Natura &Co Holding S.A.
Annual Report 2016

Plain-text annual report

Natura 2016 Annual Report Contents 3 4 6 8 8 9 11 13 14 19 20 22 30 32 35 36 37 39 40 41 46 47 49 50 54 61 64 64 66 68 70 71 73 75 77 80 98 106 107 150 Introduction Message from the founders Message from the Executive Committee We are Natura Developments and Challenges Map of Operations Strategy Integrated performance assessment Business Model International Operations AESOP Personnel Management Corporate Governance Risk management Ethics and transparency Our products and concepts Innovation Consumer safety Natura multi-channel Relationship selling Digital channels Natura in Retail Our processes Commitments to the future The Amazon Program Management of GHG emissions Environmental accounting Water management Waste management Relationship with suppliers Developments in logistics Local communities The Natura Institute Institutional marketing About this report GRI Content Index 2050 Sustainability Vision Appendices Supplementary indicators Letter of Assurance 2 2016 ANNUAL REPORTINTRODUCTION Communication focused on sharing The volume of information and data disclosed every year by Natura embodies our commitment to transparency. In this report alone, there are more than 150 indicators providing insight into the influence exerted by the different areas of our business. The 2016 Annual Report is part of Natura’s reporting process, which also includes a printed magazine, presenting the main highlights of the period covered, and the Management Report, published on February 23rd in the business newspaper Valor Econômico. Our Quarterly Performance Reports also serve to update the performance of the company’s main social and envi- ronmental indicators. The Natura 2016 Annual Report follows the GRI (Global Reporting Initiative) Standards for reporting sustainability performance, issued in 2016. Natura is a pioneer in the issuing of GRI-aligned reports – it was the first company in Latin America to adopt this practice, back in the year 2000. We also seek to be in line with the integrated reporting principles set out by the IIRC (International Inte- grated Reporting Council). With each new issue, we strive to disclose our results in the clearest and most integrated way possible. For this reason, we have consolidated all indicators in this report. You should also pick up a copy of the 2016 Natura Report magazine. Written in true journalistic style, it highlights the main events of the year, illus- trating them with reports featuring some of the consultants that comprise our relationship network. Read more about this year’s developments in the next pages! Marcelo Bicalho Behar Corporate Affairs Director Learn more about the making of this report here. 3 2016 ANNUAL REPORTMESSAGE FROM THE FOUNDERS Possibilities in liquid times Antonio Luiz da Cunha Seabra, Guilherme Peirão Leal and Pedro Luiz Barreiros Passos 102-14 Uncertainty, and the insecurities it generates, are predominant features of the world in our times. Liquid times – as the recently deceased Polish sociologist Zygmunt Bauman called them – are characterized by a pro- cess of fragmentation of civilization and human life, which distances peo- ple and countries. Universal fraternal feelings are weakened as distrust, individualism and egocentrism gain weight. The overriding sensation is one of profound doubt about our individu- al and collective destinations, which provokes anxiety and anguish, a sense of frustration with politics and grave tensions between nations. Bleak scenarios evoke the reawaken- ing of nationalism, protectionist im- pulses, intolerance towards diversity and anything different, in addition to the risk of serious setbacks in terms of the environment and healthy, in- clusive development. One of the is- sues that generates uncertainty on a global level is extreme social inequal- ity, within countries and between them, an alarming situation for us all. Given this panorama, it is necessary for us to seek the lights of our funda- mental principles and our origins in humanism and in respect for others. Basic truths, such as awareness that we are all part of the chain of life on the planet should fuel our thoughts and our resolve, and guide our ac- tions in the struggle for further ad- vances for mankind. We remain convinced that is only by feeling and thinking systemically that we will be able to commit to all the dimensions of life because of our love and respect for it. And it is this com- mitment that enables us to see the beauty in uncertainty. It offers us op- portunities for all kinds of innovation, encompassing especially the social realm. Uncertainty also exercises a particu- lar power: it demands that each and every one of us – individuals and po- litical, social, business, academic and cultural leaders – do their part. That we participate in public life and in the discussion about the future we want to build. Or that we be the change we want to see happen, as Mahat- ma Gandhi or, more recently, Barack Obama put it. Companies, in turn, in defense of their own interests, are able to and are responsible for assuming the role of agents of social and environmental transformation. They should under- stand these two commitments as op- portunities for disruptive innovation. As discussed in the latest World Eco- nomic Forum in Davos, it is neces- sary to concretize the contribution capitalism can make to reducing the inequality. pains caused by social We are part of this movement which, based on new paradigms, seeks to generate development and prosper- ity for all, especially those who have been left behind. A NATURA Nourished by our experiences, beliefs and knowledge, we are aware of the scale of the challenges we are fac- ing. But we also know our vocation, competencies and qualities, which have enabled us to build a company that has played a key social role in transforming the lives of hundreds of thousands of people over time. Mainly BOARD OF DIRECTORS Antonio Luiz da Cunha Seabra Guilherme Peirão Leal Pedro Luiz Barreiros Passos 4 2016 ANNUAL REPORTby means of our Relationship Selling network. We experienced many transforma- tions during the course of 2016. Re- garding our main operation in Brazil, the planning which will enable us to improve our results from now on is clearly defined. In parallel, we intend to maintain the accelerated pace of growth in our International Opera- tions, identifying the best means of taking our value proposition to oth- er geographies. Here, particularly worthy of note is the performance of Aesop, the brand of Australian origin which is now an integral part of Natu- ra and is expanding globally. It is important to remember that 2016 was a year of transition also for Na- tura’s senior management: Roberto Oliveira de Lima, whom we thank and wish all the best, concluded his term as CEO. The executive leadership of the company has now passed to João Paulo Ferreira, who initiates a new phase of his highly successful seven years with Natura. We are excited to have an experienced, cohesive group of high-performing leaders aligned with a future vision that has been es- tablished jointly. For our part, we con- tinue to engage in driving ever stron- ger governance for the company. Permanently aligned with our origins, at Natura we prioritize reverence for relations and systemic thinking, the foundations of our commitment to sustainability. It is this fundamental belief in the power of relations and empathy, and the wealth of diversity, that guides us, strengthens us and il- luminates our journey into the future. And what is the future, if not the fruit of our actions today, in the present? BOARD OF DIRECTORS Giovanni Giovannelli Silvia Freire Dente da Silva Dias Lagnado Carla Schmitzberger Roberto de Oliveira Marques Marcos de Barros Lisboa Plínio Villares Musetti 5 2016 ANNUAL REPORTMESSAGE FROM THE EXECUTIVE COMMITTEE From left to right: Agenor, Flavio, Josie, João Paulo, Robert, Lettiere, Andrea and Erasmo; in the back, Natura Relationship Man- agers gather during the 2017 Annual Meeting Prosperity, belonging and purpose João Paulo Ferreira, Chief Executive Officer, Agenor Leão, Andrea Alvares, Erasmo Toledo, Flavio Pesiguelo, José Roberto Lettiere, Josie Romero and Robert Chatwin 102-14 We are confident about the construc- tion of the strategic foundations of our new cycle of prosperity. A se- ries of advances in 2016 sustain our confidence that we will be success- ful in turning our operation in Brazil around. This will be done primarily through the strategy of revitalizing direct selling, our focus for 2017. We are launching a new value proposi- tion for our consultants which will en- able their professional development, modernize their way of working and boost their earnings. If, on the one hand, our consumers receive more personalized service that reinforces their experience with our products, on the other, consultants will perceive in Natura a growing environment based on new forms of relationship with the company. We want to provide our 1.8 million consultants with more and more op- portunities for prosperity, sustained by the feeling of belonging to a com- munity united around the purpose of individual and collective enhance- ment and the ideal of generating positive impacts in our society. In 2016, the performance of our oper- ation in Brazil and the exchange fluc- tuations throughout Latin America ended up affecting Natura’s results. Our consolidated net revenues to- taled R$ 7.9 billion, with Ebitda of R$ 1.3 billion and net income of R$ 297 million. The political and economic crisis in the country led to a reduction in spending on various categories of cosmetics, fragrances and person- al care products and the impover- ishment of the Brazilian consumers’ shopping basket. Our International Operations also faced a more complex business envi- 6 2016 ANNUAL REPORTJoão Paulo was one of the hosts of Natura’s 2017 Annual Meeting, which took place in the city of Atibaia, in São Paulo ronment. Changes in government and transitions in economic policy posed new challenges for Natura’s vigorous expansion in Latin America. Even so, we maintained our pace of growth in local currency, we are the preferred brand in three of the five countries in which we operate and we passed the mark of 500,000 consultants in the region. In parallel, we have increas- ingly strengthened our capabilities for operating in mature markets. Since joining Natura, the Australian brand Aesop has expanded in size by four-fold. Our experience in the inter- national retail trade is complemented by the Natura stores in New York and Paris, spaces that are helping us gar- ner the knowledge which will enable us to adjust our portfolio and design a scalable model for future expansion. Financially speaking, we were more efficient in allocating resources. Sim- ilarly, we drove productivity gains in our production and logistics opera- tions, without compromising service quality for our consultants and con- sumers – we deliver more than 50% of all orders in Brazil and Latin Amer- ica in up to 48 hours. Our structure is prepared to support Natura’s growth and this enables us to keep our in- vestments focused on digital tech- nology and marketing, generating impact and faster returns. And our teams are more engaged than ever, as shown by the increased ratings in the survey conducted in all areas of the company and the geographies in which it operates, a factor which bol- sters our confidence. It is our understanding that tech- nology is a powerful enabler, driving the businesses of our consultants by providing the means and information that permit even closer relations with our consumers. Rede Natura, our dig- ital plataform, doubled in size during the year, became established in Chile and has now arrived in Argentina. The transfer of these advances to the oth- er operations is happening at a fast- er and faster rate. We have already passed the stage of using technolo- gy merely to facilitate transactions and are on course to becoming a data-oriented company, which pos- itively affects decision-making, pro- ductivity and the quality of relations between Natura, consultants and consumers. We also progressed in our entry into the retail trade with the inauguration of five company-owned stores in São Paulo. The return from consumers ex- ceeded our expectations, as did the way our consultants interacted with these product trial outlets. This gain in competencies encourages us to extend this channel to other states in Brazil in 2017. Moreover, we expanded the reach of our operations in drug- store chains. Our learning from the use of these different channels enables us to visualize an immense opportunity for driving synergies. Most importantly, we identified that, rather than sowing conflict, we will be developing a space for cooperation and complementary activities, in which the consumer will benefit from the multiple manifesta- tions of Natura with a higher quality buying experience. In 2016, we also successfully re- launched two of our icons, the Chro- nos and Ekos lines, which have always translated our spirit of innovation, capable of generating a technolog- ical response to the demands of our times in a way that only Natura can. Thus, we are pursuing further disrup- tive innovations that ally the best of global cosmetics science with the wealth of our biodiversity assets. We are engaged in driving a new cycle of prosperity for our entire relation- ship network. Our products and our brand are the vehicles through which we intend to generate the positive im- pact we are aiming for in society. We continue to be guided by our Reason for Being, a genuine quest for each in- dividual: well-being well, manifest in a harmonious relationship with oneself, with others and with the whole. 7 2016 ANNUAL REPORTWe are Natura We are a Brazilian multinational which was founded in 1969, and operates in the cosmetics, hygiene and beauty sector. Bolstered by our beliefs, we are committed to developing products that transmit more sustainable values and behaviors throughout our entire relationship network. 102-1, 102-2 Under the Natura brand, we do busi- ness not only in Brazil, but also in Ar- gentina, Chile, Colombia, , France, Mex- ico, Peru and the USA (while in Bolivia, we operate through a local distribu- tor). In the Brazilian market, we are the top performers in direct selling and are expanding our retail operations through our own stores and partner- ships with drugstore chains. We have also invested in a fast growing digital platform. 102-4 We have around 6,500 employees and 1.8 million consultants sell our products. Our headquarters is located in the city of São Paulo (São Paulo state) and we have factories in Cajamar (São Paulo state) and Benevides (Pará state), as well as outsourced production in Argen- tina, Colombia and Mexico. Our logistics structure includes a hub in Itupeva (São Paulo state) and nine distribution cen- ters – the newest of which was opened in Argentina in 2016. Our international presence also includes the Australian brand Aesop, which was acquired by Natura at the end of 2016. We are a public company, whose shares are listed with the BM&Fbovespa stock exchange, in the Novo Mercado segment, thus re- quiring the implementation of the high- est standards of corporate governance. 102-3, 102-5, 102-8 Our performance is guided by the phi- losophy of positive well-being, which reflects the harmonious relationship of individuals with themselves, with others and with the whole. Over the course of our history, we have deepened our com- mitment to sustainable development. As a company, we have set ourselves the challenge of having a positive finan- cial, social, cultural and environmental impact. These goals were consolidated in our 2050 Sustainability Vision, pub- lished in 2014. That same year, we were the first publicly traded company to be- come a B Corporation (or B Corp) and join the global movement that is giving equal attention to both economic and socio-environmental results. At the be- ginning of 2017, we completed the pro- cess of renewing this certification for a further two years. Our product development efforts combine sustainable design with traditional and scientific knowledge, making use of an open innovation model that involves a network of na- tional and global partners. We work together with our suppliers to reduce the impact of our products, expanding the use of recycled materials, such as PET and glass. Over 80% of our for- mulas are plant-based – and there- fore renewable – and we maintain a close relationship with around 2,000 families from the Amazon region in or- der to obtain the active ingredients we require and are found only in Brazilian ecosystems, while encouraging pro- duction techniques that help preserve 256,000 hectares of standing forest. Developments Challenges We continued our steady growth in International Operations, which represented 32.4% of the compa- ny’s consolidated net revenue in 2016. We launched EP&L, or “environmental accounting”. Natura is the world’s first company to conduct a study of this kind for its entire portfolio, including the product use phase. The Rede Natura platform has doubled in size in two years and is already one of Brazil’s leading digital channels for beauty products. In 2016, we celebrated the milestone of ten years of no animal testing. To recover the strength of direct selling, by introduc- ing new value models to our consultants. To strengthen Brazilian operations amid an unfa- vorable economic environment. To sustain the company’s International Operations’ growth rate. To enhance the multichannel shopping experience through synergy between Relationship Sales and expansion of digital and retail channels. Natura is in the Top 20 of the world’s most sustain- able companies, according to the Corporate Knights Global 100 ranking. To make the organization increasingly agile and innovative in order to respond in a timely manner to the changes faced by the world today. Crer para Ver (Believing is Seeing) set a new record, bringing in more than R$ 38 million from Brazil and International Operations. To make progress in achieving the 2020 goals that are part of our 2050 Sustainability Vision. 8 2016 ANNUAL REPORTThe Natura World Geographic distribution of our operations 102-6 y 102-7 Denmark Sweden Norway United Kingdom Françe Paris Canada New York USA Switzerland Germany Italy Brazil São Paulo Mexico Colombia Peru Chile Argentina MANUFACTURING PLANTS Benevides (PA) Cajamar (SP) 9 DISTRIBUTION CENTERS IN BRAZIL AND 5 IN LATIN AMERICA INTERNATIONAL OPERATIONS Argentina*, Mexico* , Colombia* Peru and Chile *Manufacturing done through authorized third party suppliers. 9 2016 ANNUAL REPORTCountries in which Natura operates Countries with Aesop stores Cities with Natura stores South Korea Japan Taiwan Hong Kong Macau Malaysia Singapore Australia New Zealand 176 STORES* with a unique DESIGN 64 CITIES IN 20 COUNTRIES 41 NEWS STORES IN 2016 * December 2016 10 2016 ANNUAL REPORTStrategy Strategy After two years strengthening the foundations for a new cycle of prosperity, in 2017, Natura’s focus will be on accelerating the implementation of its strategy. We are guided by six drivers, with four of them dedicated to recapturing our market share in Brazil. 1 Revitalizing direct selling Rela- tionship Sales, which always have been a Natura hallmark and the main strength of our company, also will be maximized to enhance consumers’ experience with our brand. Over the course of 2016, we built a new val- ue proposition for consultants. This included valuing their development (generating returns in income, bene- fits, recognition and personal devel- opment) and segmenting them into various profiles. 2 Repositioning the Natura brand The launch of the campaign Viva Sua Beleza Viva, in 2016, was the first major step in raising awareness of the Natura as an expert in beauty and working to rebuild relations with con- sumers. We will continue to move in this direction to build the perception of a vibrant brand that is open to dialogue. 3 Strategic review of the brand architecture We want Natura to continue launching important inno- vations in the market, such as the re- launch of the Ekos and Chronos lines in 2016. To achieve this, we integrated the marketing, sustainability and in- novation areas under the same exec- utive department. We want to create products that combine high technol- ogy, the sustainable use of biodiversi- ty and disruptive concepts. 4 Multi-channel shopping expe- rience In 2016, we began to un- derstand the synergies and comple- mentarity between Relationship Sales and our digital channels and retail. This process is helping us to revise our portfolio and commercial strategies. As a result, we will be present in con- sumers’ shopping experience, offering the adequate level of assistance, con- venience and experimentation. Two drivers guide our international operations: 5 Strengthening our position in Latin America By sustaining strong annual growth, we hope to fig- ure, by 2021, among the top four pro- ducers of cosmetics, fragrancies and toiletries in all markets in which we operate. To achieve this, we are accel- erating the adaptation of the evolu- tions developed in Brazil to our other operations, such as digitalization and segmenting Relationship Sales. 6 Expanding in developed and developing markets We aspire to take our brand and value proposi- tion to mature markets in Europe, Asia and North America. We transformed our operations in France and the Unit- ed States, and have successfully iden- tified which lines are more attractive for countries with this profile, such as Ekos, Chronos and Mamãe e Bebê. We also learned many important lessons from our experience with the expan- sion of Aesop. Our strategies are also supported by facilitating processes that ensure the foundations for the evolution of busi- ness. In 2016, we captured efficiency gains in the allocation of our finan- cial resources as well as in operations and logistics. We continued the dig- ital transformation by modernizing our Relationship Sales and launching e-commerce operations. We also seek to intensify our innova- tion efforts within a more agile and flexible work environment. Our ac- tions converge to achieve the 2050 Sustainability Vision, which translates Natura’s long-term commitment to exerting a positive impact on four levels: economic, social, environmen- tal and cultural. 12 2016 ANNUAL REPORTIntegrated performance assessment 103-2, 103-3 in Brazil Declining revenues influ- enced Natura’s economic perfor- mance in 2016, especially in the third quarter. Exchange rate fluctuations in Latin America also had a signifi- cant impact, and ended up reducing the positive impact brought about by the growth experienced in our In- ternational Operations. Despite the challenging economic environment, which caused a drop in income, and led consumers to seek cheaper prod- ucts, the fourth quarter saw an im- provement, driven by our strategy for the Christmas season. Consequent- ly, the consolidated Net Revenue for 2016, at R$ 7.9 billion, remained stable in comparison to the previous year. The consolidated EBITDA fell by 10%, to R$ 1.3 billion, even though it grew by 46% in Latin America and by 28% at Aesop. Natura was faced with a scenario that required considerable discipline in the management of investments, working capital and expenses, but continued to generate value for its en- tire relationship network. The gener- ation of wealth (allocated payments) for employees (R$ 1.3 billion), suppliers (R$ 6.5 billion) and consultants (R$ 4.4 billion) was greater than in 2015. The only reductions were in the amounts allocated to government (R$ 2 bil- lion), mostly related to tax payments, and to shareholders (R$ 119 million), through profit distribution. The social impacts of our operations also benefit from sales of the Crer para Ver product line, whose prof- its ate used for the improvement of public education, through the Natura Institute. The funding increased from R$ 30 million in 2015 to R$ 38.2 mil- lion in 2016, in Latin America (outside Brazil, the resources are managed by local offices acting in partnership with the Natura Institute). These re- sources enable activities such as the development of a study assessing integral education in Brazil and the expansion of the number of schools participating in the Comunidades de Aprendizagem (Learning Communi- ties) project in Argentina, Chile, Co- lombia, Peru and Mexico. Our strategic decision to support the development of the Pan-Amazon re- gion, through the Amazon Program, is yielding integrated economic, social and environmental impacts. We allo- cated more than R$ 220 million to this program in 2016, mainly to purchase all-natural Brazilian (64%), and we are close to meeting, ahead of schedule, the target of doing R$ 1 bil- lion in business in the region between 2010 and 2020 – we had already reached R$ 973 million by the end of 2016. The volume of inputs purchased from the region already accounts for nearly 20% of all the raw materials used by Natura and benefits 2,358 families from the supplier communi- inputs ties. The development of local econ- omies through production activities that respect nature helps internalize the concept that a standing forest generates wealth. In return, these partners provide us with some of the main assets employed in production. Still on the topic of environmental performance, the reduction in pro- duction volumes did not affect our relative CO2 emissions performance, which remained practically stable, at 3.17 kgCO2e per kilogram of bill- able product. This result was mainly due to logistical improvements, such as increased use of coastal shipping to transport products in the north and northeast of Brazil. The choice of products in the portfolio also con- tributed to this figure, through the increased use of materials that have a smaller environmental impact, such as fragrances bottled in recycled glass and the Ekos line, which uses 100% recycled PET. The percentage of recycled material used in packag- ing rose from 2.90% in 2015 to 4.27% last year. However, the reduction in volume of products sold did affect our relative water consumption per unit pro- duced, which increased by 8%. Nev- ertheless, regarding our total water consumption, there was a 5% reduc- tion in the volume of water withdrawn across all our operations, compared to 2015. All our financial statements are available here. 13 2016 ANNUAL REPORTBusiness Model The power of relationships is the ba- sis of our business model. We seek to generate value and develop technolo- gies so that, by 2050 and considering all the stages of the production cycle, our impact will be a positive one. We start by sourcing our raw materials according to ethical and fair trade principles, while at the same time transforming social and environmen- tal challenges into more inclusive and sustainable business opportunities. We engage with local communities of the Amazon region, encouraging the development of production chains that preserve the standing forest, while generating resources for tra- ditional communities. In our open in- novation model, national and global partners share traditional and scien- tific knowledge and design expertise for the development of new product lines. We also work together with suppliers to reduce the impact of our production, implementing a chain for the reuse of recycled materials such as PET and glass. More than 80% of our formulas are of vegetable origin (and therefore renewable) and all the alcohol we use is organic, produced using methods that conserve ecosys- tems and animal and plant life. Our consultants provide power and reach to our products and concepts. Indeed, it is their belief in our value proposition that propels this entire ecosystem – their engagement helps transform both individual and collec- tive realities. Relationship Selling is our means of conducting direct sales, which is now gaining synergy with new points of contact with consum- ers, through the Rede Natura (our digital platform) and Natura stores. All of this aims at providing a unique shopping experience and enabling the expansion and prosperity of our network. This virtuous cycle also ends up fostering values and behaviors that are more sustainable and pro- moting positive being well through- out the entire chain. We are attuned to the global agen- da, and have incorporated the Sus- tainable Development Goals (SDG) approach to the evaluation tools we use to assess the transformative po- tential of our activities. Furthermore, in order to provide the scale required by our transformational activities, our brands and sub-brands must become platforms that encourage new models of production and consumption. 14 2016 ANNUAL REPORTBusiness model We endeavor to generate value throughout our network 257,000 hectares of forest conserved SUPPLIERS We stimulate the production of recycled glass and PET and lower impact materials 1 ETHICAL TRADE IN INPUTS We buy ingredients from communities in the Amazon, fomenting chains that keep the forest standing and generate development for 2,119 families. Our products combine traditional knowledge, science and design. 4 CONSCIOUS CONSUMER We encourage new consumption standards, including the use of refills and the proper disposal of packaging. NATURA MOVEMENT Platform that links volunteers with social and environmental projects. More than 50,000 people benefited in the health, education, culture, sports and other areas 20% of our packs are eco-efficient1; 597,000 1-liter bottles correspond to the amount of recycled glass used in our perfumery BRANDS AND CAUSES Ekos Standing forest SOU Intelligent consumption Chronos Women’s empowerment Mamãe e Bebê The bond between mother and child Crer para Ver Quality education 22 1 EPackaging at least 50% lighter than regular/similar packaging; or comprising 50% post-consumer and/or renewable non-cellulosic materials that do not increase mass. ORGANIC ALCOHOL Our perfumery uses alcohol supplied by the company Native. The cane comes from plantations that regenerate the Atlantic Rainforest. 83% of our ingredients are of renewable vegetable origin 340 animal species, 49 of them under threat, have returned to their habitats 30% increase in the volume of water in the rivers and streams in the region 20,000 hectares of sustainable cultivation 2 3 RELATIONSHIP SELLING As well as generating income, we invest in our consultants’ development. We offer discounts in education 1.8 million consultants take our products and our values to the consumers More than 8,000 consultants resumed their studies, some at university level SUSTAINABLE MANUFACTURING We have switched to vegetables in our formulas, and we use recycled raw materials. We have our own factories in Brazil and third-party plants in Argentina, Colombia and Mexico. For 10 years we have been Carbon Neutral. We have reduced and offset emissions throughout the chain. 2.8 million metric tons of CO2 offset up until 2016, equivalent to the emissions caused by 480,000 car trips around the world CRER PARA VER (BELIEVING IS SEEING) A non-cosmetic product line the profit from which is invested in education. R$ 38 million raised in Brazil and the operations in Latin America during 2016. Value added Economic (R$ million) 2014 2015 Consolidated net revenue 7,408.4 7,899.0 2016 7,912.7 Consolidated EBITDA 1,554.5 1,495.9 1,343.6 Consolidated net income Free cash flow Average daily trading volume in the stock1 % revenue contribution from Intl, Ops,² 201-1 Distribution of wealth (R$ million) Shareholders3 Retained earnings Consultants Employees Suppliers Government Environmental Relative GHG emissions (kg of CO2e/kg of product manufactured)4 5 732.8 208.6 47.9 19.2 2014 709 24 4,122 1,075 5,925 1,724 2014 3.00 513.5 818.1 30.2 29.0 2015 360 154 4,421 1,245 6,374 2,149 2015 3.17 296.7 469.9 39.1 32.3 2016 119 178 4,430 1,327 6,512 2,009 2016 3.17 GHG emissions in the value chain (‘000 tons)5 332,326 321,267 303,424 Water consumption in Brazil (liters/unit manufactured) 0.45 % of post-consumer recycled materials in Brazil % eco-efficient packaging in Brazil6 1.2 29 0.49 2,9 26 0.53 4,3 20 CAPTION: NCs: Natura Consultants; NCAs: Natura Consultant Advisors NOTES: 1. Source: Bloomberg. 2. Excludes local distribution in Bolivia. 3. Amounts refer to interest on capital and dividends for the fiscal years. 4. CO2e (or CO2 equivalent): measure used to express greenhouse gas emissions based on the global warming potential of each gas. 5. Includes scopes 1, 2 and 3 of the GHG Protocol. 2016 inventory audited by KPMG. 6. Packaging at least 50% lighter than regular/similar packaging; or composed of 50% potentially post-consumer and/or renewable non-cellulosic materials that do not increase mass. 17 2016 ANNUAL REPORTQuality of relationships Employee engagement survey (Brazil and Intl. Ops.)7 Loyalty of suppliers in Brazil8 Loyalty of NCs in Brazil8 Loyalty of NCAs in Brazil8 Loyalty of Consumers in Brazil8 Loyalty of NCs International Operations Loyalty of NCAs International Operations Social Overall rating in brand image survey in Brazil (%)9 Earnings Crer para Ver (R$ million)10 Cumulative business volume in the Amazon region since 2011 (R$ million) Families benefited in Supplier Communities 2014 3.80 24% 28% 30% 64% 39% 45% 2014 74 25.5 582 3,121 2015 n.d. 18% 30% 29.5% 60% 37% 52% 2015 73 30.0 752 2,251 2016 3.95 21% 31% 32% 56% 37% 53% 2016 72,5 38.2 973 2,841 7. As part of the realignment of the people management strategy, we began disclosing the Natura Engagement Survey, which more clearly portrays the organization’s health (was not conducted in 2015). In 2016, we ceased to conduct the workplace climate survey. Source: Gallup. 8. Loyalty survey – Ipsos Institute. Loyalty: percentage of people surveyed who gave the maximum score (“Top1Box”) on a 1 to 5 point scale of in three categories – satisfaction, intention to continue the relationship with Natura and whether they would recommend Natura to others. 18 2016 ANNUAL REPORTSteady growth in Latin America from Operations to pursue In 2016, our operations in Latin America (Argentina, Chile, Colombia, Mexico and Peru) maintained their 30% growth rate, in local currency, and yielded an extra 2 p.p. of EBITDA growth, advancing 10% to 12.5%. With such consistent results, International now account for 32% of our net revenue, encouraging us the objective of being among the four leading manufacturers of cosmetics, fragrances and hygiene products in all the Latin American countries in which we operate by 2021. We have continued to expand our network of Natura consultants, which grew by 7.5% in 2016, approaching the mark of 550,000. Using local marketing, communication strategies and portfolio adjustments, we have achieved above average growth in the for perfume, make-up and body product categories. We are the preferred brand in three of the region’s five countries where Natura operates: Argentina, Chile and Peru. Latin America still offers many opportunities the expansion of Relationship Selling. The digital plataform Rede Natura has been available in Chile since 2015, yielding good results, and in the first quarter of 2017, it went live in Argentina. We are also carefully designing a strategy for implementing multichannel options in the region, based on the experience gained in Brazil. In four of the five countries, Natura is among the top 20 companies with the best reputation, according to Merco (Corporate Reputation Business Monitor). In Argentina, we are in 10th place, and we are in the Top 20 in EBITDA - LATIN AMERICA (R$ million) 247,6 169,7 46% growth rate 2015 2016 Chile, Mexico and Peru. We are also a benchmark in Latin America for personnel management, having often been awarded industry recognition. In Colombia, we were presented with the Work & Life Balance certification, which attests to the quality of the practices adopted by Natura to promote a more balanced lifestyle for employees. 19 2016 ANNUAL REPORTAesop stores in Oscar Freire, in São Paulo, and Kyoto (below) in Japan Aesop becomes 100% Natura In late 2016, we completed the acquisition of 100% of the equity of Aesop, the Australian brand bought by Natura in 2013, which celebrates its 30th anniversary in 2017. Since it was taken over by Natura, rate of expansion has Aesop’s business with increased, its quadrupling In 2016, 41 in size. exclusive new stores were opened around the world, bringing the total to 176 in 20 countries across the Americas, Asia, Europe and Oceania. The products are also available in 85 different department stores. Last year, net revenue grew by 34% and the EBITDA by 27.5% (in Reais). With a portfolio of 110 products with 80 different formulas, Aesop launches an average of 10 new items per year. Among the brand’s main distinctions are the ongoing research into new ingredients that can be bioactive used on skin and hair, the eye- catching design of its stores and packaging and no animal testing of any kind, in line with Natura’s own philosophy. Aesop is run independently, through its own governance structure – with two Natura representatives on its Board of Directors. Nevertheless, the synergy between Natura and Aesop has grown year after year, with the Australian brand’s team collaborating with us to formulate a strategy to enter the retail segment through the opening of new Natura stores in Brazil and New York (in addition to the existing Paris outlet). On the other hand, we have also sought to foster change in Aesop’s operations, including raising their awareness over sustainability and the social and environmental impacts of company activities even further, as well as supporting the setting up of a foundation similar to the Natura Institute. Aesop also plans to expand its own digitalization process during 2017, transforming the online shopping experience into an extension of its exclusive stores. 20 2016 ANNUAL REPORTMichael O’Keeffe, Aesop’s CEO INTERVIEW: MICHAEL O’KEEFFE, AESOP’S CEO “We have our own way of looking at the world” Learn more about Aesop in this interview with CEO Michael O’Keeffe What are the main opportunities you envisage for 2017, the year that Aesop turns 30? We are working hard on a new digital platform. Currently, our sales through this channel represent about 7% of the total, but the consumer who buys on our website does not yet enjoy the same experience that we offer in our Aesop stores. Our goal is for there to be an increasing connectivity between different channels, so that the shop- ping experience is always satisfactory and of the highest quality in both. Like Natura, we seek to go beyond merely selling quality products, as we have our own way of seeing the world and interacting with it. Our stores ex- press our vision and concepts and the digital environment is a great oppor- tunity to enhance this. The new web- site is under development and is due to go live in the USA in 2017 and in ad- ditional countries in 2018. Is the number of stores going to keep growing at the same rate as in the last few years? We plan on keeping up our recent ex- pansion rate. We have mapped out 40 new countries we could enter, includ- ing some in Latin America, a region where we are able to count on Natu- ra’s support and expertise. that respect: Shoreditch in London, England, and Fitzroy in Melbourne, Australia. We opened our doors in those two neighborhoods, creating employment for the local community, and the areas started coming alive. Now, they are both important cultur- al hubs, with art galleries, stores and other local businesses. Aesop chooses very carefully the cit- ies and regions where it will set up its exclusive stores. Which best rep- resent the brand’s concept? The retail trade has a very strong con- nection with the surrounding com- munities. In many places, downtown has been abandoned and high street stores have virtually disappeared. Re- tail has the potential to restore life to an area, with people once again circu- lating within those places. Aesop has two stores that are very significant in Which is your favorite Aesop store? We have two very distinctive stores, especially from a design point of view. The Kyoto store, in Japan, is one and the other is located on Oscar Freire Street, in São Paulo – which was our first store in Brazil, designed by the renowned architect Paulo Mendes da Rocha. They are both incredible stores that could not exist anywhere else in the world, because they are very rep- resentative of local cultures and the countries where they are located. 