Natura &Co Holding S.A.
Annual Report 2022

Plain-text annual report

2022 Annual Report 2022 Annual Report 01 — Our Group (04) 02 — Our Brands (40) 03 — Our Commitment to Life (84) Our Group Natura &Co annual report – 2022 Our group 6 7 Message from the Board Man did not weave the web of life; he is merely a strand in it. Whatever he does to the web, he does to himself.” — Chief Si'ahl (Seattle), 1855 Luiz Seabra, Guilherme Leal and Pedro Passos, on behalf of the Board of Directors Luiz Seabra We believe that the perception of America, and special attention to the importance of relationships is reassessing the circumstances and the foundation of the great human possibilities of The Body Shop and revolution in valuing peace, solidari- Avon International. Through our ty and life in all its manifestations. transformation, creating a much lighter structure, establishing new The permanent search for im- priorities and resource allocation, provement is what promotes the promoting the evolution of the Upon entering 2022, we shared our little by little will advance. We culti- mately be responsible for achieving development of individuals, organi- traditional direct sales model, and dream of an end to the devastation vate the conviction that we can help its goals. For this transition, we invit- zations and society. Commitment using the best that innovation and caused by the pandemic. In Feb- build a fairer society, or, as we sum- ed Fábio Barbosa to be the CEO of to the truth is the path to fostering technology can offer, we will now ruary, that dream became a night- marized at our headquarters, ”here, our Group. He brought us a wealth good relationships. The greater the be able to expand our integration mare, when we began to contem- we dream of a better world”. of knowledge and experience in diversity of the parts, the great- in Latin America. Our multichannel plate the horrors of war and felt its finance and administration. In ad- er the richness and vitality of the model, with proximity and strong systemic effects. We were perplexed The harsh reality that the pandemic dition to a solid background, Fábio whole. The pursuit of beauty, a relationships with our customers, by an evil that we thought had and the war imposed on us had a is perfectly aligned with our values legitimate desire of every human offers incomparable strengths to Guilherme Leal been eradicated in our civilization. strong impact on our business. The and ideals, such as sustainability and being, must be free from prejudice leverage the foundations on which Strangely, we also began to witness great potential of global markets ethical behavior, both in his heart and manipulation. The company, a this Group is built. more deeply the sad spectacle of at the time we formed Natura &Co and in his practices. living organism, is a dynamic set of polarization in several countries: Group was suddenly altered by relationships. Its value and longevity Having come through the changes another form of war. An ideologi- unpredictability. Our initial priority Living in dark times, it is import- are linked to its ability to contribute imposed by these times of great cal war, that divides and cultivates was to take care of our employees, ant to remember what illuminates to the evolution of society and its volatility in the world market, we be- grudges. That moves our humanity support impacted communities us, and what light inspires us. At sustainable development”. lieve we have prepared our compa- away from a vision that promotes and guide our companies amid the the beginning of this message, we nies to obtain better results in their the union of diversity around the uncertainties. mentioned that our lifelong beliefs, We are confident that, despite the businesses while maintaining our common good of human society, disseminated 30 years ago, are syn- complexities and nature of these commitments to combat climate respect and preservation of life. For With the unfolding of the war, and thesized by the dream of a better times, our beliefs and our entrepre- change and reduce social inequal- our part, while regretting the divi- with the increasing complexity of world: sions and extremist sectarianism, managing companies, it seemed neurial vocation guide us towards ities. finding a brighter future. They guide we hold strong to the hope that the imperative to decentralize our busi- “Life is a chain of relationships. us towards what our units need: More than ever, we repeat, it is im- union of voices, hearts and minds, ness model, allowing each company Nothing in the universe exists by greater possibilities for growth portant to remember what illumi- the harmony of a great world choir, to develop its strategy and to ulti- itself, everything is interdependent. for Aesop and Natura &Co Latin nates us, and what light inspires us. Pedro Passos 8 9 Message from the Group CEO Natura &Co is a unique company whose people believe that success will only be achieved if we are true to our values and do the right things in the right way. Fábio Barbosa Fábio Barbosa Let me begin by stating that it is my pleasure to take on the role of leading Natura &Co into a new phase that will strengthen the company's future prospects. I have been a supporter of the company for over 25 years, even before I joined the Board of Directors in 2015. decided that it was appropriate to as well as adopting a digital-first remains as important as ever. It grant each brand more autonomy. approach to enhance our relation- serves as the binding element that With this increased independence, ships with our clients, consultants, connects us all, providing a wealth our brands have greater latitude to and representatives, and to achiev- of inspiration for designing new resonate with their customers in the ing our Commitment to Life objec- products, experiences, processes, geographies in which they operate, tives. and allocate capital and resources and methodologies across all of our businesses. more effectively in order to thrive. From the perspective of the Hold- To ensure a smooth process, we synergies and collaborations where whose people believe that suc- ing, we will continue to foster Natura &Co is a unique company I am continually impressed by the and trends evolve, it is important for established a Transition Committee they add value, but with a leaner cess will only be achieved if we are leadership’s unwavering commit- our company to reach and relate to to guide us on our journey. Along structure that will empower and true to our values and do the right ment to upholding ethical stan- our stakeholders, ensuring that we with continuing to prioritize margin reignite our business. In 2022, things in the right way. I express my dards and values, and I knew there maintain thoughtful and meaning- improvement and cash flow gener- Natura &Co Holding implemented sincere gratitude to them for their was no better company to join if ful connections. ation in a difficult external environ- a streamlined approach to provide unwavering dedication, as well as I wanted to make a meaningful ment, we assessed the strategic pri- the legal, financial, sustainability to all our stakeholders for sharing impact. Natura &Co is already a ref- Over the past few years, we have orities of each Business Unit based and HR support for the brands to these principles with us. We are erence for many and continues to made the ambitious decision to on their specific markets and areas excel, as well as a governance struc- undertaking various initiatives to aspire to be the best beauty com- expand our primarily Brazilian busi- of expertise. Central to moving ture and compliance program to ensure the company stays on track pany FOR the world. ness into a major player in the glob- forward, a new organizational de- ensure greater accountability. This because there is no contradiction al beauty industry. This transition sign was deemed necessary, which model is crucial because, despite between dreaming what we dream The world is constantly changing involved a complex integration and would entail the Holding providing operating in different geographies and delivering positive results for and presenting new challenges. Our yielded significant benefits through support for our Business Units. This and business environments, all the everyone. I am confident that we unique approach to relationships increased collaboration and the change was implemented in 2022 brands share a common goal: to have great assets and an incredible helped us to successfully navigate sharing of best practices. Nev- and will continue to evolve in 2023. work closely with society and make team with an enormous potential the pandemic and unprecedented ertheless, by 2022, with all of our It is important to note that all of our a positive impact on People and to position ourselves at the fore- macroeconomic volatility of 2020 brands sharing the standards and Business Units remain committed the Planet. That is why our Com- front of current and future chal- and 2021. However, as technology principles that bind us together, we to our shared passion for products, mitment to Life sustainability vision lenges. Natura &Co annual report – 2022Our groupNatura &Co in numbers Triple-bottom line results 10 11 53% Women in leadership positions at Natura &Co 99% Of our associates receiving at least a living wage 32,000+ Employees 2 million Hectares of conserved forest in the Amazon region R$ 36.3 billion o li d s 202 2 — C o n e u n e a te d net rev R$ 3.2 billion* -R$ 2.9 billion d E BIT DA s t e 202 2 — A d j u m e o c 202 2 — N e t i n R$ 6 billion n d c ash positio n r e a 202 2 — Y e Natura &Co annual report – 2022Our group12 13 Global footprint 100+ countries 7.7* milllion Consultants and Representatives 2,300+ stores and franchises * As of December 31, 2022 Natura &Co annual report – 2022Our group2022 Performance We started 2022 navigating a challenging macro environment, which was worsened by the war in Ukraine, and uncertainty surrounding the performance of some of our Business Units following a post- pandemic change in consumer behavior. 15 We expect a continuous improvement in revenues, as well as better adjusted profitability and cash generation while continuing to invest. Given the environment, in mid-2022, Focusing on profitability, all Business pacted by an impairment of BRL 383 & home portfolio optimization strat- profitability and contributed to par- strong top line growth and resil- we decided to reassess the Group’s Units managed to pass on inflation million), higher net financial expens- egy. Adjusted EBITDA margin was tially offsetting inflation, FX head- ient profitability (gross margin was growth model and enter a new to prices and made progress on es amid rising global interest rates 10.0%, down 120 bps despite price winds, and sales deleverage. Adjust- broadly stable in FY22) were more stabilization cycle. To keep the busi- category mix and cost control, but and higher income tax and social increases and strict cost control as ed EBITDA stood at 4.3%, down 170 than offset by planned investments ness on track, important changes global inflation, FX headwinds and contributions (FY21 had benefited a result of the challenging environ- bps YoY. we implemented included a stron- tough macro conditions impacted from relevant tax credits). ment. that pressured SG&A as a percent- age of revenues and led to an ad- ger focus on profitability and cash gross margin, which decreased by The Body Shop, which is especially justed EBITDA margin of 21.7% (-230 conversion (with incentives adjusted 110bps compared to FY21. These Each Business Unit showed different Avon International’s revenue was exposed to Western Europe, where bps compared to the previous year). accordingly), a revision of the cost factors resulted in adjusted EBITDA dynamics from a top-line and prof- down 9.9% in CC (-22.9% in BRL). core distribution channels faced structure and the role of the Holding of BRL 3.2 billion, down 23.7% YoY, itability perspective. The Business Unit is the most im- headwinds, posted a 13.5% revenue While we expect 2023 to be another company, as well as necessary revi- with margin of 8.7% (compared to pacted by the Russia-Ukraine war, YoY decrease in CC and –24.3% in challenging year, our focus on cash sions in our global footprint. 