1
natura
report 11#
FULL GRI VERSION
natura report # 11
2
1. OUR ESSENCE
3 Reason for Being
3 Vision
3 Beliefs
4 Culture Drivers
2. WHERE WE ARE
4. WHO WE WORK WITH
5 Message from the Chairmen of the Board
7 Message from the Executive Committee
9 Natura
10 Highlights of the year
10 Awards and Recognitions
12 Our market
12 Progress in Our Commitments
14 Governance
14 Board of Directors
16 Executive Governance
19 Risk Management
19 Internal Audit
19 Senior Management Compensation
22 Natura Management System
3. WHAT WE AIM FOR
23 Strategy and Prospects
24 Infrastructure to support growth
24 Managing sustainability
25 Priority topics
25 Water
25 Education
26 Sustainable entrepreneurship
26 Climate change
27 Relationship quality
27 Solid waste
28 Sociobiodiversity
29 Innovating innovation
31 Relationship quality
33 Ombudsman’s Offi ce
35 Employees
47 Consultants and NCAs
53 Consumers
56 Suppliers
58 Suppliers’ communities
62 Surrounding communities
65 Shareholders
67 Government
5. WHAT FOOTPRINT WE LEAVE
74 Natura Value Chain
75 Generating Environmental Value
75 Carbon Neutral
82 Solid Waste management
83 Water and effl uents
86 Generating Social Value
86 Instituto Natura
87 Support and sponsorship
90 Generating Economic Value
93 Financial Statements
126 About this Report
127 Global Compact
128 Assurance Declaration
130 Remissive Index
134 Credits
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1. our
essence
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 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 of
preconceived ideas and manipulation.
The company, a living organism, is a dynamic
set of relationships. Its value and longevity
are connected to its ability to contribute to
the evolution of society and its sustainable
development.
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culture drivers
THE CULTURE DRIVERS WERE CREATED
BASED ON OUR ESSENCE AS A GUIDE FOR
OUR CHOICES AND MINDSETS. THEY ARE
LIKE TRACKS SHOWING WHAT WE NEED TO
PAY SPECIAL ATTENTION TO IN OUR DAILY
ROUTINES.
THE CREATION OF THESE DRIVERS WAS THE
RESULT OF A PROCESS THAT INVOLVED THE
COMPANY FOUNDERS, MEMBERS OF THE
EXECUTIVE COMMITTEE AND THE LEAD-
ERSHIP TEAM. WE ALSO DREW ON REFLEC-
TIONS FROM THE CULTURE DIALOGUES
HELD WITH 150 EMPLOYEES FROM ALL LEV-
ELS OF THE ADMINISTRATIVE, OPERATIONAL
AND SALES FORCES IN 2009.
THEY ARE:
COMMITMENT TO THE TRUTH
Being authentic and true, honoring our
commitments with others and our owns.
Defending what we believe in and doing what
we say we will.
CONTINUOUS IMPROVEMENT
Improving always, evolving in every dimension:
material, emotional, intellectual and spiritual.
Striving continuously for self-knowledge,
recognizing our talents and our limitations.
Creating an environment that promotes learning,
continuous improvement and recognition of high
performance.
DOING THINGS WELL
Insisting on doing everything simply, but with
beauty, quality and care of details.
Discipline to honor what has been agreed upon.
INNOVATION
Be entrepreneurial, taking the lead, doing what
has never been done and assuming the risks.
Continuously scrutinize the ways things are done
and striving to fi nd new ways to do them.
SUSTAINABLE DEVELOPMENT
Consistently deliver superior results and relevant
value in the economic, social and environmental
fi elds.
Manage the short term, with a commitment to
build the company’s future.
CARING RELATIONS
Working together is better. Being generous, open
and empathetic with others, creating a climate of
trust based on relationship quality.
Recognize that others are different from us,
listen without judging, respecting their opinions
and incorporating differences to fi nd the best
solution for the whole.
PLEASURE AND JOY
Face daily challenges with optimism, lightheartedly
and in a good mood.
Celebrate achievements, fueling the enthusiasm
and energy that encourage us to grow and
continue to do more and to do it better.
Find satisfaction at work, affi nity with our purpose
in life, giving meaning to everything we do.
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2. where
we are
2.1message from
the chairmen
1.1; 1.2
THE ETHICAL CHALLENGE
OF OUR TIMES
In 2011, we witnessed the confi rmation that our world will be unsustainable, if current trends of
production, global consumption and socio-environmental imbalances continue. The wave of events
in recent years says a lot: in 2006, the awareness of global warming risks caused by man came into
being; two years later, we lived through the hardships of an economic crisis, now deepening in the
European Union. Lastly, since 2010, we have watched with bewilderment the social convulsions of
the Arab Spring in their many forms, but which have one thing in common: the quest for a fairer
and equalitarian society. We believe that only a deep transformation based on ethics of life, in which
new development logics and revigorated global governance prevail over and above the interests of
religions, countries, economic groups, will be a source of hope for future generations and for man to
continue existing on Earth.
If on the one hand this scenario is troubling, on the other hand it reasserts our determination to
make our best emotional and intellectual efforts for Natura to act increasingly as agent of necessary
social change, always managed in accordance with the principles of sustainability, in the search for the
best results – in an integrated manner – in the economic, social and environmental dimensions. This
corporate behavior which is in harmony with society’s aspirations, means we simply must take Natura
and its proposed values to new heights and frontiers.
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Today, Brazil and Latina America, our main operating markets, are in a privileged position. Though not
immune to the effects of a tougher international environment, they are less likely to be adversely
affected by global upheavals. The economic rise of an important section of the population – with
women playing a particularly prominent role – seems to have a wingspan that will be able to foster
a long and promising cycle of development, albeit far from a sustainable development, fostering full
social inclusion, broadening distribution of wealth and mitigating environmental impacts. The signifi cant
investments of large companies in products for grooming, perfumery and cosmetics in Latin America
are evidence of this much more favorable scenario. In the near future, Brazil will be the world’s second
largest market in this industry.
We began our message with an excerpt from the recently-published book by Chris-
topher Meyer, Harvard University professor, who inspiringly describes the way in
which we seek to carry on our business. We are very grateful for his generous
interpretation, which simultaneously highlights our distinctive traits and encour-
ages us to take part in a new and more community-oriented, fair and inclusive
capitalist project. We believe that our path to success lies in the historical
search for continuous improvement and innovative solutions for current and
future dilemmas, learning the “zeitgeist” and projecting it into the future. In this
new frame of mind, our greatest challenge will be to put together the new
technologies with hearts attuned to the same cause. Therefore, we envisage the
possibility of expanding the transformation power of our relationship network.
“Natura may be the
most evolved example
we’ve seen thus far of a
company managing its world
in full color and maximizing
value added to its
ecology.”
The ever greater exercise of our raison d’être, which is to foster well-being, will lead us to
improve and deepen the ties which unite us to our consultants, collaborators, business partners and
consumers. Energized by the dreams and by the quest for professional and personal achievements, we
are convinced that this group is determined to foster values such as solidarity, creativity and altruism,
with respect and reverence to life. We therefore emphasize our historical commitment to stand by
the side of all those who want to participate in this urgent collective construction of humanity.
Friendly greetings from
ANTONIO LUIZ DA CUNHA SEABRA
PEDRO LUIZ BARREIROS PASSOS
GUILHERME PEIRÃO LEAL
Co-Chairmen of the
Board of Directors
Christopher Meyer, “Standing on the Sun: How explosion of capitalism abroad will change business everywhere.”
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2.2 message from the
executive committee
1.1; 1.2
7
THE BASIS FOR THE
FUTURE OF NATURA
In the last fi ve years we have spurted profound changes at Natura. The Company practically doubled in size
between 2007 and 2011, and our results prove the consistency of our strategy: the number of Consultants
increased from 718 thousand to 1.4 million, boosting product orders from 9 million to a telling 17 million
a year; Ebitda rose from R$ 700 million to R$ 1.4 billion, with net revenue increasing from R$ 3 billion
to R$ 5 billion. International operations increased their share from 4.4% to 9%. To support this growth,
we completely reformulated our logistics model and attracted new leaders fully aligned with our business
culture and conduct. We set up a management system based on Business Units and Regional Units, and
we continued to invest in innovation, in the conception of our products, in managing our environmental
impacts and in our commercial model.
In 2011, we made our biggest investment ever, worth around R$ 350 million to expand production, develop
our logistics model and improve information technology, that are essential for sustaining our growth. We
worked on bringing about a step change in infrastructure to increasingly streamline delivery of our prod-
ucts to consultants, at a reduced cost per order and lower greenhouse gases emissions.
However the simultaneous set up of new capture of orders systems, changes in the logistics model and
the opening of new DCs affected our operations, service quality and relations. In parallel, we saw a drop
in commercial and market effi ciency. The combination of these two conditions impacted negatively on our
results, which were below expectations, requiring planning adjustments during the year.
We intend to increase the impact of our promotions, setting a better balance between central and regional
promotions. We are convinced that the infrastructure modifi cations in progress will enable us to reach
service levels capable of boosting our brand’s competitive differentials.
The year also brought new opportunities. After a period of signifi cant expansion through growth in the
sales channel that increased product penetration from 40% to 60% in Brazilian homes, we identifi ed an
opportunity to modify our strategy. Our focus is now on boosting our Consultants’ productivity by per-
suading consumers to buy a greater variety of products more frequently. After all, ours is the top brand in
the market, and our Consultants connect with 100 million consumers.
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We continue to be enthusiastic about the expansion of our international operations which is the result
of a high performance leadership team, allying experience in Natura and knowledge of the local markets.
In Argentina, Chile and Peru, countries in which our operations are at the consolidation stage, Natura grew
at the rate of 36% in local weighted currency. The Company recorded a signifi cant increase in profi tability,
with our brands positioned among the industry’s leaders. In 2011, we continued to implement local manu-
facturing, with the start-up of production in Colombia and the duplication of our Distribution Center in
Mexico. We also began to reap results from the “Red de Relaciones Sustentables” (Sustainable Relation-
ship Network), an innovation in our commercial model developed especially for the Mexican market which
encourages socio-environmental enterprise, a novelty in the direct selling industry.
In fi nancial terms, our net revenues increased 8.9%, with Ebitda growing 13.4%. In the social area, we ex-
panded wealth distribution among our main stakeholders. The changes throughout the year affected our
organizational climate and our service instability bore an impact on consultants’ satisfaction levels. On the
other hand, with regard to the environment, we achieved our targets, with reductions in emissions and in
the use of natural resources such as water and energy.
In parallel with the changes undertaken on multiple fronts, we advanced towards a new perspective for
our business. We are particularly enthusiastic about the future of direct sales. We have always believed
in the entrepreneurial and transformational capacity of people engaged in a common purpose. In an
ever more digitally connected world, in which personal treatment of consumers becomes increasingly
important, direct sales has great potential to drive continuous growth. We anticipate a future in which
relations between consultants and consumers will be supported by cutting edge information technology
and social networks, a fi eld in which services should expand greatly and drive increased value generation
for all those involved.
Inspired by our desire to see our brand occupy new spaces, we reaffi rm our desire to proceed with the
entire Natura community, further reinforcing this unique relationship network.
ALESSANDRO GIUSEPPE 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
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2.1 - 2.9
2.3
natura
Natura was born in 1969, the fruit of two passions: cosmetics and relationships. For 43 years, we have sought to
promote well being well – an expression that embodies our reason for being: to make people feel good about
themselves, about others and about the natural environment and the whole of which we are part.
We operate in the Cosmetics Fragrances and Toilletries. Since 1974, we have used direct sales as our commercial
model. This means our products reach our consumers through a network of 1.4 million consultants (NCs) in Brazil
and abroad.
To support this sales channel, we have almost 7 thousand employees working in Brazil, in our head offi ce in Cajamar,
São Paulo (São Paulo State), in fi ve commercial offi ces – Salvador (Bahia), Campinas (São Paulo State), Alphaville
(São Paulo State), Rio de Janeiro (Rio de Janeiro State) and Porto Alegre (Rio Grande do Sul State)–, in addition
to our plants and research and technology centers in Cajamar and in Benevides (Pará State) and eight distribution
centers spread nationwide (see fi gure).
We also have a strong presence in Latin America. The regional head offi ce, located in Buenos Aires, Argentina, co-
ordinates our operations in Chile, Colombia, Mexico and Peru. Our products are also marketed in Bolivia through
local distributors.
Additionally, Natura has an operation and an Advanced Technology Center in Paris, France, where the Company
develops research into new technologies, trends and advances in the area of beauty and well-being.
BRAZIL
ARGENTINA
CHILE
PERU
COLOMBIA
MEXICO
FRANCE
MANUFACTURING
INTERNATIONAL MANUFACTURE
HUBS
DISTRIBUTION CENTERS
PRODUCT CIRCULATION
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HIGHLIGHTS OF THE YEAR
ECONOMIC
_ Natura net revenues reached R$ 5,591 million, a growth of 8.9%.
_ EBITDA was R$ 1,425 million, with an EBITDA margin of 25.5%, and net earnings of R$ 830 million,
and margin of 14.9%.
_ Our international operations showed vigorous growth, with 40% increase in net revenues in
weighted local currency (35.4% in Reais); they now account for 9% of the business.
_ We undertook our largest investment ever, with capital expenditure of R$ 350 million in produc-
tion, logistics and technology.
_ The Company’s growth was below projections due to operational instabilities caused by changes
in the order capture systems and lower growth in the country and in the industry.
ENVIRONMENTAL
The following initiatives were taken:
_ Launching of the Amazônia Program aimed at yielding business around R$ 136 million in the
region in 2012.
_ Performance of our fi rst water inventory using the Water Footprint methodology; this should en-
able diagnosis and serve as the basis for a new water management policy.
_ Implementation of a new supplier selection methodology which takes into account social and
environmental impacts, in addition to price, quality and logistics.
_ Reduction of our relative GHG emissions by 25.4% between 2006 and 2011. Our target is a 33%
reduction by 2013.
_ On the other hand, with regard to our water and solid waste generation program unfortunately
we were unable to reach the set targets per unit invoiced,
SOCIAL
_ The quality of our relations with our main stakeholders was below the desired levels. There was a
drop in organizational climate from 73% to 70%. The NC and NCA loyalty rates also decreased to
19% and 24%, respectively.
_ On the other hand we created an innovative and enterprising commercial model in Mexico, ob-
taining 50% growth in the fi rst six months.
_ We initiated an important leadership development program for the 600 top Natura managers in
Brazil and overseas.
_ The Trilhas Program, a partnership with the Ministry of Education, became public policy and should
benefi t more than 3 million students in 2012.
_ We raised R$ 8.4 million with the Crer para Ver program, yet falling short of our target of
R$ 13 million.
AWARDS AND RECOGNITIONS
In 2011, Natura was elected the second most sustainable company in the world by the Canadian Research Insti-
tute Corporate Knights. This was the third time we were classifi ed in this ranking. We were also elected the 8th
most innovative Company worldwide by Forbes magazine and were the subject of a Harvard Business School
case study. The main recognitions in the year are presented below.
2.10
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MAIN NATURA AWARDS AND RECOGNITIONS IN 2011
FINANCE
Recognition
FT ArcelorMittal Boldnes
in Business Awards
INSTITUTIONAL
INSTITUTIONAL
Organization
Category
Financial Times and
ArcelorMittal
Natura was recognized as one of the 6 best
companies in the Environment category.
Recognition
Organization
Category
The 10 Most Innovative Companies
in the World
Forbes Magazine
The 100 Most Prestigious Companies
Época Negócios Magazine
The Most Admired Companies in Brazil
Carta Capital Magazine
DSN Global 100: The Top Direct
Selling Companies in the World
Direct Selling News
The Most Innovative Companies
in the World
The Most Prestigious Companies
Most prestigious brand in the Beauty
category.
The Most Admired Companies in Brazil
The Most Admired Companies in the
Cosmetics Fragrances and Toilletries.
World Ranking of the Biggest Direct
Selling Companies.
Latin American Ranking of Biggest
Direct Selling Companies.
World’s Most Ethical Company
EthiSphere
Health and Beauty
MARKETING PRODUCT AND PACKAGING
MARKETING PRODUCT AND PACKAGING
2011
x
2011
8º
2º
1º
1º
1º
3º
1º
1º
Recognition
Organization
Category
2011
Abre Award for Brazilian Packaging
Abre – Brazilian Packaging
Association
Company of the year
Cosmetics and Personal Care Products
Packaging - New Line Ekos Hair
Packaging of Family of Products - New Line
Ekos Hair
Sustainability - New Line Ekos Hair
Structural Design – Functionality New Line
Ekos Hair
Marketing – Communication Strategy: New
Line Ekos Hair
INVESTORS’ RELATIONS
Recognition
Organization
Category
Best Annual Report
CR Reporting Awards
SUSTAINABILITY
Recognition
The 20 Most Prestigious Companies
in Argentina
100 Most Sustainable Corporations
in the World
ABRASCA –Brazilian
Association of Public
Companies
Public Company Ranking
Corporate Register
Best Integrated Report
Organization
Category
Clarin Newspaper
Environmental Commitment Ranking
Corporate Knights Inc.,
Innovest Strategic Value
Advisors, Asset 4 and
Bloomberg.
100 Most Sustainable Corporations
in the World.
One of the 20 Corporate Role Models
Exame Sustainability Guide.
Best Practices: Community Relations
Exame Sustainability Guide
Exame Magazine
Best Social Responsibility
Practices - Mexico
Centro Mexicano
para la Filantropia
Fundación Chile Ranking: Best Prepared
Companies for Climate Change.
Fundación Chile and Capital
Magazine
Companies best prepared for climate
change.
natura report # 11
1º
1º
1º
1º
1º
1º
2011
3º
1º
2011
2º
2º
x
1º
1º
12
OUR MARKET
According to the most recent data from the Brazilian CFT industry association Abihpec/Sipatesp2, the market in
this country grew 7.7% in nominal terms in the fi rst ten months of the year, albeit below projections. Even with
lower economic growth, increased competition, and higher overseas investment in Brazil, Natura maintained
its market leadership, with 23.2% market share against 23.6% the previous year. We also retained high levels of
consumer preference: 89% intend to buy our products and 68% actually acquired Natura brand products.
In the Latin American countries in which we operate (Argentina, Chile, Peru, Colombia and Mexico), the most
recent Euromonitor fi gures show a 7.5% average annual growth for the CFT industry. This rate has remained
steady over the last four years. In the same period, Natura has grown on average 38% per year in these coun-
tries, climbing from the 15th to the 9th position in the CFT company ranking for the region.
The numbers for the direct selling market showed the same trend. According to the Associação Brasileira de
Vendas Diretas (Brazilian Direct Selling Association), some 3 million consultants were involved in door to door
sales last year, 3.2% up over 2010. The growth rate during the previous year was 12.2%.
PROGRESS IN OUR COMMITMENTS
Every year we assume commitments and targets to drive our socio-environmental performance. These targets
are incorporated into our Socio-Environmental Budget and are monitored by the Natura Executive Committee.
Our 2012 targets were adjusted in accordance with the operational market framework we encountered in 2011
and Natura made them challenging. The table below presents the results for the year:
2011 TARGET
WATER
2011 PERFORMANCE
2012 TARGET
Reduce total water consumption per unit
invoiced by 3%.
NOT ACHIEVED
Water consumption increased by 14%.
Maintain water consumption at 0.40 liters
per unit produced in Brazil.1
EDUCATION
EMPLOYEES
Reach average of 100 hours training per
employee in Brazil
NOT ACHIEVED
Natura had the same average as the previous year, 90
hours.
Reach an average of 88 hours training per
employee throughout Natura.
NOT ACHIEVED
85 hours reached.
CONSULTANTS AND NCAS
Train 540 thousand consultants
per subject2.
Achieve R$ 13 million sales from Crer para
Ver product line.
Reach 134 thousand NCs engaged in Natu-
ra Movement.
ACHIEVED
566 thousand NCs trained.
NOT ACHIEVED
Sales were R$ 8.4 million.
NOT ACHIEVED
Almost 123 thousand NCs engaged in Natura
Movement.
None. The scope of the target was expan-
ded to include international operations (see
below).
Reach an average of 80 hours training per
employee throughout Natura.
Train 1,005,000 consultants per subject.1
Achieve R$ 10.3 million sales from Crer
para Ver product line in Brazil and R$ 2.5
million from international operations.
Maintain 123 thousand NCs engaged in
Natura Movement.
Achieve 13% penetration among
consultants with the Crer para Ver program
in Brazil.
NOT ACHIEVED
Rate achieved was 9.5%.
Achieve 11% penetration among consul-
tants in the Crer program in Brazil and
17.7% in international operations.
CLIMATE CHANGE
Reduce relative greenhouse gases (GHG)
emissions by 33% by 2013, against 2006
baseline inventory.
Reduce scope 1 and 2 GHG Protocol emis-
sions by 10% by 2012, against 2008 baseline.
UNDERWAY
Reduction of 25.4% up to 2011.
UNDERWAY
The accrued variation from 2008 to 2011 incre-
ased 11%.
Reduce relative greenhouse gases (GHG)
emissions by 33% by 2013, against 2006
baseline inventory.
Reduce scope 1 and 2 GHG Protocol
emissions by 10% by 2012, against 2008
baseline.
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13
RELATIONSHIP QUALITY
EMPLOYEES
Achieve 32% employee loyalty in Brazil.
NOT ACHIEVED
Achieve 30% employee loyalty in Brazil.
Achieve 76% favorability in Natura
climate survey.
CONSULTANTS AND NCAS
Achieve 22% loyalty among consultants
in Brazil.
Achieve 37% loyalty among Natura
Consultant Advisors in Brazil.3
CONSUMER
Reach 54% consumer loyalty
in Brazil.
SUPPLIERS
The rate was 28%.
NOT ACHIEVED
The rate achieved was 70%.
NOT ACHIEVED
The rate achieved was 19%.
NOT ACHIEVED
The rate was 24%.
NOT ACHIEVED
The rate was 52%.
Achieve 74% favorability in Natura
climate survey.
Achieve 21% loyalty among consultants in
Brazil and 36% in international operations.
Achieve 33% loyalty among Natura
Consultant Advisors in Brazil.
Reach 54% consumer loyalty in Brazil.
Maintain 28% Natura supplier loyalty.
NOT ACHIEVED
Reach 29% Natura supplier loyalty.
SUPPLIER COMMUNITIES
Achieve 44% loyalty among suppliers’
communities.
Achieve average score of 3.67 in assess-
ment of BioQlicar community development
program.
SOLID WASTE
Reduce total weight of solid waste genera-
ted per unit invoiced by 3%.
The rate was 27%.
NOT COMPARABLE
The rate was 28%, but it was not possible to
compare it with the 2010 results because of
changes in methodology.
Achieve 30% loyalty among suppliers’
communities.
UNDERWAY
Achieve average score of 3.76.
Results will be available in May 2012.
NOT ACHIEVED
Total weight of solid waste generated by unit sold
grew 3%.
Maintain quantity of solid waste generated
per unit produced in Brazil at 20 grams.1
Sociobiodiversity
AMAZON
Did not exist.
Did not exist.
-
-
SUPPLIERS’ COMMUNITIES
Increase funding for communities by 25%.
NOT ACHIEVED
Funding was increased by 15%.
Generate R$ 136 million in business
volume in the Amazon region, considering
Natura and other partners.
Achieve 12% share for Amazon raw
materials in Natura’s raw material purchase
volumes.
Distribute R$ 12 million in wealth to sup-
pliers’ communities.
PRODUCT IMPACTS
Eliminate the use of the preservative para-
bens from the portfolio by July 1, 2011.
ACHIEVED
Natura excluded parabens from the formulation
of all its products.
No ingredient substitutions are scheduled
for 2012
1. We replaced the unit sold metrics with the unit produced. In other words, we no longer do the calculation based on the units sold (invoiced), considering instead what
is actually manufactured (produced) by Natura. According to the new calculation, water consumption and solid waste generation were reduced. (more on page 81).
2. Starting in 2012, we should have a new method of tracking this indicator, recording NC participation per subject and counting all the NC learning interactions.
Training by subject refers to different actions with specifi c subjects and focuses.
3. Errata: the NCA loyalty target for 2011 was 37% and not 40%, as published in the 2010 report.
natura report # 11
2.5
governance
14
4.1; 4.2; 4.3; 4.6
Natura aims for the best standards of corporate governance, and continually strives to for excellence in this
area. We are listed on the BM&FBOVESPA New Market, a special segment of the Brazilian Stock Exchange
with the most demanding levels of corporate governance.
Even though it is not listed on the New York Stock Exchange, Natura was the fi rst Brazilian Company to
voluntarily obtain SOx certifi cation in line with the Sarbanes-Oxley Act to guarantee the integrity of our
systems and controls against fraud and corruption. Since 2007, we have been members of the Company
Circle of Latin American Corporate Governance, after being selected by the World Bank’s International
Finance Corporation.
BOARD OF DIRECTORS
4.7
The Natura Board of Directors includes seven members who hold a one-year mandate, renewable by
approval of the General Shareholders Meeting. Currently one chair is vacant, and two of the board members
are independent.
In 2011, the Board of Directors was renewed and two of its members replaced. Edson Vaz Musa and José
Guimarães Monforte stepped down after helping in the growth and strengthening of Natura for 13 years.
Marcos Lisboa and Adílson Primo were appointed to replace them in the Annual Shareholders Meeting held
in April 2011. Well known in the market, they joined the Board as independent external members. However,
Adilson Primo resigned in November and his position is still vacant. The same meeting confi rmed the return
of Guilherme Leal, who had resigned the previous year to run in Brazil presidential elections.
We believe renewing the Board is a healthy practice that helps bringing in new ideas and a differentiated
vision for the company. In 2012, we intend to increase the number of chair members from seven to nine.
This change and the new members will be voted in during the next Extraordinary and Annual Shareholders
Meeting to be held on April 13, 2012.
The three new names to be indicated for the Board are Plínio Musetti, who is already on the Strategy
Committee, Raul Beer and Roberto Lima. This composition will give the Board three independent members.
The choice of these nominees is based on executive experience, knowledge of sustainability and the lack of
confl icts of interest.
This increase in size is aligned with Natura’s plans for the future, which include signifi cant expansion in Brazil
and Latin America, and will reinforce the team with professionals who have extensive and diverse corporate
experience. The change will also enable us to broaden the composition and reinforce the capacity of the
support committees.
The six meetings of the Board of Directors in 2011 were held in São Paulo (São Paulo State). We were unable
to fulfi ll our wish of holding meetings in the other cities in which the Company business units are located,
alternating between Brazilian and international operations.
There are four committees which meet at set intervals for discussions, to assess study proposals and make
recommendations to the Board (see fi gure below).
natura report # 11
15
COMPOSITION OF THE BOARD OF DIRECTORS*
4.1
PEDRO LUIZ BARREIROS PASSOS
Board Member and CoChairman in offi ce
ANTONIO LUIZ DA CUNHA SEABRA
Board Member and CoChairman
GUILHERME LEAL
Board Member and CoChairman
MARCOS LISBOA
Board Member and Chairman of the Audit, Risk Management and Finance Committee
JULIO MOURA NETO
Board Member and Chairman of the Strategy Committee
LUIZ ERNESTO GEMIGNANI
Board Member and Chairman of the People and Organizational Development Committee
BOARD OF DIRECTORS - SUPPORT COMMITTEES
4.1; 4.9
Audit, Risk Management and Finance
This committee is responsible for reviewing issues associated with taxes, accounting, company structure
and new investments. It provides information to the Board on fi nance, risks and relations with external
auditors. Since the beginning of 2011, it has been composed exclusively of independent external members.
With the stepping down of José Guimarães Monforte, Edson Vaz Musa and Adilson Primo from the Board
of Directors, the current Committee members are Luiz Ernesto Gemignani and Marcos de Barros Lisboa.
Although the Sox Act recommends that the committee should have three independent members, we
believe our Audit Committee works well with the current number. The committee receives support from
a technical group consisting of: the external specialists Gilberto Mifano and Taiki Hirashima; Roberto
Pedote, Senior Vice-President, Finance, Legal Affairs and Information Technology; Moacir Salzstein, Director
of Corporate Governance, and the Risk Management and Internal Audit Manager Mercedes Stinco. The
committee meets quarterly.
Strategy
This committee monitors projects drawn in strategic planning and its purpose is to study long-term initiatives
for the Company. Its composition changed last year with the entry of Plínio Musetti. Edson Vaz Musa was
replaced by Adílson Antonio Primo, who held offi ce until the end of October. Other members are Pedro
Luiz Barreiros Passos, Julio Moura Neto and the company CEO, Alessandro Carlucci. The Committee meets
every month, except in January and June.
Corporate Governance
This Committee is responsible for discussing improvements in the governance process and business
operations. It also coordinates assessments by the Board and Corporate Governance. The four current
members are: Pedro Luiz Barreiros Passos, Antonio Luiz da Cunha Seabra, Guilherme Peirão Leal and Julio
Moura Neto, and a Secretary, the Director of Corporate Governance, Moacir Salzstein. Meetings take place
quarterly.
People and Organizational Development
With the departure of Edson Vaz Musa, the Committee was reduced to two Board members: Pedro Luiz
Barreiros Passos and Luiz Ernesto Gemignani. The other members are: Fátima Raimondi, an external participant;
Alessandro Carlucci, CEO; and Marcelo Cardoso, Senior Vice-President, Organizational Development and
Sustainability. The committee addresses issues in connection with compensation, succession, projects and
training, in addition to Human Resources, the Culture Program and Natura Management System.
* On the date of publication of this report
natura report # 11
16
SENIOR MANAGEMENT ASSESSMENT AND SELF-ASSESSMENT
The most recent assessment process involving the Board of Directors took place at the end of 2010. This
consisted of a self-assessment and a broad review conducted by external consultants which included issues
such as the Board’s size, attributions and work fl ow. This analysis indicated opportunities for improvement that
have been implemented over the last two years. Due to the two analyses conducted in 2010 and the renewal
of the Board in 2011, the decision was taken not to repeat this process last year. It should be resumed in the
fi rst half of 2012.
4.10
ORDINARY GENERAL SHAREHOLDERS’ MEETING
For two years we have been making every effort to attract more shareholders to attend the Ordinary General
Shareholders’ Meeting, in particular our individual investors. Accordingly, in 2011 we assembled around 250
investors in Cajamar, where they were able to accompany the meeting held in Itapecerica da Serra in real time.
All the members of the Board of Directors and Executive Committee were present at the Cajamar event to
answer shareholders’ questions.
A public meeting by Association of Investment and Capital Market Analysts and Professionals (Associação dos
Analistas e Profi ssionais de Investimento do Mercado de Capitais, Apimec - São Paulo State) was also organized
and held along the same event. Due to the success of the encounter and the importance of this audience, the
event is expected to be repeated in 2012.
EXECUTIVE GOVERNANCE
The Executive Committee (Comex) is Natura’s main executive body and is charged with overseeing development
of the company’s strategic planning and strategic projects, overall business management and evaluation of
results based on the triple bottom line. In 2011, the CEO Alessandro Carlucci accumulated the position of Vice
President of Innovation. This vacancy should be fi lled out in 2012.
Comex has eight supporting committees in which subjects in connection with the executive areas are discussed.
COMPOSITION OF THE EXECUTIVE COMMITTEE (COMEX)
ALESSANDRO GIUSEPPE CARLUCCI
CEO
JOÃO PAULO FERREIRA
Senior Vice-President, Operations and Logistics
JOSÉ VICENTE MARINO
Senior Vice-President, Business
MARCELO CARDOSO
Senior Vice-President, Organizational Development and Sustainability
ROBERTO PEDOTE
Senior Vice-President, Finance, Legal Affairs and Information Technology
natura report # 11
17
EXECUTIVE BOARD
ALESSANDRO MENDES
Product Development Director
ALEXANDRE ALVES LEMOS
Commercial Director
ALEXANDRE CRESCENZI
Commercial Director
ANA LUIZA MACHADO ALVES
Brand and Culture Director
ANGEL MEDEIROS
Logistics Innovation Director
ARMANDO MARCHESAN NETO
Operations and Logistics Director
ARNO CORREIA DE ARAUJO
Commercial Director, Mexico
AXEL PABLO MORICZ DE TECSO
General Manager, Chile
DANIEL DE ALMEIDA GUSMAO ALVES SILVEIRA
Commercial Director
DANIEL LEVY
Business Unit Director
DANIEL MADUREIRA GONZAGA
General Manager, Peru
DENISE LYRA DE FIGUEIREDO
Business Unit Director
DENISE REGINA DE OLIVEIRA ALVES
Sustainability Director
DIEGO DE LEONE
Business Unit Director International Operations
ERASMO TOLEDO
Business Director International Operations
FABIO NOBRE DA COSTA BOUCINHAS
Digital Media Director
FLAVIO PESIGUELO
International Organizational Development
and Sustainability Director
CECILIA GOYA MEADE
General Manager, Mexico
HERIOVALDO RAMOS DA SILVA
Commercial Management Director International Operations
JOAO AUGUSTO PEDREIRA
General Business Director, Brazil
JOAO CARLOS MOCELIN
Industrial Director
JORGE LUIS ROSOLINO
commercial director
JOSE THOMAZ DEVECZ PENTEADO DE LUCA
Commercial Innovation Director
JOSELENA PERESSINOTO ROMERO
Product Availability Director
LOREDANA SARCINELLA MARIOTTO
Business Unit Director
LUCILENE SILVA PRADO
Legal Affairs Director
LUIS RENATO COSTA BUENO
Commercial Director
LUIZ CARLOS DE LIMA
Finance Director
MARCEL GOYA
Finance, IT and Legal Affairs
Director International Operations
MARCIA ANDREA DE MATOS LEAL
Management Systems Director
MARCUS OLIVER RISSEL
Commercial Director
MOACIR SALZSTEIN
Corporate Governance Director
MONICA GRANJA GREGORI
Communication and Marketing Director
NESTOR MARIANO FELPI
Order Cycle Director
NEY MAURO SIMONE DA SILVA
People Management Director
PEDRO CRUZ VILLARES
President, Instituto Natura
PEDRO ROBERTO GONZALES
General Director
RENATO ABRAMOVICH
Business Unit Director
RICARDO LOBATO FAUCON
Customer Service Director
ROBERT CLAUS CHATWIN
Business Development Director
RODOLFO WITZIG GUTTILLA
Corporate Affairs and Government Relations Director
TATIANA DE CARVALHO PICCOLI PIGNATARI
Business Unit Director
THIERRY AUBRY LECOMTE
General Director International Operations
VICTOR MUNIZ FERNANDES
Research and Development Director
natura report # 11
18
COMEX SUPPORT COMMITTEES
4.1
Customers
Created in January 2011, the committee’s main attributions are the monitoring of the quality of service Natura
provides to end consumers and consultants. It is led by João Paulo Ferreira, Vice President, Logistics Operations,
with the participation of José Vicente Marino, Vice President, Business.
Ethics
Charged with ensuring the application of the Natura Relationship Principles and correcting potential deviations,
it is led by Roberto Pedote, Senior Vice-President, Finance, Legal Affairs and Information Technology, with the
participation of Marcelo Cardoso, Senior Vice-President, Organizational Development and Sustainability.
Ideas and Concepts
Initiated in March 2011 and led by the CEO Alessandro Carlucci, this committee has as members the co-
chairmen Pedro Luiz Barreiros Passos and Antonio Luiz da Cunha Seabra and investigates innovative long-term
ideas and concepts for Natura.
Commercial Innovation
The committee’s major function is to review projects that drive innovation. It is led by José Vicente Marino, Vice
President, Business, with the participation of Roberto Pedote, Senior Vice-President Finance, Legal Affairs and
Information Technology.
Brand
Responsible for managing the Natura brand, the committee addresses brand architecture, Natura language and
movements. It is led by Alessandro Carlucci, CEO, with the participation of José Vicente Marino, Vice President,
Business, and Marcelo Cardoso, Senior Vice-President, Organizational Development and Sustainability.
Processes
Led by Marcelo Cardoso, Senior Vice-President, Organizational Development and Sustainability, this committee
is charged with overseeing the implementation of Management by Processes and defi ning action fronts and
strategies. João Paulo Ferreira, Vice President, Operations and Logistics, is involved.
Products
Led by the Innovation area, the committee monitors approval processes for new Natura products. Alessandro
Carlucci assumed temporarily the leadership of the committee, supported by José Vicente Marino, vice president,
Business.
Sustainability
Led by Marcelo Cardoso, Senior Vice-President, Organizational Development and Sustainability; the other mem-
bers are Roberto Pedote, Senior Vice-President, Finance, Legal Affairs and Information Technology, and João
Paulo Ferreira, vice president, Operations and Logistics. This committee’s role is to defi ne and track the com-
pany’s Socio-Environmental Budget and Materiality Matrix, and other matters linked to the Company’s strategic
planning. Its attributions also include the defi nition of strategic sustainability-related projects such as Carbon
Neutral and Solid Waste and the company’s positioning and strategies related to its vision of sustainability and
relationship quality.
natura report # 11
19
RISK MANAGEMENT
Risk management at Natura is an instrument incorporated into the strategic planning cycle encompassing eco-
nomic, social and environmental matters. These are divided into two main groups: strategic risks, that is, risks
that could affect company ‘s continuity and operational risks, in which our internal processes are monitored and
verifi ed periodically by the manager responsible and his/her team.
Ongoing improvement of our sustainability risk assessment mechanisms is integral to our strategy. It is our
understanding that the challenge of integrating sustainability into company’s management includes continually
assessing socio-environmental risks in the business. Even though we do not have a specifi c analysis of effects
associated with climate change in the risk management process, the company has important mitigation projects
aimed at the impacts our business may generate, such as the Carbon Neutral Program (more on page 26) and
water consumption reduction measures (more on page 25)
We identify major risks and controls for all processes, including regulatory questions and opportunities to de-
velop technologies or products to face the challenges posed by climate change.
EC2
We have a strategic risk map which is monitored by all the committees supporting corporate and executive
governance.
Since 2009, we have been working on refi ning a crisis prevention system, studying the most relevant scenarios
for the company within a broader contingency plan for all our operations.
INTERNAL AUDIT
The Natura internal audit team reports to the Audit, Risk Management and Finance Committee within a frame-
work which guarantees the auditors’ freedom of action with no interference from other company’s functions.
During the year, 29 audits were conducted in the company, encompassing all the countries in which we operate.
A total of 36 processes were assessed, compared to 33 in 2010.
Natura’s internal audits include tests and procedures that assess control environment, including measures to
prevent fraud and corruption. In 2011, we received three reports from Brazilian and international operations.
These were noticed via different channels, particularly worthy of note being the Ombudsman area. One case of
irregularity was proven, resulting in the dismissal of an employee. All the operations are subject to the processes
set forth in the Sarbanes-Oxley Act, including those involving corruption. We received SOx certifi cation at the
beginning of 2011, and this was renewed in 2012.
SO2; SO4
In 2012, we should integrate our fraud prevention controls with the involvement of internal controls, audit, the
ombudsman and legal areas. This initiative is intended to further reinforce fraud prevention. To ensure an envi-
ronment that is increasingly open and ethical, we will step up communication with all the stakeholders about
the channels available for reporting breaches and suspected breaches such as the ombudsman, the investigation
process and the role and responsibilities of the Ethics and Audit Committee.
SENIOR MANAGEMENT COMPENSATION
4.5
Our compensation plan for senior management seeks to foster engagement, balance short, medium and
long term gains and is linked with the company’s growth and share value.
For a group of executives that includes the CEO, vice presidents, directors and senior managers, gains are
linked with long-term commitment through a share option subscription or purchase plan. Since 2009 the
plan has required that the executive invest at least 50% of his/her net earnings from the profi t share plan
in the acquisition of Natura shares. 50% of these shares vest after three years, and 100% after four years.
In both cases, the plan is valid for eight years and the shares may not be sold before the end of the third
year. The model establishes an annual grant limit of 0.75%, and a maximum of 4%.
In December 2011, the volume of share options owned by the company’s executives corresponded to
around 1.71% of Natura’s stock, compared with 1.59% in 2010. The total number of Natura shares on
December 31st, 2011 was 431,239,364.
Since 2002, we have granted 21,191,529 options, 23% of which have been canceled due to employees
leaving the company.
Tables: Number of Options and Appreciation of Plans
natura report # 11
20
NUMBER OF OPTIONS
Plan
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
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
2.690.0641
2.112.352
1.604.789
2.712.645
3.404.495
1.606.063
651.354
230.007
150.985
0
0
0
0
0
0
0
0
320.062
470.274
347.838
0
0
0
21.191.529
9.042.940
1.138.174
0
0
0
0
0
0
498.823
2.249.793
2.001.021
1.470.940
6.220.577
820.965
564.725
295.397
469.406
536.687
614.843
802.364
440.271
111.331
133.849
4.789.838
23%
14%
16%
42%
47%
47%
45%
16%
5%
8%
23%
The quantity of shares granted was altered due to contract changes with some employees (impacting 52,064 options).
APPRECIATION OF PLANS*
Restated
amount of plan
R$ 7,29
R$ 4,08
R$ 10,05
R$ 21,56
R$ 32,13
R$ 30,39
R$ 23,60
R$ 25,74
R$ 37,76
R$ 44,07
Actual
Discount
Obtained
in year
42.412,4
66.917,3
26.152,8
8.531,0
3.421,0
3.139,9
2.670,4
0,0
0,0
0,0
153.244,8
Plan
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Total
Amounts in 000’s R$
Discount
obtained in
year
Potential
discount of
mature balance
Potential
discount of
non-mature
balance
55.612,0
84.884,7
31.214,9
9.396,3
3.705,8
3.342,7
2.744,9
0,0
0,0
0,0
190.901,3
0,0
0,0
0,0
0,0
1.384,6
2.855,4
4.474,5
0,0
0,0
0,0
8.714,6
0,0
0,0
0,0
0,0
0,0
6.416,7
-24.125,5
-2.607,7
-11.196,1
30.542,2
Plan Status
Vencido
Vencido
Vencido
Vencido
100% maduro
100% maduro
50% maduro
Não maduro
Não maduro
Não maduro
* Accrued amounts, corrected by the IPCA index up to December 2011. NATU 3 on December 29th, 2011: R$ 36,46
50% MATURE
April 10 – 05
April 10 – 06
April 10 - 07
March 16 – 08
March 29 - 09
April 25 – 10
April 22 – 11
April 22 - 12
March 19 – 13
March 23 – 14
100% MATURE
April 10 – 06
April 10 – 07
April 10 – 08
March 16 – 09
March 29 – 10
April 25 – 11
April 22 - 12
April 22 – 13
March 19 – 14
March 23 - 15
VALIDITY
April 10 – 08
April 10 – 09
April 10 – 10
March 16 – 11
March 29 – 12
April 25- 13
April 22 – 14
April 22 – 17
March 19 -18
March 23 – 19
natura report # 11
21
VARIABLE COMPENSATION
Variable compensation is designed to recognize and reward Natura’s executives for their performance and
results during the year. Because the Company did not achieve the social targets set for 2011, around 600
Company’s managers, Directors and Executive Committee’s members were not rewarded with any variable
compensation.
The Profi t Share System for management consists in the payment of monthly salary multiples in accordance with
the executive’s position in the organizational structure and is linked to the effective achievement of targets and
minimum growth levels established for the year. Payment is contingent on Natura’s performance reaching the
stipulated minimum. The criteria refl ect performance in the triple bottom line dimensions:
_ Economic – Consolidated Ebitda, covering Brazil and international operations;
_ Social – Organizational climate survey for employees in the Brazilian and international operations and
loyalty rate for Brazilian consultants;
_ Environmental – Carbon emissions in Brazil and in the international operations;
_ Others – Product shortage, the percentage of products not available when ordered by consultants.
The total amount awarded in the profi t share scheme, based on the long-term incentive program, may not
exceed 10% of net earnings. This limit provides Natura with a balanced and coherent system that prevents
distortions between executive compensation and company performance. The variable component, both short
and long-term, is proportionally larger for senior executives than for other employees.
The table below shows the compensation of the main employee segments in the company:
2011
Board
Executive
Committee
Senior Management
and Directors
Middle Management
Administrative
Sales Force
Operational
Total 2011
Average number
of employees
(number)
Total salary
(in millions)1
Total variable
(in millions)2
2012 Stock
Option Plan
(in number
of shares)3
7
5
102
405
1.488
875
2.436
5.317
3,13
5,86
36,40
60,63
92,85
49,09
52,21
1,30
5,49
19,90
20,79
9,20
49,67
12,77
300,17
119,11
-
-
-
-
-
-
-
-
1. Total Salary: Takes into account annual average base salary over 12 months (without charges) and overtime (with remunerated weekly rest -
DSR), 13th and 14th salaries, in millions.
2. Variable Total: Bonus, Profi t Share and Sales Bonus (with DSR) paid in year
3. Stock Options: 2012 plan not approved yet.
2010
Board
Executive
Committee
Senior Management
and Directors
Middle Management
Administrative
Sales Force
Operational
Total 2010
Average number
of employees
(number)
Total salary
(in millions)1
Total variable
(in millions)2
6
6
86
336
1.255
905
2.542
5.135
2,64
5,25
27,04
42,17
63,63
44,60
41,89
227,23
2,08
6, 28
17,83
18,14
6,29
43,19
10,33
104,13
2011 Stock
Option Plan
(in number
of shares)3
-
346.476
1.258.313
-
-
-
-
1.604.789,00
1. Total Salary: Takes into account annual average base salary over 12 months (without charges) and overtime (with remunerated weekly
rest - DSR), in millions.
2. Variable Total: Bonus, Profi t Share and Sales Bonus (with DSR) paid in year
3. Stock Options: 2011 plan approved in March 2011.
natura report # 11
2.6 natura
management system
22
All our businesses and operations are run based on the Natura Management System – designed specifi cally to
meet our needs and to transform Natura into a company that is fundamentally process driven.
This system makes for greater alignment with the company’s Essence and organizational culture, establishing
requirements that enable Natura to run the business more dynamically while simultaneously operating within
well-defi ned processes. This is vital considering the decentralized structure we adopted in 2008. With our
expansion in Brazil and Latin America, we needed an administration aligned with our value proposition, but
fl exible enough to meet specifi c demands from each location and segment.
The Natura Management System is based on three dimensions: the individual, the organization and the
relationships. It functions through 12 priority interrelated components: leadership, strategic planning, relation-
ships, sustainability, learning, individuals, processes, brand, culture, customers, innovation and triple bottom
line results.
As an ongoing process, the System generates learning and is constantly improved. In 2011, the Company
refi ned the defi nitions of each of the components, progressed in the processes and conducted extensive
training for the teams directly involved. We also started to align the system with the Fundação Nacional da
Qualidade (National Quality Foundation) management excellence model, enabling us to measure our matu-
rity and make comparisons with other process-driven companies.
Our ongoing challenge is to ensure our employees to learn and appropriate the Natura Management System
so that it is understood and executed seamlessly. In 2012, we will engage in an extensive effort to disseminate
the system and train people accordingly.
The system will increasingly align business management with our Essence, oriented to service quality and
triple bottom line results.
natura report # 11
3. what we
faim for
23
3.1 strategy
and prospects
Brazil continues to be one of the major cosmetics, fragrances and hygiene products markets in the world. Al-
though growth in 2011 was reduced as compared to previous years, it will continue to expand at a higher rate
than the global industry. Now the third top market worldwide, coming after the United States and Japan, Brazil
is expected to become number two in 2012.
In this expansion framework, it is our intent to make sure that services for our consultants and end consumers
reach a level of excellence that will boost our competitive edge.
Given the high penetration of our products, found in the homes of some 100 million Brazilians, and consumer
preference for the Natura brand, more than twice as high as the runner up, we can grow by selling consumers
a wider variety of products more often. This will involve an increase in the productivity of our consultants. To do
this we should modify our marketing mix and introduce innovations to occupy niches in which the brand is not
yet present, among other initiatives.
We are confi dent and optimistic about the expansion of our international operations, which have proved to be
an important and profi table business platform. In the Latin American countries we are expanding our sales chan-
nel and increasing local manufacturing, with a perspective of accelerated growth in a highly promising market.
We have closely accompanied transformations in the business environment, with a more demanding consumer,
the advance of digital technologies and social networks. We intend to use these tools to further expand our
business, generating income for our consultants and providing the consumer with an enhanced purchase experi-
ence.
Confi dent about the innovative spirit of our team, we believe this moment of transformation will enable Natura
to extend its value proposition to new regions, further expanding the Company’s relationship network and its
potential to contribute toward the construction of the business model of the future.
natura report # 11
24
INFRASTRUCTURE TO SUPPORT GROWTH
Natura’s investments in infrastructure will underpin the Company’s new cycle of growth. Since 2009, our logis-
tics infrastructure has undergone signifi cant transformation. We are striving to ensure that products get to our
consultants more rapidly, at a lower cost per order and with fewer greenhouse gases emissions.
In 2011, we inaugurated a new Distribution Center (DC) and expanded the capacity of three others. With high
technology product picking, extensive automation and low energy consumption, they are prepared to handle a
higher number of orders, including those with fewer items, enabling more split deliveries. Gains in productivity
ensue while reducing order costs.
This expansion will continue in 2012 with the inauguration of yet another distribution center and hub (cargo
transshipment center) in São Paulo (São Paulo State). These investments have brought the remodeling of our
logistics network forward by almost two years. Our overriding aim is to cut delivery times to consultants.
We have also driven logistics effi ciency gains in our international operations with new distribution planning for
Latin America, centralized in Colombia and Mexico. We consolidated the perfume bottling operation in Ar-
gentina where we started in 2010 and have begun soap production in Colombia. This is expected to increase
signifi cantly the proportion of products manufactured locally.
MANAGING SUSTAINABILITY
Innovation and the ongoing evolution of our business are underpinned by driving sustainability throughout our
processes. To that effect our management of sustainability is cross-structured to defi ne socio-environmental
positioning and guidelines for every organizational area.
It is our understanding that the defi nition of targets and the ongoing monitoring of our socio-environmental
performance provide the basis for transforming the organization and the decision-making processes. They also
generate new business opportunities, transforming socio-environmental challenges into value for Natura and
for our relationship network.
This evolution is an integral part of our Strategic Planning and is tracked systematically by Senior Management.
The main socio-environmental indicators, with short and long-term goals, are part of the company’s strategic
targets and are refl ected in our public commitments (more on page 12).