21 2016 ANNUAL REPORTPersonnel Management PERSONNEL MANAGEMENT Changing people to change the world Over the course of 2016, we expanded our analysis of personnel manage- ment and organizational develop- ment and laid the foundations for a cultural transformation that will take place over the coming years. We are looking to link ourselves to the trends and best practices in order to design new programs and tools for all em- ployee groups. The goal is to become a simpler, more agile and innovative company, while building upon Natu- ra’s main passions: relationships and products. We closed out the year with 6,397 employees at Natura, including both Brazil and International Operations. The prevailing scenario caused us to reassess our company structure, seeking simplification and productivi- ty, and led to a reduction of around 5% in the number of employees in Brazil. On the other hand, our teams expand- ed in Argentina, Mexico and Colombia. In France, the reduction in employee numbers was influenced by changes made to the local commercial strate- gy. At Aesop, there are 1,468 employ- ees across all the countries where the brand operates. 102-8 Natura employees1 2014 2015 2016 Brazil Argentina Chile Mexico Peru Colombia France Total 1. Does not include Aesop. 431 145 77 37 Fem. Male Total Fem. Male Total Fem. Male Total 3.091 2.141 5.232 2.988 2.163 5.151 2.842 2.065 4.907 508 465 85 550 508 89 597 75 46 121 182 141 70 44 185 139 47 117 75 213 22 235 202 28 230 199 227 40 267 272 50 322 287 34 12 46 28 8 36 11 46 49 28 52 7 185 124 227 339 18 4.216 2.375 6.591 4.166 2.425 6.591 4.061 2.336 6.397 102-8 Natura employees, by gender (%)1 2014 2015 2016 Male Female 1. Does not include Aesop. 36 64 37 63 37 63 23 2016 ANNUAL REPORTPERSONNEL MANAGEMENT Trained professionals 103-2, 103-3 Our leadership participated, for the second year in a row, in the Mosaic development program, which seeks to introduce the company to the best concepts and market practices, adapted in light of Natura’s current stage, as well as its strategic challeng- es and principles. The program was set up in 2015 to bring about more agile decision-making and provide structures and tools that promote learning about the company and for the company. The first Mosaic panel, which is man- datory for all members of the man- agement team, enables managers to experience the main stages of opera- tions and sales and identify areas for development, such as factory dynam- ics, the routine separation of orders at one of our distribution centers or the delivery of boxes of products to con- sultants at their homes. The program’s elective modules deal with topics such as empathetic communication, work- ing practices and resilience. PASSPORT TO THE FUTURE We have a specific program for ac- celerating the development of ana- lysts and coordinators. Its aim is to broaden their business perception, furnish the tools necessary to per- form satisfactorily in their roles and enhance personal development. The program focuses on facilitating ex- periences that enable a deeper un- derstanding of the topics discussed. SOPHIA The Sophia program seeks to train Marketing and Business professionals to make decisions that are in the best interest of the business, while building the brand in line with both its short- and long-term visions. We cover con- tent ranging from communications, customer relationship management (CRM) and digital. Nine projects were conducted, three of which will be pre- sented to the Executive Committee, who will assess the possibility of im- plementation and exposure of partic- ipants. 404-2 Investment in skills management and continuing education programs (R$ thousand)¹ Brazil Argentina Chile Mexico Peru Colombia France Total 2014 2015 2016 15,894 12,578 7,400 979 294 472 96 353 119 1,842 2,925 292 443 86 194 87 404 534 417 1,326 175 18,208 15,522 13,182 1. In 2016, investments made to train the Sales Force were included here. The HR and Relationship departments conduct these training sessions together. 24 2016 ANNUAL REPORTWeb portal facilitates training access We have consolidated all of our training and development activities in the Development Portal, which was launched in August 2016. Now, employees have access in one single place to all the training courses available and their respec- tive schedules. Through this portal, employees can plan ahead in order to ensure participation in one of the many activities being offered. We have also increased the frequen- cy with which the activities are advertised to management and disclose the calendar of events during all area meetings. Investment in training and development in Brazil was re- duced to a total of R$ 7.4 million, 59% less than in 2015. However, in International Operations, the investment in training increased in all countries to meet the demand of the business – which is growing fast – reaching a total of R$ 5.8 million. In 2016, priority was given to training conducted by Natu- ra’s own facilitators, thereby taking advantage of our em- ployees’ great expertise in the topics being addressed. This initiative reduced the amount spent in outsourcing train- ing facilitation and enabled the various training courses to be adapted more closely to the needs of our employees. This change had a positive impact on overall participation numbers, which reached 81%, the highest rate in the last three years. Changes in the assessment of personnel development 103-2, 103-3 We spent 2016 studying and con- ducting market research in order to improve our employee performance assessment process, with the goal of giving individuals a more central role. The model that is currently in use in- cludes employee self-assessment, as well as an evaluation by their superi- ors, subordinates and colleagues (in- cluding from other areas). Under this so-called Performance and Recogni- tion Program (PRP), the administra- tive and business staff receive feed- back on their performance and have a structured Individual Development Plan (IDP). The assessment results are discussed in the Personnel Forum, which includes the management staff who work directly with the individual under assessment, as well as repre- sentatives of other areas who have dealings with that employee. Functional Category 2014 2015 2016 404-3 Proportion of employees that receive regular career development and performance feedback¹² Male Fem. Male Fem. Male Fem. Operational 92% 85% 80% 75% 94% 80% Administrative 88% 90% 89% 79% 98% 75% Management 98% 95% 88% 90% 99% 99% Senior management 93% 88% 83% 93% 97% 100% 1. Percentages were calculated in relation to the total number of employees, including Brazil and International Operations. 2. In most cases, the employees who were not evaluated were not eligible for assessment, due to their admission date or leave of absence. 25 2016 ANNUAL REPORTNew survey to measure engagement with the Gallup consulting firm and registered an average score of 3.95, on a scale of 1 to 5. In 2014, the result was 3.8. All vice-presidential areas, in all re- gions, results. Approximately 93% of employees completed the survey. The final total represents the general average ob- tained from 12 questions with a scale between 1 and 5 points. The results improved showed can be compared to those of the more than 500 companies that conduct the same survey. According to Gallup, an improvement of 0.15 in the second edition of the survey is very good and above average. Having adopted the new methodol- ogy, we did not calculate the Loyalty Index of our employees in 2016, since the survey already included elements from the climate survey. 2014 2016 In order to gain a better understand- ing of the company’s health, we in- troduced the employee Engagement Survey, which now serves as the main yardstick for corporate environment analysis, and replaces the traditional Organizational Climate Survey. The Engagement Survey was carried out for the second time in 2016 – the first occasion having been in 2014. The survey was conducted together 102-43/102-44 Engagement Survey Brazil Argentina¹ Peru Chile Mexico France² Colombia - - - - - - - 3,88 4,15 4,33 4,08 4,16 n.a. 4,21 3,95 Average – Natura 3,8 1. The data does not include the International Business Department, which is headquartered in Buenos Aires and coordinates the activities of International Operations. 2. As a result of the strategic decision to terminate the direct selling model in France, we decided not to conduct the Engagement Survey in the country in 2016. 26 2016 ANNUAL REPORTCelebrating the beauty of diversity We have a broad and inclusive un- derstanding of diversity and support equal rights and responsibilities for all those who work with us. The theme has evolved at Natura, with 2020 in- clusion targets incorporated into the 2050 Sustainability Vision and the launching of the Natura Policy for the Appreciation of Diversity in 2016. Arising from a comprehensive study, endorsed by the company’s Execu- tive Committee, the policy is based on two major pillars. The first relates to our corporate culture and how we can best promote diversity among employees. The second refers to a policy aims at promoting equality and multiculturalism, with the inclu- sion of certain groups that, due to so- cial or historical issues, have suffered from prejudice because of disabilities, gender or ethnicity. Following the implementation of the Policy for the Appreciation of Diversity, we are giv- ing first priority to two areas: gender equality and people with disabilities. GENDER EQUALITY: HARMONIOUS BLENDING OF FAMILY AND CAREER Promoting gender equality has al- ways been a priority for Natura. That is perfectly understandable, consid- ering that our network of consultants has always been mainly comprised of women. Internally, we strive to create a favorable environment for our em- ployees, so that they can make life choices that allow for a good balance between career and family. At Natura, women benefit from an extended maternity leave amounting to six months. There is also a nursery available on site, where children aged between 4 months and three years old can be left under professional su- pervision, thus enabling breastfeed- ing during working hours. Employees at company units that do not have this infrastructure are entitled to a childcare allowance, a monthly pay- ment to cover the expenses of an out- side nursery or a nanny. We also encourage fathers to play their part in family life. In 2016, we in- creased paternity leave to 40 days. That is double the period proposed in the new Early Childhood Legal Framework, approved in March 2016. The initiative extends to same-sex couples and to adoption cases. The prenatal course provided to our fe- male employees and employees’ wives is also open to fathers. We have also engaged in public dis- cussions on the subject of women’s empowerment. In February 2016, the company signed up to the Women’s Empowerment Principles, an initia- tive of UN Women and the United Na- tions Global Compact. Then, in April, we joined the Program for Gender and Racial Equality, launched by the Brazilian Ministry for Women, Racial Equality and Human Rights. Under this initiative, companies disclose their plan of action to increase inclu- sion in the work place. Performance is monitored and, if deemed suitable throughout the program, the com- pany is awarded the Pro-Equality seal. In a pioneering move, we have made public commitments to promote gender equality. Our goal is to have women in 50% of our senior manage- ment positions in Brazil and in Inter- national Operations by 2020, as well as 100% equal pay throughout the company. We currently have 14 wom- en in this position, nine of whom were already career professionals at the company. Two of them are vice-pres- idents (out of a total of six) and 12 are directors (out of a total of 31). In or- der to boost these numbers, we have decided that, in all internal selection processes for leadership positions, we must seek a balance between male and female finalists, all of whom must have equal potential and condi- tions to take up the position for which they have applied. A FULLY ADAPTED DISTRIBUTION CENTER Our positioning expressly translates our belief that the real shortcom- ings are in the environment we are living in and not in people them- selves. That is why we seek to ensure our own spaces are suitable to all. For example, at our São Paulo Dis- tribution Center (SPDC), we made a point of designing a highly accessi- ble work place. The SPDC’s separa- tion lines, which reached full oper- ational capacity in 2016, use pick to light technology, which allows peo- ple with disabilities to easily sepa- rate products, with lights turning on to indicate the tasks that are to be performed intuitively. The inclusion extends to people with intellectual disabilities – who tend to be a chal- lenge for many companies. Employees who are hearing im- paired are allocated sponsors, col- leagues who have been trained in Libras (Brazilian Sign Language) to help them communicate. The im- portance Natura places on hiring disabled professionals is a training topic for managers under the Mosaic Program, but also extends to all em- ployees company-wide. We have de- veloped a hiring strategy specifically to attract such candidates and in 2016 we created another initiative, in partnership with APAE (Association of Parents and Friends of People with Disabilities), to hire young apprentic- es with disabilities. Presently, around 16% of all SPDC em- ployees are people with disabilities – and the goal is to reach 30%. Among the entire Natura staff in Brazil, 5.8% have disabilities – above the 5% de- manded by Brazilian legislation. Our goal is to reach 8% by 2020, as set out in our Sustainability Vision. 27 2016 ANNUAL REPORT405-1 Diversity 2014 2015 2016 Total number of employees - Brazil 5.232 5.151 4.907 Proportion of women in relation to total employees (%) Proportion of women in management positions (%) Proportion of women in senior management posi- tions – director and above (%) Proportion of employees over the age of 45 (%)1 Proportion of employees over the age of 45 in management positions (%)1 Proportion of employees over the age of 45 in senior management positions – director and above (%)1 Cultural diversity - Total management positions occupied by foreigners or those with international experience2 Cultural diversity - Proportion of management positions occupied by foreigners or those with international experience (%) 59 56 36 14 12 39 20 17 58 56 33 17 14 50 25 23 58 53 35 18 14 58 22 20 1. Over 45: 13% of our current staff turned 45 in 2016, thus contributing to the increase observed in this indicator. Furthermore, 3% of employees hired in 2016 were people over the age of 45, 13% of whom were hired for senior management positions. 2. Cultural diversity: In order to expand the company’s diversity even further, the expatriation process has been revised, with new policies governing short-term international transfers to be implemented in 2017. 405-1 Hiring and training of People with Disabilities – Brazil Number of employees with disabilities1 Proportion in relation to total employees (%) Number of employees with disabilities who participated in Natura’s training programs2 2014 2015 2016 263 5 263 286 5,6 277 284 5,8 266 1. In 2016, this indicator included employees with any kind of “borderline” disability, as determined by the law regulating inclusion quotas. This is part of Natura’s inclusion strategy, since such individuals are often doubly excluded from society, because they are limited by their disability and, at the same time, are unable to enjoy the benefits provided by law to people with disabilities. In total, there was one person in that situation in 2015 and two in 2016. 2. Total number of people with disabilities who participated in at least one Natura training course. 28 2016 ANNUAL REPORT 405-2 – Gender pay gap (by functional category) (%) 2 3 4 5 6 2014 2015 20161 Production Administrative Management Senior management -24 13 -7 -16 -23 20 -4 -15 -22 10 -1 -10 1. In 2016, collective agreements brought a 9% increase for employees in the operational and administrative areas. Managers received a fixed amount, which was incorporated into their basic pay. There were also spontaneous increases in promotion and merit programs, as well as new hirings, terminations and transfers, which affected the reported figures. 2. The calculation did not include payment of short-term incentives (Profit Sharing). 3. This includes bonuses paid to sales managers and relationship managers, plus Weekly Paid Leave (WPL). 4. Sales Force employees, which hold posts along the hierarchy, reinforce the women’s pay average, due to their sales bonuses, which are not extended to operational posts. 5. For this indicator, the most representative operational units, those in Brazil, were considered. 6. The differences in pay between men and women at Natura are entirely due to the remuneration distribution within the company structure. When compared individually within each salary group (SG) or even between SG and area, the differences are insignificant. Volunteering In 2016, we resumed our Volunteer Program, to encourage our employees to play a leading role in society and devel- op their sense of citizenship. A total of 3% of the employees in Brazil engaged in campaigns for donations, school and NGO activities and community efforts. Furthermore, the Acolher Colaborador (Employee Nurturing) category was added to the Acolher Awards, showing recognition to con- sultants who promote transformative activities. The award was presented to three employees who volunteered in so- cial work outside Natura. 29 2016 ANNUAL REPORTCorporate Governance CORPORATE GOVERNANCE Renewing our executive leadership 102-19, 102-20, 102-23, 102-29 After two years of stellar work as Na- tura’s CEO, Roberto Lima left the post in October 2016. During his term in office, he was responsible for con- solidating the company’s present strategy and making a few important changes, such as putting together a strong Executive Committee (Comex), implementing the digital, multi-chan- nel and brand repositioning agendas. João Paulo Ferreira was chosen by the Board of Directors to take his place as the new CEO. Ferreira is aligned to our beliefs and has seven years’ worth of experience heading key company pro- cesses (such as logistics, sustainability and the commercial area). He has the skills required to speed up the imple- mentation of our strategy over the coming years. He joins a young and talented Executive Committee that mixes seasoned Natura employees with deep knowledge of the company with newer hires, who are introducing new visions and ideas to the fold. In order to strengthen the relation- ship between the Board of Directors and the Executive Committee, the Director of Governance now partic- ipates in both bodies. In addition to drawing the two of them closer, the move aims to improve the monitor- ing of strategies and simplify pro- cedures. Regarding the structure of the Comex, the Marketing, Innova- tion and Sustainability areas have been brought together under a single vice-president. This reorganization seeks to strengthen brand and con- sumer preferences, while reinforcing the relationship between sub-brands and innovation and social and envi- ronmental causes, to further extend the strategic advantage already achieved in this area. In early 2017, we completed the adjust- ments to our executive framework. Five new business units were created, or- ganized according to geography and sales channels, and reporting directly to the CEO like all other departments. The new units are Direct Selling - Bra- zil, Online Business, Retail and Latin America, while the vice-president of International Operations reports di- rectly to the Board of Directors. Once again, the goal is to expedite the im- plementation of strategy. Find out about the Executive Com- mittee structure and the back- ground of each member here. Board of Directors 102-18, 102-20, 102-21, 102-26, 102-27 The Board of Directors currently has nine members, but the maximum num- ber allowed is 11, according to its bylaws. In 2016, two new members joined the board: Carla Schmitzberger and Ro- berto Marques. They bring with them a wealth of knowledge of internationa- lization, marketing, consumer goods, sales and retailing strategies, among other areas. During the same year, Luiz Ernesto Gemignani left the board, after nine years of valuable contributions to Natura. Under this new configuration, we continue to have a 55% majority of in- dependent board members, which is hi- gher than the requirements established by the Novo Mercado listing regulations. in 2015. Structural The members of the Board of Direc- tors serve a one-year term, with the possibility of renewal through a vote at the Annual General Meeting (AGM). In 2016, the implementation of stra- tegic projects dominated the board’s agenda, following the strategy review carried out is- sues relating to our business, such as breathing new life into direct selling, the opportunities presented by mul- internationalization ti-channel and and consolidation of International Operations were the main topics dis- cussed at the six meetings that took place during the year. A working group of board members and company exe- cutives was set up to further explo- re the subject of expanding into new regions. Other topics on the Board’s agenda for 2016 were executive lea- dership, organizational structure and personnel management. Four theme-specific committees su- pport he board - all of which are for- mally comprised of board members only since 2013– as follows: Strategy; Personnel and Corporate Develop- ment; Corporate Governance; and Au- diting, Risk Management and Finance. The Auditing Committee also includes consultants who are not board mem- bers. Learn more about the struc- ture of each committee here. 102-19. 31 2016 ANNUAL REPORTBOARD OF DIRECTORS IN DETAIL Age groups (%) Gender (%) Term Up to 45 years old Older than 45 years old male female Up to one year Two to three years More than three years 11% 22% 22% 89% 78% 56% 22% SELF-ASSESSMENT 102-28 In 2016, the Board of Directors carried out its biannual self-assessment anal- ysis. The previous one had been carried out in 2013. The overlong period be- tween analyses was due to the recent shake-ups in the board. The main takeaways obtained from this assessment were the need for more integration between the board and the Executive Committee, pursuit of a structure that optimizes support for the organization and determination to achieve constant evolution in board procedures. BOARD OF DIRECTORS* 102-22 Antonio Luiz da Cunha Seabra Guilherme Peirão Leal Pedro Luiz Barreiros Passos Co-Chairmen Carla Schmitzberger Giovanni Giovannelli Marcos de Barros Lisboa Plínio Villares Musetti Roberto de Oliveira Marques Silvia Freire Dente da Silva Dias Lagnado Board members See the profiles of Board of Directors members here *Valid as of December 2016. Risk management 102-30, 102-31 A review of our corporate risk man- agement model was initiated in the fourth quarter of 2016. We have drawn up a broad classification of the differ- ent types of risk, dividing them into four groups: • “Strategic”, related to the business model, governance and the environment within which the company operates. • “Operational”, linked to internal pro- cesses and business continuity. • “Financial”, market, credit and liquidity risks. • “Regulatory”, related to the applica- ble sectoral regulations. Social, envi- ronmental and economic factors are included in this classification, with the exception of operational risks. Using this classification, we conduct- ed a thorough analysis of the Natura Strategic Plan, and its guidelines for Brazil and for International Opera- tions, as well as their enablers. As a result, we were able to define the main risks affecting the implementation of short, medium and long-term busi- ness strategies (see the table below). It should be emphasized that Exec- utive Committee and the Board of Directors, through its Auditing, Risk Management and Finance Commit- tee oversee all risk management work conducted at Natura. 32 2016 ANNUAL REPORTMain risks currently being monitored 102-15 Challenge Actions Management of the brand and commercial model, including their appeal to consultants Strategy implementation Innovation capacity Product research, development, manufacturing and quality Disruption of our Information Technology (IT) systems We are constantly monitoring the rest of the industry, including consumer preferences and spending patterns. We focus on projects that help develop our commercial model, and are aligned to our value proposition and Strategic Plan, which are reviewed annually. That is the case with the new sales formats, such as the digital relationship platform (Rede Natura) and retail experiences, such as the marketing of the Sou (I Am) line in pharmacies and Natura’s own stores. Furthermore, the company is investing heavily in the revitalization of direct selling, in order to preserve its high quality, close relationship with all its Natura consultants. We conduct an annual review of our Strategic Plan and short, medium and long-term goals, including investment decisions regarding acquisitions and equity stakes, as well as entry into new markets. This activity involves all business units. The strategies and revisions thereof are presented and discussed during Executive Committee meetings and are subject to the approval of the Board of Directors. We continuously invest in innovation, through a variety of different fronts: commercial strategy, digital platforms, product development, logistics, distribution networks etc. We maintain strict control over registration of all intellectual property, especially patents, industrial designs and trademarks. These steps also help mitigate strong competition from Brazilian and multinational manufacturers that offer product lines that are similar to ours and sometimes compete within our direct selling channel. Natura is permanently committed to the health and safety of its customers. Therefore, we have established strict internal procedures, starting from a product’s concept development all the way through to making it available in the market. We also maintain a high-standard positioning, revolving around our commitment to truth and transparency. The occupational risks inherent to our operations are addressed by following the company’s Occupational Health and Safety Policy and taking preventive measures. Furthermore, Natura maintains an open line of communication with all trade union bodies, recognizing them as legitimate representatives of employee interests, regardless of rank or hierarchy, and always strives to reach a solution that is beneficial to all parties involved. Our major IT systems are managed by takings all steps necessary to maintain operational stability. We have data and server redundancy, and information backup routines. We also maintain total control over access to our systems and are constantly monitoring them to detect security vulnerabilities in databases and infrastructure components. Natura has put in place a robust management strategy for Information Security, following the guidelines set out in our Code of Conduct, and is always working to raise employee awareness, and ensure adherence to ISO 27.002:2013 standards, as well as map and deal with information security risks. 33 2016 ANNUAL REPORTChallenge Actions Attracting and retaining executives and developing leadership In order to maintain a high level of engagement among our leadership and encourage their development, we offer Mosaic, an Education and Development program consisting of a mix of coaching/formal training and self-development. We offer a remuneration package that is above market level, as a way to provide recognition and retain staff, but also to share the wealth we have generated with all employees. Moreover, we review the succession chart every year, seeking to identify professionals with the potential for executive positions. Climate change 201-2 Our efforts aim at combining economic and socio-environmental gains. Strategic projects concerning impact mitigation are now transversally structured and have become formal procedures within the company. An example is the Carbon Neutral Program, which gives priority to reducing direct and indirect emissions throughout the chain, as well as offsetting 100% of all unavoidable emissions. Socio-biodiversity The use of socio-biodiversity inputs follows Natura’s policy for the Sustainable Use of Socio-Biodiversity Products and Services, which ensures the fair distribution of benefits to supplier communities and the sustainable management of assets, in addition to complying with new legislation governing access to the country’s genetic heritage. Under the Amazon Program, Natura also seeks to boost the development of sustainable businesses based on biodiversity and traditional and/or cultural knowledge. Legal, sectoral regulation and taxes We closely follow all changes made to different aspects of the law, such as civil, tax or labor laws, because of the considerable impact that any legal changes can have on our financial situation, business model and operating results. We constantly monitor federal and state taxes applicable, as well as the activities from industry representative bodies such as ABIHPEC (for Beauty Products) and ABEVD (for Direct Selling). Other external risks (interest rates, exchange rate fluctuations, inflation, etc.) Our senior management constantly monitors external risks deriving from the economic scenario, and makes any necessary adjustments to our strategic planning, should the need arise. Business scenario (Brazil and International Operations) Constant monitoring of the political and economic situation in the countries where Natura operates, with adjustments made to the operating strategy, if necessary. 34 2016 ANNUAL REPORTEthics and transparency 102-16, 102-17 In 2016, we were awarded the Pro-Eth- ics seal, an initiative from the Office of the Brazilian Comptroller General and the Ethos Institute that recognizes or- ganizations that are committed to es- tablishing an ethical and transparent business environment. This public acknowledgement rein- forces our efforts to promote trans- parency and integrity. Over ten years ago, we established the Ombudsman’s Office, the company Code of Ethics and the principles that guide our interac- tions with the main groups with which we interact. In 2015, we created the Legal and Compliance Department and the corruption whistleblowing channel was reinforced. All complaints received are evaluated and discussed by the Ethics Committee, which assists the Executive Committee. Suppliers, partners, customers and consumers can submit complaints by e-mail to ouvidoria@natura.net. The Natura Code of Conduct dates back to 2006 and is reviewed peri- odically. Its most recent revision took place last year. Its latest version can be accessed on our Investor Relations webpage. Our main policies – regarding securities trading, related party transactions, dividends and disclosure – are also available on our website. Furthermore, all our suppliers un- dergo training related to the Natura Code of Ethics. When they are hired, they must complete the training pro- gram through an online tool. Over the years, Natura has imple- mented all best internal control practices, with a view to obtaining reasonable assurance that materi- al (significant) errors in its financial statements will be avoided and/or detected early. In 2015, the scope of these procedures was extended to Argentina for the first time, and in 2016, it was extended to all other Latin American countries where the company operates. Commitment to integrity Based on its beliefs and its long-standing commitment to upholding ethical values and building a fairer, more egali- tarian, participatory and democratic society, Natura val- ues characteristics such as honesty, integrity and trans- parency in all its activities and businesses. We consider it essential for those same values to perme- ate our company’s relationships with the government and public bodies, whether they be a part of the executive, legislative or judicial sphere, and always show respect for the prevailing legislation. Our conduct shall be fair, correct and open, and we will act in an ethical and transparent manner in all our business- es and commercial and institutional relationships. We are committed to complying with national and inter- national anti-corruption and bribery laws that are ap- plicable wherever we operate, as well as to introducing and applying monitoring and awareness building pro- grams aimed at addressing the risk of bribery and cor- ruption. We were one of the first companies to join the Business Pact For Integrity and Against Corruption (in July 2000), developed by the Ethos Institute, in partnership with Patri Government Relations and Public Policy, the United Na- tions Development Program (UNDP), the United Nations Office on Drugs and Crime (UNODC) and the Brazilian Committee of the Global Compact. A Pro-Ethics company Find out more Natura was awarded the Pro-Ethics seal, presented by the Office of the Brazilian Comptroller General and the Ethos Institute. This initiative provides recognition to organizations that are committed to establishing an ethical and transparent business environment. See our Code of Conduct and policies here. Read more about indicators related to the subject on page 122. 35 2016 ANNUAL REPORTOur products and concepts OUR PRODUCTS AND CONCEPTS A new organization focused on innovation 102-2 We see innovation as the path that has brought us to where we are now and as an essential factor in our con- tinuing to be a company that is im- portant to society, with a product portfolio that meets the constantly changing demands of our consumers. Natura is concentrating its efforts on increasing the speed with which it is known ability to innovate in a sustain- able manner generates value for the brand and gives rise to products and services. To make this possible, the Marketing, Innovation and Sustain- ability areas have been brought to- gether under the leadership of a sin- gle vice-president. The restructuring aims to reinforce the Natura way of promoting innovation: identifying consumer demand and emerging issues in society, develop- ing a solution that meets those needs and then delivering it, in the form of a product or service, while emphasizing the relationship of its sub-brands with social and environmental causes. The year 2016 saw the overhauling of important brands in our portfolio. The Ekos line was relaunched, with new formulas that further validate the benefits of each ingredient stemming from the Brazilian socio-biodiversity. The use of recycled PET in the line’s plastic packaging rose from 50% to 100%, thereby contributing to the in- creased use of material that is recy- cled after consumption. Moreover, the Ekos refills are 100% made of green polyethylene. A pioneer in questioning standards of beauty and behavior, the Chro- nos line has completed 30 years and gained new formulas and packaging, in a blend of natural ingredients and science. INVESTMENTS Investment in innovation declined in relation to the previous years and was equivalent to 2.4% of our net revenue. The innovation index, that shows the sales of products launched within the last two years as a proportion of total sales, came to 54.3%, thus proving yet again the importance of innovation to our revenues. Despite it being a low- er percentage than that achieved in 2015, the index remains at a high level in comparison to the standards of the cosmetics industry. Indicators of innovation Investment in innovation (R$ million) 2014 216 Proportion of net revenue invested in innovation (%) 3 Number of products launched 1 Innovation index (%) 2 239 67,9 2015 2016 221 3 220 58,9 187 2,4 255 54,3 1. The number of products launched includes only those products that represent a new value proposition for the consumer, with new formulas and packaging. 2. The innovation index represents the sales of products launched within the last 24 months as a proportion of the total gross revenue for that year (only in Brazil). Natura is the 3rd most innovative company in Brazil Natura is considered the most innovative consumer goods company in Brazil, according to the second edition of the yearly publication Valor Inovação Brasil, edited by the Strategy& consulting team at PwC, for the Valor Econômi- co business newspaper. In the 2016 edition, we moved up from second to first place in our industry, while maintaining our overall position as the third most innovative company in the country. Three pillars of the innovation chain were analyzed: intention, efforts and results, using both qualita- tive and quantitative indicators. 37 2016 ANNUAL REPORTShared innovation The commitment to innovation runs across the board at Natura, going far beyond the development of products in short, medium and long-term proj- ects. We have research centers at our facilities in Cajamar (São Paulo state) and Benevides (Pará state), as well as an innovation hub in New York, which aims to detect international trends. A significant share of Natura’s projects are developed under an open and col- laborative innovation model, togeth- er with renowned research institutes, other private sector organizations, universities, and laboratories, among others. The company set up the Na- tura Campus Program, in 2006, which brings these different entities togeth- er to innovate. The main initiatives created in the past year by them are: the development of the Center for Applied Research of Well-being and Human Behavior, in partnership with Fapesp (Foundation for Research Support of the State of São Paulo) and three universities; the launch of the Natura Startups pro- gram, to get the company working closer with innovative entrepreneurs; and holding the second hackathon, promoted by the Natura Campus. THE SCIENCE OF WELL-BEING Inaugurated in June, the Center for Applied Research of Well-being and Human Behavior is the result of a part- nership with Fapesp. The Center is lo- cated within the USP (University of São Paulo) Psychology Institute. Its activi- ties are boosted by the participation of researchers from Unifesp (Federal University of São Paulo) and Mackenzie Presbyterian University, who hail from different fields. Their goal is to conduct research on well-being across different fields. The 10-year investment totals to R$ 20 million, and this amount is split between Natura and Fapesp. NATURA STARTUPS In 2016, we decided to formalize our ex- isting relationship with Brazilian start- up companies. Our aim is to create busi- ness opportunities in partnership with innovative companies, thus promoting an entrepreneurial environment and connecting these startups to opportu- nities within our company. Over 2,500 startups registered to participate and 22 are currently developing projects together with Natura, while another ini- tiative that brings together Natura and Brazilian startups is being developed under the Amazon Program. Find out more (in portuguese) at http://www. natura.com.br/a-natura/inovacao/ startups (see more on page 54). CAPES-NATURA CAMPUS AWARD This award is the outcome of the open innovation program partnership be- tween Natura Campus and Capes (Co- ordination for the Development of Peo- ple in Higher Education), which is linked to the Brazilian Ministry of Education. Its goal is to stimulate high-level and high impact research in areas that are of strategic importance to Brazil, such as sustainability and biodiversity. The best papers are published in interna- tional scientific journals. In 2016, there were 268 entries, six finalists and two winners. The topics of the winning pa- pers were ‘sustainability: new materials and technologies’ and ‘Socio-biodiver- sity and biological conservation’. Com- petitions will be held every two years. Other activities promoting innovation COCRIANDO In this program, we invite people from our relationship network, mainly com- prised of consultants and consumers, to discuss different topics and co-cre- ate with Natura. In 2016, there were four sessions, under the titles: Viva sua Beleza Viva (Live your true beau- ty); Cocriação Ciranda (The wheel of cocriation); Avalie meu Look (Rate my look); and, towards the end of the year, Jornada Homem (A man’s jour- ney), the first one to focus solely on men. To find out more, go to our web- site at: www.cocriando.natura.net. EKOS HACKATHON The innovation marathon Mão na mata: traga a natureza para seu dia a dia (Dip into the jungle: bring nature into your daily routine) was organized to drive projects that would bring the Ekos line closer to its consumers. Its main purpose was to enable consum- ers’ engagement with Natura and the Amazon region, as well as connect peo- ple to projects in order to create a sig- nificant impact. We reached more than 4.5 million users through social net- works and 18 workshops for developing prototypes were set up. NATURA INNOVATION DAY In May, Natura Innovation Day brought together representatives of companies, universities, startups, investment funds and other stakeholders to share the knowledge amassed through the Ekos hackathon. The event also served to launch the Natura Startups program. INOVA TALENTOS In 2016, we completed the first cycle of Inova Talentos, an IEL/CNI (Euvaldo Lodi Institute, linked to the National Confederation of Industry) program whose objective is to raise the number of skilled professionals involved with innovative activities within the Brazil- ian business sector. Under this initia- tive, scholarship holders work at the company, and are guided by Natura tutors. This enables the exchange of experience and knowledge between all those involved, while generating gains for Natura itself. The work con- ducted by the 33 scholarship holders helped reduce the expected delivery time on 16 priority projects and led to the creation of seven new initiatives. This collaboration also yielded four of the seven state awards presented to the program as a whole, including first place in the Teams category. In 2017, we will develop 13 new projects, as part of phase 2 of Inova Talentos. 