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2023 ReportIndex Message from the Founders page 4 Message from the Executive Committee page 6 Management and Organization Natura’s business behavior, geared to sustainable development, ethics and transparency page 18 Natura The company today, its business model and its main results in 2014 page 8 Strategy The strategy adopted by Natura, including its most recent investment cycle and new sustainability vision, fully connected with the business page 12 Brands and Products Innovation as the key element in delivering products and services that drive well being well and generate social and environmental value page 23 Our Network Constant focus on the Natura relationship network, essential for the future of the business page 30 Pre sentation Direct communication this report aims to present an integrated vision of the multiple faces of the company’s life Natura PrESENtS this summarized version of its annual report. the document contains essential information about the company, providing an overview of key events in 2014. reporting initiative) G4 parameters, an international standard which incorporates sustainability data and transparency into the reporting of business activities. once again, the website www.natura.com.br/relatorioanual is the main channel for communicating natura’s performance, offering expanded content, interactivity, exclusive videos and links to other company documents or publications. in addition to striving to reflect essential company values, such as lightness and beauty, the report structure has incorporated natura’s new sustainability Vision, launched in 2014. in its 15th report, natura has the pleasure of sharing its most recent history with you. the report adopts iirC (international integrated reporting Council) integrated reporting guidelines, aimed at consolidating the integrated communication of the organization’s financial, social and environmental results. it is also aligned with Gri (Global enjoy reading it! Marcelo Bicalho Behar Corporate affairs Director 1 e C n e s s e r u o our essence reason for Being Vision our reason for Being is to create and sell products and services that promote well-being/being well. Well Being is the harmonious relationship of the individual with himself, with his own body. Being well is the empathetic, successful and pleasurable relationship of an individual with other people, with nature, and with the whole. Because of its corporate behavior, the quality of the relationships it establishes and the quality of its products and services, natura will be a group of brands with strong local and global expression, identifi ed with the community of people committed to building a better world through a better relationship with themselves, with others, with the nature of which they are a part, with the whole. Beliefs Life is a chain of relationships. nothing in the universe stands alone. everything is interdependent. the greater the individual diversity, the greater the wealth and vitality of the whole system. natura believes that valuing relationships is the foundation of the great human revolution in the pursuit of 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 enhance quality in relationships. the pursuit of beauty, a genuine aspiration of every human being, should 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 towards the evolution of society and its sustainable development. Accomplishments - - 2050 Sustainability Vision: evolution in sustainability strategy towards generating positive impacts, with business directives up until 2050 and commitments and ambitions up until 2020. B Corp certifi cation: certifi cation that attests Natura’s commitment to economic growth allied with the promotion of social and environmental well being. 1.3 million NCs in Brazil and 400 thousand NCs in the International Operations. - Natura Network (online sales platform) extended to whole of Brazil. - Average order delivery time of 4.5 days (6.8 in 2011) and 38% of orders delivered to consultants in up to two days in Brazil. - Net revenue: R$ 7.4 billion, up 5.7% - compared with 2013. - International Operations: 19.2% of consolidated net revenue (16.1% in 2013) and 16 million units produced by third-party suppliers (10.3 million in 2013). Ecoparque: inaugurated in March in Benevides, Pará. The soap factory installed on the site generates fi nancial and social value for the community and reduced environmental impacts due to 100% local production. - Aesop: 98 stores in 14 countries. 18 opened in 2014. - Natura Consultants: more than - Inclusion: 18% of the staff on the high technology picking line in the São Paulo Distribution Center (CDSP) are physically/intellectually disabled. The company’s target is 30%. Challenges - Net profi t: R$ 732.8 million*, 13% - down on 2013. r a e Y e h t f o s t h G i L h G i h Business volume in the Amazon: R$ 197 million (R$ 201.5 million in 2013). In relation to base year 2010, the accumulated business volume is R$ 582.1 million. - Market share: 1 p.p. retraction in Natura’s share of Brazilian market in 2014. - Emissions: 2.2% increase in relative greenhouse gas emissions compared with 2013. Accumulated 6.7% reduction against base year 2012. - Water consumption: 11% increase in water consumption per item manufactured (0.45 liter of water per item in 2014 compared with 0.40 liter per item in 2013). *Excluding market measurement. 2 3 MessaGe froM the founDe rs Commitment to life s r e D n u o f e h t M o r f e G a s s e M “São Paulo is almost out of water.” Paulo Nogueira Neto, professor of Ecology at the University of São Paulo (USP) and, at that time, Special Environment Secretary, in an article in the newspaper Folha de S.Paulo on May 25, 1977. “the year 2015 can be a turning point in human development if we agree on a path to resilience through strong agreements on disaster risk reduction, development financing, climate change and a new set of sustainable development goals.” Ban Ki-moon, secretary-general of the United Nations Organization, at the World Economic Forum in Davos, January 2015. BEtWEEN tHE aLErt issued by the respected, pioneering environmentalist in 1977 about the crisis now evident all over the southeast of Brazil and Ban Ki-moon’s call to action at the beginning of the year in course, awareness of the growing risks posed to life on our planet has grown dramatically, imposing the need for a transformation that will enable us to build a sustainable civilization. the impacts of this water crisis will certainly lead to more conscious consumption of this precious resource, raising its value, not just philosophically and emotionally, but also materially, in a way never seen before in our society. thus we have, triggered by this local climatic phenomenon and its consequences, an example of how 2015 might indeed be a year of transformation, in line with the un secretary general’s proposal. in são Paulo, in Brazil and worldwide. there have been more than twenty years of negotiations and fifteen revisions to the eight united nations Millennium Goals, targets proposed for combating key social and environmental issues. today, with higher levels of awareness and wider reaching governance forums, the time has come to take decisive steps towards building a world once again connected with the ethics of life. this year there will be three major acts in this concer ted movement of nations towards the common good: in July, in addis ababa, ethiopia, nations will work on adequately allocating the trillions of dollars earmarked for infrastructure investments; two months later, at the un General assembly in new York, the world will decide on the sustainable Development convergence of interests, but we believe that all of us – governments, companies, civic organizations and individuals – have a role to play in this interconnected and challenging environment characterized by finite resources. throughout natura’s 45 year history, the perception has matured that we are agents of social transformation based on genuine interactions with everyone in our relationship network. Driven by this conviction, in 2014 we renewed our collective commitments to the future through the launch of our 2050 sustainability Vision. this vision is based on a set of guidelines aimed at expanding our value creation by promoting well being well and provoking a positive economic, social and environmental impact on the world. at the same time, we obtained B Corp certification, which, using clear parameters, identifies companies committed to building a better world. We are honored to be a part of this global movement of companies working to transform society. We are also committed to helping the movement grow and attract new partners. Goals that will orient post-2015 efforts; and in December, in Paris, the Climate Change Conference will establish a new global agreement that, we hope, will promote the advances and commitments necessary for the planet. We are aware that we depend on a complex internally, 2015 will also be decisive for the company. We need to recognize that in spite of our many accomplishments, we still have to advance in key areas, particularly with regard to our recent performance in Brazil. natura’s strength is in its origins. We depend on our fundamentals, on the valuable network of relationships built up over time and reinforced recently by significant investments in infrastructure, technology and logistics. We have also enthusiastically accompanied the growing acceptance of our value proposition in the other Latin american countries in which we operate. in this new cycle, natura will be led by the experienced executive roberto Lima, who was already a board member and who readily accepted our invitation to become chief executive officer. this will ensure continuity of the work initiated by alessandro Carlucci, whom we thank for his 25 years of dedication