaluation of all components used in formulas in accordance with international safety standards.The company adopts the best cosmetovigilance practices. Information security and technology – In 2004, Natura made progress in the implementation of projects to improve quality and reduce risks in the critical business processes in order to avoid the discontinuity of its operations. Among the most significant projects are the outsourcing of IT infrastructure management and the beginning of the implementation of a contingency data processing center to ensure the availability of all operating systems in case of accident. Environment – The environmental risks are followed up and monitored by the Natura Environmental Management System, built from the NBR ISO 14001 standards certification obtained in 2004. Consistency between values and practices – The company’s commitment to ethical behavior, transparency, to open and ongoing dialogue with its many stakeholders and the adoption of corporate targets that are increasingly more compatible with sustainable development, demands from Natura the establishment of management systems that consider the risks related to these issues. To this end, the Corporate Responsibility Management System has been created (see Responsible Management, page 50, and Main Indicators, page 25). 4 0 0 2 t r o p e r l a u n n a a r u t a n 5 3 Strategy Natura’s strategy is grounded in the expression of its beliefs and values – whether in the development of products and services, whether in the quality of the relationships established with its many stakeholders – and in permanent innovation. At the center of this strategy is the expansion of its leadership on the Brazilian market. To this end, the company will continue to invest in infrastructure and quality of services, as well as in the valorization of its brand and in the growth and qualification of its group of Sales Representatives, in addition to seeking a greater balance in its product portfolio.The continuity of investments in the sustainable use of raw materials from biodiversity, among other things, and the increase of its investment in research and development as a whole are an integral part of this strategy. As a market leader, Natura continued, in 2004, to record a growth above the target market average with an increase in its share in the sector’s total revenue. Factors such as the capability of innovation, the demographic profile of the population and the growing participation of women in the labor market have been positively contributing to the development of the cosmetics, fragrances and personal hygiene industry in Brazil, proven by an annual growth many times higher than that of Brazilian Gross Domestic Product. An important aspect is the relevance of direct sales in the achievement of these results, a segment that is also developing rapidly. On an international level, the prospects are for expansion of the Natura brand in Latin America.The successful strategy for penetrating the Argentinean, Peruvian and Chilean markets, with the establishment of the direct sales model, led to the creation, in 2004, of a corporate structure focused on the Latin American market, with headquarters in Buenos Aires.This structure will be responsible for taking Natura’s value proposal to other countries of the region. In 2005, Natura is expected to start operations in Mexico. Regarding other regions, Natura will start an experience in France, with the inauguration of the Maison Natura in Paris and will expand its studies on the business model that is most suitable for other countries. To invest in the training of leaders who may accelerate the internationalization process, improve the programs to reduce environmental and social impacts, increase the knowledge of customers and further strengthen the relationships with suppliers are also among the company’s strategic objectives. 4 0 0 2 t r o p e r l a u n n a a r u t a n 6 3 4 0 0 2 t r o p e r l a u n n a a r u t a n 7 3 Cybele Amado de Oliveira was born in Salvador, State of Bahia, and was already an adult when, during a Carnival, she visited Vale do Capão, in Palmeiras, Chapada Diamantina.When she returned to Salvador, she could not stop crying. She realized that she wanted to live there, as a teacher. At 24, she returned there with her teaching diploma to teach Portuguese in a public school.The contact with the students reminded Cybele of the sentence dealt out to her in elementary school: she was a dyslexic child who would never learn how to read and write. “I know exactly how a child feels when somebody says that he or she will not learn to read and write,” she says. In the tests she gave in Vale do Capão, she determined that two thirds of the children could be labeled as dyslexic.They could barely read and write but they impressed Cybele because they were “poets” and could very easily learn. It was just a matter of method. “I started to see that the problem was not the child’s,” she says. She obtained the support of Natura’s Crer para Ver Program for her Projeto Chapada.“We saw a reduction of 70% in truancy and 80% in failure.” Today, 12 municipalities are part of the read and write teaching network that she put together.Another ten municipalities will be included in 2005.“Crer para Ver is really about believing, believing in your work. The program is part of me and I am part of its history.” Cybele dreams of a new era for the students in Chapada and in Brazil. “I dream of children learning to read the world to write their own lives.” Cybele Amado de Oliveira, Leader of the Projeto Chapada, supported by Natura, in Chapada Diamantina, State of Bahia. Laís Cruz, a Natura customer, among her friends Ulliana Ferrari and Andrea Calfat economic and financial, social and environmental results In 2004, Natura continued to present strong results in the economic and financial area, accompanied by concerns regarding environmental preservation and developments in the quality of its relationship with its many stakeholders. such as hair dyes, nail polishes and sanitary pads – increased significantly from 17.1% in 2003 to 18.9% in 2004. Net income, of 300.3 million reais, represented 17% of net revenues. Business Financial results – After consistent growth in 2003, with record in production and sales, Natura set new records in 2004. Gross revenues increased 33% and totaled 2.5 billion reais. Natura’s expansion was, once again, higher than that recorded by the market.Therefore, the company’s share in the market of cosmetics, fragrances and personal hygiene products – excluding those on which Natura does not operate, Evolution of Gross Sales (in millions of reais) 2002 2003 2004 1,411.2 1,910.1 2,539.7 Growing revenues together with controlled expenses enabled the company to close the year with an EBITDA of 431.7 million reais, 46% higher than in 2003. Gross cash generation totaled 385.6 million reais, 60.6% higher than that recorded in the previous year. Investments totaled 83.1 million reais, 4 0 0 2 t r o p e r l a u n n a a r u t a n 0 4 and the main highlight was the 21 million reais invested in the construction of a new warehouse. At the end of 2004, Natura had net investments amounting to 91.1 million reais. a small reduction of the tax burden, arising from legislation changes in the Employees’ Profit Participation Program (PIS) and Social Contribution on Billings (Cofins), at a federal level, and in the State VAT (ICMS). Evolution of the Adjusted EBITDA(1) (in millions of reais) 2002 2003 2004 199.2 295.7 431.7 1. Excludes the participation of subordinated debentures. The share of the cost of products sold in net sales dropped from 34.5% in 2003 to 32.5% in 2004.This result was driven by gains in efficiency and scale, better margin management, the appreciation of the Brazilian real in relation to the US dollar and Investment in research – One of the main factors that drove sales up was the investment of 47.4 million reais in research and development. Among the highlights are important technological innovations, such as the introduction of an internationally patented product – Elastinol+R – in the Chronos line. In 2004, 63% of the company’s revenues originated from products launched or relaunched over the previous two years. In 2003, this rate was 48.8%.The number of products launched grew from 117 in 2003 to 182 in 2004. 4 0 0 2 t r o p e r l a u n n a a r u t a n 1 4 Innovation Rate(1) (%) 2002 2003 2004 43,5 48,8 63,2 1. Portion of income arising from products launched or relaunched over the previous 24 months. Sales channel – Natura recorded an increase of 15.6% in the number of Sales Representatives. At the end of 2004, it had 407,000 Sales Representatives in Brazil and 26,000 abroad. Revenue per Sales Representative, an important direct sales indicator, grew 10.2% in Brazil, in reais, and 10.7% abroad, in US dollars. Productivity benefited, among other factors, from the investment made in support of the Sales Representatives. In this context, the distribution in 2004 of 13.7 million units of Vitrine, a product catalogue published every 21 days, merits attention. Number of Sales Representatives (in thousands) Brazil Latin America 2002 2003 2004 15 20 26 307 355 407 standard that allows for a more accelerated expansion into other markets in the region. The establishment of the operation model in Latin America, focused on direct sales, led to the creation of a corporate structure exclusively for this region. In its internationalization strategy, Natura will test, as from 2005, a new operation model in Europe, with the inauguration of its own space in Paris. Located in Saint Germain des Près, a privileged site in the French capital city, the Maison Natura Brasil will be a place where customers will find products prepared from raw materials from Brazilian biodiversity and have contact with aspects of Brazilian culture and customs. To extend the offer of its products, which are currently available in the free-shops of Brazilian domestic airports, to the duty-free shops of international airports, is also part of Natura’s strategy for international expansion. Additionally, Natura products can be purchased at the www.natura.net Website. Productivity of the Sales Representatives(1) (in thousands of reais) Production Brazil Latin America 2002 2003 2004 1.5 2.1 2.3 9.0 10.5 11.5 1. Business volume per average active Sales Representative. International operations – With a growth of 52% in US dollars, Natura’s operations in Latin America – Argentina, Chile and Peru – established in 2004 a consistent model and a Natura’s plant in Cajamar, State of São Paulo, produced 175 million units in 2004, 28% more than in the previous year.The accelerated growth rate since the inauguration of the facilities in Cajamar, in 2001, demanded the intensification of investments to increase capacity. One of the most important investments was the new warehouse, which will increase the storage capacity by 120% and is expected to be inaugurated in the first quarter of 2005. 4 0 0 2 t r o p e r l a u n n a a r u t a n 2 4 Also in 2004, the company defined the implementation of a third product separation line, which will start to be built in the first quarter of 2005. New and larger investments in machinery and equipment to increase production capacity are slated for 2005. Due to its concern with the quality of its processes, Natura created the quality office.The quality audit became more comprehensive regarding environment, security and sanitary inspection issues in the operations in both Brazil and abroad. Additionally, once the implementation of the NBR ISO 14001 is completed, the company will initiate the process to obtain the ISO 9001 standard certificate in 2005. Innovation Natura has been making efforts to permanently invest in learning and innovation in all aspects of its activities: in technological development, in the improvement of its production processes, in the sustainable use of raw materials from Brazilian biodiversity, in the communication of its concepts and values and in the improvement of the quality of its relationships. From a product innovation point of view, Natura invests heavily in research and development and in partnerships with research centers in Brazil and abroad, particularly in France, ensuring updated knowledge of trends and technological progresses in the pharmaceutical, chemical and biochemical fields. In 2004, 182 new products were launched. Number of Product Launches (units) 2002 2003 2004 91 117 182 The choice of Brazilian biodiversity as a technological platform at the end of the 90’s was a determining factor for the results recently achieved by Natura and in its commitment to sustainable development.The Ekos line products combine scientific knowledge with popular knowledge, preservation of Brazil’s natural heritage and opportunities for traditional communities. Other product lines such as Mamãe e Bebê (Mother and Baby), which values the bond between mother and child, and Chronos, which introduced the Truly Beautiful Woman concept, confirmed Natura’s ongoing concern with innovation and the conveyance of its values. From a management point of view, the company has been seeking, increasingly more to include sustainable development principles into its daily business routine.The previous adoption of the guidelines of the Global Reporting Initiative, GRI, and the establishment of the Corporate Responsibility Management System in 2004 are steps in that direction. A recent result of this movement was the inclusion of the social and environmental dimensions in the strategic map and the company’s balanced scorecard. 4 0 0 2 t r o p e r l a u n n a a r u t a n 3 4 Research and Development In 2004, Natura’s investments in research and development recorded an increase of 33.6% compared with the total funds invested in 2003. Of the launches in 2004, worthy of attention are both the products resulting from developments in cosmetic technology and raw materials from Brazilian biodiversity and the new formulas for more frequently used products, which are capable of reaching other groups of customers. Among the innovations is Elastinol+R, a raw material aimed at the treatment of aging marks in the Chronos line.This is the third version of Elastinol and its differentiating characteristic is that it produces results faster. Elastinol and its versions, patented in France, were developed together with Professor Ladilas Robert, from the Paris V University (see biography on page 26). Throughout 2004, Natura expanded the use of raw materials from Brazilian biodiversity. The flatsedge and the oil of the Surinam cherry, among others, were included in the Ekos line, and the passionflower oil was included in the Mamãe e Bebê line. Other raw materials, such as the oils of green coffee and pariparoba were developed to serve the European operation. Later, they will be included in the Brazil Ekos line.The replacement of animal fat by palm oil in all soaps of the Ekos line also merits attention. New make-up and hair products, the segments that grew the most in 2004, contributed to balance Natura’s portfolio. In the make-up segment, the company launched a new line, Aquarela (Watercolor). In the hair segment, Natura introduced new items and established the Plants line. As an indication of its efforts to develop and protect technologies, Natura applied, in 2004, for 15 patents in Brazil. Additionally, it was awarded 26 patents for inventions and industrial designs in Brazil and abroad. A portfolio of projects developed together with universities and research centers, having as their main focus the use of knowledge of the Brazilian flora in the cosmetic industry, was the origin of the innovations made in the many product lines of the company.Within the Programa Natura Campus (Natura Campus Program), developed in partnership with the Fundação de Amparo à Pesquisa do Estado de São Paulo (Foundation for the Support to Research of the State of São Paulo), Fapesp, for example, contracts with six universities were signed. Natura, in line with European legislation, is committed to fully abolishing tests on animals by 2009. In 2003, Natura had already totally abolished the use of animals in tests of finished cosmetic products (see Main Environmental Indicators, page 24).The company also invests in alternative tests as part of the development of new raw materials and has an in vitro laboratory to evaluate raw materials and products in human cells or in artificially cultivated animal cells. 4 0 0 2 a r u t a n l a u n a o i r ó t a l e r 6 3 4 0 0 2 a r u t a n l a u n a o i r ó t a l e r 7 3 Brand The Natura brand reflects the company’s Reason for Being, its beliefs and its vision of the world. It is present in everything Natura does – whether it is a product, a communication material or a relationship initiative – and in how it does it – with awareness, beauty and commitment. It is also expressed in the quality of the relationships established with the many stakeholders, with whom Natura shares its way of being. A differentiated type of stakeholder in the development of the brand is the Natura Sales Representatives. Not only do they share Natura’s way of being but they are also a means for its dissemination. When they disseminate Natura’s concepts by way of direct contact with final customers, the Sales Representatives strengthen the brand. The strengthened brand, in turn, attracts a growing number of new Sales Representatives.To support and expand this movement, Natura uses different means – advertising, merchandizing, contacts with the press and relationship programs. Among the initiatives developed in 2004 are those that reinforce Natura’s image as a company that values the Brazilian biodiversity, culture, music and fashion – such as its support for Greenpeace in the Energia Positiva (Positive Energy) project for Brazil and the sponsorship of Brazilian singer Maria Rita and of São Paulo Fashion Week. In 2004, Natura formalized its brand management internal system with tools to determine and convey concepts to all the company’s levels. One of these tools was the workshops for training on the brand.The management system will support the development of the brand in the company’s internationalization process. Different awards and surveys reaffirmed the growing strength and value of the Natura brand. In 2004, the company was elected Top of Mind, in the cosmetics category, in a survey with customers conducted by the Instituto de Pesquisas Datafolha (Datafolha Research Institute). It was also considered the Most Highly Regarded Company in Brazil in accordance with CartaCapital magazine and Instituto InterScience (InterScience Institute), and the third most valuable brand in Brazil, according to ISTOÉ Dinheiro magazine and Interbrand consultancy. Additionally, for the fifth consecutive year, it was considered a benchmark in good civic responsibility by Exame magazine and Instituto Ethos (see Awards and Recognitions, page 63). 4 0 0 2 t r o p e r l a u n n a a r u t a n 7 4 4 0 0 2 t r o p e r l a u n n a a r u t a n 6 4 Old man Arraia (Portuguese for stingray) taught his son,Arrainha, the secrets of the forest and extraction of the Brazil nut, in Almeirim, State of Pará.The father’s nickname came from his White chest, like the stingray, a consequence of an accident with fire.The son’s, because the boy would go into the forest with his father. On the outside, the boy’s chest looked nothing like a stingray’s. But inside, both father and son felt love for what they did.“It was just me and the old man,” said Delbanor Mello Viana, nostalgic for those long gone days, today a mature man and a Brazil nut harvester and leader of the São Francisco do Iratapuru community in the State of Amapá. At that time, neither father nor son knew what the nut they delivered to profiteers was for. Now,Arraia, who visited Natura’s factory in Cajamar, knows the process that transforms the yield of his work into fine fragrances. “The perfume is good,” says the leader, who is proud to see his community becoming the owner of its destiny.The cooperative they have created and the partnership with Natura have raised the awareness and improved the organization and productivity of these nut harvesters. In 2004, 8 metric tons of Brazil nuts were sold to Natura.This year, according to him, it will be 15 metric tons. “Sustainable development is the way to promote change in the community, bring benefits to education, with what nature has to offer,” says Arraia. He celebrates the fact that the Brazil nut is now locally processed, creating jobs and generating income even outside harvest time.“Natura came over and trusted in us.We also trusted in Natura.” For him, now, the most important thing is to continue to make a living without destroying the forest.“What I want to do is work with the forest standing up.” Delbanor Mello Viana, also known as Arraia, leader of Natura’s supplier community in the Sustainable Development Reserve of the Iratapuru River, State of Amapá Flávia Azevedo, a Natura customer, with family quality of relationships One of Natura’s beliefs is that life is a chain of relationships. From this belief comes the constant attention to and the concern with the quality of its relationships with its different stakeholders. Responsible management Since the end of the 90’s, Natura has sought to place corporate social responsibility in the center of its strategy and management based on two pillars: the ethical and transparent relationship with its many stakeholders and the definition of targets that are compatible with sustainable development. Over the past few years, the company has attempted to establish processes and systems that ensure the inclusion of these principles in the strategic planning and the daily business routine. In 2004, many important developments were accomplished. The company’s balanced scorecard started to reflect the three dimensions of sustainability. Today, Natura’s strategic map contemplates economic and financial and social and environmental targets. In the strategic plan, this model is used throughout the company, influencing the initiatives of all areas. What supports this process is the Corporate Responsibility Management System, which was created approximately two years ago and improved in 2004. By way of this system, a detailed diagnosis of Natura’s relationship with its stakeholders was performed, which resulted in the survey of topics to be included in the strategic plan. 4 0 0 2 t r o p e r l a u n n a a r u t a n 0 5 Therefore, all areas of Natura now systematically follow up the issues related to the quality of the relationships with stakeholders based on aspects such as ethics, transparency and efficiency of the dialogue channels, including non-business topics.The initiatives related to the critical aspects of socially responsible management are followed up by way of the Corporate Responsibility Matrix (see Main Social Indicators, page 24). already started the process to obtain the ISO 9001 certification. The inclusion of social and environmental practices in the company’s daily routine was favored by the strengthening of the Sustainability Committee, which was created two years ago and prompted the intense debate on the application of the responsible management pillars for business planning and performance. In the case of the environmental targets and indicators, the mobilization channel with the strategic plan is the Natura Environmental Management System developed from the NBR ISO 14001 certification standards. Once the implementation of these standards is completed, Natura intends to include the quality management processes and it has Natura’s Corporate Responsibility Management System caused an impression among academics and in the press. It was included, for example, in a group of analyses of the matter in the Latin American edition of December 2004 of the Harvard Business Review, in addition to being presented at many conferences. 4 0 0 2 t r o p e r l a u n n a a r u t a n 1 5 Relationship with Employees The annual organizational climate survey conducted in 2004 showed a slight variation in the result compared with the previous year.The favorability rate dropped from 76% in 2003 to 73% in 2004.The maintenance of a differentiated organizational climate is a permanent challenge to Natura.The company is recognized as a benchmark in work environment in Brazil and, in 2004, its was chosen as The Best Company for Women to Work for, in accordance with the survey published in the Exame Guide The Best Companies to Work for, together with the Great Place to Work Institute. Number of Employees Brazil Latin America 2002 2003 2004 243 290 378 2,641 2,696 3,177 In 2004, nearly 300 internal promotions opened opportunities to employees. As part of the effort to meet the current expansion stage of the company, the Corporate Education department was restructured, thus providing for a better alignment of programs with the company’s strategy. In 2004, employees received, on average, 70 hours of training, against 37 in 2003. One of the initiatives to improve management focusing on corporate responsibility was the creation of specific workshops for senior management and employees, with the objective to support decision-making based on the three dimensions of sustainability. In 2004, six manager groups participated in these workshops. The increase of investments and the expansion of the initiatives of Natura Educação (Natura Education), a program to reimburse the monthly fees of basic training and specialization courses also merits attention. With investments of R$ 450,000, 66% higher than those in 2003, Natura Educação was extended to the children of employees and, in the case of elementary, middle and high school, to outsourced employees assigned to the company's units. An important point in the establishment of stronger ties with employees was the launch of the Construindo o Futuro (Constructing the Future) program, which is operated in three dimensions: quality of life, career extension and financial planning.The objective is to lend opportunity and support to the construction of a future at the end of a career with Natura and encourage savings with the offer of a pension plan, the Poupança Incentivada Natura (Natura Incentived Savings). As part of the recognition of the results achieved by the company, the Profit-sharing Program continued to prove to be a differential in the remuneration of employees. On a comparable basis, the amounts provided for the payment of profits sharing in 2004 grew 46.9% in relation to 2003. Relationship with Sales Representatives and Customers The Sales Representatives – independent professionals who buy and resell Natura products – represent the main link of the company with the final customer.The company tries to establish with them a relationship of 4 0 0 2 t r o p e r l a u n n a a r u t a n 2 5 complicity and recognizes the important role they have in the dissemination of the company’s concepts and values. In 2004, Natura increased the group of programs that aims to recognize the value of the relationship with the Sales Representatives, reinforcing qualities that are expressed at different levels – length of activity, number of customers, sales volume, presence at events and attendance at Natura Meetings, where the company’s launches are presented. The increasingly stronger relationship and the strength of the Natura brand have been stimulating interest of the Sales Representatives.This number continues to grow. In 2004, Natura closed the year with 407,000 Sales Representatives in Brazil, a growth of 14.6% in relation to 2003. In the other countries where the company is present, the number of Sales Representatives increased 30%, reaching 26,000.The productivity of the Sales Representatives (sales by active Sales Representatives) increased 10.2% in Brazil in reais and 10.7% in the international operations, in US dollars.To this important group of the Natura community, the company generated an estimated income of 1.06 billion reais. In training events, Natura recorded, in 2004, 372,000 contacts with the Sales Representatives, compared to 319,000 in 2003. Distribution of Wealth to the Sales Representatives (in millions of reais) 2002 2003 2004 585.5 795.8 1,059.3 The link between Natura and the Sales Representatives are the sales promoters who, in turn, report to the sales managers. With the increase of the teams, the ratio of sales promoters served per manager dropped from 35 to 20. In accordance with relationship and attraction programs, Natura filled with Sales Representatives, in 2004, 70% of the sales promoters vacancies created as a result of the increase of the teams. The Sales Representatives have a relevant participation in the Programa Crer para Ver (Believing is Seeing Program) by voluntarily selling products and raising funds that are used in projects of the public school system. In the Crer para Ver Educação de Jovens e Adultos (Education of Young People and Adults), launched in 2004, the Sales Representatives can send to school young people and adults who have not completed middle school (see Relationship with Government and Society, page 58). In 2004, the Sales Representatives and customers were able to count on more efficient ways of product delivery after logistics operators with greater infrastructure were contracted. Also, for these two stakeholders, the internet remained as an important relationship channel. During the year, a monthly average of 75,500 Sales Representatives used the internet to contact Natura. Of this total, 80% sent more than half of their orders via the Web.The number of orders made by electronic means totaled 1.96 million over the year, or 30.5% of the total orders made to the company – allowing for savings of 6.2 million reais in service via telephone. Investments in marketing, product launches and a strong presence in the press contributed, in 2004, to the strengthening of the relationship with the final customer. During the year, Natura filled 21.5% of the editorial space earmarked for the cosmetic market, compared with 9.5% 4 0 0 2 t r o p e r l a u n n a a r u t a n 3 5 for the company in second place.The company increased its presence in the media by 42% in relation to 2003. Relationship with Suppliers A new approach in the relationship with key suppliers of transports and raw materials was strengthened by Natura in 2004. With the aim to strengthen the ties with these partners, the Qlicar concept was introduced. This acronym stands for and summarizes the aspects of quality, logistics, innovation, contract, service and traceability. In the transportation area, Natura decided to focus the relationship on logistics operators that are capable of taking care of the whole distribution process, from collection of the product at the plant to delivery to the Sales Representative. With proper infrastructure, transporting companies perform, in a more efficient way, a complex distribution process – Natura products reach over 5,000 Brazilian municipalities. A next step will be to assign to these suppliers the task of collecting, from the customers’ houses, the products that are the subject of complaints. A pilot project in São Paulo showed excellent results regarding customer satisfaction – in a survey, 95% of them said they were satisfied with the service. Natura seeks suppliers that share its beliefs and values. In the context regarding concern for the environment, each supplier receives a questionnaire on environmental topics in their operations, in accordance with the NBR ISO 14001 standards.Whenever there are items that are non-complied with, although tolerable, an action plan to correct these flaws is established.These suppliers are qualified to have a commercial relationship with Natura and, once the problems are corrected, they may be certified.The certified suppliers are those whose products and services are preapproved and whose receipt does not require checking.The first certifications, within the Qlicar concept, were granted in 2004. Relationship with the communities that supply raw materials from biodiversity When it launched the Ekos line, in 2000, Natura started to put into effect the sustainable use of raw materials from Brazilian biodiversity.The use of raw materials from the Brazilian flora should be economically viable and, at the same time, contemplate the proper management of the extractivist activity and sustainable development of the producing communities. Since then, the relationship with the communities that supply the raw materials from biodiversity has proven to be an important process of learning.The developments seen in 2004 reflect the application of this learning on the process to create a consistent model for the use of the raw materials and the relationship. During 2004, a multifunctional team worked on the development of a model that can, based on a pilot experience with the community of Iratapuru, in the State of Amapá, be used in other communities.The community of Iratapuru is made up of 30 families that supply the Brazil nuts, copaíba and breu branco.The experience was followed up by Amigos da Terra, an NGO that, together with the community, created a business management plan. One significant achievement was the certification of the three raw materials produced by the community by the Forest Stewardship Council. 4 0 0 2 t r o p e r l a u n n a a r u t a n 4 5 Sustainable Development Reserve of the Iratapuru River, State of Amapá, and details of the passion fruit and buriti 4 0 0 2 a r u t a n l a u n a o i r ó t a l e r 7 3 Among the measures taken is the creation of a reserve made up of a percentage of the net revenues obtained from the sale of products originating from the raw materials supplied by the community.These funds may be used both in immediate and future needs. Additionally, a consultancy specialized in sustainable development, Amapaz, will make a diagnosis of the community in order to prepare a plan for the future, which may include other activities in addition to the extractivist one.The diagnosis will include physical, territorial and social and economic aspects so as to help the community to prepare a sustainable development plan. Relationship with the neighboring communities With units in Cajamar and Itapecerica da Serra, both in the State of São Paulo, Natura has been strengthening its relationship with the communities in these municipalities. In this context, 2004 was a year of important developments. In Cajamar, the two relationship strategies created in 2003 to improve the company’s relationship with the city acted actively (see indicator 73, page 100). Natura’s internal group, made up of employees from different areas to debate and propose solutions for the needs of the municipality, supported the preparation of a master plan for the education of Cajamar and the establishment of partnerships between local schools and Natura for the organization of events such as Environment Week. The tripartite group, made up of representatives of Natura, Mata Nativa (Native Forest), an NGO, and the local administration office, signed a cooperation agreement for the implementation in that city of Agenda 21, an action plan for sustainable development established in the First United Nations Conference on the Environment and Development, the Eco-92. Additionally, with the cooperation of local leaders, it prepared a detailed analysis of Cajamar, with many social and economic and environmental indicators, conducted by Oficina Municipal, an NGO.The Pro-Agenda 21 Forum of Cajamar, made up of governmental and non-governmental organizations, and companies and citizens of the municipality, was also implemented to follow up and guide the city’s public policies. In Itapecerica da Serra, Natura decided to focus its attention and efforts on the district of Potuverá, where one of its units is located. In 2004, employees of the company voluntarily organized themselves to create a workgroup and implement projects for educational training, technological training and other interests of the community. In 2005, Natura will start a process to implement Agenda 21 in Itapecerica da Serra. In both Cajamar and Itapecerica da Serra, Natura maintains a volunteer program during work hours. In 2004, more than 100 employees participated in this program. A toll-free 0800 line was placed at the disposal of the community of Cajamar, in 2004, for them to communicate with Natura. In 2005, the same will be done for the community in Itapecerica. Relationship with the environment Natura is committed to the establishment of ways to promote sustainable development and shares its commitment with its many 4 0 0 2 t r o p e r l a u n n a a r u t a n 6 5 stakeholders. In this context, for example, its relations with its supplier communities contemplate the preservation of the environment and local development. Additionally, the company tries to keep control of its activities, products and services in such a way that the environment can absorb the impacts resulting from them.To this end, it uses the Natura Environmental Management System, Sigan, as a tool, which is based on the ISO 14001 – the company obtained the NBR ISO 14001 in May 2004. The monitoring conducted by way of Sigan identified flaws in the use of water and energy and promoted the more efficient use of these resources in a year in which production grew 28%. As it considers water a very valuable resource that must be managed with care, Natura projected the installations of the plant in Cajamar in a way that allows for its reuse. In the well built on the site, a system was installed that allows the company to take only as much water as the water table is capable of replacing.To increasingly reduce the need to take water from the well and to reduce usage in general, the increase of the water reuse rate is a permanent target. In 2004, the company was able to reduce by 23% the use of water per unit sold. Water reuse increased from 29% in 2003 to 39.5% in 2004 (see Main Environmental Indicators, page 22).The water issue is a recurring theme in Natura’s discussions with its many stakeholders. Consumption of Water per Unit Sold(1) (liters/unit) 2002 2003 2004 1.22 0.87 0.67 1. Units resold by Sales Representatives (does not include samples, gifts, resale support material, products of the Crer para Ver line, among others). Reuse of Water (% of total water treated at the Effluent Treatment Station) 2002 2003 2004 16% 29% 39.5% Regarding energy, Natura tries to ensure that industrial growth is not directly related with the increase of absolute consumption. To this end, it develops systems and processes that allow for the rational use of available energy. In 2004, the company recorded gains of scale that resulted in the decrease of fixed costs, prompting a reduction of 23% in usage per unit sold. Total Consumption of Energy (Energy Matrix)(1) per Unit Sold (kjoules/unit) 2002 2003 2004 1,025.7 785.2 603.7 1. The energy matrix is made up of the total energy that Natura uses that comes from various sources (electric, diesel and LPG). Regarding the generation of waste, the company achieved, in 2004, a reduction of 12.3% per unit sold in relation to 2003.The incineration of waste dropped from 6.4% in 2003 to 5.4% in 2004, and the disposal in landfill sites, from 24.4% to 21.2%. The percentage of recycled waste grew from 69.2% to 73.4%. Natura also seeks to identify the environmental impact of its products and the possible consequences for society. To this end, it uses the life cycle assessment methodology. In 2004, all packages of the portfolio were analyzed in accordance with this methodology. In 2005, Natura will develop and test a life cycle assessment model for raw materials. 