Priorities are defi ned in conjunction with our stakeholders. Through the discussion panels held in Brazil and
abroad, we identifi ed a set of high impact subjects for the company which are represented in the materiality
matrix. Reviewed every two years, these subjects operate as a guide for management, driving projects and
operational initiatives. The Sustainability Committee reports on performance to Natura’s Senior Management.
The matrix was reviewed in 2010 and fi nalized in 2011 helping to expand the scope of Natura’s operations in
Latin America, and the identifi cation of the following priority subjects: water, education, sustainable entrepre-
neurship, climate change, relationship quality, solid waste and sociobiodiversity (more on page 25 and 28).
Due to their relevance and the stage of maturity Natura has reached in these areas, some of these priority
subjects are now structured as company’s sub-processes.
As steward of this process, the Sustainability function is incorporated into the Organizational Development
and Sustainability process. Managing relations quality with stakeholders and meeting their demands also comes
under sustainability, encompassing the employees’ instruction as to how to relate to and dialogue with strategic
stakeholders (more on page 27 and 31).
natura report # 11
3.2 priority
topics
25
4.17
WATER
The threat of drinking water shortage represents one of the major threats to life on our planet. Consequently,
what was already a major focus in reducing our product impacts became a priority for Natura when it revised
its materiality matrix in 2010 and 2011 (read more on About this Report).
To identify the real impact our business has on water resources, two years ago Natura initiated a broad-based
study throughout the production chain – from the extraction of raw materials used in manufacturing to fi nal
product disposal. This enabled the Company to measure the business’ main impacts, both in terms of water
consumption and pollution potential.
This study became Natura’s fi rst water inventory. The methodology, also known as Water Footprint, was cre-
ated by WFN, the fi rst international organization devoted to promoting the sustainable, equitable and effi cient
use of water. Natura has partnered with WFN since 2009 and was the fi rst Company in the cosmetics industry
worldwide to apply this technology. We are also the only company in the world to include consumers product
use in the inventory.
In parallel, we invested in a series of initiatives to rationalize, reuse and treat the water used in our operations.
This resulted in a 4.7% reduction in consumption per unit produced in 2011 (more on page 83).
EDUCATION
We believe that improving the quality of education is key to developing awareness among individuals capable
of promoting a fairer, more sustainable society. This is a collective challenge that goes beyond organizations
and civil institutions. It is everyone’s responsibility. This is why in 2011 we set about building a new educational
architecture for Natura, resulting in a matrix that will guide all our internal and external actions.
Our measures aimed at education for sustainability seek to drive a transformational culture that will promote
excellence in our business and enable us to infl uence the defi nition of a new economy. We intend to use the
sustainability management structure we have, considered a benchmark in the industry, and our relationship
network to raise the awareness of our employees, suppliers and other stakeholders.
Another basic pillar of our education strategy is the Instituto Natura. A not-for-profi t organization created
in 2010, it oversees our private social investments in Brazil with a focus on quality education. The major
component in this commitment is the Crer para Ver program, which is funded by the sale of a special
product line which proceeds are invested in public education improvement projects in Brazil and Latin
America. Neither Natura nor the consultants make money from the sale of these products. The aim is to
offer educational technologies that positively infl uence public policy on education as a means of expanding
the reach of our initiatives. This is the case with the Trilhas Project to encourage reading and writing in infant
education. In 2012, the initiative will be implemented in partnership with the Ministry of Education in two
thousand municipalities, reaching three million students.
natura report # 11
26
SUSTAINABLE
ENTREPRENEURSHIP
Sustainable entrepreneurship is not only a new priority subject for Natura, but also a relatively unexplored
concept in the business world. It is relevant for our strategy, but we know we still have some way to go to learn
how to promote it. We are convinced, however, that our commercial model based on direct selling provides
us with an opportunity to foster socio-environmental actions and boost the entrepreneurial potential of our
relationship network.
In 2011, we held a discussion panel with employees to address this subject. A number of initiatives have already
demonstrated this potential, such as the Acolher Program, which encourages and supports socio-environmental
projects developed by NCs and NCAs. This is also the case with the Sustainable Relations Network the Com-
pany created in Mexico. In this direct selling model launched in mid-2011, the consultants’ level of involvement
with Natura increases not only as a function of their commercial performance, but also on account of their
engagement in socio-environmental projects in the communities in which they live (more on page 48 and 51).
CLIMATE
CHANGE
In 2007, Natura assumed one of its boldest and most important environmental commitments: the decision to
be carbon neutral. This means that the Company compensates for all product manufacturing greenhouse gases
emissions throughout the value chain by investing in reforestation programs, energy effi ciency and fuel substitution.
Even so, we know that the best initiative to save the planet is to effectively reduce our emissions. In this con-
nection we are committed to a 33% reduction in our relative emissions by 2013, against a 2006 baseline. By
the end of 2011, we reached a relative reduction of 25.4%. A further goal is a 10% decrease in our absolute
emissions (generated in the production process) between 2008 and 2012. By the end of 2011, absolute emis-
sions had increased by 11%, as a result of diffi culties in implementing certain projects. This condition should be
remediated in 2012.
The Company’s commitments present some intense challenges which require serious learning. To achieve the
targeted reductions we undertake constant analyses. In spite of our efforts, we are still dependent on external
decisions such as the composition of Brazil’s energy matrix, defi ned by public policy. With the increased use of
thermoelectric power plants, which pollute more than hydroelectric plants, the electricity grid emission factor
is more signifi cant in calculating carbon emissions, impacting the emissions of companies plugged to the grid.
Another vital point is getting our employees on board. We have presented our managers with the challenge of
incorporating carbon into our business vision, driving the issue throughout the company.
To compensate for our 2010 emissions, in 2011 we bought carbon credits in a compensation project in Colom-
bia, the fi rst time we have done so outside Brazil. We also launched a tender to select projects to neutralize our
2011 and 2012 emissions (more on page 75).
natura report # 11
27
RELATIONSHIP
QUALITY
Natura believes our development and that of our stakeholders depends on our capacity to seek broad collec-
tive solutions to our current challenges and the relationships we establish with our diverse audiences.
To turn this belief into action, the Company has been developing structured relationship management ini-
tiatives since 2009, with permanent channels for interacting with and engaging our stakeholders. We have
promoted discussion panels to receive inputs on strategic Company’s projects and initiatives, as well as to
assess relationship quality.
This has led to innovative thinking and differentiated solutions. We have increased the number of multistake-
holder panels, noting that bringing together different visions and interests drives a creative tension that helps
us see things from other people’s perspective. This exchange of ideas broadens the perspective of all involved,
allowing people to understand and respect different standpoints.
We organize activities to promote self-development and raise awareness on different subjects involving dif-
ferent audiences.
Our interactions also occur virtually through Natura Conecta (www.naturaconecta.com.br), a community
dedicated to information exchange and discussion.
Maintaining relationship quality is an increasingly strategic process for Natura and the perceptions captured in
these discussions are vital inputs for our strategic planning (more on page 31).
SOLID WASTE
For the last two years, Natura has been developing its own solid waste management program involving
partners, third-parties and consumers. The proposal is to use solid waste management to leverage new busi-
nesses through continuous innovation, collective construction, adaptation and social inclusion.
We developed a methodology which was applied to the fi rst Natura solid waste generation inventory cov-
ering the full product life cycle. This enabled a broader diagnosis of solid waste generation throughout the
production chain. The data will be used to guide Natura’s solid solid waste management planning for the
coming years.
However, we believe that effective solid waste management and a consequent reduction in impacts will only
occur through a collective effort involving companies, public authorities, solid waste collection cooperatives,
civil society and all the other links in the production and consumption chain. We also participate in a plan that
is being led by the CFT segment association, Abihpec, to drive compliance with Brazil’s national solid waste
policy regarding reverse logistics of post-consumption packaging (more on page 82).
natura report # 11
28
SOCIOBIODIVERSITY
Natura’s experience of more than ten years using Brazilian biodiversity assets in our products and distributing
wealth based on traditional knowledge demonstrates the potential to use these resources to generate wealth
for the country’s sustainability.
Eleven years ago the Company developed a production model based on relations with suppliers’ communities
organized as cooperatives and associations. These are located in diverse regions of Brazil, in particular in the
Amazon. We created production chains with these communities based on fair prices, compensation for the
use of biological resources and valuing traditional knowledge. These relations are governed by Natura’s Policy
for the Sustainable Use of Biodiversity and Traditional Knowledge which in turn adopts the guidelines set forth
by the United Nations Organization’s (UN) Convention for Biological Diversity.
This production model provides a value proposition that generates income for hundreds of families, while
driving regional development and environmental conservation. For this reason we seek to promote discussion
about the sustainable use of sociobiodiversity products and services. We also advocate the establishment
of a new legal framework for access to biodiversity that favors the sustainable use of the country’s biological
resources and its traditional associated manifestations. We want this relationship to drive research, produc-
tion and conservation of the biological diversity in these regions.
This discussion is extremely timely. After making 2010 the Year of Biodiversity, the UN determined that the
period from 2011 to 2020 would be the United Nations Biodiversity Decade, in which governments would
be encouraged to disseminate the results of their national strategies for protecting biological diversity and the
services provided (more on our practices on page 58).
AMAZÔNIA PROGRAM
By recognizing the importance of the Amazon region for the country and Natura’s history in this region,
we intend to use our brand to create sustainable development proposals for the region that will benefi t its
inhabitants and conserve the forest. Launched in 2011, the Amazônia program expands and reinforces this
commitment with view at promoting new sustainable business based on science, innovation, production
chains and local entrepreneurship. These initiatives will be focused on sociobiodiversity and valuing tradi-
tional knowledge and regional culture. Already in its fi rst year, the region was impacted by R$ 64.8 millions.
As such, we defi ned three interrelated action fronts:
Science, Technology and Innovation – Following the open innovation model adopted by Natura more
than fi ve years ago, we aim to develop knowledge “in” the Amazon, “about” the Amazon and “for” the
Amazon. We want to foster new research and to help local researchers and scientists remain in their
region of origin. In 2012, we are going to build the Natura Knowledge and Innovation Center in Manaus,
bringing together local and Natura’s researchers. Our target is to connect a network of more than one
thousand researchers from diverse institutions by 2020.
Sustainable Production Chains – Natura should increase production in the Amazon in Benevides (Pará
State), where a manufacturing plant exists since 2007. The set up of a new plant will begin in 2012 and will
occupy a site area of 172 hectares. Our goal is to stimulate the formation of a network of local extrac-
tivist communities, encouraging the development of local production and social entrepreneurship. The
purchase of materials from the Amazon is projected to grow from 11% to 30%, engaging 10 thousand
families by 2020.
Institutional Reinforcement – Natura wishes to develop wide-range sustainable development plans and
initiatives jointly with civil organizations, local governments, national and foreign companies, fi nancial
agents and other partners. An example of this kind of articulation was the defi nition of priority subjects
for the Amazônia Program, which involved the collaboration of around 100 people from diverse back-
grounds with experience in the features of Pará, Amazônia and neighboring States. This effort helped
refi ne the program strategy and defi ne our priorities: education; entrepreneurship; conservation, valuing
and using biodiversity sustainability; social justice and citizenship; public policy and culture.
natura report # 11
29
3.3
innovating
innovation
We understand innovation as a process that should cross permeate all our activities. It is at the core of our value
creation and is expressed not only in our products, but also in our commercial model, management system and
the relations we establish with our stakeholders and society as a whole. This dedication led us to be elected
the 8th most innovative Company in the world by Forbes Magazine, in a survey published in July 2011. The only
Brazilian Company ranked among the 50 most innovative companies, Natura was placed close to global icons
in innovation such as Apple (5th place) and Google (7th place).
After preparing our Vision 2030 (a document which projects the future and seeks to defi ne the Company’s
role in this new world) and Natura’s vision of innovation in 2010, we are now consolidating governance of the
innovation process and deciding on our courses of action.
We refi ned the defi nition of our four innovation differentiators which, in alignment with strategic planning, guide
the creative process and underpin research in science, technology and open innovation. These are strategic
guidelines that include new competencies as well as classical science, resulting in a more integrated approach.
In addition to traditional methods, they encompass state-of-the-art science and technology, reduced socio-
environmental impact and our desire to create products that provide an ongoing fl ow of well being well experi-
ences for our consumers.
Natura Innovation Differentiators:
_ Classical and Advanced Skin and Hair Sciences
_ Sustainable Technologies
_ Well-Being and Relationship Sciences
_ Senses, Design and Experiences
Some recent examples of our innovation capacity are to be found throughout this report, such as the measure-
ment of our water footprint (more on page 25), the launch of the Amazônia Program (more on page 28) and
the creation of the VôVó sub-brand, introducing the pioneering concept of celebrating the relationship between
grandparents and grandchildren.
To develop these and other innovations, the Company invested between 2.5% and 3% of its net annual revenue
in science, technology and the construction of knowledge networks. Investments in 2011 totaled R$ 146.6 mil-
lion. We also received tax incentives for innovation and promotion through partnerships with institutions such
as FINEP, BNDES, NCPq and FAPs. In 2011, these incentives totaled more than R$ 11 million in reimbursable
and non-reimbursable funding.
We monitor our innovation closely. It is currently at a level the Company considers optimal - between 55% and
65%. The index indicates the proportional contribution of new products launches within the last 24 months to
Natura’s revenues.
INNOVATION INDICATORS
Investment in innovation (R$ millions)
Percentage of net revenue invested in innovation (%)
Number of products launched (units)
Innovation rate (%)
2009
111,8
2,6
103
67,6
2010
139,7
2,8
168
65,7
2011
146,6
2,7
164
64,8
natura report # 11
30
INNOVATION MANAGEMENT
Natura has a governance model structured to manage innovation. It was upgraded in 2011 after the creation of
the Ideas and Concepts Committee, which is focused on ideas for the long term (more on page 18). In our business
routine, we work on four major fronts: Research and Technology; Product Development; Consumer Safety; and
Partnerships and Promotion.
Management of the product funnel, the process for introducing new projects and proposals, was also refi ned. We
increased the level of detail and specifi cations required for initiating a project or to develop a product. With well
defi ned criteria, we drove effi ciency, investing only in projects that truly add value to the brand. In this framework,
value is understood in its broadest sense, including brand, environmental footprint and other benefi ts. This means
that all new products must have attributes that strengthen our market presence, such as providing a new experi-
ence for consumers and having an environmental impact which is the same or lower than that of a similar product.
OPEN INNOVATION
We continually seek creative, innovative solutions for our scientifi c and technological challenges. Natura believes that
collaboration and collective construction are effective tools for generating innovation. This is why we have groomed and
expanded our open innovation program.
Through partnerships with scientifi c institutions Natura develops new products, processes and tools and has focused on
creating a global science and knowledge network. In 2011, we revised the guidelines to align them with our innovation
differentiators.
Natura established a partnership with the laboratory LNBio (Laboratório Nacional de Biociências) to open the Com-
pany’s Bio-Essay Laboratory in Campinas (São Paulo State). This facility enables high performance research through High-
Throughput Screening (HTS) techniques, a rapid, automated screening method for natural and synthetic compounds.
We expect results to come in the long term; however, partnerships play a fundamental role by facilitating the discovery
of new compounds to be used in our products and new uses for existing ones. The laboratory is managed by a board
comprising representatives from LNBio, Natura and two other bodies. The project received funding from the Ministry
of Science and Technology.
We have also strengthened relationship with the Massachusetts Institute of Technology (MIT), partnership which was
announced in 2010. The projects to be developed are under discussion, and in 2012 we should sign the relevant agree-
ments and start cooperative research.
NATURA CAMPUS
Our main communication and relationship platform with the scientifi c community is the Natura Campus portal
(www.naturacampus.com.br). Reorganized last year, it is designed to encourage interaction among users, con-
nectivity with the social networks and to diversify the means for building knowledge networks. Part of our open
innovation strategy, the portal provides information on science, technology and innovation. It hosts blogs and
interactive communication tools enabling researchers to contact Natura and the entire network.
Users have access to the program’s relationship agenda, information on relevant activities and events organized
by Natura and partners, and data from research and case studies we perform, reinforcing our commitment to
share learning and driving new research. In 2011, we made presentations to more than 500 people and re-
corded more than 4,400 accesses to the portal. More than 100 researchers have newly enrolled in the program.
COMMERCIAL INNOVATION
In tune with transformations in the business environment, the Company has also identifi ed opportunities to innovate our
direct selling model in Brazil and abroad. E-commerce has transformed relations between companies and consumers,
who are more and more willing to access their preferred products in different ways. We anticipate a huge potential in
digital media.
In the communication with our sales channel, we have noted growing interest in our digital media. The digital Revista
Natura has grown around 30% in user numbers, reaching 300,000 single visitors in the last cycle. Three million accesses
were counted throughout the year. In 2011 we launched the digital version for tablets (iPad and other models). We also
integrated production of communication materials for the international operations, in a more effi cient manner, central-
izing that production in Buenos Aires. This means that any advance in Brazil may be more rapidly incorporated in the
other Latin American countries.
The evolution of our commercial model has been continuous. Three years ago the Company created the Natura Con-
sultant Advisor (NCA), and more recently the Sustainable Relationship Network, developed especially for the Mexican
market (more on page 48).
natura report # 11
31
4. who we
work with
4.1
relationship
quality
4.14; 4.16; 4.17;
DMA HR
In line with its Beliefs, Natura constantly strives to improve relations and dialogue with the persons who impact
or are impacted by our business (more on page 25). In spite of our efforts, we experienced a drop in the quality
of our relationship with our stakeholders in 2011, as captured in the loyalty and satisfaction surveys. This was felt
most strongly among employees and consultants (more on pages 35 and 48).
Since 2010, we have increased the number of multistakeholder discussion panels. These exchanges of ideas
provide participants with more information, giving them the opportunity to compare different viewpoints on
a subject. For Natura, it results in a new vision and valuable inputs for the innovation process and collective
solutions. In 2011, more than 800 people took part in the 23 discussion panels promoted by Natura. We
brought together representatives of employees, consultants, Natura Consultant Advisors, shareholders, consum-
ers, suppliers, suppliers’ communities and surrounding communities, the press and the government. The subjects
discussed included product innovation, CO2 emissions and the construction of the Company’s new factory in
Benevides (Pará State).
In addition to the round of discussions for the preparation of the new Natura materiality matrix (more on page
129), we promoted three panels involving more than 100 people with background and experience regard-
ing Pará, the Amazon and neighboring States, the objective being to build a specifi c materiality matrix for the
Amazônia Program, launched in May 2011. One of these meetings was reserved for specialists and opinion
leaders familiar with the region, who contributed to Natura strategy (more on page 28).
Natura also promoted activities centered on self-development, awareness, spirituality and sustainability. One
of these was the “What you hunger for” program, a cycle of talks and meetings for employees and partners
designed to stimulate discussions on issues related to Natura’s value proposition. Additionally, Natura sponsored
the cycle of talks Frontiers of Thought (more on page 88).
natura report # 11
32
2011 DISCUSSION PANELS
Subject
Stakeholders
Attendees
Date and place
Objectives
Multistakeholders
59
Feb. - Belém (Pará)
Amazônia
Materiality
Matrix
Amazônia
Materiality
Matrix
Natura strategy
for the Amazônia
program
Materiality
Matrix - Chile
Multistakeholders
40
Specialists and
Opinion Leaders
40
Multistakeholders
38
Carbon Neutral
Multistakeholders
Sustainable Supply
Chains
Sustainable Supply
Chains
Public consultation
- New Benevides
plant
Suppliers (third
parties, fl eet,
transport,
fragrances,
oleochemicals)
Suppliers
(plastics and
graphics)
Multistakeholder
Multistakeholder
Multistakeholder
Multistakeholder
Multistakeholder
Product Innovation-
Hair Category
Product Innovation-
Body Category
Product Innovation-
Shaving Category
Product Innovation-
Functional
Deodorant
Category
Natura Culture
54
88
78
57
32
29
22
27
Feb. - Manaus
(Amazonas State)
Feb. - Manaus
(Amazonas State)
March – Casa Natura
Santiago / Chile
April - São Paulo
(São Paulo State)
May – São Paulo (São
Paulo State)
May - São Paulo (São
Paulo State)
July - Benevides
(Pará State)
August - Cajamar
(São Paulo State)
August - Cajamar
(São Paulo State)
August - Cajamar
(São Paulo State)
August - Cajamar
(São Paulo State)
Defi nition of priority subjects
for Amazônia program materiality
matrix.
Defi nition of priority subjects
for Amazônia program materiality
matrix.
Inputs for refi ning Natura’s
strategy for the Amazônia
program.
Defi nition of priority subjects
and preparation of Natura
materiality matrix.
Inputs for Carbon
Neutral Program.
Joint mapping of potential positive
and negative operational impacts
with supply chain.
Joint mapping of potential positive
and negative operational impacts
with supply chain.
Presentation of plans for
new Benevides plant. Inputs
for evolution and improvement.
Mapping and minimizing
possible economic, social
and environmental impacts
on region.
Obtaining inputs for hair
product innovation process.
Obtaining inputs for body
product innovation process.
Obtaining inputs for body
product innovation process.
Obtaining inputs for functional
deodorant product innovation
process.
Multistakeholder
49
August - Cajamar
(São Paulo State)
Understanding perceptions
of Natura Culture and fi nding
points of leverage.
natura report # 11
33
2011 DISCUSSION PANELS
Subject
Stakeholders
Attendees
Date and place
Objectives
Results
Communication
Multistakeholder
32
Requirements
for Hiring and
Approving Suppliers
- Production
Requirements
for Hiring and
Approving Suppliers
- Services
Family involvement
in agricultural
extractivist chains
Cajamar School
Employees
Employees
Multistakeholders
(suppliers’
communities,
specialists,
government and
employees)
Surrounding
Community
Itapecerica da
Serra Surrounding
Community
Future Vision for
Commercial Model
Future Vision for
Commercial Model
Itapecerica da
Serra Community
Multistakeholder
Employees
21
12
28
26
19
41
13
September – Cajamar
(São Paulo State)
September – Cajamar
(São Paulo State)
September – Cajamar
(São Paulo State)
October – Cajamar
(São Paulo State)
Obtain inputs to expand and
innovate in Natura results
communication process
Examine current supplier hiring
and approval requirements and get
inputs for revising and improving
them.
Examine current supplier hiring
and approval requirements and get
inputs for revising and improving
them.
Promote understanding of subject,
obtain inputs about risks, develop
ideal future vision to identify actions
May –Municipal
Education Board –
Cajamar (São Paulo
State)
May – Natura
Itapecerica (São Paulo
State)
October – Cajamar
(São Paulo State)
December – Casa
Natura Vergueiro - São
Paulo (São Paulo State)
Inputs for educational development
actions in Cajamar and preparation
for labor market.
Communicate closure of Natura
unit in district and present municipal
selective collection program.
Inputs for vision of Natura’s future
commercial model.
Reinforce importance of expression
of Natura essence in commercial
model and refl ect on how company
will incorporate current societal
challenges into model.
Alignment of Natura initiatives,
seeking synergies and paths for
subject, building common agenda
Sustainable
Entrepreneur-ship
Employees
17
December – Cajamar
(São Paulo State)
THE OMBUDSMAN’S OFFICE
The Ombudsman’s Offi ce is a communication channel between Natura and employees and resident third parties
at all our units in Brazil and abroad. Tasked with the due handling of criticisms, reports of deviations, suggestions,
praise etc, the area has a broader role in driving closer relations with the internal audience. All contacts are
recorded and reviewed by the Ombudsman team. We have never received any reports of discrimination;
incidents involving possible deviations in conduct are forwarded to the Ethics Committee, in which senior
management participates (read more on page 18).
The Ombudsman area is also responsible for the Natura Relationship Principles. This is a set of guidelines based
on our Beliefs and Essence designed to drive attitudes and actions to improve relations. In 2011, we reviewed
the Relationship Principles, which are applied in all our operations. The new edition will be launched in 2012.
4.4
HR4
HR10
natura report # 11
Over the years, the area’s scope has been extended to include other audiences, such as suppliers, consultants
and consumers. For consultants, the Ombudsman’s offi ce works with the Service Management area on more
critical cases. This initiative is part of a movement to drive continuous service improvement and the results of
the experience are being reviewed to check the feasibility of maintaining an ombudsman channel specifi cally for
consultants. In 2011, 3,800 cases involving consultants were dealt with.
With respect to consumers, the Ombudsman area responds to cases forwarded by the Natura Legal and Press
Relations areas, of which there were 322 in 2011.
NUMBER OF CONTACTS WITH THE OMBUDSMAN AREA
Internal audience Brazil
Internal audience international operations
Suppliers Brazil
Consultants Brazil1
Total
2009
1.096
13
13
34
1.156
2010
1.120
18
17
8
1.163
2011
1.025
7
4
0
1.036
1. Data from completed pilot project with NCs in Greater São Paulo.
PERCENTAGE OF REQUESTS DEALT WITH AGAINST TOTAL RECEIVED
% demands dealt with1
% demands forwarded2
2009
94%
6%
2010
52%
48%
2011
68%
32%
1. Cases dealt with by the Ombudsman’s offi ce and area responsible for the case.
2. Up until May 2011, contacts with the Ombudsman were forwarded to the area responsible for the resolution of technical issues.
34
PR5
SATISFACTION
WITH OMBUDSMAN
CHANNEL1
7
9
8
9
8
9
2010
2011
2009
1. Result derived from positive responses
to the question: “Are you satisfi ed with
this channel of discussion?”
HR11
HR11
EMPLOYEES IN THE BRAZILIAN OPERATION
After the experiment of fi ltering contacts and only acting as a last resort, in other words, cases not resolved
via other relationship channels, in 2011 the Ombudsman’s offi ce once again started dealing with all sugges-
tions, enquiries and incidents sent in by Natura employees. This two-year period confi rmed that the area’s
positioning as a channel for information and communication was fully consolidated, which is precisely its dif-
ferential.
Indicators for the Ombudsman have remained stable over the last three years. There has been a continuous
decrease in anonymous contacts, normally reports of breaches or complaints, down 15% in 2011. Technical
questions relative to processes, policies, procedures and infrastructure accounted for 83% of the contacts,
compared with behavioral issues (referring to people’s attitudes), at 17%. The most mentioned process in the
Ombudsman’s offi ce was people management, corresponding to 63% of cases, the most common related to
benefi ts, such as restaurant, transport, among others.
EMPLOYEES FROM
INTERNATIONAL OPERATIONS
In September 2011, the Ombudsman service was extended to employees in the French operation, the only unit
hitherto without access. There had been no contacts by the end of the year. There were seven contacts in the
other countries in 2011. Different from Brazil, in these countries the channel is used mostly to report breaches
and to make criticisms.
SUPPLIERS
Our suppliers are a fundamental part of our business chain. For this reason, the Ombudsman’s offi ce has
been available to them since 2007. They may use this channel to report breaches and make criticisms.
These contacts help to identify improvements in our practices. Four cases were recorded in 2011, com-
pared with 17 the previous year.
BREAKDOWN OF
EMPLOYEE CONTACTS
IN BRAZIL (%)
11
8
5
3
74
CRITICISMS
PRAISE
QUESTIONS
SUGGESTIONS
REPORTS OF BREACHES,
ETHICAL DEVIATIONS
TOTAL CONTACTS – 700
natura report # 11
4.2
employees
35
DMA LA;
DMA HR
As Natura expands its activities in Brazil and abroad, the challenge of building, maintaining and developing its
teams grows. In addition to having the necessary functional competencies, we want our employees to be aligned
with our value proposition, inspiring and caring for the relationships the Company establishes with all its stake-
holders. For this reason we have been strengthening instruments to develop our people and disseminating our
organizational culture, fundamental for our success and for the execution of our strategic planning.
This challenge was even greater in 2011. We implemented a series of operational and technological changes,
and a concentrated effort was required to manage the instability caused by this restructuring. This, together with
budget adjustments, compromised achievement of part of our targets for the year. One factor that was affected
was organizational climate. This challenging situation led to a drop in favorability from 73% to 70%, which was 3
percentage points below the 76% target for the year.
The survey results in the Brazilian operation were the ones that most affected the index. The organizational cli-
mate in the international operations – not affected by the operational problems – is improving. With the excep-
tion of Chile and France, all the units grew. This is an indication of advances in management and the formation
of dedicated and engaged teams in the newly created structures.
Overall, we know we must improve the quality of our relations with our employees to drive higher levels of
excellence. One focus will be to reinforce the role of leadership in managing people.
EMPLOYEE LOYALTY1
0
3
1
3
8
2
2011
2010
2009
1. Equivalent to the percentage of
employees selecting 5 (top 1 box)
on a scale from 1 to 5 points.
NUMBER OF NATURA EMPLOYEES1
Brazil
Argentina
Chile
Mexico7
Peru
Colombia
France
Total
OTHER EMPLOYMENT CONTRACTS2
Apprentices3
Interns4
Temporary workers5
Third parties6
Total – other employment contracts
2009
4.807
331
264
335
296
168
45
6.246
10
47
340
1.310
1.707
2010
5.482
395
293
329
293
170
48
7.010
152
68
445
2.048
2.713
2011
5.483
449
293
113
301
191
55
6.885
157
141
255
2.094
2.647
LA1
1. The number of expatriates and the Board of Directors were excluded from the number of employees in Brazil. As such, the numbers for
2009 and 2010 were restated.
2. Includes the operations in Brazil, Argentina, Chile, Colombia, Peru, France and Mexico.
3. Apprentices are included among the Brazilian employees.
4. The growing number of interns is due to the emphasis on the Natura entry gate program.
5. Temporary workers are considered to be those contracted for a fi xed term via employment agency under Brazilian labor law.
6. Third parties are considered to be suppliers occupying work posts (fi xed or not) within company units for more than six months.
7. This decrease is mainly due to the implantation of the new commercial model in Mexico whereby relationship managers became
consultants.
natura report # 11
36
CLIMATE SURVEY – FAVORABILITY (%)1
Brazil
Argentina
Peru
Chile
Mexico
France
Colombia
Natura
2009
72
77
78
77
84
75
88
74
2010
72
64
71
69
82
72
84
73
2011
70
72
73
66
85
64
86
70
1. Equivalent to the percentage of employees selecting 4and 5 (top 2 box) on a scale from 1 to 5 points.
EDUCATION
While it is challenging for a company, Natura believes that promoting education represents an enormous devel-
opment opportunity for our employees and a chance to sensitize our other audiences with respect to values
such as sustainable development and caring relationships.
To develop a guideline that incorporates this vision and links all our educational platforms, in 2011 we formu-
lated an educational architecture for Natura. This is a broad educational matrix setting forth the subjects to be
worked on and proposals as to how this will be done. It will serve as a guide for our internal programs, as well
as development measures for suppliers, consultants and surrounding communities.
We maintained the same training rate as the previous year in Brazil, with an average of 90 hours per employee.
Some educational actions scheduled for the year were postponed until 2012, meaning we did not reach our
target of 100 hours training per employee during the year.
Among the main educational and development actions, Natura invested in a leadership development program
(read more on the next page), education for innovation, relationship management training, and a program for interns.
Worthy of note is the fact that Human Rights has been included in the new employee induction programs and
is also covered in leadership courses and in talks which are open to all employees. The total number of hours
training given in the year was more than 7,400, an increase of almost 33% over 2010. Although there is no spe-
cifi c training on corruption, all new employees are made aware of Natura’s Relationship Principles, in which we
reject corruption and prohibit practices such as coercion and bribery.
HR3; HR8; SO3
AVERAGE HOURS TRAINING PER EMPLOYEE, BROKEN DOWN BY EMPLOYMENT CATEGORY IN THE BRAZIL-
IAN OPERATION12
Production
Administrative
Management
Directors’ level
Average Hours3
2009
89
79
62
90
82
2010
93
86
90
78
90
2011
97
86
88
60
90
1. The calculation was modifi ed in 2011 to drive greater adherence to the educational process. To ensure comparability, the numbers for
2009 and 2010 were restated.
2. This indicator includes sales force training (sales managers and relationship managers).
3. Considers total number of hours for all levels divided by the number of employees and interns in the corresponding year.
HOURS TRAINING BY GENDER IN BRAZIL 1(%)
Men
Women
1. Monitoring of indicator began in 2011
2009
n.d
n.d
2010
n.d
n.d
2011
55%
45%
In the international operations, internal training targets were exceeded in almost all the countries. In these
recently opened units where employees are still new in the company, we concentrate more on our values
and culture, brand, sustainability, the Natura Essence and the commercial model. To track the development
of training activities in these countries, we created a specifi c indicator to record the number of hours of
training (see below).
LA10
LA10
natura report # 11
37
TRAINING PER YEAR, PER EMPLOYEE
International Operations
Natura
2009
n.d
n.d
2010
n.d
n.d
2011
66%
85%
LA10
INVESTMENT IN EMPLOYEE’S EDUCATION AND TRAINING (IN 000’S OF R$)1
Operation
Brazil²
Argentina
Chile
Mexico
Peru
Colombia
France
Total
2009
20.221
103
165
526
223
22
51
21.311
2010
25.744
96
131
584
216
41
103
26.915
2011
26.415
115
260
245
241
214
380
27.870
1. To enable greater comparability, the investments were converted into reais at the exchange rate for the year.
2. The Brazilian investment numbers include training for the sales force (sales managers and relationship managers).
IN THE BRAZILIAN OPERATION –NATURA EDUCATION PROGRAM¹
Scholarships granted
Scholarships granted /enrollments (%)
Amount invested in Natura Education programs (000’s of R$)
2009
611
48
841
2010
546
43
863
2011
510
69
1.014
1. Considering all employees enrolled and selected during the year.
NATURA EDUCATION PROGRAM – COURSES TAKEN BY EMPLOYEES OR FAMILY
MEMBERS FULLY OR PARTIALLY SUBSIDIZED BY NATURA (BRAZIL)¹
Technical /vocational
Languages
Pre-university entrance
Degree programs
MBA and postgraduate programs
Total
1. Considering all employees enrolled and selected during the year.
2009
77
117
6
292
119
611
2010
47
134
5
259
101
546
2011
57
43
1
277
132
510
LEADERSHIP AND DEVELOPMENT
We invest in continuous leadership development to ensure our managers share the company’s values and
model of behavior we seek from our employees and other audiences, inspiring and mobilizing our relationship
network.
Due to the company’s growth and need to prepare successors, three years ago we started a program aimed
at developing talents and preparing future leaders. Since then, we have invested in engagement initiatives, or-
ganizational competency and leadership training, offering scholarships for MBAs and mentoring and coaching
programs. This has had a direct impact on internal promotions, which increased from 62% to 68% in the leader-
ship positions last year.
In 2011, the Company launched the Cosmos Program, the main development front for Natura’s leaders. Com-
prising four levels, it involves all the company’s 600 managers in Brazil and the international operations. The
fi rst dimension is called “school” and consists of talks and workshops on management, organizational dynamics
and sustainability. The classes were given by international specialists and were attended by 225 managers. An-
other two Cosmos dimensions involve exchanging experiences (brotherhood) and connecting ideas and people
(communities of interest). The fi nal stage or workshop, consists of applying what has been learned in business
related projects. Cosmos was the result of a collaborative process in which more than 80 people were involved,
including Natura staff, the Board of Directors, the Executive Committee, as well as external consultants.
LA11
LA11
LA11
LA11
natura report # 11
38
In parallel, we have invested heavily in succession plans for all the company’s critical positions. This enabled us to
end 2011 with short, medium and long term successors identifi ed for 62% of these positions, compared with
40% in 2010.
Also in 2011 we undertook the fi rst international selection for the trainee program, including all the countries
in which we operate. The medium to long-term objective is to develop global leaders and talents.
Natura has also a Performance Management Program for all its employees and operations. The program enables
all employees, regardless of gender, to effectively manage their performance through feedback and structured
individual development plans. Moreover, employees receive full feedback on their performance, including self-
assessment, the perceptions of managers, peers, partners and subordinates (should this be the case). This analy-
sis is designed to assess employees’ adherence to Natura’s essence and organizational culture.
LA12
ATTRACTION AND ENGAGEMENT
All the investment in building a qualifi ed team aligned with our values would make no sense if we did not pay
attention to attracting new employees. Our recruitment and selection criteria have been perfected over time
to ensure we attract people who not only have the right technical qualifi cations, but also values aligned with
the company’s.
INTERNAL
PROMOTIONS/
TRANSFERS IN
BRAZIL (%)
In 2011, this process was incremented with the development of a questionnaire to be fi lled out when candidates
are interviewed. The questionnaire encourages candidates to refl ect on their personal history, values and objec-
tives and what connects them with Natura.
We also refi ned our internal promotion strategy, consolidating the My Choices program. We made the process
more fl exible, increased the visibility of vacancies for employees and created a committee dedicated to assess-
ing internal and external candidates and their alignment with Natura’s values and objectives. This has resulted in
a series of learnings for the company: we now know more about gaps and areas in which internal promotion
is more diffi cult. The intern program was also reformulated to retain candidates whose profi le is more closely
aligned with the trainee program, increasing their chance of being hired permanently.
The result of this effort was an increase from 36% to 70% in internal promotions and transfers in Brazil in 2011.
In the international operations, we maintained our strategy of building teams that combine employees familiar
with Natura and professionals with local market knowledge. An average of 82% of management positions are
fi lled by local people.
1
6
6
3
0
7
2009
2010
2011
SENIOR MANAGEMENT MEMBERS DRAWN FROM LOCAL COMMUNITY1 (%)
2009
nd
nd
nd
nd
nd
nd
nd
Argentina
Chile
Colombia
France
Mexico
Peru
Total
2010
nd
nd
nd
nd
nd
nd
nd
2011
86
87
71
91
88
81
82
1. The data for previous years were not disclosed because the indicator was reformulated in 2011. It now considers the percentage of local
employees in the company. Previously, the indicator only took into account those employees hired during the year, which did not refl ect the
real presence of local employees.
SUPPORT AND SERVICES BENEFITING THE PUBLIC
Number of volunteers¹
2009
52
2010
57
2011
50
1.There was only one group of volunteers in 2011, organized during the second semester. The fi rst semester was dedicated to studying
opportunities for improving the volunteer program
EC7
EC9
natura report # 11
39
STAFF TURNOVER
The company’s turnover rate dropped considerably in most Natura operations, most notably in Peru, Argentina
and Mexico. We believe this is due mainly to the consolidation of these operations, in line with the strategy to in-
crease production in Latin America. In Brazil, the indicator has remained practically stable for the last three years.
EMPLOYEE TURNOVER (%)1
Brazil
Argentina
Chile
México
Perú
Francia
Colombia
2009
8
13
14
25
17
16
40
2010
8
12
16
12
27
13
21
1. Although we monitor these data by age group and gender, we do not consider these factors material for our business.
TURNOVER BY GENDER (%)
Men
Women
TURNOVER IN BRAZIL BY AGE GROUP (%)
Below 18 years
Between 18 and 25 years
Between 26 and 30 years
Between 31 and 40 years
Between 41 and 50 years
Above 50 years
TOTAL DISCHARGES
Brazil
Argentina
Chile
Mexico1
Peru
France
Colombia
Total
2009
12
6
2009
0
11
9
7
4
3
2009
551
38
36
81
49
11
31
797
2010
12
6
2010
0
15
12
7
2
4
2010
641
40
49
38
75
5
37
885
2011
8
7
17
8
8
14
21
2011
10
7
2011
0
10
9
9
6
5
2011
751
35
89
258
50
7
43
1.233
1. The number of discharges is due to the set up of the new commercial model in Mexico whereby relationship managers became consultants
DIVERSITY
In 2010, we committed to produce our fi rst refl ection on the subject of diversity. This led to the positioning
Diversity, Essence of the Web of Life (box below), which was validated by the Ethics Committee and will now
provide a basis for a widespread discussion in the company.
In this document, we set forth Natura’s understanding of diversity, based on our Essence and world view, and
we identifi ed three initial action fronts: social inclusion, women, and multiculturalism.
LA2
LA2
LA2
LA2
natura report # 11
40
DIVERSITY, THE ESSENCE OF THE WEB OF LIFE
We are all different and unique, from our genetic structure and physical traits, to the way we feel and perceive
the world around us. This multiplicity of perspectives, ways of thinking and acting enriches mankind and is
the driving force behind our existence in society. On the other hand, this diversity is only possible because it
stems from a unity, an interdependent cosmos comprising an endless network of relationships, the wonderful
web of life.
In our beliefs we state: “The greater the diversity of the parts, the greater the wealth and vitality of the whole”.
We understand that Natura is an ecosystem of relationships, and, driven by this conviction, we realize that
cultivating these interactions is intrinsic to our culture. We understand that working together is better: being
open, generous and empathetic to others, building trust and quality into the relationships. To listen without
judging, to respect opinions and incorporate differences for the benefi t of the whole.
We believe, therefore, that promoting diversity is the ultimate expression of our world view, which begins
with the individual. This is an individual who is strong, mature, self-reliant, and aware, and who has the power
to choose and to transform. However, this individual will only materialize in an open and inclusive society in
which the expression of diversity is allowed, in which everyone is born free and equal and where people have
dignity, rights and access to opportunities. And, while we respect people’s individuality, we also recognize the
value of local cultures as the product of their history.
In this framework, our position goes beyond compliance with regulatory requirements; it rises above transi-
tory issues of ethnicity, gender, nationality, religion etc. We repudiate discrimination. However, what we want
most of all is to create an environment in which we shall all be accepted, respected and loved for what we are.
In accordance with this point in time Natura is passing by and in accordance with our strategy, which is predic-
tive of a future of intense connectivity, geographical expansion and major transformations in the direct sales
model; we have chosen three areas on which to focus: social inclusion, women and multiculturalism.
We are a direct sales company and have helped drive the socio-economic inclusion of thousands of women
in Brazil and, more recently, in other Latin American countries. We have chosen sustainable entrepreneurship
as our priority subject in sustainability, underpinned by the understanding that our capacity for social transfor-
mation will be even greater. We want to use the power of our sales channel to foster social inclusion, not only
to generate income but also to improve education, a powerful driver of social transformation.
Moreover, as a community consisting primarily of women, be it employees, consultants or consumers, we
consider the feminine values in our Essence to be fundamental for the construction of a new society. And we
are committed to nourishing this feminine energy more and more in our relationships.
We believe in the power of cultural integration and in the interchange of perceptions, behavior and knowl-
edge. As a company whose roots are in Brazil, we refl ect the country’s ethnic mix and actively promote
multiculturalism. As we strive to extend our geographical reach, we are aware that this factor will be decisive
for our future success.
In addition to these three priorities, we have also detected an opportunity to promote the inclusion and
development of the disabled as a result of the adoption of new production technologies. We believe we
can offer the disabled a new level of professional accomplishment, promoting their development and perfor-
mance as individuals.
Last, we reaffi rm our vision in which the wealth represented by each human being, the signifi cance of others in
our lives and our own signifi cance in the lives of others convince us that it is in the dynamics of our relation-
ships that we will encounter the energy necessary to drive mankind’s evolution.
MULTICULTURALISM1 2
2009
2010
2011
Total number of foreign leaders or leaders
having international experience
Percentage of foreign leaders or leaders having
international experience against total leaders (%)
12
14
27
23
1. Considering global leaders and those managing processes and businesses.
2. We consider international experience to be current or past experience of over two years in Natura operations in a different country
from the employee’s country of origin.
42
33
LA13
natura report # 11
41
DIVERSITY ¹
Total Employees Brazil
2009
4.807
2010
5.482
2011
5.483
Women (%)
As a percentage of total employees
In management positions as a percentage of total
management positions
In Director’s positions as a percentage of all Director positions
Aged over 45 years (%)
As a percentage of all employees
In management positions as a percentage
of all management positions
In Director positions as a percentage of all Director positions
Hiring and training of disabled
people in Brazilian operation
Number of disabled employees
Number of disabled people as a percentage
of total employees (%)
Number of disabled people trained in Basic
Professional Competencies program
61
53
21
10
9
31
236
5,0
67
61
55
25
11
9
22
249
4,5
217
61
57
24
12
11
22
258
4,7
258
1. We do not report the classifi cation by minorities due to a different understanding of diversity which involves broader concepts of social
inclusion.
LA13
NATURA EMPLOYEES BY GENDER (%)1
Men
Women
1. Reporting of this indicator was initiated in 2011
NUMBER OF MATERNITY LEAVES AND RETURN RATE
2009
nd
nd
2010
nd
nd
2011
36
65
LA1; LA13
Number of employees requesting maternity
leave during the year
Percentage of employees who returned from maternity
leave and remained in the company for at least 12
months upon return
155
90%
200
92%
190
96%
LA15
2009
2010
2011
Since we have more women than men in the company, our maternity leave rate is high. Upon their return to
work, the company offers mothers a nursery until the child is 2 years and 11 months old. All employees are
entitled to this benefi t, irrespective of area or salary level. We also guarantee an adaptation period for mothers,
enabling them to continue to breast feed during working hours. The company provides monitoring by doctors
and social assistants during maternity leave to help mothers’ adaptation and has a pilot program offering fl exible
working hours for mothers in the administrative area. Natura also voluntarily joined the government’s six month
maternity leave program.
COMPENSATION
Our compensation practices follow the same corporate policy in all operations. In 2011, we reviewed compensa-
tion in the international operations seeking to standardize it and increase competitiveness in those countries.
The Company maintains a salary average in line with the market. Salaries are defi ned based on compara-
tive surveys in the consumers’ goods segment involving Brazilian companies or Brazilian multinationals, listed
companies or those that use similar compensation practices as Natura. The comparison is by scope and
complexity of the function.
natura report # 11
42
RATIO OF LOWEST SALARY TO MINIMUM SALARY, BY OPERATION1
Brazil
Argentina
Chile
Peru
Mexico
Colombia
France
2009
1,1
2,0
1,3
1,7
4,8
1,6
1,5
2010
1,4
1,7
1,3
1,0
4,6
1,1
1,1
2011
1,6
1,3
1,2
1,4
4,5
1,0
1.0
EC5
1. Calculation involves lowest salary in the operation divided by the minimum salary in force in December 2011 in each country.
Coherent with our international expansion strategy, we have an expatriation program which provides employees
with a differentiated package. In 2011, we had 29 expatriate employees.
Our variable compensation model is adapted to the needs of each employee segment, with specifi c targets and
forms and amounts of payment. The amount paid to non-executive employees is limited to 3% of operating earn-
ings. In 2011, employees in the operational area received on average three additional monthly salaries.
The collective agreements closed during the year granted our employees in the Brazilian operation with a salary
increase of around 10%. Managers received a fi xed increase on their base salary.
WOMEN’S SALARIES IN RELATION TO MEN’S (BY EMPLOYMENT CATEGORY) - %
Operational
Administrative
Management
Director
2009
-16
33
-6
-19
SALARY PROFILE – MONTHLY AVERAGE IN BRAZILIAN OPERATION 1 2
Women - total (R$)
Average monthly salary in production positions
Average monthly salary in administrative positions
Average monthly salary in management positions
Average monthly salary in Director’s positions
Men - total (R$)
Average monthly salary in production positions
Average monthly salary in administrative positions
Average monthly salary in management positions
Average monthly salary in Director’s positions
Above 45 years (R$)
Average monthly salary in production positions
Average monthly salary in administrative positions
Average monthly salary in management positions
Average monthly salary in director positions
Up to 45 years (R$)
Average monthly salary in production positions
Average monthly salary in administrative positions
Average monthly salary in management positions
Average monthly salary in director positions
2009
4.755
1.150
6.137
13.105
34.310
3.574
1.362
4.621
13.886
42.163
8.068
1.713
8.961
17.438
38.243
3.850
1.241
5.266
13.068
41.571
2010
- 16
30
-4
-19
2010
4.944
1.202
6.190
13.351
37.196
3.852
1.428
4.746
13.972
45.919
8.089
1.770
9.166
18.344
44.090
4.095
1.293
5.305
13.144
43.638
2011
-21
34
-7
-17
2011
5.553
1.336
6.894
13.405
37.049
4.342
1.700
5.146
14.415
44.592
8.638
1.967
9.885
18.356
43.296
4.609
1.498
5.856
13.291
42.609
LA14
LA14
1. The calculation does not take into account short term incentive payment (Profi t Sharing).
2. The bonuses paid to sales managers and relationship manager were taken into account for purposes of this calculation. When distrib-
uted throughout the categories, sales force employees reinforce the average women’s salaries due to the sales bonus, with the exception of
production jobs.
EC3
We also offer complementary pension plans, with employees deciding the percentage they wish to contribute,
up to 12% of their salary. Natura covers 60% of this amount, up to 5% of the employee’s salary. The plan is
optional and is open to all employees in Brazil, up to a salary ceiling of R$ 13,129.00. In 2011, Natura paid R$
4.3 million into the plan (compared to R$ 2.5 in 2010).
natura report # 11
43
EC3
NATURA
CONTRIBUTIONS
TO THE EMPLOYEES
SUPPLEMENTARY
BENEFIT PLAN IN
BRAZIL (in millions
of R$)
7
8
3
1
.
8
2
5
2
.
0
0
3
4
.
2009
2010
2011
With the exception of relationship managers and sales managers, who receive a bonus proportional to their
results, all Natura employees are paid 14 monthly salaries a year.
LA11
We do not have a formal plan to prepare employees for retirement. In 2011, however, we set up a pilot project
with relationship managers and sales managers. Focused on individuals close to retirement, the Building the
Future project is aimed at smoothing the emotional, physical and material aspects of this career transition. Sixty
two employees participated voluntarily in the program in 2011.
LA4
LA5
In all our operations we are fully compliant with local legislation governing collective bargaining. In Brazil,
all employees are covered by union agreements. The Human Resources area manages relations with the
unions representing our employees, conducting formal meetings with union representatives based on
pre-established agendas.
Even though prior notice of operational changes is not specifi ed in the collective bargaining agreements, the
company seeks to communicate changes with advance notice and to provide explanations. An example is the
negotiation of the transfer of workers from the Cajamar distribution center to São Paulo in 2012. The new DC
employs high technology and is automated. It will have an inclusive policy and within fi ve years some 40% of job
vacancies will be for people with some form of cognitive disability. Consequently, not all the current employees
will be transferred to the new center. During 2011, these employees negotiated the transfers and arrangements
necessary with Natura as a consequence of this move.
HR5
Natura does not have processes to identify operations in which the right to exercise freedom of association and
collective bargaining may be threatened. However, our employees have the Ombudsman’s offi ce through which
they may voice any concerns (more on page 33).