to the Company, ten of which as Ceo. We are confident that this transition will represent a new driving force for the future of the company. We would like to invite our entire relationship network to engage in this key moment of defining the course of our civilization, so that, rising above any ideology, ambition, need or market logic, we may strive to guide human activity based on value and respect for life. antonio Luiz da Cunha seabra Guilherme Peirão Leal Pedro Luiz Barreiros Passos from left to right, top to bottom, the members of natura’s administration Council: Julio Moura neto, Luiz ernesto Gemignani, raul Gabriel Beer roth, antonio Luiz da Cunha seabra, Guilherme Peirão Leal, Pedro Luiz Barreiros Passos, Marcos de Barros Lisboa, silvia Lagnado and Plínio Villares Musetti 4 5 MessaGe froM th e exeCutiVe CoMMi ttee our contract with society i e e t t M M o C e V i t u C e x e e h t M o r f e G a s s e M Roberto Oliveira de Lima Chief executive officer Agenor Leão de Almeida Junior Vice President, Digital technology Erasmo Toledo Vice President, international operations Gerson Valença Pinto Vice President, innovation C OHErENCE aND F IrM NESS of purpose are usually determinant in the achievement of goals in the most diverse areas of life. and it is no different in business. for almost half a century, natura has remained resolute in its vocation of creating not just economic, but also environmental and social value through its relationship network. this explains why our corporate conduct was recognized in 2014 by the attainment of B Corp certification, which identifies companies around the world that are committed to providing returns that go beyond profit. We are aware that financial results are fundamental in enabling our ongoing effort to become a better company for the planet, but we also know that our social pact encompasses much more than commitments among the immediate actors. it is in fact a commitment to society as a whole. Bearing this in mind, we have reached the understanding that the strategic cycle that led us to leadership of the cosmetics, fragrances and toiletries industry in Brazil must evolve. our value proposition, based on promoting well being well, on relationship selling and on sustainable development, is still powerful, but our translation of this into products and actions must stay abreast of an ever more dynamic and competitive market reality. were well below expectations. sales grew by 1.9%, while the overall target market regained vigor, growing some 10%. our operations in Latin america maintained the accelerated growth rate they have shown over the last three years, worthy of note being the advances in our consultant network, which already numbers over 400,000 in the five countries in which we have operations. aesop, acquired in 2013, also presented a robust performance, closing the year with 98 stores around the world. With this, consolidated net revenue totaled r$7.4 billion, with eBitDa at r$1.6 billion and a net income of r$732.8 million. in 2014, we maintained our major investment plan which, over the last four years, has allocated around r$2 billion to positioning natura’s technological, production and logistics infrastructure on a completely new level. We inaugurated facilities that will support our future growth, such as the ecoparque industrial Complex in the state of Pará, a new plant in the town of Cajamar and the são Paulo Distribution Center, while simultaneously strengthening and enhancing our digital technology platform. in our Latin american operations, we doubled our order picking capacity in Chile, Peru, argentina and Mexico. our 2014 results reflect this transition. We need to recognize that our results in Brazil this upgrade in data analysis capacity and in connectivity tools will enable us to leverage relationship selling, while forging even closer links between natura, our consultants and our customers. We can now identify individual needs and buying habits and provide even more personalized service, moving beyond mere geographic or social segmentation. it is our understanding that natura’s proposition, for many years unbeatable, sought to deliver well being well to everyone homogenously, always supported by relationships, products and commitments that set us apart. increased competition, whether in the retail or direct sales areas, has affected our presence and our performance. We believe that the time has come to upgrade the concept of well being well for everyone by proposing well being well for each person, using technology as an enabler to strengthen links with each individual, as has been done with our network. it was for this reason that the company developed the natura network, a digital channel through which consultants can stay abreast of changes in the way people relate to each other. We are fully focused on taking advantage of the innumerous opportunities offered by the digital age, a case in point being order processing, with 98% of our orders now being placed over the internet. our more than 6,000 employees in Brazil and in the international operations have a key role to play in the improvements we intend to implant. We have designed a new personnel management model for them, accompanied by an organizational culture that incorporates recent workplace transformations and seeks to bring them closer to our business strategy. together we will continue to innovate in our commercial structure and in the development of new products and concepts. it is our understanding that constant progress towards sustainable development is an important driver of innovation, for which reason we have renewed our ambitions and priorities with the launch of our 2050 sustainability Vision in 2014. Generating positive impacts at all of natura’s points of interaction with people and the environment is, in essence, a reaffirmation of our contract with society. With a background that gives us the credibility to assume such a commitment, we invite whoever identifies with natura to engage in this journey of conscious and responsible transformation in value creation throughout our relationship network. roberto Lima, Chief executive officer, on behalf of the executive Committee João Paulo Ferreira Vice President, networks José Vicente Marino Vice President, Brands and Businesses Josie Peressinoto Romero Vice President, operations and Logistics Lilian Guimarães Vice President, People and Culture Robert Claus Chatwin Vice President, internationalization Roberto Pedote Vice President, finance and institutional relations 6 7 a r u t a n Who We are the well being well company natura works toward generating more and more value for all its stakeholders LEaD Er OF BraZIL’S cosmetics, fragrances and toiletries industry, natura has been dedicated to creating value for its entire relationship network since its foundation in 1969. through a direct selling model, the company offers more than 1.3 million natura consultants in Brazil and more than 400 thousand in the international operations (argentina, Chile, Colombia, france, Mexico and Peru) the opportunity to generate income, while continuously driving social and environmental entrepreneurship throughout the network. underpinned by its brand and product portfolio, the company strives to get close to its customers, encouraging changes in habits and the adoption of more sustainable behaviors. natura products are also commercialized in Bolivia, through local distributors. aesop, an australian company in the premium cosmetics segment which natura acquired at the beginning of 2013, operates in 14 countries and ended the year with 98 stores (18 of which opened in 2014). With around 6,600 employees in Brazil and overseas, natura focuses on developing competencies that will enhance the business in an entrepreneurial and civically responsible way. furthermore, natura dedicates special attention to its suppliers and the 33 communities with which it currently maintains relations. the communities ensure the sustainable supply of biodiversity ingredients that form the technological base for natura products. to make this model feasible, we have a robust foundation of infrastructure, logistics and digital technology in Brazil and in the international operations (see map). uSa Aesop Stores Paris (France) Natura Store Natura today Colombia Production and distribution New York (uSa) Innovation Hub Europe Aesop Stores asia Aesop Stores Peru Distribution Mexico Production and distribution Chile Distribution argentina Production and distribution Oceania Aesop Stores 5 COMPaNY-OWNED MaNuFaCturINg PLaNtS 4 in Cajamar (São Paulo) 1 in Benevides (Pará) 4 PrODuCt trIaL kIOSkS 2 in Campinas (São Paulo) 2 in São José dos Campos (São Paulo) 8 DIStrIButION CENtErS IN BraZIL São Paulo DC (São Paulo) Canoas DC (Rio Grande do Sul) São José dos Pinhais DC (Paraná) Mathias Barbosa DC (Minas Gerais) Uberlândia DC (Minas Gerais) Castanhal DC (Pará) Jaboatão dos Guararapes DC (Paraíba) Simões Filho DC (Bahia) 3 rESEarCH aND INNOvatION CENtErS Cajamar (São Paulo) Benevides (Pará) Manaus (Amazônia) 98 Aesop stores in Europe, Oceania, Asia and North America More than 1.3 million NCs in Brazil More than 400,000 NCs in the IOs More than 5,200 employees in Brazil More than 1,300 employees in the IOs Around 5 thousand suppliers 33 communities supplying social biodiversity ingredients Around 30% of the portfolio renewed every year Around 1,500 products made available every sales cycle 18 sales cycles in 2014 95.5% on-time delivery in 2014 38% of deliveries in up to 48 hours (Brazil) 56% of deliveries in up to 48 hours (IOs) Natura Network (online sales platform) available in every state in Brazil a r u t a n hoW We Do it Business Model Guided by our essence, we strive to develop products and concepts that add value for all stakeholders throughout our chain product conception inputs suppliers internal processes transportation