4 0 0 2 t r o p e r l a u n n a a r u t a n 7 5 Relationship with shareholders As a public company since May 2004, Natura tries to establish an exemplary relationship with shareholders in the same way it does with other stakeholders.The company wants this relationship to be characterized by transparent communication, fair and equal treatment and constant improvement of corporate governance (see Corporate Governance, page 28). Relationship with government and society Natura keeps dialogue channels with federal, state and municipal governments, as well as with members of congress. Additionally, as it is aware that the company must be an agent of social transformation, it seeks to permanently enhance its initiatives aimed at the development of society. During 2004, Natura signed important agreements with governments and organizations from civil society. Among them are the cooperation agreement signed with the administration office of Cajamar and Mata Nativa, an NGO, for the implementation of Agenda 21 in Cajamar and the partnership with Fundação Abrinq (Abrinq Foundation) and the Ministry of Education for the promotion of the Education of Young People and Adults as part of the Crer para Ver (Believing is Seeing) Program. As a member of the Associação Brasileira das Empresas de Venda Direta (Brazilian Association of Direct Selling Companies) – ABEVD, Natura was a signatory to the instrument established by the association with the Ministry of Social Security for the promotion of education for the social security of independent resellers. Natura represented the Brazilian corporate sector in the International Organization of Standardization Conference on social responsibility held in June 2004 when it was decided to create, by 2008, guidelines for standardizing the application of social responsibility processes. It will also be part of the committee responsible for the definition of the guidelines of the standard. Additionally, representatives of the company were invited to participate in important discussion forums that involve civil society, such as the Forum of Cosmetics Competitiveness, the Forum of Biotechnology Competitiveness and the Brazilian Conference on Environment, in addition to working groups that discuss the access to the genetic inheritance and remuneration of the traditional knowledge, among others. One of Natura’s operating instruments in its relationship with society has been the Crer para Ver Program, maintained in partnership with the Fundação Abrinq and through which the Natura Sales Representatives voluntarily sell products that are especially created for the program, channeling the funds raised to projects of the public school system. In its nine year of existence, the program has raised 17.9 million reais and supported 148 projects in 3,638 schools. In 2004, the amount of funds raised was the highest in the program’s history. Among the projects supported in 2004 were the Cinema e Vídeo Brasileiro nas Escolas (Brazilian Cinema and Video in Schools), in the State of São Paulo, and Projeto Chapada (Chapada Project), in the State of Bahia.The objective of the Cinema e Vídeo nas Escolas is to encourage the creation of video libraries and the education of students by way of audiovisual language, based on the education of teachers.The 4 0 0 2 t r o p e r l a u n n a a r u t a n 8 5 8 WAYS TO CHANGE THE WORLD ERADICATE EXTREME POVERTY AND HUNGER ACHIEVE UNIVERSAL PRIMARY EDUCATION PROMOTE GENDER EQUALITY AND EMPOWER WOMEN REDUCE CHILD MORTALITY IMPROVE MATERNAL HEALTH COMBAT HIV/AIDS, MALARIA, AND OTHER DISEASES ENSURE ENVIRONMENTAL SUSTAINABILITY DEVELOP A GLOBAL PARTNERSHIP FOR DEVELOPMENT Projeto Chapada is focused on the development of a quality public school network in the region of Chapada Diamantina, State of Bahia, by way of the proper training of pedagogical coordinators and teachers, and the development of joint actions with municipal education departments to fight against child labor (see the statement by the project’s coordinator on page 39). Crer para Ver – Net Funds Raised (in millions of reais) 2002 2003 2004 1.7 2.6 3.0 The scope of the Crer para Ver Program was expanded in 2004 with the creation of the Crer para Ver EJA (Educação de Jovens e Adultos) (Education of Young People and Adults) in partnership with the Ministry of Education and Fundação Abrinq. In the Crer para Ver EJA, Sales Representatives are encouraged to identify people older than 15 years of age who have not completed middle school and send them back to school (see details in Highlights of Investments in Corporate Responsibility, page 66). In addition to the Crer para Ver Program, Natura supports initiatives aimed at culture, promotion of dialogue channels and sustainable development, and at the protection of the environment (see Total Support and Sponsorship, page 71) Commitments and Codes of Conduct One of the first Brazilian companies to sign the Global Compact Natura reaffirmed, in 2004, its commitment to the principles proposed by the United Nations. In July, it was represented by Guilherme Peirão Leal, cochairman of the Board, at the Global Compact Leader’s Forum in New York. During the year, many actions were taken with the aim of disseminating the principles of the Global Compact and the Millennium Development Goals to employees, Sales Representatives and partners. For example, the MDGs were printed on the covers of over 860,000 boxes of products sent to Sales Representatives all over Brazil. Additionally, the targets were highlighted in many communication materials, such as the Vitrine, a catalogue of products. In this report, 4 0 0 2 t r o p e r l a u n n a a r u t a n 9 5 Natura presents its developments in the promotion of the Global Compact principles based on the indicators of the Global Reporting Initiative (see page 76). Natura is a signatory to the code of conduct before consumers and code of conduct before direct sellers and among companies of the Associação Brasileira de Empresas de Vendas Direta (Brazilian Association of Direct Selling Companies), ABEVD, prepared in accordance with the model proposed by the World Federation of Direct Selling Associations, WFDSA. The company fully observes the Estatuto da Criança e do Adolescente (Statute of Children and Adolescents) and follows the Letter of Principles of the Instituto Ethos de Empresas e Responsabilidade Social (Ethos Institute of Companies and Social Responsibility). In 2004, it became an Organisational Stakeholder of the Global Reporting Initiative, GRI. It is the first Brazilian company to be part in this group. Natura was also awarded the following titles: Empresa Amiga da Criança (Child-friendly Company), granted by the Fundação Abrinq pelos Direitos da Criança (Abrinq Foundation for the Rights of Children); Empresa Cidadã (Civically-responsible Company), granted by the Assembly of the City of São Paulo; Empresa que Educa (Company that Educates), granted by SENAC (Brazilian Service for Commercial Learning) of the State of São Paulo. Principles of the Global Compact Human Rights Labor Environment Anti-Corruption I: The support and respect of the protection of international human rights. III: The support of freedom of association and the recognition of the right to collective bargaining. VII: The implementation of a precautionary and effective program to environmental issues. II: The refusal to IV: The abolition participate in or condone human rights abuses. of compulsory labor. V: The abolition of child labor. VI: The elimination of discrimination in employment and occupation. VIII:Initiatives that demonstrate environmental responsibility. IX: The promotion of the diffusion of environmentally friendly technologies. X: The promotion and adoption of initiatives to counter all forms of corruption, including extortion and bribery. Learning and Innovation: Education for Sustainable Development Natura is engaged in speeding up its learning on sustainable development and sharing it inside and outside the company. As part of this process, it has been promoting debates in Cajamar with many experts in this field. In 2004, Fritjof Capra, Austrian physicist, Rosalyn McKeown and Charles Hopkins, coauthors of the Education for Sustainable Development Toolkit, Ernst Ligteringen, from the Global Reporting Initiative, and John Elkington, from SustainAbility, all visited the Espaço Natura (Natura Space). In addition to participating in meetings with senior management, they gave lectures to a group of employees, partners and representatives from civil society.We took note of some of their impressions of sustainability and of Natura: Ernst Ligteringen, Fritjof Capra and John Elkington 4 0 0 2 t r o p e r l a u n n a a r u t a n 0 6 “Natura is one of the leading companies when it comes to reporting economic, social and environmental performances. It was important to hear its leaders explain why they act the way they do and how this behavior represents the company’s business model. The value of this choice has been recognized recently on the stock market. Incidentally, I would say that the majority of today’s investors accept that there is a need to pay more attention to the performance of companies, not just their quarterly financial results.” Ernst Ligteringen, Chief Executive of the Global Reporting Initiative “If you want to be sustainable, you need to be honest and investigate technical details.You must ask yourselves: What raw materials do we use? What do we do with our waste? You must show that it is economically viable to do things from an ecological point of view. Show that using water or energy efficiently can help saving money.” Fritjof Capra, physicist and environmental activist and author of the books The Web of Life and The Hidden Connections. Founder of the Center for Eco-Literacy in California, United States We need to accept that, as companies make progress in the search for sustainable development, many mistakes will be made.This is natural and we must learn quickly from them.What Natura is doing is already state of the art. Its challenge wil l be to propagate its ideas outside the company’s premises.” John Elkington, co-founder of the British business consultancy, SustainAbility 4 0 0 2 t r o p e r l a u n n a a r u t a n 1 6 Lucia Pasqualini, a Natura Sales Representative, with her customers Marina Inoue and Gelsi de Souza Awards and Recognitions The transparent and ethical relationship with its many stakeholders, as well as the constant concern with the development of these relationships, has been providing Natura with awards and recognitions (see page 100). Some of those granted in 2004 are: • Most Highly Regarded Company in Brazil – CartaCapital magazine and InterScience. • The Best Company for Women to Work for – Exame magazine and Great Place to Work Institute (second consecutive year). • Model-company in social responsibility – Exame magazine and Instituto Ethos de Empresas e Responsabilidade Social (Ethos Institute of Companies and Social Responsibility) (fifth consecutive year). • Third most valuable brand in Brazil – ISTOÉ Dinheiro magazine and Interbrand. • 16th Best Annual Report – SustainAbility, Standard & Poor’s and United Nations Environment Programme. • Best Annual Report of a Closely-held held Company Award – Associação Brasileira de Companhias Abertas (Brazilian Association of Publicly Traded Companies), Abrasca (second consecutive year). • Annual Social Report Award – Associação Brasileira de Comunicação Empresarial (Brazilian Association of Corporate Communication);Associação dos Analistas de Investimento do Mercado de Capitais (Association of Capital Markets Investment Analysts and Professionals); Instituto Ethos de Empresas e Responsabilidade Social; Fundação Instituto de Desenvolvimento Empresarial e Social (Corporate and Social Development Institute Foundation); and Instituto Brasileiro de Análises Sociais e Econômicas (Brazilian Institute of Social and Economic Analyses), Ibase (third consecutive year). • Top of Mind Award in the Cosmetics category – Folha de S.Paulo newspaper. • Environmental Merit Award – Federação das Indústrias do Estado de São Paulo (Federation of Industries of the State of São Paulo), FIESP. • Ecodesign Award – Federação e Centro das Indústrias do Estado de São Paulo/Instituto de Pesquisas Tecnológicas (Federation and Center of Industries of the State of São Paulo/Institute of Technological Research). 4 0 0 2 t r o p e r l a u n n a a r u t a n 3 6 4 0 0 2 t r o p e r l a u n n a a r u t a n 2 6 Fernanda Inouye Miura, a Natura Sales Representative, in Vila Madalena, São Paulo It is in the hectic pace of her city that Fernanda Lima, from São Paulo, moves.At 27, she is restless and does thousands of things here and there.Wherever she goes, she brings with her, in her car, a kit with Natura’s products. Fernanda is a Sales Representative and started out early in this job, selling the products to her family and friends.“It is the kind of work that you can fit into your routine”, she says. But the greatest advantage, according to her, is that Natura’s products “sell themselves”. “People feel attracted by the packages and they also love what is inside.” If it wasn’t for that, Fernanda would never have accepted to work in this field. She is shy. More than that: demanding. She wouldn’t brag about something she didn’t believe in. She believes in Natura.And she says that she identifies with the company.“I like its approach,” she said. Fernanda, like Natura, wants to help building a better world. Crazy about knowledge and human relations, she entered the world of NGOs after graduating in teaching. In one such NGO, the Centro de Estudos e Pesquisas em Educação, Cultura e Ação Comunitária (Center of Studies and Research on Education, Culture and Community Work), Cenpec, she analyzes educational projects with young people.The result of her experiences and reflections are shown in the articles she posts on the internet. “When you tell your own story, you become closer to others,” Fernanda says.“Maybe because I come from an oriental family, I always had this idea that each one of us has a mission to accomplish. For my part, everything I do is to help improve the world.” This chapter highlights some of the most important of Natura’s projects contemplated in the Corporate Responsibility Matrix (presented with the related amounts in Main Indicators, page 20). Below, there is a list presenting the projects in their different categories. For some, further details are provided (highlighted in bold).The choice was made to exemplify the coverage and the nature of the initiatives. Employees, families and outsourced employees Climate survey (see Main Social Indicators, page 24) Sales Representatives Survey to measure the quality of the relationship with the Sales Representatives Natura’s funds Fundamentals Enhancement and monitoring of quality relationship indicators Promotion and dialogue channels Provision of information / transparent communication Economic and social Promotion of local sustainable development Information editorials for the employees related to corporate responsibility, environment and sustainability Sustainability Week at Natura highlights of Investments in corporate responsibility Supplier Communities Suppliers Neighboring communities Government and society Event with suppliers to discuss environmental issues Program for the Certification of Natural Raw Materials; Plântula Project; Sustainable Development Program with Supplier Communities; Relationship with supplier communities of the Ekos line United Nations Development Programme (UNDP)(1); International Colloquium on Human Rights(1) and other projects supported Publication of Annual Report; Instrument of Commitment to sustainability – Rules and procedures for access to biodiversity Agenda 21 of Cajamar; Natura Working Group – Cajamar; Natura Working Group – Itapecerica da Serra (see indicator 73, page 100) New Ventures Brazil Program – Forum of Investors in Sustainable Ventures(1); Promotion of Voluntary Work Program and other projects supported Many sponsored projects Training of cultural agents Education for Sustainability Project Many sponsored projects N/A Many sponsored projects Initiatives to reduce energy use (see indicator 17, page 82); Compositing Center in Cajamar; Initiatives to reuse water (see Main Environmental Indicators, page 22) Diversity Program; Incentive Program for the Admission of Physically Impaired People (see indicator 60, page 95) Natura Education Program;Training of employees in sustainability; Executive Education Program (see indicator 58, page 95) Nursery; Natura Sports and Social Club; Clinical services (see indicator 48, page 92); Quality of Life Program (see indicator 60, page 95); Mother’s Day Event; Christmas’ toys and baskets event Actions to raise environmental awareness Promotion of inclusion, equality and diversity Education and Training Quality of Life Promotion of art and culture Environment Protection of the environment Minimization of material outflow and inflow Funds generated by the Sales Representatives Net funds raised by the Crer para Ver Program Tax funds Tax incentives Employees, families and outsourced employees N/A Sales Representatives N/A Supplier Communities N/A Suppliers N/A Neighboring communities N/A Government and society Crer para Ver Program Employees, families and outsourced employees Sales Representatives Supplier Communities Suppliers Government and society Biodiversity Brazil Project(3) Neighboring communities Support for the Council for the Rights of Children and Adolescents of Cajamar(2); Support for the Council for the Rights of Children and Adolescents of Itapecerica da Serra(2) 4 0 0 2 t r o p e r l a u n n a a r u t a n 7 6 1. Project sponsored or supported by Natura. 2. Project supported by Natura, by way of the allocation of 1% of the tax payable. 3. Project supported by the Rouanet Law. Note: N/A = not applicable. Employees, families and third parties 1. Programa Natura Educação (Natura Education Program) Objective: To expand access to formal education and professional training. Location: Cajamar and Itapecerica da Serra, both in the State of São Paulo. Target Public: Natura’s employees and their families, and outsourced employees assigned to the company’s units. Results: (cid:1) Around 1,600 employees benefited from Natura Educação in its four years of existence. In 2004, the program was extended to outsourced employees who are assigned to the company’s units. Eighty scholarships for technical courses were offered in accordance with the target established. However, demand was lower and served only 35 people. For the language courses and college studies, the targets were equally achieved: 90 and 100 scholarships, respectively. Target for 2005 To extend Natura Educação to the outsourced employees who work in customer service and include continuing education, post graduation and MBA courses. of the municipality in order to establish a basis for studies and proposals for future development. From this process, in which many sectors of society represented by around 30 people participated, some pillars for the expansion of the movement in the town were founded. c) Projeto Comunidade Ativa (Active Community Project) ☺ To mobilize the community behind the identification and establishment of social and political participation channels, interactive workshops were held in two districts of Cajamar (Vila Mirassol and Jardim Florim) in partnership with Mata Nativa. Consisting of conceptual and practical sections, fieldwork and preparation of the project, the workshops aimed at the implementation of democratic centers for discussion on environmental and social topics and the municipal budget. At the end, the 50 or so participants were involved in the preparation of pilot projects for the development of the districts. Target for 2005 To expand the tripartite working group, involving other local companies in this process.To publicize the results of the analysis and make them accessible to the community. To promote the implementation of the Sustainable Development Forum in Cajamar. To carry out workshops in another two districts of the city. Neighboring Communities Supplier Communities 1. Agenda 21 of Cajamar Objective: To promote coordination between leaders from civil society, the public sector and private sector to promote sustainable development in the municipality of Cajamar, in the State of São Paulo, planning and implementing, in a participative way. Location: Cajamar, in the State of São Paulo. Target Public: Community of Cajamar. Partners: Administration Office of Cajamar and NGOs Mata Nativa and Oficina Municipal. Results: The target proposed for 2004 was to expand the tripartite working group – the administration office of Cajamar and Mata Nativa , an NGO, and start the process to involve local leaders in democratic forums on municipal planning, including other companies.To analyze the results, the three main work fronts will be described: formed by Natura, a) Tripartite working group (cid:1) The group was established with the signing of a cooperation agreement by which its members commit themselves to stimulate the sustainable development of the municipality.The First Pro-Agenda 21 Cajamar Meeting was held with the participation of approximately 150 people from many sectors of the local community. At the time, a permanent commission for the mobilization and follow-up of public policies was organized aimed at the structuring of the Sustainable Development of Cajamar Forum in 2005. The expansion of the tripartite working group, in accordance with the target set for 2004, started with the First Pro-Agenda 21 Meeting. However very few representatives from the private sector were present. b) Performance of a diagnosis of the municipality of Cajamar ☺ Under the coordination of the tripartite group, an analysis of the municipality of Cajamar was made with the support of Oficina Municipal, an NGO, addressing the political, administrative, fiscal, financial, social and economic, and physical and territorial areas. This was a collective process of knowledge and evaluation of the many aspects 1. Programa de Certificação de Ativos Naturais ou Vegetais (Program for the Certification of Natural Raw Materials) Objective: To certify the raw materials from Brazilian flora that are used in the Natura Ekos line, so as to ensure their sustainable gathering (economically viable, ecologically correct, and socially fair), contributing to the preservation of biodiversity and local development. Target Public: Civil society and the scientific community. Partners: Imaflora and Instituto Biodinâmico. Results: (cid:1) The proper use of non-wood forest resources in Natura’s products is certified by the quality seal of the Forest Stewardship Council, FSC, and the Instituto de Manejo e Certificação Florestal e Agrícola (Institute for Forestry and Agricultural Management and Certification), Imaflora, is the responsible for this certification.The FSC seal ensures that the customer contributes to the preservation of forests and improvement of the social conditions of workers and local communities. In 2004, the forestry certification for six raw materials was completed: Brazil nut (Bertholletia excelsa), breu (Protium pallidum), copaiba (Copaifera spp.), fragans), rosewood (Aniba cacao (Theobroma cacao) and guarana (Paullinia cupana). The organic certification attributes quality to the natural raw material, establishing a relationship of trust with the customer. Organic agriculture favors the preservation of the agrobiodiversity of the water and soil.The IBD Organic seal is granted by the Instituto Biodinâmico (Biodynamic Institute), IBD, guided by ecological and social guidelines that involve the sustainability of agricultural production. In 2004, the organic certification of the Surinam cherry (Eugenia uniflora) was completed. Therefore, seven sources of known origin and of sustainable management were defined for plants used in the Ekos line (the target set for 2004 was to certify 8 plants). Target for 2005 To have five raw materials in the last certification phase (phase III; see indicator 24), by the end of 2005. 4 0 0 2 t r o p e r l a u n n a a r u t a n 8 6 Government and Society 1. United Nations Development Programme (UNDP)(1) Coordination: United Nations Development Programme, UNDP. Objectives: To disseminate, by way of means of a DVD, the Millennium Development Goals (MDG) and the principles of the Global Compact. To sponsor the production of a DVD that contains images of the Concert for Peace organized by the UNDP at the headquarter of the United Nations on September 19, 2003 in honor of Sérgio Vieira de Mello and the other victims of the attack to the UN office in Baghdad. Target Public: Society. Results: ☺ DVD launch expected for 2005. challenges 2. Colóquio Internacional de Direitos Humanos (International Colloquium on Human Rights)(1) Coordination: Conectas Direitos Humanos and SUR Rede Universitária de Direitos Humanos. Objectives: To gather human rights activists from various countries in Africa, Asia and Latin America to discuss the topic “The millennium development declaration and to human rights”. To promote goals: cooperation, learning and action from relations in the Southern Hemisphere. Location: From São Paulo and broadcasted to all over Brazil, the United States, Europe and Latin America. Target Public: Academics, researchers, employees of the United Nations, international representatives foundations and human rights activists. Results: ☺ The event gathered 60 human rights activists from 23 countries in Africa, Asia and Latin America who presented around 60 proposals of local initiatives for the topic and five other proposals to increase cooperation in the hemisphere. Other activities were also performed and these included workshops for the public and field visits to human rights organizations in São Paulo. from 3. Programa New Ventures Brasil – Fórum de Investidores em Negócios Sustentáveis (New Ventures Brazil Program – Forum of Investors in Sustainable Ventures)(1) Coordination: Centro de Estudos em Sustentabilidade da Fundação Getúlio Vargas (Centre of Studies on Sustainability of the Getúlio Vargas Foundation), CES-FGV. Objective: To support the development of sustainable ventures and extend the potential of their performance on the market, providing them with technical support in the formulation of business plans and bringing them closer to investors who are interested in profitable investments, based on social and environmental responsibility criteria. Location: Regions from all over Brazil. Target Public: Entrepreneurs in sustainable ventures, risk capital investors, financial institutions, private pension funds, among other agents of the financial sector. Resultados: ☺ During the “Call for Business”, over 100 consultations from entrepreneurs were received. Upon termination of the process, 33 business plans were presented, 14 of which were forwarded to the mentoring phase – in which the venture receives technical support. 1. Projects sponsored or supported by Natura. Finally, 12 ventures were taken to the Forum of Investors in Business Ventures held in São Paulo. The forum was attended by over 200 people, including, in its majority, risk capital investors, financial institutions and entrepreneurs. 4. Crer para Ver Program (Believing is Seeing) Objective: To contribute to the improvement of the quality of the public education system offered in Brazil, by means of technical and financial support to creative and innovative educational projects, and the promotion of debates on this topis in society. As a partnership between Natura Cosméticos and the Fundação Abrinq pelos Direitos da Criança e do Adolescente (Abrinq Foundation for the Rights of Children and Adolescents), the program counts on the support of the Natura Sales Representatives who voluntarily sell the products of the Crer para Ver line. In 2004, the program, in partnership with the Ministry of Education of Brazil, launched a campaign for the education of young people and adults. According to the 2000 Census of the Instituto Brasileiro de Geografia e Estatística (Brazilian Institute of Geography and Statistics), IBGE, there are 70 million people older than 15 in Brazil who did not complete middle school and 16 million of these are young people between 15 and 24 years of age. Location: twenty-one Brazilian states. Target Public: A total of 901,000 students from 3,638 public elementary and middle schools. Partners: Fundação Abrinq pelos Direitos da Criança e do Adolescente (Abrinq Foundation for the Rights of Children and Adolescents), non-governmental organizations working with education, municipal and state departments and the Ministry of Education. Results: ☺ The targets of the Programa Crer para Ver for 2004 were, in addition to raising 2.5 million reais, to launch the Crer para Ver campaign for the Education of Young People and Adults, EJA, promoting an increase in the number of enrollments, to disseminate the topic in the media and to support initiatives to improve the quality of education for this section of that public. Results of the campaign for the Education of Young People and Adults (EJA) The campaign focused on three work fronts: 1) Selection, financing and technical follow-up of projects geared towards the education of teachers of young people and adults: in 2004, the project Organizando Experiências e Organizando Propostas de Educação (Organizing Experiences and Organizing Proposals for Education)/State of São Paulo was supported, benefiting the EJA teachers of the public school system of Cajamar. 2) Launch of the Innovating the Education of Young People and Adults Award in partnership with the Ministry of Education and Culture. 3) Mobilization of the Natura Sales Representatives so that they can, voluntarily, identify potential students and raise their awareness about returning to school. Results of projects for the regular elementary and middle school education The program ended 2004 with four supported projects: Es- cola Indígena da Floresta (Indigenous School of the Forest/State of Acre; Cinema e Vídeo nas Escolas (Cinema and Video at Schools)/State of São Paulo; Janelas Cruzadas (Crossed Windows)/State of Rio de Janeiro, and Chapada/ State of Bahia. 4 0 0 2 t r o p e r l a u n n a a r u t a n 9 6 Total Support and Sponsorship in 2004 Natura’s Funds Areas Promotion of Sustainable Development Protection of the Environment Art and Culture Promotion of Equality and Diversity Strengthening of the Organizations from Civil Society and Governmental Organizations Promotion of Dialogue Total Support and Sponsorship – Natura Funds Tax Funds Areas Promotion of Sustainable Development Art and Culture Total Support and Sponsorship – Tax Funds 2004 - in reais 85,000 237,668 66,963 66,000 442,423 454,657 1,352,711 2004 - in reais 1,047,000 891,157 1,938,157 Targets assumed in the Natura 2003 Annual Report Initiative Target assumed in 2003 Program for the Certification of Natural Raw Materials Define known source of origin and sustainable management for another 8 plants used in the Ekos line≤. Plântula Project Identification of sustainable source for 17 plants. Sustainable Development Program with the Supplier Communities To start the investment of the fund for sustainable development in the communities in Central Juruá, Iratapuru and the neighboring area of Belém. Crer para Ver Program Training of Cultural Agents To launch a national Crer para Ver/Education of Young People and Adults campaign, increasing the demand for enrollment and quality of the education, and drawing the attention of society to this issue; to start a process for the inclusion of products arising from projects that create jobs and generate income in the portfolio of the Crer para Ver line in 2005. At least 80% of the young people enrolled in 2003 will finish the training course for cultural agents; involve the young people who completed the course in cultural and educational activities of the city and the company. Agenda 21 in Cajamar To expand the Tripartite Working Group and start the process for the involvement of local leaders in democratic forums aimed at planning the municipality. Novos Olhares – Make-up Workshops Expansion of the project to another five locations in Brazil and one in South America and implementation of make-up workshops in the company’s neighboring communities – Cajamar and Itapecerica da Serra; to strengthen small centers in each city and increase the free participation of the Sales Representatives. Gente Bonita de Verdade na Comunidade Program To set up, during the year, six groups of employees, totaling 140 employees, working in the neighboring communities; reach the end of the year with maps of the structural needs of the social entities so as to plan initiatives in 2005. Natura Education Program Expand the scope of the program to Natura Sales Representatives and outsourced employees.To grant to employees 80 scholarships for technical courses, 90 for language courses, and 100 for college studies. Results (cid:1) Target partially achieved. Seven plants used in the Ekos line were certified (see complete analysis of the target in the description of projects’ results, page 68). ☺ Target achieved.The potential areas for the supply of medicinal species of interest were identified and the need for research that establishes a continuing production process and contributes to the preservation of these genetic resources was evidenced. (cid:1) Target partially achieved. In 2004, the initiatives that support the communities were developed by way of partnerships and a continuous local monitoring. Natura’s investments in the program and the financial return to the communities ensured important improvements in the production chain and strengthening of local cooperatives. However, the investment of the fund in the Belém area and in Central Juruá has not yet been defined. ☺ Target achieved.The campaign was launched and the study for the inclusion of products originating from job creation and income generation projects in the portfolio was started (see complete analysis in the description of the project’s results, page 69). ☺ Target achieved. 100% of the 52 young people involved in the training course for cultural agents, in partnership with the Serviço Nacional de Aprendizagem Comercial de São Paulo (Brazilian Service for Commercial Learning), Senac, completed the course; 100% of the young people participated, on a professional basis, in two projects in partnership with the Education Board of the Municipality of Cajamar by working in the state schools.These young people were remunerated by the partners in the project. (cid:1) Target partially achieved.The process for the expansion of the tripartite working group started upon the 1st Pro Agenda 21 Meeting; the analysis of the municipality of Cajamar was made and interactive workshops in two districts of the city were carried out (see complete analysis of the target in the description of the project’s results, page 68). (cid:1) Target partially achieved. In 2004, the project was expanded to four new market management offices in Brazil. One hundred and fourteen workshops and 1.888 services to patients and their close companions were provided at the ten institutions supported by the project.The number of the project’s volunteers grew from 123 to 170.The target for the implementation of the project in the international operations has not been achieved. Make-up workshops were implemented in the company’s neighboring communities, with the involvement of Natura’s employees. The continuity of this project in 2005 is under analysis. (cid:1) Target partially achieved. In 2004, six partner entities participated in the project and received Natura’s volunteers.The volunteers carried out activities related to Shantala massage, make-up workshops and games. In total, 110 employees participated, in 166 visiting periods, divided into four groups.The map of the structural needs of the social organizations, a target that was also assumed for 2004, was not totally structured. (cid:1) Target partially achieved. All the scholarships provided for were offered.The scope of the program will be expanded in 2005 (see complete analysis in the description of projects’ results, page 68). 4 0 0 2 t r o p e r l a u n n a a r u t a n 1 7 Economic results Since its implementation in 1995, the program has supported 148 projects in 3,638 state schools in 21 states, involving 901,000 children. Between 1995 and 2004, 17.9 million reais was raised. In 2004, the fund raising, of 3 million reais, was the highest since the creation of the program and exceeded the target set for the year by 20%. Target for 2005 To maintain the fund raising for social projects at the current levels and enroll 50,000 people all over Brazil by way of the Natura Sales Representatives. 5. Projeto Biodiversidade Brasil (Biodiversity Brazil Project)(1) Objective: Stimulate discussion on topics related to Brazilian biodiversity in partnership with the Fundação Padre Anchieta – TV Cultura de São Paulo (Father Anchieta Foundation – Cultura TV Channel of the State of São Paulo). This partnership takes place by means of three shows produced and broadcasted by this channel: Biodiversidade Debate (Biodiversity Debate), a series of documentaries called Biodiversidade Documento (Biodiversity Document), and the broadcast Biodiversidade (Biodiversity), which is part of the TV program Repórter Eco. Location: From the city of São Paulo, it reaches all Brazilian states where TV Cultura programming is broadcasted. Target Public: Environmentalists, researchers, governments, businessmen and people from civil society. Partners: TV Cultura e Fundação Padre Anchieta. 