BENEFITS
We have invested in a differentiated benefi ts package, which also focuses on promoting employee well-being.
LA3
Benefi ts and facilities for all employees in the Brazilian Operation:
_ Ergonomics program, designed to ensure comfort and productivity for workers, promoting any neces-
sary adaptations.
_ Social Service: a service to help employees discuss, understand and resolve social issues.
_ Family Size Health Program.
_ Workplace exercise program.
_ Chronic disease management program for employees and dependents with chronic ailments.
_ 40% discount on purchase of up to fi ve Natura products per month.
_ Program for mothers: postnatal meeting and course for mothers-to-be.
_ Nursery allowance and special educational allowance for disabled children.
_ Life insurance.
_ Vehicles for management level employees.
_ Medication subsidy.
_ Transport to and from the workplace.
_ Private pension plan.
_ Runners project: running and walking activities with dedicated supervision.
_ Restaurant or meal vouchers
_ Discounted school materials.
_ Fitness services, swimming pool, dance classes, football tournaments and multipurpose sports court at
Clube Natura and Well Being Space (Cajamar and Itapecerica da Serra).
_ Services: seamstress, laundry, shoe repair, optician, insurance, mail, book and video rental (Cajamar and
Itapecerica da Serra).
natura report # 11
44
_ Natura Education: study scholarships for employees and family members.
_ Building the Future program (preparing for retirement for sales management, with savings incentive).
_ Nursery for children up to 2 years and 11 months of age.
_ Support in child adoption process.
_ Medical assistance plan.
_ Dental assistance plan.
_ Check-up for management level employees and above.
_ Partial reimbursement for medication for the following: cardiovascular, diabetes, kidney disease, liver
disease, oncology, neurological disorders and work-related osteomuscular diseases and psychiatric dis-
orders.
_ Telemedicine: emergency electrocardiograms by telephone.
_ Health in Movement: physical fi tness program. Medical and nutritional assessment and guidance on
physical activities.
_ Gym allowance for relationship and sales managers.
_ Five products free per month for management level employees and directors.
_ Christmas hamper.
_ Clinic: emergency medical service, physiotherapy, GPR, gynecology and obstetrics, acupuncture, ortho-
pedics, nutrition and psychology.
_ Well Being Program: integrating all specialties and professional areas, holistically addressing the physical,
emotional, spiritual and social dimensions.
We also offer special benefi ts to resident third parties providing services to Natura, with or without a fi xed
work post, for periods of more than six months:
Benefi ts for third party residents in the Brazilian Operation:
_ Course for mothers-to-be.
_ Clinic – emergency medical service.
_ Runners Project.
_ Restaurant.
_ Workplace exercises.
_ Toys.
_ Christmas hamper.
_ Transport to and from the workplace.
_ Fitness services, swimming pool, dance classes, multipurpose sports court at Clube Natura and
Well Being Space (Cajamar and Itapecerica da Serra).
_ Services: seamstress, laundry, shoe repair, optician, insurance, mail, book and video rental (Cajamar
and Itapecerica da Serra).
_ Presents on Mother’s Day and Father’s Day..
natura report # 11
continua...
45
HEALTH AND SAFETY
Company investments in accident prevention totaled R$ 794 per employee* in 2011. We continued to work
with Natura service providers to increase prevention among third parties. New audits were held in 2011, and
we progressed in involving managers in this process.
A number of initiatives were postponed until 2012, such as new preventive measures in the distribution centers
and international operations and the development of an occupational health and safety system focused on
behavioral change.
An external consultancy was contracted to analyze health and safety at our Cajamar plants and at the product
picking center. Work posts and working conditions were surveyed, identifying the most critical lines and cells and
implementing corrective and improvement projects.
TYPICAL WORK-RELATED INJURIES, DAYS LOST AND ABSENTEEISM
RATE (INCLUDING THIRD-PARTIES) IN THE BRAZILIAN OPERATION1
Employees - number of accidents with leave
Employees - number of accidents without leave
Number of work-related accidents per employee
Third-parties - number of accidents with leave2
Third-parties - number of accidents without leave2
Total work hours programed3
Work days lost3
Days lost rate (TDP)8
Frequency rate - accidents with leave4
Frequency rate - accidents with/without leave5
Investment in accident prevention per employee (R$)6
Investment in disease prevention per employee (R$)
Occupational disease frequency rate
Number of cases of occupational disease reported to
INSS - National Institute of Social Security - Cajamar
Number of cases of occupational disease reported to INSS
- National Institute of Social Security - Itapecerica da Serra
Absenteeism rate7
2009
12
5
0,004
2010
7
10
0,004
2011
10
4
0,003
4
4
2016
84
9,1
1,3
1,9
852
707
1,1
10
0,0
Nd
4
2
2010
64
6,3
0,7
1,7
882
736
0,9
9
0,0
6,5%
6
0,0
2011
51
4,7
0,9
1,2
794
940
0,2
1
1,0
6,0%
1. Data in accordance with National Institute of Social Security regulations, collective agreements with Unions, and Ministry of Labor and
Employment Ruling 3.214. Considering accidents recorded at the Cajamar, Itapecerica da Serra, Barueri, São Paulo and Benevides units
and distribution centers.
2. Accidents with leave are those in which the employee does not return to work on the day after the incident. Accidents without leave are
those in which the employee returns to work on the same day or the next working day. There were non occupation-related fatalities in the
period covered by the report.
3. Refers to Natura employees. Total number of hours programmed calculated as 8 hours/day x no. of work days scheduled.
4. Equivalent to number of accidents with leave divided by million/man hours worked.
5. Equivalent to number of accidents or victims with or without leave divided by number of man hours worked.
6. Includes full budget of Work Safety Department, expenses or investment in the Engineering and Manufacturing areas to assure and/or
improve work safety conditions. Does not include training expenses.
7. There was an error in the previously reported 2010 absenteeism rate. This was corrected.
8. Days lost rate: the factor 1 million was considered in accordance with NBR 14280, the standard used by Natura. Days lost are counted
from the day following the accident.
PERCENTAGE OF ACCIDENTS BY GENDER (WITH AND WITHOUT LEAVE) BRAZIL
Men
Women
2009
76
24
2010
76
24
2011
71
29
Formal Natura agreements with the Unions include work safety protection measures such as the use of personal
protective equipment; machinery and equipment accident prevention practices; communication of occupation-related
accidents; and the functioning of an Internal Accident Prevention Commissions (Cipa in the Portuguese acronym).
All employees in the Brazilian operations are represented in the formal work safety and health committees and
LA7
LA7
LA9
* In the 2010 Annual Report the amounts for safety and health investments were reported incorrectly in the text on this item. The correct
data are: investment of R$ 882 per employee in accident prevention and R$ 737 per employee in health. The table contained the correct
amounts.
natura report # 11
46
the Cipas, consisting of different hierarchical levels and open to all. They are structured as follows: 50% of the
representatives are indicated by Natura and the other 50% by the staff.
LA6
Investments in health totaled R$ 940 per employee* in 2011. Based on a broad diagnosis of employee health
conducted in 2010, in the second half of 2011 we implemented the Family Size Health program, which is
focused on prevention. We organized campaigns around the promotion of healthfulness, the importance of
consulting doctors and take exams, in addition to specifi c actions related to breast and prostate cancer, car-
diovascular disease and risk factors. We also set up a monitoring system for employees and dependents with
chronic diseases. This is a voluntary program in which employees are advised to seek medical help, to assess
medical services received and receive advice on consultations and examinations.
LA8
Employees are provided with internal treatment for occupational diseases. The multifunctional team comprises
doctors, an ergonomics specialist, orthopedist, physiotherapist, psychologist and Global Postural Re-education
(GPR) therapists.
In parallel, we systematically monitor work posts. Our health team also started working with the innovation
team to integrate ergonomics into new product creation and development.
EMPLOYEE COMMUNICATION
Building quality into employee’s relations also involves effi cient and adequate communication for each area.
In 2011, we integrated the internal communication process into the Brand and Culture area, as part of our
project to go beyond a mere organizational support and transform communication into a major channel for
expressing company’s values. Our current challenge is to incorporate these assumptions into the form and
content of routine employee communications.
In addition to the change in structure, in 2011 we progressed with our formal communication systems, re-
viewing existing processes and implementing new ones, as well as internal communication outlets aimed at
our regional units and international operations. We also extended the reach of the Natura Channel – a TV
system presenting news, statements and relevant information with 30 broadcasting points in our main units.
Our challenge for 2012 will be to enable more active and dynamic employees’ interaction with the Company.
[1] * In the 2010 Annual Report the amounts for safety and health investments were reported incorrectly in the text on this item. The
correct data are: investment of R$ 882 per employee in accident prevention and R$ 737 per employee in health. The table contained the
correct amounts.
natura report # 11
4.3
consultants and NCAs
47
Our consultants (NCs) are an essential link in our relationship network. It is this immense contingent of more
than 1.4 million people spread over seven countries that not only take our products, but also our value proposi-
tion and our Essence to consumers. Our efforts are aimed at ensuring they have the best service quality, op-
portunities to generate income, to be enterprising, and to engage in our socio-environmental platform.
The main challenge in connection with Consultants in 2011 was the decrease in service quality to this channel,
as a result of the instability caused by changes in the order capture and invoicing systems and logistics model.
We intensifi ed our efforts to correct imbalances in product availability throughout the year and managed to
stabilize the platform during the last four cycles of 2011, leading to a signifi cant improvement in service levels.
During this period of instability, we sought to maintain sincere, open communication with the sales force. The
Natura encounters held during each cycle were used to inform Consultants about the diffi culties and the mea-
sures being taken to correct them. Consultants also received an explanatory letter from the CEO.
We are confi dent that the investments undertaken are essential for our growth strategy and will have a very
positive effect on the quality of service provided for NCs and Natura Consultant Advisors (NCAs). The ex-
panded logistics infrastructure and the new order capture system should signifi cantly reduce delivery terms.
The benefi ts should already be felt in 2012, with a structure much better prepared to serve the sales channel.
Additionally, the ongoing vigor of our brand once again demonstrated its capacity to attract representatives, such
is true that the number of NCs grew 16.3% in 2011. The number of Natura Consultant Advisors also grew to
13,200, 17% up on the previous year. Growth was even more striking in the international operations, reaching
27%. We currently have more than 245,000 Consultants in Argentina, Chile, Mexico, Peru, Colombia and France.
In 2011, we initiated the expansion of the NCA model in Colombia and Peru. In 2012, it should be extended
to Chile and Argentina.
We believe that, similar to Brazil, the NCA model will leverage growth in our sales channel and Consultants
retention in our international operations. In addition to consulting, the Natura Consultant Advisors support the
activities of groups of up to 150 NCs, giving them advice and driving their development.
Our sales structure is strengthened by the Relationship Managers and by the Sales Managers, Natura’s employ-
ees who work closely with the NCs and NCAs, giving them support.
NUMBER OF CONSULTANTS AVAILABLE¹ 2
Brazil
Argentina
Chile
Mexico
Peru
Colombia
France
Total
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
2011
1.175,5
63,7
37,9
58,5
54,9
27,1
3,1
1.420,7
1. With regard to Brazil, the data refer to Consultants available by the end of the year. 2. In International Operations they refer to the clos-
ing position in cycle 17.
natura report # 11
48
NUMBER OF NATURA
CONSULTANT ADVISORS
IN BRAZIL1
3
8
0
9
.
6
7
2
1
1
.
0
3
2
3
1
.
20092
2010
2011
1. Refers to number of NCAs at the
end of the year.
2. The increase in the number of
NCAs is due to the expansion of the
model in the City of São Paulo and in
the Northern and Southern regions.
Operational instability affected the Consultants satisfaction rate in 2011. In the Brazilian market loyalty rate
dropped from 21% in 2010 to 19% in 2011. However, the most marked decrease occurred among the NCAs.
Implemented two years ago, we have learned a great deal during this time and we are aware that this model
requires further development. In the international operations, monitoring of satisfaction levels was initiated in
2010. Overall loyalty levels are high, but reductions in Colombia, Mexico and Peru were observed.
We understand we are not where we want to be with our Consultants but we are optimistic that we will reach
our objectives
QUALITY OF RELATIONS WITH NCS (%) BRAZILIAN OPERATION
Satisfaction1
Loyalty2
2009
88
17
2010
90
21
2011
87
19
1. Satisfi ed and completely satisfi ed NCs – Top Box.
2. Loyalty is the intersection of the Top Box referring to satisfaction, intention to continue and recommendation.
QUALITY OF RELATIONS WITH NCAS (%) BRAZILIAN OPERATION
Satisfaction1
Loyalty2
2009
95
37
2010
94
33
2011
87
24
¹ Satisfi ed and completely satisfi ed NCAs– Top Box.
² Loyalty is the intersection of the Top Box referring to satisfaction, intention to continue and recommendation.
QUALITY OF RELATIONS WITH NCS INTERNATIONAL OPERATIONS – LOYALTY RATE (%)1
Argentina
Chile
Colombia
Mexico
Peru
2009
n.a
n.a
n.a
n.a
n.a
2010
35
35
44
51
30
2011
38
36
37
40
23
1. Loyalty is the intersection of the Top Box referring to satisfaction, intention to continue and recommendation.
PR5
PR5
PR5
SUSTAINABLE RELATIONS NETWORK
Since 2010, we have been experimenting with a new way of working with our consultants in Mexico. Be-
cause of local market characteristics, we sought to innovate to be more attractive and to engage consultants
in our value proposition. This involved the creation of the Sustainable Relations Network which, after nine
work cycles in 2011, produced encouraging results: growth in the channel in Mexico reached 52% during
this period.
While in Brazil we only have two levels in the sales chain (NCs and NCAs), in Mexico there are eight levels
of progression for consultants: Natura Consultant, Natura Consultant Entrepreneur, Natura Trainer 1 and 2,
Natura Transformer 1 and 2, Natura Inspirer and Natura Associate. To progress, consultants have to meet
targets based on sales volume and the introduction of new consultants and – as a differential from other
models in the country – personal development and social and environmental engagement in the community.
To help them meet these requirements, Natura offers a series of general training programs aimed at driving
sustainable entrepreneurship (more on page 26). We want to show Consultants their potential to transform
social reality in their region, in addition to fostering the development of networks and entrepreneurial busi-
ness opportunities. To this purpose we connected the NCs with partnering institutions such as Ashoka and
the Fundação Educa.
The margin on product sales increases as Consultants progress through the levels. The NCs also receive
productivity bonuses to invest in their business and their well-being –the focus being medical assistance.
We currently have leaders at Natura Transformer level 2 and expect to have our fi rst Natura Associate
within two and a half years. This is the time necessary for a consultant to develop and achieve the required
level of network engagement. We ended the year with 61,100 NCs, of whom 1,137 were Natura Trainers 1,
312 were Natura Trainers 2, 69 were Natura Transformers 1 and 4 were Natura Transformers 2.
natura report # 11
49
TRAINING
Our focus in preparing the NCs for consulting work led us to exceed our training targets for the pe-
riod, reaching 566,000 Consultants trained, the highest number ever. The target was to train 540,000.
This is the outcome of planning and improvements made in the program geared to obtain accelerated
channel growth over recent years. Since 2010, we have been reinforcing training for less experienced
NCs. In 2011, we gave priority to the par ticipation of new NCs in regular training courses – 75% of
which are aimed at the newer consultants.
It is during this period that we experience the highest NC dropout rate, due to lack of experience or
the fact that the model does not meet their expectations. To counter this, the current materials used
to recruit consultants now provide a more in-depth explanation of the challenges and oppor tunities
involved and a specific meeting has been organized for newer NCs.
For the Natura Consultant Advisors (NCAs), in addition to initial training, we offer courses on plan-
ning and transformational attitudes, in which they are prompted to mobilize their group of consultants
for social action. In 2012, we intend to segment NCA training according to their NCA seniority in
Natura.
Training in international operations presents the additional challenge of engaging the NCs in our value
proposition, ensuring they become multipliers.
For our relationship managers we continued the workshops on culture, brand and individual develop-
ment and reflection, in addition to training on relationship management and Natura products. In tune
with contemporary reality and the potential represented by digital tools, we intend to expand our
online training.
HR6; HR7; PR8
We are signatories of the Brazilian direct selling association ABEVD’s Direct Selling Code of Conduct,
which mediates relations between salespersons and companies. We prepare NCs to act in accordance
with the company’s ethical standards. As in previous years, there were no legal or administrative ac-
tions involving the loss of NC data or privacy. Neither were there any legal actions related to child or
forced labor or hazardous working conditions involving NCs.
NC TRAINING – BRAZILIAN OPERATION (IN 000’S)
Beginners NCs
Initial training
Participation in training1
NCs trained by subject2
1. Considers participation of the same NC even in repeated training.
2. Considers participation of the same NC in different training sessions.
NC TRAINING - INTERNATIONAL OPERATIONS1 (IN 000’S)
Argentina
Chile
Colombia
France
Mexico2
Peru
Total
2009
430
354
583
527
2010
458
361
593
517
2011
505
358
640
566
2009
2.546
936
1.732
254
2.373
1.500
9.341
2010
3.501
1.671
2.160
500
3.856
3.261
14.949
2011
7.243
3.802
3.656
859
-
5.847
21.407
1. Covers number of NCs trained, mainly in Welcome, product line and business courses.
2. Monitoring of the indicator was discontinued due to the new commercial model.
natura report # 11
INCOME AND PRODUCTIVITY
The average annual income paid out to consultants showed a slight drop in 2011, from R$ 4,100 to R$ 3,900,
the same occurring with NCAs. The channel’s accelerated growth in recent years is decisive in this indicator
since consultants with less experience show lower productivity. Natura’s overall performance, which was below
expectations, was also refl ected in the Consultants’ sales.
Our strategy continues to be to train the newer consultants to drive higher productivity in the channel, and the
increase in training efforts is a refl ex of such strategy.
AVERAGE ANNUAL INCOME (R$)
Consultants (NCs)1
Natura Consultant Advisors (NCAs)2
2009
3.987
9.841
2010
4.128
9.802
2011
3.904
9.521
EC9
1 Considering the NC’s 30% profi t on the product price published in the magazine.
2 The NCAs receive commissions based on performance, the number of consultants placing orders and order volumes.
COMMUNICATION CHANNELS
A series of communication channels support sales activities, and there has been increased use of digital tools.
Currently almost all NC orders in Brazil are placed via the internet - 98% - a percentage that underscores
the potential of the web in company relations with consultants. In the other countries, use of the internet to
send in orders varies between 70% and 80%. In Colombia, it is 90%.
This good result is due to campaigns and instructions on the use of the web. After investigations and tests to
verify the ease of use by NCs, we launched a new site in 2011. To expand internet access, the Casas Natura
(Natura´s space for product testing) has computers and internet connections for consultants to send in their
orders. NCAs also provide guidance on Internet use.
The internet facilitates and streamlines contacts with consultants and brings a much larger number of them
within the Company’s reach. In 2011, we conducted our fi rst experiment with video service and service via
social networks. We also provided an online chat, the use of which grew from 7% in the fi rst semester to
18% by the end of the year.
Another channel is the Natura Call Center, or CAN in the Portuguese acronym, a toll free telephone
line through which consultants may send in their orders, suggestions, criticisms, praise or clarify doubts.
The blog (www.blogconsultoria.natura.net) and the magazine Consultoria are key communication channels.
They provide information on the concepts and features of each product, news on the Natura Movement,
as well as relevant business information. In 2011, access to the blog increased by more than 50%, reaching a
peak of 96,000 in one month, and an average of 73,000 single accesses per month. Some 1.5 million copies
of the magazine are sent to the NCs each cycle, offering Consultants exclusive promotions.
The Natura Magazine is also a major point of contact with NCs and consumers. In addition to presenting
products and features, it represents an important outlet for conveying our beliefs and values (more about
digital channels on page 30).
RECOGNITION AND INCENTIVES
We conducted a series of activities during the course of the year to recognize the role played by NCs and
NCAs, not only in sales, but also in disseminating our beliefs and values and transforming society.
This recognition revolves around length of relationship, sales performance, sale of refi lls and Crer para Ver
products – which income goes to the Instituto Natura.
We modifi ed the criteria for length of relationship with Natura to make them more attractive and selective.
Thus NCs now receive recognition upon completing 10, 20, 30 and 40 years of relationship. For the NCAs, a
function set up more recently calls for recognition based on growth and performance.
natura report # 11
50
NUMBER OF
ORDERS PLACED VIA
CONSULTORIA SITE
(in 000’s)1
1
4
9
8
.
1
0
9
2
1
.
1
6
9
5
1
.
2011
2010
2009
1. Orders placed over the internet by
the consultant, invoiced in the year.
AVERAGE NUMBER
OF CALLS ANSWERED
DAILY (in 000’s)1
8
2
4
2
0
3
2010
2009
1. Calls for Brazilian Operation.
2011
51
RECOGNITION FOR NCS
NCs recognized for length of relationship
Special NC recognitions2
Quantity of prizes distributed in special recognitions
Special recognition events
2009
64.030
10.572
473
43
2010
73.286
9.137
473
43
2011
13.7531
9.340
451
41
1. Data includes only NCs recognized for 10 and 15 years relationship. The recognitions for 20, 30 and 40 years were postponed until 2012.
2. Annual recognition of best NCs in the categories sales volume, refi ll sales and Crer para Ver product sales.
RECOGNITION FOR NCAS
NCAs recognized for growth1
Special NCA recognitions2
2009
nd
nd
2010
2.248
3.018
2011
2.443
2.931
1. Recognition for business growth.
2. Annual recognition of NCAs with best performance in: growth of number of NCs in the group, order frequency and NC retention in network.
NATURA MOVEMENT
The aim of the Natura Movement is to raise consultants’ awareness and rally them to propagate our beliefs
and vision of the world. We want to drive an individual and collective transformation process in our NCs
and NCAs. We want them to become agents of transformation in the communities they live in. To do this,
we encourage them to get involved in socio-environmental actions, on their own initiative or in partnership
with other organizations.
In 2011, almost 123,000 NCs were engaged in 11 Natura Movement projects nationwide. The numbers
show an incredible capacity to involve consultants in the movement, almost double the 2009 result, when
monitoring was initiated. Even so, this fi gure was below our target of involving 135,000 NCs in the projects
in 2011. This shortfall, however, may be attributed to overall business performance during the year.
The main Natura Movement initiatives during the year included the Acolher Program. This is a pioneering
social entrepreneurship scheme that identifi es, recognizes and encourages Consultants engaged in socio-
environmental actions nationwide. NCs participating in the program form a large network through which
they exchange experience and are eligible for technical and fi nancial support for their activities. In 2011, 18
NCs from 16 cities were selected to receive this support from more than 1,500 applications. The initiatives
undertaken include recycling cooperatives, the manufacture of disposable diapers for children and sick adults,
community nurseries, reading initiatives, social inclusion of the disabled and support for needy children. These
projects may be seen on the Natura Movement portal at (www.movimentonatura.com.br).
The Acolher program is divided into two categories: “Seed” for incipient initiatives and “Growth” for more
established ones. Consultants receive grants of R$ 5,000 and R$ 15,000 respectively, as well as technical sup-
port to drive their development as social entrepreneurs.
NCS ENGAGED IN
NATURA MOVEMENT¹
The Natura Movement website (www.movimentonatura.com.br) provides support for this work. The site
contains videos and information on social entrepreneurship and enables interaction among users. A total of
2,922 NCs are enrolled to participate in the Acolher network.
We also invested in publicizing these initiatives with the set up of the category Natura Inspiring Consultant in
the CLÁUDIA Award organized by the magazine CLÁUDIA. NCs recognized in the Acolher Program are eli-
gible for this award. Moreover, Natura established a partnership with the Rede Record TV network program
Hoje em Dia, which has a section that translates as Inspiring Women. The stories of consultants participating
in the Acolher program are presented in this section.
7
6
4
5
4
.
8
1
1
3
1
1
.
3
5
9
2
2
1
.
2011
2010
2009
1. Equivalent to average absolute
number of consultants/year.
natura report # 11
52
COMMUNITIES PROGRAM
Since 2007, Natura has been involved in social work in the Rio de Janeiro communities. Based on this ex-
perience, the Company created the Communities project in 2011. Developed in the Cidade de Deus and
Complexo do Alemão districts, the project is aimed at people wishing to become NCs and takes advantage
of these new consultants’ interest to encourage them to get involved in social work that will transform
their communities.
The fi rst step was research in these districts. We realized that many people wishing to work as Consultants
had questions that hampered them from getting started. Consequently, we made the rules for registration
more fl exible, admitting persons with protested debts of up to R$ 500, thus increasing enrollment by 75%.
We also established a partnership with the Banco Santander for the provision of microcredit and fi nancial
education courses for the NCs.
In 2012, we will expand the project to a further 20 communities where so-called police pacifi cation units
or UPPs are in place. Part of the revenue generated will be reinvested in projects in these communities
using the Acolher Program methodology.
Natura also supplies free products for use in hairdressing and make up vocational courses offered by
Faetec, as well as supporting actions designed to promote women’s self-esteem through dance and make-
up sessions in partnership with the cultural group Afroreggae.
The Natura Movement also engages NCs in educational support through sales of the Natura Crer para Ver
product line. In 2011, approximately 71,000 NCs embraced this cause, selling these products with no personal
gain (more on page 86).
Another important cause is the Natura Products Recycling program through which we encourage NCs to
collect empty product packs when visiting their clients (read more on page 82).
OTHER PROJECTS SUPPORTED BY THE NATURA MOVEMENT*
THIS IS THE ATLANTIC RAINFOREST (MATA ATLÂNTICA É AQUI)
In 2011, 1,660 NCs were involved in this project in partnership with the NGO SOS Mata Atlântica. A mobile
exhibition on the Atlantic Rainforest visited 23 cities in Brazil. The program was aimed at raising public awareness
and promoting environmental education and was attended by 114,000 people.
FORESTS MAKE A DIFFERENCE (FLORESTA FAZ A DIFERENÇA)
The dissemination of this campaign via the sales channel led around 40 thousand NCs to sign a petition against
the bill of law modifying the Brazilian Forestry Code.
*In addition to these projects, in 2011 the Natura Movement supported the following initiatives: Água de Viver, Pracatum, Respeito SP,
Canta Brasil and 10 Minutos Contra a Dengue. More information at www.movimentonatura.com.br
natura report # 11
4.4
consumers
53
DMA PR
We constantly strive to strengthen the ties we establish with our consumers and increase our understanding of
their habits, expectations and needs. Since the creation of our Consumer Insight area in 2009 we have boosted
investment in research, studies and analyses. In 2011, these investments grew 50% compared to 2010.
OVERALL BRAND
IMAGE ASSESSMENT
IN BRAZIL (%)12
These efforts do not translate merely in numbers. The main development last year was the achievement of
greater consistency in the analytical process. All the information we gather today, from the most diverse points
of contact with the consumer – including social networks – is forwarded to a Center of Analysis. This intelligence
management provides a more integrated view of the moment our consumers, our consultants and the market
are experiencing and enables us to identify opportunities and trends.
In 2011, as a result of operational diffi culties caused by changes in the infrastructure systems, we experienced an
increase in product shortages and delivery times. These factors, together with heightened competition, led to a
slight drop in consumer relationship quality indicators. Consumer loyalty decreased from 53% to 52%. In Overall
Brand Assessment, there was a drop from 81% to 73%, but even so we increased our lead over the second most
popular brand.
QUALITY OF RELATIONS WITH CONSUMERS IN BRAZIL1 2 3 (%)
Loyalty
Preference
2009
46
47
2010
53
49
2011
52
47
1. Source: Brand Essence / Instituto Ipsos
2. Research based on quantitative sample of 1,800 personal and household interviews in fi ve markets.
3. Loyalty is the intersection of the Top Box referring to satisfaction, intention to continue and recommendation.
Natura is the consumers’ preferred brand, more than twice as popular as the runner up. We increased our share
in Brazilian households to 62%, which means that we reach around 100 million people. These numbers stand
behind the development of our strategy to get consumers to buy a larger variety of products more frequently.
This will enable us to better leverage the power of the Natura brand and increase consultant productivity.
In Latin America, our brand is growing stronger year after year. In 2011, all the operations except Mexico showed
an increase in spontaneous recall of the Natura brand (see table below).
.
SPONTANEOUS KNOWLEDGE - BRAND IMAGE ASSESSMENT IN INTERNATIONAL OPERATIONS1
Argentina
Chile
Colombia
Mexico
Peru
1. Source: Brand Essence / Instituto Ipsos
2009
10
7
3
4
26
2010
17
9
1
11
32
2011
24
16
9
5
43
1
8
1
8
3
7
2009
2010
2011
1. Source: Brand Essence.
2. The Top Box overall
assessment measure
considers respondents who
gave the Natura brand the
top score on a scale from
1 to 5.
PR5
PENETRATION
IN BRAZILIAN
HOUSEHOLD¹ ² 3 (%)
1
5
4
5
2
6
2011
2010
2009
1. Penetration is the percen-
tage of households in the
universe represented in the
survey that bought the brand
in the specifi ed period.
2. Source: Kantor World Panel.
3. The panel represents 81% of
the household population and
90% of the country’s consump-
tion potential according to the
Target index. Due to updates
of the population profi le, Natu-
ra data were adjusted and the
numbers were reviewed.
natura report # 11
54
INTERNET AND SOCIAL NETWORKS
Intensive use of the web and social networks dovetails with our wish to innovate in the way we relate to our
consumers.
We have used the internet to support communication actions with great impact. For the relaunch of the hair
product line Natura Plant, we invited customers buying cinema tickets via the website Ingresso.com to record
a message as a tribute to a special woman and her relationship with her hair. The tribute was shown before the
fi lm session, surprising the customers in the audience. With extensive repercussion in the social networks, the
action was elected the best Brazilian campaign of the year by readers of the trade publication Meio&Mensagem.
The video may be seen on our YouTube channel (www.youtube/naturabemestarbem).
Another example of Natura communication with consumers is the “Adoro maquiagem” (I love makeup) portal
(www.adoromaquiagem.com.br), which has become a meeting place for makeup afi cionados. Launched in 2010,
the channel receives more than 150 thousand single users per month, and the average time spent in the chan-
nel is above fi ve minutes. The portal is connected with other online communication tools such as Twitter and
Youtube.
ETHICAL COMMUNICATION
We believe that in addition to promoting our products, Natura’s advertisements, commercials and other
communications should provide clear information and raise consumer awareness. This is backed by the com-
pany’s Ethical Communication Guidelines manual. The document is for employees and suppliers involved in
Natura communication processes and sets forth the principles underlying all communication campaigns and
actions. These include questions such as product environmental impact, conscious consumption, non-invasive
communication, respect for children, promoting dialogue and co-creation, as well as valuing diversity, clarity,
self-refl ection and the truth.
We are compliant with the standards set forth by the Advertising Self-Regulatory body Conar and the codes
of conduct of the Brazilian Advertisers Association, the Brazilian Consumer Defense Association and the Bra-
zilian Direct Selling Association. These regulations are used as guidelines for all our communications. In 2011,
we received no notices for breaches of regulations, laws and voluntary codes in connection with marketing
communication, including advertising, promotion and sponsorship.
PR6; PR7
CUSTOMER SERVICE
Natura consumers have an exclusive channel through which they may place complaints, criticisms and sug-
gestions, the Natura Customer Service or SNAC in the Portuguese acronym. The channel is toll free and
received just over 780,000 calls in 2011, 24% down on 2010.
SNAC –NATURA CUSTOMER SERVICE (000’S OF CALLS)1
Total
Answered
Unanswered
1 Calls related to Brazilian operation.
2009
1.484
1.375
109
2010
1.029
987
42
2011
783
770
13
The reduction in calls received by the SNAC service is part of the company strategy to boost use of digital
channels, in particular our online chat. It is also due to changes made in 2010 to streamline the product ex-
change process and improve fraud prevention. With more selective criteria, including the collection of prod-
ucts for evaluation, the number of complaints decreased. We believe the drop is associated with non-genuine
communications. In spite of these measures, consumer satisfaction with this service channel remained stable.
Another highlight was the creation of a specialized service cell for the Chronos product line. Manned by a
multifunctional team, we started offering consumers more detailed information about this high technology
dermo-cosmetic. New specialized service cells organized by product line should be created in 2012.
Attentive to our consumers’ right to privacy and confi dentiality, everyone communicating with Natura via the
natura report # 11
55
internet or SNAC is protected by data security policies and systems. In 2011, there were no legal or adminis-
trative cases involving breaches of consumer privacy or loss of data.
In 2011, 697 complaints were fi led with the Procon (Consumer Protection and Advisory Program). Those
complaints were mostly related to NC requests to renegotiate debts, third-parties inclusion in credit protec-
tion agency listings, and consumer complaints in connection with request for product exchange or reimburse-
ment. Complaints are reviewed by the appropriate functions and help identify potential improvements that
could be made in the Company’s processes.
CONSUMER SAFETY
We have a permanent commitment with the health and safety of our consumers. We have rigorous internal pro-
cesses to ensure safety, from product conception to packaging disposal, encompassing research, certifi cation, manu-
facture, marketing and promotion, warehousing, distribution, supply, customer service and effective product use.
PR1
For example, we honored our commitment to completely eliminate parabens from our product formulations in
2011. Although still allowed, the lack of consensus about the safety of these substances led Natura to decide for
their removal from our products. Based on our experience in this case, we established a project that acts as a radar
to detect controversial ingredients worldwide. We anticipate trends and act preventively.
Additionally, our innovation and product development process adopts the precautionary principle. In other words,
we closely monitor global scientifi c developments for possible adverse effects of any ingredient on health and re-
place them if necessary. In the case of raw materials in which there are limitations on the permitted concentration,
we always apply the standards of countries with the most restrictive legislation.
4.11
In Brazil the Company has set in place projects to improve the capture and analysis of reports of adverse events
during 2011. We strive to obtain more detailed information about the safety of our products in the market as
rapidly as possible. For this reason our service channels such as the Natura Customer Service are trained to obtain
as many details as possible in case of adverse reactions.
We are also structuring our processes to ensure alignment with the standards being established for the cosmetics
industry under the new European regulations.
It should be noted that international operations have a scientifi c management area responsible for regulatory, sur-
veillance and quality processes, reporting to the Consumer Safety and Innovation function in Brazil.
In 2011, no penalties nor administrative sanctions were imposed to Natura by the Brazilian National Health Surveil-
lance Agency (Anvisa). Nor any fi nes were imposed in connection with product impact on consumers’ health and
safety nor any signifi cant fi nes in connection with product labeling.
PR2; PR4; PR9
natura report # 11
56
4.5
suppliers
Natura maintains an open dialogue and relationship based on partnership with its suppliers. This relationship
is driven by continuous development and the joint development of solutions and improvements, because we
know that collectively we can multiply the generation of economic, social and environmental value.
The Company’s supply network is divided into different types of partners. Those who provide us with fi nished
products (third-party manufacturers) and production inputs (biodiversity assets, raw materials and packaging)
account for 50% of our purchase volume. The remainder includes indirect service and material suppliers. In 2011,
a total of 190 materials and fi nished product suppliers and more than 4,700 indirect input and service suppliers
were listed in our base.
With our expansion in Latin America, we have increased the participation of regional suppliers, through a new
regional procurement structure for the international operations. The Company’s strategy is to increasingly work
with local manufacturers (third-party suppliers). In addition to perfume bottling, initiated in Argentina in 2010,
last year the Company began soap production in Colombia. The manufacture of shampoo in Mexico, perfumes
in Colombia and moisturizers in Argentina and Colombia should begin in 2012. Among other advantages, local
production improves service levels and reduces environmental impacts of product distribution.
EC6
SUSTAINABLE SUPPLY CHAINS
In 2011 Natura set up the Company’s Sustainable Supply Chain strategy. Based on innovative methodology, it
enables Natura to take into account the real value of socio-environmental aspects in the selection of suppliers
and in establishing development plans to ensure an increasingly effi cient and sustainable production chain.
Initiated in 2010 in partnership with international specialists and the suppliers themselves, the initiative was sup-
ported by the mapping of potential socio-environmental impacts caused by the chain and calculating the cost
of preventing or mitigating these impacts. In 2011, the program was implemented: we included the following
indicators in the purchasing criteria: environmental (carbon emissions, water consumption, solid waste genera-
tion) and social (investment in education, training, the inclusion of disabled people and occupational safety) .
Applied in the selection of new vendors and in the review of the existing packaging, third-party manufacture and
logistics supplier base, the system brought gains in the three sustainability pillars: economic, social and environ-
mental. The methodology was applied to 60% of our purchases measured by value. We closed supply contracts
in which these partners committed to improving their socio-environmental performance during the next three
years. This is expected to generate approximately R$ 2 million a year in socio-environmental improvements by
2014. Since these improvements will be multiplied throughout the suppliers’ operations, the impact for society
will be worth approximately R$ 20 million during the period.
We initiated the second phase of the program in 2011, extending the methodology to service and indirect in-
put suppliers. As in the fi rst phase, this involved meeting with these partners to map their impacts. The process
should be completed in 2012 and should include the suppliers in the international operations.
We consider this initiative as a consistent evolution of the triple bottom line management system, leveraging
the socio-environmental potential of our supply chain. Worthy of note is the engagement of our suppliers. The
Company fi rmly believes in the multiplying effect of this measure, because any improvement implemented by
our partners should boost their overall performance and should not be restricted to their dealings with Natura.
natura report # 11
57
RELATIONSHIP
We monitor the quality of our relationship with suppliers through satisfaction and loyalty indicators. In 2011,
rates were stable compared with the previous year hence they did not reach the goals set for the year. The
satisfaction rate was 81%, with loyalty at 27%, one percentile point below the 2010 results (within the survey
margin of error). This result may be explained by operational shortfalls. We dealt with this situation by remaining
close to our partners and keeping them informed of the measures being taken to normalize processes. After
eight months, the main diffi culties had been overcome. Evidently, the company is aware that it is in everyone’s
best interest to maintain a totally stable operation.
SUPPLIER
LOYALTY (%)
It should be noted that in 2011 we also started to monitor two supplier-related issues raised in the discussion
panels: internal control of payments and material receipt lag-time. With respect to payments, the Company
improved contract management procedures and internal controls. Regarding material receipt diffi culties, opera-
tional improvements were set up in the second semester.
5
2
8
2
7
2
2009
2010
2011
QLICAR PROGRAM
Our supplier development program Qlicar (the Portuguese acronym for Quality, Logistics, Innovation, Competi-
tiveness, Environment&Social and Relationship) was upgraded last year. In 2011, we reinforced critical service
level indicators and included social parameters aligned with our sustainable supply chain strategy in the moni-
toring. Where we previously monitored only water and energy consumption, CO2 emissions and solid waste
generation, we now require data on investment in employees’ education, occupational safety, social inclusion and
community investment. Rather than just reporting this information, our suppliers should now be assessed based
on the progress in these indicators.
The number of participants in Qlicar was also increased to 122 suppliers of inputs, fi nished products, logistics,
brand-related services and services to consultants.
In line with our proposal to increase transparency throughout the value chain, since 2010 we have supported
the Global Reporting Initiative (GRI) GANTSCh (Global Action Network for Transparency in the Supply Chain)
training program to encourage sustainability reporting in the supply chain. In Brazil, the program is administered
by Aberje (the Brazilian Business Communication Association) and entails workshops and different activities.
We invited some small and mid-sized suppliers to participate and seven accepted in 2011. At the end of the
program, these partners will be prepared to publish a GRI standard sustainability report.
It should be noted that 100% of the contracts we sign with suppliers contain human rights clauses, covering is-
sues such as child, forced and slave labor. In 2011, we signed 36 new contracts worth some R$ 5 million.
HR1; HR6; HR7
In 2011, 219 suppliers underwent self-assessment procedures and 82% of them were submitted to periodic
audits covering aspects of quality, environment and social responsibility, including human rights.
HR2
natura report # 11
4.6
supplier
communities
58
The sociobiodiversity inputs used in our products originate from family smallholders and extractivist com-
munities in diverse parts of Brazil – mostly in the Amazon region. We establish production chains with these
communities based on fair prices, compensation for access to biological resources and traditional knowledge
and support for sustainable local development projects. This model has proved effective in generating social,
economic and environmental value for Natura and for the communities.
In 2011, we worked with 32 suppliers’ communities representing 3,235 families, 40% more than in the previ-
ous year. This increase is part of our strategy to strengthen business ties with the suppliers’ communities,
amplifying the social benefi ts derived from this relationship and business model.
SUPPLIERS’ COMMUNITIES1
Communities with which Natura maintains relations
Families benefi ting in the suppliers’ communities
2009
25
2.012
2010
25
2.301
2011
32
3.235
EC9
The income of these communities reached R$ 10 million last year, 15% more than in 2010. Although propor-
tionally higher than Company’s growth in the year, investment in the suppliers’ communities did not reach the
established target of 25% increase for the year. The main factor behind this performance was the review of
production inputs purchased during the year.
Even considering only input purchases, the amount paid out to the communities was 50% higher than the
previous year. The amount paid out per family decreased since the number of families grew more (40%) than
spending (15%).
FUNDING (000’S OF R$ )
Supply1
Compensation for access to biological resources
and associated traditional knowledge2
Funds and support3
Use of image4
Training5
Certifi cation and management6
Studies and assistance7
TOTAL
2009
2.767
2010
4.374
1.056
1.088
15
152
28
435
5.540
1.480
1.552
77
185
212
828
8.706
2011
6.749
1.597
1.002
22
133
21
512
10.037
EC8
1. Amount paid by processors or the Benevides plant for raw materials used in Natura products.
2. Amount paid to communities for access to biological resources and/or associated to traditional knowledge related to Brazilian biodiversity.
3. Voluntary Natura sustainable development funds or agreements, disbursement of which is linked with infrastructure improvement
projects or sponsorship.
4. Amounts paid for use of images of community members in institutional or marketing communication.
5. Workshops and courses funded by the company to improve sustainable production techniques.
6. Amounts invested in certifi cation and management plans for areas under cultivation.
7. Includes studies by anthropologists, lawyers, economists, NGOs and other Natura contractors for the suppliers’ communities. Also
includes studies for structuring the production chain.
natura report # 11
59
FUNDS ALLOCATED PER FAMILY (000’S R$) PER YEAR
Direct funds1
Supply2
2009
2,5
1,5
2010
3,2
2,0
2011
2,9
2,2
EC9
1. Includes funds effectively received by the communities: supply of inputs, sharing of benefi ts, use of image, funds and support.
2. Sub-item of direct funds, itemizing funds received from supply.
RELATIONSHIP GUIDELINES
Natura’s relations with the suppliers’ communities are governed by the company’s Policy on the Sustainable
Use of Biodiversity and Associated Traditional Knowledge which in turn is based on the United Nations
Convention for Biological Diversity. To initiate a relationship with a community a number of factors are
reviewed: existence of a legal organizational entity; administration and project management experience; re-
lations with other local partners; participative management among members and sustainable environmental
practices; prior experience in market relations; and production traceability.
In addition to follow the policy, Natura also draws on the Suppliers’ Communities Relationship Principles, a
document which guides the Company’s conduct and formalizes our commitment to understand and respect
a community’s way of life and form of social organization. To do this, we always strive to establish a partici-
pative, inclusive and transparent dialogue, which is conducted through a dedicated multidisciplinary team.
Consolidated in 2011, the result of the suppliers’ community loyalty assessment was 28%. This is not com-
parable with the previous year’s result – 43% - because we revised the methodology. Previously conducted
by telephone, last year the survey was based on fi eld visits by surveyors with a background in social science.
The change helped refi ne the result of the survey, providing complementary information about the qual-
ity of the relationship and different associated community perspectives. The most positive points include:
diversifi cation of sources of income, including sale of materials to new markets; formalization of the com-
mercial relationship; crop planning; opportunities for discussion and new partnerships. It was also noted that
the relationship with Natura goes beyond the fi nancial issues, with the extractivists and family smallholders
feeling appreciated by their partners, customers and the society as a whole.
We understand that there is room for our relations with the communities to evolve and we seek to con-
tinuously improve the way we manage this development. The challenges include the need to improve com-
munication and materials purchase processes, which includes planning, crop advances, joint monitoring of
logistics and administrative processes.
BIOQLICAR PROGRAM
BioQlicar is a monitoring and development program similar to the one applied to our regular suppliers, but
focused exclusively on the suppliers’ communities. It uses two groups of indicators: Bio, covering the human,
social, environmental and economic resources the local society has at its disposal to drive development;
and Qlicar (Quality, Logistics, Innovation, Competitiveness, Service and Relationship) – which addresses
monitoring of production performance. By tracking performance and development, BioQlicar boosts the
communities’ overall market relations.
The program is evaluated annually by the processors and suppliers’ communities. The 2011 results will be
ready in May 2012. The 2010 score was 3.6 (on a scale of 0 to 5).
HR2
In 2011, a series of training programs were organized, including administration, community exchanges, oc-
cupational health and safety, labor relations, as well as infrastructure improvements and local value genera-
tion. We also invested in a management and agricultural training program, in structuring cost chains and
formalizing contracts.
natura report # 11
We organized a round of talks to discuss the involvement of children and teenagers in the production chains.
The encounter was coordinated by anthropologists and Natura employees in the three supplier communi-
ties where we carried out studies on the social division of labor. The objective of the meeting was to en-
courage discussion and deepen the participants’ understanding of the subject. Our perception is that family
participation in community activities is not only an economic matter, but also a social and cultural one. The
challenge is to disseminate the debate among the different societal industries and increase understanding of
the issue. It should be noted that all the benefi t sharing and supply contracts include human rights-related
issues, in particular child and forced labor and degrading work conditions. In 2011, there were no incidents
involving indigenous populations in the areas in which we operate.
60
HR1; HR6; HR7; HR9
SHARING BENEFITS
AND CULTURAL HERITAGE
Natura addresses the issue of sharing benefi ts based on its policy on the Sustainable Use of Biodiversity and As-
sociated Traditional Knowledge. The Company’s approach is to share benefi ts whenever different forms of value in
our access to biodiversity are perceived. As such, one of the practices defi ning how these resources will be shared
is to associate payment with the number of raw materials produced from each plant and the commercial success
of the products in which these raw materials are used.
In 2011, we signed two new benefi t sharing contracts. One was for the traditional knowledge associated with
the use of andiroba in the Médio Juruá, Amazon region. This is the fi rst commercial contract undertaken with a
community located in an environmental conservation area. The second contract was for access to the biological
resources of vanilla types bahiana and chamisonis, with the Cabruca cooperative (Bahia).
We also entered various amendments to other agreements to expand the range of raw materials used in research
within our innovation program. All are related to sharing the benefi ts from access to biological resources. They
include two passion fruit contracts with the Aprocor Cooperative – Corumbataí do Sul Region Producers’ Asso-
ciation (Paraná); fi ve cocoa contracts with the Cabruca Cooperative (Bahia); one capitiú contract in Capo Limpo
(Pará); one guaçatonga contract and a passion fl ower contract in the Consórcio Terra Medicinal (CTM) commu-
nity; jenipapo, guaraná and annatto contracts with the Onça Cooperative; three cupuaçu contracts with the Reca
Project (Rondônia); and a macela contract with the Coopafl ora – Turvo Agroecological, Handicraft and Forestry
Products Cooperative, in Turvo (Paraná).
LOCAL DEVELOPMENT
To stimulate the development of the suppliers’ communities and the areas around them, we have a specifi c
company-funded promotion program. The funds are invested in projects that foster the social reinforcement
of the communities, as well as environmental conservation, cultural reinforcement, the creation of alternative
sources of income, food security, interaction with external bodies and leadership development.
SO10
One of these initiatives was the creation of the Médio Juruá, Amazon region Fund in partnership with the
Conselho Nacional de Populações Extrativistas (National Extractivist Populations Council), with support from
the Instituto Chico Mendes de Conservação da Biodiversidade (Chico Medes Conservation and Biodiversity
Institute - ICMBio) and the Centro Estadual de Unidades de Conservação do Estado do Amazonas (Ama-
zonas State Conservation Unit Center). The fund selects projects proposed by organizations in the region
based on four action fronts: building citizenship, education and health; food security and income generation;
environmental conservation and preservation; associative reinforcement and market diversifi cation.
The aim is to enable organizations such as the Médio Juruá Extractivist Reserve to seek alternative sources of
income for workers and to obtain project fi nancing. The fund’s fi rst call to tender was issued in 2011. Natura
also assisted the organizations by training them to prepare their applications in line with the required criteria.
As a result of our institutional and technical reinforcement initiatives in the Médio Juruá, Amazon region com-
munity, the quality of the materials gathered and andiroba and murumuru processing has improved. This in
turn improves relations and increases family incomes.
