Natura &Co Holding S.A. Annual Report 2010

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FY2010 Annual Report · Natura &Co Holding S.A.

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1. WHAT WE BELIEVE IN

3 Reason for being
3 Vision
3 Beliefs
4 Culture drivers

2. OUR MOMENT

3. WHAT WE AIM FOR

4. WHO WE WORK WITH

5. WHAT FOOTPRINT WE LEAVE

5 Message from the Chairmen
7 Message from the Executive Committee
9 Organizational proﬁ le

15 Our commitments
17 Governance
25 Natura Management System

26 Outlook and strategy
29 High-priority sustainability topics
35 Innovating innovation
38 Collective construction

39 Quality of relationships
44 Employees
53 Consultants and NCAs
59 Consumers
61 Suppliers
64 Supplier communities
68 Surrounding communities
71 Shareholders
73 Government

79 Natura value chain
80 Creation of environmental value
93 Creation of social value
99 Creation of economic value

6. ATTACHMENTS

104 Financial Statements
135 DNV Statement
138 About This Report
139 Global Compact Principles
140 GRI Index

1. WHAT WE BELIEVE IN

REASON
FOR BEING

Our Reason for Being is to create and sell
products and services that promote well-
being/being well.

WELL-BEING
is the harmonious and pleasant relationship
of a person with oneself, with one’s body.

BEING WELL
is the empathetic, successful, and gratifying
relationship of a person with others,
with nature, and with the whole.

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, identiﬁ ed with the community
of people who are committed to
building a better world, based on
better relationships with themselves,
with others, with nature of which they
are part, and with the whole.

BELIEFS

Life is a chain of relationships. Nothing
in the universe exists alone. Everything
is interdependent.

We believe that valuing relationships
is the foundation of an enormous human
revolution in the search for peace, solidarity,
and life in all of its manifestations.

Continuously striving for improvement
develops 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 the whole system.

The search for beauty, which is the
genuine aspiration of every human being,
must be free from 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.

CULTURE DRIVERS

THE CULTURE DRIVERS ARE BASED ON OUR
ESSENCE, AND WERE CREATED TO GUIDE OUR
CHOICES AND ATTITUDES. THEY ARE LIKE TRACKS,
TRACING A CONCRETE ROUTE AND SIGNALING
WHAT DESERVES OUR SPECIAL ATTENTION IN OUR
DAY-TO-DAY WORK.

THE DRIVERS WERE FORMED IN A COLLABORATIVE
PROCESS
INVOLVING THE FOUNDERS OF THE
COMPANY, THE MEMBERS OF THE EXECUTIVE
COMMITTEE, AND THE LEADERSHIP TEAM. WE
ALSO TOOK INSPIRATION FROM THE CULTURE
DIALOGUES, WHICH WERE HELD IN 2009 WITH
150 EMPLOYEES FROM THE ADMINISTRATIVE,
OPERATIONAL, AND SALES STAFFS. THE CULTURE
DRIVERS ARE:

COMMITMENT TO THE TRUTH
Be authentic and steadfast, making this
commitment to oneself and to others.
Defend what you believe and act consistently
with one’s beliefs.

LOOKING AFTER RELATIONSHIPS
Doing things together is better if one opens up
to others with generosity and empathy, creating
an environment of trust with quality interaction.
Recognize that others are different from you,
listen without judging, respect others’ opinions,
welcoming disagreements in order to ﬁ nd the
best outcome for everyone.

CONTINUOUS IMPROVEMENT
Always strive to improve, moving forward in
all dimensions: material, emotional, intellectual,
and spiritual.
Continuously seek to know oneself, recognizing
one’s talents and limitations.
Create an environment that fosters learning
and continuous improvement and that
recognizes high performance.

DOING THINGS WELL
Resolve to do everything with simplicity, but also
with beauty, quality, and with an eye for detail.
Have the discipline to deliver what was promised.

INNOVATION
Be an entrepreneur, take a leading role, do what
has never been done before, and take risks.
Continually question the status quo and
encourage the search for new ideas.

SUSTAINABLE DEVELOPMENT
Constantly deliver superior results and relevant
value in the economic, social, and environmental
dimensions.
Manage the short term with a commitment to
building the future of the company.

PLEASURE AND HAPPINESS
Face day-to-day challenges with optimism,
composure, and good spirit.
Celebrate achievements, fueling the enthusiasm
and energy that encourage us to move forward,
to do more, and to do it better.
Find fulﬁ llment in your work and afﬁ nity with your
life purpose by ﬁ nding meaning in everything you do.

2. OUR MOMENT

W E A R E
CONNECTED
TO THE PEOPLE AND THE
CHALLENGES OF OUR TIME.
WE WORK TOWARDS THE
P E R M A N E N T
E V O L U T I O N
O F O U R AC T I V I T I E S A N D
THEIR IMPACT ON THE THE
C O M M U N I T I E S
THAT WELCOME US.

2.1MESSAGE FROM
THE CHAIRMEN

IN A REAL SENSE,
A L L O F L I F E I S
I N T E R R E L A T E D.
A LL PERSO NS A RE C AU GHT IN
A N I N E S C A PA B L E N E T W O R K
O F M U T U A L I T Y, T I E D I N A
S I N G L E G A R M E N T O F D E S T I N Y.
WHATEVER A F F E C T S O N E
D I R E C T L Y, A F F E C T S A L L
INDIRECTLY. I CAN NEVER BE WHAT I
OUGHT TO BE UNTIL YOU ARE WHAT
YOU OUGHT TO BE, AND YOU CAN
NEVER BE WHAT YOU OUGHT TO BE
UNTIL I AM WHAT I OUGHT TO BE.
THIS IS THE INTERRELATED STRUCTURE

O F R E A L I T Y
.

Martin Luther King

License granted by Intellectual Properties
Management, Inc., Atlanta, Georgia, as
exclusive licensor of the Estate of
Dr. Martin Luther King, Jr.

THE POWER OF
TRANSFORMATION

INDIVIDUALS, COMPANIES, AND NATIONS NEED A GUIDING FORCE. AN OBJECTIVE. AN
IDEAL. WE STILL USED TO HEAR, WHEN WE FOUNDED NATURA, STRONG ECHOES OF
THE MESSAGE, THE DREAMS AND THE UTOPIAS OF MARTIN LUTHER KING, AND WE
WERE ALSO DRIVEN BY A PURPOSE THAT SEEMED UNATTAINABLE.

Since then, the determination to build our company has been nurtured by the dream of building
a better world. Like Martin Luther King, we are convinced that life makes sense only if we think,
feel, and act in a systematic way.

We are now observing the clash of sometimes opposing forces. Exacerbated individualism seek-
ing only to maximize material values coexists with the growth of a vision focused on the collective
interest. Actions and greater awareness concerning the socio-environmental cause are revealing
examples of the emergence of a change in the direction of civilization. We must therefore mobilize
society to build an agenda of transformation.

Over the years, it has become increasingly clear that if this agenda is to ﬂ ourish, it must be lived
by all those who make Natura what it is and – so we aspire – by those with whom we relate. We
live this objective intensely, aware of the fact that in the world there are those who have been
excluded, there is prejudice, social inequality, corruption.. In other words, shadows that engender
indignation and demand immediate action, as they are an affront to the ethics of life, justice and
the possibility of peace.

The individualist vision may consider it naïve for a company to have an ideal that recognizes the need
for societal change. With all due respect for those who have a different opinion, we believe we must
take into account the world that surrounds us. Looking back at our history — beginning with the
dream that is, little by little, blossoming into a tangible reality — we know we can be successful. And
the progress we have made at Natura shows that we have made the right choices.

In 2008, we began to prepare our business structure for future development. At that time, we took
steps to strengthen the foundation of our organizational culture, align our leadership more closely
with our Essence, develop a new management system, redesign our logistics model, and concentrate
on expanding our market share in Latin America and building our leadership position in Brazil.

The future holds both opportunities and challenges. We are aware of the tougher competitive
environment and remain conﬁ dent in our strengths. These include a strong brand that inspires our
consumers, who are now served by 1.2 million sales consultants, both male and female; our renewed
management abilities; and our ability to innovate — which is apparent in everything we do, from
promoting quality in our relationships to transforming biodiversity assets into products.

We would like to express our acknowledgement of the motivated and talented leadership team that
carried out this process and which is now channeling its energy into pursuing the plans to expand
our activities. We would also like to extend our gratitude to the entire Natura community for its
effort and engagement in our common causes.

The collective energy of our leadership and all of those with whom we work will power the ex-
pansion of this movement. We believe we can contribute to meeting the challenges of the future
through our willingness to ﬁ nd solutions that transform socioenvironmental dilemmas into sustain-
able business opportunities, while generating prosperity for everyone.

This, Natura’s historical calling, makes our value proposition even more attractive, thus enabling
us to set our sights beyond the current borders and to see our brand transforming even more
distant realities.

ANTONIO LUIZ DA CUNHA SEABRA

PEDRO LUIZ BARREIROS PASSOS

Co-Chairmen of the Board of Directors

2.2 MESSAGE FROM THE

EXECUTIVE COMMITTEE

NATUR A IS IN A POSITION TO
RESPOND TO THE CHALLENGES
OF THESE NEW TIMES. OUR
CONFIDENCE STEMS
FROM OUR CONTINUED ROBUST
PERFORMANCE IN RECENT YEARS.
IN 2010, WE WERE DELIGHTED
T O R E P O R T S T R O N G
E A R N I N G S — E V E N A S W E
C O N T I N U E D TO E X E C U T E T H E
P L A N B E G U N I N 2 0 0 8 T H AT I S
I N T E N D E D TO M A I N TA I N O U R
PA C E O F G R O W T H I N
BRAZIL AND ESTABLISH BASES FOR
FUTURE E XPANSION.

COMMITMENT
TO THE FUTURE

ALTHOUGH SOME OF OUR INITIATIVES ARE STRUCTURAL AND REQUIRE MORE TIME IN
ORDER TO MATURE, OUR ENTHUSIASM IS FUELED, BY THE KNOWLEDGE THAT WE HAVE
ACHIEVED ALL OF OUR INITIAL OBJECTIVES.

We saw yet another year of vigorous business expansion. Consolidated net revenues rose 21.1%, and
EBITDA was up 24.6%. We took on more sales consultants in all of our operations. Latin America is
a fertile market for business expansion and is increasingly important to our ability to grow. To meet
our expansion plans in the region, we initiated local production through partnerships in Argentina,
Colombia, and Mexico. In Brazil, Natura made strong gains, reaching a preference rate of 49% among
consumers. We expanded our leadership position by 1.1 percentage points, reaching a 23.6% share of
our target market. We created and distributed more value to all of our major stakeholders. And we
mobilized the business sector around the topic of biodiversity and reduced the environmental impact
of our products.

Not everything turned out as we had planned. Despite these advances, we still have progress to make
in the level of service we provide to our consultants. Nevertheless, we are conﬁ dent that the invest-
ments we have made in our infrastructure will raise our level of service to the standard we desire.
Despite our efforts, we also failed to achieve the results we had hoped for in organizational climate,
which were below the progress expected. However, we are convinced that we have taken the right
steps to improve the quality of our relationships with our employees. Because this is such an impor-
tant issue for Natura, we are redoubling our efforts to raise these stakeholders’ level of satisfaction.

The plan we put in place in 2008 included initiatives that have both an immediate impact and long-
term impacts. Several of these measures have contributed to our current results: innovation in our
business model with the establishment of Natura Consultant Advisers (NCA); concentrating our
portfolio on important product launches, such as the Una make-up range, Amó perfume, and Chro-
nos anti-aging facial cream; and greater investment in marketing and communications through an ad-
ditional injection of R$410 million, enabled by productivity gains of R$449 million.

We also undertook longer-lasting actions. We implemented a new process-based management model
structured around business units and regions; we refreshed our organizational culture, focusing on
developing and attracting leaders who are aligned with our Essence; we set the pace for managing the
quality of our relationships by expanding engagement practices; and we invested in our infrastructure,
upgrading our production, logistics, and information technology capabilities to improve services.

Concurrently, we turned our gaze to a more distant horizon and built our 2030 Vision. This is a long-
range commitment to strengthening Natura’s future while alerting us to the challenges and uncertain-
ties of a world in rapid transformation. It reiterates our intention to create sustainable results and to
contribute to a fairer, more inclusive and more responsible society.

Many of the events of 2010 have a common thread: enthusiasm for a project that imbues us with new
energy at every cycle of achievement. We wish to thank all of you who have been so dedicated in your
support for Natura. By working together, we will achieve innovative solutions that transform the busi-
ness challenges of the next 20 years into development opportunities that beneﬁ t society as a whole.

ALESSANDRO CARLUCCI
Chief Executive Ofﬁ cer

JOÃO PAULO FERREIRA
Senior Vice President
of Supply Chain

JOSÉ VICENTE MARINO
Senior Vice President
of Sales and Marketing

MARCELO CARDOSO
Senior Vice President of
Organizational Development
and Sustainability

ROBERTO PEDOTE
Senior Vice President of Finance,
Legal Affairs, and Information
Technology

TELMA SINICIO
Senior Vice President of Innovation

2.3

ORGANIZATIONAL
PROFILE

THROUGH OUR PRODUCTS AND
SERVICES, WE SEEK TO ENCOURAGE SELF-
AWARENESS AND PROMOTE WELL-
BEING WELL. WE ASPIRE TO PROVIDE
CONSUMERS WITH NEW WAYS OF
ESTABLISHING RELATIONSHIPS WITH
THEMSELVES, WITH THOSE AROUND
T H E M , A N D W I T H T H E WO R L D.

We are a Brazilian cosmetics, fragrances and personal care company with a strong presence in Latin America.
Since our founding in 1969, we have built a culture that values relationships. Our corporate behavior is focused
on promoting sustainable development by improving awareness about responsible and innovative use of bio-
diversity assets. We strive to create value through solutions and new opportunities that we identify in partner-
ship with our stakeholders — always with an eye to ﬁ nding a balance between the social, environmental, and
economic impacts of our business.

We have adopted a direct sales business model because we believe in our ability to generate and distribute
income, offer development alternatives and inspire more than 1.2 million sales consultants to disseminate our
value proposition to our consumers.

Natura directly employs more than 7,000 professionals. Our head ofﬁ ce is in Cajamar, state of São Paulo, and
we have ﬁ ve commercial ofﬁ ces in Brazil: Salvador (Bahia), Campinas and Alphaville (São Paulo), Rio de Janeiro
(Rio de Janeiro), and Porto Alegre (Rio Grande do Sul). Our plants and Research and Technology centers are
located in Cajamar (São Paulo) and Benevides (Pará), and in 2006, we opened an Advanced Technology Center
in Paris, France. In Brazil, our products are delivered to our consultants and consumers from distribution centers
in Cajamar and Jundiaí (São Paulo), Canoas (Rio Grande do Sul), Matias Barbosa and Uberlândia (Minas Gerais),
Simões Filho (Bahia), Jaboatão dos Guararapes (Pernambuco), and Castanhal (Pará).

We have company-owned operations in France, Argentina, Chile, Colombia, Mexico, and Peru. In addition, we
use local distributors to sell our products in Bolivia, Guatemala, Honduras, and El Salvador. In 2010, we began
manufacturing in Argentina through local partnerships. We also have Natura Houses, which are centers where
our consultants can work and train and where consumers can get to know our products. We have seven of
these in Brazil, all in the state of São Paulo, 14 elsewhere in Latin America, and one in France.

We have been a publicly traded company since 2004, with about 40% of our shares listed on the New Market of
the São Paulo Stock Exchange (BM&FBovespa). For ﬁ ve consecutive years, we have been included in Bovespa´s
Corporate Sustainability Index (CSI) (learn more on page 71, Shareholders).

MAIN HIGHLIGHTS OF THE YEAR

ECONOMIC

¾ Our net revenues totaled R$5.1 billion, a growth of 21.1%.

¾ We recorded EBITDA of R$1.2 billion, up 24.6% from the previous year, and an EBITDA margin

of 24.5%, compared with 23.8% in 2009.

¾ We achieved net income of R$744.1 million, 8.8% above the previous year.

¾ We distributed more wealth to our stakeholders. The wealth generated to our employees increa-

sed 20%, for our consultants 19% and for our shareholders 17%.

¾ International manufacturing began through partnerships in Argentina. In 2011, we will begin

operations in Mexico and Colombia.

SOCIAL

¾ Natura had 1.2 million consultants at the end of 2010. This represents a growth of 17% in Brazil

and of more than 20% in our international operations.

¾ The Natura Crer para Ver (Believing Is Seeing) program, which invests in education, received a
record R$10 million in funding, 168% more than in 2009. Funding is based on sales of speciﬁ c
items in our portfolio. Revenues from sales of these items outside of Brazil totaled R$1.3 million.

¾ Although progress has been made, the quality of the service we provide to consultants has not yet
reached the level we desire. We continue working to reduce our nonservice rate (NSR), which
keeps track of products that are ordered by consultants but are unavailable.

¾ The survey on working climate generated a 73% overall favorable response rate from our
employees, one percentage point below 2009. Declines in ratings in our international operations
and among operational staff in Brazil contributed to this decrease.

¾ The loyalty of our consultants in Brazil rose from 17% to 21%, but declined among Natura Con-

sultant Advisers, from 37% to 32%.

ENVIRONMENTAL

¾ We extended the period for achieving a 33% reduction in our relative greenhouse gas emissions

to 2013. The original target date was 2011. By 2011, our reduction was 21%

¾ We launched the ﬁ rst reﬁ ll packaging made of polyethylene from sugar cane, a renewable source
of energy. In addition to being 100% recyclable, it reduces greenhouse gas emissions that cause
global warming by 58% compared with common plastic.

¾ We reduced relative water consumption by 10%, thanks to improvements that are intended

to guarantee efﬁ cient use of resources.

¾ We created a methodology that measures the socioenvironmental impacts of our supply chain,

in an effort to improve the selection of our suppliers.

¾ We were charged by the Brazilian Institute of the Environment and Renewable Natural Resources
(Ibama) for failing to secure prior authorization to conduct research using inputs from Brazilian
biodiversity. Natura does not agree with the procedure and has formally contested these charges.

AWARDS AND RECOGNITIONS RECEIVED BY NATURA IN 2010

CUSTOMER SERVICE

Recognition

Organization

Category Awarded

Top 25 Companies in Customer
Service in the Country

IBRC/Exame

Top Companies in Customer
Service in the country

Cosmetics Industry Ranking

COMMUNICATION

Recognition

Comunique-se

FINANCE

Recognition

Top 100 Shares

Organization

Category Awarded

Comunique-se Magazine

Corporate Communication Professional: Rodolfo
Guttilla, Director of Corporate Affairs and Government
Relations at Natura

Organization

Você S/A magazine

Category Awarded

Top 100 Shares

As Melhores da Dinheiro
(The Best of Dinheiro)

Isto É Dinheiro magazine

Best Company in the Pharmaceutical, Hygiene and
Cleaning industry

The top 1000 companies with greatest revenues
- Argentina

Mercado magazine

General Ranking

The biggest companies in Latin America

America Económica magazine

General Ranking

Agência Estado Distinguished Companies

Estado de S. Paulo

General ranking of the top 10 companies listed on
Bovespa

Valor 1000

Valor Econômico newspaper

Best Company in the Hygiene and Cosmetics industry

Place

2nd

1st

Place

1st

Place

7th

1st

120th

92nd

5th

1st

INSTITUTIONAL

Recognition

Organization

Category Awarded

Place

Most Admired - Carta Capital

Carta Capital magazine

Biggest and Best

Exame

“What is a Company Image Worth” Survey

Exame Magazine and
Reputation Institute - NY

Euromoney Ranking

Euromoney magazine

Most Admired Companies in Brazil

Most Admired Company in the Personal Hygiene
Industry

Most Admired Leader: Alessandro Carlucci

Best Company in the Consumer Goods Category

Biggest and Best Ranking

The 10 Companies in Brazil
with the Best Reputation

The Best Company in the Consumer Goods Category
in Latin America

Excellence in Corporate Management in Brazil

Image Ranking - Top 100 – Argentina

Imagen magazine

General Ranking

GRI and RCA Awards

The Bizz

INTERNET

Recognition

The GRI Amsterdam Global
Conference

The Value Chain Award

The GRI Reader’s Choice Award - Best Overall

World Confederation of
Businesses

Business Excellence

Organization

Category Awarded

Quality Standard in B2B

B2B magazine

Top of Mind Internet Award

UOL

Best Company in the Cosmetics, Hygiene and Cleaning
category

We were recognized as the most remembered Brand
by consumers on the Internet in the Beauty Products
category

BRAND

Recognition

Organization

Category Awarded

Brands for Decision Makers

Jornal do Comércio RS

Recognized as the Leading Brand in the Personal Beauty
and Hygiene industry and in Environmental Preservation

Most Valuable Brands in Brazil

Interbrand and Isto É Dinheiro

5th place in the ranking of Most Valuable Brands.

Apex Brazil Award

Apex

Best International Brand Management

IMPARAward – Preferred Brands and Regional
Afﬁ nity Index

Impar Magazine/PR

2nd place in the preference of State of Paraná in the
Perfume and Cosmetics Segment

Brazil Intangibles Award – PIB

Brand Recall Award

Grupo Padrão and Consumidor
Moderno magazine

Pioneering in Intangibles

Jornal do Commércio
Newspaper – Recife

Sustainability

Top 100 most valuable brands in Brazil

The Brander magazine/IAM

Most valuable brands in Brazil

Top of Mind

Folha de São Paulo

Most remembered brand in the category of
Environmental Preservation.

Top of Mind Successful Brands Minas Gerais

Mercado Comum magazine
(MG)

Most remembered brand in the category Leadership in
Women's Beauty Products.

Top of Mind Amanhã Magazine – Porto Alegre

Amanhã magazine

Most remembered brand in the categories Perfumes
and Sustainability

Top Vale

Vale Paraibano newspaper

Category Cosmetics & Environment

World’s Hottest Brands Advertising Age Brasil

Advertising Age

Trusted Brands

Readers’ Digest

Natura was recognized as a regional brand - Brazil South
America

Voted the most socially responsible company, Best Brand
in the category "skin creams”. In addition, the CEO
Alessandro Carlucci was named "Executive of the Year”.

1st

10th

3rd

68th

5th

1st

59th

1st

5th

1st

Place

1st

Place

1st

5th

1st

2nd

1st

48th

1st

MARKETING, PRODUCT AND PACKAGING

Recognition

Organization

Category Awarded

Place

ABRE Design and Packaging

Brazilian Packaging Association

Best Packaging for Cosmetics and Personal Care - New
Natura Chronos Line

Módulo Marketing - Best Communication Strategy Açaí
Harvest 2009

Atualidade Cosmética

Atualidade Cosmética magazine
and J.R. Paula Jr. Design

Chronos Facial Treatment

Latin American Men's Perfume: Essencial Exclusivo

Elle Beauty Awards – Mexico

Expansión Group

Best spa product

Nova Beleza Award

Nova magazine

Hair: Natura Fixplant Post Hair Straightening Anti-Frizz
Finishing Cream. Best Shampoo and Conditioner for
straight hair - Natura Smooth Plant

Chronos Facial Exfoliant

Double Action - Natura Una Lipstick

Bar soap Natura Ekos - Cupuaçu Soap for slicing

HUMAN RESOURCES

Recognition

Organization

Category Awarded

Place

HR Personality of the Year Award from ABTD/
PR

ABTD/PR

Você HR Professional of the Year Award

Editora Abril

Marcelo Cardoso was recognized as HR Personality of
the Year

Marcelo Cardoso was recognized as professional of the
Year 2009 in the Hygiene and Cleaning Industry.

HR of the Year: Marcelo Cardoso, Vice President of
Organizational Development and Sustainability

Great Place to Work - Peru

Great Place to Work Institute and
El Comércio Newspaper

Best Companies to work for in Peru

Best companies to work for Mexico

Great Place to Work

One of the best companies to work for

Company of the Dreams of Youngsters

DMRH Group and Cia de
Talentos

Awarded in the ranking of the top 10 companies in the
preference of young Brazilians

SUSTAINABILITY

Recognition

2011 Global 100

Organization

Category Awarded

Place

Corporate Knights

100 Most Sustainable Corporations in the World

ET Carbon Veriﬁ cation Leaders Award –
Environmental Investment Organization (EIO)

Carbon Disclosure Project

Global company for its strategies of control, veriﬁ cation
and dissemination of carbon emissions

1st

33rd

11th

5th

66th

1st

Global 100 Most Sustainable Corporations in
the World

Best Practices for Social Responsibility – Mexico

Corporate Knights Inc., Innovest
Strategic Value Advisors, Asset 4
and Bloomberg

Centro Mexícano para La
Filantropia (Mexican Center for
Philanthropy)

The 100 most sustainable companies in the world

99th

Best practices 2010: Bond with the community

AMCHAM Corporate Citizenship Award –
Argentina

AMCHAM Argentina

Awarded in the category Sustainability-Oriented
Management

Top 100 most sustainable corporations
according to the media

Mídia B + Portal Imprensa

Ranking Fundación Chile: Companies Best
Prepared for Climate Change

Fundación Chile and Revista
Capital

Overall Ranking

Health, Cosmetics and Cleaning - Pharmaceutical
Industry

Companies Best Prepared for Climate Change

RSE National Ranking - Chilean Socially
Responsible Companies

Fundación Prohumana and Que
Pasa magazine

Honorable Mention in Chilean Socially Responsible
Companies

RSE Ranking - Argentina

Road to Credibility

Apertura magazine

Overall Ranking

SustainAbility and FBDS

Best Sustainability Report

1st

2nd

1st

3rd

16th

1st

Top Consumer Excellence in Consumer
Relations and Respect for the Environment - Rio
Grande do Sul

INEC - National Institute for
the Consumer and Citizen and
Consumer Test

Distinguished Commitment to Sustainable Consumption

1st

INVESTOR RELATIONS

Recognition

Abrasca - Best Annual Report

Organization

Public Company

Category Awarded

Ibovespa Most Transparent Companies

BM&FBovespa

Ibovespa’s Most Transparent Companies

Top Companies for Shareholders

Capital Aberto magazine

Top Companies for Shareholders

IR Magazine BRazil Awards

IBRE – Instituto Brasileiro de
Economia and FGV – Fundação
Getúlio Vargas

Best Corporate Governance and Best Environmental
Sustainability

Place

7th

6º

1st

OPERATIONS MAP

Mexico

Colombia

France

Peru

Brazil

Chile

Argentina

COMMERCIAL OPERATIONS

PLANTS

COMMERCIAL OFFICES

DISTRIBUTION CENTERS

NATURA HOUSES

RESEARCH AND TECHNOLOGY CENTERS

OUR MARKET
Once again, the cosmetics, fragrances, and personal hygiene sector continued growing at a record pace last
year, this time, however, amid a scenario of strong expansion of Brazilian economy, estimated at 7.5% of
GDP in 2010. With less strength, but with the same consistency, the rest of Latin America — notably Chile
and Mexico — also reported increases in economic activity.

The growth of the Latin American cosmetics market was double that of Europe and the United States over
the past decade. The region now represents nearly 15% of the global cosmetics market, revealing the scale
of opportunities in Latin America.

According to data published by the Brazilian Association of the Cosmetic, Toiletry, and Fragrance Industries
(Sipatesp/Abihpec), Brazil’s target market registered a nominal growth of 13.5% in 2010. Our value pro-
position once again boosted our leadership by more than 1.1 percentage points and reached a 24% share
of our target market.

Year after year, the direct-sales industry continues to attract people. According to the Brazilian Association
of Direct Seles Companies (ABEVD), there are 2.7 million direct-sales representatives in Brazil. This repre-
sents a 12.2% increase over 2009.

2.4 OUR
COMMITMENTS

EMPLOYEES

QUALITY OF RELATIONSHIPS

O V E R T H E Y E A R S , W E H A V E
D E M O N S T R AT E D A C O M M I T M E N T TO
S T R E N G T H E N I N G O U R P E R F O R M A N C E
INDIC ATORS. THESE INDIC ATORS REFLECT
O U R W I L L I N G N E S S TO I N C O R P O R AT E
I M P ROV E D M A N AG E M E N T O F O U R
PRIORITY SUSTAINABILITY TOPICS INTO
OUR STRATEGIC PLANNING. TO LEARN
MORE ABOUT THE TARGETS OUTLINED IN
THIS TABLE, PLEASE REFER TO THE CHAPTERS
“WHO WE WORK WITH” AND “WHAT WE
AIM FOR.”

COMMITMENTS
NOT ACHIEVED

COMMITMENTS
UNDER WAY

COMMITMENTS
ACHIEVED

1. 2010 COMMITMENT: Achieve a 76%1 favorable response rate in the Natura climate survey.
NOT ACHIEVED: Natura achieved a 73% favorable response rate.

2011 COMMITMENT: Achieve a 76% favorable response rate in the Natura climate survey.

2011 COMMITMENT: Achieve a 32% loyalty rate with Natura employees.
1. Due to a calculation error, we recorded a target in the previous report a target of 77%.

EDUCATION

2. 2010 COMMITMENT: Achieve an average of 100 hours of training per employee in Brazil.
NOT ACHIEVED: We recorded an average of 90 hours of training per employee in the Brazilian operations.

2011 COMMITMENT: Record an average of 100 hours of training per employee in Brazil.
2011 COMMITMENT: Record an average of 88 hours of training in Natura’s overall average, including international operations.

SUPPLIER COMMUNITIES

QUALITY OF RELATIONSHIPS

3. 2010 COMMITMENT: Increase resources allocated to supplier communities by 44% (made up of supply, distribution of
beneﬁ ts, funding, and support, use of image, training, certiﬁ cation, studies, and assistance).
ACHIEVED: We increased resources by 57% compared to 2009.

2011 COMMITMENT: Increase resources allocated to communities by 25% from 2010.
2011 COMMITMENT: Record an average grade of 3.7 in the BioQlicar (Quality, Logistics, Innovation, Competitiveness, Ser-
vice, and Relationship) assessment.
2011 COMMITMENT: Achieve a 44% loyalty rate with supplier communities.

CONSULTANTS AND (NCAs)

QUALITY OF RELATIONSHIPS

4. 2011 COMMITMENT: Achieve an 18% loyalty rate with consultants.
ACHIEVED: We achieved a 21% loyalty rate.

2011 COMMITMENT: Record a 22% loyalty rate with consultants.

5. 2010 COMMITMENT: Achieve a 40% loyalty rate with NCAs.
NOT ACHIEVED: The loyalty rate with NCAs was 32%.

2011 COMMITMENT: Achieve a 37% loyalty rate among NCAs.

EDUCATION

6. 2010 COMMITMENT: Register the participation of 517,400 consultants in training programs.
ACHIEVED: We had the participation of 540,000 consultants in our training programs.
2011 COMMITMENT: Achieve the participation of 540,000 consultants in our training programs.

7. 2010 COMMITMENT: Raise R$6 million from the sale of products of the Crer para Ver (Believing Is Seeing) line.
ACHIEVED: We achieved record revenues of R$10 million.

2011 COMMITMENT: Record R$13 million from the sale of products of the Crer para Ver line.

8. 2010 COMMITMENT: Have 100,000 consultants engaged in the Natura Movement.
ACHIEVED: 113,100 consultants engaged in the Natura Movement.

2011 COMMITMENT: Reach 135,000 consultants engaged in the Natura Movement.
2011 COMMITMENT: Reach a 13% engagement rate among consultants in the Crer para Ver program.

2. target refers to Brazilian operations

CONSUMERS

PRODUCT IMPACT

9. 2010 COMMITMENT: Eliminate parabens from our product portfolio by December 1, 2010.
NOT ACHIEVED: Due to technical difﬁ culties related to the process, system, and formulation, we were not able to ex-
clude parabens as an ingredient in the formulation of all products in this portfolio, including in our international operations.

2011 COMMITMENT: Eliminate this ingredient completely from our portfolio by June 30, 2011.

10. 2010 COMMITMENT: Eliminate phthalates from our portfolio as an ingredient in product formulation by July 1, 2010.
ACHIEVED: Natura excluded phthalates as an ingredient in the formulation of all products in its portfolio.

QUALITY OF RELATIONSHIPS

11. 2010 COMMITMENT: Maintain the consumer loyalty rate at 46%.
ACHIEVED: We achieved a 53% loyalty rate among consumers.

2011 COMMITMENT: Maintain a 54% loyalty rate with Brazilian consumers.

SUPPLIERS

QUALITY OF RELATIONSHIPS
12. 2010 COMMITMENT: Achieve a satisfaction rate of 85% with the company.
NOT ACHIEVED: We recorded a rate of 81%, the same level achieved in 2009.

2011 COMMITMENT: Maintain a 28% loyalty rate with Natura.

ENVIRONMENT

GREENHOUSE GASES (GHGs)

13. 2010 COMMITMENT: Reduce our relative emissions of GHGs by 33% by 2011, based on the inventory conducted in 2006.
COMMITMENT UNDERWAY: As of 2010, we achieved a 21% reduction.

TARGET: The estimated 33% reduction was postponed to 2013.

14. 2010 COMMITMENT: Reduce our emissions of GHGs related to scope 1 and 2 of GHG Protocol by 10% by 2012, based
on 2008 emissions.
COMMITMENT UNDERWAY: Accumulated variation from 2008 to 2010 indicated an increase of 38%.

TARGET: Reduce our emissions of GHGs related to scope 1 and 2 of GHG Protocol by 10% by 2012, based on 2008 emissions.

PRODUCT IMPACT

15. 2010 COMMITMENT: Reach a rate of 18.5% on the sale of reﬁ lls on items billed in Brazil.
NOT ACHIEVED: We achieved a 16.9% rate of reﬁ ll sales, which represents a lower percentage compared to 2009.

16. 2010 COMMITMENT: Reduce the total weight of waste per unit billed by 6%.
NOT ACHIEVED: Our index increased by 8% to 25.7 grams per unit billed.

2011 COMMITMENT: Reduce the total weight of waste per unit billed by 3%.

17. 2010 COMMITMENT: Reduce water consumption per unit billed by 10%.
ACHIEVED: Consumption was reduced by 10%.

2011 COMMITMENT: Reduce total water consumption per unit billed by 3%.

Notes:
1.In order to have a more thorough picture of the quality of our relationship with our stakeholders, we have also adopted a loyalty index
that includes three aspects: satisfaction, intention to continue the relationship with Natura, and the recommendation of our brand, unlike the
satisfaction survey, which considers only one of these aspects. Concerning our employees, in addition to the loyalty index, we also conduct the
climate survey, which assesses more speciﬁ c issues related to the work environment, careers and job satisfaction.
2. The above indicators for quality of relations have an error margin corresponding to a 95% conﬁ dence interval.
3. Except for the favorable responses in the Climate Survey, the commitments for quality of relationships refer to the Brazilian operations.

2.5

GOVERNANCE

NATURA CORPORATE GOVERNANCE
IS PERMANENTLY ENHANCED.
W E H AV E B E E N S I G N I F I C A N T LY
FOCUSED ON THIS OBJECTIVE SINCE
2 0 0 4 , W H E N N AT U R A W E N T
PUBLIC AND LISTED ITS SHARES ON
THE SÃO PAULO STOCK EXCHANGE.

Our Board of Directors comprises six members, including two founding partners, Antonio Luiz da Cunha Seabra
and Pedro Luiz Barreiros Passos. The third founding partner, Guilherme Peirão Leal, resigned in 2010 to run as
the Green Party vice presidential candidate. Of the other four members of the Board, three are independent.

Board members are selected for their qualiﬁ cations, knowledge on sustainability, experience in executive posi-
tions, and the absence of conﬂ icts of interest. Board members’ compensation includes a ﬁ xed monthly compo-
nent and a variable annual component linked to Natura’s economic, ﬁ nancial, social, and environmental results.

We continually improve and reinforce internal controls and processes, which has enabled Natura to achieve SOX
certiﬁ cation for accounting controls and ﬁ nancial reporting. SOX certiﬁ cation is based on criteria in the 2002 U.S.
Sarbanes-Oxley Act and is required of companies listed on the New York Stock Exchange. Natura is among the
ﬁ rst Brazilian companies to obtain SOX certiﬁ cation, though this is not a Brazilian legal requirement. We believe
that an efﬁ cient control environment produces transparency in the performance of our operations, ensures that
our ﬁ nancial statements accurately present our business processes, and provides security for our stakeholders.

In an effort to acquaint Board members with the customs of the various regions where we operate, the Board
has scheduled meetings outside the company’s head ofﬁ ce. Of the six regular meetings held last year, one took
place in Rio de Janeiro in April, and another was held in Mexico in September. We will maintain this practice in
2011, holding one meeting annually in a Brazilian regional ofﬁ ce and another meeting each year in one of the
countries in which we do business.

The Board of Directors is supported by four committees: Strategy; Corporate Governance; People and Or-
ganizational Development; and Audit, Risk Management, and Finance. The latter was reorganized in December
2010, and now only external and independent members may serve on this committee. This reorganization was
intended to improve internal controls. The Audit, Risk Management, and Finance Committee is responsible for
evaluating accounting, taxes, corporate affairs, and new investments. New members who took ofﬁ ce in February
2011 receive technical support from a group of external specialists and Natura executives.

In 2010, we sought to expand the participation of individual shareholders at the Annual Shareholders’ Meeting.
We gathered 200 investors at our Cajamar unit, and they were able to follow — in real time — the sharehol-
ders’ meeting taking place at Natura’s head ofﬁ ce in Itapecerica da Serra. Through this event, investors were able
to come into closer contact with our company, its controlling shareholders, and executives (learn more on page
71 – Shareholders).

Since 2007, Natura has been a member of the Company Circle of Latin American Corporate Governance,
which consists of a group of Latin American corporations selected by the International Financial Corporation of
the World Bank based on the quality of their governance practices.

BOARD OF DIRECTORS

PEDRO LUIZ BARREIROS PASSOS
Co-chairman of the Board of Directors in ofﬁ ce

ANTONIO LUIZ DA CUNHA SEABRA
Co-chairman of the Board of Directors

EDSON VAZ MUSA
Member

JOSÉ GUIMARÃES MONFORTE
Member; President of the Audit, Risk Management, and Finance Committee

JULIO MOURA NETO
Member; President of the Strategy Committee

LUIZ ERNESTO GEMIGNANI

Member; President of the People and Organizational Development Committee

PRESIDENTIAL ELECTIONS
The decision of one of the co-chairmen of our Board of Directors, Guilherme Leal, to participate in the
2010 presidential elections was one of Natura’s key governance challenges for the year. Guilherme Leal
resigned from Natura shortly after the Green Party announced him as its candidate for vice president.
Throughout this process, we emphasized transparency, clearly separating Natura’s business operations
from an individual’s decision to run for public ofﬁ ce.

Natura’s governance structure ensured that the company took all steps required to insulate corporate
governance from political inﬂ uence. Our campaign donation policy, in force since 2006, forbids donations to
candidates or political parties — a policy that gained greater signiﬁ cance last year. We also set up a special
committee to monitor media exposure of Natura and its founding partner during the elections.

EVALUATION OF THE BOARD OF DIRECTORS
In 2010, we conducted two evaluations of the members of our Board of Directors and the members of
the committees advising the Board: one self-evaluation and one external evaluation, which enabled us to
identify oppor tunities to improve our governance.

The self-evaluation was carried out by the Governance Committee, which conducted a series of indi-
vidual interviews to capture the impressions of the members concerning the dynamics of the Board and
its autonomy to make decisions, among other issues. The main findings and conclusions were compiled
and presented to the Board itself. Among the progress identified in this self-evaluation are: the resump-
tion of the executive sessions and the improvements in the working agendas.

The external evaluation, conducted by a consulting firm, involved an analysis of the size and composition
of the Board and its advisory committees, the degree of empowerment, the working climate and the
value added by its members, among other matters. Individual interviews were organized independently
by the consulting firm, based on a comparison of Natura’s initiatives with the best governance practices
identified internationally.

The aspects that received the highest marks in the external evaluation refer to the good working climate,
the freedom to address issues and to express opinions, and the clarity of the information submitted to
the Board for consideration. Never theless, it was also found that the criteria for the process of evaluat-
ing the Board and its committees should be better disseminated to the company’s senior management.
Fur thermore, it was discovered that while the general information is adequately transmitted, the flow
could be improved to give the members more time to analyze the issues. The changes resulting from this
evaluation will be implemented throughout 2011.

COMMITTEES SUPPORTING THE BOARD OF DIRECTORS

AUDIT, RISK MANAGEMENT AND FINANCE
Since early 2011, it has been formed by the independent Board members José Guimarães Monfor te,
Edson Vaz Musa and Luiz Ernesto Gemignani, and by the external specialists Gilber to Mifano and Taiki
Hirashima, the Senior Vice President of Financial, Legal and Information Technology, Affairs Rober to
Pedote, the Corporate Governance Director, Moacir Salzstein, and the Risk Management and Internal
Audit Manager, Mercedes Stinco, who serves as the committee secretary. It meets four times a year
and is primarily responsible for advising the Board of Directors in its financial and risk analysis and in its
relationship with external auditors.

STRATEGY
This committee is made up of three Board members – Pedro Luiz Barreiros Passos, Julio Moura Neto
and Edson Vaz Musa – in addition to the CEO Alessandro Carlucci. They analyze strategic issues, prepar-
ing guidelines and recommendations for the Board of Directors. The committee monitors the strategic
projects in progress, defined in Natura’s Strategic Planning, and discusses the company’s long-term ac-
tions. It meets on a monthly basis, except in January and June.

CORPORATE GOVERNANCE
Among the functions of this committee is to discuss improvements and progress in governance and in
running the business. It is made up of three Board members: Pedro Luiz Barreiros Passos, José Guimarães

Monfor te and Júlio Moura Neto, in addition to Corporate Governance Director, Moacir Salzstein, who
serves as the committee secretary. The meetings are held on a quar terly basis, although the committee
convened five times in 2010, once in an extraordinary meeting to discuss the changes to the Audit, Risk
Management and Finance Committee. The Corporate Governance committee was also responsible for
the self-evaluation process of the Board of Directors and its advisory committees, as well as for oversee-
ing the external evaluation process that occurred in the last quar ter of 2010.

PEOPLE AND ORGANIZATIONAL DEVELOPMENT
This committee is comprised of three Board members – Pedro Luiz Barreiros Passos, Edson Vaz Musa
and Luiz Ernesto Gemignani – and Fátima Raimondi, an external member who joined in 2010, as well as
the CEO Alessandro Carlucci and the Senior Vice President of Organizational Development and Sustain-
ability, Marcelo Cardoso. The meetings are held on a monthly basis, except in January and July. The com-
mittee addresses topics such as remuneration, leadership projects, succession, training and topics of in-
terest to the Human Resources Depar tment, the Culture Program and the Natura Management System.

EXECUTIVE GOVERNANCE
Natura’s main executive body, the Executive Committee (Comex), is made up of Natura’s Chief Executive
Ofﬁ cer, Alessandro Carlucci, and ﬁ ve deputy chairmen. Comex’s priorities are management of the business
and assessment of economic, social, and environmental results. Comex also monitors strategic planning
and our strategic projects.

The structure of Comex was consolidated in 2010 to enable a global outlook on business. Comex is sup-
ported by eight committees that discuss thematic topics and represent the executive body. The original
six committees supported Comex on issues related to brand, sustainability, ethics, commercial innovation,
products, and processes. Two new committees, the Customer Committee and the Ideas and Concepts
Committee, were established in early 2011.

NATURA EXECUTIVE COMMITTEE

ALESSANDRO CARLUCCI
Chief Executive Ofﬁ cer

JOÃO PAULO FERREIRA
Senior Vice President of Supply Chain

JOSÉ VICENTE MARINO
Senior Vice President of Sales and Marketing

MARCELO CARDOSO
Senior Vice President, Organizational Development and Sustainability

ROBERTO PEDOTE
Senior Vice President of Finance, Legal Affairs, and Information Technology

TELMA SINICIO
Senior Vice President of Innovation

NATURA EXECUTIVE BOARD IN 2010

ALEXANDRE CRESCENZI
Commercial Vice President – Brazil

ALESSANDRA DA COSTA
Human Resources Vice President – Brazil

ANA LUIZA MACHADO ALVES
Brand Vice President

ANGEL MEDEIROS
Logistics Innovation Vice President

ARMANDO MARCHESAN NETO
Customer Services Vice President – Brazil

ARNÔ ARAÚJO
Commercial Vice President – Mexico

AXCEL MORICZ
General Vice President – Colombia

CECÍLIA GOYA MEADE
General Vice President – Mexico

DANIEL GONZAGA
General Vice President – Peru

DANIEL LEVY
New Business Vice President

DENISE ALVES
Culture Vice President

DENISE FIGUEIREDO
Business Unit Vice President

DIEGO DE LEONE
Business Unit Vice President

ERASMO TOLEDO
Commercial Development and Innovation Vice President

FLÁVIO PESIGUELO
Organizational Development and
Sustainability Vice President – International Operations

GILBERTO XANDÓ
Business Vice President – Brazil

JOÃO AUGUSTO PEDREIRA
Business Unit Vice President

Lucilene Prado
Legal Vice President

LUIS BUENO
Regional Unit Vice President

LUIZ CARLOS LIMA
Corporate Finance Vice President

MARCEL GOYA
Finance Vice President – International Operations

MARCOS PELAEZ
Information Technology Vice President

MARCUS OLIVER RISSEL
Regional Unit Vice President

MOACIR SALZSTEIN
Corporate Governance Vice President

MÔNICA GREGORI
Communication and Marketing Vice President

NESTOR FELPI
Customer Services Vice President – International Operations

PEDRO GONZALES
General Vice President – Argentina

PEDRO VILLARES
Superintendent of Natura Institute

RENATO ABRAMOVICH
Regional Unit Vice President

RICARDO FAUCON
Supply Vice President

ROBERT CLAUS CHATWIN
Business Development Vice President

RODOLFO WITZIG GUTTILLA
Corporate Affairs and Government Relations Vice President

HERIOVALDO SILVA
Commercial Vice President – International Operations

ROGÉRIO CHER
Corporate Human Resources Vice President

JORGE ROSOLINO
Financial Vice President – Brazil

JOSELENA PERESSINOTO ROMERO
Product Availability Vice President

JOÃO CARLOS MOCELIN
Industrial Vice President

TATIANA PIGNATARI
Business Unit Vice President

TOMAS JANS
Business Vice President – International Operations

VICTOR FERNANDES
Ideas, Concepts, Science and Technology Vice President

COMMITTEES SUPPORTING COMEX

CUSTOMERS
Created in January 2011, the main function of this committee is to monitor the quality of the services provided
by Natura to its ﬁ nal consumers and consultants. It is chaired by the Senior Vice President of Operations and
Logistics, João Paulo Ferreira, and another Comex representative, the Senior Vice President of Innovation, Telma
Sinicio, also serves on the committee.

ETHICS
Monitors issues related to the Natura Relationship Principles and makes decisions on cases of violations of these
principles. It is headed up by the Senior Vice President of Financial, Legal and Information Technology Affairs Ro-
berto Pedote, and other Comex members include the CEO Alessandro Carlucci and the Senior Vice President
of Organizational Development and Sustainability, Marcelo Cardoso.

IDEAS AND CONCEPTS
Chaired by the CEO Alessandro Carlucci, this committee was created in March 2011 to deﬁ ne the long-term
innovative ideas and concepts for the company. Also serving on this committee are Senior Vice President of
Innovation, Telma Sinicio, and the shareholders and members of the Board of Directors Pedro Luiz Barreiros
Passos and Antonio Luiz da Cunha Seabra.

COMMERCIAL INNOVATION
Its primary function is to analyze the projects that bring commercial innovation to the business. This committee
is chaired by the Senior Vice President of Business, José Vicente Marino, while also serving is the Senior Vice
President of Finance, Legal Affairs and Information Technology, Roberto Pedote.

BRAND
Responsible for management of the Natura brand and analyzing topics such as brand architecture, assessing the
Natura language and reviewing its main developments. It is chaired by the CEO Alessandro Carlucci, with the
Senior Vice President of Business, José Vicente Marino, and the Senior Vice President of Organizational Develop-
ment and Sustainability, Marcelo Cardoso, also serving.

PROCESSES
Monitors the implementation of the Management by Process model, deﬁ ning focuses of attention and strategies.
It is chaired by the Senior Vice President of Organizational Development and Sustainability, Marcelo Cardoso.
The Senior Vice President of Operations and Logistics, João Paulo Ferreira, also represents Comex on this com-
mittee.

PRODUCTS
Oversees the steps and processes involved in the approval of new products created by Natura. It is chaired by
the Senior Vice President of Innovation, Telma Sinicio, while also serving is the CEO Alessandro Carlucci and the
Senior Vice President of Business, José Vicente Marino.

SUSTAINABILITY
Monitors the management of the sustainability topics associated with the company’s Integrated Planning meth-
odology, namely: monitoring the Socio-Environmental Budget (targets and commitments assumed by Natura
in these areas) and deﬁ ning the Materiality Matrix. Furthermore, it also oversees the management of strategic
projects related to sustainability, such as Carbon Neutral and the Solid Waste project. The committee is also
responsible for evaluating positions and strategies concerning the company’s vision of sustainability and Quality
of Relationships. It is chaired by the Senior Vice President of Organizational Development and Sustainability, Mar-
celo Cardoso, with the participation of the Senior Vice Presidents of Financial, Legal and Information Technology
Affairs, Roberto Pedote, and of Operations and Logistics, João Paulo Ferreira.

RISK MANAGEMENT
Natura’s risk management strategy involves analysis of two primary risks to our business: strategic risks,
which are external threats to the continuity of our business; and operational risks. Responsible managers
and their teams evaluate internal processes to identify potential operational risks. In both cases, the analysis
considers potential economic, social, and environmental outcomes.

Natura’s risk management strategy identiﬁ es processes and control mechanisms to address Natura’s pri-
mary strategic and operational risks. These include physical risks, but not risks related to climate change.
Our actions do, however, evaluate regulatory risks and identify opportunities to offer new technologies
and products that address the challenges posed by climate change.

An important development in 2010 was the consolidation of Natura’s strategic risks map, which was
incorporated into our strategic planning. This map is now monitored by all committees that support the
corporate governance and executive structures.

As part of a more comprehensive contingency plan, we have established a crisis prevention system based
on the most relevant scenarios experienced by the company. This initiative has been developed by Natura
since 2009.

As part of the review of our internal control processes, we redeﬁ ned the user proﬁ les for accessing
Natura information and data, thereby streamlining our fraud prevention management. We also reviewed
our Relationship Principles, including more details and clariﬁ cations about two speciﬁ c principles for
our employees and in-house outsourced workers, on conﬂ icts of interest and personal favoritism (read
more on page 45 – Employees).

Since 2009, Natura has been conducting an Internal Controls Evaluation to identify the main operational
risks and the controls of all its 132 processes. Last year, the evaluation involved the application of 212
questionnaires and the mobilization of 219 managers and directors. In addition to forwarding the most
important identiﬁ ed risks to Strategic Planning, they were also incorporated into the Natura’s process
planning. We also developed speciﬁ c action plans to mitigate the higher risks.

INTERNAL AUDIT
Made up of 16 professionals, Natura’s internal audit team reports to the Audit, Risk Management, and Fi-
nance Committee. This structure guarantees the independence of auditors, who are free from interference
from other areas of the company. In 2010, the team performed 33 audits of Natura’s technical capabilities,
management and operational processes, and international operations. This number far exceeded the 13
audits conducted in 2009.

Internal audits include a series of tests and procedures to evaluate the control environment and evaluate
the potential for fraud and corruption. Of the 33 audits performed in 2010, 11 cases required investigation.
Five of these cases ultimately were found to involve irregularities, and those involving misconduct resulted
in the dismissal of six employees. Each of these cases led Natura to strengthen its control mechanisms.

SENIOR MANAGEMENT COMPENSATION
Natura’s executive compensation package intends to stimulate entrepreneurship and promote executive enga-
gement, and is, in part, linked to the company’s growth and capital appreciation. Our proﬁ t-sharing system for
executives is based on multiples of base salary, in accordance with their duties. When this model was reviewed
in 2009, the variable pay component was expanded, thus enabling the company to be more competitive.

The remuneration received by the chief executive ofﬁ cer, vice presidents, ofﬁ cers and senior managers is
consistently linked to the commitment to our long-term project by means of the Stock Option or Share
Subscription Plan.

The Share Purchase or Subscription Option Program has stipulated, since 2009, that adherence to the
program is bound by the agreement of the executive to invest at least 50% of the amount received as
proﬁ t sharing in the acquisition of Natura shares. The shares may only be exercised after a vesting period
of three years for 50% of the shares, and of four years for 100% of the shares. In either case, there is an
eight year validity, and the shares are not available for sale until the end of the third year.

In 2008, the Board of Directors established an annual limit of 0.6% of total shares and a maximum limit
of 3% for the program. The model established in 2009, more aggressive than the previous year, set an
annual limit of 0.75% and a maximum of 4% . In December 2010, the amount of options held by execu-
tives represented nearly 1.59% of Natura’s shares, compared to 1.29% in December 2009. The number
of Natura shares on December 31, 2010, totaled 430,881,416.

Since 2002, we have granted 19,638,804 options, of which 23% have been cancelled due to the resigna-
tion of executives.

NUMBER OF OPTIONS

Plan

2002

2003

2004

2005

2006

2007

2008

2009

2010

Total

Granted

Exercised

Mature Balance Non-Mature Balance

Cancelled

3,533,610

3,969,220

1,901,460

1,120,760

1,153,756

1,305,508

1,800,010

2,742,128

2,112,352

2,712,645

3,404,495

1,606,063

567,874

230,227

110,852

83,48

392,492

236,987

19,638,804

8,632,156

712,959

347,839

1,039,961

2,404,809

2,077,658

5,870,267

820,965

564,725

295,397

469,406

531,037

609,831

760,049

337,319

34,694

4,423,423

23%

14%

16%

42%

46%

47%

42%

12%

23%

APPRECIATION OF THE PLANS

Amounts in Thousands of R$

Restated
Amount of
the Plan

Real Discount
Obtained in
the Year

Discount
Obtained in
the Year1

Potential
Discount of
the Mature
Balance2

Potential
Discount of the
Non-Mature
Balance 2

R$ 6.85

R$ 3.84

R$ 9.44

R$ 20.25

R$ 30.17

R$ 28.53

R$ 22.16

R$ 24.17

R$ 35.46

42,412.4

66,917.3

26,152.8

6,712.1

2,664.6

1,703.9

0.0

52,216.3

79,701.6

29,308.9

7,032.5

2,739.4

1,742.2

0.0

2,302.6

6,930.7

4,573.2

0.0

6,712.4

26,700.5

56,909.6

25,706.1

146,563.1

172,740.9

13,806.6

116,028.6

Status of
the Plan

Expired

100% Mature

50% Mature

Não Mature

Plan

2002

2003

2004

2005

2006

2007

2008

2009

2010

Total

1. Accumulated amounts, adjusted by the brazilian IPCA (Extended National Consumer Price Index) until December 2010.
2. Price of Natura shares (NATU3) on December 30, 2010: R$ 47.83.

50% Mature

10-apr-05

10-apr-06

10-apr-07

16-mar-08

29-mar-09

25-apr-10

22-apr-11

22-apr-12

19-mar-13

100% Mature

10-apr-06

10-apr-07

10-apr-08

16-mar-09

29-mar-10

25-apr-11

22-apr-12

22-apr-13

19-mar-14

Validity

10-apr-08

10-apr-09

10-apr-10

16-mar-11

29-mar-12

25-apr-13

22-apr-14

22-apr-17

19-mar-18

VARIABLE REMUNERATION

Variable Remuneration is intended to recognize and reward the executives of Natura for their performance and
results over the year, to guarantee a competitive compensation package and to align the interests of executives
and shareholders. The total amount of annual proﬁ t sharing, the basis of the long-term compensation program, is
limited to 10% of the company’s net proﬁ t. With these limits, Natura has a consistent and well-controlled system
that avoids distortions between remuneration and the company performance.

The variable component, whether short-term or long-term gains, allocates a larger amount for senior executives
than for other employees. In addition to well-deﬁ ned limits, all variable remuneration is tied to the effective at-
tainment of targets and to the surpassing of minimum growth expectations established annually by management.
Natura’s performance, therefore, must reach a minimum set for this remuneration to be paid.

The criteria determining the variable component take into account three sets of performance indicators, all
derived from the Strategic Planning. In 2010, the following indicators were used:

¾ Economic – Consolidated Ebitda, Brazilian and international operations;
¾ Social – Organizational climate survey in the Brazilian and international operations and the consultant

loyalty index;

¾ Environmental – Carbon emissions;
¾ Other – Non-Service Rate (NSR), which shows the percentage of products that are unavailable when

orders are placed by our consultants, in the Brazilian and international operations.

See below the remuneration amounts of the main staff groups:

2010

Board of Directors

Executive Committee

Senior Management
and Ofﬁ cers

Middle Management

Administrative Staff

Sales Force

Operational Staff

Total 2010

Average number
of employees

Total salary
(in millions)1

Total variable
(in millions)2

Stock Options Plan
for 2011 (in number
of options)3

336

1,255

905

2,542

5,135

2.64

5.25

27.04

42.17

63.63

44.60

41.89

2.08

6.28

17.83

18.14

6.29

43.19

10.33

227.23

104.13

1. Total Salary: Includes annual average base pay over 12 months (net) plus overtime in millions.
2. Total Variable: Bonuses, Proﬁ t Sharing and Sales Prizes paid over the year.
3. Stock Options: Plan for 2011 will be approved in March 2011.

2009

Average number
of employees

Total salary
(in millions)1

Total variable
(in millions)2

Board of Directors4

Executive Committee4

Senior Management
and Ofﬁ cers

Middle Management

Administrative Staff

Sales Force

Operational Staff

Total 2009

283

903

981

2,239

4,492

3.49

3.96

19.77

32.86

44.63

43.76

37.09

1.33

7.78

20.17

20.50

5.59

46.25

5.59

185.56

107.21

2,031,095

1. Total Salary: Includes annual average base pay over 12 months (net) plus overtime in millions.
2. Total Variable: Total Salary plus Bonuses, Proﬁ t Sharing and Sales Prizes. Proﬁ t Sharing refers to the stated year, paid in the subsequent year.
3. The number of options refers to the plan of the current year.
4. Employee numbers revised after one member of the Executive Committee was mistakenly counted as a member of the Board of Directors
in the 2009 report.

2008

Average number
of employees

Total salary
(in millions)1

Total variable
(in millions)2

Board of Directors5

Executive Committee5

Senior Management
and Ofﬁ cers

Middle Management

Administrative Staff

Sales Force

Operational Staff

Total 2009

302

971

1,097

2,132

4,597

2.64

5.45

24.31

39.85

53.54

43.81

37.89

1.33

7.29

21.22

22.57

8.67

40.06

8.63

Stock Options
Plan for 2010 (in
number of options)3

683,656

1,347,440

Stock Options
Plan for 2009 (in
number of options)4

694,726

2,040,931

207.50

109.77

2,735,657

2.6 NATURA

MANAGEMENT SYSTEM

OUR ACTIONS ARE INTENDED TO
E N G AG E A N D I N S P I R E O U R
EMPLOYEES, SUPPORTING THEM
IN CLEARLY DEFINED PROCESSES,
ENABLING THE IMPLEMENTATION OF
THE COMPANY’S STRATEGY AND
PLANS, AND GUARANTEEING THE
EXPANSION OF OUR DIFFERENTIATED
BUSINESS MODEL.

In order to organize the information ﬂ ow across all Natura’s processes and guarantee the alignment of deci-
sions with our principles, the Natura Management System has been under development since 2008, when
the model incorporated our Regional Units (in all Brazilian regions and international operations) and Business
Units (by product segment).

The System is designed to reproduce our method of operating wherever we are by means of well-deﬁ ned
processes and routines, enhancing a non-centralized and integrated management model that allows greater
independence for managers and greater proximity to consultants and consumers. The expansion of our in-
ternational actions allows greater importance on the new model.

In the coming years, our challenge will be to have this integrated management system become understood
and adopted by all Natura employees, becoming an instrinsic way of how Natura routinely does business.
To assist with this challenge, we have identiﬁ ed 12 interrelated priority components that are critical to the
success of the Natura Management System: leadership, strategic planning, relationships, sustainability, learning,
individuals, processes, brand, culture, customers, innovation, and triple bottom-line results.

The component of this new management system that is in the most advanced stage of completion is the
Management by Process model, which was established with the creation of our Business Units and Regional
Units. In 2010, we fully integrated 22 key processes in Natura. To guarantee proper implementation, we stage
assessments and process certiﬁ cation. We have created indicators for each process and have designed six
new processes to be certiﬁ ed in 2011. This has created a more effective structure for monitoring of Natura’s
18 strategic projects. They are all directly attached to our growth proposal for the coming years and they
have been approved by the Board of Directors. They are also regularly monitored by senior management.

3. WHAT WE AIM FOR

WE BELIEVE IN
THE TRANSFORMATIVE POWER
O F P E O P L E , C O M P A N I E S ,
NETWORKS, AND COMMUNITIES,
A N D W E WA N T TO P L AY A
L E A D I N G R O L E I N T H E
EVOLUTION OF
OUR SOCIETY .

3.1 OUTLOOK

AND STRATEGY

OVER THE PAST THREE YEARS, WE
HAVE COMBINED SIGNIFICANT
B U S I N E S S G R OW T H W I T H
CHANGES IN OUR MANAGEMENT
AND INFR ASTRUCTURE MODEL
AND IN OUR RELATIONSHIPS
W ITH STA K E H O LD E R S .

As a result of these intense structural developments, Natura is poised to take advantage of opportunities in
the cosmetics, fragrances and personal care market in Brazil and Latin America. We are strengthening our
competitive advantage at a time when our region enjoys a positive outlook. The expansion of manufacturing, the
participation of women in the job market, falling unemployment, and rising family incomes have led to prolonged
periods of economic growth in several Latin American countries.

We understand that the attractiveness of our market results in increased competition. We believe, however, that
the Brazilian market still offers many growth opportunities through the regionalization of our operations and by
ﬁ lling the space where our brand is not yet present. Our international operations are becoming stronger year
after year. We now have the infrastructure, market knowledge, leadership, products, sales channels, and relation-
ship networks needed to increase our share in these markets.

We are entering a cycle in which innovation is increasingly relevant in all aspects of our business — not only in
product development, but also in our sales model, in building relationships, and in ﬁ nding solutions to social and
environmental challenges. Inspired in our culture, we intend to deepen the search for solutions related to the
performance of our role as change agents in society.

STRUCTURAL CHANGES
In 2010, we initiated international production through partnerships. The shift from an exportation model to a
local production model will beneﬁ t society and reduce environmental impacts, in a combination that enables the
construction of a sustainable development model.

Operations in Argentina started in the second half of 2010 with perfume-bottling activities. In 2011, we will initi-
ate operations in Mexico and Colombia. Within three years, we intend for 50% of revenues from our interna-
tional operations in Latin America to come from products manufactured outside Brazil. When fully deployed by
2013, this new manufacturing structure will eliminate 70% of greenhouse gas emissions that result from supply
logistics in these countries.

We restructured some executive positions to monitor operations more closely, giving us the agility required
for superior management. We merged our Business and Internationalization vice presidencies and created two
general executive ofﬁ ces, one for Brazil and another for international operations. These initiatives provided our
leaders with greater autonomy and our Executive Committee with a more global and strategic vision. In January
2010, our ofﬁ ce in Buenos Aires, Argentina, began to manage our international operations.

We expect this new production-and-logistics model to drive expansion in our domestic and international busi-
ness. Additional innovations in the planning stage will improve the assistance we provide to our sales consultants
and consumers.

We have made signiﬁ cant investments in information technology, which will support our growth cycle in the
coming years. This initiative will provide greater scalability, integration, and connectivity to our systems platform.
Approximately 85% of orders from our sales consultants are received via the Internet.