10.3% FY2021). Natura &Co Latin America showed and also faced a challenging global BRL. The Body Shop at Home chan- generation and improving the Com- In 2022, Natura &Co delivered The company posted a net loss of were up 6.3% in constant currency in Western Europe) as well as the Covid, returned to more normalized to invest in our priorities, building broadly stable YoY net revenues in BRL 2.9 billion, compared to a net (CC) in FY22 (and down 1.7% in BRL planned decrease in the number of pre-pandemic levels as the econo- the path to unlock significant value. constant currency, up 0.4%, despite profit of BRL 1.0 in 2021, due to sev- due to FX impacts). The full-year representatives as the new com- my reopened. Sales deleverage led We expect a continuous improve- the challenging environment. In eral factors, including lower adjust- performance was driven by the Na- mercial model is implemented. The to a YoY decrease in adjusted EBIT- ment in revenues, as well as better BRL, net revenue of BRL 36.3 bil- ed EBITDA, higher transformations tura brand, while the year also saw new commercial model roll-out DA margin of 670 bps to 10.9%. adjusted profitability and cash gen- lion was down 9.5% YoY due to the costs (aiming to accelerate changes improving performance by Avon in brings a number of benefits, such as eration while continuing to invest. particular resilience and revenues macro environment (particularly nel, which had benefitted during pany’s capital structure will allow us depreciation of some of our op- within the Business Units to ensure the CFT category, which combined improved rep productivity, greater Aesop has another stellar year, post- erating currencies (GBP, AUD and sustainable growth), higher other were more than enough to offset digitalization, and more impactful ing 21.0% YoY net revenue growth ARS in particular) against the BRL. operating expenses (particularly im- the impacts of the planned fashion product launches, which supported in CC (and 4.6% growth in BRL). The Natura &Co annual report – 2022Our groupNatura &Co annual report – 2021 Our group 16 17 We are proud to be the world’s largest B Corp™. We are Avon, Natura, The Body Shop, and Aesop. We are Natura &Co. We are a global purpose driven group made up of four iconic beauty companies. Natura &Co operates in more than 100 countries, with over 2,300 stores, 32,000 employees and 7.7* million Representatives and Consultants. We believe in challenging the status quo in order to promote real positive economic, social, and environmental impact. We believe in the power of cooperation, co-creation, and collaboration. * As of December 31, 2022 Natura &Co annual report – 2022 Our group 18 Our purpose To nurture beauty and relationships for a better way of living and doing business. Our aspiration We will dare to innovate to promote positive economic, social, and environmental impact – and become the best beauty company FOR the world. Strategy Different paths to a common purpose Our Holding strategy is to have a portfolio of purpose-driven brands that are autonomous and supported by an operating model that ensures their accountability in terms of triple bottom line results. 21 A portfolio of autonomous brands Natura &Co Latin America Avon International The Body Shop Aesop Integration Simplification Transformation Investment Avon turnaround, integration and optimization of the brands, delivering synergies and operational leverage. Gross margin expansion, operating model simplification, digitalization, and commercial model stabilization. Channel mix recovery, top-line stabilization, and cost discipline to drive profitability. Investing for the future to support rapid growth plans with a margin expansion in the long-term. Although we anticipated difficul- was also observed from the per- near the initial year-end expecta- ties in 2022, the year turned out to spective of the Cosmetics, Fra- tions, and we are very proud of our be even more challenging than we grances, and Toiletries (CFT) market, accomplishments. had envisioned. The first quarter albeit with different outcomes was marked by the ongoing effects across categories and across each Moreover, we focused on improv- of the COVID-19 pandemic, supply of our brands. chain disruption, rising inflation, ing the fundamentals of our un- derperforming business, which lower discretionary spending, and By mid-2022, to navigate the chal- we regard as our main challenge currency fluctuations. However, the lenging environment, we shifted our and principal upside driver, and on war in Ukraine and political unrest in strategy to prioritize margin and putting strategic steps in motion Latin America added a geopolitical cash flow preservation by reduc- to boost our performance. We are uncertainty that made navigating ing working capital and reviewing accelerating the integration of the the year even more challenging for investments. We granted greater Avon and Natura businesses in Latin Natura &Co. autonomy to the Business Units to America, starting in 2023 with Peru Business unit autonomy with accountability … … supported by key shared enablers + Focus on sustainable + Strict financial + Innovation growth as part of our commitment to deliver cash generation discipline with better at heart capital allocation and cash conversion processes + Digital first + Commitment to Life + Operating model allocate resources according to their and Colombia, followed closely by + Simplification of our + Investment Our footprint as a consolidated priorities, with full P&L account- Brazil. Avon International is reorga- company was overexposed to this ability, making them more agile in nizing its geographic presence with multilayered crisis, particularly in responding to market demands. significant changes in investment in the UK – the home base for Avon This resulted in our teams in each priority markets. The Body Shop has International and The Body Shop, in Unit becoming more focused and taken steps to right-size its orga- Argentina, and in Russia, where the driven towards specific goals, work- nization, while Aesop is evaluating developments in the war directly ing diligently to secure the busi- strategic alternatives. impacted our activities. This dispro- nesses across geographies. Despite portionate pressure on our portfolio the challenges, we attained results operating model to opportunities driven further increase the by better return on accountability of the capital allocation each Business Unit process to accelerate with clear milestones value creation and deliverables Natura &Co annual report – 2022Our group2022 Board of Directors (from left to right) Georgia Garinois Melenikiotou W. Don Cornwell Andrew McMaster Jr. Ian Bickley Jessica Herrin Pedro Passos Luiz Seabra Guilherme Leal Carla Schmitzberger Nancy Killefer Fábio Barbosa Gilberto Mifano Not in attendance: Roberto Marques Our group 24 25 2022 Board of directors Finance or Accounting Sales, Marketing & Branding Strategy & Innovation Digital BUSINESS Leadership/ International Experience Legal & Regulatory ESG Risks & Compliance Operations Direct Sales Consumer Goods Sector - Beauty & Healthcare North & Central America Latin America APAC EMEA INDUSTRY-SPECIFIC GEOGRAPHY Luiz Seabra Guilherme Leal Pedro Passos Fábio Barbosa Carla Schmitzberger Gilberto Mifano Jessica Herrin Ian Bickley Andrew McMaster Jr. Don Cornwell Nancy Killefer Georgia Garinois Melenikiotou Roberto Marques � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � Natura &Co annual report – 202227 in the 2022 Report on the Bra- zilian Code of Corporate Gover- nance item 2.5.1. 3 There were exclusive meetings for external members of the Board of Directors in 2022 which were not attended by members of executive management and other guests; 2 While Natura &Co has not made any political contributions, moving forward, disbursements related to political activities can only be made under exceptional circumstances. These must be ap- proved by the Board of Directors, as opposed to the previous rule of sole assessment by the Ethics & Compliance department. Our Corporate Governance Office continually reviews the best practic- es (local and global) in conjunction In addition, we observe the recom- ous year’s rate of 86%. This prog- with our current bylaws, codes, mendations of the Brazilian Code ress highlights our commitment to policies, and internal rules, while of Corporate Governance published maintaining robust standards of also confirming to the guidelines by the Brazilian Institute of Corpo- transparency, equity, accountability, established by the Board of Direc- rate Governance (IBGC), which and corporate responsibility. The tors, which, in 2022, comprised 13 were incorporated into the rules following improvements in 2022 members elected and dismissed by of Brazil’s CVM Securities and Ex- contributed to our achievement: the General Shareholders’ Meeting change Commission in 2017. Since then, our commitment to high stan- dards of corporate governance con- 1 The Chief Executive Officer (CEO) no longer accumulates the posi- after serving a unified two-year term. Reelection is permitted. Furthermore, in accordance with tinues to be reflected in the consis- tion of Executive Chairman of the the rules as defined in the 'Novo tent progression of our adherence Board of Directors; Mercado', we stipulate in our bylaws that at least one-third of to the code. Having achieved a 43% compliance rate to the code in 2018, the first year in which the report 2 The Board of Directors discussed and approved a succession plan the Directors on the Board must be independent. In 2022, eight of the 13 became mandatory, we are proud for the CEO observing the best members of the Board of Directors, to report that our compliance rate practices recommended by the elected as a slate, were indepen- increased to 92% in 2022, a signifi- Brazilian Code of Corporate Gov- dent, which equates to 61.53% of cant improvement from the previ- ernance. The process is detailed its composition. Corporate Governance Committed to the highest standards Amidst a major reorganization process, we worked diligently to further refine our policies and take steps towards greater transparency in accordance with international best practices. 28 29 Following the resignation of Ro- Risk Management, and Finance Corporate Governance: Members berto Marques as a Board member Committee as stipulated by legal met twice in 2022 to evaluate top- and, up until mid-June of 2022, requirements – and the Group ics related to the evolution of our Executive Chairman of the Board of Operating Committee, which was governance framework, reviewing Directors and Main Executive of the established voluntarily by the com- them against the Brazilian Code of Group, the Board of Directors began pany. Each year, the composition, Corporate Governance. They also 2023 with a total of 12 members, performance, and workflows of reviewed the composition of the four of which are women. Eight these committees are revaluated committees that regularly support members (or 66%) are indepen- by the Corporate Governance the Board of Directors and moni- dent directors, and the remaining Committee. However, due to the tored the market standard for the four members comprise the three significant Group reorganization directors' compensation. co-founders of Natura Cosméticos process that occurred during the (who are co-chairmen and one of year, the Corporate Governance Strategy: Members met seven times them is appointed to preside the self-assessment was not formally in 2022. They revisited and mon- Board meetings) and Fábio Barbosa, implemented in 2022. Nonetheless, itored the strategic plan for the who assumed the position of Main we are benefiting from insights Group and the new guidelines for Executive of the Group. His primary from the Corporate Governance the Business Units. responsibility is to oversee the CEOs and Transition Committees cap- of each Business Unit, as well as the tured during the period of change. People and Organizational Devel- Holding functions, which have re- opment: Members met seven times cently undergone restructuring and Audit, Risk Management, and in 2022 to discuss topics including are under the guidance of statutory Finance: Members met nine times succession, culture, compensation, and non-statutory officers (more on in 2022. They supervised risk man- and talent retention. page 51). agement, ethics, and compliance The year in review In 2022, our Board of Directors con- processes; oversaw internal controls Moreover, three of the four subcom- and internal audit; monitored the in- mittees created the previous year to dependent external audit; discussed address specific demands were still vened nine times in ordinary and legal and tax matters; and revised in place in 2022. These included the extraordinary meetings. Meetings updated internal policies and the Finance Subcommittee which held had full attendance, demonstrating terms of strategic projects. 