38 2016 ANNUAL REPORTCONSUMER SAFETY 10 years of no animal testing In 2016, we celebrated one decade without animal testing of any kind, a decision rooted in our beliefs and values that has placed us at the fore- front of the cosmetics industry. Having made that commitment, we faced up to the challenge of finding innovative technological solutions to provide testing that would guarantee the same level of safety for Natura prod- ucts. In 1998, we committed ourselves to phasing out animal testing. In 2003, we achieved the first milestone, by halting the testing of finished prod- ucts on animals. Three years later, we took the definitive step of not carrying out animal testing at any stage of our product development process. To make this possible, Natura posi- tioned itself along the most innovative ideas being put into practice in Eu- rope, the region that was spearhead- ing the search for alternatives to an- imal testing. In 2006, we opened the Advanced Technology Center in Paris, France, a laboratory that brought our researchers closer to major Europe- an innovation hubs for the analysis of alternative technologies that would ensure testing quality for the safety of our consumers. That is how we were able to bring existing technologies to Brazil and develop our own methodol- ogies, in-house or in partnership with Brazilian universities, as well as stim- ulate a discussion regarding this sub- ject in Brazil. We now boast 67 alternative testing methodologies, which, together, en- sure the effectiveness and safety of our products. In Brazil, there are no regulations that require companies to ban animal testing altogether when developing cosmetics. A partial ban – for specific clinical trials – is expected to be put in place in 2019 and will help the industry to find solutions to the challenges that Natura has been faced with for years. One of the biggest challenges is train- ing Brazilian suppliers to carry out certain safety tests – many of which are currently only available abroad, thus making compliance with such procedures a lot more expensive. SAFETY WHEN USING NEW ACTIVE INGREDIENTS The pioneering adoption of multi- ple socio-biodiversity inputs has in- creased the challenge Natura faces to ensure product safety. Whenever a new plant is identified as a possible raw material for a new product, the extracts, oils or butters obtained from it are studied in labs to identify its components. The active ingredients then undergo rigorous safety tests, which assess the cytotoxicity (show- ing whether the substance is toxic to cells), phototoxicity (showing whether it can become dangerous or damage the skin when subjected to sunlight) and mutagenicity (which evaluates the probability of causing cancer after prolonged use). CONTROVERSIAL INGREDIENTS 103-2, 103-3 Natura’s product portfolio includes only ingredients that are well known and proven to be safe, according to international scientific community standards. Our team of researchers monitors the international discussions surrounding the growing use of each one by different industries, keeping a particularly watchful eye over the so-called controversial ingredients. When there is evidence that a sub- stance poses a risk to the environment or human health, Natura chooses to replace it in its formulas. 102-11, 416-1 That is the case, for example, of Tri- closan, which is widely used in a variety of segments, such as cosmetics, ther- apeutic and veterinary products, and many more. Its function is to prevent or inhibit contamination by microor- ganisms (bacteria, fungi and yeasts). Its widespread use by many industries can lead, over the long term, to poten- tial environmental damage, due to its poor degradability. Studies also indi- cate that it has the potential to cause hormonal changes in humans. Acting proactively to ensure the safe- ty of our formulas, we have banned the use of Triclosan in the devel- opment of new products since July 2008, and are continually striving to replace it with new, less aggressive ingredients that are antibacterial more environmentally friendly, while preserving the safety and efficacy of our products. We have made prog- ress in this endeavor and in March 2016 we removed Triclosan altogeth- er from our product portfolio. Never- theless, it may still be possible to find products on the market containing this ingredient, since their expiration date ranges from two to four years from the manufacturing date. Phthalate and paraben are other controversial substances that have already been banned by Natura. Read more about our consumer safety procedures on page 134. 39 2016 ANNUAL REPORTNatura multi-channel  NATURA MULTI-CHANNEL Relationship selling 103-2, 103-3 Injecting new life into the business of selling our products through Natura Consultants is one of our strategic ob- jectives and, in 2016, we worked hard to build the bases for our project focused on overhauling Relationship Selling. The project focuses on elevating the activity of being a Natura Consultant to a profession – starting with improv- ing the earning potential of our con- sultants and the development oppor- tunities that are available to them, all while providing an increasingly better shopping experience to our consumers. In order to expand the development opportunities available to our network, we will implement offer segmentation strategies and make extensive use of technology to enhance the power of our network. The intensive use of business intelligence and CRM tools and methods developed by us in the last few years, will enable us to provide highly customized options for each type of consultant and guide our offers in terms of incentives, remuneration, training, relationships and management. Using this information, we designed the new version of our network, which is be- ing subdivided into groups: professionals working in the beauty universe (Beau- ty Specialist), microentrepreneurs with a physical point of sale (Beauty Busi- nesswoman) and all other consultants, whether they have small, medium or large sales volumes (Beauty Consultant). The strategy provides distinctive options for each of the sub-groups, regarding personal development and opportuni- ties for growing a consultant’s business. By treating each relationship as unique, we can provide consultants with the best tools to increase their earnings and give consumers options tailored to their needs, whether it be experimen- tation, convenience or assistance. NUMBER OF CONSULTANTS The troubles faced by the Brazilian economy last year also led to a reduc- tion in the number of active consultants in the country, due to low sales volumes and rising default rates. We are con- fident that the new value proposition being introduced to our consultants will prove effective in turning this situation around. However, there has not been enough time for this plan to influence our indicators, since it is being rolled out in stages, the first of which occurred in late 2016. The implementation of differ- ent project elements is expected to con- tinue throughout 2017 and includes new sales force management practices that are capable of identifying the need for improvement in an ongoing basis. Consultants – Brazil 2012 2013 2014 2015 2016 Natura Consultants in Brazil (thousands) 1,268,5 1,290 1,319 1,377 1,256 Natura Consultant Advisors 12,125 11,957 11,328 9,500 8,310 102-43/102-44 NC loyalty index (%) – Brazil Satisfaction¹ Loyalty2 102-43/102-44 NCA loyalty index (%) – Brazil Satisfaction¹ Loyalty2 2014 2015 2016 91.8 27.5 93.3 29.8 93.1 31.2 2014 2015 2016 91.1 29.6 92.8 29.5 94.6 31.7 1. Satisfaction shows the proportion of NCs and NCAs who are “totally satisfied” or “very satisfied” (Top2Box). 2. Loyalty: the proportion of individuals surveyed who conferred the maximum grade (“Top1Box”), on a scale of 1 to 5, to three factors: satisfaction, intention to continue their relationship with Natura and recommendation. 41 2016 ANNUAL REPORT203-2 Average annual income generated (R$) Natura Consultants – both female and male (NCs)1 Natura Consultant Advisors (NCAs)2 2014 2015 2016 4,2902 14,306 4,161 17,614 4,028 18,428 1. Average annual income earned by our NCs through product sale. 2. The NCAs earn a performance-based commission (number of NCs who place orders and business volume). INTERNATIONAL OPERATIONS We continue to encourage a closer re- lationship with Natura Consultants in other Latin American countries. The consolidated number of consultants increased by 7.5% in 2016, to 543,000, with notable increases of 15% in Ar- gentina and 22% in Colombia. In the countries where Natura’s operations are more consolidated (Argentina, Chile and Peru), our focus is on in- creasing productivity, with moderate channel growth. However, in our de- veloping operations (Colombia and Mexico), we seek to rapidly increase the number of consultants and main- tain productivity levels. We decided to close our direct selling operations in France, where we had around one thousand consultants. We are now concentrating our re- sources on channels with more local relevance, such as our Natura store and e-commerce. The results of the loyalty survey once again reflect our efforts directed at maintaining a high level of quality in our relationship with our consultants. The level of loyalty of local consul- tants has remained stable at 37.4% Consultants – International Operations, by country Argentina Chile Mexico Peru Colombia France 2016 161.2 74.3 125.8 94.0 87.8 0 Consultants – International Operations, by country 2015 2016 Total 505.1 543.0 Natura Consultant Advisors – International Operations, by country1 2016 Chile Peru Colombia 1. We do not employ the NCA relationship type in Argentina or Mexico. Natura Consultant Advisors – International Operations 2015 2016 Total 2,270 2,273 681 901 691 42 2016 ANNUAL REPORTIn 2016, the Rede Natura closed out its first year of activity in Chile to great success. In the first quarter of 2017, we started implementing the digital plataform in Argentina. Having iden- tified a growing demand for the Rede Natura, we can speed up the roll out to our remaining international markets. The expertise that Natura has gained in retail is also starting to be consid- ered for implementation in our other operations in Latin America. 102-43 / 102-44 Natura Consultant loyalty index (%) – Interna- tional Operations (%)123 2014 2015 2016 Loyalty – NCs in IOs Loyalty – NCAs in IOs4 39 45 37 52 37 53 1. The indicator was revised in 2016. We decided to disclose only the consolidated figures for the countries that comprise our International Operations (Argentina, Chile, Colombia, Mexico and Peru), as the breakdown was considered to be information of strategic value to Natura. 2. Source: Ipsos Institute. 3. Loyalty: the proportion of individuals surveyed who conferred the maximum grade (“Top1Box”), on a scale of 1 to 5, to three factors: satisfaction, intention to continue their relationship with Natura and recommendation. 4. Includes only those countries where this type of relationship is present (Colombia, Peru and Chile). In Mexico, where we employ a unique multilevel strategy, the head consultants, equivalent to NCAs, are included in survey results. 43 2016 ANNUAL REPORTDo more for our consultants 103-2, 103-3 We want to make a difference in the lives of consumers, by providing them with innovative high quality products that promote beauty and well-being. Making a difference is also our main goal when we think about our network of consultants, which now comprises more than 1.8 million Natura Consul- tants (NCs). To that end, we have de- vised the IDH-CN methodology, which is used in Brazil, and monitors consul- tants’ living conditions and measures their annual development (read more about this methodology below). The first results obtained from using this new index revealed the consul- tants’ desire to further their education. Because we are committed to having a positive impact on the lives of our consultants, and are also firm believers that education can be a great driver of personal and professional evolution, we launched an education program focused on NCs (and extended to their family members) in August 2016. De- signed in partnership with the Natura Institute, the program offers a range of learning experiences, such as both fa- ce-to-face and distance learning gra- duate and postgraduate programs, language courses, and vocational tra- ining courses, at a discount or with full scholarships. This program is unique among the companies that operate using direct selling in Brazil. In a short period – from August to December 2016 – approxi- mately 11,000 people went back to school through one of the courses be- ing offered by the program. Approxi- mately 20% of all those who enrolled were family members of consultants. THESE ARE OUR PROGRAM PARTNERS: Estácio University – Consultants have a minimum 30% discount in 80 gra- duate or postgraduate courses (fa- ce-to-face or online). In 2016, 20 full scholarships sponsored by Crer Para Ver were awarded to students of online technology courses. Geekie Games – An online learning platform that helps high-school stu- dents prepare for the Enem exam, with discounts starting at 30%. In 2016, 200 full scholarships were awarded by Crer Para Ver. Prepara Courses – Chain offering pro- fessional training courses, held at more than 400 centers around the country. Three courses are offered completely free of charge (personal finance, time management and negotiation techni- ques), while discounts and full scholar- ships are available for other programs. Wizard by Pearson – Chain of langua- ge schools that offers courses at a dis- count to consultants and their family members throughout Brazil. Presently, more than 600 schools are included in the partnership. Khan Academy – Free online cour- ses to boost mathematical skills. The content available has been specially tailored to help with consultants’ daily activities. In addition to partnerships, the pro- gram also provides consultants with access to the Crer Para Ver (Believing is Seeing) Education Platform, a website that offers varied content and possibi- lities for engaging in the education of their children, students and the local community, through numerous activi- ties. There is also an online Book Club, developed exclusively for the consul- tants, which in the last year alone dis- tributed nearly 1,000 books. In 2016, 11,000 consultants also received text messages containing educational tips appropriate to the age group of their children. In 2017, the program will start offering new options relating to culture, finan- cial education and civil rights (with a particular focus on women’s rights). We will also expand the number of part- nerships with educational institutions and step up the delivery of educational tips by text message. IDH-CN 103-2, 103-3 Natura introduced the world’s first corporate human development indica- tor, the HDI-NC, in 2014. Its design was inspired by a methodology of the same name currently employed by the United Nations Development Program (UNDP). It is used to monitor the situation of Natura Consultants (NCs) in relation to three aspects of their everyday lives: health, knowledge and work. Results are measured over a range from 0 to 1 (the latter being the maximum human development standard attainable, so the closer to 1 the numbers are, the be- tter the group’s human development). As in 2014 and 2015, more than 4,000 consultants were interviewed last year and the overall HDI-NC continues to improve, reaching 0.593 in 2016. Over the three years the study has been con- ducted, the indicator has increased by 7.81%, with a 0.5% rise in 2016. However, we did notice some challenges regar- ding the assessed aspects. Financia- lly, the consultants also felt the impact of overall reduced purchasing power caused by the economic crisis in Brazil. Nevertheless, the indicator shows that consultants who have been working with Natura for over a year have higher HDI levels than those who are still get- ting started, thus revealing the positive impact the company has on the lives and self-esteem of the interviewees who have been with us the longest. The HDI-NC will continue to be moni- tored annually and will help us create management tools and corporate so- cial investments that are intrinsically related to the business and can help further improve the quality of life of our consultants. Furthermore, the index contributes to Natura’s desire to exert positive economic, social and environ- mental impacts. 44 2016 ANNUAL REPORT Cleinilany Dornela, from Rondônia, was the winner of Prêmio Acolher in 2016 in the popular vote The Natura Movement Since 2005, the Natura Movement has been used as a platform to facil- itate the creation of a collaborative network to support initiatives that promote the social development of Natura Consultants and society as a whole. In 2014, the platform went dig- ital (www.movimentonatura.com.br) and started allowing the participation of any social entrepreneur – not just Natura consultants. Since then, the number of visits has steadily grown. In 2016, there were almost 2.2 million visits, a number a lot higher than ex- pected. For NCs who are also social entrepre- neurs, we created the Acolher Awards, which provide technical and financial support to winning projects, thereby increasing their reach. The year 2016 marked the awards’ fifth edition, and for the first time, Natura’s employees were able to submit transformative initiatives where they work as volun- teers or leaders for consideration. Learn more about all the initia- tives supported by the 2016 Acolher Awards at (in portguese): www.movi- mentonatura.com.br/cs/movimento- natura/premioacolher. The Natura Movement 2014 2015 2016 Website audience¹2 Participation3 138,187 1,308,917 2,193,662 n.a. 32,724 55,355 1. Calculation of this indicator takes into consideration the number of visitors to the website. 2. In addition to consultants, there are also other groups, such as consumers, who also access the platform, but it is not possible to single out site activities pertaining to each of the different groups. 3. This calculation considers only qualified participation: registration of people or initiatives, sharing of content on social networks, interaction through the platform with initiative owners and voting for the Acolher Awards. 45 2016 ANNUAL REPORTThe Consultoria Natura mobile application Digital channels In 2016, Rede Natura doubled in size and is now one of the biggest digital sales channels for beauty products in Brazil. The number of Digital Na- tura Consultants (DNCs) working on this platform has surpassed 100,000. They assist more than 1.7 million reg- istered consumers. Consultants who work online through this platform achieved productivity increases of 8% in direct selling and 14% in combined sales (traditional sales model plus Rede Natura). The frequency of purchases was also higher. In order to encourage new consultants to work with a hybrid proposition, that is, using both for- mats, we have adjusted our financial structure, offering reduced franchise fees for those who want to try out the new hybrid model, on top of the single format amount. Consultants’ profits vary according to the format chosen. We have also adjusted the incentives offered to Relationship Managers and Natura Consultant Advisors (NCAs), so that their sales through the Rede Natura have the same value as the sales made face-to-face. Since April last year, the Rede Natura has also been selling directly to final consumers. This hybrid online system has boosted sales results, helping the Rede Natura achieve its operational break-even point. Visits to the web- site grew by 78% in 2016 and the con- version (a visit that becomes a pur- chase) rate increased by 58%. Fine tuning promotional activities and an improved return on marketing invest- ment also contributed to strong out- comes. The Rede Natura generates knowl- edge that adds value to all our chan- nels. Digital tools are important allies in identifying consumer trends and categories that are most suitable for each medium, generating data that is used to adjust marketing strategies and promotional activities applicable to all our different sales formats. The frequency of purchases through dig- ital channels is also greater. Starting from 2016, all new consultants joining Natura will have their own digital sales space, thus helping train NCs to work with our digital platform. In addition to the positive impact it has on their earnings, this will allow for a stronger connection with our consultants, en- abling access to better services and more training opportunities. This in turn will improve their performance, generating benefits that will spill out into their everyday lives. Our consultants have other digital tools at their disposal too, in addi- tion to the Rede Natura. Launched in 2016, the Consultoria Natura (Natu- ra Consulting) app for smartphones and tablets enables users to order products, check out sales, organize deliveries to each customer and ob- tain assistance. It incorporates other apps with different features, such as the Rede Natura Chat (which allows consultants to answer consumers’ questions while they are online on our sales platform). There are currently more than 300,000 Natura Consul- tants using these apps. 46 2016 ANNUAL REPORTNatura in retail In order to cater to different consum- er profiles and meet their varied de- mands, Natura started successfully selling its Sou line in drugstores in 2015, and, by 2016, it had entered the Brazilian retail market with its own stores. Our essence is still firmly based on Relationship Selling, through the work of our wonderful consultants, but we also wanted to provide our customers with a complementary ex- perience, through points of sale that enable experimentation, and drug- store chains, which serve consumers seeking convenience and practicality. Natura store at the Morumbi Shopping Center Our first stores in Brazil The first Natura store opened its doors in April, at the Morumbi Shop- ping Center, in the city of São Paulo. Four other stores were subsequently opened in the São Paulo state cap- ital, all of them in large shopping malls. This strategic decision was made based on detailed research, through which a repressed demand was detected among A and B con- sumer profiles, who stated that they were familiar with and liked Natura products, but were not used to buy- ing it from consultants. The first results surpassed our ex- pectations, validating our decision, and encouraging us to accelerate the pace of expansion in 2017, including to other cities throughout Brazil. Our stores sell around 40% of the en- tire Natura product portfolio, includ- ing fragrance lines and the brands Todo Dia, Ekos, Mamãe e Bebê, Una and Chronos. In 2017, we will also start developing products, gifts and packaging exclusively for this sales channel. All stores allow for exper- imentation, meaning that all prod- ucts can be tried out by consumers in an environment that simulates their day-to-day use – our stores are all equipped with taps and basins for soaps and bath products. Our con- sultants are also using these new stores: they bring in clients to exper- iment with products before placing an order with them. The store staff is comprised of profes- sionals hired by Natura and trained to provide beauty advice and accu- rate information about each of our items. 47 2016 ANNUAL REPORTOur stores in New York and Paris In December 2016, we held the pre-opening ceremony of our first store in New York. We started our operation by sell- ing the Ekos line, introducing this new market to the best in terms of cosmetics made from natural Brazilian inputs. Our portfolio will be expanded in the future, with the introduc- tion of the Chronos and Mamãe e Bebê (Mother & Baby) lines. Product packaging has been adapted to this market. As way of emphasizing our origins, all products bear the term “Natura Brasil” before the line name. In Paris, we are located in the commercial district of Mara- is, a bustling area of the French capital. Our sales portfolio there is focused on the Ekos, Chronos and Mamãe e Bebê lines. We are also experimenting with selling our products in multi-brand stores specializing in cosmetics. Our e-com- merce operation based in France is already selling to oth- er countries in Europe. In order to direct our resources to these new sales channels, we decided to terminate direct selling activities in France, where there were about one thousand consultants. Our goal with this presence in two important global beau- ty care hubs is to attain a scalable model for developed markets. To that end, we spent 2016 working hard to tai- lor our portfolio and packaging to these markets. We also explored different commercial models, to try to identify the attributes that would help set Natura products apart, so as to attract an increasing number of consumers. Convenience at drugstores Following the successful roll out of the Sou line to drugstores, in 2015, we doubled the number of points of sale within the Raia/Drogasil chain – from 700 to more than 1,400 drug- stores throughout Brazil. In Decem- ber 2016, we also started offering the Sou brand at branches of the Drog- aria São Paulo chain, and in January 2017, we expanded our sales to the Pacheco chain, in Rio de Janeiro, and the Panvel chain, in Rio Grande do Sul, totaling 2,955 pharmacies across the country that are now selling Natura products. 48 2016 ANNUAL REPORTOur processes OUR PROCESSES Commitments to the future 102-12 In 2014, we launched the 2050 Sus- tainability Vision and committed our- selves to making Natura a company with an active, positive impact over the environment and our society, thus altering current expectations of merely reducing and mitigating our impact. With that in mind, we have established goals that are to be achieved by 2020, and which will help us achieve the transformations we seek by 2050. As a member of the United Nations Global Compact, we are fully commit- ted to the 2030 Agenda for Sustain- able Development, because we believe this is a call to action for companies to rethink their businesses in light of a burgeoning form of capitalism. To this end, we carried out an impact analysis in 2016 to evaluate the transformative potential of Natura’s activities in rela- tion to the 17 global goals that are to be achieved by 2030. This study pointed out that, through initiatives relating to issues such as carbon, waste, women’s empower- ment, education, water, biodiversity and the Amazon, we are contribut- ing, directly or indirectly, to 16 of the 17 SDGs, the exception being SDG 14 – Life Below Water – which has to do with oceans. We believe that, in order to help our transformative activities achieve the necessary scale to make a significant impact, our main sub-brands must become platforms that promote new production and consumption models. In 2016, we became the first Latin American company to disclose the results of its EP&L (Environmental Profit and Loss) survey. The study tal- lies the “environmental accounting” of the company, calculating the positive and negative impacts of all stages of production, marketing and final dis- posal of any waste generated (see below). We also made important progress in the Amazon Program, reaching the sum of R$ 972.6 million in busi- ness turnover in the region during 2016, bringing us closer to the goal of reaching R$ 1 billion by 2020 (see more on page 54). The work of developing sustainable production chains in the region, stimulated under the Amazon Program, has led to the conservation of 257,000 hectares of standing for- est, as well as enabling development, generating income for 2,119 families in the Amazon and affecting the quality of life of more than 8,000 people in the region. Sustainable Development Goals In September 2015, during the Sustainable Development Summit, all 193 member states of the United Nations adopted the 17 Sustainable Development Goals (SDG). This new global agenda was created to provide continuity to the achieve- ments obtained through the eight Millennium Development Goals, which had been in force for 15 years. In addition to shared prosperity, health and well-being, the SDGs include the conscientious use of natural resources in the face of cli- mate change and the threat it poses to all life forms. They are a call to action for companies to rethink their businesses towards a new capitalism. With our initiatives, we have already contributed towards 16 of the 17 SDGs. 50 2016 ANNUAL REPORT2050 Sustainability Vision Main goals Brands and Products Area 2020 Goal 2016 Performance Percent of goal achieved Packaging At least 10% of all Natura Brazil packaging should be made of post-consumer recycled material. A total of 4.3% of all packaging made used post-consumer recycled materials. 2013: 1.4% 2020: 10% Achieved in 2016: 34% Climate change The Natura brand must reduce its relative emissions of greenhouse gases by 33% (Scope 1, 2 and 3). A 0.5% reduction in relative GHG emissions. This indicator is directly related to business performance, but the reduction was -1.3% in comparison to 2012. 2012: 0% 2020: -33% Achieved in 2016: 4% Socio- biodiversity Reach a turnover of R$ 1 billion in business volume in the Amazon region. The accumulated volume of business generated in the region amounted to R$ 972 million. 2010: R$ 89 million 2020: R$ 1 billion Achieved in 2016: 97% Waste Water Supply chains Collect and send for recycling 50% of the waste generated by Natura product packaging in Brazil (ton equivalent). For the Natura brand in Brazil: implement a strategy for the reduction and neutralization of impact, based on the water footprint measurement and considering the entire value chain. Ensure by 2015 that 100% of materials produced by direct manufacturers are traceable (last link) and by 2020 implement a traceability program for the other links of the Natura brand’s value chain. In 2016, we concluded the experimental pilot program introduced the year before to promote reverse logistics in the São Paulo metropolitan area. This included different sources for collecting post- consumption waste, such as collector cooperatives and the involvement of Natura Consultants. The experiment was useful for gaining knowledge and planning our strategy, procedures and action. Additionally, we participated in the sectorial reverse logistics project organized by Abihpec. Using the created methodology, we began conducting studies to map projects that have the potential to reduce our water footprint. In progress Planning stage Having identified 100% of the manufacturers in the first link of the chain, we are working to extend the overall traceability of critical chains. Planning stage 51 2016 ANNUAL REPORTOur Network Area 2020 Goal 2016 Performance Customers Define priority topics and implement a strategy to mobilize Natura brand consumers. Definition of priority claims for boosting consumer’s perception of Natura as a sustainable brand: _Living Forest _100% Organic Alcohol _Commitment to Climate change _Sustainable Packaging _Smart Refills _Quality Education _No Animal Testing _Beauty free of stereotyping Percent of goal achieved In progress Natura Consultants Generate interest in continued education and offer a broad range of educational options that meet their needs. We have developed an educational program for NCs and their families, offering partial and full scholarships for learning experiences such as: ENEM exam preparatory courses, vocational training, higher education programs, and languages courses, among others. Within three months, over 11,000 people had gone back to school. In progress Employees For the Natura brand, have women occupying 50% of senior management positions (Director and upwards). Throughout the year, we achieved a rate of 29% of senior management positions being occupied by women. Natura signed up to the UN Women’s Empowerment Principles and the Brazilian government’s Gender and Racial Equality Program. We also launched our own diversity policy in 2016, which gives priority to four areas, including women’s empowerment. Moreover, we reviewed our procedures for selecting, attracting and developing women with leadership potential. 2013: 29% 2020: 50% Achieved in 2016: 0% Local communities Develop strategies for the areas of socio- biodiversity in the Amazon region and for the communities living near our main operation hubs in Brazil together with the local population and its stakeholders through open dialogue and collaborative construction. In order to create change on a sizeable scale, we are working with local governments, communities and companies under agreements and partnerships to come up with development solutions in the Mid- Juruá (Amazonas), Lower Tocantins (Pará) and Transamazon (Pará) areas. Together with local leaders and partners, we have identified the development priorities of each territory and agreed upon collaborative plans setting out initiatives and goals. Local leadership and institutions are strengthened and empowered throughout the process. In progress 52 2016 ANNUAL REPORTManagement and Organization Area 2020 Goal 2016 Performance Percent of goal achieved Management model For the Natura brand, conduct an appraisal of external social and environmental factors, taking into consideration the positive and negative impacts of the extended value chain (from extraction of raw materials to disposal of products). Ethics and transparency For the Natura brand, implement total transparency for providing information on products and the progress of the Sustainability Vision. An appraisal of external environmental factors was carried out for the first time in 2015, converting the effects of the business on aspects such as GHG emissions, water, waste and land use and occupation into financial resources. The calculation involved the entire Natura product portfolio, throughout its entire value chain. In 2016, we will conduct the first ever appraisal study of social impacts. We have collaboratively developed the architecture of our sustainability communications, which organize product information according to the interests of our consumers when they are looking for more detailed information. Under implementation Under implementation The full list of 2020 goals and commitments can be seen here. 53 2016 ANNUAL REPORTTHE AMAZON PROGRAM The value of the standing forest 103-2, 103-3 Since 2000, with the launch of its Ekos line, Natura has sought to transform social and environmental challenges into business opportunities, having the Brazilian biodiversity as one of the main drivers of innovation. In 2011, this commitment was renewed through the launch of the Amazon Program, whose goal is to promote a new, more inclusive and sustainable development mod- el for the region, based on the notion that the forest could be more valuable if it is standing than if it were cut down. This initiative encourages the estab- lishment of sustainable businesses as an economic alternative for the region and is currently enabling development and generating income for 2,119 families in the Amazon, while helping conserve 256,798 hectares of standing forest. The Amazon is experiencing a great paradox. Despite being diversity-rich, teeming with species, cultures and knowledge, containing 55% of the world’s tropical forests and 20% of the world’s fresh river water, and playing a fundamental role in the regulation of the planet’s climate, the region’s political and economic agenda is driven by ac- tivities that cause devastation and en- vironmental and social pressure – such as growing soybeans, raising livestock, lumbering, mining and construction of hydroelectric power plants. That is why it is paramount to devise new, sustain- able development models for the region. In light of this, the Amazon Program covers three major pillars of activity: innovation; science, technology and development of sustainable chains; and institutional empowerment. Closing in on R$ 1 billion In 2016, we allocated more than R$ 220 million to the Am- azon region, mainly for purchasing natural inputs (64%), in addition to investing in industrial facilities, research and innovation, local development, education and projects for offsetting carbon emissions. All this has brought the total sum invested in the region since 2011 to R$ 972 million and we are now very close to reaching our goal of R$ 1 billion in turnover by 2020. 1. Science, Technology and Innovation (STI): This pillar is an instrument of scientific production, innovation and the gener- ating of new business whose aim is to activate and coordinate local, national and international research and knowl- edge networks to focus on biodiversity, sustainable management and agricul- ture and eco-design. NATURA AMAZON INNOVATION CENTER In 2016, the Natura Amazon Innova- tion Center (Nina - Núcleo de Inovação Natura na Amazônia, in Portuguese) was transferred from Manaus (Ama- zonas) to Benevides (Pará), where the Ecoparque is located. The purpose of the move was to increase the synergy between research and development needs in terms of technology and in- novation, applicable to our factory and socio-biodiversity production chains. Since its inauguration, Nina has been an important hub for the development of open innovation, both for Natura and for the Amazon regio (read more about innovation on page 37). In 2012, we launched the Natura Amazon Campus, which is comprised of 360 researchers, 10 local research centers and institutes and partners for that offer courses on entrepreneurship. Over 80 research projects have been registered. Furthermore, important local partner- ships were established with organiza- tions such as the Federal University of Amazonas (Ufam), the National Insti- tute for Amazonian Research (Inpa), the Brazilian Agricultural Research Corpo- ration (Embrapa) and the Amazonas State Research Support Foundation (Fapeam). The results also include the funding of four scholarships for profes- sional who will work at the company, as well as the mobilization of resources for 32 grants allocated to innovation proj- ects in the region. INNOVATION AND SUSTAINABLE CULTIVATION PRACTICES Natura, just like other cosmetics com- panies and those in the food, phar- maceutical and cleaning and hygiene industries, uses dendê oil, also known as palm oil, in its products. Around the world, palm cultivation generates controversy, because it is historical- ly associated with deforestation and monoculture. In 2016, through an inter- national alliance, Natura entered into an agreement with the USAID (United States Agency for International De- velopment) to continue developing projects that adopt the agroforestry system for cultivation of the oil palm – something it has already been doing 54 2016 ANNUAL REPORTfor the past 10 years. Natura was chosen as a partner of the US agency because it has been in- vesting in research to study alternative methods of palm cultivation since 2007. That year, in cooperation with Camta (Tomé-Açu Mixed Farming Coopera- tive), in the state of Pará, Embrapa and Finep (Funding Agency for Studies and Projects - a Brazilian public agency promoting science, technology and in- novation), we began a pilot project that used 18 hectares to test the replace- ment of palm monoculture with an agroforestry system, whereby oil palm cultivation is carried out alongside that of other plant species. The pilot project produced a significantly higher yield of palm oil than under the traditional monoculture system, and demonstrat- ed its environmental benefits – such as the natural barrier against pests cre- ated by the diversity of plant species. The alliance will support the develop- ment and expansion of agroforestry systems and business models that combine good production perfor- mance with the methods of subsis- tence farmers and the generation of ecosystem services. In addition to the partnerships established in the pi- lot project developed by Natura, we will also be supported by the ICRAF (International Centre for Research in Agroforestry, also known as the World Agroforestry Center) and the USAID it- self. The investments made by alliance members are expected to reach US$ 4.8 million. In addition to the more effi- cient production of palm oil, the system allows for carbon sequestration and prevents deforestation. 