To prepare for the changes taking place at Natura, we will transfer our administrative unit and the distribution
center in Itapecerica da Serra this year to a new facility in the city of São Paulo. We understand that these chan-
ges, which aim to provide employees with better working conditions, will also impact the local community, espe-
cially with respect to tax collection. To mitigate these impacts, we are engaging in a dialogue with the municipal
administration about the pending relocation and our plans to continue to invest in the community (learn more
on page 68, Surrounding Communities). Some administrative functions now based in Cajamar, as well as the pic-
king center (preparation of boxes with products for sending to consultants) will also be transferred to São Paulo.

OUR PLANNING
In 2010, we set up a new Strategic Planning cycle for the period from 2011 to 2015. We deﬁ ned targets and
identiﬁ ed critical success factors, indicators, and milestones required to achieve our objectives.

We know that the success of this initiative rests in part on our ability to develop leaders whose actions align with
our Essence so that they can become real agents of social transformation. We also intend to create an internal
environment with constant learning opportunities, supported by a strong organizational culture enhanced by
the many countries in which we operate. We place a high priority on taking advantage of opportunities that
derive from connectivity so that we can foster sustainable development.

These elements will guide our strategic planning for the next ﬁ ve years, allowing us to maintain our leadership
position in Brazil and to expand our direct sales model in Latin America. They will also help us generate more
value for Natura’s stakeholders. As a result, we will continue to delight and be delighted by our customers, fos-
tering our well-being well concept in an innovative manner, strengthening our brand, and maintaining the quality
of relationships with our stakeholders.

Thinking about the future is the ﬁ rst step toward innovation. In 2010, one outgrowth of our strategic planning
process was the development of our 2030 Vision. With the support of senior management, we stretched our
vision beyond the ﬁ ve-year planning cycle to focus on long-term scenarios and potential challenges.

Given the potential scenarios we predict for the world in 2030, we note one positive trend: a growing col-
lective awareness awakened by the threat posed by climate change. Nevertheless, if current patterns of pro-
duction and consumption are maintained, environmental degradation may take on devastating proportions.

In this context, we should reassert our position as social change agents and channel our capacity to inno-
vate towards ﬁ nding a balance in our business activities, by investing in new technologies and production
practices, and by inﬂ uencing the partners in our production chain – from suppliers of raw materials to our
consumers. We want to be part of the network of organizations committed to the creation of a new model
of development.

EXECUTIVE SUMMARY OF THE VISION OF NATURA IN 2030

One quick look at what humanity is experiencing reveals the inequality, corruption, hunger, disease and war
that plague our societies. Against this backdrop, the environmental devastation and growing global warming,
also consequences of man’s actions, indicate that our life in 2030 is under threat.

Faced with this desolate outlook, globalization presses on with fast-growing economic activity in large centers,
but without the global governance aimed at solving the socio-environmental challenges. Nevertheless, given
the scale of the threat posed to the future of the planet, we have noticed the awakening of a collective aware-
ness of respect for life rising above any other value or interest.

When confronted with this new hope, we see that our range of beliefs, values and Reason for Being will be-
come even more appreciated. We also believe that Brazil could be a source of inspiration for this imbalanced
world that is advancing rapidly towards globalization and universalization. Brazil could inspire the world, since
it is an extremely diverse country abounding with cultural, social and environmental wealth. And, like the
Brazilian company we are, we will help us become a leading country in the development of a new economy
for the 21st century.

To be living in this world in constant transformation not only inspires us, it also motivates us towards a more
radical, broad and thorough application of our values. We all have the opportunity to contribute to the de-
velopment of a new civilizational process and we believe that the international community will increasingly
appreciate the initiatives of companies that are committed to this change.

At Natura, we shall continue our dedicated pursuit of balance in our business activities, diminishing our negative
impacts on the environment until we can guarantee positive processes throughout our production chain. At the
same time, and with just as much determination, we will try – demonstrating the contagious enthusiasm that
the world needs – to fulﬁ ll our vocation as social change agents, justly remunerating the network involved in the
development and sale of our products and providing inclusion opportunities for the excluded population. We
need to share knowledge and opportunities so that everyone can, in a positive and autonomous manner, be part
of a collective awareness of respect for life, for the human condition and for the planet.

Therefore, we believe that our brand will enjoy global presence and recognition, and that we will be known for
our pioneering work in the development of new business based on the transformation of socio-environmental
challenges into opportunities. We also believe that we will be part of a network of interconnected entrepre-
neurs and companies recognized for producing leaders who are committed to the creation of a new model
of development.

With equal responsibility, we shall employ our capacity to innovate more comprehensively, considering the
integral vision of the human being and our mission to creatively meet consumer needs, while also seeking to
respect and preserve the threatened web of life, taking our inspiration from the collective dream to shape a
healthier future for the planet.

SUSTAINABILITY MANAGEMENT
The way we do business is guided by our search for a sustainable development plan. We are aware that
the joint management of economic, social and environmental aspects of all processes is a major challenge.
However, we have managed to effectively incorporate this integrated vision into our routine operations.
Sustainability is one of the cornerstones of our processes and a part of Natura’s Strategic Planning, which is
approved by the Board of Directors and closely monitored by senior management. Our main socioenviron-
mental indicators serve to integrate the company’s strategic plan, and these indicators are communicated to
all business units to guide their processes.

The Executive Sustainability Ofﬁ ce is responsible for this process, educating and disseminating practices throug-
hout the company. In both Brazil and in our international operations, we rely on a network of sustainability
leaders who convey global practices to each unit and assure that these practices are integrated into decision
making. Our Biodiversity Management Group systematically monitors our sustainable use of biodiversity so that
through technology development, stewardship, ethical trade actions, and beneﬁ t sharing, we preserve natural
resources and have a positive impact in our local communities.

We also seek to make continual progress in the construction of our materiality matrix. This involves a pro-
cess of determining which aspects of our company’s sustainability efforts are viewed as most relevant by our
stakeholders. This process is carried out every two years. The results of the actions related to our six priority
topics in 2010 (Amazon, Biodiversity, Greenhouse Gas Emissions, Education, Product Impact and Quality of
Relationships) are reported to Natura’s senior management by the Sustainability Committee. In 2010, for the
ﬁ rst time, we invited our international operations to take part in this process. The new materiality matrix will
be included in the next reporting cycle and incorporated into 2011 strategic planning (learn more on page
109, About this Report).

Maintaining the quality of the relationships we have established with our stakeholders is also part of our sustain-
ability management process, and this includes our educational programs on relations and dialogue with stakeholders
(read more on page 38, Quality of Relationships).

3.2 HIGH PRIORITY

SUSTAINABILITY TOPICS

AMAZON

W E S E E T H E A M A ZO N R E G I O N A S A
S T R AT E G I C D R I V E R F O R B R A Z I L ’ S
ECONOMIC DEVELOPMENT. FINDING
NEW OPPORTUNITIES FOR SUSTAINABLE
USE OF THE AMA ZON ’ S R ESOURCES IS
PARAMOUNT TO GUARANTEEING QUALITY
OF LIFE FOR FUTURE GENER ATIONS.

Twelve years ago, we decided to incorporate biodiversity assets into our products in a sustainable
manner, respecting the ways of traditional communities and the livelihoods of local families.

Based on this experience, we developed the Amazon Program, which seeks to stimulate the crea-
tion of sustainable supply chains and new businesses based on science, innovation, and entrepre-
neurship, in addition to the natural and cultural resources offered by the region. Through the Ama-
zon Program, we can contribute to sustainable development proposals that offer opportunities to
local inhabitants while keeping the forest standing.

In preparing this strategy, we reﬂ ected on the lessons of our previous actions and from workshops
on the Amazon with Natura’s senior management. The knowledge gained from these actions gave
rise to the program, which is based on the expansion of our activities in science, technology and
innovation; sustainable production chains; and the region’s institutional strengthening.

PALM OIL

We convened a panel of key opinion leaders, experts, and representatives of civil society, govern-
ment, and nongovernmental organizations to discuss a sustainable model for palm cultivation in the
region. What we learned from this process gave rise to the Amazon Program, which allows us to
build guidelines that will help us to develop a balanced production plan.

Because of improper agricultural practices that have damaged ecosystems in Asian countries, the
production of palm oil has negatively affected the biodiversity in tropical forests. However, we be-
lieve that the sustainable production and use of palm oil is possible, driving income generation and
regional development.

In 2010, we joined the Roundtable On Sustainable Palm Oil (RSPO), a global initiative led by the
WWF to certify the production process and assure compliance with social, environmental and eco-
nomic criteria. Our palm oil supplier, Agropalma, has begun the process to certify its production and
Natura will pursue its own certiﬁ cation once this has been completed.

We want to accompany the national discussions on the impact of palm and engage in dialogue with
regional leaders to develop a domestic plan for sustainable production. Since 2008, we have been
working in partnership with Embrapa to research agroforestry systems for palm production in con-
junction with other species in the Amazon, and its combined use with other oilseed crops.

BIODIVERSITY

W E R E COG N IZE T H AT CO M PA N I E S ,
SOCIETY, AND GOVERNMENT SHARE
R E S P O N S I B I L I T Y F O R T H E
CONSERVATION OF BIOMES AND FOR
PURSUING ECONOMIC OPPORTUNITIES
FOR THE SUSTAINABLE MANAGEMENT
OF NATURAL RESOURCES.

Our experience shows that production processes with lower environmental impact and innova-
tive solutions may generate positive results for both society and business. Our production model
involves some 2,300 families in Brazil and is based on the creation of fair trade and compensation
for the use of genetic heritage and traditional knowledge, proper handling of raw materials, and
promotion of local development (learn more on page 30, Supplier Communities). Our opera-
tions are guided by the Policy for the Sustainable Use of Biodiversity and Cultural Heritage, crea-
ted in 2008 based on the Convention on Biological Diversity (CBD), which establishes guidelines
for the use of raw materials and for the sharing of their beneﬁ ts.

Reaffirming our leadership role in the area of biodiversity, we headed the Brazilian Business
Movement for the Conservation and Sustainable Use of Biodiversity . More than 80 par tici-
pating companies and civil organizations signed a letter declaring their commitment to the
conservation of Brazilian biodiversity. This document encourages the government to define a
regulatory framework that fosters research and scientific advances that integrate production,
use, and conservation. The Movement sent the letter to the federal government and presented
it at the 10th Conference of the Par ties to the Convention on Biological Diversity (COP 10),
in Nagoya, Japan.

As a result of this imperfect legislation, in 2010 we received infraction notices from the Brazilian
Institute of the Environment and Renewable Natural Resources (Ibama) for alleged irregular ac-
cess to biodiversity (learn more on page 80, Creation of Environmental Value).

“SUSTAINABILITY SHOULD BE SEEN AS
AN INTEGRAL, INSEPARABLE PART OF
THE BUSINESS.”

Christian Moura, Supplier.

EDUCATION

EDUCATION IS A MAJOR CHALLENGE
THROUGHOUT L ATIN AMERIC A . THE
GEOGR APHICAL OUTREACH OF OUR
B U S I N E S S O F F E R S T H E S C O P E
AND CONDITIONS FOR LARGE-SCALE
PROJECTS AND INITIATIVES, POSITIVELY
INFLUENCING A MOVEMENT FOR THE
NEED FOR QUALIT Y EDUCATION.

In 2010, we created the Natura Institute, a non-proﬁ t organization that is responsible for all our
private social investment. Through the Crer para Ver (Believing Is Seeing) program, we invest the
proceeds from the sale of a special line of products into initiatives that can affect the quality of
education in Brazil and Latin America. In addition, we offer educational technologies to society that
can have a positive inﬂ uence on public education policies to improve literacy skills for preschool-
aged children. This would be similar to what we achieved in Brazil with the Trilhas (Trails) Project,
and we will share this with the Ministry of Education. In 2010, the Crer para Ver program obtained
the highest funding in its history, R$10 million, 168% higher than the previous year. Revenues from
international operations contributed R$1.3 million to this program in 2010 (learn more on page
93, Creation of Social Value).

Our concern with education extends to our employees, suppliers, and consultants. At a time when
Brazil faces the challenge of ﬁ nding a qualiﬁ ed workforce to drive its development, there is a clear
shortfall in secondary, technical, and higher education. Accordingly, we seek to offer our employees
education and professional development for all positions. In 2010, we created a program for the
operational staff that links career development to education. We also signiﬁ cantly increased the
number of young apprentices and launched a program that prepares these young workers for the
professional market (learn more on page 44, Employees).

In 2011, we will offer preparatory courses for job openings at Natura in the community of Cajamar
to increase the number of qualiﬁ ed candidates at Natura and other companies (learn more on page
68, Surrounding Communities). We also invest in the training of our consultants. In 2010, more than
500,000 consultants participated in training; most had less than 3 years of experience working for
Natura (learn more on page 54, Consultants and NCAs).

GREEN HOUSE GASES

WE KNOW THAT ONLY SIGNIFICANT
C UT S I N T H E VO LU M E S O F C A R B O N
LAUNCHED INTO THE ATMOSPHERE WILL
EFFEC TIVELY CONTAIN THE FORCES
THAT C R E ATE C LI MATE C HANG E .
TO HELP TO ACHIEVE THIS, WE CREATED THE
CARBON-NEUTRAL PROGRAM IN 2007.

Besides offsetting our emissions through support to socioenvironmental projects, we committed to
reducing our relative greenhouse gas (GHG) emissions by 33% between 2007 and 2011. By the end
of 2010, we had reached a total reduction of 21%, even with an increase in production. Given what
we have learned over these past ﬁ ve years, we have deferred our achievement of this goal to 2013.

Due to the reduction obtained in the last four years, even with the increase in our production, we
have learned important lessons. Today, the carbon issue is an integral part of Natura’s strategy and
inﬂ uences the company’s decision making. We have adopted innovative initiatives and conducted an
in-depth analysis of the impact of our processes so that our managers understand the contribution
of each process to GHG emissions.

We carried out a broad diagnosis of our operations in 2010 to identify new opportunities for re-
ducing and mobilizing the entire company so that these targets are met. The new study includes the
expected gains from various ongoing structural projects, from the revision of product mass and use
of biopolymers in packaging to the distribution process with the new logistic model and the start of
international manufacturing.

The complexity of these actions, involving a deep transformation of how we run our business, partially
explains the revision of our goals. An important point to highlight is that our commitment to reduction
is not limited to our own operations, but also the extraction of raw materials by all our suppliers,
which makes our reduction efforts all the more complex and our achievements all the more signiﬁ -
cant. (Learn more on page 80, Creation of Environmental Value).

We also face the additional challenge of reducing 2012 absolute emissions in the Brazilian operation
by 10% from 2008 levels. These are emissions that result from our internal production processes. We
maintained our target despite delays in the implementation of internal programs that could help us
achieve this goal, and despite the change in the Brazilian electricity matrix. The latter increased the use
of thermal plants, thereby raising the rate of carbon emissions to produce electricity.

“

IT IS NOT EASY TO CHANGE THE POLITICS OF
A COUNTRY. BUT IT IS POSSIBLE TO EDUCATE
AND CREATE A CRITICAL MASS THAT WILL MAKE
“
SUSTAINABLE DECISIONS.

Claudia Rodríguez, civil society organization representative

PRODUCT
IMPACT

ONE OF OUR PRIMARY CHALLENGES IS
TO R E D U C E T H E I M PAC T C AU S E D B Y
THE MANUFACTURE, DISTRIBUTION,
AND USE OF OUR PRODUCTS. THIS HAS
LED US TO INVEST IN PRACTICES AND
TECHNOLOGIES THAT AIM TO MINIMIZE
THESE IMPACTS, ESPECIALLY IN TWO
A S P E C T S : M A N A G E M E N T O F S O L I D
WASTE AND WATER CONSUMPTION.

The management of solid waste was a priority in our discussion panels with stakeholders. In 2010,
we developed a more extensive program, enlisting the help of 40 people, among packaging manu-
facturers, garbage collectors, industry professionals, academics, specialists, and consumers in deﬁ ning
issues and guidelines for improvement. Our ﬁ rst action, to be implemented in 2011, will be to work
with our suppliers and outsourced production partners to search for efﬁ ciencies and innovative waste
solutions — from the time raw materials are extracted all the way through postconsumption.

It is worth mentioning that new concepts were acknowledged in the recently instituted National
Policy for Solid Waste, such as the priority assigned to reduction prior to recycling and the responsi-
bility of the consumer, who is a part of the chain. The business community now faces the additional
challenge of searching for alternative treatments for its waste, including in the postconsumption phase.

Management of water consumption is another priority. This year, we decided to broaden the analysis
of our impact on this natural resource. Previously, we had focused on our internal processes and our
main suppliers. More recently, however, we started to use the water footprint concept, which gives
us a more comprehensive vision of the impact of water usage throughout the life cycle of a product
or process. The water footprint includes not only consumption, but also the potential for pollution. In
2009, we became a partner of the Water Footprint Network (WFN) group, the purpose of which is
to promote sustainable, equitable, and efﬁ cient use of water. In 2010, we used the methodology des-
cribed in the Water Footprint Manual in two of our products to learn how this applies to our business.
Natura is the ﬁ rst cosmetics company in the world to use this methodology in the manufacture of
cosmetic products (learn more on page 80, Creation of Environmental Value).

“

THE FOCUS IS ON HOW TO FACE THE PROBLEM.
LITTLE HAS BEEN DISCUSSED ABOUT HOW NOT
TO GENERATE IT.

“

Lucio Di Domenico, civil society organization representative

QUALITY OF
RELATIONSHIPS

W E B E L I E V E T H AT SOLUTIONS TO
T H E C U R R E N T C H A L L E N G E S FAC E D
BY HUMANITY ENTAIL A COLLECTIVE
PROCESS OF THINKING ABOUT THE
FUTURE WITH A FOCUS ON RAISING
AW A R E N E S S A N D D I A L O G U E .
T H E R E F O R E , N AT U R A B E L I E V E S I N
THE IMPORTANCE OF MAINTAINING
THE QUALITY OF ITS RELATIONSHIPS.

We invest in the development of efficient channels for dialogue, in sharing experiences, in
transparency, in ethical behavior, and in the creation of oppor tunities to find shared solutions.

We rely on formal channels of interaction, such as the Natura Service Channel and Natura
Consumer Service Channel, specifically created for our consultants and consumers. Through
our Ombudsman’s Office, our employees, suppliers, and Natura Consultant Advisers can also
obtain information or file complaints.

Our objective is to listen to our stakeholders, who we believe can help us improve the way we
plan and manage our operations. Last year, we demonstrated this by hosting discussion panels
that ultimately led to the establishment of a series of new initiatives at Natura. These initiatives
included a waste management program (learn more on the previous page, High-priority Topics/
Product Impact) and our position on the sustainable use of palm (learn more on page 29, High-
priority Topics/Amazon). The results of these dialogues inﬂ uenced our decision-making and the
development of our strategic planning, and also helped us develop our processes and behaviors,
which contributed to raising the standard of our relationships. We also started to include our
international operations in the process of deﬁ ning the materiality matrix (learn more on page
109, About the Report), by holding discussion panels in Colombia, Mexico, Peru, and Argentina in
2010, and in Chile in March 2011 (learn more on page 39, Quality of Relationships).

3.3

INNOVATING
INNOVATION

INNOVATION IS AT THE CENTER OF NATURA’S
VALUE CREATION AND INVOLVES ALL
THE COMPANY’S STRATEGIC PILLARS. IT
IS EXPRESSED THROUGH THE INNOVATION
O F O U R P R O D U C T S , S A L E S M O D E L S ,
T H E M A N AG E M E N T S Y S T E M A N D T H E
WAY IN WHICH WE TRANSFORM SOCIAL
A N D E N V I R O N M E N TA L C H A L L E N G E S
I N TO O P P O RT U N I T I E S F O R L E A R N I N G
A N D S U P P O R T I N G S U S TA I N A B L E
DEVELOPMENT. FOR US, INNOVATION
MEANS CREATING A FLOW OF WELL-
B E I N G W E L L T H AT S U R PA S S E S T H E
EXPECTATIONS OF OUR STAKEHOLDERS.

Two important developments took place in 2010: the construction of our Vision 2030 (learn more on
page 23) and Natura’s Vision of Innovation. These independent projects give us a long-term perspective,
outlining future opportunities and deﬁ ning the paths we want to follow.

We have identiﬁ ed the need to develop new competencies, beyond the classical sciences, developing a
more comprehensive approach. These strategies include increasing our knowledge of sciences that govern
sustainability, social biodiversity, and sensorial experience, while pursuing innovation in other ﬁ elds of
knowledge associated with the perceptions, behaviors, and rituals of groups of people. Through these new
strategic fronts, we are ﬁ ne-tuning our direction in science and technology.

This vision has also reinforced our commitment to searching for alternatives to reduce our environmental
impact and to embracing the principles of ecodesign (the development of products, processes, and services
that take environmental impact into account). As part of this commitment, for example, Natura established
a carbon-emissions limit for the approval of new products in the company (learn more on page 63, Crea-
tion of Environmental Value).

Among other innovative initiatives in sustainability management, we prepared a methodology for evaluating
the social and economic impacts of our suppliers (learn more on page 49, Suppliers) and developed a pilot
experiment to calculate the water footprint of two products in our portfolio – including, in addition to our
own operations, the consumption from extracting the raw material. (learn more on page 63, Creation of
Environmental Value).

To support these changes, we expanded our investments in research, science, and technology, and in the
creation of knowledge networks. The investment of our net revenues in innovation-related activities increa-
sed to 2.8% (R$139.7 million). This amount was invested exclusively in science and technology, innovation
management and partnerships, product development and marketing, regulatory affairs management, and
product safety (graphs 1 and 2).

1. INVESTMENT IN
INNOVATION (R$ MILLIONS)

139.7

111.8

103.0

2008

2009

2010

2. NUMBER OF PRODUCTS
LAUNCHED (UN)

168

118

103

Strategic portfolio management dictates that the ideal level of innovation, as measured by the Innovation
Index (see formula below), should range between 55% and 65%. In 2010, we recorded 61% that guaran-
teed to Natura a differentiated market presence and the appropriate strenght to the channel.

2008

2009

2010

INNOVATION INDICATORS (%)

Percentage of net sales invested in innovation
Innovation Index 1

2008
2.8
67.5

2009
2.6
67.6

2010
2.8
61.4

1. Gross revenues for the past 12 months from products launched in the past 24 months, divided by total gross revenues for the past 12 months.

Natura’s innovation is sustained by its search for excellence in:

¾ Scientiﬁ c research to identify ingredients from Brazilian sociobiodiversity and to enable the use of

these new ingredients in the manufacturing of products that offer special beneﬁ ts;
¾ Scientiﬁ c fundamentals on hair and skin, and in-depth knowledge of consumer needs;
¾ New models and methods to ensure product safety and global strategies on regulatory matters;
¾ Cosmetic Vigilance System, which monitors possible adverse impacts of products, supports the con-

sumer, and drives the innovation process;

¾ Focus on scientiﬁ c understanding of controversial ingredients and replacement strategy;
¾ Systemic understanding of well-being and its relations in the physical, emotional, cultural, and social

dimensions;

¾ Concept creation and development of new products that provide a continuous ﬂ ow of product

launches in both the short and long term;

¾ New packaging, and other innovative and different ways of providing beneﬁ ts to the consumer, with

the lowest possible environmental impact;

¾ Transformation of socio-environmental challenges into business opportunities and products, including
the sustainable use of natural resources, social biodiversity, ecodesign, and environmental indicators.

We launched products with concepts that are deeply connected to our beliefs, leading the consumer
toward new ideals and experiences. One example is Natura Chronos, a line of anti-aging cream, which
we relaunched last year. Knowing that signs of aging can differ among women in the same age group, we
developed an innovative product designed for people with different skin types rather than one based on
a consumer’s age.

The new Amó fragrance, meanwhile, is intended to stimulate the senses, the intimacy and the closeness be-
tween people. The product line aims to encourage consumers to reﬂ ect on their relationships and propose
the redemption of true love.

Similarly, when developing the new Natura UNA cosmetic line, we reﬂ ected on the motivation behind wear-
ing make-up and its symbology. In addition to using high performance raw materials, the new line is also in-
novative in its packaging and in the ingredients used in the products, combining sophistication and naturalness.

The high technology at the service of sustainability was also spotlighted with the launch of reﬁ lls for the Na-
tura Erva Doce liquid hand soap, which use green polyethylene made from sugarcane. It is the ﬁ rst cosmetic
with this kind of packaging available on the market, helping us meet our product impact reduction target (read
more on pages 86, Creation of Environmental Value).

OPEN INNOVATION
The broadening of the scope of innovation in 2010 is part of our open innovation strategy, ﬁ rst develo-
ped in 2005. This strategy is the foundation for the development of our products, processes, and tools,
through partnerships with science and research centers in Brazil and abroad. In 2010, we teamed up with
leading technological centers, such as the Massachusetts Institute of Technology, in Boston, United States
of America, and we streamlined relationships with our other international partners. We also qualiﬁ ed 27
employees in innovation management through the international certiﬁ cation program offered by the Hult
Business School in partnership with the IXL Center. This qualiﬁ cation is accredited by the Global Innovation
Management Institute.

We improved employee training to include the development of innovation competencies, including: how to
best generate new ideas and concepts; how to leverage technological convergence and our knowledge of
sustainability; and other themes related to our Essence. Staff in our business units and Brand and Sustaina-
bility departments received more than 8,000 hours of innovation training in 2010. Additionally, we offered
technical and functional training in the more traditional areas of science and technology.

We believe that a scientiﬁ c foundation, together with the systematic acquisition of knowledge using the
open-innovation model, will enable the creation of innovative concepts and ideas, enabling more rapid
development of new products and processes at a reduced cost to Natura.

NATURA CAMPUS
Created in 2007, the Natura Campus Technological Innovation Program is part of our open innovation program.
It has the support of the National Council for Scientiﬁ c and Technological Development, the São Paulo State
Research Support Foundation, and the Research and Financing Projects of the Brazilian Innovation Agency to
develop partnerships with the academic community. These institutions contribute to the joint ﬁ nancing of pro-
jects and provide participants with equipment, scientiﬁ c scholarships, and research materials.

The Natura Campus Portal (www.natura.net/campus) registered 6,000 visits in 2010. It contains a database
of voluntary researchers and has 280 research groups linked to 108 science and technology institutions. The
website, which was updated last year, is an important tool for our relationship with the academic community.
Through this portal, we received 13 new proposals from nine institutions. Two of these proposals have already
been approved.

We staged the second edition of the Natura Innovation Award last year, and the winning project was a study
by the Institute of Nuclear Energy Research, which intends to develop a non-invasive methodology for making
skin diagnoses. Held every two years, the award, supported by the Brazilian Development Bank (BNDES),
recognizes Brazil’s scientiﬁ c production and its contribution to the technological innovation process at Natura.

In 2010, we received R$900,000 in ﬁ nancial support from Finep for research and development projects.
We also obtained another R$135.7 million in BNDES ﬁ nancing for innovation, industrial training, logistics and
information technology.

COMMERCIAL AND RELATIONSHIP INNOVATION
Commercial innovation was in the spotlight last year after the creation of a committee dedicated to this area.
We also increased the use of digital tools in our contact and relationships with our sales consultants and consu-
mers. This year, our sales consultants placed 85% of their orders through the Internet. We continued to improve
our relationship with consultants through use of the “Consultancy” blog (www.blogconsultoria.natura.net) and
Twitter; we use these media to give our consultants information about our actions, products, and sustainability
measures (learn more on page 45, Consultants and NCAs).

Internet access to the Natura digital magazine (www.natura.net) increased more than 100% in the period. In
February 2011, we launched a version of this publication for the iPad. This application allows for more interactive
contact and gives users a 360-degree view of the products. Additionally, on the make-up pages, users can change
the color of the products used by the model and gain access to make-up hints. Our pages on Facebook and
Twitter and our blogs have also become strategic relationship tools that allow us to offer ﬂ exible assistance to
our consumers (learn more on page 59, Consumers).

We also redesigned, in February 2011, the Natura Conecta portal (www.naturaconecta.com.br). This allowed us
to continue improving the company’s use of virtual instruments in its relationship with stakeholders (learn more
on page 38, Quality of Relationships).

3.4 COLLECTIVE

CONSTRUCTION

W E SEEK TO I N CLU D E DI FFER EN T
PERSPECTIVES AND TO STRENGTHEN
T R A N S PA R E N C Y R E G A R D I N G
THE DISCLOSURE OF OUR RESULTS
BY MEANS OF INNOVATIVE AND
COLLABOR ATIVE TOOLS. THIS
STRATEGY IS PART OF OUR GOAL TO
CONTINUOUSLY INCREASE THE SPACE
GIVEN TO OUR STAKEHOLDERS
T O E X P R E S S T H E M S E LV E S .

As part of the preparation of this annual report, we relied once again on the Wiki Report, a virtual com-
munity of the Natura Conecta platform (www.naturaconecta.com.br) open to the participation of anyone
who is interested in our activities. This is an innovative and collaborative experience that enables conti-
nuous improvement by capturing the opinions and suggestions of different stakeholders.

The discussions held in the virtual forums gave rise to “The Natura we share” letter, published in our 2009
annual report. In 2010, we did not make the progress we had hoped for because of the reframing of Natu-
ra Conecta, which was relaunched in February 2011 (learn more on page 3, Quality of Relationships). We
hope to increase the use of this tool and transform the Wiki Report into an active forum for discussion.

We used Wiki to build Natura’s new corporate materiality matrix. The main issues identiﬁ ed in dialogues
online in Brazil and in our international operations were put to a vote by the online community. More than
150 participants chose the most relevant issues. The results are being analyzed and the new materiality
matrix will be disclosed in 2011.

Another initiative to promote dialogue with our stakeholders was the panel to discuss the “Future of the
Report.” The meeting, held in December 2010, engaged experts in communication and sustainability, as well
as employees and suppliers involved in our reporting process, in a discussion about choices for the next
20 years. Many promising ideas arose from this event. Some of the subjects that participants discussed are
in line with our goals; these include the need to create more collaborative platforms for reporting and to
establish multidisciplinary teams to run the process of disclosing our ﬁ nancial results. The discussions have
continued on the virtual platform.

As a result of this meeting, we expanded our most recent annual disclosure. In addition to the traditional
videoconference for investors and analysts, we organized an open conference to present our results. This
event, held on February 25, 2011, was chaired by Natura’s CEO and the Senior Vice President of Financial,
Legal, and Information Technology Affairs. The executives presented the key economic, social, and environ-
mental highlights of 2010, and answered questions from participants.

Our goal is to continue to expand these collaborative opportunities. To participate in Natura Conecta,
register at www.naturaconecta.com and join the Wiki Report community.

4. WHO WE WORK WITH

OUR RESULTS
A R E T H E F R U I T
O F C O L L E C T I V E
C O N S T R U C T I O N .
T H U S , W E S E E K T O
DEVELOP SPACES AND

Q U A L I T Y
RELATIONSHIPS
T H A T E N A B L E T H E
JOINT CREATION
OF SOLUTIONS

4.1

QUALITY OF
RELATIONSHIPS

S I N C E 2 0 0 9, N AT U R A H A S B E E N
D E V E L O P I N G S T R U C T U R E D
REL ATIONSHIP- MANAGEMENT
P R A C T I C E S . T H E S E P R A C T I C E S
E N CO U R AG E A CO L L A B O R AT I V E
APPROACH TO FINDING SOLUTIONS
TO C H A L L E N G E S W E A L L FAC E .
THIS SPIRIT IS REFLECTED IN THE IN-
PERSON DIALOGUE PANELS WE
HOLD WITH OUR STAKEHOLDERS, AS
WELL AS IN EVENTS THAT INTENDED
T O I M P R O V E T H E I R S E L F -
DEVELOPMENT AND AWARENESS.

In 2010, we heard from 824 people through meetings with employees, consultants, shareholders, suppli-
ers, supplier communities, consumers, the media, and people from the surrounding communities. We also
included others in this process — experts on speciﬁ c issues, key opinion leaders, and representatives of
government and civil society.

In all, we held 22 dialogue panels, more than twice as many as in 2009, when nine meetings were held. They
included dialogue panels held in our operations in Latin America (Colombia, Mexico, Peru, and Argentina),
which together contributed to the construction of our materiality matrix. The purpose was to develop a cor-
porate matrix that reﬂ ects the interests of stakeholders from all operations. In February 2011, this cycle will
be concluded with the organization of a meeting in Chile. Key issues identiﬁ ed in this process become part of
our strategic planning (learn more on page 136, About This Report).

In addition to this quantitative accomplishment, we experienced signiﬁ cant advancements in quality. Through
a process of “co-construction,” participants discussed priority issues, such as the mapping of external factors
linked to our production chain, in partnership with suppliers (learn more on page 49, Suppliers), and the initia-
tives related to the sustainable use of palm oil and solid waste management (learn more on page 28 and 32,
High-High-priority Topics/Amazon and Impact of Products).

In 2011, we relaunched the Natura Conecta virtual network (www.naturaconecta.com.br), which now has its
own platform and is integrated with other Natura virtual communities. Because of this relaunch, the use of
virtual resources to build relationships with stakeholders did not reach the extent we envisioned; however,
these activities have resumed, and everyone who is interested in our business is invited to participate (learn
more on page 37, Collective Construction).

With the goal of building transparent and straightforward relationships, we organized a series of actions for
different stakeholders. One such activity was the Reﬂ ection Cycle on Cultural Biology, with biologist Hum-
berto Maturana and professor Ximena Dávila. This event was designed to foster awareness and generate
positive change in relationships. We also continue to develop the Você tem fome de quê? (What Do You
Crave?) program by including stakeholders beyond our employees. This program involves lunch-hour talks at
the Cajamar unit. In 2010, presenters included top international thinkers, such as quantum physicist Amit Go-
swami, American entrepreneur Charles Watson, Massachusetts Institute of Technology innovation specialist
Otto Scharmer, and spiritual teacher Diane Hamilton.

For the ﬁ rst time ever, we held a meeting with former employees. The event in Cajamar brought together
more than 200 people. We thanked each of them for their contributions to the company, seeking to build
relationships of friendship and trust with this group.

Among the activities to promote individual development, we staged the Reﬂ ection Cycle on Cultural Biol-
ogy with the Chilean biologist Humberto Maturana and the human relations professor Ximena Dávila. This
activity was intended to raise the awareness of the participants and generate positive changes in relationships.
Some 100 representatives from different stakeholder groups took part in the activities.

We also organized a series of eight lectures as part of the program “Você tem fome de quê?” (What do you
crave?), offering other stakeholders, including our employees, the opportunity to participate. The program is
held periodically during the lunch period at our headquarters in Cajamar. In 2010, lectures were given by lead-
ing international thinkers, such as the Indian physicist Amit Goswami, the creative process specialist Charles
Watson, the Massachusetts Institute of Technology professor Otto Scharmer and the Zen Buddhist teacher
Diane Hamilton.

We also gave away 100 free admissions to the International Conference of the Ethos Institute 2010, which
was held under the theme “The World Under New Management – Sustainability: Society’s New Contract
with the Planet”.

DIALOGUE PANELS HELD IN 2010

Number of
participants Date (month) and Place Main topics

Stakeholder

Consumers

Surrounding
community

Consultants

Surrounding
community

Multistakeholder

January/2010
Cajamar (SP)

April/2010
Cajamar (SP)

Analysis of Natura’s strategy based on the pillars
of product, channel and corporate behavior

Presentation of the new system of resource
allocation for the Municipal Councils of Children
and Adolescents (CMDCAs); discussion and
agreement of the principles of relationship

May/2010
Cajamar (SP)

Diagnosis of problems and opportunities for
improvement of consulting activities

May/2010 Itapecerica
da Serra (SP)

June/2010
Cajamar (SP)

July/2010
Colombia

July/2010
Argentina

August/2010
Cajamar SP

Presentation of the new system of resource
allocation for the Municipal Councils of Children
and Adolescents (CMDCAs); discussion and
agreement of the principles of relationship

Dialogue between the groups with presentation
of projects under development in the municipality
and discussions between them

Deﬁ nition of priority topics for corporate
materiality matrix.

Debate on Natura’s positioning and practices in
relation to solid waste. Discussions contributed
to the guidelines of the new waste management
project

Surrounding
community

Natura Consultant
Adviser (NCA)

August/2010
Itapecerica da Serra
(SP)

Dialogue between the groups with presentation
of projects under development in the municipality
and discussions between them

August/2010
Osasco (SP)

Diagnosis of problems and opportunities for
improvement of consulting activities

Number of
participants Date (month) and Place Main topics

70 people August/2010
Cajamar (SP)

October/2010
Belo Horizonte (MG)

Discussion to determine the social and
environmental impacts to which the supply chains
are exposed (Mapping externalities)

Dialogue with NCs with up to 18 months
of activity to diagnose the key problems and
opportunities for improvement on beginning
consultant activities

October/2010
Belo Horizonte (MG)

Dialogue with former NCs who left Natura with
less than 18 months of activity to diagnose the
key problems and improvement opportunities

October/2010
Rio de Janeiro (RJ)

Dialogue with NCAs with up to 18 months
of activity to diagnose the key problems and
opportunities for improvement on beginning
NCA activities

Dialogue with former NCAs who left Natura
with less than 18 months of activity to
diagnose the key problems and improvement
opportunities

Stakeholder

Suppliers

Consultants –
Central Region of
Brazil

Former consultants
- Central Region of
Brazil

Natura Consultant
Advisers (NCAs) -
Central Region of
Brazil

Former Natura
Consultant
Advisers (NCAs) -
Central Region of
Brazil

Supplier and
processing
communities

November/2010
Cajamar (SP)

Multistakeholder

Brand Suppliers

November/2010
Peru

November/2010
Cajamar (SP)

December/2010
São Paulo (SP)

December/2010
Cajamar (SP)

December/2010
Mexico

December/2010
Cajamar (SP)

Reappraisal of the topics covered in dialogue
panels in 2009; Bioqlicar assessment and
discussion of future scenarios and joint
opportunities

Deﬁ nition of priority topics for corporate
materiality matrix.

Discussion about Natura’s positioning regarding
the use of palm oil and building a sustainable
model for the production of this input in the
Amazon region

Dialogue on the future and changes required for
the Natura Annual Report

Reappraisal of Natura’s actions on the priority
topics of sustainability and redeﬁ nition of priority
topics for corporate materiality matrix

Deﬁ nition of priority topics for corporate
materiality matrix.

Dialogue with strategic partners and employees
who work in the production of the main
expressions of our brand (products, advertising,
Natura magazine, media, events, Natura Meetings,
etc.). Reﬂ ections on challenges and strategy of
both short and medium terms for each of these
forms of brand expression.

OMBUDSMAN’S OFFICE
Natura’s Ombudsman’s Ofﬁ ce is a formal dialogue channel between the company and its employees, in-house
outsourced workers, and suppliers (Brazil). This important function helps us to monitor compliance with our
Relationship Principles commitments and whether our own actions are derived from our Essence. This resource
is also available to former employees.

These contacts are recorded and analyzed by the Ombudsman team and submitted to the responsible manager.
The Ombudsman’s Ofﬁ ce investigates complaints and allegations of misconduct, welcomes suggestions and
compliments, and receives general inquiries. Natura’s historical records do not include any cases of discrimina-
tion. All contacts that may be considered misconduct are reported to the ethics committee, of which the com-
pany’s CEO is also a member. When necessary, the ofﬁ ce enlists the support of internal auditors (learn more
on page 18, Governance).

TOTAL NUMBER OF INQUIRIES RECEIVED THROUGH THE OMBUDSMAN CHANNEL

Internal stakeholders, Brazil
Internal stakeholders, Latin America
Suppliers, Brazil
Consultants, Brazil1
Total

2008
783
26
19
52
880

2009
1,096
13
13
34
1,156

2010
1,120
18
17
8
1,163

1. Data refer to a pilot project in a sales department in the Greater São Paulo area.

Natura Ombudsman’s Ofﬁ ce surveys Brazilian employees about their satisfaction with its services. In 2010, the of-
ﬁ ce achieved a 97% satisfaction level, which is statistically equivalent to the ﬁ gure reported in 2009 (98%). We do
not conduct surveys with employees in our international operations or with suppliers or consultants since we still
don’t have a signiﬁ cant sample for this measurement.

BRAZILIAN OPERATIONS’ INTERNAL STAKEHOLDERS

In 2010, we recorded 1,120 inquiries from internal stakeholders in Brazil. The percentage of issues handled,
83% in 2009, decreased to 52% last year. This decrease resulted from our decision to change the criteria
for use of the Ombudsman’s Ofﬁ ce in an effort to promote greater dialogue between employees and their
managers. Our goal is to create a culture that encourages collaborative problem solving, reserving the Om-
budsman’s Ofﬁ ce for cases where solutions are elusive. As a result, technical inquiries regarding processes,
policies, procedures, and infrastructure were rerouted to appropriate managers.

Other changes in channel behavior were also observed. Anonymous reports decreased, thus strengthening
the consolidation of the channel as an additional tool of dialogue and relationship for employees and in-house
outsourced workers in Brazil.

1. SATISFACTION WITH THE
OMBUDSMAN CHANNEL (%)1

Some 53% of the inquiries handled by the Ombudsman’s Ofﬁ ce related to “people management”, primarily
beneﬁ ts such as medical and dental assistance, transportation, and meals. In 2009, 73% of the inquiries ﬁ elded
by the Ombudsman’s Ofﬁ ce were of this nature.

PROFILE OF CONTACTS BY INTERNAL STAKEHOLDERS IN BRAZIL

Criticisms
Compliments
Queries
Suggestions
Complaints/ethical misconduct
Total number of contacts

77%
10%
7%
4%
2%
1,120

2008

2009

2010

1. Result refers to positive responses
to the question, “Are you satisﬁ ed with
this dialogue channel?”

RELATIONSHIP PRINCIPLES

In 2010, we reviewed the Natura Relationship Principles, a set of commitments that guide our day-to-day
actions and attitudes, and we made changes to the content, adding more details to two principles: conﬂ icts
of interest and personal favoritism. Intended speciﬁ cally for our employees and in-house outsourced work-
ers, these principles include clariﬁ cations on the giving and receipt of gifts, making trips, hiring suppliers and
engaging in outside activities that may be in conﬂ ict with the work performed at Natura.

As a result of this initiative, we are now providing better guidance to our employees so they do not put
themselves in situations that involve, or may be interpreted as involving, a potential conﬂ ict of interest or case
of personal favoritism. The initiative has provoked reﬂ ection and raised awareness and respect for the topics
that were addressed, reinforcing the message that knowledge and observance of the Relationship Principles
is an individual responsibility.

INTERNAL OMBUDSMAN’S OFFICE – LATAM

In 2010, we observed an increase in the number of contacts, to 18 from 13 in 2009, with the majority origi-
nating in Peru, primarily from former employees who were dismissed due to ethical issues, after an analysis
and veriﬁ cation that involved various different departments of Natura. We saw a reduction in the number of
anonymous comments, causing the percentage of identiﬁ ed contacts to rise sharply from 31% in 2009 to 50%
in 2010. Most of the anonymous contacts are made on behalf of groups. The contacts are handled primarily by
the senior management and the People and Communication Department. Finally, most of the contacts were
made by Relationship Managers (44%), unlike in the Brazilian operations, where this channel is used most
frequently by the operational and administrative staff.

SUPPLIERS

In 2010, we also registered a small increase in contacts from suppliers, to 17 from 13 the year before. The
majority of this increase represents criticisms. The number of complaints fell from 50% of the contacts in
2009 to just 18% last year. Most of the contacts were made by suppliers of services (88%), while suppliers
of products made 12% of the contacts. All the contacts last year were identiﬁ ed, unlike in 2009 when 38% of
the contacts from service suppliers were made anonymously.

CONSULTANTS

The ofﬁ cial channel for our consultants to contact us is the Natura Service Center (NSC). The Ombudsman’s
Ofﬁ ce only handles cases that are not solved by the NSC. We have also modiﬁ ed some criteria for registering
behavioral concerns (such as, for example, problems contacting NCAs and relationship managers, incorrect
orders, etc.) and guaranteeing that technical issues are dealt with by the channel. We handled 5,335 contacts
from this stakeholder group in 2010. (Read more about our consultants on page 56).

CONSUMERS

Our consumers can use the Natura Customer Service Center (NCSC). Nevertheless, just like the service for
consultants, we may also intervene in special cases that are not solved by the NCSC, such as dissatisfaction
with the replacement of a product. In 2010, we also modiﬁ ed the criteria, starting to lend more support to
the legal ﬁ eld and the press, which require a much faster response. In 2010, we handled 730 issues from this
stakeholder group (read more about Consumers on page 59).

4.2

EMPLOYEES

THE GOOD RE SU LTS OF THE AC TIONS
TAKEN IN MORE THAN 40 YEARS WERE ONLY
ACHIEVED BECAUSE OF OUR DEDICATED
STAFF AN D ITS ALIGNME NT TO OUR
ESSENCE. MAINTAINING THE QUALITY OF
OUR RELATIONSHIP WITH EMPLOYEES IS ONE
OF OUR PILLARS FOR PROMOTING SUSTAINABLE
DE VELOPMENT AND VALUE GENER ATION.

Because of this, Natura has made a conscious effort to improve its “people management” over the last several
years. In this regard, education — a driver of sustainability — received a good deal of attention in 2010. We
established education-and-development programs for employees at different levels of the company, strength-
ened our organizational culture, created more efﬁ cient retention processes, and completed the training of our
international staff.

NUMBER OF NATURA EMPLOYEES1

Brazil
Argentina2
Chile
Mexico
Peru
Colombia
France
Total
Other employment contracts4
Apprentices 6
Trainees
Temporary staff 5
In-house outsourced workers 7

20083
4,386
306
222
277
290
135
32
5,648

12
66
445
1,787

2009
4,821
331
264
335
296
168
45
6,260

10
47
340
1,310

2010
5,509
395
293
329
293
170
48
7,037

152
68
128
2,065

1.Consolidated data as of December 31, 2010.
2.Of this total, 61 employees are part of the structure that deals with international operations, with headquarters in Argentina.
3.The operation in Venezuela was closed in 2009 and had 50 employees in 2008.
4.Includes operations in Brazil, Argentina, Chile, Colombia, Peru, and Mexico (except outsourced workers).
5.Staff hired for a ﬁ xed period under the CLT Labor Code by employment agencies and subordinated to these agencies are consid-
ered temporary.
6.In 2010, Natura launched the Semear (Seed) Program in Brazil, as the focal point for development of young apprentices.
7.Suppliers that provide services to Natura and that work in or have access to company premises for a period exceeding six
months are deemed to be in-house outsourced workers. This includes Cajamar, Itapecerica da Serra, Barueri, São Paulo and our
international operations. The scope of the indicator was changed in 2010, but it was not possible to review the historical basis due
to the change in the classiﬁ cation and deﬁ nition of the concept of outsourced workers.

With Natura’s business expansion across Latin America, our staff increased by 12.4% in 2010. The commencement
of international activities created challenges, making our structure more complex and more culturally diverse. We
intend to extend our best practices to employees working in other countries in which we operate.

Our organizational climate survey indicated a drop of one percentage point in the overall satisfaction with the
workplace environment, with a 73% rate of favorable responses from our employees. This indicator was below our
target of 76% . In Brazil, this ﬁ gure remained at 72%. We achieved a signiﬁ cant improvement among administrative
staff and maintained a high rate among the sales force.

Notwithstanding our efforts, there was a decrease in favorable responses from our operational staff. This suggests
that actions such as the Renovação (Renewal) Program and its career and development initiative, Meu Caminho
(My Way) (learn more on the next page, Education), are falling short of their goals. This program was implemented
in the second half of 2010, and we believe that it will begin to show greater beneﬁ ts in 2011.

1. Due to a calculation error, a 77% target was included in last year’s report.

According to the survey of the operational staff, we made progress in factors such as Leadership, Perfor-
mance Management, Development, Communication, Quality of the Decision-Making Process, as well as Re-
muneration and Beneﬁ ts, the aspects of the Renovação Program where the most headway has been made.
In 2011, we intend to improve the Career and Management aspects of the program.

Another issue that needs to be addressed, particularly among the administrative staff, is the management of
our physical facilities, which no longer meet current requirements. We will, therefore, in the ﬁ rst half of 2011,
inaugurate new facilities for our operations.

Satisfaction with the overall quality of the workplace also declined in our international operations. This was
the result of speciﬁ c factors in countries such as Argentina, Chile, and Peru and because of events related to
the implementation of our international business strategy. These events generated restructuring actions in
some countries. We aim to improve the execution of strategies that we believe will strengthen the quality of
our relationships with international employees.

ORGANIZATIONAL CLIMATE – APPROVAL (%)1 2

Brazil
Argentina
Peru
Chile
Mexico
France
Colombia
Natura

2008
69
80
77
83
85
60
84
72

2009
72
77
78
77
84
75
88
74

2010
72
64
71
69
82
72
84
73

1. Percentages indicated are the share of employees who rated 4 and 5 on a scale of 0–5, with 5 being the highest score. The survey
considers such issues as management, workplace environment, and career development.
2. The research methodology was adapted to incorporate the assessment of our Culture Drivers. The change, however, does not affect
comparability with the results of previous years.

We also measured employee loyalty, which registered 30% in 2010. This indicator tracks general satisfaction,
intention to continue a relationship with Natura, and whether they would recommend our brand. We also
measure the loyalty of our employees, and we are now reporting these results for the ﬁ rst time. Monitored by
Natura since 2009, this indicator cross-references information about overall satisfaction and the intention to
continue working for Natura and to recommend the company. In 2010, we achieved a result of 30% on this
indicator, one percentage point below the previous year. For 2011, we want to reach 32% loyalty in this indicator,
which will now be the main gauge of the quality of our relationship with employees.

EDUCATION
Education was an important theme in our relationships with employees during 2010. Despite falling short of our goal
to provide 100 training hours per employee in Brazil, we reached 90 hours and consider this result very signiﬁ cant. In
2011, we plan to monitor educational efforts in our international operations.

AVERAGE HOURS OF TRAINING PER EMPLOYEE PER YEAR IN BRAZILIAN OPERATIONS1

Production
Administrative
Management
Board
Total²

2008
105
90
68
9
94

2009
86
79
61
78
82

2010
90
90
83
67
90

1. This indicator includes training of the sales force (sales managers and relationship managers).
2. Includes total hours of all levels divided by the total number of employees in December of the corresponding year.

Delays in the implementation of training programs for our operating staff and our own overly ambitious
timetable for implementation contributed to the lower-than-expected number of training hours provided.

This development program is speciﬁ c for operational employees, and linked to career progress. Employees
expand their knowledge and qualify to take on new positions at Natura through training programs. In 2010,
about 30% of our operational staff participated. Classes take place during working hours and on weekends,
and special classes are offered for the hearing impaired.

We also developed an educational program speciﬁ cally for young apprentices. In addition to receiving the legally
required technical training, apprentices study subjects related to living our values and career development.

The program for apprentices led to the hiring of 134 youngsters in 2010, expanding the opportunities offered
to young people. Despite the large number of admissions, we have still not met the legal quota established by
the Young Apprentice program, although we are working towards compliance with this legislation. The pro-
gram’s technical learning was structured in partnership with the National Learning Service and the National
Commercial Learning Service.

More than 2,000 candidates participated in our selection process. The strong demand, in addition to conﬁ rm-
ing the attractiveness of Natura, illustrated the need young people have for new opportunities. Accordingly,
after the selection process, we invited the 500 shortlisted candidates to take part in a careers workshop to
contribute to the professional development of those who were not hired. We also plan to extend the scope
of the program, by helping the youngsters improve their chances of being hired in future selection processes
at Natura or by other companies (read more on page 68, Surrounding Communities).

INVESTMENT IN EDUCATION AND TRAINING OF EMPLOYEES (IN R$ ‘000)1
20084
14,062.0
162.5
82.7
473.8
74.9
12.8
73.4
14,942.1

Operation
Brazil2
Argentina
Chile
Mexico3
Peru
Colombia3
France
Total

2009
20,221.3
103,3
164,6
526.3
222,7
21,9
51,0
21,311.1

2010
25,744.0
93.3
127.0
567.5
210.0
39.9
100.3
26.882.0

1. Data in Brazilian Reais was converted to U.S. dollars at US$ 1: 2008 - R$ 1.8346; 2009 - R$ 1.7412; 2010 - R$ 1.71.
2. The ﬁ gure for investment in Brazil incorporates investment in Corporate Education, including courses with Time Jobs, and Sales Force
training (sales managers and relationship managers). For International Operations, it incorporates education courses for employees, includ-
ing relationship managers and team work.
3. Historical data for Mexico and Colombia contained inconsistencies and was recalculated.
4. The operation in Venezuela was closed in 2009 and investment in education in 2008 was 98.1.

In 2010, we also organized some speciﬁ c educational activities in the area of innovation, primarily for our
research and development staff. We invested in the use of new formats and methodologies, staging in-person
and virtual courses, as well as dialogue and discussion sessions and workshops. We also run the Natura Educa-
tion Program, which grants scholarships to employees and their family members to encourage continued
learning. In 2010, we invested R$862,000 in the program (see tables).

IN THE BRAZILIAN OPERATION - NATURA EDUCATION PROGRAM1

Scholarships awarded
Scholarships awarded/enrollment (%)
Amount invested in Natura Education (R$ thousands)

2008
473
32.6
720

2009
611
48.3
841

2010
546
43.2
862

1. Includes all employees enrolled and selected during the year.

NATURA EDUCATION PROGRAM - COURSES HELD BY EMPLOYEES
OR FAMILY MEMBERS WHOLLY OR PARTLY SUBSIDIZED BY NATURA (BRAZIL)

Technical/vocational
Languages
Pre-university
University
MBA and postgraduate

2008
48
118
11
219
77

2009
77
117
6
292
119

2010
47
134
5
259
101

All new employees in Brazil (including in-house outsourced workers) undergo integration training, where they learn
about topics related to human rights, the environment and social responsibility. These issues are also addressed in
lectures that are open to all our employees. In total, we offered 5,593 hours of training in these programs in 2010. Al-
though we have no speciﬁ c training on issues related to corruption and human rights, all our new employees learn our
Relationship Principles, which are inspired by the Declaration of Human Rights. These principles clearly demonstrate
our ofﬁ cial stance against corruption – banning all forms of bribery, corruption and kickbacks.

Our internal security staff at Cajamar have received special training on human rights and techniques for approach-
ing and searching people before they can work on the random search system at Cajamar. Implemented as a pilot
project in 2010, the searches may be conducted on employees of all levels at the company and are randomly deﬁ ned
by electronic sensors installed at the parking exits and the bus terminal. The purpose of the searches is to preserve
company property.

ORGANIZATIONAL CULTURE
By developing our organizational culture, we lay the groundwork for our Vision of the Future and reinforce our
Essence among our employees. These efforts align behavior, strategies, programs, processes, and relationship
expectations.

In 2010, we developed seven Culture Drivers (learn more on page 3), inspired by our Essence. These drivers pro-
vide clear guidance for our choices and attitudes and illustrate the behaviors and values expected by the company.

These drivers were the result of a collaborative process that involved the company’s founders, the Executive
Board, and the leadership team. We also considered suggestions made in 2009 by nearly 150 employees in the
administrative, operational, and sales areas. The drivers will be rolled out to all Natura employees in 2011, when
we will also review our main practices, symbols and organization systems, and set forth the procedures to gua-
rantee the ongoing promotion and reassertion of our culture.

LEADERSHIP
A leadership team that is committed to our Essence is fundamental to our growth. Natura has invested in the
training and development of almost 600 leaders in Brazil and abroad. In 2010, we ﬁ lled 62% of our open leadership
positions with internal staff.

In 2011, we will establish a leadership-speciﬁ c educational program that will support our desired organizational
competencies. We believe this will strengthen our organizational culture. The project will include onsite classes and
distance learning; study groups formed by people with similar interests; workshops; and activities that promote the
exchange of knowledge and ideas.

The intent of this program is to qualify leaders and to strengthen our succession plans. We map our critical positions
and, at the end of 2010, had deﬁ ned a succession plan for 40% of our short-, medium-, and long-term positions.

Our leaders currently have their careers monitored by external consultants. In 2011 we will implement a pilot
project for internal members of the Executive Committee and the Board of Directors to become mentors and
accompany the long-term development of leaders.

We have started to analyze the career development of these leaders using a 360-degree feedback assessment,
which makes an appraisal of the individual based on a self-assessment and the perception of their superiors, peers,
subordinates and other stakeholders such as suppliers. Far more transparent and participative, this assessment also
addresses performance and adherence to Natura’s Essence. Through a process of engagement, the leaders can
evaluate their life purposes inside and outside Natura and, after also considering the external evaluations, prepare a
development plan for the next ﬁ ve years. In 2011, we plan to extend this assessment process to the administrative
and operational staff.

ATTRACTION AND ENGAGEMENT
Natura relies on recruitment-and-selection processes that attract candidates who are not only technically quali-
ﬁ ed but who also identify with our Essence and values.

The new attraction model implemented in 2010 moves in this direction and goes beyond the traditional selec-
tion model. We view the application process as an opportunity for individual personal and career development.
We also seek feedback from applicants at all stages of the selection. We aim to stimulate a reﬂ ection about the
process. This initiative will formally begin in 2011.

This model has already been applied to our trainee program, back in 2009. Lasting two years, the 35 selected
young people participated in a comprehensive selection process guided by diversity, without considering univer-
sity education or ﬂ uency in languages, and with the age limit increased to 28 years.

Though we have established a strong track record for ﬁ lling leadership positions with internal staff, we did not
reach the target we established for ourselves in 2010. Compared with 2009, the internal ﬁ ll rate dropped by
25 percentage points, in part because of Natura’s growth and because of steps taken to incorporate strategic
market competencies. To reverse this trend, we redesigned our job opportunities program, which encourages
employees to seek professional growth. The job opportunities program also addresses the responsibilities of all
involved in the process, including candidates, the hiring manager, and Human Resources. In 2011, this program
will be extended to our international operations. We also made eligibility-for-advancement criteria more ﬂ exible
and strengthened efforts to promote job openings.

Outside Brazil, we offer “global opportunity allowances” that enable employees to move to other countries. This
initiative will help us form a multicultural team and allow staff to share knowledge and experiences.

Our international operations strategy depends on the formation of mixed teams of employees who are respon-
sive to our value proposition and people who are knowledgeable about these markets. Currently, most of the
staff within our international operations consist of local professionals.

1. POSITIONS FILLED
BY INTERNAL STAFF-
PLACES OFFERED/TAKEN
BY EMPLOYEES (%)

TURNOVER
We registered a small increase in employee turnover in Brazil in 2010 (see table). This increase is primarily due
to Natura’s decision to dismiss employees with low performance or commitment.

In our international operations, Mexico registered a signiﬁ cant drop in turnover rates. This was the result of bet-
ter-deﬁ ned employment proﬁ les, as well as improved recruitment, selection, and monitoring of new employees.
Increased turnover in Peru resulted principally from the restructuring of the Sales Department and the resulting
change in job requirements. In Chile, the increase in turnover was driven primarily by temporary outsourcing
after a February 2010 earthquake.

2008

2009

2010

EMPLOYEE TURNOVER (%)1

Brazil
Argentina
Chile
Mexico
Peru
France
Colombia

2008
12.4
16.6
13.9
42.7
12.2
35.0
35.4

2009
7.5
12.5
13.6
25.3
16.6
15.5
39.7

1. Although we monitor data by age group and gender, we do not take this information into account in our business.

TOTAL DEPARTURES

Brazil
Argentina
Chile
Peru
Colombia
Mexico
France

2008
891
50
29
33
35
121
20

2009
551
38
36
49
31
81
11

2010
8.4
12.3
16.4
11.6
26.6
12.6
21.0

2010
641
40
49
75
37
38
5

Considering the members of the senior management recruited from the local community, we achieved a rate
of 100% in France, 67% in Argentina, 33% in Chile and 17% in Colombia and Mexico. In Peru, we have yet to
hire local staff.

All our employees with less than three months service participate in our Performance Management Program
and receive regular feedback during their assessment cycle, in addition to structuring their own individual de-
velopment plan.

In 2010, we extended the scope of the analysis, with a view to providing a clearer performance management in
the assessment of our employees, and to offering more assertive and efﬁ cient feedback.

VOLUNTEERING
We are restructuring the initiative in 2011 to encourage more of our employees to participate in the corporate
volunteering program, whose goal is to foster transformation opportunities through volunteer work. In 2010,
we registered 57 participants. The staff who enrolled in the program worked on social projects during business
hours and, in some cases, over the weekends.

DIVERSITY
Building a more equitable and sustainable society depends on respect for diversity. In Brazil, the main challenge
is social inclusion, and the insertion of classiﬁ cations such as age group and gender is not, by itself, a guarantee
of diversity.

Education provides the best path to social inclusion. Companies’ efforts to improve the quality of education
beyond their own doors can have a substantial impact on inclusion and promote the personal and professional
maturity of the employees (learn more on pages 30 and92 High-High-priority Topics/Education and Generation
of Social Value).

Our vision of diversity also consists of engaging professionals in regions where we operate. Their experience
with other societies, cultures, and value systems provides us with a means for improving our relationships with
our stakeholders. In our units, 23% of leaders have had professional experience in other countries.

Although our vision on the theme has evolved, we know that we still have to improve our positioning regarding
diversity and deploy more effective actions.

MULTICULTURE 1 2

Total foreign leaders or leaders
with international experience
Percentage of foreign leaders or of leaders with
international experience in relation to all leaders (%)

2008

2009

2010

n.d

23.1

1. Includes process management, business and global leaders.
2. We take into consideration current or past international experience in Natura in operations with nationality different to that of the
employee and with a minimum duration of two years.

In 2010, we recorded an increase in the hiring of people with disabilities, although still slightly below the mini-
mum quota of 5% established by law, as a result of the higher rise in the staff numbers than the growth in the
hiring of these employees. We are streamlining our program to provide for the development not only of people
with disabilities, but also for their managers, and we are also hiring people with different types of disabilities.
We believe that in addition to simply complying with the hiring quota, we have the responsibility to promote
the integration of disabled employees in the company, in society and with coworkers, which is why we are now
offering more basic skills training courses, attended by 217 people in 2010, nearly three times the previous year.
We also completed the training of 57 employees in sign language, to act as facilitators to improve the inclusion
of the hearing impaired.

DIVERSITY ¹

Total employees in Brazil

Women
In relation to total employees (%)
In management positions compared to
the total number of management positions (%)
In board positions compared to the total
number of board positions (%)

Above 45 years
In relation to total employees (%)
In management positions compared to
the total number of management positions (%)
In board positions compared to the total
number of board positions (%)

2008
4,386

2009
4,821

2010
5,509

63.7

52.3

19.2

10.5

8.2

38.5

60.5

51.9

17.6

12.2

11.3

35.3

60.7

54.2

21.7

10.6

9.2

28.3

1. In this edition, we no longer report the classiﬁ cation by race due to a different understanding about diversity, which involves broader
concepts of social inclusion.

HIRING AND TRAINING OF PEOPLE WITH DISABILITIES (BRAZIL)

Employees with disabilities
People with disabilities in relation to total employees (%)
People with disabilities, trained in the
Basic Professional Skills program

2008
237
5.4

2009
236
5.0

2010
249
4.5

217

COMPENSATION
Our compensation practices follow the corporate policy effective in all countries. However, if inecessary,
we may adjust amounts and potential earnings in accordance with each market.

Salaries are established according to reference surveys, the salary structures of Brazilian or multinational
companies, publicly held companies, and companies whose compensation practices are similar to ours. The
comparability is based on the scope and complexity of functions. We maintain a salary average that is in
line with market practices.