business model consumption O U R R E S O U R C E S Global research center, the Natura Amazônia Innovation Center and an innovation office in New York Innovation network with more than 220 partners in Brazil and abroad Relationship communities (3,1oo families), who supply inputs such as pitanga, Brazil nut and moriche palm, or who share in the benefits 13.3% of inputs in terms of value acquired from the Amazon region 190suppliers of raw materials and packaging, such as fragrances, organic alcohol and glass 39,91% free floating shares in capital market R$ 505,7 million invested in capital expenditure 6,600 employees 13distribution centers in Brazil and in the IOs Transportation service providers 1,7 million NCs in Brazil, Latin America and France and 13,300 Natura Consultant Advisors (NCAs) Aesop, an Australian brand with 98 stores in 14 countries 57%of Brazilian households consume Natura products at least once a year1 a r u t a n Guaranteed product quality and safety Radical transparency: moving toward full traceability of portfolio Co-creating: collaborative innovation initiative involving customerss Encouraging conscious and sustainable consumption Promoting well being well and positive experiences Brand leadership in Brazil Steady growth in brand preference in IOs Our Essence Innovative products and concepts that promote well being well Network of relationships through which we sell our products Corporate behavior geared to sustainable development H O W W E T R A N S F O R M R$216 million (3% of revenues) invested in innovation and development funding in 2014 GHG and waste impacts are calculated before the product is designed Sharing benefits with communities Sustainable management Research into renewable sources of inputs for formulas and packaging Selection and development programs for suppliers based on social and environmental criteria Sustainability vision that incorporates business plans and indicates priorities for 2020 Production in Brazil, in Latin America and in Australia (Aesop) High technological capacity enables more than 2.4 million products to be picked, fulfilling more than 61.000 orders per day Investments in marketing Incentives for personal development and entrepreneurship Training and tools to leverage consulting activities Expansion by means of digital consultants W H A T W E D E L I V E R 30% of the portfolio renewed every year Portfolio that contributes to socio-environmental development R$582 million invested in the economic, environmental and social development of the Amazon region up to 2014 % of total carbon emissions 43% of absolute CO2e emissions related to the extraction of biodiversity raw materials and other inputs environmental Solid Waste % of recycled post-consumer material % of product recyclability¹ % eco-efficient packaging² Water Water consumption (l/unit prod.) Carbon relative GhG emissions (kgCo2e/kg product invoiced)3 2012 2013 2014 1,6 84 14 1,4 56 22 1,2 58 29 2012 0,40 2013 2014 0,40 0,45 2012 2013 2014 3,21 2,93 3 absolute GhG emissions (‘000 t)3 299 328 332 economic Social and environmental development of partners' businesses Cash generation of approximately 0.14 times Ebitda and low net indebtedness (1.08 times Ebitda) delivery time to NCs 4,5days is the average 38%of deliveries within 95,5% 48 hours on-time delivery Natura Movement: collaboration network to support Natura Consultants' social and environmental projects and other stakeholders Social, economic and human development of the NCs 10% of absolute CO2e emissions 9% of absolute CO2e emissions 15% of absolute CO2e emissions 23% of absolut CO2e emissions 1Kantar Worldpanel (october 2013 to september 2014). Distribution of wealth (r$ millions) 2012 2013 2014 shareholders5 Consultants6 employees suppliers Government7 so c ial 846 854 3.671 4.107 803 4.837 1.743 917 5.425 1.804 702 4.152 1.010 5.989 1.721 Quality of relationships 2012 2013 2014 Climate sur vey – favorability among employees (Brazil and ios)8 supplier loyalty (Brazil and ios)9 nC loyalty Brazill9 nCa loyalty Brazil9 72 24 24 40 51 38 49 49 78 31 23 38 52 38 47 54 75 26 27,5 30 64 39 45 64 oth er in di ca tor s number of nCs (‘000s) overall rating in brand image sur vey in Brazil (%)10 amount raised by Believing is seeing Brazil (education) – (r$ million) 2012 1.573 79 2013 1.657 78 2014 1.743 74 12,8 17,1 18,8 amount raised by Believing is seeing ios (education) – (r$ million) 4,5 4,8 6,7 accumulated business in the amazon region (r$ million)11 122 385 582 to incorporate packaging with a reduction in weight of at least 50% in comparison with regular/similar packaging; or composed of 50% potentially marketable recycled materials and/or renewable non-cellulosic materials that do not increase mass; 3Changes were made to the GhG inventor y emission factor. figures for 2012 and 2013 were recalculated to ensure comparability; 4takes aesop into account; 5orepor ted figures correspond to dividends and interest on equity effectively paid to shareholders, i.e., cash basis of accounting; 6ein 2014, due to advances in Latin american operations, we adjusted our estimate of nC margins. Previous amounts were restated to ensure comparability; 7the item Government represents the taxes levied on natura’s activities and those of the nCs, that is, the total load of direct and indirect taxes, subtracted from the taxes levied in previous stages in the chain, Economic indicators (r$ MM) 2012 2013 2014 Consumer loyalty Brazil9 Consolidated net revenue 6.345,7 7.010,3 7.408,4 nC loyalty ios9 Consolidated ebitda 1.511,9 1.609,0 1.554,5 nCa loyalty ios9 Consolidated net income 874,4 842,6 732,8 Consumer loyalty ios9 internal cash generation 1.018,9 1.023,9 922,6 average daily stock trading volume % of revenue from ios (%) 54,3 11,6 61,1 16,14 47,8 19,24 PerforManCe Generating shared value Consolidated net revenue for Brazil and the international operations increased by 5.7% compared with 2013 IN 2014, natura’s net revenue in Brazil reached r$ 6 billion, up 1.9% on the previous year. During the year, the international operations accounted for 19.2% of consolidated revenue, against 16.1% in 2013. the fi gures include the australian brand aesop and the operation in france. Local production in Latin america exceeded 16 million units, against 10.3 million in 2013. Consolidated net revenue for Brazil and the ios grew 5.7% in 2014, totaling $ 7.4 billion. ebitda was r$ 1.6 billion with net income of r$ 732.8 million, a reduction of 13% compared with 2013. Wealth distributed to natura stakeholders totaled r$ 13.6 billion. the total for the supplier communities was r$ 8.9 million, compared with r$ 11.2 million in 2013. the reduction is explained by the use of inputs held in stock over recent years. from January to october 2014, the Brazilian Cosmetics, fragrances and toiletries (Cft) market grew 14%, according to the industry associations sipatesp/abihpec, par ticularly worthy of note being the soap, hair and deodorant segments in toiletries. according to euromonitor data, natura’s market share in Brazil suffered a 1 p.p. retraction in 2014. in the Latin american operation, in addition to increased profi tability, natura showed the highest growth in market share during the year. in Chile, argentina and Peru, natura already fi gures among the preferred brands. Net revenue (R$ billion) Net revenue IOs* (R$ million) Number of NCs* (thousands) Dividends (R$ per share) Relative CO2 emissions * (kg of CO2e/kg of product) +10% g.y.* +40% g.y. +9% g.y. -0,3% g.y. 2010: 5.100 2014: 7.400 2010: 372,1 2014: 1.419,2 2010: 1.221 2014: 1.743 2010: 1,65 2014: 1,63 2012: 3,21 2014: 3 *average annual growth *international operations *natura Consultants *accumulated reduction: 6,7% 1in 2014, the indicator began to incorporate additional aspects and the figure for represented under the item suppliers; 8Climate sur vey – hay Group; 9Loyalty sur vey – 2013 was recalculated to ensure comparability; 2the indicator was redefined in 2014 instituto ipsos; 10Brand essence sur vey - ipsos institute; 11Base year 2010. 11 strategy Business strateGY evolution of model Y G e t a r t s Recycling workshop at the Casa Natura, in Argentina natura is working on leveraging relationship selling and strengthening the brand for consultants and clients, enhancing the well being well proposition gr OWtH IN INCOM E in Brazil and the resulting expansion in the number of retail and direct selling brands have significantly transformed the business environment for the cosmetics, fragrance and toiletries industry. as a result, natura realized it needed to strengthen operations around the company’s fundamentals: offering quality products that promote well being well for the company’s relationship network. We also want to strengthen the company’s presence among customers through the development of complementary channels – such as the natura network digital platform – which enable and leverage direct sales. the company also aims to differentiate its communication, bringing the natura brand closer to its stakeholders once again by underscoring the core attributes that unite them. We are still capturing the benefits of an investment cycle totaling almost r$ 2 billion over the last four years, which enhanced our technological, production and logistics infrastructure. We plan to capitalize on this, leveraging relationship selling through high connectivity and extensive information processing and analytical capacity. the 1.7 million natura consultants form a powerful social network that must be supported by technological resources able to recognize the needs and behaviors of the consultants’ customers, providing personalized offerings driving greater convenience and satisfaction with the buying experience. the company has been investing in the provision of information, applications, means of payment and other instruments to enhance the consultants’ performance. in the international