1. Project supported with Rouanet Law. 4 0 0 2 t r o p e r l a u n n a a r u t a n 0 7 this period, produced. Results: ☺ In 2004, 26 Biodiversidade broadcasts, one documentary for Biodiversidade Documento and 7 Bio- diversidade Debate programs were produced. From August to December 2004, the programs were rerun. Since the beginning of the project, 145 Biodiversidade broadcasts, 34 Biodiversidade Debate programs and 8 documentaries for Biodiversidade Documento have been the During www.biodiversidadebrasil.com.br Website received and replied to 7,000 messages from viewers of the shows or people interested in the biodiversity topic. the documentary Bioconexão A Vida em In 2004, Fragmentos (Bioconnection Life in Fragments) won the Documentary Award on the Biodiversity of the Atlantic Forest in the Television 2004 category. The award was organized by the Aliança para a Conservação da Mata Atlântica (Alliance for the Preservation of the Atlantic Forest), a partnership between Conservação Internacional Brasil (International Brazil Preservation) and the Fundação SOS Mata Atlântica (SOS Atlantic Forest Foundation).The International Center for Journalists and the International Federation of Environmental Journalists also participated. In 2003, this documentary won the 1º Concurso Biodiver- sidade Brasil (First Biodiversity Brazil Contest), which was also carried out through the partnership and with the Ministry of Environment. Target for 2005 To produce 48 Biodiversidade broadcasts, one documentary on a theme yet to be defined, prospect of a partnership for the production of a second documentary, prospect for the distribution of the shows to the state-owned TV companies in Latin America. Transparent Relations with Society and Dialogue with Stakeholders Lectures about Corporate Responsibility given in 2004 Event Environment Working Group Lecture Environmental Indicators Corporate Social Responsibility Principles and Practices Course: Selection, Evaluation of and Partnership with Suppliers Section Annual Meeting of the Pan American Standards Commission (COPANT) Natura Social Responsibility Case Study Natura Social Responsibility Case Study Organization/Inviter Lecturer Date Location Audience ABIHPEC – The Brazilian Association of the Personal Hygiene, Perfume and Cosmetics Industry Getúlio Vargas Foundation – São Paulo, Extension Course in Social Responsibility Eliane Anjos 2/18/2004 São Paulo, State of São Paulo Eliane Anjos 4/26/2004 São Paulo, State of São Paulo Around 20 participants, including managers, environment assistants and technicians from various industries Around 30 course students The Brazilian Association of Technical Standards Rodolfo Witzig Guttilla 5/14/2004 Salvador, State of Bahia 1º Forum for the Development of Suppliers Course for Managers Course for Managers Mobiliza Amazônia 2004 (Mobilize the Amazon 2004) – Seminar to Raise Funds For Organizations from Civil Society Implementation of the Natura Environmental Management System Natura and Corporate Responsibility Natura Annual Report Moblization of Relations and Vocation – Natura’s Experience Fifth Cycle of Lectures of the Federal University of São Carlos Natura and Social Responsibility Transportadora Americana Karina Aguilar 5/20/2004 Americana, State of São Paulo Superior School of Advertising and Marketing Getúlio Vargas Foundation – State of São Paulo Ashoka Empreendedores Sociais and Sector Chamber of Social Responsibility of the Commercial Association of the State of Pará Federal University of São Carlos Nelmara Arbex Nelmara Arbex Guilherme Leal 5/20/2004 5/26/2004 5/28/2004 São Paulo, State of São Paulo São Paulo, State of São Paulo Belém, State of Pará Isabel Ferreira 5/31/2004 São Carlos, State of São Paulo Sixth Environment Week Brazilian Water Reuse Case Study The Federation of Industries of the State of São Paulo – Environment Department Eliane Anjos 6/1/2004 São Paulo, State of São Paulo Sixth Environment Week Committee of Young Executives of the Chamber of Commerce of Campinas Second Unimed Social Responsibility Seminar International Meeting on Social Responsibility Environmental Performance Indicators Natura Social Responsibility Case Study Natura and the Environment Corporate Responsibility Unimed Bureau Veritas The Federation of Industries of the State of São Paulo – Environment Department Eliane Anjos 6/3/2004 São Paulo, State of São Paulo The American Chamber of Commerce – Campinas Giuliana Ortega 6/8/2004 Karina Aguilar Itamar Correia da Silva Pedro Passos Eliane Anjos 6/24/2004 7/7/2004 7/28/2004 8/10/2004 Campinas, State of São Paulo Atibaia, State of São Paulo São Paulo, State of São Paulo São Paulo, State of São Paulo Ribeirão Preto, State of São Paulo Monthly Meeting on Social Responsibility Seminar on Environmental Education and Management Social Responsibility – Natura’s View Natura and the Environment Association of Christian Company Officers School of Pharmaceutical Sciences of Ribeirão Preto – University of São Paulo Around 220 participants, including executives from the social responsibility and quality areas and representatives of the Pan American Standards Commission and regulatory bodies from Latin America Around 150 employees and suppliers of Transportadora Americana Around 30 company managers Around 30 company managers Around 300 participants, including social entrepreneurs, small businessmen, representatives from organized civil society, third sector specialists, the community and the general public Around 400 college students in engineering, production, psychology, social sciences, among others Around 300 representatives from the industrial sector, government, trade associations and entities from the third sector Around 300 representatives from the industrial sector, government, trade associations and entities from the third sector Around 35 young executives Around 100 employees of Unimed and guests Around 400 executives, in particular from the quality area Around 20 businessmen from various sectors Around 200 graduation and post graduation students, professors and employees of the school and other units of the campus of the university in Ribeirão Preto (medicine, nursing, dentistry, philosophy, economy and business administration) Around 50 participants, including officers, managers, environment managers from industries, lawyers, members of other chambers of commerce, representatives from the government, among others Environment Committee Seminar on Socially Responsible Management From Sustainability Project to Practice – Environmental Technologies Implemented in the Construction of the New Space Adherence to Social Responsibility by Investors, Private Pension and Investment Funds 24th Brazilian Seminar on Intellectual Property Biodiversity and Intellectual Property São Paulo Apimec Meeting Apimec Natura The American Chamber of Commerce – São Paulo Eliane Anjos 8/11/2004 Cajamar, State of São Paulo Federation of Industries of the State of São Paulo, Center of Industries of the State of São Paulo and Ethos Institute of Companies and Social Responsibility ABPI – Brazilian Association of Intellectual Property Association of Capital Markets Investment Analysts and Professionals of the State of São Paulo and Natura Rodolfo Witzig Guttilla 8/11/2004 São Paulo, State of São Paulo Around 100 participants, including businessmen and professionals of the social responsibility area Antônio Siqueira Pedro Passos, David Uba and Helmut Bossert Pedro Passos 8/17/2004 8/18/2004 Brasília, Federal District Cajamar, State of São Paulo Around 250 people, including lawyers and technicians from the intellectual property area 160 participants, including capital market analysts, investors and others 8/18/2004 São Paulo, State of São Paulo 18 directors of the Foundation for the Brazilian Quality Award Third Corporate Forum – Fundamentals of Excellence Excellence in Management and Social Responsibility The Foundation for the Brazilian Quality Award 4 0 0 2 t r o p e r l a u n n a a r u t a n 2 7 Rodolfo Witzig Guttilla Giuliana Ortega Nelmara Arbex Rodolfo Witzig Guttilla Giuliana Ortega e Cristina Pastorello Nelmara Arbex Nelmara Arbex Helmut Bossert Event Lecture Organization/Inviter Lecturer Date Location Audience Editora Caju Eliane Anjos 8/23/2004 São Paulo, State of São Paulo First Forum on Environmental Management in Industrial Plants Sustainability Corporate Forum and Corporate Responsibility Fifth Week of Lectures of the College of Social and Applied Sciences of the University of the Paraíba Valley Life Cycle Assessment as an Environmental Management Tool Sustainability and Corporate Responsibility Centre of Studies on Sustainability and The Getúlio Vargas Foundation The Importance of Social Responsibility for Companies University of the Paraíba Valley Forum on gender affirmative analysis and initiatives in companies Gender Challenges at Natura ABN-Amro and Itaipu-Binacional Social Responsibility Gaby Comunicação Around 30 participants – Environment officers, managers and technicians from various industries Around 120 participants, including professionals from the private sector and entities from civil society Around 240 Social Sciences college students 8/24/2004 São Paulo, State of São Paulo 8/26/2004 São José dos Campos, State of São Paulo 9/3/2004 São Paulo, State of São Paulo Representatives from ten companies related to the topic 9/11/2004 Belém, State of Pará Around 180 professionals from the communication area Second Corporate Communication, Press Relations and Public Relations Meeting of the State of Pará Environment Committee Business Administration Week of the Superior School of Advertising and Marketing Meeting of the Civic Responsibility Council of the The Federation of Industries of the State of Minas Gerais Integrated Management Course Sustainability from Project to Practice – Environmental Technologies Implemented in the Construction of the New Space Natura Social Responsibility Case Study The American Chamber of Commerce – Campinas Eliane Anjos 9/15/2004 Campinas, State of São Paulo Around 50 participants, including environment officers, managers and technicians from industries, lawyers, representatives from the government, among others Superior School of Advertising and Marketing Susy Yoshimura 9/28/2004 São Paulo, State of São Paulo Around 30 business administration college students Social Responsibility – Principles and Practices Fiemg – The Federation of Industries of the State of Minas Gerais Guilherme Leal 10/4/2004 Natura Social Responsibility Case Study Senac SP – Brazilian Service for Commercial Learning of the State of São Paulo 10/16/2004 Belo Horizonte, State of Minas Gerais Cajamar, State of São Paulo Around 40 members of the Corporate Civic Responsibility Council of Fiemg 31 students from the Masters course in Health, Security and Environment Around 500 participants, including social entrepreneurs, businessmen, representatives from organized civil society multilateral organizations, and governments and third sector specialists Around 200 participants, including corporate leaders, community and NGOs Around 380 executives, including company directors, chairmen and officers Third UNIFAI Multidisciplinary Symposium Course for Managers Natura Lecture Corporate Responsibility – Challenge or Commitment Unifai – Assunção University Center Corporate Responsibility Management System – Natura’s Experience FGV – Getúlio Vargas Foundation – State of São Paulo Natura Institutional Case Study Unip – São Paulo University Global Summit on Social Entrepreneurship – The Future of Social Entrepreneurship – How Big Can Small Get? Participation in the “Lessons from Scaling from Various Models – Organic Growth Model” panel The Schwab Foundation for Social Entrepreneurship Guilherme Leal 10/25/2004 São Paulo, State of São Paulo Around 200 students from different areas 11/4/2004 São Paulo, State of São Paulo Around 30 company managers and managers from related areas São Paulo, State of São Paulo Around 300 business administration college students 11/4/2004 11/5/2004 São Paulo, State of São Paulo European Conference on Corporate Social Responsability Natura Ekos Case Study Ministry of Economic Affairs of The Netherlands Sonia Tuccori 11/8/2004 Maastricht,The Netherlands Fifth Brazilian Congress of Corporate Governance Apimec RJ Meeting Share Offering and Corporate Governance – Natura’s Experience Natura Case Study IBGC – Brazilian Institute of Corporate Governance Guilherme Leal 11/8/2004 São Paulo, State of São Paulo Apimec RJ – Association of Capital Markets Investment Analysts and Professionals of the State of Rio de Janeiro – and Natura Esalq – Luiz de Queiroz Superior School of Agriculture International Association for Continuing Education Training David Uba e Moacir Salzstein 11/11/2004 Rio de Janeiro, State of Rio de Janeiro 90 participants, including capital market analysts, investors and others Fernanda Ferraz 11/11/2004 Piracicaba, State of São Paulo Around 180 graduation, masters and doctors degree academics Solange Rubio 11/20/2004 São Paulo, State of São Paulo 60 Business Administration college students Access to Biodiversity and Sharing of Benefits Natura Social Responsibility Case Study – Program of Relationship with the Neighboring Community Natura Annual Report Case Study Uniethos Giuliana Ortega 11/24/2004 São Paulo, State of São Paulo 25 professionals of various companies Natura Corporate Responsibility - Environmental Management Brazilian Federation of Banks Nelmara Arbex 11/25/2004 São Paulo, State of São Paulo Around 200 company managers and professionals from various areas Social Responsibility and Communication Association of Advertising Professionals Participation in debate and round table Yale School of Forestry and Environmental Studies Rodolfo Witzig Guttilla Sonia Tuccori 12/1/2004 São Paulo, State of São Paulo Around 80 professionals from the advertising area 12/1/2004 Yale, Connecticut – United States Around 300 participants, including professors, students, anthropologists and researchers from Yale University Symposium on Traditional Knowledge and Preservation of Agrobiodiversity Management of Knowledge – Companies’ Experiences Planning and Implementation Course – Social Responsibility Management for Sustainable Development First Seminar on Financial Marketing Tenth Forum of Debates of the APP – São Paulo Association of Advertising Biodiversity and Business in the Amazon: Partnerships between Communities, Corporations and Government 4 0 0 2 t r o p e r l a u n n a a r u t a n 3 7 ABC – The Brazilian Association of Cosmetology Aberje – The Brazilian Association of Corporate Communication ABEVD – The Brazilian Association of Direct Selling Companies (www.abevd.org.br) ABIA – The Brazilian Association of Food Industries (www.abia.org.br) ABIFITO – The Brazilian Association of the Phytotherapeutic and Health Promotion Products Sector (www.abifito.org.br) ABIHPEC – The Brazilian Association of the Personal Hygiene, Perfume and Cosmetics Industry (www.abihpec.org.br) ABNT – The Brazilian Association of Technical Standards (www.abnt.org.br) ABPI – The Brazilian Association of Intelectual Property (www.abpi.org.br) ABPVS – The Brazilian Association of Sanitation Control Professionals (www.abpvs.com.br) ABQV – The Brazilian Association of Quality of Life (www.abqv.org.br) Acelp – The Portuguese Language Corporate Communication Association The Itapecerica da Serra Development Agency AIPPI – The International Association for the Protection of Intelectual Property (www.aippi.org) Alanac – The Association of the Brazilian Pharmaceutical Companies (www.alanac.org.br) AMCHAM – The American Chamber of Commerce of São Paulo (www.amcham.com.br) Amerco – The Association of Corporate Communication of the Mercosur Peruvian Civil Asociation of Companies Related to Brazil – Brazil Group Anpei – The Brazilian Association of RD&E of Innovative Companies (www.anpei.org.br) Asipi – The Interamerican Association of Industrial Property (www.asipi.org) Aspi – The São Paulo Association of Intelectual Property (www.aspi.org.br) Asug – The Association of the SAP Users in Brazil (www.asug.com.br) Audibra – Brazilian Institute of Internal Auditors (www.audibra.org.br) Argentinean Chamber of the Cosmetic and Perfurmery Industry (Capa) Chamber of Commerce of Lima Argentinean Chamber of Direct Sales Chilean Chamber of Direct Sales Câmara Net – The Brazilian Chamber of Electronic Commerce (www.camara-e.net) Peruvian Chamber of Direct Sales Ceal – The Council of Latin American Businessmen (www.ceal-int.org) Cempre – Corporate Commitment to Recycling (www.cempre.org.br) Ciesp – The Center of Industries of the State of São Paulo (www.ciesp.org.br) Commitment to Leadership and Social Influence Representation in Trade Associations and Associations in General Trade Association/Association Natura Representative Type of Representation Eneida Berbare Rodolfo Guttilla 1. Rodolfo Guttilla 2. Moacir Salzstein 3. Karen Cavalcanti 4. Lucilene Prado 5. Angel Medeiros 6. Lucila Taninaga Ariadne Morais Vicente de Mello Ariadne Morais Vicente de Mello 1. Pedro Luiz Passos 2. Rodolfo Guttilla 3. Moacir Salzstein 4. Lucilene Prado 5. Elizabete Vicentini Renato Wakimoto 1. Eneida Berbare 2. Antonio Siqueira Elizabete Vicentini 1. Plínio Yasbek 2. Luiza Cruz Rodolfo Guttilla 1. Rodolfo Guttilla 2. Marcelo Soderi Eneida Berbare Representative Chairman of the Decision-Making Council 1. Chairman 2. Coordinator of the Research Committee 3. Coordinator of the Communication Committee 4. Coordinator of the Taxation and Government Relations Committee 5. Member of the Supply Chain Committee 6. Member of the Research Committee Representatives Representatives 1.Vice President 2. Director 3. Representative in the Foreign Trade Committee 4. Representative in the Taxation Committee 5. Representative in the Biodiversity Committee Representative 1. Representative of the Copyrights, Patents, Brands, and Technology 2. Representative Representative 1. Associated Member - Founder 2. Executive Secretary Chairman 1.Vice President 2. Representative Representative Ariadne Morais Representative 1. Pedro Luiz Passos 2. Antônio Siqueira 3. Rodolfo Guttilla 4.Vicente de Mello 5. Eliane Anjos 6. Fábio Piastrelli Mengozi 7. Elizabete Vicentini 8. Eneida Berbare Rodolfo Guttilla 1. Member of the Board 2. Member of the Strategic Group Legal of Directors and Vice Presidents 3. Corporate Affairs Member 4. Member of the Competition Strategic Group Brazil and Director of the Balanced Scorecard Brazil Working Group 5. Environment Committee Member 6. Relationship Management Committee Member 7. Member of the ANVISA Subgroup 8. Member of the Intellectual Property Technical Group Chairman Erasmo Toledo Representative Trade Association/Association Natura Representative Type of Representation Mandate 2002 / 2005 1. 2003 / 2005 1 and 2. June 2004 / June 2007 July 2004 / July 2008 1. 2004 / 2005 July 1999 / July 2005 Fiesp/NAS – The Federation of Industries of the State of São Paulo/Social Action Center (www.fiesp.org.br) FPNQ – The Foundation for the Brazilian Quality Award (www.fpnq.org.br) Funbio – The Brazilian Fund for Biodiversity (www.funbio.org.br) The Abrinq Foundation for the Rights of Children (www.fundacaoabrinq.org.br) The Getúlio Vargas Foundation/Centre of Studies on Sustainability (www.ces.fgvsp.br) G50 – The Group of 50 Carnegie Endowment for International Peace Gife – The Group of Institutions, Foundations and Companies (www.gife.org.br) GRI – Global Reporting Initiative (www.globalreporting.org) Ibef – The Brazilian Institute of Finance Executives (www.ibef.com.br) IBGC – The Brazilian Institute of Corporate Governance (www.ibgc.org.br) Ibri – The Brazilian Institute of Investor Relations (www.ibri.org.br) Iedi – The Institute of Studies for Industrial Development (www.iedi.org.br) AKATU Institute (www.akatu.org.br) The Fernand Braudel Institute of World Economy (www.braudel.org.br) The São Paulo Institute Against Violence (www.spcv.org.br) MBC – Competitive Brazil Movement (www.mbc.org.br) Sipatesp – Perfume and Beauty Products Industry Union in the State of São Paulo Uniethos (www.uniethos.org.br) WFDSA – World Federation of Direct Selling Associations (www.wfdsa.org) WWF Brasil (www.wwf.org.br) 1. Pedro Luiz Passos 2. Rodolfo Guttilla 3. Eliane Anjos 1. Pedro Luiz Passos 2. Roberto Zardo 3. Sophia Segawa 4.Yara Rezende Guilherme Peirão Leal 1. Guilherme Peirão Leal 2. Nelmara Arbex 3. Pedro Villares 4. Susy Yoshimura Nelmara Arbex 1. Delegate Representative of SIPATESP 2. Director of the Social Action Center 3. Representative in the Environment Department 1. Member of the Trustee Council 2. Representative in the Benchmarking Thematic and Management by Processes Committees 3. Representative in the Benchmarking Thematic and Management by Processes Committees 4. Representative in the Intellectual Capital and Innovation Committee Deputy Member of the Decision-Making Council 1. Member of the Board 1, 2, 3 e 4. Member of the Steering Committee of the Programa Crer para Ver (Believing is Seeing Program) Member of the Advisory Council Guilherme Peirão Leal Member Nelmara Arbex Member Mandate 1. June 2001 / June 2004 2. September 2003 / September 2004 1. 2003 / 2005 November 2001 / November 2005 1. Since 1992 and since 1996 2 e 3. Since 2003 4. Since 2004 Nelmara Arbex Jorge Casmerides Member of the Stakeholders Council Member 2002 / 2005 Lucilene Prado Representative Marcel Goya Helmut Bossert Eduardo Zornoff Guilherme Peirão Leal Representatives Member of the Board Guilherme Peirão Leal Guilherme Peirão Leal Member of the Steering Council Member of the Institute Rodolfo Guttilla 1. Maria Helena Zucchi 2. Roberto Zardo 3. Moacir Salzstein 4. Rodolfo Guttilla 1. Pedro Luiz Passos 2. Rodolfo Guttilla Nelmara Arbex Pedro Luiz Passos Representative 1. Representative in the Innovation Thematic Committee 2, 3 e 4. Representatives 1.Vice President and Coordinator of the Industrial Relations Working Group 2. Director Member of the Technical Council Member of the CEO Council Guilherme Peirão Leal Member of the Steering Council September 2000 / Undetermined 1 and 2. June 2004 / June 2007 December 2001 / March 2006 Elizabete Vicentini Director May 2002 / May 2005 Eneida Berbare Representative Eneida Berbare Antonio Siqueira Anna Sant'Anna Representatives Representative Meire Stuchi Representative 1. Mauricio Bellora 2. Jelena Nadinic Erasmo Toledo Elby Stromeyer Mauricio Bellora Mauricio Pinto Fábio Mengozi 1. Member of the Steering Commission 2. Member of the Technical Commission Representatives Member of the Steering Commission Director of the Chamber Representative Erasmo Toledo Guilherme Peirão Leal Representative Member Eliane Anjos Representative 2004 / 2005 1. Guilherme Peirão Leal 2. Itamar Correia da Silva 1. Director 2. Holder of the title of Director of the Board of Ciesp Jundiaí Coordinator of the Environment Thematic Council Office Holder of the Technical Chamber of Underground Water – CTAS Director of Industry and Commerce 1 and 2. September 2004 / September 2007 1. Guilherme Peirão Leal 2. Nelmara Arbex 3. Rodolfo Guttilla 1. Member of the Decision-Making Council 2. Office Holder 3. Substitute 1. May 2003 / May 2005 4 0 0 2 t r o p e r l a u n n a a r u t a n 4 7 CNI – The Brazilian Confederation of Industries (www.cni.org.br) Committee of the Upper Tietê Hydrographic Basin Eliane Anjos Eliane Anjos The Council for the Rights of Children and Adolescents of Cajamar Ethos – The Ethos Institute of Companies and Social Responsibility (www.ethos.org.br) Walkyria Dias Contact Details of Natura’s Representatives to Trade Associations and Associations in General Nome Anna Sant'Anna Antonio Siqueira Ariadne Morais Eduardo Zornoff Elby Stromeyer Eliane Anjos Elizabete Vicentini Eneida Berbare Fernanda Ferraz Guilherme Peirão Leal Itamar Correia da Silva Jelena Nadinic Jorge Casmerides Karen Cavalcanti Lucilene Prado Luiza Cruz Marcel Goya Marcelo Soderi Maria Helena Zucchi Mauricio Bellora Mauricio Pinto Meire Stuchi Moacir Salzstein Nelmara Arbex Pedro Luiz Barreiros Passos Pedro Villares Plínio Yasbek Roberto Zardo Rodolfo Witzig Guttilla Sophia Segawa Susy Yoshimura Vicente de Mello Yara Rezende Função Information Technology Manager Executive Director – Legal Affairs Regulatory Affairs Analyst Market Planning Manager Technical Director – Peru Environment Manager Technical Manager Brands and Patents Manager Lawyer Cochairman of the Board Senior Executive – Operations and Logistics Technical Director – Argentina International Operations Controller Institutional Communication Manager Legal Manager Human Resources Consultant Economic Planning Manager Marketing Manager Commercial Manager Executive Director – Latin America Operations Manager – Chile Controller Brazil Strategic Plan Manager Corporate Responsibility Manager Chief Executive Officer Executive Director – Sales Brazil Health Promotion Coordinator Executive Director – Quality Executive Director – Corporate Affairs Quality Coordinator Crer para Ver Program Coordinator Executive Director – Flora Medicinal Information Technology Manager Email annasantanna@natura.net antoniosiqueira@natura.net ariadnemorais@natura.net eduardozornoff@natura.net elbystrohmeier@natura.net elianeanjos@natura.net elizabetevicentini@natura.net eneidaberbare@natura.net fernandaferraz@natura.net guilhermeleal@natura.net itamarsilva@natura.net jelenanadinici@natura.net jorgecasmerides@natura.net karencavalcanti@natura.net lucileneprado@natura.net luizacruz@natura.net marcelgoya@natura.net marcelosoderi@natura.net mariahelenazucchi@natura.net mauriciobellora@natura.net mauriciopinto@natura.net meirestuchi@natura.net moacirsalzstein@natura.net nelmaraarbex@natura.net pedropassos@natura.net pedrovillares@natura.net plinioyasbek@natura.net robertozardo@natura.net rodolfoguttilla@natura.net sophiasegawa@natura.net susyyoshimura@natura.net vicentedemello@natura.net yararezende@natura.net Telefone 55 11 4446 2771 55 11 4446 2881 55 11 4446 2806 55 11 4147 8670 51 14 241 2230 55 11 4446 2485 55 11 4446 2850 55 11 4446 2860 55 11 4446 2866 55 11 4446 2203 55 11 4446 2401 54 11 4545 6059 55 11 4446 2911 55 11 4446 2530 55 11 4446 2840 55 11 4446 2192 55 11 4446 2713 55 11 4147 8456 55 11 4446 2590 54 11 4545 6665 56 2 620 9200 55 11 4446 2810 55 11 4446 2616 55 11 4446 2580 55 11 4446 2200 55 11 4147 8331 55 11 4446 2507 55 11 4446 2280 55 11 4446 2561 55 11 4446 2772 55 11 4147 8409 55 11 4446 2501 55 11 4446 2735 4 0 0 2 t r o p e r l a u n n a a r u t a n 5 7 Natura presents its economic, environmental and social performance indicators in accordance with the recommendations of the Associação dos Analistas e Profissionais de Investimento do Mercado de Capitais (Association of Capital Markets Investment Analysts and Professionals) – Apimec, Associação Brasileiras das Companhias Abertas (Brazilian Association of Publicly-Traded Companies), Abrasca, and the Global Reporting Initiative – GRI. Also, Natura follows the guidelines of the Instituto Ethos de Empresas e Responsabilidade Social (Ethos Institute of Companies and Social Responsibility). In this 2004 report, the indicators now include information on the international operations.These are, it is worth noting, operations of an administrative nature. Due to this fact, and to the size of these operations, their social and environmental impact is different from that in Brazil. Abroad, some of the processes for gathering social and environmental information were under implementation at the end of 2004 and will be more complete in the years ahead. The year of 2004 was also the first year in which the Environmental Management System and the Corporate Responsibility Management System were fully implemented, leading to the consolidation of internal processes. Due to these developments, this report presents more detailed data and a more clear indication of the points to be improved. An example of the detailing of the data is the new methodology for monitoring investments in the social and environmental areas.These investments are organized by stakeholder and summarized in the corporate responsibility matrix (see page 25). The table of correspondence between the principles of the Global Compact and the company’s performance indicators shown below illustrates Natura’s contribution to the promotion of the principles proposed by the United Nations. The Principles of the Global Compact Human Rights I: The support and respect of the protection of international human rights. II: The refusal to participate or condone human rights abuses. Labor III: The support of freedom of association and the recognition of the right to collective bargaining. IV: The abolition of compulsory labor. V: The abolition of child labor. VI: The elimination of discrimination in employment and occupation. Environment VII: The implementation of a precautionary and effective program to environmental issues. VIII:Initiatives that demonstrate environmental responsibility. IX: The promotion of the diffusion of environmentally friendly technologies. Indicadores GRI 62, 63, 64, 66 63, 64 49, 50, 67 69 68 60, 61, 66 13 a 35, 40, 43, 63, 64 13 a16, 19, 23, 24, 32 a 37, 41 a 43 17, 22, 35, 36 Anti-Corruption X: The promotion and adoption of initiatives to counter all forms of corruption, 75 including extortion and bribery. Further clarifications on this report may be obtained from: José David Vilela Uba, Senior Executive – Finance and Investor Relations Rodolfo Witzig Guttilla, Executive Director – Corporate Affairs and Government Relations Natura’s Website Other information can be requested via: Natura Service Center Environment Department Strategic Planning Department Investor Relations Department Corporate Responsibility Department Investor Relations Website Note: N/A = Not applicable and NA = Not available 55 11 4446-2701 55 11 4446-2561 www.natura.net 0800-11 55 66 55 11 4446-2485 55 11 4446-2713 55 11 4446-2180 55 11 4446-2580 www.natura.net/investor 4 0 0 2 t r o p e r l a u n n a a r u t a n 7 7 economic, environmental and social indicators global reporting initiative “We are a registered Organisational Stakeholder of the Global Reporting Initiative (GRI) and support the mission of the GRI to develop globally accepted sustainability reporting guidelines through a global, multi-stakeholder process.” “This Report has been prepared in accordance with the GRI 2002 Guidelines. It represents a balanced and reasonable presentation of our organization’s economic, environmental and social performance.” Pedro Luiz Barreiros Passos Chief Executive Officer Economic Performance Indicators The indicators in this section comprehend the activities in Brazil and international operations (Argentina, Chile, Peru and Bolivia), unless when otherwise mentioned. Direct Economic Impacts Customers 1. Net sales (in thousands of reais). Net Sales 2. Regional market analysis. Natura does not release this information. Suppliers 2002 993,139 2003 1,328,910 2004 1,769,664 Brazil Argentina Chile Peru Total Natura 7. Increase/decrease in retained earnings at the end of period (in thousands of reais). Net income Public Sector 2002 21,741 2003 63,884 2004 300,294 8. Total sum of taxes of all types paid broken down by country (in thousands of reais). 2002 373,032 3,077 1,964 1,954 380,027 2003 490,316 6,631 2,173 2,964 502,084 2002 NA 2003 NA 2004 531,346 9,200 3,156 4,103 547,805 2004 NA 3. Cost of all goods, materials, and services purchased (in thousands of reais). Cost of all goods, materials and services purchased 2002 679,367 2003 942,240 2004 1,365,906 9. Subsidies received broken down by country or region. Subsidies 4. Percentage of contracts that were paid in accordance with agreed terms, excluding agreed penalty arrangements. Percentage of contracts paid in accordance Employees 2002 99.7% 2003 99.6% 2004 99.6% 5. Total payroll and benefits (including wages, pension, other benefits, and redundancy payments) broken down by country or region (in thousands of reais). Brazil Argentina Chile Peru Total Natura Ratio of investments in training and operating costs Ratio 2002 143,157 4,967 3,579 3,368 155,071 2002 1.16% Investments in the education and training of employees (in thousands of reais) 2002 5,618 Investiments(2) 2003(1) 167,088 4,514 2,620 3,561 177,783 2003 1.16% 2003 7,053 2004 233,194 5,066 4,343 4,688 247,291 2004 0.99% 2004 7,875 4 0 0 2 t r o p e r l a u n n a a r u t a n 8 7 1. The 2003 payroll amounts, broken down per operation, were adjusted in this Report as the data previously released were preliminary. We point out the fact that the total 2003 payroll amount did not change. 2. The criteria to account for investments in the education and training of employees were reviewed and became more comprehensive.To meet these new criteria, the amounts related to the previous years, stated in this Report, were changed and do not correspond to the amounts released in the previous editions. Investors 6. Distributions to providers of capital broken down by interest on debt and borrowings, and dividends on all classes of shares, with any arrears of preferred dividends to be disclosed (in thousands of reais). Interest on debts and borrowings Dividends and interest on capital(1) Total 2002 134,004 14,651 148,655 2003 64,439 60,331 124,770 2004 33,834 216,352 250,186 1. The 2002 and 2003 figures refer to dividends and interest on capital of Natura Participações. 10. Donations to community, civil society, and other groups broken down in terms of cash and in-kind per type of group . Natura is disclosing the amounts invested in corporate responsibility in 2004 in a different way from that adopted in the previous years in order to present more complete data (see Corporate Responsibility Matrix – Main Indicators, page 25). 11. Total spent on non-core business infrastructure development. In 2004, 860,000 reais was spent in initiatives such as: expansion of the capacity of treatment of effluents by the Effluent Treatment Station in Cajamar; improvements in the treatment system to increase efficiency in the removal of the organic load at the Effluent Treatment Station in Itapecerica da Serra; improvements in the drainage of rain water; installation of a vacuum pump for the Núcleo de Aprendizagem Natura (Natura Learning Center) in order to reduce energy use; installation of lighting sensors; drilling and installation of wells for monitoring the soil; forestry renewal project and implementation of a composting center. Indirect Economic Impacts 12. The organization’s indirect economic impacts. One of the most relevant indirect economic impact generated by Natura is the wealth generated to the almost 433,000 independent Sales Representatives, as shown by the graph below. Accordingly, it is worth noting the significant distribution of wealth to other stakeholders, such as employees, shareholders and the government (see Main Indicators, page 20). Distribution of Wealth (1)(2) to Independent Sales Representatives (in millions of reais) Brazil International Operations (Argentina, Chile and Peru) 2002 2003 2004 14.3 19.7 27.6 571.2 776.0 1,031.8 1. Amount estimated based on recommended sales prices. 2. The 2002 and 2003 amounts were adjusted because they have been aligned with the criteria of the Associação Brasileira de Empresas de Venda Direta (Brazilian Association of Direct Selling Companies), ABEVD. 4 0 0 2 t r o p e r l a u n n a a r u t a n 9 7 Environmental Performance Indicators The answers to these indicators take into consideration the operations in Brazil and the international operations of Natura (Argentina, Chile and Peru). It is worth noting that the company has a productive operation only in Brazil. Abroad, it operates with product sale and distribution centers.This means that the operation in Brazil, due to its size and complexity, is still the center of the company’s work. For the answers that do not explicitly state the operations to which they refer, the reader should consider the content to be valid for all international operations. Materials 13.Total materials use other than water, by type. Brazil Material use – kilograms Material use – liters 2002 NA NA 2003 NA NA 2004 22,736,597 13,568,344 Note:The analysis of the 2004 amounts showed that the system that determines the figures presented in 2002 and 2003 was vulnerable.Therefore, the figures for those years are not comparable with those for 2004. For this reason, the amounts from the previous years are not available. International operations Not applicable. As the operations abroad are commercial, the amount of materials used is not significant when compared with those of the industrial operation in Brazil. 14. Percentage of materials used that are wastes (processed or unprocessed) from sources external to the organization. Brazil Materials – metric tons 2002 1,590 2003 1,956 2004 2,547 Note: This number was calculated taking into consideration the average reuse of potential waste from our suppliers. International operations Not applicable, as the operations abroad are commercial. Energy 15. Direct energy use segmented by primary source (joules). Brazil (joules) Primary electricity source(1) Self-generated electricity (diesel-powered generator) Diesel oil used in generators LPG use(2) Total energy use of the energy matrix (joules)(3) Energy use of the energy matrix per unity sold (kjoules/unit)(3)(4) 2002 7.54 x 1013 6.55 x 1011 22.6 x 1011 19.4 x 1012 2002 9.70 x 1013 2003 7.47 x 1013 5.02 x 1011 17.3 x 1011 23.5 x 1012 2003 9.99 x 1013 2004 7.9 x 1013 2.88 x 1011 9.95 x 1011 24.65 x 1012 2004 10.47 x 1013 1,025.7 785.2 603.7 1. Even showing a growth of 28% in produced items in 2004, Natura showed efficiency in energy use, increasing by only 5.75% the consumption of electric energy (primary electricity source) in relation to 2003.This result is due to the many energy use reduction initiatives that may be seen in indicator 17. 2. Calorific value: LPG = 11,500 Kcal/kg; gasoline = 11,277 Kcal/kg (1 Kcal/kg = 4,186.8 joules/kg). 3. The energy matrix is made up of the total energy that Natura uses that comes from various sources (electric, diesel and LPG). 4. In 2004, there was a reduction of 23% in the use of energy per unit sold, particularly due to the economy of scale and the implementation of alternatives for reducing consumption. Target for 2005 To reduce by 5.5% the relative consumption of energy. International operations These data have not been determined, as their amounts are not considered significant in relation to the production activity carried out in Brazil. 16. Indirect energy use. Not applicable. Natura does not purchase energy products for its production process. 4 0 0 2 t r o p e r l a u n n a a r u t a n 1 8 Natura Sales Representatives(1) (in thousands) Brazil Argentina Chile Peru 2002 2003 2004 8 3 4 3 7 5 8 10 13 307 355 407 4 0 0 2 t r o p e r l a u n n a a r u t a n 0 8 1. The figures refer to the available Sales Representatives – those who placed at least one order in the last four sales cycles. Economic Targets assumed in the Natura 2003 Annual Report indicator 10 Target assumed in 2003 To raise net funds amounting to R$ 2.5 million. Results ☺ Target achieved. In 2004, the fund raising, of 3 million reais, was the highest since the creation of the program and exceeded the target set for the year by 20%. 