PROPORTION OF LOWEST WAGE COMPARED TO THE MINIMUM WAGE IN EACH COUNTRY
2009
1.1
2.0
1.3
1.7
4.8
1.6
1.5

2008
1.2
1.5
1.4
1.6
4.6
1.1
1.1

Brazil
Argentina
Chile
Peru
Mexico
Colombia
France

2010
1.4
1.7
1.3
1.0
4.6
1.1
1.1

We also offer a variable compensation model adjusted to the characteristics of each stakeholder, with speciﬁ c
forms of payment, targets, and amounts. Income distributions to nonexecutive stakeholders are limited to 3% of
the operating income. In 2010, our operational employees received, on average, the equivalent of three additional
months’ salary in variable pay.

Looking to cater to the growth and the internationalization of the company, we offer an expatriate program with
a package of special services and beneﬁ ts, as well as development and career opportunities. We currently have 30
expatriate employees at our operations in Chile, Argentina, Peru, Mexico, Franca and Colombia.

In 2010, collective bargaining agreements provided our employees in Brazil with a salary increase of around 7.17%.
Female administrative employees who comprise the sales force – relationship managers and sales managers – re-
corded a higher salary increase than the collective bargaining agreement due to the sales bonuses they obtained.
Over the year, the sales bonuses earned by the female staff increased 7.8% compared to 2009.

RATIO OF WOMEN’S SALARIES COMPARED TO MEN’S (BY EMPLOYEE CATEGORY) (%)

Operational
Administrative
Managers
Executives

2008
-18.34
13.56
-4.38
-19.60

SALARY PROFILE (R$) - AVERAGE MONTHLY SALARY IN OPERATION BRAZIL 1 2 3

Women - total (R$)
Average monthly salaries for production jobs
Average monthly salaries for administrative positions
Average monthly salaries for management positions
Average monthly salaries for board members

Men - total (R$)
Average monthly salaries for production jobs
Average monthly salaries for administrative positions
Average monthly salaries for management positions
Average monthly salaries for board members

Over 45 years (R$)
Average monthly salaries for production jobs
Average monthly salaries for administrative positions
Average monthly salaries for management positions
Average monthly salaries for board members

Up to 45 years (R$)
Average monthly salaries for production jobs
Average monthly salaries for administrative positions
Average monthly salaries for management positions
Average monthly salaries for board members

2008
4,352.0
1,104.5
5,287.9
12,341.1
31,185.9

3,550.3
1,352.5
4,656.4
12,906.9
38,788.7

7,540.2
1,676.3
8,161.9
15,198.0
38,395.8

3,653.3
1,213.6
4,652.1
12,379.8
36,658.4

2009
-15.59
32.80
-5.63
-18.62

2009
4,755.1
1,150.0
6,137.4
13,105.1
34,309.8

3,574.3
1,362.3
4,621.5
13,886.2
42,162.5

8,067.5
1,712.7
8,961.0
17,437.9
38,242.9

3,850.4
1,240.7
5,266.5
13,068.4
41,570.5

2010
-15.83
30.43
-4.44
-19.00

2010
4,943.6
1,201.6
6,189.8
13,351.0
37,195.7

3,851.9
1,427.5
4,745.5
13,971.7
45,919.0

8,088.8
1,770.2
9,166.3
18,343.6
44,089.5

4,095.0
1,293.2
5,304.9
13,144.4
43,637.8

1. The calculation does not consider payment of short-term incentives (Proﬁ t Sharing).
2. Bonuses paid to sales managers and relationship managers were considered for the purpose of calculating this indicator. Sales
employees, when distributed in categories, reinforce the average female wages by sales bonus, excluding production jobs.
3. In this edition, we no longer report the classiﬁ cation by race due to a different understanding of diversity, which involves broader
concepts of social inclusion.

In all our operations, we follow the standards and limits established by local legislation concerning collective
bargaining. In Brazil, for example, the collective bargaining agreements sealed with unions include all employees.

We recognize and uphold the right of all employees to be represented by their respective unions, although we
have no formal processes in place to identify operations in which the right to exercise freedom of association
and collective bargaining may be at risk. However, our employees have the Natura Ombudsman’s Ofﬁ ce at their
disposal to report any type of complaint (read more in Quality of Relationships). Natura’s relationship with
unions is managed by the Human Resources Department and we organize meetings to discuss agendas that are
set in advance with union representatives.

1. CONTRIBUTIONS
MADE BY NATURA TO
EMPLOYEE PENSION
PLAN (R$ MILLION)

3,076.0

2,527.8

Even though prior notiﬁ cation of operational changes is not speciﬁ ed in the collective bargaining agreements,
we always make an effort to communicate these changes in advance and, upon doing so, provide clariﬁ cations.

1,387.0

In our pension scheme, each employee can decide on the amount they wish to contribute, from a scale of 1%
to 5% of their salary, and Natura will add another 60% to their contribution. The scheme is optional and avail-
able to all employees in Brazil. With the exception of relationship managers and sales managers, who receive
bonuses proportional to the results they achieve, all our employees receive, in addition to their annual salary,
two additional month’s wages at the end of each year (known in Brazil as the 13th and 14th salaries, the 13th
being required by law).

Natura does not have any formal program to prepare employees for retirement, although in 2011 we are going
to implement a pilot project for our relationship managers. The project consists of a series of workshops on
career transition that are intended to promote reﬂ ection on the future. Individual sessions will also be organized
throughout the year for the relationship managers. Among other topics, these sessions will address career plan-
ning, alternative activities such as a second job or volunteer work, and saving and investing. The program is vol-
untary and geared towards managers who are approaching retirement. The project will eventually be expanded
to include all employees.

BENEFITS
Our beneﬁ ts policy is centered on the idea of offering well-being to all who work with us. Learn about the
beneﬁ ts offered:

Beneﬁ ts offered to employees in the Brazilian Operation:

¾ Natura Educação (Natura Education) Program: scholarships for employees and their families
¾ Construindo o Futuro (Building the Future) Program (includes savings incentives): Encourages the habit

of saving among employees

¾ Nursery for employees’ children up to 2 years and 11 months of age
¾ Support for adoption processes
¾ Health care plan
¾ Dental care plan
¾ Check-up for employees from management level upwards
¾ Partial reimbursement of drug costs for cardiovascular diseases, diabetes, renal failure, cancer, liver
diseases, neurological disorders, work-related musculoskeletal disorders and psychiatric disorders

¾ Telemedicine: ECG by phone in emergencies
¾ Saúde em Movimento (Health in Motion) Program: encouraging physical activity. Medical and nutri-

tional evaluations and also of physical ﬁ tness before starting activities
¾ Fitness Center Grant for Relationship Managers and Sales Managers
¾ Five free products per month for employees at managerial level
¾ Health Area: Urgent and emergency medical care, physiotherapy, RPG, gynecology and obstetrics,
acupuncture, orthopedics, nutrition and psychology. Also included are programs for Hearing Conser-
vation and Occupational Health Medical Control with examinations for admission, periodic exams,
job changes, return to work and layoffs, and activities for early detection, treatment and monitoring
of cases of occupational diseases

¾ Quero Estar Bem (I Want to Be Well) Program, created in 2010, includes all the specialties and profes-
sionals of the Health Area, considering the human being fully in four dimensions: physical, emotional,
spiritual and social (read more in Worker’s Health and Safety).

As well as these beneﬁ ts, the employee is entitled to:

¾ Ergonomics Program, which seeks a productive and comfortable adjustment of the worker to their work,

promoting the changes necessary for their well being, inside and outside the company.

2008

2009

2010

1. The company’s contributions
increased due to the end of the
surplus situation of the pension fund

¾ Social Services. Ensures employees an opportunity for discussion, understanding and resolution of issues

of a social order.

¾ Workplace exercise program
¾ Purchase of ﬁ ve Natura products per month with 40% discount
¾ Vacation Project (activities in Espaço Natura, in July, aimed at employees’ children aged between 6 years

and 12 years 11 months)

¾ Professional guidance
¾ Cuidando de Quem Cuida (Caring for Carers) Program: postnatal meeting, course for pregnant women
¾ Subsidized day care and special needs care (offered to employees with children with special needs), to

defray the costs of education

¾ Life Insurance
¾ Payroll deduction loan
¾ Vehicles for management-level employees
¾ Family Moment: entertainment, culture and recreation for employees with children up to 9 years 11

months and distribution of toys

¾ Pharmacy Agreement
¾ Contracted transportation
¾ Runners Project, running and walking workouts monitored by specialized professionals
¾ Restaurant
¾ Christmas Basket
¾ Gifts (Mother’s Day, Father’s Day and birthday)
¾ Sale of Discounted School Materials
¾ Fitness, swimming pool and multisport court services at Natura Club (Cajamar and Itapecerica da Serra)

and Well Being Area

¾ Services and facilities: seamstress, laundry, shoemaker, optician, insurance, postal services, rental of books

and videos
¾ End of Year Party
¾ Celebrations for years worked

Beneﬁ ts offered to resident third parties:

¾ Course for pregnant women
¾ Health Area - emergency care
¾ Runners Project
¾ Restaurant
¾ Workplace exercise
¾ Toys
¾ Christmas Basket
¾ Contracted transportation
¾ Fitness, swimming pool and multisport court services at Natura Club (Cajamar and Itapecerica da

Serra) and Well Being Area

¾ Services and facilities: seamstress, laundry, shoemaker, optician, insurance, postal services, rental of

books and videos

¾ Gifts - Mother’s Day and Father’s Day

HEALTH AND SAFETY
We continued to step up our safety efforts, investing R$882,000 in accident prevention in 2010. We main-
tained throughout the year the same low level of work-related accidents as in 2009: 17 in total, of which 7
were accidents with leave and 10 were accidents without leave.

A special project conducted with service suppliers cut the number of accidents suffered by outsourced workers
by 25%. An analysis of the accidents indicates that workplace behavior is the main cause of injury. For 2011, we
intend to concentrate on developing and implementing a system of health and safety management that focuses on
avoiding risky behavior, and on providing better support and services to our units in both our Brazilian operations
(distribution centers, Natura Houses, etc.) and our international operations.

TYPICAL INJURIES AND LOST WORKDAYS AND WORK-RELATED ABSENCES (INCLUDING OUTSOURCED
EMPLOYEES) IN THE BRAZILIAN OPERATION 1

Employees - number of accidents with leave²
Employees - number of accidents without leave³
Number of work accidents per employee

2008
16
5
0.005

2009
12
5
0.004

2010
7
10
0.004

Outsourced employees – number of accidents with leave4
Subcontractors - number of accidents without leave 4
Working days lost5
Frequency rate of accidents with leave 6
Frequency rate of accidents with/without leave 7
Investment in disease prevention per employee (R$)
Investment in accident prevention per employee (R$)8
Number of cases of occupational diseases reported
to the National Social Security Institute – Cajamar
Number of occupational diseases reported to the
National Social Security Institute on - Itapecerica da Serra
Rate of absenteeism (%) 9
Number of deaths
Occupational illness frequency rate 10

11
2
131
1.71
2.24
479.6
722.8

1
n/a
0
0.64

4
4
84
1.31
1.85
707.4
851.5

0
n/a
0
1.09

4
2
64
0.69
1.67
736.5
882.5

0
5.45
0
0.88

1. This includes accidents recorded in the units of Cajamar, Itapecerica da Serra, Barueri, São Paulo, Benevides and distribution centers.
2. Accidents with leave are those in which the employee does not return to their activities on the next working day.
3. Accidents without leave are those in which the employee returns to work on the same day of the accident or the next working day.
4. This includes our “resident” and “non-resident” service providers.
5. This refers to Natura employees.
6. Equal to the number of accidents with leave per million man-hours worked (HHT).
7. Equal to the number of accidents or employees involved in accidents with or without leave per million man-hours worked (HHT).
8. Includes the entire budget of the Department of Occupational Safety, expenditures and investments carried out by the Engineering and
Manufacturing area to guarantee and/or improve occupational safety conditions. This does not include spending on training.
9. We began tracking the rate of absenteeism in 2010.
10. Number of cases per 106 man hours worked.

Formal agreements with unions include measures to improve workplace protection, namely the use of
protection equipment, procedures for the prevention of accidents with machinery and equipment, commu-
nication of workplace accidents, and the installation of an Internal Accident Prevention Commission (IAPC).
All our employees in Brazil are represented in formal health and safety committees and also in the different
IAPCs, on which any company employee, regardless of their seniority, may serve. They observe the follow-
ing structure: 50% of their representatives appointed by Natura and 50% appointed by our staff.

We invested R$736 million in health management in 2010 and we prepared a diagnosis of the health of our
staff. Based on this assessment, in December 2010 we launched an illnesses prevention program to encourage
employees to take care of their health. One of the initiatives involves better management of more complex
health issues, in which employees or their dependents who have a speciﬁ c condition will be invited to take part
in programs to monitor their health problem. We shall also launch in 2011 a program to prevent hypertension.

Once identiﬁ ed, cases of occupational illness are treated by a multidisciplinary team made up of occupational
health doctors, an ergonomist, an orthopedist, a physiotherapist, an acupuncturist, a psychologist, Global
Postural Reeducation (GPR) therapy and a social worker. Furthermore, frequent evaluations will be made of
our work stations and we also offer workplace exercise classes for everyone at the company.

In November 2010, 33 employees, part of a group working in special areas of the factory to rehabilitate
from physical injury, were dismissed by Natura. The layoffs followed a thorough evaluation and were made
exclusively due to lack of commitment and improper behavior in the workplace. Natura operates in strict
compliance with legislation and we are conﬁ dent that we have always acted respectfully and transparently
towards our employees. The dismissed employees who had surgeries scheduled, in accordance with prevail-
ing legislation and their employee category’s collective bargaining agreement, had their health insurance ex-
tended. When questioned by the Labor, Administration and Public Service Commission of the Lower House
of Congress, we presented all the necessary explanations concerning the layoffs.

COMMUNICATIONS WITH EMPLOYEES
In 2010, we made improvements to the quality of our communication with the operational staff, including chang-
es in the use of language and an expansion of the speciﬁ c means of communication for this group of employees.

We also segmented the Natura TV Channel, which is broadcast at 23 points in our Brazilian operations, offering
speciﬁ c programming for our operational employees. We also improved communication with the staff at the
Benevides Industrial Plant.

Employees can also use Natura Nós (Natura Us), an internal social network that is also available to in-house
outsourced workers and relationship managers. In 2010, a review of the network was made and improvements
will be introduced in 2011.

4.3

CONSULTANTS
AND NCAs

OUR SALES CONSULTANTS ARE A
FUNDAMENTAL COMPONENT
OF OUR BUSINESS MODEL. THEY NOT
ONLY SELL OUR PRODUCTS BUT ALSO
DISSEMINATE OUR ESSENCE
A N D O U R VA LU E PRO POSI T IO N .

In 2010, we reached an important milestone: Our sales force exceeded 1 million consultants in Brazil and
200,000 in our international operations. The number of sales consultants grew by 18% in Brazil, and by
more than 20% internationally.
Favorable economic conditions aside, this development is due primarily to the consolidation of our Natura
Consultant Adviser (NCA) model. Natura completed its ﬁ rst operating cycle in all regions of Brazil in 2010
using the new NCA model. NCAs are a signiﬁ cant part of our commercial strategy and enable a closer re-
lationship with our consultants. Within this structure, relationship managers work more closely with NCAs,
each of whom, in turn, offers support to up to 150 consultants by providing guidance and assistance to
their development, in addition to working as consultants themselves.
In 2010, we had more than 11,000 NCAs, 24% more than in 2009. Relationship, commercial training, and
sales actions focused on new consultants played an important role in promoting the growth of the sales
channel. Together with the NCA platform, these activities converged to produce one of the lowest turno-
ver rates ever at Natura.
In our international operations, the most signiﬁ cant factors fueling the growth of our sales force were
increased recognition of our brand, consultant-recruitment campaigns, management-improvement proces-
ses, and better monitoring of the sales channel.

NUMBER OF CONSULTANTS IN BRAZIL AND INTERNATIONAL OPERATIONS (THOUSANDS)¹ 2

Brazil
Argentina
Chile
Mexico
Peru
Colombia
France
Total

2008
730.1
37.3
17.5
20.0
35.2
5.9
0.8
846.83

2009
879.7
46.5
24.5
31.2
42.6
13.0
1.4
1,038.9

2010
1,028.7
53.2
31.0
41.2
45.5
19.0
2.5
1,221.1

1. In Brazil, the ﬁ gure refers to the number of consultants available at the end of the year.
2. In the international operations, the data refers to the closing position of cycle 17.
3. Operations in Venezuela, with 2,800 consultants, were discontinued in 2009.

Our international operations are not based on the NCA model. In 2010, however, we implemented a project
in Mexico inspired by the success of this initiative in Brazil. We created the Natura Consultant Entrepreneur
(NCE), whose primary function is to attract new consultants and promote entrepreneurship. This strategy is
based on the characteristics of local markets and was designed to boost Natura’s direct sales in Mexico by
attracting new consultants to our business and value generation model.

The quality of our consultant relationships is a key driver of our success. We held six dialogue panels in 2010
to detect improvement opportunities and build collaborative solutions that may assist in the development of
our activities. Some of these meetings were attended by consultants and NCAs who had been working with
the company for less than a year and a half, as well as by former consultants and NCAs who worked with the
company less than 18 months. The purpose was to gain a better understanding of the challenges consultants
faced in the early stages of their work with Natura.

1. NUMBER OF NCAs
IN BRAZIL 1

11,276

9,083

5,844

20082

20093

2010

1. Refers to the number of NCAs
at year’s end.
2. Includes Midwestern, São Paulo
Interior, Northeastern, Rio de
Janeiro, and Minas Gerais regions.
3. The increase in the number of
NCAs is related to the expansion
of the model in São Paulo Capital,
North, and South regions.

The level of satisfaction is permanently monitored, and our relationship-quality rates have remained stable
over time. The loyalty of our consultants increased from 17% to 21% in 2010. The loyalty index of our NCAs
has fallen. Because of the novelty of the NCA model, we still face challenges, such as our response time in
meeting NCA needs. We continue to seek ways to improve this relationship.

QUALITY OF RELATIONSHIPS WITH CONSULTANTS (BRAZILIAN OPERATIONS) (%)1

Satisfaction 2
Loyalty 3

Jan/08
88
16

QUALITY OF RELATIONSHIPS WITH NCAs (BRAZILIAN OPERATIONS) (%)1
Jan/08
93
31

Satisfaction 2
Loyalty 3

Jan/09
88
17

Jan/09
95
37

Jan/10
90
21

Jan/10
94
32

1. As of 2010, we have modiﬁ ed the survey criteria, no longer monitoring the relationship with consultants and with NCAs and instead
adopting Satisfaction and Loyalty as indicators of the quality of the relationship.
2. Consultants and NCAs either “satisﬁ ed” or “completely satisﬁ ed.” - Top 2 Box
3. Loyalty denotes Top Box for satisfaction, intention to continue a relationship with Natura, and willingness to recommend the brand.

INCOME AND PRODUCTIVITY
Average annual income distributed to consultants increased, from R$3,900 in 2009 to R$4,100 last year. These
data are positive in light of the signiﬁ cant increase in the numbers of new consultants joining us in recent years,
and they are now quicker to reach the productivity levels of those who have been active for longer. However,
there was a slight decrease in NCA per-capita income due to the business model’s rapid growth.

ANNUAL AVERAGE INCOME GENERATED IN THE BRAZILIAN OPERATIONS (R$)

Natura Consultant Advisers (NCAs)¹
Natura Consultants 2

2008
3,380
4,097

2009
9,841
3,987

2010
9,802
4,128

1.We consider the catalogue price (full price) and the consultant’s 30% proﬁ t.
2. NCAs are commissioned based on performance in terms of number of consultants submitting orders and volume of orders.

TRAINING AND CAPACITY BUILDING
The success of our business strategy also depends on the level of training and engagement of our con-
sultants, so we have been investing increasing amounts of resources in training. In 2010, in Brazil 517,400
consultant trainings took place, exceeding our target of 500,000. We emphasize training opportunities for
consultants with less than three years’ experience through distance learning and in-person courses; 78%
of these consultants have taken advantage of this. We have also developed a speciﬁ c training model for
our international operations, to be applied in 2011, with a revised approach drawing on our experience
in Brazil and the content adapted to local needs. These activities are comprehensive and cover product
knowledge, sales techniques, and socioenvironmental awareness.

Natura Houses are used for training and for Natura meetings at the beginning of each cycle, when we
present new products and developments to our consultants. In 2010, we opened two new Natura Houses
in Brazil, one in the Itaquera neighborhood of São Paulo and the other in Santo André, a city inside the
metropolitan region of São Paulo. The latter caters to a smaller number of consultants, enabling a closer
relationship with them to achieve even greater engagement. We also opened three new units for our in-
ternational operations: one in Lima, Peru, and one each in Buenos Aires and Cordoba, Argentina. In all, we
have seven Natura Houses in Brazil and 15 abroad.

PARTICIPATION OF CONSULTANTS IN TRAINING IN BRASIL (IN THOUSANDS)

New consultants
Initial training
Training participations1

2008
304.0
164.9
458.2

2009
430.2
354.4
583.0

2010
457.9
360.9
592.6

1. May include more than one participation by the same Natura consultant even when repeating a training course.

New consultants take part in induction training, during which they are monitored from the moment they join
Natura until they receive the products from their ﬁ rst order. This allows them to familiarize themselves with the
work of consultants and with our value proposition. They also have at their disposal on the internet our Portal do
Conhecimento (Knowledge Portal), with exclusive content and news for consultants, information about Natura
products and tips about making sales.

We completed the course given in partnership with the National Service for Commercial Education (Senac), in
which we offered our consultants in São Paulo training in entrepreneurship and make-up techniques, and we are
looking to forge new partnership to continue the project. We continue to invest in new initiatives to improve pro-
fessional development, such as special training in new products that we consider strategic.

For NCAs, we upgraded the initial training program, extending the course from just two days to one month, and
basing it on in-person meetings, virtual tools and content, while promoting individual reﬂ ection and making available
the support of relationship managers.

For our managers, we offer training on the operational side of the business and to prepare them for an increasingly
more autonomous role as managers of groups of consultants and NCAs. Every two years, managers are invited
to participate in a workshop on our competitive advantages, during which they address topics such as: brand,
products, quality of relations and sustainability. We also decided to extend this training to our NCAs, and 50% of
them took the course in 2010.

As a signatory to the Brazilian Direct Selling Association code of conduct for business-to-business and direct sellers,
Natura develops programs to train consultants for the business and to uphold the company’s ethical standards.

In 2010, as in previous years, no legal or administrative cases were ﬁ led against Natura involving any violation of
privacy or consultants’ personal data. Nor was there any record of legal cases on issues such as child, hazardous,
or slave labor involving consultants.

QUALITY OF SERVICES
In 2010, we reduced our non-service rate (NSR), reversing the upward trend of 2009. This indicator mea-
sures the nonavailability of products ordered by consultants. Despite this improvement, we are still far from
offering the level of service we hope to provide to our sales channel.

When a nonservice cannot be avoided, we try to minimize the inconvenience caused to our consultants by
offering substitute products and running promotions. We have aligned business areas for service response,
logistics control and marketing planning to ensure effective communication with relationship managers,
consultants, and NCAs in dealing with cases of nonservice.

The changes being made to the logistics model are having a beneﬁ t on the sales channel. In 2010, to ex-
panded capacity and opened new distribution centers, thus raising the quality of service provided to our
consultants and cutting delivery times (Learn more on page 26, Structural Changes).

The increased numbers of distribution centers will improve inventory management and help us to avoid
product loss. In 2010, as part of our effort to reduce the NSR, we built up the inventories, though this
results in a higher level of product loss because of label expirations or, in some cases, discontinuation of
sales. In 2011, we will improve inventory management to reduce loss rates.

Complaints from consultants about the services we provide have been reduced nearly 40%. Like the NSR,
this indicator measures their complaints in relation to problems during the order cycle, from requests for
products to their delivery to consultants.

In 2010, we also improved the service through better management of commemorative dates. We surveyed
consultants to anticipate demand at particular times, thus inﬂ uencing planning to cater to extra demand.

COMMUNICATION CHANNELS
We have several structured communication channels to support sales activities. The share of consultant
orders placed over the Internet rose to 85% in Brazil in 2010. In 2009, the percentage was 70%. The rate
for our international operations is 69%. In 2009, consultants only in Chile and France were able to place
orders over the Internet; in 2010, Internet ordering was extended to Argentina, Peru, and Colombia. In
2011, it will be extended to Mexico (graph 1).

In addition to making the order-taking process more efﬁ cient, electronic tools also enabled us to enhance and
expand our interaction with consultants. To facilitate access, all Natura ofﬁ ces have computers with internet
access for use by consultants, who may be assisted by NCAs to become familiarized with this channel.

1. NUMBER OF ORDERS
PLACED THROUGH
THE CONSULTANT
SITE IN BRAZIL (IN
THOUSANDS) 1

12,900.5

8,941.1

Visits to our redesigned Consultancy blog (www.blogconsultoria.natura.net) doubled during 2010, from an
average of 40,000 to 80,000 per month. Visits to our Natura digital magazine (www.natura.net) increased
100%. In February 2011, we also launched a revised digital reader version for the iPad (Learn more on
page 35, in Innovating Innovation).

4,277.6

The Natura Service Center (NSC) is also available to our consultants. The NSC offers a toll-free hotline for
receiving product orders; answering queries about products and services; and handling compliments, com-
plaints and suggestions. We continuously strive to improve this resource, and in 2010 we launched a new
project to settle more queries on the ﬁ rst call. Critical issues are forwarded to the Ombudsman’s Ofﬁ ce.

2008

2009

2010

1. Orders taken by a consultant
over the Internet, as billed for
indicated years.

In 2010, the NSC received 23,700 calls a day, down from 28,000 in 2009. This reduction is a direct result
of greater Internet for placing orders; only 14% of orders were made through the NSC, compared with
29% in 2009.

2. CAN - NATURA
SERVICE CENTER IN
BRAZIL1

RECOGNITION AND INCENTIVES
We seek to strengthen relationships with our consultants by holding events in which we acknowledge and
thank them. In Brazil in 2010, more than 73,000 consultants were thanked for their length of service, and
more than 9,000 were recognized for outstanding performance in both sales volume and sales of reﬁ lls and
products from Natura’s Crer para Ver (Believing Is Seeing) line. Consultants who have been active for 15
years are invited to visit the Natura plant in Cajamar (São Paulo), where they are welcomed at an event and
honored by our directors and vice presidents.

32.8

28.0

23.7

Consultants who have been with the company for ﬁ ve and 10 years receive awards, and we also give prizes
for outstanding sales performances. In 2010, we launched a recognition program for NCAs who made good
progress and achieved strong results.

2008

2009

2010

We also organized incentive campaigns for the purpose of driving up sales, with messages that are aligned
with our value proposal. One of the main events in 2010 was the Chronos Convention, attended by more
than 300 consultants, NCAs and relationship managers.

In the NCA recognition program, 2,200 NCAs were rewarded for their good progress and 3,000 for their
strong results.

RECOGNITION NCS

Total NCs recognized for time in activity
Total NCs recognized for performance
Number of awards for recognition with distinction
Number of events of recognition with distinction

2008
65,000
14,493
1,120
56

2009
64,030
10,572
473
43

2010
73,286
9,137
473
43

NATURA MOVEMENT
The Natura Movement is intends to raise awareness of our values among our consultants and inﬂ uence
positive behavioral changes in their families, customers, and surrounding communities. The Natura Move-
ment involves our own projects as well as external initiatives that are focused on two main pillars: reducing
environmental impacts (with a focus on Natura products) and social transformation (through social inclu-
sion and human-development projects).

Across Brazil, we have worked with 12 projects. Last year, 113,000 consultants were involved in these
activities — more than twice the number in 2009 and exceeded our goal of engaging 100,000 consultants.
To achieve this goal, we invest our efforts in raising awareness and mobilization initiatives. In 2010, we set
up our Acolher (Welcome) Program, which provides technical and ﬁ nancial support for environmental
projects developed by consultants across Brazil. The ﬁ rst projects to receive support from the program
will be announced in April 2011.

The program also seeks to promote an exchange of knowledge and to engage consultants in socially res-
ponsible actions. This program’s portal, www.movimentonatura.com.br/acolher, offers a way for consultants
to connect and to share experiences and provides information about other initiatives and social entrepre-
neurship. Almost 3,000 consultants have registered on the portal, which received more than 100,000 visits
between September and December 2010.

The Natura Movement also supports Natura’s Crer para Ver (Believing Is Seeing) program by encouraging
consultants to make online sales of products. In 2010, some 65,000 consultants participated in each sales
cycle (learn more on page 92, Creation of Social Value).

1. NCS ENGAGED IN
NATURA MOVEMENT¹1

113,118

45,467

In the Natura Product Recycling program, which encourages consultants to collect the empty product contain-
ers during their visits to customers, more than 184 metric tons of packaging was gathered, compared to 120
metric tons in 2009. We made little progress, however, increasing the number of participating consultants, a
ﬁ gure that stood at around 15,000 last year. We realize that the scope of this recycling is too limited, since it
does not come close to the scale necessary for collecting all the post-consumption packaging. This is why we are
structuring a more comprehensive waste management plan at Natura (read more on page 32 Priority Topics/
Product Impact).

n.a.

2008

2009

2010

1. Equal to the absolute number of
consultants average/year. This indicator
has been monitored since

This recycling program – which was already in place at the end of 2009 in the city of São Paulo and along the
São Paulo state coastline, in the Baixada Fluminense region of Rio de Janeiro, throughout the state of Espírito
Santo and in the state capitals of Recife (Pernambuco) and Salvador (Bahia) – was extended to include the
whole state of Rio de Janeiro in 2010. The containers are delivered to our transportation companies, which in
turn deliver them to recycling cooperatives, contributing to raising the incomes of recyclable waste collectors
and to the proper disposal of the containers.

RECYCLING PROJECT

Penetration of participating consultants¹
Total collected (metric tons)²

2008
2.3%
118.0

2009
2.4%
120.0

2010
1.2%
184.3

1. Percentage of participating consultants (delivery of box with waste) out of total consultants active in the cycle.
2. Natura packaging and products after use.

OTHER PROJECTS SUPPORTED BY THE NATURA MOVEMENT

ÁGUA DE VIVER
Realizado em parceria com a ONG SOS Mata Atlântica, grupos formados por CNs, CNOs e gerentes de
relacionamento monitoram a qualidade da água de rios e riachos das comunidades onde vivem e atuam, pro-
movendo o engajamento da população local. Em 2010, foram realizados 76 monitoramentos em 37 cidades
com a participação de 610 CNs.

ÁGUA DE VIVER (WATER TO LIVE)
Developed in partnership with SOS Mata Atlântica, an environmental NGO, groups formed by consultants,
NCAs and relationship managers monitor the quality of the water in rivers and streams in the communities
where they live and work, promoting the engagement of the local population. Last year, 76 monitoring exercises
were conducted in 37 towns with the participation of 610 consultants.

MATA ATLÂNTICA É AQUI (ATLANTIC FOREST IS HERE)
Also run in partnership with SOS Mata Atlântica, a truck travels to Brazilian towns showing an exhibition on the
Atlantic Forest biome and staging activities to raise awareness, mobilize and educate about the importance of
preserving the forest. In 2010, the activities were held in 36 towns with the participation of 4,600 consultants,
while some 114,500 people visited the exhibition.

GRUPO CULTURAL AFROREGGAE (AFROREGGAE CULTURAL GROUP)
The partnership with the Grupo Cultural AfroReggae completed four years in 2010. Natura provides institu-
tional support for the organization in its activities that involve an exchange of knowledge and promote culture.
Last year, 121 consultants participated in the actions of the group that beneﬁ ted some 2,000 people.

RESPEITO SÃO PAULO (RESPECT SÃO PAULO)
The program is organized by Natura and aims to raise awareness among our consultants so they can act as
change agents in the region. Average participation in each cycle of the program was 3,000 consultants.

OTHER ACTIONS
We continue to support the Civil Police of Rio de Janeiro which, together with AfroReggae, engage in dialogue
on human rights and the culture of peace in various different communities in the state, involving 12,000 people
in 2010. We have also started to support the Gol de Letra Foundation in Rio de Janeiro, the Pracatum Associa-
tion in Salvador (Bahia) and the Canta Brasil Socio-Cultural Group in Bento Gonçalves (Rio Grande do Sul).

4.4
CONSUMERS

OUR CONSUMER-RELATIONS INITIATIVES
ARE DRIVEN BY OUR DESIRE TO LEARN
ABOUT THE HABITS AND NEEDS OF
THE MILLIONS OF CONSUMERS WHO
U S E O U R P R O D U C T S . W E WA N T
TO OFFER THEM AN EXPERIENCE
THAT STIRS THEIR SENSES AND
PROMOTES WELL-BEING WELL.

Over the past two years, we have signiﬁ cantly expanded our efforts to survey, listen to, and engage in dialo-
gue with consumers to understand them better and to offer products that exceed their expectations. The
information we get in return inﬂ uences our strategic planning and provides input for the innovation process.

In 2010, Natura’s investment in market research grew 58% from the previous year. It is wor th noting that
we had already taken a major step forward in 2009, setting up our Consumer Insight area to improve
our knowledge of the market and to identify trends. We expanded this initiative to our international
operations in 2010.

In this context, we want to go beyond product-development surveys to examine and understand our
consumers’ attitudes and behaviors. We want to be present in all the market segments, from the very ﬁ rst
moments of a child’s life through old age. Therefore, we are studying speciﬁ c consumer segments, such
as men, seniors, and preteens. We are also extending consumer behavior research to areas we consider
relevant, such as beauty and conscious consumption.

In 2010, we held our ﬁ rst dialogue panel exclusively for consumers. Twenty-two members of the public
from several regions of Brazil and different age groups participated. At the meeting, we discussed their
ideas for improving our products, services, and activities.

This commitment to strengthening ties with our customers has ensured Natura’s continuing high levels of ac-
ceptance, as shown by the Brand Essence/Ipsos image survey. According to this study, 81% of consumers gave
top marks to our brand. In addition, 49% of cosmetics consumers selected Natura as their brand of choice.
Our consumer loyalty rate, which demonstrates consumer satisfaction and their willingness to recommend and
continue to buy our products, is 53% — a signiﬁ cant increase over the previous year’s rate of 46%. Through our
expansion in the Brazilian market, we have reached 55% of homes in Brazil (graphs 1 and 2).

QUALITY OF RELATIONSHIPS WITH CONSUMERS IN BRAZIL (%)1 2

Loyalty 3
Preference
Would recommend

2008
n.a.
47
n.a.

2009
46
47
72

2010
53
49
78

1. Source: Brand Essence.
2. From 2009 onward, the survey expanded its coverage to include three more cities, totaling six areas. Last year, we did not report the
three new survey areas because there was no historical comparison. In 2010, we are including this analysis, and we have revised the 2009
ﬁ gures accordingly.
3. The loyalty index is calculated based on the percentage of consumers who gave the maximum score for Satisfaction, Intention to Conti-
nue Buying, and Recommendation.

We maintain other channels for engaging consumers, such as our growing Internet presence through social
networks and our own online communities for building relationships with customers. Examples of this prac-
tice include portals called I Love Make-Up (www.adoromaquiagem.com.br), Skin Care (www.cuidedapele.
com.br), and Love in Motion (www.amoremmovimento.com.br). These sites encourage visitors to exchange
experiences. We also launched the Natura Musical portal (www.naturamusical.com.br), a community that
offers information about the project and invites our customers to interact with sponsored artists. In 2010,
these communities registered 3.3 million accesses and were visited by more than 2.7 million people.
Another important factor is the growing consumer interest in gift items suggested by Natura, as sales of these
products have increased twice as fast as our standard items. This can be attributed to a greater perception of the
value of our brand, but also to the information garnered from surveys that led us to reformulate our strategy for
commemorative dates such as Mother’s Day, Valentine’s Day and Christmas.

1. GLOBAL EVALUATION
OF BRAND IMAGE
SURVEY (BRAZIL) (%)¹ ²
81
81

2010

2009

2008
1. Source: Brand Essence.
2. The top box overall assessment
metric considers respondents that
gave top marks to the Natura
brand on a scale from 1 to 5.

2. PENETRATION
IN BRAZILIAN
HOMES (%) ¹ ²

54,8

52,4

46,3

2008

2009

2010

1. Source: Kantar World Panel.
2. Penetration is the percentage
of households in the population
covered by the survey that have
purchased
the
speciﬁ ed period.

the brand

We also encourage our consumers to play a more active role in product development, such as in the launch
of the Una make-up line. The tones of classic lipstick colors (those most used by consumers), for example,
were chosen based on the results of market research involving more than 2,000 women.
In addition to promoting products, our advertising and publicity also makes a commitment to raising con-
sumer awareness, upholding ethical principles and championing diversity. It also expresses our concern
with advertising to children and with the sustainable use of biodiversity assets.
Natura operates within the rules of the Advertising Self-Regulation Council and the codes of conduct
of the Brazilian Association of Advertisers, the Brazilian Consumer Protection Association and the Bra-
zilian Association of Direct Selling Companies. These rules are used organically as guidelines in all our
communications.

CUSTOMER SERVICE
The main channel for consumers to contact us is the Natura Customer Service (NCS). The NCS received
more than 1 million calls in Brazil in 2010, 31% fewer than the previous year.

This decrease is associated with efforts to reduce false reporting of product defects. We began to analyze
products returned by consumers before replacing them and improved our controls as a result. Complaints
fell by 62% , a decrease we believe is associated with the reduction of false reports, and we have become
more efﬁ cient at replacing products that present genuine problems. Information derived from the analysis
of genuine problems contributes to innovation and the continuous improvement of our products and
services.

The initiative has enhanced our response and prompted an improvement in the quality of our service. With
a smaller volume of calls, we have been able to improve the management of NCS services and the number
of unanswered calls fell from 7% in 2009 to 4% in 2010.

NCS - NATURA CUSTOMER SERVICE (CALLS IN THOUSANDS)1

Total
Answered
Unanswered

1 Calls relating to Brazilian operations.

2008
1,531.0
1,471.0
60.0

2009
1,484.4
1,375.3
109.1

2010
1,028.9
987.0
41.8

As we are concerned with the privacy and conﬁ dentiality of our consumers, everyone who contacts us
through the internet or the NCSC is protected by policies and systems that ensure data security. In 2010, we
did not record any proven complaints of privacy violation or loss of data of our consumers.

HEALTH AND SAFETY
In 2010, we restructured our consumer safety area. We brought all of our processes related to the
safety and effectiveness of ingredients together under a single management system. This includes ﬁ nished
products, regulatory issues, the cosmetic vigilance system, and clinical research. With our international
expansion in 2010, we worked with our teams in Latin America to improve our understanding of regula-
tory issues outside of Brazil.

The health and safety of our consumers and the efﬁ cacy of our products are concerns that have been
incorporated into our business process, from the development of product concepts to the ﬁ nal disposal
of packaging, including research and development, certiﬁ cation, manufacturing, marketing and promo-
tion, storage, distribution, supply, customer service and actual product use.

In 2010, we completed product reformulations to eliminate phthalates from our production and, by
June 2011, we expect to eliminate parabens from our formulas. Our target was to have both completely
eliminated in 2010, but we revised our goal because of technical challenges. Although these ingredients
do not pose proven risks to consumers, we decided to remove them from our formulas because there
is no scientiﬁ c consensus about proper precautions.

Parabens belong to a group of preservatives used in cosmetics and foods. Since Natura only uses com-
pounds that pose no risk to human health, this lack of scientiﬁ c consensus on the potential harmful ef-
fects of some types of parabens (the types not used by Natura) prompted us to completely eliminate the
use of all parabens. Phthalates, meanwhile, are a family of compounds used for many different purposes,
including as additives in the manufacture of plastics and in the cosmetic industry. Natura used to work
with a compound from this family, diethyl phthalate, as a solubilizer of fragrances, a bittering agent and
alcohol denaturizer. When applied in low concentrations, there are no indications that diethyl phthalate
can be harmful to health. Nevertheless, since this ingredient may be mistaken for other controversial
versions of phthalates, they have also been completely eliminated from our production.

The precautionary principle is invariably adopted by Natura before using a new ingredient or launching
a new formula. In other words, if the international medical and scientiﬁ c communities have any doubts
about the potential adverse health effects of a product, we choose not to use it. For raw materials that
have some limitation on the permitted concentration, we always try to comply with the standards of
countries with the most restrictive legislation. All our new ingredients and formulas are tested by a team
of dermatologists.

We also have a Cosmetic Vigilance System that monitors the potential adverse effects of our products.
In addition to protecting the end consumer, this system also fuels our innovation process. All the com-
munication we receive on health or safety reactions is investigated and monitored.

In 2010, Natura received no legal penalties or inquiries from the National Health Surveillance Agency
(Anvisa), Brazil’s health sector regulator, not any ﬁ nes resulting from the effects of our products on the
health and safety of consumers. Furthermore, we did not receive any signiﬁ cant ﬁ nes related to product
labeling.

There were 463 complaints ﬁ led with the Brazilian Consumer Protection Agency against Natura. Most
referred to requests to negotiate the debts of consultants, third party inquiries related to undue black-
listing as a result of registration fraud, and complaints from dissatisﬁ ed customers who did not get a
product exchange or refund. All complaints are analyzed by the relevant departments and the ﬁ ndings
are used to improve our processes.

4.5
SUPPLIERS

OUR PURSUIT OF CONTINUOUS
IMPROVEMENT IN THE QUALITY
OF OUR PARTNERSHIPS WITH
SUPPLIERS PL AYS A KEY ROLE IN
MAINTAINING OUR COMMITMENT
TO SUSTAINABILITY.

The number of supplier-par tners we work with totaled just over 4,900. Of these, about 5% work with
finished goods and production inputs (biodiversity ingredients, raw materials, packaging materials). The
remainder provides services or delivers ingredients and materials indirectly required for our business
processes. Despite the growth of our international activities, these par tners are located mainly in Brazil

In Latin America, we recently adopted the strategy of developing local production through outsourced part-
ners. In 2010, we started bottling perfume in Argentina and, in 2011, we will expand production to Colombia
and Mexico. This model, in addition to cutting costs and having less of an environmental impact, takes into
account important concepts for Natura, such as partnership and co-construction, and it places a value on
partners with local knowledge and good socio-environmental practices. (Read more on page 25, Structural
Changes).

We aim to continually evolve our processes in order to boost our business par tners’ levels of satis-
faction. In 2010, the supplier-satisfaction index remained stable at 81%, compared with 82% in 2009.
This fell shor t of our target of increasing satisfaction to 85%. Some operational issues, such as logistical
bottlenecks, contributed to this. We will introduce new processes for planning and handling materials in
the first quar ter of 2011.

We also did not move forward as fast as we would have liked with improving the flow of contracts and
payments, an issue raised by suppliers during the dialogue panels. Through our services center, we have
improved monitoring of payments and have optimized the process of drafting contracts and related
suppor t systems. We believe these advances, made in the second half of 2010, will be reflected in better
service during 2011.

One positive aspect is that our suppliers’ loyalty rate rose from 25% in 2009 to 28% in 2010. This indicator,
which we are reporting for the ﬁ rst time, has been monitored by Natura since 2008, and it combines ove-
rall satisfaction, intention to continue a relationship with Natura, and whether a supplier would recommend
Natura to other suppliers. For 2011, we hope to mantain a 28% supplier-loyalty rate, which will now be the
main indicator for assessing our relationships with suppliers (graph 1).

1. OVERALL
SATISFACTION – BY
SUPPLIER (%)¹ 2

Since 2009, we have been active on five fronts identified for improving our supplier relationships: em-
ployee awareness of critical issues affecting the supplier relationship; closer relations with strategic
suppliers; improving the product innovation funnel process to include suppliers; improving the payment
process; and extension of our corporate supplier development program to other categories of supplies
and services.

2010

2009

2008
1 Percentage of suppliers
satisﬁ ed or fully satisﬁ ed.
2 The indicators have a margin
of error corresponding to a 95%
conﬁ dence interval.

To raise the awareness of new employees as to the impor tance of supplier relations, we reinforced the
theme in the integration program. This is an impor tant point that should be intensified in 2011 to align
new employees with the precepts that guide our quality in relations with suppliers.

We held four dialogue panels with suppliers to discuss the following issues: solid waste, the relationship
between suppliers and supplier communities, and sustainable supply chains. We continued to hold meetings
to monitor the performance of the Qlicar (Quality, Logistics, Innovation, Competitiveness, Service, and
Relationship) program, with a focus on continuous improvement, as well as the effectiveness of procedures
that deﬁ ne our relationships with strategic partners. These periodic meetings — which include “Breakfast
Meetings with Suppliers” and “Alliance Conferences” enable us to maintain and improve these relationships.

In the product innovation process, we intensiﬁ ed the ﬂ ow of information to suppliers and established clearer
rules for project management, consolidating these initiatives with the creation of a department devoted ex-
clusively to innovation with suppliers.

QLICAR PROGRAM
In 2010, we extended the reach of Qlicar, which covered 97 partners — mainly suppliers of inputs and some
of our service providers. Qlicar was extended to vendors that provide such services as marketing and com-
munication campaigns and sub-brand publicity. We also reactivated BioQlicar for our supplier communities
(learn more on page 64, Supplier Communities).

We emphasize continuous performance improvement in our programs involving suppliers of ﬁ nished goods
and among our transportation companies, call centers, and logistics vendors. In 2011, we will extend this ap-
proach to in-depth awareness of environmental issues.

We also reinforced the educational pillar, staging workshops on how to prepare sustainability reports and use
them as a tool for evaluating and monitoring a company’s management. We also organized a training course
on the production of greenhouse gas emissions inventories.

In the ﬁ eld of education, we began, half way through 2010, to train suppliers how to prepare sustainability
reports using the Global Reporting Initiative (GRI) model adopted by Natura. Seven suppliers from different
sectors are taking a course of workshops, scheduled for completion in July 2011, intended to qualify and engage
them in the use of sustainability reporting to evaluate and managetheir socio-environmental impacts. This train-
ing is conducted in partnership with the Brazilian Association of Corporate Communication (Aberje).

We are also training six suppliers on the subject of Climate Change, based on the guidelines of the Green-
house Gas Protocol (GHG Protocol) – the methodology used by companies and governments to under-
stand, measure and manage their carbon emissions. This project is run in partnership with the Getúlio Vargas
Foundation and its goal is to help these partners improve their emissions monitoring.

In another development that deserves attention, seven suppliers signed up to the Brazilian Business Move-
ment for the Conservation and Sustainable Use of Biodiversity, led by Natura. This is a movement of compa-
nies that have made a voluntary commitment to the conservation of social biodiversity. The companies that
joined the initiative were: Agropalma, Beraca, Firmenich, Centroﬂ ora, IFF, Native and Solabiá.

Our suppliers are required to complete self-evaluations and audits to analyze issues of quality, environment
and social responsibility, and also aspects related to human rights, such as the use of child labor, forced labor or
the equivalent of slave labor. In 2010, no cases of human rights violations were identiﬁ ed. All our 187 product
suppliers completed the self-evaluation process and 53% submitted to periodic audits. Additionally, all the
suppliers who are part of the Qlicar program were audited.

SUPPLIERS AUDITED OR SELF-EVALUATED ON QUALITY, ENVIRONMENT AND SOCIAL RESPONSIBILITY 1

Productive Suppliers (self-evaluated %)
Productive suppliers audited (%)
Suppliers Qlicar audited (%)

2008
100
48
100

2009
100
48
100

2010
100
53
100

1. The aspects of human rights covered are child labor and slave labor or labor analogous to slave labor.

HUMAN RIGHTS CLAUSES IN CONTRACTS 1 2

Percentage of signiﬁ cant investment agreements
that include human rights clauses
Total number of signiﬁ cant investment agreements
that include human rights clauses (thousands)

2008

2009

2010

100%

2.0

100%

2.5

100%

2.2

1. The deﬁ nition of signiﬁ cant investment was revised to represent the expressed number more coherently. Among the criteria to verify
whether a particular investment is signiﬁ cant or not, are: value (contracts over R$ 200,000); contracts involving intellectual property; real
estate acquisitions; donations and sponsorship.
2. The clauses relate to child labor and slave labor or labor analogous to slave labor.

SUSTAINABLE SUPPLY CHAINS
We took on a great challenge in 2010: to develop a methodology to quantify the environmental impacts
that our partners’ activities may cause for society (known as socio-environmental externalities) and con-
vert the data into monetary values. The new methodology will be incorporated into the process of selec-
ting suppliers and is aligned with our ambition of developing sustainable supply chains.

The study links the primary impacts of the supply chain with Natura’s priority sustainability issues. We
applied it on a pilot basis for the selection of two suppliers in 2010: one from the services segment and
the other from products. In both cases, we decided to select partners who, in addition to meeting tradi-
tional technical criteria, demonstrated advantages in social and environmental indicators, such as reducing
greenhouse gas emissions and investing in education.

Our goal is to apply this methodology to 16 groups of materials and services (accounting for 60% of the
value of our purchases) by the end of the ﬁ rst quarter of 2011, and to reach 100% of our portfolio within
the next two years.

This pioneer process is a result of collective construction. We held two dialogue panels gathering 70 peo-
ple from 14 supplier categories, which helped us identify all the externalities to which each one is exposed.

The methodology was developed in partnership with the consulting ﬁ rm A.T. Kearney, known for its work
in supply chain management, and with the support of representatives from The Economics of Ecosystems
and Biodiversity (TEEB), of the United Nations.

4.6

SUPPLIER
COMMUNITIES

W H EN N AT U R A CO M M I T T ED TO A
TEC H NOLOGY PL ATFOR M THAT
INCORPOR ATES INPUTS E X TR ACTED
FROM BR A ZILIAN BIODIVERSIT Y
IN A SUSTAINABLE WAY, WE INITIATED
R E L AT I O N S H I P S W I T H S U P P L I E R
COMMUNITIES THAT PROVIDE NOT ONLY
R AW MATER IAL S BUT AL SO ACCESS
TO TR ADITIONAL KNOWLEDGE .

This business model produces value for Natura and helps to create wealth for communities and small
farmers while driving local development. In 2010, our network of relationships involved 25 supplier com-
munities comprising 2,301 families in the North, Northeast, Southeast, and South of Brazil and in Ecuador.
Eleven supplier communities provide materials for our plant that makes oils and soaps in Benevides (Pará)
(learn more on page 68, Surrounding Communities). The number of families involved was 14% higher than
the previous year. Examples of progress in this relationship include a 57% increase in resources allocated
to communities and the effective implementation of our Rural Supplier Development program, called Bio-
Qlicar (Quality, Logistics, Innovation, Competitiveness, Service and Relationship). This program is growing
into a robust platform for dialogue and for the development of small farmers and partner communities
involved in our supply chains of biodiversity inputs (graphs 1 and 2).

1. NUMBER OF
COMMUNITIES WITH
WHICH NATURA
DOES BUSINESS ¹

Our relationship with supplier communities is based on the Natura Policy for the Sustainable Use of Bio-
diversity and Associated Traditional Knowledge, and is aligned with the International Convention on Bio-
logical Diversity. This policy, which was formulated in 2008 and disseminated to our stakeholders in 2009,
regulates our processes and helps us improve the planning of demand for inputs purchased from these
communities. It also sets parameters for negotiating the equitable distribution of beneﬁ ts obtained from
the use of these ingredients.

Our policy dictates that approval to embark on a relationship with new communities or to start new research
and supply projects must involve internal forums to assess all the risks and opportunities, both for the commu-
nity and for Natura. The selection is made based on a diagnosis of the following characteristics of the communi-
ties: supplies, relationship, plant production and marketing, and it also includes an analysis of the traceability, the
administrative organization and the legal structure of the association or cooperative, engagement with partners
and environmental conservation practices, among other things.

In what we consider our priority communities, we are committed to the preparation of sustainable develop-
ment plans, implemented through projects run in partnership with the communities and other organizations.
The focus of these plans is to contribute to sustainable local development, so society as a whole can develop.

The reasons for terminating a relationship may include the discontinuation of a product line or use of a speciﬁ c
raw material, or failure to satisfy critical supply criteria (quality, volume, etc.). It is worth pointing out that this
analysis is only made after a period in which all the conditions that allow the community to meet these require-
ments have been provided (training, investments in infrastructure, management, etc.).

2010
2009
2008
1. In 2010, we revised the
for quantiﬁ cation of
criteria
supplier
communities, which
now consider only traditional
communities and family farmers.
We revised the numbers for
2008 and 2009 accordingly.

2. BENEFITED FAMILIES

2,301

2,012

1,823

Internally, we have a multidisciplinary team that uses management systems and governance mechanisms to pro-
mote a more comprehensive inclusion of these communities into our business model, and we are also streamlin-
ing our procedures so we can adapt better to the local contexts of each community.

In 2010, we began to assess the loyalty of supplier communities to Natura, based on a survey similar to that
which is conducted with our other suppliers. These methodologies will be consolidated in 2011. The initial
assessment revealed the need for improvement in some aspects of these relationships, such as communi-
cation, the procurement process, and joint development opportunities in the supply chains.

2008

2009

2010

We also improved dialogue with supplier communities by inviting them to a three-day conference.
This meeting, involving 60 people, also included representatives of processing companies (suppliers
that take ingredients such as almonds, seeds, or fruit from our supplier communities and conver t them
into oils or other substances that are incorporated into our products). Through dialogue, we have
promoted better integration between these two impor tant groups in our supply chain. At the confe-
rence, we showed how the issues discussed in 2009 had evolved and we conducted an assessment of
BioQlicar. We also discussed scenarios for the coming years, the future of our relationships, and each
side’s role in fostering sustainability.

As a way of giving fresh impetus to the communities and making clear their importance to Natura, we staged
two product launches in the communities that supply their inputs. We launched the Una make-up line at the
Cooperative of Small Agroextractivist Producers in Esperantinópolis, in the state of Maranhão, which supplies
ground babassu coconut. We also chose the community of Jacarequara – home to the Mixed Farmers Coopera-
tive Between the Caeté and Gurupi Rivers (Coomar), in Santa Luiza do Pará, in the state of Pará – as the site
of the launch of our new Ekos line of soap. This event was attended by 30 journalists from across Brazil, who
not only learned more about the new product, but were also introduced to the work conducted in the com-
munities. These events have also brought our consultants and supplier communities closer together, creating an
environment for the exchange of cultures and world visions between the different links in Natura’s sales and
production chain.

We also presented the work of our supplier communities at the 10th Conference of the Parties to the Conven-
tion on Biodiversity (COP-10), in Nagoya, Japan. Furthermore, the Ekos Portal (www.naturaekos.com.br), which
promotes the range of products from the Ekos line, also contains information on the work in these communities,
such as the model of sustainable extraction and the socio-environmental concerns.

We organized anthropological studies in 2010 on the involvement of children and adolescents, members of the
supplier communities’ families, in the production chain. The studies reveal that this involvement is not limited to
the economic or legal dimension, but also considerssocial and cultural issues. The social division of labor in the
extractivist communities observes a characteristic vision of the world that belongs to their own cultural system.
As a result, we did not identify any practices justifying corrective action. We will continue to monitor the issue
in 2011 to make sure that no children or adolescents are being exposed to risk.

It is worth noting that in 2010 we did not register any incidents involving indigenous populations in the locations
were we operate.

RESOURCES FOR COMMUNITIES
In 2010, our transfer of resources to supplier communities rose 57% over 2009 levels, to R$8.7 million. This
amount refers to payments for the supply of inputs; contracts for sharing beneﬁ ts; for access to genetic he-
ritage or associated traditional knowledge; for use of images; and for direct investments in local sustainable
development.

RESOURCES ALLOCATED (R$ THOUSANDS)1

Supply
Sharing beneﬁ ts from access to genetic heritage or
associated traditional knowledge 2
Funds and support 3
Use of image 4
Training 5
Certiﬁ cation and stewardship 6
Studies and advisory services 7
Total

2008
2,283.9

1,435.7
631.2
15.4
56.4
23.4
555.5
5,001.5

2009
2,767.2

1,056.3
1.087.7
14.5
151.8
27.8
435.1
5,540.4

2010
4,373.6

1,480.1
1.551.7
76.5
184.6
212.2
827.7
8,706.4

1. Data for 2008 and 2009 have been revised due to the reallocation and reclassiﬁ cation of project expenses in supplier communities and
the exclusion of amounts associated with one community that is no longer part of this group.
2. Sharing of beneﬁ ts with the communities enabling access to Genetic Heritage and/or Associated Traditional Knowledge.
3. Corresponds to Funds and Sustainable Development Agreements voluntarily supported by Natura, for which disbursement has always been
contingent on projects or sponsorship for infrastructure improvements.
4. Amounts paid by Natura for the use of images of community members in institutional publicity pieces or in marketing.
5. Includes Natura’s payments to hold workshops and courses for communities to improve their sustainable production techniques.
6. Amounts invested in certiﬁ cation and stewardship plans in cultivation areas within supplier communities.
7. Includes reports and consulting services provided by specialists and NGOs contracted by Natura to work with supplier communities.

Growth in the amount of resources resulted from higher demand - driven by new product launches - but also
by more beneﬁ t-sharing payment contracts coming due in 2010 than in previous years. For 2011, we expect
total distribution to grow 25%, a lower percentage than last year.

In 2011, we intend to streamline our information system on the various different divisions of Natura that
are part of this relationship, extending our control over this and other indicators associated with supplier
communities.

RESOURCES ALLOCATED PER FAMILY (R$ THOUSANDS)

Direct resources1
Supply 2

2008
2.4
1.4

2009
2.5
1.5

2010
3.1
2.0

1. Includes resources actually received by the communities: supply of inputs, beneﬁ t sharing, use of image, funding and support.
2. Sub-item of direct resources, highlighting the funding received for supply.

BIOQLICAR PROGRAM
Our supplier communities take par t in the BioQlicar Program, an initiative similar to the development
program applied to the other suppliers.

Five years ago, we began to develop a program to monitor and improve the supply chain that provides
us with ingredients from biodiversity. After a period of conceptual and methodological evaluation, by
2010 we had a more robust model consisting of two indicator categories: BIO (economic, physical, en-
vironmental, social and human resources); and Qlicar (monitoring the production performance of rural
suppliers). We hope to use this program to promote an objective dialogue, streamline our par tnerships
and strengthen our business model. BioQlicar helps communities organize in different ways, stimulating
their development and guiding their relations with the market as a whole. It also guides our procedures
and relationship strategies to make supply chains more sustainable. This model considers two indicator
categories: bio (economic, physical, environmental, social, and human resources) and Qlicar (monitoring
the production performance of rural suppliers). In 2011, we will assess the program together with the
communities, and our goal is to reach a score of 3.7 on a scale of 0 to 5.

We also conducted, for the first time, a complete survey of data from the communities for the program.
This involved meetings in 23 of the 25 supplier communities and with 7 processing companies. The re-
sults were discussed with these two groups, enabling us to prepare joint action plans and improve the
supply chains.

The construction of BioQlicar observed the seven principles of the BioTrade Program of the United
Nations Conference on Trade and Development (UNCTAD), which addresses, among other things, the
conservation of biodiversity, fair and equitable sharing of benefits, compliance with national and interna-
tional regulations, and respect for the rights of all the actors involved.

SHARING BENEFITS AND CULTURAL HERITAGE
We signed four new beneﬁ t sharing contracts in 2010, which were negotiated based on the principles of the
Natura Policy for the Sustainable Use of Biodiversity and Associated Traditional Knowledge. In general, the
amount of resources shared depends on the number of raw materials produced from the plant, and on the
commercial success of the products c

The ﬁ rst contract was signed with the Ver as Ervas Association, from Belém in the state of Pará, for the tradi-
tional knowledge associated with the use of the ingredient pataqueira (Conobea scoparioides). According to
the terms of the contract, the resources will be used in projects for the community, such as the renovation of
the association’s facilities.

We also signed a beneﬁ t sharing contract for genetic access to the species aperta-ruão (Piper aduncum) with
the group Consórcio Terra Medicidinal, from Barra do Turvo in the state of São Paulo, and the NGO Programa
da Terra. The resources will be invested in improving the quality of life of family farmers involved in the process
and to develop the production chain.

The third contract involved access to yellow passion fruit (Passiﬂ ora edulis ﬂ avicarpa Degener) and was signed
with the Agroindustrial Cooperative of Farmers from Corumbataí do Sul and Region (Coaprocor), in the state
of Paraná. The community has used the beneﬁ t sharing resources to make improvements to the production
chains, such as purchasing land for its new facilities, training and mobilization events for farmers.

The ﬁ nal contract involves macela-do-campo (Achyradine satureoides), signed with the Bernado Hakvoort
Agroforestry Institute, located in the town of Turvo, also in the state of Paraná. The resources will be spent
on the institutional strengthening of the organization and the local cooperative, through technical training and
increasing the number of farmers associated with the projects of Natura.

LOCAL DEVELOPMENT
Natura’s relationship with the supplier communities is not restricted to commercial relations and production.
The relationship also involves the promotion of actions geared towards sustainable local development. We try
to invest in projects that strengthen the social fabric of the communities and help in matters such as environ-
mental conservation, cultural promotion and the improvement of local infrastructure.

One example is the partnership with the Federation of Agencies for Social Welfare and Education (FASE) and
Labor, in Benevides, which has generated a series of training courses for local producers (read more on page
68, Surrounding Communities).

Projects that contribute to the local development of supplier communities:

MIXED COOPERATIVE OF EXTRACTIVIST PRODUCERS FROM THE SUSTAINABLE DEVELOPMENT
RESERVE OF THE IRATAPURU RIVER – COMARU (AMAZONAS)
Offers scholarships for technical and higher education courses

with funding from the Iratapuru Fund.

COOPERATIVE OF AGROECOLOGICAL, ARTISANAL AND FORESTRY PRODUCERS OF TURVO –
COOPAFLORA (PARANÁ)
We organized a training course on managing cooperatives and a meeting of youngsters from the region of
Turvo, attended by more than 300 people. The purpose of the event was to encourage the young people to
remain in the countryside, strengthening family farming and curbing rural migration.
The funds for these actions are provided by Natura’s local development program.

PARTNERSHIP FOR ECONOMIC REFORESTATION – RECA (RORAIMA AND ACRE)
We supported, with funding from the local development program, the construction of an agricultural school
to provide a vocational education in the communities. The school currently has more than 70 students.

COOPERATIVE OF AGROEXTRACTIVIST DEVELOPMENT AND ENERGY OF MÉDIO JURUÁ - CO-
DAEMJ (AMAZONAS)
In partnership with the Small Business Support Agency (Sebrae) and the Chico Mendes Institute for the
Conservation of Biodiversity, we supported a training course on how to run a cooperative for 40 people.

BURITI PALM OIL PRODUCERS FROM THE MUNICIPALITY OF PALMEIRA DO PIAUÍ (PIAUÍ)
We staged training courses in citizenship, associativism and cooperativism, and agroforestry systems for 50
people, organized with the non-monetary shared beneﬁ ts resulting from our access to the traditional knowl-
edge and genetic heritage of the Buriti Palm.

WOMEN’S MOVEMENT OF THE ISLANDS OF BELÉM (MMIB), COTIJUBA (PARÁ)
Using its own resources, Natura supported the ﬁ nal stages of construction of the MMIB’s handicrafts facility,
used to produce biojewelry, beneﬁ tting the 13 families that are members of the association.

ASSOCIATION OF PRODUCERS OF BOA VISTA DO ACARÁ – (AMAZONAS)
We held a workshop to teach the skills needed for organizational management for the 23 families in the com-
munity. The initiative was organized with our own resources.

VER AS ERVAS ASSOCIATION, BELÉM (PARÁ)
We organized training for 100 people in how to develop projects to support the association and raise money.
Although the community does not supply Natura, the relationship involves the sharing of traditional knowl-
edge. The initiative was organized with Natura’s own resources.