16 meetings and was led by the our Board of Director’s unwaver- Main Executive of the Group Fábio ing commitment to addressing the Group Operating Committee Barbosa. Topics discussed included effects of the external environment (GOC): Composed of the Group the company’s hedge policy, financ- on our business, as well as making CEO, the CEOs of the Business Units, ing, and monitoring of cash flow, complex decisions regarding our and representatives from critical among others. The Cybersecurity quarterly results, strategic planning, areas within the company. The Subcommittee held two meetings risk management, people and cul- members met four times during led by Andrew McMaster, an inde- ture, sustainability, and the transi- the first semester of 2022, two of pendent director and member of tion to a more streamlined Holding which were two-day sessions. They the Audit Committee. They dis- company structure. are responsible for supervising each cussed the structure and sensitive The Board of Directors had the identifying synergies and opportu- and the orientation of the roles of support of five committees, two of nities among them. which were statutory – the Audit, the Holding and the Business Units The Internal Audit Subcommittee of Natura &Co's Business Units and matters relating to cybersecurity, 30 31 held two meetings led by Luiz Carlos The Board of Directors is now Company's quarterly and annual Natura & Co's methodological ap- Passetti, an external Audit Commit- better positioned to provide adviso- financial statements and monitor proach is aligned with the best tee member, and monitored the ry services and to monitor the im- the management acts, ensuring international practices. It is based management and development of plementation of elements relating they comply with their assigned internal audit activities. These three to critical areas including cash and legal and statutory duties. on the integrated framework suggested by the Committee of Committed to the highest standards subcommittees are linked to the treasury management, corporate Audit Committee. The discussions strategy, governance and compli- relating to our entry into Asia were ance, executive compensation and Capital market and shareholders In 2022, the Chief Financial Officer Treadway Commission (COSO), the international market average, in accordance with the terms of our guidelines defined for Risk Manage- Management Compensation Policy. Each member of The Board of Sponsoring Organizations of the Our compensation strategy is comparable to the Brazilian and incorporated into the Strategy Com- succession, and reputation. Addi- (CFO) assumed responsibility for ment in ISO 31000, and the con- mittee and are no longer addressed tionally, we have established a relations with our investors, thus cepts established in the Three Lines Directors receives a monthly pro labore and is granted share-based incentive plans to drive long-term commitment. Those Directors within a dedicated subcommittee. Sustainability Committee to assist accumulating the statutory roles Model, developed by The Institute who are also Committee members receive a fixed monthly addition As part of the Corporate Gover- our strategy and governance on Officer), a structure that aimed to explicitly informing the duties of the Board of Directors in developing of CFO and IRO (Investor Relations of Internal Auditors (IIA). Beyond to their regular compensation. nance restructuring process, it these transversal areas. The com- further strengthen communication the governing body and the exter- As for our Executives, they are compensated with a fixed monthly was decided that the activities of mittee is supported by our new with the market. nal assurance providers, this model salary and direct and indirect benefits. Their variable compensa- the Group Operating Committee’s materiality assessment and Com- ensures clear segregation between tion combines short and long-term incentive plans, linked to the (GOC) would be discontinued. mitment to Life sustainability vision On December 31st, 2022, the roles and responsibilities—firstly, di- achievement of purpose-driven results. In 2022, as anticipated, Despite the GOC committee’s busy (more on page 36). Company’s market capitalization rect accountability for risk decisions we also started compensating our management for meeting the schedule in the first semester of the was BRL16,1 billion, with 1.383.152.570 (business management). Secondly, targets related to our 2030 Commitment to Life and the US$ 1 billion year, it was time to move away from The Fiscal Council was convened common shares. Our free float was the independent oversight of risk sustainability-linked bond issued by our subsidiary Natura Cosméti- highly structured and formal efforts at Natura & Co's Annual General 60.52%, with the remaining 38.54% decisions and definitions in the risk cos in 2021. Since 2008, we have been applying sustainability targets within the Board of Directors, and Meeting on April 20, 2022, for a one- held by the controlling shareholders, management workflow. linked to executive compensation, and this is one step further in our the supervising and identifying of year mandate. It is an independent 0.08% by the Board of Directors and pledge to generate value for all our stakeholders. synergies among the Business Units. body composed of three members statutory directors, and 0.71% by our For further information on risk Instead, our focus was on creating elected by the shareholders, two of treasury. a new work stream that prioritized whom were nominated by Natura & the independence and account- Co's controlling group and the third ability of the Business Units. Conse- by minority shareholders. All the Risk Management Our risk management practices are from May 2023. management, please refer to the reference form that will be available More information on the total compensation of our management in 2022 can be found on ri.naturaeco.com. quently, we established an interim members are seasoned profession- a core component of our com- Transition Committee, which als with extensive experience in ac- mitment to achieving corporate For information on emergent risk, please refer to the sustainability ap- was led by Fábio Barbosa, and counting and finance. Natura &Co goals with accountability, compli- pendix available at ri.naturaeco.com whose task was to define a leaner provided onboarding sessions to the ance, disclosure, and fairness. Each central structure that maintained Fiscal Council members in which employee in the Holding, at every the necessary functions to support they met the heads of some areas of hierarchical level, is responsible for our businesses, enabling them to the Company such as Finance, Risks being aware of the risks involved in thrive individually and optimize and Internal Controls and Compli- their area, considering short, medi- their performance. The appointed ance. Members received the nec- um, and long-term aspects, along members of the Transition Commit- essary information to perform their with managing and reporting them tee met 12 times during the second duties adequately and to be familiar according to the concepts, guide- semester of 2022, with the partici- with the Group business. Besides lines, and instructions described in pation of some GOC members, to the onboarding sessions, they our Enterprise Risk Management deliberate on proposals for a new met ordinarily three times during Policy and detailed in additional operating model that has now their mandate in 2022 to review documents. been implemented. and discuss, among others, the Fixed Compensation Variable Compensation Base Salary Direct and indirect benefits Participation in Committees Annual Variable compensation (bonus) Share-based compensation Board of Directors Natura &Co CEO Statutory Officers Fiscal Council (if applicable) � � � � � � � � � � � � � Natura &Co annual report – 2022Our group32 33 Ethics and compliance In 2022, we concluded the integration of the Ethics & Compliance (E&C) program for Natura &Co. We now have a comprehensive structure that serves our Holding company and our Business Units, addressing the compliance risks we face today while preparing us for the risks of tomorrow. and Director screening program, we screen all officers and direc- tors of our Holding company and each Business Unit parent entity to ensure there are no legal or reputa- tional issues or concerns. Third-Party Due Diligence We also expect our suppliers and other third parties to conduct their business with transparency Our employees are expected to ask questions, raise concerns, and report, in good faith, any suspected wrongdoing. and integrity, and to be committed to the highest standards of ethical Political Contribution Reviews Natura &Co does not make con- Throughout the year, the E&C team also supported management action conduct and environmental prac- tributions to campaigns, parties programs based on market reviews tice, as detailed in our Supplier or candidates during or outside of conducted in 2021, including im- Code of Conduct. electoral processes. The Compa- provements in policy awareness and ny does not contribute directly or In 2022, Natura &Co carefully risk- indirectly to political parties, move- assessed the new third party sup- ments, committees, political orga- pliers and other parties retained by nizations or unions, their represen- Natura &Co to conduct work on its tatives, or candidates, except when behalf, using an automated process required by applicable laws. to identify only those third parties accessibility, a culture that reflects our Speak Up campaigns, and con- fidence in reporting. New or updated policies in 2022 Following the launch of updated Group Anti-Corruption and Trade Furthermore, this program supports Legal, Human Resources, Finance, our Commitment to Life sustainabil- Risk & Controls, Cybersecurity, and Employee Training Natura &Co expects its employ- that present a possible risk to our However, we act to drive positive Sanctions policies in 2021, Natura company. This includes different social transformations, as well as en- &Co issued or revised the following ity vision by guiding us to operate Internal Audit. The team is led by ees to feel committed to playing levels and types of reviews, includ- couraging political participation as policies in 2022: ethically, with integrity and respect, the Vice President of Group E&C, their role in helping to protect our ing reputational (corruption, fraud, a transformational force in society across our entire collective and in who reports to the Chief Legal & reputation, supported in making human rights and environmental) and conscious voting. every country in which we oper- Compliance Officer. the right ethical choices when or full anti-corruption and privacy ate. By conducting ourselves in this faced with difficult dilemmas, and due diligence for select third manner, we can focus on growing Each Business Unit has an Ethics confident about the right course of parties retained by our Business Market Monitoring In 2022, our E&C team reviewed 11 Privacy & Data Protection Policy guides our employees on handling data across the entire data lifecycle. It defines Natura &Co's our company and giving back to our Committee with critical manage- action to take. In 2022, Natura &Co Units. of our markets to assess the imple- approach to privacy principles of communities. ment and functional leaders. offered a full range of training for its mentation and effectiveness of the lawfulness, fairness & transparency; Our dedicated internal E&C team executive committee also receives ance policies, with 2,618 employees 1,245 suppliers and 322 resellers. such as Argentina, Brazil, Mexico, the accuracy; integrity, confidentiality spans 12 markets and supports each an update on progress in the pro- receiving live training and 27,479 Philippines, South Africa, and South & storage limitation; and account- Once a quarter, each Business Unit employees on Natura &Co compli- In 2022, Natura &Co reviewed E&C program, including key markets purpose limitation, minimization & of the established hallmarks of an gram. effective program, including policies taking online programs. Charitable Contribution Reviews In 2022, we reviewed nearly 900 Korea. The markets were selected ability. following an in-depth E&C risk as- and procedures, training and com- Our E&C program was publicly munications, third party oversight, acknowledged for the first time Officer & Director Reviews We must also ensure that our proposed donations to causes and sessment in multiple risk areas. The Conflicts of Interest Policy helps charitable groups selected by our review includes targeted interviews ensure that our employees always monitoring and investigations. The as a Holding when the Ethisphere executive leadership represents businesses for their shared values, to across various levels and functions act in Natura &Co's best interests by E&C team acts as a Hub and serves Institute 2022 World's Most Ethical the highest levels of integrity and ensure they uphold our ethical and in each market, an Ethics Line test, establishing guidelines to prevent the Holding and the Business Units, Companies listed us in the Health compliance with the law. In light of human rights standards. a review of reporting and investiga- actual or perceived conflicts of in- working closely with colleagues in & Beauty category. this, as part of our annual Officer tion data, and transaction testing. terest in the following areas: finan- Natura &Co annual report – 2022Our group 34 35 cial interests, personal relationships, Retaliation of any kind against any