17. Initiatives to use renewable energy sources and to increase energy efficiency. Brazil Among the initiatives to rationally use energy, Natura: • Mapped the benefits and the performance of the solar energy system installed in 2003 for the lighting of the parking lots and bus stops on Rodovia Anhangüera. Additionally, it prepared a project to increase the use of solar energy to heat water at the restaurants. • Conducted a study on Green Building (quantitative evaluation that uses international concepts to compare the current situation with a benchmark), based on four criteria: consumption of resources, environmental loads, quality of the internal environment and quality of services). • Replaced the cooling gas of the air conditioning system by Isceon gas, which is ecologically correct and reduces the use of electric energy. • Took measures to improve lighting and installed motion sensors in the administrative office rooms. • Applied reflective paint on the service lane in Cajamar to reduce the electric energy use by the air conditioning system. • Kept the Energy Reduction Brigade, a group of employees responsible for identifying possibilities for reducing energy expenses. International operations There are not initiatives of Natura to increase energy use efficiency in Argentina. In 2005, all operations will establish targets to this end. 18. Other indirect (upstream/downstream) uses of energy and their implications, such as organizational travel, product lifecycle management and use of energy-intensive materials. Not available. Natura has not been determining on a systematic basis the impact of meetings held and trips taken because of its operations. Water 19. Total water use. Brazil Total water use (cubic meters)(1) Water use per unit sold (liters/unit)(2) 2002 115,741 1.22 2003 110,499 0.87 2004 116,367 0.67 1. Even with a growth of 28% in the number of units produced, the consumption of water increased only 5.3% in relation to 2003. This result is due to the increase in the reuse of treated water for watering the gardens, cleaning metal structures, external walls and streets of the Cajamar facilities, as it can be seen in indicator 22. In 2004, there was a reduction of 23% in the consumption of water per unit sold, which shows the efficiency of the company’s production processes and the search for excellence in managing natural resources. 2. Target for 2005 To reduce by 1% the relative consumption of water. International operations These data have not been determined, as their amounts are not considered significant in relation to the production activity carried out in Brazil. 20. Water sources and related ecosystems and habitats significantly affected by use of water. Brazil As there is no public water supply system, all the water used in Cajamar and Itapecerica da Serra comes from local tube wells. The annual withdrawal of water respects the water table replenishment criteria, observing the maximum and minimum outflow determined during the drilling and testing and using the natural resources in a sustainable way. Additionally, in the Brazilian operations, Natura has been developing many initiatives to reduce consumption and increase the reuse of water (on these initiatives, see indicators 19, 21 and 22). International operations The offices use water from the public supply system. 21. Annual withdrawals of ground and surface water as a percentage of annual renewable quantity of water available from the sources. Brazil Withdrawal 2002 65.7% 2003 58.2% 2004 70.1% Note: The increase of 11.9 percentage points in the withdrawal of ground water is due, mainly, to the increase of 28% in Natura’s production and to the presence of an additional 481 employees and 3,000 visitors in the Cajamar unit.This increase was partially offset by a higher use of treated water for watering the gardens and cleaning metal structures and external walls of the Cajamar facilities. International operations Not applicable. As they are commercial operations, Natura does not withdraw ground or surface water and uses water from the public supply system. 4 0 0 2 t r o p e r l a u n n a a r u t a n 2 8 22. Total recycling and reuse of water. Brazil Water recycled and reused (cubic meters)(1) Percentage of reuse in relation to the total water treated by the Effluent Treatment Station 2002 5,172(2) 16% 2003 20,233 29% 2004 29,065 39.5% 1. Since 2002, Natura reuses treated water (originated in its effluent treatment system) for washing streets and external walls, in water mirrors and for watering 2. plants. In 2002, the total amount of water recycled and reused was 5,172 cubic meters, as informed in this Report and not 6,509 cubic meters as shown in the 2003 Annual Report. Target for 2005 Increase from 39.5% to 49% the percentage of treated water reused. International operations Not applicable. As they are commercial operations, Natura does not reuse water. Biodiversity 23. Location and size of land owned, leased or managed in biodiversity-rich habitats. Although local biodiversity-rich habitats have not been detected, Natura is located in two regions that have great Itapecerica da Serra and Cajamar, respectively in a springs protection area and in an environmental importance: environmental protection area, both within the Atlantic Forest’s biome. 24. Description of the major impacts on biodiversity associated with the organization’s activities and/or products and services in terrestrial, fresh-water, and marine environments. Natura uses in its products raw materials originating from nature, such as extracts, oils and compounded materials.The areas that supply raw materials developed with Brazilian or exotic species cultivated in Brazil are selected by Natura based on traceability and sustainability in order to ensure a minimum environmental impact. The preservation of biodiversity – genetic diversity, diversity of species, ecosystems and processes of natural forests – is stimulated when it provides benefits and products that can generate economic resources, not depleting the environment and strengthening local social relations. The environmental impacts arising from forest management activities are analyzed in many aspects: Biotic Mean(1) – Positive impact, taking into consideration that the harvest does not exceed the capacity to support the area and it can also favor the renewal of species and, consequently, the forest succession dynamics(3); contribution to the preservation of the genetic diversity maintained by traditional populations (on farm preservation(3)). Physical Mean(4) – Positive impact on the soil as the maintenance of the forest coverage helps the preservation of this resource.The removal of forest biomass (frequent harvests) has a negative impact on the recycling of nutrients(5). Anthropic Mean(6) – Positive impact, especially related to the establishment of the rural worker, the creation of jobs and the contribution to local development.The cultural aspect is strengthened as knowledge obtained via inherited tradition is valued. Two processes are adopted to ensure the sustainable use of natural resources: the identification of the origin of raw materials and the program for the certification of raw materials for two types of management, non-wood forestry and agricultural. Non-wood forestry management – Its main objective is to ensure the continuous supply of raw material and minimize the environmental impacts of this activity, maintaining the capacity of sustainable production. A forestry certification is structured to evaluate the process for the extraction of raw materials and the type of management used in accordance with the Principles and Criteria of the Forest Stewardship Council, FSC, which take into consideration the social, economic and environmental aspects. Agricultural management – It privileges good production practices, including agroecological concepts. An agricultural certification is structured to evaluate the process for the agricultural production of the materials in accordance with the Principles and Criteria of the Sustainable Agriculture Network, SAN and Instituto Biodinâmico (Biodynamic Institute), IBD. The Natura process for the certification of raw materials is divided into three phases: Phase I: Internal process for the identification and selection of a potential supply area. This phase is characterized by the typology of producers, the organization of the community and the existing type of management (agricultural or forestry). Phase II: Preparation of socioenvironmental analyses, botanical inventories and a management plan. Phase III: Implementation of the management plan and an external audit for certification. 1. Biotic mean: Flora (original vegetation, seed deposit on the soil, natural regeneration), fauna (vertebrates and insects), and microorganisms. 2. Forestry Succession:This is a process of progressive change in the proportion and composition of individuals from a vegetal community until this community reaches a state of dynamic equilibrium with the environment. 3. On farm preservation: This is a strategy that complements ex situ preservation and is characterized as one of the forms of genetic preservation of agrobiodiversity; its particularity is the fact that it involves genetic resources that are cultivated by the traditional populations, who have a great diversity of phytogenetic resources and a broad knowledge of them. 4. Physical mean: Air, water resource and edaphic resource. 5. Cycling of nutrients: Movement of elements and inorganic compounds from the environment to the organisms and from these organisms back to the environment, by way of biogeochemical cycles. 6. Anthropic mean: Settlement of the rural worker in the countryside, jobs, regional development, landscaping. 4 0 0 2 t r o p e r l a u n n a a r u t a n 3 8 Status of the raw materials State Amazonas PHASE I End X Beginning X Raw materials Andiroba Carapa guianensis Buriti Mauritia flexuosa Cacao Theobroma cacao Lemongrass Cymbopogon citratus Chamomile Chamomilla recutita Brazil nut Bertholletia excelsa Copaiba Copaifera spp Breu Protium pallidum Cumaru Dipteryx odorata Cupuacu Theobroma grandiflorum Guarana Paulllinia cupana Rosewood Aniba ferrea Macela Achyroclines satureoides Passion fruit Passiflora edulis Yerba Maté Ilex paraguariensis Murumuru palm Astrocaryum murumuru Surinam cherry Eugenia uniflora Flatsedge Cyperus articulatus Piauí Bahia São Paulo Paraná Amapá Amapá Amapá Em avaliação Rondônia Bahia Amazonas Paraná Minas Gerais Amazonas São Paulo Pará Rio Grande do Sul PHASE II End Beginning PHASE III Beginning End Notes X X X X X X X X X X X X X X X X X X X X X X X X Traditional management Traditional management X Agroforestry system X Cultivation Cultivation X Traditional management X Traditional management X Traditional management Traditional management Agroforestry system X Organic cultivation Traditional management Traditional management Cultivation X X X X Traditional management Traditional management X X X X Organic cultivation Cultivation X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X X Target for 2005 Of the total 35 native or exotic species obtained in Brazil, which produce the natural raw materials used by Natura (essential oils, fixed oils and extracts), eight had their certification completed in 2004 (23% of the total). In 2005, the target is to include another five in the phase III of the certification process, reaching a total of 13 certifications (37% of the total). 25. Total amount of land owned, leased, or managed for production activities, or extractive use. The Natura Ekos line purchases its natural raw materials in areas leased, rented or managed by rural communities or producers. Mindful to ensure that the area is exploited in a sustainable way, Natura tries, in addition to ensuring a sustainable exploitation model, to characterize the environmental importance of these areas. In 2004, the company did not purchase any additional area for its production activities. 26. Amount of impermeable surface as a percentage of land purchased or leased. Brazil In 2004, due to the construction of the new vertical warehouse, there was a small increase in the built area of the Espaço Natura (Natura Space) in Cajamar, which is now 81,573 sq. m. Consequently, the impermeable surface now represents approximately 12.6% of the total land. In the Itapecerica da Serra unit, there was no change in the size of the built area, which remained at 14,366 sq. m (approximately 15% of the total land area). International operations Not applicable. 27. Impacts of activities and operations on protected and sensitive areas. After analyzing the list of the six protected area categories of The World Conservation Union, IUCN, we identified two Natura partner areas that have the characteristics of the sixth category, which is called “Managed resources in protected areas: protected areas for the sustainable use of natural ecosystems”.These partners are the Extractivist Reserve of Central Juruá (located in the State of Amazonas) and the Sustainable Development Reserve of Iratapuru (located in the State of Amapá). They were both created by the federal and state governments to promote the sustainable exploitation of locally available resources, generating wealth and jobs for the existing local populations. 4 0 0 2 t r o p e r l a u n n a a r u t a n 4 8 The activities related to the purchase of raw materials that are developed in the protected and sensitive areas mentioned in indicator 25 are monitored by the responsible environmental agencies (Instituto Brasileiro do Meio Ambiente e Dos Recursos Naturais Renováveis (Brazilian Institute of the Environment and Renewable Resources), Ibama, and the State Environment Department) and are complemented by the certification program. In addition to the preparation of management plans, the greatest benefit of the certification process is a monitoring of the impact of the management activities on an available resource. These strategies help mitigate the negative impacts and potentiate the positive ones. In relation to its production activities, Natura did not verify any environmental impact in protected and sensitive areas in 2004. 28. Changes to natural habitats resulting from the organization’s activities and operations and percentage of habitats protected or restored. According to the information reported in indicator 27, Natura did not verify any environmental impact arising from its activities and operations in natural habitats in 2004. Even so, it developed, in 2004, a forest renewal project at the Cajamar and Itapecerica da Serra units. The objective is to start planting native tree species in 2005 in order to value up and renew the natural landscape in the areas where the company operates (see further details in indicator 29). The preparation and the accomplishment of the management plans of two protected areas – the Extractivist Reserve of Central Juruá and the Sustainable Development Reserve of Iratapuru – in partnership with Natura promote the restoration of the balance in these two ecosystems. 29. Objectives, programs, and targets for protecting and restoring native ecosystems and species in degraded areas. Natura uses raw materials originating from degraded areas and recognizes the importance of restoration projects as an essential factor for the preservation and management of the soil. One of the raw materials used by Natura, the cupuacu, originates in the State of Rondônia, from the project of Reflorestamento Econômico Consorciado e Adensado (Economic, Associated and Planted Reforestation), Reca, which is characterized as a production system (agroforestry) that provides for the restoration of degraded areas and, at the same time, promotes the preservation of biodiversity. Additionally, Natura prioritizes the work with traditional communities, recognizing the importance of these populations as agents in the process to preserve biodiversity. Brazil In 2004, the company started a Project for Forestry Restoration at the Cajamar and Itapecerica da Serra units, where it operates, in order to change the structure of the landscape, increase the diversity of the species and improve the ecological relations: • In Cajamar, the objective is to establish an ecological-economic zoning (ecozoning)(1) of a green area, currently covered by eucalyptus planted by the former owner of the land. Certain premises are considered: the preservation of natural resources, the future use for the expansion of the operations and the use of green areas for environmental education activities. In order to replace, beginning in 2005, part of the planted forest, some species of Brazilian flora will be used, in particular the embauba (Cecropia pachystachya), Golden Trumpet Tree (Tabebuia chrysotricha) and pink peroba (Aspidosperma polyneuron). • In Itapecerica da Serra, the aim is to enrich a green area that already boasts an exuberant diversity of native species. Among the species to be planted beginning in 2005 are the cabreuva (Myroxylum peruiferum), guapuruvu (Schizolobium parahyba) and the jatoba (Hymenaea courbaril var. Stilbocarpa). • In addition to these projects, Natura promotes, by means of partnerships, the following projects: Expedição Energia Positiva para o Brazil (Positive Energy Expedition for Brazil), Projeto de Educação e Recuperação Ambiental da Mata Atlântica no Vale do Rio Doce (Project for Environmental Education and the Recovery of the Brazilian Atlantic Forest in the Rio Doce Valley), Projeto Canguçu (Cangucu Project), Jardim Botânico do Rio de Janeiro (Botanical Gardens of Rio de Janeiro), and Projeto Pomar (Orchard Project). 1. Ecological-economic zoning (ecozoning): aims to geographically delimit territorial areas for the purpose of establishing special use systems in order to promote a harmonious integration between economic, environmental and social interests. International operations There are no similar initiatives in the other operations as the company does not own protected areas abroad. Additionally, the policy of support and sponsorship for environmental preservation projects has not been defined. 30. Number of IUCN Red List species with habitats in areas affected by the organization’s operations. The two species used by Natura that are part of The World Conservation Union (IUCN) Red List and the Official List of Endangered Flora of the Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais Renováveis (Brazilian Institute of the Environment and Renewable Resources), Ibama, are the Yerba Maté (Ilex paraguariensis) and the Brazil nut (Bertholletia excelsa). The areas that supply these raw materials are certified by the Forest Stewardship Council, FSC, ensuring a sustainable harvest. 31. Business units currently operating or planning operations in or around protected or sensitive areas. In accordance with the information in indicator 23, Natura operates in two regions of environmental importance in the State of São Paulo: Itapecerica da Serra and Cajamar located, respectively, in a springs protection area and in an environmental protection area, both within the Atlantic Forest’s biome. However, their operations meet the applicable legal requirements and seek sustainable development (see also indicators 25 and 27). 4 0 0 2 t r o p e r l a u n n a a r u t a n 5 8 Emissions, Effluents and Waste 32. Greenhouse gas emissions (CO2, CH4, NO2, HFCs, PFCs e SF6) (metric tons). During the evaluation of the environmental aspects and impacts, the existence of significant sources of greenhouse gas emissions during the production process was not identified. Regarding the business model (direct sales), we realize that the distribution of products by road transportation is a source to be monitored.Therefore, in 2005, the process for determining these atmospheric emissions will begin in order to find out the current stage and identify measures that may be taken to minimize these emissions. 33. Use and emissions of ozone-depleting substances. Emission of ozone-depleting substances 2002 NA 2003 NA 2004 N/A Note: HCFC, R12 and R22 gases (which, in 2003, represented 1% of the total gases used at Natura) were replaced by Isceon gas, which is non-ozone depleting. 34. NOx, SOx and other significant air emissions by type. Brazil As 75.5% of the energy use by Natura comes from a hydroelectric source and 23.6% from the use of LPG, the emission of substances such as NOx and SOx was considered “non-significant”. International operations Not applicable. As the operations are of a commercial nature, the energy used in these places come from the public system and the emission of gases is considered insignificant. 35. Total amount of waste by type and destination (metric tons). Brazil Type of waste Class I waste Class II-A waste Class II-B waste 2002 1,022.08 1,626.18 532.98 2003 753.13 2,501.98 377.58 2004 909.09 3,225.53 832.98 Note: In accordance with the NBR 10004/2004 standard: class I waste is hazardous waste (obsolete cosmetic products, medical and laboratory waste and alcohol); class II-A waste is non-inert waste (physicochemical and biological sediment from the effluent treatment station, paper, cardboard, waste from sweeping, organic and domestic waste); and Class II-B waste is inert waste (glass, metals, plastic and debris). Destination Incinerated(1) Disposed of in landfill sites(1) Recycled(2)(3) 2002 5.52% 31.91% 62.58% 2003 6.40% 24.40% 69.20% 2004 5.43% 21.20% 73.41% 1. The reduced incineration of waste and disposal in landfill sites was the result of initiatives to prioritize recycling. 2. As from this Report, all data referring to reused and recycled waste are grouped and historical data are adjusted. 3. The increased recycling of waste in 2004 is due to the implementation of improvement initiatives – forwarding waste from the restaurant, garden pruning, sweeping and biological sediment for composting – as well as to the separation of other recyclable waste at the Itapecerica da Serra unit. Value of solid waste per item sold (g) 2002 2.99 2003 2.92 2004 2.56 Target for 2005 Reduce the generation of waste by unit sold from 2.56 g in 2004 to 2.38 g. International operations These data were not determined due to the fact that the amounts are not considered significant when compared with the production activity, which is performed in Brazil only. 36. Significant discharges to water by type. Brazil Total volume of treated effluents (cubic meters) 2002 65,647 2003 79,580 2004 82,786 Note: The increase of 4.03% in the discharge of water in 2004 in relation to the previous year is due to the 28% increase in Natura’s production, particularly in the shampoo and cream plants, which generate large amounts of effluents in their cleaning processes. Target for 2005 To keep the monthly average efficiency rate in the removal of the organic load from the effluents in Itapecerica da Serra above 90% whereas the minimum efficiency rate (removal rate required by the legislation) is 80%. International operations Not applicable. As the activities performed in these operations are of a commercial nature, the offices use the public system for the treatment of effluents. 4 0 0 2 t r o p e r l a u n n a a r u t a n 6 8 37. Significant spills of chemicals, oils, and fuels in terms of total number and total volume. In 2004, there were no occurrences of significant spillage of chemicals that could have compromised the quality of the soil and surface and/or underground water at the company’s production site. Note: The Natura Emergency Service Plan is operated at the site, providing, registering and monitoring information that promote corrective and preventive measures.The plan has not been used to correct any occurrence of significant spillage. 38. Other relevant indirect greenhouse gas emissions (CO2, CH4, NO2, HFCs, PFCs e SF6) (metric tons)(1)(2) Brazil Emission of CO2 during distribution – gasoline Emission of CO2 during distribution – diesel Emission of CO2 during distribution – alcohol Emission of other gases 2002 434.33 6,633.86 20.97 NA 2003 521.20 7,960.63 25.16 NA 2004(3) NA NA NA NA 1. The calculation of the emission of CO2 was based on: gasoline = 1.76 kg CO2 x liters of gasoline; diesel = 2.64 kg CO2 x liters of diesel; alcohol = 0.85 kg CO2 x liters of alcohol. 2. Natura understands that relevant indirect gas emissions originate from its distribution.The company has an outsourced fleet.The data are obtained by way of the consumption of fuel informed by the transporting companies for the distribution of products. 3. As we adopted a new transport strategy in 2004, some measurements of fuel use and emission of pollutants need to be restructured, an activity that will be prioritized in 2005, already using the new established transportation model. International operations Natura did not conduct this survey on its transporting companies abroad. 39.Water sources and related ecosystems and habitats significantly affected by discharges of water and runoff. Brazil The Espaço Natura (Natura Space) in Cajamar discharges its effluents into the Juqueri river, which is the main affluent of the right margin of the Tietê river in the State of São Paulo. In Cajamar, an Effluent Treatment Station is in operation.This has a physicochemical and biological treatment system and fully meets the applicable legal requirements (Brazilian Environment Council – Conama Resolution Nº 20, Article 21 and State Executive Order 8468/76, Articles 12 and 18). As the Espaço Natura in Itapecerica da Serra is in a springs protection area and produces only sanitary sewage, it infiltrates its effluents in the soil after a treatment, in a conventional station, that significantly reduces the organic load of the effluent generated. International operations Not applicable. As the operations are of a commercial nature and carried out only in urban areas, there are no affected sources of water. Suppliers 40. Performance of suppliers relative to environmental components of programs and procedures described in response to governance structure and management systems section. Brazil The evaluation of the performance of suppliers regarding strategic issues for sustainability has been carried out by way of a relationship program that started in 2003. In 2004, this program started to be called QLICAR, encompassing aspects such as Quality, Logistics, Innovation, Cost/Contract, Service and Traceability.The sustainability aspects, which include the environment and corporate responsibility, are approached in the Quality aspect. The objective of this program, which is also extended to transporting companies, is to establish a work process that gets closer to suppliers. Natura also establishes with its suppliers commitments in contracts that contain clauses on compliance with legal environmental requirements. Additionally, the NBR ISO 14001 certification process, completed at the beginning of 2004 for operations at the Cajamar and Itapecerica da Serra units, guided Natura in the determination of the environmental risk management system of the company and its suppliers. As one of the results of this process, in the same year Natura started an environmental evaluation of new suppliers and of the suppliers considered to be “environmentally critical” (suppliers of raw materials and packaging, environmental service providers, transporting companies with diesel-powered fleets, among others). This was done by way of an analysis of all of the documentation related to environmental licensing and to the questionnaires filled out by them. Of the total suppliers analyzed: • 19% were evaluated as A (meet between 90% and 100% of the requirements). • 24% were evaluated as AB (meet between 80% and 89% of the requirements). • 29% were evaluated as B (meet between 60% and 79% of the requirements). No supplier was evaluated as C (meet less than 60% of the requirements). There are also 28% of the suppliers that have not been evaluated because they have not yet sent the required documentation. Natura will focus its efforts in 2005 on obtaining the remaining documentation and completing the environmental evaluation. (See also: Main Environmental Indicators, page 22, and target assumed in the 2003 Natura Annual Report, page 90.) 4 0 0 2 t r o p e r l a u n n a a r u t a n 7 8 Compliance 43. Incidents of and fines for non-compliance with all applicable international declarations/conventions/treaties, and national, sub-national, regional, and local regulations associated with environmental issues. Incidents or fines 2002 0 2003 0 2004 0 Note: Natura was not fined in 2004 for non-compliance with applicable legal environmental requirements. With the implementation of the Natura Environmental Management System, Sigan, all legal requirements related to the significant environmental aspects and impacts are monitored in the operations in Brazil. This enables a constant interaction between departments for the control of activities, protecting the company from any wrongdoing. Additionally, Natura also monitors the progress of legislative bills with the creation of internal discussion forums, allowing for a proactive posture by the company regarding future situations. Transport 44. Significant environmental impacts of transportation used for logistical purposes. Natura understands that one of the main environmental impacts of its activities arises from the atmospheric emission originating from the distribution of its products. Brazil Natura continues to evolve its review of its transport model by hiring transportation companies with newer fleets (reducing the level of atmospheric emissions), inspecting the level of black smoke of hired vehicles, establishing new routes, streamlining shipments and, consequently, reducing the number of trips. The result is a greater efficiency in the use of fuels (the data resulting from the emission of gases in the distribution of the company’s products may be seen in indicator 38). International operations From 2005 onwards, Natura will define, in these operations, the calculation of the environmental impact caused by the distribution of its products. Overall 45. Total environmental expenditures by type (in thousands of reais). Natura is disclosing the amounts invested in corporate responsibility in Brazil, including the environmental investments related to 2004, in a different way from that adopted in previous years.This is in order to present more complete data.The amounts are presented on page 25 of this Report. Target for 2005 a) Disclose and employ the procedures of the quality system established with suppliers. b) Evaluate 100% of the documentation of all “environmentally critical” suppliers and new suppliers. c) Of the suppliers evaluated in 2004, to increase by 30% those classified as A. International operations From 2005 onwards, Natura will analyze similar initiatives for these other operations. Products and Services 41. Significant environmental impacts of the principal products and services. To grow in a sustainable way implies changing production and consumption standards. Aware that its packages have a significant impact on the lifecycle of its products, Natura completed in 2002 the first stage of the packaging environmental inventory project by way of the use of the Life Cycle Assessment, LCA(1) methodology. In 2003, the LCA project was included in the formal process for the launch of the company’s products. In 2004, following one of the Natura Environmental Management System procedures, no packaging design decision for the launch of products was made without an assessment of the comparative impact between the various alternatives. Therefore, before it is launched, all new types of packaging undergo a preliminary environmental impact study using the LCA methodology, in order to supply information for decision making. In 2004, the Environmental Impact Model Manager’s Office was created within the Innovation Vice President’s Office. This new office will be responsible for the running of projects related to the determination, evaluation and mitigation of the greatest environmental impacts during the life cycle of Natura’s products. The evolution of some environmental impact indicators is monitored on a monthly basis by the company. In 2004, the controlled indicators were: Percentage of products launched after the packaging LCA: The target for each month was 100%.The company achieved the target in all periods. Percentage of the portfolio of products whose packaging LCA has been calculated and documented: The target for 2004 was 100% of the portfolio and the company closed the year with 100%. Total Natura impact: Natura uses in its LCA studies the Life Cycle Inventory of available databases treated in accordance with the Eco-Indicator 99(2) methodology. Natura’s target for 2004 was to reduce the average environmental impact of packaging by reducing the weighted average, measured by business unit, as well as the total figure, which must be lower than or equivalent to that calculated in 2003.The 2004 x 2003 analysis shows that: • The weighted average impact per invoiced unit grew 1%. • The total impact (absolute number) increased 45%. The increase in total impact is due to the growth in the number of items sold, of 36%. 1. Natura uses Life Cycle Thinking, which is based on the product Life Cycle Assessment, LCA, and on the Design for Environment, DfE concept. This is an integrated approach of concepts, techniques and procedures to access the environmental, economic, technological and social aspects of products and organizations with an aim to continuously improve the lifecycle prospect. DfE (ecodesign) provides guidance on the systematic integration of environmental considerations in the project of products and processes. 2. Bibliography: GOEDKOOP, Mark; SPRIENSMA, Renilde;The Eco-Indicator 99 – A damage oriented method for Life Cycle Impact Assessment, 2nd edition. Pré Consultants B.V., 2000. Target for 2005 a) Ensure that all products launched have their packages analyzed by the life cycle assessment (LCA) tool. b) Reduce by 2%, in relation to 2004, the weighted average of the environmental impact of Natura product packages. c) Determine environmental performance indicators for the products and add information related to these indicators on the labels. d) As there is no available model for the life cycle assessment of raw materials in the cosmetic industry, Natura will develop a model in 2005. It will be applied on the Ekos shampoo line and subject to international analysis. 42. Percentage of the weight of products sold that is reclaimable at the end of the products’ useful life and percentage that is actually reclaimed. Brazil Percentage of the weight of products sold that is reclaimable at the end of the products’ life cycle Percentage that is actually reclaimed(2) 2002 NA NA 2003 NA NA 2004 38%(1) NA 1. Of the whole mass of packaging of products sold by Natura, 97.5% are recyclable and, therefore, could be reclaimed both in Brazil and abroad. This is equivalent to 38% of the whole mass sold (content and package).The content of Natura products is washable or perfuming and cannot be reused at the end of its useful life. 2. We do not have a program to quantify the percentage of what is actually recovered. International operations Information on the recovery of packaging was not consolidated. 4 0 0 2 t r o p e r l a u n n a a r u t a n 8 8 Targets assumed in the Natura 2003 Annual Report Indicator Target Assumed in 2003 15 To reduce by 15% the consumption of energy per item separated upon shipment. 22 Increase from 29% to 39% the percentage for reusing treated water. 24 30 35 36 40 41 To ensure sustainable sources for 14 plants and, for 8 of these plants, to carry out field certification (phase III concluded). Replace or discontinue use of the illipe (Shorea stenoptera) species. Reduce by 5% the amount of solid waste per item separated (in 2003, Natura generated 2.4 g of solid waste per item separated). The organic load (biochemical demand of oxygen) that is present in the effluents discharged by industries accounts for a large part of the pollution generated. In that respect, Natura will increase by 10% the annual average efficiency in the removal of organic load from the effluents discharged in Itapecerica da Serra. In order to meet the requirement of the Natura Environmental Management System, Sigan, 100% of the environmental documentation of suppliers whose activities may cause impact on environment will be evaluated. a) To carry out a packaging Life Cycle Analysis (LCA) study on 100% of the products launched and cover 100% of the packaging of the product portfolio that will undergo LCA studies. b) Expand the biodegradability program, trying to develop an expertise center in evaluation methods for other raw materials, in addition to those already existing for the surface-active agents. c) To reduce the average environmental impact of packaging by reducing the weighted average of the environmental impact of packaging measured by Business Unit, as well as the total figure, which must be lower than or equivalent to that calculated in 2003. Results ☺ Target achieved. In 2004, Natura reduced by 21.3% the relative consumption of energy per item separated upon shipment due to the following reasons: economy of scale, less use of air conditioning and the implementation of alternatives for the reduction of consumption. ☺ Target achieved. 39.5% of recycled water was used.The increase of 10.5 percentage points is due, mainly, to the increased reuse of treated water for watering the gardens, cleaning metal structures, external walls and streets of the Cajamar facilities. ☺ Target achieved. A sustainable source was ensured for 14 plants (10 species of Flora Medicinal and 4 of Natura) and 8 species were certified in the field. ☺ Target achieved. Use of the illipe (Shorea stenoptera) species was discontinued. ☺ Target achieved. there was an In 2004, increase of 32% in the amount of separated items and only 19% in the total generation of waste, which meant a reduction of 10% in the weight of waste per item separated. ☺ Target achieved. The efficiency in the removal of organic load from the effluents discharged in Itapecerica da Serra increased 11.5%, reaching, in the last quarter of 2004, 92.2% efficiency. (cid:2) Target partially achieved. Of all of the critical suppliers, 60% delivered all necessary documentation, which was analyzed, 29% delivered only part of the documentation and 8% are being cut out. In 2005, Natura will focus its efforts on obtaining the remaining documentation and consequent environmental evaluation. (cid:2) Target partially achieved. a) Of the total products launched in 2004, 100% underwent a packaging LCA study and 100% of the products sold at the end of the year showed a life cycle study on their packages; b) The group was it has been formed and coordinated by the Raw Materials Committee, in the research and development area with the objective to coordinate all matters of the company related to raw materials. Studies related to the different classes of raw materials are being conducted. The main information on biodegradability has been surveyed and it has been verified that there are no standard methods for certain classes. c) The weighted average impact per unit sold dropped 1% and the total impact (absolute value) increased 45%. The stronger total impact is due mainly to the increase in the volume of items sold, of 36%. 