2. Socio-biodiversity Production Chains The second pillar is aimed at structur- ing, refining and extending sustainable production chains in the Amazon, in- vesting in the training, production effi- ciency and technology that is essential for cooperatives to thrive, generate wealth locally and achieve social devel- opment. SUPPLIER COMMUNITIES 304-2, 103-2, 103-3, 413-2 Every year, we broaden and strength- en our relationship with the commu- nities that supply our natural inputs. We maintain links with 33 local com- munities, three of which were included in 2016. Together, they represent 2,841 families. Around 75% of these business partners are located in the Amazon region, totaling 27 communities and 2,119 families. The other communities we maintain relationships with are lo- cated in different parts of Brazil (see map showing the location of all suppli- er communities here) Two of the three new supplier commu- nities are situated on Marajó island (Pará state), a new area of operations for Natura. These new partnerships were required to expand the sourcing of certain bioactive ingredients, such as ucuuba, murumuru and andiroba (all types of plant), enabling us to in- crease the proportion of these inputs in our soaps. The income received by the commu- nities during the year exceeded R$ 10 million. That is 55% higher than the amount received in 2015 and, in ad- dition to payment for supplies (R$ 5.8 million), it included the sharing of ben- efits derived from access to traditional knowledge (R$ 3.07 million), support for community infrastructure, training and payment for use of their image. 203-1 We have measured the positive im- pacts created by our relationship with local families, such as income gen- eration through the purchase of in- puts, investment in developing higher value-added production chains and transfer of technical skills through the training we provide. Now that they are much better organized, the communi- ties are entering into partnerships with other companies, as well as Natura, to supply inputs obtained from the Brazil- ian biodiversity. This development was achieved using a sustainable produc- tion and commercial model. We have also invested in improving the productivity of these communities and adding value to their supplies, by upgrading the infrastructure of two extraction units (one in the Mid-Juruá region and the other in the northeast of Pará) and thereby improving the quality to the oil and butter produced. We have continued with our training programs in the fields of health, safety, good management practices and or- ganization management, training 545 people in 2016. Also in 2016, 100% of supplier commu- nities were audited by our Socio-bio- diversity Chain Verification System, developed jointly with the UEBT (Union for Ethical Biotrade). This procedure looks into labor issues, organization management and good production practices, and ensures the tracking of production chains, which is one of our greatest challenges. This verification is ongoing, since the families need to de- velop a system to provide documenta- tion confirming the origin of all inputs. The audits are performed annually in each of the communities, generating action plans that are monitored until the next audit. Once a year, the communities partici- pate in the Qlicar Award - which distin- guishes Natura suppliers - in the Bio- Qlicar category. The award goes to the most noteworthy community, the one that has shown the greatest evolution in several categories revolving around quality and good practices. The BioQli- car ratings underwent some changes in 2016, and the calculation now takes into consideration the ratings provided by the Verification System, as well as an indi- cator that measures the planned volume of production and delivery deadline. The communities achieved a 3.93 rat- ing in 2016. This index, which used to be a part of BioQlicar but is now an element of the Verification System, ad- vanced slightly in comparison to the previous year’s figure, of 3.62. The rat- ing is weighted, along with the OTIF (on time in full) assessment rating of the community. The improvement is due to the communities’ improved audit rat- ings, as well as greater compliance with the action plans during 2016, which also increases the community’s rating throughout the year. There was also an improvement in the OTIF rating, com- pared to 2015, due to better delivery planning, both by Natura and by the communities, and greater investment in chain infrastructure. 414-1 55 2016 ANNUAL REPORTSocio-biodiversity Conservation – Amazon 257,000 hectares of forest = 1.7 times the area of the city of São Paulo We influence the preservation of standing forest in the Amazon by using inputs obtained from its biodiversity in a sustain- able manner, in partnership with supplier communities, as well as boosting development and generating income for more than 2,000 families in the region. 203-2 Communities and families benefitted (units)1 2014 2015 2016 Communities that Natura has a relationship with Families benefitted within the communities Families benefitted within the Amazon region2 33 3,121 2,106 30 2,251 1,529 33 2,841 2,119 1. We continued using the GPS method, which was introduced in 2015, for tracking our suppliers. The number of communities reported includes seven associations and 26 cooperatives. 2. The number of families benefitted in 2015 has been corrected. Resources allocated per family (R$ thousand) 2014 2015 2016 Direct resources Supplies 2.3 1.1 2.3 1.3 3.1 2.0 203-1 Investments made in the communities (R$ thousand)1 2014 2015 2016 Supplies 3,040 2,837 Sharing of the benefits derived from access to genetic heritage or related traditional knowledge Support and infrastructure Use of image Training Technical services Studies Total 3,982 300 21 946 184 414 2,411 443 14 245 139 490 5,771 3,070 669 36,3 77 255 245 8,887 6,579 10,123 1. Direct investments are amounts deposited directly to the communities in payment for the supply of raw materials, sharing of benefits and use of image. The categories of support and infrastructure, training, studies and technical services represent resources invested by Natura in the form of services, hiring of partners, research, equipment purchases, and infrastructure improvements, among other benefits. Such investments are made at Natura’s discretion to add value to these production chains. 56 2016 ANNUAL REPORTNatura’s supplier communities Inputs supplied, by state RR PA AM Carauari Murumuru butter Andiroba oil AC Nova Califórnia Cupuaçu butter Brazil nut oil Açaí pulp Andiroba oil RO Juruena Brazil nut oil AP Laranjal do Jari Brazil nut oil Gurupá Brasil Novo Medicilândia Uruará Afuá Vitória do Xingu Anapu Pacajá Andiroba nuts Cocoa beans Murumuru nuts Ucuuba nuts Capitiú leaves Storax leaves Pataqueira leaves Altamira Cupuaçu butter Murumuru butter Ucuuba butter Andiroba oil Passionfruit oil Piri Piri roots TO Brazilian copal seeds GO DF Campestre de Goiás MT MS SP Guaçatonga leaves Barra do Turvo Curumbataí do Sul PR Passionfruit seeds Turvo SC Pennyroyal leaves RS Campestre da Serra Afuá Belém Abaetetuba Santo Antônio do Tauá Santa Luzia do Pará Moju Irituia u Igarapé-Miri Acará Cametá Tomé-Açu napú Pj á Babassu flour Esperantinópolis MA PI CE RN PB PE AL SE Cocoa beans Sapucainha nuts BA Camamu Ilhéus Montes Claros Buriti oil MG ES RJ 57 2016 ANNUAL REPORTCommunityLocationCodaemjCarauari (Amazonas)CofrutaAbaetetuba (Pará)ComaruLaranjal do Jari (Amapá)CoomarSanta Luzia do Pará (Pará)CoopafloraTurvo (Paraná)CoopavamJuruena (Mato Grosso)CoopçãoPacajá (Pará)CopaespEsperantinópolis (Maranhão)CopoamMedicilândia (Pará)CopobomAnapu (Pará)CopopsUruará (Pará)CommunityLocationAdincocmaAfuá (Pará)ApobvAcará (Pará)AprocampSanto Antônio do Tauá (Pará)AtaicGurupá (Pará)CaepimIgarapé - Miri (Pará)CabrucaIlhéus (Bahía)CamtaTomé Açu (Pará)CamtauaSanto Antônio do Tauá (Pará)CartCametá (Pará)CepotxAltamira (Pará)CoaprocorCorumbataí do Sul (Paraná)CommunityLocationCopotranVitória do Xingu (Pará)CopoxinBrasil Novo (Pará)GF GuaçatongaBarra do Turvo( San Pablo)GF JatobaCampestre de Goiás (Goiás)GF PoejoCampestre da Serra (Rio Grande do Sul)GF SapucainhaCamamu (Bahía)Grande SertãoMontes Claros (Minas Gerais)IrituiaIrituia (Pará)JauariMoju (Pará)MMIBBelém (Pará)RecaNova Califórnia (Rondônia) ECOPARQUE In order to bring together sustainable production chains and companies that want to do business related to so- cio-biodiversity, in 2014 we inaugurat- ed the Ecoparque, in Benevides (Pará state). Developed based on the concept of industrial symbiosis, this structure aims at attracting other companies in- terested in doing business locally. Cur- rently, about 60% of Natura soaps sold in Brazil and through our International Operations is produced at the Eco- parque. In 2015, Symrise, a German oils and natural essences manufacturer, es- tablished its operations next to Natura, thus becoming the first partner to set up shop in this new industrial park. In order to manage the impact caused by operations, the plant has adopted some innovative sustainable solutions, such as implementing filtration gar- dens for the treatment of wastewater, ensuring natural ventilation and light- ing and installing a geothermal system that improves the efficiency of the air conditioning system. 3. Institutional empowerment 103-2, 103-3 The empowerment of local institutions and establishment of partnerships for the joint creation of proposals that benefit all parties involved is critical to the development of a standing for- est economy. Starting from a priority matrix, put together with the input of the local population, we determined the most important areas for trans- forming the current situation of the Amazon, focusing on forestry edu- cation, fostering entrepreneurship, digital inclusion and carbon projects. Furthermore, we are working togeth- er with local governments, grassroots communities and companies through agreements and partnerships to cre- ate territorial development solutions in the Mid-Juruá (Amazonas state), Lower Tocantins and Transamazon (both Pará state) areas. (See our main activities below). EDUCATION ADAPTED TO THE REALITY OF LIVING IN THE FOREST Under the Alternating Schools project, children and teenagers alternate be- tween residing at school and learning online at the family’s rural property. Schools that offer this option play a vi- tal role in tackling the exodus of young people from forest areas. Due to a lack of access to quality education, many young people migrate to large urban centers in search of better opportuni- ties for personal development. Provid- ing quality education that is adapted to the reality of living in a forest is es- sential to the creation of a prosperous ecosystem in the Amazon, as well as to the development of more sustainable production techniques. The Federal University of Western Pará (Ufopa), in Santarém, together with the Association of Rural Family Homes of Pará State (Arcafar), Natura and the Natura Institute, has set up the first specialization course in “Pedagogy of Alternation and Rural Development in the Amazon”. It is aimed at teachers from these rural schools who, despite having a higher education degree, are not trained in this methodology. The course will run until August 2017 and all available places were filled. Natura also supports Arcafar, which represents the 30 Rural Family Homes (CFRs, in Brazil), as the alternating schools are called, in Pará. Through direct investment and incentives, such as the allocation of funding to the Mu- nicipal Committee for the Rights of Children and Adolescents (CMDCA) in Cametá (PA), we empower these schools by helping them improve their infrastructure, classrooms, digital cen- ters and training. For instance, the re-inauguration of the Cametá rural family home, in 2016, enabled around 60 young people from rural areas of four municipalities in Lower Tocantins to attend high school classes with in- built vocational training in crop and livestock farming. The number of plac- es available is expected to grow by 50% in 2017. This way, we are able to contribute with the training of professionals and improve the quality of education with a focus on forest living, affecting around 1,800 young students from the Rural Family Homes in Pará. FOSTERING ENTREPRENEURSHIP In order to support young entrepreneurs who have sustainable business solu- tions that embrace the standing forest, we have developed a pre-acceleration project for regional startups, working in partnership with Artemísia, a non-prof- it organization that has pioneered the support of social impact businesses. Launched in the second half of 2016, the initiative already has 140 projects regis- tered, 17 of which were chosen to be part of the Natura Amazon Challenge: Busi- nesses that are good for the Standing Forest. In order to participate in the chal- lenge startups must present solutions that are in line with the United Nations Sustainable Development Goals (SDGs). During a one-week immersion course, the entrepreneurs received in-person training in business and skills develop- ment and visited Natura supplier com- munities in Lower Tocantins, as well as the Ecoparque. The network of mentors was critical to ensure optimal busi- ness development. Mentors included the Pará State Secretaries for Innova- tion and Economic Development and professors from the Federal University of Pará and the Guamá Technological Park, as well as important partners with experience in fostering entrepreneur- ship, such as the Telefônica Foundation, Mov Investimentos and Impactix. At the end of the immersion course, four startups were chosen to receive Artemísia mentoring for three months. 58 2016 ANNUAL REPORT Here are the finalists: • MEU Empreendedorismo Universi- tário (Manaus, Amazonas state) – A collaborative platform for entrepre- neurial education, aimed at develop- ing university students and urban and rural entrepreneurs. • Arcafar (Altamira, Pará state) – A lo- cal agribusiness focused on teaching, but which also sells products to gen- erate income and support alternating schools. • Asproc – Pirarucu Production Chain (Carauari, Amazonas state) – A pira- rucu processing business from the Mid-Juruá region. • Da Tribu (Belém, Pará state) – Training and job creation for women through sustainable fashion and the produc- tion of latex-based accessories. Territorial Development Given the complexity and challenges faced in the Amazon, we work through agreements and partnerships to create large- scale transformations. We are active (working alongside local governments, grassroots communities and companies) in the territorial development of the Mid-Juruá (Amazonas state), Lower Tocantins and Transamazon (both Pará state) regions. Consequently, we understand the priorities of each region and have prepared joint plans containing initiatives and goals for them. Local leaders and institutions are empowered throughout this process. Here are the main initiatives developed in each territory up to 2016: Legal Amazonia Boa Vista 6. 6. RR AP AM Manaus PA Benevides Belém Lower Tocantins MA vc Mid-Juruá Transamazon AC Rio Branco oRioRioRRRR oooRR oRioRi PPP PPPPPorto Velho RO Mid-Juruá • First class of the vocational training course on Forestry and Sustainable Development, together with the Sustainable Amazon Foundation • Access to basic sanitation and safe water for 500 riverside communities, through a partnership between the Chico Mendes Memorial Fund and the Ministry for Social Development • Overhauling of the oil mill, yielding 25% more efficiency and production capacity • Construction of more than 1 km of waterfront warehouses, for delivering products • Opening of a UAB (Open University of Brazil) campus near riverside communities, through Capes (Coordination for the Development of People in Higher Education) • Implementation of the Social Progress Index – Mid-Juruá, a tool for measuring the impact of our initiatives Lower Tocantins • Investments to improve the infrastructure of the Rural Family Homes (CFRs) in Abaetetuba and Cametá, increasing access to quality education MT Cuiabá • Installation of five computer labs in the region, benefiting alternating schools and partner cooperatives, in a joint endeavor with TAM • Training of 27 municipal secretaries to aid in the preparation of their Municipal Education Plans and distribution of 2,778 Trails kits, together with the Natura Institute, to improve literacy in 2,340 schools in the region. • In 2016, we launched the first specialization course in sustainable agriculture for the Lower Tocantins, benefiting 35 technicians working in the region Palmas TO Transamazon • We supported the recognition and certification of seven Rural Family Homes in the region, enabling them to apply for public funding • By means of an incentive, through the Municipal Council for the Rights of Children and Adolescents, we supported the refurbishment of a CFR in the municipality of Brasil Novo • First specialization course in the Pedagogy of Alternation, in the Amazon region, for teachers from the 30 CFRs in the state of Pará, launched in partnership with Arcafar and Ufopa 59 2016 ANNUAL REPORT The Amazon Program and the SDGs The Amazon Program’s emphasis is on SDG 15: SDG 15: Life On Land. We seek to promote the sustainable use of terrestrial ecosystems, managing forests in a sustain- able manner and reversing land degradation and loss of di- versity. Through the Amazon Program, we have contributed to the conservation of 256,798 hectares of standing forest, which is equivalent to more than 277,000 football pitches. However, since we make systemic interventions in the Amazon region, our activities have a direct impact on the following 12 SDGs as well: ASDG 1: NO POVERTY. We have been working for 17 years in partnership with agroextractivist cooperatives from the Amazon region, boosting development and generating in- come for 2,000 families and having a direct impact on im- proving the quality of life of 8,000 people. SDG 2: ZERO HUNGER. We give priority to production models that ensure the food security of the communi- ties involved, such as agroforestry systems. Many refer to them as food forests. They generate income for local communities, while guaranteeing food security and forest preservation. SDG 3: GOOD HEALTH AND WELL-BEING. Social inclu- sion and income generation improve the access of riverside communities to health services and boost their quality of life. That is the case in Mid-Juruá, in the state of Amazo- nas, where access to safe water is directly contributing to the reduction of infant mortality and improved health and well-being of more than 500 riverside families. SDG 4: QUALITY EDUCATION. We support the empower- ment of 30 rural community schools in the state of Pará, giving 2,000 young people access to quality education, in- cluding technical training tailored to their local situation. This raises their chances of leading a more dignified and prosperous life in the forest. SDG 5: GENDER EQUALITY. Working with species from the local biodiversity enables important advances in the train- ing of women as leaders and the creation of jobs and gen- eration of income for women from the Amazon region. One such example is the Belém Islands Women’s Movement, in Cotijuba, and the empowerment of women through the harvesting of andiroba in the Mid-Juruá and of tonka beans by the AVIVE women’s association in the state of Amazonas. SDG 6: CLEAN WATER AND SANITATION. Through a part- nership with the Ministry of Social and Agrarian Develop- ment, established in early 2015, the Amazon Sanitation Project has provided basic sanitation infrastructure and access to drinking water to 500 riverside families in the Mid-Juruá region of Amazonas state. SDG 8: DECENT WORK AND ECONOMIC GROWTH. The Amazon Program is geared towards inclusive and sustain- able economic development, contributing to the develop- ment of leadership, strengthening of cooperatives, and creation of jobs and generation of income in 25 communi- ties comprising 2,000 families in the region. SDG 9: INDUSTRY, INNOVATION AND INFRASTRUCTURE. We have invested in agricultural innovation, training and infrastructure, in order to boost the competitiveness of the 24 cooperatives from the Amazon region that are our partners, seven of which have local micro-plants. This al- lows them to improve the added value of their products. Furthermore, we bring together sustainable production chains and the demand from companies for natural inputs, through our Ecoparque, an industrial park in Benevides (Pará state) that focuses on a standing forest economy. SDG 10: REDUCED INEQUALITIES. The Amazon is one of the regions with lowest per capita income in the country and social indicators that are below the Brazilian average. The Amazon Program stimulates the standing forest econ- omy as a development alternative for the region, thus con- tributing to a new business perspective, wealth generation and shared value in the region. SDG 12: RESPONSIBLE CONSUMPTION AND PRODUCTION. We invest in the empowerment of local leaders and co- operatives, traceability, fair trade practices, the sharing of benefits through access to genetic heritage and tradi- tional knowledge, projects for social improvements, the creation of value added to local communities by setting up micro-plants, and in sustainable production and manage- ment systems, such as organic agriculture, agroforestry systems and forestry management. SDG 13: CLIMATE ACTION. At present, 41% of Natura’s proj- ect portfolio for offsetting carbon is composed of projects in the Amazon that avoid the emission of 1.16 million tons of CO2 into the atmosphere. These projects support the use of clean energy, the restoration of deforested areas and forest conservation (Redd+). SDG 17: PARTNERSHIPS FOR THE GOALS. We act in part- nership with grassroots communities, governments, NGOs and local companies, under territorial development ar- rangements, empowering leadership and institutions and bringing together the efforts of the various stakeholders of several different locations in order to foster development and improve the region’s quality of life (see the map show- ing the three territorial groups and the impact of our ac- tivities). 60 2016 ANNUAL REPORTNEW BIODIVERSITY LAW Last year we celebrated the comple- tion of the revision process of the legal framework for access to Brazilian bio- diversity resources, which is regulated by Law no 13,123/15 through a decree. Different industries and local commu- nities had been awaiting for more than ten years for legislation that reduced the hurdles surrounding the access to Brazil’s genetic heritage. During this time, regulation was guaranteed through a provisional measure. Al- though there is still room for improve- ment, we believe this new law promotes access for research purposes and the sustainable use of assets, increases the generation of value for companies and local communities and favors the sustainable use of those resources, by ensuring their conservation. As a result of the new legislation, the registration of research on biodiver- sity assets will be performed through SisGen (National System for the Man- agement of Genetic Heritage and Associated Traditional Knowledge), which is expected to go live in 2017. Before the launch of this system, re- searchers and companies needed to obtain the approval of the Ge- netic Heritage Management Council (CGEN) in order to begin any type re- search, even when the asset would not be used commercially. This extremely taxing process took years and made many initiatives unfeasible. The new legislation also makes changes to the way traditional communities are re- munerated for their knowledge of bio- active ingredients. While the provisional measure was still in effect, Natura prepared its Policy on the Use of Biodiversity, which estab- lishes the procedures for conducting research and using natural inputs, as well as rules governing its relationship with traditional communities, holders of the knowledge regarding the use of these natural assets. Our standards are based on the provisions of the Conven- tion on Biological Diversity (CBD), a body linked to the United Nations, which was also used as the basis for Brazil’s new regulatory framework. In 2017, we will finish adjusting our policy so that it is in accordance with the new Brazilian law. MANAGEMENT OF GHG EMISSIONS Carbon Neutral for 10 years 103-2, 103-3 We are fully aware of our responsibil- ity regarding issues such as climate change and greenhouse gas (GHG) emissions. For this reason, we estab- lished the Carbon Neutral Program in 2007. This program aims at reducing the impact of emissions from all stages of our operations – starting from the extraction of raw materials through our processes and those of our produc- tion chain all the way to post-consumer disposal of product packaging. The re- sult is a combination of economic, social and environmental gains. The Carbon Neutral Program is divided into three main areas: measurement, reduction and offsetting of emissions. Every year, we monitor the amount of greenhouse gases released into the at- mosphere using an audited inventory. The relative analysis of the amount of CO2 equivalent per kilogram of man- ufactured product, revealed an index of 3.17 kgCO2e/kg, a small reduction of 0.5% in relation to 2015. This indicator was affected by reduced production during this period. Nev- ertheless, we were able to maintain the level reached in the previous year, due to various efficiency initiatives, which have since been reinforced (see the table below). In line with our 2050 Sustainability Vision, we will continue pursuing significant new carbon re- ductions throughout our value chain – by 2020, we are committed to re- ducing our relative GHG emissions by 33%, compared to 2012 levels. That is a challenge for Natura as a whole, since we have already reduced them by 33% between 2007 and 2012. In terms of absolute emissions, the re- sult for the year was 303,424 tCO2e, for our value chain. This was down by 5.4% in comparison with 2015, also due to the lower production levels. Emissions that cannot be avoided are 100% offset. Consequently, Natura has been a carbon neutral company since 2007. The offsetting is done by purchas- ing carbon credits from organizations that have reduced their emissions. In line with Our Essence, we have designed the carbon offset program so that it will generate further social and environ- mental benefits. We only purchase cred- its from projects associated with forest regeneration and maintenance, energy efficiency or the substitution of fossil fu- els (read more it in the box below). Since the beginning of the program, we have issued five calls for projects and signed contracts for 35 initiatives in Brazil and other Latin American countries where we operate (Argenti- na, Chile, Colombia, Mexico and Peru). This portfolio is currently composed of 63% energy projects and 37% for- est initiatives. Over 41% of the projects come from regions in what is defined as Amazônia Legal and the Pan-Amazon Basin. According to a report from the Carbon Disclosure Program (CDP), Na- tura is the fourth largest global com- pany taking part in the world’s volun- tary carbon credit market. In 2016, we achieved our goal of locally compensating emissions in each of the countries that are part of our Inter- national Operations, through the pur- chase of credits in Mexico and Chile. One of our biggest highlights, Chile, benefit- ted from the acquisition of 26,000 car- bon credits from the Valdiviana Coastal Reserve, a protected area managed by The Nature Conservancy. In Peru, we bought 62,420 carbon credits from the country’s largest forest initiative, the company Bosques Amazónicos, and now have two projects running in that country. It was the largest transaction ever of its kind by a private company in the country. Moreover, in Argentina, in 2015, 70,000 carbon credits were pur- chased for US$ 4 million, from the Raw- son wind farm. Again, it was the largest transaction ever of its kind in the coun- try and the first one carried out volun- tarily. In Mexico, we signed a contract for 4,367 credits pertaining to a project for eco-efficient stoves. This alone will generate 190,000 tCO2e in credits. 61 2016 ANNUAL REPORT305-2 / 305-4 2014 2015 2016 Total CO2e emissions (t)¹² Relative emissions (kg of CO2e/kg of billed product) Accumulated reduc- tion in relative emis- sions since 2012 (%) 332,208 321,267 303,424 3.00 3.17 3.17 6.9 1.4 1.3 1. CO2e (or CO2 equivalent): measurement used to represent emissions of greenhouse gases, based on the global warming potential of each one. 2. Includes Scopes 1, 2 and 3 of the GHG Protocol. THE PURSUIT OF ECO-EFFICIENCY 103-2, 103-3 For the past 10 years, Natura has been transforming its processes in order to reduce its greenhouse gas emissions. Our initiatives permeate the selec- tion of raw materials, manufacturing, transport and other company pro- cesses, but always overlooking the whole production chain: • Use of refills, including in fragrances, in a pioneering initiative in the cos- metics industry • Greater use of post-consumer recy- cled glass in fragrance bottles, anoth- er pioneering initiative • Increased use of post-consumer recycled PET in product packaging (some items already use 100% recy- cled PET) • Reduction of air shipment for exports to other Latin American operations • Use of coastal shipping to supply distribution centers in the north and northeast of Brazil, while reducing the use of road transportation • Improved transport performance for consultants in Brazil, with the opening of new distribution centers • First company in Latin America to use electric vehicles to deliver prod- ucts to consultants and consumers. They emit nine times less CO2 than conventional vehicles. We are cur- rently using five electric vehicles, in four cities. • Reduction of electricity consumption at Natura sites • Optimized production of the cata- logs used by our consultants • Increased sales of low relative emis- sion items, notably in the soap and body care categories • In Vitória and Porto Alegre, we are already using bicycles with baggage compartment to deliver products to consumers and Espaço Natura cata- logs to consultants • Use of plant-based inputs (current- ly 83% of the total) instead of fos- sil-based inputs • Use of organic alcohol in 100% of the fragrances category. This type of alcohol is produced without using any pesticides, chemical fertilizers or burning, and has brought 20,000 hectares of forest back to life – includ- ing the return of 340 animal species (including endangered species such as jaguars) and a 30% increase in the volume of water in nearby streams • Supplier development program, fo- cused on improving performance and compliance with good social and en- vironmental practices • Use of a type of paper that results in fewer emissions when printing the Es- paço Natura catalog Projects that yield social and environmental benefits Through the offset program, we promote the maintenance, and regeneration, of standing forests, as well as projects that promote reforestation, energy efficiency and the substitution of fossil fuels. The environmental benefits arising from the im- plementation of these projects are measured and convert- ed into carbon credits. These are sold to Natura, which uses them to offset its own unavoidable emissions. Many of these projects go beyond environmental benefits, with a positive effect on the communities involved. One of these initiatives, led by the Perene Institute in the Recôncavo Baiano region, promotes the exchange of old wood-burning stoves for more eco-efficient models. The new models use a combustion chamber, which means it requires less firewood, while the small volume of smoke generated is removed from the home through a chimney. This results in lower green- house gases emissions and eases the pressure that leads to deforestation. These stoves are considered a social technology, because they are inexpensive and simple to use. To build its structure, homeowners buy sand, cement and ceramic blocks, while the Perene Institute provides all technical components and labor. Our relationship with the Perene Institute began in 2008, through the second Natura Carbon Neutral call to tender. Since then, through partnerships in two other tenders, we have committed ourselves to building 7,880 eco-efficient stoves, benefiting an equal number of families, in municipali- ties such as Maragogipe and São Felipe. So far, 6,400 stoves have been built and the carbon credits resulting from their installation represents 6% of the total volume acquired by Natura between 2008 and 2016. The sale of carbon credits to Natura help the institute finance the construction of more eco-efficient stoves. We also support a similar program in Mexico, in partnership with the Utsil Naj project, which is run by six organizations. Over 4,367 stoves have already been installed, which will generate a reduction of 190,000 tCO2e in emissions. In ad- dition to the environmental benefits, each family saves 193 Mexican pesos per month (about R$ 30) because they are using this technology. 62 2016 ANNUAL REPORTAdditional benefits of carbon offsetting Forest restoration 13 projects supported Restored area: 2,155 hectares (equivalent to more than 2,000 football pitches). BIOMES Amazônia Legal and Pan-Amazon: 1,212 hectares Atlantic Forest: 427 hectares Other Biomes: 516 hectares Total GHG removed from the atmosphere: 639,933 tCO2e Forest conservation 5 projects Area of the projects seeking conservation: 12,135 hectares (equivalent to more than 12,000 football pitches) Amazônia Legal and Pan Amazon: 12,077 hectares Other Biomes: 57 hectares (We have no project in the Atlantic Forest) Total GHG removed from the atmosphere: 382,602 tCO2e 305-1/305-2 Emissions of our value chain (t)1 2 2014 2015 2016 Extraction and transportation of raw materials and packaging (processing and transporting it all the way through to direct suppliers) 141,574 127,788 122,337 Direct suppliers (processing and transporting it to Natura) 35,154 31,731 30,378 Industrial and internal processes 29,325 18,557 15,633 Product sale (transportation and distribution) 49,593 66,749 63,465 Product use and packaging disposal 76,680 76,442 71,611 Overall total 332,326 321,267 303,424 1. All GHGs were included in the calculations. 2. To calculate our inventory, we included the total volume of our Scope 1, 2 and 3 emissions. Our inventory adheres to the standards of the GHG Protocol and the principles of the ABNT NBR ISO 14064-1, which determine the rules for their design, development, management, preparation and reporting. In 2016, the report was audited by KPMG. 63 2016 ANNUAL REPORT305-1/305-2/305-3 Direct and indirect emissions of greenhouse gases (t)¹² 2014 2015 2016 Direct GHG emissions (Scope 1) 1,635 4,156 4,975 Direct biogenic emissions (from the burning or biodegradation of biomass) 8,826 9,347 8,870 Indirect emissions of GHG and Energy (Scope 2) 8,371 7,909 5,094 Other indirect GHG emissions (Scope 3) 322,319 309,202 293,355 Indirect biogenic emissions of CO2 (in metric tons of CO2) 8,921 10,746 9,366 Total 332,325 321,267 303,424 1. All GHGs were included in the calculations. 2. To calculate our inventory, we included the total volume of our Scope 1, 2 and 3 emissions. Our inventory adheres to the standards of the GHG Protocol and the principles of the ABNT NBR ISO 14064-1, which determine the rules for their design, development, management, preparation and reporting. In 2016, the report was audited by KPMG. Environmental accounting We were the first company in Latin America (and the only one of the glob- al cosmetics industry) to publish the full findings of its EP&L (Environmental Profit & Loss). It was released in July 2016, during the launch of the Natu- ral Capital Protocol, in London. In the calculation, which translates environ- mental impact into financial values, we included solid waste generation, land use, and water consumption and pollu- tion, as well as emissions of greenhouse gases and other air pollutants. In this first study, using data from 2013, the estimated result came to R$ 132 million. WATER MANAGEMENT The challenge of the water footprint 103-2 / 103-3 Having chosen a methodology that covers all impacts throughout our val- ue chain, in 2016 we looked for initia- tives to reduce our water footprint. We assessed the potential of a few projects and investigated the opportunities to offset their impact, similarly to what we do with greenhouse gas (GHG) emis- sions under the Carbon Neutral Pro- gram. Indeed, we see opportunities for synergy with this program, especially when it comes to the forest projects we are currently supporting. However, our greatest challenge still lies with product consumption, which is heavily influenced by consumer be- havior. Actually, the greatest impact is not the volume of water consumed while taking a shower, but rather the effects of generating energy to heat the water, since the Brazilian electric- ity matrix is largely based on hydro- electric power. This responsibility is shared between both company and society. Based on the detailed information ob- tained from the analysis of our water footprint, we will include the water as- sessment indicator in our environmen- tal impact calculation, which helps us development new products. This calculation evaluates inputs and raw materials and estimates the effects of a product before it has even been manufactured. Waste generation and GHG emissions are already included in the calculation, and now will broaden its scope to include water issues as well. This will the innovation teams in their decision-making. The relative indicator that measures water consumption in our industrial processes rose by 9% in 2016, to 0.53 liters per unit produced. This result was especially influenced by reduced production volumes throughout the year, which put pressure on our effi- ciency indicators. For the same rea- son, our total water consumption for the year was down by 5%. 64 2016 ANNUAL REPORT303-1 Water consumption (l/unit produced) 2014 2015 2016 0.45 0.49 0.53 Water consumption by location (m3) 2014 2015 2016 Natura sites1 Other locations2 174,045 177,866 191,277 60,356 52,826 50,224 Natura’s third-party suppliers3 60,299 63,027 37,453 Total water consumption 294,700 293,719 278,955 1. This includes the following industrial units: Cajamar and Ecoparque (Benevides). 2. Includes Nasp, Lapa, distribution centers and the Itupeva hub. 3. Main suppliers who manufacture finished products for Natura. The leading third-party suppliers account for around 90% of this volume. 