operations, the target is to accelerate the transfer of innovations and learning, in particular to the countries in which the businesses have reached a higher level of consolidation, such as argentina, Chile and Peru, while continuing to expand the sales channel and the level of brand awareness in Colombia and in Mexico. Meanwhile, aesop will continue to grow in large urban centers worldwide, focused on the premium cosmetics segment. this expansion will include the opening of stores in Brazil in 2015. the acquisition of aesop reinforces our belief in the potential for expanding natura’s business in the future through new brands and product categories. Continuous growth in the IOs - 19.2% of natura’s consolidated revenue - More than 400 thousand nCs (115 thousand in argentina alone) - Local production (via partners) of 16 million units in argentina, Colombia and Mexico - Most valuable retail brand in Latin america (Best retail Brands/interbrand) - Management system (buying, stocks, finance etc.) implanted in Peru and Mexico - - - 56% of deliveries in up to 48 hours r$ 6.7 million raised through Believing is seeing program for promotion of educational actions elected the best company to work for 2014 (Great Place to Work) in Colombia - Differentiated multi-level model (sustainable relations network) drives the development of leaders, entrepreneurship and socio-environmental actions in Mexico - Leadership in direct selling segment in Chile 12 13 Y G e t a r t s risKs Continuous monitoring Main risks monitored the risk management structure includes different information sources, a dedicated team and constant monitoring by senior leadership rI Sk Commercial model innovation capacity MItIgatION MEaSurES Permanent monitoring of sector of activity and focus on projects to improve the company’s commercial model and value proposition, exemplified by the launch of the natura network digital relationship and sales platform Continuous investment in innovation on a number of different fronts (commercial strategy, product development, logistics and distribution network etc.). the company invests around 3% of its annual revenue in innovation Leadership development natura has a specific program to develop and retain leaders. this is coordinated by the People Management area and is linked with business strategy information security Product quality Climate change social biodiversity structured management of this question with guidelines set forth in the company’s code of conduct and constant efforts to drive employee awareness. full communication traceability and compliance with the iso 27.002:2013 information security standard the portfolio is compliant with all quality and safety standards from the conception stage on here the objective is to combine financial and socio-environmental gains. to reduce the impact of emissions from its operations, natura has its Carbon neutral program which covers three areas: emissions measurement (throughout the value chain), reduction and compensation the use of social biodiversity inputs is controlled by the natura sustainable use of social Biodiversity Products and services policy, which guarantees fair benefit sharing with the supplier communities and sustainable management of ingredients and assets. natura also seeks to promote sustainable businesses through its amazon program. together with other organizations, the company is engaged in an effort to approve new legislation governing access to biodiversity tax load Permanent monitoring of taxation at federal and state level. active participation in industry associations such as abihpec and aBeVD other external risks (interest rates, exchange variation, inflation etc.) senior management permanently monitors the external risks presented by the economic conjuncture, modifying strategic planning as necessary institutional Conjuncture (Brazil and international operations) Permanent monitoring of the political-economic conjuncture in the countries in which natura operates, modifying strategy as necessary. the alterations in importation rules in argentina, impacting natura’s supply capacity, influenced the decision to increase local production in the ios, generating reductions in costs and environmental impacts IN LINE WItH StratEgIC planning, at natura economic and socio-environmental risks are divided into two categories: strategic ones, which may affect business ambitions and the continuity of the company, and operational ones, related to internal company processes. the risk mapping process is fed by different information sources: the analysis of internal and external factors, mapping of the natura value chain (the natura management system), self-assessment of risks, loss and fraud indicators, internal audit reports, controls stemming from sox certification (based on the us sarbanes-oxley act) and reports received by the ombudsman. action plans to mitigate risks are monitored by the executive Committee. all strategic risks for natura are also accompanied by the Board of Directors through the advisory committees. Representation of global monitoring of discussions about controversial ingredients a whole new level of customer service inVestMents Y G e t a r t s investments in logistics infrastructure and digital technology drive gains in efficiency and improved service levels 2014 Sa W tHE CuLM INatION of logistics infrastructure and digital technology projects driven by an approximate investment of r$ 2 billion initiated in 2011. operations were initiated at a new 11 thousand m² factory in Cajamar (são Paulo) which is a reference in automation and productivity. in Benevides (Pará), the ecoparque industrial complex, which houses the natura soap plant, was inaugurated. the company’s new high technology são Paulo Distribution Center (CDsP) came into regular operation in the first half of the year, complementing the activities of the seven other centers around Brazil. of a series of indicators that monitor distribution, pre and post sale service and product availability), which soared from 40% in 2011 to 71% in 2014. in addition to reducing operating costs, the investments have impacted service levels for nCs and customers. “from 2011 to 2014, we improved our customer service indicators significantly”, says the company’s vice president of operations and Logistics, Josie romero. the best illustration of this is the customer service index (consisting the natura network is already operating on a flexible, fully digital technology platform that services both the traditional and the digital direct selling models. to maintain service levels, natura has implanted an internal support and service center operating 24 hours a day, seven days a week, which monitors the buying experience for consultants and customers on the digital platforms available. the evolution in infrastructure and technology is also matched in the international operations, as exemplified by the duplication of order picking capacity in Peru, argentina, Chile and Mexico, and the forthcoming launch of the natura network in Chile, scheduled for 2015. Service levels - Brasil 2011 2014 95,5% 84% 71% 6,8 days 40% 38% 4,5 days on-time deliveries 15% Delivery within 48 hours Customer service rate average delivery time 14 15 Y G e t a r t s sustai naBi Li tY Vision think positive impact the new sustainability vision combines strategic directives for 2050 and ambitions to be achieved by 2020 LauNCHED IN 2014, the new sustainability vision is fully aligned with business strategy and is intended to transform natura into a company that generates positive impacts in every dimension of its activities. What this means is that its operations should improve the environment and society, rupturing the current paradigm whereby impacts are merely reduced and mitigated. the new vision consists of a set of strategic guidelines to build this positive impact for all the company’s businesses by 2050, in addition to the targets natura is committed to achieving by 2020. “the vision clearly indicates the path we want to follow. More than ever, this strategy will guide not only product innovation, but also innovation in all our work processes”, networks vice president João Paulo ferreira underscores. the targets are organized in three interdependent pillars (Brands and Products; our network; and Management and organization), the integrated management of which will be incorporated into organizational culture. to further enhance the sustainability vision, in 2014 natura also reviewed its materiality matrix. after consulting stakeholders in Brazil and in the international operations, cross referencing perceptions with the 2020 ambitions and validation by senior leadership, natura identifi ed fi ve new priority topics that will help guide company management and its interactions with key stakeholders and society. Priority topics 1. Solid waste: development of packaging that provokes lower environmental impact and promotes conscious consumption. 2. Climate change: reduction of greenhouse gas emissions throughout the value chain, as well as neutralization through projects that generate social benefi ts. 3. Valuing social biodiversity: promoting sustainable business through the use of products and services coming mainly from the Pan-amazon region. 4. Water1: relative reduction in consumption and pollution of water throughout the value chain and neutralization of impact on water sources.. 5. Transparency and origin of products: increased visibility of natura business practices and origins of its products 6. Education2: developing the consultant network, employees, and public education. 