4 0 0 2 t r o p e r l a u n n a a r u t a n 0 9 Social Performance Indicators The answers to these indicators take into consideration the operations in Brazil and the international operations of Natura (Argentina, Chile and Peru). It is worth noting that the company has a productive operation only in Brazil. Abroad, it operates with product sale and distribution centers.This means that the operation in Brazil, due to its size and complexity, is still the center of the company’s work. For the answers that do not explicitly state the operations to which they refer, the reader should consider the content to be valid for all international operations. Labor Practices and Decent Work Employment 46. Breakdown of workforce, where possible, by region/country, status (employee/non-employee), employment type (full time/part time), and by employment contract (permanent/fixed term or temporary). Brazil Employees Temporary Outsourced employees(1) Trainees Peru Employees Outsourced employees(1) Trainees Chile Employees Outsourced employees(1) Trainees Argentina Employees Outsourced employees(1) Trainees 2002 2,641 88 752 24 60 7 0 54 5 0 129 5 0 1. Outsourced employees who are assigned to the company’s units are taken into consideration. 47. Net employment creation and average turnover by region/country. Jobs created – Brazil Jobs created in Cajamar Jobs created in Itapecerica da Serra Total 2002 1,685 956 2,641 2003 2,696 230 780 13 72 5 0 61 13 0 157 4 1 2003 1,681 1,015 2,696 2004 3,177 259 1,000 37 103 25 2 70 24 0 205 2 0 2004 2,044 1,133 3,177 Note: The whole sales force (sales promoters, sales managers, market manager, sales supervisors and field assistants) is accounted for in Itapecerica da Serra. Employment creation and retention of employees Brazil Jobs created in the period Employee turnover rate Peru Jobs created in the period Employee turnover rate Chile Jobs created in the period Employee turnover rate Argentina Jobs created in the period Employee turnover rate Internal job opportunities Percentage of vacancies offered that were taken by employees 2002 -400 6.04% 0 16% -4 7.40% -5 NA 2002 56% 2003 55 6.53% 12 16% 7 7.40% 28 7.1% 2003 54% Creation of work opportunities – number of Natura Sales Representatives(1) (in thousands) (em milhares) Brazil Argentina Chile Peru 2002 307 8 3 4 2003 355 10 3 7 1. The figures refer to the available Sales Representatives – those who placed at least one order in the last four sales cycles. 2004 481 7.81% 31 15.53% 9 20.20% 48 16% 2004 38% 2004 407 13 5 8 4 0 0 2 t r o p e r l a u n n a a r u t a n 1 9 48. Employee benefits beyond those legally mandated. Brazil • Programa Natura Educação (Natura Education Program): subsidies for employees in the form of scholarships for college studies, and technical and language courses; subsidies for the children of employees in the form of scholarships for college studies and technical courses; subsidies in the form of transportation vouchers and school material to the outsourced employees who wish to complete elementary and middle school. • Programa Construindo o Futuro (Constructing the Future Program): guidance and preparation for retirement and savings incentives.The company deposits on a monthly basis 60% of the amount determined by each employee, which varies from 1% to 5% of his or her salary. • Programa Prosperar (Prosper Program): financial education for employees. • Support for employees in adoption processes. • Daycare center for the children of female employees (up to 3 years and 11 months). • Pediatric service for the children in the daycare center. • Medical health plan. • Dental health plan. • Psychological therapy service. • Checkup: laboratory, biochemical and hematological tests, preventive diagnosis of cardiovascular diseases, imaging diagnosis, nutritional orientation, preventive tests for women and men, appointments with specialists and general practitioners. • Medical services in the company’s facilities for the prevention of metabolic conditions (diabetes, cholesterol and triglyceride) and cardiovascular conditions (hypertension). • Services for the prevention of work-related medical conditions: orthopedics, physiotherapy, global posture reeducation, short psychotherapy and audiometry in the company’s facilities. • Self-help program for those who wish to stop smoking. • Telemedicine (electrocardiogram by telephone in emergency cases). • Women’s Health Program: gynecological service in the company’s facilities. • Pregnant Women Relationship Program: prenatal follow up in the company’s policlinic and course for pregnant employees, outsourced employees and wives of employees. Laboratory tests without costs to employees and wives of employees are also performed. • Physical evaluation: made before the beginning of a systematic physical exercise in the company’s gym. • Alternative therapies: acupuncture in the company’s facilities. • Speech therapy. • Dermatology. • Therapeutic massages. • Programa de Reeducação Alimentar (Learning New Eating Habits Program): nutritional service in the company’s facilities. • Occupational exercise. • Exercise gymnasium in the company’s facilities for all employees who are members of the Natura Sports and Social Club in Cajamar and Itapecerica da Serra. • Beauty Center at the Natura Sports and Social Club (Cajamar and Itapecerica da Serra): manicure, hairdresser, massage and waxing for employees and outsourced employees. • Services and facilities: in the convenience area, services such as sewing, dry cleaners, shoe repair, eyewear shop, insurance, post office, pharmacy, and video rental are offered. • Funeral allowance. International operations The public conditions for medical, dental and therapeutic services vary greatly between the countries. Natura provides additional services in accordance with the local conditions and the benefits are, therefore, different to those offered in Brazil. • Argentina: corporate medical care and group life insurance. • Chile: Natura does not offer benefits other than those provided for by law in this country. • Peru: corporate medical care, dental health care and personal liability insurance. Labor and Management Relations 49. Percentage of employees represented by independent trade union organizations or other bona fide employee representatives broken down geographically or percentage of employees covered by collective bargaining agreements broken down by region/country. Brazil Employees represented 2002 100% 2003 100% 2004 100% Note: Brazil is a signatory to the conventions of the International Labour Organization (ILO) that determine the need for the existence of union organizations that represent employees in negotiations of their interest with employers. Natura observes the pertinent legislation, which requires its employees to be unionized. International operations Natura observes what is provided for in the legislation of the countries where it operates. 50. Policy and procedures involving information, consultation, and negotiation with employees over changes in the organization’s operations. Brazil Information: The changes in the company’s operations are always communicated to all employees by way of internal means of communication: notice boards in different locations within the company, Intranet, monthly newspaper (Ser Natura Colaborador) and e-mail. In the Intranet, there is a page that shows updated information about the company’s organizational structure. 4 0 0 2 t r o p e r l a u n n a a r u t a n 2 9 Natura also discloses relevant information about changes in the organization in meetings between employees and the CEO’s office, in which all managers participate, and in the Scheduled Meetings between the senior management and their teams. Consultation: The possibility of a change is broadly discussed in the many formal decision-making committees and forums (described in indicator 51). Negotiation: Natura establishes a broad process of communication and involvement with its employees whenever there are major changes in operations. Minor changes are negotiated within the department forums. International operations As the other operations are smaller, the information (notice boards and Intranet), consultation and negotiation forums are very simplified. 51. Provision for formal worker representation in decision-making or management, including corporate governance. Brazil Employees are encouraged to give their opinions, make suggestions and freely criticize the company.This can be done at the Scheduled Meetings or by way of other channels, such as the Fale com a Natura (Talk to Natura) (see indicators 50 and 70). One of these groups is the Quality and Cost Reduction Group, which aims to reduce costs in processes, products and services while maintaining quality. All employees may send suggestions, for discussion, to the Quality department. There is the structure known as Management of the Internal Customer Satisfaction Level, GSCI, which is aimed at the operating department and made up of employees legitimately chosen by their colleagues and by the Human Resources Department, to which the employees can forward suggestions for improvements. There are also the Commissions for the Negotiation of the Profit and Results Policy, which are made up of elected employees from within the company. International operations As the operations are smaller, these forums are simplified and are held in small meetings. Health and Safety 52. Practices on recording and notification of occupational accidents and diseases, and how they relate to the ILO Code of Practice on Recording and Notification of Occupational Accidents and Diseases. Brazil All accidents, whether with leave of absence or not, are recorded, accounted for, and analyzed to determine their causes and to implement corrective or preventive measures. Additionally, accidents are registered with the Social Security Ministry, with the Labor and Employment Ministry and with the union of the related job category. The analysis of the accidents is coordinated by the Labor Security department and performed by a group made up of: security technician or work security engineer, occupational physician, heads of departments, victim (if possible), witnesses, maintenance staff and representatives of the employees within the Comissão Interna de Prevenção de Acidentes de Trabalho (Internal Commission for the Prevention of Work-related Accidents).The analysis report is publicized to the heads of departments and employees so that they can be aware of it and promote the implementation of corrective or preventive measures, which are discussed in the meetings of the commission. There is also the Programa Quase Acidente (Near Accident Program), which records events that did not cause any injury to employees but did present a risk, and are, therefore, analyzed and corrective or preventive measures are implemented.These events are also publicized and discussed by employees by means of the Comissão Interna de Prevenção de Acidentes. In the Internal Week of Work-related Accidents, Sipat, many activities aimed both at awareness and prevention are organized. The objective of this week is to change attitudes, encouraging preventive behavior in all situations: at work, at home and when in traffic. These activities include lectures, theater, seminars, games and contests. The Sipat involves the employees of Natura and outsourced companies. International operations In the international operations, the activities of employees are exclusively administrative. In these activities, health and security issues are less critical than those in production sites.There is no record of leave due to occupational diseases. 53. Description of formal joint health and safety committees comprising management and worker representatives, and proportion of workforce covered by any such committees. Brazil Each business unit of Natura has a Comissão Interna de Prevenção de Acidentes do Trabalho. These commissions follow all legal requirements – Regulatory Rule Nº 5 of Directive 3.214/78 of the Labor and Employment Ministry and operate as follows: • The members have a one-year mandate. • The number of participants is proportional to the total number of the company’s employees related to the level of risk of the activity. • Half of its members are elected by the employees themselves and the unions of the related category are informed of and invited to actively participate in the elective process.The other half of the members are appointed by the company. • The members and substitutes elected have their jobs guaranteed for the mandate period, plus one year. • The members of these commissions participate in the analysis of accidents, identify and propose improvements for the elimination or neutralization of risks and help publicize the prevention and security concepts, aiming at a broader awareness of employees. • The reports and minutes of the ordinary or extraordinary meetings are forwarded to the heads of departments and management and released to employees. International operations This indicator does not apply to the operations abroad as the activities are of a commercial nature. 4 0 0 2 t r o p e r l a u n n a a r u t a n 3 9 54. Standard injury, lost day, and absentee rates, and number of work-related fatalities (including subcontracted workers). Brazil International operations Not available. 2002 3 Number of accidents with employees (with leave of absence) 8 Number of accidents with employees (without leave of absence) Average work-related accidents/employee 0.004 Number of accidents with subcontracted workers (with leave of absence)(1) NA Number of accidents with subcontracted workers (without leave of absence)(1) NA 2.83 Absenteism 38 Lost workdays 255.00 Investment in the prevention of diseases/employee (reais) Investment in the prevention of accidents/employee (reais) 56.08 Number of reports to the Brazilian Institute of Social Security on occupational diseases – Cajamar Number of reports to the Brazilian Institute of Social Security on occupational diseases – Itapecerica da Serra Number of reports to the Brazilian Institute of Social Security on occupational diseases – Santo Amaro(3) 3(2) N/A 5(2) 2003 5 15 0.007 5 34 2.06(2) 16 285.00 121.05 3 0 0 2004 6 12 0.007 16 7 3.14 57 408.00 428.93 2 0 0 1. These figures refer to outsourced employees who are assigned to the company’s units. 2. The figures in the 2003 edition of this report, which were incorrect due to a failure in the department’s internal control, are now corrected. 3. The Santo Amaro unit was discontinued in December 2002. International operations This indicator does not apply to the operations abroad as the activities are of a commercial nature. 55. Description of policies or programs (for the workplace and beyond) for HIV/AIDS. Brazil Natura is part of the Conselho Empresarial Nacional de Prevenção ao HIV/AIDS (Brazilian Corporate Council for the Prevention of HIV/AIDS), an invitational body made up of 24 corporate entities that was created in 1998 by the Health Ministry. The objective of the program for the prevention of and fight against AIDS is to provide information to fight discrimination and segregation, and leads to changes in behavior. Natura has adopted a policy that involves the service and treatment of HIV-positive employees and their dependants, in addition to a partnership with government agencies. Prevention campaigns are conducted periodically, particularly during Carnival, on Labor Day, on Valentine’s Day and on World AIDS Day (December 1st). In 2004, Natura was recognized by the Joint United Nations Programme on HIV/Aids, Unaids, for its contribution to the fight against this disease in Brazil. International operations Natura does not have initiatives that are similar to those described here in its international operations. 56. Description of formal agreements with trade unions or other bona fide employee representatives covering health and safety at work, and the proportion of the workforce covered by any such agreements. Brazil Natura follows the guidelines relating to health and safety of the Consolidation of the Labor Laws and other collective bargaining agreements with unions with which Natura relates. Some items included in these agreements and observed by Natura are: remuneration during the first fifteen days of sick leave, additional social security contribution, provision of a Work- related Accident Report and adoption of protective measures relating to working conditions and the safety of workers, implementation of the rulings of the Internal Commission for the Prevention of Work-Related Accidents, and guarantees of the medical and laboratory tests provided for in legislation, among others. International operations Natura respects the labor legislation of the countries where it operates. Training and Education 57. Average hours of training per year per employee by category of employees. Brazil Employees in production positions Employees in administrative positions Employees in managerial positions Employees in executive positions Total (average hours/year/employee) 2002 41 19 53 32 34 2003 33 36 66 40 37 2004(1) 78 61 86 68 70 1. In 2004, this indicator also started to contemplate the training of sales promoters and the Programa Natura Educação (Natura Education Program), which were not considered in 2002 and 2003. 4 0 0 2 t r o p e r l a u n n a a r u t a n 4 9 58. Description of programs to support the continued employability of employees and to manage career endings. Brazil Programa Natura Educação (Natura Education Program) The objective of the program is to increase the access of employees and their families and of outsourced employees assigned to the company’s units to formal education and professional training. In 2004, Natura granted 80 scholarships for technical courses, 90 for language courses and 100 for college studies as a subsidy to the participants monthly tuition fee (see chapter Highlights of Investments in Corporate Responsibility, page 66). Programa de Educação Executiva (Executive Education Program) This program subsidizes up to 80% of the cost of MBA and post graduation courses for employees and executive training programs for executives. Support Center In the processes of organizational restructuring, Natura makes available support centers for employees who no longer work for the company, offering, among other benefits: psychological support, resources to improve professional qualification and employability prospects, such as PC information technology courses and lectures on how to prepare a curriculum vitae, guidance on professional placement alternatives, analysis of personal prospects in view of retirement, provision of access to new health plans, unemployment insurance and Fundo de Garantia por Tempo de Serviço (Government Severance Indemnity Fund for Employees), guidance on financial planning for the family, career advice with personal and family guidance and support, guidance for reentering the market and self-development initiatives. Programa Construindo o Futuro (Constructing the Future Program) – preparation for retirement The program was launched in July 2004 with the aim to prepare and guide employees in their life projects after retirement. It is divided in three approaches: quality of life, financial planning and career extension. The Programa Construindo o Futuro uses initiatives that already exist in the Programa Natura Qualidade de Vida (Quality of Life Natura Program), which is aimed at all employees. Regarding financial planning, the company launched, for all employees, the Savings Incentive, which encourages them to save from 1% to 5% of their salaries per month.To the saved amount, Natura adds 60%.The activities aimed at career extension focus on employees who are older than 58 years of age.The objective is to support them in their search for a second career, which may range from the opening of their own company to volunteer work, for example. By the end of the year, 72% of employees had enrolled with the program. International operations Natura does not yet promote programs abroad that are similar to those carried out in Brazil. It is worth recalling that the conditions of public services in relation to professional education and preparation for retirement differ between the countries. 59. Specific policies and programs for skills management or for lifelong learning. Brazil Natura’s policy consists of providing 100% of the technical training necessary for them to do their jobs, and support the personal and professional development of all employees. A tool, which was developed in the Intranet, contains all the internal or external education and training opportunities gathered in a Guia de Aprendizagem (Learning Guide). In 2004, the focus on the dissemination of the sustainability concept was reinforced. The Programa Desenvolvimento Sustentável – Visão Geral (Sustainable Development Program – General View) with the aim to make employees aware of the importance of the topic, and the Programa Desenvolvimento Sustentável – Visão Geral II (Sustainable Development Program – General View II), specific for managers, were offered. Another important focus was the Programa de Meio Ambiente (Environment Program), which trained approximately 2,000 people, from employees and outsourced employees, to work in accordance with the requirements of the ISO 14001 standard. Additionally, the environment-related themes continue to be highlighted in the many corporate education programs.They are addressed from the integration of new employees, outsourced employees and temporary workers to the daily activities organized by the participants of the Comissão Interna de Meio Ambiente (Environment Internal Commission). There are also the Natura Educação (Natura Education) and Educação Executiva (Executive Education) programs that offer learning opportunities for life (see indicator 58); the course for pregnant employees, which addresses themes such as physiology of pregnancy, postural and emotional aspects of pregnancy, breastfeeding and care with the baby (see indicator 65); and the Prosperar – Educação Financeira Workshop (Prosper – Financial Education Workshop), whose main objective is to facilitate and help in the management and planning of the personal and family budget of employees, for whom training with an external consultancy is provided. International operations Natura does not yet promote abroad activities similar to those above. It is worth recalling that the conditions of public services in relation to support for qualification and training differ between the countries. Diversity and Opportunity 60. Description of equal opportunity policies or programs, as well as monitoring systems to ensure compliance and results of monitoring. Natura’s stand is clear in all its documents of intention and relations with society, regarding its respect for diversity and equality of treatment. Brazil Programa de Qualidade de Vida (Quality of Life Program) Natura adopts a differentiated policy for pregnant or breastfeeding women, giving them all the conditions necessary for them to exercise motherhood and respecting their needs and the needs of their children. 4 0 0 2 t r o p e r l a u n n a a r u t a n 5 9 Programa de Incentivo à Contratação de Pessoas Portadoras de Deficiência (Incentive Program for the Admission of Physically Impaired People) The program consists of the following stages: • Review of the jobs available in the many departments together with specialized organizations. • During the hiring process, the Recruitment and Selection, Ergonomics and Social Welfare departments, together, evaluate the type of impairment and the activity to be performed. • The Social Welfare department promotes awareness initiatives with the employees of the department that will receive the new employee, focusing on integration and the type of impairment in relation to autonomy and dependence. • Some employees perform the important and voluntary role of “sponsors”, helping in the integration of physically impaired employees and guiding them whenever necessary. Training materials have been adapted to serve the physically impaired employees. Sign language is used in courses attended by hearing impaired employees. For visually impaired employees, voice software is made available. During the year, there were two sign language courses for leaders, “sponsors”, and policlinic, daycare center and human resources personnel aiming at better communication. The company also made available a telephony program for visually impaired employees and installed public telephones for those who are hearing impaired. In August 2002, Natura signed a Conduct Adjustment with the Labor Ministry in order to achieve the percentage target for the admission of physically impaired people, which is calculated based on the total number of company employees. In 2003, Natura reported, semiannually, to the Government Attorney’s Office on the measures taken to achieve this target. Currently, there are 114 physically impaired employees in the company (corresponding to 3.69% of the total number of employees). The adjustment signed with the Labor Ministry determines that this proportion must be of 5% in 2005. Internal Job Opportunities Exchange All vacancies available in the company are advertised on the notice boards and Intranet, ensuring openness and transparency for the processes of internal deployment of personnel. International operations Natura does not have similar initiatives in the other operations. From 2005 onwards, the Internal Job Opportunities Exchange will be global, that is, for all operations. Human Rights Strategy and Management 61. Composition of senior management and corporate governance bodies (including the board of directors), including female/male ratio and other indicators of diversity as culturally appropriate . Brazil Composition(1) Total Employees Physically impaired people(2) Percentage in relation to the total number of employees Percentage in managerial positions in relation to total managerial positions Percentage in managerial positions in relation to total executive positions Women Percentage in relation to the total number of employees Percentage in managerial positions in relation to total managerial positions Percentage in managerial positions in relation to total executive positions Black and mulatto women(3)(4) Percentage in relation to the total number of employees Percentage in managerial positions in relation to total managerial positions Percentage in managerial positions in relation to total executive positions Black and mulatto men(3)(4) Percentage in relation to the total number of employees Percentage in managerial positions in relation to total managerial positions Percentage in managerial positions in relation to total executive positions Over 45 years of age Percentage in relation to the total number of employees Percentage in managerial positions in relation to total managerial positions Percentage in managerial positions in relation to total executive positions 4 0 0 2 t r o p e r l a u n n a a r u t a n 6 9 2002 2,641 2.2% 0 0 62% 55.2% 10% NA NA NA NA NA NA 9% 8.2% 40% 2003 2,696 3.9% 0 0 62.4% 56.4% 16.7% NA NA NA NA NA NA 9.2% 7.9% 25% 2004 3,177 3.6% 0 0 62% 53.75% 17.64% 12% 0.05% 0 11.33% 0.07% 0 11% 12% 23.53% Salary Profile (reais)(5) Women – total(6) Average monthly salary for production employees Average monthly salary for administrative employees Average monthly salary for managers Average monthly salary for executives Men – total(6) Average monthly salary for production employees Average monthly salary for administrative employees Average monthly salary for managers Average monthly salary for executives Black and mulatto women Average monthly salary for production employees Average monthly salary for administrative employees Average monthly salary for managers Average monthly salary for executives Non-black and non-mulatto women Average monthly salary for production employees Average monthly salary for administrative employees Average monthly salary for managers Average monthly salary for executives Black and mulatto men(7) Average monthly salary for production employees Average monthly salary for administrative employees Average monthly salary for managers Average monthly salary for executives Non-black and non-mulatto men(7) Average monthly salary for production employees Average monthly salary for administrative employees Average monthly salary for managers Average monthly salary for executives 2002 770.66 3,052.59 7,494.96 N/A 991.38 2,660.40 9,055.62 26,733.04 2003 860.64 3,608.05 8,872.45 NA 1,088.90 3,177.31 9,979.63 34,081.84 NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA NA 2004 824.00 4,330.00 9,901.00 23,272.00 1,084.00 4,068.00 11,059.00 33,084.07(4) 900.00 4,509.00 10,956.00 N/A 868.53 4,482.75 9,409.60 23,272.30 1,071.00 3,211.00 10,153.00 N/A 1,148.87 4,713.93 10,938.06 33,084.07 1. The racial origin of employees was established by self-classification.The classification determined by the Instituto Brasileiro de Geografia e Estatística (Brazilian Institute of Geography and Statistics), IBGE, because it is the only officially available in the country: “race: white, oriental, indigenous, back or mulatto”. The expression “non-black or non-mulatto” denotes the sum of the number of employees who checked the alternatives white, oriental or indigenous. The company recognizes that this type of classification does not meet the requirements of many social movements in the country. 2. The total number of physically impaired employees increased from 105 to 114. The target for 2005 is to achieve 5% of physically impaired employees in relation to the total number of employees. 3. The race reclassification was made in December 2004.The 2002 and 2003 records were not correct. 4. The percentage of employees that classified themselves as “black or mulattos” in relation to the total number is practically the same, regardless of gender. Within the managerial level, the proportion of blacks and mulattos is very low. Natura considers this to be an issue that will require specific action plans that have not yet been discussed. 5. For the purposes of calculating this indicator, the salaries paid to sales managers and promoters were considered. 6. In the production area, in which there are seven salary groups, the difference in the average salary between men and women is a result of the fact that 98.5% of the women are in the 1, 2 and 3 salary brackets (which are lower), whereas the proportion of men in these brackets is of 79.8%.The positions of electrician, handler, mechanic, machine preparer and lathe operator, for which salaries are higher, are mainly held by men, due to the characteristics of the job. In the managerial group, in which there are six salary groups, the difference in the average salary between men and women is a result of the fact that 71.2% of the women are in the lower salary brackets, whereas 51% of the men are in these brackets. In the administrative group, in which there are 15 salary brackets, we verified a difference in the average salary between black and mulatto men and the others.The group of non-black and non-mulatto men has 39.4% of employees in the five highest salary brackets in the group, whereas the other group has 30% of employees in the five highest salary brackets. 7. Target for 2005 Reach the proportion of 5% of physically impaired employees in relation to the total number of employees. International operations Not available. Natura intends to have these data available in 2005. 62. Description of policies, guidelines, corporate structure, and procedures to deal with all aspects of human rights relevant to operations, including monitoring mechanisms and results. Natura follows, in its management policies and practices, principles established by the Universal Declaration of Human Rights, such as the freedom and equality of all human beings, without distinction by race, color, sex, language, religion, ethnic or social background. Its many policies and practices – such as the Human Resources Policy – take into consideration the right to life, freedom, and personal safety and ban child labor and ensure the freedom to meet and associate. They also provide for equitable work and salary conditions, and social protection, such as food and medical assistance, which are special for motherhood and childhood. In its institutional documents, Natura states its commitments to its employees. Among these commitments, the following merit note: stimulate diversity among employees and respect each one’s individuality; improve relationships and the forms of work; invest in the education and training of employees; ensure total safety in working conditions; create conditions for individual potential to be fully used, based on the criteria of recognition and reward for each person’s contribution. All employees must know what is expected from them and how their work will be evaluated.They all have their performance evaluated based on the alignment of their professional behavior with the company’s principles. Natura is one of the first Brazilian companies to sign the Global Compact, which is an initiative of the United Nations, UN, which seeks to mobilize the international corporate community to promote basic values in the fields of human rights, 4 0 0 2 t r o p e r l a u n n a a r u t a n 7 9 labor, the environment and the fight against corruption. Natura publicly assumes a commitment to the principles proposed by this UN initiative. In 2004, Natura sought to internally publicize in its Sales channel the Millennium Development Goals.They were addressed in communication materials prepared for employees and Sales Representatives. 63. Evidence of consideration of human rights impacts as part of investment and procurement decisions, including selection of suppliers and contractors. Brazil Respecting the Consolidação das Leis do Trabalho (Consolidation of the Labor Laws) Natura includes in its standards and procedures consideration about the contracting of service providers and third parties. This requires that the employment relationship of the contracted company’s employees be perfectly and legally registered, in accordance with the Consolidação das Leis do Trabalho (Consolidation of the Labor Laws).This is also done for possible service providers. Contracts with suppliers The contracts with suppliers have specific clauses regarding the banning of child labor. International operations Natura does not have similar initiatives in the international operations. 64. Description of policies and procedures to evaluate and address human rights performance within the supply chain and with contractors, including monitoring systems and results of monitoring. Brazil Qualification of new suppliers Natura adopts a process of qualification of new suppliers, which are evaluated in accordance with a checklist specific for this purpose, which includes social responsibility issues. Certification of suppliers in quality assurance Natura adopts a process of certification of suppliers in quality assurance, by which audit exams are conducted with strategic suppliers. Among the issues analyzed is the question of child labor. Other issues will be added from 2005 onwards. Certification of raw materials from rural and extractivist suppliers Natura establishes with its suppliers of natural raw materials that the extraction of the raw materials must not compromise the environmental balance, that there must be no child labor, and that the traditions and lifestyle of the communities must be preserved, in addition to ensuring a fair and equitable partnership. This is monitored by way of a follow up of the process for the certification of raw materials, whose objective is to ensure that the extraction of these materials is conducted in an environmentally sustainable and socially fair way (See Chapter Environmental, Social and Institutional Initiatives and Partnerships, page 66, and indicator 24). International operations In 2005, Natura intends to develop in these operations initiatives similar to those taken in Brazil. 65. Employee training on policies and practices concerning all aspects of human rights relevant to operations. Brazil In 2004, Natura carried out some awareness raising activities for employees on themes related to human rights, as described below: Breastfeeding – Awareness regarding the importance of breastfeeding is part of the course given to pregnant women twice a year. Annually, around 40 pregnant women are trained, including employees, wives of employees, outsourced employees and wives of outsourced employees. Receipt of physically impaired people – Natura had already adopted the policy of hiring physically impaired people before it was required by law. The receipt of these people is planned for before they are hired. The evaluation of the activities to be performed by them and of the departments to which they will be assigned is made by an institution specialized in physically impaired people. The result of this evaluation is a mapping that guides the human resources department in the recruitment process once a vacancy is available.Then, the Selection, Ergonomics and Social Welfare departments participate in the selection process so as to evaluate whether the impairment hinders the performance of the activity.When the person is hired, the Social Welfare department works to raise awareness in the departments that will receive the physically-impaired person and to adjust him or her to the work environment (see indicator 60). To make communication with the hearing impaired employees easier, 70 hearing employees took the course in Libras (the Brazilian Sign Language) in 2004. International operations In 2005, Natura intends to develop in these operations initiatives that are similar to those taken in Brazil. Non-discrimination 66. Description of global policy and procedures or programs preventing all forms of discrimination in operations, including monitoring systems and results of monitoring. See indicator 60. 