outside professional interests; gifts person making a report, or those from third parties; entertainment involved in an investigation, is strict- or hosting; and the procurement ly prohibited at Natura &Co, and is process & function. itself considered a violation of our Code of Conduct. Trade Sanctions Policy is a critical part of how we comply with In 2022, our integrated Ethics Line laws that regulate trade and impose received 896 reports. sanctions that may apply to Natura &Co. It limits dealings with certain We have also established an inte- countries, entities, and individuals. grated internal investigation pro- There is also a mandatory 'recusal' tocol that covers the handling of all by employees related to any activity reports based on the nature of the subject to sanctions laws. matter and the level of the person- Anti-Trust Policy aims at pre- venting anti-competitive behavior nel involved. This protocol applies to all of the reports received by the Ethics Line or through other key by Natura &Co, covering areas reporting channels. such as the importance of identi- fying who our competitors are and An internal management remedi- understanding our market position; ation committee for any substan- relationships with resellers, suppliers tiated reports is established by the & authorities; interactions with trade E&C team based on the protocol. associations and bodies; and how we In cases involving particular senior manage sensitive competitive data. management levels, the Chairman Reporting & Investigations Our employees are expected to of the Audit Committee is called on to participate. ask questions, raise concerns, and In 2022, 63 associate remedial ac- report, in good faith, any suspected tions were taken following an inter- wrongdoing. nal review of a substantiated report. One way that employees can make In 2023, we plan to continue to ad- a report is through our Ethics Line, vance the E&C program at Holding an integrated tool in use across and the Business Units as we seek our Holding company and each of to continue to rise to the challenge the Business Units. Our Ethics Line of protecting the reputation of our is promoted at each Business Unit four, socially conscious, iconic through our Speak-Up campaigns. beauty brands at Natura &Co. It ensures the security and pres- er-vation of all reports, and their confidentiality, to the extent permitted by law. Top categories of employee remediation actions in 2022 Written/verbal warning 31 Terminated Training/coaching Contractor removed Relocated/transferred Top categories of reports into ethics line in 2022* Workplace Conflicts, Inappropriate Behavior or Employee Relations Matters Customer Service, Communications or Non-Compliance Related Matters Conflict of Interest Report Form Other Violations of Code or Internal Policies Dealings with Independent Sales Representatives1 16 8 3 2 36% 19% 16% 5% 5% Information security In 2022, we brought all Informa- Security Officer. These boards are Assurance service for third-par- tion Security teams and budgets supported by a new risk manage- ty risk management and for together to create the Natura &Co ment structure, linked to the Enter- existing, new and changing IT, Cyber Hub. This new unit provides prise Risk Management Framework. and digital development. strategic direction, assurance, and Furthermore, new Natura &Co operational services to all Natura Information Security Policies were New identity and access man- agement platform, including &Co Business Units and Functions. published in 2022, with additional new privileged access manage- Additionally, all existing improve- detailed security standards under ment. ment initiatives were merged into development. Based on these poli- the Cyber Program, delivering cies, mandatory training for all staff New Security Operations Centre and Vulnerability Management connected solutions that meet each was rolled out in 2022, including Service. brand’s specific information securi- regular phishing testing. ty needs. Agile teams continually improv- ing the security of user devices, The Cyber Programme continues to software and infrastructure. A new cyber governance has been drive improvements in cyber matu- put in place with frequent report- rity through investment in new tools, Risk Assessments on Operation- al Technology in factories and ing to the Board of Directors, the processes, and services, and the use distribution centers, on Business Audit Committee and the executive of the National Institute of Standards Continuity & Disaster Recovery, teams. Each Business Unit has a & Technology (NIST) Cyber Security and on Backup & Recovery pro- * Table reflects top categories and is not an exhaustive list. dedicated cyber board overseen Framework. These enhancements cesses. by a senior Business Information include the following: Natura &Co annual report – 2022Our group 36 37 Materiality Assessment As a relationship-based group, concepts like proximity, engagement, and dialogue are constant ongoing processes. Hence, conducting a formal materiality assessment ensures we prioritize the issues that have the biggest impact on our business and governance, communities and the environment, and that matter most to our stakeholders. issues on business success, including financial performance and the value of the company. This is an ongoing process that does not have a designated fre- quency, although we recognize that it is important to do frequent updates so we can maintain a clear oversight of our material issues, ensuring we are addressing the key topics for both our internal and external stakeholders. t c a p m I l a t e i c o S / l a t n e m o r i v n E 1 4 6 2 7 9 3 6 5 15 14 8 10 11 12 Top 15 issues 1. Climate action 2. Human rights (internal and in the supply chain) Poverty/ livelihoods (including living wage) 3. 4. Circvlarity/ packaging (recycling and alternative sourcing) 5. Sustainable sourcing (ingredients 13 management) 6. Waste and effluent management (other than packaging) 7. Water management 8. Employee health and well being 9 Community impact 10. Regeneration of nature/ natural resource management 11. Deforestation (impact through the value chain) 12. Ethics and integrity (including bribery & $ $ anti-corruption $ 13. Product design & life-cycle management (including carbon footprint) 14. Diversity and inclusion 15. Biodiversity As a relationship-based group, con- Body Shop, one from Avon and one cepts like proximity, engagement, from Aesop. Later, we analyzed the The assessment results are plotted Business impact and dialogue are constant ongoing results of an online survey with 590 on a materiality matrix, with their processes. Hence, conducting a for- respondents among external and position relative to the degree of mal materiality assessment ensures internal stakeholders – employees, stakeholder interest and potential we prioritize the issues that have the suppliers, NGOs, investors, private business impact. Amazon) are matters that assume topic for The Body Shop compared Human Rights and be Human-Kind. biggest impact on our business and sector, and academia – encompass- more importance for Natura &Co with the other brands. "Product Circularity / Packaging (recycling governance, communities and the ing the Holding and each one of the Overall, the priority issues are similar Latam. Single-use plastic and prod- quality and safety“ and “product and alternative sourcing) is aligned environment, and that matter most businesses and combining local and between the Holding and the busi- uct design/lifecycle assessment are design” are issues that assume more with Embrace Circularity and Re- to our stakeholders. As well as con- global perspectives. Furthermore, nesses. Climate Action, for instance, also material for Natura &Co Latam, importance for Aesop and its stake- generation. sidering the Holding, the process in- we also conducted 40 in-depth in- is a consensual issue across all stake- as well as product innovation and holders than for the other brands; cluded a more detailed examination terviews with internal and external holders and brands and is highly climate action. however, they didn’t score as highly As a strategy for managing poten- of each of the four businesses, thus stakeholders to test the prioritiza- expected to be addressed by Natura as issues impacting the Environ- tial events that could have an impact enabling the more accurate capture tion and get quality feedback. &Co as a leader on this theme. Social issues are highlighted as im- ment / Social scale. of the perception of stakeholder portant topics to show Avon’s con- on the achievement of our goals, we have inserted the Commitment groups in all the regions in which Our material issues were assessed However, each one has some differ- tribution to a better society, reflect- The assessment also showed that to Life as a Corporate Risk Scenario the group operates. applying double materiality, i.e., ing priority material issues con- ing the company’s core purpose of the top 3 material issues are very and annually the exposure level of The process began with nine in- impacts of the company’s activities stakeholders. For instance, there is a women. Social regeneration and ment to Life strategy. Climate action Leadership and the Audit, Risk Man- depth interviews with sustainability on the economy, environment, and strong feeling that ‘poverty / liveli- value distribution topics, such as is linked to Address the Climate agement and Finance Committee leaders of our businesses: four of people (including impacts on their hoods’ (focused on representatives ‘Gender equality’ and ‘Improving Crisis & Protect the Amazon. Human linked to the Board of Directors. in the environmental and social sidering their own operations and helping to create a better world for similar to the pillars of the Commit- this risk is reported to the Executive them from Natura &Co, two from Human Rights), and the business and consultants) and ‘biodiversity’ livelihoods’ are high impact. ‘Animal Rights (internal and in the sup- Natura &Co Latam, one from The impact of environmental and social (connected to deforestation of the welfare’ was mentioned as a core ply chain) is connected to Defend Natura &Co annual report – 2022Our group Awards and recognitions 38 39 Natura &Co was once again listed on the B3 Corporate Sustainability Index (ISE) Ranking and is the only cosmetics company included in this prestigious listing. Natura &Co was nominated for the first time as a group in the Ethisphere 2022 World’s Most Ethical Companies® ranking. This honor is reserved for a select number of companies with exceptional programs and a commitment to advancing business integrity. + + Natura &Co was listed in the Corporate Knights 2022 Top 100 which is based on public data relating to 24 key performance indicators including products and services aligned with sustainable goals, diversity and salaries, emissions and consumption. + + Natura &Co was an inaugural recipient of King Charles III´s Terra Carta Seal, which recognizes global companies which are driving innovation and demonstrating their commitment to, and momentum towards, the creation of genuinely sustainable markets. Natura &Co annual report – 2022Our groupOur brands 4242 43 Founded in 1969, Natura is a Brazilian multinational in the cosmetics and personal care segment, a leader in direct sales in Brazil, and recognized for protecting the Amazonian social biodiversity through its sustainable business model. Natura products are cruelty free and 93% vegan. With over 7,100 employees and more than 2 million Beauty Consultants in Latin America, Natura operates in 10 countries. In 2014, Natura became the first publicly traded company to receive B Corp ™ certification, and its third certification was concluded in 2020. Natura’s EKOS line is certified by the Union for Ethical Biotrade (UEBT). Founded in 1886, Avon connects people in more than 70 countries, using the power of beauty to transform women’s lives for the better. 