1included due to the water crisis affecting southeastern Brazil, where natura’s main operation is located; it reflects the business’s high dependence on water and the fact that it is one of its major impacts; 2in the stakeholder consultation process, the topic was focused on developing education for nCs. action fronts within the topic were educational measures for employees and suppor t for improvements in public education. Pilars from the Sustainability Vision 2050 Natura’s Materiality Matrix BRANDS AND PRODUCTS OUR NETWORK K E Y S T A K E H O L D E R ’ S P E R S P E C T I V E 16 MANAGEMENT AND ORGANIZATION 4 6 2 5 3 1 non-prioritized topics of the vision priority topics of the vision for key audiences topics from the vision prioritized by stakeholders and validated as strategic by leadership Sustainability performance Brands and products 2020 ambitions and Our Network 2020 ambitions and Not initiated At planning stage Underway Technical and economic feasibility study and analysis stage, awaiting approval Projects/initiatives at pilot or operational test stage Y G e t a r t s Dimension commitments 2014 Performance Status* Dimension commitments 2014 Performance Status* Packaging use at least 10% post-consumer natura used 1.2% post-consumer Employees achieve rate of 50% women in natura achieved the rate of 30% recycled material in the total mass recycled material in the total mass of of natura packaging in Brazil natura packaging in Brazil 1,4% 2013 2020 10% Completion 2014 -2,3% leadership positions (director level women in leadership positions and above) at natura (director level and above) Climate change reduce relative greenhouse gas natura’s relative greenhouse gas Communities Develop strategies for social a strategy has been developed 29% 2013 2020 50% Completion 2014 5% Underway biodiversity territories in the Pan- and validated for the neighboring amazon region and the communities communities in Cajamar, nasp around our main operations in Brazil (são Paulo) and Benevides, as well through dialogue and collaborative as for the territories in the Médio construction with the local Juruá and Baixo tocantins – in the populations and actors northeast of Pará. in the Médio Juruá and around Benevides, territorial Development Plans have been drafted involving an agenda of projects, targets and indicators that is shared with other companies. the plans for remaining territories and surrounding communities are under preparation emissions for natura brand by 33% emissions increased by 2.2% in (scopes 1, 2 and 3) 2014. against base-year 2012, the accumulated reduction is 6.7% 0% 2012 2020 -33% Completion 2014 21% Social biodiversity achieve a business volume of r$ 1 Business volume of r$ 197 million in billion in the Pan-amazon region 2014. in the region, total accumulated r$ millions business volume from the base year 89 2010 2020 1.000 2010 is r$ 582.1 million Solid waste Collect and recycle 50% of the solid Confi guration of integrated waste generated by natura product Management Project, the pilot packaging in Brazil (in t equivalent) of which will be initiated in the second half of 2015. natura has been discussing this issue with organizations and companies to link the entire reverse logistics chain effi ciently and fairly Completion 2014 54% At planning stage Water for the natura brand in Brazil, the study of natura’s water footprint implement a strategy to reduce began in 2014 and will be concluded consumption and neutralize impact in 2015. in addition to taking into based on measurement of water account the extended chain, the footprint throughout the value chain methodology measures levels of Not initiated biodegradability and ecotoxicity, that is, the effects products may cause on living organisms when they are discharged into the environment Supply chains By 2015, ensure the traceability of natura developed and implemented 100% of the inputs produced by the the natura Biodiversity input supply direct manufacturers (last link) and, Chain Verifi cation system, aimed at by 2020, implement a traceability monitoring and developing these program for the remaining links in chains. the development of the the natura brand value chain strategy for tracing remaining inputs will be initiated in 2015 Our Network Dimension Consultants 2020 ambitions and commitments 2014 Performance Status* encourage interest in continuous natura enhanced its educational learning and provide an extensive offerings for nCs, both online and educational offer that meets their in the classroom. in partnership with needs a specialized organization, a pilot project involving 15 thousand nCs offered vocational courses with mixed online and classroom delivery. 200 courses from the escola Digital platform were also included in the Portal do Conhecimento (Knowledge Portal), where e-learning measures for consultants are concentrated Management and Organization 2020 ambitions and Dimension commitments 2014 Performance Status* Management model for the natura brand, implement the natura has begun to develop a evaluation of socio-environmental methodology to evaluate its own externalities, taking into account environmental externalities and those the positive and negative impacts of the entire value chain. in addition to At planning stage of the extended value chain (from solid waste and emissions, for which the extraction of raw materials to inventories are ready, the company will product disposal) fi nalize studies on its water footprint in 2015 and is concluding methods of measuring use of land and biodiversity assets. these externalities will be evaluated in 2015 and integrated into the management model At planning stage Ethics and transparency for the natura brand, implant after a diagnosis undertaken in 2014, total transparency in the provision which indicated that the data on of information on products product labels no longer refl ect all of and evolution of the company’s natura’s environmental initiatives, the At planning stage sustainability vision environmental table on the packaging will be updated in 2015. new indicators were defi ned based on the company’s new sustainability vision. the way company communicates its business practices and its sustainability vision will also be enhanced Underway Governance of implant an advisory Council Planning for the advisory Council was sustainability comprising external specialists, to initiated in 2014. after approval, it is evaluate the company’s progress and expected to be implanted in 2015 to further develop its strategy At planning stage *refers to achievement of ambition in 2014 relative to 2020 and to the base-year stipulated. COMPA N Y’S PERSPECTIVE The full list of ambitions and 2020 commitments may be consulted in the complete version of the Annual Report: www.natura.com.br/relatorioanual 17 Management and Organization Ethics and transparency Natura continually updates its processes to reinforce ethical behavior throughout the company N O I I T A z N A g r O d N A T N E M E g A N A M Neusa Nascimento, Rafael Avila and Claudineia Zorzela, Natura employees Since itS beginni ng, Natura has continually reviewed and enhanced its practices and processes in order to ensure ethical and transparent conduct in the company. In 2014, with the entry into force of Brazil’s new anti-corruption law, the company developed a series of associated initiatives, such as mapping all critical areas based on the degree of interaction with public authorities, as well as the creation of more rigorous procedures for selecting suppliers and accounting for payments. The Code of Conduct was also updated in accordance with the new law and to highlight certain key questions. Another important measure was the development of two specific codes of conduct, one for the sales force and the other for suppliers. Furthermore, the Ombudsman channel was restructured, involving the contracting of a partner specialized in business ethics, the expansion of the telephone service, which is now available 24 hours a day, seven days a week, in Portuguese, Spanish and English, and the creation of a website (www.ouvidorianatura.com.br). For the fifth year running, the Natura operation complied voluntarily with the United States Sarbanes-Oxley Act, which imposes a series of audit and security mechanisms designed to prevent fraud. For the first time ever, the operations in Argentina, Mexico and Peru were also Sox compliant. 18 19 gOvErNA NCE In constant movement Evolution in management reflects Natura’s commitment to best governance practices and its future strategy AFteR 2 5 YeARS in Natura, ten of which as chief executive officer, Alessandro Carlucci left the company in 2014, ending a cycle of important achievements. To take his place, the Board of directors invited roberto Lima, who was a board member in 2012 and 2013 and has broad experience leading large corporations. “Natura has an exemplary history and a strategy in place to which I will strive to contribute, remaining true to the principles and values which have made this company one of the most admired in Brazil and abroad”, said Lima, who took over as CEO of Natura in September. In October, Silvia Lagnado was elected to the Board of directors. She brings relevant experience as a result of her years of executive experience in the international cosmetics and toiletries market. Also in 2014, the founding partners Antônio Luiz Seabra, guilherme Peirão Leal and Pedro Luiz Barreiros Passos once again participated in the Board of directors’ advisory committees, with the exception of the Audit Committee, where membership is restricted to external members. Additionally, the company’s related Parties Transactions policy was disseminated to ensure that any decisions with the potential to generate conflict be taken transparently and in line with Natura’s best interests. N O I I T A z N A g r O d N A T N E M E g A N A M Dow Jones Sustainability Index In 2014, Natura was listed on the New York Stock Exchange’s dow Jones Sustainability Index (dJSI), a reference for investors who take socio- environmental matters into consideration in their decision making. during the year, the company also engaged with investors from Asia, and for the first time