4.7

SURROUNDING
COMMUNITIES

WE KNOW THAT OUR OPERATIONS
BRING ABOUT CHANGE IN THE
LOCATIONS WHERE WE OPER ATE,
SO WE HAVE INVESTED IN CLOSE
RELATIONS WITH THE COMMUNITIES
AROUND OUR UNITS IN CAJAMAR
(SÃO PAULO), ITAPECERICA DA SERRA
(SÃO PAULO), AND BENEVIDES (PARÁ).

However, we recognize that we must develop new strategies for ensuring smooth transitions in other com-
munities as our operations grow in Brazil and abroad. For example, our relationship strategy should include
places where we have distribution centers: Jundiaí (São Paulo), Matias Barbosa (Minas Gerais), Jaboatão dos
Guararapes (Pernambuco), Canoas (Rio Grande do Sul), Simões Filho (Bahia), Uberlândia (Minas Gerais),
and Castanhal (Pará). The same should apply to our international operations. Outsourced manufacturing in
Argentina started at the end of 2010 and will be extended to Mexico and Colombia. Our aim is to contribute
to the development of these regions through partnerships with the community, authorities and representa-
tives of civil society.

In an effort to understand the needs of the communities surrounding our operations at Cajamar and Itapecerica
da Serra, we held ﬁ ve dialogue panels involving representatives of civil society, government, associations, and
nongovernmental organizations in 2010. At these events, we sought to learn the issues and challenges these
communities face, understand how these groups interact with one another in the community, exchange experi-
ences, and ﬁ nd joint solutions.

Investments in projects at Cajamar and Itapecerica da Serra totaled R$438,700 in 2010, of which R$408,700
were corporate-funded and R$30,000 were revenues from the Natura Crer para Ver program. Natura also al-
locates 1% of its income tax to Municipal Councils for the Rights of Children and Adolescents, and we intend
to build relationships with these bodies to monitor the use of these funds more closely (learn more on page
93, Creation of Social Value).

INVESTMENT IN INFRASTRUCTURE AND SERVICES FOR PUBLIC BENEFIT (R$ THOUSANDS) 1
2009

2008

Investment in communities around
Natura units – Natura funds
Investment in communities around
Natura units – Crer para Ver program²
Total

342.8

249.2
592.0

407.9

2.5
410.4

2010

408.7

30.0
438.7

1. Investments in the municipalities of Itapecerica da Serra and Cajamar.
2. This amount does not include funds intended for the Trilhas (Trails) project at Cajamar or the Encontros de Leitura (Reading) project at
Itapecerica, both related to the Crer para Ver program.

In 2010, the number of employees living in Cajamar rose from 565 to 659. This increase was slightly below the rate
of growth of Natura’s staff as a whole. We have noted in past years that many people from our surrounding com-
munities have sought employment with us but do not have the qualiﬁ cations we require. This reﬂ ects shortcomings
in educational and training facilities, which is a challenge not only in these locations but also in Brazil as a whole. In
general, youngsters who applied to join Natura through our Young Apprentice program also demonstrated this lack
of qualiﬁ cation. We believe there is an opportunity for us to take action in this respect, and in 2011 we will develop
training programs for these groups to increase their own marketability, whether for positions at Natura or other
companies in the community (learn more on page 31, High-priority Topics/Education).

EMPLOYEES FROM THE SURROUNDING COMMUNITIES (%)1

Cajamar
Benevides2

2008
18.2
96.0

2009
17.4
98.0

2010
16.6
94.5

1. Itapecerica da Serra does not have employees from the surrounding communities.
2. The municipalities near Benevides are also considered as surrounding communities.

Natura does not have any speciﬁ c procurement policy for surrounding communities, although the new methodol-
ogy for selecting suppliers to be used in 2011 considers location together with other technical and socio-environ-
mental criteria (read more on page XX, Suppliers). In 2010, we recorded an increase in the volume of business with
partners in the communities surrounding Natura’s three main units, which is the result of maintaining partnerships
with the current suppliers.

PURCHASES FROM SUPPLIERS FROM THE COMMUNITIES SURROUNDING THE UNITS 1 (R$ MILLION)

Cajamar2
Itapecerica da Serra2
Benevides3
Total

2008
52.0
1.2
34.4
87.6

2009
69.9
1.2
44.6
115.7

2010
73.6
1.3
46.5
121.4

1. The values include taxes.
2. Purchases from suppliers located in the municipalities of Cajamar and Itapecerica da Serra, metropolitan region of São Paulo, Brazil.
3. Purchases from suppliers in the state of Pará exclusively the industrial unit of oils and soap mass located in Benevides, in northern Brazil.

CAJAMAR
One of the highlights of Natura’s performance at Cajamar in 2010 was the revision of the Municipal Education
Plan. In 2003, we supported the local government’s ﬁ rst plan, and once again we are part of this initiative. In 2003,
community involvement was low, whereas now 300 representatives of civil society are involved — evidence that
this group is more cohesive and participatory.
Last year, in conjunction with Cajamar’s municipal government, we engaged a higher-education institution (Funda-
ção Escola de Sociologia e Política de São Paulo) to help us to revise the plan. We covered 70% of the cost of the
contract, and the municipal government paid the remainder. The project was planned jointly with the community
through meetings held in all districts. The new plan covers education for municipal schools for the next 10 years —
setting targets, strategies, and action plans. We also used funds from the Natura Crer para Ver (Believing is Seeing)
program to produce a booklet to be distributed to the community, providing details on how the plan will work.
We have a partnership with the NGO Mata Nativa. In 2010, we commissioned the Institute of Socio-Environmen-
tal Research and Projects to advise on the process of improving and streamlining the NGO’s management. Mata
Nativa is a benchmark institution in the town, and it has been contacted by several industries seeking assistance
with socio-environmental issues.
Also in partnership with Mata Nativa, in 2010 we completed a project to map the potential areas for reforestation
in Cajamar. The study consisted of a general inventory of the local ﬂ ora and an identiﬁ cation of protected areas
(known as “Permanent Preservation Areas” and “Legal Reserves”), degraded areas and riparian forests. Technical
reports and georeferenced maps were drawn up of the potential areas for reforestation found in the region. This
project was widely publicized in the municipality and it can provide valuable insight for the creation of the mu-
nicipality’s Master Plan and Agenda 21. The initiative also received the support of the National Biomass Reference
Center and the Advanced Studies Center in Applied Economics, both part of the University of São Paulo.
For the past four years, we have sponsored the publication “Cajamar em Verso e Prosa” (Cajamar in Verse and
Prose), a project that encourages an appreciation for the written word and celebrates the memory of the town,
organized by the Municipal Board of Education. We also sponsor the printing of newspapers for schools in the
municipality.
Cajamar was included in the Trilhas (Trails) project of Natura’s Crer para Ver (Believing is Seeing) program, which is
organized in all the municipality’s public schools catering to children from 4 to 6 years old in primary or pre-school.
The project lasted two years and involved 16 municipal schools, 125 teachers and 2,863 pupils in 2009 and 2010
(read more on the Trilhas project on page 92, Creation of Social Value/Crer para Ver).

ITAPECERICA DA SERRA
Our main activity in Itapecerica da Serra revolves around expanding the selective garbage collection program.
Therefore, we support the Municipal Environment Department (Green Division) and the local recycling coop-
erative. The medium-term goal is for selective collection to cover the entire municipality through a mixed system
involving motorized transport, collectors, and voluntary points of delivery.

In 2011 we will transfer our operations in Itapecerica da Serra to the city of São Paulo. We have outgrown our
current facilities in Itapecerica da Serra, which no longer offer ideal working conditions (learn more on page 26,
Structural Changes). We are aware that this decision will affect the community, and we are carrying out a transi-
tion process to minimize these impacts. We have maintained social investment in 2011 and are preparing the
cooperative and the municipal government to independently manage the selective collection service. This has
been the objective of this project since its outset; throughout the partnership, we have supported the reorgani-
zation of the cooperative, the structuring of its processes, the professionalization of the cooperative members,
and the increase in the volume collected.

Natura lent its support by commissioning the Institute of Socio-Environmental Research and Projects to advise
the cooperative and train its members. As a result, the cooperative has received more funding to expand its
premises, structure its accounting and ﬁ nancial practices and understand the importance of the professionaliza-
tion of its membership. The cooperative currently has 25 members and, in 2010, they all started to pay into the
Brazilian Social Security System (INSS). The average monthly volume of recyclables handled by the cooperative
increased from 50 metric tons in 2009 to 69 metric tons last year, and it also reported record earnings.

In 2010, the municipality of Itapecerica da Serra also participated in the Encontros de Leitura (Reading Meetings)
project of the Crer para Ver (Believing is Seeing) program. The project trains teachers who work with children
of 4 and 5 years old in reading and writing activities. It was attended by 50 teachers from 29 schools and 37
technical professionals and school principles, beneﬁ ting 1,461 pupils.

BENEVIDES
The Benevides plant has been in operation since 2006. It has the responsibility for training, negotiating, and main-
taining relationships with farmers that supply some of the biodiversity ingredients it uses. These agroextractivist
producers and communities (mostly grouped into cooperatives) are called “community enterprises” and are also
part of our supplier communities (learn more on page 64, Supplier Communities). They are located in various
towns and cities in the state of Pará, well beyond the municipality of Benevides.
In 2010, we worked with 11 associations and cooperatives comprising 1,100 families — 80% more than the 610
families in 2009. There was also growth in the amount of raw materials purchased, from 394 tons in 2009 to 500
tons in 2010. Our operations in Benevides will be expanded in 2011 with the construction of a new soap plant,
which is expected to increase the production capacity of our local operations.
To achieve the signiﬁ cant growth that we report each year, we make an effort to improve the production systems
of these associations and to promote the diversiﬁ cation of their products. For example, we organize development
activities for these producers in partnership with the organizations Labor and the Federation of Agencies for So-
cial Welfare and Education (FASE). These include the Workshop on Almond Quality, the Murumuru Stewardship
Course, Health Workshops, the Course on Security and Environment for Extractivists, the Cooperativism Training
Program and the Training Program in Cooperative Management. In addition, we stage technical consulting activities,
lasting two days each, in which Natura visits the partners and gives lectures on production quality, environment,
security and social organization.
In 2010, we launched a pilot project with the Coofruta cooperative, located in Abaetetuba, in the state of Pará, to
decentralize the production of the oils we use in our products. Currently, the communities supply the inputs (such
as seeds, almonds, etc.) to processing companies that produce the oil and deliver it to Natura. Our goal is to help
the communities to produce the oil themselves, thereby increasing their earnings and diversifying their business, in
addition to improving the logistics of the production process. To assess the results of this project, we are develop-
ing indicators to measure not only rising incomes, but also the social beneﬁ ts associated with the new production
opportunities (read more about the communities around Benevides on page 64, Supplier Communities).

4.8
SHAREHOLDERS

SINCE NATURA WENT PUBLIC IN
2004, WE HAVE SOUGHT TO BUILD
A TRANSPARENT AND HIGH-
QUALITY RELATIONSHIP WITH
OUR SHAREHOLDERS, INVESTORS,
AND CAPITAL MARKET ANALYSTS BY
KEEPING THEM WELL INFORMED.

We follow the recommendations of Brazil’s Securities and Exchange Commission and the rules of the
BM&FBovespa, where Natura shares are listed on the New Market segment.

Our Annual Shareholders’ Meeting, in April 2010 at our Cajamar facility, brought together more than 200 share-
holders. These individuals had an opportunity to develop closer contact with our company, our controlling sha-
reholders, and our executives (learn more on page 17, Governance). This year, we also held the second Natura’s
Day, a meeting with 80 Brazilian and international capital market analysts and professionals.

To maintain close relations with this group during 2010, we conducted quarterly conference calls and took
part in conferences and individual meetings in Brazil and abroad. We held 600 meetings with investors. We also
redesigned our website (www.natura.net/investidor), our main communication channel. The site’s functionality
has improved, facilitating better access to information and providing greater interactivity, such as an investment
simulator and the section Fale com RI (Talk to IR). Since its launch in June, we have recorded an average of 16,000
visits per month.

PROFILE OF SHAREHOLDERS

Individuals
Brazilian legal entities
Foreign legal entities
Total

2008
9,993
396
538
10,927

2009
7,699
560
668
8,927

2010
7,838
560
850
9,248

At the end of 2010, foreign corporate investors held 88% of outstanding shares. Brazilian corporate investors
held 7% and individual investors held 5% of these shares.

CAPITAL STRUCTURE
SHAREHOLDERS

Majority shareholders
Treasury shares
Management shares
Outstanding shares
Total shares

INTEREST

59.88%
0.00%
0.57%
39.55%
100.00%

NUMBER OF SHARES

258,017,219
655
2,458,016
170,405,526
430,881,416

MAJORITY SHAREHOLDERS
The capital stock of Natura consists exclusively of common shares. The table below shows the percentage of
shares held in 2010 by shareholders that own 5% or more of the capital stock and by the Board.

SHAREHOLDER
____________
Lisis Participações S.A.
Controlled by Antonio Luiz da Cunha Seabra
Utopia Participações S.A.
Controlled by Guilherme Peirão Leal
Passos Participações S.A.
Controlled by Pedro Luiz Barreiros Passos

NUMBER OF
COMMON SHARES

%
_________

95,946,968

91,557,964

22,606,809

22.27

21.25

5.25

SHAREHOLDER
____________
ANP Participações S.A.
Controlled by Anizio Pinotti
RM Futura Participações S.A.
Controlled by Ronuel Macedo de Mattos
Antonio Luiz da Cunha Seabra
Guilherme Peirão Leal
Pedro Luiz Barreiro Passos
Anizio Pinotti
Ronuel Macedo de Mattos

NUMBER OF
COMMON SHARES

%
_________

22,583,608

15,918,754
3,628,920
3,462,917
855,038
854,160
602,081

5.24

3.69
0.84
0.80
0.20
0.20
0.14

NATURA SHARE PERFORMANCE
The price of Natura shares rose 37% in 2010, while Brazil’s main stock market index (Ibovespa) ended the
year just 1.3% higher. Trading volume also rose 30% from the previous year. Since 2004, when we went public,
Natura shares have risen 754.7%, while the Ibovespa gained 267.9% in the same period.

Natu3

Ibovespa

Base 100 = 05/25/2004

NATU 3
05/25/2004
R$ 5.61

FOLLOW ON
07/31/2009

755%

NATU 3
12/30/2010
R$ 47.70

268%

2004
NATU3: +87.2%
Ibov: +33.0%

2005
NATU3: +37.9%
Ibov: +28.3%

2006
NATU3: +51.1%
Ibov: +29.1%

2007
NATU3: – 41.4%
Ibov: +47.4%

2008
NATU3: +18.0%
Ibov: – 41.4%

2009
NATU3: +101.6%
Ibov: +82.7%

2010
NATU3: +37.0%
Ibov: +1.3%

We continue to be part of the leading Brazilian stock market indexes - Ibovespa, IBrX-50 (which lists the 50
most liquid shares on the exchange), the Tag Along Stock Index, the Corporate Governance Index, and the
Corporate Sustainability Index, the latter of which uses sustainability criteria to select shares of companies.
We are also listed on the Morgan Stanley Composite Index, a benchmark for foreign investors.

Particularly noteworthy last year was the inclusion of our shares on the BM&FBovespa’s Carbon Efﬁ cient
Index, which considers each company’s greenhouse gas emissions. Created with the aim of encouraging com-
panies to measure, monitor, and disclose their carbon emissions,the index incorporates indicators related to
climate change issues. Consisting of companies that were already listed on the IBrX-50 and that voluntarily
accepted these emissions standards, the new index requires companies to run periodic emission inventories
to remain in the portfolio. Natura has been conducting emission inventories since 2007 (for more details, see
page 62 in Creation of Environmental Value).

1. AVERAGE DAILY SHARE
VOLUME TRADED
(R$ MILLIONS) 1

33,182

25,983

18,098

PAYMENT OF DIVIDENDS
On February 23, 2011, Natura’s Board of Directors approved a proposal for the payment of R$659.6 million in
dividends and R$59.9 million in interest on capital (R$50.9 million net of withholding tax) for the 2010 ﬁ nancial
year. This proposal was to be shared at the Annual Shareholders’ Meeting on April 8, 2011.
On August 12, 2010, Natura paid dividends amounting to R$253.9 million and interest on capital of R$30.1
million (net of withholding tax). The remaining balance, to be paid on April 14, 2011, following ratiﬁ cation by
the Annual Shareholders’ Meeting, will be R$405.6 million in dividends and R$20.7 million in interest on capital
(net of withholding tax). These dividends and interest on capital referring to earnings for 2009 will represent net
earnings per share of R$1.65 (R$1.37 per share in 2009), corresponding to 99% of free cash generation1 and
95% of net income2 for 2010.

1. (Internal cash generation) +/- (changes in working capital and long-term liabilities) – (acquisitions of property, plant and equipment).
2. Net income as deﬁ ned by Law 6404/76.

2008

2009

2010

1.Source: Economática.

4.9

GOVERNMENT

NATUR A’S RELATIONSHIP WITH THE
GOV ER N M EN T I S G U I D E D BY OPE N ,
T R A N S P A R E N T, A N D U N B I A S E D
DIALOGUE. WE WANT TO BE RECOGNIZED
AS AN IMPORTANT CONTRIBUTOR TO THE
PROCESS OF FORMULATING PUBLIC POLICY,
PL AYING A LE ADING ROLE IN SOCIAL
TRANSFORMATION ON ISSUES RELATED TO
OUR BUSINESS AND OUR WORLD VISION.

The year 2010 was marked by two major events: the International Year of Biodiversity and the Brazilian
presidential elections. These issues occupied our Agenda of Priority Topics for Government Relations,
which also included the optimization of the tax burden, the regulation of solid waste and the development
of strategic regional plans. The agenda lists the issues in which the Brazilian government’s political and ins-
titutional sphere of inﬂ uence affects Natura’s Strategic Planning.

Once again, our main efforts were aimed at introducing a new legal framework for access to biodiversity
and associated traditional knowledge, ensuring the conditions for sustainable use of the nation’s genetic
heritage and the traditions associated with it.

This matter has been on our agenda for 10 years. We believe that if Brazil is to create wealth from the sus-
tainable use of its biodiversity, consolidating its global leadership in this area, legislation is required to pro-
vide guidance and protection to companies and researchers. Today, the issue is regulated by an incomplete
and inconsistent Provisional Measure that does not guarantee institutional stability for the development of
science and technology. We believe that building a model that brings together production, consumption,
and conservation is the only way to contain loss of biological diversity. Establishing alternatives depends on
the government resolving the current standoff.

Our action plan for moving this issue forward is focused on three priorities: communication, which can
improve societal understanding and unite the community to demand action; engagement with communities
to seek support for this effort; and inﬂ uencing decision makers to move forward with the legal framework.

We believe that the bill, which has been stalled with the chief of staff of the President of the Republic since
2007, should be sent to Congress. Throughout 2010, we reafﬁ rmed this belief. In the legislature, the bill will
be discussed, negotiated, and adapted to provide an appropriate legal framework.

We staged hearings with federal congressmen and senators, and meetings with representatives of the
Ministry of the Environment, the Ministry of Development, Trade and Industry, the Ministry of Science
and Technology and the Ofﬁ ce of the Chief of Staff. We were also one of the founding members of the
Business Movement for the Conservation and Sustainable Use of Biodiversity, an initiative expressing the
commitment of Brazilian companies to conserve biodiversity that has been signed up to by more than 60
companies and a number of civil society organizations. (Read more on the topic on page 29 and 79, Priority
Topics/Biodiversity and Creation of Environmental Value).

As a result of Brazil’s imperfect regulatory framework, in 2010 we received infraction notices from the
Brazilian Institute for the Environment and Renewable Natural Resources (Ibama). We disagree with these
ﬁ ndings and have formally challenged them (read more on page 64, Creation of Environmental Value).

Another topic on our agenda was the participation of Guilherme Leal, then co-chairman of the Board of
Directors, in the 2010 presidential elections. (read more on page 18, Governance).

In relation to taxation, we worked with the Brazilian Association of Cosmetic, Toiletry and Fragrance Indus-
try (Abihpec), to raise awareness in Congress about the effects of Provisional Measure 497 of July 2010.
This measure would dramatically increase the tax burden on cosmetics companies. Taxation is already very
high, and further increases would also have a signiﬁ cant impact on consumers.

Concerning state taxation, we support the efforts of the Brazilian Association of Direct Selling Companies
(ABEVD) in the working group set up by the National Public Finance Policy Council (Confaz) to establish a
common methodology for calculating Value Added Margin (VAM) in all Brazilian states. This would be a major
breakthrough both for our process system and for the states, since it would reduce the likelihood of an inter-
state tax war. Since no progress has been made on this issue, we continue to negotiate directly with state go-
vernments and we still have cases pending in court in the states of Paraná, Mato Grosso do Sul and the Federal
District, where it has not been possible to reach an agreement on the method of calculating VAM.

On the matter of waste treatment, the publication of the National Policy on Solid Waste, following the
approval of Law 12,305 of 2010, was a major breakthrough. The new policy paves the way for the conso-
lidation of a system that involves the entire solid waste process, including manufacturers, government and
consumers. However, there is still a great deal of work to be done to regulate the law, such as deﬁ ning clear
responsibilities and goals. In 2010, we met with industry representatives to forge a common understanding
on the regulation of the National Policy. We shall continue, through Abihpec, to negotiate a sector-wide
agreement to share the responsibilities for the treatment of waste. (read more on page 32, Priority Topics/
Product Impact).

Among the challenges for 2011, Natura’s expanding international business will require a more robust go-
vernance system for our relations with government, in order to guide our corporate and local relationships
in environments with different political contexts and varying degrees of representativeness. One of our
planned strategies is to regionalize our Priority Agenda, targeting our regional ofﬁ ces in Brazil and also
our international operations. As a result, we shall remain closer to the issues that can impact our business.

We obtained ﬁ nancing from government agencies through tax incentives that reached just over R$34
million in 2010. Tax beneﬁ ts for our research and innovation projects represented the largest share of
this funding. Law 11,196 of 2005, known locally as Lei do Bem (Law of the Good), provides incentives for
companies developing technological innovations.

GOVERNMENT FUNDS (R$ MILLIONS)

Tax incentives for support and sponsorship 1
Lei do Bem (income tax and social contribution tax
deductions on up to twice the amount spent on research
and technological innovation) 2
Subsidy for ICMS (state VAT) in Itapecerica da Serra
Incentive for extension of maternity leave 3
Total

2008
5.2

2009
6.1

2010
8.5

15.6
1.8
0.0
22.6

12.4
3.1
0.0
21.6

19.0
6.0
0.6
34.1

1. In 2010, Natura sponsored projects eligible for tax deduction under the Rouanet Law (Articles 18 and 26) and the Ancine pro-
gram. Tax incentives were also received for Natura Musical – ICMS in the state of Minas Gerais.
2. Tax beneﬁ t related to the 2009 Lei do Bem was amended by the projects’ review / audit process.
3. Created by Decree 7052/2009, this expense is not deductible from the calculation of taxable income or from CSLL social contri-
bution tax, but it is fully deductible from corporate income tax (IRPJ).

LOBBYING AND SOCIAL INFLUENCE
We favor the practice of political lobbying when it is done transparently and ethically. We support regula-
tion of this activity, which is lawful and legitimate but lacks rules and limits. In attempting to ﬁ ll this regula-
tory vacuum, we follow our own guidelines for government relations. Lobbying on behalf of our company
is conducted by Daniel Serra, Elizabete Vicentini, Kassia Reis, Rodolfo Guttilla, and Thais Chueiri, who are
all Natura employees.

In addition, we publish other documents outlining our positions and our conduct. We distribute these do-
cuments at our meetings with government representatives.

These documents are: the Integrity Policy against Corruption and Bribery, in which we condemn all illicit prac-
tices, and the Campaign Donation Policy, which clariﬁ es our decision not to make donations to political parties
or candidates, whether inside or outside election periods. For 2011, we are going to publish our policy on hiring
lobbyists, since we believe that this is another good practice in transparency with our stakeholders.

To join forces and move forward on collective demands for our industry, Natura is a member of Abihpec
and the Brazilian Direct Selling Association (ABEVD). Through these associations, we and our market com-
petitors present a uniﬁ ed voice on issues related to our business and the competitiveness of our industry.
Natura is also a member of the World Federation of Direct Selling Associations.

In 2010, this organization continued to implement its long-term strategic plan that was approved in 2009. Our
membership secures Natura an important foothold in the international market, giving us the opportunity to
learn in different countries and allowing us to broaden our global relationship network. We are also working to
increase our role and inﬂ uence in sector associations in Latin America, in virtue of our expansion in the region.

Continuing in our efforts to positively inﬂ uence our stakeholders through open and transparent dialogue, we
actively take part in networking opportunities, discussions and collaboration events both in Brazil and abroad.

In 2010, we were formally represented in 54 industry associations, entities, and organizations.

REPRESENTATION IN CLASS ENTITIES AND ASSOCIATIONS

Entity/Association

ABA – Associação Brasileira de Anunciantes (Brazilian Association
of Advertisers)

ABERJE – Associação Brasileira de Comunicação Empresarial
(Brazilian Association of Corporate Communication)
(www.aberje.com.br)

ABEVD – Associação Brasileira de Empresas de Vendas Diretas
(Brazilian Association of Direct Selling Companies)
(www.abevd.org.br)

ABIA – Associação Brasileira das Indústrias da Alimentação
(Brazilian Association of Food Industries)

ABIFRA – Associação Brasileira das Indústrias de Óleos Essenciais,
Produtos Químicos Aromáticos, Fragrâncias, Aromas e Aﬁ ns
(Brazilian Association of Essential Oils, Aromatic Chemical
Products, Fragrances, Aromas and Similar Industries)

ABIHPEC – Associação Brasileira da Indústria de Higiene Pessoal,
Perfumarias e Cosméticos (Brazilian Association of the Personal
Hygiene, Perfume and Cosmetic Industries) (www.abihpec.org.br)

Natura Representative

Type of Representation

1. José Vicente Marino

1. Member of the National
Executive Board

2. Vanessa Giannotti

2. Representative of the Committee
of Good Communication Practices

Rodolfo Guttilla

Chairman of the Decision-Making
Council

1. Vice

1. Rodolfo Guttilla

Chairman

2. Lucilene Prado

3. Daniel Serra

2. Coordinator of the Committee
of Legal Affairs and Government
Relations

3. Vice Chairman of the Ethics
Committee

Rodolfo Guttilla

Director

Sérgio Gallucci

Representative

1. Rodolfo Guttilla

1. Vice Chairman

2. Lucilene Prado

2. Director

3. Elizabete Vicentini

4. Thais Chueiri

5. Luiz Felipe

3. Representative of the Technical
and Regulatory Committee

4. Representative of the
Environment Committee

5. Representative to the Labor
Relations GroupRelações com
Trabalho

ABNT – Associação Brasileira de Normas Técnicas (Brazilian
Association of Technical Standards) (www.abnt.org.br)

ABPI – Associação Brasileira da Propriedade Intelectual (Brazilian
Association of Intellectual Property) (www.abpi.org.br)

ABRASCA – Associação Brasileira das Companhias Abertas
(Brazilian Association of Listed Companies) (www.abrasca.org.br)

ABRH – Associação Brasileira de Recursos Humanos (Brazilian
Association of Human Resources)

AIPPI – Association Internationale pour la Protéction de la
Propriété Intellectuelle (International Association for the
Protection of Intellectual Property) (www.aippi.org)

AMVD – Associación Mexicana de Ventas Directas (Mexican
Direct Selling Association)

ANPEI – Associação Nacional de Pequisa, Desenvolvimento e
Engenharia das Empresas Inovadoras (Brazilian Association of
Research, Development and Engineering of Innovative Companies)
(www.anpei.org.br)

ASIPI – Associación Interamericana de la Propriedad Industrial
(Interamerican Association of Industrial Property) (www.asipi.org)

Asociación Civil Argentina de Empresas Brasileñas (Argentine Civil
Association of Brazilian Companies) (www.grupobrasil.com.ar)

Elizabete Vicentini

Representative

Lucilene Prado

Representative

Helmut Bossert

Representative

Denise Asnis

Representative

Lucilene Prado

Representative

Cecilia Riviello

Representative

Luciana Hashiba

Director

Lucilene Prado

Representative

Heriovaldo Silva

Deputy Treasurer

ASPI – Associação Paulista de Propriedade Intelectual (São Paulo
Association of Intellectual Property) (www.aspi.org.br)

Lucilene Prado

Representative

Cámara de Comercio de Lima (Chamber of Commerce of Lima) Daniel Gonzaga

Representative

Cámara Peruana de Venta Directa (Peruvian Chamber of Direct
Selling)

Daniel Gonzaga

Representative

Cámara de Venta Directa do Chile (Direct Selling Chamber of Chile Hans Werner

Representative

CAMBRAS – Cámara de Comercio Argentino Brasileña (Argentine
Brazilian Chamber of Commerce) (www.cambras.org.ar)

CANIPEC – Cámara Nacional de la Industria de Permumeria,
Cosmetica y Articulos de Tocador e Higiene (México) (Mexican
National Chamber of the Perfumery, Cosmetics and Beauty and
Personal Care Products Industry)

Heriovaldo Silva

Representative

1. Carolina Muñoz

1.Representative

2. Javier Herrero

2. Representative

CAPA – Cámara Argentina de la Indústria de Cosmética y Perfumeria
(Argentine Chamber of the Cosmetics and Perfumery Industry)

Heriovaldo Silva

Deputy Member of the Accounts
Review Commission

CASIC - Consejo de Asociaciones de la Industria de Cosmeticos
Latinoamericana (Council of the Latin America Cosmetics Industry
Association)

CAVEDI – Cámara de Venta Directa de Argentina (Direct Selling
Chamber of Argentina)

Rodolfo Guttilla

Representative

Pedro Gonzalez

Representative

CEMEFI –Centro Mexicano para la Filantropia ( Mexican Center
for Philanthropy)

1. Javier Herrero

1. Representative

2. Rosana Bertozzi

2. Representative

CIESP – Centro das Indústrias do Estado de São Paulo (Center of
Industries of the State of São Paulo) (www.ciesp.org.br)

CONAR – Conselho Regional de Autoregulamentação Publicitária
(Regional Council for Advertising Self-regulation)

CONSOCIAL – Conselho Superior de Responsabilidade Social
(Higher Board of Social Responsibility) (FIESP)

Rodolfo Guttilla

Director

José Vicente Marino

Member of the Higher Board

Maria Lucia Guardia

Council Member

ETHOS – Institutos Ethos de Empresas e Responsabilidade Social
(Ethos Institute of Companies and Social Responsibility)
(www.ethos.org.br)

In deﬁ nition

2. Marcelo Cardoso

FNQ – Fundação Nacional da Qualidade (Brazilian National
Foundation on Quality) (www.fnq.org.br)

Pedro Luiz Passos

FUNBIO – Fundo Brasileiro para a Biodiversidade (Brazilian
Fund for Biodiversity) (www.funbio.org.br)*

In deﬁ nition

2. Member of Ethos Steering Group
10 Years

Vice Chairman of the Board of
Trustees

Fundação SOS Mata Atlântica (SOS Atlantic Forest Foundation)

Pedro Luiz Passos

Member of the Board

GIFE – Grupo de Institutos, Fundações e Empresas (Group of
Institutions, Foundations and Companies)

Maria Lucia Guardia

Representative

Global Compact - Caring for Climate

Marcos Vaz

Member of Steering Committee

GRI - Global Reporting Initiative (www.globalreporting.org)

Rodolfo Guttilla

Member of the Stakeholder Council
and Co-chair of the Brazilian
National Annex

IBGC – Instituto Brasileiro de Governança Corporativa (Brazilian
Institute of Corporate Governance) (www.ibgc.org.br)

IBRI – Instituto Brasileiro de Relações com Investidores (Brazilian
Institute of Investor Relations) (www.ibri.org.br)

IEDI – Instituto de Estudos para o Desenvolvimento Industrial
(Institute of Studies for Industrial Development) (www.iedi.org.br)

Moacir Salztein

Representative

Helmut Bossert

Representative

Pedro Luiz Passos

Chairman of the Board

IIRC - International Integrated Reporting Committee

Roberto Pedote

Member of Steering Committee

Instituto Empreender Endeavor Brasil (Endeavor Brazil
Entrepreneur Institute) (www.endeavor.org.br)

Pedro Luiz Passos

Member of the Board

Instituto São Paulo Contra a Violência (São Paulo Institute Against
Violence) (www.spcv.org.br)

Rodolfo Guttilla

Representative

INTA - International Trademark Association

Lucilene Prado

Representative

IPT – Instituto de Pesquisas Tecnológicas (Institute of Technological
Research) (www.ipt.br)

Pedro Luiz Passos

Member of the Board

LIDE – Grupo de Líderes Empresariais (Business Leaders Group)

MBC – Movimento Brasil Competitivo (Competitive Brazil
Movement) (www.mbc.org.br)

Movimento Nossa São Paulo (Our São Paulo Movement)
(www.nossasaopaulo.org.br)

PCPC Council - Personal Care Products Council
(www.personalcarecouncil.org)

1. Alessandro Carlucci

1. Representative

2. Rodolfo Guttilla

2. Representative

Pedro Luiz Passos

Member of the Board

In deﬁ nition

Elizabete Vicentini

Representative

Rede Social São Paulo (São Paulo Social Network)

Maria Lucia Guardia

Member of the Management
Committee

SIPATESP – Sindicato da Indústrtia de Perfumaria e ARtigos de
Toucador do Estado de São Paulo ( Perfume and Beauty Products
Industry Union in the State of São Paulo)

1. Rodolfo Guttilla

1. Vice Chairman

2. Lucilene Prado

2. Deputy Director

The Arthur W. Page Society (www.awpagesociety.com)

UEBT - Union For Ethical Biotrade

Rodolfo Guttilla

Marcos Vaz

Representative

Vice-Chairman

WBCSD - World Business Council for Sustainable Development
(www.wbcsd.org)

WFDSA - World Federation of Direct Selling Associations

Alessandro Carlucci

Conselheiro

1. Alessandro Carlucci

1. Treasurer

2. Rodolfo Guttilla

2. Counselor

WWF Brasil (www.wwf.org.br)*

In deﬁ nition

5. WHAT FOOTPRINT WE LEAVE

W E WA N T TO
CREATE VALUE
FOR ALL THOSE DIRECTLY
OR INDIRECTLY INVOLVED
W I T H O U R C O M PA N Y B Y

REDUCING
OUR ENVIRONMENTAL
I M P A C T

W H I L E G E N E R A T I N G
E C O N O M I C A N D S O C I A L

B E N E F I T S

5.1NATURA
VALUE CHAIN

NATURA’S MAIN PERFORMANCE
INDICATORS IN 2010 RELATED TO
THE STAGES OF OUR VALUE CHAIN.

1. EXTRACTION AND
TRANSPORTATION OF RAW
MATERIALS AND PACKAGING
(DIRECT AND INDIRECT SUPPLIERS)

R$ 3.7 BILLION distributed to
suppliers for the purchase of ingredients,
raw materials, and services

81% of suppliers were satisﬁ ed

36 CERTIFIED INGREDIENTS used

106,144 METRIC TONS of
greenhouse gases emitted related to the
extraction and transportation of raw
materials and packaging

24,775 METRIC TONS of greenhouse
gases emitted by our direct suppliers
(process and transportation to Natura)

4. USE OF PRODUCTS AND
DISPOSAL OF PACKAGING.

16.9% of reﬁ lls on items billed in Brazil

65.4 millipoints/kg is the
environmental impact of packaging per
quantity of products1

58,509 metric tons of greenhouse gas
emissions related to the ﬁ nal disposal of
products and packaging

1. This includes the impact of extraction and
manufacturing of packaging.

2. INDUSTRIAL AND INTERNAL
PROCESSES.

R$ 769.2 MILLION distributed to
employees as beneﬁ ts and salaries

R$ 139.7 MILLION invested in
innovation

0.47 LITER of water consumed
per unit billed

443.8 KILOJOULES of energy
consumed per unit billed

25.7 GRAMS of waste generated
per unit billed

25,611 METRIC TONS of
greenhouse gases emitted in
internal processes

3. PRODUCT SALES
(TRANSPORTATION AND
DISTRIBUTION).

R$ 2.7 BILLION distributed to
consultants as sales-related earnings

1.2 MILLION consultants in all
operations

21% consultant loyalty index

168 new products launched

38,275 METRIC TONS of
greenhouse gases emitted transporting
products to consultants and consumers

CROSS-SECTIONAL INDICATORS

R$744.1 MILLION in net income

R$5.1 BILLION in net revenues

EBITDA of R$1.2 BILLION

EBITDA margin of 24.5%

R$80 MILLION invested in
corporate responsibility

R$1.4 BILLION paid to the
government in direct and indirect taxes

R$646.9 MILLION distributed
to shareholders as dividends and
interest on capital

5.2

CREATION OF
ENVIRONMENTAL
VALUE

O U R M A I N C H A L L E N G E I S TO
BA L A N C E TH E G ROW TH O F
OUR BUSINESS WITH OUR USE OF
N AT U R A L R E SO U RCE S L E A D I N G
US TO DEVELOP INNOVATIVE
TO O L S A N D PR AC T I C E S TO
REDUCE THE IMPACT OF OUR
O P E R AT I O N S A N D P R O D U C T S .

We continue to build on our intiatives related to waste generation and efﬁ cient uses of water and energy.
In 2009, we made a decision to be mindful not only of our own impacts on the environment, but to consider
the environmental performance when evaluating potential supply chain partners. As such, our calculation
of our key indicators – water and electricity consumption and waste generation – included data from con-
tracted suppliers. In 2010, we began to include the performance of our distribution centers and other Natura
facilities in these indicators. Our challenge now is to include the results of our international operations in
these data. Through these initiatives, we can glean a more accurate portrayal of the impact generated by our
business, devise more comprehensive action plans, and inﬂ uence our suppliers to take measures to ensure
environmentally balanced production.

1. TOTAL CO2e EMISSIONS1 2
(IN METRIC TONS)

253,312

232,827

201,493

CARBON NEUTRAL
In 2007, we started our Carbon-Neutral Program to signiﬁ cantly reduce our emissions of greenhouse gases
(GHGs). This initiative compels us to ﬁ nd alternatives for improving our efﬁ ciency and ensures our success
by mitigating the environmental impacts of our rapid growth.

2008

2009

2010

Starting the program was the ﬁ rst step of a commitment we made to society: to reduce the company’s
GHG emissions by 33% within ﬁ ve years, using our 2006 emissions as a baseline. Since than, we reached a
21% reduction and induced a profound transformation in the processes of our business, besides we neutral-
ized our emissions by supporting social-environmental projects. Through a diagnosis, in 2010 we reviewed
the program deadline for achieving the goal of 2011 to 2013 (read more on next page).

2. RELATIVE EMISSIONS
(KG OF CO2E/KG
PRODUCTS INVOICED)1 2

3.82

Last year, Natura’s absolute emissions totaled 253,312 metric tons of CO2e, continuing the trend we set in
recent years for emissions to grow at a slower pace than our business output. In relative terms, there was a
7.3% decline in GHG emissions, due primarily to signiﬁ cant process improvements in our order cycle (which
involves product distribution), international operations, and business management.

3.55

3.30

Three core components form the heart of the Carbon-Neutral Program: expanding the scope of our in-
ventory; reducing GHG emissions; and offsetting those that cannot be avoided (graphs 1 and 2).

TOTAL EMISSIONS CO2e (METRIC TONS) 1 2 3

Direct GHG emissions (Scope 1)
Indirect GHG emissions from energy (Scope 2)
Other indirect GHG emissions (Scope 3)
Total

2008
5,469
1,692
194,332
201,493

2009
6,104
1,135
225,587
232,827

2010
7,969
2,249
253,094
253,312

1 CO2e (or CO2 equivalen)t, a measure used to express GHG emissions, based on their global warming potential.
2 The inventory calculation model was upgraded in 2010. The 2009 base has been recalculated to ensure comparability, and the 2008
base has been maintained because the variation did not exceed the 5% recalculation threshold deﬁ ned by the GHG protocol.
3. The scope of Natura’s inventory has a life cycle view, and it includes all direct and indirect emissions, considering the entire value chain,
from extraction of raw materials to ﬁ nal product disposal.

2008

2009

2010

1. CO2e (or CO2 equivalent): mea-
sure used to express greenhouse
gas emissions, based on the global
warming potential of each one.
2 The inventory calculation model was
enhanced in 2010 to ensure more ac-
curate methods, particularly emission
factors used in calculations. The 2009
base has been recalculated to enable
accurate assessment of performance
in 2010. The 2008 base has been
maintained because the improvement
made in 2010 did not exceed the re-
calculation threshold of 5% variation
deﬁ ned by the GHG protocol.

EMISSIONS INVENTORY
To calculate our inventory, we take into account the total volume of our emissions related to scope 1, 2 and
3 – in other words, the survey covers the extraction of raw materials in nature to the ﬁ nal disposal of the
product. Our inventory follows the standards of the Greenhouse Gas Protocol Initiative and ABNT stan-
dard NBR ISO 14064-1, which set out the rules for conceiving, developing, managing and preparing them.
PwC, an independent auditing and consulting ﬁ rm, conducts speciﬁ c veriﬁ cation (limited assurance) of the
data in the 2010 Natura Consolidated GHG Inventory Report.

Periodically, we make improvements to streamline the process of calculating the inventory and speed up
the access to the information. In 2010, the analysis started to be made on a quarterly basis, instead of the
previous practice of every four months. This shorter cycle allows for the identiﬁ cation of improvement
opportunities throughout the inventory process, making it possible to correct distortions throughout the
year to achieve the targeted results. Since last year, we have been using a new methodology thatallows an
evaluation of the impacts of each Natura product.

Our operations do not emit or use substances that damage the ozone layer. Emissions of particulate matter
and NOx and SOx gases are monitored and are not signiﬁ cant.

REDUCTION
Only carbon-emissions cuts will contain climate change and its impacts. That is why reducing our GHG
emissions is central to the Carbon Neutral Program.

The complexity of the actions, which involve a deep transformation of how we do business, partly explain the
revised deadline for attaining the target reduction of 33%. Several forecasts made at the outset of the program
in 2007 turned out to be incorrect or were overly ambitious to achieve the goal in ﬁ ve years. We also found
ourselves behind schedule in implementing some of our projects, partly because of a slower-than-expected
technological evolution of the market. Among the difﬁ culties we currently face is a low supply of raw materials
from plant origin, like biopolymers used in manufacturing lower-impact plastic packaging, and a shortage of com-
mercially viable recycled materials with traceable chains for use in the manufacturing of packaging.

To accelerate carbon-emission reductions in the years ahead, we launched the Less Carbon, More Pro-
ductivity program in 2010. This initiative is structured on ﬁ ve action fronts: staff engagement, education,
and training, identiﬁ cation of projects, improvements in processes, and connecting with the business. In
the last three pillars, signiﬁ cant advances have been made in incorporating the carbon impact into business
decisions by creating policies for prioritizing materials and new measurement tools.

We also now generate detailed analyses of the emissions from Natura’s major processes. We have a tool
capable of estimating gas emissions from each process, which enables managers to understand the impact
of their activities on the company’s emission inventory and to make more conscientious decisions as a re-
sult. In the new product development area, we have created a tool for estimating emissions from products
and packaging beginning with their conception. In other words, based on speciﬁ c data, this tool can forecast
a potential product’s future environmental impact in addition to making comparisons with items of the
same category and Business Unit.

On another front of the Less Carbon More Productivity program, we identiﬁ ed 10 projects with new reduc-
tion opportunities and we created eight rules for the development of new products. One of these rules, for
example, establishes that the launch of new items or modiﬁ cations to existing ones must have GHG emissions
that are equal or lower than the product they are replacing or the average of the category the item belongs to.
If emissions are higher, it must be submitted to analysis by the Product Committee, which reports to Natura’s
Executive Committee.

The program also encompasses education and engagement, seeking to disseminate knowledge on climate
change among employees from different levels and departments of Natura.

These efforts have resulted in the formation of a portfolio of projects with the potential for us to achieve our
target to cut GHG emissions by 33% by 2013. They have also prompted a shift in our management, which now
incorporates carbon reduction criteria into our business processes. Moreover, carbon has also been incorpo-
rated into Natura’s key processes, such as the strategic growth plan for product categories and the Natura
Project Management Methodology.

We have already begun to reap the fruit of this process by exceeding the relative emissions reduction
target, having achieved 7.3% in 2010 compared to a projected target of 4.4% . The decline is primarily due
to signiﬁ cant reductions in several processes like the Order Cycle (which involves the distribution of our
products), international operations and Business Management.

¾ Consolidation of the regional distribution centers (we have opened three new centers since 2009)
and greater incentives for these centers to use maritime transport. These logistical changes have
brought us closer to our consultants and cut diesel and gasoline consumption by transportation com-
panies delivering orders.

¾ Use of smaller boxes in product distribution, permitting more efﬁ cient loading of cars and trucks.
¾ In our international operations, the sharp rise in product billings (nearly 60%), driven primarily by
the operations in Argentina and Colombia, contributed to the reduction of relative emissions, since
carbon emissions did not rise proportionally.

¾ Advances in the sale of products with a lower carbon index than the average of Natura products in

the skin/body care category: soaps and oils, in addition to the launch of the new reﬁ ll.

We also face the additional challenge of reducing absolute GHG emissions by 10% between 2008 and
2012. This target refers to direct emissions and electricity consumption (the so-called scopes 1 and 2 of
our Brazilian operations). We are sticking to our commitment, although we have not yet reached the
expected results given the delay in implementing projects, in addition to external factors. Because of
the delay in release of the environmental license, we postponed by almost a year the installation of a
ﬂ ex boiler, which began operating at the end of 2010. Another postponed initiative was the adoption of
ethanol-powered vehicles for the sales force, implemented beginning March 2011, eight months after the
initial period. These two initiatives will produce results this year and represent over 60% of the emis-
sions to be cut.

A further difﬁ culty involves the increased use of coal-ﬁ red thermal power plants in Brazil. With a more
polluting energy matrix, the emission factor of the electricity grid was increased by over 100% in the com-
position of total GHG emissions.

OFFSETTING
Emissions that cannot be avoided are offset through projects that focus on energy efﬁ ciency, the exchange
of fossil fuels for renewable energy, and the reforestation of degraded areas. Methods are selected using a
biannual public tender available throughout Brazil.

In the process for the 2009–2010 two-year period, six projects were selected in Brazil, from among the 82
submitted, which were expected to neutralize 465,237 metric tons of CO2e emissions in 2009 and 2010. Part
of these emissions were offset by purchasing credits and others will be offset with future credits. In 2011, a
new contract is expected to be concluded that will include a project to offset emissions in Latin America.

GHG emission offset projects supported by Natura – 2009/2010 series

ENERGY PROJECTS

USE OF RENEWABLE BIOMASS
SUSTAINABLE CARBON CONSULTING
The project promotes the use of sawdust, woodchips and sugarcane bagasse to replace native ﬁ rewood
taken from Brazil’s cerrado savannah region for the furnaces of the ceramic roof tile company Cerâmica
Santorini in Ituiutaba, in the state of Minas Gerais. We have purchased 35,634 metric tons of CO2 already
generated and sealed a partnership to offset another 102,200 metric tons in seven years.

USE OF RENEWABLE BIOMASS
SUSTAINABLE CARBON CONSULTING
The project intends to replace native wood used in furnaces, which has added to the deforestation of Bra-
zil’s caatinga thorn forest, with inputs such as coconut shells, pruned branches of cashew trees, sugarcane
bagasse and sawdust. The project is developed at ceramics company Cerâmica JL Silva, in Lajedo, in the
state of Pernambuco. It has offset 74,880 metric tons of CO2e in four years.

ENERGY EFFICIENT STOVES IN THE RECÔNCAVO BAIANO II
PERENE INSTITUTE
The project expands the 2009 initiative to replace rudimentary wood-burning stoves for more efﬁ cient
versions in rural households in Bahia. The initiative will install 5,000 new stoves in the region. Rudimentary
stoves consume more wood, emit more greenhouse gases and add to the degradation of the Atlantic For-
est, and they are also a health hazard due to the smoke they release. The project will offset 94,000 metric
tons of CO2e in eight years.

REPLACING FUEL OIL WITH SEBUM
EQAO CONSULTING
The reduction in emissions results from the partial replacement of fossil fuels (oil) with renewable fuel (se-
bum) used in the boilers of the textile company Companhia de Fiação e Tecidos Santo Antônio, in Pirapora,
in the state of Minas Gerais. The project has offset 13,523 metric tons of CO2e in one year.

FORESTRY PROJECTS

EMAS-TAQUARI BIODIVERSITY CORRIDOR CARBON PROJECT
ORÉADES GEOPROCESSING CENTER
The project will restore 200 hectares of degraded forest – of a total area of 600 hectares – with native
species around the Emas National Park and the River Taquari Springs State Park (in the states of Goiás
and Mato Grosso do Sul). The forecast is for the project to offset 70,000 metric tons of CO2e in 30 years.

XINGU SOCIO-ENVIRONMENTAL CARBON
SUSTAINABLE XINGU ASSOCIATION, SOCIOAMBIENTAL INSTITUTE (ISA) AND CENTRO DE
VIDA INSTITUTE (ICV)
The objective of this project is to restore 220 hectares of degraded land earmarked for preservation
around the source of the Xingu River in the state of Mato Grosso. The project will offset 75,000 metric
tons of CO2 in 30 years.

GHG emission offset projects in progress – 2007/2008 series

FORESTRY PROJECTS

CARBON, BIODIVERSITY AND COMMUNITY IN THE PAU-BRASIL ECOLOGICAL CORRIDOR (2008 SERIES)
BIOATLÂNTICA INSTITUTE (IBIO)
Reforestation project in the Pau-Brasil National Park and the Monte Pascoal National Park, in Porto Seguro,
in the state of Bahia. It will offset 79,050 metric tons of CO2 for Natura in 30 years.
Status in 2010 – The project should be fully implemented in 2011 and the ﬁ rst carbon credits are forecast for 2015.

XINGU SOCIO-ENVIRONMENTAL CARBON (2008 SERIES)
SOCIOAMBIENTAL INSTITUTE (ISA) AND CENTRO DE VIDA INSTITUTE (ICV)
Recovery of 116 hectares of degraded riparian forest and springs at the source of the Xingu River in the state
of Mato Grosso. It will offset 40,000 metric tons of CO2 in 30 years.
Status in 2010 – The project should be fully implemented in 2011 and the ﬁ rst carbon credits are forecast
for 2014.

FOREST CARBON – RECOVERY AND PRESERVATION OF NATURAL RESOURCES (2007 SERIES)
ECOLÓGICA INSTITUTE
The project is working to recover nearly 150 hectares of degraded land, by planting native species of trees in
the protected areas (“Permanent Preservation Areas” and “Legal Reserves”) of two rural settlements in the
region of Cantão, in the state of Tocantins. When complete, the project will have offset 60,000 metric tons
of CO2e in 20 years.
Status in 2010 – The project has been implemented and the ﬁ rst carbon credits are forecast for 2013.

LANDSCAPE RESTORATION AND AGROFORESTRY SYSTEMS (2007 SERIES)
ECOLOGICAL RESEARCH INSTITUTE (IPÊ)
Restoring the vegetation and protecting the diversity of species in an area of 55 hectares, in addition to
implementing 129 hectares of agroforestry systems for the production of coffee. The project will commer-
cially beneﬁ t the rural producers in Pontal do Paranapanema, in the state of São Paulo. The ﬁ nal offset will be
60,000 metric tons of CO2e in 30 years.
Status in 2010 – The project has been fully implemented and the ﬁ rst carbon credits are forecast for 2011.

ENERGY PROJECTS

ENERGY EFFICIENT STOVES IN THE RECÔNCAVO BAIANO (2008 SERIES)
PERENE INSTITUTE
The project provides for the replacement of rudimentary wood-burning stoves for families living in the
rural communities of the Recôncavo Baiano region of the state of Bahia with more efﬁ cient stoves. The
target is to offset 18,880 metric tons of CO2e in eight years.
Status in 2010 – The project should be fully implemented in 2011 and the ﬁ rst carbon credits are forecast
for 2014.

Completed projects

ENERGY

USE OF RENEWABLE BIOMASS (2007 SERIES):
ECOLÓGICA ASSESSORIA
Use of renewable biomas for ﬁ ring ceramics at four companies in the states of Pará and Tocantins (60,000
metric tons of CO2e offset)

SMALL HYDROELECTRIC POWER PLANT COOPERATIVES (2007 SERIES):
Generation of renewable energy by the cooperatives Creral, Cooperluz and Ceriluz in the state of Rio
Grande do Sul (which resulted in the offsetting of 14,000 metric tons of CO2e).

REPLACING FUEL OIL WITH CERTIFIED BIOMASS (2007 SERIES):
Replacing oil-based fossil fuel for renewable fuel from woodchips certiﬁ ed by the Forest Stewardship
Council (FSC) at AMC Têxtil in the state of Santa Catarina (30,000 metric tons of CO2e offset).

USE OF RENEWABLE BIOMASS (2008 SERIES):
SUSTAINABLE CARBON
Use of renewable biomass for ﬁ ring ceramics in the state of Alagoas (60,000 metric tons of CO2e offset).

BIODIVERSITY

The United Nations declared 2010 as the International Year of Biodiversity. We strengthened our actions in
support of a policy that leads to sustainable development through the use of biodiversity assets and the creation
of a new Brazilian legal framework for access to genetic heritage and its associated traditional knowledge.

Since 2008, we have relied on the Natura Policy for the Sustainable Use of Biodiversity and Traditional
Knowledge. This policy establishes directives for the use of raw materials and the sharing of beneﬁ ts, such
as raw material extraction with the mandatory use of sustainable stewardship through extractivist fam-
ily agriculture-based systems. It is the fruit of the experience acquired as part of a group that plunged
into little-explored complex topics and followed the principles of the Convention on Biological Diversity
established by the United Nations. It presents action guidelines for all internal departments involved in
product research and development on the basis of genetic resources and/or their associated traditional
knowledge. In the case of our relationship network, it serves, among other purposes, as an instrument to
support decision making by upholding our values and the manner in which we work (learn more on page
30, High-Priority Topics/Biodiversity).

SANCTIONS APPLIED BY IBAMA

In November and December 2010, Natura received 68 infraction notices from the Brazilian Institute of the
Environment and Renewable Natural Resources (Ibama) with ﬁ nes of R$22 million for allegedly irregular
access to biodiversity for research and product development. Other local and foreign companies, scientists,
and public research institutions also received notices.

Natura does not agree with these actions and has formally challenged them. We believe that the need for
authorization from the government to start research is a barrier to the development of science and does
not uphold the rights of traditional communities nor does itguarantee protection of biomes. In addition, the
time taken to analyze an application, usually about two years, would mean that pure or applied research
by business would not be feasible.

We believe that our activity complies with the principles of the Convention on Biological Diversity (CBD),
the United Nations treaty on which Natura bases its policy for the sustainable use of biodiversity and tra-
ditional knowledge. Natura has prior approval from all suppliers of biological materials, has signed contracts
with them, and shares beneﬁ ts from the commercial exploitation of species, and does so fairly and equitably.

In 2010, we received important endorsements, particularly from abroad, that attest to our commitment.
The World Business Council for Sustainable Development selected, from among 2,000 companies around
the world, 24 case studies in the responsible use of biodiversity. Natura was identiﬁ ed by the study as the
only company that manages to comply with the three principles of the Convention on Biological Diversity
(CBD): prior consent, sharing of beneﬁ ts and environmental conservation. We were also mentioned in
The Economics of Ecosystems and Biodiversity, published by the United Nations Environment Program,
currently the most important study on the economics of ecosystems and biodiversity.

We view the notiﬁ cations as a positive opportunity, however, to discuss the urgency of developing a legal
framework for biodiversity.

CERTIFICATION OF INGREDIENTS
We certiﬁ ed six more ingredients in 2010 used in perfumes and cosmetics and in our Frutífera line of fruit teas.
They include Cinnamon, Cloves and Dog Rose. We also modiﬁ ed the status of one ingredient to uncertiﬁ ed in
virtue of the changes in the renewal process for organic certiﬁ cation.

We ended the year with 36 certiﬁ ed species, which means that more than 60% of the biodiversity assets
used by Natura have certiﬁ ed production and origin.

This process is part of our Program for the Certiﬁ cation of Ingredients, which is a statement of our commitment
to respecting the ecological limits to the production of ingredients we acquire from supplier communities. This
program guarantees that production remains within the levels the environment is capable of supporting.

NUMBER OF ASSETS LICENSED 1

Total assets licensed (units)
Percentage of total licenses2 (%)

2008
26
54

2009
31
58

2010
36
61

1. Includes vegetable inputs in the form of waxes, oils, extracts, essential or fresh oils (cosmetics and teas).

The certiﬁ cations include family farmers and the traditional communities whose production is certiﬁ ed by
three different protocols: organic agriculture (the Biodynamics Institute, Ecocert, the International Agricul-
tural Organization, and the Ecological Market Institute); sustainable agriculture (the Sustainable Agriculture
Network); and forestry (the Forest Stewardship Council).

Natura does not use invasive species or engage in habitat conversion, which involves transforming a natural
environment to cater to production interests. We look for raw materials in places where they occur naturally,
we avoid monoculture and we give preference to products that are pesticide-free, in accordance with organic
production models.

One of the prerequisites of certiﬁ cation is production traceability, a process in which producers document
and provide information on the origin of all their production.

STATUS OF THE NATURA INGREDIENT CERTIFICATION PROGRAM 2010

Ingredient/Ekos (State)

Start

End

Start

End

Start

End

Production System

Andiroba
Carapa guianensis (Amazonas)

Açaí Berry
Euterpe precatoria (Rondônia)

Lemongrass (F)
Cymbopogon citratus
(Paraná and São Paulo)

Brazil Nut
Bertholletia excelsa (Amapá)

Cacau
Theobroma cacao (Bahia)

White Pitch
Protium pallidum (Amapá)

Cupuaçu
Theobroma grandiﬂ orum
(Rondônia)

Passion Fruit
Passiﬂ ora edulis (Minas Gerais)

Yerba Mate
Ilex paraguaiensis
(Rio Grande do Sul)

Murumuru Palm
Astrocaryum murumuru
(Amazonas)

Pitanga
Eugenia uniﬂ ora
(São Paulo and Paraná)

Priprioca
Cyperus articulatus (Pará)

Manejo tradicional

Agroforestry
system

SAN

X Cultivation

ECOCERT

Traditional
stewardship

Imaﬂ ora

Agroforestry
system

IBD

Traditional
stewardship

Imaﬂ ora

Agroforestry
system

SAN

Cultivation

Traditional
stewardship

Imaﬂ ora

Traditional
stewardship

Cultivation
and organic
stewardship

ECOCERT

X Cultivation

IBD

Ingredient/Other

Start

End

Start

End

Start

End

Notes

STAGE I

STAGE II

STAGE III

Arabica Coffee
Coffea arabica (Minas Gerais)

Fragrant Granadilla
Passiﬂ ora alata (São Paulo)

Paramela
Adesmia buronioides (Patagônia,
Argentina)
Poejo
Cunilla gallioides
(Rio Grande do Sul)

Carnaúba Palm
Copernicia cerifera
(Rio Grande do Norte)

Palo Santo
Bursera graveolens (Ecuador)

Copaíba
Copaifera spp (Amazonas)

Green Tea (F)
Camelia sinensis (Paraná)

Candeia
Eremanthus erythropappus
(Minas Gerais)

Lemon Balm (F)
Melissa ofﬁ cinalis (Paraná)

Carqueja (F)
Bacharis genisteloides D.C.
(Paraná)

Peppermint (F)
Mentha piperita L. (Paraná)

Chamomile (F)
Chamomilla recutita (Paraná)

Fennel (F)
Foeniculum vulgare Miller
(Paraná)

Cinnamon (F)
Cinnamomum zeylanicum Ness
(Alemanha)

Cloves (F)
Caryophyllus aromaticus L.
(Bahia and Germany)

Dog Rose (F)
Rosa canina L. (Germany)

Paracress
Spilanthes oleracea (São Paulo)

Lemon Brazil
Ocimum americanum (Pará)

X Cultivation

SAN

X Cultivation

IBD

X Stewardship OIA

X Cultivation

ECOCERT

X Stewardship IBD

X Stewardship ECOCERT

X Cultivation ECOCERT

X Stewardship ECOCERT

X Stewardship Imaﬂ ora

Organic
cultivation

ECOCERT

Cultivo
orgânico

Organic
cultivation

ECOCERT

Organic
cultivation

IMO

Organic
cultivation

IMO

IBD

1. We have nine certiﬁ ed ingredients that are part of the portfolio of products that have not yet been launched on the market. They are
not, therefore, listed in this table.
2. The raw materials marked with an (F) are part of the Frutífera organic fruit tea line.
3. Stage I: Internal process of identiﬁ cation and selection of a potential supplier area. This phase is characterized by the typology of produc-
ers, the organization of the community and the existing type of stewardship (agricultural or forestry).
4. Stage II: Preparation of certiﬁ cation strategies, involving discussion of the processes with plant product suppliers, choice of the certiﬁ ca-
tion agency and preliminary analysis of the supplier area by this agency (when necessary).
5. Stage III: Inspection of certiﬁ cation in the supplier areas, implementation of the action plan to meet the compliance requirements of the
certiﬁ cation agencies and opinion of the certiﬁ cation agency to obtain the seal.
* Forest Certiﬁ cation, Forest Stewardship Council (FSC) seal (partner certiﬁ cation agency - IMAFLORA)
Sustainable Agriculture Certiﬁ cation, Sustainable Agriculture Network (SAN) seal (partner certiﬁ cation agency - IMAFLORA)
Organic Certiﬁ cation, Biodynamics Institute (IBD) seal (partner certiﬁ cation agency - IBD)
Organic Certiﬁ cation, Ecocert seal (partner certiﬁ cation agency - ECOCERT)
Organic Certiﬁ cation, International Agricultural Organization (OIA) seal (partner certiﬁ cation agency in Argentina)
Organic Certiﬁ cation, Ecological Market Institute (IMO) seal (partner certiﬁ cation agency - IMO)

Of all the inputs used by Natura, two are developed from species on the endangered list compiled by the Bra-
zilian Institute for the Environment and Renewable Natural Resources (Ibama) and the International Union
for the Conservation of Nature and Natural Resources (IUCN). These are Brazil Nut (Bertholletia excelsa)
and Yerba Mate (Ilex paraguariensis). For this reason, we have funded studies in partnership with Embrapa
Genetic Resources and Biotechnology to preserve these species. Furthermore, we only purchase these raw
materials from areas certiﬁ ed by the FSC.

AREAS OF OPERATION
Natura works with suppliers of species of Brazilian biodiversity from across the country. Some of them are
situated in areas protected by the National System of Preservation Units, such as the Médio Juruá Extractivist
Reserve, in the state of Amazonas, and the São Francisco Community, located in the Iratapuru Sustainable De-
velopment Reserve, in the state of Amapá.

In the Médio Juruá Extractivist Reserve, which comprises 253,000 hectares of protected land, Andiroba and
Murumuru Palm stewardship occurs in an area smaller than 1% of the total reserve.

The sustainable stewardship of Brazil Nuts, Copaiba and White Pitch, meanwhile, occurs in an area of approxi-
mately 4,000 hectares, less than 0.5% the 842,000 hectares of the Médio Juruá Extractivist Reserve. All produc-
tion has the approval of these Preservation Units.

Natura’s head ofﬁ ce is located in an area of 646,000 square meters inside an Environmental Protection Area
off the Anhanguera Highway, in the municipality of Cajamar, in Greater São Paulo. A stewardship plan developed
by Natura has been removing exotic species, restoring the native forest and increasing the local biodiversity. In
2010, some 3,500 trees of 90 species native to the Atlantic Forest were planted. The project also controls and
monitors the species of ﬂ ora and fauna.