5.6 million Representatives across the world sell its iconic products, building their own beauty businesses. Avon believes a better world for women is a better world for all, and is committed to acting for gender equality, speaking out about issues that matter and creating positive change. Together with Avon Foundation, the company has donated over US$1.1 billion, with a focus on tackling gender violence and breast cancer. Founded in 1976, The Body Shop became a certified B Corp™ in 2019. The Body Shop seeks to make posi- tive change in the world by offering high-quality, naturally inspired pro- ducts produced ethically and sustai- nably and campaigns for social and environmental justice. Having pio- neered the philosophy that business can be a force for good, this ethos is still the brand’s driving force. The Body Shop today is a truly omni- channel business with more than 2,500 retail locations (owned and franchised) in more than 80 coun- tries; The Body Shop at Home direct to consumer channel in the UK and Australia; and an e-commerce pre- sence in nearly 60 markets. Aesop is renowned for creating products with meticulous attention to detail, along with a unique exploration of the intersection of botanicals and science to create sensorial and highly efficacious formulations for skin, body, hair, fragrance, and home. Since its creation in 1987 in Australia, Aesop has expanded to 29 countries around the globe with almost 300 signature stores, each having its own unique design that celebrates the community it serves. Aesop is proudly a Certified B Corporation®. Natura &Co annual report – 2022Our brandsNatura &Co annual report – 2022 Our brands 44 Message from the CEOs João Paulo Ferreira Angela Cretu João Paulo Ferreira (Natura &Co Latin America), Angela Cretu (Avon International), David Boynton (The Body Shop), and Michael O’Keeffe (Aesop) In 2022, we faced a rapidly changing world - one presenting pressing and compound challenges that require continued global collaboration to be overcome. Despite geopolitical and economic situations impacting performance and disrupting operations in some of the geographies where we are present, we ended 2022 reinforcing the value of our commitment to generating positive societal impact. to selling products would adverse- cial services platform. Avon Latin ly impact women and children in America is more stable, showing the region. We continue to believe better results in the Beauty catego- in dialogue and the power of the ry. Despite significant headwinds collective standing up for humanity in key markets, Avon International and promoting peace. saw improvements in distribution channel KPIs, while Aesop showed Against a challenging backdrop of resilience, enjoying another year geopolitical and economic volatility, of solid growth. The Body Shop, in 2022 we felt it was necessary to although impacted by a weak retail review our strategic priorities and environment, particularly in the UK, transition to a leaner and more agile continued to pursue its transforma- model; one giving greater auton- tion plan. omy to the brands and supporting Along with the pandemic and its their resilience and ability to restart a path conducive to the delivery of Positive impact is a premise for David Boynton consequential effects, the war in operations and continue serving long-term value. Consequently, our innovation in Natura &Co. A ded- Ukraine had a marked impact on our Representatives despite the four Business Units gained more au- ication to sustainability and inno- our operations. Faced with the devastating circumstances. tonomy in the allocation of resourc- vation proved a powerful catalyst challenges and complexities the es and accountability. for navigating socio-environmental situation presented, putting people Regarding our operations in Russia, challenges in business opportunities first was a decision aligned with The Body Shop and Aesop sus- In response to the transition, and delivering growth across all the our collective values and beliefs. pended trading. Avon continued Natura experienced a strong brands. As such, our focus was on sup- to provide its Representatives with rebound during the fiscal year. porting and protecting the safety the means to sustain their financial This was supported by increased Natura made a commitment to and well-being of our employees independence by offering its social consultant productivity, owing to demonstrating how it creates value and representatives. Additionally, selling model via a simplified and an improved combination of the beyond financial indicators like we worked with institutions, com- self-contained operation. This was product proposition. Additionally, revenue and profit, and launched its munities and suppliers to provide considered to be critical support for a strong digital social selling and Integrated Profit & Loss (IP&L). resources and support humanitari- women whose livelihoods depend e-commerce performance saw In addition to financial results, this an relief for those most in need. We on their Avon business, and we growth in retail and an impressive innovative and integrated man- are proud of our Ukrainian team for concluded that restricting access performance by &Co Pay, our finan- agement tool attributes economic Michael O’Keeffe Looking ahead, we continue to set high ambitions for our Commitment to Life sustainability vision, a reflection of the mission, values and purpose of Natura &Co. 46 47 reinventing work and helping them protest in the United Kingdom and new Aesop store in Cambridge, UK, lead safe and healthy lives. More urging decision makers at COP27 among others, demonstrated this than 20% of every sale helps create to ensure youth voices are heard in commitment, promoting the exten- better futures for women, and Avon climate negotiations. sive use of reclaimed materials and has donated over $1.1B to date to supporting heritage crafts and local fighting Breast Cancer and ending Aesop’s continued growth has been bullrush materials from the River violence against women and girls. underpinned by elevating its cus- Cam to bring the store to life. tomer experience, enhancing its The Body Shop is improving its product offerings and upholding a Looking ahead, we continue business with the rollout of its sus- strong focus on sustainability and to set high ambitions for our tainable Changemaking Workshop innovation. concept stores, which show 15% Commitment to Life sustainability vision, a reflection of the mission, value to the positive and negative munities. Using recycled plastic that explained the importance of points of uplift compared to the In 2022, Aesop launched its values and purpose of Natura &Co. impacts generated by our business retrieved from the Brazilian coast citizenship and social participation rest of its retail properties. Its refill most advanced eye treatment, This vision aligns and unites the (externalities) in the environmental, in its packaging, Kaiak Oceano de- in easy-to-understand language program, now in place in 793 stores, Exalted Eye Serum, as part of the brands based on collective action social, and human dimensions. This livered a robust sales performance for all. It included a web series that has also proved a success and boasts Skincare Plus+ range, and its Eide- to tackle some of the world’s most tool assesses the impacts gener- while addressing environmental connected political issues to the ev- a higher repeat rate than single-use sis fragrance, an evocative journey pressing issues: addressing the cli- ated by a range of activities, from issues. The largest part of the pack eryday lives of our network, making bottles. Moreover, as part of its inspired by the myth of Narcissus. mate crisis and the growing threat the supplier chain and extractivist has 20% less plastic, and 50% of all it more relatable and accessible for product upgrade and rejuvenation In addition to product innovation, of climate risks, protecting the communities in the Amazon region the plastic used in it is recycled. everyone. program, it rebranded the Drops Of 2022 saw Aesop continue to evolve Amazon and promoting solutions to Natura operations, beauty con- Youth range to Edelweiss, in a con- its channel offering, including the based on nature, ensuring equal- sultants, product use and product As part of our commitment to safe- Avon continued to progress its certed effort to embrace inclusion pilot of further travel retail spaces in ity and inclusion, and embracing end of life. The IP&L highlights the guarding the environment, Natura Open Up & Grow strategy, finaliz- and move away from harmful brand- Europe, the introduction of an ex- circularity and regeneration. As we positive impacts generated by Na- took its concerns to national tele- ing the implementation of a new ing that promotes ‘anti-ageing’. panded treatment experience in the assess the third year of our commit- tura's partnerships with extractivist vision by raising awareness about commercial model, redefining its newly opened Regent Street store ments, we can step back and reflect communities and the Carbon Neu- the increasing rates of deforestation brand proposition and accelerating The Body Shop has continued to in London, and the continued roll- on the improvements made in areas tral Program. For example, Natu- in the Amazon region during the its digitalization. Avon has focused build on its track record of cam- out of elevated fragrance spaces, such as the gender pay gap and the ra's partnership with extractivist main presidential electoral debates on optimizing its portfolio to paigning for social and environmen- including armoires and a dedicated organization’s carbon footprint, as communities returns 8.6 times the in Brazil. We called upon the candi- deliver aspirational beauty at irre- tal justice and in May 2022 launched Sensorium in Shanghai. well as the journey towards over- amount invested, while the Carbon dates to take urgent and effective sistible value and has seen 5% sales its biggest global campaign yet: coming significant challenges, such Neutral Program returns 40.1 times action to halt the destruction and volume growth in its hero products, Be Seen Be Heard, in collaboration Bringing sustainability closer to its as circularity and regeneration. By the investment to society. These made a call to action to protect the including the award-winning with the Office of the United Na- customers and further integrating reorienting the focus of our busi- results demonstrate that the com- forest in the Brazilian Senate during Anew Renewal Power Serum with tions Secretary-General's Envoy it into the company’s operations nesses to the things that make us pany's commitment to sustainable public debates leading up to the Protinol™, which consistently tests on Youth. This campaign seeks to has also been a key focus. Aesop thrive individually, and retaining the development not only benefits the Climate Conference in Egypt. better than premium competitors. raise the voices of millions of young has pioneered a circularity trial in orientation of a collective bound by environment and society but also The exclusive, patented Protinol™ people in over 75 countries. In under key stores in Australia with posi- the purpose of creating a positive generates economic value. Natura also launched the Voto helps restore years of collagen a year the campaign has already tive results and launched its first impact on society, we can better Consciente campaign in Brazil, loss in seven days for dramatically begun to create long term change, Sustainable Concept Store in the tackle the challenges that await us Natura’s innovation drive was further which was designed to encourage smoother, plumper and firmer skin. including inspiring 37,000 new SeongSu district in Seoul, Korea. in 2023 and ahead. manifested in the launch of new our employees, consultants, and young voter registrations in the Globally, Aesop’s new stores contin- Chronos product lines and in the in- representatives to recognize the Avon believes in creating positive US, supporting partners Undi18 ued to leverage sustainable practic- crease in the use of bioactives in the significance of civic duty through social change by supporting the in reducing the voting age in es and materials to enhance their Ekos line, reinforcing our relationship voting. The campaign kicked off progress of women and is commit- Malaysia, forcing major changes designs and to reaffirm the brand’s with the Amazon forest and its com- with the distribution of content ted to empowering women through to protect young people's right to commitment to sustainability: the Natura &Co annual report – 2022Our brands48 49 Business structure Aesop LatAm Avon International CEO Angela Cretu The Body Shop CEO David Boynton Natura Avon LatAm Natura &Co LatAm CEO João Paulo Ferreira Aesop CEO Michael O’Keeffe The Body Shop LatAm Natura &Co Holding Group CEO Fábio Barbosa Natura &Co Latin America: includes all opera- tions under the Natura brand in all markets and The Body Shop: includes all operations under The Body Shop brand, except those located in Avon, Aesop and The Body Shop brands located Latin America. David Boynton is the CEO of in Latin America. João Paulo Ferreira is the CEO The Body Shop. of Natura &Co Latin America. Avon International: includes all operations under the Avon brand, except those located in Latin America. Angela Cretu is the CEO of Avon International. Aesop: includes all operations under the Aesop brand, except those located in Latin America. Michael O'Keeffe is the CEO of Aesop. Natura &Co annual report – 2022Our brands 50 51 The Holding Despite facing challenges, cific capabilities and teams, such Natura &Co has faith in the strength as finance, legal and compliance, of our purpose and businesses. We reputation, risk management, have reviewed our short-term prior- cybersecurity, executive compen- ities and are focusing on executing sation, corporate strategy, and our them to navigate