ever organized a road show in Chile. Another advance was the reformulation of the webpage for investors (http://natu.infoinvest.com.br/), underscoring data related to the strategy, the commercial model and sustainability Recognition of performance A review of Natura’s variable remuneration policy was one of the People Management area’s main priorities in 2014. The changes will include a new profit share system for all managers, which will come into effect as of 2015. It comprises four indicators: - - - - Consolidated Ebitda (Brasil and International Operations): 40% Country Ebitda: 30% Socio-environmental indicators: 20% Individual performance appraisal: 10% The biggest B Corporation in the world in tHe L ASt MOntH of 2014, Natura received B Corp certification, becoming part of a global network of companies that associate economic growth with the promotion of social and environmental well being. This commitment will be set forth in the company’s bylaws – one of the movement’s prerogatives. Natura thus became the largest B Corp certified company in the world, as well as the first publicly traded company to obtain this distinction. For João Paulo Ferreira, vice president of Networks, the achievement came at the right time. “This certification underscores our need to focus on short-term strategy, but without losing sight of the long-term, the company’s future. Our objective in becoming a B Corporation is to maximize value for society as a whole.” The movement was born in the United States in 2006, lead by the not-for-profit organization B Lab. Today, it consists of around 1,200 organizations in 38 countries. In Brazil, some 30 companies participate in the movement. gOvErNMENT ANd SOCIETY Fairer and more supportive education The Instituto Natura consolidates its position, forming partnerships that promote learning by and for all nAtURA HA S An AMbi tiOn active role in the debate to formulate public policies that drive the sustainable development of society. One of the areas in which the company wants to do this is education, a key focus for its private social investment strategy, conducted through the Instituto Natura. the assumption of an Created in 2010, the institute manages the funds raised by the sale of Believing is Seeing products, which are subsidized by Natura and promoted and sold by the consultants on a non-profit basis. In 2014, consultant mobilization reached a record 20.15% of the active network in Brazil, generating r$ 18.8 million in revenues from product sales, also a record. These funds are invested in providing support for the public education administrations, innovation in educational technologies and educational and social transformation. An example is the Education Support Network (rAE in the Portuguese acronym), a program that builds bridges between projects and public and private partners. In 2014, the network was active in 26 municipalities in the northeast of Pará – a priority region for the Amazon program created by Natura in 2011 –, implementing the institute’s own projects such as the Trilhas (Trails) literacy program for early learners, which has been recognized as public policy by the Brazilian Ministry of Education since 2012. 20 21 N O I I T A z N A g r O d N A T N E M E g A N A M Brands and products Ana Luisa de Toledo Camargo, Natura employee PEOP LE MANA gEMEN T A new way of working CULTUrE 10 years of Natura Musical Natura prepares its employees to execute company strategy without losing sight of its values and culture company’s bASeD On tHe strategy for the future and new trends in labor relations, Natura reviewed its people management model and its organizational culture. This broad internal reassessment led to the updating of the organizational design, of the company’s forms of appraisal and recognition, as well as its internal communication strategy. the introduction of 360º appraisal for all employees based on the competencies established for their positions. The results will be discussed with the newly created People Forum, which will then draft an individual development plan for each employee, define suitable recognition (both financial and non- financial) and determine the individual’s next career steps. The first step was to draft the new profile of the Natura employee, identifying the functional, behavioral and leadership competencies required for diverse positions within the company. As a result of this process, Natura developed its new appraisal and performance management model (already tested among management level employees), which will come into force in 2015. The main changes include The major goal is to consolidate a team that is even more prepared to meet current and future business challenges and to contribute effectively to achieving the results expected by the company. “We are clear about where we want to get to, and it will require discipline and persistence to reap the fruits of the transformation we are undertaking”, says Lilian guimarães, vice president of People and Culture. 22 In 2015, Natura Musical, part of the company’s cultural support and sponsorship program, will celebrate a decade of activities. during this time, the project has developed into a platform for the renovation of Brazilian music, which is disseminated to different audiences in diverse manners. Examples are the Natura Musical festival, with its free shows in public areas, the Natura Musical website, with exclusive contents, as well as an online radio station. recently the program was expanded, with an increase from four to six public tenders to select projects and fund them using the company’s own resources or tax incentive funding. In 2014, the selection processes (one nationwide and five at state level: Bahia, Minas gerais, Pará, rio grande do Sul and São Paulo) attracted 4,226 entries. 30 proposals were selected. 2014 Natura Musical - r$ 8,4 million in private funds + r$ 6.7 million in incentive law funding invested in Natura Musical in 2014 - - - 45 projects underway 70 shows with an estimated total audience of 100 thousand people 40 thousand people in the 14th edition of Natura Musical Festival in Belo Horizonte (Minas gerais) S T C U d O r P d N A S d N A r B NETWOrK Collective learning beLieF in Open and networked innovation means that currently 60% of Natura’s innovation projects are developed jointly with more than 200 partners, including companies, universities, research institutions, test laboratories and foment organizations. By organizing an innovation marathon in 2014, the company strengthened its relations with the MIT’s (Massachusetts Institute of Technology) Media Lab based in Boston (USA), which will receive two Brazilian researchers selected in the initiative. Behavior) is underway, with the defi nition of a partnering university to host the research center scheduled for 2015. In Brazil, the unprecedented partnership with the research body Fapesp (Fundação de Amparo à Pesquisa do Estado de São Paulo) for the creation of the Centro de Pesquisa Aplicada em Bem-Estar e Comportamento Humano (Center of Applied research in Well-Being and Human In 2014, the company also consolidated its Innovation Hub, an offi ce in New York (USA) dedicated to identifying trends in conjunction with the Natura innovation areas in Brazil: the global Innovation Center in Cajamar, a science and technology center in Benevides and NINA (Natura Amazônia Innovation Center), in Manaus. The company also maintained its Co- creating program, which is open to Natura customers, consultants and anyone who identifi es with the brand and wishes to participate in the conception of products and services. Four co-creating journeys, involving virtual and face-to-face dynamics were organized in 2014, generating 884 contributions. # U r B A N O L U N A E C O C O M PAC TO E KO S 1 0 0 % A M A z Ô N I A S OA P S N AT U r A TO d O d I A P L A N T I N T E N S A Main launches in 2014 S T C U d O r P d N A S d N A r B Juliana Rodrigues Calil, employee at the Natura Global Innovation Center, in Cajamar Creating via partnerships is the formula IN NOvATION representing a new signature in the men’s With fragrances and bottles inspired by Available in different The line increased the The entire product line was Providing regenerative Natura fragrances, with concentration of the vegetable repositioned with new formulas cosmetic scalp therapy perfume market. The women’s sensuality and prolonged perfume and oils extracted from Amazon that permit greater moisturizing as an alternative to concept speaks to a young femininity performance social biodiversity assets in the and more fragrance, as well as moisturizing in the public into the urban ar t scene bar soap noodles (base mass) more functional and sustainable hairdressing salon packs that use green plastic Natura strategy is intended to respond to current socio-environmental and cultural challenges Results One e XAMpLe OF how the company transforms socio-environmental challenges into new business oppor tunities was the 2014 launch of the Ecocompacto aerosol deodorant, enabling Natura to enter a new segment offering a more sustainable product. For Natura, entering this market was an enormous challenge, because aerosols uses propellant gases to propagate the antiperspirant ingredient in the form of a spray or mist. developed in Brazil, the pioneering Ecocompacto resulted from a close par tnership between Natura and its suppliers. It is a high-performance product, employing 15% less aluminum, having half the volume and generating 48% fewer greenhouse gas emissions than conventional products, while providing the same yield. “For Natura, green technologies are the driving force behind business growth. Increasingly, our products will be developed in the forefront of ecodesign and eco-effectiveness, involving the entire value chain,” says gerson Pinto, vice president of Innovation. Ecocompacto Gan h os dos produtos Investment in