4 0 0 2 t r o p e r l a u n n a a r u t a n 8 9 Freedom of association and collective bargaining 67. Description of the freedom of association policy and the extent to which this policy is universally applied independent of local laws, as well as a description of procedures or programs to address this issue. Natura values all forms of expression of civic responsibility and democracy and, accordingly, recognizes the right of its employees to form unions. The relationship with unions is maintained by means of periodic meetings between the human resources department and union representatives. Currently, Natura has relations with four unions. The employees participate in the negotiation activities of the Employees’ Profit-sharing Program by way of two commissions. One of them is made up of managers, supervisors, administrative and operating technicians who discuss guidelines and targets with representatives of the company and unions that approve the Employees’ Profit-sharing Program.The other commission, made up of managers, approves the Individual Profit-sharing Program together with representatives of the company and the union.The two commissions are elected by the employees by way of a formal process that is witnessed by the union. Child Labor 68. Description of a policy that excludes child labor as defined by the ILO Convention 138 and the extent to which this policy is visibly stated and applied, as well as a description of the procedures or programs to address this issue, including monitoring systems and results of monitoring. Brazil The company respects the Estatuto da Criança e do Adolescente (Statute of Children and Adolescents), which forbids child labor, and has set these principles as a clause in its contracts with all suppliers. Additionally, Natura is a member and partner of Fundação Abrinq (Abrinq Foundation), a non-governmental organization that protects the rights of children, and has the Selo Empresa Amiga da Criança (Child-friendly Company Seal), which was granted by this foundation. For the qualification and certification of suppliers in quality assurance, an evaluation is conducted including, among other themes, the child labor issue. International operations The company observes the legislation of the countries where it operates. Forced and Compulsory Labor 69. Description of a policy to prevent forced and compulsory labor and the extent to which this policy is visibly stated and applied, as well as a description of the procedures or programs to address this issue, including monitoring systems and results of monitoring. Brazil All employees are registered in accordance with the Consolidação das Leis do Trabalho (Consolidation of the Labor Laws). The company is not aware of any complaints about forced labor regarding its suppliers. International operations The company observes the legislation of the countries where it operates. Discipline practices 70. Description of a non-retaliation policy and the effective, confidential employee grievance system (including, but not limited to, its impact on human rights). Brazil Natura makes available to its employees many communication channels with the company so that they can forward their suggestions, grievances or complaints so these can be properly addressed. Employees are encouraged to give their opinions, make suggestions and freely criticize the company.This can be done at the Meetings with the CEO’s office, at the Scheduled Meetings, or by way of other channels. One example is the Fale com a Natura (Talk to Natura), a communication channel between the employees and the company, which allows the free expression of questions, compliments, complaints, requests, criticisms and suggestions, which can be sent to an e-mail address. Each department of the company is responsible for replying on the theme that was questioned or proposed. Another important channel is the GSCI, Management of the Internal Customer Satisfaction Level, which was created to monitor the actions of the annual organizational climate survey.The employees that participate in this group are elected by their work colleagues.To the GCSI meeting, they bring suggestions, criticisms and proposals. Target for 2005 a) To develop a relationship code. b) To create a Natura Ombudsman Office. International operations Natura does not have similar initiatives in the other operations. Security practices 71. Human rights training for security personnel. Brazil All security department employees take a training course that lasts 120 hours and covers, among other things, issues like ethics, discipline and criminal law. Additionally, they periodically receive recycling training. International operations Not available. Indigenous rights 72. Description of policies, guidelines, and procedures to address the needs of indigenous people. Natura does not carry out activities with indigenous people but recognizes and respects the different cultures and the rights of the different sociocultural groups that are present in Brazilian territory. 4 0 0 2 t r o p e r l a u n n a a r u t a n 9 9 Society Community 73. Description of policies to manage impacts on communities in areas affected by the company’s activities, as well as a description of procedures or programs to address this issue, including monitoring systems and results of monitoring. Brazil Neighboring communities – Cajamar and Itapecerica da Serra, State of São Paulo Created in 2003, the Natural Cajamar Internal Working Group was structured on four work fronts: education and training, creation of jobs and generation of income, environment and relationship. In each one of these fronts, projects have been implemented aimed at improving Natura’s relationship with the community of Cajamar and supporting the development and implementation of projects. The Internal Working Group implemented seven projects during the year with the participation of 16 employees, around 9,000 people from the different districts of Cajamar, 10 government institutions, 5 non-governmental institutions and one service provider company. In 2004, the Tripartite Working Group (formed by Natura, the Administration Office of Cajamar and the NGO Mata Nativa) was formalized after a cooperation agreement was signed.The objective of this working group is to promote the mobilization of leaders from civil society and the governmental public sector for the planning and implementation of Agenda 21 in Cajamar. One forum for this purpose was held in December 2004 and was attended by hundreds of people from the city. Also, in 2004, an internal working group was created in Potuverá, a district in Itapecerica da Serra, to improve Natura’s relationship with the community. As in Cajamar, the group works on projects on four fronts: education and training, creation of jobs and generation of income, environment and relationship. The group implemented seven projects during the year with the participation of 60 employees, around 3,100 people from the community of Itapecerica da Serra, 17 government institutions, 11 non-governmental institutions and 8 service provider companies. In order to formalize the Natura-Community relationship in 2004, a toll-free 0800 line was made available for the residents of Potuverá and Cajamar.Therefore, a free channel for communication and recording the topics brought by the community was established. The Natura Environmental Management System also has a channel for registering and replying to communications with stakeholders, including the neighboring communities, on environmental issues. Supplier communities To monitor the conditions of compliance with the supply agreement established between these communities and the suppliers of Natura (which prepare the raw materials originating from these communities), there is the relationship program that involves frequent visits to these communities. In some cases, the program also promotes the development of local projects and their monitoring for the purpose of evaluating their social and environmental impacts. Anthropological reports continue to be prepared in accordance with the requirements of the Conselho do Patrimônio Genético (Genetic Legacy Management Council), CGEN. Social and environmental reports are being prepared together with the communities from Iratapuru, State of Amapá, and the neighboring communities of Belém, State of Pará. In the areas from which the natural raw materials are gathered, Natura complements the existing monitoring of the certification process of the Forest Stewardship Council, FSC, and Instituto Biodinâmico (Biodynamic Institute), IBD Target for 2005 a) To implement a multipartite forum that defines guidelines for the development plan of Cajamar, following the principles of sustainability. b) Set up a tripartite working group for the implementation of Agenda 21 in Potuverá, Itapecerica da Serra. c) Make an analysis of the district of Potuverá. d) Report on the social and environmental impact of Natura’s activities in the supplier communities that are considered most important. International operations These operations have local social projects that are not necessarily related to the district or region where the office is located. Chile – Natura Chile raises funds for social initiatives that arise from the sale of some products1. In 2004, R$ 22,200 was raised and invested in many initiatives of the Escuela Santiago de Guayaquil. Additionally, the company donates used paper for recycling to Fundación San José for the initiative “Bota por la Vida”. Peru – Natura Peru makes frequent donations of information technology equipment (this does not involve expenses). Argentina – Natura Argentina develops a voluntary project that promotes frequent visits to a local orphanage. In 2004, R$ 6,205 was spent in this project. 1. Tarjeta Navidad, Caja de Regalo, Bolsa Plástica, Kit Tarjeta Visita, Bolsa Regalo Grande, Bolsa Natura Blanca Grande, Bolsa Natura Blanca Mediana, Bolsa Natura Blanca Chica. 74. Awards received relevant to social, ethical, and environmental performance. Award The Most Highly Regarded Companies in Brazil Organization CartaCapital magazine and Interscience The Best Companies according to ISTO É Dinheiro magazine ISTO É Dinheiro magazine and Deloitte The Best Companies to Work For in Latin America Great Place to Work Institute Objective The survey recognizes organizations that distinguish themselves highly for their ethical behavior, social commitment, environmental responsibility and civic responsibility awareness. To show to the market the best companies in management in Brazil based on financial sustainability, human resources, innovation, environment and social responsibility indicators. To identify the companies that were a benchmark in the editions of the Best Companies to Work for in the Latin American countries where the Great Place to Work Institute conducts this survey. Awarded category Most admired company in the sector; One of the 10 most admired companies in Brazil Hygiene, Health and Cosmetics 2002 2003 2004 1st 1st 2nd 3rd 2nd 1st 1st One of the 100 Best Companies to Work For in Latin America 4 0 0 2 t r o p e r l a u n n a a r u t a n 0 0 1 Organization Objective Hay Group and Valor Econômico newspaper Rádio Bandeirantes and Omni Marketing To identify the companies that have the best organizational climate management practices. To elect the 11 most recognized brands in the opinion of the audience in the “respect for consumers” category. Award The 3 Best Organizational Climate Practices Election of the Brand that Respects Consumer the Most Companies that People Most Wish to Work For Financial Times CEO’s World Research Forbes Brasil magazine Financial Times and Pricewaterhouse- Coopers Exame Guide of Good Corporate Civic Responsibility Exame Magazine and Ethos Institute Exame Você S.A. Guide The Best Companies to Work For Exame magazine and Great Place to Work Institute The Best 25 Companies to Work For in Peru Trusted Brands in Brazil Great Place to Work Institute Peru and El Comercio Seleções Reader's Digest magazine Best and Largest by Exame magazine Exame magazine Aberje Award Aberje Best Annual Report Abrasca Award Abrasca Social Report Award Abamec, Aberje, Ethos, Fides, Ibase Companies of the Year DCI Award Eco Award Ecodesign Award DCI Newspaper The American Chamber of Commerce of São Paulo Fiesp/Ciesp, IPT Environmental Merit Fiesp Award Fiesp/Ciesp Environmental Preservation Ford Motor Company Award. PNBE Civic Responsibility Award Ford e Conservation International do Brasil PNBE Quality of Life Award ABVQ – Brazilian Association of Quality of Life State Week for the Fight Against Cancer Award Social Value Award Viagem Award Health Department of the State of São Paulo Valor Econômico newspaper, Ethos Institute of Social Responsibility and Akatu Institute Viagem e Turismo magazine A survey conducted by the British newspaper, the Financial Times, with 1000 CEO’s from around the world in 2002, showed Natura, as one of the main companies among those that are internationally recognized, for its respect to the environment. The main objective of this publication is to publicize the best corporate social responsibility practices based on criteria such as coverage, innovation, sustainability, establishment of partnerships and results of projects. The guide promotes a thorough evaluation of the work environment and human resources management practices and policies of the companies.The evaluation is based on a survey conducted with the employees of each company and on the quality of the human resources policies. To identify the best 25 companies to work for in Peru by way of the organizational climate survey. The survey detects the long-lasting bond established between readers and their favorite brands based on trust in the product. To show the most complete and comprehensive analysis of corporate Brazil by way of data obtained by companies – growth, profitability, financial health, investments in property, plant and equipment, market share and productivity per employee. To identify the magazines, newspapers, films and corporate communication projects that best met the corporate strategic demands in the year. To encourage improvement in the preparation of clearer and more transparent reports with quality and a large volume of information and innovative character, regarding both the information reported and the graphic design. An award that aims to stimulate the preparation and publication of social reports by companies, recognizing the quality of the publications. It also aims to convey the importance of the social report as an instrument of transparency of the company’s initiatives, of dialogue with society and as a corporate management tool, in addition to creating benchmarks for practices of excellence in social responsibility management. To recognize the companies most highly-regarded by executives and businessmen. To recognize and promote throughout Brazil social initiative projects developed by private companies in the fields of culture, education, environment, health and participation in communities. To encourage the development of products with recycled material and which consume less energy. To annually identify and honor the industrial, extractivist, manufacturing or agroindustrial company that has distinguished itself in the implementation of an environmental project with a significant result for the improvement in the quality of the environment. To annually identify the most significant projects carried out in Brazil for the preservation of nature. To publicly recognize the initiatives of businessmen, entities and individuals who contributed to improve the quality of life of other Brazilian individuals. To stimulate the development and the implementation of quality of life programs in institutions, awarding organizations that carry out specific and innovative initiatives in this work sphere and that are successfully improving the quality of life of their employees. To recognize the institutions that had the best projects against cigarette smoking. To publicize and disseminate the corporate social responsibility practices by way of public recognition of programs developed by companies that may be taken as reference and inspire the multiplication of initiatives for these purposes. To identify the best among many items related to tourism. Awarded category 2002 2003 2004 2nd 9th 35th 2nd 1st 7th 1st 9th 1st 4th 4th 1st 1st 1st 1st 1st 1st 1st 1st Overall ranking; Sector-specific ranking Most respected Brazilian companies; One of the companies that best uses environmental resources in the world Model company in social responsibility One of the 150 Best Companies to Work For; The best company for women to work for One of the Best 25 Companies to Work For The trustworthiest company in the cosmetic sector Hygiene, Health and Cosmetics. Management Report; Mural Newspaper (State of São Paulo and Brazil) Closely-held Company. Overall National; São Paulo State Regional Most highly regarded company; Hygiene, Health and Cosmetics Environment: Projeto Biodiversidade Brasil (Biodiversity Brazil Project) “Natura Bags Case Study” packaging design Winner in the 10th awarding event with the “Espaço Natura Cajamar” case study The Initiative of the Year in Environmental Preservation: Biodiversity Brazil Project “The businessman we want” (Guilherme Peirão Leal) Learning New Eating Habits Program Program for the prevention and fight against cigarette smoking Respect to the environment with the “Natura Bags” case study – popular jury Ecological Merit:Work with Brazilian biodiversity Note: The numbers refer to the company’s position in the award/recognition ranking, when applicable. 4 0 0 2 t r o p e r l a u n n a a r u t a n 1 0 1 Bribery and Corruption 75. Description of the policy, procedures and management systems, and compliance mechanisms for organizations and employees addressing bribery and corruption. Natura states its commitment to ethics and transparency in all of its public documents. However, it does not have a specific document that addresses this topic. Target for 2005 To elaborate a specific policy about these topics. Political Contributions 76. Description of the policy, procedures and management systems, and compliance mechanisms for managing political lobbying and contributions. Natura has not prepared a specific policy for this topic. Target for 2005 To elaborate a specific policy about this topic. Competition and Pricing 77. Court decisions regarding cases pertaining to anti-trust and monopoly regulations. No equity transaction was carried out that represented an anti-trust act. 78. Description of policy, procedures and management systems, and compliance mechanisms for preventing anti-competitive behavior. Natura does not have a formal policy that addresses this issue. Brazil The company is a signatory to the code of conduct before consumers and of the code of conduct before direct sellers and between companies of the Brazilian Association of Direct Selling Companies, ABEVD.The codes of conduct of the ABEVD are in accordance with the model proposed by the World Federation of Direct Selling Association, WFDSA. International operations Natura is a signatory to the codes of ethics of the Direct Selling Houses of Argentina and Chile. Responsibility for the Product Customer Health and Safety 79. Description of policies for preserving customer health and safety during use of products and services, and the extent to which these policies are visibly stated and applied, as well as a description of procedures or programs to address this issue, including monitoring systems and results of monitoring. Natura has structured a Product Safety Committee whose mission is to keep the Policy on Natura Product safety updated and issue compulsory opinions.The policy establishes the criteria and the preclinical and clinical evaluations for all products under development before they are launched on the market. The committee issues opinions on the development of all products regarding their safety for use by human beings. Only after this analysis does the area responsible for the registration of the product with the Brazilian Agency for Sanitary Inspection, Anvisa, request the proper authorizations. Natura adopts as its main product safety strategy the toxicological evaluation of all raw materials contained in their formulas, in accordance with international standards. Natura has a biochemistry and skin renewal laboratory with state-of-the-art equipment for in vitro tests, on cell culture. All these tests follow the recommendations of foreign agencies, such as the Food and Drug Administration and the Seventh Directive of the European Union. Natura also has a Consumer Center where efficiency tests on many existing products are performed, in addition to performance evaluations of new products. Finally, the company keeps samples of each batch of products placed on the market, until the product expires. It also puts into effect the concepts of cosmetovigilance, that is, a systematic evaluation of any adverse reactions to the many products sold by the company. Customers who have some kind of reaction during the use of a product are attended to by a highly trained team or dermatologists for the establishment of a clear causal relation.With this information, guidelines are given to the respective areas of the company in order to improve the product in question or feed an information system that helps both improve the commercial presentation and develop future products. Animal testing Tests on animals for cosmetic products Although this indicator is not explicitly required, Natura believes it is important to reaffirm its position against the performance of laboratory animal testing. It only performs those that are required by law. For over six years, the company has been seeking alternatives to tests of this nature, which it fully abolished in 2003 for finished cosmetic products. However, Natura still performs some tests on animals in the case of a new raw material, provided that there are no alternative methods that can eliminate the risks to the health of users. The company follows the most rigorous international technical and scientific criteria based on the principle internationally known as 3Rs: reduction, refinement and replacement.This principle guides the largest cosmetic industries in the world with the objective of analyzing and developing alternative methods to animal testing. Natura, in line with European legislation, has a commitment to fully abolish experiments on animals for cosmetic products. Additionally, the company invests in alternative tests as part of the development of new raw materials. it implemented an in vitro laboratory to evaluate raw materials and products in human cells or in artificially cultivated animal In 2000, 4 0 0 2 t r o p e r l a u n n a a r u t a n 2 0 1 cells.These continuous efforts allow for the gradual reduction of the use of animals in these evaluations, aiming at its abolition in accordance with the Seventh European Directive for Cosmetics. Phytotherapeutic product testing As required by the proper authorities (Anvisa), Natura needs to perform tests on animals to verify the safety and efficiency of phytotherapeutic products. Number of tests on animals For cosmetic products For phytotherapeutic products 2002 1,263 118 2003 308 249 2004 66 200 Note: Natura performs tests on animals to evaluate possible toxicological effects of our raw materials from Brazilian biodiversity and for which there is not a scientific description of such effects. Although the Brazilian authorities (Anvisa) do not require the performance of tests on animals for new raw materials, the Guia de Segurança para Cosméticos (Security Guide for Cosmetics) of Anvisa recommends the characterization of the effects of raw materials before the evaluation of their action on human beings. For such characterization, Natura follows the Declaration of Helsinki of the European Community, in accordance with which the biomedical research involving human beings must follow generally accepted scientific principles and be based on laboratory experiments, in vitro and on animals, that are properly performed based on a thorough knowledge of scientific literature. Target for 2005 To keep the number of animals used in tests of raw materials for cosmetic products below 170, which represents a reduction of 32% in relation to the target for 2004.This means an increase of 158% in the number of tests performed in 2004. This increase is due to the fact that some tests scheduled for 2004 were not performed and will be performed in 2005. 80. Number and type of instances of non-compliance with regulations concerning customer health and safety, including penalties and fines assessed for these breaches. There is no record of penalties or fines.The company is in compliance with the required regulations. 81. Number of complaints upheld by regulatory or similar official bodies to oversee or regulate the health and safety of products and services. Brazil Complaints 2002 0 2003 4 2004 1 Note: There are no legal proceedings for the complaints made in 2003 or 2004, nor was any irregularity verified in the company’s products. International operations There is no record of any such complaints. 82. Voluntary code compliance, product labels or awards with respect to social and/or environmental responsibility that the organization is qualified to use or has received. Natura: a) Reaffirmed its commitment to the principles of the Global Pact (see more details on the Global Pact Website: www.pactoglobal.org.br). b) Is a signatory to the code of conduct before customers and of the code of conduct before direct sellers and between companies of the Brazilian Association of Direct Selling Companies, ABEVD.The codes of conduct of the ABEVD are in accordance with the model proposed by the World Federation of Direct Selling Association, WFDSA. c) Fully observes the Statute of Children and Adolescents, a Brazilian law that provides for the protection of these individuals. d) Adopts the Letter of Principles of Instituto Ethos Institute of Companies and Social Responsibility, a Brazilian NGO that aims to guide companies in socially responsible management (find out more on the Website of the Ethos Institute: www.ethos.org.br). it became an Organisational Stakeholder of the Global Reporting Initiative, GRI, and is the only Brazilian company to be part of this group. When it became an Organizational Stakeholder, Natura started to have a series of benefits and commitments to the institution that allow for a closer and more active relationship (see more details on the GRI site: www.globalreporting.org). e) In 2004, f) Is recognized as an ethical and socially and environmentally responsible company by representatives from civil society and government, both in Brazil and abroad. This recognition is expressed in the form of awards, as can be seen in the table in indicator 74 of this report. g) The following awards received by Natura grant quality seals that may be used: Exame Guide of Good Civic Responsibility, Social Report Award, Environmental Merit Fiesp Award and Ecodesign Award (see details on all these awards in indicator 74 of this report). h) Is recognized in Brazil with the following titles: Child-friendly Company, granted by the Abrinq Foundation for the Rights of Children; Civically Responsible Company, granted by the Assembly of the City of São Paulo; Company that Educates, granted by SENAC (Brazilian Service for Commercial Learning) of the State of São Paulo. i) In 2004, it received the NBR ISO 14001 certification. Products and Services 83. Description of policies, procedures and management systems, and compliance mechanisms related to product information and labeling. Brazil In Brazil, the texts on the labels of the Natura cosmetic products are in accordance with Resolution Nº 79 of August 28, 2000 and Resolution Nº 335 of July 22, 1999 of the Brazilian Agency for Sanitary Inspection, Anvisa, and follow the guidelines 4 0 0 2 t r o p e r l a u n n a a r u t a n 3 0 1 of the Consumer’s Protection and Defense Code.The rules of the Brazilian Institute of Weights and Measures, Inmetro, are also observed. Natura uses its labels and brochures as a means of conveying knowledge, within which consumers find, in addition to the detailed information about the products and their benefits, reflections on themes related to the concepts that inspired these products. International operations There is no record of any violations. Respect for Privacy International operations The labels observe the rules of each country. 84. Number and type of instances of non-compliance with regulations concerning product information and labeling, including any penalties or fines imposed for these breaches. There is no record of penalties or fines.The company is in compliance with the required regulations. 85. Description of policies, procedures and management systems, and compliance mechanisms related to customer satisfaction, including the results of surveys measuring customer satisfaction. Brazil In order to relate directly with Sales Representatives and customers, Natura relies on the Natura Customer Service, Snac, and the Natura Service Center, CAN. Snac was created in 1990 and acts effectively in assessing customer satisfaction by means of a team who is prepared to provide information and make recommendations on products, as well as receive suggestions and criticism, addressing all of them and following-up the processes until their final solution. The results of this service are recorded in reports, statistics and analyses. Natura Customer Service Total calls answered by Snac (in thousands) Percentage of complaints in relation to total calls answered by Snac Percentage of unanswered complaints(1) Total complaints involving the Consumer’s Defense Code: Administrative proceedings (Consumer Protection Agency – Procon) Legal proceedings (civil and criminal)(2) Total formal complaints involving consumers’ health and security 2002 1,142 26% 3.2% 94 24 2 2003 1,804 31% 7% 68 45 4 2004 1,905 32% 2.3% 23 72 0 1. Number of complaint calls aborted due to the waiting line in relation to the total number of complaint calls. 2. The figures in the 2003 Annual Report were incorrect due to a failure in the department’s internal control, however, they are correct in this edition. Customer Satisfaction Very satisfied / Satisfied 2002 95% 2003 96% 2004 NA(1) 1. The result of the customer satisfaction survey was not available when this report went to print.The figure related to 2004 will only be shown in the online version (www.natura.net). International operations Not available. Advertising 86. Description of policies, procedures and management systems, and compliance mechanisms for adherence to standards and voluntary codes related to advertising. Brazil Although Natura does not have a specific policy for this purpose, it bases its actions on the Conselho Nacional de Auto- regulamentação Publicitária (Brazilian Council of Advertising Self-Regulation) and follows the code of conduct of the Associação Brasileira dos Anunciantes e de Defesa do Consumidor (Brazilian Association of Advertisers and Consumer’s Defense), which, among other objectives, seeks to preserve social responsibility in advertising so that the rights of consumers are not affected by misleading messages or messages that represent aggression to the cultural and moral standards of society. The advertising agencies with which Natura works base their work on ethics and corporate responsibility.Their practices are in line with the entities that regulate the market: the Conselho Executivo das Normas-padrão da Atividade Publicitária (Executive Council of the Standard Rules of the Advertising Activity), the Associação Brasileira das Agências de Publicidade (Brazilian Association of Advertising Agencies) and the Conselho Nacional de Auto-regulamentação Publicitária. It also works on the development of campaigns for NGOs and seeks ethics in the language and content of its campaigns, respecting consumer rights. International operations Not available. 87. Number and types of breaches of advertising and marketing regulations. Brazil Penalties or fines 2002 0 2003 0 2004 1 Note: The company is in compliance with the existing regulation and for this reason it filed for an administrative remedy against a fine that was unduly applied in 2004. A decision on the argued remedy has not yet been issued. 4 0 0 2 t r o p e r l a u n n a a r u t a n 4 0 1 88. Description of policies, procedures and management systems, and compliance mechanisms for consumer privacy. The company is a signatory to the code of conduct before consumers of the Associação Brasileira de Empresas de Vendas Direta (Brazilian Association of Direct Selling Companies), ABEVD, prepared in accordance with the model proposed by the World Federation of Direct Selling Associations, which addresses respect for privacy. Natura also has a privacy policy for the Internet, which is published on its Website. The site www.natura.net ensures the privacy and confidentiality of the information related to the people who register there. In Brazil, the Natura Customer Service System, Snac, has an information confidentiality policy, which is in the contract signed between Natura and the outsourced companies that provide the customer service. 89. Number of substantiated complaints regarding breaches of consumer privacy. Brazil Complaints International operations There are no records of complaints. Targets assumed in the Natura 2003 Annual Report Indicator Target assumed in 2003 51 54 57 58 73 79 85 To stay in the benchmark group of Hay Group, a people-management consulting firm that is present in 35 countries and serves the 500 largest Brazilian companies. Hay Group is responsible for Natura’s Annual Organizational Climate Survey. a) Invest 10% more than in 2003, per employee, in the prevention of diseases. b) Increase by a factor of 4.7 times the amount of investments per employee in the prevention of accidents. c) Stabilize the number of cases of work-related diseases in Cajamar and Itapecerica da Serra. To invest 40 hours in training, on average, per employee per year To start the implementation of a program for employees to prepare for their retirement. To create a direct channel of dialogue with neighboring communities. To reduce by 25% the number of tests on animals with raw materials for cosmetic products a) To reduce to 30% the percentage of complaints in relation to total calls answered by the Snac. b) To reduce by 3% the percentage of unanswered complaints. 2002 0 2003 0 2004 0 Results ☺ Target achieved. Natura stayed in the benchmark group of Hay Group. (cid:2) Target partially achieved. a) The investments in the prevention of diseases, per employee, showed a significant increase of 43%. b) The investments in the prevention of accidents per employee increased by a factor of 3.5 times. Although the it was lower than that increase was significant, proposed last year. c) There were no new cases of work-related disease in Itapecerica da Serra. In Cajamar, there were 2, a number that is lower than in 2003 (three cases). ☺ Target achieved. In 2004, the average training time was 70 hours, including for sales promoters. ☺ Target achieved. In 2004, the Constructing the Future Program was implemented with the aim to prepare and guide employees in their life projects after retirement (see details in indicator 58 of this report). ☺ Target achieved. A channel of dialogue with the neighboring communities of Cajamar and Potuverá (a district of the municipality of Itapecerica da Serra) was implemented by making available a toll-free 0800 line for registering the complaints, opinions and suggestions of the communities. ☺ Target achieved.There was a reduction of 78.5% in the number of tests on animals with raw materials for cosmetic products. (cid:2) Target partially achieved. a) The percentage of complaints in relation to total calls answered by the Snac was 32%. b) The percentage of unanswered complaints was reduced to 2.3%. 