these difficult Commitment to Life sustainability times. In this journey, simplifying initiatives. Because the Holding our operating model to a Holding company will not be engaged in company approach was crucial to the Business Unit’s operations, support this new chapter of our other capabilities such as R&D, history. procurement, digital innovation, technology, and talent development The actions aimed at streamlining have now been absorbed by the our structure were devised by a businesses, resulting in organiza- temporary Transition Committee, tional changes at the Holding linked to the Board of Directors, company level, with the following and led by the Group CEO, Fábio executives: Barbosa. These were carefully con- sidered to achieve the right balance Guilherme Castellan remains as between centralized corporate Natura &Co Chief Financial Officer. functions and business goals with Additionally, Guilherme oversees a view to delivering on our strategic Investor Relations, Corporate Strate- ambitions. As part of this process, gy, and Cybersecurity; the committee reviewed our mar- gins and operating cash flow targets and defined steps to significantly Itamar Gaino continues as the Natura &Co Chief Legal and reduce operating costs at the Compliance Officer, with addi- Holding level. By the end of 2022, tional responsibility for Tax, Risk, the committee had completed its and Internal Controls. The Legal & mission, with most of the chang- Compliance team still operates as a es already executed and further Hub, leveraging its expertise across changes planned for the beginning all Business Units and the Holding of 2023. company team; With the discontinuation of the Group Operating Committee (GOC) Beth Powell has a broadened role as Natura &Co VP of People & (see more on page 30), our corpo- Reward following the departure of rate mission shifted from being a Paula Fallowfield. The holding HR highly centralized hub for business function now has a streamlined re- decisions to focusing on defining mit, responsible for succession and KPIs, monitoring the performance compensation of senior executive of our brands, and capital alloca- roles, defining and managing tion. Led directly by the CEO, the share plans, delivering People Holding company maintains spe- Technology, and overseeing Hold- Credit: Shane Rounce Natura &Co annual report – 2022Our brands52 53 In 2022, our corporate efforts shifted from a model that sought global synergies to one that provided the businesses with the support needed to generate value for all stakeholders. ing Internal Communications and lishing a stable common ground and of women in our leadership. Nev- People Analytics; translating the new approach into ertheless, we are still dealing with improved inventory management, and managed payables according a people organization that is leaner complexities regarding our diversity to the commercial business cycle. Marcelo Behar remains as VP of Sustainability & Group Affairs, and poised to turn our businesses and inclusion targets that we hope Embrace, our partnership program around from 2023 with greater au- to overcome in 2023. You can find which aims to develop quality long including External Communica- tonomy and accountability. more information on page 98. tions and Advocacy. Marcelo also term relationships with our key suppliers, completed its second oversees the review of the Holding Most importantly, we strove to At Natura &Co, our managers en- year successfully, with awardees in company sustainability structure, articulate the process with transpar- sure people know what they should categories connected to the pillars ensuring that it best enables the ency and consistency while setting do and why they should do it. This of our vision and strategy. More in- Business Units to face challenges honest expectations and engaging assumption means that we individu- formation at www.naturaeco.com/ with greater accountability our leadership team in the internal ally establish blocks to build some- suppliers-embrace/ and autonomy. communications efforts. Therefore, thing bigger than ourselves. We despite the challenges, we achieved are a collective of people sharing As a result, our corporate expenses favorable consolidated results in purpose and dreams to mobilize were down 30% compared with our annual employee engagement minds and hearts for the benefit of 2021. survey. We also maintained a steady the world. These principles continue low voluntary employee turnover. to be the foundation of our corpo- People first Every decision made throughout There was also significant prog- due to the reorganization process, rate culture project, paused in 2022 this strategic shift has been taken ress in our people goals within the and to be resumed in 2023. with the utmost care for our people. Commitment to Life sustainability Wherever possible, we worked with vision. We closed the gender pay impacted individuals to identify op- gap one year ahead of our target Update on global synergies For the supply chain, we further portunities for relocation within the while advancing in ensuring a living improved our strategic sourcing Business Units. Our Human Resourc- wage (or higher) for all and remain- through better commercial nego- es team had a pivotal role in estab- ing vigilant on the representation tiations, optimized operations for Path to investment grade We almost doubled our average debt maturity based on a process of careful management liability. → 2020: capital injection and deleveraging of the balance sheet following the acquisition of Avon with significant liabilities. → 2021 and 2022: liability management to reduce the overall cost (sustainability bond) and succes- ses in extending the maturity or improving the nature of the debt, which was extremely important in navigating the crisis. → 2023: liability management and capital structure remain our top priorities for achieving investment grade. Natura &Co annual report – 2022Our brands Natura &Co Latin America The path to growth Our combined operations in Latin America showed strength, with a solid performance in Natura and encouraging sequential improvements in Avon CFT. The next stage is leveraging our social selling model to operate both brands simultaneously and boost prosperity for the network. In 2022, Natura &Co Latin America to offset the impacts of the planned reaped the benefits of the adjust- Fashion & Home portfolio optimiza- ments made just after the initial tion strategy in Avon Latin America. rollout of Avon’s new commercial Adjusted EBITDA margin was 10%, model in Brazil, and also posted down 120 bps despite price increas- positive results for Natura Latin es and strict cost control as a result America. The Business Unit ended of the challenging environment. the year consolidating its strong- hold leadership in the region, The conclusion of the first stage of showing particular resilience amid the integration provided additional the difficult global macroeconomic insights into direct sales channel circumstances, amplified by political behavior and what to expect during instability in some countries. Total the implementation of the planned revenues in 2022 were up 6.3% in accelerated combination of the CC (down 1.7% in BRL due to foreign Avon and Natura businesses in Latin exchange impacts and hyperinfla- America. A fully dedicated team tion accounting effects). The full- has been put in place to rollout the year performance was driven by the strategy across the region in 2023 Natura brand, while the year also (starting with Peru and Colombia, saw improvement performance by and followed by Brazil). The objec- Avon in the CFT category, which tive is to unify the value proposition combined were more than enough for Consultants and Representatives 57 Rock for the forest Natura was back at the Rock in Rio Music Festival in 2022 to raise awareness of the importance of keeping the Amazon forest alive and standing. Brand activations such as "NAVE" and "Portal Natura" invited the public to get to know other dimensions of the forest and engage in choices that positively impact the planet's future. More information can be found on page 96. so that 100% of them can operate maintaining its market share and with both brands simultaneously. leadership. The latest data available In this phase, the Natura brand's from Euromonitor (2021) also shows commercial and distribution plat- that the brand maintains its leader- form will incorporate Avon’s opera- ship in the country. Natura was also tions, offering a higher service level, ranked the 7th most valuable brand driving efficiencies, and unlocking in Brazil by Brand Finance and, once profitability. Nevertheless, both again, ranked the strongest cosmet- brands will maintain and enhance ics brand in the world in the brand their individual attributes to con- strength index. Topline growth for sumers, amplify their distinctiveness Natura in Brazil was 14.4% in CC and complementarity, and working (14.3% in BRL), boosted by price towards a digital mindset to explore increases, combined with a better opportunities. Natura: sustained leadership In 2022, Natura's net revenue in the region was up 14.5% in CC (6.2% in mix. The gift category also showed a better performance in Q4 com- pared to the brand’s total growth in the region. BRL), with solid momentum in Brazil The average available consultant and further growth in Hispanic base reached 1.16 million in Bra- America. zil, broadly stable compared with the previous year. The continuous In Brazil, based on data from efforts to create an ecosystem Kantar, Natura resumed growth through the acceleration of a 100% in line with the Cosmetics, Fragranc- customized consultant offer and es and Personal Care (CFT) market, digital social-selling tools such as Natura &Co annual report – 2022Our brandsthe ones for content creation and the retail and online channels in the tative activity also improved sequen- network training proved their worth last months of 2022. yet again. In addition, consultant productivity was up by a strong +14.9% in Q4-22 compared to Q4-21 Avon: fixed fundamentals If the first wave of the Avon turn- tially compared to the previous year, further closing the gap to YE 2021 levels. in Brazil, a softer performance se- around in Latin America took more In Hispanic America, the new com- quentially, but on track of a tougher time than expected due to exter- comparable base. The penetration nal and internal challenges, route of digital (consultants who logged corrections implemented at the mercial model showed progress in Ecuador, and quick wins in Colom- bia and Central America, with a in at least once to the digital cata- end of 2021 in Brazil yielded positive sequential increase in activity and log or the app during the quarter) trends in 2022. Avon recorded an higher representative recruitment. reached an impressive 82.1% in Q4- encouraging sequential topline im- Overall, net revenue for Avon in 22. Retail and online channels also provement in the Beauty segment Hispanic America was down 2.4% in All eyes on Avon saw significant growth in 2022. The throughout the year. The measures CC (-13.8% in BRL), despite the men- number of own stores reached 90 adopted to balance business activity tioned performance in the markets For the second year, Avon spon- (+18 compared to the previous year), and recruit new representatives stated above, as well as in Argen- &Co Pay In 2022, the platform to enable financial and digital inclusion for consultants and representatives posted strong growth in the number of accounts, reaching approximately 500,000, while the Total Payment Vol- ume (TPV) amounted to R$ 25.6 billion for the year. The successful performance in Brazil was supported by the accelerated adoption of the Pix instant pay- ment service and the processing of all sales to consul- tants via credit card, both launched in 2021. Due to the commencement of additional support for the retail operation and the launch of the Avon brand in the last quarter of 2022, &Co Pay now has the enhanced capacity to capture and process all of Natura's direct sales and e-commerce payments across all channels and brands in Brazil. Natura consultants who use the platform generally have higher activity and lower pay- ment default levels. Also, our international expansion process started with a pilot implemented in Q4 in our sored Big Brother, the biggest while franchise stores increased to resulted in improved KPIs, including tina. It was, however, impacted by Argentina operation. reality show in Brazil, boosting 649 (+74 compared to the previ- productivity growth in the Beauty a decrease in Mexico (which has the visibility of Representatives, ous year). Digital also showed solid category, which also benefited from higher exposure to the Fashion and In early November 2022, &Co Pay obtained the Brazil- showing innovative products, performance, with digital top line a better product and price mix, Home category), as well as