innovation1 (R$ million) Percentage of net revenue invested in innovation Number of products launched (units) Innovation rate2 -48% lower GHG emissions Natura 's entr y into aerosol deodorant segment, where the biggest market is Brazil (22% share of global deodorant market)¹ -72% emissões de GEE -20% na compra do refil dos frescores 100% reciclado pós-consumo pack volume -50% -15% aluminum 100% de ativos da biodiver sidade amazônica e 154 produzido no Ecoparque (PA) com justa repar tição de benefícios com as comunidades envolvidas Gera • redução de custos para a Natura • valor financeiro e social para a comu nidade local 2012 2013 207 216 3% 3% 2,6% 239 67,2% 63,4% 67,9% 179 104 2014 2012 2013 2014 2012 2013 2014 2012 2013 2014 12013 Euromonitor data 12013 Euromonitor data Refis Frescores 1 Natura started to take some indirect innovation expenses and the cost of innovation in Latin America into account. The new metric is valid for 2013 and 2014; 2 The percentage of revenues from the sale of products launched in the last two years. Sabonetes 100% Amazônia 24 25 Resultados Receita líquida (em R$ MM milhões) Receita líquida OIs (em R$ MM por ação) +13% a.a. +40% a.a. 2009: 4242,1 2013: 7010,3 2009: 292 2013: 1130,1 Dividendos (em R$ por ação) Número de CNs (em milhares) +10% a.a. +12% a.a. 2009: 1,37 2013: 1,99 2009: 1038,9 2013: 1656,5 Emissão relativa de CO2 (kg de CO2e/kg de produto) -6% a.a. 2009: 3,55 2013: 2,79 Programa Amazônia Consumption of Amazonian inputs as percentage of total Natura consumption (%) 30 11,4 13,4 13,3 2012 2013 2014 2020 ambition Accumulated business volume in Pan-Amazon region1 (R$ million) 1.000 582 385 122 2012 2013 2014 2020 ambition 1Base year 2010. BLENDER EXTRUSION STAMPING PACKING NOODLES WITH BIODIVERSITY ACTIVE INGREDIENTS + BIODIVERSITY ACTIVE INGREDIENTS + ADDITIVES PHASE 3 FINALIzATION OF PrOdUCTION IN THE NATUrA SOAP PLANT When the noodle is ready, additives and other biodiversity active ingredients are blended into the soap mass. The ingredients are subject to the additional production stages and the soap is fi nalized in the Ecoparque plant. Vegetable blend Biodiversity oils Saponification Additives Drying NOODLE CONTAINING BIODIVERSITY ACTIVE INGREDIENTS PHASE 4 dISTrIBUTION OF THE NATUrA EKOS 100% AMAzÔNIA SOAP BArS Third-party providers transport the soap to the distribution centers. The distribution centers pick the orders and deliver the product to the Natura consultant’s home. With the Natura Network online platform, the soap may also be delivered directly to the customer’s home. Customers acquire a high added value product, leveraging the potential of the Amazon region’s social biodiversity. ECOPARQUE DIST RIBU TION CEN TERS CON SULTANT’S HOME CLIENT’S HOME COMM UNITIES (RETU RN IN THE FORM OF FUNDS ) J O U R N E Y O F N AT U R A E KO S 1 0 0 % A M A Z Ô N I A S O A P With the inauguration of the Ecoparque in Benevides (Pará), all the stages of the Natura Ekos soap manufacturing process were concentrated in the Natura soap factor y. In parallel, more social biodiversity active ingredients were added to the formulation. Previously, the products were finalized by third-par ty contractors in Minas gerais and São Paulo. PHASE 1 EXTrACTION OF THE vEgETABLE OIL Natura’s partnering supplier communities use sustainable management techniques to extract oils from plants that make up the region’s biodiversity: açaí berries, murumuru palm, andiroba, buriti palm etc. The communities receive an amount related to benefit sharing. This foments local entrepreneurship and a standing forest economy. AÇAÍ BERRIES ANDIROBA BURITI PALM AND OTHERS PHASE 2 PrOdUCTION OF THE SOAP NOOdLES IN THE NATUrA SOAP PLANT The oils extracted from biodiversity ingredients are inserted during the noodle (dry soap mass shaped like a noodle) manufacturing process. Resultados Receita líquida (em R$ MM milhões) Receita líquida OIs (em R$ MM por ação) +13% a.a. +40% a.a. 2009: 4242,1 2013: 7010,3 2009: 292 2013: 1130,1 Dividendos (em R$ por ação) Número de CNs (em milhares) +10% a.a. +12% a.a. Sodium hydroxide 2013: 1656,5 2009: 1,37 2013: 1,99 2009: 1038,9 Emissão relativa de CO2 (kg de CO2e/kg de produto) -6% a.a. 2009: 3,55 2013: 2,79 Programa Amazônia Consumption of Amazonian inputs as percentage of total Natura consumption (%) 30 11,4 13,4 13,3 2012 2013 2014 2020 ambition Accumulated business volume in Pan-Amazon region1 (R$ million) 1.000 582 385 122 2012 2013 2014 2020 ambition Relative CO2 emissions (kg of CO2e/kg of product invoiced)¹ Post-consumer recycled material in finished product packaging in Brazil Recyclability (recyclable material in finished product packaging)2 in Brazil Eco-efficient packaging3 in Brazil S T C U d O r P d N A S d N A r B 3,21 2,93 3 1,6% 1,4% 83,7% 1,2% 56% 57,5% 29% 21,7% 13,4% 2012 2013 2014 2012 2013 2014 2012 2013 2014 2012 2013 2014 1There were changes in the gHg inventory emissions factor. The 2012 and 2013 were restated to ensure comparability; 2In 2014, the indicator incorporated additional recycling feasibility factors in Brazil, and the 2013 amount was restated to ensure comparability; 3Eco-efficient packs are those that represent a reduction of at least 50% in weight compared with a similar/ regular pack; or which consist of 50% post-consumer recycled material and/or renewable non-cellulosic material, as long as there is no increase in mass. Essencial: pack provides information on percentage of post- consumer recycled glass EC O-EFFI CIENC Y More recyclable and recycled materials The refill for the Natura Ekos line of perfumes is yet another example of innovation in sustainable technologies innO vAtin g tOwARDS a positive impact for the business, society and the environment. This phrase is an excellent illustration of the way one of the main novelties in the Natura portfolio was developed in 2014: these are the refills for the Natura Ekos Frescores line of fragrances, made from 100% recycled post-consumer PET containers, generating 72% fewer greenhouse gas emissions. With this launch, Natura became the first major cosmetics brand to use this type of material in the perfume category. After enhancing the facilities of partnering glass recyclers, at the beginning of 2015 the company included 20% recycled post- consumer premium category glass in the packs of some perfume brands. Nowadays the innovation and product development areas have an integrated calculator to measure environmental gains and losses, enabling the estimation of the potential environmental impact in terms of emissions, solid waste and quantity of recycled post-consumer material generated. 2014 rESULTS The year saw a 2.2% increase in Natura’s relative emissions, as a result of revenue growth below initial estimates. This is because a percentage of the emissions is related to the operation’s fixed structure the cost of which does not vary in function of the annual production volume. Even so, considering 2012 (the base year for the new target of an additional 33% reduction in emissions by 2020), there was an accumulated reduction of 6.7%. According to the company’s Sustainability manager, Keyvan Macedo, it is expected that it will be easier to achieve the new target from 2017 on, when specific projects that will contribute more effectively to reductions will be launched. The proportion of post-consumer recycled material used, targeted to reach 10% by 2020, was 1.2% in 2014. This represents a slight reduction due to the variation in the product mix (lower sales of products using post-consumer recycled materials or higher sales of products not using recycled material). An expansion will be implanted to ensure the 2020 target is achieved. Eco-efficient packaging increased by 7 p.p., corresponding to 29% of the total. After remaining stable for three years, water consumption also increased by 11%, due to the lower production volume, the expansion of the Cajamar industrial unit and the opening of the Ecoparque. Radical transparency In line with the new sustainability vision which intends to implant total transparency in the provision of product information, from 2015 the packaging for the entire Natura portfolio will present a new environmental table. After a study conducted in 2014 and based on best market practices, a series of new indicators have been defined, as has the best way of communicating these. 28 29 Our Network A powerful social network K r O W T E N r U O Lívia Santos da Conceição, Natura Consultant in Salvador The aim is to continually enhance the value proposition for the consultant network, supported by new technologies bASeD On A FiRM beLi eF in the power of relationships, Natura chose the direct selling model to deliver its portfolio to customers. Today the company has more than 1.3 million consultants in Brazil and over 400 thousand in its International Operations. In 2014, NCs all over Brazil gained an additional channel for generating business: the Natura Network. This enables consultants to have their own webpage on the internet as a vehicle for building relationships and commercializing products, combining this format with traditional direct selling and boosting their productivity. The Natura Network has been attracting a new consultant profile. These are generally younger people who feel at home in the virtual environment and who tend to prefer not to have to deal with operational factors, such as payments and delivering product to customers. This is the case with rafael gustavo Noris (25), from the town of Pedreira in São Paulo state. Owner of a book store, rafael has also been a digital consultant since October 2014. “The space is very accessible and easy to operate, I do not have to worry about payments and the company provides me with different kinds of support materials for promotional purposes”, he states. With the Network in nationwide operation, the challenge now is to gain more in-depth understanding of the profile of consultants operating in the digital environment. This will permit Natura to provide them with ongoing targeted training, driving business growth throughout the network. The company is also testing its first multi-category offering via the Natura Network. For the time being available in São Paulo state, Natura + involves the commercialization of fashion and household products developed by partnering entrepreneurs and available exclusively via the internet. Digital business relationship managers (Natura employees): have access to a tablet which facilitates their activities. There are also exclusive order capture applications for tablets and smartphones that expand relationship possibilities in the Natura encounters and other events. NCAs (Natura Consultant Advisors): with a tool developed in SMS messaging format, the NCAs may access information on the sales cycle status and monitor individual consultants more closely. NCs (Natura Consultants) and customers: also in SMS format, customers are able to locate an NC and make purchases by sending a message with the word Natura to the number 28128. 