SO10
Another signifi cant initiative was the inauguration of an agro-industrial venture in the Cofruta community
(Pará). This process is the result of a collective discussion involving several cooperatives in the Lower Tocan-
tins region and other local partners (NGOs, agricultural unions). With this unit, the communities which previ-
ously supplied Brazil nuts and seeds as production inputs now process the material and sell the oil to Natura
and other customers. We have thus helped to add value to the production process, diversify the cooperative’s
business and strengthen the region. For Natura, the process results in logistics gains. The project is manned
by young people trained in management and cooperative administration in a program organized by Fase (the
Social and Educational Assistance Federation), another measure supported by Natura.
natura report # 11
natura
Suppliers’
Communities
Reca (Associação dos Pequenos
Agrossilvicultores do Projeto de
Refl orestamento Econômico
Consorciado e Adensado) -
Cupuaçu (theobroma grandifl orum)
butter and pulp, Cumaru (Dipteryx
odorata) seeds, Açaí (Euterpe
precatoria) pulp and Brazil
nut oil
Comaru (Iratapuru
Producers and
Extractivists
Cooperative) - Brazil
Nut (Bertholletia excelsa)
Oil and Breu Resin Oil
(Protium pallidum)
61
Apobv (Boa Vista do Acará Producers’ Association) - Piri piri root Cyperus articulatus
Belém Islands Women’s Movement - Piri piri root (Cyperus articulatus)
Aprocam (Campo Limpo Producers’ Association) - Piri piri root (Cyperus articulatus)
andestoraque leaves (Myroxilon Balsamun)
Camta (Tomé-Açu Mixed Agricultural Cooperative) - Cupuaçu (theobroma grandifl orum)
butter, Açaí(euterpe oleracta) pulp, Cocoa seed and passion fl ower oil (passifl ora edulis)
Cofruta (Abaetetuba Fruit Producers’ Cooperative) - Andiroba (Carapa guianensis) and
Murumuru (Astrocaryum murumuru) seeds
Associação Ver-as-Ervas das Erveiras e Erveiros do Ver-o-Peso -
Does not supply materials
Igarapé-Miri Agricultural Cooperative - Andiroba (Carapa guianensis) and Murumuru
(Astrocaryum murumuru) seeds
Cart (Resistência de Cametá Agricultural Cooperative) - Murumuru (Astrocaryum
murumuru )seeds
Coomar (Mid Caeté and Gurupi Mixed Producers’ Cooperative) - Murumuru
(Astrocaryum murumuru) seeds
Copoam (Amazon Organic Producers’ Cooperative) - Cocoa seed (Theobroma cacao)
Santo Antônio do Tauá Mixed Agro-Extactivist Cooperative - Murumuru (Astrocaryum
murumuru) seeds
Associação Jauari (Jauari – Caminhos com Cristo Residents’ and Producers’ Association) -
Murumuru (Astrocaryum murumuru) seeds
Coopcao (Organic Cocoa Producers’ Cooperative) - Cocoa seed (Theobroma cacao)
Copops (Perpétuo Socorro Organic Products Cooperative) - Cocoa seed (Theobroma
cacao)
Copotran (Transamazônica Organic Producers’ Cooperative) - Cocoa seed Theobroma
cacao
Copoxim - Cocoa seed (Theobroma cacao)
Copobom (Bom Jardim Organic Cocoa Producers’ Cooperative) - Cocoa seed
(Theobroma cacao)
Codaemj (Médio Juruá, Amazon region
Energy Extractivist Development
Cooperative) / Asproc (Carauri Rural
Products Association) / Amaru (RDS
Uacari Residents’ Association) -
Andiroba (Carapa guianensis) and
Murumuru(Astrocaryum murumuru)
Equador
50
AC
50
Malvas - Palo
Santo Leaf
(Kielmeyera
coriacea)
RO
374
AP
32
34
17
AM
400
13
101
140
16
PA
6
127
120
11
7
8
118
11
91
64
Coopaesp (Esperantinópolis Smallholder and
Extractrivist Cooperative) - Babassu fl our (Orbignya
Phalerata)
MA
68
PI
50
Buriticoop (Palmeira
do Piauí) - Does not
supply currently
MT
400
BA
140
54
30
Chico Mendes Legal Reserve -
Does not supply materials
MG
176
Coopavam (Vale do
Amanhecer Producers’
Cooperative) - Brazil nut oil
SP
5
PR
364
96
Coaprocor (Corumbataí do Sul and region Agro-industrial
Producers’ Cooperative) - Passion fruit seed (Passifl ora
edulis Sims)
Coopafl ora (Turvo Agro-ecological, Handicraft and
Forestry Products Cooperative) - Chamomile fl ower
(chamomilla recutita) Melissa (melissa offi cinalis), Macela
(achyrocline satureiodes), Sage (Salvia offi cinalis) Rosemary
(Rosemarinus offi cinalis); Lemon grass leaves (Cymbopogon
citratus), Mint (mentha piperita) and CarquejaBacharis
genisteloides y secas de hierba limón, menta y carqueja
Cabruca (South Bahia Organic
Producers’ Cooperative) -
Cocoa seed(Theobroma cacao)
Onça (Onça Project
Agricultural Cooperative) -
Research material
Cooprocam (Camamu
Agricultural Producers’
Cooperative) - Not supplying
currently
Grande Sertão Family
Smallholder and Extractivist
Cooperative - Buriti palm oil
CTM (Terra Medicinal
Consortium) - Passion fl ower
leaves (Passifl ora edulis)
XX number of families involved
natura report # 11
62
4.7
surrounding
community
With the expansion of Natura’s operations, the challenges and responsibilities involved in establishing relationship
quality with the communities surrounding our operations has grown. We are aware that the company’s presence
causes impacts and we strive to ensure these are increasingly positive.
Our main rationale regarding surrounding communities is to identify local partners with whom we may operate. We
believe that strengthening existing actors and leaders leads to more consistent and sustainable results.
A large part of our initiatives are focused on the Cajamar (São Paulo State), Itapecerica da Serra (São Paulo State) and
Benevides (Pará State) communities, where our main operations are located. Investments in projects in these locations
totaled R$ 822,000 in 2011, almost double the amount spent the previous year.
INFRASTRUCTURE AND SERVICE INVESTMENTS FOR PUBLIC BENEFIT (000’S OF R$)
Investments in communities surrounding Natura
units - Natura funding1
Investments –Crer para Ver funding2
1 Investments refer to districts of Cajamar and Itapecerica da Serra.
2. Crer para Ver investments in Benevides.
2009
2010
2011
408
3
409
30
822
96
EC8
One of our commitments for 2011 was to extend our relationship strategy beyond the communities in which we
already invest. The aim is to expand our local development programs to other regions, a strategy which continues
to be a challenge for the company.
In 2011, we directed 1% of Natura’s income tax due to the Children’s and Adolescents’ Municipal Councils in seven
municipal districts. Among these, we established closer relations with the councils in three locations in which Na-
tura has DCs: Jaboatão dos Guararapes (Pernambuco), Canoas (Rio Grande do Sul) and Castanhal (Pará). In these
regions we organized meetings to learn about the local reality and child and adolescent-related issues in the region.
With respect to employees resident in the areas around our main units, there was an increase in hiring in Cajamar,
especially among operators and apprentices. All the 163 young people in the program were indicated by employ-
ees. Worthy of note is the fact that a large number of temporary workers, third-parties and service providers
working with Natura live in the surrounding communities. In Benevides, like in 2010, there was a decrease in this
indicator due to the unit’s growth, meaning a number of employees from outside the region were hired.
EMPLOYEES RESIDENT IN SURROUNDING COMMUNITIES (%)1
Cajamar
Benevides
2009
17
98
2010
17
95
2011
21
60
1. Itapecerica da Serra is an administrative unit and does not count employees from the surrounding community.
Business volume with suppliers from Cajamar, Itapecerica da Serra and Benevides accounted for 4% of Natura’s
total purchases during the year.
EC6
natura report # 11
63
PURCHASES FROM SUPPLIERS IN THE COMMUNITIES AROUND PLANTS1 (R$ MILLIONS)
Cajamar
Itapecerica da Serra
Benevides
Total
2009
70
1,2
45
116
2010
74
1,3
47
121
2011
62
3,0
64
129
EC6
1. The method for consolidating this indicator was changed. From 2011, the amounts net of taxes recoverable were considered. Conse-
quently the 2011 data are not comparable with previous years.
CAJAMAR
Since 1998, we have focused on establishing partnerships with the community, public authorities and civil as-
sociations in Cajamar with a view at contributing to local development. In 2011, we assisted in the set up of the
targets and projects established in the Municipal Education plan funded by Natura the previous year. In partnership
with the Municipal Education Board and with support from Ideca (Educational, Cultural and Community Action
Development Institute), work began on building the municipal learning assessment system. This will be applied to
students in municipal schools and will provide more accurate in-depth information on teaching quality and on the
needs of each school.
To provide local youngsters with new employment opportunities, we created the Cajamar School in 2011. This is
an educational program to prepare them to participate in apprentice selection processes, not only at Natura but
also in other companies in the region, and increase their chance of employment. A total of 65 adolescents took
part in the program, and fi ve were recruited by Natura.
We also developed our existing partnership with the NGO Mata Nativa. Since 2010, we have contracted Ipesa
(Socio-environmental Projects Institute) to strengthen the organization in institutional and management terms.
We supported the NGO in a project involving shared management of a municipal park in partnership with public
authorities and community leaders. The aim is to set up an environmental education framework and reinforce
management of the environmental protection areas in the region that includes Cajamar, Cabreúva and Jundiaí.
ITAPECERICA DA SERRA
After 20 years in which a key part of our operations have been located in Itapecerica da Serra, we should be
leaving the district by the end of 2012. This decision is due to the fact that the site offers no room for expansion
considering the company’s growth.
We recognize that our leaving the district generates impacts, in particular with respect to tax revenues. Since
the decision was made, every care has been taken to inform the community and discuss the best way to close
this current cycle of work and partnerships. The decision was communicated offi cially to the local government
with two years notice, giving it time to adjust to the resulting fi scal impact (more on page 68). The move was also
discussed in a discussion panel with the surrounding community in 2011.
SO1
The projects the company supports in the community will be maintained throughout 2012. The main action Na-
tura supported was the set up of selective solid waste collection in the Potuverá district, which was concluded in
2011. The next challenge is to extend this service to other districts in the municipality. Natura has been involved
in this project since 2007 in partnership with the Municipal Environment Department and Cris, the Itapecerica
da Serra Recycling Collective. Our support entails contracting the NGO Ipesa, which has been training and as-
sisting our partners in the project.
In the community discussion panel we addressed the future of the project. In our view, the cooperative and the
local government are now ready to run the service by themselves - the main objective of the partnership all
along. We also supported the communication plan to spread the information on the collection program in the
community.
SO1
To drive knowledge generation Natura supported Ipesa in systematizing the methodology for setting up co-
operatives based on the experience in Itapecerica da Serra. We believe this model may be replicated in other
districts and could even contribute to the creation of a public policy on selective solid waste collection. Thus
our participation in the project is being concluded with support for systematization of the knowledge acquired
during this period.
The Itapecerica da Serra operation will be transferred to a facility in the city of São Paulo (São Paulo State)
which will house 2,500 administrative staff and a modern distribution center (DC). The new facility, which will be
inaugurated in 2012, is projected to have a reduced environmental impact and to provide an inclusive workplace.
natura report # 11
64
BENEVIDES
Natura’s activities in the region around Benevides (Pará State), where we have a soap factory, increased signifi -
cantly in 2011. As a result of the growing use of biodiversity assets in our products, the number of communities
with whom we work increased from 12 to 15 in 2011. The number of families grew from 1,100 to 1,536, or
more than 40%, last year. The disbursement generated from the acquisition of inputs increased 60%, from R$ 1.6
million in 2010 to R$ 2.6 million a year later.
Natura has been around in the Benevides region since 2006. It has a local team dedicated to community rela-
tions, which in this case covers a larger range, including several municipal districts in the state of Pará. With the
construction of a new plant in Benevides and the increase in investment earmarked for the Amazônia Program,
community relations should grow in the coming years (more on page 28).
We organized a public consultation in the municipality to present the plans for the new unit and opened a
discussion channel on the Natura Conecta portal (www.naturaconecta.com.br) through which the local com-
munity is able to accompany the progress of the new plant. Another public consultation is planned for 2012.
To promote qualifi cation of local manpower, we organized an initial training course for electromechanical opera-
tors in partnership with Senai. Within 12 months, there will be 40 trained professionals who will be eligible to
work in the new Natura plant should they want to.
Finally, Natura initiated an education project in 10 municipalities in the Benevides and Castanhal region. This
represents the beginning of an educational planning process in these districts in conjunction with the municipal
education departments, with Cedac (Comunidade Educativa) as a partner (more about Benevides on page 60).
SO9
SO1
natura report # 11
65
4.8
shareholders
2011 was a particularly challenging year for Natura, but one in which our investor relations strategy and trans-
parency once again proved to be positive, generating value for the company.
In a year in which Natura’s fi nancial and operational results were below expectations, the Company success-
fully maintained communication with shareholders and the fi nancial market, putting the Company’s perfor-
mance in perspective in 2011 and reaffi rming our commitments and our future prospects.
Our communications with shareholders involved 553 encounters throughout 2011, quarterly teleconfer-
ences, as well as private meetings in Brazil and abroad. Another key communication tool is our webpage
(www.natura.net/investidor).
For the fi rst time ever we also organized a meeting with Association of Investment and Capital Market Ana-
lysts and Professionals (Associação dos Analistas e profi ssionais de Investimento do Mercado de Capitais,
Apimec-São Paulo State) in conjunction with the Annual Shareholders Meeting (more on page 16).
The third Natura’s Day was attended by around 100 market analysts and specialists from Brazil and abroad.
Presented by the Executive Committee, the meeting revealed Natura’s future plans and helped forge closer
relations between company leaders and the fi nancial market.
The Company understands that it is still challenging to convince investors about the value of sustainability
and the integrated management of fi nancial, environmental, social results and governance. To learn more and
make headways with this kind of approach in the capital markets, Natura held meetings with Socially Re-
sponsible Investors (SRI) in Canada and in the United States. The event was attended by 21 investors whose
decisions are oriented to the triple bottom line. Natura intends to maintain this initiative.
Natura CEO Alessandro Carlucci’s agenda includes annual visits to long-term shareholders and participation
in periodic meetings with investors, of which there were nine in 2011.
In an operation approved by the Board of Directors in July 2011, Natura bought back 4 million shares to sup-
port the exercise of stock options, as a means of avoiding subscriptions.
SHAREHOLDER PROFILE
Individuals
Brazilian legal entities
Overseas legal entities
Total
BREAKDOWN OF SHAREHOLDERS
SHAREHOLDERS
Controlling shareholders
Treasury shares
Management shares
Outstanding shares
Total Shares
2009
7.699
560
668
8.927
2010
7.838
560
850
9.248
2011
8.722
659
867
10.248
STAKE
59,83%
0,70%
0,55%
38,91%
100,00%
NUMBER OF SHARES
258.017.219
3.021.757
2.387.123
167.813.165
431.239.264
natura report # 11
66
CONTROLLING SHAREHOLDERS
As it is listed on the BM&FBOVESPA New Market, Natura capital consists exclusively of ordinary shares. The
table below shows the number of shares of our capital stock held by shareholders that own 5% or more of our
capital stock or by members of the Board in 2011.
DAILY SHARE VOLUME
TRADED (R$ million)
SHAREHOLDER
NUMBER OF ORDINARY SHARES
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
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
95.946.968
91.557.964
22.606.809
22.583.608
15.918.754
3.628.920
3.462.917
855.038
854.160
602.081
9
8
9
5
2
.
2
8
1
3
3
.
6
9
6
3
4
.
2010
2009
Source: Economática
2011
%
22,27
21,25
5,25
5,24
3,69
0,84
0,80
0,20
0,20
0,14
NATURA SHARE PERFORMANCE (NATU3)
In 2011, Natura shares depreciated 20.4%, against a18.1% decrease in Ibovespa, the main BM&FBOVESPA (Stock
Exchange) index. Since Natura went public in 2004, its shares have signifi cantly outperformed the index, as shown
in the chart below:
NATU3
Índice Bovespa
Base 100 = 25/05/2004
NATU 3
25/05/2004
R$ 5,27
FOLLOW ON
31/07/2009
NATU 3
29/12/2011
R$ 36,21
588,0%
200,9%
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%
2011
NATU3: -20.4%
Ibov: -18.1%
Natura is listed in the main indices in the Brazilian stock market: Ibovespa, IBrX-50 (which lists the most liquid
shares on BM&FBOVESPA), ISE (Índice de Sustentabilidade Empresarial or Business Sustainability Index), Índice
de Governança Corporativa (Corporate Sustainability Index), Tag Along Share Index, Morgan Stanley Compos-
ite Index and ICO2 (BM&FBOVESPA Carbon Effi cient Index). In its second year of operation, the ICO2 only
includes companies with emissions inventories and management. Natura was listed in the index once again.
TOTAL VOLUME
TRADED (R$ millions)1
2
9
3
6
.
5
2
3
8
.
0
8
8
0
1
.
2010
2009
1. Source: Economática.
2011
natura report # 11
67
PAYMENT OF DIVIDENDS
On February 15, 2012, the Board of Directors approved a proposal to be submitted to the Annual Shareholders
Meeting on April 13, 2012, for the payment of dividends and interest on own capital of R$ 762.6 million and R$
61.1 million (R$ 51.9 million net of withholding tax) respectively, relative to 2011 results2.
On July 20, 2011, dividends totaling R$ 295.3 million and interest on own capital totaling R$ 31.9 million (net of
withholding tax) were paid out, pending approval by the Annual Shareholders Meeting. The balance to be paid
out on April 18, 2012, upon approval of the Annual Shareholders Meeting, will be R$ 467.3 million in dividends
and R$ 20.1 million in interest on own capital (net of withholding tax).
The sum of these dividends and interest on own capital relative to the results of 2011 will represent a net com-
pensation of R$ 1.89 per share (R$ 1.65 per share in 2010), corresponding to 99% of 2011 net profi t.
4.9
government
Our government relations strategy is based on ethics and transparency. We believe that Natura’s interests ex-
tend beyond business and that we should contribute to discussions and to the formulation of public policies that
are relevant for the company and for social transformation.
One subject Natura has been debating with the Brazilian government for almost a decade: improvements to
the legislation regarding access to biodiversity and traditional knowledge as a means of combining innovation
and the sustainable use of these resources. Together with a number of other companies, experts and civil or-
ganizations, we advocate the creation of a new legal framework for research into biodiversity in Brazil and for
biodiversity use.
Currently access to biological resources is governed by an unsatisfactory temporary act which provides security
neither for companies or researchers, nor for the environment. Natura argues that it is possible to generate
competitiveness for the country through the responsible use of these resources and wishes to create a system
to integrate production, consumption and, more importantly, conservation of the planet’s biodiversity.
As a result of this impasse, in 2011 Natura received two violation notices from Brazilian Institute of Environment
and Natural Resources (Instituto Brasileiro do Meio Ambiente de dos Recursos Naturais Renováveis, IBAMA)
for alleged illegal access to biodiversity for purposes of research and product development. The fi nes, which total
R$ 500 thousand, are being challenged administratively.
In spite of the lack of solid results - we had expected a new bill of law to be forwarded to Congress by the Of-
fi ce of the Chief of Staff in 2011- we believe there has been some progress. The subject has been discussed by
the Agriculture, Environment and Development and Technology ministries and a consensus has been reached
on the need to change the legislation. There has also been greater engagement on the part of civil society, under
the leadership of organizations such as the Cosmetics Fragrances and Toilletries association Abihpec, of which
Natura is a member.
Another important step forward was the beginning of negotiations with the Federal Government about pay-
ment for sharing access to biological resources on Federal land, in an attempt to break a stalemate and in spite
of divergences as to the current legal framework.
Through MEB (Business for the Conservation and Sustainable Use of Biodiversity), an organization which Natura
helped found, we took part in the fi rst industry discussions promoted by the Brazilian government to defi ne
Brazilian biodiversity targets for 2020.
2. These amounts already take into account the changes in treasury stock from the date of the Board meeting until the base date for the
payment of dividends and interest on own capital on February 24, 2012, maintaining the amount to be paid per share decided in the
meeting.
natura report # 11
68
The vote on the new Brazilian Forestry Code was also on the Company’s agenda. We communicated the
proposed changes in the legislation to our consultants, arguing that they are not conducive to environmental
conservation. This generated some 40 thousand signatures for the Floresta Faz a Diferença (Forests Make a Dif-
ference) internet campaign designed to involve the public in the Forestry Code reform.
In 2011, we also established initial discussions on biodiversity with the SBPC or the Brazilian Society for the
Progress of Science, our objective being to propose a joint academic and business agenda on this subject.
We are paying close attention to Rio+20, which will take place in Rio de Janeiro in June 2012. We believe the
conference could be a major opportunity to further the debate on the role of different nations in building a new
economic model and applying the Convention for Biological Diversity.
Through intensive use of the social networks, the Company wishes to engage the public in discussing the
subjects involved regardless of the diplomatic outcomes. We also participate in the “Grupo de Mulheres
Rumo à Rio+20 – Sustentabilidade no Feminino” (Women for Rio+20 - Feminine Sustainability), coordinated
by the Environment Ministry, which intends to introduce its own agenda in the conference. The initiative
proposes discussions on the participation of women, incentives for green entrepreneurship and promotion
of responsible consumption.
Also in the environmental area, we are on the Abihpec commission to build an industry agreement that meets
the requirements of the National Solid Solid waste Policy, in force since 2010. The legislation requires the cre-
ation of solid waste disposal systems throughout the value chain, including manufacturers, the government and
consumers. Although we consider the law to be an advance, it is our understanding that there is still much to be
done in terms of establishing targets and responsibilities. Natura is seeking to transform this socio-environmental
challenge into business opportunities in its production chain (more on page 27).
Natura addresses tax issues mainly through the ABEVD - the Brazilian Direct Selling Association. We advocate
the establishment of a common methodology for determining added value margin in all Brazilian States. We
believe that this measure is necessary to avoid even greater fi scal confl icts and distortions between the States.
We established two important challenges for the government relations process in 2011: the extension of
Natura’s relations with government in our international operations and the regionalization of our priority
agenda. For this reason, we will expand our internal team, which should increase our capacity to act in
adverse situations.
Natura is not involved in any litigation related to anti-competitive laws and has received no signifi cant penalties
or non-monetary sanctions for breaches of associated laws and regulations.
In 2011, fi nancing from government fomenting agencies through tax incentives totaled R$ 37.3 million. Part of
these funds were related to the 2005 Law 11.196, known as Lei do Bem, which provides incentives for com-
panies that develop technological innovations. However, in 2011, the Brazilian tax authority, Receita Federal,
established new rules for the use of the benefi ts provided for in the law. We believe that this change may block
the granting of funding to many companies, including Natura. In conjunction with Fiesp (the Federation of In-
dustry of the State of São Paulo), we are attempting to modify this ruling which could jeopardize the innovation
potential of Brazilian companies.
SO7; SO8
EC4
We also obtained R$ 71.2 million in fi nance from promotion agencies such as BNDES (Banco Nacional de De-
senvolviomento Econômico e Social) and Finep (Financiadora de Estudos e Projetos) for innovation, industrial
training, logistics and innovation technology.
EC4
Another item on the Natura government relations agenda in 2011 was the transfer of the Company’s facilities
in Itapecerica da Serra (São Paulo State) to a new area in the city of São Paulo (São Paulo State). The move will
occur in 2012. The local government was given two years notice on the move so it would have time to prepare
and minimize the fi nancial impact of our departure. The relations we have built with the local community over
the years have ensured that this transition will take place smoothly. (more on page 63).
natura report # 11
69
GOVERNMENT FUNDING (R$ MILLIONS)
Tax Incentives for Support and Sponsorship1
Lei do Bem (Income tax (IR) and Social Contribution
(CS)) deductions of up to double the expenditure
in research and technological innovation)2
Sales Tax (ICMS) subvention in Itapecerica da Serra
Others3
Total
2009
6
2010
9
2011
10
12
3
0,0
22
21
6
0,6
36
22
4
1,1
37
EC4
1. Corporate income tax (IRPJ)incentives related to the Rouanet law, Ancine, Children’s and Adolescents’ Fund, Worker’s meal program and
Minas Gerais sales tax (ICMS) incentive, corresponding to the Natura Musical projects.
2. The tax benefi t related to Law 11.196, 2010, was changed due to the project revision/audits.
3. Incentive for the extension of maternity leave by two months instituted under Decree 7052/2009. The expense is non-deductible from
actual profi t and the CSLL base calculation, but is fully deductible from corporate income tax (IRPJ).
LOBBYING AND SOCIAL INFLUENCE
Natura defends political lobbying on the condition that it observes the strictest standards of ethics and trans-
parency. The Company does, however, believe that this requires specifi c legislation in Brazil and, although there
were no advances on the part of the government in this area in 2011, we continue to participate in debates
promoted by institutions such as the University of São Paulo (USP) and Aberje (Brazilian Business Communica-
tion Association) about regulation of this activity in the country.
SO5
To minimize risks caused by lack of regulation, in 2011 Natura published its policy for contracting lobbyists. The
policy is restrictive and adopts the principle that lobbying should be carried out by individuals who are quali-
fi ed and conversant in the matter at hand. The professionals representing Natura are all company’s employees:
Rodolfo Guttilla, Lucilene Prado, Isabel Fujimori, Elizabete Vicentini, Luciene Soares, Carlos Henrique Silva,
Kássia Reis and Luciano Pedregal.
Our activities are also subject to the Policy on Corruption and Bribery, which sets forth standards of conduct
for dealing with public authorities. It should be noted that Natura, in accordance with its Campaign Donations
Policy, does not make any donations to candidates or political parties.
S04; SO6
We believe that joining forces is the most effi cient way of achieving positive, transformational results and
actively participate in trade and industry associations. In this area, the most signifi cant event was the election
of Natura CEO Alessandro Carlucci as chairman of the World Federation of Direct Selling Associations. The
fi rst Brazilian to hold the position, his main goals will be to promote and strengthen direct sales worldwide,
underscoring its importance as an alternative for promoting entrepreneurship, income generation and social
transformation. Carlucci’s mandate lasts until October 2014.
Carlucci’s election should increase our importance in Latin American trade associations, in which we are step-
ping up our activities. This participation will boost Natura’s international experience and expand our global re-
lationship network. In addition our local general manager in Chile, Hans Werner, is the Chairperson of the local
direct selling Association (Cámara de Venta Directa de Chile) We are active in the main industry bodies in
Brazil and abroad such as Abihpec (CFT industry) and ABEVD (Direct selling industry).We seek to promote
open, transparent dialogue with society. We believe that collective discussions associated with free competi-
tion is one of the most effi cient ways of driving competitiveness, addressing critical issues and expanding the
industry’s presence.
natura report # 11
REPRESENTATION IN TRADE/INDUSTRY ASSOCIATIONS
Organization/Association
Natura Representative
Position
70
4.12; 4.13
ABA - Associação Brasileira de Anunciantes (Brazilian Advertisers
Association)
José Vicente Marino
Vanessa Giannotti
Aberje- Associação Brasileira de Comunicação Empresarial (Brazilian
Business Communication Association) (www.aberje.com.br)
Rodolfo Guttilla
Abevd – Associação Brasileira de Empresas de Vendas Diretas
(Brazilian Direct Selling Association)
Abifra - Associação Brasileira das Indústrias de Óleos Essenciais,
Produtos Químicos Aromáticos, Fragrâncias, Aromas e Afi ns (Brazilian
Essential Oils, Aromatic Chemicals, Fragrances and Aromas Industry
Association)
Guto Pedreira
Rodolfo Guttilla
Lucilene Prado
Fernanda Airoldi
Luciano Pedregal
Sérgio Gallucci
Abihpec - Associação Brasileira da Indústria de Higiene Pessoal,
Perfumarias e Cosméticos (Brazilian Personal Hygiene, Perfumery
and Cosmetics Industry Association)
(www.abihpec.org.br)
Rodolfo Guttilla
Lucilene Prado
Elizabete Vicentini
Luciene Soares
Kassia Reis
Ricardo Bittencourt
Luiz Felipe Carvalho de
Moreira
Elizabete Vicentini
Member of National Board
Member Best Communication
Practices Committee
Chairman Steering Committee
Member Presidents’ Council
VicePresident
Coordinator Legal Affairs
and Government Relations
Committee
Member Research Committee
Member Ethics Council
Representative
1st VicePresident
Director
Representative Technical and
Regulatory Committee
Representative Environment
Group
Representative Tributary
Working Group
Representative Overseas Trade
Working Group
Representative Labor Relations
Group
Representative
ABNT - Associação Brasileira de Normas Técnicas (Brazilian Technical
Standards Association) (www.abnt.org.br)
ABPI - Associação Brasileira da Propriedade Intelectual (Brazilian
Intellectual Property Association) (www.abpi.org.br)
Abrasca - Associação Brasileira das Companhias Abertas (Brazilian
Listed Companies Association) (www.abrasca.org.br)
ABRH - Associação Brasileira de Recursos Humanos (Brazilian
Human Resources Association)
Agendis
Aippi - Association Internationale pour la Protéction de la Propriété
Intellectuelle (International Intellectual Property Protection
Association) (www.aippi.org)
Instituto Akatu pelo Consumo Consciente (Akatu Conscious
Consumption Institute
Lucilene Prado
Representative
Fabio Cefaly
Ney Silva
Rodolfo Guttilla
Lucilene Prado
Representative
Representative
Representative
Representative
José Vicente Marino
Representative
AMVD - Associación Mexicana de Ventas Directas (Mexican Direct
Selling Association)
Cecilia Riviello
Anpei - Associação Nacional de Pesquisa, Desenvolvimento e Engenharia
das Empresas Inovadoras (National Association of Research, Development
and Engineering of Innovative Companies) (www.anpei.org.br)
Asipi - Asociación Interamericana de la Propriedad Industrial (Inter-
American Industrial Property Association)
(www.asipi.org)
Carolina Muñoz
Luciana Hashiba
Member of Steering
Committee
Representative Regulatory
Affairs Committee
Director
Lucilene Prado
Representative
natura report # 11
Capa - Cámara Argentina de la Indústria de Cosmética y Perfumeria
(Argentine Chamber of Cosmetics and Perfumery Industry)
Heriovaldo Silva
Casic - Consejo de Asociaciones de la Industria de Cosmeticos
Latinoamericana (Council of Latin American Cosmetics Industry
Associations)
Cavedi - Cámara de Venta Directa de Argentina (Argentine Direct
Sales Chamber)
CEBDS – Conselho Empresarial Brasileiro para o Desenvolvimento
Sustentável (Brazilian Business Council for Sustainable Development)
Janice Casara
Pedro González
Representative
Asociacion Civil Argentina de Empresas Brasileñas (Argentinean
Association
of Brazilian Companies) (www.grupobrasil.com.ar)
Aspi - Associação Paulista de Propriedade Intelectual (São Paulo
Intellectual Property Association) (www.aspi.org.br)
Cámara de Comercio de Lima (Lima Chamber of Commerce)
Cámara de Venta Directa de Chile (Chile Direct Selling Chamber)
Cámara Peruana de Venta Directa (Peru Direct Selling
Chamber)
Cambras - Cámara de Comercio Argentino Brasileña (Argentine-
Brazil Chamber of Commerce) (www.cambras.org.ar)
Canipec - Camara Nacional de la Industria de Perfumeria, Cosmetica
y Articulos de Tocador e Higiene (National Perfumery, Cosmetics,
Toiletry and Hygiene Industries Association)
Cemefi - Centro Mexicano para la Filantropía (Mexican Philanthropy
Center)
Ciesp - Centro das Indústrias do Estado de São Paulo (São Paulo
Industries Center) (www.ciesp.org.br)
Copecoh – Comité Peruano de Cosmética
e Higiene
Conar - Conselho Regional de Auto-regulamentação
Publicitária(Regional Advertising Self-Regulatory Council)
Ethos - Institutos Ethos de Empresas e Responsabilidade Social (Ethos
Business and Social Responsibility Institute) (www.ethos.org.br)
FNQ – Fundação Nacional da Qualidade (National Quality
Foundation)
(www.fnq.org.br)
Funbio - Fundo Brasileiro para a Biodiversidade (Brazilian Biodiversity
Fund) (www.funbio.org.br)
Fundação SOS Mata Atlântica (SOS Atlantic Rainforest Foundation)
Global Compact - Caring for Climate
GRI - Global Reporting Initiative
(www.globalreporting.org)
71
Heriovaldo Silva
Treasurer
Lucilene Prado
Representative
Daniel Gonzaga
Hans Werner
Daniel Gonzaga
Representative
President
Representative
Heriovaldo Silva
Representative
Carolina Muñoz
Javier Herrero
Rodolfo Guttilla
Javier Herrero
Rosana Bertozci
Rodolfo Guttilla
Luciano Pedregal
Daniel Gonzaga
Representative on Regulatory
Affairs Committee
Vice President Sustainable
Development Commission
Deputy Member - Account
Review Committee
Director
Representative
Representative
Representative
Director
CIESP Councilor – Jundiaí
Representative
José Vicente Marino
Member of Higher Council
Guilherme Peirão Leal
Marcelo Cardoso
Pedro Luiz Passos
Board Member
Member of Ethos Management
Council
Vice President Curatorship
Council
Guilherme Peirão Leal
Member of Consulting Council
Pedro Luiz Passos
Guto Pedreira
Rodolfo Guttilla
Member of Council
Member of Steering
Committee
Member of Stakeholder
Council and Co-chairman of
Brazilian National Annex
Representative
IBGC - Instituto Brasileiro de Governança Corporativa (Brazilian
Corporate Governance Institute) (www.ibgc.org.br)
Moacir Salzstein
Ibri - Instituto Brasileiro de Relações com Investidores (Brazilian
Investor Relations Institute) (www.ibri.org.br)
IEDI - Instituto de Estudos para o Desenvolvimento Industrial (Institute
of Industrial Development Studies)
(www.iedi.org.br)
Fabio Cefaly
Representative
Pedro Luiz Passos
Chairman of Board
IIRC - International Integrated Reporting Committee
Roberto Pedote
Instituto Empreender Endeavor Brazil (www.endeavor.org.br)
Instituto São Paulo Contra a Violência (Institute São Paulo Against
Violence) (www.spcv.org.br)
Pedro Luiz Passos
Rodolfo Guttilla
Member of Steering
Committee
Member of Board
Representative
natura report # 11
natura report # 11
72
Representative
Member of Board
Representative
Representative
Member of Board
Chairman of Board of
Sustainable São Paulo Institute
INTA - International Trademark Association
IPT - Instituto de Pesquisas Tecnológicas (Technological
Research Institute)
(www.ipt.br)
LIDE - Grupo de Líderes Empresariais Business Leaders Group Alessandro Carlucci
Lucilene Prado
Pedro Luiz Passos
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)
SIPATESP - Sindicato da Indústria de Perfumaria e Artigos de
Toucador do Estado de São Paulo (São Paulo State Perfumery
and Toiletry Industry Association)
The Arthur W. Page Society
(www.awpagesociety.com)
UEBT - Union For Ethical Biotrade
WBCSD - World Business Council
for Sustainable Development
(www.wbcsd.org)
WFDSA - World Federation of Direct Selling Associations
Rodolfo Guttilla
Pedro Luiz Passos
Guilherme Peirão Leal
Elizabete Vicentini
Representative
Rodolfo Guttilla
Lucilene Prado
Vice President
Deputy Director
Rodolfo Guttilla
Representative
Ricardo Faucon
Alessandro Carlucci
Vice Chairman
Board Member
Alessandro Carlucci
Rodolfo Guttilla
Moacir Salzstein
President
Advisory Council for Latin
America, Member of Board
of Directors and Member of
Advocacy Committee
Assistant Treasurer &
Governance, Operating Group
Member of the Consulting
Council
WWF Brasil (www.wwf.org.br)
Guilherme Peirão Leal
natura report # 11
73
5. what footprint
we leave
natura report # 11
74
5.1
natura
value chain
NATURA’S MAIN RESULTS IN 2011, FROM
RAW MATERIAL EXTRACTION
TO PACKAGING DISPOSAL
STAGE 1: EXTRACTION AND
TRANSPORTATION OF RAW MATERIALS
AND PACKAGING (DIRECT AND INDIRECT
SUPPLIERS).
R$ 4,3 BILLION paid to suppliers for purchases of
inputs and services 81% satisfaction among suppliers
81% satisfaction among suppliers
37 forestry ASSETS certifi ed
117.276 TONS dof greenhouse gases (GHG)
emissions from extraction and transport of raw
materials and packaging (44% of Natura’s total
emissions)
21.299 TONS of GHG emissions by direct
suppliers (processing and transport to Natura)
(8% of total)
STAGE 3: PRODUCT SALES
(TRANSPORT AND DISTRIBUTION)
2,9 BILLION paid to Consultants for product
sales, an increase of around 6% compared to 2011
1,4 MILLION Consultants in all operations, 16.3%
growth in our Consultant base
19% Consultant loyalty rate, against 21% in 2010
24% NCA loyalty, against 33% in 2010
164 new products launched in 2011
EN29
38.279 TONS tons of GHG emissions in
transport of products to consultants and
consumers(14% of total Natura emissions)
STAGE 2: INDUSTRIAL PROCESS
AND INTERNAL PROCESSES
R$ 634 MILLION distributed to employees
in benefi ts and salaries, a
147 MILLION invested in innovation
0,40 LITERS of water consumed per unit
produced, 4.7% down on 2010
20 GRAMS of solid waste generated per
unit produced, 13% down
24.731 TONS of GHG emissions from
internal processes (9% of total)
STAGE 4: PRODUCT USE AND
PACKAGING DISPOSAL
EN26
17% refi lls among items invoiced in Brazil
123 MPT/KG, environmental impact of
packaging per quantity of product1, 10%
down on 2010
63.431 TONS of GHG emissions in
disposal of products and packaging (24%
of total Natura emissions)
1. Indicator also includes impact on extraction
and transformation of packaging.
CROSS INDICATORS
1,4 BILLION paid to government in direct
and indirect taxes, the same level as the
previous year
763 MILLION distributed to shareholders
in dividends and interest on own capital, on
a cash basis, an 18% increase
R$ 830,9 MILLION in net earnings, up 11.7%
R$ 5.591,4 MILLION in net revenues, up 8.9%
EBITDA R$ 1.425,0 MILLION an increase of 13.4%
EBITDA margin of 25,5% (against 24.5% in 2010)
70 MILLION in sustainability investments
natura report # 11
5.2
generating
environmental value
75
DMA EN
Natura’s business expansion has been accompanied by an increase in environmental programs and practices
aimed at reducing impacts. From the start, the programs developed to meet the complexity of the business
incorporated a broader perspective involving the entire production chain. This approach has guided initiatives
to reduce carbon emissions, water consumption and solid waste generation, subjects Natura considers to be
priorities (more on page 26).
To fully assess Natura’s environmental impact, we also monitor indicators from our main third-parties that
supply raw materials and packaging. In addition to the Cajamar and Benevides plants, data includes the Ca-
sas Natura (Natura´s space for product testing) and distribution centers located in different regions in the
country. It was noted that in comparison with the more mature units, some newer ones still need to refi ne
environmental management. To guide this process and identify improvement opportunities, last year we cre-
ated an operational sustainability committee to integrate the different areas involved and improve manage-
ment at the new sites.
We also recognize that we need to further integrate environmental performance into the international op-
erations, which have grown in importance since 2010.
EN18
CARBON NEUTRAL
The Carbon Neutral program was launched in 2007. Since then the climate change debate has grown in impor-
tance. At Natura, our initiatives are centered on ongoing reduction of greenhouse gases (GHG) emissions and
offsetting all emissions that cannot be avoided. The program’s initial target was a 33% reduction in relative emissions
by 2011, against a 2006 baseline. However, as we learned and dealt with numerous challenges, the decision was
taken to extend this target to 2013.
In 2011, while our net revenue grew 8.9%, our absolute emissions totaled 265,015 metric tons of CO2e, an ap-
proximate 5% increase in volume over 2010. However, our relative emissions decreased 5.3%. In this calculation,
absolute emissions are divided by the kilograms of products sold. On an aggregate basis since 2006, relative emis-
sions were reduced by 25.4%.
EN16; EN17
TOTAL CO2 E EMISSIONS
(in metric tons)
7
2
8
2
3
2
.
2
1
3
3
5
2
.
5
1
0
5
6
2
.
2009
2010
2011
natura report # 11
76
EN16; EN17
RELATIVE EMISSIONS
(kg CO2 e/kg products
produced)
5
5
3
,
0
3
3
,
2
1
3
,
2009
2010
2011
EN16; EN17
EN18
EN26
EMISSIONS INVENTORY
Natura’s emissions calculation involves an inventory process that takes into account the total volume of
direct and indirect emissions, ranging from raw material extraction to fi nal product disposal in accordance
with the Greenhouse gases Protocol Initiative scopes 1,2 and 3. The inventory is also compliant with the
ABNT NBR ISO 14064-1 standard and is audited by an independent consultancy, which, in 2011, was
KPMG. Both establish rules for the conception, development, management and execution of GHG inven-
tories.
EN19;
EN20
It should be noted that our operations do not emit or use substances harmful to the ozone layer. Par-
ticulate material and NOx and SOx emissions are monitored in our chain and are not deemed signifi cant.
TOTAL EMISSIONS (BY SCOPE)
Direct GHG emissions (Scope 1)
Indirect GHG and energy emissions (Scope 2)
Other indirect GHG emissions (Scope 3)
Total (tons)
2009
6.104
1.135
225.587
232.827
2010
7.969
2.249
243.094
253.312
2011
6.062
1.865
257.089
265.015
REDUCTION
The 2010 decision to postpone our 33% reduction target until 2013 led to a diagnosis of our operations
and business aimed at identifying new elimination opportunities. In 2010, the Less Carbon, More Produc-
tivity program was implemented to build a project portfolio that simultaneously drives gains in effi ciency
and reductions in emissions.
The projects already underway include:
_ 6% reduction in the size of the Natura magazine.
_ Fuel credit cards for the sales force valid only for ethanol.
_ Replacement of LPG with ethanol to fi re the Cajamar boiler.
_ Use of smaller boxes (half-size) for product deliveries, resulting in more effi cient truck loading and
reduced solid waste.
_ Encouragement to use videoconferencing instead of live meetings.
Programs in progress that will drive future gains:
_ Decentralization of logistics network with the opening of new distribution centers, reducing fuel consump-
tion in deliveries (more on page24).
_ Expansion of overseas production, resulting in reduction of imports from Brazil
_ Use of new pack sizes.
_ Benevides: we have two projects for the next two years– use of a biomass-powered boiler and the set up
of a new industrial unit scheduled for 2013. Both will be more energy effi cient.
We are driving the discussion of emissions volumes throughout the company and have increased visibility
of this issue among employees through training and engagement initiatives in the Less Carbon, More Pro-
ductivity program.
Since 2010, Natura’s product development process has used an emissions calculation methodology that enables
the Company to measure product and packaging emissions before the product is created, allowing managers to
give priority to reduced emissions. Product launches involving higher emissions have to be re-examined.
In 2011 we began to develop emission reduction projects in our international operations and initiated training
programs in the use of the emissions calculation tool.
natura report # 11
77
COMPENSATION
Every two years we hold a tender for the selection of environmental projects that allow the Company to offset
unavoidable GHG emissions. The initiatives include the reclamation of degraded forest areas and the replacement
of fossil fuels with more effi cient renewable alternatives.
EN26
The project selection tender to neutralize 2011 and 2012 emissions is underway. We have shortlisted 10 initia-
tives from 121 applications.
Natura has also contracted the fi rst compensation project outside Brazil to complement its 2009/2010 projects.
This involves the purchase of credits already generated by a reforestation project in the city of Cáceres, Colombia,
offsetting 60,000 metric tons of CO2.
We have monitored the results of previous compensation projects from 2007/2008 and 2009/2010, some of
which are still underway. A few examples are shown below:
2009/2010
USE OF RENEWABLE BIOMASS – CONSULTORIA SUSTAINABLE CARBON
This promotes the use of sawdust, woodchips and sugarcane bagasse instead of native Cerrado timber
to generate energy for Cerâmica Santorini’s ovens in Ituiutaba (MG). We purchased 35,634 metric
tons of CO2 already generated in three years and have agreed to offset a further 102,200 over seven
years. Credits were issued for 21,272 metric tons in 2011.
MORE EFFICIENT COOKERS IN THE RECÔNCAVO BAIANO II REGION – INSTITUTO PERENE
This is an extension of a 2008 initiative to replace rudimentary cookers for more effi cient ones in rural house-
holds in Bahia. Five thousand new appliances that use less timber will be installed, reducing GHG emissions. The
project should offset 94,000 metric tons of CO2 over 8 years. 1,200 cookers were installed in 2011.
CARBON PROJECT IN THE EMAS-TAQUARI BIODIVERSITY CORRIDOR – NGO ORÉADES NÚCLEO DE
GEOPROCESSAMENTO
Reclamation with native species of 200 hectares of a degraded area from a total area of 600 hectares around
the Emas National Park and the Nascentes do Rio Taquari State Park (Goiás and Mato Grosso do Sul). The
projected compensation is 70,000 metric tons over 30 years. Planting was concluded early in 2012.
XINGU SOCIO-ENVIRONMENTAL CARBON – ASSOCIAÇÃO XINGU SUSTENTÁVEL, INSTITUTO
SOCIOAMBIENTAL (ISA) AND INSTITUTO CENTRO DE VIDA (ICV)
The objective is to reclaim 220 hectares of degraded permanent preservation area in the headwaters of the
Xingu river in Mato Grosso. 75,000 metric tons of CO2 should be offset over 30 years.
2008
CARBON, BIODIVERSITY AND COMMUNITY IN THE PAU BRASIL - INSTITUTO BIO ATLÂNTICA (IBIO)
ECOLOGICAL CORRIDOR
Forestry rehabilitation in the Pau-Brasil and Monte Pascoal National Parks in Porto Seguro (Bahia).This proj-
ect will offset 79,050 metric tons of CO2 for Natura over 30 years. A total of 56 out of 250 hectares were
reclaimed and other areas will be prospected in 2012. The fi rst credits are scheduled to be due by 2015.
XINGU SOCIO-ENVIRONMENTAL CARBON - INSTITUTO SOCIOAMBIENTAL (ISA) AND INSTITUTO
CENTRO DE VIDA (ICV)
Reclamation of 116 hectares of degraded riverside vegetation around the headwaters of the Xingu river
in the State of Mato Grosso. The area has already been planted and will compensate 40,000 metric tons of
CO2 in 30 years. The fi rst credits should be issued in 2014.
EFFICIENT STOVES IN THE RECÔNCAVO BAIANO REGION - INSTITUTO PERENE
The project involves the replacement of rudimentary wood stoves with effi cient ones for families in rural
communities in the Recôncavo Baiano region. All the stoves have already been installed and the compensa-
tion target is 18,880 metric tons of CO2 e over eight years. The fi rst credits should be issued in 2014.
natura report # 11
78
2007
FOREST CARBON – RECLAMATION AND CONSERVATION OF NATURAL RESOURCES – INSTITUTO
ECOLÓGICA
The project is aimed at reclaiming around 150 hectares of degraded areas through the planting of native
tree seedlings in permanent protection areas and legal reserve areas in two rural settlements in the Cantão
region of Tocantins. The project is underway and will compensate 60,000 metric tons of CO2 in 20 years.
LANDSCAPE AND AGROFORESTRY RECONSTITUTION - INSTITUTO DE PESQUISAS ECOLÓGICAS (IPÊ)
The project reconstitutes the vegetation and conserves species diversity in a 55 hectare area and imple-
ments 129 hectares of agroforestry systems for coffee production. The total compensation will be 60,000
metric tons of CO2e over 30 years. Planting took place between August 2008 and February 2009. The fi rst
credits were generated in December 2011.
SOCIOBIODIVERSITY
Natura’s use of Brazilian sociobiodiversity assets is governed by the company’s Sustainable Use of Biodiversity
and Traditional Knowledge policy. This policy was developed in full alignment with the United Nations Organiza-
tion’s Convention for Biological Diversity guidelines. We acquire biodiversity inputs from suppliers’ communities,
cooperatives and smallholders in different regions of Brazil, in particular in the Amazon (more on pages 28, 58
and 67).
EN12; EN14
ENVIRONMENTAL CERTIFICATION
RWe fully respect the ecological production limits of the biodiversity materials used in our products. The com-
pany has a Vegetable Raw Material Certifi cation plan to ensure this process does not exceed the environmental
carrying capacity.
EN12
This process is carried out by independent certifi cation bodies and incorporates production traceability, requir-
ing producers to document and account for the origin of their entire production.
Certifi cation is extensive to family smallholders and traditional communities and is divided into three catego-
ries: organic produce (Instituto Biodinâmico, Ecocert, Organização Internacional Agropecuária and Instituto de
Mercado Ecológico), sustainable agriculture (Sustainable Agriculture Network) and forestry produce (Forest
Stewardship Council).
In 2011, fi ve new species were certifi ed, including rosemary, sage and guaraná, making for a total of 37 Natura
production inputs that have some form of certifi cation.
Natura does not use invasive plant species, avoids monoculture and gives priority to organic production. Neither
does it promote activities that may subjugate natural environments to production interests (habitat conversion).
Among the inputs used by Natura, three are based on assets on the list of species threatened with extinction
published by the Ministry of the Environment and the National Union for the Conservation of Nature and Re-
sources (União Internacional para a Conservação da Natureza e dos Recursos). These are: Brazil nut (Berthol-
letia excelsa), considered vulnerable, yerba mate (Ilex paraguariensis), low risk, and Ucuúba (Virola surinamensis),
which is threatened. Acquisition of these materials is governed by sustainable biodiversity usage principles; two
of them are certifi ed (see table below).
EN15
.
natura report # 11
STATUS OF ASSET CERTIFICATION PROGRAM1
Species
Production system
Status
(phase)2
III (fi nal)
III (fi nal)
II
III (fi nal)
III (fi nal)
III (fi nal)
Agroforestry system
Agroforestry system
Traditional stewardship
Traditional stewardship
Agroforestry system
Cultivation
Açaí berry Euterpe precatoria (Roraima State)
Açaí berry Euterpe oleracea (Pará State)
Andiroba Carapa guianensis (Amazonas State)
Breu Protium pallidum (Amapá State)
Cocoa Theobroma cacao (Bahia State)
Lemon grass (F) Cymbopogon citratus (Paraná State/São
Paulo State)
Brazil nut Bertholletia excelsa (Amapá State)
Cupuaçu Theobroma grandifl orum (Roraima State)
Passion fruit Passifl ora edulis (Minas Gerais State)
Yerba Mate Ilex paraguaiensis (Rio Grande do Sul State) Traditional stewardship
Traditional stewardship
Murumuru Astrocaryum murumuru (Amazonas State)
Cultivationand organic
Surinam cherry Eugenia unifl ora (Paraná State/São Paulo
stewardship
State)
III (fi nal)
Organic cultivation
Piri piri root Cyperus articulatus (Pará State)
III (fi nal)
Organic cultivation
Rosemary Rosmarinus offi cinalis L. (Paraná State)
III (fi nal)
Cultivation
Arabian coffee Coffea arabica (Minas Gerais State)
Chamomile(F) Chamomilla recutita (Paraná State)
III (fi nal)
Organic cultivation
Candeia Eremanthus erythropappus (Minas Gerais State) Stewardship and cultivation III (fi nal)
III (fi nal)
Cinnamon (F) Cinnamomum zeylanicum Ness (Germany) Organic cultivation
III (fi nal)
Carnaúba Copernicea cerifera (Rio Grande do Norte
State)
Traditional stewardship
Agroforestry system
Cultivation
III (fi nal)
III (fi nal)
I
III (fi nal)
II
III (fi nal)
Stewardship
Species – Other lines
Production system
Carqueja (F) Bacharis genisteloides D.C. (Paraná State)
Green Tea (F) Camelia sinensis (Paraná State)
Copaiba Copaifera spp (Amapá State)
Lemon Brazil Ocimum americanum (Pará State)
Fennel (F) Foeniculum vulgare Miller (Paraná State)
Guaraná Paullinia cupana (Bahia State)
Mint (F) Mentha piperita L. (Paraná State)
Spilanthes extract Spilanthes oleracea (São Paulo State)
Organic cultivation
Stewardship
Stewardship
Organic cultivation
Organic cultivation
Organic cultivation
Organic cultivation
Organic cultivation
Fragrant granadilla Passifl ora alata (São Paulo State)
Organic cultivation
Lemon balm (F) Melissa offi cinalis (Paraná State)
Organic cultivation
Palo Santo Bursera graveolens (Ecuador)
Stewardship
Paramela Adesmia buronioides (Patagonia- Argentina)
Stewardship
Sage Salvia offi cinalis (Paraná State)
Organic cultivation
Status
(phase)
III (fi nal)
III (fi nal)
III (fi nal)
III (fi nal)
III (fi nal)
III (fi nal)
III (fi nal)
III (fi nal)
III (fi nal)
III (fi nal)
III (fi nal)
III (fi nal)
III (fi nal)
Sapucainha Carpotroche brasiliensis (Bahia State)
Agroforestry system
II
79
Certifi cation
IBD
IMO
Underway
FSC – Imafl ora
IBD
ECOCERT
FSC – Imafl ora
IBD
Underway
FSC – Imafl ora
Underway
ECOCERT
IBD
ECOCERT
SAN – Imafl ora
Ecocert
FSC – Imafl ora
Imo
Ibd
Ecocert
Ecocert
Fsc – Imafl ora
Ibd
Ecocert
Ibd
Ecocert
Ibd
Ibd
Ecocert
Ecocert
Oia
Ecocert
Ibd
1. Only species that have already been included as raw materials in marketed products are considered in this table. Raw materials marked with an (F)
are part of the organic fruit tea product line.