Our facility in the municipality of Itapecerica da Serra, in the state of São Paulo, alongside the Régis Bittencourt
Highway, stands on an area of 96,543 square meters inside the Protection and Recovery Area of the Springs of
the Guarapiranga Water Basin. In 2008, we completed a project to restore riparian forest and, since 2009, we
have been handling the maintenance of the area.

The restoration projects developed at Cajamar and Itapecerica da Serra are monitored by the São Paulo State
Natural Resources Protection Department, the government agency responsible for this issue. Both units have
permanent preservation reserves. Although administrative activities are conducted at both units, production oc-
curs in Cajamar. All these operations are in full compliance with applicable legal requirements.

PRODUCT IMPACT

We monitor the impact of our product packaging using the Life Cycle Assessment (LCA) tool, in addi-
tion to carbon emissions. This tool enables us to quantify and monitor the ecological impact of packaging
materials from the extraction of the raw materials through production, use, and disposal (graphs 1 and 2)

To reduce this impact, Natura invests in innovative technologies and employs the concepts of ecological design,
which includes reducing the mass of packaging and using recycled and recyclable materials. (Read more on our
position on page 32, Priority Topics/Product Impact).

1. ENVIRONMENTAL
IMPACT OF PACKAGING BY
QUANTITY OF PRODUCT
(MPT/KG)

71.3

69.5

65.4

TOTAL MATERIAL USED BY TYPE (EXCEPT WATER) IN THOUSANDS ¹

Kilograms
Liters

2008
22,434.4
8,792.0

2009
27,991.3
10,813.9

2010
22,475.3
11,016.7

2008

2009

2010

1. Refers to the Cajamar site. Consumables reported are inputs (raw materials and packaging) for processing of ﬁ nished and semi-
ﬁ nished products.

In 2010, we launched in Brazil the ﬁ rst cosmetic product with green polyethylene packaging: reﬁ lls for
Natura Erva Doce hand soap. Manufactured from sugar cane, a renewable source, green polyethylene is
100% recyclable and reduces (GHG) emissions by 58% compared with conventional plastic, according to
Natura internal studies.

We also launched a new reﬁ ll for the Todo Dia (Everyday) moisturizer. Internal studies showed 66% less
environmental impact in comparison with the previous reﬁ ll, 83% less plastic than in regular packaging, and
a 97% reduction in waste generated.

In spite of these advances, we saw a decline in the use of reﬁ lls in comparison with all items billed by Na-
tura. We sought to achieve a target an 18.5% of the total of these items; our rate in 2010 was 16.9% . This
development was due in part to greater representativeness of sales of items in special or seasonal kits that
cannot be reﬁ lled. The potential for increasing reﬁ lls is signiﬁ cant. While 40% of our products have a reﬁ ll
option, they represent 55% of our billed products. In our international operations, use of reﬁ lls is increasing
in most countries except Mexico, with a consistent recovery in Argentina and Chile. For 2011, our challenge
is to increase the awareness of reﬁ ll options for our consumers outside Brazil.

2. RECYCLED
MATERIALS USED (%)1

13.0

10.4

2008

2009

2010

1. The indicator considers packaging
materials and distribution materials
(magazines, distribution boxes, and
bags) recycled after use.

REFILLS PERCENTAGE OF ITEMS BILLED (%)¹

Brazil
Argentina
Chile
Colombia
France
Mexico
Peru

2008
19.9
20.7
16.1
12.1
9.3
11.6
21.4

2009
18.4
15.9
11.7
12.2
8.5
11.5
18.6

2010
16.9
18.3
13.9
13.2
9.8
11.3
18.9

1. Corresponds to total reﬁ lls billed divided by total items billed.

Since 2007, we have been compiling an environmental table for our products, raising the awareness of our con-
sumers by providing information on the origin, the manufacturing process and the percentage of certiﬁ ed raw
materials, in addition to the use of recycled and recyclable materials and the number of reﬁ lls.

PRODUCT

% material of renewable plant origin
% material of natural plant origin
% material with certiﬁ cate of origin
Packaging
% recycled material after use
% recyclable material

2008
77.4
8.0
20.3

0.7
85.8

2009
79.2
5.2
16.1

0.7
85.9

2010
81.5
6.6
16

0.8
85.7

1. More information on the environmental table at http://www2.natura.net/Web/Br/Inst/src/TabMeioAmbiente.asp
2. Certiﬁ cate of origin 99% organic farming and 1% forest stewardship

We comply with all legal requirements on the provision of information on product ingredients, instructions for
use, declared beneﬁ ts and outsourced production. Our labels observe all applicable legislation and respect all
the cosmetics-related regulations issued by Anvisa in Brazil, as well as the regulatory agencies of other countries
where we operate. We also compile an environmental table for our products, which provides information on
their environmental impact.

WASTE MANAGEMENT

Solid waste management at Natura includes separation, classiﬁ cation, conditioning, collection, transporta-
tion, and ﬁ nal disposal, with the aim of reducing volume, expanding recycling, and being particularly careful
with hazardous waste. In 2010, we began to develop an extensive solid waste management project cover-
ing the entire life cycle of our products, from the extraction of raw materials to the disposal of packaging
and the reuse of materials (learn more on page 33, High-Priority Topics/Product Impact).

We recorded an increase of 19.8% in total waste generated last year and 8.2% in the relative index, which
compares the quantity of waste per product unit billed. This increase can be attributed to the inclusion of
data in the indicator from four distribution centers and the Natura Houses in Brazil. Had these areas not
been included, the index would have remained at the same level as the previous year. Our increase in pro-
duction and the higher disposal of obsolete products also affected waste generation. These developments
present a glimpse of the challenge we face in improving our waste management processes (graph 1).

1. TOTAL QUANTITY
OF WASTE PER UNIT
BILLED (GRAMS/UNIT)1

25.8

23.8

25.7

We also recorded an increase in the generation of hazardous waste, due primarily to the amount of
discontinued or expired cosmetics products in stock. This was prompted by our efforts to improve the
quality of service. We increased our inventories in 2009 in an attempt to avoid product shortages for our
consultants, causing us to register a higher loss index in 2010. We have reviewed this practice to avoid such
high losses again.

To reverse this situation, we have established an action plan that includes alternatives that minimize the
environmental impact of the primary waste-generating processes, periodic veriﬁ cation of the indicator, and
a review of items currently incinerated or sent to landﬁ lls so as to deﬁ ne alternative recycling methods.
We also plan to standardize data collection at Natura and third-party units. The goal of this is to improve
the quality of the information collected and initiate waste monitoring in our international operations. Our
target for 2011 is to reduce the total weight of waste per unit billed by 3% .

With new alternatives for disposing of materials that were previously incinerated, and through a partner-
ship with our cardboard supplier to recycle 100% of this material in Cajamar, we increased the percentage
of recycled waste by 8.3% . Today, 92.1% of all waste produced at Natura is recycled.

2008

2009

2010

1. Before 2008, the indicator was
calculated considering only
the
waste generated at Natura units. In
2010, we included main contractors
and improved the calculation basis
to match the indicators of water and
energy. For this reason, the historical
record was recalculated.

We have been running a pilot recycling project in Colombia since 2009, in which our consultants assist by
collecting recyclable material. In 2010, we more than doubled the amount of material collected, reaching
97,285 metric tons. This increase can be attributed to the introduction of the Natura Changemaker Con-
sultant program, which encourages consultants to get involved in their communities (housing complexes,
department stores, etc.) to install recycling banks for these materials. We also seal partnerships with local
companies to support the project with logistical and administrative assistance.

TOTAL AMOUNT OF WASTE BY TYPE (mt) AND LOCATION GENERATED 1 2
2008
1,348.3
4,330.7
1,444.6
7,123.6
224.5
1,286.8
8,634.9

Class I3
Class II-A
Class II-B
Waste at the Cajamar and Itapecerica da Serra sites
Waste at other Natura sites4
Waste at Natura contracted manufacturers5
Total weight of waste disposed of

2009
1,436.6
4,817.8
1,390.5
7,618.9
251.4
1,241.6
9,111.9

2010
2,128.2
4,717.5
1,308.0
8,153.7
1,412.1
1,346.5
10,912.3

1. According to NBR 10.004/2004: Class I Waste: hazardous waste (outdated cosmetics, clinical and laboratory waste and alcohol); Waste
Class II-A, non-inert waste (physico-chemical and biological efﬂ uent treatment plant sludge, paper, cardboard); Waste Class II-B: inert waste
(metals, plastics).
2. Natura does not include in this indicator waste generated in construction works (debris) carried out on its sites.
3. Refers to Class I waste, deemed hazardous under the Basel Convention, transported and treated. We do not import, export or transport
such waste internationally.
4. Refers to the generation of waste from the industrial unit at Benevides - Pará, opened in May 2007, and the Administrative Unit of
Barueri (Alphaville), in the distribution centers of Matias Barbosa (MG), Recife (PE), Salvador (BA), Canoas (RS), the outpost of Uberlândia
(MG), the hub at Jundiaí (SP), and in Natura houses.
5. Contracted manufacturers are companies that make (or are involved in the ﬁ nal stage of production of) ﬁ nished products with the
Natura brand. We monitor the 10 main contracted parties responsible for approximately 90% of the units produced outside Cajamar.

WASTE DISPOSAL 1

Incinerated

(%)
(mt)

Dumped in landﬁ ll

(%)
(mt)
Recycled
(%)
(mt)

1. Waste at the Cajamar, Itapecerica da Serra and Alphaville sites

RECYCLING OF WASTE BY DISPOSAL METHOD (mt) 1

Composting
Co-processing
Transformation

1. Waste at the Cajamar, Itapecerica da Serra and Alphaville sites

WATER AND EFFLUENTS

2008

2009

2010

2.5
176.3

8.8
627.8

88.7
6,319.5

2008
942.5
727.8
4,649.2

1.9
142.4

6.6
510.3

91.5
6,958.3

1.2
101.0

6.7
546.5

92.1
7,535.7

2009
1,284.8
1,288.1
4,385.4

2010
1,112.7
1,635.8
4,787.3

2. WATER CONSUMPTION
PER UNIT BILLED (LITERS/
UNIT BILLED)1

0.52

Following the implementation of efﬁ ciency projects, awareness programs and water consumption control,
we achieved a 10% reduction in relative consumption per unit billed. Our absolute consumption of water
remained stable, even as our production rose. The improvements implemented in waste management
also resulted in gains in water reuse and recycling in 2010. Knowing that sustainable use of water is a major
global challenge, we have made progress in analyzing our water footprint (learn more on page 33, High-
priority Topics/Product Impact).

0.48

0.47

The reduction in relative water consumption was motivated by reductions at Cajamar and Itapecerica da
Serra, which reduced consumption by 5% . However, there was a 17% increase in water use in other Natura
areas, the result of having incorporated the Simões Filho Distribution Center, in the state of Bahia, into the
indicator. We also recorded an increase of 3.5% in absolute consumption at outsourced companies, stem-
ming from an increase in units purchased (graph 2).

2008

2009

2010

1. The indicator takes into account
the volume of water used by Natu-
ra and the major contracted parties

WATER CONSUMPTION BY SOURCE AT THE MAIN NATURA SITES

Cajamar and Itapecerica da Serra sites m3) 1
Other Natura sites in Brazil (m3) 2
Contracted Natura manufacturers (m³) 3
Total water consumption (m3)

2008
112,342
11,894
37,090
161,326

2009
123,012
27,813
49,783
200,608

2010
116,883
32,600
51,507
200,991

4. WATER CONSUMPTION
PER UNIT BILLED
(LITERS/UNIT BILLED)1

0.52

1. Consumption in the two units includes all administrative and production activities and events at the sites.
2. Water consumption at other Natura Brasil sites refers to the units of Alphaville, Benevides, Natura Houses, Distribution Centers (DCs)
and Outposts. For the 2010 calculation, one more DC was included.
3. Contracted manufacturers are companies that manufacture ﬁ nished products on behalf of Natura; the indicator covers 95% of all units
purchased by Natura.

0.48

0.47

The percentage of reused water increased from 35% to 38% of the total amount used in our operations. The
volume of recycled and reused water in 2010 was 49,700 cubic meters, nearly 40% more than in 2009. This
increase occurred in virtue of Natura’s decision to reuse residual water from the treatment system, redirecting
it to supply the site in observance of all standards and controls required by law.

PERCENTAGE AND TOTAL VOLUME OF WATER RECYCLED AND REUSED

Recycled and reused water (m³)1
Percentage of reused water of total treated water
at efﬂ uent treatment plant (%) 2
Percentage of reuse over total water drawn (%)

2008
35,824.0

38.0
32

2009
35,838.0

35.0
29

2010
49,734.0

38.0
43

1. Recycled water is water extracted from waste water generated at the Cajamar site that, after physiochemical and biological treatment
at the Efﬂ uent Treatment Plant, is used for irrigation, urinals, ﬂ oor cleaning and ponds. Reused water is water that returns from the process
with sufﬁ cient quality to be used in the supply process.
2. This percentage refers to the volume of reused water from the treatment plant compared to the total volume of water treated at the
Cajamar and Itapecerica da Serra treatment plants.

SIGNIFICANT DISCHARGES TO WATER (m³) 1

Total volume of treated efﬂ uent

1. Refers to the Cajamar and Itapecerica da Serra sites.
2. The information was revised because of a calculation error.

20082
100,979.0

2009
101,672.0

2010
102,903.0

For our everyday consumption, given the absence of a public supply system, the water used at our facilities
in Cajamar and Itapecerica da Serra is drawn from two artesian wells. Our underground water source is a
crystalline aquifer, and the water extraction meets the regulations of the São Paulo State Water and Electrical
Energy Department (DAEE). In 2010, following a risk analysis conducted by Natura, we applied for a permit
to build a third well as a contingency to support the growth of production. We have a permit to draw water
from our artesian wells up to the following limits: 8m3/h in Itapecerica, 12m3/h at the ﬁ rst well in Cajamar and
15m3/h at the second well in Cajamar.

A study completed in 2010 identiﬁ ed that the region possesses water in sufﬁ cient quantities to supply our cur-
rent demand without running the risk of compromising our activities or those of the surrounding area. New
studies will be conducted based on the company’s forecast growth for the next few years.

In Benevides, water is obtained from artesian wells and captured rainwater. At our other facilities, such as Natura
Houses and Distribution Centers, it is provided by the public water supply system.

In 2010, we registered no incidents of signiﬁ cant spills or accidents involving products or substances causing an
environmental impact as a result of our operations.

Before being discharged, all our efﬂ uents pass through the Efﬂ uent Treatment Station (ETE). The quality fully
meets the applicable legal requirements, respecting all discharge conditions and standards provided for in Brazil-
ian legislation. In the town of Cajamar, the treated efﬂ uent is discharged into the Juqueri River, which is consid-
ered a class 3 river, meaning its water may be used in household supply after conventional treatment. In 2010, the
Cajamar ETE was modernized, improving even further the quality of the operation’s efﬂ uent treatment system.

The Itapecerica da Serra ETE, meanwhile, is located in a spring water preservation area, and after conventional
treatment the efﬂ uents ﬁ lter through the soil. The efﬁ ciency of the organic matter removal is, on average, 96.9%.

At the Benevides Industrial Plant, we have a system to capture industrial wastewater, which is treated exter-
nally by a contracted company. After treatment, domestic efﬂ uent is channeled to a septic tank. We intend to
install an ETE in Benevides in 2011, but this depends on the Municipal Environment Department releasing
the necessary licenses.

2010
2009
2008
1. The indicator takes into account the
volume of water used by Natura and
the major contracted parties

CAJAMAR PERMEATE

BOD (mg/L)
COD (mg/L)
Oils and greases (mg/L)

Legal parameter
60
150
120

TREATED EFFLUENT ITAPECERICA DA SERRA

BOD (mg/L)
COD (mg/L)
Oils and greases (mg/L)

Legal parameter
60
150
120

ENERGY

2008
5.5
43.6
7.8

2008
19.6
73.2
8.1

2009
6.0
43.0
7.1

2009
20.2
69.0
7.5

2010
7.4
45.0
15.4

2010
25.4
65.2
14.8

In 2010, we reduced relative energy consumption (consumption per unit billed) by 0.8% . To achieve this
result, we implemented several improvements, primarily at Cajamar, in addition to efﬁ ciency gains from
better energy resource management. In absolute terms, the Cajamar and Itapecerica da Serra units reg-
istered a 2.8% combined increase in consumption, owing to the installation of new manufacturing equip-
ment. The 22.1% increase in other Natura areas was the result of having incorporated the Simões Filho
Distribution Center, in Bahia, in this indicator, as well as the modernization of three other distribution
centers. Total consumption by major subcontractors parties rose by 30.8% because of the greater number
of units acquired (graph 1).

1. ENERGY
CONSUMPTION
PER UNIT BILLED
(KILOJOULES) 1

552.1

447.3

443.8

We registered a 74% decline in diesel oil consumption in our generators, due to fewer power outages at
our head ofﬁ ce. This means there was less demand for generators.

2010 ENERGY MATRIX (CAJAMAR AND ITAPECERICA) (%)

Electricity
LPG
Diesel
Solar energy

2008
75.9
22.0
2.1
0.01

2009
75.9
23.1
1.0
0.01

2010
77.3
22.4
0.3
0.02

2008

2009

2010

1. The indicator takes into account the
energy used by Natura and major con-
tracted parties.

We encourage the use of energy generated from renewable and alternative sources. In 2010, we introduced the
Encouraged Energy Sales Contract, which stipulates that electrical energy supplied to our facilities in Cajamar
and Itapecerica come from the primary encouraged sources (wind, biomass, solar and small hydroelectric power
stations). In previous years, electrical energy was purchased from the Brazilian energy grid, which is generated
from both renewable and non-renewable sources.

In Cajamar, we also use a system of solar energy that now provides lighting for the parking lot and heats water
in the changing rooms and in the kitchen. The solar energy represents 0.03% of our energy matrix. In December
2010, we substituted 80% of the LP gas used in our boilers in Cajamar for alcohol, which will result in an emis-
sions reduction of around 1,360 metric tons of CO2 per year, starting in 2011.

DIRECT ENERGY USE, SEGMENTED BY PRIMARY SOURCES (JOULES X 1012)
2008
95.9
0.03
2.7
27.8
126.4

Primary source of electricity
Self-generated electricity (diesel generator)
Diesel fuel used in generators
Consumption of LPG
TOTAL

DIRECT ENERGY CONSUMPTION (JOULES X 1012)

Renewable sources
Non-renewable sources

2008
0.03
30.50

2009
94.0
0.03
1.6
28.9
124.5

2009
0.03
30.50

2010
98.9
0.03
0.41
28.6
127.9

2010
0.03
29.01

INDIRECT ENERGY CONSUMPTION (JOULES X1012)

Primary electricity source

2008
95.9

2009
94.0

2010
98.9

ENERGY SAVED BY USING SOLAR ENERGY (JOULESX109)

Consumption of solar energy (joules)

2008
19.96

2009
19.96

2010
19.96

ENERGY SAVED BY ENERGY EFFICIENCY PROJECTS (JOULESX109) 1

1. Projects intended to reduce the consumption of electrical energy, diesel oil or LPG

2008
n.a

2009
1.95

2010
2.55

IMPACTS FROM MAIN SUPPLIERS
We are also analyzing the impacts of our suppliers, with the intention of stepping up the monitoring of our value
chain for water and energy consumption and waste generation. (Learn more on this issue at www.natura.net/
relatorio).

In 2010, we analyzed 58 partners and we can assert that their investments have improved their energy efﬁ ciency
and kept the indicator almost stable in spite of the increased demand for production. An improvement was
observed in the water indicator after one supplier installed a water reuse system. The same performance was
not seen in the generation of waste, however, which rose 28%, the result of the increase in production and the
lack of efﬁ ciency gains.

We withdrew the data from our distribution centers that were previously included in this indicator: Matias Bar-
bosa, Jaboatão and Canoas. The change is due to our decision to incorporate consumption by the distribution
centers into Natura’s own performance indicators. This process is part of the adjustments we have made to
provide a more accurate diagnosis of the impact of our operations. The information on our main outsourced
suppliers that produce some of our products is also excluded from this analysis, since their data are also included
in the performance indicators of Natura.

LEADING NATURA SUPPLIERS OF PACKAGING AND RAW MATERIALS 1 2

2008
46

2009
58

2010
58

Number of suppliers evaluated

Energy Consumption (joules x 10)
Primary source of electricity - electricity consumption
Self-generated electricity - diesel generator
Consumption of LPG
Other - natural gas
Total energy consumed

Water consumption (m3)
Total water consumption (thousand)

127.0
4.6
1.8
113.8
247.2

118.1

Waste generation by leading Natura suppliers (tonnes)
Total waste generated

1,752

210.6
4.2
4.7
140.3
359.8

155.4

2,669

146.2
0.1
4.9
207.1
358.3

135.5

3,419

1. Leading input suppliers of the following categories: accessories, packaging, graphics, fragrances, raw materials, printing services and Na-
tura boxes. The numbers are estimated: suppliers are requested to allocate their energy, water consumption and waste generation, taking
into account the percentage production for Natura.
2. In 2010, the numbers for three distribution centers (Matias Barbosa, Jaboatão and Canoas) were redirected to Natura internal indica-
tors. To ensure comparability of indicators, we reviewed the numbers for 2008 and 2009, excluding those DCs.

5.3 CREATION OF
SOCIAL VALUE

O U R G O A L I S T O C R E A T E
SOCIAL BENEFITS BY INVESTING
I N E D U C AT I O N , S H A R I N G T H E
G E N E R AT E D R E S O U R C E S A N D
S U P P O R T I N G P E O P L E A N D
INSTITUTIONS THAT ARE COMMITTED
TO T H E CON S T RU C T I O N O F A
SUSTAINABLE SOCIET Y.

NATURA INSTITUTE
We have made systematic private social investments since the 1990s because we believe this is a way to express
our Essence: that the value and longevity of a company are related to its ability to contribute to the evolution
of society and its sustainable development.

In 2010, we took an important step forward by founding the Natura Institute, an independent nonproﬁ t orga-
nization, to extend and strengthen our initiatives, and improve internal management and governance processes
and practices for our social initiatives. Fostering education - a priority for sustainability in Natura’s view - is also
the pillar that supports all the activities of the new organization.

The Institute was founded with the participation of members of our Board of Directors and executives. In 2011,
we will make progress in its administrative organization and set up an audit committee and an advisory board,
as well as deﬁ ne a strategic plan for the institution. The institute is given 0.5% of Natura’s annual net income in
addition to funds from Natura’s Crer para Ver (Believing is Seeing) program.

CRER PARA VER (BELIEVING IS SEEING) PROGRAM
The highlight of our societal activity in 2010 was the record amount of funds raised by the Natura Crer para Ver
program. We had committed to reaching R$6 million, but by the end of the year we had reached R$10 million,
the largest amount raised by the program since its inception in 1995. In 2010, the program invested more than
R$3.9 million in projects. This amount is the result of a R$2.1 million savings from the year’s investment plan, es-
timated at R$6 million, through partnerships and exchanges. Therefore, the difference of more than R$5 million
between the amount we collected and what we spent in the year is available in cash holdings for use in 2011
and will help us expand the current projects.

The goal of Crer para Ver is to improve the quality of public schooling. The program funds literacy initiatives
in preschools and elementary schools, as well as for young adults. Our consultants actively participate in the
program by selling the exclusive Crer para Ver product line, receiving no commission for doing so. The Natura
Institute has assumed the administration of our investments in educational initiatives.

INVESTMENT IN EDUCATION FOR PUBLIC BENEFIT IN BRAZIL (R$ THOUSANDS)

Net funds raised by the Crer para Ver program1
Total amount of projects developed and supported2

2008
3,767.0
3,381.0

2009
3,768.2
4,075.6

2010
10,098.5
3,876.4

1. Refers to income before income tax (IR) deduction for the Crer para Ver program’s fund. Until 2009, net funds raised by the program
had referred to net proﬁ t after IR tax.
2. Refers to the total actually contributed in the year (from the fund and directed to projects and their implementation).

1 PENETRATION -
CRER PARA VER
(% CYCLE) 1

9.9

7.1

The strong growth in the funds allocated to the program was prompted by a review of our operational strategy.
We have upgraded our portfolio, launched new products with a stronger sales appeal and conducted a diagnosis
to identify new sub-brand visibility opportunities.

In 2010, participation in the program by our consultants in Brazil reached 9.9%, higher than the ﬁ gure in 2009
but still lower than our expectations to engage 12% of consultants. For 2011, we intend to further increase
this participation. We realize that this is a major challenge and, to overcome it, we shall continue to step up our
awareness-raising actions with consultants.

2008

2009

2010

1. This percentage is based on the
number of consultants that purchased
at least one item of the Crer para Ver
line within a cycle divided by the total
number of consultants that placed or-
ders during the same cycle.

Using funds raised by the Natura Crer para Ver program, we extended its reach to 100 new municipalities.
The program now invests in 350 municipalities across Brazil and beneﬁ ts nearly 450,000 people, namely
students, teachers, coordinators, and principals in 5,690 public schools.

Our international operations implemented this program in 2009. Net revenues reached R$1.3 million in 2010,
compared with R$430,000 in the previous year. Funds in these countries are invested in teacher training
and beneﬁ t vulnerable populations. In Chile, for instance, some of these funds are helping to rebuild schools
destroyed by the February 2010 earthquake.

The main initiative of the Crer para Ver program in Brazil is the Trilhas (Trails) Project. This project beneﬁ ts
310,000 children and 15,000 educators in 4,300 schools. The Trilhas Project is designed for children ages 4–6
and provides instructional materials and support for teachers and school principals to help students develop
reading, writing, and speaking skills. In 2010, we signed a technical cooperation agreement with the Ministry
of Education, enabling the ministry to share this methodology with other municipalities and institutions —
transforming the project into a public initiative.

In 2010, we questioned 60% of the principals and teachers from the schools involved, in all regions of the country,
to evaluate the project. The principals and teachers gave an average score of 9.46 and 9.19, respectively, when asked
about the contribution of Trilhas to improving education. More than 80% of the educators considered the teaching
activities to be adequate for children and almost half of them conﬁ rmed that they started to read more to their
pupils after the project started.

OTHER CRER PARA VER PROJECTS
In 2010, we invested in projects such as Encontros de Leitura (Reading Meetings), Formar em Rede (Network-
ing) and the Chapada Project. Since we believe that the ﬁ rst two projects have achieved their goals, they have
been withdrawn from the program, which will invest in new initiatives in 2011. We also support the improve-
ments being made to the Municipal Education Plan in Cajamar, where our head ofﬁ ce is located.

ENCONTROS DE LEITURA (READING MEETINGS)
The project is run in partnership with the Education and Documentation Center for Community Action, and last
year it continued to operate in the same 226 schools that were involved in 2009. It beneﬁ tted 1,200 teachers
and 14,000 pupils in 10 municipalities in the following states: Goiás, Rio Grande do Norte, Bahia, Amazonas, São
Paulo, Santa Catarina, Sergipe, Acre and Espírito Santo. The project consists of meetings between education spe-
cialists, school principals, supervisors and teachers to discuss and develop actions to encourage reading among
children from 4 to 6 years old.

FORMAR EM REDE (NETWORKING)
Developed by the Avisa Lá Institute and the Razão Social Institute, this project is supported by Natura in 6
municipalities. The initiative establishes virtual communities formed by education specialists and teachers from
the public school system, with the objective to improve the quality of pre-school education for children up to
6 years old. These communities organize in-person and distance actions to improve, develop and disseminate
practices in the ﬁ eld of reading, caring and playing.

CHAPADA PROJECT
This initiative has received technical and ﬁ nancial support from the Natura Crer Para Ver program since 1997.
Run by the Chapada Institute of Research and Education, the project aims to improve the quality of public pri-
mary education in 24 municipalities in the Chapada Diamantina region of Bahia. To achieve this, it stages ongoing
training for educational directors, supervisors and other teaching professionals. In 2010, the project worked with
600 schools, nearly 5,300 educators and more than 92,000 pupils.

We also conducted the second overall evaluation of the project, listening to the opinions of nearly 4,200 pupils
and more than 500 educators. This process identiﬁ ed progress in important areas of education, namely how well
the children are learning and the deﬁ nition of the role of educational directors, supervisors and local coordina-
tors in training actions.

CRER PARA VER ACTIONS IN 2010
Action Front/
Project

Name of partner
organization

Centro de Educação
e Documentação para
Ação Comunitária
(Education and Docu-
mentation Center for
Community Action)
Education and Docu-
mentation Center for
Community Action

Projects
Developed

EI - Reading
Meetings Project

Projects
supported

EI - Trilhas
Project

EF - Chapada
Project
EF - Training
Network
Cajamar
Municipal
Education Plan
Update

Munici-
palities
served

Number
of schools
served

226

No. of partici-
pating teachers,
coordinators
and principals
1,201

Investment R$

No. of
students
beneﬁ ted

14,236

972,661.05

310

4,378

15,245

309,684

2,297,120.16

600

486

5,339

1,076

92,973

483,626.07

10,792

85,279.98

37,784.87

Chapada Institute

Avisa Lá Instituto and
Razão Social Institute
CENPEC – Centro de
Estudos e Pesquisas em
Educação, Cultura e Ação
Comunitária (Center for
Studies and Research in
Education, Culture and
Community Action)

FESPSP – Fundação
Escola de Sociologia e
Política de São Paulo
(School of Sociology and
Politics Foundation of São
Paulo)
Total

1.EI – Pre-School
2. EF – Primary School

350

5,609

22,861

427,685

3,876,472.13

Our business expansion has allowed us, for another year running, to increase the generation and distribution
of wealth to our main audiences.

DISTRIBUTION OF WEALTH
Our growing business has enabled us to generate wealth and distribute it to our main stakeholders again this year.
This is the result of Natura’s growth and the expanding market in which we operate. Revenues to suppliers in
particular increased, thanks to the growth of output in 2010.

DISTRIBUTION OF WEALTH (R$ MILLIONS)1

Shareholders2
Consultants
Employees
Suppliers3
Government3

2008
425.9
2,023.8
556.4
2,357.2
1,276.7

2009
551.9
2,302.5
643.0
3,087.5
1,147.4

2010
646.9
2,738.2
769.2
3,707.4
1,476.5

1. More details of value-added statements may be found in the Accounting Statements (page 75, 78, 79 and 103).
2. The amount of wealth distributed to shareholders refers to dividends and interest on capital for the period.
3. Data have been revised from last year’s report because we identiﬁ ed an inconsistency in the classiﬁ cation criteria used.

In relation to government, transfers were higher due to the growth of Natura’s gross revenue in the period,
which is the calculation base for sales taxes, and there was also a larger taxable income base for income tax (IR)
and social contribution tax (CSLL).

INVESTMENT MATRIX
In 2010, we maintained our level of investment in corporate responsibility at 1.3% of net revenues. These in-
vestments include increased spending on the education and training of our consultants and employees, in line
with our educational strategy (learn more on page 26 in High-Priority Topics, Education). We also increased
our investments to support civil society organizations (learn more below). Total investments with respect
to the environment were lower because negotiations on carbon emissions-offsetting projects have yet to be
ﬁ nalized. We concluded negotiations for ﬁ ve environmental projects for the 2009/2010 season, and negotia-
tions for ﬁ ve others are expected to be concluded in the ﬁ rst quarter of 2011.

MATRIX FOR INVESTMENT IN CORPORATE RESPONSIBILITY1 (R$ THOUSANDS)

Employees, family members, and others
Consultants
Consumers
Suppliers
Supplier communities
Surrounding communities
Society2
Environment
TOTAL invested in stakeholders
Management expenses
TOTAL Natura funds
Percentage of net revenue
Net amount raised by consultants for
the Crer para Ver (Believing Is Seeing) program
Tax-deductible investments under Roaunet Law
Audiovisual Law / ANCINE
State VAT tax (ICMS) in Minas Gerais
State VAT tax (ICMS) in São Paulo3
1% Income Tax to CMDCA4
1% Income Tax to Condeca5
GRAND TOTAL

2008
18,729.3
2,566.8
270.9
212.8
647.0
342.8
8,827.4
5,467.2
37,064.2
7,148.3
44,162.5
1.2%

2009
17,251.3
3,563.4
480.3
243.8
1,424.6
407.9
15,772.0
8,073.6
47,217.0
4,045.7
51,162.7
1.2%

3,767.0
2,852.8
400.0
2,000.0
622.1
0

3,768.2
2,422.2
920.0
645.0
0
0
1,015.0 938.00
54,869.4 59,956.0

2010
20,159.9
4,800.0
600.0
329.8
1,805.7
408.7
23,387.0
6,638.7
58,130.2
4,972.0
63,032.2
1.3%

10,098.5
3,095.1
1,100.0
823.4
0
319.0
1,682.0
80,220.1

1. Amounts invested in support and sponsorship are included in this matrix, but are shown as they were divided among beneﬁ ciaries. The matrix
includes investments in projects or actions that are not intrinsic to Natura’s business and go beyond legal requirements.
2. The data on society were revised since we added one resource that was not previously considered.
3. Due to an error reported last year, the 2008 data was revised.
4. CMDCA = Municipal Council for Rights of Children and Adolescents. Since 2008, 1% of income tax (IR) has been allocated to the CMDCA.
5. Condeca = Council for Rights of Children and Adolescents.

SUPPORT AND SPONSORSHIPS
Our social investments not only express our well-being well concept, but also reiterate the underlying driv-
ers of our corporate behavior. In 2010, we allocated R$24.3 million to intiatives that fall under three broad
themes: strengthening civil society organizations, supporting sustainable development, and promoting Bra-
zilian culture with a focus on music.

Our business model entails the expansion of relationships with organizations that are committed to building
a sustainable society, which is why we invest in organizations that share our vision for the world and that
support causes that are signiﬁ cant to our industry. For instance, we sponsored several programs of the Ethos
Institute for Business and Social Responsibility. These Ethos programs included the Sustainable Amazon
Forum, Sustainable Connections, Corporate Responsibility in the Media, and Promotion of Integrity and
Fighting Corruption.

In 2010, we participated once again in the Global Entrepreneurship Week, coordinated by the Endeavor
Institute, which is located in Brazil. As the largest global movement focused on entrepreneurship, the event
took place simultaneously in 102 countries for seven days of talks, competitions, workshops, games, fairs,
and awareness-building activities.

We continued to support the Global Reporting Initiative (GRI), which develops international guidelines
and standards for compiling sustainability reports. We sponsored GRI’s Amsterdam Global Conference on
Sustainability and Transparency (May 26–28, 2010), at which our stakeholders met to discuss sustainability
and transparency-related issues.

We enjoy a partnership with Associação Brasileira de Comunicação Empresarial (Brazilian Association of
Corporate Communication – Aberje). This organization presented an event designed to help Brazilian com-
panies develop guiding principles for communicating with the news media and key opinion leaders. Natura
sponsored this event and presented its connection with biodiversity, focusing on its relationship with sup-
plier communities.

We also sealed a partnership with the United Nations Conference on Trade and Development (UNCTAD) to
disseminate good business practices related to social biodiversity. We supported the organization’s schedule of
events for the International Year of Biodiversity, attending the Global Expo, in Shanghai, and the Global Business
of Biodiversity Symposium, in London, and also participating in the 10th Conference of the Parties (COP-10) to
the Convention on Biological Diversity (CBD), held in Nagoya, Japan.

See below other highlights of 2010:

HUMAN RIGHTS
We support the Human Rights Fund, an institution that promotes the defense of human rights in Brazil, by creat-
ing sustainable grant mechanisms. Each year, the institution stages a selection process to give ﬁ nancial support to
a regionally diverse range of projects, preferably beneﬁ ting those with less access to traditional funding sources.
Natura supported four of these projects, in the Amazon region, with the intention of strengthening local move-
ments and offering social development opportunities.

CONSERVATION OF BRAZILIAN FLORA
The project “Plants of Brazil: An Historic Recovery and Virtual Herbarium for the Knowledge and Conservation
of Brazilian Flora”, coordinated by the National Council of Scientiﬁ c and Technological Development (CNPq),
retrieves images and information on samples of Brazilian ﬂ ora that were collected up until the 20th century by
foreign missions and taken to museums and herbariums around the world. The repatriated digital ﬁ les will form
the database of the Authenticated Virtual Herbarium of Species of Brazilian Flora (Reﬂ ora).

HISTORICAL HERITAGE
We have donated funds for the reconstruction of the Artistic Culture Theater, which began in March 2010 and
should be complete by 2012. This historical theater, located in downtown São Paulo, was inaugurated in 1950
and was partially destroyed by a ﬁ re in 2008. This investment by Natura is intended to help preserve Brazilian
culture, represented by this important building.

We continue to underwrite initiatives that increase societal awareness about sustainable development. One
such example is our support of the documentary Tudo mudo pode mudar o mundo (Everyone Can Change the
World). This ﬁ lm, by Mara Mourão, presents stories of societal leaders and the Afro-Reggae cultural group.

See below some highlights of 2010:

SOCIAL ACTIONS
We continued to sponsor the AfroReggae group, from Rio de Janeiro. Among the projects supported by the
group is the television program Conexões Urbanas (Urban Connections), aired on the Multishow channel,
which addresses violence, citizenship and sustainability. The NGO also runs more than 70 social projects that
impact the lives of more than 10,000 residents in communities in the city.

We also kept up our support for the Pamáali Indian Municipal School – run by the Baniwa and Coripaco in-
digenous peoples and attended by native Brazilian groups from the region of Alto Rio Negro in São Gabriel da
Cachoeira, in the state of Amazonas. The school caters to some 3,000 people from the community. The funding
pays for research by the students, the publication of teaching and outreach material, network meetings, training
workshops for teachers and sustainability activities in the ﬁ eld of food security.

DESIGN
The 3rd Brazilian Design Biennial was held from September 14 to October 31, at different venues in the Paraná
state capital of Curitiba, under the theme “Design, Innovation and Sustainability”. During this exhibition, the city’s
streets and parks were transformed into a stage for the event, interacting with residents and visitors.

FILMMAKING
“Everyone can change the world” is a Brazilian documentary that tells the story of social leaders around the
planet, showing the social impacts of their work, the obstacles they encounter and the gratiﬁ cation they derive
from their work.

The Natura Musical (Musical Natura) program continues as our primary expression of support for Brazilian
culture. A national call for projects and another regional call in the state of Minas Gerais allowed us to choose
projects from different artistic areas, as well as those selected directly by the program. In 2010, we supported
17 projects. Since Natura Musical began in 2005, we have supported more than 140 such initiatives.

The components of the program include: support for music, sponsorship of national tours, the Natura Musi-
cal (Musical Natura) portal (www.naturamusical.com.br), an on-line radio, a radio show broadcast across the
country and the Natura Nós (Natura Us) Festival. The funding comes from incentive laws and contributions
by Natura.

See more details about the projects:

FILMS AND DVDS
The ﬁ lm “Music according to Tom Jobim” celebrates the work of the singer and songwriter, interpreted by vari-
ous Brazilian and foreign artists, as a project to document and preserve the memory of the songwriter.

We also supported the recording on DVD of the concert “Pra Nhá Terra”, by the musical groups Ponto de
Partida and Meninos de Araçuari, and the feature length documentary “Iê Iê Iê”, made from a four-part television
series with music by Arnaldo Antunes.

INTERNET
In the project “Mestres Navegantes” (Master Mariners), we recorded the work of regional musicians who pre-
serve the customs, folklore and cultural traditions in the Vale do Paraíba region of São Paulo. The project has
released CDs, photos, videos and personal pages on each musical act on the internet, in addition to organizing
free workshops on the musicians for young people in the historical town of São Luiz do Paraitinga, in São Paulo.

CONCERTS AND TOURS
Natura supported the recording and the tour of the singers Vanessa da Mata and Carlinhos Brown, and seven
free performances by the São Paulo State Symphony Orchestra Choir (OSESP) in the city of São Paulo.

To raise awareness about the topic of sustainability through art and culture, we organize the Natura Nós (Na-
tura Us) Festival. In 2010, it was held in October, in the city of São Paulo, and featured acts such as Air, Snow
Patrol, Jamiroquai and the Brazilians Vanessa da Matta, Céu, Karina Buhr, Cidadão Instigado, Móveis Coloniais de
Acaju and Marcelo Jeneci. The ﬁ rst day of the festival was dedicated to children, with performances by Adriana
Partimpim, Pequeno Cidadão, Palavra Cantada and Pato Fu.

SUPPORT AND SPONSORSHIPS – INVESTMENTS BY TOPIC (R$ THOUSANDS) 1

Sustainable development 2
Promoting Brazilian culture with a focus on music 3
Civil society and governmental organizations

Sustainable Development
Total funds invested by Natura
Total funds from incentives
Federal Cultural Incentive Law (Rouanet Law)
Law on investment in production and co-production
of cinematographic and audiovisual projects, and in
infrastructure for production and exhibition
(Audiovisual Law/Ancine)

Promoting Culture
Total funds from Natura
Total funds from incentives
Federal Cultural Incentive Law (Rouanet Law)
State Cultural Incentive Law, Minas Gerais
State Cultural Incentive Law, São Paulo 4
Law on investment in production and co-production
of cinematographic and audiovisual projects, and in
infrastructure for production and exhibition
(Audiovisual Law/Ancine)

Strengthening Civil Society Organizations
Total funds from Natura
Total funds from incentives
Federal Cultural Incentive Law (Rouanet Law)

2008
3,382.0
6,077.0
2,247.1

1702.4
550
450.00

2009
2,174.0
7,833.0
2,725.6

1600
574
474.00

2010
2,052.4
15,442.5
6,809.9

2832
350
250.00

100.00

1327.403
4749.6158
2227.542
1600
622.07

4844
2989
1524
645
0.0

10720.6
4721.9
2898.5
823.4
0.0

300.00

820.00

1.000.00

1771.879
475.2655
475.27

2102.066
623.5
623.50

6279.93
530
530.00

1 Includes funds invested by Natura and funds from incentive legislation.
2 Funds related to sustainable development have been revised from previous reports, given that we included a sponsorship that was not
previously included in ﬁ gures reported.
3 Data on promoting Brazilian culture has been revised from previous reports due to a reporting error.
4. The amount of funds resulting from the São Paulo State Cultural Incentive Law in 2008 was revised, since we identiﬁ ed an error in the
reported ﬁ gure.

5.4 CREATION OF

ECONOMIC VALUE

NATURA’S STRONG PERFORMANCE,
CO U PL ED W I T H T H E G ROW TH
OF THE COSMETIC, TOILETRY, AND
FR AGR ANCE MARKET RESULTED
IN POSITIVE ECONOMIC AND
F I N A N C I A L I N D I C A T O R S .

Consolidated net revenue in 2010 was R$5.136 billion, an increase of 21.1% over 2009. EBITDA (earnings
before interest, taxes, depreciation, and amortization) was R$1.256 billion with an EBITDA margin of 24.5%.
Net income was R$744.1 million. This performance reﬂ ects the strength of our marketing strategy, the launch
of new products, and an 18% increase in the number of consultants — who now total more than 1,221,000
in our operations in Brazil and overseas.

COSTS AND EXPENSES
We reduced the costs of goods sold (COGS) from 30.5% in 2009 to 30.3% in 2010. Inﬂ ationary pressure
remained under control, the exchange rate was favorable during this period, and our strategy for increasing
prices proved to be efﬁ cient, with less dispersion among the categories. These positive effects, however,
were partly offset by higher product losses in Brazil — the result of additional inventories generated in the
ﬁ nal quarter of 2009. For 2011, the loss-prevention process is being strengthened, and we expect a signiﬁ cant
improvement in this indicator.

We also recorded a reduction in sales expenses, accounting for 33.2% of net revenues in 2010 (35.3% in
2009). We made greater investments in marketing, which provides vigorous support for product launches, as
well as training and events for the sales force. This increase was mitigated by greater logistical efﬁ ciency and
the dilution of sales force costs. The highlight was the percentage of orders placed over the Internet in Brazil,
which stood at 86% in 2010 (71.2% in 2009).

Administration and general expenses accounted for 11.8% in 2010 (10.6% in 2009). The increase in the year-
over-year comparison, which was in line with our forecasts, is due to higher expenditures for research and
development (rising from 2.5% of net revenues in 2009 to 2.8% in 2010); higher investments in projects that
enable the company to grow, primarily in the areas of information technology, logistics, and leadership devel-
opment; a higher head count to support the advance of the model of Management by Process, Business Units,
and Regional Units; and the cost of maintaining investments made in information technology.

EBITDA AND NET INCOME
In 2010 our consolidated net income stood at R$744.1 million, which represents growth of 8.8% compared
with the previous year. In 2009, we recorded a lower effective IR/CSLL rate as a result of having accelerated the
ﬁ scal amortization of goodwill in the period. This ﬁ scal beneﬁ t ended last year. This year, the effective tax rate
was 33.5%.

1. CONSOLIDATED
NET REVENUE
(R$ MILLIONS)

5,136.7

4,242.1

3,576.2

2008

2009

2010

2. CONSOLIDATED
EBITDA (R$ MILLIONS)

1,256.8

1,008.5

860.1

Consolidated EBITDA stood at R$1.256 billion in 2010, up 24.6% over 2009. The margin rose from 23.8% to
24.5% in 2010 (graph 2).

2008

2009

2010

SUMMARY OF CASH FLOW
Free cash generation for the year was R$716.3 million versus R$418.6 million in 2009. This 71.1% increase
resulted from more efﬁ cient working capital management by extending payment terms for suppliers; reducing
inventory coverage; reducing the balance of recoverable taxes; and making the change from annual to quarterly
income tax assessments and payments. We are reﬁ ning cash ﬂ ow management processes, which should result
in even more efﬁ ciency in 2011.

Internal cash generation was R$832.9 million for the year. This growth of 7.3% over the previous year is in line
with the growth of 8.8% recorded in net income for the period.

SUMMARY OF CONSOLIDATED CASH FLOWS (R$ MILLIONS)

Net income for ﬁ nancial year

(+) Depreciation and amortization

Internal cash generation

(Increase)/decrease in Working Capital

Non-cash items (exchange variation)
Operational cash generation
Additions of intangible assets
Free cash generation¹

2009
683.9
92.4
776.3
(189.9)
(27.5)
558.9
(140.4)
418.6

2010
744.1
88.8
832.9
99,6
20.7
953.2
(236.9)
716.3

Var. %
8.8
(3.9)
7.3
(152.4)
(175.3)
70.5
68.7
71.1

1 (Internal cash generation) +/- (changes in working capital and long-term liabilities) – (acquisitions of property, plant and equipment).

Investments in property, plant, and equipment in 2010 totaled R$236.9 million and were concentrated in informa-
tion technology, manufacturing capacity, and logistics infrastructure. Investments in property, plant and equipment in
2011 are estimated at R$300 million and will concentrate on the ongoing development of our information tech-
nology platform, including a sound base for the international area, in addition to continuing our project to improve
logistics and increase our industrial capacity.

PRO FORMA RESULTS PER OPERATION BLOCK
The proﬁ t margin achieved on exports from Brazil to international operations was deducted from the COGS of
the respective operations, revealing the real impact of these subsidiaries on the company’s consolidated results.
Accordingly, the Pro Forma Statement of Results for Brazil shows only sales in the domestic market.

The performance of our operation in Brazil remained strong, with growth of 20.6% in net revenues, reaching
R$4.764 billion. The EBITDA in Brazil was R$1.335 billion compared to R$1.085 billion in 2009, representing
growth of 23%. Margins were 28% in 2010 and 27.5% in 2009.

PRO FORMA FINANCIAL HIGHLIGHTS, BRAZIL (R$ MILLION)

2009

2010

Var %

Total number of consultants -
end of period (thousands)
Product units for resale (millions)
Gross revenue
Net revenue
Gross proﬁ t
Gross margin (%)
Selling expenses
General and administrative expenses
Employee proﬁ t sharing
Management compensation
Other operating income / (expenses), net
Financial income / (expenses), net
Earnings before taxes
Net income
EBITDA
EBITDA Margin (%)

875.2
348.1
5,418.5
3,949.5
2,761.4
69.9
(1,300.5)
(376.5)
(55.8)
(14.1)
(15.8)
(40.9)
957.8
778.6
1,085.9
27.5

1,028.7
378.7
6,489.6
4,764.6
3,356.4
70.4
(1,487.4)
(516.2)
(70.4)
(14.4)
(15.7)
(47.9)
1,204.4
836.0
1,335.2
28

17.5
8.8
19.8
20.6
21.5
0.5pp
14.4
37.1
26.1
2.5
(1.0)
17.1
25.7
7.4
23.0
0.5pp

1. Number of consultants by the end of the 18th cycle of sales.

The year 2010 was positive for our international operations and marked a new phase in business expansion.
International operations represented 7.2% of Natura’s consolidated net revenues last year. Net revenues from
these operations grew by 37.3% in local currency (27.2% in Brazilian reais). The sales channel expanded by 20.8%,
enabling us to achieve the ﬁ gure of 192,000 consultants in the region.

100

PRO FORMA EBITDA PER OPERATION BLOCK (R$ MILLIONS)

Brazil
Argentina, Chile and Peru
Mexico and Colombia
Other investments
Total

2009
1,085.9
8.9
(42.3)
(44.1)
1,008.5

2010
1,335.2
13.1
(32.5)
(59.1)
1,256.8

Var %
23.0
47.8
(23.2)
34.1
24.6

The operations under consolidation (Argentina, Chile, and Peru) showed growth of 27.4% in local currency
(17% in Brazilian reais) in net revenue. The result was inﬂ uenced by several negative factors, such as the earth-
quake in Chile in February of 2010, which partially destroyed our facilities and interrupted billings for 22 days.

The pro forma EBITDA of this group of operations showed positive consolidation at R$13.1 million for the
year, a growth of 47.8% over 2009. This reﬂ ected a dilution in sales and administrative expenses in spite of
the increasing investment in our brand in these countries.

Operations under implementation (Mexico and Colombia) showed high growth rates of 69.2% in local cur-
rency (64.5% in Brazilian reais), disregarding the revenue from the operation in Venezuela, which was closed
in 2009. Pro forma EBITDA showed a loss of R$32.5 million (versus R$42.3 million in 2009), reﬂ ecting recent
and continuing investments to expand these operations.

PRO FORMA FINANCIAL HIGHLIGHTS - OPERATIONS UNDER CONSOLIDATION
(ARGENTINA, CHILE, PERU) - (R$ MILLIONS)

Total consultants - end of period 1 (thousands)
Product units for resale (millions)
Gross revenue
Net revenue
Gross proﬁ t
Gross margin (%)
Selling expenses
General and administrative expenses
Other operating income / (expenses), net
Financial income / (expenses), net
Earnings before taxes
Net income / (loss)
EBITDA
Ebitda margin (%)

PRO FORMA FINANCIAL HIGHLIGHTS - OPERATIONS UNDER
IMPLEMENTATION (MEXICO AND COLOMBIA)1 (R$ MILLIONS)

Total consultants - end of period 1 (thousands)
Product units for resale (millions)
Gross revenue
Net revenue
Gross proﬁ t
Gross margin (%)
Selling expenses
General and administrative expenses
Other operating revenues / (expenses), net
Financial income / (expenses), net
Earnings before taxes
Net income / (loss)
Ebtida
Ebitda margin (%)

1. Number of consultants by the end of the 18th cycle of sales.

2009
113.6
22.5
285.4
218.5
138.1
63.2%
(109.3)
(23.4)
1.4
0.3
7.1
(1.1)
8.9
4.1

2009
44.2
7.1
76.3
66.5
41.8
62.8
(69.7)
(16.1)
(0.2)
(1.3)
(45.5)
(48.0)
(42.3)
(63.6)

2010
129.6
28.4
335.9
255.7
157.3
61.5
(124.4)
(21.5)
(1.7)
(0.8)
8.9
3.7
13.1
5.1

2010
60.2
13.1
114.0
98.3
56.3
57.3
(76.0)
(14.8)
(0.1)
(1.0)
(35.6)
(36.0)
(32.5)
(33.1)

Var %
14.1
26.2
17.7
17.0
13.9
-1.7pp
13.8
(8.1)
na
na
25.6
na
47.8
1.1pp

Var %
36.3
83.6
49.4
47.8
34.8
-5.5pp
9.0
(7.9)
(54.3)
na
(21.8)
(25.0)
(23.2)
30.5pp

101

6. ATTACHMENTS

ATTACHMENTS

Financial Statements
DNV Statement
About This Report
Global Compact Principles
GRI Index

FINANCIAL
STATEMENTS

NATURA COSMÉTICOS S.A.
Financial statements related to ﬁ scal year ended at December 31, 2010
and auditors’ report.
In accordance with the legal and statutory rules we submit, to the
appreciation of your honour, the balance sheet and the ﬁ nancial
statements related to the ﬁ scal year ended at December 31, 2010.
Together with the information included in the footnotes here in, the
Company’s Management is entirely available to the shareholders to any
other clariﬁ cation.

102

Balance Sheets
As of december 31, 2010
(In thousands of Brazilian reais - R$)

ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade accounts receivable
Inventories
Recoverable taxes
Related parties
Other receivables
Total current assets
NONCURRENT ASSETS
Long-term assets:
Recoverable taxes
Deferred income tax and social contribution
Escrow deposits
Other noncurrent assets
Investments
Property, plant and equipment
Intangible assets
Total noncurrent assets
TOTAL ASSETS

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES
Borrowings and ﬁ nancing
Trade and other payables
Suppliers - related parties
Payroll, proﬁ t sharing and related taxes
Taxes payable
Provision for tax, civil and labor risks
Derivatives
Other payables
Total current liabilities

NONCURRENT LIABILITIES
Borrowings and ﬁ nancing
Taxes payable
Provision for tax, civil and labor risks
Allowance for investment losses
Provision for healthcare plan
Total noncurrent liabilities

SHAREHOLDERS’ EQUITY
Capital
Capital reserves
Earnings reserves
Treasury shares
Proposed additional dividend
Other comprehensive losses
Total equity attributable to owners of the Company
Noncontrolling interests
Total shareholders’ equity
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

The accompanying notes are an integral part of these ﬁ nancial statements.

Company (BRGAAP) Consolidated (BRGAAP e IFRS)
2009
2009

2010

Note

5
6
7
8
28.1.

8
9.a)
10
11
12
13
13

206,125
493,692
185,092
34,799
25,361
52.470
997,539

254,463
414,645
94,338
93,760
26,757
27,620
911,583

560,229
570,280
571,525
101,464
-
66,399
1,869,897

500,294
452,868
509,551
191,195
-
62,454
1,716,362

4,921
87,491
289,070
20,052
1,099,188
92,175
18,586
1,611,483
2,609,022

33,697
82,952
187,656
90
1,000,600
50,375
11,527
1,366,897
2,278,480

109,264
180,259
337,007
44,904
-
560,467
120,073
1,351,974
3,221,871

63,931
146,146
232,354
7,429
-
492,256
82,740
1,024,856
2,741,218

Company (BRGAAP) Consolidated (BRGAAP e IFRS)
2009
2009

2010

Note

15
16
28.1

17
18
4.2

15
17
18
12
24.2.

19.a)

19.c)
19.b)

60,086
113,232
246,589
63,769
205,361
-
3,340
54,471
746,848

469,590
84,471
211,591
56,750
85,161
1,465
6,869
26,339
942,236

226,595
366,494
-
162,747
371,815
-
4,061
64,747
1,196,459

569,366
255,282
-
130,792
239,574
1,465
8,652
30,219
1,235,350

368,356
169,912
53,282
-
13,123
604,673

25,707
113,383
54,384
565
2,384
196,423

465,068
209,316
73,784
-
19,742
767,910

134,992
150,280
71,432
-
9,342
366,046

418,061
149,627
282,944
(14)
430,079
(23,196)
1,257,501
-
1,257,501
2,609,022

404,261
142,993
253,693
(14)
357,611
(18,723)
1,139,821
-
1,139,821
2,278,480

418,061
149,627
282,944
(14)
430,079
(23,196)
1,257,501
1
1,257,502
3,221,871

404,261
142,993
253,693
(14)
357,611
(18,723)
1,139,821
1
1,139,822
2,741,218

103

Statement of Income
For the year ended December 31, 2010
(In thousands of Brazilian reais - R$, except earnings per share)

NET REVENUE
Cost of sales
GROSS PROFIT
OPERATING (EXPENSES) INCOME
Selling
Administrative and general
Employee proﬁ t sharing
Management compensation
Equity in subsidiaries
Other operating (expenses) income, net
INCOME FROM OPERATIONS BEFORE
FINANCIAL (EXPENSES) INCOME
Financial income
Financial expenses
INCOME BEFORE INCOME TAX AND
SOCIAL CONTRIBUTION
Income tax and social contribution
NET INCOME
ATTRIBUTABLE TO:
Owners of the Company
Noncontrolling interests
EARNINGS PER SHARE - R$
Basic
Diluted

Note

22
22
22
28
12
26

25
25

9.b)

Company (BRGAAP) Consolidated (BRGAAP e IFRS)
2009

2009

2010

5,514,315
(2,283,926)
3,230,389

4,593,165
(1,956,558)
2,636,607

5,136,712
(1,556,806)
3,579,906

4,242,057
(1,294,565)
2,947,492

(1,292,365)
(837,808)
(18,174)
(14,417)
25,764
456
-
1,093,845
17,515
(58,237)

(1,062,579)
(698,241)
(21,049)
(13,139)
(2,830)
961
-
839,730
56,794
(83,805)

(1,704,322)
(605,442)
(70,351)
(14,417)
-
(17,468)
-
1,167,905
53,639
(103,375)

(1,496,125)
(450,868)
(55,784)
(14,063)
-
(14,624)
-
916,028
84,176
(126,050)

1,053,123
(309,073)
744,050

812,719
(128,795)
683,924

1,118,169
(374,120)
744,050

874,154
(190,230)
683,924

744,050
-

683,924
-

744,050
-

683,924
-

27.1.
27.2.

1,7281
1,7219

1,5926
1,5880

1,7281
1,7219

1,5926
1,5880

The accompanying notes are an integral part of these consolidated ﬁ nancial statements.

Statement of Comprehensive Income
For the year ended December 31, 2010
(In thousands of Brazilian reais - R$)

NET INCOME

Other comprehensive losses-

Losses from translation of ﬁ nancial
statements of foreign subsidiaries

TOTAL COMPREHENSIVE INCOME

ATTRIBUTABLE TO

Owners of the Company

Noncontrolling interests

Company (BRGAAP) Consolidated (BRGAAP e IFRS)

Note

2010

2009

2010

2009

744,050

683,924

744,050

683,924

(4,473)

(23,884)

(4,473)

(23,884)

739,577

660,040

739,577

660,040

739,577

660,040

739,577

660,040

The accompanying notes are an integral part of these consolidated ﬁ nancial statements.

104

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F

Statement of Cash Flows
For the year ended December 31, 2010
(In thousands of Brazilian reais - R$)

Company (BRGAAP) Consolidated (BRGAAP e IFRS)
2009
2009

2010

Note

CASH FLOW FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization
Provision for losses on swap and forward contracts
Provision for tax, civil and labor contingencies
Interest and inﬂ ation adjustment of escrow deposits
Income tax and social contribution
(Gain) Loss on sale on property, plant and equipment
and intangible assets
Equity in subsidiaries
Interest and exchange rate change on borrowings
and ﬁ nancing and other liabilities
Stock options plans expenses
Provision for discount on sale of ICMS credits
Allowance for doubtful accounts
Allowance for inventory losses
Provision for healthcare plan

9.a

6
7
24.2

(INCREASE) DECREASE IN ASSETS
Current:
Trade accounts receivable
Inventories
Recoverable taxes
Other receivables
Noncurrent:
Recoverable taxes
Other receivables
Subtotal

INCREASE (DECREASE) IN LIABILITIES
Current:
Domestic and foreign suppliers
Payroll, proﬁ t sharing and related taxes, net
Taxes payable
Other payables
Noncurrent:
Taxes payable
Provision for tax, civil and labor contingencies
Other payables
Subtotal

OTHER CASH FLOWS FROM OPERATING ACTIVITIES
Payments of income tax and social contribution
Payments of derivatives
Payment of interest on borrowings and ﬁ nancing

744,050

683,924

744,050

683,924

15,305
5,477
106
(15,318)
309,073

(468)
(25,764)

11,918
(4,539)
12,188
(10,266)
128,795

(702)
2,830

88,848
8,787
3,545
(18,129)
374,120

32,620
-

92,426
(4,004)
9,090
(13,240)
190,230

19,834
-

(4,668)
4,081
-
9,005
3,981
10,739
1,055,598

33,662
4,339
-
8,211
3,635
2,384
876,379

(5,137)
11,288
465
9,149
30,132
10,400
1,290,137

10,825
8,573
2,414
10,051
9,650
9,342
1,029,115

(88,052)
(77,360)
58,961
(23,433)

5,565
(56,996)
(60,485)
4,081

(126,561)
(92,106)
89,731
(3,945)

7,482
(185,569)
(83,912)
8,734

38,703
(19,962)
(111,143)

(13,509)
(45)
(121,389)

(44,597)
(37,475)
(214,953)

(30,441)
(108)
(283,814)

28,761
7,019
18,197
63,130

(29,302)
1,688
(70,140)
1,433

111,212
31,955
(8,192)
34,528

45,499
86
(94,059)
(1,005)

56,529
(2,673)
(565)
170,398

113,383
(22,184)
(14,439)
(19,561)

59,036
(2,658)
-
225,881

150,280
(22,216)
(10,652)
67,933

(221,535)
(9,006)
(35,405)

(128,758)
(13,924)
(4,574)

(269,001)
(13,378)
(44,902)

(184,365)
(16,255)
(19,919)

NET CASH PROVIDED BY OPERATING ACTIVITIES

848,906

588,173

973,784

592,695

CASH FLOW FROM INVESTING ACTIVITIES
Acquisition of property, plant and equipment and intangible assets
Proceeds from sale of property, plant and equipment
and intangible assets
Escrow deposits
Dividends received from subsidiaries
Investments in subsidiaries

(66,870)

(30,568)

(236,876)

(140,632)

3,174
(86,096)
30,000
(117,486)

4,323
(55,272)
-
(154,720)

9,864
(86,524)
-
-

6,066
(55,858)
-
-

NET CASH USED IN INVESTING ACTIVITIES

(237,278)

(236,237)

(313,536)

(190,424)

CASH FLOW FROM FINANCING ACTIVITIES
Payments of borrowings and ﬁ nancing - principal
Proceeds from borrowings and ﬁ nancing
Payment of dividends and interest on capital
Capital increase through subscription of shares

19.b
19.a

(592,075)
565,293
(646,985)
13,800

(634,274)
988,310
(551,860)
12,838

(781,931)
819,275
(646,985)
13,800

(827,121)
1,109,497
(551,860)
12,838

continue...

106

Statement of Cash Flows
For the year ended December 31, 2010
(In thousands of Brazilian reais - R$)

...continuation

Company (BRGAAP) Consolidated (BRGAAP e IFRS)
2009
2009

2010

Note

NET CASH USED IN FINANCING ACTIVITIES

(659,967)

(184,986)

(595,840)

(256,646)

Gains (losses) on translation of foreign-currency cash
and cash equivalents

(4,473)

4,172

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

(48,338)

166,950

59,935

149,797

Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year

254,463
206,125

87,513
254,463

500,294
560,229

350,497
500,294

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Additional statements of cash ﬂ ows information:
Restricted cash
Bank overdrafts - unused

The accompanying notes are an integral part of these consolidated ﬁ nancial statements.