4 0 0 2 t r o p e r l a u n n a a r u t a n 5 0 1 As it is fully adopting the guidelines of the Global Reporting Initiative, GRI, Natura is including the index in the 2004 Annual Report, in accordance with the recommendations of that organization. The objective of the index, in addition to making it easier to reference the information and indicators, is to evaluate the level of adherence of the company to the GRI guidelines. Further information on the GRI model can be obtained from the www.globalreporting.org website. Vision and Strategy Economic Performance Indicators Social Performance Indicators Core Additional Theme Core indicator page indicator page index global reporting initiative item 1.1 1.2 item 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12 2.13 2.14 2.15 2.16 2.17 2.18 2.19 2.20 2.21 2.22 page 10 2 Profile page 14 14 14, 28 N/A 14 14, 28 14 21-25 50-58 75 20 20 14 28 N/A N/A N/A 20, 78, 81, 91 20, 25 20, 77 N/A 77 Theme Clients Suppliers indicator EC1(1) page 78 EC2(2) EC3(3) EC4(4) Employees EC5(5) Investors Public Sector EC6(6) EC7(7) EC8(8) EC9(9) EC10(10) * 78 78 78 78 79 79 79 79 EC11 ** EC12(11) 79 EC13(12) 79 Environmental Performance Indicators Core Additional indicator page indicator page Indirect Economic Impacts Theme Materials Energy EN1(13) EN2(14) EN3(15) EN4(16) Labor Practices and Decent Work Labor and Management Relations Health and Safety Training and Education Diversity and Oportunity Strategy and Management Systems LA1(46) LA2(47) LA3(49) LA4(50) LA5(52) LA6(53) LA7(54) LA8(55) LA9(57) LA10(60) LA11(61) HR1(62) HR2(63) HR3(64) Non-Discrimination HR4(66) Freedom of Association and Collective Bargaining HR5(67) Child Labor Forced and Compulsory Labor HR6(68) HR7(69) 91 91 92 92 93 93 94 94 94 95 96 97 98 98 98 99 99 99 Additional indicator LA12(48) page 92 LA13(51) 93 LA14 LA15(56) LA16(58) LA17(59) ** 94 95 95 HR8(65) 98 HR9 HR10(70) HR11(71) HR12(72) HR13 HR14 ** 99 99 99 ** ** SO6(77) SO7(78) PR4(80) PR5(81) PR6(82) PR7(84) PR8(85) PR9(86) PR10(87) 102 102 103 103 103 104 104 104 104 105 Governance Structure and Management Systems item page Water EN5(19) 3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 3.13 3.14 3.15 3.16 3.17 3.18 3.19 3.20 28 28 28 50 28 14, 28 11, 59 29 50-58 50-58 50-58 50-58 56 59 74 23, 52, 54 66-75 N/A 50, 66-105 50 Biodiversity EN6(23) EN7(24) EN8(32) EN9(33) EN10(34) EN11(35) EN12(36) EN13(37) Emissions, Effluents and Waste Suppliers Products and Services EN14(41) EN15(42) Compliance EN16(43) Transport Overall EN17(17) EN18 EN19(18) EN20(20) EN21(21) EN22(22) EN23(25) EN24(26) EN25(27) EN26(28) EN27(29) EN28(30) EN29(31) EN30(38) EN31 EN32(39) 82 ** 82 82 82 83 84 84 84 85 85 85 85 87 ** 87 Disciplinary Pratices Security Pratices Indigenous People Rights Community Corruption and Bribery Political Contributions Competition and Pricing 81 81 81 81 82 83 83 86 86 86 86 86 87 88 88 89 SO1(73) SO2(75) 100 102 SO4(74) 100 SO3(76) 102 SO5 ** EN33(40) 87 Customer Health and Safety PR1(79) 102 PR2(83) 103 Products and Services Advertising EN34(44) EN35(45) 89 89 Respect for Privacy for Privacy PR3(88) 105 PR11(89) Note: In the table above, the columns that refer to the core and additional indicators follow the names determined by the GRI, but they also present – in the same column, on the side and between brackets – the numbering used in this report. GRI names – EC, economic indicators; EN, environmental indicators; LA, labor indicators; HR, human resources indicators; SO, social indicators; PR, products and services indicators. * Core indicators not included in this Report: EC2: Natura considers this information to be solely used by its internal management. ** Additional indicators not included in this Report: EC11, EN18, EN31, LA14, HR9, HR13, HR14 and SO5 4 0 0 2 t r o p e r l a u n n a a r u t a n 7 0 1 financial statements natura cosméticos s.a. Balances sheets as of december 31, 2004 and 2003 (in thousands of Brazilian reais – R$) ASSETS CURRENT ASSETS Cash and banks Temporary cash investments Trade accounts receivable Inventories Recoverable taxes Advances to employees Related parties Deferred income and social contribution taxes Other receivables Total current assets LONG-TEM ASSETS Related parties Advance for future capital increase Receivables from shareholder Tax incentives Deferred income and social contribution taxes Recoverable taxes Escrow deposits Other receivables Total long-term assets PERMANENT ASSETS Investments Property, plant and equipment Total permanent assets TOTAL ASSETS Company 2004 2003 Consolidated 2004 2003 26,656 158,631 236,453 1,634 3,009 4,084 833 12,198 358 443,856 - 770 172 1,122 12,624 876 20,370 - 35,934 30,801 26,482 172,123 354 715 3,558 25,837 11,035 2,180 273,085 3,382 9,503 - 635 7,978 - 7,548 - 29,046 29,592 202,020 250,066 121,961 18,158 6,949 - 21,630 6,063 656,439 - - 172 1,162 21,301 3,848 24,256 1,716 52,455 34,072 102,039 180,118 79,254 8,525 4,938 1,275 22,096 5,214 437,531 3,382 - - 641 9,447 - 14,595 1,715 29,780 373,748 13,231 386,979 866,769 332,698 10,744 343,442 645,573 8,707 298,822 307,529 1,016,423 2,809 253,739 256,548 723,859 LIABILITIES AND SHAREHOLDERS’ EQUITY Company 2004 2003 Consolidated 2004 2003 CURRENT LIABILITIES Loans and financing Domestic suppliers Foreign suppliers Suppliers - Related parties Salaries, profit sharing and related charges Taxes payable Debentures Related parties Dividends Interest on capital Other payables Reserve for losses on swap contracts Total current liabilities LONG-TERM LIABILITIES Loans and financing Debentures Reserve for contingencies Provision for losses on subsidiaries Other payables Total long-term liabilities MINORITY INTEREST SHAREHOLDERS' EQUITY Capital Capital reserves Profit reserves Total shareholders' equity TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 11,879 6,755 - 102,151 28,272 52,776 - 94 113,644 13,623 35,356 4,544 369,094 19,549 - 39,769 64 841 60,223 - 230,762 112,016 94,674 437,452 866,769 72,240 4,578 - 18,948 21,765 51,850 102,170 939 20,000 8,541 20,054 9,012 330,097 31,052 130,656 24,870 6,282 - 192,860 - 56,387 9,998 56,231 122,616 645,573 62,407 76,971 4,172 - 65,265 62,382 - - 113,644 13,623 42,331 6,138 446,933 71,982 - 59,559 - 1,885 133,426 7 230,762 112,016 93,279 436,057 1,016,423 75,102 55,384 2,139 5,304 41,563 64,297 102,170 964 20,000 8,541 24,243 9,012 408,719 32,986 130,656 28,381 - 1,809 193,832 (30) 56,387 9,998 54,953 121,338 723,859 4 0 0 2 t r o p e r l a u n n a a r u t a n 9 0 1 Statements of Income for the years ended december 31, 2004 and 2003 (in thousands of Brazilian reais – R$, except for earnings per share) Company Gross sales to domestic market Gross sales to foreign market Other sales GROSS OPERATING REVENUES Taxes on sales, returns and rebates NET OPERATING REVENUES Cost of sales GROSS PROFIT OPERATING (EXPENSES) INCOME Selling General and administrative Management and employee profit sharing Management compensation Equity in subsidiaries INCOME FROM OPERATIONS BEFORE FINANCIAL EFFECTS Financial expenses Financial income INCOME FROM OPERATIONS Nonoperating income (expenses), net INCOME BEFORE DEBENTURES PARTICIPATION AND TAXES Debentures participation INCOME BEFORE TAXES ON INCOME Income and social contribution taxes NET INCOME BEFORE MINORITY INTEREST Minority interest NET INCOME EARNINGS PER SHARE - R$ Statements of changes in shareholders’ equity for the years ended december 31, 2004 and 2003 (in thousands of Brazilian reais – R$) 2004 2003 2,457,891 1,840,014 - 72 1,840,086 (439,013) 1,401,073 (634,815) 766,258 - 5 2,457,896 (576,564) 1,881,332 (776,170) 1,105,162 (458,913) (248,006) (13,418) (6,977) 2,788 380,636 (18,301) 21,125 383,460 1,098 384,558 (7,178) 377,380 (76,969) 300,411 - 300,411 3,516 (374,060) (147,360) (10,810) (4,595) 18,571 248,004 (61,478) 25,834 212,360 669 213,029 (127,709) 85,320 (20,158) 65,162 - 65,162 1,812,321 Consolidated 2004 2003 2,472,046 1,860,287 47,876 1,957 1,910,120 (581,210) 1,328,910 (458,405) 870,505 66,782 829 2,539,657 (769,993) 1,769,664 (575,260) 1,194,404 (535,909) (216,900) (34,990) (8,422) - 398,183 (38,156) 35,414 395,441 (868) 394,573 (7,178) 387,395 (87,102) 300,293 1 300,294 (403,018) (180,545) (20,466) (5,934) - 260,542 (64,439) 34,339 230,442 1,455 231,897 (127,709) 104,188 (40,364) 63,824 60 63,884 COMPANY BALANCES AS OF DECEMBER 31, 2002 Supplementary dividends for 2002 Dividends paid Net income Allocation of net income: Legal reserve Reserve for profit retention Interest on capital Dividends BALANCES AS OF DECEMBER 31, 2003 Capital increases through:: Capitalization of debentures Merger of Natura Empreendimentos S.A. Capitalization of BNDES loan (Debentures) Purchase of shares Sale of treasury shares through exercise of stock options Receivables from shareholder Profit on sale of shares Recognition of net liabilities on merger of Natura Empreendimentos S.A. ecognition of net liabilities on merger of Natura Participações S.A. Absorption of reserve Net income Allocation of net income: Legal reserve Reserve for profit retention Dividends Interest on capital BALANCES AS OF DECEMBER 31, 2004 4 0 0 2 t r o p e r l a u n n a a r u t a n 0 1 1 Capital reserves Profit reserves Capital 56,387 Treasury shares - Share premium - Investment grants 9,998 Legal 7,429 Retention 17,357 Retained earnings - TOTAL 91,171 - - - - - - 56,387 138,569 1,415 34,391 - - - - - - - - - - - - - - - - - - (1,415) 309 (3,029) 480 - - - - - - - - - - - 100,000 - - - 5,177 - 496 - - - - - - - - (3,668) - - 65,162 (3,668) 65,162 - - - - 3,258 - - - 9,998 10,687 - 31,855 - - 45,544 (3,258) (31,855) (10,049) (20,000) - - - (10,049) (20,000) 122,616 238,569 1,415 34,391 (1,415) 5,486 (3,029) 976 (23,367) - - - - - - - - - - - - - - - (23,367) - - - - - - - - - (7,058) - (29,235) 7,058 - 6,986 (22,249) - 300,411 - 300,411 - - - - - - - - - - - - - - - 230,762 - - - - (3,655) - - - - 105,673 - 15,021 - - - - - - 18,650 9,998 - 76,024 - - 76,024 - (15,021) (76,024) - (186,910) (186,910) (29,442) (29,442) 437,452 - Statements of changes in financial position for the years ended december 31, 2004 and 2003 (in thousands of Brazilian reais – R$) SOURCES OF FUNDS From operations: Net income Items not affecting working capital: Depreciation and amortization Monetary and exchange variations on long-term items, net Increase in provision for contingencies Increase in other provisions Deferred income and social contribution taxes Equity in subsidiaries Disposal of permanent assets Minority interest From shareholders: Capitalization of debentures Capital increase through subscription of shares Sale of treasury shares Dividends received From third parties: Transfer from long-term to current assets Increase in long-term liabilities Minority interest Total sources USES OF FUNDS Additions to property, plant and equipment Increase in investments Increase in long-term assets Decrease in long-term liabilities Transfer from long-term to current liabilities Dividends proposed and paid Interest on capital Total uses Merger of Natura Empreendimentos S.A. and Natura Participações S.A. net assets INCREASE (DECREASE) IN WORKING CAPITAL REPRESENTED BY: Increase in current assets Increase in current liabilities INCREASE (DECREASE) IN WORKING CAPITAL Company 2004 2003 Consolidated 2004 2003 300,411 65,162 300,294 63,884 3,809 (6,772) 17,796 1,168 (4,233) (2,788) 1,333 - 310,724 107,913 34,391 630 - - - - 453,658 7,629 34,975 9,070 18,656 11,809 186,910 29,442 298,491 23,393 131,774 170,771 38,997 131,774 3,887 (6,544) 14,050 919 (1,138) (18,571) 669 - 58,434 - - - 25,722 - 17,054 - 101,210 5,414 12,966 17,913 - 73,750 23,668 10,049 143,760 - (42,550) 37,169 79,719 (42,550) 34,340 (1,307) 33,052 1,420 (9,196) - 1,828 (1) 360,430 107,913 34,391 630 - 20,122 - 37 523,523 76,886 6,179 15,289 - 24,740 186,910 29,442 339,446 3,383 180,694 218,908 38,214 180,694 33,673 (10,136) 16,551 906 5,017 - 1,596 (60) 111,431 - - - - 1,222 17,025 (28) 129,650 23,891 - 5,910 - 75,686 23,668 10,049 139,204 - (9,554) 91,895 101,449 (9,554) 4 0 0 2 t r o p e r l a u n n a a r u t a n 1 1 1 Notes to the Financial Statements for the years ended december 31, 2004 and 2003 (amounts in thousands of Brazilian reais – R$, unless otherwise indicated) 1. OPERATIONS Natura Cosméticos and its subsidiaries (the “Company”) are engaged in the development, production, distribution and sale, substantially through direct sales by Natura beauty consultants, of cosmetics, fragrances, hygiene and health products. The Company also holds equity interests in other companies in Brazil and abroad. The Extraordinary Shareholders’ Meeting held on March 5, 2004 approved the merger of the net assets of Natura Empreendimentos S.A. and Natura Participações S.A. into the Company. The merger was recorded based on an accounting valuation supported by a valuation report issued by independent experts. Natura Participações S.A. owned 100% of the capital stock of Natura Empreendimentos S.A., which in turn, owned 100% of the capital stock of the Company.These mergers did not modify the activities described in the paragraph above. The shareholders’ equity of Natura Empreendimentos S.A. and Natura Participações S.A. as of January 31, 2004, the accounting date of the mergers, were R$104,951 and R$75,716, respectively. After eliminations of intercompany receivables and payables and the investment balances, as required by Brazilian accounting practices, the Company recorded net liabilities of Natura Empreendimentos S.A. and Natura Participações S.A. amounting to R$23,367 and R$29,235, respectively. The amounts of the net assets are as follows: NATURA EMPREENDIMENTOS S.A. ASSETS Current assets Cash and banks Recoverable taxes Other receivables Total current assets Long-term assets Related parties Total long-term assets Permanent assets Investments Total permanent assets Total assets LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Loans and financing Taxes payable Dividends Other payables Total current liabilities Long-term liabilities Loans and financing Other payables Total long-term liabilities Shareholders’ equity Capital social Capital reserves Profit reserves Total shareholders’ equity Total liabilities and shareholders’ equity 24,105 645 33,338 58,088 10,544 10,544 136,522 136,522 205,154 17,566 660 61,215 3,747 83,188 17,004 11 17,015 86,950 5,347 12,654 104,951 205,154 NATURA PARTICIPAÇÕES S.A. ASSETS Current assets Cash and banks Recoverable taxes Related parties Total current assets Long-term assets Receivables from sale of shares Total long-term assets Permanent assets Investments Goodwill on investments (-) Provision for maintenance of dividend payment capacity Total permanent assets Total assets LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Other payables Total current liabilities Long-term liabilities Related parties Total long-term liabilities Shareholders’ equity Capital Capital reserves Profit reserves Accumulated deficit Total shareholders’ equity Total liabilities and shareholders’ equity 307 129 61,215 61,651 5,506 5,506 104,951 1,208,041 (1,208,041) 104,951 172,108 86,001 86,001 10,391 10,391 1,107,776 5,450 5,550 (1,043,060) 75,716 172,108 2. PRESENTATION OF FINANCIAL STATEMENTS The accompanying financial statements have been prepared in accordance with Brazilian accounting practices and standards established by the Brazilian Securities Commission (CVM). the Brazilian corporate law Until December 31, 1995, established a simplified methodology for the recording of inflation effects determined to that date. This methodology, named Monetary Restatement of the Balance Sheet, consisted of the restatement of permanent assets (investments, property, plant and equipment, and deferred charges) and shareholders’ equity accounts at the indexes disclosed by the Federal Government. The net effect of the monetary restatement was accounted for in the statement of income in a specific account under the heading Monetary the Balance Sheet. This monetary Restatement of restatement was prohibited by Law Nº 9249, of December 26, 1995, effective January 1, 1996. 3. SIGNIFICANT ACCOUNTING PRACTICES a) Results of operations – Determined on the accrual basis of accounting. b) Temporary cash investments – Consists of highly liquid temporary investments with maturities of less than three months, stated at cost plus income earned to the balance sheet dates. 4 0 0 2 t r o p e r l a u n n a a r u t a n 2 1 1 c) Allowance for doubtful accounts – Recognized based on an analysis of risks on realization of receivables, in an amount considered sufficient to cover possible losses. d) Inventories – Stated at the average cost of acquisition or production, adjusted to market value and for possible losses, when applicable. e) Investments – Investments in subsidiaries are accounted for under the equity method, plus goodwill on acquisition of investments, as shown in Note 11. f) Property, plant and equipment – Recorded at acquisition cost, monetarily restated to December 31, 1995, plus interest capitalized during the construction period. Depreciation is calculated under the straight-line method, based on the estimated economic useful lives of the assets, at the rates shown in Note 12. g) Deferred charges – Represented by goodwill arising from the merger of shares of Natura Empreendimentos S.A., into Natura Participações S.A., less the provision for adjustment to market value, as described in Note 13. h) Current and long-term liabilities – Stated at known or estimated amounts, plus, if applicable, interest and monetary and exchange variations incurred to the balance sheet dates. i) Income and social contribution taxes – The provision for income tax was recorded at the rate of 15%, plus a 10% surtax on annual taxable income exceeding R$240. Social contribution tax was calculated at the rate of 9% of taxable income. Deferred income and social contribution taxes recorded in current and long-term assets result from expenses recorded in income, although temporarily nondeductible for tax purposes.Additionally, deferred income and social contribution taxes were recorded on tax loss carryforwards. Pursuant to CVM Resolution Nº 273/98 and CVM Instruction Nº 371/02, deferred taxes are recorded at their probable realizable values, as detailed in Note 9. j) Loans and financing – Adjusted based on exchange and monetary variations and interest incurred to the balance sheet dates, as provided for by contract and mentioned in Note 14. k) Reserve for contingencies – Adjusted to the balance sheet dates based on the probable loss amount, according to the nature of each contingency and supported by the opinion of the Company’s legal counsel. The fundamentals and the nature of reserves are described in Note 16. l) Hedge transactions – The nominal values of hedge transactions are not recorded in the balance sheet. Unrealized gains or losses on these transactions are recorded on the accrual basis of accounting, as mentioned in Note 22.b). m) Financial income and expenses – Represented by interest and monetary and exchange variations on temporary cash investments, loans and financing. o) Earnings per share – Calculated based on the number of shares at the balance sheet dates. p) Supplementary information – In order to permit additional analysis, the Company presents as supplementary information the consolidated statements of cash flows and value added. q) Use of estimates – The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses for the reporting periods. Since management’s judgment involves estimates of the probability of future events, actual results may differ from the estimates. 4. CONSOLIDATION CRITERIA The consolidated financial statements as of December 31, 2004 and 2003 have been prepared in accordance with the consolidation principles established by Brazilian accounting practices and regulatory instructions established by the CVM, and include the financial statements of the Company and its direct and indirect subsidiaries, as follows: Direct: Indústria e Comércio de Cosméticos Natura Ltda. Natura Cosméticos S.A. – Chile Natura Cosméticos S.A. – Peru Natura Cosméticos S.A. – Argentina Natura Brasil Cosmética Ltda. – Portugal Commodities Trading S.A. – Uruguai Nova Flora Participações Ltda. Natura Inovação e Tecnologia de Produtos Ltda. Natura Europa SAS Indirect: Natura Logística e Serviços Ltda. Flora Medicinal J. Monteiro da Silva Ltda. Ybios S.A. Ownership interest - % 2003 2004 99.76 99.96 99.85 99.99 99.99 100.00 100.00 100.00 100.00 99.76 99.96 99.85 99.99 99.99 100.00 99.43 - - 99.99 99.99 100.00 31.93 100.00 - The consolidated financial statements have been prepared based on the financial statements as of the same date and consistent with the accounting practices described in Note 3. Investments in subsidiaries were proportionally eliminated against shareholders’ equity and net income of the respective subsidiaries. Intercompany balances and transactions and unrealized profits were also eliminated.The minority interest in the Company’s subsidiaries was shown separately. The financial statements of foreign subsidiaries were translated into Brazilian reais at the exchange rates in effect on the date of the related financial statements. n) Interest on capital – For corporate purposes, interest on capital is accounted for as allocation of income in shareholders’ equity. For tax purposes, interest on capital is treated as financial expense, reducing the income and social contribution tax basis for the year. After the merger of Natura Empreendimentos S.A. in March 2004, as described in Note 1, the Company became the parent company of Natura Inovação e Tecnologia de Produtos Ltda., which was previously wholly owned by Natura Empreendimentos S.A.. 4 0 0 2 t r o p e r l a u n n a a r u t a n 3 1 1 In 2004, the Company acquired ownership interest in the companies Ybios S.A. and Natura Europa SAS, established in the same year. The Company’s shareholders’ equity and net income as of December 31, 2004 and 2003 differ by R$1,395 and R$1,278, and R$117 and R$1,278, respectively, from the amounts stated in the consolidated financial statements, due to the elimination of the subsidiaries’ unrealized profits. Reconciliation between consolidated net income and shareholders’ equity: individual (Company) and Company Elimination of unrealized profits of the subsidiary Indústria e Comércio de Cosméticos Natura Ltda. with other subsidiaries Consolidated Net income Shareholders’ equity 2004 300,411 2003 65,162 2004 2003 437,452 122,616 (117) 300,294 (1,278) 63,884 (1,278) (1,395) 436,057 121,338 The operations of the direct and indirect subsidiaries are as follows: Indústria e Comércio de Cosméticos Natura Ltda. – Engaged in the production and sale of Natura products to Natura Cosméticos S.A. - Brazil, Chile, Peru and Argentina, whose amounts are mentioned in Note 10. Natura Cosméticos S.A. - Chile, Natura Cosméticos S.A. - Peru, Natura Cosméticos S.A. - Argentina, Natura Brasil Cos- mética Ltda. - Portugal, Commodities Trading S.A. - Uruguai – Their activities are an extension of the activities conducted by the parent company Natura Cosméticos S.A. - Brazil. Nova Flora Participações Ltda. – Holds equity interest in the subsidiary Flora Medicinal J. Monteiro da Silva Ltda. Natura Inovação e Tecnologia de Produtos Ltda. – Engaged in product research and development. Natura Europa SAS – Engaged in the purchase, sale, import, export and distribution of cosmetics, fragrances in general, and hygiene and health products. Natura Logística e Serviços Ltda. – Engaged in the provision of administrative and logistics services. Flora Medicinal J. Monteiro da Silva Ltda. – Engaged in the production and sale of phytotherapic products of its own brand. Ybios S.A. – Engaged in research, management and development of projects, products and services in the biotechnology area, and may also enter into agreements and/or partnerships with universities, foundations, companies, cooperatives, associations, and other public and private entities; provision of services in the biotechnology area; and holding of equity interest in other companies. 5. TEMPORARY CASH INVESTMENTS Bank certificates of deposit - CDBs Investment funds Company 2004 2003 Consolidated 2003 2004 128,841 29,790 158,631 26,482 - 26,482 57,527 165,583 44,512 36,437 202,020 102,039 4 0 0 2 t r o p e r l a u n n a a r u t a n 4 1 1 As of December 31, 2004, bank certificates of deposit (CDBs) are remunerated at rates ranging from 100% to 101.8% of the CDI (interbank deposit rate) (100% to 101.5% in 2003). Investments funds are remunerated at rates ranging from 99.5% to 105.5% of the CDI (100% to 106% in 2003). 6. TRADE ACCOUNTS RECEIVABLE Trade accounts receivable Allowance for Company 2004 2003 Consolidated 2004 2003 250,246 187,670 265,048 197,845 doubtful accounts (13,793) (15,203) (14,982) (17,383) Allowance for return of goods 7. INVENTORIES Finished products Raw materials and packaging Work in process Promotional material Imports in transit Reserve for losses - (344) 236,453 172,123 - (344) 250,066 180,118 Company 2004 1,604 2 - 28 - - 1,634 2003 354 - - - - - 354 Consolidated 2004 57,105 2003 35,163 62,327 7,617 9,308 - (14,396) 121,961 42,486 5,931 2,239 824 (7,389) 79,254 8. RECOVERABLE TAXES IRPJ (corporate income tax) Social contribution tax ICMS (state VAT) IPI (federal VAT) PIS/COFINS/CSLL – withheld at source Other Long-term Current Company 2004 2,701 - 1,184 - - - 3,885 876 3,009 2003 - - 715 - - - 715 - 715 Consolidated 2004 8,984 1,420 6,129 - 2003 2,688 583 1,827 1,063 1,896 3,577 22,006 3,848 18,158 - 2,364 8,525 - 8,525 9. INCOME AND SOCIAL CONTRIBUTION TAXES (Company) and a) Deferred – Deferred income and social contribution taxes recorded in the financial statements result from temporary differences temporary differences and tax loss carryforwards (subsidiaries). These credits are recorded in current and long-term assets, in view of their expected realization based on projections of taxable income, considering the limit of 30% for annual offset of tax loss carryforwards against taxable income, pursuant to applicable legislation. The amounts are as follows: Current: Tax loss carryforwards Temporary differences: Reserve for inventory losses Allowance for doubtful accounts Reserve for losses on swap contracts Other Deferred income and Company 2004 2003 Consolidated 2003 2004 - - - - 691 6,468 4,895 2,512 4,829 5,169 4,829 5,169 1,545 5,824 3,064 2,802 2,087 9,128 3,064 4,883 social contribution taxes 12,198 11,035 21,630 22,096 Long-term: Tax loss carryforwards Temporary differences: - - 2,032 - Reserve for contingencies Other 12,058 566 7,368 610 18,399 870 8,562 885 Deferred income and social contribution taxes 12,624 7,978 21,301 9,447 As required by CVM Resolution Nº 273/98 and CVM Instruction Nº 371/02, management, based on projections of results, estimates that the recorded tax credits will be fully realized within five years. The amounts recorded in long-term assets will be realized as follows: 2005 2006 2007 2008 2009 Consolidated 2004 - 1,644 3,207 9,796 6,654 21,301 2003 5,514 1,102 1,143 1,688 - 9,447 b) Current expense – Reconciliation of income and social contribution taxes: Company 2004 2003 Consolidated 2004 2003 377,380 85,320 387,395 104,188 (128,309) (29,009) (131,714) (35,424) - 6,314 948 - - - (6,317) (7,430) - 10,011 (1,290) 3,417 - 10,011 (1,290) 3,417 41,611 (1,230) - 410 41,611 (693) - 363 (76,969) (20,158) (87,102) (40,364) Income before taxes on income Income and social contribution taxes at the rate of 34% Equity in subsidiaries Losses generated by subsidiaries Deferral of exchange variation Interest on capital Reversal of provision for maintenance of dividend payment capacity Other Income and social contribution taxes Current income and social contribution taxes (81,497) (28,494) (96,736) (43,892) Deferred income and social contribution taxes 4,528 8,336 (76,969) (20,158) 9,634 3,528 (87,102) (40,364) 10.RELATED PARTIES Receivables from and payables to related parties are as follows: Company 2004 2003 Consolidated 2004 2003 Current assets: Accounts receivable: Indústria e Comércio de Cosméticos Natura Ltda.(a) Natura Logística e Serviços Ltda.(a) Natura Inovação e Tecnologia de Produtos Ltda.(a) Nova Flora - - - Participações Ltda.(b) Natura Participações S.A.(c) Natura Empreendimentos S.A.(c) 833 - - 49 58 8 - - - Dividends receivable: Indústria e Comércio de Cosméticos Natura Ltda. Long-term assets: Loans: - 833 25,722 25,837 Natura Participações S.A.(d) Advance for future capital increase: - 3,382 Nova Flora Participações Ltda.(e) 770 9,503 - - - - - - - - - - 172 - 172 Receivables from sale of shares(f) Current liabilities: Suppliers: Indústria e Comércio de Cosméticos Natura Ltda.(g) Natura Logística e Serviços Ltda.(h) Natura Inovação e Tecnologia de Produtos Ltda.(i) Loans: Natura Accounts payable: Natura Inovação e Tecnologia de Produtos Ltda. Natura Participações S.A.(j) Dividends payable: Natura Empreendimentos S.A. Shareholders Interest on capital payable: Natura Empreendimentos S.A. Shareholders 85,874 10,379 8,028 3,265 8,249 102,151 5,304 18,948 94 - 94 - 148 939 - - - - - - - - - 113,644 113,644 20,000 - 20,000 - 113,644 113,644 20,000 - 20,000 - 13,623 13,623 8,541 - 8,541 - 13,623 13,623 8,541 - 8,541 - - 1,234 14 27 - 1,275 3,382 - - - - 5,304 5,304 816 - 148 964 Empreendimentos S.A.(d) - 791 Transactions with related parties are summarized as follows: 4 0 0 2 t r o p e r l a u n n a a r u t a n 5 1 1 Natura Cosméticos S.A. Indústria e Comércio de Cosméticos Natura Ltda. Natura Cosméticos S.A. – Argentina Natura Cosméticos S.A. – Peru Natura Cosméticos S.A. – Chile Natura Europa SAS Natura Inovação e Tecnologia de Produtos Ltda. Flora Medicinal J. Monteiro da Silva Ltda. Product sales Product purchases 2004 - 2003 - 2004 2003 924,649 765,789 (a) Receivables from sales of Natura products to employees. (b) Amount receivable due to the capital reduction made on January 30, 2004, approved by the shareholders’ meeting held on the same date. (c) Receivables from leases of properties as described in item (m). (d) Loan from Natura Cosméticos S.A. 949,674 783,541 - - (e) Cash contributions to Nova Flora Participações Ltda. mainly for maintenance of working capital. - - - - - - - - - - 13,353 9,292 6,800 4,899 4,374 317 2,803 - 164 390 (f) On September 29, 2000, April 30, 2002, December 30, 2002 and January 5, 2004, Natura Empreendimentos S.A. and Natura Participações S.A. issued restricted shares to two of its principal Directors in exchange for financings totaling R$6,174, which accrue interest at a 3% per year and mature between April 30, 2009 and September 30, 2010. In the corporate restructuring completed in March 2004, these shares were exchanged for common shares issued by Natura Cosméticos S.A. These financings, which amounted to R$4,823 as of December 31, 2004 (R$5,492 in 2003,), are paid by dividends and interest on capital on the restricted shares. (g) Payables for the purchase of products. Prices and terms are within normal market conditions. - - 949,674 783,541 17 368 949,674 783,541 (h) Payables for services described in item (k). (i) Payables for services described in item (l). Guarantees commission:(j) Natura Empreendimentos S.A. Natura Cosméticos S.A. Indústria e Comércio de Cosméticos Natura Ltda. Natura Logística e Serviços Ltda. Service sales Service purchases 2004 2003 2004 2003 - - - - - 1,904 - - - 1,904 - - - - - - 1,692 201 11 1,904 Administrative structure:(k) Natura Logística e Serviços Ltda. Natura Cosméticos S.A. Indústria e Comércio de 118,749 - 87,043 - - 84,297 - 60,793 11.INVESTMENTS (j) Guarantees of Natura Empreendimentos S.A. and Natura Participações S.A., merged into the Company, as mentioned in Note 1. (k) Logistics and general administrative services. (l) Product and market research and development. (m)Rental of the industrial complex located in Cajamar and several units that compose Natura’s facilities. The main intercompany balances as of December 31, 2004 and 2003, as well as the intercompany transactions that affected the results for the years refer to transactions between the Company and its subsidiaries, which were substantially carried out under usual market conditions for each type of transaction. Cosméticos Natura Ltda. Natura Inovação e Tecnologia de Produtos Ltda. Flora Medicinal J. Monteiro - - - - 24,355 17,671 10,097 8,549 da Silva Ltda. - 118,749 - 87,043 - 118,749 30 87,043 Product research and development:(l) Natura Inovação e Tecnologia de Produtos Ltda. Natura Cosméticos S.A. Ybios S.A. 71,914 - - 71,914 52,247 - - 52,247 - 71,865 49 71,914 - 52,247 - 52,247 Lease of properties and common charges:(m) Indústria e Comércio de Cosméticos Natura Ltda. 8,627 136 Natura Cosméticos S.A. Natura Logística e Serviços Ltda. Natura Inovação e Tecnologia 5,031 - 116 1,049 - - - - 5,804 3,238 de Produtos Ltda. Natura Empreendimentos S.A. Natura Participações S.A. - - - 8,763 - - - 5,031 1,753 27 14 8,763 1,301 323 169 5,031 Investments in subsidiaries Goodwill on acquisition of investment – Nova Flora(i) Amortization of goodwill Intangible recorded on acquisition of commercial location – Natura Europa(ii) Company 2004 2003 Consolidated 2004 2003 373,748 332,698 - - - - - - 8,015 8,015 (5,487) (5,206) - - 373,748 332,698 6,179 8,707 - 2,809 (i) The goodwill on the acquisition made by the subsidiary Nova Flora Participações Ltda. is being amortized on a straight-line basis over ten years and is supported by an appraisal report issued by independent appraisers, based on the expectation of future profitability as of December 31, 2003, which was reviewed and updated by the Company’s management. (ii) Represents an intangible recorded by the Company relating to the purchase of a commercial location where Natura Europa SAS will operate. Total service sales/purchases 199,426 146,225 199,426 146,225 Investments in direct subsidiaries are as follows: 4 0 0 2 t r o p e r l a u n n a a r u t a n 6 1 1 Shares of subsidiaries Number of shares (common shares) held Ownership interest – % Capital Shareholders’ equity of subsidiaries Share in shareholders’ equity Net income (loss) of subsidiaries Indústria e Comércio de Cosméticos Ltda. 328,992 Natura Cosméticos S.A. Chile 43,780 Natura Cosméticos S.A. Peru 22,016 Natura Cosméticos S.A. Argentina 65,285 Natura Brasil Cosméticos S.A. Portugal 18 Commodities Trading S.A. Uruguai 297 Nova Flora Natura Inovação e Tec. de Participações Prod. Ltda Ltda 5,008 2,413 43,762 328,202 18 21,983 99.76% 99.96% 99.85% 99.99% 99.99% 18 22,016 328,992 65,285 43,780 65,278 349,223 348,385 346 346 2,940 2,936 2,966 2,965 19,859 (4,171) (431) (6,333) 297 100% 297 20 20 2,413 100% 2,413 1,028 1,028 5,008 100% 5,008 8,214 8,214 Total Natura Europa SAS 14,115 14,115 100% 14,115 9,854 9,854 374,527 373,684 Book value of Company investment: Balances as of December 31, 2003 Increase in investments Increase in investment due to the merger of Natura Empreendimentos S.A. Equity in subsidiaries Dilution of sharequotas of Natura Cosméticos S.A. Recognition (reversal) of provision for losses Balances as of 328,574 - 639 3,876 1,921 1,445 1,531 7,766 - 19,811 - (4,169) - (430) - (6,332) - - - - - - - - December 31, 2004 348,385 Provision for losses in long-term liabilities: Balances as of 346 2,936 2,965 December 31, 2003 Reversal of provision Recognition of provision Balances as of December 31, 2004 - - - - - - - - - - - - - - - - (64) (64) (74) 11 - - (75) - 64 - - - (64) (64) (2) (1,360) 9 (4,664) 2,833 22 - - (2) - - - 9,503 - (1,360) (833) (6,282) - - - 14,518 332,698 37,108 8,205 9 - (4,664) - - - - 8,205 2,788 (833) (6,218) 20 1,028 8,214 9,854 373,748 - - - - (6,282) 6,282 - - - - - - - - - - (6,282) 6,282 (64) (64) The provision for losses on investments, recognized due to the shareholders’ deficit of the subsidiary Nova Flora Participações Ltda., was reversed on January 31, 2004, as a result of the capitalization of this company. 12.PROPERTY, PLANT AND EQUIPMENT Is comprised of: Machinery and equipment Vehicles Furniture and fixtures IT equipment Software licenses Leasehold improvements Advances to suppliers Other Buildings Installations Machinery and equipment Vehicles Molds Furniture and fixtures IT equipment Software licenses Leasehold improvements Land Advances to suppliers Construction in progress Other Annual depreciation rate - % 10 20 10 20 20 12 - - Annual depreciation rate - % 4 10 10 20 33 10 20 20 12 - - - 2004 Accumulated depreciation 610 4,788 3,031 5,624 1,226 157 - 2 15,438 2004 Accumulated depreciation 19,166 24,757 32,305 7,816 20,703 6,825 19,094 5,379 175 - - - 4,771 140,991 Cost 960 13,071 3,929 6,868 3,079 756 - 6 28,669 Cost 126,990 64,486 76,549 19,953 26,879 12,809 31,910 12,477 774 15,910 19,742 21,478 9,856 439,813 Net book value 350 8,283 898 1,244 1,853 599 - 4 13,231 Net book value 107,824 39,729 44,244 12,137 6,176 5,984 12,816 7,098 599 15,910 19,742 21,478 5,085 298,822 Company 2003 Accumulated depreciation 700 3,577 2,726 5,006 704 128 - 2 Net book value 188 5,566 1,118 1,491 1,874 425 78 4 12,843 10,744 Cost 888 9,143 3,844 6,497 2,578 553 78 6 23,587 Consolidated 2003 Accumulated depreciation 14,165 18,872 25,622 5,772 12,876 5,812 16,159 2,881 147 - - - 4,791 107,097 Net book value 112,760 43,937 40,515 9,087 8,208 5,302 9,606 6,100 424 15,910 1,534 - 356 253,739 Cost 126,925 62,809 66,137 14,859 21,084 11,114 25,765 8,981 571 15,910 1,534 - 5,147 360,836 4 0 0 2 t r o p e r l a u n n a a r u t a n 7 1 1 13.DEFERRED CHARGES As mentioned in Note 1, on March 5, 2004, Natura Participações S.A. and its wholly owned subsidiary, Natura Empreendimentos S.A., were merged into the Company. Natura Participações S.A. had recorded goodwill on the investment in Natura Empreendimentos S.A. amounting to R$1,028,041 and a corresponding provision for maintenance of dividend into Natura payment capacity. This goodwill arose from the merger of the shares of Natura Empreendimentos S.A. Participações S.A. on December 27, 2000.This restructuring was approved by the Extraordinary Shareholders’ Meeting held on that date, and the amounts are supported by a valuation report issued by independent experts. The amounts are as follows: Goodwill on investments Provision for maintenance of dividend payment capacity 2004 905,655 (905,655) - Company 2003 - - - The provision for maintenance of dividend payment capacity will result in the recognition of the goodwill amortization tax benefits for all of the Company’s shareholders.The goodwill amount is being amortized over a seven-year period. 14.LOANS AND FINANCING Type Floating Rate Notes Company 2004 - 2003 58,989 Consolidated 2004 - 2003 58,989 Maturity March 2004 Charges 7.6% + exchange vari- ation (dollar) - - 36,545 - December 2008 31,131 42,294 31,131 42,294 - - - - - - - - 26,654 27,828 6,706 - - - 3,768 2,786 297 2,009 297 2,009 - 1,269 August to October 2007 December 2011 March 2005 December 2005 April 2005 and June 2009 February 2005 March 2004 - - - - - - - - 1,088 372 - - March 2005 January 2005 - 741 December 2004 Interest of 3.0% per year + TJLP (long-term interest rate) 73% (71% in 2003) – interest of 4.0% per year + TJLP 27% (29% in 2003) – interest of 4.0% per year + UMBNDES (**) Semi-annual LIBOR + 6.1% per year + exchange variation (dollar) Interest of 105% of CDI (interbank deposit rate) Interest of 9.5% per year + exchange variation (pesos) Interest of 5.2% per year + TJLP Interest of 4.5 % per year + TJLP Interest of 3.5 % per year + TJLP Euro Libor + 2.0% per year + exchange variation (euro) Interest of 4.6% per year + exchange variation (pesos) Interest of 2.8% per year + exchange variation (dollar) FINEP (Financing Agency for Studies and Projects) BNDES (Brazilian Bank for Economic and Social Development) Loans (onlending – IFC [International Finance Corporation]) Resolution nº 2.770 and overdraft account Loans – Argentina BNDES-FINAME (Government Agency for Machinery and Equipment Financing) BNDES-Poc (*) BNDES Loans – France Loans – Chile ACE (advance on export contracts) Total Current Long term 31,428 11,879 19.549 103,292 72,240 31.052 134,389 62,407 71,982 108,088 75,102 32,986 (*)Poc – Proposal of Credit Operation (**)UMBNDES – BNDES monetary unit 4 0 0 2 t r o p e r l a u n n a a r u t a n 8 1 1 Guarantees Promissory notes and guarantee of Natura Empreendimentos S.A. and Natura Participações S.A. Guarantee, promissory notes and receivables of Natura Cosméticos S.A. Mortgage and bank guarantee Promissory notes and guarantee of Natura Cosméticos S.A. Promissory notes and guarantee of Natura Cosméticos S.A. Guarantee of Natura Cosméticos S.A. Chattel mortgage and guarantee of Natura Empreendimentos S.A. and Natura Cosméticos S.A. Guarantee of Natura Cosméticos S.A. Chattel mortgage and guarantee of Natura Empreendimentos S.A. and Natura Cosméticos S.A. Guarantee of Natura Cosméticos S.A. Guarantee of Natura Cosméticos S.A. Promissory notes and guarantee of Natura Empreendimentos S.A. Maturities of long-term debt are as follows: 2005 2006 2007 2008 2009 2010 2011 Consolidated 2004 - 25,359 21,714 13,470 3,847 3,790 3,802 71,982 2003 12,352 11,572 9,018 44 - - - 32,986 Financin.g in local currency from the BNDES is guaranteed mainly by the Cajamar unit. Loans related to floating rate notes were represented by short-term credit lines, primarily for maintenance of working capital, and were settled in March 2004. 