2. Phase I: Internal process of identifying and selecting a potential supply area. This phase consists of producer typology, community organization and
type of stewardship (agricultural or forestry). Phase II: Development of certifi cation strategies, entailing discussion of processes with producers, choice
of certifi cation body and preliminary analysis of supplying area by this body (when necessary). Phase III: Certifi cation inspection in supplying areas,
implementation of action plan for compliance with certifi cation requirements and certifi er report to obtain seal.
natura report # 11
80
NUMBER OF CERTIFIED ASSETS¹
Total certifi ed assets (units)
Percentage of total species certifi ed (%)2
2009
31
58
2010
36
61
2011
37
59
1. Only vegetable inputs in the form of waxes, oils, extracts, essential or natural oils (cosmetics and teas) are considered. Certifi cations con-
sidered: organic (IBD, Ecocert, OIA, IMO), sustainable agriculture (SAN), forestry stewardship (FSC). In exceptional cases, additional volumes
of raw materials may be acquired from non-certifi ed areas in function of: increased internal demand, decreases in productivity in certifi ed
areas, stock shortages among certifi ed suppliers.
2. The percentage was adjusted to include inputs for the fruit based organic teas as well as cosmetics.
ORIGIN OF MATERIAL AND PRODUCT CERTIFICATION
% material of renewable vegetable origin
% material of natural vegetable origin
% material with certifi ed origin
2009
79%
5%
16%
2010
82%
7%
16%
2011
81%
9%
12%
PR3
NATURAS FACILITIES
Occupying 646 thousand square meters, Natura headquarters are located in a designated Environmental
Protection Area on the Anhanguera highway bordering Cajamar, São Paulo. A stewardship plan undertaken
by Natura includes the removal of alien species, forestry reconstitution and an increase in local biodiversity. In
2011, 5 thousand seedlings of different native Atlantic Rainforest species were planted to reclaim and enrich
the area. The project encompasses control and monitoring of species of fl ora and fauna. The plan is scheduled
to be completed in 2012.
In Itapecerica da Serra, São Paulo, we occupy a 96,500 square meter area which is located within the Guarapi-
ranga Water Basin Water Source Reclamation and Protection Area. The reclamation project for this area was
completed in 2008, and the company has maintained it since then.
Cajamar and Itapecerica are located in permanent preservation areas, and Natura’s operations in these loca-
tions are fully compliant with all legal requirements.
In Benevides (Pará State), we acquired land for the set up of a new Natura noodle (soap base) plant and
ancillary facilities. The plot‘s size is 172,900 hectares and is part of the municipality’s industrial and commercial
expansion zone. There are two permanent protection areas (APPs) on the property.
The company works with suppliers of inputs based on biodiversity assets in several regions of the country.
Some of these are located in areas protected under the National Conservation Units System: the Médio Juruá
Extractivist Reserve in Amazonas, and the Iratapuru State Sustainable Development Reserve in Amapá.
In the Médio Juruá, Amazon region, in which the protected area covers 253 thousand hectares, andiroba and
murumuru extraction takes place in less than 1% of the total area of the reserve. We signed our fi rst contract
for sharing the benefi t of traditional knowledge associated with andiroba with the suppliers’ community in
2011. This was an unprecedented commercial agreement with a community in an environmental protection
area and was authorized by the federal government’s Biological resources Management Council (Conselho de
Gestão do Patrimônio Genético).
The sustainable extraction of Brazil nuts, copaiba and breu takes place in an area of approximately 4 thousand
hectares, less than 0.5% of the 842,000 hectares occupied by the Iratapuru Reserve. The extraction is fully
approved by the management of these conservation units.
EN26
PRODUCT IMPACT
We seek to reduce the environmental impact caused by Natura packaging by investing in the development of
innovative technology and cutting edge ecodesign, including the continuous reduction of packaging mass and
the use of lower impact raw materials, as well as recycled and recyclable materials.
EN2
The investments made have led to a 10% reduction in impacts. Our performance is monitored using a life
cycle assessment tool which quantifi es impacts from raw material extraction, through production and use to
fi nal disposal.
natura report # 11
EN11; EN13
EN26
PACKAGING
ENVIRONMENTAL
IMPACT BY PRODUCT
QUANTITY (mpt/kg)1
7
3
1
3
2
1
ND
2011
2010
2009
1. There were changes in
calculation of the indicator; the
2010 fi gure was recalculated
to allow comparability with
2011. The 2009 fi gure was not
recalculated.
EN2;
EN6
In 2011, one of the features of the relaunch of the Ekos line was the reformulation of product packaging, reduc-
ing GHG emissions by around 45% and increasing the percentage of recycled post-consumption material used
in the products. The changes included FSC certifi ed cartons produced with 40% recycled post-consumption
paper. This material is 100% recyclable and results in GHG reductions of approximately 10% compared with
the material used in the past. We also started to produce Ekos conditioner packs and refi lls using 100% green
plastic and PET bottles with 50% recycled post-consumption material. The bar soap, previously packed in 3-unit
cardboard packs, is now marketed individually in paper fl ow packs that are smaller and lighter.
There was, however, a reduction in the percentage of recycled and recyclable materials used. This was mainly
due to the increase in the number of pages of the Natura magazine (which is not printed on recycled paper)
and reduced use of transport cartons containing a higher proportion of recycled material. In these cases, eco-
effi ciency and a reduction in materials at source were given priority.
PR3
Natura products come with an environmental table providing information on the origin, transformation and
certifi cation percentage of raw materials, percentage of recycled and recyclable material used and number of
product refi lls. They are fully compliant with legal requirements regarding information on ingredients. Product
labeling is also compliant with legislation and meets all the cosmetic industry requirements determined by
Anvisa, Brazil’s national health surveillance authority.
81
EN2
RECYCLED MATERIALS
USED (%)1
0
1
0
1
9
2011
2010
2009
includes
indicator
1. The
% of packaging materials
and % of support materials,
such as magazines, shipping
cartons and bags using
post-consumption
recycled
material.
PRODUCT
Post-consumption recycled (%)
Recyclable (%)
TOTAL USE OF MATERIALS BY TYPE (EXCEPT WATER)
Total direct materials (t)
Total direct materials (m3)
REFILLS AS PERCENTAGE OF ITEMS INVOICED (%)
Brazil
Argentina
Chile
Colombia
France
Mexico
Peru
EN2
EN1
EN26
2009
0,7
86
2009
27.991
10.814
2009
18
16
12
12
9
11
19
2010
0,8
86
2011
1,1
84
2010
22.475
11.017
2011
22.170
11.279
2010
17
18
14
13
10
11
19
2011
17
18
15
15
10
10
16
INDICATOR CALCULATION METHODOLOGY
An important decision Natura took in 2011 was to change the methodology to calculate its effi ciency in
water, energy and solid waste. The Company replaced the unit sold metrics by the unit produced. This
means that instead of proceeding with the calculation by number of marketed units (invoiced) we now
consider everything that Natura and its third-party suppliers actually produce). With this change, the
water, energy and solid waste indicators, as well as our targets for the previous years were recalculated
to allow comparability. The methodology for carbon emissions was maintained.
This change in metrics allows a more accurate assessment of the impact of our operations and acceler-
ates the identifi cation of opportunities for improvement.
natura report # 11
82
SOLID WASTE
Natura’s system of industrial solid waste management encompasses the stages of sorting, classifi cation, disposition,
collection, transport and disposal. The company constantly seeks to reduce the volume of solid waste generated
and to increase recycling. In 2011, solid waste generation was reduced from 23 to 20 grams per unit produced.
EN26
TOTAL QUANTITY OF SOLID WASTE PER UNIT PRODUCED (GRAMS/UNIT)1
2009
19
Total weight of solid waste per unit produced (g/un)
2010
23
2011
20
EN22
1. The indicator was changed from unit sold to unit produced. The 2010 and 2009 data were recalculated accordingly.
In 2011, there was an increase in hazardous solid waste sent for recycling. This was due to a higher loss rate from
product discontinuation, expiry or scrappage. These products are used in co-processing, as is the case with solid
solid waste from makeup, contaminated materials and raw materials. There was a reduction in non-hazardous solid
waste, such as sludge and wood. Recycling of these items also decreased because physico-chemical sludge is no
longer used in composting operations upon the recommendation of the regulatory body. We increased incinera-
tion of non-hazardous solid waste due to an increase in damaged pallets in Benevides (Pará State), where we still
do not have any disposal alternatives.
NATURA DIRECT SOLID WASTE BY TYPE AND DESTINATION (TONS)1
Total hazardous solid waste (Class I)2
% Recycling3
% Incineration
% Landfi ll
Total non-hazardous solid waste (Class II - A and B)
% Recycling3
% Incineration
% Landfi ll
Overall total Natura direct solid waste4
Natura indirect solid waste (tons)
Waste from other Natura Spaces5
Waste from Natura third-party manufacturer6
Total indirect solid waste
2009
1.499
89
10,7
0
6.371
91
0,6
8
7.870
0
1.242
1.242
2010
2.163
95
5,4
0
6.254
91
0,2
9
8.416
1.149
1.347
2.496
2011
3.228
97
2,7
0
5.767
89
0,6
10
8.995
1.691
1.589
3.280
EN22
EN24
1. These indicators were reformulated and recalculated in accordance with the new G3.1 guidelines.
2. Natura does not import, export or transport solid waste overseas.
3. Solid waste used in composting, co-processing and transformation is considered to be recycled.
4. Refers to the spaces in Cajamar, Itapecerica da Serra, Alphaville and Benevides. Natura does not include the solid waste generated in
civil construction works (rubble) on its premises in this indicator.
5. Refers to the Distribution Centers, Advanced Centers, Hub and Casas Natura (Natura´s space for product testing). Monitoring of solid solid
waste from these units begun in 2010.
6. Refers to the 10 major third-party manufacturers, who account for approximately 95% of total outsourced production volume.
To encourage recycling the Company has implemented two reverse logistics programs. In Brazil, we have been
maintaining a Natura Movement program since 2009 whereby Consultants collect the packaging used by con-
sumers. The program is active in only some cities, with 120 metric tons of packaging collected in 2011. In another
initiative in place in Colombia since 2010, Consultants collect materials or create collection stations at their homes.
A total of 235 metric tons of empty packaging were collected in the country last year. We recognize that these ef-
forts are incipient considering the total solid waste generated by our products. For this reason, the new solid waste
management strategy under development should reinforce reverse logistics (more about solid waste on page 27).
BRAZIL RECYCLING PROJECT
Penetration among consultant¹(%)
Total collected (tons)²
2009
2,4
120
2010
1,2
184
EN27
2011
0,4
121
1. Percentage of Consultants participating (delivery of box with solid waste) divided by total consultants active in the cycle.
2. Natura post-consumption packaging and products.
natura report # 11
WATER AND EFFLUENTS
EN26
EN9;
EN25
In addition to the drawing of the fi rst water inventory throughout the Natura production chain (more on page
25), the Company continued to manage operation consumption. The result was a 4.7% reduction in water
volume consumed per unit produced in 2011. This was due to a range of improvements such as: adjustments
in the water treatment system in one of the Cajamar plants, enabling more water to be reused; a new rentank
(mobile tank) washing system, which will be replicated in other units as of 2012; replacement of drinking water
with reused water in sub-processes in the effl uent treatment plant; identifi cation of rationalization opportunities
at third-parties.
Due to the lack of a public supply, the water used in the Cajamar and Itapecerica da Serra facilities comes from
artesian wells. Our ground water is withdrawn from the Cristalino Aquifer water table and the withdrawal is
compliant with the permits granted by the DAEE (Portuguese acronym fot State Water and Electrical Power
Department). In 2011, a new well was drilled, but the water volume was insuffi cient for industrial use. A new
well should be drilled in a different location to meet increased production demand.
Our challenge is the trend towards an absolute increase in consumption due to the expansion of Natura’s activi-
ties. However we continue to seek new ways to reuse water to attend ongoing effi ciencies.
EN23
In 2011 there were no signifi cant spillages or accidents with products causing any kind of impact.
83
EN8
WATER CONSUMPTION
PER UNIT PRODUCED
(liters/unit produced)1
2
4
0
,
2
4
0
,
0
4
0
,
2011
2010
2009
1. There was a change in
calculation of the indicator
from unit sold to unit produced.
For this reason, 2010 and
2009 data were recalculated.
WATER CONSUMPTION BY SOURCE1
Main sites (m3)1 2
Other spaces (m3)2
Third-party manufacturers (m³) 3
Total water consumption (m3)4
2009
124.511
26.314
49.783
200.608
2010
117.861
31.622
51.507
200.991
2011
127.870
51.624
68.454
247.948
EN8
1. Takes into account the Cajamar and Itapecerica da Serra units.
2. In 2009 and 2010, consumption at Itapecerica da Serra was mistakenly accounted for in Other Spaces. The calculation was adjusted
and the fi gures for the two years updated.
3. Third-parties are companies that manufacture fi nished products for Natura. Water consumption is measured at major third-parties ac-
counting for 95% of outsourced production.
4. Considers withdrawal from wells, public supply and supply by truck.
There was a decrease in reuse rates at Cajamar due to maintenance at the effl uent treatment plant, which tem-
porarily limited its effi ciency. This was partially offset by a new treatment system which increased reuse. It should
be noted that Natura’s effl uent treatment is fully compliant with legal requirements.
VOLUME OF WATER RECYCLED AND REUSED
Water recycled1and reused (m³)2
Percentage reuse over total water treated
in effl uent treatment plant (%)3
Percentage reuse over total water withdraw4
2009
38.2675
35
34
2010
49.733
2011
41.630
38
47
29
36
EN10
1. From sanitary and industrial wastewater generated at the Cajamar site which after treatment is used in watering plants, toilets and
urinals, road cleaning and decorative pools.
2. Water from the Cajamar production process that is reused in the drinking water system.
3. The percentage refers to the volume of reused water from effl uent treatment compared with the total amount of water treated in the
Cajamar treatment plants.
4. The reuse and recycling data refer to the volume of water recycled and reused at Cajamar. The reuse percentages over the totals for
2009 and 2010 were reviewed because they mistakenly included data from Itapecerica da Serra, which does not reuse water.
5. Data reassessed and corrected.
SIGNIFICANT DISCHARGES IN WATER BODIES (M³)1
Total volume of treated effl uent
2009
101.672
2010
102.903
2011
100.747
EN21
1. Refers to Cajamar and Itapecerica da Serra sites. At Benevides effl uent is treated externally.
natura report # 11
84
TREATED EFFLUENT AT CAJAMAR
Cajamar
DBO1 (Mg/L)
DQO2 (Mg/L)
Oils and fats (Mg/L)
Itapecerica da Serra
DBO1 (Mg/L)
DQO2 (Mg/L)
Oils and fats (Mg/L)
1. BOD – Biological Oxygen Demand
2. COD– Chemical Oxygen Demand
Legal parameter
60
150
120
Legal parameter
60
150
120
2009
6
43
7
2009
20
69
8
2010
7
45
15
2010
25
65
15
2011
46
145
45
2011
31
59
26
EN21
EN7
EN6;
EN7
ENERGY
In 2011, we recorded a 12% decrease in relative electricity consumption due to the efforts to improve manage-
ment and effi ciency, in particular at third-party suppliers.
Currently 50% of the power used at Cajamar is associated with temperature control and compressed air, con-
stituting a natural focus for improvement projects. We managed to eliminate losses and increase air conditioning
distribution effi ciency, reducing power consumption. We also completed a project to eliminate compressed air
leakages in one of the plants and are replicating this initiative in other Company’s areas.
EN4
ENERGY CONSUMPTION
– ENERGY MATRIX
PER UNIT PRODUCED
(kjoules/unit)1
Absolute energy consumption grew due to the expansion of the distribution centers and administrative sup-
port areas throughout the country. There was also an increase in diesel consumption due to greater use of
emergency generators as a result of interruptions and oscillations in the energy supplied by power companies.
2
2
4
6
6
4
0
1
4
2011
2010
2009
1. There was a change in
calculation of the indicator
from unit sold to unit produced.
For this reason, 2010 and
2009 data were recalculated.
DIRECT ENERGY CONSUMPTION BY PRIMARY SOURCE (joules x 1012)1
Solar energy2
Diesel oil used in generators
LPG consumption
Electricity
Ethanol consumptioN3
Bunker oil consumption
EN4
2009
0,02
3
29
112
-
17
2010
0,02
3
30
128
-
18
2011
0,02
6
21
136
15
19
1. Until 2010, the Natura energy matrix only considered Cajamar and Itapecerica da Serra. In 2011, we incorporated into the indicators
the distribution centers, administrative support centers and Casas Natura (Natura´s space for product testing) and the data for the previ-
ous years were recalculated.
2. At the Cajamar unit we use solar energy to light the car park and heat water in the cloakrooms and kitchen.
3. We started using ethanol to fi re the boilers at Cajamar in 2011.
0,01
10
69
3
7
11
2011 ENERGY MATRIX (%)
Electricity
LPG
Diesel
Ethanol
Bunker oil
Solar energy
EN3
TOTAL ENERGY CONSUMPTION (joules x 1012)
Cajamar and Benevides sites
Other Natura spaces in Brazil1
Natura third-party manufacturer energy consumptioN2
Total
2009
142
19
41
201
2010
150
30
41
220
2011
158
39
54
251
EN3; EN4
1. Refers to consumption at Alphaville, Itapecerica, Casas Natura (Natura´s space for product testing), distribution centers, advanced
centers. In 2011, the DCs were expanded and the CSC Água Branca offi ces were included.
2. Companies manufacturing fi nished products for Natura. The third-parties that are monitored account for approximately 95% of the
outsourced production.
natura report # 11
85
ENERGY SPARED (joulesx109)1
Due to energy effi ciency projects2
Due to solar energy source
2009
2,0
20
2010
2,6
20
2011
1,8
20
EN5; EN6
1. Refers to projects implemented in Cajamar.
2. The reduction projects are accounted for only once upon implementation. Therefore, as we invest in energy effi ciency measures, there is a
decrease in the pace of identifi cation of new improvements.
THIRD-PARTY MANUFACTURERS
Natura also monitors the environmental impact of its main suppliers. In 2011, data from 62 partners were re-
viewed. The Company works with these suppliers to improve data collection.
MAIN NATURA PACKAGING AND RAW MATERIALS SUPPLIERS1
Total suppliers measured
Energy consumption (joules x 1012)
Primary source electricity - electricity consumption
Self-generated energy - diesel generator
LPG consumption
Others - natural gasl
Total energy consumed
Water consumption (m3)
Total water consumption
Solid waste generation by main Natura suppliers (t)
Total solid waste generated
2009
62
2010
58
2011
62
216,8
4,2
4,8
140,4
366,2
146,2
0,1
4,9
207,1
358,3
96,2
20,4
6,2
119,5
243,3
166.528
135.500
179.740
2.947
3.419
2.005
1. Main Natura input suppliers in the following categories: accessories, packaging, design, fragrances, raw materials, printing services, chemi-
cals and boxes. Suppliers inform their energy and water consumption and solid waste generation according to the percentage of their
production dedicated to Natura.
2. To ensure greater reliability and consistency, we reorganized the data collection methodology for suppliers in 2011, improving the infor-
mation received. Therefore it is not possible to compare current results with those of previous years.
natura report # 11
5.3 generating
social value
86
DMA SO
INSTITUTO NATURA
The Instituto Natura is a non-profi t organization created in 2010 to expand and strengthen our private social
investment initiatives. The institute has enabled us to leverage our efforts and investments in measures that
improve the quality of public education.
The main achievement of the institute to date has been the partnership formalized with the Ministry of Edu-
cation in 2011 to transform the Trilhas project into public policy. Executed by the Instituto Natura under the
technical coordination of Cedac (Comunidade Educativa), Trilhas is a methodology to encourage 6 year-old
children to read, write and speak. The initiative consists of teaching techniques, materials and practical support
for teachers and principals in the participating schools, furthering the development of students beginning to
acquire literacy skills. The partnership with the Ministry of Education should benefi t more than 3 million students
in 3 thousand municipalities as of 2012.
The Instituto Natura’s main source of funding is the Natura Crer para Ver (To Believe is to See) program – a
special non-cosmetic product line which earnings go to the institute. Neither Natura nor the Consultants earn
money from sales of this line. In 2011, sales from the Crer para Ver line were R$ 8.4 million, coming in below
target. Although lower than the record sales in 2010, the volume was still twice that of 2009.
This is due mainly to Natura’s overall sales performance in the year and the fact that the Crer para Ver product
line did not have the expected consumer appeal. The program will be adjusted accordingly in 2012. (more about
the Crer para Ver program and Trilhas project in the Instituto Natura Report).
.
CRER PARA VER PROGRAM IN BRAZIL (000’s of R$)
Net income from Crer para Ver Program1
Crer para Ver penetration (% cycle)3
Total cost of projects developed and supported2
Municipalities served
Schools served
Participating teachers, coordinators and principals
Students benefi ting
2009
3.768
7
4.076
nd
nd
nd
nd
2010
10.099
10
3.877
370
5.690
22.861
427.685
2011
8.397
9,5
5.900
345
4.943
18.471
922.028
1. Refers to profi t before income tax dedicated to Crer para Ver Program Fund. Before 2009, net income referred to net profi t after
income tax.
2. The costs of the projects refer to the total amount injected in the project during the year (withdrawn from the fund and invested
in the projects).
3. Percentage of NCs involved with Crer para Ver (through purchase of products from product line), among the active NCs.
EC8; EC9
CRER PARA VER PROGRAM IN THE INTERNATIONAL OPERATIONS (000’s of R$)
Net income from Crer para Ver Program1
Crer para Ver penetration (% cycle)2
2009
627
nd
2010
1.366
15
2011
2.187
18
EC8
1. Refers to profi t before income tax dedicated to Crer para Ver Program Fund. Before 2009, net income referred to net profi t after
income tax.
2. Percentage of NCs involved with Crer para Ver (through purchase of products from product line), among the active NCs.
natura report # 11
87
DISTRIBUTION OF WEALTH
Even in a year of less vigorous growth, Natura continued to increase value generation for some of its main
stakeholders.
DISTRIBUTION OF WEALTH (R$ millions)
EC9
Shareholders1
Consultants
Employees
Suppliers
Government
Total
2009
552
2.303
643
3.088
1.147
7.732
2010
647
2.738
769
3.707
1.477
9.338
2011
763
2.906
634
4.363
1.472
10.138
EC1
1. The numbers for shareholder refer to dividends and interest on own capital during the period
SUPPORT AND SPONSORSHIP
Natura supported actions and initiatives aligned with its Beliefs, propagating well being well, culture, institutional
reinforcement, increased awareness and sustainable development. In 2011, spending on support and sponsor-
ships, including tax incentives, totaled R$ 24 million.
NATURA FUNDS (000’s of R$)
Sustainable Development
Brazilian Culture with a focus on music
Behavior and Attitude1
Support for civil organizations
Total Natura funds
Funding through incentives (000’s of R$)
Sustainable Development
Brazilian Culture with a focus on music
Support for civil organizations
Total funding through incentives
Grand Total
2009
1.600
4.844
na
2.102
8.546
574
2.989
624
4.187
12.733
2010
1.702
10.721
na
6.280
18.703
350
4.722
530
5.602
24.305
2011
1.900
13.365
750
2.790
18.806
80
4.853
610
5.543
24.439
1. In 2011, we included “Behavior and Attitude” in support and sponsorship. This involved sponsorship of two initiatives: Frontiers of Thought
and Fashion Mob.
See a description of the main projects supported in 2011, by category:
1. BRAZILIAN CULTURE WITH A FOCUS ON MUSIC
NATURA MUSICAL
This is the Natura cultural program focused on music. Launched in 2005, it has supported some 170
music-related projects and processes, benefi ting 17 Brazilian States and more than 700 thousand people.
The program operates on three fronts: music promotion, whereby sponsorship projects are selected
directly or by public tender using tax incentives or direct funding; music festivals held in São Paulo and
Minas Gerais; and an interactive digital music platform (www.naturamusical.com.br) for afi cionados of
Brazilian music.
In 2011, there was a national tender through which the program invested R$ 1.5 million in six projects
via the Rouanet incentive law, as well as a tender in Minas Gerais awarding R$ 1 million to fi ve initia-
tives via a State sales tax (ICMS) cultural incentive law. Natura Musical provided direct funding for four
other projects.
The projects sponsored included the digitalization of the Gilberto Gil music collection, the recuperation
of the Chiquinha Gonzaga music collection, the launch of Karina Buhr’s second CD, a survey of traditional
popular folk music entitled Mestres Navegantes and a book and CD by the instrumentalist Paulo Moura,
in addition to a national tour for the launch of a Roberta Sá CD.
natura report # 11
88
For the third year running, the company organized the Natura Nós Festival in São Paulo starring Brazilian
and international artists which was attended by 28 thousand people. We also promoted the fi rst Natura
Musical Minas Festival in Belo Horizonte, Minas Gerais, with local artists and performers from other parts
of the country. This 12-hour event featured 16 attractions in free shows held in the city’s parks. The total
audience was around 30 thousand.
In partnership with the cultural group AfroReggae, Natura set up the Natura Musical Studio in Rio de
Janeiro’s Vigário Geral community. With state-of-the-art equipment, the studio will be opened both to
renowned artists and to local community talents.
More information is available at www.naturamusical.com.br and in the program social networks.
2. SUSTAINABLE DEVELOPMENT / INSTITUTIONAL REINFORCEMENT
TEEB BRASIL
The TEEB (The Economics of Ecosystems and Biodiversity Brazil) Brazil initiative for the business industry,
launched in October 2011, is aimed at assessing and adapting this extensive global program to the Brazilian
reality. The objective of the program, which is scheduled to be concluded in 2013, is to map biodiversity and
ecosystem services, calculating the risks from losses and the opportunities from the conservation and sustain-
able use of these assets.
The project is led by Conservation International (CI-Brasil), the United Nations Environment Program
(UNEP) and the World Conservation Monitoring Center or (UNEP-WCMC). Natura is in the top TEEB
Brazil sponsorship category.
We accepted the invitation to support TEEB Brazil because, in addition to its potential for innovation, it is
aligned with our strategies, in particular our Platform for the Sustainable Use of Biodiversity, and the Amazônia
and Sustainable Production Chain programs. Active participation in TEEB Brazil provides the Company with
the opportunity to learn more about the services provided by nature and attributing a monetary value to
socio-environmental impacts.
GRI G4 GUIDELINES
Natura supports the development of guidelines for the fourth generation of GRI (Global Reporting Initia-
tive) indicators. Together with other leading global corporations, we are members of the G4 Consortium,
which is supporting the specialists, organizations and companies involved in reviewing economic, social and
environmental performance indicators for sustainability reports.
The GRI is an international organization dedicated to defi ning a model for sustainability reporting, indicating
quantitative and qualitative information that is relevant for understanding an organization’s impact and the
value it may generate for a specifi c region.
NATIONAL GREEN ECONOMY DISCUSSIONS
In 2011, Natura continued to support the National Green Economy Discussions – Road to Rio+20, part
of the global Green Economy Coalition (GEC) initiative, which is led by the NGO Vitae Civilis in Brazil.
The Company also supports the East Amazon regional seminar coordinated by Vitae Civilis and the Insti-
tuto Peabiru. The objective of the meeting is to produce solid proposals to accelerate the transition to a
green economy. Natura took part in the event and presented its Amazônia Program in public for the fi rst
time. The event, which was attended by companies, NGOs and government offi cials, was aimed at develop-
ing proposals for an Essential Green Economy Agenda for the United Nations Conference on Sustainable
Development Rio+20.
REFLORA PROJECT
This project is aimed at repatriating information and images of the Brazilian fl ora collected by foreign
researchers from the 18th to the 20th century. Distributed throughout different museums worldwide,
this collection is being digitalized in a project coordinated by the Herbarium of the Rio de Janeiro Jardim
Botânico. It is also supported by the National Scientifi c and Technological Development Council (Conselho
Nacional de Desenvolvimento Científi co e Tecnológico, CNPq)
MOVIMENTO EMPRESARIAL PELA BIODIVERSIDADE (BUSINESS MOVEMENT FOR BIODIVERSITY)
EThe Business Movement for the Conservation and Sustainable Use of Biodiversity (MEB) has as its aim the
mobilization of Brazilian business to conserve and use biodiversity sustainability. Developing a joint agenda
with civil organizations, the movement promotes discussion between the government and the private
industry with a view to improving the current legal and regulatory frameworks governing the area. Natura
led the creation of MEB in 2010 and maintained its support for the initiative in 2011.
natura report # 11
89
3. BEHAVIOR AND ATTITUDE
FRONTIERS OF THOUGHT
Held for the second year in São Paulo, Frontiers of Thought is an annual program of seminars on behavioral
trends given by important contemporary intellectuals, personalities and scientists. Eight seminars were held
in 2011 with key thinkers such as the sociologist Zygmunt Bauman, philosophers Luc Ferry, Edgard Morin
and Alain de Botton and the former Brazil’s President Fernando Henrique Cardoso, among others.
FASHION MOB
In 2011, Natura sponsored the 3rd Fashion Mob in partnership with Casa de Criadores. The event objec-
tive is to turn fashion popular, enabling professionals (both experienced or not), students and others to
gain visibility for their work in the fi elds of fashion, art and video in São Paulo’s streets.
The participants organized a parade, a show and a contest in downtown São Paulo. Their work was
evaluated by personalities from the fashion world, stylists, journalists and make-up artists, among others.
INVESTMENTS IN SUSTAINABILITY
Natura’s sustainability-related investments totaled R$ 70.4 million in 2011. This amount includes the promotion
of discussion panels with stakeholders, research into sustainable technologies, certifi cation of natural materials
used in production, among others. In 2011, investments in research into sustainable technologies decreased
because a few projects were concluded and their results were turned into programs.
SUSTAINABILITY INVESTMENT MATRIX (000’s of R$)1
Socio-environmental projects and programs2
Organization of discussion channels
Education and training
Research into sustainable technologies
Management expense3
Certifi cations4
Clean technologies5
Effl uent treatment and solid waste disposal
Total
2009
5.376
1.312
18.572
312
22.103
103
1.090
4.465
53.333
2010
7.612
2.518
23.799
588
28.260
91
775
4.270
67.913
2011
8.378
2.023
21.301
159
32.616
61
640
5.270
70.448
EN30
1. The Sustainability Investment Matrix was reformulated and grouped by type of investment. The amounts were reviewed and recalculated
from 2009.
2. Project and program spending related to priority subjects.
3. Spending related to team, studies and consultancies, additional benefi ts for employees and other general expenses.
4. Certifi cation expenses: forestry, organic production, management systems and sustainable construction.
5. Spending on clean technologies set up in Natura’s facilities, such as the fl exible boiler at Cajamar.
natura report # 11
5.4 generating
economic value
Once again, Natura increased its revenues and profi t. In 2011, the Company posted net revenues in the amount
of R$ 5,591.4 million, 8.9% up on the previous year. EBITDA reached R$ 1,425.0 million, an increase of 13.4%
with a 25.5% margin (compared to 24.5% in 2010). Net profi t was up 11.7% at R$ 830.9 million. Net margin
was 14.9%, against 14.5% in 2010. Noteworthy were our international operations, which now account for 9%
of Natura consolidated net revenue.
To prepare Natura for further growth, in 2011 we made the largest investment ever. Capital expenditure total-
ing R$ 350 million was allocated to production, logistics and technology projects. In 2012 we intend to invest a
further R$ 420 million in our information technology platform, in the fi nal stage of the new logistics model and
in the expansion of the Company’s industrial capacity (more on page 24).
COSTS AND EXPENSES
Cost of Goods Sold (CGS) showed a 50 base point improvement, reaching 29.8% of net revenue. The benefi ts
of the price increase and better cost management in 2011 were partially offset by promotions.
Selling expenses accounted for 34.9% of net revenues, a slight increase compared with 33.2% posted in 2010,
due to a reduced dilution of fi xed logistics and sales force costs. Investments in marketing in the international
operations continued to increase in line with the expansion strategy for these units.
Administrative and general expenses were 12.2%, against 11.8% the previous year. We continued to invest in
commercial and product innovation and, at the end of the year, we intensifi ed our cost effi ciency efforts without
compromising growth strategy.
Employee profi t share was down by 57.1% compared with the previous year, due to the non-achievement of
social targets (more on page 21).
Other revenues and operating expenses were R$ 63.1 million. This includes the non-recurring effect of the rec-
ognition of PIS and Cofi ns tax credits on services and the negotiation of added value margin in Paraná and the
Distrito Federal. It also takes into account the non-recurring effect of recognition of a contingent PIS and Cofi ns
tax asset, credit from taxes on fi nancial earnings and warehousing.
SUMMARY OF CASH FLOW
Internal cash generation in 2011 was R$ 940.8 million, 13% increase, in line with the 11.7% growth in net profi t.
From this amount, R$ 207.2 million was invested in working capital and R$ 346.4 million in property, plant and
equipment, resulting in free cash generation of R$ 410.6 million, 42.7% down on 2010.
There was an ongoing increase in stock coverage, infl uenced mainly by a shortfall in sales. There was also an
increase in taxes recoverable, due to the revision of PIS and Cofi ns tax credits on services, fi nancial earnings and
freight, which will be converted into cash in the fi rst semester of 2012.
We believe that the planning model adopted will enable us to reduce stock coverage in the course of the year.
This plus the conversion of taxes recoverable into cash will permit signifi cantly improved working capital in 2012.
90
DMA EC
CONSOLIDATED
NET REVENUE
(in million R$)
,
1
2
4
2
4
.
,
4
6
3
1
5
.
,
4
1
9
5
5
.
2009
2010
2011
CONSOLIDATED EBITDA
(R$ million)
,
5
8
0
0
1
.
,
8
6
5
2
1
.
,
0
5
2
4
1
.
Investment in property, plant and equipment reached $ 346.4 million at the end of the year, 15% higher than the
initial forecast. We continue to invest in logistics, manufacturing and information technology.
2009
2010
2011
natura report # 11
91
SUMMARY OF CONSOLIDATED CASH FLOW1 (R$ million)
Net earnings
(+) Depreciation and amortization
Internal cash generation
(Increase) / Reduction in Working Capital
Non-cash items (exchange variation)
Operational cash generation
Variations in intangible assets
Free cash generatio3
2010
744,1
88,8
833,0
99,6
20,7
953,2
(236,9)
716,4
2011
830,9
109,9
940,8
(207,2)
23,3
756,9
(346,4)
410,6
Var %
11,7
23,7
13,0
na
12,6
(20,6)
46,2
(42,7)
1. (Internal cash generation) +/- (changes in working capital and long term assets and liabilities) – (acquisitions of property, plant and
equipment).
OPERATIONS RESULTS
In the Brazilian operation, Natura net revenues were R$ 5,087.6 million, an increase of 6.8%. EBITDA margin
was 29.0%, compared with 28.0% the previous year.
The gross profi t from Brazilian exports to the international operations was subtracted from the Cost of
Goods Sold of the relevant operations, demonstrating the real impact of these subsidiaries on the company’s
consolidated results. Therefore, the pro forma Income Statement for Brazil only presents the result of sales
to the internal market.
PRO FORMA FINANCIAL HIGHLIGHTS BRAZIL
Total number of consultants - end of year* (in 000’s)
Product units for resale (in millions)
Gross revenue
Net revenue
Gross profi t
Gross margin (%)
Sales expenses
Administrative and general expenses
Employee profi t share
Management compensation
Other net operating revenues / (expenses)
Net operating revenues / (expenses)
Income before income tax and charges (IR/CSLL)
Net profi t
Ebitda
Ebitda margin (%)
2010
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
2011
1.175,5
410,5
6.898,9
5.087,6
3.611,3
71,0
(1.686,5)
(577,9)
(30,2)
(9,4)
65,7
(73,5)
1.299,4
901,1
1.476,1
29
Var %
14,3
8,4
6,3
6,8
7,6
0,5
13,4
12,0
(57,1)
34,5
n/d
53,3
7,9
7,8
10,5
1,0
1. Number of Consultants at end of the 18th sales cycle.
The net revenue from the international operations during the year was R$ 503.8 million, a 40% increase in weighted
local currency. EBITDA for the year (considering pro forma EBITDA) showed a loss of R$ 51.1 million, an improve-
ment of R$ 27.3 million compared with the previous year (R$ 78.4 million).
PRO FORMA EBITDA BY OPERATING BLOCK (R$ millions)
Brazil
Argentina, Chile e Peru
Mexico e Colombia
Other investments
Total
2010
1.335,2
13,1
(32,5)
(59,1)
1.254,8
2011
1.476,1
43,0
(24,2)
(69,9)
1.425,0
Var %
23,0
47,8
(23,2)
34,1
24,6
Considering only the operations under consolidation (Argentina, Chile and Peru), net revenues were R$ 335.1
million, a 36.1% increase in weighted local currency (45.2% in reais). In these units, the number of Consultants
increased by 20.5%, reaching 157,300 by the end of 2011. The EBITDA was favorable at R$ 43.0 million. The
higher investment in marketing was offset by the dilution of the sales force and administrative expenses and
greater logistics effi ciency.
natura report # 11
92
The net revenue in the international operations under development (Mexico and Colombia) were R$ 149.2
million, 55.6% up in weighted local currency (51.8% in reais). Consultant numbers grew 42.1%, reaching 85,600
by the end of 2011. These operations continued to show an accrued negative EBITDA of R$ 24.2 million, the
result of the investments underway.
PRO FORMA FINANCIAL HIGHLIGHTS - OPERATIONS UNDER CONSOLIDATION (ARGENTINA, CHILE,
PERU) - (R$ million)
Total number of consultants - end of year* (in 000’s)
Product units for resale (in millions)
Gross revenue
Net revenue
Gross profi t
Gross margin (%)
Sales expenses
Administrative and general expenses
Financial effects
Profi t / (loss) before income tax (IR/CSLL)
Net profi t / (loss)
Ebitda
Ebitda margin (%)
2010
130,5
23,6
335,9
255,7
157,3
61,5
(124,4)
(21,5)
(0,8)
8,9
3,7
13,1
5,1
PRO FORMA FINANCIAL HIGHLIGHTS - OPERATIONS UNDER DEVELOPMENT
(MEXICO E COLOMBIA)1 - (R$ million)
Total number of consultants - end of year * (in 000’s)
Product units for resale (in millions)
Gross revenue
Net revenue
Gross profi t
Gross margin (%)
Sales expenses
Administrative and general expenses
Financial effects
Profi t / (loss) before income tax (IR/CSLL )
Net profi t / (loss)
Ebitda
Ebitda margin (%)
2010
60,2
9,3
114,0
98,3
56,3
57,3
(76,0)
(14,8)
(1,0)
(35,6)
(36,0)
(32,5)
n/d
2011
157,3
32,9
441,5
335,1
212,5
63,4
(148,8)
(23,2)
(2,6)
36,6
31,9
43,0
12,8
2011
85,6
14,9
172,9
149,2
92,2
61,8
(99,8)
(17,6)
(1,2)
(27,6)
(31,0)
(24,2)
n/d
Var %
20,5
39,3
31,5
31,0
35,1
1,9
19,7
7,9
211,8
n/d
n/d
227,2
7,7
Var %
42,2
60,7
51,7
51,8
63,8
4,5
31,3
19,0
27,6
(22,4)
(13,9)
(25,6)
-
natura report # 11
93
NATURA COSMÉTICOS S.A.
With reference to the fi scal year ending December 31, 2011 and to the
opinion of the independent auditors and
pursuant to the legal and statutory norms, we hereby submit, for your
review, the balance sheet and the account statements covering the
fi scal year ending on December 31, 2011. In addition to the information
provided in the explanatory notes, Management remains fully available for
any further clarifi cation the shareholders may require.
fi nancial
statements
11#
natura report # 11
BALANCE SHEETS AS OF DECEMBER 31, 2011
(In thousands of Brazilian reais - R$)
94
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Trade receivables
Inventories
Recoverable taxes
Related parties
Derivatives
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’ EQUITYS
CURRENT LIABILITIES
Borrowings and fi nancing
Trade and other payables
Suppliers - related parties
Payroll, profi t sharing and related taxes
Taxes payable
Derivatives
Other payables
Total current liabilities
NONCURRENT LIABILITIES
Borrowings and fi nancing
Taxes payable
Provision for tax, civil and labor risks
Others provisions
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.
Note
Company (BR GAAP)
2010
2011
Consolidated (BR GAAP and IFRS)
2010
2011
5
6
7
8
27.1
4.2
11
8
9.a)
10
11
12
13
13
166,007
535,309
217,906
69,417
37,908
28,184
115,328
1,170,059
12,299
80,145
244,938
4,562
1,253,721
332,215
78,929
2,006,809
3,176,868
206,125
493,692
185,092
34,799
25,361
-
52,470
997,539
4,921
87,491
289,070
20,052
1,099,188
92,175
18,586
1,611,483
2,609,022
515,610
641,872
688,748
201,620
-
28,626
126,783
2,203,259
111,239
189,552
295,839
29,935
-
800,434
162,754
1,589,753
3,793,012
560,229
570,280
571,525
101,464
-
-
66,399
1,869,897
109,264
180,259
337,007
44,904
-
560,467
120,073
1,351,974
3,221,871
Note
Company (BR GAAP)
2010
2011
Consolidated (BR GAAP and IFRS)
2010
2011
14
15
27.1
16
4.2
14
16
17
18
19.a)
19.c)
19.b)
66,424
183,317
293,024
58,551
260,027
-
29,359
890,702
852,549
97,955
49,600
35,818
1,035,922
427,073
160,313
292,457
(102,849)
490,885
(17,635)
1,250,244
-
1,250,244
3,176,868
60,086
113,232
246,589
63,769
199,698
3,340
41,788
728,502
368,356
175,575
53,282
25,806
623,019
418,061
149,627
282,944
(14)
430,079
(23,196)
1,257,501
-
1,257,501
2,609,022
168,962
488,980
-
132,045
446,800
-
37,932
1,274,719
1,017,737
140,545
64,957
44,809
1,268,048
427,073
160,313
292,457
(102,849)
490,885
(17,635)
1,250,244
1
1,250,245
3,793,012
226,595
366,494
-
162,747
366,006
4,061
52,064
1,177,967
465,068
215,125
73,784
32,425
786,402
418,061
149,627
282,944
(14)
430,079
(23,196)
1,257,501
1
1,257,502
3,221,871
fi nancial statements # 11
INCOME STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2011
(In thousands of Brazilian reais - R$, except earnings per share)
95
Note
NET REVENUE
Cost of sales
GROSS PROFIT
OPERATING (EXPENSES) INCOME
Selling expenses
Administrative and general expenses
Employee profi t sharing
Management compensation
Equity in investees
Other operating income (expenses), net
INCOME FROM OPERATIONS BEFORE
FINANCIAL INCOME (EXPENSES)
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
The accompanying notes are an integral part of these fi nancial statements.
Company (BR GAAP)
2010
5,514,315
(2,283,926)
2011
5,848,777
(2,375,514)
Consolidated (BR GAAP and IFRS)
2010
5,136,712
(1,556,806)
2011
5,591,374
(1,666,300)
3,473,263
3,230,389
3,925,074
3,579,906
(1,503,069)
(816,818)
(3,765)
(9,443)
54,789
43,579
(1,292,365)
(837,808)
(18,174)
(14,417)
25,764
456
(1,952,740)
(680,730)
(30,168)
(9,443)
-
63,077
(1,704,322)
(605,442)
(70,351)
(14,417)
-
(17,468)
1,238,536
86,502
(163,247)
1,093,845
17,515
(58,237)
1,315,070
122,698
(200,038)
1,167,905
53,639
(103,375)
21
22
22
22
22
27
12
25
24
24
9.b)
1,161,791
(330,890)
1,053,123
(309,073)
1,237,730
(406,829)
1,118,169
(374,120)
830,901
744,050
830,901
744,050
830,901
-
744,050
-
830,901
-
744,050
-
26.1
26.2
1,9320
1,9279
1,7281
1,7219
1,9320
1,9279
1,7281
1,7219
STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEAR ENDED DECEMBER 31, 2011
(In thousands of Brazilian reais - R$)
Note
NET INCOME
Other comprehensive income (losses) -
Gains (losses) arising on translating the fi nancial
statements of foreign subsidiaries
Company (BR GAAP)
Consolidated (BR GAAP and IFRS)
2011
830,901
2010
744,050
2011
830,901
2010
744,050
12
5,561
(4,473)
5,561
(4,473)
TOTAL COMPREHENSIVE INCOME
836,462
739,577
836,462
739,577
ATTRIBUTABLE TO
Owners of the Company
Noncontrolling interests
The accompanying notes are an integral part of these fi nancial statements.
836,462
-
739,577
-
836,462
-
739,577
-
fi nancial statements # 11
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STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2011
(In thousands of Brazilian reais - R$)
Note
2011
2010
2011
2010
Company (BR GAAP)
Consolidated (BR GAAP and IFRS)
97
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 transactions
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 investees
Interest and exchange rate changes on borrowings
and fi nancing and other liabilities
Exchange rate changes on other assets and other liabilities
Stock options plans expenses
Provision for discount on assignment of ICMS credits
Allowance for doubtful accounts
Allowance for inventory losses
Provision for healthcare plan and carbon credits
Recognition of untimely used tax credits
Recognition of tax credits related to lawsuit
13
17
9.a)
24
6
7
18
25
25
(INCREASE) DECREASE IN ASSETS
Trade receivables
Inventories
Recoverable taxes
Other receivables
Subtotal
INCREASE (DECREASE) IN LIABILITIES
Domestic and foreign suppliers
Payroll, profi t sharing and related taxes, net
Taxes payable
Other payables
Provision for tax, civil and labor contingencies
Subtotal
CASH GENERATED BY OPERATING ACTIVITIES
OTHER CASH FLOWS FROM OPERATING ACTIVITIES
Payments of income tax and social contribution
Payments of derivatives
Payment of interest on borrowings and fi nancing
NET CASH GENERATED BY OPERATING ACTIVITIES
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
Withdrawal (payment) of escrow deposits
Dividends received from subsidiaries
Investments in subsidiaries
830,901
744,050
830,901
744,050
27,565
(16,442)
(2,866)
(28,841)
330,890
1,559
(54,789)
94,985
22
6,359
-
(492)
9,801
10,012
(11,887)
(15,461)
1,181,316
(41,125)
(42,615)
(14,648)
(171,952)
(270,340)
69,443
(5,218)
28,692
34,006
(816)
126,107
15,305
5,477
106
(15,318)
309,073
(468)
(25,764)
(4,668)
-
4,081
-
9,005
3,981
10,739
-
-
1,055,598
(88,052)
(77,360)
97,664
(43,394)
(111,142)
28,761
7,019
74,726
62,565
(2,673)
170,398
109,921
(14,305)
(7,998)
(51,173)
406,829
13,457
-
121,674
(7,767)
13,369
323
(674)
19,725
12,384
(16,852)
(40,378)
1,389,436
(70,918)
(136,948)
(45,224)
(157,950)
(411,040)
121,752
(30,702)
24,060
(14,132)
(829)
100,149
88,848
8,787
3,545
(18,129)
374,120
32,620
-
(5,137)
-
11,288
465
9,149
30,132
10,400
-
-
1,290,137
(126,561)
(92,106)
45,134
(41,418)
(214,951)
111,212
31,955
50,844
34,528
(2,658)
225,881
1,037,083
1.114,854
1,078,545
1,301,067
(255,182)
(15,082)
(57,812)
(221,535)
(9,006)
(35,405)
(319,623)
(18,382)
(76,700)
(269,001)
(13,378)
(44,902)
709,007
848,908
663,840
973,785
13
(277,036)
(66,870)
(346,367)
(236,876)
2,535
72,973
34,000
(121,173)
3,174
(86,096)
30,000
(117,486)
3,726
92,341
-
-
9,864
(86,524)
-
-
12
NET CASH USED IN INVESTING ACTIVITIES
(288,701)
(237,278)
(250,300)
(313,536)
fi nancial statements # 11
continúa...