(48,338)

166,950

59,935

149,797

-
147,900

-
197,720

6,155
265,500

5,769
242,145

Statement of Value Added
For the year ended December 31, 2010
(In thousands of Brazilian reais - R$)

Note

REVENUES
Sales of products and services
Other operating (expenses) income, net
Allowance for doubtful accounts
INPUTS PURCHASED FROM THIRD PARTIES
Cost of sales and services
Materials, electricity, services and others
GROSS VALUE ADDED

RETENTIONS
Depreciation and amortization

VALUE ADDED GENERATED BY THE COMPANY

TRANSFERRED VALUE ADDED
Equity in subsidiaries
Financial income - includes inﬂ ation and exchange rate variations
TOTAL VALUE ADDED TO BE DISTRIBUTED

DISTRIBUTION OF VALUE ADDED:
Employees and social charges
Taxes and contributions
Financial expenses and rentals
Dividends
Interest on capital
Retained earnings

Supplemental statement of value added information

Company (BRGAAP) Consolidated (BRGAAP)
2009

2010

2009

2010

6,394,783
6,477,739
456
(83,412)
(4,278,970)
(2,488,991)
(1,789,979)
2,115,813

5,333,613
5,402,269
961
(69,617)
(3,590,406)
(2,133,895)
(1,456,511)
1,743,207

6,850,225
6,951,106
(17,468)
(83,412)
(3,707,385)
(2,355,631)
(1,351,754)
3,142,841

5,705,072
5,789,313
(14,624)
(69,617)
(3,087,532)
(1,957,104)
(1,130,427)
2,617,540

(15,305)
(15,305)

(11,918)
(11,918)

(88,848)
(88,848)

(92,426)
(92,426)

2,100,508

1,731,289

3,053,993

2,525,114

66,933
25,764
41,169
2,167,440

53,964
(2,830)
56,794
1,785,253

53,639
-
53,639
3,107,632

84,176
-
84,176
2,609,290

(2,167,440) 100% (1,785,253) 100% (3,107,632) 100% (2,609,290) 100%
(191,654) 11%
(642,954) 21%
(769,245) 25%
(818,464) 46% (1,476,512) 47% (1,147,364) 52%
(130,187)
4%
(554,537)
7%
1%
(43,254)
(90,995) 15%

(222,957) 10%
(1,111,331) 51%
4%
(659,570) 31%
3%
1%

5%
(554,537) 11%
2%
(43,254)
(90,995) 25%

(117,825)
4%
(659,570) 21%
2%
1%

(59,883)
(24,597)

(86,349)

(89,102)

R$454,114 and R$424,222 are included in caption ‘Taxes and contribution’ in 2010 and 2009, respectively, and refer to reverse charge State VAT (ICMS) levied
on the estimated proﬁ t margin set by the State Departments of Finance based on sales made by Natura consultants to ﬁ nal customer.
For the analysis of this tax impact on the statement of value added, these amounts should be deducted from those recorded in ‘Sales of products and services’
and ‘Taxes and contributions’, since sales revenue does not include the estimated proﬁ t attributable to Natura consultants on the sale of products, in the
amounts of R$2,738,227 and R$2,302,549 in 2010 and 2009, respectively, considering an estimated proﬁ t margin of 30%.

107

The accompanying notes are an integral part of these ﬁ nancial statements.

Notes to the Financial Statements
For the year ended December 31, 2010
(Amounts in thousands of Brazilian reais - R$, unless otherwise stated)

1. GENERAL INFORMATION
Natura Cosméticos S.A. (the “Company”) is a publicly-traded company,
headquartered in Itapecerica da Serra, State of São Paulo, registered
in the São Paulo Stock Exchange (BM&FBOVESPA), under the ticker
“NATU3”.
The Company’s and its subsidiaries’ activities (“Natura’s Group” or the
“Group”) include the development, production, distribution and sale,
substantially through direct sales by Natura Beauty Consultants, of
cosmetics, fragrances, and hygiene products. The Company also holds
equity interests in other companies in Brazil and abroad.

2. SUMMARY OF SIGNIFICANT ACCOUNTING PRACTICES

issued by

Interpretations

2.1. Statement of compliance and basis of presentation
The Company’s ﬁ nancial statements include:
• The consolidated ﬁ nancial statements prepared in accordance with
the International Financial Reporting Standards (IFRS) issued by the
International Accounting Standards Board - IASB and the accounting
practices adopted in Brazil, identiﬁ ed as Consolidated – IFRS and BR
GAAP.
• The Parent’s individual ﬁ nancial statements prepared in accordance
with the accounting practices adopted in Brazil, identiﬁ ed as Company
– BR GAAP.
The accounting practices adopted in Brazil include those established in
the Brazilian Corporate Law as well as the Pronouncements, Instructions
and
the Accounting Pronouncements
Committee (CPC) and approved by the Brazilian Securities and Exchange
Commission (CVM).
The individual ﬁ nancial statements include investments in subsidiaries,
joint ventures and associates which are measured under the equity
method, as required by the legislation prevailing in Brazil. Therefore, these
individual ﬁ nancial statements are not fully compliant with IFRS, which
requires that these investments be stated at fair value or acquisition cost.
Since there is no difference between the consolidated shareholders’
equity and the consolidated net income attributable to the Company’s
shareholders recorded in the consolidated ﬁ nancial statements prepared
under IFRS and the accounting practices adopted in Brazil, the Company
elected to present the individual and the consolidated ﬁ nancial statements
as a single set in the side-by-side comparison format.
The ﬁ nancial statements have been prepared on the historical cost basis
except for certain ﬁ nancial instruments that are measured at fair values,
as explained in the accounting policies below. Historical cost is generally
based on the fair value of the consideration given in exchange for assets.
The main accounting practices adopted in preparing these consolidated
ﬁ nancial statements are summarized below. These practices are consistent
with those adopted in the prior reporting period, except otherwise
indicated.

2.2. Consolidation
a) Subsidiaries and joint-controlled entities
Subsidiaries are all the entities in which the Company has the power
to govern ﬁ nancial and operating policies of an entity so as to obtain
beneﬁ ts from its activities and that the Company owns half or more
of the interest. In the applicable cases, the existence and the effect of
potential voting right, currently exercisable or convertible, are taken into
consideration to determine if the Company controls or not another
entity. Subsidiaries are fully consolidated from the date when control
is transferred to the Company and cease to be consolidated, when
applicable, when control no longer exists.
In the cases control is jointly held, the consolidation of the ﬁ nancial
statements is made proportionally to the interest percentage.
b) Consolidation criteria and subsidiaries included in the consolidated
ﬁ nancial statements

Interest holding - %
2009

2010

Direct interest:
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
Natura Inovação e Tecnologia de Produtos Ltda.
Natura Cosméticos y Servicios de Mexico. S.A. de C.V.
Natura Cosméticos de Mexico, S.A. de C.V.
Natura Distribuidora de Mexico, S.A. de C.V.
Natura Cosméticos C.A. - Venezuela
Natura Cosméticos Ltda. - Colômbia
Flora Medicinal J. Monteiro da Silva Ltda.
– under dissolution
Natura Cosméticos España S.L. - Espanha
Natura (Brasil) International B.V. - Holanda
Natura Cosméticos y Vestimentas S.A. - Uruguai

99.99
99.99
99.94
99.97
-
99.99
99.99
99.99
99.99
-
99.99

99.99
99.99
99.94
99.97
98.00
99.99
99.99
99.99
99.99
99.99
99.99

-
100.00
100.00
-

99.99
100.00
100.00
99.99

Indirect interest:
Through Indústria e Comércio de Cosméticos Natura Ltda.:
Natura Logística e Serviços Ltda.
Through Natura Inovação e Tecnologia de Produtos Ltda.:
Ybios S.A. (proportional consolidation - joint control)
Natura Innovation et Technologie de
Produits SAS - France
Through Natura (Brasil) International B.V.
- The Netherlands:
Natura Brasil Inc. - EUA - Delaware
Natura International Inc. - EUA - Nova York
Natura Worldwide Trading Company - Costa Rica
Natura Brasil SAS - França
Natura Brasil Inc. - EUA - Nevada
Natura Europa SAS - França

99.99

42.11

33.33

100.00

100.00
100.00
100.00
100.00
100.00
100.00

The consolidated ﬁ nancial statements have been prepared based on the
ﬁ nancial statements as of the same date and consistent with the Company’s
accounting practices. Investments in subsidiaries were proportionally
eliminated against shareholders’ equity and net income of the respective
subsidiaries. Intercompany balances and transactions and unrealized proﬁ ts,
net of taxes, were also eliminated.
The operations of the direct and indirect subsidiaries are as follows:
• Indústria e Comércio de Cosméticos Natura Ltda.: engaged principally
in the production and sale of Natura products to Natura Cosméticos S.A.
- Brazil, Natura Cosméticos S.A. - Chile, Natura Cosméticos S.A. - Peru,
Natura Cosméticos S.A. - Argentina, Natura Cosméticos Ltda. - Colombia,
Natura Europa SAS - France, Natura Cosméticos de Mexico, S.A. de C.V.,
and Natura Cosméticos C.A. - Venezuela.
• Natura Cosméticos S.A. - Chile, Natura Cosméticos S.A. - Peru, Natura
Cosméticos S.A. - Argentina, Natura Cosméticos C.A. - Venezuela, Natura
Cosméticos Ltda. - Colombia and Natura Distribuidora de Mexico, S.A. de
C.V.: their activities are an extension of the activities conducted by the parent
company Natura Cosméticos S.A. - Brazil.
• Natura Inovação e Tecnologia de Produtos Ltda.: its activities consist of
product and technology development and market research. It is the only
owner of Natura Innovation et Technologie de Products SAS - France, a
research and technology satellite center opened in 2007 in Paris.
• Natura Europa SAS - France and Natura Brasil SAS - France: engaged in
the purchase, sale, import, export and distribution of cosmetics, fragrances in
general, and hygiene products.
• Natura Cosméticos de Mexico, S.A. de C.V.: imports and sells cosmetics,
fragrances in general and hygiene products to Natura Distribuidora de
Mexico, S.A. de C.V.
• Natura Cosméticos y Servicios de Mexico, S.A. de C.V.: provides
administrative and logistics services to Natura Cosméticos de Mexico, S.A.
de C.V. and Natura Distribuidora de Mexico, S.A. de C.V.

108

• Natura Cosméticos España S.L. - Spain: company in start-up stage and
its activities will be an extension of the activities developed by the parent
company Natura Cosméticos S.A. - Brazil.
• Flora Medicinal J. Monteiro da Silva Ltda. – under dissolution: used to be
engaged in the sale of phytotherapic and phytocosmetic products of its
own brand. Since 2005 this company has had no activities. On March 31,
2008, after the merger of Nova Flora Participações Ltda., Flora Medicinal J.
Monteiro da Silva Ltda. became a direct subsidiary of Natura Cosméticos
S.A. - Brazil. In December 2010, the company has obtained approval for
dissolution and its net assets were absorbed by Natura Cosméticos S.A.
• Natura Logística e Serviços Ltda.: engaged in the provision of administrative
and logistics services to Natura Group companies based in Brazil.
• Natura Innovation et Technologie de Produits SAS - France: engaged
mainly in research activities developed for in vitro tests, an alternative to
tests in animals, for safety and efﬁ cacy testing of active compounds, skin care
and new packaging materials.
• 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.
As Ybios S.A. is a jointly-owned subsidiary whose ﬁ nancial statements were
proportionally included in the Company’s consolidated ﬁ nancial statements,
the main assets, liabilities and statement of income accounts, which were
included in the consolidated ﬁ nancial statements at the ratio of 42.11%
of interest (33.33% in December 31, 2009) after ownership elimination
adjustments, are stated below:

Current assets
Property, plant and equipment
Current liabilities
Net losses

2010
630
98
87
(682)

2009
409
197
282
(630)

• Natura Europa SAS - France and Natura Cosmetics USA Co.: in January
2009, the shares in these subsidiaries’ capital stock were assigned as a capital
contribution to the holding company Natura (Brasil) International B.V. - The
Netherlands, and the Company became the indirect holder of such interests
through this holding company in The Netherlands.
c) Discontinuation of subsidiaries’ operations
The Board of Directors’ Meetings held in July and October 2009 approved
the discontinuation of the operations of subsidiaries Natura Cosméticos
C.A. - Venezuela, Natura Brasil Cosmética Ltda. - Portugal and Natura
Cosméticos y Vestimentas S.A. - Uruguay. As of December 31, 2009, these
companies’ winding up is in progress, except for the subsidiaries in Uruguay
and Portugal, which were still in start-up stage when the discontinuation of
their operations was decided. The operations of the subsidiary in Venezuela
were discontinued in the third quarter of 2009, and thus the recognition of
an allowance for impairment losses was required.
On December 31, 2010, the net assets balance of Natura Cosméticos C.A. -
Venezuela, recorded in the Company’s consolidated ﬁ nancial statements, less
allowances for asset impairment losses and collection of liabilities during the
operation termination process, was R$273.
2.3. Business segment report
Reporting on operating segments is consistent with the internal report
provided to the chief operating decision maker. The chief operating decision
maker, responsible for allocating resources to the operating segments and
assessing their performance, is represented by the Company’s Executive
Committee.
2.4. Translation into foreign currency
a) Functional and reporting currency
Items included in ﬁ nancial statements of the Company and each one of
the subsidiaries included in the consolidated ﬁ nancial statements are
measured using the currency of the main economic environment in which
the companies operate (“functional currency”).
b) Foreign currency transactions and balances
The ﬁ nancial statements are presented in Reais (R$), which corresponds to
the Group’s presentation currency.
Foreign currency-denominated
the
Company’s functional currency - Brazilian reais - at exchange rates prevailing
on the dates of the transactions. Balance sheet accounts are translated at
the exchange rates prevailing at the balance sheet dates. Foreign exchange
gains and losses resulting from the settlement of such transactions and the
translation of monetary assets and monetary liabilities denominated in
foreign currency are recognized through the statement of income, under the
captions “Financial income” and “Financial expenses”.
c) Translation
In preparing the consolidated ﬁ nancial statements, the statements of income

transactions are

translated

into

and cash ﬂ ows, and all other changes in assets and liabilities are translated into
Brazilian reais at the average monthly exchange rate, which approximates the
exchange rate prevailing at the date of the underlying transactions. Balance
sheets are translated into Brazilian reais at the exchange rates prevailing at
year end.
The effects of the exchange differences resulting from these translations are
presented in line item ‘Other comprehensive income’, in shareholders’ equity.
In case of disposal or partial disposal of interest in a Group company, through
sale or as a result of capital payment, the cumulative exchange difference is
recognized in the statement of income as part of the gain or loss on the
disposal of the investment.
2.5. Cash and cash equivalents
Include cash, demand deposits and short-term investments redeemable in
up to 90 days from the investment date, highly liquid or convertible to a
known cash amount and subject to immaterial change in value, which are
recorded at cost plus income earned through the balance sheet dates and
do not exceed their market or realization value.
2.6. Financial instruments
2.6.1. Categories
The category depends on the purpose for which the ﬁ nancial assets and
liabilities were acquired or contracted and is determined upon initial
recognition of the ﬁ nancial instruments.
The Company classiﬁ es its ﬁ nancial assets under the following categories:
Financial assets measured at fair value through proﬁ t or loss
The ﬁ nancial assets are measured at fair value through proﬁ t or loss when
they are acquired for such purpose, principally in the short term. Derivative
ﬁ nancial instruments are also classiﬁ ed as held for trading. Assets in this
category are classiﬁ ed as current assets.
In the case of the Company, this category encompasses only derivative
ﬁ nancial instruments. The balances related to gains or losses on unsettled
transactions are classiﬁ ed in current assets or current liabilities, and gains
or losses arising from changes in fair value are recorded under “Financial
income” or “Financial expenses”.
Financial assets held-to-maturity
Comprise investments in certain ﬁ nancial assets classiﬁ ed by treasury at their
inception as held-to-maturity, which are measured at acquisition cost plus
income earned according to contractual terms and conditions.
Available-for-sale ﬁ nancial assets
When applicable, available-for-sale ﬁ nancial assets include non-derivative
ﬁ nancial assets, which are designated as available-for-sale or are not classiﬁ ed
as (a) loans and receivables, (b) held for trading or (c) ﬁ nancial assets at
fair value through proﬁ t or loss. As of December 31, 2010 and 2009, the
Company did not have assets recorded in the ﬁ nancial statements under
this classiﬁ cation.
Loans and receivables
Includes non-derivative ﬁ nancial assets with ﬁ xed or determinable receipts
that are not quoted in an active market. They are included in current assets,
except for maturities greater than 12 months after the balance sheet
date, which are classiﬁ ed as noncurrent assets. As of December 31, 2010
and 2009, include cash and cash equivalents (note 5) and trade accounts
receivable (note 6).
Financial liabilities held by the Company are classiﬁ ed into the following categories:
Financial liabilities measured at fair value through proﬁ t or loss
Financial liabilities are classiﬁ ed as measured at fair value through proﬁ t or
loss when they are held for trading or designated as fair value through proﬁ t
or loss.
Other ﬁ nancial liabilities
Other ﬁ nancial liabilities are measured at the amortized cost using the
effective interest method. As of December 31, 2010 and 2009 other ﬁ nancial
liabilities comprised borrowings and ﬁ nancing (note 15) and trade and other
payables.
2.6.2. Measurement
Regular purchases and sales of ﬁ nancial assets are recognized upon the
date transactions occur, i.e., on the date the Company agrees to buy or
sell the asset. Financial assets at fair value through proﬁ t or loss are initially
recognized at their fair value, and transaction costs are recognized through
the statement of income. Loans and receivables are accounted for at the
amortized cost.
Gains or losses resulting from changes in the fair value of ﬁ nancial assets
measured at fair value through proﬁ t or loss are recognized in the statement
of income in caption “Financial income” or “Finance expenses”, respectively,
in the period in which they occur. As regards ﬁ nancial assets classiﬁ ed as
“Available for sale”, if applicable, these changes are recorded in caption
“Other comprehensive income”, within equity, until they are settled, when
they are reclassiﬁ ed to the statement of income.
2.6.3. Offsetting ﬁ nancial instruments
Financial assets and ﬁ nancial liabilities are offset and the net amount is
presented in the balance sheet when there is a legally enforceable right to

109

set off recognized amounts and the intent to either settle them on a net
basis, or to recover the asset and settle the liability simultaneously.
2.6.4. Derivative ﬁ nancial instruments and hedge accounting
Derivative transactions contracted by the Company and its subsidiaries are
limited to swaps and currency Non Deliverable Forwards (NDFs) intended
exclusively to hedge against the currency risks related to the positions in the
balance sheet plus projected cash outﬂ ows in foreign currency for capital
increases in foreign subsidiaries
They are measured at fair value, and changes in fair value are recognized
through proﬁ t or loss, except when they are designated as cash ﬂ ow hedges,
to which changes in fair value are recorded in ‘Other comprehensive income’
within shareholders’ equity.
The fair value of derivatives is measured by the Company’s treasury
department based on the information on each contracted transaction and
the related market information at the balance sheet dates, such as interest
rate and foreign exchange coupon. When applicable, such information is
compared with the positions reported by the trading desks of each involved
ﬁ nancial institution.
Even though the Group uses derivatives for hedging purposes, it does not
apply hedge accounting.
The fair values of derivatives are disclosed in note 4.
2.7. Trade accounts receivable and allowance for doubtful accounts
Trade accounts receivable are stated at their nominal value, less the
allowance for doubtful accounts, which is recognized based on an analysis
of past experience with losses, in an amount considered sufﬁ cient to cover
possible losses, as described in note 6.
2.8. Inventories
Stated at the lower of average cost of acquisition or production and net
realizable value. The details are shown in note 7.
2.9. Investments in subsidiaries, associates and joint-controlled entities
The Group holds interest in subsidiaries, associates and joint-controlled entities.
Subsidiaries are entities that are controlled by the Company. Control is the
power to govern the ﬁ nancing and operating policies so as to obtain beneﬁ ts
from its activities, what usually means .the capacity to exercise the majority of
voting rights. The potential voting rights are considered in the evaluation of
control exercised by the Group in another entity, when they are exercisable
at the time of such evaluation
Associates are entities over which the Company has signiﬁ cant inﬂ uence
and that is neither a subsidiary nor a joint venture. Signiﬁ cant inﬂ uence is the
power to participate in the ﬁ nancial and operating policies of the investee
without exercising individual or joint control on these policies.
Joint-controlled entities are entities where the venturers have a contractual
agreement which establishes joint control on its economic activities.
Investments in subsidiaries, associates and joint-controlled entities are
accounted for using the equity method. The ﬁ nancial statements of
subsidiaries, associates and joint-controlled entities are prepared on the
same date as the Company’s ﬁ nancial statements. Adjustments are made,
if necessary, to comply their accounting policies with the ones adopted by
the Company.
Under the equity method the Group’s interest on the investee’s net income
or loss is recorded in the statement of income under the caption “Equity in
subsidiaries”. Unrealized gains and losses resulting from transactions between
the Company and its investees are eliminated based on its interest on each
investee. Investee’s other comprehensive income are recorded directly in the
Company’s equity under the caption “Other comprehensive income”.
2.10. Property, plant and equipment
Stated at acquisition cost and/or construction, plus interest capitalized during
construction period, when applicable, for the case of eligible assets and
reduced by accumulated depreciation and by impairment losses, if applicable.
Depending on the nature of the asset and the time it was purchased, cost
refers to the historic cost of purchase or the historic cost of purchase
adjusted for the effects of hyperinﬂ ation until December 31, 1997, when
the Brazilian economy was considered hyperinﬂ ationary for IFRS purposes.
Rights in tangible assets that are maintained or used in the operations of the
Company and its subsidiaries, originated from ﬁ nance leases, are recorded as
purchase ﬁ nancing, and a ﬁ xed asset and a ﬁ nancing liability are recognized
at the beginning of each transaction, where assets are also submitted to
depreciation calculated based on the estimated useful lives of the assets.
Land is not depreciated. Depreciation of the other assets is calculated under
the straight-line method to distribute their cost over their useful lives, as
follows:

Buildings
Machinery and equipment
Molds
Facilities and leasehold improvements
Furniture and ﬁ xtures
Vehicles

Years
25
13
3
5 - 13
14
3

Useful lives are revised annually.
Gains and losses on disposals are calculated by comparing the proceeds
from the sale with the carrying amount, and are recognized in the statement
of income.
2.11. Intangible assets
Software and ERP systems licenses purchased are also capitalized and
amortized at the rates also described in note 13, and expenses on the
software maintenance are recognized as expenses when incurred.
Expenses ERP systems purchase and implementation are capitalized as
intangible assets when there is evidence that future economic beneﬁ ts will
ﬂ ow through the Company, taking into consideration their economic and
technologic viability. Expenses on software development recognized as assets
are amortized under the straight-line method over its estimated useful life.
The expenses related to software maintenance are expensed when incurred.
Separately purchased trademarks and patents are stated at their historic cost.
Trademarks and patents acquired in a business combination are recognized
at fair value on the acquisition date.. Amortization is calculated under the
straight-line method at the annual rates described in note 13.
2.12. Expenses on product research and development
In view of the high level of innovation and the turnover rate of the products
in the Company’s sales portfolio, the Company adopts the accounting policy
of recognizing product research and development expenditure as expenses
for the year, when incurred. Details are disclosed in note 22.
2.13. Leases
Lease classiﬁ cation is made at the inception of the lease. Leases where the
lessor retains substantially all the risks and rewards incidental to ownership
are classiﬁ ed as operating leases. Lease payments under an operating lease
are recognized as an expense on a straight-line basis over the lease term.
Leases where the Company and its subsidiaries retain substantially all the
risks and rewards incidental to ownership are classiﬁ ed as ﬁ nance leases.
These leases are capitalized in balance sheet at the commencement of the
lease term at the lower fair value of the leased asset and the minimum lease
payments.
Each lease payment is apportioned between liabilities and the ﬁ nance
charge so as to permit obtaining a constant rate on the outstanding liability.
The corresponding obligations, less ﬁ nance charge, are classiﬁ ed in current
liabilities and noncurrent liabilities, according to the lease term. Property, plant
and equipment items purchased through ﬁ nance leases are depreciated over
the shorter of their economic useful lives, as described in item 2.10 or the
lease term.
2.14. Impairment assessment
Property, plant and equipment, intangible assets and, when applicable, other
noncurrent assets are annually tested to identify evidences of impairment,
or also signiﬁ cant events or changes in circumstances that indicate that their
carrying amounts will not be recovered. When applicable, when there is a
loss, arising from situations where the carrying amount of an asset exceeds
its recoverable amount, deﬁ ned as the higher of its value in use and its fair
value less costs to sell, this loss is recognized in the statement of income.
Assets are grouped in their lowest levels for which there are separately
identiﬁ able cash ﬂ ows - Cash Generating Units (CGUs) - for recoverable
amount evaluation purposes.
2.15. Trade payables
They are recognized initially at its nominal amounts. They are subsequently
carried at amortized cost, i.e., plus interest, monetary and exchange variations
incurred through the balance sheet dates.
2.16. Loans and ﬁ nancings
Initially recognized at fair value of proceeds received less transaction costs.
They are subsequently carried at amortized cost, i.e., plus charges, interest,
inﬂ ation and exchange rate changes incurred through the balance sheet
dates, as shown in note 15.
2.17. Provisions for tax, civil and labor contingencies
The provisions for contingent liabilities are recognized when the Company
and its subsidiaries have a legal or constructive obligation as a result of past
events, where it is probable that disbursements will be required to settle
the obligation, and its present value can be reliably estimated. Provisions are
quantiﬁ ed at the present value of the expected disbursement to settle the
obligation using the appropriate discount rate, according to related risks.
Adjusted for inﬂ ation through the balance sheet dates to cover probable
losses, based on the nature of contingencies and the opinion of the
Company’s legal counsel. The basis and nature of the reserves for tax, civil
and labor contingencies are described in note 18.
2.18. Income tax and social contribution - current and deferred
Current and deferred income tax and social contribution are recognized in
the statement of income, except, when applicable, in the proportion related
to items recognized directly in shareholders’ equity. In this case, taxes are
recognized directly in shareholders’ equity, in “Other comprehensive income”.
Except for the subsidiaries located abroad, which apply the tax rates prevailing
in the country where they are based, income tax and social contribution of

110

the Company and its subsidiaries in Brazil are calculated at the tax rates of
25% and 9%, respectively, to income tax and social contribution.

Current income tax and social contribution expense is calculated using the
law enacted at the balance sheet date, pursuant to Brazilian tax regulations.
Management periodically measures the positions assumed in the income tax
return regarding the situations where applicable tax regulations are subject to
possibly different interpretation and, when appropriate, recognizes provisions
based on the amounts it expects to pay tax authorities.
Deferred income tax and social contribution are calculated based on
deductible temporary differences between tax and ﬁ nancial reporting
basis of assets and liabilities. Deferred income tax and social contribution
are calculated using the tax rates enacted on the balance sheet date and
that must be applied when the corresponding deferred income tax and
social contribution assets are realized or deferred income tax and social
contribution liabilities are settled.
Deferred income tax assets are recognized only to the extent that there is a
reasonable certainty that future taxable income will be available and against
which temporary differences can be offset.
The amounts of deferred income tax and social contribution assets and
liabilities are only offset when there is a legally enforceable right to offset
tax assets against tax liabilities and/or when deferred income tax and social
contribution assets and liabilities are related to the income tax and social
contribution levied by the same tax authorities on the taxable entity or
different taxable entities, where there is intention to settle the net balances.
Details are disclosed in note 9.
2.19. Stock option plans
The Company offers equity-settled share-based compensation plans to its
employees and executives based on the Company’s shares.
The fair value of the options granted is recognized as an expense in the
statement of income during the vesting period, and options are vested
after certain speciﬁ c conditions are fulﬁ lled. At the balance sheet dates, the
Company’s Management reviews its estimates on the number of options
vested based on the conditions fulﬁ lled and, when applicable, recognizes in
the statement of income as a contra entry to shareholders’ equity the effect
arising from the revision of the initial estimates.
2.20. Proﬁ t sharing
The Company recognizes a proﬁ t-sharing liability and expense based on
a formula that takes into consideration the taxable income attributable to
the owner of the Company after certain adjustments, which is linked to
the achievement of operational goals and speciﬁ c objectives, established and
approved at the beginning of each year.
2.21. Dividends and interest on capital
The proposed dividends and interest on capital made by the Company’s
Management included in the portion equivalent to minimum dividends is
recorded in caption “Other payables” in current liabilities, as it is considered
as a legal liability provided for by the Company’s bylaws. However, the portion
of dividends exceeding minimum dividends declared by Management after
the reporting period but before the authorization date for issuance of these
ﬁ nancial statements is recorded in caption “Proposed additional dividend”
within equity, and its effects are presented in note 19.b).
For corporate and accounting purposes, interest on capital is stated as
allocation of income directly in shareholders’ equity.
2.22. Actuarial gains and losses of healthcare plan and other costs related to
employees’ beneﬁ t plans
The costs related to the contributions made by the Company and its
subsidiaries to deﬁ ned contribution retirement plans are recognized on the
accrual basis. Actuarial gains and losses recorded in the retirees’ healthcare
expansion plan are recorded in the statement of income in accordance
with IAS 19 and CPC 33, based on the actuarial calculation prepared by an
independent actuary, as detailed in note 24.2.
2.23. Results of operation and revenue recognition
Income and expenses are recorded on the accrual basis. Revenue from sales
is recognized in income when all risks and rewards incidental to product
ownership are transferred to the customer.
Income from tax incentives, received in the form of a monetary asset, is
recognized in the statement of income when received as a contra account
to costs and investment already incurred by the Company in the jurisdiction
where the tax incentive is granted. There are no established conditions to
be met by the Company that might affect the recognition of tax incentives.
2.24. Effective interest method
Effective interest method is used to calculate the amortized cost of a
debt instrument and allocate its interest income over the related period.
The effective interest rate is the rate that discounts exactly the estimated
future cash receipts (including fees paid or received that are an integral part

of the effective interest rate, transaction costs and other premiums or
discounts) throughout the estimated useful life of the debt instrument or,
when applicable, by a shorter period, for the net carrying amount on the
date of initial recognition.
Income is recognized based on the effective interest of debt instruments not
classiﬁ ed as ﬁ nancial assets at fair value through proﬁ t or loss.
2.25. Statement of value added
The purpose of this statement is to disclose the wealth created by the
Company and its distribution during a certain reporting period, and is
presented by the Company, as required by the Brazilian Corporate Law,
as an integral part of its individual ﬁ nancial statements, and as additional
disclosure of the consolidated ﬁ nancial statements, since this statement is
not required by IFRSs.
The statement of value added was prepared using information obtained
in the same accounting records used to prepare the ﬁ nancial statements
and pursuant to the provisions of CPC 09 Statement of Value Added. The
ﬁ rst part of this statement includes the wealth created by the Company,
represented by revenue (gross sales revenue, including taxes levied thereon,
other income, and the effects of the allowance for doubtful accounts),
inputs acquired from third parties (cost of sales and purchase of materials,
electricity, and services from third parties, including taxes levied at the time
of the acquisition, the effects of impairment losses, and depreciation and
amortization), and the value added received from third parties (equity
in subsidiaries, ﬁ nancial income, and other income). The second part of
the statement of value added presents the distribution of wealth among
personnel, taxes, fees and contributions, remuneration of third parties capital
and shareholders’ equity.
2.26. New standards, changes and interpretation of standards
a) Standards, interpretations and revised standards effective on December
31, 2010 which did not have a material impact on the Company’s ﬁ nancial
statements.
The following interpretations and revised standards were issued and were
effective on December 31, 2010. However, they did not have a material
impact on the Company’s ﬁ nancial statements:

Standards
Improvements
to IFRSs - 2009

Main requirements
Amendment of
several standards

Amendments

to IFRS 1

Limited exemption from
comparative IFRS 7
disclosures for ﬁ rst
-time adopters

Effective date
Effective for annual periods
beginning on or after
January 1, 2010

Effective for annual periods
beginning on or after
July 1, 2010

Amendments Additional exemptions for Effective for annual periods

to IFRS 1

ﬁ rst-time adopters

Amendments

to IAS 32

Classiﬁ cation of
issue rights

beginning on or after
January 1, 2010

Effective for annual periods
beginning on or after
February 1, 2010

Amendments

to IFRS 2

Intragroup share-based
payments settled
in cash

Effective for annual periods
beginning on or after
January 1, 2010

IFRIC 19

Extinguishing liabilities
by issues of
equity instruments

Effective for annual periods
beginning on or after
January 1, 2010

issued Resolution 636/10, which approves
In August 2010, CVM
pronouncement CPC 41 - Earnings per Share, issued based on IAS 33 -
Earnings per Share. CPC 41 provides for the disclosure of earnings per share,
without impact on recognition, measurement and presentation of individual
ﬁ nancial statements. The Company adopted CPC 41 in its individual and
consolidated ﬁ nancial statements for the year ended December 31, 2010.
b) Standards, interpretations and revised standards not yet effective and
which were not early adopted by the Company.
The following standards and revised standards have been issued and are
mandatory for reporting periods beginning on or after January 1, 2011. However,
the Company did not early adopt these standards and revised standards.

111

Standards Main requirements Effective date

Improvements
to IFRSs - 2010

Amendment of
several standards

IFRS 9 (as changed
in 2010)

Financial
instruments

Amendments

to IAS 24

Related-party
disclosures

Amendments

to IFRS 1

Removal of ﬁ xed
dates for ﬁ rst-
time adopters

Amendments

to IFRS 7

Disclosures - transfers
of ﬁ nancial assets

Effective for annual periods
beginning on or after
January 1, 2011

Effective for annual periods
beginning on or after
January 1, 2013

Effective for annual periods
beginning on or after
January 1, 2011

Effective for annual periods
beginning on or after
July 1, 2011

Amendments Deferred taxes - recovery Effective for annual periods

to IAS 12

of the underlying assets
when an asset is measured
using the fair value
model in IAS 40

beginning on or after
January 1, 2012

Amendments
to IFRIC 14

Prepayments of minimum Effective for annual periods

funding requirements

beginning on or after
January 1, 2011

IFRS 9 Financial Instruments (effective beginning January 1, 2013). The
publication is part of the improvement project of IASB on the measurement,
classiﬁ cation and recognition of ﬁ nancial instruments issued in November
2009 and replaces the part of IAS 39 related to the measurement and
classiﬁ cation of ﬁ nancial assets. This standard prescribes the classiﬁ cation
of ﬁ nancial assets into two categories: assets measured at fair value and
assets at amortized cost, where the classiﬁ cation is determined at the time of
recognition of the asset and in accordance with the entity’s business model
and features of the contracted ﬁ nancial instrument. Due to the features of
the ﬁ nancial instruments currently contracted by the Company, no signiﬁ cant
effects are expected at the time of adoption of this standard beginning
January 1, 2013.
Considering the current operations of the Company and its subsidiaries,
management does not expect that the adoption of these new rules,
interpretations and changes will have a relevant effect on the ﬁ nancial
statements.
The Accounting Pronouncements Committee - CPC has not yet issued the
pronouncements and amendments related to the new and revised IFRSs
above. Because of the CPC’s and the Comissão de Valores Mobiliários -
CVM’s commitment to keep the set of standards issued updated according
to the changes made by the International Accounting Standards Board -
IASB, we expect that such pronouncements and amendments be issued
by the CPC and approved by the CVM by the date they become effective.

3. CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
The preparation of ﬁ nancial statements requires Management to use
certain signiﬁ cant accounting estimates and judgment in applying the
accounting policies.
Accounting estimates and assumptions, reviewed on an ongoing basis, are
based on historical experience and other factors, including expectations of
future events that are considered to be reasonable in the circumstances.
These estimates and assumptions could differ from actual results. The effects
of the accounting estimates revisions are recognized in the period in which
they occur.
These signiﬁ cant assumptions and accounting estimates are follows:
a) Income tax, social contribution and other taxes
The Company recognizes deferred tax assets and liabilities based on
differences between the carrying amount stated in the ﬁ nancial statements
and the tax base assets and liabilities using statutory tax rates. The Company
reviews regularly deferred tax assets in terms of possible recovery, considering
historical proﬁ t generated and projected future taxable income, based on a
technical feasibility study.
b) Provision for tax, civil and labor contingencies
The Company is a party to several lawsuits and administrative proceedings,
as described in note 18. Provisions are recognized for all contingencies arising
from lawsuits that represent probable losses and that can be reasonably
estimated. The probability assessment includes assessing available evidences,
the hierarchy of the laws, available previous decisions, most recent court
decisions and their relevance within the legal system, and the assessment of
the outside legal counsel. Management believes that these provisions for tax,
civil and labor contingencies are fairly presented in the ﬁ nancial statements.
c) Healthcare plan
The current amount of the healthcare plan is contingent to a series of factors

determined based on actuarial calculations that update a series of assumptions,
for example, the discount and other rates, which are disclosed in note 24.2. The
change in one of these estimates could impact the results presented.

4. FINANCIAL RISK MANAGEMENT
4.1. General considerations and policies
The Company and its subsidiaries enter into transactions involving ﬁ nancial
instruments, all of which are recorded in balance sheet accounts, for the
purpose of reducing its exposure to currency and interest risks, as well as
maintaining their investment capacity and growth strategy. The Company
contracts short-term investments, loans and ﬁ nancing, as well as derivatives.
Risks and the ﬁ nancial instruments are managed through the deﬁ nition
of policies and strategies and implementation of control systems, deﬁ ned
by the Company’s Finance Committee and approved by the Board of
Directors, which establish foreign exchange exposure limits and allocate
funds in ﬁ nancial institutions. The compliance of the treasury area’s positions
in ﬁ nancial instruments, including derivatives, in relation to these policies,
is presented and assessed on a monthly basis by the Finance Committee
and subsequently submitted to the analysis of the Audit Committee, the
Executive Committee and the Board of Directors.
The treasury area’s procedures deﬁ ned by the current policy include monthly
projection and assessment of the Company’s consolidated foreign exchange
exposure, on which Management’s decision-making is based.
The Short-term Investments Policy established by the Company’s Management
elects the ﬁ nancial institutions with which contracts can be entered into and
sets limits for the amounts to be invested in each ﬁ nancial institution.
Almost in their entirety (98.7% on December 31, 2010 and 99.9% on
December 31, 2009), foreign-currency denominated loans and ﬁ nancing
have been hedged against foreign exchange ﬂ uctuations by contracting swap
derivatives to hedge the related transactions.
4.2. Financial risk factors
The Group and its subsidiaries’ activities expose the companies to several
ﬁ nancial risks: market risk (including currency and interest risks), credit risk
and liquidity risk. The Company’s overall risk management program is focused
on the unpredictability of ﬁ nancial markets and seeks to minimize potential
adverse effects on the ﬁ nancial performance, using derivatives to protect
certain risk exposures.
Risk management is carried out by the Company’s central treasury, and
policies must be approved by Internal Committees and the Board of
Directors. The treasury identiﬁ es, assesses and hedges the Company against
possible ﬁ nancial risks, mainly arising from interest and foreign exchange rates.
a) Market risk
The Company is exposed to market risks arising from its business activities.
These market risks mainly comprise possible changes in exchange and
interest rates.
i) Currency risk
Due to different types of trade receivables and ﬁ nancial liabilities assumed
by the Company in foreign currencies, an Exchange Rate Hedging Policy was
implemented, establishing exposure limits linked to these risks.

foreign currency-denominated amounts

from
The Policy considers
receivables and payables related to commitments already assumed and
recorded in the ﬁ nancial statements based on the Company’s operations,
as well as future cash ﬂ ows, with average maturity of six-month period,
not yet recorded in the balance sheet arising from: (i) purchase of inputs
for manufacturing products; (ii) machinery and equipment import; and (iii)
investments in foreign subsidiaries in their related currencies.
For exchange rate exposure, the Company and its subsidiaries contract
derivative (swaps) and Non Deliverable Forward (NDFs) transactions. The
exchange rate hedging policy establishes that the hedge contracted by the
Company should limit loss due to exchange rate depreciation related to
the net income estimated for the current year considering the expected
depreciation of the Reais against the U.S. dollar. This limit deﬁ nes the ceiling,
or maximum exchange rate the Company may be exposed.
As of December 31, 2010 and 2009, the consolidated exchange rate
exposure, excluding investments in foreign subsidiaries exposure, is as follows:
Consolidated
2009
2010

Assets position
Trade accounts receivable (1)
Derivative instruments (2)
Total assets

Liabilities position:
Loans and ﬁ nancing (3)
Trade accounts payable (4)
Total liabilities
Total exposure

3,386
5,239
94,358
186,654
99,598 190,040

(58,675) (142,649)
(4,964)
(4,409)
(63,639) (147,058)
35,959 42,982

112

(1)Trade accounts receivable: correspond to receivables related to the
Company and its Brazilian subsidiaries’ exports, excluding the balances of
foreign subsidiaries, maintained in their functional currencies.
(2) Derivative instruments: swap and forward outstanding contracts, stated
below, with maturities between January 2011 and February 2017, were
signed by the counterparts represented by the Banks Bradesco (54%), Brasil
(2%), HSBC (6%), ItauBBA (19%) and Citibank (19%) as follows:

Consolidated
Notional amount Assets (liabilities)
at fair value
2009
(8,430)
(8)
(214)
(8,652)

Type of operation
Financial Swaps (2.1)
Financial Forwards (2.1)
Operating forwards (2.2)

2009
133,033
187
53,464
186,684

2010
(2,830)
-
(1,231)
(4,061)

2010
59,817
-
34,542
94,359

As of December 31, 2010, the notional amount, totaling R$94,359
(R$186,684 as of December 31, 2009) represents the assets of derivative
ﬁ nancial instruments contracted to hedge the exposure of Company and its
subsidiaries liabilities to foreign exchange risks. The assets (liabilities) balances
refer to the net adjustment receivable and payable, respectively, calculated
at fair value as of December 31, 2010 and 2009 of outstanding derivatives
contracted by the Company and its subsidiaries effective at year-end.
(2.1) For ﬁ nancial exchange rate exposures, generated by trade accounts
receivable, accounts payable and loans and ﬁ nancing denominated in foreign
currency, the Company and its subsidiaries have contracted swap and forward
transactions aiming to mitigate exchange rate risks to which these loans and
ﬁ nancing are subject. Swap transactions consist of swapping the exchange
rate changes by a percentage of CDI – Interbank Deposit Rate - ﬂ oating
rate. Forward transactions establish a future parity between the Brazilian real
and foreign currency based on their equivalence when contracted, adjusted
by a ﬁ xed interest rate.
(2.2) For operating forwards, which are related to cash ﬂ ows from future
capital increases in foreign subsidiaries, forward transactions are contracted.
(3) Loans and ﬁ nancing: refer to loans and ﬁ nancing payables denominated
in foreign currency. As of December 31, 2010, the equivalent amount in U.S.
dollar was US$35,215 million.
(4) Trade accounts payable: refer to payable balances in foreign currency due
to trade accounts payable.
As of December 31, 2010 and 2009, the company exchange rate exposure
is shown as follows:

Assets position:
Derivative instruments (1)
Total assets
Liabilities position:
Loans and ﬁ nancing (2)
Trade accounts payable (3)
Total liabilities
Total exposure

Company
2009
2010

86,676
86,676

168,505
168,505

(52,567)
(842)
(53,409)
33,267

(114,712)
(497)
(115,209)
53,296

(1) Derivative instruments: swap and forward outstanding contracts, stated
below, with maturities between January 2011 and July 2014, were signed
by the counterparts represented by the Banks Bradesco (57%), Brasil (1%),
HSBC (2%), ItauBBA (20%) and Citibank (20%) as follows:

Type of operation
Financial Swaps (1.1)
Financial Forwards (1.1)
Operating forwards (1.2)

Company
Assets (liabilities)
at fair value
2009
(6,647)
(8)
(214)
(6,869)

Notional amount
2009
2010
94,231
53,534
187
-
53,464
34,542
147,882
88,076

2010
(2,109)
-
(1,231)
(3,340)

As of December 31, 2010, the notional amount, totaling R$88,076
(R$147,882 as of December 31, 2009) represents the assets of derivative
ﬁ nancial instruments contracted to hedge the exposure of Company and its
subsidiaries’ liabilities to foreign exchange risks. The assets (liabilities) balances
refer to the net adjustment receivable and payable, respectively, calculated
at fair value as of December 31, 2010 and 2009 of outstanding derivatives
contracted by the Company and its subsidiaries, effective at year-end.
(1.1) For ﬁ nancial exchange rate exposures, generated by loans and ﬁ nancing
denominated in foreign currency, the Company and its subsidiaries have
contracted swap and forward transactions aiming to mitigate exchange
rate risks to which these loans and ﬁ nancing are subject. Swap transactions
consist of swapping the exchange rate change by a percentage of changes
of CDI ﬂ oating rate. Forward transactions establish a future parity between

the Brazilian real and foreign currency based on their equivalence when
contracted, adjusted by a ﬁ xed interest rate.
(1.2) For operating forwards, related to future cash ﬂ ows, forward transactions
are contracted.
(2) Loans and ﬁ nancing: refer to loans and ﬁ nancing payables denominated
in foreign currency. As of December 31, 2010, the equivalent amount in U.S.
dollar was US$31,550.
(3) Trade accounts payable: refer to balances payable in foreign currency due
to trade accounts payable.
ii) Interest rate risk
As the Company has no signiﬁ cant assets exposed to interest rates, its net
income and operating cash ﬂ ows are not materially impacted by changes in
market interest rate.
The Company’s interest rate risk arises on short-term investments and short-
and long-term loans and ﬁ nancing. The Company’s Management has the policy
of maintaining its indices of exposure to asset and liability interest rates linked
to ﬂ oating rates. Short-term investments and loans and ﬁ nancing, except when
contracted as long-term interest rate (TJLP), are adjusted by Interbank Deposit
Rate - CDI ﬂ oating rate, pursuant to contracts entered into with ﬁ nancial
institutions and by trading securities with stock exchange investors.
The Company contracts swaps to mitigate the risks of loan and ﬁ nancing
transactions with indices different from the CDI ﬂ oating rate.
iii) Sensitivity analysis
Foreign exchange risk
For the sensitivity analysis of ﬁ nancial derivatives, the Company’s Management
understands it is necessary to take into consideration corresponding liabilities
recorded in the balance sheet as linked operations, as follows:
Consolidated
58,675
Total loans and ﬁ nancing in foreign currency
(59,817)
Notional amounts of ﬁ nancial derivatives
(1,142)
Net exposure

Similarly, the Company considers that part of operating derivatives in the
amount of R$34,542 should not be included in the sensitivity analysis as they
were settled on January 3, 2011 to which was recorded a loss of R$1,231.
Thus, the sensitivity analysis will be applied only to the amount of R$59,817
as a result of the aforementioned considerations.

Exposure
Financial

Company’s

Scenario
risk Probable

Depreciation of U.S. dollar

Scenario Scenario
Remote
Possible
(571)
(286)

The probable scenario reﬂ ects BM&FBOVESPA – São Paulo’s Stock
Exchange quotation as of January 12, 2011 (R$1.70/US$). Considering asset
exposures in U.S. dollar (risk of depreciation of this currency), the possible
scenario takes into consideration a 25% depreciation as of December 31,
2010 (R$1.25/US$) and a 50% depreciation (R$0.83/US$) for the remote
scenario.

Total loans and ﬁ nancing in foreign currency
Notional amount of ﬁ nancial derivatives
Net exposure

Company
52,567
(53,534)
(967)

Similarly, the Company considers that part of operating derivatives in the
amount of R$34,542 should not be included in the sensitivity analysis as they
were settled on January 3, 2011 to which was recorded a loss of R$1.231.
Thus, the sensitivity analysis will be applied only to the amount of R$53,534
as a result of the aforementioned considerations

Exposure
Financial

Company’s

Scenario
risk Probable

Depreciation of U.S. dollar

Scenario Scenario
Remote
Possible
(483)
(242)

The probable scenario reﬂ ects BMF&BOVESPA quotation as of January
12, 2011 (R$1.70/US$). Considering asset exposures in U.S. dollar (risk of
depreciation of this currency), the possible scenario takes into consideration
a 25% depreciation as of December 31, 2010 (R$1.25/US$) and a 50%
depreciation (R$0.83/US$) for the remote scenario.
The Company and its subsidiaries do not use derivatives for speculative
purposes.
Interest rate risk
As described in the previous item 2.1., as of December 31, 2010 almost all the
foreign currency-denominated loans and ﬁ nancing were hedged by foreign
currency ﬂ uctuation to CDI ﬂ uctuation swaps, in light of the Company’s
hedging policy, which exposes the Company to CDI ﬂ uctuation risks. The
table below presents the interest rate exposure of transactions linked to the
variation of CDI and TJLP (“Long Term Interest Rate”):

113

Total loans and ﬁ nancing
Short-term investments
Net exposure

Company Consolidated
(569,073)
521,915
(47,158)

(428,442)
196,437
(232,005)

Concerning the net exposure of loans and ﬁ nancing linked to the interest
rates CDI and TJLP, from which the Company has deducted the balances
of short-term investments, also linked to CDI (note 5), the Company’s
Management understands that, in view of the low risk of major ﬂ uctuations
in CDI in 2010 because of the stability policy implemented by the Federal
Government and the history of increases of the basic interest rate of
the Brazilian economy in recent years, the sensitivity analysis of the risk
of increase in CDI and TJLP that would impact the Company’s ﬁ nancial
expenses should consider a maximum increase of 25% in CDI (representing
an increase of approximately 2.5 percentage points), which should impact
ﬁ nancial expenses by approximately R$1,179.

b) Credit risk
Credit risk refers to the risk that the counterparty will not fulﬁ ll its contractual
obligations, which may cause ﬁ nancial losses to the Group. Company’s sales
are made to a great number of Beauty Consultants and this risk is managed
through a strict credit granting process. The result of this management is
reﬂ ected in “Allowance for doubtful accounts”, as explained in note 6.
The Group is also subject to credit risks related to ﬁ nancial instruments
contracted for the management of its business.
The Company believes that credit risk in operations that it holds with ﬁ nancial
institutions is low, as these are considered by the market as prime banks.
c) Liquidity risk
Effectively managing liquidity risk implies to maintain enough cash and
marketable securities, funds available through credit facilities used and the
ability to settle market positions.
Management monitors the Company’s consolidated liquidity level considering
the expected cash ﬂ ow against unused credit facilities.

d) Financial liabilities
Carrying amounts of consolidated ﬁ nancial liabilities measured at amortized cost and its corresponding maturities are as follows:
Consolidated

Less
than

Between
one and

Between
three and

More
than ﬁ ve

Fair
value

As of December 31, 2010 one year two years ﬁ ve years years 2010
Current assets:
Loans and ﬁ nancing
Trade accounts payable
Noncurrent:
Loans and ﬁ nancing

226,595
331,909

421,403

465,068

39,425

4,240

-
-

Discount

effect

-
-

Carrying
amount
2010

226,595
331,909

465,068

4,3, Capital management
The Group’s intention in managing its capital is to safeguard its capacity to
continuously provide return to the Company’s shareholders and beneﬁ ts to
other stakeholders and to maintain an ideal capital structure to reduce this cost.
As other companies in its industry, the Company monitors its capital based
on ﬁ nancial leverage indices, This index corresponds to the net debt divided
by total equity, The net debt corresponds to total loans (including short- and
long-term loans, as shown in the consolidated balance sheet), deducted from
cash and cash equivalents.
The ﬁ nancial leverage indices as of December 31, 2010 and 2009 can be
summarized as follows:

Company Consolidated
2009

2009

2010

428,442

495,297

691,663

704,358

(560,229) (500,294)
(206,125)
131,434 204,064
222,317
1,257,501 1,139,821 1,257,501 1,139,821

(254,463)
240,834

4,4 Financial derivatives

Regarding swap and forward transactions outstanding as of December 31,

2010 and 2009, gains and losses at fair value, are as follows:

Company Consolidated

Gains (losses) on changes

in fair values on swap

and forward transactions

2010

2009

2010

2009

Financial “Swaps”

(2,109)

(6,647)

(2,830)

(8,430)

Financial “Forwards”

(8)

Operating forwards

(1,231)

(214)

(1,231)

(214)

(3,340)

(6,869)

(4,061) (8,652)

a) Details on derivative transactions

i) Financial derivatives

Information on ﬁ nancial derivatives as of December 31, 2010 and 2009,

contracted by the Company and its subsidiaries, arising from loans and

17,7%

21,1%

10,5% 17,9%

ﬁ nancing denominated in foreign currency, is as follows:

Notional amount

Accumulated
effect
through
December
31, 2010 - at
fair value

Fair value

2010

2009

2010

2009

53,534
-
53,534

4,231
90,000
94,231

52,121
-
52,121

2,997
111,192
114,189

(2,109)
-
(2,109)

54,231
-
54,231

4,027
116,809
120,836

-
-
-

187

192

187

200

114

Short- and long-term
loans and ﬁ nancing
(-) Cash and cash
equivalents
Net debt
Shareholders’ equity
Financial leverage
index

Company
Description
Swap contracts:
Asset position:
Long position - U.S. dollar
Long position - yen

Liability position:
CDI ﬂ oating rate:
Long position - U.S. dollar
Long position - yen

Forward contracts:
Long position - U.S. dollar
Liability position:
Fixed rate

Consolidated
Description
Swap contracts-
Asset position:
Long position - U.S. dollar
Long position - yen

Liability position-
CDI ﬂ oating rate:
Long position - U.S. dollar
Long position - yen

Forward contracts-
Long position - U.S. dollar
Liability position-
Fixed rate

Notional amount

Accumulated
effect
through
December
31, 2010 - at
fair value

Fair value

2010

2009

2010

2009

59,817
-
59,817

43,003
90,000
133,003

57,367
-
57,367

28,138
111,192
139,330

(2,830)
-
(2,830)

60,197
-
60,197

30,951
116,809
147,760

-
-
-

187

192

187

200

ii) Operating derivatives
Information on operating derivatives as of December 31, 2010 and 2009, contracted by the Company and its subsidiaries for hedging the exposure arising
from future cash ﬂ ows, is as follows:

Company and Consolidated
Description
Forward contracts:
Long position - U,S, dollar

Liability position-
Fixed rate:
Long position - U,S, dollar

Accumulated
effect
through
December
31, 2010 - at
fair value

Fair value

Notional amount
2009

2010

2009

34,542
34,542

53,464
53,464

34,555
34,555

54,124
54,124

(1,231)
(1,231)

34,542
34,542

53,464
53,464

35,786
35,786

54,338
54,338

-
-

For derivatives maintained by the Company as of December 31, 2010, due
to the fact contracts are directly entered into with the ﬁ nancial institutions
and not through a Mercantile and Futures Exchange, there are no margins
deposited as guarantee of the related operations.
4.5. Fair value estimate
The fair value of ﬁ nancial instruments not traded in active markets (for
example, over-the-counter derivatives) is determined using valuation
techniques. The Company uses several methods and sets assumptions that
are based on existing market conditions at the balance sheet date. The fair
value of forward exchange contracts is determined based on forwards
exchange rates quoted at the balance sheet date.
The amounts of trade receivables and trade payables recognized at their
carrying amounts approximate their fair value in view of the short term of
the transactions conducted.
The Company and its subsidiaries use hierarchy rules to measure the
fair value of its ﬁ nancial instruments, as set out in CPC 40 - Financial
Instruments: Disclosure, for ﬁ nancial instruments measured in the balance
sheet, which requires the disclosure of fair value measurements at the
following hierarchy level:
• Prices quoted (unadjusted) in active markets for identical assets and
liabilities (Level 1).
• In addition to the quoted prices, included in Level 1, inputs used by the
market for assets or liabilities, whether directly (e.g., prices) or indirectly (e.g.,
derived from prices) (Level 2).
• Inputs for assets or liabilities that are not based on the data adopted by the
market (i.e., unobservable inputs) (Level 3).
The table below shows the consolidated assets and liabilities measured at fair
value as of December 31, 2010:

Financial assets at fair value
- Derivatives
Total assets

Level 1

Level 2

Total
Level 3 balance

-
-

90,298
90,298

-
-

90,298
90,298

The fair value of the ﬁ nancial instruments traded in active markets (such as
held-for-trading and available-for-sale securities) is based on market prices
at the balance sheet date. A market is considered active if quoted prices
are readily and regularly available from an exchange, dealer, broker, industry
group, pricing service or regulatory agency, and those prices represent actual
and regularly occurring market transactions on an arm’s-length basis. The
quoted market price used for the ﬁ nancial assets held by the Group is the
price of current competitors. These instruments are included in Level 1.

The fair value of ﬁ nancial instruments not traded in active markets (for
example, over-the-counter derivatives) is determined using valuation
techniques. These valuation techniques make maximum use of market inputs,
where available and rely as little as possible on entity speciﬁ c inputs. If all
material inputs required for the fair value measurement of an instrument are
adopted by the market, the instrument is included in Level 2.
If one or more than one material inputs are not based on market inputs, the
instrument is included in Level 3.
Under Level 2 rules, speciﬁ c valuation techniques used to measure ﬁ nancial
instruments include:
• Quoted market prices or quotations of ﬁ nancial institutions or brokers for
similar instruments.
• The fair value of interest rate swaps is measured as the present value of
future cash ﬂ ows estimated based on the yield curves adopted by the market.
• The fair value of foreign exchange futures contracts is determined using
future exchange rates at the balance sheet date, using the amount resulting
from the discount to present value.

115

• Other techniques, such as the analysis of discounted cash ﬂ ows, are used to
determine the fair value of the remaining ﬁ nancial instruments.
The Group does not have ﬁ nancial instruments measured at fair value under
Level 3 for the year ended December 31, 2010.
Fair value of ﬁ nancial instruments stated at amortized cost
Short-term investments
The amounts of short-term investments recorded in the ﬁ nancial statements
approximate their realizable values as they refer to ﬂ oating rate transactions
and are highly liquid.
Loans and ﬁ nancing
The amounts of loans and ﬁ nancing recorded in the ﬁ nancial statements,
except loans and ﬁ nancing indexed to TJLP, approximate their collectible
amounts as they are indexed to CDI ﬂ uctuation.
Financing indexed to TJLP approximates the collectible amount recorded in
the ﬁ nancial statements as TJLP is also correlated to CDI and is a ﬂ oating rate.
Trade accounts receivable and trade accounts payable
Additionally, the amounts of trade accounts receivable and trade accounts
payable recognized at their carrying amounts approximate their fair value in
view of the short term of the transactions conducted.

5. CASH AND CASH EQUIVALENTS

Company Consolidated
2009
61,242

2010
38,314

2009
12,010

2010
9,688

Company

Balance at

2009 Additions (a) Reversals (b)

2010

(47,658)

(92,417) 83,412

(56,663)

Consolidated

Balance at

2009 Additions (a) Reversals (b)

2010

(56,515)

(99,679) 90,530

(65,664)

(a) Allowance recognized according to note 2.7.
(b) Refers to accounts that are over 180 days past due, which were written
off due to uncollectible amounts and due to receipts of balances that were
previously written off.
The expense on the recognition of the allowance for doubtful accounts was
recorded in “Selling expenses” in the statement of income. When recovery of
additional cash is less than probable, the amounts debited from the allowance
for doubtful accounts are reversed against the deﬁ nite write-off of the
receivable against income.
Maximum exposure to credit risk at the reporting date is the carrying amount
of each aging range, as shown in the aging list above. The Company and its
subsidiaries do not have any guarantee for past-due receivables.

Cash and banks
Bank certiﬁ cates of deposit
(CDB) - ﬂ oating rate

Current
Noncurrent - short-term
investments (note
17.(c) - tax contingencies)

196,437
206,125
206,125

242,453
254,463
254,463

528,070
566,384
560,229

444,821
506,063
500,294

7. INVENTORIES

-
206,125

-
254,463

5,769
6,155
566,384 506,.063

As of December 31, 2010, CDBs carry interest at rates ranging from 100.0%
to 101.5% (100.0% to 103.1% as of December 31, 2009) of the Interbank
Deposit Rate (CDI).
CDBs are classiﬁ ed by Management of the Company and its subsidiaries as
“Cash and cash equivalents” as they are considered ﬁ nancial assets that may
be redeemed immediately and subject to insigniﬁ cant risk of changes in its
value.

6. TRADE ACCOUNTS RECEIVABLE

Trade accounts receivable
Allowance for doubtful
accounts

Company Consolidated
2009
635,944 509,383

2009
462,303

2010

2010
550,355

(56,663)
(47,658)
493,692 414,645

(65,664)
(56,515)
570,280 452,868

Finished products
Raw materials and packaging
Promotional material
Work in process
Allowance for losses

Company Consolidated
2010
2009
465,027
397,783
127,305
126,479
37,576
16,503
17,290
14,327
(45,541)
(75,673)
571,525 509,551

2009
95,202
-
5,634
-
(6,498)
94,338

2010
181,188
-
14,383
-
(10,479)
185,092

The increase recorded in the finished product balance in 2010 is chiefly
due to the expansion of the logistics capacity of the Company’s several
distribution centers, as well as the resizing of the production capacity
of subsidiary Indústria e Comércio de Cosméticos Natura Ltda., based
on demand planning in order to monitor the growth of the Company’s
operations observed in recent years and also in 2010, as well as the
decline in the indices of failure to meet point-of-sale orders.
The changes in the allowance for inventory losses for the year ended
December 31, 2010 are as follows:

The aging list of trade accounts receivable is as follows:

Balance at

Company

Current
Up to 30 days past due
31 to 60 days past due
61 to 90 days past due
91 to 180 days past due

Company Consolidated
2009
402,482
73,330
9,757
6,655
17,159
509,383

2009
355,402
73,330
9,757
6,655
17,159
462,303

2010
492,947
93,967
16,777
9,406
22,847
635,944

2010
432,703
79,136
10,897
8,072
19,547
550,355

2009 Additions (a) Reversals (b)
(14,880) 10,899

(6,498)

2010

(10,479)

Consolidated

Balance at

2009 Additions (a) Reversals (b)
(159,227) 129,095

(45,541)

2010

(75,673)

The balance of trade accounts receivable in consolidated is basically
denominated in Brazilian reais, and approximately 91% of the outstanding
balance as of December 31, 2010 refers to real-denominated transactions (95%
as of December 31, 2009). The remaining balance is denominated in several
currencies and refers to sales of foreign subsidiaries.
The changes in the allowance for doubtful accounts for the year ended
December 31, 2010 are as follows:

(a) Refers mainly to the recognition of the reserve for discontinuance,
expiration and quality losses, according to actual need to cover expected
losses on the realization of inventories and the policy established by the
Company and its subsidiaries.
(b) Refers to write-offs of products discarded by the Company and its
subsidiaries.