Chile and ian Central Bank’s approval to operate as a financial and restating the brand’s com- growth of 19.8% in 2022, driven by product innovation, and marketing Peru, both impacted by political and institution, namely a Direct Credit Company (Socie- mitment to women’s causes. a substantial number of visits and strategies such as the Big Brother economic context. Through The Fantastic World of the average ticket, leveraged by Brazil sponsorship. Avon, the participants had an branding media, fragrance mix, and As observed in Brazil, the Beauty immersive experience of Avon’s freight initiatives. However, Avon's overall net revenue category grew by 4.6% in Latin make-up, fragrances, and body in Brazil was still down 5.7% com- and face products. The brand With regard to the Hispanic coun- pared with 2021 due to a drop in also addressed topics such as tries in Latin America, Natura's net Fashion and Home sales, as a result diversity, gender, self-esteem, revenue was up 14.6% in CC (-5.3% of a deliberate ongoing portfolio and entrepreneurship. Avon in BRL), despite political and eco- reduction in this category and a America, but this was offset mainly by the Fashion and Home category. The adjustments in the portfolio will also continue during the sec- ond wave of integration and will reached more than 150 million nomic turmoil, especially in Argen- post-lockdown change in consumer be based on criteria of profitability, people during the course of the tina, Chile and Peru. The average habits. show, led interactions in social available consultant base reached return on invested capital, and com- plementarity to Natura’s portfolio media, and registered a 177% 0.88 million in 2022, reaching 3,7% The number of average available and categories. growth in e-commerce sales of growth compared to 2021. The representatives in Brazil improved compared to the average in the previous months. Body Shop Latin America and Aesop sequentially and showed a stabiliza- experienced a good performance in tion of the channel. Overall represen- dade de Crédito Direto). This will result in a new phase for the financial services business with the availability of important levers for cash, funding, credit, and the inclusion of our consultants and representatives. A pilot is also underway in Brazil as part of the prepara- tions to roll this facility out to retail operations. Natura &Co annual report – 2022 Empowering prosperity through a mindful financial approach to society, environment, and economy To balance profit and purpose in their management ap- the communities in Natura production chain for en- proach, Natura has developed an Integrated Profit and vironmental conservation through offsetting carbon Loss (IP&L) model. This model assigns monetary values initiatives, returns 40.1 times the investment to society. to the impacts of Natura's activities on the economy, environment and society. This allows for an integrated Through IP&L, Natura has found that for every US$1 in analysis of the effects on the business's financial results revenue, the company generated US$1.5 of positive and contributes to the consideration of dynamic and impact on society in 2021. This model is the result of a transparent materiality in corporate governance. IP&L cycle of advances in Natura's impact assessment mech- assesses a wide range of Natura's activities, from suppli- anisms since 2010 with the development of Environ- er chains and extractivist communities in the Amazon mental Profit and Loss (EP&L) and Social Profit and Loss region to Natura operations, beauty consultants, prod- (SP&L) models, published in 2016 and 2018, respectively. uct use, and product end-of-life. It is a model in constant evolution, in accordance with the advancements in the scientific community and the The IP&L methodology is comprehensive and involves developments in the spheres of impact valuation. It also several stages, including the use of metrics from institu- incorporates the sustainability strategy of the company, tions such as Wage Indicator, WHO, and OECD, as well as well as the business model that is based on the princi- as indicators from Natura's business. For example, we ples of purpose, prosperity, and belonging. apply the living income* concept and evaluate consul- tants with income above this level (positive effect of our Through that journey, Natura's IP&L model continues to business model) and those who have not yet reached the evolve, and the company has been sharing this meth- reference value (counted as a negative effect, where we odology with investors and other companies to achieve can move forward to help them prosper economically). a more transparent and comparable model. Natura will In addition to earnings from product sales, indirect ben- report update data on IP&L, related to 2022 results, in efits, such as professional training, are valued. In another mid-2023, at Natura &Co Latin America GRI report. example, in the Amazon, we evaluated the impacts of purchasing inputs from biodiversity of sustainable origin and investments made in the region and compared deforestation data from neighboring areas with infor- mation from the places where we operate to see how our operation contributed to conserving the standing forest**. For instance, Natura's partnership with extractiv- ist communities returns 8.6 times the amount invested, while the Carbon Neutral Program, which remunerates *Natura uses the terminology of living income for consultants because they carry out an entrepreneurial activity and living wage for employees. In both, it uses the living wage parameter and methodology from the Wage Indicator Foundation. The living wage figure is calculated proportio- nally to the average time (hours) dedicated to consulting. **Each hectare conserved is equivalent to R$ 3000. Source: Groot, R., Brander, L., van der Ploeg, S., et al. (2012) Global Estimates of the Value of Ecosystems and Their Services in Monetary Units. Natura innovavtion Luna Coragem Supported by neuroscience tests and well-be- ing studies, Natura created Luna Coragem, a fragrance that encourages and empowers women. It combines the protea flower, which symbolizes resistance and hope, the warmth of pink pepper, and the creaminess of copaí- ba, an ingredient from Brazilian biodiversity. The woody scent of patchouli complements this invitation to conquer new spaces, equality, respect, and representation. Chronos Aqua Plumping Bio-Hydrating Serum A new addition to the Chronos range, this watery serum formula with fevillea prebiotic, an active ingredient from Brazilian biodiversity, and triple hyaluronic acid 1.5%, fills and hydrates all the layers of the skin with an immediate, pro- gressive, and lasting effect. It stimulates self-fill- ing and hydration, reducing the appearance of soft to deep lines and wrinkles. 63 Kaiak The original Natura Kaiak, Kaiak Pulso, Kaiak Aventura, and Kaiak Oceano lines have new, improved and more sustainable packaging with caps containing 20% less plastic and 50% material derived from recycled waste retrieved from the Brazilian coastline by social cooper- atives. From the start, the Kaiak range was de- signed with choices that respect the ocean and fragrances that evoke its power and freshness. Essencial Único The noblest and most sophisticated fragrance within Natura’s “Casa de Perfumaria do Brasil”, Essencial Único showcases a unique floral bou- quet that combines the purest filtered accords of Egyptian jasmine (for the feminine version) or vetiver (for the masculine one) with copaí- ba, a precious wood from the Amazon forest. Natura also launched refills for its entire Essen- cial range, with 45% recycled glass and a 100% post-consumer recycled plastic cap. Natura &Co annual report – 2022Our brandsAvon International In the right direction Avon International ends 2022 with restored business fundamentals and a new commercial model fully implemented to deliver organic revenues and margin expansion – all enabled by a reignited brand proposition. In 2022, Avon faced unexpected, at approximately 80% of pre-war challenging external circumstances levels. Neighboring countries, such given its geographical footprint: the as Poland and Romania, also sig- deteriorating economic conditions nificant markets for Avon, started in key markets, with the cost of seeing a decline in consumer con- living crisis and inflationary pres- fidence during the second half of sures, and, notably, the outbreak of 2022, as the result of additional pres- the war in Ukraine. Because of the sure on energy prices, which is also international sanctions imposed affecting Western Europe. These on Russia, Avon has stopped invest- crises combined impacted Avon’s ments and suspended exports overall results for the year, with from the country, maintaining only total net revenue down 9.9% in CC self-contained local operations in (-22.9% in BRL), and adjusted EBITDA support of women (who operate margin down 4.3% in CC (-170 bps as independent entrepreneurs) and compared to the previous year). their children, as Avon has done for the last 137 years. Russia and Ukraine apart, Avon demonstrated steady ongoing In Ukraine, the focus has been progress in its Open Up & Grow on aiding Avon’s employees and strategy, with tangible, sequential Representatives, providing humani- improvements in key performance tarian assistance (see more on page metrics compared with 2021. By 99) and restoring operations, now resetting fundamentals and radi- 65 The Power of Aging In partnership with Marie Claire UK, Avon launched the podcast series “The Power of Aging”, following the pub- lication of its research that showed that two-thirds of women globally feel their con- fidence is improving as they age (67%) and that aging is not something to fear (63%). The initiative invited five talent- ed women from the world of beauty, media, and business to share their positive experienc- es of life after 40, what impacts their sense of power as they age, and their changing atti- tudes to beauty. Natura &Co annual report – 2022Our brands 66 By resetting fundamentals and radically simplifying the business, Avon is now leaner, more agile, and has greater standardization of commercial and marketing processes. cally simplifying the business, Avon is now leaner, more agile, and has greater standardization of com- mercial and marketing processes. Effective revenue management and strict financial discipline have been able to mitigate the impact of mac- roeconomic conditions. Further- more, Avon continued to optimize its geographical presence, trans- ferring three countries to a partner distributor (Saudi Arabia, India, and Kyrgyzstan) and closing down the business in Albania. The announced closure of Avon’s Suffern R&D facility in the United tatives, a growth of 4,9pp versus the a 20% reduction in product offers, States, relocating R&D operations previous year or five times pre-pan- with a focus on building cult and to Brazil and Poland, and the out- demic levels, while digital sales hero products. The innovation pipe- sourcing of the IT infrastructure and accounted for 7.9% of total revenue, line is centered on fewer and more application services will also result a growth of 0.7pp year-over-year. significant innovations, stretching in considerable recurring savings Accelerating Avon’s omnichannel to middle and upper mass to drive from 2023 onward. Furthermore, presence remains a critical path gross margin, pricing power, and these moves will drive the pace and going forward, opening up access sustainability. relevancy of innovation in product to Representatives and consumers development and technology. wherever they want to connect. Avon is driving brand reappraisal Beauty your way Avon’s new commercial model has For example, an exciting launch in through a clear cult product strate- 2022 was the integration of artifi- gy, based on the very best products cial intelligence and AR-powered loved by Representatives and con- been implemented in 30 markets. makeup try-on technology to help sumers. In 2022, it conducted a new This simplified program delivers an customers find their perfect match. series of blind-tests against premium enhanced earnings opportunity for They can see the products come competitors in the fragrance, make Avon’s Representatives with a per- to life with hyper-realistic results up and skin care categories. The sonalized experience, supporting using their mobile camera, a web- results showed that 11 out of 12 Avon them to do beauty their way. It also cam on a desktop computer, or an products were considered as good helped improve Representative re- enhanced high-touch shopping or even better than luxury products tention (up 4%) and productivity (up experience available in the Repre- that cost up to four times more. 8%), particularly in the higher-earn- sentatives’ digital brochures. ing Representative segments. Aspirational beauty, Finally, a GlobalData fragrance claim validation prepared in October 2022 As part of the continuous focus on the digitalization of the direct selling irresistible value The portfolio transformation is still confirmed that Avon remains the largest fragrance brand in the world channel, the penetration of the Avon underway, driving simplification (as measured by volume or units ON App reached 30% of Represen- and harmonization and resulting in sold in 2021). Natura &Co annual report – 2022Our brandsAvon International innovation ANEW Sensitive+ Collection Built upon Avon’s award-winning breakthrough Protinol™ technology, the system helps to re- duce the appearance of fine lines and wrinkles while replenishing the skin’s moisture barrier. Unlike other active ingredients such as Retinol, Protinol™ boosts collagen without irritating the skin. The affordable groundbreaking range in- cludes Anew Sensitive+ Cream Cleanser, Anew Sensitive+ Dual Collagen Eye Cream, and Anew Sensitive+ Dual Collagen Face Cream. 