...continuación
CASH FLOW FROM FINANCING ACTIVITIES
Repayments of borrowings and fi nancing - principal
Proceeds from borrowings and fi nancing
Payment of dividends and interest on capital
Interim dividends and interest on capital
Repurchase of treasury shares
Sale of treasury shares due to exercise of stock options
Capital increase through subscription of shares (353,289 common shares
at average price of R$39.69)
19.b)
(425,383)
822,047
(430,079)
(332,809)
(104,452)
1,240
(592,075)
565,293
(357,611)
(289,375)
-
-
(648,687)
1,045,702
(430,079)
(332,809)
(104,452)
1,240
98
(781,931)
819,275
(357,611)
(289,375)
-
-
9,012
13,800
9,012
13,800
NET CASH USED IN FINANCING ACTIVITIES
Gains (losses) arising on translating foreign currency cash and cash equivalents
(460,424)
-
(659,968)
-
(460,073)
1,914
(595,841)
(4,473)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(40,118)
(48,338)
(44,619)
59,935
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
206,125
166,007
254,463
206,125
560,229
515,610
500,294
560,229
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
NON-CASH TRANSACTIONS:
Capital lease of property, plant and equipment
Offseting of tax liability and escrow deposit
ADDITIONAL INFORMATION TO THE STATEMENTS
OF CASH FLOWS
Restricted cash
Bank overdrafts - unused
13
17
11
The accompanying notes are an integral part of these fi nancial statements.
(40,118)
(48,338)
(44,619)
59,935
56,694
114,345
-
-
56,694
114,345
-
-
-
117,900
-
147,900
6,757
235,500
6,155
265,500
STATEMENTS OF VALUE ADDEDFOR THE YEAR ENDED DECEMBER 31, 2011
(In thousands of Brazilian reais - R$, except additional information)
Company (BR GAAP)
Note
REVENUES
Sales of goods and services
Other operating income (expenses), net
Allowance for doubtful accounts
INPUTS PURCHASED FROM THIRD PARTIES
Cost of sales and services
Materials, electricity, outside services and other
GROSS VALUE ADDED
RETENTIONS
Depreciation and amortization
WEALTH CREATED BY THE COMPANY
TRANSFERRED VALUE ADDED
Equity in investees
Financial income - includes infl ation adjustments
and exchange differences
TOTAL WEALTH FOR DISTRIBUTION
25
6
13
12
24
2011
6,847,933
6,887,213
43,580
(82,860)
(4,538,955)
(2,610,197)
(1,928,758)
2,308,978
(27,565)
(27,565)
2,281,413
141,291
54,789
86,502
2,422,704
2010
6,394,783
6,477,739
456
(83,412)
4,278,970)
(2,488,991)
(1,789,979)
2,115,813
(15,305)
(15,305)
Consolidated (BR GAAP and IFRS)
2010
2011
6,850,225
7,499,050
6,951,106
7,524,250
(17,468)
63,078
(88,278)
(83,412)
(3,707,385)
(4,362,838)
(2,355,631)
(2,624,578)
(1,351,754)
(1,738,260)
3,136,212
3,142,841
(88,848)
(109,921)
(88,848)
(109,921)
2,100,508
3,026,291
43,279
25,764
17,515
2,143,786
122,698
-
122,698
3,148,989
3,053,993
53,639
-
53,639
3,107,632
DISTRIBUTION OF WEALTH:
Employees and payroll taxes
Taxes and fees
Financial expenses and rentals
Dividends
Interest on capital
Retained earnings
(2,422,704) 100%
(250,870) 10%
(1,182,449) 49%
(158,485)
7%
(762,563) 31%
3%
(61,130)
0%
(7,207)
(2,143,786) 100%
10%
51%
4%
31%
3%
1%
(222,957)
(1,111,331)
(65,448)
(659,570)
(59,883)
(24,597)
(3,148,989) 100%
(634,261) 20%
(1,472,345) 47%
(211,483)
7%
(762,563) 24%
2%
(61,130)
0%
(7,207)
(3,107,632) 100%
(769,245) 25%
(1,476,512) 47%
(117,825)
4%
(659,570) 21%
2%
(59,883)
1%
(24,597)
Additional information to the statements of value added
R$442,063 and R$454,114 of the amounts recorded in line item ‘Taxes and fees’ in 2011 and 2010, respectively, 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 customers.
To analyze this tax impact on the statement of value added, these amounts should be deducted from those recorded in ‘Sales of goods and services’ and ‘Taxes and fees’
since sales revenue does not include the estimated profi t attributable to Natura consultants on the sale of products, in the amounts of R$2,906,137 and R$2,738,227 in
2011 and 2010, respectively, considering an estimated profi t margin of 30%.
The accompanying notes are an integral part of these fi nancial statements.
fi nancial statements # 11
99
Equity interest - %
2010
2011
NOTES TO THE INDIVIDUAL AND CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2011
(Amounts in thousands of Brazilian reais - R$, unless otherwise stated)
1. GENERAL INFORMATION
Natura Cosméticos S.A. (“Company”) is a publicly-traded company, re-
gistered in the special trading segment called “Novo Mercado” in the
São Paulo Stock Exchange (BM&FBOVESPA), under the ticker “NATU3”,
and headquartered in Itapecerica da Serra, State of São Paulo.
The Company’s and its subsidiaries’ activities (“Natura Group” or
“Group”) include the development, production, distribution and sale of
cosmetics, fragrances, and hygiene products, substantially through direct
sales by Natura Beauty Consultants. The Company also holds equity
interests in other companies in Brazil and abroad.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
2.1. Statement of compliance and basis of preparation
The Company’s fi nancial statements include:
• The consolidated fi nancial statements prepared in accordance with the In-
ternational Financial Reporting Standards (IFRSs), 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 ac-
counting 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 Interpretations issued by the Accounting Pronouncements Commit-
tee (CPC) and approved by the Brazilian Securities and Exchange Com-
mission (CVM).
The individual fi nancial statements present the valuation of investments in
subsidiaries, joint ventures and associates which are measured by the equity
method, as required by legislation prevailing in Brazil. Therefore, these indi-
vidual fi nancial statements are not fully compliant with IFRS, which requires
that these investments be carried at fair value or acquisition cost.
Since there is no difference between the consolidated shareholders’ equity
and the consolidated net income attributable to owners of the Company
recorded in the consolidated fi nancial statements prepared in accordance
with IFRSs and accounting practices adopted in Brazil and the Company’s
shareholders’ equity and net income disclosed in the individual fi nancial sta-
tements prepared in accordance with accounting practices adopted in Brazil,
the Company elected to present the individual and the consolidated fi nancial
statements as a single set, placed side-by-side.
The fi nancial statements have been prepared based on the historical cost
basis except for certain fi nancial instruments that are measured at their
fair values, as described in the accounting policies below. The historical
cost is generally based on the fair value of the consideration paid in ex-
change for an asset.
The signifi cant accounting practices applied to the preparation of these
consolidated fi nancial statements are presented below. These policies have
been consistently applied in the previous annual reporting period presen-
ted, except as otherwise indicated.
2.2. Consolidation
a) Subsidiaries and joint-controlled entities
Subsidiaries are all entities over which the Company has the power to
govern the fi nancial and operating policies so as to obtain benefi ts from
their activities and in which generally holds more than 50% of the equity
interest. In the applicable cases, the existence and the effect of potential
voting rights, currently exercisable or convertible, are taken into conside-
ration to determine if the company control another entity. Subsidiaries
are fully consolidated from the date in which 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 state-
ments is made proportionately to the interest percentage.
b) Companies include in the consolidated fi nancial statements
99.99
99.99
99.94
99.97
99.99
99.99
99.99
99.99
99.99
100.00
100.00
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 Inovação e Tecnologia de Produtos Ltda.
Natura Cosméticos y Servicios de México, S.A. de C.V.
Natura Cosméticos de México, S.A. de C.V.
Natura Distribuidora de México, S.A. de C.V.
Natura Cosméticos Ltda. - Colombia
Natura Cosméticos España S.L. - Spain
Natura (Brasil) International B.V. - The Netherlands
Indirect interest:
Via Indústria e Comércio de Cosméticos Natura Ltda.:
Natura Logística e Serviços Ltda.
Via Natura Inovação e Tecnologia de Produtos Ltda.:
Ybios S.A. (proportionate consolidation - joint control) 43.33
Natura Innovation et Technologie
de Produits SAS - França
Via Natura (Brasil) International B.V. - The Netherlands:
Natura Brasil Inc. - USA - Delaware
Natura International Inc. - USA - New York
Natura Worldwide Trading Company - Costa Rica
Natura Brasil SAS - France
Natura Brasil Inc. - USA - Nevada
Natura Europa SAS - France
100.00
100.00
100.00
100.00
100.00
100.00
100.00
99.99
99.99
99.99
99.94
99.97
99.99
99.99
99.99
99.99
99.99
100.00
100.00
99.99
42.11
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 policies. Investments in subsidiaries have been eliminated pro-
portionately to the investor’s interests in the subsidiaries’ shareholders’
equity and net income or loss, intergroup balances and transactions and
unrealized profi ts, net of taxes.
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.
- Brasil, Natura Cosméticos S.A. - Chile, Natura Cosméticos S.A. - Peru,
Natura Cosméticos S.A. - Argentina, Natura Cosméticos Ltda. - Colombia,
Natura Europa SAS - France, and Natura Cosméticos de Mexico S.A. de
C.V..
• Natura Cosméticos S.A. - Chile, Natura Cosméticos S.A. - Peru, Natura
Cosméticos S.A. - Argentina, Natura Cosméticos Ltda. - Colombia and Na-
tura 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.: it is engaged in 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: engaged in the purchase, sale, import, ex-
port and distribution of cosmetics, fragrances in general, and hygiene pro-
ducts.
• Natura Cosméticos de Mexico, S.A. de C.V.: engaged in the import and
sale of 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.: engaged in the
provision of administrative and logistics services to Natura Cosméticos
de Mexico, S.A. de C.V. and Natura Distribuidora de Mexico, S.A. de C.V.
• Natura Cosméticos España S.L.: company in start-up stage and its activi-
ties will be an extension of the activities carried out by its parent company
Natura Cosméticos S.A. - Brazil.
fi nancial statements # 11
• Natura Logística e Serviços Ltda.: engaged in the provision of adminis-
trative 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 testing as an alternative
to animals testing, for to the safety and effi ciency of test active compounds,
skincare products and new packaging materials.
• Ybios S.A.: engaged in biotechnology research, management and de-
velopment of projects, products and services, and may also enter into
agreements and/or partnerships with universities, foundations, companies,
cooperatives, associations and other public and private entities, provide
services in the biotechnology area, and holding of equity interest in other
companies.
As Ybios S.A. is a jointly controlled entity whose fi nancial statements were
proportionately included in the Company’s consolidated fi nancial state-
ments, the main assets, liabilities and income statement accounts, which
were included in the consolidated fi nancial statements at the ratio of
43.33% of interest (42.11% as of December 31, 2010) after equity interest
elimination adjustments, are stated below:
Current assets
Property, plant and equipment
Current liabilities
Net revenue for the year
Loss for the year
2011
567
56
30
128
(1,086)
2010
630
98
87
1,098
(682)
• Natura Europa SAS and Natura Cosmetics USA Co.: in January 2009 the
shares of these subsidiaries 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
company headquartered in The Netherlands.
c) Discontinuation of subsidiaries’ operations
At the meetings held in July and October 2009, the Board of Directors
approved the discontinuation of the operations of subsidiary Natura Cos-
méticos C.A. - Venezuela, which resulted in the need to recognize an allo-
wance for asset impairment losses.
As of December 31, 2011, the net assets balance of Natura Cosméticos
C.A. - Venezuela, recorded in the Company’s consolidated fi nancial state-
ments, less allowances for asset impairment losses and collection of liabili-
ties during the operation termination process, was R$306.
2.3. Segment reporting
Information per operating segments is consistent with the internal report
provided to the chief operating decision maker. The chief operating deci-
sion maker, responsible for allocating resources to the operating segments
and assessing their performance, is the Company’s Executive Committee.
2.4. Translation of foreign currency
a) Functional currency
Items included in the fi nancial statements of the Company and each one
of the subsidiaries included in the consolidated fi nancial statements are
measured using the currency of the main economic environment in which
the companies operate (“functional currency”).
b) Foreign currency transactions and balances
Foreign currency-denominated transactions are translated into the
Company’s functional currency - Brazilian reais - at the exchange rates
prevailing on the dates of the transactions. Balance sheet accounts are
translated at the exchange rates prevailing at the end of the reporting
period. Foreign exchange gains and losses arising on the settlement of such
transactions and the translation of monetary assets and monetary liabilities
denominated in foreign currency are recognized in profi t or loss, in line
items “Financial income” and “Financial expenses”.
c) Presentation currency and translation of fi nancial statements
The fi nancial statements are presented in Brazilian reais (R$), which cor-
responds to the Group’s presentation currency.
In preparing the consolidated fi nancial statements, the statements income
statement and the statement of cash fl ows, and all other changes in foreign
subsidiaries’ assets and liabilities, whose functional currency is the local cur-
rency, 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 yearend.
100
The effects of exchange differences resulting from these translations are
presented in line item ‘Other comprehensive income’ and in shareholders’
equity. In case of disposal or partial disposal of interest in a Group com-
pany, through sale or as a result of capital payment, the cumulative exchan-
ge difference is recognized in the income statement 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
within 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 end of the reporting
period and do not exceed their fair or realizable values.
2.6. Financial instruments
2.6.1. Categories
The category depends on the purpose for which fi nancial assets and fi nan-
cial liabilities were acquired or contracted and is determined on the initial
recognition of the fi nancial instruments.
Financial assets held by the Company are classifi ed into the following ca-
tegories:
Financial assets measured at fair value through profi t or loss
Consist of fi nancial assets held for trading, when acquired for such pur-
pose, principally in the short term. These assets are measured at fair value
at the end of the reporting period and any differences are recognized in
profi t or loss. Derivative fi nancial instruments are also classifi ed in this ca-
tegory. Assets in this category are classifi ed in current assets.
In the case of the Company, this category includes only derivative fi nancial
instruments. The balances of outstanding derivatives are measured at their
fair values at the end of the reporting period and classifi ed in current as-
sets or current liabilities, and changes in fair value are recorded in “Financial
income” or “Financial expenses”, respectively.
Held-to-maturity fi nancial assets
Comprise investments in certain fi nancial assets classifi ed by treasury at
their origination as held to maturity, and are measured at amortized cost
using the effective interest method.
Available-for-sale fi nancial assets
When applicable, this category includes non-derivative fi nancial assets that
either designated as available for sale or are not classifi ed into any of the
other categories, such as (a) loans and receivables; (b) held-to-maturity
investments; or (c) fi nancial assets at fair value through profi t and loss. As of
December 31, 2011 and 2010, the Company did not have fi nancial assets
recorded in its fi nancial statements under this classifi cation.
Loans and receivables
Include non-derivative fi nancial assets with fi xed or determinable pay-
ments that are not quoted in an active market. They are recorded in cur-
rent assets, except for maturities greater than 12 months after the end of
the reporting period, when applicable, which are classifi ed as noncurrent
assets. As of December 31, 2011 and 2010, in the case of the Company,
comprise cash and cash equivalents (note 5) and the balances of trade
receivables (note 6).
Financial liabilities held by the Company are classifi ed into the following
categories:
Financial liabilities at fair value through profi t or loss
They are classifi ed as fair value through profi t or loss when the fi nancial
liability is either held for trading or it is designated as fair value through
profi t or loss.
Other fi nancial liabilities
They are measured at the amortized cost using the effective interest me-
thod. As of December 31, 2011 and 2010, in the case of the Company,
comprise borrowings and fi nancing (note 14) and domestic and foreign
trade payables.
2.6.2. Measurement
Regular purchases and sales of fi nancial assets are recognized on the tran-
saction date, i.e., on the date the Company agrees to buy or sell the
asset. Loans and receivables and held-to-maturity financial assets are
measured at amor tized cost.
fi nancial statements # 11
Financial assets at fair value through profit or loss are initially recog-
nized at their fair value and transaction costs are recognized in the
income statement. Gains or losses resulting from changes in the fair
value of financial assets at fair value through profit or loss are recog-
nized in the income statement, in “Finance income” or “Finance costs”,
respectively, for the period in which they occur. Changes in financial
assets classified as “Available for sale”, when applicable, are recorded
in “Other comprehensive income” and shareholders’ equity until the
financial assets are settled, when they are ultimately reclassified to
profit or loss for the year.
2.6.3. Offsetting financial instruments
Financial assets and financial liabilities are offset and the net amount
is presented in the balance sheet when there is a legally enforceable
right to set off recognized amounts and the intent to either settle
them on a net basis, or to recognize the asset and settle the liability
simultaneously.
2.6.4. Derivative instruments and hedge accounting
Derivative transactions contracted by the Group consist of swaps
and non-deliverable forwards (NDFs) intended exclusively to hedge
against the foreign exchange risks related to the positions in balance
sheets and projected cash outflows in foreign currency for capital
increases in foreign subsidiaries.
They are measured at fair value, and changes in fair value are recog-
nized through profit or loss, except when they are designated as cash
flow hedges, to which changes in fair value are recorded in “Other
comprehensive income” within shareholders’ equity.
The fair value of derivatives are measured by the Company’s treasury
depar tment based on information on each contracted transaction
and related market inputs at the end of the repor ting period, such
as interest rates and exchange coupon. When applicable, these inputs
are compared with the positions repor ted by the trading desks of
each involved financial 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.
2.6.5. Effective interest method
Used to calculate the amor tized cost of a debt instrument and allo-
cate its interest income over the related period. The effective interest
rate is the rate that exactly discounts estimated future cash receipts
(including all fees and points paid or received that form an integral
par t of the effective interest rate, transaction costs and other premiu-
ms or discounts) through the expected life of the debt instrument or,
where appropriate, a shor ter period, to the net carrying amount on
initial recognition.
Income is recognized on an effective interest basis for debt instru-
ments other than those financial assets classified as fair value through
profit or loss.
2.7. Trade receivables and allowance for doubtful debts
Trade receivables are stated at their nominal amount, less the allo-
wance for doubtful debts, which is recognized based on the history
of losses using an aging list, in an amount considered sufficient by
management to cover possible losses, as described in note 6.
2.8. Inventories
Carried at the lower of average cost of purchase or production and
net realizable value. Details are disclosed in note 7.
2.9. Investments in subsidiaries, associates and jointly controlled en-
tities
The Group holds interest in subsidiaries, associates and joint control-
led entities (shared control).
Subsidiaries are the companies over which the Company has control.
Control is the power to govern the financial and operating policies of
an entity so as to obtain benefits from its activities, which in general
consists of the ability to exercise the majority of the voting rights. Po-
tential voting rights considered when assessing the control exercised
by the Company over the other entity, when they can be exercised at
the time of the assessment.
An associate is an entity over which the Company has significant
101
influence and that does not qualify as a subsidiary or a joint venture.
Significant influence is the power to par ticipate in the financial and
operating policy decisions of the investee but is not control or joint
control over those policies.
The investees under shared control are jointly controlled entities
where the venturers have a contractual agreement which establishes
joint control on its economic activities.
Investments in subsidiaries, associates and jointly controlled entities
are accounted for by the equity method of accounting. The financial
statements of subsidiaries, associates and jointly controlled entities
are prepared for the same repor ting date of the Company. Adjust-
ments are made, if necessary, to conform their accounting policies to
those adopted by the Company.
Under the equity method of accounting, the share attributable to the
Company of the profit or loss for the period of such investments is
accounted for in the income statement, in line item “Equity in inves-
tees”. Unrealized gains and losses arising on transactions between
the Company and the investees are eliminated based in the percen-
tage interest held in such investees. The other comprehensive income
of subsidiaries, associates and jointly controlled entities is recorded
directly in the Company’s shareholders’ equity, in line item “Other
comprehensive income”.
2.10. Proper ty, plant and equipment
Stated at cost of purchase or construction, plus interest capitalized
during construction period, when applicable, for the case of eligible
assets, and reduced by accumulated depreciation and impairment los-
ses, if applicable.
Rights in tangible assets that are maintained or used in the operations
of the Group, originated from finance leases, are recorded as purcha-
se financing, and a fixed asset and a financing 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 calcula-
ted 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 fixtures
Vehicles
Years
25
13
3
5 - 13
14
3
The useful lives are reviewed annually.
Gains and losses on disposals are calculated by comparing the pro-
ceeds from the sale with the carrying amount, and are recognized in
the income statement.
2.11. Intangible assets
2.11.1 Software
Software and ERP systems licenses purchased are also capitalized and
amor tized at the rates also described in note 13, and expenses on
the software maintenance are recognized as expenses when incurred.
The ERP system purchase and implementation costs are capitalized as
intangible assets when there is evidence that future economic bene-
fits will flow into the Company, taking into consideration its economic
and technologic viability. Expenses on software development recog-
nized as assets are amor tized under the straight-line method over its
estimated useful life. The expenses related to software maintenance
are expensed when incurred.
2.11.2 Trademarks and patents
Separately purchased trademarks and patents are stated at their his-
toric cost. Trademarks and patents acquired in a business combination
are recognized at fair value on the acquisition date. Amor tization is
calculated on a straight-line basis at the annual rates described in
note 13.
fi nancial statements # 11
2.11.3 Carbon credits - Carbon Neutral Program
In 2007 the Company assumed to its employees, customers, suppliers
and shareholders the commitment to become a Carbon Neutral com-
pany, which consists of offsetting all the emissions of Greenhouse Gases
(GHGs) by its entire production chain, from raw material extraction to
post-consumption. Even though this commitment is not a legal obligation,
since Brazil did not adopt the Kyoto Protocol requirements, it is consi-
dered a constructive obligation, under CPC 25 - Provisions, Contingent
Liabilities and Contingent Assets, which required the recognition of a
provision in the fi nancial statements if it can result in a disbursement and
be realizably measured.
The liability is estimated using audited carbon emission inventories taken
on an annual basis and valued based in the average price per ton of car-
bon of outstanding contracts and the estimated prices of future carbon
purchases. As of December 31, 2011, the liability’s balance recognized in
line item “Other provisions” (see note 18) refers to total carbon emissions
in 2007-2011 that were not fully offset through the related projects, thus
preventing the awarding of a carbon neutral certifi cate.
In line with its beliefs and principles, the Company elected not to directly
purchase any carbon credits and invested, instead, in socio-environmental
projects in communities. Accordingly, the expenses incurred will produce
carbon credits as these projects are completed or mature. During this pe-
riod, these expenses are recognized at cost as intangible assets (see note
13) as they represent a right for future use. As of December 31, 2011,
the balance recognized in intangible assets refers to expenses incurred
in socio-environmental projects that will result in future carbon neutral
company certifi cates.
The obligation to become a carbon neutral company will be met when the
related carbon neutral company certifi cates are actually awarded to the
Company, and thus these assets will be offset against said liabilities.
The difference between the assets and liabilities as of December 31, 2011
refers to the cash amounts that the Company will still disburse on other
socio-environmental projects to ensure the future issuance of carbon neu-
tral company certifi cates.
The accounting methodology was designed in accordance with IAS 8 -
Accounting Policies, Changes in Accounting Estimates and Errors, which
prescribes that in the absence of a standard, interpretation or guideline
that specifi cally applies to a transaction, management shall use its judgment
in developing and applying an accounting policy that results in informa-
tion that is relevant to the economic decision-making needs of users and
reliable, in that the fi nancial statements represent faithfully the fi nancial
position, fi nancial performance and cash fl ows of the entity.
2.12. Research and product development expenses
In view of the high level of innovation and the turnover rate of the pro-
ducts in the Company’s sales portfolio, the Company adopts the accoun-
ting 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 does not retain 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 Group retains 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 present value of minimum
lease payments.
Each lease payment is apportioned between liabilities and the fi nance
charges so as to permit obtaining a constant effective interest rate on the
outstanding liability. The corresponding obligations, less the 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 their useful lives, as described in note
2.10, or over the lease term, when it is shorter.
2.14. Impairment assessment
102
Property, plant and equipment, intangible assets and, when applicable,
other noncurrent assets are annually tested to identify evidences of impair-
ment, or also signifi cant events or changes in circumstances that indicate
the carrying value of an asset may not be recoverable. Where 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
income statement.
For impairment assessment purposes, assets are grouped at the lowest le-
vels for which there are separately identifi able cash fl ows (cash-generating
units, or CGUs).
2.15. Trade payables
These are initially recognized at their nominal amounts, plus interest, infl a-
tion adjustments and exchange differences through the end of the repor-
ting period, when applicable.
2.16. Borrowings and fi nancing
Initially recognized at fair value of proceeds received less transaction costs,
plus charges, interest, adjustments and exchange differences incurred
through the end of the reporting period, as shown in note 14.
2.17. Provision for tax, civil, and labor contingencies
The provisions for contingent liabilities are recognized when the Group
has a legal or constructive obligation as a result of past events, and it is
probable that disbursements will be required to settle the obligation, and
its value can be reliably estimated. Provisions are quantifi ed at the present
value of the expected disbursement to settle the obligation using the ap-
propriate discount rate, according to related risks.
Adjusted for infl ation through the end of the reporting period to cover
probable losses, based on the nature of contingencies and the opinion of
the Company’s legal counsel. The bases for and nature of the provisions for
tax, civil, and labor contingencies are described in note 17.
2.18. Current and deferred income tax and social contribution
Recognized in the income statement, except, when applicable, in the pro-
portion related to items recognized directly in shareholders’ equity. In
this case, taxes are recognized directly in shareholders’ equity, in line item
“Other comprehensive income”.
Except for the foreign subsidiaries, which apply the tax rates prevai-
ling in each one of the countries where they are located, income tax
and social contribution on the Company’s and its Brazilian subsidia-
ries’ profits are calculated at the tax rates of 25% and 9%, respectively.
Current income tax and social contribution expenses are calculated
using the laws and regulations enacted by the end of the repor ting
period, pursuant to Brazilian tax regulations. Management periodically
measures the positions assumed in the income tax return regarding
the situations where applicable tax law is subject to possibly different
interpretations and, when appropriate, recognizes provisions based
on the amounts it expects to pay tax authorities.
Deferred income tax and social contribution are calculated on tem-
porary differences between the tax base of assets and liabilities and
their carrying amounts. Deferred income tax and social contribution
are calculated using the tax rates enacted on the end of the repor ting
period 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 and social contribution assets are recognized
only to the extent that there is a reasonable cer tainty that future
taxable income will be available and against which temporary diffe-
rences can be offset.
The amounts of deferred income tax and social contribution assets and
liabilities are only utilized when there is a legally enforceable right to off-
set current tax assets against tax liabilities and/or when current 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.
fi nancial statements # 11
2.19. Stock option plan
The Company offers equity-settled share-based compensation plans
to its executives.
The stock option plan is measured at fair value on grant date and is
expensed during the vesting period as a balancing item to “Additio-
nal paid-in capital”, in shareholders’ equity. At the end of the repor-
ting period, the Company’s management reviews its estimates on the
number of options vesting based on the conditions fulfilled and, when
applicable, recognizes in the income statement the effect arising from
the revision of the initial estimates as a balancing item to sharehol-
ders’ equity. The details are disclosed in note 23.2..
2.20. Profit sharing
The Company recognizes a profit sharing liability and an expense
based on a formula that takes into consideration the net income
attributable to the owners of the Company after cer tain adjustments,
which is linked to the achievement of operational goals and specific
objectives, established and approved at the beginning of each year.
2.21. Dividends and interest on capital
The proposed distribution of dividends and interest on capital made
by the Company’s management included in the por tion equivalent to
the mandatory minimum dividends is recognized in line item “Other
payables” in current liabilities, as it is considered as a legal obligation
provided for by the Company’s bylaws; however, the por tion of divi-
dends exceeding minimum dividends declared by management after
the repor ting period but before the authorization date for issuance
of these financial statements is recognized in line item “Proposed
additional dividends” and their effects are disclosed in note 18.(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’ benefit plans
The costs related to the contributions made by the Group to defi ned-
-contribution retirement plans are recognized on the accrual basis. Ac-
tuarial gains and losses recorded in the retirees’ healthcare expansion
plan are recorded in the income statement in accordance with IAS 19
and CPC 33 – Employee Benefi ts, based on the actuarial calculation
prepared by an independent actuary, as detailed in note 18.
2.23. Revenue and expense recognition
Revenue and expenses are recognized on an accrual basis. Sales re-
venue is recognized when all risks and rewards of ownership of the
product are transferred to the customers.
Income from tax incentives, received in the form of a monetary asset,
is recognized in the income statement when received as a balancing
item to costs and investment already incurred by the Company in
the jurisdiction where the tax incentive is granted. There are no es-
tablished conditions to be met by the Company that might affect the
recognition of tax incentives.
103
The statement of value added was prepared using information ob-
tained in the same accounting records used to prepare the financial
statements and pursuant to the provisions of CPC 09 - Statement of
Value Added. The first par t of this statement includes the wealth cre-
ated 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 par ties
(cost of sales and purchase of materials, electricity, and services from
third par ties, including taxes levied at the time of the acquisition, the
effects of impairment losses, and depreciation and amor tization), and
the value added received from third par ties (equity in investees, fi-
nancial income, and other income). The second par t of the statement
of value added presents the distribution of wealth among personnel,
taxes, fees and contributions, lenders and lessors, and shareholders.
2.25. New and revised standards and interpretations
a) Standards, interpretations and revised standards in effect on
December 31, 2011 which did not have a material impact on the
Company’s financial statements
The following interpretations and revised standards were issued and
were in effect on December 31, 2011. However, they did not have a
material impact on the Company’s financial statements:
Standard Main requirements Effective date
Improvements
to IFRSs - 2010
Amendments to
several standards.
Effective for annual periods
beginning on or after January 1, 2011
Amendments to IFRS 1
Limited exemption from
comparative IFRS 7 disclosures
for fi rst-time adopters
Effective for annual periods
beginning on or after July 1, 2010
Amendments
to IAS 24
Related-party
disclosures
Effective for annual periods
beginning on or after January 1, 2011
Amendments to
IFRIC 14
Prepayments of minimum
funding requirements
Effective for annual periods
beginning on or after January 1, 2011
Amendments to
IAS 32
Classifi cation of
issue rights
Effective for annual periods
beginning on or after
February 1, 2010
IFRIC 19
Extinguishing fi nancial liabilities
with equity instruments
Effective for annual periods
beginning on or after July 1, 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 the Company’s annual periods beginning on or
after December 31, 2011. However, the Company did not early adopt
these standards and revised standards.
Standard Main requirements Effective date
IFRS 9 (as amended
in 2010)
Financial instruments
Effective for annual periods
beginning on or after January 1, 2013
Amendments to IFRS 1 Removal of fi xed dates
for fi rst-time adopters
Effective for annual periods
beginning on or after July 1, 2011
Amendments to IFRS 7 Disclosures - transfers
of fi nancial assets
Effective for annual periods
beginning on or after July 1, 2011
The por tion of tax incentives recognized in the income statement is
allocated to the tax incentive reserves, in the “Earnings reserves”, in
shareholders’ equity.
Amendments to
IAS 12
Deferred taxes - recovery of the Effective for annual periods
underlying assets when an
asset is measured using the
fair value model in IAS 40
beginning on or after January 1, 2012
2.24. Statement of value added
The purpose of this statement is to disclose the wealth created by
the Company and its distribution during a cer tain repor ting period,
and is presented by the Company, as required by the Brazilian Corpo-
rate Law, as an integral par t of its individual financial statements, and
as additional disclosure of the consolidated financial statements, since
this statement is not required by IFRSs.
IAS 28 (Revised in 2011) Revision of IAS 28
Investments in
Associates and
Joint Ventures
to include the changes
changes introduced by IFRSs
10, 11 and 12.
IAS 27 (Revised in 2011) IAS 27 requirements related
Separate Financial
Statements
to consolidated fi nancial
statements are replaced by
IFRS 10. The requirements
for separate fi nancial statements
are maintained.
Effective for annual periods
beginning on or after January 1, 2013.
Effective for annual periods
beginning on or after January 1, 2013.
fi nancial statements # 11
Effective for annual periods
beginning on or after January 1, 2013.
rates. The Company reviews regularly deferred tax assets in terms of
possible recover y, considering the history of earnings generated and
projected future taxable income, based on a technical feasibility study.
104
IFRS 10 -
Consolidated
Financial
Statements
IFRS 11 -
Joint Arrangements
IFRS 12 - Disclosure
of Interests in Other
Entities
IFRS 13 -
Fair Value
Measurement
Replaces the IAS 27
requirements applicable to
consolidated fi nancial statements
and SIC 12. IFRS 10 provides
a single consolidation model
that identifi es control as the
basis for consolidation for all
types of entities.
Effective for annual periods
beginning on or after January 1, 2013.
Eliminated the proportionate
consolidation model for jointly beginning on or after January 1, 2013.
controlled entities and maintained
equity method model only. It
also eliminates the concept to
‘jointly controlled assets’ and
maintains only ‘jointly controlled
operations’ and ‘jointly
controlled entities’.
Expands the current disclosure Effective for annual periods
requirements in respect of
entities, whether or not
consolidated where the
entities have infl uence.
Replaces and consolidates
in a single standard all
the guidance and requirements
in respect of fair value measurement
contained in other IFRSs.
IFRS 13 defi nes fair value and
provides guidance on how to
measure fair value and
requirements for disclosure
relating to fair value
measurement. However,
it does not introduce any
new requirement or amendment
with respect to items to be measured
at fair value, which remain as
originally issued.
Effective for annual periods
beginning on or after January 1, 2013.
Amendments to
IAS 19 - Employee
Benefi ts
Effective for annual periods
beginning on or after January 1, 2013.
Eliminates the corridor
approach and requires,
recognition of actuarial gains
and losses as other comprehensive
income for pension plans and
other long-term benefi ts in profi t
or loss, when earned or
incurred, among other changes.
Amendments to IAS 1 -
Presentation of
Financial Statements
Introduces the requirement that Effective for annual periods
all items recognized in
other comprehensive income
be separated into and totaled as
items that are and items that
are no subsequently reclassifi ed
to profi t or loss.
beginning on or after January 1, 2013.
Considering the current operations of the Group, management does
not expect these new rules, interpretations and changes to have a
material impact on the financial statements as from their adoption.
The CPC has not yet issued the pronouncements and amendments
related to the new and revised IFRSs presented above. Because of
the CPC’s and the CVM’s commitment to keep the set of standards
issued updated according to the changes made by the IASB, we ex-
pect 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 the use of certain
critical accounting estimates and the exercise of judgment by the
Company’s management in the process of application of accounting
policies.
The accounting estimates and underlying assumptions are reviewed
on an ongoing basis and are based on historical experience and other
factors that are considered to be relevant in the circumstances. Actual
results may differ from those estimates. The effects resulting from the
revision of accounting estimates are recognized in the revision period.
These significant 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 financial sta-
tements and the tax base assets and liabilities using statutory tax
b) Provision for tax, civil, and labor contingencies
The Company is a par ty to several lawsuits and administrative pro-
ceedings, as described in note 17. Provisions are recognized for all
contingent liabilities arising from lawsuits that represent probable los-
ses and can be reliably estimated. The probability assessment includes
assessing available evidences, the hierarchy of laws, available previous
decisions, most recent cour t decisions and their relevance within the
legal system, and the assessment of the outside legal counsel. Mana-
gement believes that these provisions for tax, civil and labor contin-
gencies are fairly presented in the financial 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 se-
ries of assumptions, for example, the discount and other rates, which
are disclosed in note 23.2. The change in one of these estimates could
impact the results presented.
4. FINANCIAL RISK MANAGEMENT
4.1 General considerations and policies
Risks and the financial instruments are managed through the defini-
tion of policies and strategies and implementation of control systems,
defined by the Company’s Treasury Committee and approved by the
Board of Directors. The compliance of the treasury area’s positions
in financial instruments, including derivatives, in relation to these po-
licies, is presented and assessed on a monthly basis by the Treasury
Committee and subsequently submitted to the analysis of the Audit
Committee, the Executive Committee and the Board of Directors.
Risk management is performed by the Company’s general treasury
function, which is also responsible for approving the short-term invest-
ments and loan transactions conducted by the Group’s subsidiaries.
4.2. Financial risk factors
The Group’s activities expose them to several financial 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 financial markets and seeks to minimize potential
adverse effects on the financial performance, using derivatives to pro-
tect cer tain risk exposures.
a) Market risks
The Group is exposed to market risks arising from their business
activities. These risks mainly comprise possible changes in exchange
and interest rates.
i) Foreign exchange risk
The Group is exposed to the foreign exchange risk arising from fi-
nancial instruments denominated in currencies different from their
functional currencies. To reduce this exposure, the Group implanted
a policy to hedge against the foreign exchange risk that establishes
exposure limits linked to this risk (Foreign Exchange Hedging Policy).
The treasury area’s procedures defined by the current policy include
monthly projection and assessment of the Company’s and its subsi-
diaries’ foreign exchange exposure, on which management’s decision-
-making is based.
The Foreign Exchange Hedging Policy considers foreign currency-
-denominated amounts from receivables and payables related to
commitments already assumed and recorded in the interim financial
information based on the Company’s operations.
fi nancial statements # 11
As of December 31, 2011 and 2010, the Group is basically exposed to risks
of fl uctuations in the U.S. dollar. To hedge against foreign exchange expo-
sures, the Group contracts derivative (swaps) and non-deliverable forward
(NDF) transactions. The Foreign Exchange Hedging Policy establishes that
the derivatives contracted by the Group should limit loss due to exchange
rate depreciation related to the net income estimated for the current year
considering the expected depreciation of the Brazilian real against the U.S.
dollar. This limit sets the cap on the maximum foreign exchange exposure
that the Group can undertake in relation to the U.S. dollar.
As of December 31, 2011, the Company’s and the consolidated balance
sheets include accounts denominated in foreign currency which, in the ag-
gregate, represent net liabilities of R$438,667 and R$444,894, respectively
(R$52,567 and R$58,675 as of December 31, 2010, respectively). These
accounts are substantially represented by borrowings and fi nancing which,
as of December 31, 2011, are hedged by swap arrangements.
Derivatives to hedge foreign exchange risk
The Company classifi es derivatives into “fi nancial” and “operating”. “Finan-
cial” derivatives include swaps or forwards contracted to hedge against the
foreign exchange risk associated with foreign-currency-denominated bor-
rowings and fi nancing. “Operating” derivatives (usually forwards) include
derivatives contracted to hedge against the foreign exchange risk on the
business’s operating cash fl ows.
As of December 31, 2011, outstanding swap and forward contracts, with
maturities between January 2013 and January 2018, were entered into the
counterparties represented by the banks Bradesco (25%), Banco do Brasil
(12%), Bank of America (62%) and HSBC (1%), broken down as follows:
105
Financial swaps - Company
Type of transaction
Swap contracts (1)
Asset position:
Long position - U.S. dollar
Liability position:
CDI fl oating rate:
Short position in CDI
Financial swaps - consolidated
Type of transaction
Swap contracts (1)
Asset position:
Long position - U.S. dollar
Liability position:
CDI fl oating rate:
Short position in CDI
Principal
2011
2010
Fair value Gain (loss) for the year
2010
2010
2011
2011
396,938
53,534
435,094
52,121
28,184
(2,110)
396,938
53,534
406,910
54,231
-
-
Principal
2011
2010
Fair value Gain (loss) for the year
2010
2010
2011
2011
404,662
59,817
442,574
57,367
28,626
(2,830)
404,662
59,817
413,947
60,197
-
-
Operating forwards - Company and consolidated
Type of transaction
Forward contracts (2):
Asset position:
Long position - U.S. dollar
Principal
2011
2010
Fair value Gain (loss) for the year
2010
2010
2011
2011
-
34,542
-
34,555
-
(1,231)
Liability position:
Fixed rates:
Short position in fi xed rate
-
34,542
-
35,786
-
-
(1) Swap transactions consist of swapping the exchange rate fl uctuation for a percentage of the fl oating rate Interbank Deposit Rate (CDI).
(2) Forward transactions establish a future parity between the Brazilian real and the foreign currency based on their equivalence when contracted, adjusted
by a fi xed interest rate.
The notional amount represents the amounts of the contracted
derivatives. Fair value refers to the value of outstanding contracted
derivatives recognized in balance sheets.
For derivatives maintained by the Group as of December 31, 2011
and 2010, due to the fact contracts are directly entered into with
the financial institutions and not through a Mercantile and Futures
Exchange, there are no margin calls deposited as guarantee of the
related transactions.
Total borrowings and fi nancing
in foreign currency
(*)
Receivables in foreign currency
Payables in foreign currency
Company Consolidated
438,667
444,894
-
15,043
(5,231)
18,765
Notional amounts of fi nancial derivatives
(435,543)
(439,742)
Net asset (liability) exposure
18,168
18,685
Sensitivity analysis
For the sensitivity analysis of derivatives, the Company’s management
understands it is necessary to take into consideration corresponding
assets and liabilities with exposure to exchange rates recorded in the
balance sheet, as follows:
(*) The stated amount does not take into account the loan of the Company´s
Peruvian subsidiary totaling R$36,483. Management understands that there
is no foreign exchange exposure on this liability since it will be settled by
the subsidiary with proceeds from transactions in this country, therefore in
the same currency the debt was raised.
fi nancial statements # 11
The tables below show the gain (loss) that would have been recognized
in profi t or loss for the year ended December 31, 2011 based on the
following scenarios:
The tables below show the gain (loss) that would have been
recognized in profit or loss for the year ended December 31, 2011
based on the following scenarios:
Company
Company’s
Probable
Scenario
Scenario
Description risk
scenario
II III
Net liability exposure
Us dollar
appreciation
(322)
(4,542)
(9,084)
Consolidated
Company’s Probable
Scenario
Scenario
Description risk
scenario
II
III
Net liability exposure
Us dollar
appreciation
(331)
(4,671)
(9,342)
The probable scenario considers future U.S. dollar rates obtained at
BM&FBOVESPA for the maturity dates of the fi nancial instruments
exposed to foreign exchange risks. Scenarios II and III consider a 25%
(R$2.34/US$1.00) and 50% (R$2.81/US$1.00) appreciation of U.S. dollar,
respectively. Probable scenarios II and III are presented as required by
CVM Instruction 475/08. In assessing possible changes in exchange rates,
management uses the probable scenario, which is being presented for
compliance with IFRS 7 – Financial Instruments: Disclosures.
The Group does not use derivatives for speculative purposes.
ii) Interest rate risk
The interest rate risk arises from shor t-term investments and loans.
Financial instruments issued at floating rates expose the Group to
cash flow risks associated with the interest rate. Financial instruments
issued at fixed rates expose the Group to fair value risks associated
with the interest rate.
The Company’s cash flow risk associated with the interest rate arises
from shor t-term investments and shor t- and long-term loans and
financing issued at floating rates. The Company’s management adopts
the policy of maintaining its rates of exposure to asset and liability
interest rates pegged to floating rates. Shor t-term investments are
adjusted by the Interbank Deposit Rate (CDI) whereas borrowings
and financing are adjusted based on the Long-term Interest Rate
(TJLP), CDI and fixed rates, according to the contracts made with
the related financial institutions, and trading securities with investors
in this market.
Management believes that the risk of significant changes in the CDI
and TJLP in the next 12 months is low taking into consideration the
stability achieved with the current monetary policy implemented by
the Federal Government, in addition to the history of increases in
Brazilian policy rate over the past years. For this reason, the Company
has not conduct derivative transactions to hedge against this risk.
The Group contracts swap transactions to mitigate risks on borrowing
and financing transactions subject to an index other than CDI, TJLP or
fixed rates. However, as of December 31, 2011 and 2010, the Group
did not have this type of derivative as they assessed the related risk
as very low, as described below.
Sensitivity analysis
As described in the foreign exchange risk section above, as of
December 31, 2011 almost all
foreign-currency-denominated
borrowings and financing are hedged by swap arrangements that
exchange the foreign-currency liability index for the CDI rate
fluctuation, in light of the Company’s policy to hedge such risks. The
Company is, therefore, exposed to CDI fluctuation. The table below
presents the exposure to interest rate risks of transactions pegged to
CDI and TJLP, including derivative transactions:
106
Company Consolidated
Total borrowings and fi nancing
- in local currency (note 14)
(480,305)
(705,322)
Derivatives pegged to CDI/TJLP
(438,667)
(444,894)
Short-term investments (note 5)
138,078
424,159
Net liability exposure
(780,895)
(726,057)
The sensitivity analysis considers the exposure of borrowings and
financing pegged to CDI and TJLP rates, net of shor t-term investments,
also pegged to the CDI rate (note 5).
The tables below show the loss (gain) that would have been
recognized in profit or loss for the year ended December 31, 2011
based on the following scenarios:
Company
Company’s
Probable
Scenario
Scenario
Description risk
scenario
II III
Net liabilities
Interest rate
increase
1,328
(19,561)
(40,450)
Consolidated
Company’s
Probable
Scenario
Scenario
Description risk
scenario
II III
Net liabilities
Interest rate
increase
1,234
(18,188)
(37,610)
The probable scenario considers future interest rates obtained at
BM&FBOVESPA for the maturity dates of the financial instruments
exposed to interest rate risks. Scenarios II and III consider an increase
in the interest rate of 25% (13.4% per year) and 50% (16.1% per
year), respectively.
b) Credit risk
Credit risk refers to risk of a counterpar ty not complying with its
contract obligations, which would result in financial losses for the
Company. Sales of the Group are made to a great number of sales
representatives (Natura Beauty Consultants) and this risk is managed
through a strict credit granting process. The result of this management
is reflected in the ‘Allowance for doubtful accounts’, as explained in
note 6.
The Group is also subject to credit risks related to financial instruments
contracted for the management of its business, primarily represented
by cash and cash equivalents, shor t-term investments and derivative
instruments.
The Company believes that the credit risk of transactions with
financial institutions is low, as these are considered by the market as
prime banks.
The Policy for Shor t-term Investments adopted by the Company’s
management establishes the financial institutions with which the
Group can do business and defines fund allocation limits and the
amounts that may be invested in each of these financial institutions.
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 flows against unused credit facilities.
The carrying amounts of financial liabilities is measured at amor tized
cost, and their corresponding maturities are as follows:
fi nancial statements # 11
Company as of
December 31, 2011
Current:
Borrowings and fi nancing
Trade payables
Derivatives
Noncurrent:
Less than
one year
One to
two years
Two to
fi ve years
More than
Fair value
Discount
Carrying
fi ve years 2011 effect
amount 2011
107
118,949
148,805
29,555
-
-
-
-
-
-
-
-
-
118,949
148,805
29,555
(52,525)
-
(1,371)
66,424
148,805
28,184
Borrowings and fi nancing
-
810,404
53,284
80,154
943,842
(91,293)
852,549
Consolidated as of
December 31, 2011
Current:
Borrowings and fi nancing
Trade payables
Derivatives
Noncurrent:
Less than
one year
One to
two years
Two to
fi ve years
More than
Fair value
Discount
Carrying
fi ve years 2011 effect
amount 2011
199,515
454,093
29,948
-
-
-
-
-
-
-
-
-
199,515
454,093
29,948
(30,553)
-
(1,322)
168,962
454,093
28,626
Borrowings and fi nancing
-
890,243
146,652
94,300
1,131,195
(113,458)
1,017,737
4.3. Capital management
The Company’s objectives in managing its capital are to ensure that the
Company is continuously capable of offering return to its shareholders and
benefi ts to other stakeholders, and maintain an optimal capital structure to
reduce this cost.
The Company monitors capital based on the fi nancial leverage ratios. This
ratio corresponds to the net debt divided by the total capital. The net debt
corresponds to total borrowings and fi nancings (including short- and long-
term borrowings, as shown in the consolidated balance sheet), deducted
from cash and cash equivalents. The net debt shown below does not take
into consideration the adjustments to derivatives contracted to mitigate the
foreign exchange risk.
The consolidated fi nancial leverage ratios as of December 31, 2011 and
2010 are as follows:
Company
2010
Consolidated
2010
2011
2011
Short- and long-term
borrowings and fi nancing
Cash and cash equivalents
Net debt
918,973
(166,007)
752,966
428,442
(206,125)
222,317
1,186,699
(515,610)
671,089
691,663
(560,229)
131,434
the repor ting period, with the resulting amount being discounted to
present value.
Fair value of fi nancial instruments at amortized cost
Short-term investments
The carrying amounts of the short-term investments approximate their fair
values as transactions are conducted at fl oating interest rates and can be
immediately redeemable.
Borrowings and fi nancing
The carrying amounts of borrowings and fi nancing, except those pegged to
a fi xed rate, approximate their fair values as they are pegged to a fl oating
rate, the CDI fl uctuation. The carrying amounts of fi nancing pegged to TJLP
approximate their fair values as the TJLP is also pegged to CDI and is a fl oating
rate.
The fair value of borrowings and fi nancing contracted at fi xed interest rates
does not have signifi cant variation related to the book value disclosed in note
14.
Shareholders’ equity
Financial leverage ratio
1.238,553
60,79%
1,257,501
17,68%
1,238,554
54,18%
1,257,502
10,45%
Trade and other payables
4.4. Fair value estimate
Financial instruments are measured at fair value at the end of the
repor ting period as prescribed by CPC 40 – Financial Instruments:
Disclosures and according to the following hierarchy:
• Level 1: Prices quoted (unadjusted) in active markets for identical
assets or liabilities. 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.
• Level 2: Used for financial instruments that are not traded in active
markets (for example, over-the-counter derivatives) and whose fair
value is determined using valuation techniques that, in addition to
the quoted prices, included in Level 1, use other inputs adopted by
the market for assets or liabilities, whether directly (i.e., prices) or
indirectly (i.e., derived from prices).
• Level 3: Inputs for assets or liabilities that are not based on the data
adopted by the market (i.e., unobservable inputs).
As of December 31, 2011 and 2010, the measurement of all the
Company’s and its subsidiaries’ derivatives falls under the Level 2
characteristics. The fair value of exchange rate derivatives (swap and
forwards) is determined based on the exchange rate at the end of
It is estimated that the carrying amounts of trade receivables and trade
payables approximate their fair values in view of the short term of the
transactions conducted.
5. CASH AND CASH EQUIVALENTS
Cash and banks
Floating rate Bank certifi cates
of deposit (CDBs)
Company
2010
9,688
Consolidated
2010
38,314
2011
98,208
2011
27,929
138,078
166,007
196,437
206,125
417,402
515,610
521,915
560,229
As of December 31, 2011, the CDBs yield interest ranging from 100.0% to 101.5% of CDI (100.0%
to 101.5% as of December 31, 2010).