65 2016 ANNUAL REPORTWASTE MANAGEMENT At the end of the cycle 103-2, 103-3 When we develop our products, we think about their entire life cycle (from the choice of raw materials to disposal of the packaging) and we are commit- ted to progressively reducing the en- vironmental impact of our processes. This is made possible by the use of raw materials that are of plant-based in our formulas, as well as the growing use of recyclable and post-consumer recy- cled materials and the development of eco-efficient* packaging. For the past ten years, we have been re- searching and investing in the reuse of glass in the production of our fragrance lines, while taking care to maintain the sophistication that is expected of pack- aging of this kind. That is a challenge we face every time we develop a new product, because numerous tests are required to get the glass mixture just right, so that the quality and color of the recycled material are not compro- mised in any way. In 2015, the packaging of our perfumes from the Ekos Frescor, Humor, Kaiak for men and Essencial for men lines contained 20% post-consumer recy- cled glass. Consequently, we avoided emitting 539 tons of greenhouse gases into the atmosphere. Production using recycled glass has been ongoing since the beginning of 2015, consuming the equivalent of 600,000 1 liter soft drink bottles. In 2015, we used glass recycled from waste disposed of by the beverage industry. By 2016, we had produced the first batch of recycled glass that used glass obtained from recycling cooper- atives (which increases the technical challenge of maintaining packaging quality and standards that correspond to our expectations). From the start, we have worked with service providers in the recycling chain, who are submitted to a strict accreditation process that assesses traceability, business legality and compliance with industry regula- tions. In 2016, 4.3% of the materials used to make our packaging were of post-con- sumer recycled origin, a percentage that has been steadily growing. The goal is to have 10% of all packaging made from post-consumer recycled materials by 2020. The Ekos line has contributed immensely towards this goal. Its 2016 relaunch saw a huge bump in the use of recycled ma- terials, with all its packaging now using 100% post-consumer recycled materi- als or 100% green polyethylene. We are also continuously expanding our offer of product refills and have pioneered the introduction of refills in the category of fragrances, with the Ekos Frescores line. * Packaging with at least 50% of weight reduction in comparison to normal/similar packaging or that is composed of at least 50% of post-consumer recycled materials and/or non-cellulose renewable materials, provided they do not increase its mass. 301-2 Post-consumer recycled material used in the packaging of finished products¹ – Brazil (%) 2014 2015 2016 % of post-consumer recycled material used in the packaging of finished products 1.2 2.9 4.3 Direct biogenic emissions (from biomass burning or biodegradation) 8.826 9.347 8.870 1. The indicator takes into consideration the percentage of post-consumer recycled material mass in relation to total mass of packaging materials, weighted according to the manufactured quantity. 301-2 Recyclable material in the packaging of finished products¹ (%) 2014 2015 2016 % of recyclable material in the packaging of finished products2 57.5 50 51 1. Recyclability: this indicator looks into the percentage of recyclable material mass in relation to total mass of packaging materials, weighted according to the manufactured quantity. 66 2016 ANNUAL REPORTAcquiring expertise in reverse logistics 103-2, 103-3 The National Policy on Solid Waste posed a challenge to companies, since it requires the establishment of logistics chains for the return of post-consumer packaging. Conse- quently, companies have had to de- velop ways of connecting with their consumers, in order to ensure proper disposal of all packaging after use. In 2016, Natura completed a one-year experimental pilot program devised to promote reverse logistics in the São Paulo metropolitan area. Un- der that program, different means of collecting post-consumer waste were organized, including a commer- cial partnership with five collection cooperatives. Natura Consultants were also recruited to collect mate- rials. After collection, the waste was sent to recycling centers. The exper- iment was useful to learn more about this chain, as well as reverse logistics operations, and helped us define a strategy, procedures and actions to help achieve our goal of applying re- verse logistics to 50% of our products by 2020. We also support the Dê a Mão para o Futuro (Give the Future a Hand) program, which is an industry initia- tive coordinated by the Brazilian As- sociation for the Personal Hygiene, Fragrances and Cosmetics Industry, along with the Brazilian Association of Cleaning Product Companies and the Brazilian Association of Processed Biscuit, Pasta, Bread and Cake Manu- facturing Companies. Eco-efficient packaging - Brazil (% of manufactured items) 1 2014 2015 2016 Brazil Argentina Chile Colombia Mexico Peru 29 12.9 14.1 16.7 10.8 17.1 26 23.1 21.6 29.8 20.1 25.1 20 20.1 16.9 27.9 17.8 22.0 1. The 2014 International Operations figures refer only to the proportion of refills in relation to all manufactured items. The 2015 data from these countries were recalculated to meet the definition of eco-efficient packaging adopted in Brazil. Figures for France are not available. 67 2016 ANNUAL REPORTRELATIONSHIP WITH SUPPLIERS Developing commercial partnerships 103-2, 103-3, 102-9 Suppliers are among Natura’s most important stakeholders. In Brazil, we have approximately 5,000 commer- cial partners, 650 of which are cat- egorized as recurrent suppliers and represent 70% of our purchase vol- umes. These are, therefore, most often long-term relationships. Accordingly, we are continually implementing new initiatives to fine-tune our relation- ship with these stakeholders. An example is the QLICAR program, whose objective is to boost chain performance through supplier per- formance management and activi- ties focused on the joint development of processes. The program’s acronym in Portuguese stands for each of the aspects that this initiative assesses – (Q)uality, (L)ogistics, (I)nnovation, (C) ompetitiveness; (A) for environmen- tal and social; and (R)elationship. In 2016, 155 companies participated in the QLICAR program (see the cate- gories in the list below). In 2016, we resumed our Annual Stra- tegic Meeting with suppliers. It was attended by 149 executives from 54 different companies, with whom we shared our strategy and future re- quirements. We also renegotiated our partnerships to ensure produc- tion quality and the competitiveness of our product portfolio. Another measure introduced during 2016 was the adoption of an elec- tronic bidding system, which is wide- ly used by companies of all industry. This new system brings agility and even more transparency to the hiring process. To participate in tenders, suppliers are screened, particular- ly regarding technical capacity and past performance. We now plan to include credibility (relationship his- tory) to the screening of companies that are submitting new bids to Na- tura and are participants of the QLI- CAR program. We believe this is a fair and objective way of highlighting their partnership track record and their efforts to improve procedures and performance. In 2016, total payments to our sup- pliers came to R$ 4.2 billion, a stable figure in comparison to the previous year. QLICAR CATEGORIES • Production suppliers of raw mate- rials, packaging and/or who manufac- ture the final product) • Bio (supplier communities) • Brand (branding, design, copywri- ters, communication agencies) • Cycle (logistics and transport ope- rators) • Innovation (contribute new ideas for product development) • TD (suppliers of software, hardware, IT services) • Facilities (resident services, such as cleaning, security, catering and employee transportation) 414-1 Investment practices and purchasing processes - Brazil Percentage of new suppliers that were screened using human rights criteria1 (%) 2014 2015 2016 2.2 2.3 1.9 1. We continually evaluate suppliers from critical categories. The number of new suppliers in categories that are subject to assessment and monitoring for environmental, labor, impact-on-society and human rights criteria is low in comparison to the total number of new suppliers, representing approximately 2% of the total. However, suppliers from critical categories account for approximately 70% of the total volume of Natura’s purchases. The human rights aspects considered are child labor and forced or compulsory labor practices, where Natura has a zero-tolerance policy that prohibits the hiring of any supplier found to have engaged in such practices. 68 2016 ANNUAL REPORTSATISFACTION SURVEY We carry out an annual evaluation that measures supplier satisfaction, which also allows us to identify where there is room for improvement. De- spite 2016 being a challenging year, requiring some adjustments be made to ensure Natura remained competi- tive, the satisfaction indicator showed an increase from the previous year, going from 77% to 79%. This result demonstrates the assertiveness of our relationship with these stakeholders, which prioritizes open dialogue and transparency. We also track an indi- cator that measures supplier loyalty, which looks at supplier satisfaction in working with the company, willing- ness to continue doing business with us, and whether they would recom- mend Natura as a customer. In this regard, we grew 3 percentage points in Brazil, to 21%, following the decrease registered in 2015. In our International Operations, loyalty remained stable at 41% after a considerable rise from 2014 to 2015. 103-43/102-44 Loyalty Index (%)12 Suppliers (Brazil) Suppliers (IOs) Suppliers (Brazil & IOs) Supplier communities3 103-43/102-44 Satisfaction Index (%)4 2014 2015 2016 24 33 26 - 18 41 25 28 21 41 27 - 2014 2015 2016 Suppliers 86 77 79 1. Loyalty: percentage of individuals consulted who gave the maximum score on a 1 to 5 point scale in three categories – satisfaction, intention to continue the relationship with Natura and recommendation of Natura as a customer. 2. In 2016, we noted a 2.0 pp rise in the Natura Supplier Loyalty index, with a 3.0 pp increase in Brazil. Dissatisfaction was seen as having been positively addressed in all aspects (except the meeting of deadlines), with emphasis on the work carried out in negotiations, leading to improvements in operational processes and communication with suppliers. Ongoing relations and negotiations are the main areas where there is room for improvement. 3. The loyalty survey conducted with supplier communities takes place on a biannual basis. The last assessment was in 2015 and the next will be in 2017. 4. Satisfaction: percentage of satisfied and totally satisfied suppliers (or “top 2 box” – ratings of “4” or “5”). 69 2016 ANNUAL REPORTDEVELOPMENTS IN LOGISTICS Faster deliveries to consultants and consumers We continue to reap the benefits of the investments made over the last five years to improve our logistics in- frastructure and refine the process of order separation and delivery. The São Paulo Distribution Center (SP DC), which first opened its doors in 2013, ramped up to its full capacity in 2016, making it the company’s largest DC in activity. It handles the entire demand from the state of São Paulo, which rep- resents 20% of the total number of or- ders received by Natura. This has resulted in enormous efficien- cy gains. At present, a Natura Consul- tant residing in any city in the state of São Paulo takes, on average, 2.8 days to receive any order at home. The SP DC also supplies all Natura stores and the network of drugstore partners that sell the Sou and Tez lines, while also delivering orders from consum- ers who purchase online through Rede Natura. In order to help consultants receive ever more precise information, we launched a new feature in 2016 that allows them to verify, whenever they place an or- der, whether products are available in stock at the distribution center nearest their residence – thus enabling them to receive items more quickly – or whether the desired items are still in transit. In 2016, 45% of all Natura orders were delivered within 48 hours in all regions of Brazil. In 2015, the figure was 42%. WELL RECEIVED The company has been awarded the Ebit Diamond seal, the highest certi- fication given to companies that sell online. This certification relates to de- liveries made on time and the probabil- ity of a user making further purchases through the online platform. Natura also received recognition one more time for being one of the com- panies with the best customer service in Brazil, according to an annual study conducted by Exame magazine, in partnership with the IBRC (Ibero-Bra- zilian Institute for Customer Relations). In 2016, we placed second in the rank- ing, while in 2015 we were awarded the top position. Recognition in 2016 Época Reclame Aqui Award – Natura ranked first in the Beauty, Aesthetics and Cosmetics category. Ebit Award – Natura was the second “Loja mais Querida (Best Liked Store)” for online retailing in the cos- metics and fragrances category. The criteria evaluated by consumers who participated in the selection process included efficiency of the shopping experience, price and meeting delivery deadlines. Exame/IBRC ranking of customer services In 2016, Natura ranked second, surpassed only by Google. 24/7 monitoring of logistics In order to guarantee efficiency and service quality, Natura has estab- lished a Traffic Center that monitors all company logistics operations in Brazil, including production units and distribution centers. Real-time monitoring makes logistics process- es more agile and helps with deci- sion-making when unexpected plan- ning adjustments or other external changes occur. ADVANCES IN LATIN AMERICA We also continued to invest heavily in our International Operations, es- pecially on logistics efficiency and in- frastructure preparation for regional growth. Currently, about 65% of all orders are delivered within 48 hours, and in some countries, it has reached 70%. These investments also reflect the geographical extension of our de- liveries – for example, our products are delivered to consultants on Easter Is- land, which is about 3,700 km off the west coast of Chile. In November, the company opened a distribution center in Argentina, the largest one Natura has outside Brazil. The facility has automated separation lines equipped with ‘pick to light’ tech- nology. We also saw gains in our Latin Amer- ican local production index, through improvements in Argentina, Colombia and Mexico. These countries already account for about 35% of all products sold by International Operations, and is especially strong in the fragrances and body care categories. This strate- gy strengthens our international pres- ence, ensuring an increasingly effec- tive level of service to consultants and consumers. It also reduces our logistics costs and our carbon footprint, while allowing us to stimulate the develop- ment of local supply chains, much as we do in Brazil. 70 2016 ANNUAL REPORTLOCAL COMMUNITIES Developing the areas surrounding Natura’s operations 413-1, 413-2, 103-2, 103-3 Our commitment to having a positive impact on the communities surround- ing our operations is set out in our 2050 Sustainability Vision and we have cre- ated a series of activities that benefit local populations. The municipalities of Cajamar (São Paulo state) and Bene- vides (Pará state) have hosted Natura production units since 2000 and 2014, respectively. Our main distribution cen- ter, the São Paulo Distribution Center (SP DC), has been in the Jaguara dis- trict of the state capital since 2012. That is also where our headquarters are lo- cated, which are currently undergoing renovations. Together with other companies, grass- local roots communities, NGOs and populations, we have formed territorial arrangements and prepared a Local De- velopment Plan for each of these areas. Important results have already been achieved by social mobilization move- ments such as “Comunidade Viva” (Living Community), in Jaguara, “Inova Cajamar” (Innovate Cajamar), in Cajamar, and UD- BEN in Benevides. All these stakeholders combined efforts to prepare a partici- pative analysis, determine development priorities and draw up a plan setting out its main initiatives and their goals. Local leaders and institutions are empow- ered through this process. We also use the Community Social Progress Index in Cajamar and Jaguara. This diagnostic and measurement tool helps us under- stand both positive and negative social and environmental impacts the initia- tives have on the area. In 2016, there were no recorded negative impacts. Quite the opposite actually, as current initiatives have had a demon- strable positive influence over local com- munities (see more below). 203-1 Local communities – Brazil (R$ thousand) Investment in communities surrounding Natura’s units - Natura resources1 Investment in communities surrounding Natura’s units - Crer para Ver resources 2014 2015 2016 375 590 478 455 530 556 1. All investments are allocated to non-governmental organizations and partners that contribute towards the implementation and operation of projects in each location. CAJAMAR (SÃO PAULO STATE) The Inova Cajamar (Innovate Cajamar) Movement has formed new partner- ships and seen growth in the number of participants, including representa- tives of public and private institutions, civil society, municipal employees and Natura’s employees and consultants. Ten monthly meetings were held in 2016, along with three community drives for the transformation of public spaces and municipal culture, involving more than a thousand participants. During municipal elections, the move- ment got 25 candidates (who were run- ning for mayor and council member) to commit to the adoption of the principles of the Sustainable Cities Program. Natura’s partnership with the SOS Mata Atlântica Foundation also en- abled the visit of 1,200 students and teachers from 13 Cajamar schools to the SOS Mata Atlântica Forestry Exper- iments Center, in Itu (SP). In addition to a guided visit, the visitors received around 3,000 seedlings of Brazilian native spe- cies to plant in their school grounds and neighborhoods. By the end of the proj- ect, the schools participated in a draw for a graffiti workshop, with the winning institution having its walls decorated with graffiti depicting the fauna and flo- ra of the Atlantic Forest. Learn more: Follow the initiatives at www.inovacajamar.org.br (in portuguese) and facebook.com/inovacajamar First municipal transformation community drive (in portuguese): https://www.youtube.com/watch?v=GXZVlJ7rxz4&t=23s 71 2016 ANNUAL REPORT JAGUARA (SÃO PAULO STATE) In 2016, the Movimento Comunidade Viva (Living Community Movement) from Jaguara focused on expanding local engagement, as well as publicizing im- portant neighborhood councils and en- couraging its members to join them. There were also 12 monthly meetings and two community drives aimed at transforming public spaces and cul- tivating local talent through culture, sports, food, leisure and income gen- eration. The response to the initiative was significant, having attracted more than 1,500 participants. Moreover, a local CV database was set up with the profiles of around 400 participants, so that companies in the area can recruit locally, thus creating jobs and generating income within the community. Learn more: facebook.com/comvivajaguara Video of one of the community drives (in portuguese): https://www.youtube.com/watch?v=h1QtJZCzYnA&t=13s BENEVIDES (PA) The Natura Local Development Pro- gram - Benevides, in partnership with UDBEN (Association for the Develop- ment of Benevides), conducted two community drives in the region: Giro Cultural (Cultural Round) and Giro de Negócios e Oportunidades (Business and Opportunities Round), bringing together around 610 participants, 33 partners, 23 attractions and 28 volun- teers, in four different locations. In order to stimulate professional training, we signed a cooperation agreement with Senai (National In- dustrial Training Service), enabling the creation of training courses in indus- trial production processes. Between 2015 and 2016, there were four class- es with 83 young people undergoing training, 11 of whom have been hired locally. Another area of activity in Benevides is the development of micro and small lo- cal businesses. Together with Sebrae (Brazilian Service to Support Micro and Small Enterprises), 108 companies were identified as having potential for development and 18 of them received training. Of those, five small compa- nies have already become Ecoparque suppliers, thus helping invigorate the local economy. 413-1 Proportion of Natura operations that set up programs focused on the development, engagement and impact assessment of local communities, and include: Ongoing assessment of social and environmental, including gender1, impact due to engagement of the local population Public disclosure of assessment results1 Community development programs based on local needs 66.6% 66.6% 100% Stakeholder engagement plan following the identification of the main stakeholders 100% Community public advisory committees or groups based on local communities and procedures that include groups at risk Occupational health and safety councils or committees and other labor representative bodies for dealing with impacts Formal structure for lodging complaints or ombudsman2 100% No 100% 1. The Social Progress Indicator (IPS, in Portuguese) is measured every two years. The most recent survey was conducted in Cajamar and the district of Jaguara, in 2015. 2. In addition to an Ombudsman channel that is open to all stakeholders, Natura organizes engagement programs, conducts impact assessment and is involved with local communities in and around Cajamar, Benevides and the district of Jaguara. We are also in constant contact with these communities. 72 2016 ANNUAL REPORT THE NATURA INSTITUTE IN CAJAMAR AND BENEVIDES Focused on the training of literacy teachers, the Trilhas (Tracks) project reached: • 31 schools, 117 teachers and 3,038 students in Benevides. • 22 schools, 132 teachers and 3,151 students in Cajamar. from an With an emphasis on educational transformation integrated perspective, connecting teachers, stu- dents, families and community, the Co- munidade de Aprendizagem (Learning Community) project has affected: • 7 schools, 112 teachers and 2,145 students in Benevides. • 10 schools, 314 teachers and 1,850 students in Cajamar. Activities supporting education man- agement, including, for example, assis- tance from the Natura Institute in the preparation of municipal education plans (PMEs), were also conducted, having an impact on: • 49 schools, 450 teachers and 18,335 students in Benevides. • 49 schools, 779 teachers and 19,118 students in Cajamar. We initiated our efforts in Benevides in 2014. In the beginning, the municipality’s Basic Education Development Index (IDEB) for the early years of elementary education was 4.4. In 2016, Benevides reached 5.4, surpassing the national target of 4.6. In Cajamar, we helped the municipality raise the IDEB for the early years of elementary education to 5.8, well above the 5.1 mark recorded in the previous assessment (2013). THE NATURA INSTITUTE Supporting quality education 203-1, 203-2, 103-2, 103-3 We founded the Natura Institute in 2010 to manage and apply the funds generated by the sales of the Crer para Ver (Believing is Seeing) line of non-cos- metic products that was launched in 1995 and whose profits are used in full to support projects aimed at improv- ing the quality of public education. Since then, profits have been steadily rising, hitting a new record in 2016 with a total of R$ 38.2 million. In Brazil, the figure reached R$ 23.7 million, while the volume amounted to R$ 14.5 million in International Operations. Our consultants are the real stars of this movement in favor of education, since they are the ones engaged in selling products from this line while waiving their own profits (as does Na- tura). In 2016, there were more than 1.5 million registered consultants in Brazil and in International Operations who sold at least one Crer para Ver prod- uct. It is important to stress that Bra- zilians also started to benefit from a structured project in support of edu- cation (read more about this initiative on page page 44). As it entered its fifth year of activity in 2015, the institute updated its strategic plan in an effort to make its initiatives even more transformative, and with long-term effects. In 2016, the positive effects of this new positioning were al- ready being felt. Since 2011, the institute has support- ed the efforts of state Departments of Education to set up full-time school programs. In 2015, in partnership with other institutes, the Natura Institute conducted a major study based on the results obtained from schools in Pernambuco state that pioneered the full-time education model. This repre- sented a positive contribution to the debate on the subject and influenced the development of public policies in the field. The states of Maranhão, Paraíba, Sergipe and Espírito Santo re- ceived the support of the Institute and its partners in 2016 to implement their full-time school programs. Including all Departments of Education that are being supported, the program involves approximately 770 full-time schools in eight states. In 2016, the Comunidade de Apren- dizagem na Escola (School Learning Community) project, which aims to drive a social transformation process that involves not only the school and the students, but also their families and the wider community, was jointly de- veloped with 24 state Departments of Education across Brazil, involving 594 schools. In International Operations, where programs are led by local oper- ations with support from the institute, the project has already been imple- mented in approximately 378 schools in Argentina, Chile, Colombia, Mexico and Peru. During 2016, we certified 102 trainers to work in the Comunidade de Aprendizagem program in Brazil and abroad. The model has been improved upon and gained recognition from gov- ernment education agencies. In Argen- tina, for instance, two provinces made Comunidade de Aprendizagem part of their official education programs. In addition, in Peru, it was included in the most important government teach- er-training program. In Brazil, the Natura Institute has done extensive work in partnership with the municipal Departments of Education of Cajamar (São Paulo state) and Ben- evides (Pará state), where we have pro- duction units. In both places, the RAE (Educational Support Network) project was implemented in 2013, in an effort to improve education management and boost students’ learning outcomes. The Institute’s efforts are based on a deep analysis of local needs that led to the subsequent development of a four- year action plan designed to strength- en the pedagogical management at those departments. RAE’s activities, coupled with programs aimed at stimulating educational im- provements that are promoted by pub- lic school networks in Benevides and Cajamar, are already yielding positive results, confirmed by the improvement of scores in the Prova Brasil, the nation- al school performance assessment, and the IDEB (Basic Education Development Index) rating achieved by these munic- ipalities. In the latter, Benevides went from 4.4 in 2013 to 5.4 in 2016, while in Cajamar it rose from 5.4 to 5.8. 73 2016 ANNUAL REPORT 203-1/203-2 Investment in education for public benefit – Brazil 2014 2015 2016 Crer para Ver program funding1 (R$ million) 18.8 19.5 23.7 Crer para Ver penetration2 (% cycle) 20.2 22.9 22.6 Projects developed and supported3 (R$ thousand) 15,976 23,898 23,313 Participating municipalities 4,994 4,884 Participating schools Participating teachers Students involved 73,380 148,084 3,196,017 - - - Participating municipal Departments of Education 4,594 4,884 State Departments of Education in partnership with the Natura Institute 27 27 828 910 9,183 476,507 828 22 1. Refers to profit, before deducting income tax, from the Crer para Ver line’s sales. 2. Average of 18 indicator cycles showing the proportion of Natura Consultants who bought an item from the Crer para Ver line, in relation to the total number of active Natura Consultants. 3. The amount the Natura Institute invested in 2016 (in thousands of reais) is divided between projects (R$ 16,362), mobilization (R$1,566) and payroll costs and operating expenses directly related to the projects (R$ 5,384). Read more at (in portuguese): www.institutonatura.org.br 203-1/203-2 Investment in education for public benefit – International Operations 2014 2015 2016 Crer para Ver program funding1 (R$ thousand) 6,692 10,523 14,537 Crer para Ver penetration2 (% cycle)2 18.7% 17% 19.4% Projects developed and supported3 (R$ thousand) 4,350 8,112 10,237 Schools/organizations assisted 306 337 475 Participating teachers, coordinators and directors 2,025 10,598 13,057 Students benefited 66,860 60,091 89,021 1. Refers to profit, before deducting income tax, from the Crer para Ver line’s sales. 2. Average of 18 indicator cycles showing the proportion of Natura Consultants who bought an item from the Crer para Ver line, in relation to the total number of active Natura Consultants. 74 2016 ANNUAL REPORTINSTITUTIONAL MARKETING Activities focused on support and sponsorship In 2016, we continued to invest in the support and sponsorship of programs, allocating funds for initiatives working towards sustainable development and the empowerment of civil society organi- zations, as well as for historical platforms linked to Natura’s corporate behavior. We also funded cultural projects, throu- gh Natura Musical, and fashion-oriented projects that enhance the development of our brand positioning. In line with company-wide efforts to re- duce costs, investment in support and sponsorship was smaller in 2016 than in previous years. Changes made to the tax incentives available also affected the fi- nancial amounts directed to these initia- tives. Two regional calls for tenders were not carried out in 2016 in the states of Mi- nas Gerais and São Paulo. In the former, this was as a direct consequence of the changes made to the terms and proces- ses of its incentive law, and in the latter, this was the result of changes made to the ICMS tax calculation procedure. As for the funding of events with resources from Natura itself, we did not hold the Natura Musical Festival in 2016. We have been supporting Brazilian music for 11 years, continuing Natura Musical’s activities in the areas of renovation and preservation. Throughout the years, we have contributed to the annual release of around 20 albums, some of which made it to a few best albums of the year lists, whi- le others won national and international awards. We also support projects for the registration and dissemination of Brazi- lian music genres and folk figures. In 2016, more than 1,500 projects applied through our selection processes. Of tho- se, 25 initiatives were chosen to take part in the 2017 edition of the Natura Musical project, through one national and three regional calls to tender (Bahia, Pará and Rio Grande do Sul). Among the projects selected are established artists like Her- meto Pascoal, Anelis Assumpção and Nina Becker and new talents like Rubel from Rio de Janeiro and Sofia Freire from Pernambuco, both selected by popular vote on the Natura Musical website. A total of around R$ 4.6 million were in- vested in the four calls, combining Natu- ra’s own funds with resources obtained through incentive laws. At the national level, the support is provided under the Rouanet and Audiovisual laws, and at the state level, through the ICMS tax le- gislation. In 2016, there were approxima- tely 50 projects already underway, ha- ving been selected in previous years. As a result of these, 37 cultural products whe- re launched, including CDs, DVDs, LPs and books and over 100 concerts were held all over the country. Projects also benefitted from the distribution of musi- cal content through digital channels, na- mely on the Natura Musical website and its social networks, which together have more than 1.5 million followers. Another important initiative was the resumption of Natura’s involvement in fashion events, by sponsoring São Pau- lo Fashion Week, the biggest and most important fashion event in Latin Ame- rica, with two editions taking place in April and October 2016. Inspired by the proposal of the Viva Sua Beleza Viva (Live Your Living Beauty) campaign, we organized a series of talks on topics re- lated to the world of beauty care and behavior, discussing issues such as “men in transition,” “she’s too old for this” and “makeup for everyone”. We also organi- zed daily concerts featuring artists such as Elza Soares, Filipe Catto, O Terno and Emicida. Lastly, we were present at other important Brazilian fashion events, such as Casa de Criadores and Rio Moda Rio, where we were able to make an impres- sion on the more than 330,000 people who attended these live events. Support and sponsorships – Natura Funding (R$ thousand) 2014 2015 2016² Sustainable Development Brazilian Music Fashion¹ Empowerment of Civil Society Organizations Municipalities Total Natura funding 5,295 8,440 0 1,150 n.a. 154 9,010 0 1,020 314 337 1,879 2,610 603 0 14,885 10,498 5,429 1. In 2016, we resumed our investment in Fashion, previously reported under “Behavior and Attitude”. 2. In 2016, changes were made to the methodology used for reporting Natura’s funding, meaning it is now different from the one used previously. Only investments using our own funds, which are directly allocated to projects, were reported. Investments in program marketing and communication are not included. 75 2016 ANNUAL REPORTSupport and sponsorships – Funds obtained through tax incentives (R$ thousand) 2014 2015 2016 Brazilian Music 6,690 5,541 3,175 Total funds obtained through tax incentives 6,989 5,541 3,175 Combined Total (Natura + tax incentives) 21,874 16,039 8,604 76 2016 ANNUAL REPORTAbout this Report ABOUT THIS REPORT Learn about the Standards used in the preparation of the 17th Natura GRI report The Natura 2016 Annual Report pres- ents the highlights of the year, our business performance and the com- mitments undertaken by the compa- ny. Since the year 2000 edition, we have published the annual informa- tion in accordance with the Global Re- porting Initiative (GRI) sustainability reporting frameworks – the first com- pany in Latin America to produce this type of report. Furthermore, this infor- mation has been disclosed along with the Annual Report since 2002, bring- ing together financial and non-finan- cial data in one single report. 102-51, 102-52 This report has been prepared in ac- cordance with the GRI Standards: Comprehensive Option. Replacing the G4 version of the sustainability indica- tors, the Standards version proposes a reorganization of information. This is the first time we have adapted our information to the new format. We believe that there is more to be done in terms of adapting it to the new requirements and intend to be ful- ly in alignment with it as of next year. 102-54, 102-55 Other references guiding the develop- ment of this report were our Materiality Matrix, which lists the six topics award- ed the highest priority, in the opinion of our stakeholders (see the relation below) and the goals of our 2050 Sus- tainability Vision. 102-46 As a result, we have a set of indicators of the profile, governance and eco- nomic, financial and social factors that guided the production of this 2016 report. In the GRI Content Index, we list only the most material indicators. Because of our commitment to trans- parency, we have chosen to continue reporting on other indicators, both GRI and those pertaining specifically to our own business (see the Appendices for more information). The report also serves to communicate our progress regarding the principles of the Global Compact, of which Natura is a member. The Global Compact is a UN ini- tiative that calls brings together compa- nies, workers and civil society to promote sustainable growth and civil rights. The information contained in the fi- nancial statements covers all of our operations, including Aesop, the Aus- tralian company acquired in 2013. For information, however, non-financial the scope of the indicators covers only Natura’s activities in Brazil and our In- ternational Operations, where most of our operations are concentrated and, consequently, the greater part of our social and environmental impacts lies. 102-45 Significant changes in relation to data reported in previous years, as well as alterations made to the calculation base or measurement techniques are pointed out in the text and tables con- tained in this report. 102-10, 102-48, 102-49 The data presented in this publication refer to the period from January 1st to December 31st of 2016 and the entire disclosure process has been super- vised by the Vice-President of Finance and Institutional Relations. The annu- al report has also received the outside assurance of EY Auditores Indepen- dentes S.S. 102-32, 102-50, 102-56 For more information about this re- port, please contact the team respon- sible for its preparation by email at relatorioanual@natura.net. Stakehol- ders can also express their opinions on Natura’s performance, and its man- agement and relationship practices through social networks and in meet- ings. 102-53 MATERIAL TOPICS 102-40, 102-42 As part of our communication process with our relationships network, we have consulted our main stakeholders in order to determine the company’s critical issues. During the most recent procedure, carried out in 2014, six material topics were defined, namely water, education for the development of employees and NCs, climate change, waste, transpar- ency, product origin and enhancing the role of socio-biodiversity. The process of determining the ma- teriality took into consideration our Sustainability Vision, outlining the company’s strategy for 2050 and the goals to be achieved by 2020. The process began with the identification of more than 20 sustainability topics, pre-selected from the Sustainability Vision and industry documents, which were then presented in a series of con- sultations in Brazil and where we have International Operations. The survey took into consideration the perceptions of Natura’s most valued stakeholders, such as Employees - in- cluding management -, Natura Con- sultants, customers and suppliers - in- cluding supplier communities, as well as the opinions of a few shareholders and representatives of local communities. In all, more than 4,200 online surveys were completed and 40 face-to-face and telephone interviews were conducted. Additionally, we also held a panel dis- cussion with 18 participants represent- ing different stakeholder groups. 