116

8. RECOVERABLE TAXES

Company Consolidated
2009

2010

2009

2010

ICMS on purchases
of goods
Refundable ICMS - ST
on interstate sales – RS
Refundable ICMS - ST
on interstate sales - SP (a)
ICMS (state VAT) - ST (reverse
charge) - Santa Catarina State
Refundable ICMS - ST - voluntary
reporting proceeding - SP (b)
Taxes - foreign subsidiaries
ICMS on purchases of
ﬁ xed assets
COFINS on purchases
of ﬁ xed assets
PIS on purchases of ﬁ xed assets
PIS and COFINS on purchase
of goods
IRPJ (withholding income tax)
and CSLL (social
contribution tax)
PIS/COFINS/CSLL - withheld
at source
Other
(-) Provision for discount
on sale of ICMS credits

Current
Noncurrent

97,888

68,556

3,022

7,120

-
-

6,825

20,967

3,022

20,967

89,767

7,120

89,767

3,335

-
-

16,421
21,567

15,200
17,070

3,836

16,136

11,891

-
-

9,589
2,237

10,983
2,562

19,743

8,448

20,025

8,448

1,746

2,176

-
3,000

-
39,720
34,799
4,921

-
1,104

5,574
12,282

3,436
3,149

-
127,457
93,760
33,697

(2,879) (2,414)
255,126
210,728
191,195
101,464
63,931
109,264

(a) Refers to the State Reverse Charge System VAT (ICMS - ST) amount
that has been separately disclosed and withheld on a monthly basis on the
Company’s and its subsidiary Indústria e Comércio de Cosméticos Natura
Ltda.’s products sold and shipped to customers located in the Federal District
and States other than the São Paulo State, pursuant to São Paulo State tax
legislation in effect since February 2008.
Under the Special Regime granted to the Company by São Paulo State
Department of Finance (SeFaz - SP) in January 2009, when determining
monthly Company’s ICMS, since February 2008, it was allowed to offset
an amount equivalent to 75% of the ICMS - ST, arising from subsequent
transactions not carried out in the State of São Paulo. The remaining
recoverable ICMS - ST balance, equivalent to 25%, was utilized by the
Company after an administrative inspection by tax authorities.
This Special Regime is suspended since April 2009 so that the Company
ﬁ les with tax authorities its accessory obligations in the format required
by the Special Regime and Tax Administration Coordinator (CAT)
Administrative Rule 17/99 and was rectiﬁ ed during the second half of 2010,
once the Company had complied with all the requirements related to the
documentation requested by tax authorities.
The amounts related to the 25% of the credits of ICMS - ST that were
recorded previously in noncurrent assets were reclassiﬁ ed to current assets
for the quarter ended September 30, 2010 due to a special regime called
“Fast Track” that was approved by SeFaz, which allows the Company to
offset the credits as of the date of the ﬁ nancial statements through a bank
guarantee in the minimum amount of the credits that were offset through
the date of the ﬁ nancial statements.
As of December 31, 2010 the Company has offset the amount of R$76.9
million which was supported by a bank guarantee.
The tax credits recorded under the self-assessment process, totaling
R$16,953 as of December 31, 2009, were offset in the ﬁ rst half of 2010
based on authorization granted by tax authorities, as the Company amended
its tax books for the period from February to May 2008.
(b) On September 24, 2008, the Tax Administration Coordinator of the SeFaz
- SP accepted the voluntary reporting request ﬁ led by the subsidiary Indústria
e Comércio de Cosméticos Natura Ltda. where, after internal veriﬁ cations
made by its management, this company evidenced undue withholdings of
ICMS - ST in the period February-May 2008 due to a different interpretation
of the provisions of article 264, IV, 313-E and 313-G of ICMS Regulation
(RICMS/2000). The said voluntary reporting request is also intended to clarify

and permit the application of the procedures necessary to regularize the
transactions carried out by this subsidiary during the referred period. As a
result of this regularization, ICMS - ST credits were calculated at R$16,421 as
of December 31, 2010 and R$15,200 as of December 31, 2009.

The credit will be offset by the subsidiary after veriﬁ cation by tax authorities;
however, based on the subsidiary’s legal counsel’s and management’s
assessment, the risk of not offsetting the amounts recognized as of December
31, 2010 is remote.

9. INCOME TAX AND SOCIAL CONTRIBUTION

a) Deferred

Deferred income tax (IRPJ) and social contribution (CSLL) result from
Company and its subsidiaries’ temporary differences. These credits are
recorded in noncurrent assets, in accordance with CPC 26. The amounts are
as follows:

Company Consolidated

2010

2009

2010

2009

Temporary differences

Allowance for doubtful
accounts (note 6))

Allowance for losses on
inventories realization
(note 7)

19,266

16,204

19,266

16,204

3,563

2,209

21,725

12,591

Reserve for tax, civil and
labor contingencies (note 18) 18,884

20,224

40,375

38,940

Non-inclusion of ICMS in
the PIS and COFINS basis
(note 17)

Actuarial liability - healthcare
plan (note 24.2.)

Allowance for losses on swap
and forward contracts
(note 25)

Provision for ICMS - ST -
Paraná State, Federal District
and Mato Grosso do Sul
(note 17)

Allowances for losses on
advances to suppliers

Accrued contractual
obligations

Provision for Proﬁ t sharing

Provision for discount on
assignment of ICMS credits

Accrued beneﬁ ts sharing
and partnerships

Provision for international
operations

Other temporary
differences

573

534

28,869

19,668

4,462

811

6,702

3,176

1,136

2,335

1,381

2,941

13,672

10,970

13,672

10,970

3,879

4,483

4,432

4,997

1,947

733

1,761

2,777

1,419

4,139

979

821

6,874

4,553

6,874

4,553

6,562

4,420

13,235

18,135

26,645

21,307

87,491

82,952

180,259

146,146

Changes in deferred income tax and social contribution assets in Company
for the annual reporting periods are stated as follows:

117

Company

2009

of income 2010

(Charged)
credited to
the statement

Temporary differences
Allowance for doubtful accounts
Allowance for losses on inventories
realization
Reserve for tax, civil and labor
contingencies
Non-inclusion of ICMS in the PIS
and COFINS basis
Allowance for losses on swap
and forward contracts
Provision for ICMS - ST - Paraná
State, Federal District and Mato
Grosso do Sul State
Allowances for losses on advances
to suppliers
Accrued beneﬁ ts sharing and
partnerships
Actuarial liability - healthcare plan
Accrued contractual obligations
Provision for Proﬁ t sharing
Other temporary differences

16,204

3,062

19,266

2,209

1,354

3,563

20,224

(1,340)

18,884

534

573

2,335

(1,199)

1,136

10,970

2,702

13,672

4,483

(604)

3,879

4,553
811
733
1,761
18,135
82,952

2,321
3,651
1,214
(1,761)
(4,900)
4,539

6,874
4,462
1,947
-
13,235
87,491

Changes in deferred income tax and social contribution assets on a
consolidated basis for the years presented are stated as follows:

Consolidated

2009

of income 2010

(Charged)
credited to
the statement

Temporary differences
Allowance for doubtful accounts
Allowance for losses on inventories
realization
Reserve for tax, civil and labor
contingencies
Non-inclusion of ICMS in the PIS
and COFINS basis
Allowance for losses on swap
and forward contracts
Provision for ICMS - ST - Paraná
State, Federal District and Mato
Grosso do Sul Statel
Allowances for losses on advances
to suppliers
Accrued beneﬁ ts sharing and
partnerships
Temporary differences of
international operations
Actuarial liability - healthcare plan
Accrued contractual obligations
Provision for Proﬁ t sharing
Provision for discount on assignment
of ICMS credits
Other temporary differences

16,204

3,062

19,266

12,591

9,134

21,725

38,940

1,435

40,375

19,668

9,201

28,869

2,941

(1,560)

1,381

10,970

2,702

13,672

4,997

(565)

4,432

4,553

2,321

6,874

4,420
3,176
1,419
4,139

2,142
3,526
1,358
(4,139)

6,562
6,702
2,777
-

821
21,307
146,146

979
158
5,338
26,645
34,113 180,259

Management, based on projections of future taxable income, estimates that
the recorded tax credits will be fully realized within ﬁ ve years.
The amounts recorded as deferred income tax and social contribution will
be realized as follows:

2011
2012
2013
2014 and thereafter

Company Consolidated
86,263
11,977
36,993
45,026
180,259

45,607
10,254
5,416
26,214
87,491

In addition, as of December 31, 2010, the Company had unrecognized tax
loss carryforwards and temporary differences from foreign subsidiaries not
recorded in the ﬁ nancial statements of the foreign subsidiaries due to the lack
of a history of taxable income and taxable income projections for coming
years, as shown below.
Tax credits, calculated at the prevailing tax rates in the related countries
where the subsidiaries are located, are stated as follows:

Total temporary differences
Tax loss carryforwards:
Argentina
Chile
Mexico
Colombia
France

13,594
75,926
79,156
48,072
45,761

The tax credits on tax loss carryforwards generated by the subsidiaries do
not have an expiry date for offset, except for the subsidiaries in Argentina and
Mexico, which expire as follows:

2011
2012
2013
2014
2015
2016 and thereafter

Argentina
3,203
2,944
4,390
-
2,518
539
13,594

Mexico
-
-
-
11
6,869
72,276
79,156

a) Reconciliation of income tax and social contribution

Company Consolidated
2010 2009

2009

2010

Income before income tax
and social contribution
Income tax and social
contribution at the
rate of 34%
Technological research and
innovation beneﬁ t -
Law 11196/05 (*)
Tax incentives - donations
Equity in subsidiaries (note 12)
Unrecognized deferred taxes
on tax losses generated by
foreign subsidiariesor
Interest on capital tax beneﬁ t
Other adjustments due to
Law 11638/07 and Provisional
Act 449/08
Write-off of goodwill –
liquidation of Flora Medicinal
Tax utilization of goodwill
(note 14)
Other permanent differences
Income tax and social
contribution expenses
Income tax and social
contribution - current
Income tax and social
contribution - deferred
Effective rate - %

1,053,122

812,719 1,118,169 874,154

(358,062) (276,324) (380,178) (297,212)

19,035
5,820
8,760

9,956
2,868
(962)

19,035
8,296
-

9,956
5,278
-

-
18,242

-
28,048

(31,459) (37,739)
28,048

18,242

649

(1,037)

(1,623)

(2,035)

8,332

-
(11,849)

108,189
467

- 108,189
(14,765) (4,715)

(309,073) (128,795) (374,120) (190,230)

(313,612) (144,403) (408,233) (224,457)

4,539
29.3

15,608
15.8

34,113
33.5

34,227
21.8

(*) Refers to the tax beneﬁ t established by Law 11196/05, which allows
for the direct deduction from the calculation of taxable income and the
social contribution tax basis of the amount corresponding to 60% of the
total expenses on technological research and innovation, observing the rules
established in said Law.

10. ESCROW DEPOSITS
Represent Group’s restricted assets related to amounts deposited and held

118

by the courts until the litigation to which they are linked is resolved.
The Company and its subsidiaries’ escrow deposits as of December 31, 2010
and December 31, 2009 are as follows:

Company Consolidated
2009

2010

2009

2010

53,809

167,019

ICMS - ST (*) - unaccrued
(note 18 (a))
ICMS - ST suspended collection
(*) (note 17.(b))
Other accrued tax obligations
2,893
(note 17.(d) and (g))
Unaccrued tax lawsuits
41,102
Accrued tax lawsuits (note 18)) 15,263
938
Unaccrued civil lawsuits
1,874
Accrued civil lawsuits (note 18)
Unaccrued labor lawsuits
4,410
Accrued labor lawsuits
(note 18)

1,762
289,070

29,162

53,809

29,162

110,640

167,019 110,640

2,743
25,581
14,296
313
231
2,994

42,297
46,460
16,563
1,343
1,976
5,130

39,640
29,103
15,721
636
1,878
3,381

11. OTHER NONCURRENT ASSETS

Company Consolidated
2009

2009

2010

Advances to advertisement
services
Asset held for sale
Advance for future capital increase
Restricted cash - CDBs (*)
(note 18.(f) - “Tax risks”)

20,052
-
-

-
20,052

-
-
90

20,997
17,752
-

1,660
-
-

-
90

6,155
44,904

5,769
7,429

(*) Refers to amounts pledged as collateral by restricted temporary
investments of the subsidiary Natura Inovação e Tecnologia de Produtos
Ltda., related to the court collection of Federal VAT (IPI) for July 1989, when
wholesale units were held equivalent to manufacturing establishments by
Law 7798/89.

1,696
187,656

2,410 2,193
337,007 232,354

12. INVESTMENTS

(*) Refers to the ICMS - ST declaratory action ﬁ led by Paraná State, the
Federal District and Mato Grosso do Sul State, as discussed in notes 17.(b)
and 18 - “Contingent tax liabilities - possible risk”, item (a).

Investments in subsidiaries

Company
2009
1,000,600

2010
1,099,188

Information on and changes for period ended December 31, 2010

Indústria e

Natura

Flora

Natura Cosméticos Cosméticos Medicinal

Comércio de Natura
Cosméticos Cosméticos Cosméticos
Cosméticos
B.V. -
Natura Ltda. S.A. - Chile
Colombia Holanda (*) España S.L.
526,155
9
99,175
66,744
41,782
99.99% 99.99% 99.94% 99.97% 99.99% 99.99% 99.99% 99.99% 99.99% 100.00% 100.00%

J. Monteiro de Produtos de México S.A.
Ltda.
5,008 126,550

S.A. - Peru Argentina Venezuela da Silva Ltda.
-

5,116 96,143

5,872

Ltda. -

C.A. -

S.A. -

(*)

Total
972,554
-

Natura
Inovação e
Tecnologia Cosméticos Cosméticos International Natura

Natura
(Brazil)

Natura

Capital
Interest - %
Subsidiary’s shareholders’
equity (deﬁ cit)
Interest in shareholders’ equity
Subsidiaries net income (loss)
for the year of subsidiaries, net
of translation effects
Carrying amount of investments
Balances as of December
31, 2009
Equity in subsidiaries
Exchange rate change and
other adjustments in the
translation of investments in
foreign subsidiaries
Company’s contribution to
the stock options plan of
subsidiaries’ executives and
other reserves
Reclassiﬁ cation of proﬁ ts on
inventories not eliminated
Earnings distribution
Capital increases
Balances as of December
31, 2010
Allowance for losses
Balances as of December
31, 2009
Merger of advance for future
capital increase (AFAC)
Allowance for losses
Merger of Flora Medicinal
Balances as of December
31, 2010

947,995
947,900

23,249
23,247

(892) 56,919
(891) 56,902

273
273

(514)
(514)

45,026
45,021

26,953
26,950

8,783
8,782

8,207
8,207

83 1,116,082
83 1,115,960

105,630

(5,827)

(2,613) (11,381)

(629)

(514)

12,575 (27,811) (17,552) (26,116)

25,762

836,851
105,625

24,074
(5,827)

3,769 30,908
(2,612) (11,378)

511
(629)

-
-

10,864
61,713
12,575 (27,808) (17,550) (26,120)

25,315

6,535

60 1,000,600
26,276

1,907

(2,048) (3,699)

215

(428)

(666)

(240)

486

(4,473)

5,513

1,161

6,674

(17,375)
-
-

-
-
3,092

-
-

-
-
- 41,071

-
-
176

-
-
- (30,000)
-

-
-
30,109

-
-
20,037

-
-
22,978

-
-
23

(17,375)
(30,000)
117,486

930,614

23,246

(891) 56,902

273

45,021

26,950

8,782

8,208

83 1,099,188

(564)

-
-
-

120
(514)
958

-
-
-

120
(514)
958

(*) Consolidated information of the following companies:

Natura Cosméticos - Mexico: Natura Cosméticos y Servicios de Mexico, S.A. de C.V.; Natura Cosméticos de Mexico, S.A. de C.V.; and Natura Distribuidora
de Mexico, S.A. de C.V.
Natura Europa SAS: Natura (Brazil) International B.V. (The Netherlands), Natura Brasil Inc. (USA - Delaware), Natura International Inc. (USA - New York),
Natura International Inc. (USA - Nevada), Natura Worldwide Trading Company (Costa Rica), Natura Europa SAS (France) and Natura Brasil SAS (France).

119

13. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
Company

PROPERTY, PLANT AND EQUIPMENT

Vehicles
Leasehold improvements (b)
Machinery and equipment
Furniture and ﬁ xtures
IT equipment
Projects in progress
Advances to suppliers

Weighted

average annual
depreciation
rate - %

2010

2009

Adjusted Accumulated Net book Adjusted Accumulated Net book
cost depreciation value

depreciation value

cost

21
15
4
7
18
-
-

34,234
23,486
27,668
6,264
6,614
11,699
15,159
125,124

(14,491)
(9,053)
(3,018)
(2,584)
(3,803)
-
-
(32,949)

19,743
14,433
24,650
3,680
2,811
11,699
15,159
92,175

31,358
19,246
13,478
5,676
6,507
1,212
639
78,116

(13,259)
(5,627)
(2,039)
(2,479)
(4,337)
-
-
(27,741)

18,099
13,619
11,439
3,197
2,170
1,212
639
50,375

Company

INTANGIBLE ASSETS

Software

Weighted

average annual
amortization
rate - %

2010

2009

Adjusted Accumulated Net book Adjusted Accumulated Net book
cost amortization value

amortization value

cost

29.190

(10.604)

18.586

19.441

(7.914)

11.527

Consolidated

PROPERTY, PLANT AND EQUIPMENT

Weighted

average annual
depreciation
rate - %

2010

2009

Adjusted Accumulated Net book Adjusted Accumulated Net book
cost depreciation value

depreciation value

cost

Machinery and equipment
Buildings
Installations
Land
Molds
Vehicles
IT equipment
Furniture and ﬁ xtures
Leasehold improvements (b)
Projects in progress
Advances to suppliers
Other

6
4
9
-
30
21
19
11
15
-
-
3

308,262
151,161
120,440
27,180
105,362
56,361
75,749
27,164
44,273
35,489
28,648
3,897
983,986

(124,315)
(54,305)
(65,066)
-
(79,921)
(21,181)
(45,969)
(11,926)
(18,725)
-
-
(2,111)
(423,519)

183,947
96,856
55,374
27,180
25,441
35,180
29,780
15,238
25,548
35,489
28,648
1,786
560,467

278,805
151,142
110,476
33,662
85,698
48,312
65,469
27,732
36,106
16,269
25,213
6,660
885,544

(122,623)
(48,210)
(59,339)
-
(68,283)
(18,581)
(44,714)
(12,557)
(14,363)
-
-
(4,618)
(393,288)

156,182
102,932
51,137
33,662
17,415
29,731
20,755
15,175
21,743
16,269
25,213
2,042
492,256

Consolidated

INTANGIBLE ASSETS

Business lease - Natura Europa SAS - France (a)
Software
Trademarks and patents

Weighted

average annual
amortization
rate - %

2010

2009

Adjusted Accumulated Net book Adjusted Accumulated Net book
cost amortization value

amortization value

cost

-
18
10

4,629
188,660
1,573
194,862

-
(73,376)
(1,413)
(74,789)

4,629
115,284
160
120,073

5,250
131,429
1,951
138,630

-
(54,546)
(1,344)
(55,890)

5,250
76,883
607
82,740

(a) The business lease generated on the purchase of a commercial location
where Natura Europa SAS - France operates is supported by an appraisal
report issued by independent appraisers, attributable to the fact that it is an
intangible, marketable asset, which does not suffer any decrease in value over
time. The change in the balance between December 31, 2010 and December
31, 2009 is basically due to the effects of the exchange variation for the
period.
(b)The depreciation rates consider the terms of the property lease
agreements.

The Company conducted an analysis of the useful economic life of the
remaining property, plant and equipment items and intangible assets, with

effects being recorded beginning January 1, 2010. As a result of the review
of the accounting estimate, which was intended to realign the remaining
useful life of assets, and, consequently, the depreciation over the remaining
life of assets, a positive impact was recorded in depreciation for year of 2010,
compared to the prior period, in the amount of R$14,634.
Additional information on property, plant and equipment
a) Assets pledged as collateral
As of December 31, 2010, the Company and its subsidiaries have property,
plant and equipment items pledged as collateral in bank ﬁ nancing and loan
transactions, as well as items attached to the defense of lawsuits, as shown
below:

120

Company
Machinery and equipment
Land
IT equipment
Vehicles
Balances at end of year

b) Expenses on operating leases

Consolidated
3,171
-
3,506
4,730
11,407

3,171
700
4,092
7,730
15,693

Vehicles
Molds
Facilities
IT equipment
Furniture and ﬁ xtures
Other

Leases

Company Consolidated
2009
8,960

2009
1,217

2010
6,539

2010
1,217

c) Balance of capitalized interest

Buildings

Consolidated

2010
1,479

2009
1,531

14. INTANGIBLE ASSETS - GOODWILL ON INVESTMENTS
On March 5, 2004, Natura Participações S.A. was 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 future dividend payment capacity in the same
amount. This goodwill arose from the merger of the shares of Natura
Empreendimentos S.A. into Natura Participações S.A. on December 27, 2000.
This merger was approved by the Extraordinary Shareholders’ Meeting held
on that date, and the amounts are supported by a valuation report issued by
independent appraisers.
The amounts are as follows:
Company
2009
318,203

2010
318,203

Goodwill on investments
Provision for maintenance of future
dividend payment capacitys

(318,203)
-

The provision for maintenance of future dividend payment capacity, as
it is in the full amount, will result in the recognition of the goodwill
amor tization tax benefits for all of the Company’s shareholders.

As mentioned in note 3, considering the changes in accounting practices
introduced by Law 11638/07 and Provisional Act 449/08, conver ted into
Law 11941/09, since January 1, 2009 the existing goodwill balance as of
December 31, 2008 has no longer been amor tized, and the provision for
future dividends, covering the full dividend amount, has no longer been
reversed. Accordingly, as of January 1, 2009, the goodwill tax benefit has
been used in monthly calculations of income tax and social contribution
based on the Transitional Tax Regime (RTT), in accordance with the
provisions of Provisional Act 449/08 and the effects mentioned in note
9.b).

Consolidated amortization expenses of intangible assets estimated for the next
years

2011
2012
2013
2014 and thereafter

Changes in property, plant and equipment

Company Consolidated
19.436
19.436
19.436
61.765
120.073

2.690
2.690
2.690
10.516
18.586

Company Consolidated
2009

2009

2010

50,75

37,865

492,256 477.661

Balances at the beginning of
the year
Additions (less transfers from
projects in progress - when
terminated):
Machinery and equipment
Projects in progress/advances
to suppliers

13,498
-
-
769
545
1,036
57,121
(2,706)
(12,615)
92,175

11,094
-
-
980
432
627
25,981
(3,552)
(9,919)
50,375

24,193 18,099
8,787
16,986
3,414
7,208
5,825
7,304
1,578
1,618
3,696 2,896
175,228 111,125
(37,605) (20,984)
(69,412) (75,546)
560,467 492,256

Company Consolidated
2009

2009

2010

11,527

9,008

82,740

75,029

9,749
-
(2,690)
18,586

4.587
(69)
(1,999)
11,527

29,507
61,648
(4,879)
(4,916)
(19,436) (16,880)
82,740
120,073

(-) Write-offs, net
(-) Depreciation
Balances at the end of the year

Changes in intangible assets

Balances at the beginning of
the year
Additions:
Software (including
implementation costs)
(-) Write-offs and others, net
(-) Amortization
Balances at the end of the year

15. LOANS AND FINANCINGS

Local currency
BNDES - EXIM (a)
FINEP (Financing Agency
for Studies and Projects)
Promissory notes
Debentures
BNDES (a)
Guaranteed account
BNDES - FINAME
Banco do Brasil - FAT
Fomentar (Workers’
Assistance Fund)
Capital lease - ﬁ nancing
FINEP - grant
Total local currency

Foreign currency
BNDES - EXIM (a)
BNDES (a)
Export ﬁ nancing -
ACC/ACE (a)
Resolution 2770 (a)
Resolution 4131 (a)
International operation
- Peru
Total foreign
currency
Grand total

Company Consolidated

2010
-

2009

2010
- 116,388

2009 Reference
41,707

-
-
- 350,856

27,633

- 352,669

39,985
- 350,856
-
29,549 110,996 100,949
355
2,001
6,168
6,506

180
-

352,669
23,206
-
-

-
-

4,970
-
1,660
-
- - 2,086 1,211
375,875 380,585 623,127 547,861

3,908
940

B
C
D
E
F
G

H
I
J

Company Consolidated

2010
-
2,479

2009
-
2,921

2010
1,229
7,358

2009 Reference
10,427
9,984

A
E

-
-
- 111,791
-

50,088

-
10,447
- 111,791
-

50,088

- - 9,861 13,848

52,567 114,712 68,536 156,497
428,442 495,297 691,663 704,358

K
L
M

121

8,884

5,061

29,669 21.468

32,389

7,787

84,555 49,058

Current
Noncurrent

60,086 469,590 226,595 569,366
368,356 25,707 465,068 134,992

Reference Currency
A

Real

Maturity
February and
December 2011

Charges
6.7% of the debt with interest of 8.3% p.a. Guarantee of Natura Cosméticos S.A.
+ exchange ﬂ uctuation (dollar) for 20%
of the debt maturing in February 2011
and 93.3% of the debt with ﬁ xed interest
of 7% p.a. maturing in December 2011.

Collaterals

F
G

Real

Real
Real

Real

US dollar

March 2013

TJLP (b)

Guarantee of Natura Cosméticos S.A.
and bank guarantee

June 2010

Interest of 106% CDI (c)

May 2013

Interest of 108 % do CDI (c)

N/A

April 2010 and
February 2017

For the installment maturing in April 2010: Mortgages (f)
interest of 4.5% p.a. + TJLP (b) +
UMBNDES (e)

For the installment maturing in February
2017: (i) TJLP (b) + interest of 2.8% p.a.
for 85% of the debt; (ii) exchange
ﬂ uctuation (dollar) + interest of 8.54% p.a.
or 9% of the debt; and (iii) TJLP (b)
+ interest of 2.3% p.a. for 6% of the debt

Bank guarantee

April 2011
November 2015

123.9% of CDI (c) p.a. + IOF (d)
Interest of 4.5% p.a. + TJLP (b)

February 2014

Interest of 4.4% p.a. + TJLP (b)

Guarantee of Natura Cosméticos S.A.
Chattel mortgage, guarantee of Natura
Cosméticos S.A. and promissory notes

Chattel mortgage, guarantee of Natura
Cosméticos S.A. and promissory notes

Through September
2012

Interest of 99.5% to 102.99% of
DI - CETIP (g)

Leases are collateralized by the underlying assets

January 2011

March 2010

January 2011

N/A

Exchange ﬂ uctuation + 0.52% p.a.

Guarantee of Natura Cosméticos S.A.

Exchange ﬂ uctuation + 2.11% p.a.

US dollar

February 2011

Exchange ﬂ uctuation + 1.22% p.a.

Novo sol

December 2011

Interest of 4.15% p.a.

Guarantee of subsidiary Indústria e Comércio
de Cosméticos Ltda.
Guarantee of subsidiary Indústria e Comércio
de Cosméticos Ltda.
Bank guarantee

(a) Loans and ﬁ nancing for which swap contracts (CDI) were entered into.
(b) TJLP - Long-term Interest Rate.
(c) CDI - Interbank Deposit Rate.
(d) IOF - Tax on Financial Transactions.
(e) UMBNDES - Monetary Unit of National Bank for Economic and
Social Development (BNDES). Local currency ﬁ nancing from the BNDES
is collateralized by the Cajamar unit of subsidiary Indústria e Comércio de
Cosméticos Natura Ltda.
(f) Mortgages - relate to real estate of the Cajamar unit of the subsidiary
Indústria e Comércio de Cosméticos Natura Ltda.
(g) DI - CETIP - daily index calculated based on the average DI, disclosed
by the Clearinghouse for the Custody and Financial Settlement of Securities
(CETIP).

Maturities of noncurrent liabilities are as follows:

2011
2012
2013
2014
2015
2016 and thereafter
Total

Company Consolidated
2009
2010
42,695
-
33,799
39,425
23,728
379,440
16,991
22,963
17,779
19,001
4,239
-
465,068 134,992

2009
6,556
6,556
6,556
4,470
1,569
-
25,707

2010
-
6,530
355,820
4,450
1,539
17
368,356

a) Description of the main current bank loan and ﬁ nancing agreements:
1. BNDES - EXIM Pré-Embarque and BNDES - EXIM Pré-Embarque Especial
Programs
The subsidiary Indústria e Comércio de Cosméticos Natura Ltda. beneﬁ ts
from the ﬁ nancing programs of the BNDES in the pre-shipment stage for the
export of goods and services. As a rule, the requirements for participation in
said programs are: (i) to have credit approved by the ﬁ nancial institution that
will enter into the ﬁ nancing agreement; and (ii) to manufacture products with
a using at least 60% locally.
2. Financing agreements with the BNDES
The Company and its subsidiaries Indústria e Comércio de Cosméticos
Natura Ltda. and Natura Inovação e Tecnologia de Produtos Ltda. have
credit facility agreements with the BNDES to facilitate direct investments in
the Company and its subsidiaries in order to improve certain product lines,
train research and development employees, optimize operation product
separation lines in the Cajamar - SP industrial facilities, set up of a vertical
warehouse also in the Cajamar - SP industrial facilities, hire consultancy ﬁ rms
for the new distribution centers, build two new distribution centers, one in
Matias Barbosa - MG and another in Jaboatão dos Guararapes - PE, as well
as restructure the administration of the Itapecerica da Serra - SP unit and
purchase the equipment necessary for these purposes.
3. Financing agreement with the FINEP
The subsidiary Natura Inovação e Tecnologia de Produtos Ltda. has innovation
programs aimed at the development and acquisition of new technologies
by means of partnerships with universities and research centers in Brazil
and abroad. These innovation programs have the support of research and
technological development incentive programs of the FINEP, which facilitates
and/or co-ﬁ nances equipment, scientiﬁ c grants and research material for the
participating universities.

122

These funds were used to partially ﬁ nance investments incurred in the
drafting of the “Technology Platforms for New Cosmetics and Nutritional
Supplements” project.
4. Machinery and Equipment Financing - FINAME
The Company beneﬁ ts from a credit facility with the BNDES, related to
FINAME onlendings, intended to ﬁ nance the purchase of new machinery and
equipment manufactured in Brazil. Said onlending is carried out by granting
credit to Indústria e Comércio de Cosméticos Natura Ltda., granting rights to
receivables to the ﬁ nancial institution accredited as a ﬁ nancing agent, usually
Banco Votorantim S.A., Banco Itaú Unibanco S.A., Banco do Brasil S.A., HSBC
Bank Brasil S.A. and Banco Santander Brasil S.A., which enter into such said
ﬁ nancing with Indústria e Comércio de Cosméticos Natura Ltda.
These agreements are collateralized by the ﬁ nanced assets. Indústria e
Comércio de Cosméticos Natura Ltda. is the trustee and the Company is
the guarantor of these assets. In addition, the Company and its subsidiaries
are obliged to meet the Provisions Applicable to BNDES Agreements and
General Regulatory Conditions of FINAME-related Transactions.
5. Resolution nº 4131/62
Bank Credit Note - Onlending of Funds Raised Abroad - Resolution 4131/62,
raised with Banco Bradesco on November 10, 2010 and maturing on
February 10, 2011, whose principal totals US$ 30,0000.
6. Promissory notes
First issue of promissory notes totaling R$350,000, single series, unguaranteed,
with nominal unit value of R$1,000, issued under Brazilian Securities and
Exchange Commission (CVM) Instruction 476, on December 17, 2009. The
promissory notes were settled in June 2010, with the debenture issuance.
7. Debentures
First issuance of simple debentures, nonconvertible into shares, totaling
R$350,000, in single series, without guarantee and without ﬁ nancial covenants,
with face value of R$1,000, in conformity with CVM Instruction 476/09, issued
on May 26, 2010 and subscribed and paid in May 28, with the payment of
semiannual interest in May and November, and principal maturing on May
26, 2013.
b) Finance lease transactions
Lease obligations are effectively guaranteed, since the leased asset is reversed
to the lessor in case of default.
Financial obligations are broken down as follows:

Gross ﬁ nance lease obligations - minimum
lease payments:
Less than one year
More than one year and less than ﬁ ve years

Future ﬁ nancing charges on ﬁ nance leases
Financial lease obligations - accounting balance

2010

2009

642
377
1,019
(79)
940

844
950
1,794
(134)
1,660

c) Contract covenants
As of December 31, 2010 and 2009, ﬁ nancing and loan agreements entered
into by the Company and its subsidiaries do not contain restrictive clauses
that establish obligations regarding the maintenance of ﬁ nancial indices by
the Company and its subsidiaries. The Company were in compliance with
all the restrictive clauses.

16. TRADE AND OTHER PAYABLES

Domestic and foreign suppliers
Freight payable

Company Consolidated
2009
2009
2010
60,876 331,909 231,687
23,595
34,585
23,595
366,494 255,282
84,471

2010
78,647
34,585
113,232

The Company and consolidated balances payable to foreign suppliers as of
December 31, 2010 is R$4,964 e R$842, respectively (R$4,409 e R$497,
respectively, as of December 31, 2009), and mostly refers to U.S. dollar-
denominated amounts.

17. TAXES PAYABLE

Company Consolidated
2009

2009

2010

ICMS Company and reverse
charge payable (b)
PIS/COFINS payable
(injunction) (a)

217,826

150,095

242,676 213,860

1,686

1,570

84,908

57,848

IRPJ and CSLL payable
IRPJ and CSLL (injunction) (c)
IRPJ and CSLL (injunction - PAT)
IRRF
IPI – exempt and zero-taxed
products (d)
UFIR adjustment on federal
taxes (e)
IPI credit on purchase of property,
plant and equipment and supplies
for own use and consumption (f)
Action for the annulment of
a tax liability – INSS (g)
PIS/COFINS/CSLL
PIS/COFINS payable
Taxes - foreign subsidiaries
ISS payable

99,347
33,472
-
7,901

15,520
13,624
-
5,436

125,816
33,472
2,261
13,203

25,786
13,624
965
9,574

39,404

36,897

6,216

5,181

6,360

5,313

3,768

3,595

2,893
5,319
-
-
613
375,273

2,743
4,100
-
-
275
198,544

2,893
7,554
6,663
9,354

2,743
5,557
5,284
7,220
2,799 1,588
581,131 389,854

Escrow deposits ((b), (d) and
(g) )(note 10)
Current
Noncurrent

(169,912)
205,361
169,912

(113,383)
85,161
113,383

(209,316) (150,280)
371,815 239,574
209,316 150,280

(a) The Company and its subsidiary Indústria e Comércio de Cosméticos Natura
Ltda. are challenging in court the inclusion of ICMS in the tax basis of PIS and
COFINS (taxes on revenue). In June 2007, the Company and its subsidiary
were authorized by the court to pay PIS and COFINS without the inclusion
of ICMS in the tax basis, starting April 2007. The balance recognized as of
December 31, 2010 refers to the unpaid amounts of PIS and COFINS, from
April 2007 to December 2010 adjusted based on the SELIC (Central Bank
overnight rate), and to which the obligation is on hold. Part of the balance, in
the adjusted amount of R$2,606, is deposited in escrow.
(b) As of December 31, 2010, R$119,371, R$34,969 and R$12,679 of the
total amount recognized refer to the ICMS - ST of State of Paraná, Federal
District and State of Mato Grosso do Sul, respectively (R$95,834 for State of
Paraná and R$14,806 for Federal District as of December 31, 2009), which
is being challenged in court, as also mentioned in note 18 - “Contingent
tax liabilities - possible risk”, (a). The Company has made monthly escrow
deposits for the unpaid amounts.
(c) On February 4, 2009, the Company was granted an injunction,
subsequently conﬁ rmed by court decision, that suspended the collection
of income tax and social contribution on any amounts received as arrears
interest, paid on late payment of contractual obligations receivables to the
Natura Beauty Consultants. The appeal ﬁ led by the Federal Government is
awaiting judgment.
(d) Refers to Federal VAT (IPI) on zero-taxed, untaxed or exempt raw
materials and packaging materials. Subsidiary Indústria e Comércio de
Cosméticos Natura Ltda. ﬁ led a writ of mandamus and obtained an injunction
granting the right to the credit. On September 25, 2006, the injunction was
revoked by a decision that considered the request invalid. The Company
ﬁ led an appeal for reconsideration of merits and reinstatement of the
injunction. To suspend the payment of tax, in October 2006, the Company
made an escrow deposit in the amount offset under the injunction, whose
adjusted balance totals R$39,404 as of December 31, 2010 (R$36,897 as of
December 31, 2009). In the fourth quarter of 2009, in order to utilize the
beneﬁ ts granted under Provisional Act 470/09, which creates a program for
the payment and payment in installments of tax debts, the subsidiary ﬁ led
a motion partially withdrawing the claims made in the injunction ﬁ led that
maintains only the claim of tax credits on tax-exempt products, thus dropping
the lawsuits claiming IPI credits of zero-taxed and untaxed products (see
details in note 18, in topic ‘Tax installment plans created under Provisional
Act 470/09). On this date, after having met the requirements to join the tax
installment plan introduced by Provisional Act 470/09, the subsidiary awaits
the tax authorities’ approval to write off the suspended collection amounts
and the corresponding escrow deposits.
(e) Refers to the inﬂ ation adjustment of 1991 federal taxes on income (IRPJ/
CSLL/ILL) based on the UFIR (ﬁ scal reference unit), discussed in a writ of
mandamus. The amount involved is deposited in escrow. On February 26,
2010, the Company ﬁ led a motion for the withdrawal of this lawsuit to be
able to utilize the beneﬁ ts granted under Law 11941/09, which creates a
program for the payment and payment in installments of tax debts.
(f) Subsidiary Indústria e Comércio de Cosméticos Natura Ltda. discusses,
through writs of mandamus, the right to IPI credit on the purchase of property,
plant and equipment items and consumables. On February 26, 2010, this
subsidiary ﬁ led a motion for the withdrawal of this lawsuit to be able to utilize
the beneﬁ ts granted under Law 11941/09, which creates a program for the
payment and payment in installments of tax debts.

123

(g) Refers to the social security contribution required by tax assessments
issued by the National Institute of Social Security as a result of an inspection,
which claims that 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 being challenged in court through a tax debt annulment action
and are deposited in escrow. The amounts required in the tax assessment
notice comprise the period from January 1990 to October 1999. In 2007,
the Company reversed the amount of R$1,903, relating to the expiration
of part of the amount involved in the lawsuit for the period from January
1990 to October 1994, as recently instructed under Case Law Decision 8
of the Federal Supreme Court (STF). On March 1, 2010, the Company ﬁ led
a request that withdraws part of the claims made and partially waiving its
right to utilize the beneﬁ ts granted under Law 11941/09 regarding the social
security contributions due by the companies that provided services to the
Company during the period from November 1994 to December 1998.
Tax installment plans created by Law 11941/09
On May 27, 2009, Federal Government enacted Law 11941, as a result of
the conversion of Provisional Act 449/08, which, among other changes to
tax law, established the possibility of a tax debt installment plan managed
by the Federal Revenue Service, the National Social Security Institute and
the National Treasury Attorney General (PGFN), including the remaining
balance of consolidated debts in the REFIS (Law 9964/00), Special Installment
Plan (PAES) (Law 10684/03) and the Exceptional Installment Plan (PAEX)
(Provisional Act 303/06), in addition to the regular payments in installments
provided for by article 38 of Law 8212/91 and article 10 of Law 10522/02.
The entities that opted for paying or dividing into installments the debts
under this Law, in the applicable cases, may settle the amounts corresponding
to default and automatic ﬁ nes and late-payment interest, including those
related to legally enforceable debts to the Government, using tax loss
carryforwards, and will beneﬁ t from reduced ﬁ nes, interest and legal charges
whose reduction percentage depends on the installment plan chosen.
Pursuant to the established rules, for compliance with the ﬁ rst stage of
installment payments, the Company and its subsidiaries, after having ﬁ led
motions at Court formalizing the withdrawal of lawsuits whose taxes would
be paid in installments, applied for installment payments, choosing installment
plans and indicating the generic nature of tax debts, paying the respective initial
installments, pursuant to the provisions of Federal Revenue Service (SRF) and
National Treasury Attorney General (PGFN) Joint Administrative Rule.
The tax debts recorded for payment in installments by the Company and its
subsidiaries, pursuant to Law 11941/09, are as follows:

Company

INSS tax liability - tax
notiﬁ cation (a)
IRPJ/CSLL/ILL (b)
Others

INSS tax liability - tax
notiﬁ cation (a)
IRPJ/CSLL/ILL (b)
IPI on the acquisition of
property, plant and
equipment and materials
for own use and
consumption (c)
Others

Interest and
inﬂ ation
Reversals adjustment

2010

-
-
-
-

2,893
150
6,216
1,034
100
1,539
1,284 10,648

2009

2,743
5,182
1,439
9,364

Consolidated

Interest and
inﬂ ation
Reversals adjustment

2010

-
-

150
1,048

2,893
6,361

2009

2,743
5,313

3,595
2,280
13,931

-
(368)
(368)

3,768
173
123
2,035
1,494 15,057

(a) The details of this lawsuit are mentioned in note 17 (g) of item “Tax
contingencies”. Due to the withdrawal from this lawsuit, as the Company
opted to pay all its debt at sight, it reversed to income R$1,586 on the
fourth quarter of 2009, corresponding to 100% of the late-payment ﬁ ne
and 45% of the interest.

(b) The details of this lawsuit are mentioned in note 17 (e) of item “Tax
contingencies”. Since the Company has an escrow deposit for this lawsuit,
no reversal of late-payment ﬁ nes and interest was made by the Company
upon its withdrawal.
(c) The details of this lawsuit are mentioned in note 17 (f) of item “Tax
contingencies”. Due to the withdrawal from this lawsuit, as the Company
opted to pay all its debt at sight, it reversed to income R$1,375 on the
fourth quarter of 2009, corresponding to 100% of the late-payment ﬁ ne
and 45% of the interest.

Due to the lack of tax loss carryforwards, the Company and its subsidiaries
will not offset them against the remaining balance of the interest on
installments.
The following steps of the tax debt installment plan include the
consolidation of tax debts by the PGFN and the Federal Revenue
Service; in this step the Companies will indicate the debts to be paid in
installments and the number of installments. This consolidation stage of
tax debts is estimated to occur by the end of the ﬁ rst semester of 2011.
Tax installment plans created under Provisional Act 470/09
As of October 13, 2009, Provisional Act 470 was enacted, introducing
the tax debt payment and installment plans arising from the undue use of
sector tax incentive, introduced by article 1 of Decree Law 491, of March
5, 1969, as well as those arising from the undue use of IPI credits, in the
scope of the PGFN and the Federal Revenue Service.
On November 3, 2009, the PGFN and the Federal Revenue Service
published in the Federal Ofﬁ cial Gazette (DOU) the Joint Administrative
Rule 9, which establishes the debt payment and installment plan
addressed in article 3 of Provisional Act 470/09. The debts arising from
the undue utilization of industry tax incentives introduced by article 1 of
Decree Law 491/69, and those arising from the undue utilization of IPI
credits challenged by the PGFN and Federal Revenue Service may be
exceptionally paid at sight or in installments to each agency by November
30, 2009.
As mentioned in note 17, item (d), the subsidiary Indústria e Comércio
de Cosméticos Natura Ltda. ﬁ led a motion partially withdrawing from
the injunction ﬁ led related to IPI credits arising from the products
purchased at zero tax rate or tax exempt, which amounted to R$24,071
as of December 31, 2010.
As of December 31, 2010, the Company awaits the position of the PGFN
to complete the stage related to the consolidation of tax debts and to
write off the balances of suspended liabilities against escrow deposits
made until this date at the inﬂ ation adjusted amounts. As there are
escrow deposits made in the past and due to the option made by the
Company, which opted for payment at sight, no gain was recognized in
income from the reversal of ﬁ ne and late interest.

18. PROVISION FOR TAX, CIVIL AND LABOR CONTINGENCIES
The Company and its subsidiaries are parties to tax, labor and civil lawsuits
and administrative tax proceedings. Management believes, supported by
the opinion and estimates of its legal counsel, that the reserves for tax,
civil and labor contingencies are sufﬁ cient to cover possible losses. These
reserves, net of escrow deposits, are as follows:

Tax
Civil
Labor

Current
Noncurrent

Company Consolidated
2010
2009
42,970 45,076
14,137 10,750
17,071
16,677
72,897
73,784
1,465
-
71,432
73,784

2009
33,932
8,469
13,448
55,849
1,465
54,384

2010
29,867
9,284
14,131
53,282
-
53,282

124

Tax contingencies

(a) Refers to ﬁ ne for late payment of Federal taxes.

The provisions for tax contingencies are shown below:
Changes for the years ended December 31, 2009 and 2010

Company

Inﬂ ation

2009 Additions Reversals adjustment 2010

Late payment ﬁ nes on
Federal taxes paid in
arrears (a)
Deductibility of CSLL
(Law 9316/96) (b)
Federal VAT (IPI) - tax
collection lawsuit (c)
IRPJ and CSLL tax
assessment - legal
fees (d)
Tax notiﬁ cation -
IRPJ 1990 (e)
Legal fees and other (h)
Total reserve for tax
contingencies
Escrow deposits
(note 10)

1,024

7,295

(70)

999

267

7,562

4,952

(4,970)

5,799

(1,709)

362

4,452

3,198
11,664

-
3,299

-
(2,195)

3,342
144
744 13,512

33,932

3,299

(8,944)

1,581 29,867

(14,296)

(967) (15,263)

Consolidated

Inﬂ ation

2009 Additions Reversals adjustment 2010

5,776

1,511

7,295

Late payment ﬁ nes on
Federal taxes paid in
arrears (a)
Deductibility of CSLL
(Law 9316/96) (b)
Federal VAT (IPI) -
tax collection lawsuit (c) 4,952
IRPJ and CSLL tax
assessment - legal
fees (d)
Tax notiﬁ cation - IRPJ
1990 (e)
Failure to include ICMS
in tax bases for PIS and
COFINS - legal fees (f)
Semiannual PIS - Decree
Laws 2445/88 and
2449/88 (g)
2,085
Legal fees and other (h) 17,626
Total reserve for tax
contingencies
Escrow deposits
(note 10)

(15,721)

45,076

2,633

3,198

(71)

1,505

267

7,562

(4,970)

(1,710)

386

4,452

144

3,342

147

2,780

-
4,165

-
(3,211)

106

2,191
2,558 21,138

4,165

(9,962)

3,691 42,970

(842) (16,563)

(b) Refers to CSLL that was addressed by an injunction that questions
the constitutionality of Law 9316/96, which prohibited the deduction of
CSLL from its own tax basis and the IRPJ basis. A portion of this reserve, in
the amount of R$5,559 (R$5,272 as of December 31, 2009), is deposited
in escrow. (c) Refers to a tax collection lawsuit intended to collect IPI for July
1989, when wholesale establishments began to be considered equivalent to
industrial establishments under Law 7798/89. The lawsuit is in the 3rd Region
Federal Court (São Paulo) for judgment of the appeal ﬁ led by the debtor. The
amounts involved in this tax collection lawsuit are collateralized by restricted
investment held by the subsidiary Natura Inovação e Tecnologia de Produtos
Ltda., in the amount of R$6,155 as of December 31, 2010 (R$5,769 as of
December 31, 2009). The balance of the reserve for this lawsuit was reversed
in the ﬁ rst quarter of 2010 because of the change in the likelihood of loss
from probable to remote based on the analysis carried out by the Company’s
legal counsel.

(d) Refers to attorneys’ fees for the defense in the tax assessment notices
issued against the Company in December 2006 and December 2007 by
the Federal Revenue Service, claiming the payment of income tax and social
contribution on the deductibility of the yield of debentures issued by the
Company for ﬁ scal years 2001 and 2002, respectively. The legal counsel’s
opinion is that the likelihood of unfavorable outcome in these tax assessment
notices is remote.

A ﬁ nal and unappealable administrative decision on the tax assessment notice
issued against the Company in August 2003 challenging the deductibility, in
ﬁ scal year 1999, was issued on January 2010 that maintains part of the income
tax assessed and the whole of the social contribution. After this decision, on
April 7, 2010, the Company ﬁ led a lawsuit to cancel the remaining installment
of IRPJ and CSLL. The legal counsel considers that the likelihood of an
unfavorable outcome is remote.

e) Refers to a tax assessment notice issued by the Federal Revenue Service
claiming the payment of income tax on the earnings obtained on exports
entitled to tax beneﬁ ts carried out in ﬁ scal year 1989, at the rate of 18% (Law
7988, of December 29, 1989) and not 3%, as set out in article 1 of Decree
Law 2413/88, used by the Company at the time to pay its taxes.

(f) Refers to legal fees for ﬁ ling and dealing with the administrative proceeding
for requesting a refund of the ICMS included in the PIS and COFINS tax basis
in the period from April 2002 to March 2007. The legal counsel assessed the
risk of loss as remote.

(g) Refers to the offset of PIS paid as per Decree Laws 2445/88 and 2449/88,
in the period from 1988 to 1995, against Federal taxes due in 2003 and 2004.
The reversal made by the Company in 2007 in the amount of R$14,910
is due to the ﬁ nal decision favorable to the Company, rendered in August
2007. The remaining reserve refers to the subsidiary Indústria e Comércio de
Cosméticos Natura Ltda., which is awaiting the appreciation of the lawsuit by
the Board of Tax Appeals.

(h) The balance refers to lawyers’ fees to defend the Company’s and its
subsidiaries’ interests in tax lawsuits. The amount of R$4,000, accrued in
2009, refers to lawyers’ fees to prepare the defense against an IRPJ and
CSLL infringement notiﬁ cation against the Company, issued on June 30, 2009,
which challenges the tax deductibility of goodwill amortization carried out
resulting from the merger of Natura Participações S.A. It is the opinion of the
Company’s legal counsel that, as structured, the transaction and its tax effects
can be upheld in a court of law and thus the risk of loss is classiﬁ ed as remote.

125

Civil contingencies

Changes for the years ended December 31, 2009 and 2010

Sundry civil lawsuits (a)

Legal fees - environmental civil lawsuit (b)

Company

Interest and

inﬂ ation

2009 Additions Reversals

Payments

adjustmen

2010

5,111

1,363

5,265

(4,658)

(1,177)

287

149

4,828

1,512

Civil lawsuits and legal fees - Nova Flora Participações Ltda.

1,995 2,346

- (1,466) 69 2,944

Total reserve for civil lawsuits

Escrow deposits (note 10)

Current

Noncurrent

Sundry civil lawsuits (a)

Legal fees - environmental civil lawsuit (b)

Legal fees - IBAMA lawsuit (c)

8,469 7,611 (4,658) (2,644) 506 9,284

(231) (1,643)

- (1,874)

1,465

7,004

- 9,284

Consolidated

Interest and

inﬂ ation

2009 Additions Reversals

Payments

adjustmen

2010

5,353

5.892

(4,822)

(1,192)

1,363

3,965

486

149

5,717

1,512

3,965

Civil lawsuits and legal fees - Nova Flora Participações Ltda.

4,034 135

(1,466)

240 2,943

Total reserve for civil lawsuits

Escrow deposits (note 10)

Current

Noncurrent

10,750 9,992 (4,822)

(2,658)

875 14,137

(1,878)

(98)

(1,976)

1,465

9,285

- 14,137

(a) As of December 31, 2010, the Company and its subsidiaries are parties
to 1,211 civil lawsuits and administrative proceedings (1,578 as of December
31, 2009), of which 1,127 were ﬁ led with civil courts, special civil courts and
the consumer protection agency (PROCON) by Natura Beauty Consultants,
consumers, suppliers and former employees, most of which claiming
compensation for damages.

(b) Refers to legal fees for the defense of the Company’s interests in the
public lawsuit ﬁ led by the Federal Public Prosecution Ofﬁ ce of Acre against
the Company and other institutions for alleged access to the traditional
knowledge associated to the asset (“murumuru”)..

(c) Refers to attorney’s fees for the defense in the tax assessment notice
issued by Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais
Renováveis (IBAMA) against the Company in November 2010 for alleged
irregular access to biodiversity. The Company’s management and its legal
counsel consider the risk of loss in these tax assessment notices as remote
due to full compliance with all the principles established in the Biological
Diversity Convention (“CDB”), an international treaty signed during Rio-92
and of illegality and unconstitutionality of legal mark which has incorporated
CDB in the Brazilian legal system. Except for inputs from Federal Government
land—which refuses to negotiate—the Company shares beneﬁ ts in 100% of
the accesses in the use of biodiversity; it is the ﬁ rst to share beneﬁ ts with
traditional communities and detains approximately 68% of the requests with
the Regulatory Body for authorization to have access to biodiversity.

Labor risk

As of December 31, 2010, the Company and its subsidiaries are parties to

766 labor lawsuits ﬁ led by former employees and third parties (641 as of

December 31, 2009), claiming the payment of severance amounts, salary

premiums, overtime and other amounts due, as a result of joint liability.

Reserves are periodically reviewed based on the progress of lawsuits and

history of losses on labor claims to reﬂ ect the best current estimate.

Changes for the years ended December 31, 2009 and 2010

Company

Inﬂ ation

2009 Additions Reversals adjustment 2010

Total provision for

labor risk

13,448

1,308

(2,216)

1,591 14,131

Escrow deposits

(note 10)

(1,696)

(66)

- (1,762)

126

Total provision for
labor risk
Escrow deposits
(note 10)

Consolidated

Inﬂ ation

2009 Additions Reversals adjustment 2010

17,071

1,842

(4,278)

2,042 16,677

(2,193)

(217)

- (2,410)

Contingent liabilities - possible risk
The Company and its subsidiaries are parties to tax, civil and labor
lawsuits, for which there is no reserve for losses recorded, because the
risk of loss is considered possible by management and its legal counsel.
These lawsuits are as follows:

Company Consolidated
2009

2009

2010

Tax:
Declaratory action - ICMS
- ST (a)
Offset of 1/3 of COFINS -
Law 9718/98 (b)
Tax notiﬁ cation - INSS (c)
IPI tax assessment notice (d)
Administrative proceeding –
tax assessment notice ICMS –
ST – DF (e)
Administrative proceeding –
tax debt – ICMS – ST – RS (f)
Tax assessment notice –
São Paulo State Department
of Finance – ICMS inspection (g)
Tax assessment - transfer
pricing on loan agreements
with foreign related company (h)
Tax debt notiﬁ cation - GFIP (i)
ICMS - ST deﬁ ciency notice (j)
Request for offset of taxes of
the same type - IRPJ and
IRRF (k)
Other

Civil
Labor

53,809

29,162

53,809

29,162

5,121
4,567
5,178

4,925
4,456
-

5,121
4,567
5,178

4,925
4,456
-

25,077

7,720

25,077

7,720

15,919

7,255

15,919

7,255

9,837

1,779
974
440

1,716
902
529

1,779
974
440

1,716
902
529

568
44,051
167,320
3,315
61,547
232,182

532
23,619
80,816
16,858
48,986
146,660

568

532
52,373 28,849
175,642 86,047
18,024
85,899 74,710
265,674 178,781

4,133

(a) As of December 31, 2010, the balance recorded is as follows:
1. ICMS - ST - Paraná State - R$46,768 (R$28,186 as of December 31,
2009) - lawsuit ﬁ led by the Company challenging the changes in ICMS - ST
tax basis introduced by Paraná Decree 7018/06. The amount discussed in the
lawsuit, related to the period from January 2007 to December 2010, is fully
deposited in escrow, as mentioned in notes 10 and 17, and its collection is
suspended
2. ICMS - ST - Federal District - R$5,574 (R$976 as of December 31, 2009)
- declaratory action ﬁ led by the Company to challenge its liability for the
payment of ICMS - ST due to the lack of a statute on and statutory criteria
for the determination of the tax base of this tax or, subsequently, the need
to enter into an Agreement to set out the ICMS - ST tax basis. The amount
under litigation, related to the period from February 2009 to December
2010, is fully deposited in escrow, as referred to in notes 10 and 17, and its
collection is suspended.
3. ICMS ST MS - R$1.467 - declaratory action ﬁ led by the Company to challenge
its liability for the payment of ICMS - ST to the State of Mato Grosso do Sul
due to the lack of a statute on and statutory criteria for the determination of
the tax base of this tax or, subsequently, the need to enter into an Agreement
to set out the ICMS - ST tax basis. The amount under litigation, related to the
period from February 2009 to December 2010, is fully deposited in escrow, as
referred to in notes 10 and 17, and its collection is suspended.
(b) Law 9718/98 increased the COFINS rate from 2% to 3%, and allowed
this 1% difference to be offset in 1999 against the social contribution tax paid
in the same year. However, in 1999, the Company and its subsidiaries ﬁ led
for an injunction and obtained authorization to suspend the payment of the
tax credit (1% rate difference) and to pay COFINS based on Supplementary
Law 70/91, prevailing at that time. In December 2000, considering former
unfavorable court decisions, the Company and its subsidiaries enrolled in
the Tax Debt Reﬁ nancing Program (REFIS), for payment in installments of
the debt related to the COFINS not paid in the period. With the payment
of the tax, the Company and its subsidiaries gained the right to offset 1% of
COFINS against social contribution tax, which was made in the ﬁ rst half of
2001. However, the Federal Revenue Service understands that the period

for offset was restricted to base year 1999. On September 11, 2006, the
Company was notiﬁ ed that the offsets made were not approved, and timely
ﬁ led the applicable appeal. This proceeding is awaiting ruling at the lower
administrative court.

(c) Lawsuit ﬁ led 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 promoters. The amounts are being challenged in court through
a tax debt annulment action and are deposited in escrow. The amounts
required in the tax assessment notice cover the period from January 1994
to October 1999.
(d) Refers to a tax collection lawsuit intended to collect IPI due to the lack of
payment e inappropriate classiﬁ cation of products. The Company has ﬁ led a
defense in the court and is awaiting for deﬁ nitive ruling
(e) Refers to a tax assessment notice related to ICMS – ST, issued by the
State of Federal District, regarding a supposed underpayment related to the
difference in the payment of Company’s own ICMS and ICMS – ST. Company
has ﬁ led a defense in the administrative level and is awaiting for deﬁ nitive
ruling..
(f) Refers to a tax assessment notice by Rio Grande do Sul State Department
of Finance against the Company due to its condition of tax substitute, in order
to charge ICMS that is supposedly due, related to subsequent operations
applied by its Sales representatives which live in the State of Rio Grande do
Sul Company has proposed annulment to cancel this requirement, which is
awaiting ﬁ nal trial.
(g) Refers to a tax assessment notice by São Paulo Department of Finance
with respect to a supposed offset of ICMS related to the acquisition of
property, plant and equipment which were transferred to other facility on
the acquisition date, as well as assets acquired that are not related to the
production and trading activities.
(h) 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 a foreign related party. On July 12, 2004, an
administrative defense was ﬁ led and is still being judged. In June 2008, the
Company ﬁ led an appeal against the unfavorable decision with the Board of
Tax Appeals, which is awaiting judgment.
(i) Demand of ﬁ ne for failure to complete the GFIP (FGTS Payment and
Social Security Information Form), an accessory social security obligation, for
independent contractors’ social security contributions and indemnities. The
Company is challenging the collection at the judicial level.
(j) Tax assessment notice for ICMS - ST, collected by Goiás State, due to
alleged underpayment by the Company. The Company has ﬁ led its defense at
the administrative level and is awaiting the ﬁ nal judgment.
(k) Refers to the non-approval of the offset of IRRF (Withholding Income Tax)
credits related to the second quarter of 2000 against IRPJ debts for the fourth
quarter of 1999. The Company has ﬁ led its defense at the administrative level,
for which a partially favorable judgment has been rendered. On July 12, 2006,
an annulment action was ﬁ led, and an escrow deposit was made, to challenge
collection of the balance of offset not approved by the Federal Revenue
Service.
Contingent assets
The Company and its subsidiaries handle the following material contingent
assets:
a) The Company and its subsidiary Indústria e Comércio de Cosméticos
Natura Ltda. are challenging in court the unconstitutionality and illegality of
the increase in the tax basis for PIS and COFINS established by article 3,
paragraph 1, of Law 9718/98. The amounts involved in the lawsuits, updated
as of December 31, 2010, total R$20,920 (R$20,078 as of December 31,
2009). Even though said article 3, paragraph 1, of Law 9718/98 was declared
unconstitutional by the Federal Supreme Court in 2009, consistent with
the claim ﬁ led by the Company and its subsidiary, there is no ﬁ nal and
unappealable decision on the lawsuits ﬁ led by the Companies, which await
the judgment by the 3rd Region Federal Court (TRF). The legal counsel’s
opinion is that the likelihood of favorable outcome is probable.
b) The Company and its subsidiaries Indústria e Comércio de Cosméticos
Natura Ltda., Natura Inovação e Tecnologia de Produtos Ltda. and Natura
Logística e Serviços Ltda. are requesting at administrative level the refund
of the ICMS and ISS (Service Tax) included in the PIS and COFINS tax basis
and paid in the period from April 1999 to March 2007. The amounts of
the refund request as of December 31, 2010 are R$288,584 (R$265,277
as of December 31, 2009). The legal counsel believes that the chance of a
favorable outcome is probable.
The Company and its subsidiaries have the accounting policy of recognizing
contingent assets only after there is a ﬁ nal and unappealable decision on the
lawsuits. Since no unappealable decisions have been issued on said lawsuits
favorable to the Company and its subsidiaries, they did not recognize credits
related to contingent assets.

127

19. SHAREHOLDERS’ EQUITY
a) Capital
As of December 31, 2009, the Company’s capital was R$404,261.
In March 2010, 181,212 common shares without par value were subscribed
at the average price of R$15.53, totaling R$2,826, and, therefore, the
Company’s capital is represented by 430,455,773 subscribed and paid-in
registered common shares without par value, totaling R$407,087. Authorized
capital decreased from 11,035,564 to 10,854,352 registered common shares.
In June 2010, 101,439 common shares without par value were subscribed at
the average price of R$26.57, totaling R$2,696, and, therefore, the Company’s
capital is represented by 430,557,212 subscribed and paid-in registered
common shares without par value, totaling R$409,783. Authorized capital
decreased from 10,854,352 to 10,752,913 registered common shares.
In September 2010, 242,098 common shares without par value were
subscribed at the average price of R$25.50, totaling R$6,172, and, therefore,
as of September 30, 2010 the Company’s capital increased to 430,799,310
subscribed and paid-in registered common shares without par value, totaling
R$415,955. Authorized capital increased from 10,752,913 to 10,510,815
registered common shares.
In December 2010, 82,106 common shares without par value were
subscribed at the average price of R$25.65, totaling R$2,106, and, therefore,
as of December 31, 2010 the Company’s capital increased to 430,881,416
subscribed and paid-in registered common shares without par value, totaling
R$418,061. Authorized capital increased from 10,510,815 to 10,428,709
registered common shares.

b) Dividend and interest on capital payment policy
The shareholders are entitled to receive every year a mandatory minimum
dividend of 30% of net income, considering principally the following
adjustments:
• Increase in the amounts resulting from the reversal of previously recognized
reserves for contingencies.
• Decrease in the amounts intended for the recognition of the legal reserve
and reserve for contingencies.
The bylaws allow the Company to prepare semiannual and interim balance
sheets and, based on these balance sheets, authorize the payment of dividends
upon approval by the Board of Directors.
On April 8, 2010, the Company paid dividends totaling R$339,385 (R$0.79
per share) and interest on capital in the total gross amount of R$18,226
(R$0.042 gross per share), pursuant to payment approved by the Board of
Directors on February 24, 2010 and ratiﬁ ed at the Annual Shareholders’
Meeting held on April 6, 2010, related to net income of 2009.
On July 21, 2010, the Board of Directors approved, for conﬁ rmation at
the Annual Shareholders’ Meeting that will resolve on the approval of the
ﬁ nancial statements for the year ending December 31, 2010, a proposal for
the payment of interim dividends and interest on capital on income recorded
in the ﬁ rst half of 2010, in the amount of R$253,947 (R$0.59 per share) and
R$35,427, gross of withholding income tax (R$0.082 per share), respectively.
The total amount of interim dividends and interest on capital corresponds
to 86.9% of net income recorded in the ﬁ rst half of 2010 and was paid on
August 12, 2010.
In addition, on February 23, 2011, the Board of Directors appreciated a
proposal to be submitted to the Annual Shareholders’ Meeting to be held
on April 8, 2011, for the payment of dividends and interest on capital (gross),
in the total amounts of R$405,623 and R$24,456 (R$20,788, net of IRRF),
respectively, related to income for 2010, which, together with the R$253,947
- dividends and R$35,427 - interest on capital (gross) paid in August 2010,
correspond to 95% of net income for 2010.
Dividends were calculated as follows:

Net income for the year
Tax incentive reserve - investment grant
Calculation basis for minimum dividends
Mandatory minimum dividends
Annual minimum dividend
Proposed dividends
Interest on capital
IRRF (Withholding tax) on interest on capital
Total dividends and interest on capital,
net of IRRF
Amount exceeding the mandatory
minimum dividend
Dividends per share
Interest on capital per share
Total dividends and interest on capital
per share

Company
2009
683,924
(3,145)
680,779
30%
204,234
554,537
43,254
(6,488)

2010
744,050
(5.973)
738,077
30%
221,423
659,570
59,883
(8,983)

710,470

591,303

489,047
1,5312
0,1182

387,069
1,2888
0,0854

1,6494

1,3742

As mentioned in note 2.21, the portion of dividends exceeding minimum
dividends, declared by Management after the reporting period but before
the authorization date for issuance of these ﬁ nancial statements, should not
be recorded as liability in the respective ﬁ nancial statements and the effects
of such additional dividends should be disclosed in a note. As a result, as of
December 31, 2010 and 2009, the following portions of dividends exceeding
minimum dividends were recorded in shareholders’ equity as “Proposed
additional dividend” at the date of the ﬁ nancial statements:

Dividends
Interest on capital

2010
405,623
24,456
430,079

Company
2009
339,385
18,226
357,611

c) Treasury shares
As of December 31, 2010, the caption “Treasury shares” was as follows:

Stock
R$
655 14

R$
21.37

Average
cost - R$

d) Share premium
Refers to the premium generated on the issuance of 3,299 common shares
resulting from the capitalization of debentures totaling R$100,000, occurred
on March 2, 2004.
e) Legal reserve
Since the balance of legal reserve plus capital reserves, addressed by article
182, paragraph 1, of Law 6404/76, exceeded 30% of the capital, the Company
decided, in accordance with article 193 of the same Law, not to recognize
a legal reserve on net income earned in ﬁ scal years 2006, 2007, 2008, 2009
and 2010.
f) Reserve for retained earnings
As of December 31, 2010, the reserve for retained earnings was recognized
pursuant to article 196 of Law 6404/76 for use in future investments, in the
amount of R$23,421 (R$82,988 as of December 31, 2009). The retention
for 2010, prepared by Management and approved by the Board of Directors
on February 23, 2011, will be submitted to the approval of the Annual
Shareholders’ Meeting to be held on April 8, 2011.
g) Other comprehensive income (loss)
The Company records in this line the effects of exchange variation through
its foreign investments. The accumulated effect will be reverted to income
as a gain or loss only at the time of the sale or write-off of the investment.