30 31 I T E R R E F O K I K K r O W T E N r U O Sônia Ceneviva, Natura Consultant in Catanduva (SP), presides an organization supporting women with cancer. Marisa Cabral, a Natura customer from the city of São Paulo, collaborates with Sônia’s initiative. The two are connected by the Movement Legenda de Imagem com o nome da Déborah Salles e Fernanda Érika K r O W T E N r U O Top left: Anadelli Soares Braz, a consultant who participates in the Natura Movement. She organizes a project aimed at providing young people with professional training in the city of São Paulo Top right: The consultant Celma grace de Oliveira in the NgO she created to train female artisans in goiânia (goiás) Bottom left: In Manhumirim (Minas gerais), the consultant Flávia dias Herculano heads a recyclable waste picker cooperative Bottom right: The consultant Iria de Sá Pinheiro teaches music to children and adolescents in the region of Tartarugalzinho (Amapá). The project is part of the Natura Movement Training courses explore virtual world tRAining AnD DeveLOpMent initiatives for consultants also made inroads into the digital world. In the second half of the year, the company introduced an online version of the Natura Encounter, a product communication event organized every sales cycle. In par tnership with the Instituto Natura, the company’s e-learning platform, known as the Knowledge Por tal, hosted a pilot project to boost the training por tfolio on offer. After a sur vey, 200 vocational courses from the Escola digital platform were included in the por tal. The same initiative led to a par tnership with the company Prepara Cursos for the offer of vocational courses delivered in a combined face-to-face and online format. Around 15 thousand consultants had access to a free course on personal finance and other programs offering special payment terms were also made available. 80% of the NCs taking courses rated the experience as good or very good. HDI-NC In 2014, Natura took measures to create an index capable of measuring the impact of the company’s business model on the human development of its consultant network. This was inspired by the HdI (Human development Index), adapted to the reality of the direct selling model and Natura. The HdI-NC will be measured on an annual basis and its results will feed the development of specific action plans. Natura Movement in new format Since 2006, the Natura Movement has been the major channel through which the company supports and encourages NCs to engage in actions aimed at socio- environmental transformation. In 2014, the movement went beyond the boundaries of the company and the consultant network, becoming a digital platform that connects the diverse initiatives with people interested in participating in them. Social entrepreneurs, including Natura consultants, may file their initiatives on the website www.movimentonatura.com.br. Once an initiative has been selected by Natura, it is shared with everyone. People who are interested in supporting a project may declare their skills and interests, and the Natura Movement will then help them to find an initiative that requires someone with the profile they have posted. 32 33 K r O W T E N r U O Closer and closer Knowing in order to grow K r O W T E N r U O Monitoring center in the city of São Paulo tracks the NCs’ and customers’ buying experience on the digital platforms Ivanildo Melo is the director of the Camtauá cooperative, supplier of the active ingredient andiroba which enhances the Natura Ekos line FASteR, MORe integRA teD and connected with the world. A company that is closer and readily available, with products and services driving well being well the way everyone wants it and needs it. These are the drivers through which Natura intends to revitalize its direct selling model, with initiatives that offer expanded shopping experiences. To do this, the company has increased its use of CrM (Customer relationship Management) tools and data analysis to segment offers, channels and communication, supporting consultants in the activation of their customer portfolio. “Companies need to recognize the needs of each customer profile in mass markets. Our recent investments in technology enable us to do this, but the investments will continue”, states Agenor Leão, Natura’s vice president of digital Technology. In 2014, the extension of the Natura Network to the whole of Brazil provided customers with yet another option for access, with the facility of online payment (credit card or payment order) and faster delivery, directly from Natura. With the extension of the platform, the company launched the Natura Closer movement, offering exclusive products, promotions and gifts during the 2014/2015 summer season. The movement encouraged customers to look for the NCs during this period, either in person, via the internet or via SMS message, the company’s latest novelty. The new experiences on offer include the Natura gift Card, which is currently available in the whole of the state of São Paulo. The cards may be acquired the same way as any other items in the Revista Natura. AS SOOn AS it included the sustainable use of biodiversity ingredients in its business platform, Natura was faced with the challenge of managing its supply chains efficiently and ensuring traceability. Even though this monitoring already existed in almost all the chains, there was still a lack of systematized information in a robust, secure data bank that could be audited and used for crop planning. such as investments under taken, production levels and local infrastructure, as well as integration with other corporate management systems. With mobile tools (tablets used by the field teams),it is possible to consult, collect and update information on family farmers and cooperatives, including photographic documentation. This became possible in 2014 with the implementation of the Natura Social Biodiversity system. As Mauro Costa, Social Biodiversity Supply and relationship manager in the Supply area, explains, this is a geographic information system that enables online localization of all the chains and access to indicators To forge closer ties with the company’s some 5 thousand suppliers, in 2014 Natura implemented a more efficient supply management tool which drives greater process transparency. The company also consolidated its Supplier Committee, a forum in which the terms and conditions of par tnership may be defined and the demands of these stakeholders may be aired. 34 35 Vice President of Finance and Institutional Relations roberto Pedote Corporate Affairs Marcelo Bicalho Behar Institutional Communication Newton Branda Coordination of the Annual Report Jaqueline Nichi Support Francisco Higa and rafael Seara (valuepoint) Corporate Finance Financial information Alexandre Nakamaru, José Wanderley and Enzo russo Market relations Fabio Cefaly and Tatiana Carvalho Sustainability Luciana villa Nova and Juliana Pasqualini Copy and sustainability consulting report Sustentabilidade Editing Álvaro Almeida (MTb 45.384/rS), Talita Fusco (MTb 11.615/Mg) and Michele Silva (MTb 11.829/rS) Reporting Fernanda Mori and gabriela Scheinberg Project and relationship management Ana Souza Materiality and GRI consulting victor Netto and Tatiana Lopes Revision Assertiva Produções Editoriais Art direction and graphic design Trip Editora Chief editor Paulo Lima Superintendent Carlos Sarli Editorial director Fernando Luna Creative director Ciça Pinheiro Director Claudio govêa Copy director Andréa de Marco Account managementAriane Komatsu Art ricardo Martini and Thiago Freitas Designers Frederico Floeter and Beatriz Midon Executive production Carol gariani Photography Marlos Bakker, vavá ribeiro, Melissa duarte, Eduardo delfin, Kiko Ferrite, Marcos Suguio and Acervo Natura Illustration Eva Uviedo Acknowledgements Atelier Carlos Motta Translation to english raymond Maddock Printing Stilgraf All carbon emissions related to the production of this report have been offset. NATU3 BM&FBOVESPA ® NATURA BRAZIL Rod. Anhanguera, Km 30,5 Via de acesso Natura /SKF Empresarial Itaim 07790-190, Cajamar (SP) Tel. +55 11 4446 2000 NATURA ARGENTINA Calle Cazadores de Coquimbo, 2.860 2º piso Província de Buenos Aires C.P. 1605 Tel. +54 11 5554 6161 NATURA CHILE Av. Apoquindo, 4.501, Piso 9 Las Condes, Santiago, Chile Tel. +56 2 595 9200 NATURA COLOMBIA Carrera 7, 77, Edificio Torre Siete, Piso 14, Oficina 1.401 Bogotá, Colombia Tel. +57 1 326 8787 NATURA MEXICO Av. Ejército Nacional, 579 Mezzanine C, Colonia Granada, C.P. 11520, Del. Miguel Hidalgo, México D.F. Tel. +52 55 2282 6000 NATURA PERU Av. del Ejército, 801 Miraflores, Lima 18 Tel. +51 1 440 1362 NATURA FRANCE Natura Europa SAS 10 Rue de Chevreul 92150 Suresnes, France Tel. +33 1 53 64 21 00
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