78 2016 ANNUAL REPORTMateriality - 102-43, 102-44, 102-46, 102-47, 103-1 Topic Description Where 103-1 Related factors and GRI indicators SDG Correlation Water Education for Employee and NC development Climate change Waste Relative reduc- tion in water consumption and pollution throughout the value chain and neutralization of water impact Development of consultant network and of employees, including actions to promote the improvement of public education. Reduction of greenhouse gas emissions throughout the value chain and neutralization through projects that include social benefits. Development of packaging that has a smaller environmental impact and promotes conscientious consumption. • Water sources and the environment • Supplier communities • Operational units • Society in general • Consumers (use and post-consumer disposal) • Natura Consultants • Employees • Natura Institute • Society in general • Suppliers • Transportation companies • Operational units • Environment • Product creation • Operational units (zero waste) • Transportation cooperatives _ Recyclable materials • Consumers (post- consumer disposal) • Environment Transparency and product origin Increased visi- bility of business practices and the origin of pro- ducts. • Supply chain • Supplier communities • Operational units • Corporate management • Consumers • Water • Effluent and waste 303-1, 303-1, 306-1, 306-5 SDG 6. Clean Water and Sanitation • Indirect economic impacts • Education and training SDG 4. Quality Education 203-1, 203-2, 404-1, 404-3 • Economic Performance • Emissions 201-2, 305-1, 305-2, 305- 3, 305-4, 305-5, 305-6 • Materials • Effluent and waste • Products and services 301-2, 306-2, 301-3 • Environmental assessment of suppliers • Assessment of supplier labor practices • Assessment of supplier human rights track record • Assessment of supplier impacts on society • Product and service labeling • Products and services 102-9, 308-1, 414-1, 417-1 SDG 13. Climate Action SDG 12. Responsible Consumption and Production SDG 12. Responsible Consumption and Production 79 2016 ANNUAL REPORTMateriality - 102-43, 102-44, 102-46, 102-47, 103-1 Topic Description Where 103-1 Related factors and GRI indicators SDG Correlation Enhancing the role of socio-biodiversity • Product creation • Supplier communities • Purchasing policies • Consumers • Amazon region Promotion of sustainable busi- nesses by using products and services mainly from the Amazon region. • Economic performance • Indirect economic impacts • Biodiversity • Local communities • Child labor • Forced or compulsory labor practices • Assessment of supplier human rights track record • Channels for grievances and complaints regarding human rights • Products and services 201-1, 201-2, 203-1, 203-2, 304-1, 304-2, 413-1, 408-1, 409-1, 414-1 y 103-2 SDG 15. Life On Land GRI Content Index 102-55 GRI Standard Disclosure Page/ response Omission SDG cor- relation with the disclosures GRI 102: General disclosures 2016 102-1 Name of the organization 102-2 Activities, brands, products and services 102-3 Location of organization's headquarters 102-4 Location of operations 102-5 Ownership and legal form 8 8, 37 8 8 8 80 2016 ANNUAL REPORTGRI Standard Disclosure Page/ response Omission 102-6 Markets served 102-7 Scale of the organization 102-8 Information on employees and other workers 102-9 Supply chain 102-10 Significant changes to the organization and its supply chain 102-11 Precautionary Principle or approach 102-12 External initiatives 102-13 Membership of associations GRI 102: General disclosures 2016 102-14 Statement from senior decision-maker 102-15 Key impacts, risks, and opportunities 102-16 Values, principles, standards, and norms of behavior 102-17 Mechanisms for advice and concerns about ethics 102-18 Governance structure 102-19 Delegating authority 102-20 Executive-level responsibility for economic, environmental, and social topics 102-21 Consulting stakeholders on economic, environmental, and social topics 9, 10 9, 10 8, 23, 108 68 78 39 50 126 4, 6 33 35 35 31 31 31 31 SDG cor- relation with the disclosures 8. Decent employment and economic growth 16. Peace, justice and strong institutions 16. Peace, justice and strong institutions 16. Peace, justice and strong institutions 81 2016 ANNUAL REPORTGRI Standard Disclosure Page/ response Omission 102-22 Composition of the highest governance body and its committees 102-23 Chair of the highest governance body 32 31 102-24 Nominating and selecting the highest governance body GRI 102: General disclosures 2016 102-25 Conflicts of interest The definition of board members considers the qualifications, complementarity of executive experiences, identification with the operating principles of Natura’s business and the absence of conflicts of interest. The term of office is one year and can be renewed at the end of this period, if approved during the General Shareholders Meeting. Read more on page 31 We seek to uphold the best corporate governance practices. All decisions about operations are submitted to our management team, in accordance with the roles defined in our Bylaws. In the event of a possible conflict of interest between the subjects under review and any member of our deliberative bodies, we follow the conditions laid down in the Brazilian Corporations Law, and the respective member must abstain from voting; the final decision is up to the other members that do not have any relationship with the matter under review. SDG cor- relation with the disclosures 5. Gender equality 16. Peace, justice and strong institutions 16. Peace, justice and strong institutions 5. Gender equality 16. Peace, justice and strong institutions 16. Peace, justice and strong institutions 82 2016 ANNUAL REPORTGRI Standard Disclosure Page/ response Omission SDG cor- relation with the disclosures It is a job of the Board of Directors to decide upon and monitor the implementation of the company’s strategy and regularly assess the performance of the CEO and the Executive Committee. Board members analyze the quarterly performance and Natura’s annual report, which include the main environmental indicators that are important to the company. Also examined by the board are the definition and review of the strategic plan, expansion projects and investment programs, risk management and the definition of the amount of profit to be shared with Natura’s employees. Read more on page 31 102-26 Role of highest governance body in setting purpose, values, and strategy GRI 102: General disclosures 2016 102-27 Collective knowledge of highest governance body 102-28 Evaluating the highest governance body’s performance 102-29 Identifying and managing economic, environmental, and social impacts 102-30 Effectiveness of risk management processes 102-31 Review of economic, environmental, and social topics 102-32 Highest governance body’s role in sustainability reporting 31 32 31 32 32 78 4. Quality education 16. Peace, justice and strong institutions 83 2016 ANNUAL REPORTGRI Standard Disclosure Page/ response Omission SDG cor- relation with the disclosures 102-33 Communicating critical concerns GRI 102: General disclosures 2016 102-34 Nature and total number of critical concerns 102-35 Remuneration policies 102-36 Process for determining remuneration Board members analyze the quarterly performance and Natura’s annual report, which include the main environmental indicators that are important to the company. Also examined by the board are the definition and review of the strategic plan, expansion projects and investment programs, risk management and the definition of the amount of profit t0 be shared with Natura’s employees. Board members analyze the quarterly performance and Natura’s annual report, which include the main environmental indicators that are important to the company. Also examined by the board are the definition and review of the strategic plan, expansion projects and investment programs, risk management and the definition of the amount of profit t0 be shared with Natura’s employees. All details of our policy and practice of remuneration of senior management is explained in our Reference Form, which can be accessed here. All the details of our policy and practice of remuneration of senior management are explained in our Reference Form, which can be accessed here. 84 2016 ANNUAL REPORTGRI Standard Disclosure Page/ response Omission SDG correlation with the disclosures GRI 102: General disclosures 2016 102-37 Stakeholders’ involvement in remuneration 102-38 Annual total compensation ratio 102-39 Percentage increase in annual total compensation ratio 102-40 List of stakeholder groups 102-41 Collective bargaining agreements Shareholders approve the executive officers’ remuneration at the General Shareholders Meeting (GSM). During the meeting, they can comment favorably or negatively on the subject. Learn about our remuneration policy regarding senior management on page 184 of this document. 110 111 78 Covering 100% of employees, the collective bargaining negotiations are coordinated by the human resources department and obey the standards and limitations determined by local legislation. 102-42 Identify- ing and selecting stakeholders 78 16. Peace, justice and strong institutions The reassess- ment of the information for 2016 prohibited the reporting of this item due to the confidential nature of the information. 8. Decent employ- ment and economic growth 85 2016 ANNUAL REPORTGRI Standard Disclosure Page/ response Omission SDG correlation with the disclosures GRI 102: General disclosures 2016 Natura maintains open communication at all times with its stakeholders. One of its initiatives brings together consumers, consultants and researchers, among others, for a program focused on the co- creation and generation of ideas in the field of innovation. We also annually evaluate the quality of these relationships through satisfaction and loyalty surveys conducted with our priority stakeholders: employees, Natura Consultants, suppliers, supplier communities and consumers. Read more on pages 23, 41, 43, 69, 79, 123, 133 23, 41, 43, 69, 79, 123, 133 78 79 79 78 78 78 78 78 78 102-43 Approach to stakeholder engagement 102-44 Key topics and concerns raised 102-45 Entities in- cluded in the con- solidated financial statements 102-46 Defining report content and topic Boundaries 102-47 List of mate- rial topics 102-48 Restate- ments of information 102-49 Changes in reporting 102-50 Reporting period 102-51 Date of most recent report 102-52 Reporting Cycle 102-53 Contact point for questions regarding the report 86 2016 ANNUAL REPORTGRI Standard Disclosure Page/ response Omission SDG correlation with the disclosures 102-54 Claims of reporting in accordance with the GRI Standards 102-55 GRI Content Index 78 80 GRI 102: General disclosures 2016 102-56 External assurance 78, 150, 151 103-1 Explanation of the material topic and its boundary 79 GRI 103: 2016 Management approach 103-2 The management approach and its components 13, 39, 107, 111 GRI 201: Economic Performance 2016 103-3 Evaluation of the management approach 13, 39, 107, 111 201-1 Direct economic value generated and distributed 17 201-2 Financial implications and other risks and opportunities due to climate change 201-3 Defined benefit plan obligations and other retirement plans 201-4 Financial assistance received from government 34, 107 111 107 1. Eradicate poverty 5. Gender equality 8. Decent employment and economic growth 16. Peace, justice and strong institutions 2. Zero hunger 5. Gender equality 7. Accessible and clean energy 8. Decent employment and economic growth 9. Industry, innovation and infrastructure 13. Combating climate change 87 2016 ANNUAL REPORTGRI Standard Disclosure Page/ response Omission SDG correlation with the disclosures 203-1 Investments in infrastructure and services 55, 56, 71, 73, 74, 132 GRI 203: 2016 Indirect economic impact 203-2 Indirect economic impact 56, 73, 74 103-1 Explanation of the ma- terial topic and its boundary 79 GRI 103: 2016 Man- agement approach 103-2 The management approach and its components 66, 67, 141 103-3 Evaluation of the management approach 66, 67, 141 301-1 Materials used by weight or volume GRI 301: Materials 2016 301-2 Recycled input materials used 301-3 Reclaimed products and their packaging materials 103-1 Explanation of the ma- terial topic and its boundary 141 66 142 79 GRI 103: 2016 Man- agement approach 103-2 The management approach and its components 64, 143 103-3 Evaluation of the management approach 64, 143 2. Zero hunger 5. Gender equality 7. Accessible and clean energy 9. Industry, innovation and infrastructure 11. Sustainable Cities and Communities 1. Eradicate poverty 5. Gender equality 8. Decent employment and economic growth 16. Peace, justice and strong institutions 8. Decent employment and economic growth 12. Responsible consump- tion and production 8. Decent employment and economic growth 12. Responsible consump- tion and production 8. Decent employment and economic growth 12. Responsible consump- tion and production 1. Eradicate poverty 5. Gender equality 8. Decent employment and economic growth 16. Peace, justice and strong institutions 88 2016 ANNUAL REPORTGRI Standard Disclosure Page/ response Omission SDG correlation with the disclosures 303-1 Water withdrawal by source 65, 143, 144 6. Clean water and sanitation 303-2 Water sources significantly affected by withdrawal of water 144 6. Clean water and sanitation GRI 303: Water 2016 303-3 Water recycled and reused 144 103-1 Explanation of the material topic and its boundary 79 GRI 103: 2016 Management approach 103-2 The management approach and its components 54, 58 103-3 Evaluation of the management approach 54, 58, 59 6. Clean water and sanitation 8. Decent employment and economic growth 12. Responsible con- sumption and produc- tion 1. Elimination of po- verty 5. Gender equality 8. Decent employment and economic growth 16. Peace, justice and strong institutions 89 2016 ANNUAL REPORTGRI Standard Disclosure Page/ response Omission SDG correlation with the disclosures GRI 304: Biodiversity 2016 304-1 Operational sites owned, leased, managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas 304-2 Significant impacts of activities, products, and services on biodiversity 304-3 Habitats protected or restored 304-4 IUCN Red List species and national conservation list species with habitats in areas affected by the organization’s operations 103-1 Explanation of the material topic and its boundary 146 55 147 147 79 GRI 103: 2016 Management approach 103-2 The management approach and its components 61, 62 103-3 Evaluation of the management approach 61, 62 6. Clean water and sanitation 14. Underwater life 15. Life on land 6. Clean water and sanitation 14. Underwater life 15. Life on land 6. Clean water and sanitation 14. Underwater life 15. Life on land 6. Clean water and sanitation 14. Underwater life 15. Life on land 1. Elimination of po- verty 5. Gender equality 8. Decent employment and economic growth 16. Peace, justice and strong institutions 90 2016 ANNUAL REPORTGRI Standard Disclosure Page/ response Omission 305-1 Direct greenhouse gas (GHG) emissions (Scope 1) 63, 64, 137 GRI 305: Emissions 2016 305-2 Indirect greenhouse gas (GHG) emissions (Scope 2) 62, 63, 64, 137 305-3 Indirect greenhouse gas (GHG) emissions (Scope 3) 64, 137 SDG correlation with the disclosures 3. Good health and welfare 12. Responsible con- sumption and produc- tion 13. Combating climate change 14. Underwater life 15. Life on land 3. Good health and welfare 12. Responsible con- sumption and produc- tion 13. Combating climate change 14. Underwater life 15. Life on land 3. Good health and welfare 12. Responsible con- sumption and produc- tion 13. Combating climate change 14. Underwater life 15. Life on land 91 2016 ANNUAL REPORTGRI Standard Disclosure Page/ response Omission 305-4 Greenhouse gas (GHG) emissions intensity 305-5 Reduction of greenhouse gas (GHG) emissions GRI 305: Emissions 2016 305-6 Emissions of ozone-depleting substances (SDG) 305-7 Nitrogen oxides (NOX), sulfur oxides (SOX), and other significant air emissions 62 138 138 138 SDG correlation with the disclosures 13. Combating climate change 14. Underwater life 15. Life on land 13. Combating climate change 14. Underwater life 15. Life on land 3. Good health and welfare 12. Responsible con- sumption and produc- tion 13. Combating climate change 3. Good health and welfare 12. Responsible con- sumption and produc- tion 13. Combating climate change 14. Underwater life 15. Life on land 92 2016 ANNUAL REPORTGRI Standard Disclosure Page/ response Omission SDG correlation with the disclosures 103-1 Explanation of the material topic and its boundary 79 GRI 103: 2016 Management approach 103-2 The management approach and its components 64, 66, 145 103-3 Evaluation of the management approach 64, 66, 145 306-1 Total water discharge by quality and destination 145, 146 306-2 Waste by type and disposal method 142, 143 GRI 306: Effluents and waste 2016 306-3 Significant spills 146 306-4 Transport of hazardous waste 143 306-5 Water bodies affected by water discharges and/or runoff 145, 146 1. Eradicate poverty 5. Gender equality 8. Decent employment and economic growth 16. Peace, justice and strong institutions 3. Good health and welfare 6. Clean water and sanitation 12. Responsible consumption and production 3. Good health and welfare 6. Clean water and sanitation 12. Responsible consumption and production 3. Good health and welfare 6. Clean water and sanitation 12. Responsible consumption and production 14. Underwater life 15. Life on land 3. Good health and welfare 12. Responsible consumption and production 6. Clean water and sanitation 15. Life on land 93 2016 ANNUAL REPORTGRI Standard Disclosure Page/ response Omission SDG correlation with the disclosures 103-1 Explanation of the material topic and its boundary 79 GRI 103: 2016 Management approach 103-2 The management approach and its components 68, 130 GRI 308: Supplier environmental assessment 2016 103-3 Evaluation of the management approach 308-1 New suppliers that were screened using environmental criteria 308-2 Significant negative impacts, actual and potential, in the supply chain and measures taken 103-1 Explanation of the material topic and its boundary 68 129 130 79 GRI 103: 2016 Management approach 103-2 The management approach and its components 24, 25 103-3 Evaluation of the management approach 23, 24, 25 404-1 Average hours of training per year per employee 109 1. Eradicate poverty 5. Gender equality 8. Decent employment and economic growth 16. Peace, justice and strong institutions 1. Eradicate poverty 5. Gender equality 8. Decent employment and economic growth 16. Peace, justice and strong institutions 4. Quality education 5. Gender equality 8. Decent employment and economic growth GRI 404: Training and education 2016 404-2 Continuous programs for upgrading employee learning and retirement transition assistance programs 404-3 Percentage of employees receiving regular performance and career development reviews 24, 109, 110 8. Decent employment and economic growth 25 5. Gender equality 8. Decent employment and economic growth 94 2016 ANNUAL REPORTGRI Standard Disclosure Page/ response Omission SDG correlation with the disclosures 103-1 Explanation of the material topic and its boundary GRI 103: 2016 Management approach 103-2 The management approach and its components 103-3 Evaluation of the management approach GRI 408: Child labor 2016 408-1 Operations and suppliers at significant risk for incidents of child labor 103-1 Explanation of the material topic and its boundary GRI 103: 2016 Management approach 103-2 The management approach and its components GRI 409: Forced or Compulsory Labor 2016 103-3 Evaluation of the management approach 409-1 Operations and suppliers identified as at sig- nificant risk for incidents of forced or compulsory labor 103-1 Explanation of the material topic and its boundary GRI 103: 2016 Management approach 103-2 The management approach and its components 103-3 Evaluation of the management approach 79 125 125 125 79 125 125 125 79 71 71 1. Eradicate poverty 5. Gender equality 8. Decent employment and economic growth 16. Peace, justice and strong institutions 8. Decent employment and economic growth 16. Peace, justice and strong institutions 1. Eradicate poverty 5. Gender equality 8. Decent employment and economic growth 16. Peace, justice and strong institutions 8. Decent employment and economic growth 1. Eradicate poverty 5. Gender equality 8. Decent employment and economic growth 16. Peace, justice and strong institutions 95 2016 ANNUAL REPORTGRI Standard Disclosure Page/ response Omission SDG correlation with the disclosures GRI 413: Local communities 2016 413-1 Operations with local community engagement, impact assessments, and development programs 413-2 Operations with significant actual and potential negative impacts on local communities 103-1 Explanation of the material topic and its boundary 71, 72 55, 71 79 GRI 103: Management approach 2016 103-2 The management approach and its components 68, 130, 131 GRI 414: Supplier Social Assessment 2016 103-3 Evaluation of the management approach 68, 130, 131 414-1 New suppliers that were screened using social criteria 55, 68, 130, 131 414-2 Negative social impacts in the supply chain and actions taken 125, 130, 131 103-1 Explanation of the material topic and its boundary 79 GRI 103: 2016 Management approach 103-2 The management approach and its components 39, 134 103-3 Evaluation of the management approach 39, 134 1. Eradicate poverty 2. Zero hunger 1. Eradicate poverty 5. Gender equality 8. Decent employment and economic growth 16. Peace, justice and strong institutions 5. Gender equality 8. Decent employment and economic growth 16. Peace, justice and strong institutions 5. Gender equality 8. Decent employment and economic growth 16. Peace, justice and strong institutions 1. Eradicate poverty 5. Gender equality 8. Decent employment and economic growth 16. Peace, justice and strong institutions 96 2016 ANNUAL REPORTGRI Standard Disclosure Page/ response Omission SDG correlation with the disclosures GRI 417: Labeling of products and services 2016 417-1 Requirements for product information and labeling 417-2 Incidents of non- compliance concerning product and service information and labeling 417-3 Incidents of non- compliance concerning marketing communication regulations and codes 134 134 134 12. Responsible consumption and production 16. Peace, justice and strong institutions 16. Peace, justice and strong institutions The Global Compact Principles Page 1. Respect and protect human rights 28, 29, 68, 71, 72, 85, 124, 125, 128, 130, 131 2. Prevent violations of human rights 68, 124, 128, 130, 131 3. Support freedom of association at work 4. Abolish forced labor 5. Abolish child labor 6. Eliminate discrimination in employment 85, 121, 124 68, 130, 131 68, 125, 130, 131 28, 68, 110, 111, 124, 110730, 131, 135, 136, 7. Support a precautionary approach to environmental challenges 107 8. Promote environmental responsibility 55, 61, 62, 63, 64, 65, 66, 107, 129, 130, 131, 134, 137, 138, 139, 140, 142, 141, 143, 144, 145, 146, 147, 148 9. Encourage environmentally friendly technologies 66, 138, 41, 142, 144 10. Combat corruption in all its forms, including extortion and bribery 122, 123, 125 97 2016 ANNUAL REPORT2050 Sustainability Vision 2050 Sustainability Vision Brands and Products Area 2020 Goal 2016 Performance Percent of goal achieved SDG Brands Formulas The environmental and social footprints of all Natura brand products will be disclosed, along with their respective improvement commitments. Implementation of a new proposal for communication and engagement with consumers and Natura consultants, highlighting the social and environmental impacts that their purchase/sale has on society and the planet. Under imple- mentation 12. Responsible Consumption and Production Ensure that 30% of all inputs used by Natura Brazil, in terms of value, come from the Amazon region. 19.1% of the inputs used by Natura Brazil were sourced from the Amazon region. 2010: 10% 2020: 30% Achieved in 2016: 46% At least 10% of all Natura Brazil packaging should be made from post- consumer recycled material. A total of 4.3% of all packaging made used post-consumer recycled materials. 2013: 1.4% 2020: 10% Achieved in 2016: 34% Packaging At least 74% of all Natura Brazil packaging should be made from recyclable material In 2016, 51% of all Natura Brazil packaging used recyclable material. 2013: 56% 2020: 74% Achieved in 2016: -28% Ensure that 40% of Natura Brazil’s billed units are eco-efficient packaging¹ 20% of the units billed in Brazil were eco- efficient packaging¹ 2013: 21.4% 2020: 40% Achieved in 2016: -8% 12. Responsible Consumption and Production 3. Good Health and Well-Being 12. Responsible Consumption and Production 12. Responsible Consumption and Production 11. Sustainable Cities and Communities 12. Responsible Consumption and Production 11. Sustainable Cities and Communities 99 2016 ANNUAL REPORT 2050 Sustainability Vision Brands and Products The Natura brand must reduce its relative emissions of greenhouse gases by 33% (Scope 1, 2 and 3). Continue offsetting all emissions that cannot be avoided, by means of initiatives that, in addition to the reduction and/ or sequestration of greenhouse gases, also aim at providing social and environmental benefits, especially in the Amazon region. Implement a strategy for the diversification of renewable energy sources used by Natura Brazil’s operations. Reach out to 10,000 families that are part of the Amazon production chains. The indicator is directly related to business performance and the forecast was for an increase in relative GHG emissions. However, they remained stable, due to efficiency gains in key processes. The reduction in relation to 2012 is 1.3%. Since the program was started 10 years ago, we have made five calls for tenders for the purchase of credits and engaged 35 initiatives. Over 40% of projects supported come from the Legal Amazon and Pan-Amazon Basin regions. In 2016, we included projects in Mexico and Chile, thereby achieving the goal of offsetting emissions locally in all countries where we operate. We have mapped out 11 opportunities to diversify our renewable energy sources and have already begun implementing some of those options. We have boosted development and generated income for 2,119 families in the Amazon region, affecting the quality of life of around 8,000 people and contributing to the conservation of 257,000 hectares of standing forest. Turnover of R$ 1 billion in volume of business in the Amazon region. The accumulated volume of business generated in the region amounts to R$ 972 million. 2012: base year 2020: -33% Achieved in 2016: 4% 13. Climate Action 17. Partnerships for the Goals In progress 13. Climate Action Under imple- mentation 13. Climate Action 2010: 1,734 2020: 10,000 Achieved in 2016: 5% 15. Life On Land 1. No Poverty 10. Reduced Inequalities 2010: R$ 89 million 2020: R$ 1 billion Achieved in 2016: 97% 12. Responsible Consumption and Production 17. Partnerships for the Goals Climate change Energy Socio- biodiversity 100 2016 ANNUAL REPORT2050 Sustainability Vision Brands and Products In 2016, we concluded the experimental pilot program introduced the year before to promote reverse logistics in the São Paulo metropolitan area. This included different sources for collecting post- consumption waste, such as collector cooperatives and the involvement of Natura Consultants. The experiment was useful for gaining knowledge and planning our strategy, procedures and action. Additionally, we participated in the sectorial reverse logistics project organized by Abihpec. Using the created methodology, we began conducting studies to map projects that have the potential to reduce our water footprint. In progress 12. Responsible Consumption and Production 11. Sustainable Cities and Communities Planning phase 6. Clean Water and Sanitation Having identified 100% of the manufacturers in the first link of the chain, we are working to extend the overall traceability of critical chains. Planning phase 8. Decent Work and Economic Growth 12. Responsible Consumption and Production 13. Climate Action Waste Water Supply chains Collect and send for recycling 50% of the waste generated by Natura product packaging in Brazil (ton equivalent). For the Natura brand in Brazil: implement a strategy for the reduction and neutralization of impact, based on the water footprint measurement and considering the entire value chain. Ensure by 2015 that 100% of materials produced by direct manufacturers are traceable (last link) and by 2020 implement a traceability program for the other links of the Natura brand’s value chain. 101 2016 ANNUAL REPORT2050 Sustainability Vision Customers Define priority topics and implement a strategy to mobilize Natura brand consumers. Significantly increase the real average income of Natura Consultants in Brazil. Generate interest in continued education and offer a broad range of educational options that meet their needs. Our Network Definition of priority claims for boosting consumer’s perception of Natura as a sustainable brand: • Living Forest • 100% Organic Alcohol • Commitment to Climate change • Sustainable Packaging • Smart Refills • Quality Education • No Animal Testing • Beauty free of stereotyping A program to boost direct selling, including steps aimed at increasing productivity and income according to type of consultant. We have developed an educational program for NCs and their families, offering partial and full scholarships for learning experiences such as: ENEM exam preparatory courses, vocational training, higher education programs, and languages courses, among others. Within three months, over 11,000 people had gone back to school. In progress 12. Responsible Consumption and Production In progress 5. Gender Equality 8. Decent Work and Economic Growth In progress 4. Quality Education Natura Consultants Create an indicator to evaluate the human development of this group and define a strategy to obtain significant improvements. In three years of tracking the HDI-NC in Brazil, we have recorded an improvement of 7.81%, with 0.5% in 2016 alone. This indicator monitors Natura’s impact on the quality of life of its consultants. In progress 5. Gender Equality 8. Decent Work and Economic Growth 4. Quality Edu- cation Expand the collaboration network, supporting social and environmental entrepreneurship activities. The Natura Movement is a digital platform that connects those who have social and environmental projects with those who want to help. During 2016, the site had close to 2.2 million visits, nearly double that of the previous year. It is estimated that more than 50,000 people were benefited by supported projects in the fields of health, education, culture and sport, among others. In progress 8. Decent Work and Economic Growth 102 2016 ANNUAL REPORT2050 Sustainability Vision For the Natura brand, have women occupying 50% of senior management positions (senior management and above). Employees For the Natura brand in Brazil, to have people with disabilities representing 8% of total employees. Implement a strategy to boost employees’ potential through engagement with Natura’s culture. Our Network Throughout the year, we achieved a rate of 29% of senior management positions being occupied by women. Natura signed up to the UN Women’s Empowerment Principles and the Brazilian government’s Gender and Racial Equality Program. We also launched our own diversity policy in 2016, which gives priority to four areas, including women’s empowerment. Moreover, we reviewed our procedures for selecting, attracting and developing women with leadership potential. People with disabilities represent 5.8% of the total number of employees at Natura. In our diversity policy, launched in 2016, this group was defined as one of our four priorities. In a pioneering move, our São Paulo distribution center has been highly automated and 16% of its employees are people with some kind of disability, mainly cognitive. Based on Natura’s Mission, which was revised in 2015, we have begun a process of cultural transformation that includes the alignment of all Natura practices and procedures. This work will be intensified in 2017. The implementation of the Volunteer program, in 2016, is one of the actions that reinforce our commitment to create a positive impact by encouraging citizenship among our employees and motivating them to play a leading role in society. 2013: 29% 2020: 50% Achieved in 2016: 0% 5. Gender Equality 2013: 4.3% 2020: 8% Achieved in 2016: 5.8% 8. Decent Work and Economic Growth Under imple- mentation 12. Responsible Consumption and Production 16. Peace, Justice and Strong Institutions 103 2016 ANNUAL REPORT2050 Sustainability Vision Our Network We have put together Local Development Plans for Cajamar, Jaguara and Benevides. The groups involved conducted participatory analyses, identified development priorities and agreed upon initiatives and targets. We also applied the Community Social Progress Index in Cajamar and Jaguara, as an instrument for the diagnosis and measurement of the positive and negative social and environmental impacts of implemented activities. In order to spur large-scale transformation, we work through arrangements and partnerships with local government, grassroots communities and companies to create territorial development solutions in the Mid- Juruá (Amazonas state), Lower Tocantins and Transamazon (both Pará state) regions. Together with local leaders and partners, we seek to understand the development priorities of each territory and agree upon shared initiatives and targets. Local leadership and institutions are empowered throughout the entire process. The evaluation criteria for social and environmental performance, applicable to all Qlicar Program supplier categories, have been defined. Local communities Improve the indicators for measuring the human and social development of local communities and develop a plan for making significant improvements. Develop a strategy for territories important to socio-biodiversity in the Amazon region and to the communities surrounding our main operations in Brazil, through open dialogue and collaborative engagement with local populations and stakeholders. Suppliers Improve the process of supplier selection and management, while furthering the integration between social and environmental parameters with financial ones. In progress 8. Decent Work and Economic Growth 10. Reduced Inequalities In progress 8. Decent Work and Economic Growth 10. Reduced Inequalities In progress 12. Responsible Consumption and Production 8. Decent Work and Economic Growth 104 2016 ANNUAL REPORT2050 Sustainability Vision Management and Organization Management model For the Natura brand, conduct an appraisal of external social and environmental factors, taking into consideration the positive and negative impacts of the extended value chain (from extraction of raw materials to disposal of products). Government and society Stimulate a discussion and public debate on material topics, based on the review of the materiality matrix conducted in 2014. Engagement with stake- holders Ethics and transparency Sustainabili- ty governan- ce Institutionalize a governance model featuring external engagement to improve sustainability management and strategy. For the Natura brand, implement total transparency for providing information on products and the progress of the Sustainability Vision. Set up an Advisory Committee, composed of outside specialists, who will assess the company’s progress and help improve our strategy. An appraisal of external environmental factors was carried out for the first time in 2015, converting the effects of the business on aspects such as GHG emissions, water, waste and land use and occupation into financial resources. The calculation involved the entire Natura product portfolio, throughout its entire value chain. In 2016, we will conduct the first ever appraisal study of social impacts. We have actively participated in several forums and coalitions, where we offered our experience to enrich the discussion of the topics in our materiality matrix. One of the important forums addressed the relationship between our business initiatives and the Sustainable Development Goals set under the United Nations Development Program, in September 2015. We are in the process of identifying innovative collaborative arrangements with partners that are capable of positively changing the environment for the implementation and development of our Sustainability Vision. We have collaboratively developed the architecture of our sustainability communications, which organize product information according to the interests of our consumers when they are looking for more detailed information. Strategic alignment with the Na- tura Board of Directors to set up an advisory network to support the generation of creative and innovative solutions and introdu- ce guidelines for developing the company’s strategy. Under implementation 12. Respon- sible Consumption and Production Under implementation 17. Partner- ships for the Goals Planning phase Under implementation Planning phase 12. Respon- sible Consumption and Production 12. Respon- sible Consumption and Production 12. Respon- sible Con- sumption and Produc- tion 105 2016 ANNUAL REPORTAppendices  SUPPLEMENTARY INDICATORS Economic and financial management Economic Performance 103-2/103-3 201-2- Financial implications and other risks and opportunities arising from climate change At Natura, we do not conduct specific analyses regarding the effects related to climate change in our risk management process. However, important mitigation projects focusing on the impacts that the business may generate are now organized transversely and have become formal sub- processes at the company. Examples of this are the Carbon Neutral Program and the practices for the sustainable use of socio-biodiversity and related traditional knowledge. Actions to offset CO2 emissions (Carbon Neutral Program) is voluntary at Natura, not mandatory, and do not portray the financial implications of climate change risks. Currently, biodiversity is one of the main topics in the social and environmental group that draws up the compendium of company risks. In the second half of 2016, we began a project to map out the risks presented by three other topics: social responsibility, waste and climate change. Once the mapping has been concluded, we will create a matrix that considers all four risks related to sustainability. As far as the climate change risk goes, our focus is to understand, monitor and mitigate anything that can affect our value chain. Read more about our risk management procedures on page 34. 201-4 – Government funding1 (R$ million) 2014 2015 2016 Tax incentives for support and sponsorship2 Innovation Law nº 11,196/2005 (deduction from income tax and social contribution bases of up to double the spending on Research and Technological Innovation) Others3 Total 8 30 2 40 3 14 1 18 4 18 3 25 1. The government does not have a stake in the company’s shareholding structure. 2. Corporate income tax (IRPJ) incentives related to the Rouanet and Sports laws, the Fund for the Rights of Children and Adolescents, the worker’s nutrition program and ICMS tax incentives in relation to Natura Musical projects. 3. Incentives relating to the two-month extension of maternity leave, introduced under Decree nº 7,052/2009. The expense is not deductible from the taxable income and social contribution (CSLL) calculation bases, but is fully deductible from the IRPJ. 107 2016 ANNUAL REPORTPersonnel Management Employee Profile 102-8 Number of Natura Employees Brazil Argentina Chile Mexico Peru Colombia France Total 2014 2015 2016 Fem. Male Total Fem. Male Total Fem. Male Total 3,091 2,141 5,232 2,988 2,163 5,151 2,842 2,065 4,907 431 77 508 465 85 550 508 89 597 145 75 213 37 46 22 182 121 141 70 44 185 139 47 117 75 235 202 28 230 199 227 40 267 272 50 322 287 34 12 46 28 8 36 11 46 49 28 52 7 185 124 227 339 18 4,216 2,375 6,591 4,166 2,425 6,591 4,061 2,336 6,397 102-8 Other types of contract 2014 2015 2016 Fem. Male Total Fem. Male Total Fem. Male Total Apprentices1 Interns2 70 124 47 48 117 108 49 157 106 172 84 31 115 61 47 29 153 90 Temporary staff3 325 548 873 118 1,025 1,143 26 473 499 In-house service providers4 771 1,065 1,836 721 1,444 2,165 642 1,582 2,224 Total 1,290 1,708 2,998 1,031 2,549 3,580 835 2,131 2,966 1. Young Apprentices are hired by a third-party company that manages them. 2. The difference between the number of interns reported (90) and the program headcount (168) is due to contracts terminating in the month of December 2016. 3. Fixed-term contracts through an employment agency and involving subordination are regarded as temporary under the Labor Law (CLT). This number covers Natura Brazil temporary staff. The number of temporary staff has fallen, as a result of the company’s own decision to reduce the number of people on such contracts. A policy was drawn up specifying the conditions for such contracts. Moreover, in previous years, there was a greater need for this type of employee, due to the move of the Cajamar Distribution Center to São Paulo. 4. In-house service providers are those suppliers that provide services to Natura and who work at or access the company’s installations for a period of more than 6 months, and may or may not have a fixed workstation at the company. This number covers the service providers allocated to Natura Brazil operations. 108 2016 ANNUAL REPORTTraining and Education 404-1 Average -hours of training (hrs/employee)\ p.a.- Brazil123 2014 2015 2016 Total Fem. Male Total Fem. Male Total Fem. Male Operational 109 Administrative Management Senior management Average hours Young apprentice4 Interns4 61 31 15 78 - - 101 54 34 21 66 - - 115 82 27 12 95 - - 73 33 24 12 49 34 74 68 26 26 19 38 34 74 76 55 21 9 64 34 74 32 28 41 30 31 24 25 42 29 26 41.5 40.8 37 39 41 31 38 43 53.8 52.8 58.8 1. Does not include employees on unpaid leave without payroll expenses or those of the Natura Institute. 2. Natura does not divulge its education budget and strategy to third parties. 3. Training hours refer to training given in 2016 but may also include training provided in previous years and only entered into the log in 2016. 4. Natura invests in Development Programs for Interns and Young Apprentices, including behavioral and technical training, aimed at developing and preparing youths to perform their activities, but due to a concept revision, these hours will not be included in the overall average. Average - hours of training, per employee (hrs) 2014 2015 2016 International Operations Natura1 76 77 61 51 59 38 1. Consolidated average of all Natura Brazil operations and International Operations. 