20. BUSINESS SEGMENT REPORTING
Segment reporting is consistent with the management reports provided by the main operating decision-maker to assess the performance of each segment
and the allocation of funds. Although the main decision-maker analyzes the information on revenue at its different levels, according to the reports used by
management to make decisions, the Company’s business is mainly segmented based on the sales of cosmetics by geographic regions, which are as follows:
Brazil, Latin America (“LATAM”) and other countries. In addition, LATAM is divided in two groups for analysis: (i) Argentina, Chile and Peru; and (ii) Mexico,
Venezuela and Colombia. The segments’ business features are similar and each segment offers similar products through the same consumer access method.
Net revenue by region is presented as follows in 2010:
• Brazil: 92.8%

• Mexico, Venezuela and Colombia: 1.9%

• Argentina, Chile and Peru: 5.0%

• Other: 0.3%

128

Although international segments do not represent more than 10% of the information required to aggregate a segment, as established by the aggregation criteria
described in IFRS 8 - Operating Segments, management has substantial evidence that its foreign business share will increase considerably against consolidated
ﬁ nancial balances and, thus, management opted to report them separately.
The accounting policies of each segment are the same as applied by the Company. The performance of the Company’s segments was assessed based on the net
operating income, net income and noncurrent assets. This measurement basis excludes the effects of interest, income tax and social contribution, depreciation
and amortization.
The ﬁ nancial information related to the segments as of December 31, 2010 and 2009 is summarized in the tables below. The amounts provided to the
Executive Committee related to net income and total assets are consistent with the balances recorded in the ﬁ nancial statements and with the accounting
policies applied.

2010

Net
income
revenue (loss)

Net

Brazil
Argentina, Chile and Peru
Mexico, Venezuela and Colombia
Other (*)
Consolidated

4.767,741
255,702
98,275
14,994
5,136,712

835,484
(19,822)
(45,992)
(25,620)
744,050

Net
income
revenue (loss)

Net

Brazil
Argentina, Chile and Peru
Mexico, Venezuela and Colombia
Other (*)
Consolidated

3,946,421
218,541
66,473
10,622
4,242,057

842,214
(14,357)
(52,519)
(91,414)
683,924

(*) Includes operations France and expenses in the United States in 2009.

Noncurre
nt

Depreciation
and

Financial
expenses,

Income
amortization net tax assets assets
2,970,381
(374,412)
156,666
(1,027)
69,041
1,319
25,783
3,221,871

1,258,950
19,489
10,858
16,177
1,305,474

(82,692)
(3,405)
(2,104)
(647)
(88,848)

- -
(49,736)

(47,918)
(842)
(976)

(374,120)

Total

2009

Noncurre
nt

Depreciation
and

Financial
expenses,

Income
amortization net tax assets assets
2,533,261
(188,559)
123,891
(1,441)
50,337
(230)
33,729
-
2,741,218
(190,230)

984,566
14,108
5,532
20,650
1,024,856

(40,912)
317
(1,279)
-
(41,874)

(86,863)
(2,128)
(1,945)
(1,490)
(92,426)

Total

Current
liabilities
1,236,800
76,802
33,009
6,738
1,353,349

Current
liabilities
1,244,953
64,749
17,972
9,408
1,337,082

The Company has only on class of products that is sold to Natura Beauty
Consultants which is classiﬁ ed as “Cosmetics”. As such, disclosure of
information by products and services is not applicable.
The Company has a dispersed customer portfolio, with no concentration of
revenue.
The revenue from foreign related parties informed to the Executive Committee
was measured in accordance with that stated in the statement of income.

21. NET OPERATING REVENUE

Company Consolidated
2009

2009

2010

Gross revenue:
Domestic market
Foreign market
Other sales

Taxes on sales
Returns and cancellations
Net revenue

471,185

-
-
- -

6,486,421 5,410,052 6,487,124 5,410,545
377,445
1,479 1,323
6,486,421 5,410,052 6,959,788 5,789,313
(7,782)
(963,424) (809,105) (1,814,394) (1,539,474)
5,514,315 4,593,165 5,136,712 4,242,057

(8,682)

(7,782)

22. OPERATING EXPENSES AND COST OF SALES
a) Breakdown of operating expenses and cost of sales by function:

Company Consolidated
2010
2009
2,283,926 1,956,558 1,556,806 1,294,565

2009

2010

b) Breakdown of operating expenses and cost of sales by nature:

Company Consolidated

2010

2009

2010

2009

Variable costs and indirect

costs of resale materials

and productsa

2,283,926 1,956,558 1,319.106 1,093,965

Marketing and selling

expenses

846,913

661,316

910,489

716,420

Freight expenses

223,236

200,922

234,066

216,259

Research and product

development expenses

(note 2.12.)

Project expenses

Services expenses

Employee beneﬁ t

299

51,958

111,794

33,601

37,804

101,587

90,418

65,227

57,739

171,970

133,470

expenses (note 23)

261,441

253,456

628,078

521,938

Compensation of key

management personnel

(note 28.2)

Depreciation and

14,417

13,139

14,417

14,063

amortization charges

15,305 11,918 88,848

92,426

Others expenses

107,183

86,345

430,819

320,652

Cost of sales
Marketing and selling
expenses
General and administrative
expenses
Management compensation
Compensation of key
management personnel
(note 28.2)
Total

1,292,365 1,062,579 1,704,322 1,496,125

Provision of administrative

837,808
18,174

698,241
21,049

605,442
70,351

450,868
55,784

services (note 28.1)

328,183

252,015

Provision of research and

development services

14,417 13,139
14,063
4,446,690 3.751,566 3,951,338 3,311,405

14,417

(note 28.1)

Total

266,959 220,354 - -

4,446,690 3,751,566 3,951,338 3,311,405

129

23. EMPLOYEE BENEFIT EXPENSES

Remaining

Payroll and bonuses
Management compensation
(note 23.1.)
Pension plan (note 24.1.)
Executives’ compensation
Taxes payable

Company Consolidated
2009
354,037

2010
177,326

2009
174,908

2010
414,167

18,174
2,167
4,081
59,693
261,441

21,049
961
4,826
51,711
253,456

70,351
2,528
11,288
129,744
628,078

55,784
1,387
8,573
102,157
521,938

23.1. Management and employee proﬁ t sharing
The Company and its subsidiaries pay proﬁ t sharing to their employees and
ofﬁ cers, tied to the achievement of operational targets and speciﬁ c objectives,
established and approved at the beginning of each year. As of December 31,
2010 and 2009, the amounts below were recorded as proﬁ t sharing:

Employee
Management (*)

Company Consolidated
2009
55,784
5,749
61,533

2010
18,174
6,018
24,192

2009
21,049
5,424
26,473

2010
70,351
6,018
76,369

(*)Included in caption “Management compensation”.

23.2. Stock option plan
Once a year the Board of Directors meets in order to choose the directors
and managers who will receive the options and the total number to be
distributed.
Under the format prevailing until 2008, the programs had a four-year vesting
period, after which 50% of the options could be exercised at the end of the
third year and 50% at the end of the fourth year, and a maximum term of
two years for the exercise of options after the end of the fourth year of the
vesting period.
In 2009, the plan was revised to establish the end of the fourth year as the
vesting date of all the options granted, with the possibility of reducing the
vesting period to three years through the cancelation of 50% of the options
granted and setting the four years as the maximum term for the exercise of
the options.
On March 19, 2010, 2,175,646 options were granted under this new plan
format, with the exercise price of R$34.17.
The changes in the number of outstanding stock options and their related
weighted-average prices are as follows:

2010

2009

Average

exercise price Options

per share - R$ (thousands) per share - R$ (thousands)
Balance at
beginning of year
Granted
Cancelled
Exercised
Balance at end
of year

19.24
22.44
23.96
10.78

4,733
2,583
(568)
(1,210)

23.22
34.17
22.80

5,538
2,176
(268)

22.74

(607)

6,839

28.10

23.22

5,538

Out of the 6,839,000 outstanding options as of December 31, 2010 (5,538,000
outstanding options as of December 31, 2009), 822,000 outstanding options
are vested (685,000 outstanding options as of December 31, 2009). The
options exercised by employees of the Company and/or its subsidiaries as
of December 31, 2010 resulted in the issuance of 607,000 shares (1,210,000
shares as of December 31, 2009).
The expense related to the fair value of the options granted during the period
ended December 31, 2010, according to the elapsed vesting period, was
R$4,081 and R$11,288, Company and on a consolidated basis, respectively
(R$4,339 and R$8,573 Company and on a consolidated basis, respectively, as
of December 31, 2009).
The outstanding stock options at the end of the quarter/year have the
following vesting dates and exercise prices
December 31, 2010:

Date of grant
March 16, 2005
March 29, 2006
April 24, 2007
April 22, 2008
April 22, 2009
March 19, 2010

December 31, 2009:

Date of grant
April 10, 2004
March 16, 2005
March 29, 2006
April 24, 2007
April 22, 2008
April 22, 2009

options

live (years) options

Exercise Outstanding contractual Exercisable
price - R$
20.25
30.17
28.53
22.16
24.17
35.46

0.21
1.23
2.35
3.36
6.40
7.32

82,981
414,120
650,333
1,128,902
2,436,105
2,126,372
6,838,813

82,981
414,120
325,167
-
-
-
822,268

Remaining

options

live (years) options

Exercise Outstanding contractual Exercisable
price - R$
8.92
19.12
28.49
26.94
20.92
22.82

0.28
1.22
2.24
3.36
4.37
7.41

93,622
281,911
623,221
807,511
1,210,647
2,520,690
5,537,602

93,622
281,911
309,906
-
-
-
685,439

As of December 31, 2010, market price per share was R$47.69 (R$36.31 as
of December 31, 2009).
Signiﬁ cant data included in the fair value pricing model of the options granted
in 2010:
• Fair value of stock option of R$10.82 (R$7.83 in 2009) on grant date.
• Volatility of 37% (39% in 2009).
• Dividend yield of 5.3% (5.3% in 2009).
• Expected option life of three and four years.
• Risk-free annual interest rate of 10.8% (9.6% in 2009).
Below is a simulation of the effects from: (a) the exercise of options granted
through December 31, 2010; and (b) the exercise of all options liable to
being granted under the Stock Option Plan. For both scenarios, we assumed
that all options were exercisable as of December 31, 2010, based on the
Company’s shareholders’ equity on that date:

Average exercise price per share - R$
Number of common shares
Number of shares to be issued with the
exercise of the options
Book value per share as of December
31, 2010 - R$
Book value per share as of December 31, 2010,
considering the exercise of all options granted
under each plan - R$
Dilution of book value per share considering the
exercise of all options granted in each plan - R$
Dilution in percentage considering the exercise
of all options granted in each plan

Scenario I
Granted
options

28.10
430,881,416

Scenario II
Total
plan
28.10
430,881,416

6,838,813

17,953,392

2.90

2.85

0.05

2.90

2.78

0.12

1.72%

4.00%

24. EMPLOYEE BENEFITS
24.1. Pension plan
The Company and its subsidiaries sponsor two employees’ beneﬁ t plans: a
pension plan, through a private pension fund managed by Brasilprev Seguros
e Previdência S.A., and an extension of healthcare plans to retired employees.
The deﬁ ned contribution pension plan was created on August 1, 2004 and
all employees hired from that date are eligible to it. Under 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% to 5% of the employee’s
monthly compensation.
On December 31, 2010, the Company and its subsidiaries did not have
actuarial liabilities arising from the former employees’ pension plan.
The contributions made by the Company and its subsidiaries totaled R$2,167
(Company) and R$2,528 (Consolidated) in the period ended December 31,
2010 (R$961, Company and R$1,387, Consolidated in the period ended
December 31, 2009) and were recorded as expenses in the period.

130

24.2. Healthcare plan
The Company and its subsidiaries maintain a postemployment healthcare
plan for a group of former employees and their spouses that is governed by
speciﬁ c rules. As of December 31, 2010, the plan had 304 (Company) and
2,165 (Consolidated) participants.
As of December 31, 2010, the Company and its subsidiaries had a reserve for
the actuarial liability arising from this plan totaling R$13,123 (Company) and
R$19,742 (Consolidated), (R$2,384, Company and R$9,342, Consolidated
as of December 31, 2009), which was calculated by an independent actuary
considering the following main assumptions:

Annual percentage
(in nominal terms)

Financial discount rate
Increase in medical expenses (reduced by 0.5% per year)
Long-term inﬂ ation
General mortality table

2010
11.2
10.5 a 5.5
4.5
RP 2000

25. FINANCIAL INCOME (EXPENSES), NET

Company Consolidated
2009

2010

2009

2010

Financial income:
Interest on short-term
investments
Inﬂ ation adjustment and
foreign exchange gains (a)
Gains on swap and
forward transactions
Other ﬁ nancial income

Financial expenses:
Interest on ﬁ nancing
Inﬂ ation adjustment and
foreign exchange losses (a)
Losses on swap and
forward transactions
Other ﬁ nancial expenses

Financial expenses, net

13,171

6,378

35,809

28.610

44,414

45.745

2,403
1,941
17,515

1,379
4,623
56,794

3,901
13,895
53,639

3,459
6,362
84,176

(39,896)

(20,274)

(58,457)

(38,466)

(3,757)

(43)

(7,130)

(7,980)

(9,075)
(5,509)
(58,237)
(40,772)

(57,660)
(12,076)
(5,828) (25,712)
(83,805) (103,375)
(49,736)
(27,011)

(67,418)
(12,186)
(126,050)
(41,874)

27. EARNINGS PER SHARE
27.1. Basic
Diluted earnings per share is calculated by adjusting the weighted average
outstanding common shares supposing that all potential common shares that
would cause dilution are converted. The Company has only one category
of common shares that would potentially cause dilution: the stock options.
2009

2010

Net income attributable to the Company’s
shareholders
Weighted average of common shares
issued
Weighted average of treasury shares
Weighted average of outstanding common
shares
Basic earnings per share - R$

744,050

683,924

430,548,910
(655)

429,461,590
(10,208)

430,548,255
1,7281

429,451,382
1,5926

27.2. Diluted
Diluted earnings per share is calculated by adjusting the weighted average
outstanding common shares supposing that all potential common shares that
would cause dilution are converted. The Company has only one category of
common shares that would potentially cause dilution: the stock options.

Net income attributable to the owners
of the Company
Weighted average of number of common
shares issued
Weighted average of treasury shares
Weighted average of number of outstanding
common shares issued
Basic earnings per share - R$

2010

2009

744,050

683,924

430,548,255
1,564,844

429,451,382
1,017,758

432,113,098
1.7219

430,469,140
1.5888

The objective of the breakdowns below is to explain more clearly the
foreign exchange hedging transactions contracted by the Company and
their contra entries in the statement of income shown in the previous table:

Consolidated
2009
2010

28. RELATED-PARTY TRANSACTIONS
28.1. Intragroup transactions
Receivables from and payables to related parties are as follows:

(a)
Inﬂ ation and exchange gains
Inﬂ ation and exchange losses

(a) Breakdown
Exchange rate changes on loans
and ﬁ nancing
Adjustment for inﬂ ation on ﬁ nancing
Exchange rate changes on imports
Exchange rate changes on accounts payable
in foreign subsidiaries
Exchange rate changes on export
receivables

34
(7,130)
(7,096)

45.745
(7,980)
37,765

(2,781)
34
(1,089)

51,587
(2,925)
619

(1,399)

(823)

(1,861)
(7,096)

(10,693)
37,765

26. OTHER OPERATING INCOME (EXPENSES), NET

Gain on sale of property,
plant and equipment
Actuarial liability - healthcare
plan (note 24.2)
Others
Other operating income
(expenses), net

Controladora Consolidado

2010

2009

2010

2009

387

702

(9,044)

(9,265)

(1,378)
(1,447)

(2,384)
2,643

(5,400)
(3,024)

(9,342)
3,983

465

961

(17,468)

(14,624)

Current assets:
Natura Inovação e Tecnologia
de Produtos Ltda. (a)
Natura Logística e Serviços Ltda. (b)

Advance for future capital increase-
Flora Medicinal J. Monteiro da Silva Ltda. (c)

Current liabilities-
Suppliers:
Indústria e Comércio de Cosméticos
Natura Ltda. (d)
Natura Logística e Serviços Ltda. (e)
Natura Inovação e Tecnologia de Produtos
Ltda. (f)

Dividends and interest on capital payable

Company
2009

2010

13,143
12,218
25,361

12,171
14,586
26,757

-
-

90
90

153,597
47,356

153,509
27,627

45,636
246,589
163

30,455
211,591
174

Transactions with related parties are as follows:

131

Company
Product sales Product purchases
2009
2009

2010

Indústria e Comércio de
Cosméticos Natura Ltda.
Natura Cosméticos S.A.-Brasil
Natura Cosméticos S.A.-Peru
Natura Cosméticos S.A.
-Argentina
Natura Cosméticos S.A.-Chile
Natura Cosméticos S.A.-México
Natura Cosméticos Ltda.
-Colômbia
Natura Cosméticos C.A.
-Venezuela
Natura Europa SAS-França
Natura Inovação e Tecnologia
de Produtos Ltda.
Natura Logística e Serviços Ltda.
Natura Cosmetics USA Co.

3,006,596 2,611,231

-
-

-
-
-

-
-

-
-
- 2,837,687 2,465,453
34,151
-

34,104

-
-
-

-
-

42,693
32,971
35,533

46,970
25,300
22,353

18,514

10,846

-
4,672

1,417
3,885

-
-

799
-
56
-
- - - 1
3,006,596 2,611,231 3,006,596 2,611,231

388
34

Service sales Services purchases
2009
2009

2010

Administrative structure: (g)
Natura Logística e Serviços
Ltda.
Natura Cosméticos S.A. - Brasil
Indústria e Comércio de
Cosméticos Natura Ltda.
Natura Inovação e Tecnologia
de Produtos Ltda.

438,095
-

333,652
-

-
328,183

-
252,015

67,810

52,176

- -
438,095
333,652

Product and technology
research and development: (h)
Natura Inovação e Tecnologia
de Produtos Ltda.
220,354
Natura Cosméticos S.A. - Brasil - -
220,354

266,959

42,102
438,095

29,461
333,652

-
266,959
266,959

-
220,354
220,354

The main intercompany balances as of December 31, 2010 and 2009, as well
as the intercompany transactions that affected the years then ended, refer to
transactions between the Company and its subsidiaries.
Because of the Company’s and subsidiaries’ operational model, as well as
the channel chosen to distribute products, direct sales via Natura Beauty
Consultants, a substantial portion of sales is made by the subsidiary Indústria
e Comércio de Cosméticos Natura Ltda. to the parent company Natura
Cosméticos S.A. in Brazil and to its foreign subsidiaries.
Sales to unrelated parties amounted to R$7,620 for the year ended
December 31, 2010 (R$6,628 for the year ended December 31, 2009).
There is no allowance for doubtful accounts recognized for intercompany
receivables on December 31, 2010 and 2009 since there are no past-due
receivables with risk of default.
According to note 15, the Group companies usually grant each other pledges
and collaterals to guarantee bank loans and ﬁ nancing.

2010
Stock option grant
Stock option

Compensation
Variável
Fixed (a) Total

Average
exercise

balance

3,348

1,985

5,333

5,051
8,399

4,033
6,018

9,084
14,417

1,512,568
1,512,568

28,10

2009
Stock option grant
Stock option

Compensation
Variável
Fixed (a) Total

Average
exercise

balance

3,562

1,713

5,275

4,828
8,390

3,960
5,673

8,788
14,063

977,338
977,338

23,22

Board of
Directors
Ofﬁ cers
(statutory)

The compensation of the Company’s executives is as follows:

2010
Stock option grant
Stock option

Compensation
Variável
Fixed (a) Total

Average
exercise

balance

3,538

3,066

- -
3,538
3,066

3,538
3,538

3,066
3,066

Executives
(not statutory)

25,194 14,917

40,111

2,961,042

28,10

6,728
-

6,632
-

-
3,899

-
3,843

2009
Stock option grant
Stock option

Compensation
Variável
Fixed (a) Total

Average
exercise

balance

1,567

1,544

Executives
(not statutory)

18,539 10,813

29,352

2,498,686

23,22

“In vitro” research and tests: (i)
Natura Innovation et
Technologie de Produits SAS
- França
Natura Inovação e Tecnologia
de Produtos Ltda.

Lease of properties and
common charges: (j)
Indústria e Comércio
de Cosméticos Natura Ltda.
Natura Logística e Serviços Ltda.
Natura Inovação e Tecnologia
de Produtos Ltda.
Natura Cosméticos S.A.
- Brasil

- -
6,632
6,728

1,263
6,728

1,245
6,632

Total of sales or purchases
and services

3,721,916 3,174,935 3,721,916 3,174,935

(a) Refers to advances granted for provision of product and technology
development and market research services.
(b) Refers to advances granted for provision of logistics and general
administrative services.
(c) Refers to remittances to Flora Medicinal J. Monteiro da Silva Ltda.
(d) Payables for the purchase of products.
(e) Payables for services described in item (g).
(f) Payables for services described in item (h).
(g) Logistics and general administrative services.
(h) Product and technology development and market research services.
(i) Provision of “in vitro” research and tests.
(j) Refers to the lease of part of the industrial complex located in Cajamar -
SP and buildings located in the municipality of Itapecerica da Serra - SP.

(a) Refers to the proﬁ t sharing recorded in the statement of income. The amounts
include any additions and/or reversals to the provision recorded in the previous
year in view of the ﬁ nal assessment of the targets established for directors, ofﬁ cers
and executives.
(b) Refers to the balance of unexercised vested and unvested options as of the
balance sheet date.
(c) Refers to the weighted-average exercise price of the option at the time of the
stock option plans, adjusted for inﬂ ation based on the Extended Consumer Price
Index (IPCA) through the balance sheet date.

29. COMMITMENTS
29.1. Inputs supply contracts
The subsidiary Indústria e Comércio de Cosméticos Natura Ltda. entered
into a contract for the supply of electric power to its manufacturing activities,
in effect through 2015, which provides for the purchase of a minimum
monthly volume of 3.6 Megawatts, equivalent to R$363. As of December 31,
2010, the subsidiary was compliant to the contract’s commitment.

132

The amounts are recognized as electric power is consumed over the contract
term; prices are based on volumes and also estimated assuming the continuity
of the subsidiary’s operations.

Total minimum supply payments, measured at present value, according to the
contract, are:

Less than one year
More than one year and less than ﬁ ve years
Over ﬁ ve years

2010
3,899
9,591
2,578
16,068

2009
3,941
12,525
2,462
18,928

29.2. Operating lease transactions
The Company and its subsidiaries have commitments arising from operating
leases of properties where some of its foreign subsidiaries, the head ofﬁ ce in
Brazil and “Casas Natura” in Brazil and abroad are located.
Contracts have lease terms of one to ten years and no purchase option clause
when terminated; however, renewal is permitted under the market conditions
where they are entered into, for an average of two years.
As of December 31, 2010, the commitment made for future payments of these
operating leases had the following maturities:

2011
2012
2013 and thereafter

Company
1,217
1,217
3,806
6,240

Consolidated
5,332
3,426
7,221
15,979

30. INSURANCE (UNAUDITED INFORMATION)
The Company and its subsidiaries contract insurance based principally on risk
concentration and signiﬁ cance, at amounts considered by Management to be
sufﬁ cient, taking into consideration the nature of its activities and the opinion
of its insurance advisors. As of December 31, 2010, the insurance coverage
was as follows:

Item
Industrial complex/
inventories

Insured
Type amount
Any material damages to
829,987
buildings, facilities and
machinery and equipment

Vehicles

Loss of proﬁ ts

Fire, theft and collision
for 1,480 vehicles

Normalization of proﬁ ts
arising from material damages
to facilities, buildings and
production machinery
and equipment

57,357

1,372,097

31. APPROVAL OF FINANCIAL STATEMENTS FOR ISSUANCE
These individual and consolidated ﬁ nancial statements were approved
for issuance by the Board of Directors at the meeting held on February
23, 2011.

133

REPORT OF INDEPENDENT AUDITORS
ON FINANCIAL STATEMENTS

To Management and Shareholders of Natura Cosméticos S.A.
Itapecerica da Serra - SP
We have audited the accompanying individual and consolidated ﬁ nancial statements of Natura Cosméticos S.A. (the “Company”),
identiﬁ ed as Parent and Consolidated, respectively, which comprise the balance sheet as of December 31, 2010, and the statements of
income, comprehensive income, changes in stockholders’ equity and cash ﬂ ows for the year then ended, and a summary of signiﬁ cant
accounting policies and other explanatory information.

Management’s responsibility for the ﬁ nancial statements
Company’s Management is responsible for the preparation and fair presentation of the individual ﬁ nancial statements in accordance with
Brazilian accounting practices and the consolidated ﬁ nancial statements in accordance with International Financial Reporting Standards
- IFRS, as issued by International Accounting Standards Board - IASB, and in accordance with Brazilian accounting practices and for such
internal controls as Management determines it is necessary to enable the preparation of ﬁ nancial statements that are free from material
misstatement, whether due to fraud or error.

Auditors’ responsibility
Our responsibility is to express an opinion on these ﬁ nancial statements based on our audit, which was conducted in accordance
with Brazilian and international standards on auditing. Those standards require that we comply with ethical requirements and plan and
perform the audit to obtain reasonable assurance about whether the ﬁ nancial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the ﬁ nancial statements. The
procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the ﬁ nancial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the
preparation and fair presentation of the Company’s ﬁ nancial statements in order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit
also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by
Management, as well as evaluating the overall presentation of the ﬁ nancial statements.
We believe that the audit evidence we have obtained is sufﬁ cient and appropriate to provide a basis for our audit opinion.

Opinion on individual ﬁ nancial statements
In our opinion, the individual ﬁ nancial statements present fairly, in all material respects, the ﬁ nancial position of Natura Cosméticos
S.A. as of December 31, 2010 and of its ﬁ nancial performance and its cash ﬂ ows for the year then ended in accordance with Brazilian
accounting practices.

Opinion on consolidated ﬁ nancial statements
In our opinion, the consolidated ﬁ nancial statements present fairly, in all material respects, the ﬁ nancial position of Natura Cosméticos
S.A. as of December 31, 2010 and of their consolidated ﬁ nancial performance and their consolidated cash ﬂ ows for the year then ended
in accordance with IFRS, as issued by the IASB, and Brazilian accounting practices.

Emphasis of matter
As described in note 2.1., the individual ﬁ nancial statements were prepared in accordance with Brazilian accounting practices. For Natura
Cosméticos S.A. these practices differ from IFRS, applicable to separate ﬁ nancial statements, only in relation to measurement of equity method
investments in subsidiaries, associates and joint-controlled entities, which are measured based on cost or fair value in accordance with IFRS.

Other matters
Statements of value added
We have also audited individual and consolidated statements of value added (DVA) for the year ended December 31, 2010, whose
presentation is required by Brazilian corporate law for public companies, and as supplementary information under IFRS which do not
require the presentation of DVA. These statements were subject to the same audit procedures previously described and, in our opinion,
are appropriately presented, in all material respects, in relation to the overall ﬁ nancial statements presentation.

Convenience translation
The accompanying ﬁ nancial statements have been translated into English for the convenience of readers outside Brazil.

São Paulo, February 23, 2011

Edimar Facco

Auditores Independentes Engagement Partner
CRC nº 2 SP 011609/O-8 CRC nº 1 SP 138635/O-2

134

DNV ASSURANCE STATEMENT
SUMMARY

NATURA SUSTAINABILITY REPORT 2010

1. Context and responsibilities
Det Norske Veritas (DNV) has been commissioned by Natura Cosméticos SA (‘Natura’) to provide assurance
services in connection with the Portuguese version of Natura’s Sustainability Report 2010 (‘the Report’).
The Board of Natura is responsible for all information provided in the Report as well as the processes
for collecting, analysing and reporting that information. DNV’s responsibility regarding this veriﬁ cation is to
Natura only, in accordance with the scope of work commissioned. The stakeholders of Natura are the
intended users of this Assurance Statement. DNV disclaims any liability or responsibility to a third party for
decisions, whether investment or otherwise, based upon this Assurance Statement summary, or its full version
available in Portuguese at www.natura.net/relatorio. Our conclusions are based on the assumption that the
data and information provided to DNV is complete and true.

2. Independence
DNV states its independence and impartiality with regard to this commission. DNV was not involved in the
preparation of any text or data included in the Report, except for this Assurance Statement summary and
its full version available in Portuguese at www.natura.net/relatorio. Moreover, in 2010, DNV did not provide
any services to Natura that could compromise the independence or impartiality of our ﬁ ndings, conclusions
or recommendations.

3. Scope and limitations
DNV’s assurance engagement consisted of the veriﬁ cation of information provided in the Report, as well as
the assessment of the underlying data management and reporting processes, for the period of 12 months
ending on 31 December 2010. Based on the scope of work commissioned by Natura, the main objectives of
this engagement were to assess and verify:
(cid:129) Processes and activities carried out by Natura in order to identify, assess and prioritise material

sustainability issues;

(cid:129) Processes and activities carried out by Natura in order to identify, analyse and respond to stakeholders’
interests and concerns in relation to the company’ sustainability strategy, management and performance,
and the content of the Report;

(cid:129) Systems, processes and tools to collect, aggregate, control and assure the quality of data and report on

sustainability-related information;

(cid:129) The description of sustainability related policies, strategies, objectives, initiatives, achievements and

performance in 2010, as described in the Report;

(cid:129) Adherence of reported information to the principles of materiality, reliability, balance, clarity and comparability
set out in the Global Reporting Initiative Sustainability Reporting Guidelines, 2006 and AccountAbility’s
AA1000 Assurance Principles Standard, 2008 (AA 1000 APS);

(cid:129) Veriﬁ cation and endorsement of the GRI (2006) application level declared by Natura.
This statement does not cover the veriﬁ cation of information or processes related to greenhouse gas
emissions, which were subject to assessment and assurance by another third party.
This assurance engagement focused primarily on the quality of the sustainability information and data
presented in the Report and the underlying reporting systems. DNV’s scope of work did not include an
assessment of the adequacy, effectiveness or efﬁ ciency of Natura’s sustainability strategy or management
practices. It also excluded the assessment or veriﬁ cation of sustainability management, performance or
reporting practices by Natura’s suppliers or any other third parties mentioned in the Report.

4. Approach
This assurance engagement was carried out between January and April 2011 by suitably qualiﬁ ed and
experienced professionals, following DNV’s Protocol for Veriﬁ cation of Sustainability Reports. DNV’s
Veriﬁ cation Protocol has been developed in accordance with the most widely accepted reporting and
assurance standards, including AA1000 APS (2008) and the GRI Sustainability Reporting Guidelines,
2006 (GRI G3).

135

The methods used in this engagement included:
(cid:129) Interviews with 32 directors, managers and staff responsible for processes related to the management of

material issues at Natura’s headquarters and production units in Cajamar and Benevides (Brazil);

(cid:129) Participation (as an observer) in a multi-stakeholder engagement event organized in Belém, State of Pará

(Brazil) to discuss the material issues related to sourcing in the Amazon region;

(cid:129) Interviews with 4 selected external stakeholders representing supplier communities of the company and a

local regulatory agency;

(cid:129) Review of documentation and other evidence of developments in the company’s sustainability objectives,

resources and activities;

(cid:129) Review of sustainability performance-related reports, performance records and samples of data at source;
(cid:129) Assessment of the quality and effectiveness of data management systems and tools for collection,
aggregation quality control, and reporting of sustainability information. This also involved testing selected
data samples;

(cid:129) Review of the outputs of materiality assessment and external stakeholder engagement initiatives carried
out by Natura, as well as internal and external communications regarding Natura’s commitment, approach
and performance on sustainability;

(cid:129) Assessment of draft and ﬁ nal versions of the Report against relevant reporting and report assurance

standards and guidelines.

5. Main conclusions and opportunities for improvement
Based on the work undertaken as part of this assurance engagement, DNV concludes that:
(cid:129) Natura’s Sustainability Report 2010 generally provides a reliable and fair representation of Natura’s
sustainability related policies, management approach, initiatives and performance over the reporting period.
(cid:129) The Report is well aligned with the principles established in the GRI Sustainability Reporting Guidelines

(2006). DNV also endorses the GRI Application Level of A+, declared by Natura.

(cid:129) Natura continued to develop their understanding of material topics, in close collaboration with stakeholders
in Brazil and overseas (Argentina, Chile, Colombia, México and Peru). The outcomes from these initiatives
have been adequately considered in the preparation of the Report.

(cid:129) The reliability of the information is still limited due to the lack of systematization of the company’s data

management processes, in particular in the international operations.

In the course of the veriﬁ cation, DNV identiﬁ ed the following opportunities for improvement:
(cid:129) Inclusivity and responsiveness: continue to improve the description of the company’s stakeholders’ interests
and expectations in relation to Natura’s sustainability strategy and the content of the Report. The Report
could also better describe how Natura has responded or intends to respond to stakeholder expectations.
(cid:129) Reliability: increase the systematization of data management processes, in particular in the company’s

international operations. Internal audits of sustainability data are also recommended.

(cid:129) Comparability:

(cid:129) improve the monitoring of sustainability performance in international operations, in order to increase the
scope of reporting of performance in the Report. This should also increase comparability of performance
across the various operations of Natura;

(cid:129) continue to deepen Natura’s understanding of the sustainability performance of its main products and

supply chains, following the pilot initiatives initiated in 2010.

(cid:129) Clarity: improve the clarity and homogeneity of future translated versions of the Report into English.

Detailed information on DNV’s approach, conclusions and recommendations is provided in the full Assurance
Statement available in Portuguese at www.natura.net/relatorio.

Jasmin Eymery

Veriﬁ cador principal

Alexandre Simões Jorge
Veriﬁ cador

Antonio Ribeiro
Controle da qualidade

Det Norske Veritas, São Paulo, 13 May 2011

136

137

ABOUT THIS REPORT

For the 11th consecutive year, we are publishing the Natura Annual
Report. This report is prepared according to the guidelines of the
Global Reporting Initiative (GRI) for the period from January 1 to
December 31, 2010. We have adopted the G3 version of the GRI,
and for the fourth consecutive year we declare that we have applied
the A+ application level for reporting our economic, social, and
environmental performances.

The socioenvironmental information herein was subject to external
veriﬁ cation by Det Norske Veritas (DNV). Greenhouse gas inventory data
were subject to a speciﬁ c veriﬁ cation (limited assurance) by the auditing
and consulting ﬁ rm PwC, while the economic and ﬁ nancial information
was audited by Deloitte Touche Tohmatsu Auditores Independentes.

Report Application Level

G3 Proﬁ le
Disclosures

G3 Management
Approach
Disclosures

G3 Performance
Indicators &
Sector Supplement
Performance
Indicators

T
U
P
T
U
O

s
e
r
u
s
o
l
c
s
i
D
d
r
a
d
n
a
t
S

C
Report on:
1.1
2.1 - 2.10
3.1 - 3.8, 3.10 - 3.12
4.1 - 4.4, 4.14 - 4.15

Not Required

Report on a minimum of
10 Performance Indicators,
including at least one from
each of: Economic, Social
and Environmental

C+ B

B+ A

A+

d
e
r
u
s
s
A
y
l
l
a
n
r
e
t
x
E

t
r
o
p
e
R

Report on all criteria listed
for Level C plus:
1.2
3.9, 3.13
4.5 - 4.13, 4.16 - 4.17

Management Approach
Disclosures for each
Indicator Category

Report on a minimum of
20 Performance Indicators,
at least one from each of
Economic, Environmental,
human rights, Labor,
Society, Product
Responsibility

d
e
r
u
s
s
A
y
l
l
a
n
r
e
t
x
E

t
r
o
p
e
R

Same as requirement
for Level B

Management Approach
Disclosures for each
Indicator Category

Report on each core G3
and Sector Supplement*
Indicator with due regard
to the Materiality Principle
by either: a) reporting
on the Indicator or b)
explaining the reason for
its omission.

d
e
r
u
s
s
A
y
l
l
a
n
r
e
t
x
E

t
r
o
p
e
R

* Sector supplement in ﬁ nal version

This publication considers the information related to all our
operations. These include Argentina, Chile, Colombia, Mexico, Peru,
and France, in addition to the operations in Bolivia and Central
America, where we operate through distributors. The scope of the
socioenvironmental information is mainly related to the activities in
Brazil, where our production is concentrated and where most of our
social and environmental impacts occur. The economic data include
all our operations.

Since 2009, the calculation of our key environmental impacts – water
and energy consumption and waste generation – has included data
from outsourced suppliers who manufacture our products in Brazil.
Therefore, we have undertaken a more precise evaluation of the
impacts of our operations. One of our challenges for the future is to
begin monitoring the indicators of the outsourced operations of our
international operations. In 2010 we started production in Argentina,
and we expect to begin production in Chile and Mexico in 2011.

Possible signiﬁ cant changes in relation to previous years, as well as
changes in the calculation basis or measurement techniques, are
presented throughout the report and in the tables.

We present data on our relationships with our priority stakeholders,
whom we deﬁ ne as our brand builders: employees; consultants and
Natura Consultant Advisers; consumers; suppliers; supplier communities;
surrounding communities; shareholders; and government.

The information in this report is available in different formats and
accessible through different communication channels:

(cid:129) Management Report – published in the Valor Econômico and
Brasil Econômico newspapers and in the Diário Oﬁ cial ofﬁ cial
gazette on February 24, 2011, containing the main performance
data for the year.

(cid:129) Report for key opinion leaders – the main printed publication
containing the most relevant information about our performance.
Available in Portuguese, English, and Spanish.

(cid:129) Internet – presents the full content in Portuguese and English.

Access our electronic address www.natura.net/relatorio.

(cid:129) Special edition for employees – contains topics of interest to
our internal stakeholders and is also available on the Internet in
Portuguese and Spanish.

(cid:129) Special edition for our consultants – contains speciﬁ c information
for our sales channel, available in Portuguese only and on the
Internet.

The preparation of the report was discussed as well as published on
the Natura Conecta virtual platform (www.naturaconecta.com.br).
Access to the portal is free to all.

CONSTRUCTING MATERIALITY
The participation of our stakeholders in developing the materiality
matrix not only involves deﬁ ning the content of the report, it also directs
our strategic management of sustainability. The concerns identiﬁ ed
during the process produce a blueprint for senior management to
draw up the company’s plans, which are consequently reﬂ ected in the
company report.

Undertaken every two years, the materiality matrix cross-references
the socioenvironmental topics identiﬁ ed by our stakeholders as
relevant (external axis) with their importance for the company
(internal axis). Topics are selected on the basis of importance to the
company’s strategy, operating risks and opportunities, and for their
pioneering spirit.

The matrix presented in this report was constructed in 2008 and
detailed and expanded with our stakeholders from the Brazilian
operations in 2009. In all, 1,400 people were involved in the process.
The high-High-priority Topics in sustainability were deﬁ ned as the
Amazon, Biodiversity, Education, Greenhouse Gases, Product Impact,
and Quality of Relationships. The Amazon region was not identiﬁ ed
by the stakeholders, but we included it in our priorities because we
consider this to be a key factor for Brazil’s development (learn more
on page 24, High priority Topics).

MATERIALITY MATRIX

r
e
d
o
h
e
k
a
t
s

s
t
s
e
r
e
t
n

L
A
N
R
E
T
X
E

Biodiversity

Greenhouse gases

Quality of relationships

Impacts of products

Education

Control and influence level

high medium low

INTERNAL
Natura´s importance

138

Throughout 2010, we undertook a new cycle of engagement so
as to update the materiality matrix, making important progress. A
description of this process will be incorporated into the discussions
of Natura’s strategic planning in 2011 and published in the next
reporting cycle.

The next matrix will include stakeholders from our Latin American
operations. This will enable us to identify high-High-priority Topics
that reﬂ ect all our units, not just our Brazilian operations. We held a
multistakeholder panel at our head ofﬁ ce in Cajamar (São Paulo), in
addition to dialogues for this purpose in Argentina, Peru, Colombia,
and Mexico in 2010, and in March 2011 in Chile.

We moved forward with the Wiki Reports in early 2011. We revisited
the discussions held in the six virtual forums of 2010 and presented
the progress of our work on high-High-priority Topics. This platform
was also used to set priorities for the topics in the new materiality
matrix. Our objective was to enable participants to contribute to
the Natura’s actions in a collaborative manner, evaluating them and
making suggestions — thus turning the report into a living document
in the spirit of ongoing communication and permanent dialogue. The
Wiki Natura Report community is available at www.naturaconecta.com.
br and all those interested can participate (learn more on page 33,
Collective Construction).

GLOBAL COMPACT PRINCIPLES
Since July 2000, Natura has been a signatory of the Global
Compact, a United Nations initiative that brings together
companies, workers, and civil society to promote sustainable
growth and citizenship. We are also part of the Global
Compact Brazilian Committee (CBPG), created from the
partnership between the Ethos Institute and the United Nations
Development Program in 2003.

We also hosted a panel discussion led by specialists. Employees and
suppliers involved in the Natura reporting process and external
communication and sustainability professionals participated in this
event. We reﬂ ected on current characteristics of our reporting and
what changes are required, pointing out more appropriate formats,
types of approaches, and frequency.

The process of gathering information for the annual report is supported
by a communications agency with experience in sustainability. It includes
more than 50 interviews with representatives of both employees and
management, who update indicators by different departments of the
company. Last year, we improved data collection with the support of
an online tool for ﬁ lling out data by the relevant areas, though there
is still a need for better data management throughout the year. The
information in this report is validated by senior management and is
subject to external audit.

We are recognized for our effort to integrate economic, social and
environmental information into our report. We are aware, however,
that we still have a lot to develop until we succeed in interrelating the
main impact of our activities.

For further information on this report, please directly contact the team
responsible for its preparation by e-mail: relatorioanual@natura.net.

The CBPG is made up of companies, UN agencies in Brazil,
legal entities, academia, and organizations that work on
such topics as human and labor rights, the environment, and
combating corruption. For further information on this initiative,
visit www.pactoglobal.org.br.

Global Compact
Principles
Human Rights Principles
Principle 1
Respect and protect human rights
Principle 2
Prevent human rights violations
Principles of Labor Rights
Principle 3
Support freedom of association in the workplace
Principle 4
Abolish forced labor
Principle 5
Abolish child labor
Principle 6
Eliminate discrimination in the workplace
Principles of Environmental Protection
Principle 7
Support a preventive approach to environmental challenges
Principle 8
Promote environmental responsibility

Relevant GRI
Indicators

HR1; HR2; HR3; HR4; HR5;
HR6; HR7; HR8; HR9

HR1; HR2; HR8

HR5; LA4; LA5

HR7

HR6

HR4; LA2; LA13; LA14

EN2; EN5; EN6; EN7; EN10;
EN13; EN14; EN18; EN21;
EN22; EN26; EN27; EN30

Indirectly relevant
GRI indicators

LA4; LA13;
LA14; SO1

Performance
information

p. 37 and 50

p. 52

p. 39

HR1; HR2; HR3

p. 50 and 51

HR1; HR2; EC5; EC7; LA13

p. 41 and online

EC2 p. 14 and 62

Performance Chapter
EC2; EN1; EN3; EN4; EN8; EN9;
EN11; EN12;EN15; EN16; EN17; p 60 to 66
EN19;EN20; EN23; EN24; EN25;
EN28; EN29; PR3; PR4

Principle 9
Encourage environmentally friendly technologies
Principle against Corruption
Principle 10
Fight corruption in all its forms,
including extortion and bribery

EN2; EN5; EN6; EN7;
EN10; EN18; EN26;EN27

p. 30 and 31

SO2; SO3; SO4

SO5; SO6

p. 18, 56 and 57

139

GRI INDEX

See the table below to locate the performance indicators, as per the GRI standard, as well as references and explanations for those that we
reported partially.

1. STRATEGY AND ANALYSIS
Proﬁ le Disclosure
1,1
1,2
2. ORGANIZATIONAL PROFILE

Description
Statement from the most senior decision-maker of the organization.
Description of key impacts, risks, and opportunities.

Proﬁ le Disclosure
2,1
2,2

2,3

2,4

2,5

2,6
2,7
2,8
2,9
2,10
3. REPORT PARAMETERS

Proﬁ le Disclosure
3,1
3,2
3,3
3,4
3,5

3,6

3,7

3,8

3,9

3,10

3,11

Description
Name of the organization.
Primary brands, products, and/or services.
Operational structure of the organization, including main divisions, operating companies, subsidiaries, and
joint ventures.
Location of organization's headquarters.
Number of countries where the organization operates, and names of countries with either major opera-
tions or that are speciﬁ cally relevant to the sustainability issues covered in the report.
Nature of ownership and legal form.
Markets served (including geographic breakdown, sectors served, and types of customers/beneﬁ ciaries).
Scale of the reporting organization.
Signiﬁ cant changes during the reporting period regarding size, structure, or ownership.
Awards received in the reporting period.

Description
Reporting period (e.g., ﬁ scal/calendar year) for information provided.
Date of most recent previous report (if any).
Reporting cycle (annual, biennial, etc.)
Contact point for questions regarding the report or its contents.
Process for deﬁ ning report content.
Boundary of the report (e.g., countries, divisions, subsidiaries, leased facilities, joint ventures, suppliers).
See GRI Boundary Protocol for further guidance.
State any speciﬁ c limitations on the scope or boundary of the report (see completeness principle for
explanation of scope).
Basis for reporting on joint ventures, subsidiaries, leased facilities, outsourced operations, and other
entities that can signiﬁ cantly affect comparability from period to period and/or between organizations.
Data measurement techniques and the bases of calculations, including assumptions and techniques
underlying estimations applied to the compilation of the Indicators and other information in the report.
Explain any decisions not to apply, or to substantially diverge from, the GRI Indicator Protocols.
Explanation of the effect of any re-statements of information provided in earlier reports, and the reasons
for such re-statement (e.g.,mergers/acquisitions, change of base years/periods, nature of business,
measurement methods).
Signiﬁ cant changes from previous reporting periods in the scope, boundary, or measurement methods
applied in the report.
Table identifying the location of the Standard Disclosures in the report.
Policy and current practice with regard to seeking external assurance for the report.

3,12
3,13
4. GOVERNANCE, COMMITMENTS AND ENGAGEMENT

Proﬁ le Disclosure

4,1

4,2

4,3

4,4

4,5

4,6

4,7

4,8

4,9

4,10

4,11

4,12

4,13

4,14
4,15

4,16

4,17

Description
Governance structure of the organization, including committees under the highest governance body
responsible for speciﬁ c tasks, such as setting strategy or organizational oversight.
Indicate whether the Chair of the highest governance body is also an executive ofﬁ cer.
For organizations that have a unitary board structure, state the number of members of the highest
governance body that are independent and/or non-executive members.
Mechanisms for shareholders and employees to provide recommendations or direction to the highest
governance body.
Linkage between compensation for members of the highest governance body, senior managers, and
executives (including departure arrangements), and the organization's performance (including social and
environmental performance).
Processes in place for the highest governance body to ensure conﬂ icts of interest are avoided.
Process for determining the qualiﬁ cations and expertise of the members of the highest governance body
for guiding the organization's strategy on economic, environmental, and social topics.
Internally developed statements of mission or values, codes of conduct, and principles relevant to econo-
mic, environmental, and social performance and the status of their implementation.
Procedures of the highest governance body for overseeing the organization's identiﬁ cation and manage-
ment of economic, environmental, and social performance, including relevant risks and opportunities, and
adherence or compliance with internationally agreed standards, codes of conduct, and principles.
Processes for evaluating the highest governance body's own performance, particularly with respect to
economic, environmental, and social performance.
Explanation of whether and how the precautionary approach or principle is addressed by the organi-
zation.
Externally developed economic, environmental, and social charters, principles, or other initiatives to
which the organization subscribes or endorses.
Memberships in associations (such as industry associations) and/or national/international advocacy or-
ganizations in which the organization: * Has positions in governance bodies; * Participates in projects or
committees; * Provides substantive funding beyond routine membership dues; or * Views membership
as strategic.
List of stakeholder groups engaged by the organization.
Basis for identiﬁ cation and selection of stakeholders with whom to engage.
Approaches to stakeholder engagement, including frequency of engagement by type and by stakeholder
group.
Key topics and concerns that have been raised through stakeholder engagement, and how the organiza-
tion has responded to those key topics and concerns, including through its reporting.

PERFORMANCE INDICATOR

ECONOMIC

Performance Indicator
Economic management
approach
Economic performance

Description

Detailing about what isn’t reported

Reported
Fully
Fully

Pages
5
5

Reported
Fully
Fully

Pages
9
9

Fully

Fully
Fully
Fully
Fully
Fully

9
9
9, 102, 103 and 128
9
10

Reported
Fully
Fully
Fully
Fully
Fully

Pages
138
138
138
139
138

Fully

Fully
Fully

138

139

138

140
134

Reported

Pages

Detailing about what isn’t reported

Fully

Fully
Fully

Fully

75;139

138
138

33 and 39

32-33; 38; 54;
62; 68

Reported

Pages

Detailing about what isn’t reported

Fully

EC1

EC2

EC3
EC4
Market presence

EC5

Direct economic value generated and distributed, including revenues, operating costs, employee
compensation, donations and other community investments, retained earnings, and payments to capital
providers and governments.
Financial implications and other risks and opportunities for the organization's activities due to climate
change.
Coverage of the organization's deﬁ ned beneﬁ t plan obligations.
Signiﬁ cant ﬁ nancial assistance received from government.

Fully

Fully
Fully

94; 103; 105, 106
and 131

21 and 27

50
36; 74 and 95

Range of ratios of standard entry level wage compared to local minimum wage at signiﬁ cant locations
of operation.

Fully

140

Policy, practices, and proportion of spending on locally-based suppliers at signiﬁ cant locations of
operation.

Partially

Procedures for local hiring and proportion of senior management hired from the local community at
signiﬁ cant locations of operation.

Fully

Development and impact of infrastructure investments and services provided primarily for public beneﬁ t
through commercial, in-kind, or pro bono engagement.
Understanding and describing signiﬁ cant indirect economic impacts, including the extent of impacts.

Fully

48; 68 and 92

54 and 94

We report our purchasing practices from local
suppliers and related expenses, but we do not show
the percentage in relation to total supplying because
that information is not available.
We will begin managing that data in 2011,
and will therefore report the results in 2012.

Description

Reported

Pages

Detailing about what isn’t reported

Fully

EC6

EC7

Indirect economic impacts

EC8

EC9
ENVIRONMENTAL

Performance Indicator
Environmental manage-
ment approach
Materials

EN1

EN2
Energy
EN3
EN4
EN5

EN6

EN7
Water
EN8
EN9
EN10
Biodiversity

EN11

EN12

EN13
EN14

EN15

Emissions, efﬂ uents
and waste
EN16
EN17
EN18
EN19
EN20
EN21
EN22
EN23

EN24

EN25

Products and services

Materials used by weight or volume.

Partially

Percentage of materials used that are recycled input materials.

Direct energy consumption by primary energy source.
Indirect energy consumption by primary source.
Energy saved due to conservation and efﬁ ciency improvements.
Initiatives to provide energy-efﬁ cient or renewable energy based products and services, and reductions
in energy requirements as a result of these initiatives.
Initiatives to reduce indirect energy consumption and reductions achieved.

Total water withdrawal by source.
Water sources signiﬁ cantly affected by withdrawal of water.
Percentage and total volume of water recycled and reused.

Location and size of land owned, leased, managed in, or adjacent to, protected areas and areas of high
biodiversity value outside protected areas.
Description of signiﬁ cant impacts of activities, products, and services on biodiversity in protected areas
and areas of high biodiversity value outside protected areas.
Habitats protected or restored.
Strategies, current actions, and future plans for managing impacts on biodiversity.
Number of IUCN Red List species and national conservation list species with habitats in areas affected
by operations, by level of extinction risk.

Total direct and indirect greenhouse gas emissions by weight.
Other relevant indirect greenhouse gas emissions by weight.
Initiatives to reduce greenhouse gas emissions and reductions achieved.
Emissions of ozone-depleting substances by weight.
NO, SO, and other signiﬁ cant air emissions by type and weight.
Total water discharge by quality and destination.
Total weight of waste by type and disposal method.
Total number and volume of signiﬁ cant spills.
Weight of transported, imported, exported, or treated waste deemed hazardous under the terms of the
Basel Convention Annex I, II, III, and VIII, and percentage of transported waste shipped internationally.

Fully

Fully
Fully
Fully

Fully

Fully
Fully
Fully

Fully

Fully
Fully

Fully

Fully
Fully
Fully
Fully
Fully
Fully
Fully
Fully

Fully

86 and 87

91
91
91

89
89
89

69 and 86
29 and 83

29 and 84

79
79
79-80
80
80
89
88
89

Identity, size, protected status, and biodiversity value of water bodies and related habitats signiﬁ cantly
affected by the reporting organization’s discharges of water and runoff.

Partially

EN26

Initiatives to mitigate environmental impacts of products and services, and extent of impact mitigation.

Partially

78; 86-88

EN27

Percentage of products sold and their packaging materials that are reclaimed by category.

Partially

Compliance

EN28

Transport

EN29

Overall

Monetary value of signiﬁ cant ﬁ nes and total number of non-monetary sanctions for noncompliance with
environmental laws and regulations.

Fully

Signiﬁ cant environmental impacts of transporting products and other goods and materials used for the
organization’s operations, and transporting members of the workforce.

Fully

78 and 80

EN30

Total environmental protection expenditures and investments by type.

Partially

SOCIAL – LABOR PRACTICES AND DECENT WORK

Performance Indicator
Labor management
approach
Employment
LA1

Total workforce by employment type, employment contract, and region.

LA2

Total number and rate of employee turnover by age group, gender, and region.

Description

Reported

Pages

Detailing about what isn’t reported

Fully

43-44

Fully

Partially

We report the total terminations and turnover rate by
region, but we do not show segmentation by gender
and age group. This is not material information for
our business.

141

We report the total materials used by weight
and volume, but we don’t use stratiﬁ cation by non-
renewable materials and direct materials because
that information is not available.
We will begin managing that data in 2012,
and will therefore report the results in 2013.

We report information about bodies of water
impacted by our disposal, but we do not report the
dimension and value of the biodiversity in the body
of water.
This is not material information for our business.

We report various initiatives to mitigate the environ-
mental impacts of our products and services. We did
not include measures to mitigate impacts related to
noise in the publication.
Natura’s materiality matrix prioritized environmental
issues such as greenhouse gases and impacts from
products with special focus on solid waste, not inclu-
ding the issue of noise pollution.
This is not material information for our business.
We report the total weight of recovered products
and packaging, but not the percentage in relation to
the total billed.
That information is not yet available. We will begin
managing that data in 2012, and will therefore report
the results in 2013.
The Residue issue is our priority at Natura, reﬂ ected
in our materiality exercise. It is important to us to
act in such a way as to promote results for society,
beyond just for Natura. Hence, our actions will also
consider materials beyond our products.

We report various organizational investments and
expenses, including those related to the environment,
but we do not use the segmentation requested by
the indicator. This is not material information for our
business.

LA3

Beneﬁ ts provided to full-time employees that are not provided to temporary or part-time employees,
by major operations.

Labor/ management relations
LA4

Percentage of employees covered by collective bargaining agreements.

Fully

LA5

Minimum notice period(s) regarding operational changes, including whether it is speciﬁ ed in collective
agreements.

Partially

Occupational health and safety

Percentage of total workforce represented in formal joint management–worker health and safety com-
mittees that help monitor and advise on occupational health and safety programs.

Fully

LA6

LA7

LA8

LA9
Training and education
LA10

LA11

LA12
Diversity and equal opportunity

Rates of injury, occupational diseases, lost days, and absenteeism, and number of workrelated fatalities
by region.

Partially

Education, training, counseling, prevention, and risk-control programs in place to assist workforce mem-
bers, their families, or community members regarding serious diseases.
Health and safety topics covered in formal agreements with trade unions.

Average hours of training per year per employee by employee category.
Programs for skills management and lifelong learning that support the continued employability of
employees and assist them in managing career endings.
Percentage of employees receiving regular performance and career development reviews.

LA13

Composition of governance bodies and breakdown of employees per category according to gender,
age group, minority group membership, and other indicators of diversity.

LA14
SOCIAL – HUMAN RIGHTS

Ratio of basic salary of men to women by employee category.

Description

Performance Indicator
Human rights manage-
ment approach
Investment and procurement practices

HR1

HR2

HR3

Percentage and total number of signiﬁ cant investment agreements that include human rights clauses or
that have undergone human rights screening.
Percentage of signiﬁ cant suppliers and contractors that have undergone screening on human rights and
actions taken.
Total hours of employee training on policies and procedures concerning aspects of human rights that are
relevant to operations, including the percentage of employees trained.

Non-discrimination
HR4
Freedom of association and collective bargaining

Total number of incidents of discrimination and actions taken.

Fully

Operations identiﬁ ed in which the right to exercise freedom of association and collective bargaining may
be at signiﬁ cant risk, and actions taken to support these rights.

Fully

HR5

Child labor

HR6

Fully

Partially

Fully

We communicate operational changes in advance, but
we have a minimum timeframe to issue this notice.
This is not material information for our business.

We report various data about occupational health and
safety, but we do not report the distribution of this
information by region. This is not material information
for our business.

We report our staff breakdown according to our
view of diversity, but we do not segment the data by
gender and age group. This is not material information
for our business.

Reported

Pages

Detailing about what isn’t reported

Fully

38; 41 and 45

Operations identiﬁ ed as having signiﬁ cant risk for incidents of child labor, and measures taken to contri-
bute to the elimination of child labor.

Fully

55, 63 and 65

Forced and compulsory labor

HR7

Security practices

HR8

Indigenous rights
HR9
SOCIAL – SOCIETY

Performance Indicator
Social management
approach
Community

SO1

Corruption
SO2
SO3
SO4
Public policy
SO5

SO6

Anti-competitive behavior

SO7

Compliance

SO8

Operations identiﬁ ed as having signiﬁ cant risk for incidents of forced or compulsory labor, and measures
to contribute to the elimination of forced or compulsory labor.

Fully

55 and 63

Percentage of security personnel trained in the organization’s policies or procedures concerning aspects
of human rights that are relevant to operations.

Partially

We report our safety practices, which encompass
Human Rights training, but we do not report the per-
centage of the safety teams that undergo training and
outsourcers that participate in the training sessions in
relation to the total. This data is not available.

Total number of incidents of violations involving rights of indigenous people and actions taken.

Fully

65 and 96

Description

Reported

Pages

Detailing about what isn’t reported

Fully

92 and 95

Nature, scope, and effectiveness of any programs and practices that assess and manage the impacts of
operations on communities, including entering, operating, and exiting.

Percentage and total number of business units analyzed for risks related to corruption.
Percentage of employees trained in organization’s anti-corruption policies and procedures.
Actions taken in response to incidents of corruption.

Public policy positions and participation in public policy development and lobbying.
Total value of ﬁ nancial and in-kind contributions to political parties, politicians, and related institutions
by country.

Total number of legal actions for anticompetitive behavior, anti-trust, and monopoly practices
and their outcomes.

Fully

Fully
Fully
Fully

Fully

Monetary value of signiﬁ cant ﬁ nes and total number of non-monetary sanctions for noncompliance with
laws and regulations.

Fully

21
45
21

SOCIAL – PRODUCT RESPONSIBILITY

Description

Performance Indicator
Product responsibility
management approach
Customer health and safety

Reported

Pages

Detailing about what isn’t reported

Fully

60-61 and 87

PR1

PR2

Product and service labeling

PR3

PR4

PR5
Marketing communications

PR6

PR7

Customer Privacy

PR8

Compliance

PR9

Life cycle stages in which health and safety impacts of products and services are assessed for improve-
ment, and percentage of signiﬁ cant products and services categories subject to such procedures.
Total number of incidents of non-compliance with regulations and voluntary codes concerning health
and safety impacts of products and services during their life cycle, by type of outcomes.

Type of product and service information required by procedures, and percentage of signiﬁ cant products
and services subject to such information requirements.
PR4 Total number of incidents of non-compliance with regulations and voluntary codes concerning
product and service information and labeling, by type of outcomes.
PR5 Practices related to customer satisfaction, including results of surveys measuring customer satisfaction.

Programs for adherence to laws, standards, and voluntary codes related to marketing communications,
including advertising, promotion, and sponsorship.
Total number of incidents of non-compliance with regulations and voluntary codes concerning marketing
communications, including advertising, promotion, and sponsorship by type of outcomes.

Fully

44 and 59

Total number of substantiated complaints regarding breaches of customer privacy and losses of custo-
mer data.

Fully

55 and 60

Monetary value of signiﬁ cant ﬁ nes for noncompliance with laws and regulations concerning the provision
and use of products and services.

Fully

142

EDITORIAL TEAM

Art direction and graphic design
Modernsign Design e Inovação

Writing and proofreading
Report Comunicação

Image treatment and prepress
Modernsign Design e Inovação

Printing
Margraf

Photography
Daniela Giorgia Spinardi and Wilson Spinardi Júnior
(cover, back cover, cover ﬂ ap, p. 1 to 5, 20, 21, 34,
35, 38, 42, 54, 58, 59)
Marcio Scavone (p. 6 and 8)
Marcos Suguio (p. 48)
Taterka (p. 36, 46, 50, 52 and 73)

Determination of Indicators
Sustainability Ofﬁ ce,
Ofﬁ ce of the Senior Vice President of Financial
and Legal Affairs
and Report Comunicação

General Coordination
Corporate Affairs and
Government Relations Ofﬁ ce

This report was prepared in GillSans, with the cover printed on Couché Suzano Matte 230
g/m2 paper and the body printed on Couché Suzano Matte 150 g/m2 paper. A total of 3,000
copies of this edition were printed in Portuguese, 1,000 in English and 1,000 in Spanish.

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