6. TRADE RECEIVABLES
Trade receivables
Allowance for
doubtful accounts
Company
2010
550,355
Consolidated
2010
635,944
2011
706,861
2011
591,480
(56,171)
535,309
(56,663)
493,692
(64,989)
641,872
(65,664)
570,280
The aging list of trade receivables is as follows:
fi nancial statements # 11
Current
Past due:
Up to 30 days
31 to 60 days
61 to 90 days
91 to 180 days
Company
2010
432,703
Consolidated
2010
492,947
2011
543,472
2011
452,392
102,107
14,029
9,950
13,002
591,480
79,136
10,897
8,072
19,547
550,355
117,560
16,254
13,306
16,269
706,861
93,967
16,777
9,406
22,847
635,944
The balance of trade receivables in consolidated is basically denominated
in Brazilian reais, and approximately 89% of the outstanding balance as of
December 31, 2011 refers to real-denominated transactions (91% as of
December 31, 2010). 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 period ended
December 31, 2011 are as follows:
Company
Balance
at 2010
Reversals (b)
(56,663) (82,860) 83,352
Additions (a)
Consolidated
Balance
at 2010
Reversals (b)
(65,664) (88,277) 88,952
Additions (a)
Balance
at 2011
(56,171)
Balance
at 2011
(64,989)
(a) Allowance recognized according to note 2.7..
(b) Refers to accounts that are over 180 days past due that were written
off due to uncollectible amounts.
The expense on the recognition of the allowance for doubtful accounts
was recorded in ‘Selling expenses’ in the income statement. When recovery
of additional cash is less than probable, the amounts credited to line item
‘Allowance for doubtful accounts’ are in general reversed against the defi nite
write-off of the receivable and is recorded in net income or loss.
Maximum exposure to credit risk at the reporting date is the carrying
amount of each aging range, net of the allowance for doubtful accounts, as
shown in the aging list above. The Group does not have any guarantee for
past-due receivables.
7. INVENTORIES
Finished products
Raw materials and packaging
Promotional material
Work in progress
Allowance for losses
Company Consolidated
2011 2010
465,027
565,739
127,305
149,806
37,576
52,288
17,290
16,314
(95,399) (75,673)
688,748 571,525
2010
181,188
-
14,383
-
(10,479)
185,092
2011
219,626
-
18,560
-
(20,280)
217,906
The changes in the allowance for inventory losses for the year ended December 31, 2011
are as follows:
Company
Balance
Reversals (b)
at 2010
(10,479) (20,741) 10,940
Additions (a)
Consolidated
Balance
at 2010
Reversals (b)
(75,673) (66,900) 45,175
Additions (a)
Balance
at 2011
(20,280)
Balance
at 2011
(95,399)
(a) Refer basically to the recognition of the allowance for losses due to
discontinuation, expiration and quality, to cover expected losses on the
realization of inventories, pursuant to the Group’s policy.
(b) Consist of write-offs of products discarded by the Company.
8. RECOVERABLE TAXES
108
Company Consolidated
2011 2010
97,888
154,942
3,022
-
7,120
8,296
2011
-
-
8,296
2010
-
3,022
7,120
ICMS on purchases of goods
Refundable ICMS - ST on interstate sales, RS
Refundable ICMS - ST on interstate sales, SP (a)
Refundable ICMS - ST - voluntary
reporting proceeding, SP (b)
Taxes - foreign subsidiaries
ICMS on purchases of fi xed assets
PIS and COFINS on purchases of fi xed assets
PIS and COFINS on purchase of goods
PIS and COFINS resulting from win
on a lawsuit (c)
IRPJ and CSLL on freight
PIS, COFINS and CSLL - withheld at source
Other
Provision for discount on sale
of ICMS credits
Current
Noncurrent
-
-
15,428
-
45,012
11,887
728
-
365
-
-
6,825
-
19,743
-
10
-
3,000
-
22,170
24,318
7,376
68,187
16,852
3,236
2,024
8,834
16,421
21,567
16,136
11,826
20,025
-
1,746
5,574
12,282
- -
(3,376)
(2,879)
81,716 39,720
312,859 210,728
69,417 34,799
201,620
101,464
12,299 4,921
111,239
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 State of São Paulo, pursuant to São
Paulo State tax legislation in effect since February 2008. In 2010, São Paulo
State Department of Finance (SeFaz - SP) granted the Company a special
regime that allows it to offset the credits through the “Fast Track”, in which
the credits are offset in the month following its computation, through a
bank guarantee.
(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). Said voluntary reporting request
clarifi ed and permitted the application of the procedures necessary to
regularize the transactions carried out by this subsidiary during the referred
period. The requirements were met and the credit was fully offset in 2011.
(c) The stated amount refers to the recognition of PIS and COFINS tax
credits as a result of the favorable outcome in a lawsuit claiming the
unconstitutionality and illegality of the PIS and COFINS taxable basis
broadening established by Law 9718/98. See details on note 17 (a)
(contingent assets).
9. INCOME TAX AND SOCIAL CONTRIBUTION
a) Deferred
Deferred Corporate Income Tax (IRPJ) and Social Contribution on Net
Income (CSLL) result from temporary differences in the Company and
in its subsidiaries. These credits are kept recorded in noncurrent assets, as
prescribed by CPC 26 (R1) – Presentation of Financial Statements. The
amounts are as follows:
fi nancial statements # 11
109
9,533
82,379
110,771
73,980
110,678
Total temporary differences:
Tax loss carryforwards:
Argentina
Chile
Mexico
Colombia
France
Tax credits on tax loss carryforwards generated by the subsidiaries can be
carried forward indefi nitely, except for those of the subsidiaries in Argentina
and Mexico, which expire as follows:
2012
2013
2014
2015
2016 and thereafter
Argentina
3,060
4,564
-
1,909
-
9,533
Mexico
-
-
11
7,434
103,326
110,771
b) Reconciliation of income tax and social contribution
Company Consolidated
2011 2010
2011
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 investees (note 12)
Unrecognized deferred taxes on tax losses
generated by foreign subsidiaries
Tax Transition Regime (RTT) - Provisional
Act 449/08 – Law 11,638/07 adjustments
Write-off of goodwill – liquidation
of Flora Medicinal
Interest on capital tax benefi t
Other permanent differences
Income tax and social
contribution expenses
Income tax and social
contribution - current
Income tax and social
contribution - deferred
Effective rate - %
1,161,791 1,053,123
1,237,730 1,118,169
(395,009) (358,062)
(420,828) (380,177)
22,386
6,582
18,628
19,035
5,820
8,760
22,386
9,668
-
19,035
8,296
-
-
-
(28,915)
(31,459)
(774)
649
(3,242)
(1,623)
-
21,067
8,332
18,242
(3,770) (11,849)
-
21,067
8,332
18,242
(6,965) (14,766)
(330,890) (309,073)
(406,829) (374,120)
(323,543) (313,612)
(416,123) (408,233)
(7,347)
28.5
4,539
30.5
9,294
32.9
34,113
33.5
Allowance for doubtful
accounts (note 6)
Allowance for losses
on inventories
realization (note 7)
Reserve for tax, civil and labor
contingencies (note 17)
Non-inclusion of ICMS
in the PIS and
COFINS basis (note 17)
Actuarial liability - healthcare
plan (note 23.2)
Allowance for losses on
swap and forward
contracts (note 24)
Provision for ICMS –
ST, PR, DF, MS, MT
and RJ States (note 16)
Allowances for losses on
advances to suppliers
Accrued contractual obligations
Provision for discount on assignment
of ICMS credits
Accrued benefi ts sharing
and partnerships
Temporary differences
of foreign subsidiaries
Provision for profi t sharing
Depreciation rate adjustments
to useful lives (RTT)
Other temporary differences
Company Consolidated
2011 2010 2011 2010
19,098 19,266 19,098
19,266
6,895 3,563 28,219
21,725
17,743 18,884 36,896
40,375
620
573 39,173
28,869
6,573 4,462
9,565
6,702
(9,583) 1,136
(9,733)
1,381
8,247 13,672
8,247
13,672
1,992 3,879
1,439 1,947
2,137
2,713
4,432
2,777
-
-
1,148
979
6,178 6,874
6,178
6,874
-
3,955
-
9,681
- 10,947
6,562
-
1,420 - (6,989) -
15,568 13,235 32,272 26,645
80,145 87,491 189,552 180,259
Management, based on projections of future taxable income, estimates that
the recorded tax credits will be fully realized within fi ve years.
Tax credits will be realized as follows:
2012
2013
2014
2015 and thereafter
Company
42,679
11,753
4,633
21,080
80,145
Consolidated
83,230
18,180
59,240
28,902
189,552
With respect to the Company’s foreign subsidiaries, except for the operation
in Argentina which reports taxable income, the other subsidiaries do not
record tax credits on tax loss carryforwards and temporary differences in
their fi nancial statements due to the absence of a history of taxable income
and taxable income projections for the coming fi scal years.
As of December 31, 2011, tax credits calculated at the prevailing tax rates
in the countries where the subsidiaries are located, are as follows:
(*) 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.
The changes in income tax and social contribution for the year were as
follows:
fi nancial statements # 11
Company
Charged / (credit)
Balance
at 2010 to profi t or loss
87,491
Balance
at 2011
7,346 80,145
Consolidated
Balance
Charged / (credit)
at 2010 to profi t or loss at 2011
189,552
180,259
(9,293)
Balance
10. ESCROW DEPOSITS
Represent Group’s restricted assets related to amounts deposited and held
by the courts until the litigation to which they are linked is resolved.
The Group’s escrow deposits as of December 31, 2011 and 2010 are as
follows:
Company Consolidated
2011
80,304
2010
53,809
2011 2010
53,809
80,304
110
11. OTHER CURRENT AND NONCURRENT ASSETS
Company Consolidated
2011
2010
2011 2010
Advances to advertisement services
111,690
64,886
112,666
66,246
Asset held for sale
Insurance
-
-
17,752
17,752
1,829
1,565
2,464
2,224
Restricted cash - CDBs (*)
-
-
6,757
6,155
Others
Current
Noncurrent
6,371 6,071
17,079 18,926
119,890 72,522
156,718 111,303
115,328 52,470
126,783 66,399
4,562 20,052
29,935 44,904
(*) Refers to a blocked account pledged as guarantee related to the court
collection of Federal VAT (IPI) for July 1989 when wholesale units were held
equivalent to manufacturing establishments under Law 7798/89. The lawsuit is
ICMS - ST (note 17.(a))
ICMS - ST suspended collection (*)
(note 16 (b))
Other accrued tax obligations
(note 16 (e) and (g))
Other suspended tax obligations (note 16 (c))
Unaccrued tax lawsuits
Accrued tax lawsuits (note 17)
Unaccrued civil lawsuits
Accrued civil lawsuits (note 17)
Unaccrued labor lawsuits
Accrued labor lawsuits (note 17)
88,521
167,019
88,521
167,019
pending a decision on the appeal from the defendant at the Federal Regional
8,556
9,434
10,426
10,955
30,676
34,373
9,600
9,952
938
1,016
1,874
1,886
4,410
5,844
1,762
2,653
244,938 289,070
52,024
10,955
38,254
11,515
1,108
1,992
6,999
4,167
295,839
48,106
10,426
36,034
10,754
1,343
1,976
5,130
2,410
337,007
Court of the 3rd region (São Paulo). Based on the Company’s legal counsel
assessment the likelihood of loss in this lawsuit is possible.
12. INVESTMENTS
Investments in subsidiaries
and jointly controlled entities
Company
2011
2010
1,253,721
1,099,188
Information and changes in the balances for the year ended December 31, 2011
Indústria e
Comércio de
Cosméticos
Natura Ltda.
Natura
Cosméticos
S.A. - Chile
Natura
Cosméticos
S.A. - Peru
Natura
Cosméticos
S.A. -
Argentina
Natura
Cosméticos
C.A. -
Natura
Inovação e
Tecnologia
de Produtos
Venezuela Ltda.
Natura
Cosméticos de
Mexico S.A. (*)
Natura
Cosméticos
Ltda. -
Colombia
Natura
(Brasil)
International
B.V. - The
Netherlands (*)
Natura
Cosméticos
España S.L.
Total
Share capital
Equity interest
526,155
101,336
13,903
106,116
6,609
99.99%
99.99%
99.94%
99.97%
99.99%
Subsidiaries’ shareholders’ equity
1,060,440
20,385
1,486
72,847
Interest in shareholders’ equity
1,060,334
20,383
1,485
72,825
306
306
5,008
99.99%
28,812
28,809
192,975
72,948
85,847
73 1,110,970
99.99%
99.99%
100.00%
100,00%
47,601
13.435
47,596
13.434
8,444
8,444
106 1,253,861
106 1,253,721
Subsidiaries’ net income (loss)
for the year
Carrying amount of investments
124,882
(3,535)
(4,728)
7,685
(1)
15,527
(46,023)
(20.973)
(18,052)
-
54,782
Balance as of December 31, 2010
930,614
23,246
(891)
56,902
Equity in investees
124,881
(3,535)
(4,725)
7,683
273
(1)
45,021
26,950
8.782
8,208
83
1,099,188
15,527
(46,019)
(20.970)
(18,052)
-
54,789
Exchange rate change and other
adjustments on the translation
of investments in foreign subsidiaries
Company’s contribution to the stock
options plan of subsidiaries’ executives
and other reserves
Profi t distribution
Capital increases
-
672
357
2,431
34
89
(384)
1.893
468
-
5,561
4,839
-
-
-
-
-
-
-
-
-
2,171
(34,000)
-
-
-
-
-
-
-
-
7,010
(34,000)
-
- 6,744
5,809
-
-
67,049
23.729
17,819
23
121,173
Balance as of December 31, 2011
1,060,334
20,383
1,485
72,825
306
28,809
47,596
13.434
8,444
106
1,253,721
(*) Consolidated information of the following companies:
Natura Cosméticos de México S.A.: Natura Cosméticos y Servicios de México, S.A. de C.V., Natura Cosméticos de México, S.A. de C.V. and Natura Distribuidora de México, S.A. de C.V.
Natura (Brasil) International B.V. - The Netherlands: Natura (Brasil) 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)
Natura Inovação e Tecnologia de Produtos Ltda.: Ybios S.A. and Natura Innovation et Technologie Produits S.A.S. - France
fi nancial statements # 11
13. PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS
Company
111
PROPERTY, PLANT
AND EQUIPMENT
Vehicles
Leasehold improvements (a)
Machinery and equipment
Buildings
Furniture and fi xtures
IT equipment
Projects in progress
Advances to suppliers
Weighted
average annual
2011
2010
depreciation
Adjusted
Accumulated
Residual
Adjusted
Accumulated
Residual
rate - % cost depreciation amount
21
15
4
7
18
-
-
39,010
35,419
114,844
56,694
11,633
50,867
67,843
2,191
378,501
(16,991)
(11,844)
(7,421)
-
(3,006)
(7,024)
-
-
(46,286)
22,019
23,575
107,423
56,694
8,627
43,843
67,843
2,191
332,215
34,234
23,486
27,668
-
6,264
6,614
11,699
cost depreciation amount
19,743
(14,491)
14,433
(9,053)
24,650
(3,018)
-
-
3,680
(2,584)
2,811
(3,803)
11,699
-
15,159
15,159 -
92,175
125,124 (32,949)
Company
INTANGIBLE
ASSETS
Software and other
Carbon credits (c)
Software and other
Weighted
average annual
2011
2010
amortization
Adjusted
Accumulated
Residual
Adjusted
Accumulated
Residual
rate - % cost amortization amount
17
17
88,848
(17,356)
7,437 -
96,285 (17,356)
71,492
7,437
78,929
cost amortization amount
13,248
23,852
(10,604)
5,338
5,338 -
18,586
29,190 (10,604)
Consolidated
PROPERTY, PLANT
AND EQUIPMENT
Machinery and equipment
Buildings
Installations
Land
Molds
Vehicles
IT equipment
Furniture and fi xtures
Leasehold improvements (a)
Projects in progress
Advances to suppliers
Other
Weighted
average annual
2011
2010
depreciation
Adjusted
Accumulated
Residual
Adjusted
Accumulated
Residual
rate - % cost depreciation amount
6
4
9
-
30
21
19
11
15
-
-
3
410,901
207,836
132,919
27,214
116,068
59,490
76,305
32,976
50,599
80,563
47,724
(145,342)
(60,400)
(73,512)
-
(87,966)
(22,430)
(23,933)
(11,937)
(18,581)
-
-
4,196 (2,256)
1,246,791 (446,357)
265,559
147,436
59,407
27,214
28,102
37,060
52,372
21,039
32,018
80,563
47,724
1,940
800,434
308,262
151,161
120,440
27,180
105,362
56,361
75,749
27,164
44,273
35,489
28,648
cost depreciation amount
183,947
(124,315)
96,856
(54,305)
55,374
(65,066)
27,180
-
25,441
(79,921)
35,180
(21,181)
29,780
(45,969)
15,238
(11,926)
25,548
(18,725)
35,489
-
28,648
-
1,786
3,897 (2,111)
560,467
983,986 (423,519)
Consolidated
Weighted
average annual
2011
2010
amortization
Adjusted
Accumulated
Residual
Adjusted
Accumulated
Residual
rate - % cost amortization amount
INTANGIBLE
ASSETS
Software
Carbon credits (c)
Business lease - Natura Europa SAS – France (b)
Trademarks and patents
cost amortization amount
109,946
(73,376)
5,338
-
4,629
-
160
(1,413)
(74,789) 120,073
183,322
5,338
4,629
1,573
194,862
18
-
-
10
182,890
7,437
5,074
1,652
197,053
(32,676)
-
-
(1,623)
(34,299)
150,214
7,437
5,074
29
162,754
fi nancial statements # 11
(a) The amortization rates take into consideration the lease terms of leased
properties, which range from three to fi ve years.
(b) 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, the value of which does
not decrease over time. The change in the balance between December
31, 2011 and December 31, 2010 is basically due to the effects of the
exchange fl uctuation for the period.
(c) Carbon Neutral Program (note 2.11.3).
The Company reviewed the remaining useful lives of the property, plant and
equipment items and intangible assets and recorded the resulting effects
beginning January 1, 2010. As a result of the revision of this accounting
estimated, which had the purpose of aligning the remaining useful lives of the
assets and, consequently, the remaining depreciation with the residual lives
of the assets, the Company recorded an impact, credited to depreciation in
2011, as compared to depreciation recorded in the previous year, totaling
R$11,482.
Additional information on property, plant and equipment:
a) Assets pledged as collateral
As of December 30, 2011, the Group has property, plant and equipment
items pledged as collateral of bank fi nancing and loan transactions, as well as
items attached to the defense of lawsuits, as shown below:
4,229
3,477
3,171
10,877
Company Consolidated
4,229
4,063
3,171
11,463
Vehicles
IT equipment
Machinery and equipment
Balances at yearend
b) Leases
In 2011 the Company entered into fi nance lease transactions to purchase
property, plant and equipment totaling R$56,694, recognized in line item
“Buildings” and “sale leaseback” transactions totaling R$24,537, recognized
in line item “Machinery and equipment” . As of December 31, 2011, the
balance of lease payables, classifi ed in line item “Borrowings and fi nancing”
(note 14) totals R$79,673.
c) Balance of capitalized interest
Buildings
Changes in property, plant and equipment
Consolidated
2010
1,479
2011
1,427
Company Consolidated
Balance at beginning of year
Additions (less transfers from projects
in progress - when terminated):
Machinery and equipment
Projects in progress/advances to suppliers
Vehicles
Molds
Facilities
IT equipment
Furniture and fi xtures
Other
Leases
Depreciation
Transfers and disposals, net
Balance at yearend
2011
92,175
2010
50,375
2011 2010
560,467 492,256
28,373
114,902
15,069
-
-
40,611
4,176
8,884
32,389
13,498
-
-
769
545
4,777 1,036
57,121
207,908
56,694
-
(12,615)
(20,814)
(3,748) (2,706)
92,175
332,215
45,037
165,726
21,031
15,344
6,112
11,377
5,679
29,669
84,555
24,193
16,986
7,208
7,304
1,618
5,524 3,696
275,830 175,228
-
56,694
(69,412)
(84,108)
(8,449) (37,605)
800,434 560,467
112
Changes in intangible assets
Company Consolidated
2011
2010
2011 2010
Balance at beginning of year
18,586
11,527
120,073
82,740
Additions:
Software (includes implementation costs)
64,993
4,411
66,402
56,310
Carbon credits
4,135
5,338
4,135
5,338
69,128
9,749
70,537
61,648
Transfers and disposals, net
(2,034)
-
(2,043)
(4,879)
Amortization
(6,751)
(2,690)
(25,813)
(19,436)
Balance at year end
78,929
18,586
162,754
120,073
14. BORROWINGS AND FINANCING
Company Consolidated
2011
2010
2011
2010
Reference
Local currency
BNDES - EXIM
FINEP (Financing Agency for
Studies and Projects)
-
-
-
67,607
116,388
A
-
27,106
27,633
B
C
D
E
F
G
H
I
J
K
L
M
N
O
Debentures
353,256
352,669
353,256
352,669
BNDES
21,708
23,206
141,689
110,996
Guaranteed account
Working capital
BNDES FINAME
Banco do Brasil - FAT Fomentar
(Workers’ Assistance Fund)
-
48,613
-
-
Finance leases
56,729
-
-
-
-
-
-
2,001
48,613
-
7,336
6,506
2,697
3,908
56,729
940
FINEP - grant
-
-
289
2,086
Total local currency
480,306
375,875
705,322
623,127
Foreign currency
BNDES - EXIM
-
-
-
1,229
BNDES
4,486
2,479
10,713
7,358
Resolution 4131/62
411,237
50,088
411,238
50,088
International operation - Peru
-
-
36,483
9,861
Machinery fi nancing
22,944
-
22,944
-
Total foreign currency
438,667
52,567
481,377
68,536
Grand total
918,973
428,442
1,186,699
691,663
Current
66,424
60,086
168,962
226,595
Noncurrent
852,549
368,356
1,017,737
465,068
fi nancial statements # 11
113
Reference
Currency
Maturity
Charges
Collaterals
A
B
C
D
E
F
G
H
I
J
K
L
Real
Real
Real
Real
Real
Real
Real
Real
Real
Real
Dollar
Dollar
March 2014
Interest of 2.5% p.a. + TJLP (462)
Guarantee of Natura Cosméticos S.A.
March 2013 and
TJLP (b) for the installment maturing
Guarantee of Natura Cosméticos S.A.
May 2019
in 2013 and interest of 5% for the
and bank guarantee
installment maturing in May 2019
May 2013
January 2018
Interest of 108% of CDI (c)
N/A
TJLP (b) for the installment maturing
Bank guarantee
in March 2016 + interest of
0.7% to 2.8% p.a.
April 2011
January 2012
123.9% of CDI (c) p.a. + IOF (b)
Guarantee of Natura Cosméticos S.A.
105.5% of CDI (c) p.a. + IOF (b)
Guarantee of Natura Cosméticos S.A.
September 2016
Interest of 4.5% p.a. + TJLP
Chattel mortgage, guarantee of Natura
Cosméticos S.A. and promissory notes
February 2014
Interest of 4.4% p.a. + TJLP
Chattel mortgage, guarantee of Natura
Cosméticos S.A. and promissory notes
Through August 2026
Interest of 108.0% of DI - CETIP (c)
Leases are collateralized by the
December 2012
N/A
underlying assets
None
February 2011
Exchange fl uctuation + 8.31% p.a. (a)
Guarantee of Natura Cosméticos S.A.
January 2018
Exchange fl uctuation + 1.8% p.a. +
Guarantee of Natura Cosméticos S.A.
Resolution nº 635 (a)
eand bank guarantee
M
Dollar
October 2013
Exchange fl uctuation + interest of
Guarantee of subsidiary Indústria
1.87% to 3.89% p.a. (a)
e Comércio de Cosméticos Ltda.
N
O
Novo sol
December 2012
Interest of 5.20% p.a.
Bank guarantee
Dollar
December 2016
Exchange fl uctuation +
interest of 3.87% p.a. (a)
Leases are collateralized by
the underlying assets
(a) Loans and fi nancing for which swap contracts (CDI) were entered into.
(b) IOF - Tax on Financial Transactions.
(c) DI - CETIP - daily index calculated based on the average DI, disclosed by Cetip S.A. (Brazilian clearinghouse and over-the-counter market).
Maturities of noncurrent liabilities are as follows:
3. Financing agreement with the FINEP
2012
2013
2014
2015
2016 and thereafter
Company Consolidated
2011 2010
39,425
379,440
22,963
19,001
90,696 4,239
1,017,737 465,068
2010
6,530
355,820
4,450
1,539
61,650 17
852,549
368,356
2011
-
771,468
11,067
8,364
-
840,496
48,132
38,413
A description of the outstanding bank loan agreements is as follows:
a) Description of bank loans
1. BNDES - EXIM Pré-Embarque and BNDES - EXIM Pré-Embarque Especial Programs
The subsidiary Indústria e Comércio de Cosméticos Natura Ltda. benefi ts from BNDES
fi nancing programs for the pre-shipment stage of goods and services exports. 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 using at
least 60% of locally sourced materials.
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, build new distribution centers, and
restructure the administration of the Itapecerica da Serra, SP unit and purchase the equipment
necessary for these purposes
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 FINEP’s research and technological development incentive programs, which
facilitates and/or co-fi nances equipment, scientifi c grants and research material for the
participating universities.
These funds were used to partially fund the investments made in the drafting of the “Technology
Platforms for New Cosmetics and Nutritional Supplements” and the “Research and Innovation
for the Development of New Cosmetics” projects.
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 subsidiary 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. or Banco Santander Brasil S.A., which enters into such said fi nancing with Indústria e
Comércio de Cosméticos Natura Ltda.
These agreements are collateralized by assigning the fi duciary ownership of the assets described
in the related agreements. The subsidiary Indústria e Comércio de Cosméticos Natura Ltda. is
the trustee and the Company is the guarantor of these assets. In addition, the Group is required
to meet the Provisions Applicable to BNDES Agreements and the General Regulatory Terms
and Conditions of FINAME-related Transactions.
fi nancial statements # 11
5. Resolution 4131/62
Bank Credit Note - Onlending of funds raised abroad under Resolution
4131/62, through fi nancial institutions.
6. 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 obligations
Financial obligations are broken down as follows:
Consolidated
2010
2011
Gross fi nance lease obligations -
minimum lease payments:
Less than one year
More than one year and less than fi ve years
More than fi ve years
Future fi nancing charges on fi nance leases
Financial lease obligations - accounting balance
12,633
54,102
78,800
145,535
(65,862)
79,673
642
-
377
1,019
(79)
940
c) Restrictive covenants
As of December 31, 2011 and 2010, most fi nancing and loan agreements
entered into by the Group subsidiaries do not contain restrictive covenants
establishing obligations regarding the maintenance of fi nancial ratios by the
Company or its subsidiaries.
Only the agreement entered into with BNDES contains restrictive covenants
requiring maintenance of certain fi nancial ratios. As of December 31, 2011,
the Company was in compliance with all the restrictive clauses.
The agreement entered into with BNDES in July 2011 contains restrictive
covenants requiring maintenance of the following fi nancial ratios:
- EBITDA margin equal or higher than 15%; and
- Net debt/EBITDA equal or lower than 2.5 (two wholes and fi ve tenths).
As at December 31, 2011, the Company was fully compliant with such
restrictive covenants.
15. TRADE AND OTHER PAYABLES
Domestic trade payables
Foreign trade payables (*)
Freight payable
Company Consolidated
2011 2010
435,328 326,945
4,964
34,887 34,585
488,980 366,494
2010
77,805
842
34,585
113,232
2011
133,762
15,043
34,512
183,317
18,765
(*) Refer mostly to US dollar-denominated amounts.
16. TAXES PAYABLE
Company Consolidated
2011 2010
2010
2011
Taxes on revenue (PIS/COFINS)
(injunction) (a)
Ordinary ICMS
Regular and reverse charge ICMS (b)
IRPJ and CSLL
IRPJ and CSLL (injunction) (c)
IRPJ and CSLL (injunction - PAT)
Withholding income tax (IRRF)
IPI - exempt and zero-taxed products (d)
UFIR adjustment to federal taxes (e)
IPI credit on purchase of property, plant
and equipment and supplies for own
use and consumption (f)
Action for annulment of INSS debt (g)
Withholding PIS/COFINS/CSLL
PIS/COFINS
Taxes - foreign subsidiaries
Service tax (ISS)
1,823
59,894
89,301
127,458
56,941
2,656
7,621
-
6,361
1,686
50,807
167,019
99,347
33,472
-
7,901
-
6,216
115,214
84,908
75,657
81,687
89,301 167,019
150,639 125,816
33,472
2,261
13,203
39,404
6,360
56,941
6,029
11,974
42,432
6,519
-
3,073
2,490
-
-
-
2,893
5,319
-
-
364 613
-
3,073
3,324
1,110
17,888
3,768
2,893
7,554
6,663
9,354
1,214 2,799
114
Escrow deposits ((b) and (g)) (note 10)
Current
Noncurrent
357,982 375,273
(97,955) (175,575)
260,027 199,698
175,575
97,955
587,345 581,131
(140,545) (215,125)
446,800 366,006
140,545 215,125
(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 Integration Program Tax on Revenue (PIS) and Social Security Funding
Tax on Revenue (COFINS). In June 2007, the Company and its subsidiary
were authorized by the court to pay PIS and COFINS without the inclusion
of ICMS in their tax basis, starting April 2007. The balances recognized as of
December 31, 2011 refer to the unpaid amounts of PIS and COFINS, from
April 2007 to December 2011 adjusted using the SELIC (Central Bank’s
policy rate), the collection of which is on hold. Part of the balance, in the
adjusted amount of R$3,065, is deposited in escrow.
(b) As of December 31, 2011, R$12,669, R$52,305, R$23,274, R$273 and
R$780 of the total amount recognized refer to the ICMS - ST of State
of Paraná, Federal District, State of Mato Grosso do Sul, State of Mato
Grosso and State of Rio de Janeiro, respectively (R$119,371, R$34,969 and
R$12,679 Federal District and State of Mato Grosso do Sul, respectively
as of December 31, 2010), which is being challenged in court, as also
mentioned in note 17 ‘Contingent tax liabilities - possible risk’, (a). The
Company has made monthly escrow deposits for the unpaid amounts.
On November 26, 2011, the Company entered into an arrangement, to be
enforced after the end of the current reporting period, with the State of
Paraná to set the Value Added Margin (MVA) applicable to the calculation
of ICMS-ST due on transactions conducted by consultants.
Accordingly, Natura Cosméticos recognized the MVA application (up to
the cap determined by the technical study) for taxable events prior to
November 2011 and dropped part of the lawsuits on this matter, resulting in
(i) the transfer of R$114,345 to the State of Paraná as ICMS-ST and (ii) the
withdrawal of the deposited R$16,930 excess because of the retrospective
extension of the tax benefi t.
The MVA applicable to taxable events prior to November 2011 is still being
discussed in courts and is currently at court expert review stage.
(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$42,432 as of December 31,
2011 (R$39,404 as of December 31, 2010). 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 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. Subsequently,
in December de 2011, the subsidiary fi led a motion to also drop the lawsuit
claiming tax credits on tax-exempt products, which are deposited in escrow.
Thus, the subsidiary awaits the transfer to the State of the escrow deposits
after a fi nal and unappealable decision is issued.
fi nancial statements # 11
(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 dropping 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 and
awaits the issue of a fi nal and unappealable decision.
(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.
(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 cover 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
08 of the Federal Supreme Court (STF). On March 1, 2010, the Company
fi led a motion dropping 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 (joint liability) during the period from November 1994 to
December 1998.
115
Tax installment program established 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:
Action for annulment of INSS debt (a)
2,893
-
-
-
IRPJ/CSLL/ILL debts (b)
6,216 186 (521)
-
9,109 186
(521)
-
180
480
660
3,073
6,361
9,434
2010
Additions
Reversals
Payments
adjustment
2011
Company
Infl ation
INSS debt - action for annulment (a)
IRPJ/CSLL/ILL debts (b)
IPI on acquisition of property, plant and equipment and
Consolidated
Infl ation
2010
Additions
Reversals
Payments
adjustment
2011
2,893
6,360
-
186
-
(521)
-
-
180
494
3,073
6,519
materials for own use and consumption (c)
3,768 - (3,654)
(223) 109
-
13,021 186 (4,175)
(223) 783
9,592
(a) See item (g) on this note for details.
(b) See item (e) on this note for details.
(c) See item (f) on this note for details.
Due to the lack of tax loss carryforwards, the Company will not offset them
against the remaining balance of the interest on installments.
In the second half of 2011, after the consolidation of the debts, the
administrative proceedings were settled in one single payment, which led to
a reversal of the provision.
The next steps of the Company’s and its subsidiaries’ tax installment
plans, which are being discussed in courts, depend on a decision about
the consolidation of the related debts, which is expected in order to
settle such debts by transferring existing escrow deposits to the Federal
Government.
Tax installment plans created under Provisional Act 470/09
On October 13, 2009, Provisional Act 470 was enacted introducing the tax
debt payment and installment plans arising from the undue use of an industry
tax incentive, introduced by Article 1 of Law Decree 491, of March 5, 1969,
and the undue use of IPI credits, regulated by the Attorney General of the
National Treasury (PGFN) and Federal Revenue Service (RFB).
On November 3, 2009, the PGFN and the Federal Revenue Service published
in the Federal Offi cial Gazette (DOU) 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.
fi nancial statements # 11
As mentioned in item (d) above, subsidiary Indústria e Comércio de
Cosméticos Natura Ltda. fi led a motion partially withdrawing from the
injunction fi led related to IPI credits claimed on products purchased at zero
tax rate or tax exempt.
As of December 31, 2011, the Company awaits a decision of the 3rd Region
Federal Court, based on the PGFN’s and Federal Revenue Service’s position,
to complete the stage related to the consolidation of tax debts and 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 in light of the option made by the subsidiary to pay tax debts at
sight, no gain was recognized in profi t or loss from the reversal of late payment
fi ne and interest.
Tax contingencies
The provision for tax contingencies is broken down as follows:
Late payment fi nes on federal taxes paid in arrears (a)
CSLL deductibility (Law 9316/96) (b)
IRPJ and CSLL tax assessment - attorney fees (c)
Tax assessment - 1990 IRPJ (d)
Failure to include ICMS in PIS and COFINS tax bases - attorney fees (e)
Attorney and other fees (g)
Total provision for tax contingencies
Escrow deposits (note 10)
Late payment fi nes on federal taxes paid in arrears (a)
CSLL deductibility (Law 9316/96) (b)
IRPJ and CSLL tax assessment - attorney fees (c)
Tax assessment annulment action - 1990 IRPJ (d)
Failure to include ICMS in PIS and COFINS tax bases - attorney fees (e)
Semiannual PIS - Decree Laws 2445/88 and 2449/88 (f)
Attorney and other fees (g)
Total provision for tax contingencies
Escrow deposits (note 10)
(a) Refer to fi ne for late payment of federal taxes.
116
17. 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, based on the opinion
and estimates of its legal counsel, that the provision for tax, civil, and labor
contingencies are suffi cient to cover potential losses. This provision is broken
down as follows:
Tax
Civil
Labor
Company Consolidated
2011 2010
42,970
14,137
14,219 16,677
65,055 73,784
2011
27,612
12,234
9,754
49,600
2010
29,867
9,284
14,131
53,282
33,850
16,986
Company
Infl ation
2010
Additions
Reversals
Payments
adjustment
2011
999
7,562
4,452
3,342
951
424
-
-
-
-
-
-
(666)
-
(635)
12,561
-
(3,137)
29,867
424
(4,438)
(683)
-
-
-
-
-
(683)
54
323
1,182
172
(316)
794
7,885
4,968
3,514
-
1,027
10,451
2,442 27,612
(9,600)
-
-
-
(352) (9,952)
Consolidated
Infl ation
Additions
Reversals
Payments
adjustment
2010
1,505
7,562
4,452
3,342
6,063
2,191
424
-
-
-
-
-
(453)
-
(666)
-
(5,588)
-
17,855
700
(6,571)
42,970
1,124
(13,278)
(683)
-
-
-
-
-
-
(683)
72
323
1,182
172
(475)
129
2,314
3,717
2011
865
7,885
4,968
3,514
-
2,320
14,298
33,850
(10,754)
-
-
-
(761)
(11,515)
(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 provision, in the adjusted amount of R$5,905 (R$5,559 as of December 31, 2010), is deposited in escrow.
The lawsuit is stayed waiting a decision of the STF on the subject and will be decided under established case law.
(c) Refers to attorney 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.
(d) 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. The Company has fi led a lawsuit to cancel the tax assessment. The lawsuit is stayed waiting
a STF decision on the subject.
fi nancial statements # 11
117
(e) Refers to attorney fees for fi ling and handling the lawsuits challenging the inclusion of ICMS in the PIS and COFINS tax basis in the period from February
1998 to December 2011. The provision for attorney fees was reversed in the second half of 2011 as the risk of loss assessed by the legal counsel was
reviewed and changed from remote to possible loss, based on the progress of the leading case (ADC-18) which is with the Federal Supreme Court and
the changes in this Court’s composition.
(f) 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.
(g) The balance refers to lawyer fees to defend the Company’s and its subsidiaries’ interests in tax lawsuits. The amount of (i) 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; (ii) R$700 refers
to the lawyers’ fees to present the defense in the tax assessment by the SeFaz - RS which has identifi ed supposed differences on the ICMS-ST with respect
to interstate shipments made to Company’s sites located in the Rio Grande do Sul (RS). According to the Company’s legal counsel opinion, the risk of an
unfavorable outcome is remote.
Civil contingencies
Company
Several civil lawsuits (a)
Lawyer fees - environmental civil lawsuit (b)
Civil lawsuits and lawyer fees - Nova Flora Participações Ltda 2,944
Total provision for civil contingencies
Reversals
(9,052)
(64)
(3)
9,284 10,925 (9,119)
Additions
10,925
-
-
2010
4,828
1,512
Payments
(133)
-
-
(133)
Infl ation
adjustment
219
87
971
1,277
2011
6,787
1,535
3,912
12,234
Escrow deposits (note 10)
(1,874)
-
-
-
(12)
(1,886)
Several civil lawsuits (a)
Lawyer fees - environmental civil lawsuit (b)
Lawyer fees - IBAMA lawsuit (c)
Consolidated
Infl ation
2010
Additions
Reversals
Payments
adjustment
2011
5,716
1,512
3,965
11,193
-
-
(9,291)
(64)
(301)
(146)
-
-
250
87
152
7,723
1,535
3,816
Civil lawsuits and lawyer fees - Nova Flora Participações Ltda.
2,944
-
(3)
-
971
3,912
Total provision for civil contingencies
14,137
11,193
(9,659)
(146)
1,460
16,986
Escrow deposits (note 10)
(1,976)
-
-
-
(16)
(1,992)
(a) As of December 31, 2011, the Company and its subsidiaries are parties
to 2,491 civil lawsuits and administrative proceedings (1,211 as of December
31, 2010), of which 2,382 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) The provision includes R$1,192 with respect 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”). Our legal counsel’s opinion is that the risk of losses is remote.
(c) Refers to attorney fees for the defense in the tax assessment notice
issued by Instituto Brasileiro do Meio Ambiente e dos Recursos Naturais
Renováveis, or IBAMA (Brazilian environmental agency) against the Company
in 2010 for alleged irregular access to biodiversity. Through December 2011,
the Company had been imposed 70 fi nes by IBAMA, totaling R$21,955, and
fi led administrative defenses for all of them. No decision on the merits has
been rendered yet; therefore, such fi nes cannot be considered as a liability.
The Company’s management and its legal counsel consider the risk of loss
in these fi nes for the alleged non-sharing of benefi ts and the fi nes for the
alleged irregular access to biodiversity as remote due to full compliance
with all the principles established in the Convention on Biological Diversity
(“CBD”), an international treaty signed during Rio-92 and of the illegality and
unconstitutionality of the current legal framework, which incorporates the
CBD 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 contingencies
As of December 31, 2011, the Company and its subsidiaries are parties to
827 labor lawsuits fi led by former employees and third parties (766 as of
December 31, 2010), claiming the payment of severance amounts, salary
premiums, overtime and other amounts due, as a result of joint liability. The
provision is periodically reviewed based on the progress of lawsuits and
history of losses on labor claims to refl ect the best current estimate.
Company
Infl ation
2010 Additions
Reversals adjustment
2011
14,131
4,439
(9,241)
425 9,754
Total provision for
labor contingencies
Escrow deposits (note 10)
(1,762)
(891)
-
- (2,653)
Consolidated
Infl ation
2010 Additions
Reversals adjustment
2011
16,677
7,708
(11,096)
930 14,219
Total provision for
labor contingencies
Escrow deposits (note 10)
(2,410)
(1,757)
-
- (4,167)
fi nancial statements # 11
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 their legal counsel. These lawsuits
are as follows:
Company Consolidated
2011 2010
2011
2010
Tax:
Declaratory Action - ICMS - ST (a)
Offset of 1/3 of COFINS - Law 9718/98 (b)
Action for annulment of INSS debt (c)
IPI assessment notice (d)
Administrative proceeding - ICMS
- ST assessment, DF (e)
Administrative proceeding - ICMS
- ST assessment, PA (e)
Administrative proceeding - tax debt
- ICMS - ST, RS (f)
Tax assessment notice – Rio Grande do
Sul State Department of Finance (g)
Tax assessment notice - São Paulo State
Department of Finance - ICMS audit (h)
Tax assessment - transfer pricing on loan
agreements with foreign related company (i)
Other
Civil
Labor
80,304
5,357
4,910
5,451
53,809
5,121
4,567
5,178
80,304
5,357
4,910
5,451
53,809
5,121
4,567
5,178
8,815
25,077
8,815
25,077
3,423
-
3,423
-
9,066
15,919
9,066
15,919
30,184
-
-
-
30,184
-
9,837
9,837
1,779
1,856
55,870
36,837
186,203
167,320
3,315
2,953
61,547
42,792
231,948 232,182
1,856
1,779
43,828 54,355
203,031 175,642
4,133
73,856 85,899
265,674
279,963
3,076
(a) As of December 31, 2011, the balance recorded is broken down as
follows:
1. ICMS – ST, PR - R$49,962 (R$46,768 as of December 31, 2010) - 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 2011, is fully deposited in escrow, as
mentioned in notes 10 and 16 (b), and its collection is suspended.
2. ICMS - ST, Federal District - R$15,401 (R$5,574 as of December 31,
2010) - 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 2011, is fully deposited in escrow, as referred to in notes 10 and
16 (b), and its collection is suspended.
3. ICMS - ST, MS - R$9,734 (R$1,467 as of December 31, 2010) - 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
2010 to December 2011, is fully deposited in escrow, as referred to in notes
10 and 16 (b), and its collection is suspended.
4. ICMS - ST, MT - R$3,410 as of December 31, 2011 - 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 October
2009 to July 2011, is fully deposited in escrow, as referred to in notes 10 and
16 (b), and its collection is suspended.
5. ICMS - ST, SC - R$1,797 as of December 31, 2011 - declaratory action
fi led by the Company to challenge its liability for the payment of ICMS - ST
to the State of Santa Catarina 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 July 2011 to August
118
2011, is fully deposited in escrow, as referred to in notes 10 and 16 (b), 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 alleged
nonpayment and incorrect classifi cation of the goods sold. The Company
has fi led a defense with courts and awaits a fi nal ruling on the matter.
(e) Tax assessment notice collecting ICMS - ST, issued by the Federal District,
as a result of an alleged underpayment of the Company’s own ICMS and
ICMS - ST. The Company has fi led its defense at the administrative level and
is awaiting the fi nal judgment.
(f) Tax assessment notice issued by the Rio Grande do Sul State Department
of Finance against the Company due to its condition of tax substitute, in order
to charge allegedly due ICMS, due to the lack of a criterion to determine
the correct tax basis, related to subsequent transactions conducted by
independent resellers domiciled in the State of Rio Grande, do Sul. The
Company fi led an annulment action to cancel this collection and awaits a
fi nal court decision on the matter.
(g) Tax assessment issued by the Rio Grande do Sul State Department of
Finance claiming a tax credit related to ICMS for an alleged incorrect use
of the tax basis reduction granted to intrastate transactions and reduction
of the intrastate tax rate to calculate the tax rate differences. We have fi led
administrative defense, which awaits a fi nal decision.
(h) Tax assessment notice issued by São Paulo State Department of Finance
for alleged credits claimed on the purchase of property, plant and equipment
items which were transferred to other units on purchase date, and goods
purchased that allegedly are not directly related to production and sales
activities. The Company fi led an administrative defense, whereby it claims
the possibility of claiming such tax credits, the expiration of tax debt, and
illegality of charging interest equivalent to one-tenth percent per day, and
awaits a fi nal decision thereon.
(i) 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 a discretionary appeal against the unfavorable decision with
the Board of Tax Appeals, which is awaiting judgment.
fi nancial statements # 11
Contingent assets
The Company and its subsidiaries material contingent assets are as follows:
a) The Company and its subsidiary Indústria e Comércio de Cosméticos
Natura Ltda. are challenging in cour t the unconstitutionality and
illegality of the increase in the tax basis for PIS and COFINS established
by Ar ticle 3, Paragraph 1, of Law 9718/98. The amounts involved in the
lawsuits, updated to December 31, 2011, are R$21,935 (R$20,920 as
of December 31, 2010). In the first quar ter of 2011, the 3rd Region
Federal Cour t published a cour t decision, on a Motion for Clarification
of Judgment filed by the companies, favorable to the Company and
that allows the offset of the tax credits (i) against any federal taxes
payable by Natura Cosméticos and (ii) limited to PIS and COFINS
debts of Indústria e Comércio de Cosméticos Natura Ltda. As a result,
the Company has recognized PIS and COFINS credits in the amount of
R$16,852 in line item ‘Recoverable taxes’ related to undue payments
made in the five years prior to the date the lawsuits were filed, as a
balancing item to line item ‘Other operating income (expenses)’ for
the period.
b) The Company and its subsidiary Indústria e Comércio de Cosméticos
Natura Ltda. have fi led special and extraordinary appeals with the Superior
Court of Justice and the Federal Supreme Court claiming the recognition
of their right to offset unduly paid taxes during the ten-year period prior to
date both lawsuits were fi led and, with respect to Indústria e Comércio de
Cosméticos Natura Ltda., the right to offset such credits against any federal
taxes managed by the subsidiary. The Company has fi led a request for the
recognition and awaits the approval of the related credits to be able to
offset them against federal taxes.
c) 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 the refund of ICMS and ISS included
in the PIS and COFINS tax basis and paid in the period from April 1999 to
March 2007. The amounts of the refund requests as of December 31, 2011
are R$135,305 (R$120,808 as of December 31, 2010). The legal counsel
believes that the likelihood of a favorable outcome is probable.
18. OTHER PROVISIONS
Retirees’ healthcare plan
Carbon credit (note 2.11.3)
Other provisions
Company Consolidated
2011 2010
19,713
12,683
29
2010
13,123
12,683
-
2011
19,332
16,486
-
28,132
16,486
191
35,818
25,806
44,809 32,425
The Group has a postemployment healthcare plan for a group of
former employees and their spouses that is governed by specifi c rules.
As of December 31, 2011, the plan had 1,073 (Company) and 2,144
(Consolidated) participants.
As of December 31, 2011, the Group had a provision for the actuarial
liability arising from this plan, totaling R$19,332 (Company) and R$28,132
(Consolidated) (R$13,123, Company and R$19,713, Consolidated as of
December 31, 2010).
During the year, the impact of this plan on profi t or loss is related to the
service cost totaling R$1,192, interest expenses totaling R$2,823, and
changes in actuarial assumptions totaling R$4,499.
The carried liability was calculated by an independent actuary taking into
consideration the following main assumptions:
119
Financial discount rate
Increase in medical expenses (reduced by 0.5% p.a.)
Long-term infl ation rate
General mortality table
Annual percentage (in nominal terms)
2011
10.5
10.5 a 5.5
4.5
RP2000
19. SHAREHOLDERS’ EQUITY
a) Issued capital
As of December 31, 2010, the Company’s capital was R$418,061.
In the fi rst quarter of 2011, 153,230 common shares without par value
were subscribed at the average price of R$24,78, totaling R$3,797, and,
therefore, at March 31, 2011 the Company’s capital was represented by
431,034,646 subscribed and paid-in registered common shares without par
value, totaling R$421,858. Authorized capital decreased from 10,428,709 to
10,275,479 registered common shares.
In the second quarter of 2011, 200,059 common shares without par value
were subscribed at the average price of R$25,51, totaling R$5,104, and,
therefore, the Company’s capital at June 30, 2011 was represented by
431,234,705 subscribed and paid-in registered common shares without par
value, totaling R$426,962. Authorized capital decreased from 10,275,479 to
10,075,420 registered common shares.
In the third quarter of 2011, 4,559 common shares without par value were
subscribed at the average price of R$24.71, totaling R$111, and, therefore, the
Company’s capital was represented by 431,239,264 subscribed and paid-in
registered common shares without par value, totaling R$427,073. Authorized
capital decreased from 10,075,420 to 10,070,861 registered common shares
In the fourth quarter of 2011 there was no change in capital. Therefore, the
shareholders’ equity stated as of December 31, 2011 is equal to the capital
detailed above.
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 14, 2011, dividends paid totaled R$405,623 (R$0.9414 per share)
and gross interest on capital paid totaled R$24,456 (R$0.0567 gross per
share), in accordance with the 2010 net income distribution approved by
the Board of Directors on February 23, 2011 and confi rmed by the Annual
Shareholders’ Meeting held on April 8, 2011, which added to the R$253,947
in dividends and the R$35,427 in interest on capital paid in August 2010,
totals a distribution of approximately 95% of the net income for the year
ended December 31, 2010.
On July 20, 2011, 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, 2011, a proposal
for the payment of interim dividends and interest on capital on income
recorded in the fi rst half of 2011, in the amount of R$295,302 (R$0.68 per
share) and R$37,507, gross of withholding income tax (R$0.087 gross per
share), respectively. The total amount of interim dividends and interest on
capital corresponds to 98% of net income recorded in the fi rst half of 2011.
In addition, on February 15, 2012, the Board of Directors approved a
proposal to be submitted to the Annual Shareholders’ Meeting to be held
on April 13, 2012, for the payment of dividends and gross interest on capital
totaling R$467,261 and R$23,624 (R$20,080, net of IRRF), respectively,
related to income for 2011, which added to the R$295,302 in dividends
and the R$37,506 in interest on capital paid in August 2010 correspond to
a distribution of approximately 99% of net income for 2011.