404-1 - Hours of training, by gender – Brazil (%)¹ 2014 2015 2016 Male Female 49 50 55 45 52 48 1. There is no gender-specific training strategy. But we did approve an executive coaching initiative, in 2016, that takes women’s issues into consideration throughout the process, if that is of interest to the employee. 404-2 - Programs for skills management and ongoing education: Natura Education program - Brazil112 2014 2015 2016 Scholarships granted Scholarships granted as a proportion of total applications (%)3 Amount invested in the Natura Education program (R$ thousand) 322 58 1,178 214 65 955 132 0 535 1. All employees with active scholarships during the year are considered as having participated in the program 2. In the event of termination resulting from internal restructuring, Natura supports these employees in their career transition by offering a set of special conditions. 3. The Natura Education program is being reviewed and will be relaunched in the first half of 2017, with new scholarships. Employees who are already participating in the program have had their scholarships renewed. 109 2016 ANNUAL REPORT404-2 Courses taken by employees or their family members that were fully or partially paid for by Natura (Brazil) 2014 2015 2016 Technical/vocational Languages University MBA or post-graduate Total number of courses Remuneration 33 1 175 113 322 21 0 105 88 214 8 0 70 54 132 202-1 – Ratio between the organization’s lowest pay grade and the local minimum wage, by gender (%)1 Country Brazil Argentina Chile Peru Mexico Colombia France 2014 2015 2016 Total Male Fem. Total Male Fem. Total Male Fem. 1.5 1.5 1.9 3.1 5.7 1.0 1.2 1.5 3.1 2.4 3.9 6.5 1.0 1.8 1.5 1.5 1.9 3.1 5.7 1.0 1.2 1.4 1.6 1.9 3.3 5.9 1.0 1.1 1.4 3.1 2.4 4.8 7.4 1.0 1.8 1.4 1.6 1.9 3.3 5.9 1.0 1.1 1.6 1.5 1.9 2.7 6.5 1.0 1.1 1.6 3.0 4.0 4.7 7.8 1.0 1.3 1.6 1.5 1.9 2.7 6.5 1.0 1.0 1. Our pay levels take into account competitive remuneration packages offered in each local market. Small differences are due to the absence of both genders in the same position in that country or to an employee having recently joined the company at the lowest level of the pay range for that position. There are no gender-based pay differences. 102-38 - Ratio between the organization’s highest pay grade and the overall average, by country Reassessment of the information for 2016 prevented the reporting of this item, due to information confidentiality. 110 2016 ANNUAL REPORT102-39 - Ratio between pay rise for the highest pay grade and the organization’s average pay rise, by country¹ Country Unit Overall average Highest pay grade Overall average Highest pay grade Overall average Highest pay grade Brazil Argentina Chile Colombia Mexico Peru 2014 2015 2016 11.00 0.66 13.56 1.21 10.85 11.00 35.00 36.00 36.00 30.00 42.00 32.00 % 18.00 3.00 13.00 6.00 5.00 2.00 4.00 9.00 11.00 6.00 6.00 6.00 2.00 10.00 2.00 0.00 8.00 11.00 5.00 9.00 7.00 4.00 12.00 0.00 1. Considering the basis salary. 103-2/103-3 201-3 – Pension plan (R$ million)¹ 2 2014 4,087 2015 4,642 20163 3,753 1. Natura Savings Incentive is a defined contribution plan managed by an Open Plan Supplementary Pension entity. The guarantee of coverage or annuity with actuarial risk is not mandatory for the company. Employees’ participation is voluntary and, currently, 42% of employees participate in the program. 2. An employee can contribute anywhere from 1% to 5% of their salary, while the employer’s contribution is 60% on top of the employee’s contribution, up to a salary level of R$ 19,140.00. 3. The decrease in the amount invested is due to the reduction in the number of employees, who withdrew their savings upon termination, as well as lower number of employees joining the plan (participation is on a strictly voluntary basis). Staff Turnover 401-1 - Total number and rate of new hirings and employee turnover Total and rate of new hirings. by age group1 2 2014 Age group Number – by gender Rate - by gender (%) Overall number Overall rate (%) Under 30 30 to 50 Over 50 Male Fem. Male Fem. 214 182 2 267 362 7 3.2% 4.1% 2.8% 5.5% 0.0% 0.1% 481 544 9 7.3% 8.3% 0.1% Total. by gender 398 636 6.0% 9.6% 1.034 15.7% 111 2016 ANNUAL REPORT Total and rate of new hirings. by age group1 2 2015 Age group Number – by gender Rate - by gender (%) Under 30 30 to 50 Over 50 Male Fem. Male Fem. 201 189 3 229 289 3.0% 3.5% 2.9% 4.4% 6 0.0% 0.1% Total. by gender 393 524 6.0% 8.0% Overall number Overall rate (%) 430 478 9 917 6.5% 7.3% 0.1% 13.9% Total and rate of new hirings. by age group1 2 2016 Age group Number – by gender Rate - by gender (%) Male Fem. Male Fem. Under 30 30 to 50 Over 50 137 167 3 224 267 7 Total. by gender 307 498 4.8% Overall number Overall rate (%) 361 434 10 5.6% 6.8% 0.2% 805 12.6% 2.1% 3.5% 2.6% 4.2% 0.0% 0.1% 7.8% Total and rate of new hirings. by gender12 2014 2015 2016 Female Male Total Total Rate (%) Total Rate (%) Total Rate (%) 636 398 1,034 9.6 6.0 15.7 524 393 917 8.0 6.0 498 7.8% 307 4.8% 13.9 805 12.6% 1. Meaning of turnover: number of terminations, whether this decision is made by the company (with or without just cause) or the employee, and includes the hiring of a replacement. Calculation method: terminations with a request for replacement / effective company headcount. 2. For the number and rate of terminations at IOs, interns are included. In Brazil, interns and Natura Institute employees are not included. 112 2016 ANNUAL REPORTTotal and rate of new hirings. by region 2014 2015 2016 Total Rate (%) Total Rate (%) Total Rate (%) Brazil Argentina Chile Mexico Peru France Colombia Total 719 10.9% 602 9.1% 1.8% 109 1.7% 121 23 19 41 5 106 0.3% 0.3% 0.6% 0.1% 1.6% 28 32 34 6 106 917 0.4% 0.5% 0.5% 0.1% 1.6% 511 122 34 34 34 4 66 8.0% 1.9% 0.5% 0.5% 0.5% 0.1% 1.0% 1,034 15.7% 13.9% 805 12.6% Number of terminations. by country 2014 2015 2016 Brazil Argentina Chile Mexico Peru France Colombia Total Total Rate (%) Total Rate (%) Total Rate (%) 755 11.5% 719 10.9% 765 12.0% 88 39 26 64 11 65 1.3% 0.6% 0.4% 1.0% 0.2% 1.0% 74 27 36 39 16 53 1.1% 0.4% 0.5% 0.6% 0.2% 0.8% 84 34 29 38 22 50 1.3% 0.5% 0.5% 0.6% 0.3% 0.8% 1,048 16% 964 14.6% 1,022 16.0% 113 2016 ANNUAL REPORTNumber of terminations, by age group 2014 2015 2016 Male Fem. Male Fem. Male Fem. Under 25 25 to 35 35 to 50 Over 50 30 100 235 13 40 146 421 63 28 71 245 15 18 143 401 43 27 187 176 19 Total, by gender 378 670 359 605 409 Total 1,048 964 1,022 15 247 276 75 613 2014 2015 2016 Turnover Brazil, by gender¹ (%) Male Fem. Male Fem. Male Fem. 11 9 9 8 13 9 Turnover. by age group - Brazil (%)¹ 2014 2015 2016 Under 18 18 to 25 26 to 30 31 to 40 41 to 50 Over 50 0.0 12.0 9.0 10.1 9.3 9.1 0.0 12.1 8.8 8.5 9.0 7.4 0.0 13.1 11.9 10.2 10.3 10.5 1. Meaning of turnover: number of terminations, whether this decision is made by the company (with or without just cause) or the employee, and includes the hiring of a replacement. Calculation method: terminations with a request for replacement / effective company headcount. 2. For the number and rate of terminations at IOs, interns are included. In Brazil, interns and Natura Institute employees are not included. 114 2016 ANNUAL REPORTTurnover rate. by country (%)12 Brazil Argentina Chile Mexico Peru France Colombia Total 2014 9.79 8.30 8.80 18.67 7.27 6.47 16.28 10.25 2015 8.83 11.69 10.78 20.94 10.31 5.16 13.12 9.57 2016 10.75 11.64 14.54 20.75 15.58 15.50 13.94 11.46 1. Meaning of turnover: number of terminations, whether this decision is made by the company (with or without just cause) or the employee, and includes the hiring of a replacement. Calculation method: terminations with a request for replacement / effective company headcount. 2. For the number and rate of terminations at IOs, interns are included. In Brazil, interns and Natura Institute employees are not included. Vacancies filled with company employees (%) 2014 2015 2016 Brazil International Operations Total 62 55 60 57 42 54 61 47 57 Senior management vacancies filled by company employees12 (%) 2014 2015 2016 Brazil International Operations Total 70 66 61 72 51 67 73 49 65 1. According to the strategy for the recognition and development of company employees, the number of vacancies filled internally was considered one of the goals of the Personnel Management department. Moreover, some of the departments that had previously demanded intensive external hiring for the acquisition of skills did not do so in 2016. 2. Considers Pay Grade 16 and above. 115 2016 ANNUAL REPORTDiversity 405-2 Pay profile – Average monthly pay in Brazil Operations (R$)1 2 3 4 5 6 2014 2015 2016 Women - Total Production Administrative Management 6,756 1,687 7,448 15,926 7,462 1,823 8,256 16,998 Senior Management 45,643 46,655 Men - Total Production Administrative Management Senior Management Over 45 years old Production Administrative Management Senior Management Up to 45 years old Production Administrative Management 5,687 2,211 6,563 17,136 5,899 2,381 6,880 17,631 54,569 54,843 9,156 2,355 9,843 20,411 62,791 5,836 1,942 6,743 15,876 9,590 2,555 11,061 21,356 61,112 6,340 2,096 7,371 16,721 7,613 2,026 8,217 18,244 48,758 6,210 2,600 7,451 18,512 53,911 9,395 2,777 10,690 22,558 55,214 6,594 2,309 7,581 17,785 Senior Management 43,953 46,055 49,146 1. In 2016, collective bargaining agreements yielded a 9% increase for employees in the operational and administrative areas. The management area received a fixed-amount increment that was incorporated within their basis pay. There were also spontaneous increases and promotion and merit programs, as well as hirings, terminations and transfers, which affected the amounts reported. 2. The calculation does not include the payment of short-term incentives (Profit Sharing). 3. Included the premiums paid to sales managers and relationship managers, plus the WRB (Weekly Remunerated Break). 4. Sales Force employees, when distributed across their categories, with the exception of production posts, reinforce women’s average pay, because of the sales premium. 5. For this indicator, we used the most representative operating units of Brazil. 6. Variations between Female and Male pay levels are exclusively due to remuneration distribution according to Natura’s structure. An individual comparison of pay grade shows that there are no significant differences between the pay of men and women. 116 2016 ANNUAL REPORT401-3 – Rates of return to work following maternity/ paternity leave and retention, by gender1 2014 2015 2016 Employees who were entitled to take maternity / paternity leave Men Women Total Men Employees who took maternity / paternity leave during this period Women Total Men2 Employees who returned to work after their maternity / paternity leave ended Women Employees who returned from maternity / paternity leave and were still employed by the company 12 months after their return Rate of retention of employees who re- turned to work after their leave ended Total Men Women Total Men Women Total 2,141 3,091 5,232 56 157 213 55 160 215 53 137 190 85% 77% 79% 2,163 2,988 5,151 77 158 235 76 145 221 49 126 175 89% 79% 81% 2,065 2,842 4,907 87 139 226 88 151 239 71 107 178 93% 74% 81% 1. Calculation of the retention rate of employees who returned to work after their leave ended is based on the total number that stayed on for more than one year, divided by the total number of individuals who were on leave in the previous year. 2. The 2015 result was corrected from 77 to 76, because one paternity leave began in 2015 and ended in 2016. Health and Safety 403-2 – Rates of injuries, occupational illnesses and days lost1 2014 2015 Absenteeism rate 3.33 2.64 1. Refers only to Natura’s own employees. 2016 Fem. 3.02 Male 1.81 Total 2.34 117 2016 ANNUAL REPORT403-2 –Injuries and days lost as a result of work – Brazil1 2014 2015 2016 Employees In-house service providers2 Employees Employees In-house service providers2 Occupational illness fre- quency rate (%) Days lost – accidents34 0 186 0 134 Rate of days lost – accidents 17.04 23.74 Injury rates (accidents with or without time off )5 Fatalities 1.83 0 5.67 0 0.2 212 19.81 1.212 0 In-house service providers2 0 329 0.1 161 38.23 15.36 4.42 0 1.43 0 0 150 14.9 2.68 0 1. Considers the accidents involving employees registered at the units of Cajamar and Lapa, distribution centers, Itupeva hub, Nasp and Ecoparque. Minor injuries that only required first aid were not included. 2. Includes our service providers allocated at the units of Cajamar and Lapa, distribution centers, Itupeva hub, Ecoparque and Nasp. 3. A day lost is when the employee does not return to his or her job until the next work day after the incident, and includes all subsequent days starting from that date. 4. Total hours scheduled: 8 hours/day x number of business days in the period. 5. Equivalent to the number of accidents with or without time off work, per million person-hours worked. Investments in health and safety Prevention of accidents, per employee (R$)1 Prevention of illness (R$)2 2014 1,200 2,905 2015 1,068 2,661 2016 1,407 2,848 1. Training expenses are not included. 2. With regard to investments in disease prevention, at the end of 2016, Natura launched the Viva sua Saúde (Live your Health) program, which takes an integrated approach to life and physical, emotional, financial and social health. The existing programs were distributed among these pillars, in order to make them relevant and unify the language and communication channels used. Existing programs for chronic illnesses, counseling, pre-natal care, vaccination campaigns, ergonomics and the program that organized the presence of medical professionals on site (physical therapy, psychology, orthopedics and gynecology) were kept on. 403-3- Employees with high incidence or high risk of diseases related to their occupation There are no workers involved in jobs with a high risk of catching any sort disease, since there is no manipulation of any type of raw material that could explain the incidence of diseases contracted due to a particular job. Employees diagnosed with an occupational illness receive support, such as transportation and medication assis- tance, so they can receive treatment. There are a variety of specialists in our internal infirmaries, located at the com- pany’s main units, to ensure treatment and close monitor- ing of employees. We also provide a Professional Support Program, through which it is possible to obtain psycholog- ical, legal and social guidance. In 2016, the health area focused on the analysis and mon- itoring of employees with occupational illnesses and was able to considerably reduce the percentage of employees who need to go on leave due to this type of afliction. 118 2016 ANNUAL REPORTBenefitis 401-2 – Comparison between benefits of full-time and temporary employees Stakeholder group All employees in Brazil Operations Benefit Description Ergonomics program Seeks to make every worker comfortable and productive in his or her workstation and well-adjusted to their working conditions, making changes if needed. Social service Espacio de discusión, comprensión y resolución de las cuestiones de orden social de los colaboradores. Calisthenics program Promotes quality of life and health in the work environment and helps reduce stress-related illnesses. Chronic illness management program Discounts on product purchases Viva Saúde program Program for Women For employees and family members of those with chronic illnesses. A 40% discount in up to five Natura products per month. Aimed at all employees, with the goal of stimulating a reflection on quality of life and the importance of prevention and promoting good health. Regular pre-natal check-ups by a dedicated medical team, medical insurance upgrade and postpartum psychological monitoring. Child care and special help subsidies Hosting of meet-ups for pregnant women and their partners and/or other family members or friends. Life insurance To cover education costs of children with disabilities. Transport Vehicles and a fuel allowance for employees at senior management level and above. Parking Available at Cajamar, Nasp and Alphaville. Drugstore discount program Medicine discounts for all employees with payment deducted directly from their salary. Free chartered transport Runners project 140 bus lines chartered at no cost to employees. Training for running races and walks in local parks (Villa-Lobos, Ibirapuera, Alphaville e Cajamar), run by professionals. Sale of school mate- rials With discounts and installments deductible from employee’s salary. Natura Club Fitness training, swimming pool (extended to family members, including on weekends), dancing classes, football tournaments and multi-sports court (Cajamar). Well-being center Massages, hairdressing, waxing and manicures, at special prices. Services and conve- niences Seamstress services, laundry, shoe repair, optician, insurance company, post office and book rental store and video store (Cajamar). Partnerships Discounts and/or perks for employees (gym, home appliances, travel agency, panetones - traditional Milanese fruit cake usually consumed during Christmas time, - movie theaters and theme parks). 119 2016 ANNUAL REPORTStakeholder group All employees in Brazil Operations Benefit Description Presents Presents for employees’ mothers and fathers and toys at Christmas for their children. Recognition of length of employment Employees get a party and a present when they have been working for Natura for five years, and then again every five years after that. Natura Education Scholarships for employees and family members (the program is being revised in 2017). Nursery Fully subsidized for children up to the age of 2 years and 11 months. Adoption Support offered during adoption processes. Medical and dental plans Medical plan, with no fixed cost for the employee, and a dental plan. We also offer check-ups for employees from management level up. Partial reimbursement of the cost of medicines For treating cardiovascular diseases, diabetes, kidney failure, cancer, liver diseases, neurological disorders, work-related musculoskeletal disorders and psychiatric disorders. Telemedicine Eletrocardiogram by phone, in emergency cases. Health on the move Program that encourages physical activity, including nutritional, and medical check-up and orientation, as well as advice from a personal trainer. Gym subsidy For relationship managers and sales managers. Free products Christmas food vouchers Health center Five free products per month for management level employees and directors. To all employees. Emergency medical assistance, physical therapy, RPG, OB/GYN, acupuncture, orthopedics, nutrition and psychology. Personal support program Offers personal assistance in the areas of finance, psychology and law, among others. Restaurants on site at Cajamar, Ecoparque, Nasp and the Itupeva hub Tempo de Casa and Momento Família events Each restaurant caters to the employees of that site and from other locations that are there on business, as well as service providers whose contract states that food services are Natura’s responsibility. Tempo de Casa (Length of Employment) and Momento Família (Family Time) events are held in Cajamar. End of the year company party Combined end of the year celebration for employees of the operational and administrative categories. 120 2016 ANNUAL REPORT Labor Relations 402-1 – Minimum notification period for operational changes There is no minimum period for the notification of operational changes in the collective agreements, but Natura meets the minimum deadlines specified in the current legislation and/or agreed with trade union. 103-2 Channels for airing grievances and lodging complaints related to labor practices Brazil Operations1 Registered Forwarded Resolved3 2015 20162 348 297 271 348 297 271 348 297 271 1. Includes complaints by employees and in-house service providers about benefits, overtime, working hours, medical and dental care, and education and training activities, among other personnel management issues. 2. There was a 9% decline in the volume of complaints regarding labor practices, a figure that is still smaller than the general decline seen in the number of complaints lodged by internal stakeholders (14%). 3. The indicator makes no mention of the nature of the complaints received and dealt with. Therefore, complaints that were not forwarded, for whatever reason, are considered to have been resolved. 121 2016 ANNUAL REPORTEthics and human rights Fighting Corruption 205-1 Units submitted to assessment of risks related to corruption Natura is assisted by the Compliance, Internal Controls, Risk Management, Ombudsman and Internal Audit areas in the prevention of and fight against corruption. All com- pany processes and areas are indirectly subjected to risk assessment and mitigation. Natura currently has several tools it uses for this purpose, such as the Code of Conduct, which includes e-learning for all the employees in Brazil and in International Operations; the Ombudsman chan- nel, which guarantees safe, anonymous and confidential reporting of any violation of the Natura Code of Conduct, the activities of the Ethics Committee, the Policy of Integrity against Bribery and Corruption, and specific codes of con- duct for suppliers and the Natura sales force. Additionally, we conduct regular audits regarding payments and a few choice suppliers. In 2016, the Internal Controls, Risks and Compliance areas continued with the program designed to comply with the Brazilian anticorruption law (Law no 12,846 / 2013) by means of: (i) reviewing the mapping of all critical areas, resulting in 27 areas mapped out; (ii) testing of internal controls mapped for the compliance program; and (iii) internal communica- tions reinforcing the guidelines related to this subject. 205-2 - Employees trained in anti- corruption policies and procedures Senior management Management Administrative Operational Total 2014 2015 20161 Informed Trained Informed Trained Informed Trained 57 765 3,721 2,372 6,915 44 630 3621 2015 59 679 3,819 2,246 6,310 6,803 48 619 3,594 1,998 6,259 54 631 3,584 2,101 51 614 3,393 1,928 6,687 6,683 1. Total number of training sessions held in 2016 on the Code of Conduct with employees from Brazil operations and International Operations and the proportion of the headcount base at the end of December 2016. Indirect operational staff were added to the administrative staff. Of the 6% of the headcount who did not attend Code of Conduct training, 55% were on leave and 36% work in International Operations, where there was considerable reinforcement of the training and improvement opportunities were identified. 122 2016 ANNUAL REPORT205-2 – Commercial partners informed about anti- corruption procedures – Brazil1 Total number of partners % of partners South Southeast Midwest Northeast North Total 33 480 5 21 16 555 10% 13% 5% 7% 5% 12% 1. In 2016, we revised the Code of Conduct for suppliers in Brazil and in International Operations. This update was communicated to 555 suppliers in Brazil. Natura made payments to 4,720 Brazilian suppliers in 2016, so the communication rate represents 12% in terms of supplier numbers, but in terms of purchase volume it is equivalent to 83%. Confirmed cases of corruption and actions taken In 2016, six cases of fraud were confirmed, none of which involved a public body. This number represents half the figure for the previous year. The six cases resulted in disci- plinary actions for five employees (termination). As for commercial partners, there were no cases in which contracts were rescinded or not renewed due to an inci- dent of this nature. 205-3 102-43 / 102-44 Satisfaction with the Ombudsman – Brazil1 2014 2015 2016 Employees (%) 83 83 82 1. Ratings from 7 to 10 are considered as being satisfied with this channel. The survey response rate was 50%. We are still evolving in terms of conducting the survey in such a way that we have a more substantial rate of response in relation to the total volume of complaints. Disciplinary actions In 2016, our complaint and analysis channels confirmed six cases of fraud that resulted in disciplinary actions being taken against five employees, who were dismissed by Na- tura. There were no cases involving a public body. 205-3 The dissemination of clear and specific codes of conduct for each stakeholder group (employees, suppliers and the sales forces in Brazil and in International Operations) provides clarity on instances of non-compliance and, combined with the reinforcement of the whistleblowing channel, strength- ens the company’s conduct in ethical issues. 419-1– Percentage of employees trained in anti-corruption procedures Management Non-management 2014 82% 92% 2015 90% 92% 2016 97% 94% 123 2016 ANNUAL REPORTHuman Rights 410-1 – Percentage of security staff trained in policies or procedures related to human rights Our security practices cover human rights training, in- cluding legal training, as required by the Federal Police, and internal training. All employees of the surveillance area undergo the training required by the Federal Po- lice. Additionally, they are trained in special activities, for which we do not have figures for the year of 2016. 406-1 – Total number of incidents of discrimination and corrective actions taken All lodged complaints are handled by the Ombudsman. Natura has never received a complaint about proven discrimination, but if one arises, appropriate action will be taken. It should be noted that all complaints re- garding possible ethical deviations, as is the case with discrimination, are reported to the Ethics Committee, which is composed of Natura’s senior managers, among others. 103-2 – Number of grievances and complaints that have been registered, processed and resolved1 2014 2015 2016 Employees and in-house service providers - Brazil 1,256 Employees and in-house service providers - International Operations Suppliers - Brazil Supplier communities Total 1. Complaints received by the Ombudsman. 5 13 0 1,274 910 17 29 0 956 771 15 48 0 834 Complaints dealt with by the Ombudsman 2014 2015 20164 Total of complaints forwarded Total of complaints dealt with1 % complaints dealt with23 1,170 1,170 92 888 888 93 794 794 95 1. Complaints dealt with by the Ombudsman’s Office, together with the managers responsible for the process/ manager mentioned. 2. The survey considered the ratio between complaints lodged and dealt with regarding Internal Stakeholders (731), International Operations (15) and Suppliers (48). 3. Of the 40 complaints that were not forwarded, 9 were filed at the request of the complainant themselves and 31 were filed because of insufficient information. 4. In 2016, 32% of all complaints were anonymous. Regarding their subjects, 74% were related to technical criticism and 26% dealt with behavioral issues. The main subjects of complaints were related to issues regarding chartered transportation, VIP stores, health center and medical plan, food and electronic punch card. During 2016, of all comments received, 64% were criticism, 10% complaints, 7% suggestions and 4% praise. 407-1 – Degree of application of the right of free association and operations and suppliers identified as risky Natura did not identify any operations or suppliers where the right to exercise freedom of association and collective bargaining may be violated. The Ombudsman is available to suppliers in Brazil and in International Op- erations. The Suppliers Code of Conduct was launched in Brazil in 2014 and in 2015 for International Operations. Both address the issue of freedom of association and collective bargaining. 124 2016 ANNUAL REPORT408-1/409-1 – Operations and suppliers at risk for occurrences of child labor and actions taken. Opera- tions and suppliers identified at risk for situations of forced or slave labor and actions taken. 103-2/ 103-3 We performed an analysis of supplier communities in 2013, and implemented specific action plans that addressed the involvement of children and adolescents in biodiversity production chains. The plans, which have all been conclud- ed, involved dissemination of our positioning (Natura does not tolerate forced or slave or child labor in its production chains), discussion of the points raised in the analysis and investment in the traceability of the inputs supplied. Incident monitoring is now carried out by the Socio-Biodi- versity Chain Verification System, which was implemented in all supplier communities in 2016, together with the UEBT (Union for Ethical BioTrade). This system has an indicator that monitors the risk of occurrence of child labor, slave la- bor or forced labor. There was no verified occurrence of child labor, forced la- bor or slave labor in the communities that supply Natura’s biodiversity inputs. However, in some Amazon communities that sell biodiversity inputs, there are signs that there are children and adolescents working in its production chains, albeit in a family environment – a cultural tradition in some communities. This does not necessarily mean they are not complying with Natura’s principles (i.e.: children who help their parents, but attend school, are not not complying with the principles of ethical biotrade). The Socio-Biodiversity Chain Verification System is accred- ited annually by external auditors. Read more about our relationship with supplier commu- nities, on page 55. 408-1/414-2 - Significant real and potential negative impacts on human rights in the supply chain and actions taken. Operations and suppliers at risk for occurrences of child labor and actions taken In 2016, 338 suppliers were submitted to an assessment regarding their impact on environmental, social, labor and human rights (child labor and forced or slave labor) issues. Since Natura has a zero tolerance policy for child and forced labor, there are no suppliers that present this risk and, there- fore, no improvement agreements have been signed. We also reviewed the Code of Conduct for suppliers in Bra- zil and in International Operations in 2016, reinforcing our position of full compliance with human rights requirements and zero tolerance for child and forced labor. 411-1 - Total number of incidents of violations involving rights of indigenous peoples and actions taken In 2016, there was no record of any incident involving indigenous peoples in any of the locations where the company operates. Unfair Competition / Compliance 206-1/419-1 - Total number of lawsuits for unfair competition. Monetary value of significant fines and total number of non-monetary sanctions There was no record, in 2016, of any lawsuit related to un- fair competition, trust or monopoly practices or significant fines or non-monetary sanctions resulting from non-com- pliance with laws and regulations. Public Policy 415-1 – Policies on financial contributions made to political parties, politicians or institutions The company has not made any kind of contribution to po- litical parties and/or candidates running for public office, in any of its operations, during or outwith elections since 2006 125 2016 ANNUAL REPORT102-13 - Institutional Relations In 2016, Natura became involved in public affairs through trade associations dealing with issues related to sustain- ability, such as the preparation of the regulation frame- work for access to biodiversity, the industry agreement on packaging and the national policy on solid waste. We were also present during discussions on taxation. The company’s institutional representation in 2016 was as follows: Roberto Lima, then Natura’s CEO, was on the CEO Council of the WFDSA (World Federation of Direct Selling Associations), an organization that brings together 60 di- rect selling associations from all over the world. In Brazil, Moacir Salzstein, Natura’s Director of Corporate Gover- nance, took over the vice-presidency of the ABEVD (Bra- zilian Association of Direct Selling Companies). Moreover, Natura has active representation on this association’s committees, such as the Committee for Legal and Tax Af- fairs; the Institutional Relations Committee; and the Re- search Committee, among others. These actions reinforce our belief that relationships and the direct selling model are the core of our business. Also in 2016, Marcelo Behar, the Director of Corporate Af- fairs, served as vice-president of Abihpec (Brazilian Associ- ation for the Personal Hygiene, Fragrances and Cosmetics Industry), an association where we are also very active in its working groups, especially in: Environment, Taxation and Regulatory, in addition to the respective subgroups. As part of our industry activities, we also participated in Getap (Applied Taxation Studies Group) and the Fiscal Studies Center (NEF) at the Getúlio Vargas Foundation. At the CNI (National Confederation of Industry), we partici- pate in environmental, tax and foreign trade forums. Daniel Gonzaga, Director of Product Development, is on the executive board of Anpei (National Association for Re- search, Development and Engineering of Innovative Com- panies). Our co-founders also serve on the board of various asso- ciations. Pedro Passos is a member of the board of Iedi (In- stitute for Industrial Development Studies). Guilherme Leal is a member of the B Team, a global group of leaders for social, environmental and economic transformation, and of the Advisory Committee of the Ethos Institute (Ethos Insti- tute for Business and Social Responsibility), where Marcelo Behar sits on the Steering Committee, and we also partici- pate in some working groups. 126 2016 ANNUAL REPORTNatura Consultants Productivity 203-2 – Average annual income generated (R$) 2014 2015 2016 Consultants (NCs)1 Natura Consultant Advisors (NCAs)2 4,290 14,306 4,161 17,614 4,028 18,428 1. Average annual income earned by our NCs through Natura product sales. 2. The NCAs receive commissions according to their performance (number of NCs placing orders and volume of business). Training and Recognition Participation of Natura Consultants in training – Brazil (thousand) 2014 2015 Beginner Natura Consultants Initial training Total NCs trained on the topics1 Training activities NCs trained (%) 496 378 372 2014 45 543 315 393 2015 41 Training courses carried out2 (thousand) 1,546 1,909 2016 554 230 397 2016 39 1,789 1. Participation of the same consultant in different training courses. Only training in the Face, Fragrances and Makeup categories, applied by Relationship Managers, is included. 2. Total number of training courses held, whether delivered by Relationship Managers, through online training and/or other initiatives. Training of Natura Consultants– International Operations1 2 2014 2015 2016 Argentina Chile Colombia Peru Total 7,512 4,490 5,666 6,512 8,590 4,091 6,717 7,088 10,389 5,233 7,035 12,582 24,180 26,486 35,239 1. Average number of consultants trained per cycle, without repetition, in the three main categories: Face, Fragrances and Makeup. 2. In 2016, we launched virtual courses in all categories, which are also included in this indicator. 127 2016 ANNUAL REPORTRecognition of NCs - Brazil 2014 2015 2016 NCs recognized as Natura standouts1 NCAs recognized as Natura standouts2 7,433 2,287 13,894 1,631 12,177 1,389 1. Natura Standouts: program that values and gives recognition to individuals in our network who excel each year in different ways. 2. The NCA Recognition Program was developed to value and give recognition to those who show outstanding behavior in orientation activities. In Natura Standouts, the Advisors gain recognition because of activity and volume. In Evolução do Momento (Evolution of the Moment), we celebrate the development of NCAs in orientation activities. Customer Services 103-2 - Complaints related to impacts on society registered, processed and resolved through a formal mechanism Brazil Operations12 Registered Forwarded² Resolved 2014 2015 2016 1,826 2,369 3,556 1,826 2,296 2,953 1,826 2,296 2,953 1. The scope considers the complaints of consumers and Natura Consultants lodged through the channels that serve these stakeholders. We do not include suppliers here, because this group is contemplated in another indicator. 2. There was a significant increase in complaints made by consultants regarding unsolicited orders and negative experiences reported by consumers. The increase in unresolved complaints is due to cases being closed for lack of response from the complainant. 128 2016 ANNUAL REPORTSuppliers Environmental Impact Natura’s main suppliers of packaging and raw materials1 2014 2015 2016 Total number of suppliers evaluated 94 118 83 Energy consumption Primary source of eletricity – eletricity consumption (J) 1,1 x 1,014 9,9 x 1,013 8,3 x 1,013 Self-generated electricity – diesel generator (J) 1,6 x 1,013 1,9 x 1,013 4,9 x 1,013 LPG consumption (J) 1,3 x 1,013 3,9 x 1,012 3,1 x 1,012 Others – natural gas (J) 6,7 x 1,013 6,0 x 1,013 3,8 x 1,013 Total energy consumption (J) 2,1 x 1,014 1,8 x 1,014 1,7 x 1,014 Water consumption Total water consumption (m³) 342,813 281,000 157,978 Waste generation Total waste sent to landfills or incinerated (t) Total waste sent to recycling (t)2 845 8,280 1,460 6,065 1,285 4,618 1. In 2016, the survey response rate was down 30% in comparison with the previous year. Despite the increase in diesel consumption, total energy consumption decreased by 5% in relation to the previous year. Considering the relative consumption, there was a 16% drop in total energy consumption and by 44% in water consumption. In the case of waste, we are starting to see more robust results following a change in the calculation method, in 2015 - we now separate the different types of disposal and waste class (hazardous or non-hazardous). 2. The indicator started to be monitored in 2013. Social and environmental evaluation of suppliers is based on respondents’. The monitoring of environmental data is part of the supplier development program (Qlicar) and, through that program, we seek to increase the number of respondents and stimulate continuous improvement. Suppliers that do not participate in the Qlicar program are also monitored. As expected, there were reductions in the consumption of water and electricity, as a reflection of the water shortage crisis and the Brazilian energy scenario. 308-1 – New suppliers selected based on environmental criteria1 Total number of suppliers screened Total number of suppliers hired based on environmental criteria % of suppliers hired based on environmental criteria 2014 1,876 42 2.2 2015 2016 1,719 39 2.3 999 19 1.9 1. The number of new suppliers in the categories that are subject to evaluation and monitoring of environmental, labor, social impact and human rights criteria is low when compared to the total number of new Natura suppliers, at around 1.9%. However, these categories account for 70% of Natura’s entire purchase volume. 129 2016 ANNUAL REPORT308-2 - Total number of critical suppliers evaluated based on environmental factors1 Suppliers submitted to environmental impact assessment Suppliers identified as the cause of significant environmental impacts Improvement agreements signed Improvement agreements signed (%) 2014 2015 20162 414 409 338 142 128 120 134 73 53 94% 57% 44% 1. Environmental assessment is carried out through audits. Identified deviations are monitored monthly by the auditing department. We have already seen improvements in 44% of cases. 2. In 2016, we changed the calculation criteria, considering all suppliers audited during the year and only suppliers that completed the agreed upon improvement actions. Impact Related to Labor Practices 103-2 / 103-3 414-1 – Percentage of new suppliers selected based labor practices-related criteria12 2014 2015 2016 Total number of suppliers screened Total number of suppliers hired based on labor criteria % of suppliers hired based on labor criteria 1,876 42 2.2 1,719 39 2.3 999 19 1.9 1. The volume of new suppliers in the categories that are subject to evaluation and monitoring of environmental, labor, social impact and human rights criteria is low when compared to the total number of new Natura suppliers, at around 1.9%. However, these categories account for 70% of Natura’s entire purchase volume. 2. The percentage variation is not relevant, but there is a significant reduction in the total number of suppliers, due to a change in the methodology for calculating this indicator. Now, only companies that were registered and that handled purchase orders during the year in question are considered new suppliers. 