15.TAXES PAYABLE Taxes payable are represented by: ICMS (state VAT) IPI (federal VAT) COFINS (tax on revenue) PIS (tax on revenue) Income tax Social contribution tax Withholding income tax PIS/COFINS/CSLL (Law Nº 10,633/03) Other Company 2004 2003 Consolidated 2003 2004 48,640 - 382 84 - - 2,873 30,922 - 284 88 687 222 19,647 48,650 431 4,424 960 159 - 4,084 34,008 - 6,159 1,386 876 327 20,319 770 27 52,776 - - 51,850 1,095 2,579 62,382 - 1,222 64,297 In 2003, the balances recorded under the heading “Withholding income tax” referred mainly to withholding income tax on debentures. 16.RESERVE FOR CONTINGENCIES The Company and its subsidiaries are parties to tax, labor and civil lawsuits and to tax proceedings at the administrative level. Based on the opinion of its external legal counsel, management believes that the reserve for contingencies is sufficient to cover probable losses from unfavorable judgments. The balances of contingencies are as follows: Tax Labor Civil Company 2004 2003 Consolidated 2003 2004 36,970 2,198 601 39,769 22,206 2,411 253 24,870 53,190 3,244 3,125 59,559 23,866 2,935 1,580 28,381 Tax contingencies – Accrued tax contingencies are comprised of the following proceedings: Deductibility of CSLL (Law nº 9316/96)(a) Monetary restatement of federal taxes (IRPJ/ CSLL/ILL) according to the UFIR (fiscal reference unit)(b) Tax assessment – INSS Company 2004 2003 Consolidated 2003 2004 8,057 5,223 8,057 5,223 4,694 4,753 4,814 4,874 (social security contribution)(c)4,371 3,836 4,371 3,836 IPI (federal VAT) – Tax collection lawsuit(d) 3,353 2,954 3,353 2,954 PIS (tax on revenue) – Semiannual – Decree-laws Nº 2445/88 and 2449/88(e) 11,039 - 5,456 36,970 IPI - zero rate(f) Attorneys’ fees and other - - 5,440 22,206 12,370 13,604 6,621 53,190 - - 6,979 23,866 (a) Refers to social contribution tax that was addressed by a mandate that questions the constitutionality of Law Nº 9316/96, which prohibited the deduction of CSLL from its own tax basis and the IRPJ (corporate income tax) basis. A portion of this contingency, in the amount of R$ 3,245, is still deposited in escrow at December 31, 2004. (b) Refers to the monetary restatement of federal taxes (IRPJ/CSLL/ILL) related to 1991 based on the UFIR, discussed in a mandate. An escrow deposit has been made for the amount involved in this contingency. (c) Refers to the social security contribution (INSS) required by tax assessments issued by the National Institute of Social Security as a result of an inspection. The Company, as a taxpayer having joint liability for tax payment, is required to pay INSS on services provided by third parties.The amounts are discussed in court through a tax debt annulment action and are deposited in escrow. (d) Refers to a tax collection lawsuit seeking to collect the IPI related to July 1989, when wholesale establishments began to be considered equivalent to industrial establishments under Law Nº 7798/89.The amounts involved in this tax collection lawsuit are guaranteed through the blocking of an affiliated company’s bank account. (e) Refers to the offset of PIS paid as per decree-laws Nos. 2445/88 and 2449/88, in the period from 1988 to 1995, against federal taxes due in 2003 and 2004. (f) Refers to IPI tax credits on raw materials and packing materials purchased at a zero tax rate. The Company filed for a mandate and was granted an injunction for the right to the credit. Labor contingencies – As of December 31, 2004, the Company and its subsidiaries are parties to 163 labor lawsuits filed by former employees and third parties (168 in 2003), claiming the payment of severance amounts, salary premiums, overtime and other amounts due, as a result of joint liability. Civil contingencies – As of December 31, 2004, the Company and its subsidiaries are parties to 571 lawsuits (263 in 2003) at the civil court, special civil court and Procon (Consumer Protection Agency), filed by beauty consultants, consumers and former employees, mostly related to indemnity claims. Escrow deposits – Escrow deposits, which represent the Company’s restricted assets, refer to amounts deposited in court until litigation is resolved. The balance of these deposits as of December 31, 2004 was R$ 24,256 (R$ 14,595 in 2003) - Consolidated, and is classified under the heading Escrow Deposits in long-term assets. 4 0 0 2 t r o p e r l a u n n a a r u t a n 9 1 1 Possible losses – The Company and its subsidiaries are parties to tax, civil and labor lawsuits, for which the risk of loss is considered possible by management and its legal counsel. These lawsuits, for which the Company did not record any reserve, are as follows:: Tax: IPI credit on purchases of fixed assets(a) INSS debt annulment action(b) Tax assessment – transfer pricing on loan agreements(c) ICMS tax collection lawsuit – Pernambuco State(d) Tax assessment – PIS debt(e) Other Civil Labor Total Company 2004 2003 Consolidated 2004 2003 - - 9,245 4,702 4,199 3,686 4,199 3,686 1,707 - 1,707 - - - 2,388 8,294 6,109 7,933 22,336 1,043 2,042 2,288 9,059 5,462 2,216 16,737 - - 2,860 18,011 7,799 19,094 44,904 1,043 2,042 2,664 14,137 9,438 3,296 26,871 (a) (a) The subsidiary Indústria e Comércio de Cosméticos Natura Ltda. is discussing through mandates, the right to the IPI credit on purchases of fixed assets and consumption materials. (b) Lawsuit filed by the Company seeking the annulment of the tax demanded by the INSS through a tax assessment notice issued for purposes of collecting the social security contribution on the allowance for vehicle maintenance paid to sales promotors. (c) Refers to a tax assessment notice whereby the Federal Revenue Service is demanding the payment of IRPJ and CSLL on the difference of interest on loan agreements with foreign related parties. On July 12, 2004, an administrative defense was filed and is still being judged. (d) Refers to an ICMS tax collection lawsuit whereby the State Finance Department intended to collect amounts that have already been paid by the Company. After proof of tax payment was presented, the State Finance Department requested, on November 3, 2004, the dismissal of the lawsuit without sentencing the Company to pay court costs and legal fees. (e) Tax assessment notice for collection of PIS on differences between the tax bases as per Complementary Law No. 7/70 and Decree-laws No. 2445/88 and No. 2449/88. In view of former decisions by both the Board of Tax Appeals and the Federal Supreme Court, the Company and its legal counsel understand that the risk of loss for 2004 is remote. 17.MANAGEMENT AND EMPLOYEE PROFIT SHARING The Company and its subsidiaries pay its employees and management a share of their profits, which is tied to operational and other specific targets, and approved at the beginning of each year. As of December 31, 2004, this profit sharing was recorded in the amount of R$34,990 (R$20,466 in 2003) under the heading “Salaries, profit sharing and related charges” in Consolidated and “Operating expenses” in the statements of income. The portion related to management profit sharing is R$5,758 as of December 31, 2004 (R$3,776 in 2003). 18.DEBENTURES Current liabilities: Debentures Long-term liabilities: Debentures Consolidated 2004 2003 - - 102,170 130,656 The Extraordinary Shareholders’ Meeting on April 14, 1998 authorized the issue of 140,000,000 registered, endorsable and nonconvertible debentures in the amount of R$140,000, with no predetermined maturity date, for the indirect controlling shareholders of the Company. From 1998 to 2003, 130,656,000 debentures were subscribed, totaling R$130,656. Authorized debentures entitle their holders to a yield based on the amount of debentures issued of up to 70% of income before provision for income tax as of March 31, June 30, September 30, September 30 and December 31 of each year. Starting in 2002, the method of calculating debentures is represented by the share of debentures on shareholders’ equity and the value of the debentures, applied on the issuer’s income before provision for income tax as of June 30, and December 31, of each year. At the Extraordinary Shareholders’ Meeting held on March 2, 2004, after approval by the debenture holders at the Debenture Holders’ Meeting held on February 27, 2004, it was decided that 130,656,000 debentures issued by the Company, corresponding to R$238,569 (R$130,656 - principal of the debentures, and R$107,913 - debentures payable, as of January 31, 2004, net of withholding income tax - the effect on net income for the period was R$7,178), would be capitalized by the Company in the form of a capital increase of R$138,569, representing 3,299 common shares, and the recognition of a capital reserve amounting to R$100,000.The effects of this corporate act are discussed in Note 19.b). 19.SHAREHOLDERS’ EQUITY a) Merger of companies – At the Extraordinary Shareholders’ Meeting held on March 5, 2004, the Company’s shareholders approved the merger of Natura Empreendimentos S.A. and Natura Participações S.A. into the Company based on an accounting valuation supported by a valuation report issued by independent experts. The net assets merged into the Company were R$104,951 for Natura Empreendimentos S.A. and R$75,716 for Natura Participações S.A., based on the book values of these companies. b) Capital – Em 31 de dezembro de 2003 o capital social era de R$56.387, dividido em 25.000 ações ordinárias sem valor nominal e 10.955 ações preferenciais sem valor nominal. resultantes do Em 2 de março de 2004, os acionistas reunidos em Assem- bléia Geral Extraordinária deliberaram: (i) capitalizar os créditos resgate das debêntures subordinadas de sua titularidade e da remuAs of December 31, 2003, the Company’s capital was R$56,387, divided into 25,000 common shares without par value and 10,955 preferred shares without par value. On March 2, 2004, the shareholders decided at an Extraordinary Shareholders’ Meeting to: (i) capitalize the credits arising from the redemption of the subordinated debentures held by them and from the net remuneration on the debentures through January 31, 2004; and (ii) split the shares issued by the Company in the proportion of 2,099 new shares for each existing share. The total amount of the capitalized credits was R$238,569, and was allocated to a capital reserve in the amount of R$100,000 and a 4 0 0 2 t r o p e r l a u n n a a r u t a n 0 2 1 capital increase in the amount of R$138,569, representing 3,299 new common shares at an issuance price of R$72,300 per share.These shares were subsequently split in the proportion of 2,099 new shares for each existing share, resulting in capital of R$194,956, divided into 59,399,601 In the common shares and 22,994,545 preferred shares. Shareholders’ Meeting held on March 5, 2004, the shareholders approved, among other matters: b.1) Merging Natura Participações S.A. and Natura Empreendimentos S.A., into the Company. b.2) Canceling the Company shares held by the merged parent companies. b.3) Amending the bylaws to R$196,371, represented by 83,266,061 shares. On May 24, 2004, the Board of Directors’ Meeting approved an increase in the Company’s capital within the limit of authorized capital, due to the exercise of the right to convert the debentures issued by the Company and fully subscribed by BNDES Participações S.A. into common shares of the Company, as allowed by the Private Indenture of Issuance of Registered Debentures Convertible into Common Shares, dated February 23, 2001. Consequently, 2,172,550 registered common shares without par value, totaling R$34,391, were subscribed, and the Company’s capital was changed from R$196,371, represented by 83,266,061 common shares, to R$230,762, represented by 85,438,611 common shares. As of December 31, 2004, the Company’s capital is R$230,762.The subscribed and paid-up capital is represented by 85,438,611 common shares without par value. c) Receivables from management – In 2004, the amount of R$3,029 was reclassified from the heading “Receivables from shareholder” to the heading “Capital reserve” until it is paid up. Details are disclosed in Note 10.f. d) Interest on capital – The Company’s management proposed in an executive board meeting the payment of interest on capital pursuant to its bylaws, CVM Resolution Nº 207/86 and Law Nº 9,249/95. As of December 31, 2004, the gross amount of interest on capital is R$ 29,442 (R$10,049 in 2003) and was calculated in accordance with statutory limits, also with respect to the mandatory minimum dividend of 30% (25% in 2003) in accordance with article 203 of Law Nº 6404/76 and the Company’s bylaws. Income tax was withheld and paid by the Company. e) Dividend payment policy – Each year, shareholders are entitled to a minimum dividend equivalent to 30% (25% in 2003) of net income for the year, considering principally the following adjustments: – The increase in the amounts resulting from the reversal, in the year, of reserves for contingencies, recognized previ- ously. – The decrease in the amounts intended for the recogni- tion, in the year, of the legal reserve and reserve for con- tingencies. respectively, for the first half of the year. The remaining balance of dividends and interest on capital, in the amounts of R$113,644 and R$13,623, respectively, will be paid in 2005. Dividends were calculated as follows: Net income Profit reserve – legal Calculation basis for minimum dividends Mandatory minimum dividends Annual minimum dividends Supplementary dividends Proposed dividends Interest on capital, net of withholding income tax Withholding income tax Total interest on capital and dividends Amount exceeding the mandatory minimum dividend Dividends per share – R$ Interest on capital per share – R$ Company 2004 300,411 (15,021) 285,390 30% 85,617 - 186,910 25,026 4,416 2003 65,162 (3,258) 61,904 25% 15,476 3,668 20,000 8,542 1,507 216,352 33.717 130,735 2.204 0.347 18,241 0.658 0.279 f) Treasury shares – As of December 31, 2004, common shares in treasury totaled 651,849, at an average cost of R$1.6970. g) Share premium – Refers to the goodwill generated on the issuance of 3,299 common shares resulting from the capitalization of debentures in the amount of R$100,000, as further detailed in item b) above. h) Reserve for profit retention – As of December 31, 2004 and 2003, this reserve was recorded in accordance with article 196 of Law No. 6,404/76 to be used in future investments, in the amounts of R$76,024 and R$31,855, respectively. The reserve recorded in 2003 was used on March 5, 2004 for absorbing excess liabilities arising from the merger of the companies Natura Empreendimentos S.A. and Natura Participações S.A. See details in item b) above. 20.STOCK OPTION PROGRAM In 1998, the extinguished Natura Empreendimentos S.A. approved an incentive policy for certain directors and managers of the group’s companies, through which they would be entitled to purchase shares. Subsequently, this Program was also assumed by the extinguished Natura Participações S.A., and the general bases of the Stock Option Grant Program (the “Program”) remained unchanged. approved On March 5, 2004, the Shareholders’ Meeting of Natura Cosméticos S.A. the merger of Natura Empreendimentos S.A. and Natura Participações S.A. into the Company, at which time the Company assumed the Program. On March 25, 2004, the Company completed an initial public offering in Brazil and modified the Program to remove the Company’s obligation to re-purchase the shares subject to the plan and change the basis for determination of the stock option strike price. The bylaws allow the Company to prepare semi-annual and interim balance sheets, and based on these balance sheets, authorize the payment of dividends upon approval by the Board of Directors. The Board of Directors meets once a year for the purpose of, within the Program’s general bases, establishing the Plan, indicating the directors and managers who will receive the options and the total amount to be paid. The Company paid, in August 2004, dividends and interest on capital in the amounts of R$73,266 and R$11,403, Before the Company completed its initial public offering, the amount established for exercising the options was updated 4 0 0 2 t r o p e r l a u n n a a r u t a n 1 2 1 according to inflation levels as measured by the Extended Consumer Price Index (IPC-A), and the Company had the obligation to repurchase the shares.The plans for 2000, 2001, 2002, 2003 and 2004 were approved under these rules. The plans for 2000 and 2001 have a 3-year time span for exercising the options, that is, the right to exercise options will be based on 1/3 per year.The plans for 2002, 2003 and 2004 have a four-year time span for exercising the options, and the exercise rights are 50% at the end of the third year and 50% at the end of the fourth year. Subsequent to the Company’s initial public offering, the Company’s management, in a meeting held on April 26, 2004, changed these Programs to remove the requirement of the Company to re-purchase shares pursuant to the Program, and modified the criteria for determining the purchase or subscription price of the shares, which became the average market price of the Company’s common shares at BOVESPA over the last ten sessions. The option strike price is still updated based on the IPC-A inflation index.The deadline for exercising the options received is two years, counted from the date when all the holder’s options have matured (became exercisable). The information related to the stock option plans is summarized as follows: Number of stock options (in shares): Balance of options as of February 1, 2004 (after merger of Natura Participações S.A.) Cancelled options Exercised options (*) Distributed options Balance of options as of December 31, 2004 * Breakdown of exercised options through December 31, 2004. Options converted into shares and sold Options converted into shares and held Total options exercised 2,476,351 (75,146) (985,877) 380,292 1,795,620 841,064 144,813 985,877 Options converted into shares and sold generated a cash disbursement in the amount of R$ 11,086, resulting from the difference between the amount paid by option holders in the amount of R$16,574 and the amount of R$27,660 paid by Natura Cosméticos S.A. in the repurchase. Balance of call options by plan: Amount for the year according to the IPCA Number of through call options december 31, 2004 (in shares) 17.65 10,348 18.51 84,513 25.69 743,439 14.39 585,786 371,534 35.41 1,795,620 2000 2001 2002 2003 2004 Total As mentioned above, as from the Company’s initial public offering, the Company is no longer required to repurchase the shares subject to the Program, and, since the recording of the provision related to the stock option program as set forth in CVM Official Circular No. 01/2004 is no longer mandatory and is not a practice adopted by publicly-traded companies in Brazil, the amount of R$9,564 related to this provision was reversed as of June 30, 2004, against the administrative expenses account, in the amount of R$2,578, and retained earnings, in the amount of R$6,986. The amount of R$6,986 recorded in the retained earnings account is due to the fact that the provision was originated in the company Natura Participações S/A and received by Natura Cosméticos S/A as net assets in the merger process of March 2004, as disclosed in Note 1, and therefore had no effect on the income of Natura Cosméticos S/A. As of December 31, 2004, had the Company’s management opted to record the effects of the Program based on the intrinsic value of the options (the difference between market price as of December 31, 2004 and the option value updated according to the IPC-A) recorded over their related vesting period, the pro forma consolidated net income for the year ended December 31, 2004 would have been R$242,981, as shown below: Net income – Company Effect of plans considering maturity period Net income – pro forma 2004 300,294 (57,313) 242,981 The pro forma net income includes all estimated effects for the shareholders arising from the probable exercise of the options. As of December 31, 2004, Company’s shares was R$77.50. the market price of the the Company 21.PENSION PLAN On August 1, 2004, implemented a supplementary defined contribution plan for all employees of Natura and its subsidiaries.According to the terms of this plan, the cost is shared between the employer and the employees, so that the Company’s share is equivalent to 60% of the employee’s contribution according to a contribution scale based on salary ranges from 1.0% to 5.0% of the employee’s compensation. The plan is managed by Brasilprev Seguros e Previdência S.A. and the Company’s contributions for the year ended December 31, 2004 totaled R$1,313. through 22.FINANCIAL INSTRUMENTS a) General conditions – The Company and its subsidiaries enter into transactions involving financial instruments, all recorded in balance sheet accounts, to meet their own needs, and reduce exposure to market, currency, and interest rate risks.These risks and the respective financial instruments are managed the definition of strategies, establishment of control systems, and determination of exchange exposure limits. Temporary cash investments are mainly made at negotiated rates of return, since the Companies intend to hold these investments to redemption.These investments reflect market conditions at the balance sheet dates. Loans and financing are recorded at the contractual interest rates of each transaction. b) Exchange risk – The Company has entered into swap and forward transactions to hedge against exchange variation on its liabilities resulting from financing agreements. According to 4 0 0 2 t r o p e r l a u n n a a r u t a n 2 2 1 the Company’s policy, swap transactions must be contracted for all debts that may expose the Company to exchange risks. These transactions consist of swaps between two variable rates: foreign currency and CDI (interbank deposit rate). As of December 31, 2004 and 2003, the Company had swap and forward transactions with financial institutions in the amounts of R$74,007 and R$65,558, respectively. These transactions generated losses of R$6,138 and R$9,012 respectively, recorded in current liabilities. The exchange exposure is substantially indexed to the U.S. dollar. The Company and its subsidiaries do not have derivative financial instruments. c) Interest rate risk – The Company and its subsidiaries are exposed to fluctuations in the long-term interest rate (TJLP) due to the financing agreements entered into with the BNDES. d) Fair values – As of December 31, 2004 and 2003, the fair values of cash and banks, temporary cash investments, and accounts receivable and payable approximate the amounts recorded in the financial statements due to their short term. The fair values of loans and financing substantially approximate the amounts recorded in the financial statements since these financial instruments have variable interest rates. As of December 31, 2003, the fair values of debentures were equivalent to those recorded in the financial statements, since the Company had the option to pay these debentures at any moment at book value. As mentioned in Note 18, in March 2004, as part of the corporate restructuring, the debentures were transferred to the Company’s shareholders’ equity. The book and fair values of swap and forward transactions are as follows: Consolidated 2004 2003 Book value Fair value Book value Fair value 6,138 6,494 9,012 6,783 Swap and forward transactions e) Credit risk – The Company’s sales are made to a large number of beauty consultants. The Company manages the credit risk through a strict credit granting process. 23.INSURANCE The Company and its subsidiaries contract insurance based principally on risk concentration and significance, at amounts considered by management to be sufficient, taking into consideration the nature of its activities and opinion of its insurance advisors. As of December 31, 2004, the insurance coverage was as follows: Items Coverage Industrial complex / inventories Vehicles Loss of profits Any material damages to buildings, installations and machinery and equipment Fire, theft and collision for 816 vehicles Nonrealization of profits arising from material damages to installations, buildings and production machinery and equipment Insured amount 384,862 16,891 558,270 4 0 0 2 t r o p e r l a u n n a a r u t a n 3 2 1 Statements of Cash Flows for the years ended december 31, 2004 and 2003 (in thousands of Brazilian reais – R$) CASH FLOWS FROM OPERATING ACTIVITIES Net income Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization Monetary and exchange variations, net Reserve for losses on swap contracts Reserve for contingencies Reserve for obsolete inventories Other reserves Deferred income and social contribution taxes Disposal of permanent assets Debentures participation, net of taxes Minority interest (INCREASE) DECREASE IN ASSETS Current assets: Accounts receivable Inventories Other ativos Long-term assets: Escrow deposits Other receivables Subtotal INCREASE (DECREASE) IN LIABILITIES Current assets: Suppliers Payroll and related charges Taxes payable Other payables Long-term liabilities: Other payables Subtotal NET CASH PROVIDED BY OPERATING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property, plant and equipment Investments NET CASH USED IN INVESTING ACTIVITIES CASH FLOWS FROM FINANCING ACTIVITIES Decrease in current and long-term loans Payment of dividends Payment of interest on capital Payment of debentures Sale of treasury shares NET CASH USED IN FINANCING ACTIVITIES Merger of Natura Empreendimentos S.A. and Natura Participações S.A. net assets NET INCREASE IN CASH AND BANKS Cash and banks at beginning of year Cash and banks at end of year CHANGE IN CASH AND BANKS SUPPLEMENTARY CASH FLOW DISCLOSURE Income and social contribution taxes paid Interest paid on loans and financing Swap contracts paid 4 0 0 2 t r o p e r l a u n n a a r u t a n 4 2 1 Consolidated 2004 2003 300,294 63,884 34,340 7,353 4,243 33,052 7,007 1,420 (9,634) 1,828 5,743 (1) 385,645 (68,455) (49,715) 532 (9,073) 115 (126,596) 19,099 21,691 (20,705) 8,517 (1,448) 27,154 286,203 (76,886) (6,179) (83,065) (9,130) (130,003) (11,403) - 630 (149,906) 42,269 95,501 136,111 231,612 95,501 33,673 (14,076) 36,581 16,551 588 2,762 (3,528) 1,596 102,170 (60) 240,141 (23,042) (5,406) 1,304 (11,296) 3,934 (34,506) 4,417 8,498 6,183 (21,769) (1,432) (4,103) 201,532 (23,891) - (23,891) (82,458) (9,103) (3,292) (4,080) - (98,933) - 78,708 57,403 136,111 78,708 84,378 12,061 9,170 13,468 9,657 8,134 Statements of Value Added for the years ended december 31, 2004 and 2003 (in thousands of Brazilian reais – R$) REVENUES Sales of goods, products and services Allowance for doubtful accounts - reversal/recognition Nonoperating INPUTS PURCHASED FROM THIRD PARTIES Cost of sales and services Materials, energy, outside services and other GROSS VALUE ADDED RETENTIONS Depreciation and amortization VALUE ADDED GENERATED BY THE COMPANY VALUE ADDED RECEIVED IN TRANSFER Financial income TOTAL VALUE ADDED TO BE DISTRIBUTED DISTRIBUTION OF VALUE ADDED Payroll and related charges Taxes and contributions Financial expenses and rents Debentures participation Dividends Interest on capital Minority interest Retained earnings* * Excludes unrealized profit from subsidiaries. Consolidated 2004 2,509,073 2,533,614 (23,673) (868) (1,365,906) (852,405) (513,501) 1,143,167 (34,340) (34,340) 1,108,827 35,414 35,414 1,144,241 (1,144,241) (247,291) (547,804) (41,675) (7,178) (186,910) (29,442) 1 (83,942) 100% 21% 48% 4% 1% 17% 2% 0% 7% 2003 1,879,961 1,904,835 (26,329) 1,455 (942,240) (555,757) (386,483) 937,721 (33,673) (33,673) 904,048 34,339 34,339 938,387 (938,387) (177,783) (502,084) (66,987) (127,709) (23,668) (10,049) 60 (30,167) 100% 19% 53% 7% 14% 3% 1% 0% 3% Supplementary information on the statements of value added: Of the amounts recorded under "Taxes and contributions" in 2004 and 2003, the amounts of R$296,892 and R$224,160, respectively, refer to ICMS (state VAT) under the taxpayers' substitution regime levied on the estimated profit margin defined by the State Finance Secretariats obtained from sales made by Natura beauty consultants to final consumers. In order to analyze this tax impact on the statements of value added, these amounts should be deducted from the amounts recorded under "Sales of goods, products and services" and "Taxes and contributions", since sales revenues do not include the estimated profit attributable to Natura beauty consultants upon the sale of products, in the amounts of R$1,059,324 and R$795,764 in 2004 and 2003, respectively, considering an estimated profit margin of 30%. 4 0 0 2 t r o p e r l a u n n a a r u t a n 5 2 1 Independent Auditors’ Report To the Board of Directors and Shareholders of Natura Cosméticos S.A. São Paulo - SP 1. 1.We have audited the accompanying individual (Company) and consolidated balance sheets of Natura Cosméticos S.A. and subsidiaries as of December 31, 2004 and 2003, and the related statements of income, changes in shareholders’ equity, and changes in financial position for the years then ended, all expressed in Brazilian reais and prepared under the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements. 2. Our audits were conducted in accordance with auditing standards in Brazil and comprised: (a) planning of the work, tak- ing into consideration the significance of the balances, volume of transactions, and the accounting and internal control systems of the Company and its subsidiaries, (b) checking, on a test basis, the evidence and records that support the amounts and accounting information disclosed, and (c) evaluating the significant accounting practices and estimates adopted by management, as well as the presentation of the financial statements taken as a whole. 3. In our opinion, the financial statements referred to in paragraph 1 present fairly, in all material respects, the individual and consolidated financial positions of Natura Cosméticos S.A. and subsidiaries as of December 31, 2004 and 2003, and the results of their operations, the changes in shareholders’ equity, and the changes in their financial positions for the years then ended in conformity with Brazilian accounting practices. 4. The supplementary information contained in Attachments I and II, referring to the statements of cash flows and value added, respectively, is presented for purposes of additional analysis and is not a required part of the basic financial state- ments.This information was audited by us in accordance with the auditing procedures mentioned in paragraph 2 and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. 5. The accompanying financial statements have been translated into English for the convenience of readers outside Brazil. São Paulo, February 4, 2005 DELOITTE TOUCHE TOHMATSU Auditores Independentes CRC 2 SP 011609/O-8 EDIMAR FACCO Engagement Partner CRC 1 SP 138635/O-2 4 0 0 2 t r o p e r l a u n n a a r u t a n 6 2 1 Credits Editorial Council: Antonio Luiz da Cunha Seabra, Guilherme Peirão Leal, Pedro Luiz Barreiros Passos, Alessandro Giuseppe Carlucci, José David Vilela Uba, Itamar Correia da Silva, Philippe Joseph Pommez and Rodolfo Witzig Guttilla Publication and Coordination: José David Vilela Uba, Senior Executive – Finance and Investor Relations, and Rodolfo Witzig Guttilla, Executive Director – Corporate Affairs and Government Relations Editorial Coordination: Cynthia Rosenburg, Corporate Communications Department, Karen Cavalcanti and Juliana Nappo, Institutional Department Writing of Texts: Antonio Felix, José Paulo Kupfer, Mauricio Lara and Renato Modernell Interviews: Museu da Pessoa (Museum of the Person) Survey and Determination of Indicators, and Support for the Identification of Content: Nelmara Arbex, Corporate Responsibility Department Translation into English: Maria Emilia Guttilla Art Director: Wilson Spinardi Junior, Modernsign Design e Inovação Art Editor: Rogério de Stacchini Trezza, Modernsign Design e Inovação Printing: Litokromia Natura’s team responsible for the determination and provision of indicators and for the provision of the information in this report: Alan Nascimento, Alesandra Quintão, Alessandro Carlucci, Alessandro Mendes, Aline de Oliveira, Ana Luiza Nossar, André Battaglia, Antonio Siqueira, Antonio Youssef, Áureo de Almeida, Camila Fornazari, Camila Souto, Carmen Nascimento, Carolina Pulizzi, Caroline Moreira, Claudia Falcão, Cláudia Granato, Cláudio Souza, Cristiane Barbosa, Cristiane de Moraes, Cristina Liberado, Cynthia Rosenburg, Daniela Galli, David Uba, Denise Asnis, Diana Sonobe, Ednalva Moreira, Eduardo Luppi, Elaine Lemes, Elenilza Amorim, Eliane dos Anjos, Eliane Munford, Elizabete Vicentini, Euclydes Filho, Fabiana de Almeida, Fernando Oliveira, Flavia Motta, Flávio Pesiguelo, Franci Sérgio Koja, Frederico Bandini, Gabriela Scannapieco, Georgia Bernardes, Gerardo Iglesias, Gilberto Batistão, Gisela Toledo, Gislaine Lima, Giuliana Ortega, Hector Avedaño, Indramara Albuquerque, Isabel Ferreira, Itamar Correia da Silva, Janice Casara, Jean Gesztesi, Jorge Leyton, José Carlos Dias, Juan Rivadeneyra, Júlia Gianzanti, Juliana Fullmann, Juliene Piniano, Karen Cavalcanti, Karina Aguilar, Kyioco Kondo, Laura Gambeta, Leandro Machado, Lídia Pinto, Liliane Lima, Luciana Villa Nova, Lucilene Prado, Luiz Carlos, Luiz Foggetti, Luiza Cruz, Malu Garcia, Marcel Goya, Marcelo dos Santos, Marcelo Soderi, Márcio Mansur, Marcio Tomoyosi, Marcos Bianchi, Maria Amélia de Moraes, Maria Isabel Diniz Luz, Maria Rosa Meira, Marie Ywasaki, Mario de Oliveira, Maurício Bellora, Moacir Salzstein, Mônica Gianotti, Mônica Gregori, Mônica Ogando, Natali Lima, Nelmara Arbex, Nivaldo Pizzinato, Olívia Hirakawa, Pedro Villares, Plínio Yasbek, Renata Sbardelini, Renato Wakimoto, Ricardo Capella, Ricardo Dessen, Ricardo Yoshida, Roberto Zardo, Rodolfo Guttilla, Rodrigo Onias, Rodrigo Roux, Rosana Pistoresi, Rosangela Brandão, Rosemeire Áquila, Sebastião Sampaio Alves, Sérgio Delarcina, Simoni Chitarra, Solange Rubio, Sônia Tuccori, Sophia Ribeiro, Soraia Pena, Stêfania Valle, Susy Yoshimura, Tarcila Chiodin, Teresa Chiocchetti, Vinícius Dalben, William Lussier, Wilson Ergonomista,Yve Muniz Photography: 1st cover and 4th cover: Arnaldo Pappalardo; Fold-over flap of the 1st cover: Eduardo Simões; Page 1: Arnaldo Pappalardo; Page 2: Eduardo Simões; Pages 6 and 7: Composition of photos by Arnaldo Pappalardo (Brazil nut and mother and daughter),Willy Biondani (beach) and Matthieu Belin; Pages 12 and 13: Eduardo Simões; Page 15: Arnaldo Pappalardo; Pages 18 and 19: Eduardo Simões; Page 21: Arnaldo Pappalardo; Pages 26 and 27: Eduardo Simões; Pages 29 to 33: Eduardo Simões; Pages 35 to 37: Arnaldo Pappalardo; Pages 38 and 39: Eduardo Simões; Page 41: Arnaldo Pappalardo; Pages 44 and 45: Arnaldo Pappalardo; Page 46: Rafael Quintino; Pages 48 and 49: Eduardo Simões; Page 51: Willy Biondani; Page 55: Composition of photos by Pedro Martinelli (extractivist reserve) and Arnaldo Pappalardo; Page 60: Publicizing Photos; Page 62: Willy Biondani; Pages 64 and 65: Eduardo Simões; Page 70: Arnaldo Pappalardo; Page 80: Arnaldo Pappalardo; Page 89: Arnaldo Pappalardo; Page 127: Arnaldo Pappalardo. Monotypes on Photos by: Willy Biondani (pages 10-11, 14, 34 and 106); Bob Wolfenson (1st cover and pages 8-9); Marcos Suguio (pages 28-29 and 108); Matthieu Belin (pages 3, 4 and 40); Pedro Martinelli (4th cover and pages 20 and 50); Roberto Linsker (pages 66 and 76). This report was printed using GillSans typeface on Reciclato paper 240 g/sq. m for the cover and Reciclato paper 150 g/sq. m for the pages.This publication is made up of 7,000 issues in Portuguese, 1,500 in English and 500 in Spanish. The monotypes, a printing process that originates a single copy, were done by Rogério Trezza and Wilson Spinardi Junior on photos by various photographers. Sao Paulo, 2005. Natura Brasil Natura Cosméticos S.A. Rod. Régis Bittencourt, km 293 - s/nº CEP 06882 700 - Itapecerica da Serra - SP Tel. (55 11) 4147 8300 Fax (55 11) 4147 8636 Indústria e Comércio de Cosméticos Natura Ltda. Rod. Anhanguera, km 30,5 - s/nº CEP 07750 000 - Cajamar - SP Tel. (55 11) 4446 2000 Fax (55 11) 4446 2093 Centro de Distribuição - Matias Barbosa Rodovia BR 040, km 800, Lote 5 Bairro Empresarial Parque Sul CEP 36120 000 - Matias Barbosa - MG Tel./Fax (55 32) 3273 2766 bemestarbemestarbem Centro de Distribuição - Uberlândia Rua Ignês Favato, 301, Distrito Industrial CEP 38402 340 - Uberlândia - MG Tel. (55 34) 3222 8202 Fax (55 34) 3232 2126 Natura Argentina Av. del Libertador, 1295 - 1º piso Vicente López (1638) Capital Federal - Argentina Tel. (54 11) 4837 6100 Fax (54 11) 4837 6005 Natura Chile Ricardo Lyon, 222 of 201 Providencia - Santiago - Chile Tel. (56 2) 620 9200 Fax (56 2) 620 9230 Natura Peru Av. Del Ejército, 801 Miraflores - Lima 18 - Peru Tel. (511) 440 1362 Fax (511) 440 1362 ex. 275 Natura Europa 2, carrefour de La Croix-Rouge Saint Germain de Prés 75006 - Paris - France Tel. 33 (0) 1 42 22 12 59 Fax 33 (0) 1 45 48 45 54 Natura Brasil Indústria e Comércio de Cosméticos Natura Ltda. Rod. Anhanguera, km 30,5 - s/nº CEP 07750 000 - Cajamar - SP Tel. (55 11) 4446 2000 Fax (55 11) 4446 2093 Natura Cosméticos S.A. Rod. Régis Bittencourt, km 293 - s/nº CEP 06882 700 - Itapecerica da Serra - SP Tel. (55 11) 4147 8300 Fax (55 11) 4147 8636 Centro de Distribuição - Matias Barbosa Rodovia BR 040, km 800, Lote 5 Bairro Empresarial Parque Sul CEP 36120 000 - Matias Barbosa - MG Tel./Fax (55 32) 3273 2766 bemestarbemestarbem Centro de Distribuição - Uberlândia Rua Ignês Favato, 301, Distrito Industrial CEP 38402 340 - Uberlândia - MG Tel. (55 34) 3222 8202 Fax (55 34) 3232 2126 Natura Argentina Av. del Libertador, 1295 - 1º piso Vicente López (1638) Capital Federal - Argentina Tel. (54 11) 4837 6100 Fax (54 11) 4837 6005 Natura Chile Ricardo Lyon, 222 of 201 Providencia - Santiago - Chile Tel. (56 2) 620 9200 Fax (56 2) 620 9230 Natura Peru Av. Del Ejército, 801 Miraflores - Lima 18 - Peru Tel. (511) 440 1362 Fax (511) 440 1362 ex. 275 Natura Europa 2, carrefour de La Croix-Rouge Saint Germain de Prés 75006 - Paris - France Tel. 33 (0) 1 42 22 12 59 Fax 33 (0) 1 45 48 45 54 Teresa Testino Maria Aparecida Sousa Ladilas Robert Verónica Saez Cybele Amado Delbanor Mello Viana Fernanda Inouye Miura 12 18 26 32 38 48 64 bemestarbemestarbem bemestarbemestarbem 4 0 0 2 t r o p e r l a u n n a a r u t a n bem estar bem www.natura.net 4 0 0 2 t r o p e r l a u n n a a r u t a n Message from the Board 2 Reason for Being 8 Vision and Beliefs 10 Company Profile 14 Methodology and Main Indicators 20 Corporate governance and Capital Markets 28 Risk Management 34 Economic and Financial, Social and Environmental Results 40 Quality of Relationships 50 Highlights of Investments in Corporate Responsibility 66 Economic, Environmental and Social Indicators – GRI 76 Index – GRI 106 Financial Statements 108
Continue reading text version or see original annual report in PDF format above