Dividends were calculated as follows:
fi nancial statements # 11
Net income for the year
Company
2011 2010
830,901 744,050
Tax incentive reserve - investment grant
(3,677) (5,973)
Calculation basis for minimum dividends
827,224 738,077
Mandatory minimum dividends
Annual minimum dividend
Proposed dividends
Interest on capital
IRRF on interest on capital
30%
30%
248,167 221,423
762,563 659,570
61,130
59,883
(9,170) (8,983)
Total dividends and interest on capital, net of IRRF
814,523
710,470
Amount exceeding mandatory minimum dividend
566,356 489,047
Dividends per share - R$
1.7760
1.5312
Interest on capital per share, net - R$
0.1208 0.1182
Total dividends and interest on capital
per share, net - R$
1.8968 1.6494
As referred to 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, is not be
recorded as a liability in the related fi nancial statements and the effects of
such supplementary dividends must be disclosed in a note. As a result, as of
December 31, 2011 and 2010, the following portions of dividends exceeding
mandatory minimum dividends were recorded in shareholders’ equity as
‘Proposed additional dividends’:
Company
2011
2010
467,261
405,623
23,624
24,456
490,885
430,079
Dividends
Interest on capital
c) Treasury shares
The Company repurchased during the period 3,066,300 common
shares, at the average price of R$34.06, in order to meet the exercise of
options granted to the Company’s and its direct and indirect subsidiaries’
management and employees. In addition to the repurchase of shares in
the period, a total of R$895, at an average unit cost of R$32.92, was used
in the exercise of options.
As of December 31, 2011, line item ‘Treasury shares’ is broken down as
follows:
Balance at beginning of year
Repurchased
Used
2011
Number of
Average price
shares R$’000 per share - R$
655
3,066,300
14
104,452
21.37
34.06
(45,198)
(1,617)
26.58
Balance at yearend
3,021,757
102,849
34.04
120
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,
2010 and 2011.
f) Reserve for retained earnings
As of December 31, 2011, the reserve for retained earnings was recognized
pursuant to article 196 of Law 6404/76 for use in future investments, and
amounts to R$3,530 (R$23,421 recognized as of December 31, 2010). The
retention for 2011, prepared by management and approved by the Board of
Directors on February 15, 2012, will be submitted to and approved by the
Annual Shareholders’ Meeting on April 13, 2012.
g) Other comprehensive income
The Company records in this line item the effects of exchange differences
arising on translating investments in foreign subsidiaries. The accumulated
effect will be reversed to income as a gain or loss only in case of sale or
write-off of the investment.
20. SEGMENT INFORMATION
Segment reporting is consistent with 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 geography, which are as
follows: Brazil, Latin America (“LATAM”) and other countries. In addition,
LATAM is divided into two groups for analysis: (i) Argentina, Chile and
Peru (“Consolidating Operations”); and (ii) Mexico and Colombia (“ ”).
The segments’ business features are similar and each segment offers similar
products through the same consumer access method.
Net revenue by geography is as follows in 2011:
• Brazil: 91.0%
• Consolidating Operations: 6.0%
• Operations under Implementation: 2.7%
• Other: (0.3%)
Although the international segments do not represent more than 10%
of the information required to aggregate a segment, pursuant to 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 practices for each segment are the same as those described
in note 2, description of Natura’s business and signifi cant accounting policies.
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.
fi nancial statements # 11
121
The fi nancial information related to the segments as of December 31, 2011 and 2010 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.
2011
revenue income amortization
expenses, net
tax
assets assets liabilities
Net
Net
Depreciation and
Financial
Income
Noncurrent
Total
Current
Brazil
Argentina, Chile and Peru
Mexico and Colombia
Other (*)
Consolidated
5,089,533
916,148
(102,938)
(73,470)
(406,168)
1,535,676
3,482,649
1,142,356
355,058
149,166
17,617
(578)
(66,996)
(17,673)
(4,226)
(2,183)
(2,625)
(1,245)
379
(1,040)
25,282
11,857
187,016
96,070
90,915
34,730
(574)
-
-
16,938
27,277
6,718
5,591,374
830,901
(109,921)
(77,340)
406,829
1,589,753
3,793,012
1,274,719
revenue income amortization
expenses, net
tax
assets assets liabilities
Net
Net
Depreciation and
Financial
Income
Noncurrent
Total
Current
Brazil
Argentina, Chile and Peru
Mexico and Colombia
Other (*)
Consolidated
4,767,741
835,484
(82,692)
(47,918)
(374,412)
1,305,450
2,970,381
1,074,101
255,702
98,275
14,994
(19,822)
(45,992)
(25,620)
(3,405)
(2,104)
(842)
(976)
(1,027)
1,319
19,489
10,858
156,666
69,041
76,802
33,009
(647)
-
-
16,177
25,783
6,738
5,136,712
744,050
(88,848)
(49,736)
(374,120)
1,351,974
3,221,871
1,190,650
2010
(*) Includes operations in France and Corporate LATAM.
The Company has only on class of products that is sold to Natura Beauty
b) Breakdown of operating expenses and cost of sales by nature:
Consultants which is classifi ed as “Cosmetics”. As such, disclosure of
information by products and services is not applicable.
The Company has a diversifi ed customer portfolio, with no concentration
of revenue.
The revenue from foreign related parties reported to the Executive
Committee was measured in accordance with that presented in the
income statement.
21. NET REVENUE
Company Consolidated
Company Consolidated
2011
2010
2011 2010
Variable costs and indirect costs of resale
materials and products
2.375,514 2,283,926
1,385,624 1,319,106
Marketing and selling expenses
955,713
846,913
1,016,101
910,489
Freight expenses
Services expenses
246,563
223,236
265,148
234,066
57,927
65,227
180,332
171,970
Employee benefi ts (note 23)
263,540
261,441
644,983
628,078
Depreciation and amortization charges
27,565
15,305
109,921
88,848
Compensation of key management
Compensation of key management
personnel (note 27.2.)
Others expenses
9,443
14,417
9,443
14,417
103,275
141,083
727,830
584,364
Gross revenue:
Domestic market
Foreign market
Other sales
2011
2010
2011 2010
Provision of administrative services (note 27.1)
433,192
328,183
-
-
6,898,727 6,486,421
6,896,735 6,487,124
services (note 27.1.)
-
-
637,593
471,185
Total
235,877
266,959
- -
4,708,609 4,446,690
4,339,382 3,951,338
Provision of research and development
- -
1,437 1,479
6,898,727 6,486,421
7,535,765 6,959,788
Returns and cancellations
(11,514)
(8,682)
(12,212)
(8,682)
Taxes on sales
Net revenue
(1,038,436)
(963,424)
(1,932,179) (1,814,394)
5,848,777 5,514,315
5,591,374 5,136,712
23. EMPLOYEE BENEFITS
Company Consolidated
22. OPERATING EXPENSES AND COST OF SALES
Payroll and bonuses
Employee profi t sharing
a) Breakdown of operating expenses and cost of sales by function:
Defi ned contribution de pension plan
Company Consolidated
(note 23.1.)
2011
2010
2011 2010
Executives’ compensation
Cost of sales
2,375,514 2,283,926
1,666,300 1,556,806
Taxes payable
Marketing and selling expenses
1,503,069 1,292,365
1,952,740 1,704,322
General and administrative expenses
816,818
837,808
680,731 605,442
23.1. Profi t sharing
2011
2010
2011 2010
183,741
177,326
439,684 414,167
3,765
18,174
30,168
70,351
2,553
6,359
2,167
4,081
4,300
2,528
13,369
11,288
67,122 59,693
157,462 129,744
263,540 261,441
644,983 628,078
Compensation of key management
personnel (note 23.1.)
Compensation of key management
3,765
18,174
30,168
70,351
The Company and its subsidiaries pay profi t sharing to their employees and
personnel (note 27.2.)
9,443
14,417
9,443 14,417
Total
4,708,609 4,446,690
4,339,382 3,951,338
offi cers tied to the achievement of operating targets and specifi c goals, established
and approved at the beginning of each year. As of December 31, 2011 and 2010,
the amounts below were recorded as profi t sharing:
fi nancial statements # 11
Employees
Offi cers (*)
Company Consolidated
2011 2010
70,351
30,168
-
6,018
30,168 76,369
2010
18,174
- 6,018
3,765
24,192
2011
3,765
As of December 31, 2010
Grant date
Exercise
price - R$
Remaining
contractual
life
Existing
Vested
options (years) options
122
(*) Included in line item ‘Management compensation’.
23.2. Share-based payments
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 23, 2011, 1,491,780 options were granted under this new plan
format, with the Exercise price of R$42.39.
The changes in the number of outstanding stock options and their related
weighted-average prices are as follows:
2011
2010
Options
per share - R$ (thousands) per share - R$ (thousands)
Options
Average
exercise price
Average
exercise price
Balance at beginning of year
Granted
Cancelled
Exercised
28.10
42.39
29.35
6,839
1,492
(563)
23.22
34.17
22.80
25.33 (405)
22.74
5,538
2,176
(268)
(607)
Balance at yearend
32.84 7,363
28.10
6,839
Out of the 7,363,000 outstanding options as of December 31, 2011 (6,839,000
outstanding options as of December 31, 2010), 1,214,000 outstanding
options are vested (822,000 outstanding options as of December 31, 2010).
The options exercised in 2011 resulted in the issuance of 405,000 shares
(607,000 shares in for the year ended December 31, 2010) and in the use of
45,000 of the shares held in treasury.
The expense related to the fair value of the options granted recognized in
net income for the year ended December 31, 2011, according to the elapsed
vesting period, was R$6,359 and R$13,369, Company and on a consolidated
basis, respectively (R$4,081 and R$11,288, Company and on a consolidated
basis, respectively, as of December 31, 2010).
The stock options outstanding at the end of the year have the following
vesting dates and exercise prices:
As of December 31, 2011
Grant date
Exercise
price - R$
Remaining
contractual
life
Existing
Vested
options (years) options
March 29, 2006
April 24, 2007
April 22, 2008
April 22, 2009
March 19, 2010
March 21, 2011
31.97
30.24
23.48
319,317
470,274
848,250
25.61 2,249,793
0.21
1.33
2.34
5.39
319,317
470,274
424,125
-
37.58 2,004,244
6.31
-
43.85
1,470,940
7.31
-
March 16, 2005
March 29, 2006
April 24, 2007
April 22, 2008
April 22, 2009
March 19, 2010
20.25
30.17
28.53
82,981
414,120
650,333
22.16 1,128,902
24.17 2,436,105
0.21
1.23
2.35
3.36
6.40
82,981
414,120
325,167
-
-
35.46 2,126,372
7.32
-
6,838,813
822,268
As of December 31, 2011, market price per share was R$36.26 (R$47.69 as of
December 31, 2010).
The options were measured at their fair values on grant date, pursuant to
IFRS 2 - Shared Based Payments. The weighted average fair value of the
options as of December 31, 2011 was R$32.84.
The options were priced using the binomial pricing model. The signifi cant
data included in the fair value pricing model of the options granted in 2011
was as follows:
• 36% volatility (37% as of December 31, 2010).
• Dividend yield of 5.3% (5.3% as of December 31, 2010).
• Expect option life of three and four years.
• Risk-free annual interest rate of 10.98% (10.8% as of December 31, 2010).
23.3. 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.
As of December 31, 2011, the Group did not have actuarial liabilities arising
from the former employees’ pension plan.
The contributions made by the Company and its subsidiaries totaled R$2,553
(Company) and R$4,300 (Consolidated) in the period ended December 31,
2011 (R$2,167, Company and R$2,528, Consolidated in the period ended
December 31, 2010) and were recorded as expenses for the year.
24. FINANCIAL INCOME (EXPENSES)
Company Consolidated
2011
2010
2011 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
Gains (losses) on the mark-to-market
of swap and forward derivatives
Other fi nancial expenses
21,707
13,171
55,463
35,809
-
-
2,403
1,941
17,515
40,438
24,357
86,502
3,218
39,469
34
3,901
24,548 13,895
122,698 53,639
(72,487)
(39.896)
(92,044)
(58,457)
(36,496)
(26,359)
(3,757)
(9,491)
(38,266)
(27,688)
(7,130)
(12,218)
(1,171)
(26,735)
(163,248)
(76,746)
416
(5,509)
(58,237)
(40,722)
(1,040)
142
(40,999) (25,712)
(200,037) (103,375)
(77,340) (49,736)
7,362,818
1,213,716
Financial expenses, net
fi nancial statements # 11
The objective of the breakdowns below is to explain more clearly the
foreign exchange hedging transactions contracted by the Company and
the related balancing items in the income statement shown in the previous
table:
(a)
Infl ation adjustment and foreign exchange gains
Infl ation adjustment and foreign exchange losses
(a) Breakdown:
Exchange rate changes on borrowings
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
Consolidated
2010
34
(7,130)
(7,096)
2011
3,218
(38,266)
(35,048)
(32,104)
(55)
(2,256)
(2,781)
34
(1,089)
(3,852)
(1,399)
3,218 (1,861)
(35,048) (7,096)
25. OTHER OPERATING INCOME (EXPENSES), NET
Company Consolidated
2011
2010
2011 2010
Gain (loss) on sale of property,
plant and equipment
PIS and COFINS credits (*)
Untimely used PIS and COFINS credits
918
106
(1,125)
(9,044)
11,887
15,461
-
-
16,852
40,378
-
-
Other operating income (expenses)
15,313 350
6,973
(8,424)
Other operating income (expenses), net
43,579 456
63,078
(17,468)
(*) The stated amount includes the recognized PIS and COFINS tax credits
arising from a favorable outcome in a lawsuit claiming the unconstitutionality
and illegality of the PIS and COFINS taxable basis broadening established
by Law 9718/98. For further details see note 17 (a), on contingent assets.
26. EARNINGS PER SHARE
26.1. Basic
Basic earnings per share are calculated by dividing the net income
attributable to the owners of the Company by the weighted average of
common shares issued during the year, less common shares bought back by
the Company and held as treasury shares.
2011
2010
Net income attributable to owners
of the Company
830,901
744,050
Weighted average of common shares
issued - thousands
431,129,772
430,548,910
Weighted average of treasury shares
(1,059,330) (655)
Weighted average of outstanding
common shares
Basic earnings per share - R$
26.2. Diluted
430,070,442
430,548,255
1.9320
1.7281
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 owners
of the Company
Weighted average of outstanding
common shares
Adjustment for stock options
Weighted average number of common
shares for diluted
earnings per share calculation purposes
Diluted earnings per share - R$
123
2011
2010
830,901
744,050
430,070,442 430,548,255
1,564,844
930,348
431,000,790 432,113,098
1.7219
1.9279
27. RELATED-PARTY TRANSACTIONS
27.1. Intergroup balances and transactions
Receivables from and payables to related parties are as follows:
Current assets:
Natura Inovação e Tecnologia de Produtos Ltda. (a)
Natura Logística e Serviços Ltda. (b)
Indústria e Comércio de Cosméticos Natura Ltda. (c)
Current liabilities:
Trade payables:
Indústria e Comércio de Cosméticos Natura Ltda. (c)
Natura Logística e Serviços Ltda. (d)
Natura Inovação e Tecnologia de Produtos Ltda. (e)
Company
2011
2010
12,531
20,809
4,568
37,908
13,143
12,218
-
25,361
163,146
114,737
15,141
293,024
153,597
47,356
45,636
246,589
Related-party transactions are as follows:
Company
Product sales Product purchases
2011 2010
2010
2011
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. - Mexico
Natura Cosméticos Ltda. - Colombia
Natura Europa SAS - France
Natura Inovação e Tecnologia de Produtos Ltda.
3,155,905 3,006,596
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,972,918 2,837,687
35,382
49,852
33,211
38,715
19,989
5,365
431
34,104
42,693
32,971
35,533
18,514
4,672
388
Natura Logística e Serviços Ltda.
-
-
42
34
3,155,905 3,006,596
3,155,905 3,006,596
Service provided
2011
2010
Services received
2011 2010
Administrative structure: (f)
Natura Logística e Serviços Ltda.
Natura Cosméticos S.A. - Brasil
Indústria e Comércio de Cosméticos Natura Ltda.
Natura Inovação e Tecnologia de Produtos Ltda.
433,192
-
-
-
433,192
438,095
-
-
-
438,095
-
323,715
67,694
41,783
433,192
-
328,183
67,810
42,102
438,095
Product and technology research and
development: (g)
Natura Inovação e Tecnologia de Produtos Ltda.
Natura Cosméticos S.A. - Brazil
In vitro research and testing: (h)
Natura Innovation et Technologie
de Produits SAS - France
Natura Inovação e Tecnologia
de Produtos Ltda.
235,877
266,959
- -
266,959
235,877
-
-
266,959
235,877
235,877 266,959
2,790
3,538
-
-
-
2,790
-
3,538
2,790
3,538
2,790 3,538
Lease of properties and shared charges: (i)
Indústria e Comércio de Cosméticos Natura Ltda.
Natura Logística e Serviços Ltda.
Natura Inovação e Tecnologia de Produtos Ltda.
Natura Cosméticos S.A. - Brasil
Total of sales or purchases and services
6,728
7,296
-
-
-
-
-
-
7,296 6,728
3,835,060 3,721,916
-
4,227
1,699
-
3.899
1,567
1,370 1,262
7,296 6,728
3,835,060 3,721,916
fi nancial statements # 11
(a) Advances granted for provision of product and technology
development and market research services.
(b) Advances granted for provision of logistics and general administrative
services.
(c) Payables for the purchase of products.
(d) Payables for services described in item (f).
(e) Payables for services described in item (g).
(f) Logistics and general administrative services.
(g) Product and technology development and market research services.
(h) Provision of in vitro research and testing services.
(i) Lease of part of the industrial complex located in Cajamar, SP and
buildings located in the municipality of Itapecerica da Serra, SP.
The main intergroup balances as of December 31, 2011 and 2010, as
well as intergroup 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$5,341 for the period ended
December 31, 2011 (R$5,650 for the period ended December 31, 2010).
No allowance for doubtful accounts was recognized for intragroup
receivables as of December 31, 2011 and 2010 due to the absence of past-
due receivables with risk of default.
According to note 14, the Group companies usually grant each other pledges
and collaterals to guarantee bank loans and fi nancing.
27.2. Key management personnel compensation.
The total compensation of the Group’s key management personnel is
broken down as follows:
2011
Compensation
Fixed
Variable Total Fixed
(*)
Board of Directors
Offi cers
3,786
5,657
9,443
-
3,786
- 5,657
- 9,443
2010
Compensation
Variable Total
(*)
5,333
3,348 1,985
5,051 4,033
9,084
8,399 6,018 14,417
Executives
30,587
2,390 32,977
25,194 14,917 40,111
(*) Refers to profi t sharing recorded in the year. 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.
124
28. COMMITMENTS
28.1. 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$363. As of December
31, 2011, the subsidiary was compliant to the contract’s commitment.
The amounts are carried based on electric power consumption estimates in
accordance with the contract period, whose prices are based on volumes,
also estimated, resulting from the subsidiary’s continuous operations.
Total minimum supply payments, measured at nominal value, according to
the contract, are:
Less than a year
More than one year and less than fi ve years
More than fi ve years
2011
2010
3,983 3,899
9,842 9,591
- 2,578
13,825 16,068
28.2. Operating lease transactions
The Company and its subsidiaries have commitments arising from operating
leases of properties where some of its foreign subsidiaries, the head offi ce
in Brazil and “Casas Natura” in Brazil and abroad are located.
Contracts have lease terms of one to ten years and no purchase option
clause when terminated; however, renewal is permitted under the market
conditions where they are entered into, for an average of two years.
As of December 31, 2011, the commitment made for future payments of
these operating leases had the following maturities:
2012
2013
2014 and thereafter
1,217
1,119
Company Consolidated
6,011
4,940
2,687 6,618
5,023 17,569
29. INSURANCE
AThe Group has an insurance policy that considers principally risk
concentration and materiality, and insurance is obtained at amounts
considered by management to be suffi cient, taking into consideration
the nature of its activities and the opinion of its insurance advisors. As of
December 31, 2011, insurance coverage is as follows:
Insured
amount
916,659
52,242
1,615,685
27.3. Share-based payments
Breakdown of Company offi cers and executives’ compensation:
Item
Type of coverage
Industrial complex/
inventories
Any damages to buildings, facilities, and
machinery and equipment
balance (number) price R$ balance (number)
2011
Stock option grant
Stock option Average exercise
2010
Stock option grant
Stock option Average exercise
price R$
(b)
28.10
28.10
(b) (a)
1,512,569
2,961,042
32.84
32.84
Offi cers
Executives
(a)
1,700,155
3,173,327
Vehicles
Fire, theft and collision for 1,337 vehicles
Loss of profi ts
Loss of profi ts due to material damages to
facilities, buildings and production machinery
and equipment
(a) Refers to the balance of unexercised vested and unvested options at the
end of the reporting period.
(b) 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 end of the reporting period.
30. APPROVAL OF FINANCIAL STATEMENTS
The individual and consolidated fi nancial statements were approved by
the Board of Directors and authorized for issue at the meeting held on
February 15, 2012.
fi nancial statements # 11
125
INDEPENDENT AUDITORS’ REPORT ON FINANCIAL STATEMENTS
To the Shareholders, Board of Directors and Management 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, 2011, and the statements of income,
comprehensive income, changes in 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
accounting practices adopted in Brazil and the consolidated fi nancial statements in accordance with International Financial Reporting
Standards - IFRSs, issued by the International Accounting Standards Board - IASB, and in accordance with accounting practices adopted in
Brazil, and for such internal control as Management determines is necessary to enable the preparation of fi nancial statements that are free
from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these fi nancial statements based on our audit. We conducted our audit 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 Company’s
preparation and fair presentation of the 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 the individual fi nancial statements
In our opinion, the individual fi nancial statements referred to above present fairly, in all material respects, the fi nancial position of Natura
Cosméticos S.A. as of December 31, 2011 and its fi nancial performance and its cash fl ows for the year then ended in accordance with
accounting practices adopted in Brazil.
Opinion on the consolidated fi nancial statements
In our opinion, the consolidated fi nancial statements statements referred to above present fairly, in all material respects, the consolidated
fi nancial position of Natura Cosméticos S.A. as of December 31, 2011 and its consolidated fi nancial performance and its consolidated cash
fl ows for the year then ended in accordance with IFRSs issued by IASB and accounting practices adopted in Brazil.
Emphasis of matter
We draw attention to note 2.1. to the fi nancial statements, which states that the individual fi nancial statements have been prepared in
accordance with accounting practices adopted in Brazil. In the case of Natura Cosméticos S.A., these accounting practices differ from the
IFRSs, applicable to separate fi nancial statements, only with respect to the measurement of investments in subsidiaries, associates and joint
ventures by the equity method of accounting, which, for purposes of IFRSs, would be measured at cost or fair value. Our opinion is not
qualifi ed in respect of this matter.
Other matters
Statements of value added
We have also audited the individual and consolidated statements of value added (DVA) for the year ended December 31, 2011, prepared
under the responsibility of the Company’s Management, the presentation of which is required by Brazilian Corporate Law for publicly-
traded companies, and as supplemental information for IFRS that do not require the presentation of DVA. These statements were subject
to the same auditing procedures described above and, in our opinion, are fairly presented, in all material respects, in relation to the fi nancial
statements taken as a whole.
The accompanying fi nancial statements have been translated into English for the convenience of readers outside Brazil.
São Paulo, February 15, 2012
Auditores Independentes
CRC nº 2 SP 011609/O-8
Edimar Facco
Engagement Partner
CRC nº 1 SP 138635/O-2
fi nancial statements # 11
ABOUT THIS REPORT
We developed different forms of discussion with view at presenting
Natura’s performance to stakeholders as completely as possible
and enabling them to assess the Company’s progress.
For this reason, for 12 years Natura has issued its annual
sustainability repor t in accordance with the Global Repor ting
Initiative (GRI) guidelines and for the last ten years the Company
has published its sustainability repor t and annual (financial) repor t
as a single document. Every year we seek to improve this process
by providing complete data in perspective that is widely accessible
to anyone interested in the Company.
In this year’s Natura Repor t, we have refined both the format and
the language of the publication (see box 1). In the discussion panels
held in 2010 and 2011 our stakeholders expressed the wish for a
more concise content and a lighter format. The information in the
print version, for example, is more objective and was developed
with the input of Natura stakeholders. The complete annual
repor t with more detailed information is available for download
in PDF format from our website.
DIFFERENT FORMS OF COMMUNICATION
_Natura Management Report – main performance data for the year
published in the newspapers Valor Econômico, Brasil Econômico and
Diário Ofi cial on February 16, 2012.
_Natura Annual Report (printed version) – summarized format with
room for company stakeholders to express their opinion on Natura’s
performance and relationship practices. Available in Portuguese,
English and Spanish.
_Website – as with the print version, the portal www.natura.net/
relatorio presents the information in summarized report. Available
in Portuguese, English and Spanish.
_Natura Annual Report (full version) – available for download in PDF
format also from the website www.natura.net/relatorio. This version
presents the full content of the report with detailed information.
Available in Portuguese, English and Spanish.
_Ipad – the content of the Natura Report is available for iPads in
Portuguese.
The performance indicators are in accordance with GRI G3.1
guidelines at application level A+. The data refer to the period
from January 1st to December 31st 2011. The socio-environmental
information relates in great par t to the Company‘s activities in
Brazil where our production is concentrated, as are most of our
social and environmental impacts. The economic data encompasses
all our operations, both in Brazil and abroad. Between 2010 and
2011, we included the Latin American countries in the construction
of the materiality matrix (more below) and in a greater number
of socio-environmental indicators. We are, however, aware that
we need to increase monitoring of our international operations,
which constitutes a challenge for the company.
For our main environmental
impacts - water and energy
consumption and waste generation - the calculations also include
data from third-party manufacturers who supply us with fi nished
products in Brazil. This enables us to carry out a more accurate
diagnosis of the impact generated by our operations.
Signifi cant changes in the bases of calculations or indicator measurement
techniques are indicated throughout the text and the tables.
126
3.1 - 3.11; 4.12; 4.14 - 4.17
The report also presents data on the people who are part of Natura’s
daily routine: employees, consultants and Natura Consultant
Advisors (NCAs), consumers, suppliers, suppliers’ communities,
surrounding communities, shareholders and government.
The fi nancial data were audited by the Consulting Company
Deloitte Touche Tohmatsu Auditores Independentes, while
the GRI indicators and AccountAbility AA1000 Standards were
assured by Ernst & Young Terco Auditores Independentes S.S..
The consultancy KPMG also provided a limited assurance of the
company’s greenhouse gas (GHG) emission data in the 2011
inventory.
INTEGRATED REPORTING
Since 2002, Natura has published its sustainability and fi nancial
reports in a single document encompassing all dimensions of
the business: economic and fi nancial, social, environmental and
governance.
The integrated report, a global trend, is aimed not only at
combining fi nancial and non-fi nancial documents in the same
publication but at refl ecting a business strategy that incorporates
all dimensions of the business in its management and analysis of
risks and opportunities.
To learn and to grow in this area, Natura is involved in the main global
forums discussing integrated reporting. It sponsors the development
of the fourth generation of GRI indicators, designed to further
integrate fi nancial and non-fi nancial information. The Company
also participates in the International Integrated Reporting Council
(IIRC), comprising global leaders of companies, investors, academic
institutions, industry associations, regulatory and standardization
bodies seeking to create a global standard for integrated reports.
The IIRC global committee is engaged in defi ning global indicators
and principles. Natura is one of the companies involved in the pilot
project, and this report is aligned with the initial framework set forth
by the IIRC. (see the table below).
External
External
Factors
Factors
External
External
Factors
Factors
The information is gathered with the support of a sustainability
communication consultant Company. It involves more than 50
interviews both with employees and a control, as well as the updating
of indicators by diverse company areas. An additional 20 people
representing external Natura stakeholders were interviewed for the
printed version of the report. Quantitative indicators are gathered
using an online tool which is fi lled out by the areas in charge. The
content is also evaluated by an internal committee comprising
managers responsible for the quality of relations with our different
stakeholders and led by Natura senior management.
natura report # 11
MOST RELEVANT SUBJECTS
The materiality matrix is the graphical representation of Natura’s
priority sustainability-related subjects (see chart). It not only underpins
the report content, but also provides a diagnosis from which senior
management makes plans for the Company, which are consequently
refl ected in its report.
Reviewed every two years, it is the result of the cross referencing of the
socio-environmental subjects indicated as relevant by our stakeholders
(external axis) and their importance for the company (internal axis) in
accordance with its strategy, risks or opportunities and willingness to
innovate.
The matrix in this report was built from 2010 to 2011 based on discussion
panels held with stakeholders from Brazil and, for the fi rst time ever, from
our international operations. This enabled us to build a corporate matrix
with a broader perspective that refl ects the needs of the locations in
which we operate. The priority sustainability topics identifi ed were: water,
education, sustainable entrepreneurship, climate change, relationship
quality, waste and socio-biodiversity (more on page 25).
For more information about this report, contact relatorionatura@natura.net.
GLOBAL COMPACT
Natura has been a signatory of the Global Compact since July
2000. This is a United Nations Organization (UN) initiative
that unites companies, workers and civil society in pursuit of
sustainable growth and citizenship. We are also members of
the Global Compact Steering Committee and signatories of its
Caring for Climate program.
The Company is also on the Brazilian Global Compact Committee
(CBPG in the Portuguese acronym), which foundation resulted
from a partnership between the Instituto Ethos and the United
Nations Development Program (UNDP) in 2003.
The CBPG is a voluntary group comprising companies, United
Nations agencies in Brazil, trade bodies, academics and civil
organizations. It is dedicated to incorporating these principles into
business. For further information on the initiative, please access
www.pactoglobal.org.br
127
EXTERNAL
Stakeholder interest
Education
Solid Waste
Water
Climate change
Relationship quality
Sociobiodiversity
Sustainable entrepreneurship
INTERNAL
Importance for Natura
THE GLOBAL COMPACT PRINCIPLES
The following is a list of GRI indicators aligned
with the Global Pact principles: .
1. Respect and protection of human rights
2. Prevention of human rights violations
3. Support of freedom of association at work
4. Abolishment of forced labor
5. Abolishment of child labor
6. Elimination of discrimination at work
7. Support of a preventive approach to environmental challenges
8. Promotion of environmental responsibility
9. Encouragement of environmentally friendly technologies
10. Combat corruption in all its forms, including extortion
and bribery
Natura supports the Global Reporting Initiative (GRI). As an
organizational stakeholder, it contributes to the GRI mission of
developing globally accepted sustainability reporting guidelines
through the participation of stakeholders.
natura report # 11
assurance
declaration
INDEPENDENT AUDITORS’ LIMITED ASSURANCE REPORT ON THE ANNUAL REPORT
ON SUSTAINABILITY IN LINE OF GRI GUIDELINES (LEVEL A) AND OF ACCOUNTABILITY
PRINCIPLES STANDARD AA1000APS – NATURA COSMÉTICOS S.A.
128
3.13
To the Board of Directors, Shareholders and Offi cers
Natura Cosméticos S.A.
1. We have performed limited assurance procedures on certain in-
formation contained in the Annual Report on Sustainability of Natu-
ra Cosméticos S.A., GRI Level A for the year ended December 31,
2011, prepared under the responsibility of Company management.
Our responsibility is to issue a limited assurance report on certain
information disclosed in this report.
2. The work was carried out in accordance with Assurance Standards
and Procedures - NBC TO 3000, issued by the Brazil’s National As-
sociation of State Boards of Accountancy (CFC) on assurance work
other than audit or review of historical information, and comprised:
(a) planning of the work considering the materiality and volume of
information; (b) inquiry of and discussion with the professionals of
Natura Cosméticos S.A. to gain an understanding of the main criteria,
assumptions and methodologies used when preparing the Annual
Report on Sustainability; (c) check, on a sampling basis, of evidence
which supports the report data; (d) comparison of the information
contained in the sustainability report with the Global Reporting Ini-
tiative (GRI) Guidelines – Level A and with Accountability Principles
Standard AA1000APS; (e) discussion with Natura Cosméticos S.A.
about the results obtained.
3. Our work aimed at checking whether the documentation of the
Sustainability Report was in accordance with the GRI Level A indi-
cators, which represent the global parameters for the preparation
of sustainability reports and Accountability Principles Standard AA-
1000APS. The GRI indicators comprise three levels of information
which guide the limited assurance procedures. Worth noting is that
our checking procedures relied on the Level A indicators, which
represent an advanced level with regards to the number of per-
formance indicators reported at Economic, Social, Environmental,
Human Rights, Labor Practices and Product Accountability levels, as
well as to how the related indicators are managed. Also, the work
considered the specifi c indicators of Profi le G3.1 (generation 3.1 of
GRI parameters). With regards to Accountability Principles Standard
AA1000APS, we checked the information contained in the report,
based on its three key principles: inclusion, materiality and responsi-
veness, as set forth in the standard.
4. The scope of our work did not include: (i) validation of his-
torical information, market information, descriptive information,
fi nancial data audited by other independent auditors, goals, pro-
jections and opinions subject to subjective evaluations, Natura
Institute and Inventory of Greenhouse Gas Emissions (GGE)
effect; (ii) check of input data used to design the aforesaid GRI
indicators, relying therefore on data provided by Natura Cosmé-
ticos S.A. Accordingly, our report does not provide any limited or
reasonable assurance on such information.
5. Based on our work described in this report, we are not aware
of any signifi cant change which should be made to the informa-
tion contained in the Natura Cosméticos S.A.’s Sustainability Re-
port for the year ended December 31, 2011 for it to be in accor-
dance with the GRI Guidelines – Level A and with Accountability
Principles Standard AA1000APS.
6. The information contained in Natura Cosméticos S.A.’s Sus-
tainability Report for periods before and after the year ended
December 31, 2011 was not checked by us.
São Paulo, April 3, 2012
Auditores Independentes S.S.
CRC 2SP015199/O-6
Partner Luiz Carlos Passetti
CRC 1SP144343/O-3
natura report # 11
129
natura report # 11
REMISSIVE INDEX
G3.1 REMISSIVE INDEX
130
Description
Message from the President and Chairman of the Board.
Description of main impacts, risks and opportunities.
Description
Name of the Organization.
Brands, products and / or services.
Operating structure.
Location of organizational head offi ce.
Countries in which the organization operates.
Nature of ownership and legal form.
Markets served.
Size of organization.
Changes during the reporting period.
Awards and certifi cations.
1 - Strategy and analysis
Profi le
1.1
1.2
2 - Organizational profi le
Profi le
2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10
3 - Report parameters
Description
Profi le
Reporting period.
3.1
Previous report.
3.2
Reporting cycles.
3.3
Contact information.
3.4
Defi nition of content.
3.5
Boundary of report.
3.6
Scope of report.
3.7
Basis for preparation of the report.
3.8
Data measurement techniques and bases for calculations.
3.9
Consequences of restatement information.
3.10
Signifi cant changes.
3.11
GRI Summary.
3.12
3.13
External assurance.
4 - Governance, commitments and engagement
Profi le
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
Profi le
Description
Governance structure.
Indication of whether the President of the highest governance body is also an
executive director.
Number of independent or non executive members in the highest governance body.
Mechanisms for nomination to government bodies.
Relationship between compensation and economic and socio-environmental
performance.
Processes to avoid confl icts of interest.
Qualifi cation of members.
Internal values, conduct codes and principles.
Board activities.
Board self-assessment.
Precautionary principle.
Charters, principles and initiatives.
Participation in associations.
List of stakeholders.
Identifi cation of stakeholders.
Engagement of stakeholders.
Main stakeholders' subjects and concerns.
Description
ECONOMIC PERFORMANCE INDICATORS
DMA EC
Aspectos
Performance indicator
Economic performance
EC1
EC2
EC3
EC4
Market presence
EC5
EC6
EC7
Indirect economic impacts
EC8
EC9
Information on approach to economic management
Economic performance
Disclosure on Management Approach
Indirect economic impacts
Description
Direct economic value generated and distributed, including revenue, operating
costs, employee compensation, donations and other community investments,
retained earnings and payments to providers of capital and governments.
Financial implications and other risks and opportunities for the organization's
activities due to climate change.
Coverage of organization-defi ned pension benefi ts obligations.
Signifi cant fi nancial assistance received from government.
Ratio of lowest salary to local minimum wages in important operating units.
Policies, practices and proportion of spending on local suppliers in important
operating units.
Procedures for local hiring and proportion of senior managers recruited from local
community in important operating units.
Development and impact of infrastructure investments and services provided
primarily for public benefi t through commercial engagement, in kind donations or
pro bono activities.
Identifi cation and description of signifi cant indirect economic impacts, including
extent of impacts.
Details of part not reported
Details of part not reported
Details of part not reported
Details of part not reported
Details of part not reported
Details of part not reported
Global Pact Principles
7; 8
6
6
Report
Total
Total
Report
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Report
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Report
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Report
Total
Total
Total
Total
Report
Total
Total
Total
Total
Total
Total
Total
Total
Total
Pages
5
5
Páginas
9
9
9
9
9
9
9
9; 93
9
10
Páginas
126
126
126
126
126
126
126
126
126
126
126
130
128
Páginas
14
14
14
33
19
14
14
3
14; 15
16
55
70; 126
70
31; 126
31; 126
31; 126
25; 126
Páginas
10; 90; 93
10; 90; 93
9
38; 50; 58; 59;
62; 86; 87
Pages
87
19
42; 43
68; 69
42
56; 62; 63
38
58; 62; 86
38; 50; 58;
59; 86; 87
natura report # 11
131
Global Pact Principles
8
Details of part not reported
“We reported the total materials
used by weight and volume but did
not classify them by non-renewable
materials and direct materials used
because the information is not
available.
We will measure this data in 2012
and report it in 2013.
8; 9
8
8
7; 8; 9
7; 8; 9
7; 8; 9
8
8
7; 8; 9
7; 8
7; 8
7; 8
7; 8
8
8
8
7; 8; 9
8
8
8
8
8
8
7; 8
7; 8; 9
7; 8; 9
We provide information about
water bodies impacted by our
discharges, but we do not report
on the size and biodiversity value
of the water body. Information not
material to our business.
“We reported on a number
of initiatives to mitigate the
environmental impacts of our
products and services. Measures to
mitigate noise-related impacts were
not included in the report.
The Natura materiality matrix
prioritized environmental themes
such as greenhouse gases, product
impacts and in particular solid
waste. Sound pollution was not
included because it is not material
for our business. “
Relatamos o peso total de produtos
e embalagens recuperados, mas
não a porcentagem em relação ao
total faturado. A informação ainda
não está disponível. Passaremos
a fazer a gestão deste dado em
2012, desta forma, reportaremos
seus resultados em 2013. O
tema Resíduos é prioritário para
a Natura, refl etido em nosso
exercício de materialidade. Para
nós, é importante atuar de forma
a promover resultados para a
sociedade, mais do que apenas para
a Natura. Por isso, nossas ações
contabilizarão também materiais
além de nossos produtos.
ENVIRONMENTAL PERFORMANCE INDICATORS
DMA EN
Aspectos
Information on approach to environmental management
Materials
Energy
Water
Biodiversity
Emissions, effl uents and waste
Products and services
Compliance
Transport
General
Description
Materials used by weight or volume.
Performance indicator
EN1
EN2
Energy
EN3
EN4
EN5
EN6
EN7
Water
EN8
EN9
EN10
Biodiversity
EN11
EN12
EN13
EN14
EN15
Percentage of recycled materials used.
Direct energy consumption discriminated by primary energy source.
Indirect energy consumption discriminated 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 water withdrawal.
Percentage and total volume of water recycled and reused.
Location and size of areas owned, leased or 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 measures and future plans to manage impacts on biodiversity.
Number of IUCN Red List species and domestic species listed for conservation
with habitats in areas affected by operations, discriminated by level of risk of
extinction.
Total direct and indirect greenhouse gas emissions by weight.
Other relevant greenhouse gas emissions by weight.
Initiatives to reduce greenhouse gas emissions and reductions obtained.
Emissions of ozone depleting substances by weight.
NOx, SOx and other signifi cant atmospheric emissions by weight and type.
Total water discharge by quality and destination.
Total weight of waste by type and disposal method.
Number and total volume of signifi cant spillages.
Weight of waste transported, imported, exported or treated deemed hazardous
under the terms of the Basel Convention Appendices I, II, III and VIII, and
percentage of waste shipped internationally .
Identifi cation, size, protection status and biodiversity value of water bodies and
their habitats signifi cantly affected by water discharge and runoff from reporting
organization.
Emissions, effl uents and waste
EN16
EN17
EN18
EN19
EN20
EN21
EN22
EN23
EN24
EN25
Products and services
EN26
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Report
Parcial
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Not
75
80
84
25; 83
28; 78
25 - 27;
75 - 85
80; 81
75
74; 75
75
Pages
81
80; 81
84
84
85
81; 85
84
83
83
83
80
78
80
78
78
75; 76
76
75; 76
76
76
83; 84
82
83
82
Partial
83
Initiatives to mitigate environmental impacts caused by products and services and
extent of reduction of these impacts.
Partial
74; 76; 77;
80 - 83
EN27
Percentage of products and packaging reclaimed by product category.
Partial
82
natura report # 11
Compliance
EN28
Transport
EN29
General
EN30
Monetary value of relevant fi nes and total number of non-monetary sanctions for
non-compliance with environmental laws and regulations.
Signifi cant environmental impacts from the transport of products and other goods
and materials used in the organization’s operations, including the transport of
workers.
Total investment and spending on environmental protection by type.
LABOR AND DECENT WORK PRACTICE PERFORMANCE INDICATORS
Information on approach to managing labor practices
Employment
Relations between workers and management
Occupational health and safety
Training and education
Diversity and equal opportunity
Ratio of men's base salary to women's
Description
DMA LA
Aspectos
Performance indicator
Emprego
LA1
LA2
LA3
LA15
Relations between workers and management
LA4
LA5
Total number of workers by employment type, employment contract and region.
Total number and turnover rate of employees by age group, gender and region.
Benefi ts provided to full-time employees that are not provided to temporary or
part-time employees, broken down by major operation.
Rate of return to work and retention after maternity/paternity leave, by gender.
Percentage of employees covered by collective bargaining agreements.
Minimum prior notice of operational changes and whether this procedure is
specifi ed in collective bargaining agreements.
Occupational health and safety
LA6
LA7
LA8
LA9
Training and education
LA10
LA11
LA12
Percentage of employees represented by formal health and safety committees
comprising managers and workers and which help monitor and provide guidance
on occupational health and safety programs.
Rates of injuries, occupational diseases, days lost, absenteeism and total number of
work-related fatalities by region.
Education, training, counseling, prevention and risk control programs in place to
assist employees, their families or community members regarding serious diseases.
Health and safety topics covered by formal Union agreements.
Average number of training hours per year, per employee, broken down by
employee category.
Competency management and ongoing training programs supporting continued
employability and end of career management.
Percentage of employees receiving regular performance and career development
assessments.
Diversity and equal opportunity
LA13
Composition of governance bodies and breakdown of employees by category,
gender, age group, minority groups and other diversity indicators.
Ratio of men’s base salary to women’s
LA14
Ratio of men’s basic salary to women’s by employment category.
Total
42
HUMAN RIGHTS PERFORMANCE INDICATORS
DMA HR
Aspects
HR2
HR3
Information on management approach to human rights
Management and investment practices
Non discrimination
Freedom of association and collective bargaining
Child labor
Forced or slave labor
Safety practices
Indigenous rights
Assessment
Remediation
Description
Performance indicator
Management and investment practices
HR1
Percentage and total number of signifi cant investment contracts that contain
human rights clauses or were submitted to human rights related assessments.
Percentage of critical contractors and suppliers that were submitted to human
rights related assessments and measures taken.
Total hours training for employees in human rights related policies and procedures
pertinent to the operations, included percentage of employees trained.
Non discrimination
HR4
Freedom of association and collective bargaining
HR5
Total number of cases of discrimination and measures taken.
Operations identifi ed in which the right to exercise freedom of association and
collective bargaining may be at signifi cant risk and measures taken to support this
right.
Child labor
HR6
Forced or slave labor
HR7
Operations identifi ed in which there is signifi cant risk of use of child labor and
measures taken to abolish child labor.
Operations identifi ed in which there is signifi cant risk of use of forced or slave
labor and measures taken to eradicate forced or slave labor.
132
8
8
7; 8; 9
Details of part not reported
Global Pact Principles
We give prior notifi cation of
operational changes, but do not
have a minimum notice period for
this. This information is not material
for our business.
We report a number of
occupational health and safety data,
but not by region. This information
is not material for our business.
We report the breakdown of the
work force in accordance with
our view of diversity. We do not
segment the data by gender and
age group. This information is not
material for our business.
6
1; 3
3
1; 6
1
Details of part not reported
Global Pact Principles
1; 2; 4; 5; 6
1; 2; 4; 5; 6
1; 2; 4; 5
1; 6
1; 3
1; 4; 5
1; 4; 5
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Report
Total
Total
Total
Total
Total
Partial
Total
Partial
Total
Total
Total
Total
Total
Partial
67
74
89
35
35; 39; 41
27; 33
45
36
36; 39
41
Pages
35; 41
39
43
41
43
43
46
45
46
45
36; 37
37; 43
38
40; 41
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Report
Total
Total
Total
Total
Total
Total
Total
31; 35
36; 57; 60
33
43
49; 57; 60
49; 57; 60
45
60
33; 34
33; 34
Pages
57; 60
57; 59
36
33
43
49; 57; 60
49; 57; 60
natura report # 11
Security practices
HR8
Indigenous rights
HR9
Assessment
HR10
Remediation
HR11
Percentage of security personnel submitted to training in human rights related
policies or procedures as relevant to the operations
Partial
36
Total number of cases of breaches of indigenous peoples' rights and measures
taken.
Percentage and total number of operations that have undergone human rights
reviews and / or impact assessments.
Total
Total
Number of human rights complaints fi led, addressed and resolved formally through
complaint mechanisms
Partial
SOCIAL PERFORMANCE INDICATORS
DMA SO
Aspects
Information about approach to social management
Surrounding communities
Corruption
Public policies
Anti-competitive practices
Compliance
Total
Total
Total
Total
Total
Total
60
33
34
58; 62; 86
58; 62
36; 69
63
68
68
133
1; 2
We provide information on our
safety practices, which include
Human Rights training. However, we
do not report on the percentage of
security teams undergoing training
and third parties participating in
training as a proportion of the
whole. These data are not available.
1
1
1
Performance indicator
Description
Report
Pages
Details of part not reported
Global Pact Principles
Surrounding communities
SO1
SO9
SO10
Corruption
SO2
SO3
SO4
Public policy
SO5
SO6
Anti-competitive
practices
SO7
Compliance
SO8
Nature, scope and effectiveness of any programs and practices to assess and
manage the impacts of operations on the community, including startup, operation
and closure.
Operations having signifi cant potential or real negative impacts on local
communities.
Preventive and mitigating measures implemented in operations having signifi cant
potential or real negative impacts on local communities.
Percentage and total number of units submitted to risk assessments related to
corruption.
Percentage of employees trained in organization's anticorruption policies and
procedures.
Measures taken in response to cases of corruption.
Positioning on public policy and participation in the drawing of public policy and
lobbying.
Total amount of fi nancial contributions and contributions in kind to political parties,
politicians or related institutions discriminated by country.
Total number of legal actions related to anti-competitive, market sharing or
monopolistic practices and their outcomes.;
Monetary value of relevant penalties and total number of non-monetary sanctions
resulting from non-compliance with laws and regulations.
PRODUCT AND SERVICE RESPONSIBILITY PERFORMANCE INDICATORS
DMA PR
Aspectos
Performance indicator
Customer health and safety
PR1
PR2
Information about management approach to products and services
Customer health and safety
Product and service labeling
Communication and marketing
Customer privacy
Compliance
Description
Product and service life cycle phases at which impacts on health and safety are
assessed with view at improving and percentage of products and services subject
to these procedures.
Total number of cases of non-compliance with regulations and voluntary codes
related to impacts caused by products and services on health and safety during
their life cycle, discriminated by type of outcome.
Product and service labeling
PR3
Communication and marketing
PR6
PR4
PR5
PR7
Customer privacy
PR8
Compliance
PR9
Type of product and service information required in labeling procedures, and
percentage of products and services subject to such requirements.
Total number of cases of non-compliance with regulations and voluntary codes
related to product and service information and labeling, broken down by type of
outcome.
Practices related to customer satisfaction, including results of surveys measuring
satisfaction.
Adherence to laws, standards and voluntary codes related to marketing
communication, including advertising, promotions and sponsorship.
Total number of cases of non-compliance with laws, standards and voluntary
codes related to marketing communication, including advertising, promotions and
sponsorship, broken down by type of outcome.
Total number of substantiated complaints regarding breaches of customer privacy
and loss of customer data.
Penalties in connection with the supply and use of products and services.
1
10
10
10
10
10
Details of part not reported
Global Pact Principles
8
8
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Total
Report
Total
Total
Total
Total
Total
Total
Total
Total
Total
63; 64
64
60
19
36
19; 69
69
69
68
68
53
55
55; 81
54
54
55
Pages
55
55
80; 81
55
34; 48; 53
54
54
49
55
natura report # 11
credits
Corporate Affairs and Government
Relations area
Publisher
Rodolfo Witzig Guttilla (Mtb 17.739/SP)
Overall Coordination
Leandro Machado and Rosangela Ferro
Support
Andressa Malcher and Renato Gyotoku
Corporate Finance area
Financial information
Alexandre Nakamaru, José Wanderley and Bruno Ifanger
Investor relations
Helmut Bossert and Fabio Cefaly
Sustainability area
Socio-environmental information
Denise Alves, Karina Aguilar and Ingrid Camilo
Text and proofi ng
Report Comunicação
Editing
Álvaro Almeida (Mtb 45.384/RS)
and Michele Silva (Mtb 11.829/RS)
Reports
Carolina Kannebley, Giedre Moura
and Mayara Luma Lobato
Proofi ng
Katia Shimabukuro
Translation into english
Raymond Maddock
Art work and graphical design
Modernsign Design e Inovação
Art direction
Wilson Spinardi Junior
Art edition
Ailton Augusto Silva, Daniela Giorgia
and Marcelo Schulze-Blanck
Production coordination
Daniela Giorgia
Layout
Manoel Araújo and Marcelo Schulze-Blanck
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