414-2 - Significant real and potential negative impacts on labor practices in the supply chain Suppliers submitted to labor impact assessment Suppliers identified as the cause of significant negative impacts Improvement agreements signed Improvement agreements signed (%) 2014 2015 20161 414 409 338 123 120 113 117 65 50 95.12% 54.17% 44.25% 1. In 2016, we changed the calculation criteria, and now include all suppliers audited in that year and, for improvements, only the suppliers that completed the agreed upon actions. 130 2016 ANNUAL REPORTImpact on Society 103-2 / 103-3 414-1 – Percentage of new suppliers selected based on impact on society 2014 2015 2016 Total number of suppliers screened Total number of suppliers based on criteria relating to their impact on society1 % of suppliers hired based on criteria relating to their impact on society2 1,876 42 2.2 1,719 39 2.3 999 19 1.9% 1. The percentage variation is not relevant, but there is a significant reduction in the total number of suppliers, due to a change in the methodology for calculating this indicator. Now, only companies that were registered and that handled purchase orders during the year in question are considered new suppliers. 2. The number of new suppliers in categories that are subject to evaluation and monitoring of environmental, labor, social impact and human rights criteria is low when compared to the total number of new Natura suppliers, at around 1.9%. However, these categories account for 70% of Natura’s total volume of purchases and refer to production inputs, third-party manufacturers, gifts, laboratories, research, transport, logistics operators, customer services, marketing, services, local communities and cooperatives. 414-2 - Significant real and potential negative impacts of the supply chain on society and actions taken1 2 Suppliers submitted to assessment of their impact on society Suppliers identified as the cause of significant negative impacts on society Improvement agreements signed Improvement agreements signed (%) 2014 2015 2016 409 338 115 126 130 104 78 51 90% 62% 39% 1. In 2016, we changed the calculation criteria, and now include all suppliers audited in that year. In the percentage of agreements reached, we have included only those suppliers that have completed the improvement actions agreed upon. 2. The most significant impacts relate to meeting the quotas of apprentices or people with disabilities, lack of or adequate training in the Code of Ethics, unidentified local community development activities, disclosure or not of the complaints channel. We stress that the identified deviations are monitored monthly by the auditing department and we have seen improvements in 39% of cases. 414-1 - Percentage of new suppliers selected based on human rights-related criteria (%) 1 2 2014 2015 2016 2.2% 2.3% 1.9% 1. The volume of new suppliers in the categories that are subject to evaluation and monitoring of is low when compared to the total number of new Natura suppliers, at around 1.9%. However, these categories account for 70% of Natura’s entire purchase volume. 2. The percentage variation is not relevant, but there is a significant reduction in the total number of suppliers, due to a change in the methodology for calculating this indicator. Now, only companies that were registered and that handled purchase orders during the year in question are considered new suppliers. 131 2016 ANNUAL REPORTSupplier Communities 203-1 - Significant impact on supplier communities 103-2 / 103-3 The positive impacts arising from the relationship between Natura and its supplier communities are income generated from the purchase of inputs, investment in the development of higher value-added production chains, and encourage- ment to develop the technical capacities and skills of these partners, through training, as well as knowledge exchange with other producers and the development of partnerships with other companies. All these actions aim at contributing to the establishment of a sustainable commercial model focused on the conservation of socio-biodiversity. No neg- ative impacts have been identified so far in the supplier communities with which Natura works. Direct investments are made in the form of payments for supplies, sharing of benefits and use of image, and are paid directly to each local community. When it comes to providing support and infrastructure for the development of produc- tion chains, training, studies and technical services, financial resources allocated through projects that support coopera- tives, materials, equipment and courses directed at improv- ing the production chain or providing technical support. Among the indirect impacts of their relationship with Natu- ra are the development of production chains and improve- ment of skills of the populations involved, through training in health and safety programs, good management prac- tices and administrative and organizational management. Additionally, there is potential to create new opportunities and commercial partnerships, form a network of commu- nities and knowledge exchange, focus on biodiversity con- servation and establish a commercial model focused on biodiversity that can influence stakeholders. In 2016, there was an increase in investments, mainly due to the abundant volume of inputs provided for soap pro- duction, leading to a greater need for investments in infra- structure and materials in the production chains; studies and technical services. Read more about our relationship with supplier commu- nities on page 55. 132 2016 ANNUAL REPORTConsumers Brand Image 102-43 / 102-44 Loyalty (%) 1 2 2014 2015 2016 Consumers - Brazil Consumers - IOs3 64 65 58 67.3 56.2 68.7 1. Brand Essence research conducted by the Ipsos Institute in all countries, between November and December 2016. 2. Indicators generated through a quantitative survey of 3,000 interviews in Brazil (30 municipalities across the country), and 2,000 interviews in the five Latin American countries (Argentina, Chile, Peru, Colombia and Mexico). Loyalty is based on the percentage of people surveyed who gave the maximum score (Top1Box), on a scale of 1 to 5 points, to three factors: satisfaction, intention to continue the relationship with Natura and recommending the brand. 3. The scores from Chile and Colombia were not considered in 2016, due to an invalidation of study results caused by a field quality problem involving the Ipsos Institute. The study will be redone in these countries, with results expected in May 2017. The 2015 indicator has been recalculated on the same basis, to ensure comparability. 102-43 / 102-44 Consumer Preference Index12 – Customers (%) 2014 2015 2016 Consumers - Brazil Consumers - IOs3 Recommendation - IOs4 41.8 21.4 81.9 35.1 24.3 81.9 30.9 27.3 91.1 1. Brand Essence research conducted by the Ipsos Institute in all countries, between November and December 2016. 2. Indicators generated through a quantitative survey of 3,000 interviews in Brazil (30 municipalities across the country), and 2,000 interviews in the five Latin American countries (Argentina, Chile, Peru, Colombia and Mexico). Brand preference is based on the following question: Out of all the cosmetics, hygiene and beauty brands you know, which is your favorite? 3. For IO preference, the weighted scores of Argentina and Peru were considered. The results from Chile were not considered in 2016, due to an invalidation of study results caused by a field quality problem involving the Ipsos Institute. The study will be redone, with results expected in May 2017. In Mexico and Colombia, countries that are in consolidation, we did not evaluate brand preference. 4. The recommendation results for Chile and Colombia were not included, since the research was invalidated in those countries, for the reasons cited in note 3. Global assessment of brand image survey - Brazil¹ (%) 2014 74.2 2015 73.0 2016 72.5 1. Source: Brand Essence / Ipsos Institute. The indicators are the result of a quantitative sample of 3,000 interviews conducted in person at people’s homes in 27 different cities. It is the same sample used in the 2015 research, whichh makes the data obtained comparable. 133 2016 ANNUAL REPORTConsumer Health and Safety 416-1 - Assessment of the impacts on health and safety during product and service life cycle The categories of marketed hygiene products, cosmet- ics and perfumes are regulated by Anvisa in Brazil, as well as by similar local regulatory bodies where we have International Operations. In 2015, a new indicator was created – “delivery of technical dossier to Anvisa for ap- provement of new product” – in which all Anvisa legal requirements regarding health and safety are checked off. With this new indicator, 100% of marketed products follow established procedures and are monitored for post-market availability. Also in 2016, we opened our first Natura store in New York. All products sold in the U.S. market have been evaluat- ed and comply with local regulatory requirements, such as those of the Food and Drug Administration (FDA), and of the California Proposition 65 (a list of more than 800 chemical products that are subject to restricted use). 417-1 – Labeling of products and services 103-2/ 103-3 Natura products contain information on how to use them, which of the substances used in its formula are capable of generating social and environmental impacts, how to dis- pose of the product, indication of the recommended num- ber of times the packaging can be reused and data on pro- duction outsourcing. All Natura cosmetics are evaluated according to the requirements of the Environmental Table. Read more about our consumer safety practices on page 39 Origin of materials and product certification (%) 2014 2015 2016 Materials of renewable plant origin Materials of natural plant origin Materials with certificate of origin 82.6 7.2 12.2 83 6.6 13 83 5.6 13 Marketing Communications 417-3 - Cases of non-compliance regarding product and services communications In 2016, Natura received no notifications regarding non-compliance with regulations and laws, nor any voluntary codes related to marketing communications, including advertising, promotional actions and sponsorships. 416-2/417-2/419-1 – Fines or non-compliance related to impacts caused by products and services, labeling or the supply and use of products and services In 2016, Natura received no notices, penalties or fines for violation of the laws and regulations that govern the supply and use of products, labeling or allegedly endangering the health and safety of consumers. Only one payment was made in 2016, totalling R$ 6,000, due to non-compliance with import standards and formalities. 134 2016 ANNUAL REPORTLocal Communities Hiring from the local communities 202-2 - Senior managers who are from local communities - Brazil¹ 2014 2015 20166 Total number of senior managers Cajamar (%)2 Benevides (%)3 Nasp (%)4 Lapa (%)5 185 3.1 0.0 9.2 n.a. 169 1.5 0 0 22.1 164 0 0 0 4.3 1. Senior managers are the positions starting from Senior Manager (Business Manager, Process Manager and Global Manager) at Brazilian operating units. 2. Surroundings of Cajamar: the whole town of Cajamar (São Paulo state). 3. Surroundings of the Ecoparque: municipalities of Benevides, Marituba, Santa Bárbara and Santa Izabel, and Mosqueiro district (part of the city of Belém), all in the state of Pará. 4. Surroundings of Nasp: Jaguara district (part of the city of São Paulo, comprising the following neighborhoods: Vila Jaguara, Vila Piauí, Remédios and Jardim Marisa); 5. A few employees have been temporarily allocated to the Lapa site. This allocation is provisional, for the duration of construction at the new Nasp site. After it is completed, these employees will be allocated there permanently. Its surroundings include the districts of Lapa, Vila Leopoldina and Barra Funda, all in the city of São Paulo (São Paulo state). 6. At present, none of the senior managers resides in a local community that surrounds one of Natura’s operational units. The only exception is the Lapa site, which is temporary, as explained in the note above. Actions designed to boost local development currently place more emphasis on hiring employees from local communities for entry-level positions at Natura. Senior managers who are from local communities – IOs (%)¹2 2014 2015 2016 Argentina Chile Colombia France Mexico Peru Total 59 0 50 100 44 40 50 59 0 20 100 50 66 40 67 20 25 25 70 67 57 1. Senior managers are those holding positions from Senior Manager upwards. 2. Most of the senior management roles are occupied by professionals who are native to the country where Natura is operating, so that the business works according to local market benchmarks. In 2016, some of the senior manager vacancies were filled by employees from Brazil who possessed the skills required to take on these roles. 135 2016 ANNUAL REPORTEmployees from local communities¹ (%) 2014 2015 2016 % of employees from local communities in Benevides2 % of employees from local communities in Cajamar34 % of employees from local communities at Nasp45 % of employees from local communities in Lapa6 26 15 1 n.a. 43 17 2 7 48 17 2 5 1. In 2016, we changed the criteria for defining the regions considered as local communities surrounding Natura, in order to align them with the regions covered in our territorial development strategy. As a result, this indicator directly reflects the results of our efforts in activities that contribute to local social and environmental development. The data for the years 2014, 2015 and 2016 were updated according to these new criteria. 2. Surroundings of Ecoparque, in Benevides: municipalities of Benevides, Marituba, Santa Bárbara and Santa Izabel, and the district of Mosqueiro, which is part of the city of Belém, all in the state of Pará. 3. Surroundings of Cajamar: the entire town of Cajamar (São Paulo state). 4. Despite the efforts and activities directed at the territorial development of Cajamar and Nasp, 2016 was a year of restrictions on new employee hiring, which meant that the number remained stable between 2015 and 2016. 5. Surroundings of Nasp: district of Jaguara, which is part of the city of São Paulo (São Paulo state) and comprises the neighborhoods of Vila Jaguara, Vila Piauí, Remedios and Jardim Marisa. 6. Region not considered in the territorial development strategy, since the allocation of employees to this site is provisional, for the duration of construction at the new Nasp site. After it is completed, these employees will be allocated there permanently. The surroundings of Lapa include the districts of Lapa, Vila Leopoldina and Barra Funda, all in the city of São Paulo (São Paulo). 204-1 - Policies, practices and proportion of spending on local suppliers (R$ million)1 2014 2015 2016 Cajamar Benevides2 Total Spending on local suppliers as a proportion of total spending on suppliers (%) 148 132 281 7.0 144 178 322 6.9 155 111 266 5.1 1. They are considered suppliers of the municipalities of Cajamar and Benevides, but supply any Natura unit. 2 In Cajamar, the financial increment is mainly due to an increase in business dealings with partners who migrated to the local environs. In Benevides, the reduction was a reflection of changing the definition of “local”, which previously included the entire state of Pará. 136 2016 ANNUAL REPORTEnvironmental Management GHG Emissions 305-1/305-2 – Emissions from the value chain 1 2 2014 2015 2016 Extraction and transportation of raw materials and packaging (processing and transportation to direct suppliers) 141,574 127,788 122,337 Direct suppliers (processing and transportation to Natura) 35,154 31,731 30,378 Industrial and internal processes 29,325 18,557 15,663 Product sale (transportation and distribution) 49,593 66,749 63,465 Product use and packaging disposal 76,680 76,442 71,611 Overall total (t) 332,326 321,267 303,424 1. All the GHG gases were included in the calculations. 2 To calculate our inventory, we considered the total volume of our emissions under Scopes 1, 2 and 3. Our inventory follows GHG Protocol standards and the principles of the ISO 14064-1 standard, which establish rules for its design, development, management, preparation and reporting. In 2016, the report was audited by KPMG. 305-1/305-2/305-3 – Direct and indirect greenhouse gas emissions12 2014 2015 2016 Direct GHG emissions (Scope 1) 1,635 4,156 4,975 Direct biogenic emissions (from biomass burning or biodegrada- tion) 8,826 9,347 8,870 Indirect GHG and energy emissions (Scope 2) 8,371 7,909 5,094 Other indirect GHG emissions (Scope 3) 322,319 309,202 293,355 Indirect biogenic emissions of CO2, in metric tons 8,921 10,746 9,366 Total (t) 332,325 321,267 303,424 1. All the GHG gases were included in the calculations. 2. To calculate our inventory, we considered the total volume of our emissions under Scopes 1, 2 and 3. Our inventory follows GHG Protocol standards and the principles of the ISO 14064-1 standard, which establish rules for its design, development, management, preparation and reporting. In 2016, the report was audited by KPMG. 137 2016 ANNUAL REPORT305-5 – Reduction in greenhouse gases emissions 2016 Weight (t eq of CO2) Type of gas Use of coastal shipping to supply distribution centers in the north/northeast Export gains due to local production Launch of Ekos perfume refill Recycled glass for fragrances Recycled PET packaging 1,118 890 186 86 535 CO2e CO2e CO2e CO2e CO2e Scope (1, 2 or 3) Objetivo 3 Objetivo 3 Objetivo 3 Objetivo 3 Objetivo 3 305-6/305-7 – Emission of substances that deplete the ozone layer / Emissions of NOx, SOx and other significant atmospheric emissions Natura does not use substances that affect the ozone lay- er in its operations. Furthermore, since clean fuels (ethanol, LPG and briquette) are used in all boilers, there are no sig- nificant measurable quantities of NOx and SOx emissions. Transport CO2 emissions Product transportation Logistics Product export Employee transportation Waste transportation Chartered Sales force vehicles Vehicles used by senior management 2014 2015 2016 49,593 10,951 219 2,229 577 449 50,395 16,353 204 2,079 457 331 49,856 13,609 206 1,955 357 201 138 2016 ANNUAL REPORTEnergy 302-1 – Direct and indirect Energy Consumption, divided by primary source (TJ) 1 Type of Source 2014 2015 2016 Solar energy Renewable 0.02 0.02 0.02 Diesel used in generators Non-renewable LPG consumption Non-renewable 6 6 3.27 7.10 4.31 6.17 Electricity Mixed source, predominantly renewable2 197 205.71 189.90 Alcohol consumption3 Renewable BPF oil consumption: Non-renewable Briquette consumption4 Renewable 32 - 33 38.65 40.45 - 1.00X10-12 33.12 29.27 1. Consumption in relation to Natura’s energy matrix: Cajamar, Benevides, Lapa, Distribution Centers and Nasp administrative support, Itupeva hub, Shared Services Center (CSC) and regional offices. 2. Electricity is classified as a renewable source because 75.5% of the Brazilian energy matrix was composed of renewable sources in 2016, according to the National Energy Balance report. 3. Renewable fuel used in Cajamar for steam production. 4. The BPF boiler has been fully replaced by biomass in Benevides as one of the steps to reduce fossil fuel consumption. 302-1 - Energy matrix (%)¹ Type of Source 2014 2015 2016 Electricity2 Mixed source, predominantly renewable LPG consumption Non-renewable source Diesel used in generators Non-renewable source Alcohol consumption3 Renewable source BPF oil consumption Non-renewable source 72 2 2 12 0 71 2 1 13 0 70 2 2 15 0 Solar energy Briquette4 Renewable source 0.01 0.004 0.007 Renewable source 12 12 11 1. Consumption in relation to Natura’s energy matrix: Cajamar, Benevides, Lapa, Distribution Centers and Nasp administrative support, Itupeva hub, Shared Services Center (CSC) and regional offices. 2. Natura stores are not included. 3. Renewable fuel used in Cajamar for steam production. 4. The BPF boiler has been fully replaced by biomass in Benevides as one of the steps to reduce fossil fuel consumption. 139 2016 ANNUAL REPORT302-1 - Total energy consumption, by source (TJ) 2014 2015 2016 Non-renewable fuels Renewable fuels Total fuels 11.8 10.38 10.49 262.2 277.49 259.64 274.0 287.87 270.13 302-1 - Total energy consumption (TJ) 2014 2015 2016 Electricity1 Heating Refrigeration2 Steam3 Total energy 203.1 208.98 194.21 0.00 0.00 66.1 0.00 0.00 0.00 0.00 74.80 72.00 269.2 283.78 266.20 1. Natura stores are not included. 2. At the Cajamar site, electricity used for refrigeration is already included in the total electricity consumption figure. 3. Total consumption of alcohol and briquettes, plus LPG consumption for Cajamar’s boiler. 302-1 - Total energy consumption¹ (TJ) 2014 2015 2016 Cajamar and Benevides2 Other Natura locations in Brazil3 Natura's third-party manufacturers4 Total energy matrix 198.8 75.2 45.0 215.7 72.1 35.8 212.7 57.5 25.9 319.0 323.7 296,0 1. There was a slight reduction (1%) in absolute energy consumption at Cajamar and Benevides, due to a decline in production volumes. Reduction (17%) in absolute consumption of other Natura locations; reduction (28%) in absolute consumption of third-party manufacturers, due to reduced production volumes and internalization of the production of certain products at Cajamar and Benevides. These factors resulted in an 8% decrease in energy consumption compared to 2015. 2. Cajamar and Benevides represent 64% of Natura’s total energy matrix. 3. Other Natura Brazil locations: Itupeva hub, Lapa and Nasp - both in São Paulo (all in São Paulo state). 4. Companies that manufacture finished products for Natura, representing approximately 90% of the total units purchased by Natura. 140 2016 ANNUAL REPORT302-2 – Energy consumption outside Natura spaces (TJ)1 2014 2015 2016 Goods and services acquired 245.94 189.44 148.23 Upstream transportation and distribution 479.71 497.59 495.83 Operational waste generated - - - Business trips 79.58 55.65 45.38 Transportation of employees 30.99 29.48 27.75 Downstream transportation and distribution 194.13 207.94 214.79 Total 1,030.35 980.10 931.99 1. Conversion of fuel consumption to energy using IPCC factors. 302-3 – Energy Intensity 2014 2015 2016 Energy consumption per unit produced1 (Joules x 1012 – kJ) 484.3 539.9 564.9 1. Consumption in relation to Natura’s energy matrix (Cajamar, Benevides, third-party Suppliers, DCs, Itupeva hub, Lapa and Nasp). Calculation formula: sum of all Natura Energy Sources divided by total of units produced. 302-4 – Energy saved (Joules x 1012) 2014 2015 2016 En virtud de proyectos de eficiencia1 En virtud de consumo de energía solar 6.84 0.02 0.04 0.02 0.00 0.02 1. Solar energy consumption has been continuous since the implementation of parking lot lighting and water heating for the nursery, in 2005. Waste Management 103-2 / 103-3 301-1 – Materials used, by weight or volume (except water)1 2014 2015 2016 Direct materials (t) Direct materials (m3) 53,259 70,283 70,635 11,663 9,583 8,162 1. The calculation method was revised and now includes all inputs or raw materials received at Cajamar and Benevides. Prior to 2014, the amount reported included only the materials consumed by Cajamar’s factories. Therefore, the values for 2014 and 2015 were also updated, In line with the new methodology. 141 2016 ANNUAL REPORTEnvironmental impact of packaging, by product quantity¹ (mpt/kg) 2014 2015 2016 Brazil 64 69 53 1. The Life Cycle Assessment methodology goes from the extraction of raw materials to final disposal. The software used to calculate packaging LCA has an international database; therefore, it is necessary to adapt/group the materials used by Natura and the disposal scenarios to Brazilian standards. The environmental impact of packaging as measured by the LCA tool showed a reduction in comparison with the previous year, due to efforts to expand the use of eco-efficient packaging and reduce greenhouse gas emissions, as well as fluctuations in the sales mix. 301-3 - Recovered packaging in relation to total billed products1 2014 2015 2016 Colombia Colombia Argentina2 Colombia Argentina % of recovered packaging in relation to total billed products/items 37% 73% 1% 37% 0,5% Kg of materials recovered 286,608 624,419 22,245 282,150 9,350 1. We have worked on the EcoPontos project in Colombia since 2015, through an alliance with the Family Foundation and recyclers’ associations in Bogotá, Bucaramanga, Medellín, Rionegro and Valledupar. In 2016, we stopped accounting for the waste recovered from our distribution center, since it is not in line with the post-consumer reusable materials methodology. Considering only EcoPontos materials, the volume grew last year, whereas in 2015 this volume amounted to 216 tons. 2. We reviewed our strategy in 2016 and ended the joint project with the Buenos Aires government; consequently, the booked amount refers only to the period from January to April. We partnered with Cempre (Business Commitment to Recycling) and joined the Business Fund for Recycling (Feri) program, which coordinates business resources and public policies to improve waste management and boost recycling rates. Their goal is to help the collective effort of companies in the recovery of post-consumer materials, boosting the impact of the investments. 306-2 – Total weight of waste, by type and disposal method12 2014 2015 2016 Total waste per unit produced (g/un.) 25 25.5 22.8 1. The waste/unit produced indicator is the sum of Natura’s total direct and indirect waste, in grams, divided by the total of units directly and indirectly produced by Natura. 142 2016 ANNUAL REPORT306-2– Direct and indirect waste5 Natura’s direct waste, by type and final disposal (%) Total hazardous waste (Class I) Incinerated Recycling1 Total non-hazardous waste (Class II-A and B) Discarded in landfill Recycling1 Incinerated Discarded in landfill 2014 2015 2016 92 7.6 0 87 4 9 82.4 17.6 0 90 6 4 71.0 28.9 0 91 1,9 7,2 Natura’s total direct waste (t)2 12,168 11,585 9,600 Natura’s total indirect waste (t) 2014 2015 2016 Waste from other Natura locations3 Waste from third-party suppliers4 2,266 2,127 2,053 1,543 1,162 1,131 Total indirect waste (t)5 4,319 3,670 2,293 1. Includes recycled waste sent for composting, co-processing and transformation. 2. Refers to the Cajamar, Benevides, Nasp and SP-DC sites. Natura does not include in this indicator waste generated by construction (rubble) at its sites. 3. Refers to distribution centers, except the SP-DC, Itupeva hub and Lapa. The waste from these units started to be monitored as of 2015. 4. Refers to the main third-party suppliers, representing approximately 90% of the total produced by third parties. 5. In 2016, there was a reduction of 17% in the amount of waste generated, deriving mainly from lower production volumes and projects designed to reduce waste generation that were implemented during the period. The 38% reduction in total indirect waste was due to a planned reduction of production by third-party suppliers, whose volumes were taken over by Natura. 306-4– Total weight of hazardous waste transported Natura does not import, export or transport this type of waste internationally. Water 103-2 / 103-3 303-1– Water consumption (l/unit produced) 2014 2015 2016 0.45 0.49 0.53 143 2016 ANNUAL REPORTWater consumption, by location (m3) 2014 2015 2016 Natura sites1 Other locations2 174,045 177,866 191,277 60,356 52,826 50,224 Natura’s third-party suppliers3 60,299 63,027 37,453 Total Water consumption 294,700 293,719 278,955 1. Covers our industrial units: Cajamar and Ecoparque (Benevides). 2. Includes Nasp, Lapa, distribution centers and the Itupeva hub. 3. Manufacture finished products for Natura. The leading third-party suppliers account for about 90% of the volume produced. 303-1– Total water withdrawal, by source1 (m3) 2014 2015 2016 Surface water (rivers, lakes, wetlands, oceans) 0 0 0 Groundwater 174,045 177,866 191,277 Water distribution company 30,960 20,872 23,858 Total 205,006 198,738 215,135 1. Relates to the Cajamar, Benevides, Nasp and Lapa units. It is not possible to list the sources used by distribution centers, Itupeva hub and third party suppliers, due to the variety of water withdrawal sources used. 303-2– Water sources significantly affected by water withdrawal Due to the lack of a public water supply system, the water resources used at the Cajamar and Benevides facilities are withdrawn from semi-artesian wells. These systems are monitored daily and comply with all regulations estab- lished on the permits granted by the supervising bodies. At Nasp, in the city of São Paulo (SP), the water is supplied by the public utility system. 303-3 – Volume of water recycled and reused 2014 2015 2016 Water recycled¹ and reused² (m³) 99,586 82,972 63,523 Reclaimed water as a proportion of the total amount of water treated at the effluent treatment plant³4 (%) Reclaimed water as a proportion of total water withdrawn (%) 61 67 45 59 42 41 1. Recycled water: water reused for toilet flushing, irrigation and other industrial processes. 2. Reused water: water that is returned from the Cajamar production process and is used in the drinking water system. 3. Reclaimed water: the sum of recycled and reused water. 4. For this indicator, only Cajamar data were considered. 144 2016 ANNUAL REPORTEffluent 103-2/ 103-3 306-1/306-5 – Total water discharge, broken down by quality and disposal. Protection and biodiversity index of bodies of water and habitats Effluent treated at Cajamar (mg/l) Legal parameter 2014 2015 20163 BOD1 QOD2 Oils and greases 60 150 120 20 65.68 17 13.3 55.1 18.4 29.1 76.4 16.6 1. BOD – biochemical oxygen demand. 2. QOD – chemical oxygen demand. 3. Refers to the Ecoparque, in operation since April 2014. 4. The increase in Ecoparque effluent volume is due to the inauguration of the on-site cafeteria, which adds to the volume of sanitary effluent, and to the establishment of Symrise’s (a partner company) headquarters at the Ecoparque, which adds to the volume of industrial effluent. Furthermore, effluent originating from cleaning procedures carried out in 2015 had been stored in tanks, with final treatment scheduled for 2016. Effluent treated at Benevides (Ecoparque) (mg/l)3 Legal parameter 2014 2015 20164 BOD1 QOD2 Oils and greases - - - 7 64 1 10.9 55.9 7.0 5.5 33.4 5.0 1. BOD – biochemical oxygen demand. 2. QOD – chemical oxygen demand. 3. Refers to the Ecoparque, in operation since April 2014. 4. The increase in Ecoparque effluent volume is due to the inauguration of the on-site cafeteria, which adds to the volume of sanitary effluent, and to the establishment of Symrise’s (a partner company) headquarters at the Ecoparque, which adds to the volume of industrial effluent. Furthermore, effluent originating from cleaning procedures carried out in 2015 had been stored in tanks, with final treatment scheduled for 2016. 145 2016 ANNUAL REPORT306-1/306-5 Total water discharge, by quality and disposal Volume (m³) Treated Water quality and treatment method Disposal To be reused by another organiza- tion? 2014 2015 2016 2016 2016 2016 2016 Cajamar1 110,829 129,041 157,101 Yes Benevides -Ecoparque2 - 4,261 18,369 Yes Activated sludge Filtration garden Reuse then dis- charged into the river Discharge into the river No No Benevides 11,838 The old Benevides industrial unit was closed in October 2014 and the prop- erty was returned to its owner Nasp3 28,163 17,849 15,311 No N.A. Municipal network No 1. At Cajamar, the discharge goes into the Juqueri River (class 3). This body of water presents the following results (BOD upstream: 17.7mg/l, downstream: 12.5mg/l), from July 13, 2016. 2. At Benevides/Ecoparque, the discharge goes into a tributary of the Benfica River (class 2). This body of water presents the following results (BOD upstream: <3mg/l, downstream: <3mg/l), from March 23, 2016 and September 28, 2016. This shows that these discharges do not damage the rivers and are in full compliance with current legislation. 3. Nasp has only domestic effluent, which is collected by the Sabesp sewage system. Since there are no meters, the volume of effluent is equal to the volume of water consumed. 306-3 – Total number and volume of significant spills There were no significant substance spills or accidents involving products that have had an environmental impact recorded in 2016. Biodiversity 304-1 – Location and size of areas Cajamar Benevides (Ecoparque) Nasp (São Paulo) Area type Owned Owned Rented Position in relation to the protected area This is an APA (Environmental Protection Area) Includes protected areas Located in an urban industrial area Type of operation Administrative and industrial, for the production of cosmetics Administrative and in- dustrial, for the production of soap paste and soaps Administrative and logistics, for storage and distribution of cosmetics Size of operational unit 646,000 m² 1,729,000 m² 111,700 m² Biodiversity value1 Not available Not available Not available 1. Considers the attributes of the protected area and of areas with a high level of biodiversity outside the protected area (terrestrial, freshwater or marine ecosystem) and classification by conservation status (e.g.: IUCN Category, Ramsar Convention, national legislation, etc.). 146 2016 ANNUAL REPORT304-3 – Protected or restored habitats 2016 Area/Project Size (hectares) Location Area status Cajamar Maintenance of roads and firebreaks Nasp No defined projects Program for the Restoration of Degraded Areas (Prad) 4 Ecoparque Program focused on Permanent Protection Areas (APP), and includes areas of riparian forest. The goal is to boost the local forest. Partnerships (for protection or restoration)? No No No 304-4 – Total number of species included on the IUCN red list and on other conservation lists1 Critically endangered 2014 - 2015 - 2016 - Virola surinamensis (IUCN) – ucuuba Virola surinamensis (IUCN and Env. Min) – ucuuba Endangered Virola surinamensis* (IUCN) – ucuuba Pinus elliottii (IUCN) – slash pine Euphorbia cerifera (CITES) – Candelilla Euphorbia cerifera (CITES) – candelila Vulnerable Bertholletia excelsa (IUCN and Env. Min) - Brazil nut Vitellaria paradoxa (IUCN) - shea tree Bertholletia excelsa (IUCN and Env. Min) - Brazil nut Bertholletia excelsa (IUCN and Env. Min) – Brazil nut Vitellaria paradoxa (IUCN) – shea tree Vitellaria paradoxa (IUCN) – shea tree Santalum album (IUCN)* - white sandalwood Near threatened Ilex paraguariensis (IUCN) - Paraguay tea Ilex paraguariensis (IUCN) – Paraguay tea Ilex paraguariensis (IUCN) – Paraguay tea - - Least concern Cyperus articulatus (IUCN) – piri piri Pinus elliottii (IUCN) – slash pine Bulnesia sarmientoi (CITES and IUCN) – holy wood 1. Plant species that are at risk of extinction, be they native to Brazil or exotic (imported and grown in Brazil) which are used in Natura product lines. Conservation projects are in place, in partnership with research institutions and direct suppliers, to protect the species from Brazilian biodiversity. For the Brazil nut and Paraguay tea, two conservation projects have been carried out, in partnership with Embrapa. Likewise, we have just concluded a conservation project, in partnership with UFSCar (Federal University of São Carlos) to protect ucuuba trees, by collecting its fruit without cutting them down. We also support the adoption of agroforestry systems for the production of Brazil nuts, ucuuba and piri piri in communities in the Amazon. Paraguay tea is off the list of Brazilian flora that are at risk of extinction. On the other hand, piri piri has been placed, for the first time, on the list of the IUCN (International Union for Conservation of Nature) and is a species whose organic chain was developed by Natura. The slash pine species of Pinus, used in fragrance formulas, is obtained from a planted forest whose origin is traceable, as guaranteed by the supplier. In the case of the shea tree, the supplier participates in the Global Shea Alliance, a movement aimed at promoting the sustainability of this production chain. As for candelilla and holy wood, both feature on the CITES (Convention on International Trade in Endangered Species of Wild Fauna and Flora) list, but the supplier complies with international legislation, and possesses the necessary CITES certification. The sandalwood comes from Sri Lanka, a country that follows strict species protection and conservation policies, and has its sourcing guaranteed by the supplier. Furthermore, we have received UEBT (Union for Ethical BioTrade) Certifications for 14 Amazon supplier communities, thereby reinforcing our commitment to ethical sourcing. 147 2016 ANNUAL REPORT Number of certified socio-biodiversity suppliers1 Certified socio-biodiversity suppliers2 Total number of audited socio-biodiversity suppliers % of socio-biodiversity suppliers that have been audited (%) Total number of certified supply chains (input v supplier)3 Total number of audited supply chains (input v supplier) % of total certified supply chains (input v supplier) (%) 2016 14 33 100% 40 113 35% 1. The Socio-Biodiversity Chain Verification System aims at monitoring the principles of ethical biotrade within the supply chains for socio-biodiversity inputs. The system has been applied to 100% of socio-biodiversity suppliers. In the 2016 audit, 14 communities were deemed suitable for certification. Suppliers that have not yet been certified follow monitored action plans. Their status will be assessed with the next audit, and they may then qualify to become certified suppliers. In 2016, the verification system received its first accreditation by external auditors. However, the system has been operating since 2015. 2. Socio- biodiversity suppliers include supplier communities, which are organized into cooperatives and associations, and rural producers. 3. Supply chain: the input provided versus the supplier. Grievance Mechanism 103-2– Number of grievances and complaints regarding environmental impacts 2014 2015 2016 Compliance Registered Forwarded Complaints 20 20 9 20 20 9 20 20 9 307-1 – Significant fines and total number of sanctions for non-compliance with legislation No fines or monetary sanctions related to environmental issues were registered in 2016. 148 2016 ANNUAL REPORTInvestments Investments and spending on environmental protection (R$ thousand)1 Details 2014 2015 2016 Socio-biodiversity Amazon Program¹ 385,000 169,765 220,700 Climate change Carbon Neutral Program 1,731 764 3,293 Waste Water and effluent Reverse Logistics Program and disposal of industrial waste from Natura units Water Footprint Program and treatment of industrial effluent from Natura units Innovation and Social and Environmental Tech- nology Sustainable technology for products and clean technology implemented in operations Social Others TOTAL3 Programs such as Natura Movement, HDI-NC and Local Development at Natura units² Support, sponsorship and associations related to sustainability2, as well as environmental insurance 6,327 9,935 11,375 2,685 3,410 3,583 6,645 6,661 3,874 2,081 2,784 2,225 1,880 1,263 1,194 406,349 194,582 246,244 1. The figures disclosed here for the Amazon Program are annual, unlike the amount disclosed in the Volume of Business in the Amazon indicator (a commitment of the Sustainability Vision), which represents the accumulated amount. 2. Natura Units: Cajamar, Nasp and Benevides. 3. The support and sponsorship listed here is different from Natura’s General Support and Sponsorship indicator, since it only includes the support, sponsorship and participation in associations that are related to the subject of sustainability. The 2014 data do not include associations, because the indicator was revised and recalculated in 2015. 149 2016 ANNUAL REPORT Credits NATURA DIRECTOR OF CORPORATE AFFAIRS Marcelo Bicalho Behar Communication and Creation manager Milena Buosi Coordination of the Annual Report Fábio Peixoto (MTb 59.577/SP) Art direction and graphic design Vanessa Kinoshita Design Carolina Almeida and Cassio Silva SUSTAINABILITY Renata Puchala, Keyvan Macedo, Juliana Pasqualini and Andreza Souza FINANCE AND INVESTOR RELATIONS Financial information Márcio Bologna, Daniel Praça and Leandro Grellet Galvão Market relations Marcel Goya and Luiz Palhares COLLABORATORS FOR THIS EDITION TEXT AND SUSTAINABILITY CONSULTING Report Sustentabilidade Editing Álvaro Almeida and Michele Silva Reporting Renata Costa Project and Relationship Management Ana Souza GRI Consulting Débora Passos , Fabíola Nascimento and Victor Netto DESIGN Bruna Foltran PHOTOGRAPHY Julia Rodrigues, Tomás Arthuzzi and Acervo Natura INFOGRAPHICS Rodrigo Damati REVISION Kátia Shimabukuro TRANSLATION Greenletters Document owner Enzo Raphael Russo CRC: 1SP275298/O-4 152 2016 ANNUAL REPORT

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