68 69 Far Away Splendoria A modern, brighter interpretation of the liquid gold of Middle Eastern per- fumery, Splendoria is the newest, most glamorous member to join the original Avon Far Away family. While traditional oud is considered dark and masculine, Avon created an exclusive White Oud accord to give this rare Middle Eastern ingredient a fresh twist and a more feminine and sensual edge. This accord is complemented by the rich fruitiness of black splendor plums, a bouquet of white floral gardenias, and finished with warm, creamy vanilla. Eve Privé Avon’s first-ever customized fragrance, Eve Privé features a delicate white musky mole- cule that was exclusively designed to mix with the chemistry of each skin type to enhance its natural scent. This comforting, customizable musk forms the heart of the woody floral scent, which opens with the crisp hit of red apples and delicate jasmine petals. Moreover, due to this molecular technology, the personal fra- grance lingers for hours to create the feeling of a second skin. Ultra Color Lip Gloss Formulated with 3D-light reflective pigments and pomegranate and grapefruit extracts for an uplifting boost, the gloss range can be worn alone as a clear shimmer to allow the natural lip to show through or layered on top of lipstick for a more dramatic effect. It includes an XL wand that follows the natural curve of the lips to enhance and define contours. Available in 15 shades that harmonize with all skin tones and with three different finishes: sheer, creamy, and shimmer. Natura &Co annual report – 2022Our brandsThe Body Shop Advocate for the future The past year was far from easy. Still, The Body Shop is on track to turn its business around through a revived retail experience, rejuvenated products, and a restated purpose that amplifies the voices of young people. 71 To overcome these challenges, the management team looked closely at the business and acted on all the fronts that were under its control to drive margin improvement, including strict financial discipline, minimizing discretionary spending, and rightsizing the overhead structure. The set-up of additional global support for franchise partners with actions to stimulate demand meant that, by the end of the year, inventory levels were much higher than pre-pandemic levels. Despite the uneven results through- out the year, the e-commerce chan- nel saw ongoing improvements, reaching double pre-pandemic levels in 2022. As for The Body Shop at Home, after performing superla- tively during the lockdowns, it saw a steep decline in consultant numbers It is no exaggeration to say that adjusted EBITDA margin was 10.9% as economies reopened. This reduc- 2022 was the most difficult year in (-670 bps compared to the previous tion in size led to it reverting to be- the history of The Body Shop. An year) due to sales deleverage and ing a complementary channel in the extraordinary set of external factors gross margin pressure, also impact- UK and Australia, while operations in significantly disrupted the business, ed by the price of inputs and for- the United States were closed. prompting The Body Shop team to eign exchange dynamics. Although pursue the best possible outcome showing signs of recovery towards in very challenging circumstances. the end of the year, footfall to stores Retail at heart Key to its continued transformation, Having taken tough decisions and was not enough to offset the decline The Body Shop is ramping up the decisive action to adapt to the com- of The Body Shop at Home, which deployment of its new Change- plex environment, The Body Shop is had risen exponentially during the making Workshop stores, a process continuing its transformation jour- pandemic, and the high product in- that was significantly delayed by ney to reposition the business for ventory levels held by the franchise the lockdowns during the different new times and return to achieving partners during the lockdowns. waves of COVID-19. The revitalized profit with purpose. Moreover, The Body Shop suspend- retail experience is attracting new ed all 26 stores and e-commerce customers, with a 15 pp improve- In 2022, The Body Shop’s total net operations in Russia after the start ment in performance compared to revenue was down 13.5% in CC of the war in Ukraine, while con- the traditional model. By the end of (-24.3% in BRL), mainly due to chan- tinuing to support the people who 2022, 10% of the brand’s footprint nel mix rebalancing after COVID-19 depended on the business for their had been refitted, including owned and reduced disposable income in livelihood. Europe, especially in the UK. The and franchised stores. The pace of refitting more stores will continue Natura &Co annual report – 2022Our brands72 in 2023. Furthermore, the in-store tion to Kenya. refill stations, now installed in 793 stores, established a new standard in the industry. They are engaging Global recognition Regardless of the challenges, to- consumers, particularly the young, day, The Body Shop is closer to its in the circular economy, offering a original vision than it has been in more affordable option for personal decades, upholding the legacy of care products and achieving a high- its founder Dame Anita Roddick. er repeat purchase rate than plastic It continued to gain recognition bottles. through high-profile awards across the world. These included winning Product rejuvenation is also ad- The Beauty Brand that is Making a vancing across categories, with Difference, awarded by The Sunday high-quality natural formulations Times in the UK, the “Health and and sustainable premium packag- Beauty Retailer of the Year” from ing. Due to the disruptions in the the Retail Asia Awards in India, and supply chain caused by the pan- the Fast Company Brands That Mat- demic, The Body Shop was only able ter in the United States. Nowadays, to launch the first reimagined range retail has to fight even harder to in the second half of 2021. This in- be relevant for new times and new cluded the iconic body butters, fol- generations. For The Body Shop, this lowed rapidly by hair care and body means growing the business while shower gels, as well as premium positively impacting people and skincare and a wellness range. By the planet. One example of this is the end of 2022, approximately half the new global campaign Be Seen of the portfolio had been reformu- Be Heard, which seeks to raise the lated, with more to come in 2023. voices of young people in public life (find out more on page 91). Finally, another drive for growth is The Body Shop’s presence in 80 countries, which may offset head- winds in some national economies. Initiatives underway include the positive outlook for the reposition- ing in Japan (after the buy-back from the head franchisee) and significant expansion plans by the head franchisee in India. The Body Shop was a pioneer in markets such as Saudi Arabia and South and Southeast Asia, and it intends to repeat this feat in the sub-Saharan African countries, where the com- pany is already extending distribu- Stand on mental health In 2022, The Body Shop re-launched its premium skincare range Drops of Youth, renaming it Edelweiss and taking a stand on the anti-aging narrative. The Self-Love Index research commissio- ned by The Body Shop sho- wed that consumers want brands to take real action to promote positive mental health in society and not to undermine self-confidence through the propagation of unrealistic claims. Natura &Co annual report – 2022Our brands74 75 The Body Shop Innovation Edelweiss The former Drops of Youth inspired the new skincare range. It is now enriched with double the concentration of edelweiss, a rare mountain flower that grows in Alpine environments subject to extreme weather conditions and has powerful antioxidant properties. The formula is 43% more potent than retinol and is made with 99% natu- ral-origin ingredients to help smooth and protect the skin. Vitamin C Glow Revealing Serum The newly developed serum packs 10% of vita- min C – the highest concentration ever offered by The Body Shop and is enriched with baku- chiol to help reduce the appearance of uneven pigmentation. The formulas for the entire Vita- min C range are now made with at least 90% natural-origin ingredients. Some contain camu camu berry extract, one of nature’s richest sources of vitamin C. Wellness & Self-Care The range features three new routines: Sleep (lavender and vetiver), Boost (mandarin and bergamot), and Breathe (eucalyptus and rosemary), designed to help people recharge, reconnect, and re- energize. The products have at least 90% natural-origin ingredients and contain 100% natural essential oils. They are vegan- certified and come in recyclable glass and aluminum jars or bottles. Jamaican Black Castor Oil A widely tested and reviewed range to help detangle, hydrate, and define all types of curls and coils. The formula is enriched with Community Fair Trade shea butter and vegan keratin protein and is presented in four products: curl activator, cleansing conditioner, intense moisture mask, and leave-in conditioner. Natura &Co annual report – 2022Our brands77 Aesop Continued evolution From its salon origins in Australia to a truly global ‘new luxury’ player today, Aesop continues to evolve and thrive. In 2022 the brand extended its footprint, enhanced both product and customer experiences, and took a design-led approach to advancing against a bold sustainability agenda. 2022 once again saw outstanding resumption of international travel. achievements for Aesop, which con- An increase in store productivity tinued to drive global growth while combined with a favorable product maintaining its distinctive position- and price mix counter balanced ing centered on disruptive design, inflationary cost constraints. considered creativity, and passion for delivering sensational customer The adjusted EBITDA margin was service with a sensorial and immer- 21.7% (-230 bps compared to the sive experience. previous year), pressured as ex- pected by planned investments All regions delivered strong growth to deliver future growth, primar- ment within Aesop’s strategic ambi- significantly outpacing the wider ily related to the roll-out of new tions. Besides the launch of Aesop. industry. Total net revenues reached stores, technology, supply chain, com and a storefront on the T-Mall 21% in CC (4.6% growth in BRL), driv- and human resources enhance- platform, Aesop opened its first two en by stronger retail and wholesale ments, including preparation for physical stores in mainland China in sales and softer e-commerce per- Aesop’s entry to China. December. The first store on Shang- formance, normalizing the channel hai’s Dongping Road pays homage mix post-COVID with the return of The start-up of operations in China to Chinese craftsmanship, houses consumers to the streets and the at the end of 2022 was a pivotal mo- an immersive fragrance Sensorium The first store on Shanghai’s Dongping Road pays homage to Chinese craftsmanship, houses an immersive fragrance Sensorium, and is surrounded by a garden with Chinese medicinal herbs. Natura &Co annual report – 2022Our brands(dedicated and uniquely-designed sensory installations were brought experience, as well as integrating space for fragrance and aroma), to life throughout the year such as more local payment systems and and is surrounded by a garden with the Armoire in both Paris and Lon- expanding its clienteling solutions. Chinese medicinal herbs. It has had don, the Bibliothèque in Vienna, a an overwhelming reception from Sensorium in Regent Street London Aesop continues to engage its both customers and the media, and and bespoke in-shelf fragrance global customer communities with is outperforming trading expec- executions in further stores across creative conversations, for example tations. A second Shanghai store the globe. in Xiantandi followed a few weeks with Queer Library celebrations in various cities, the Future Fables au- later, achieving strong early success. Three locations were highly em- dio series, and Othertopias playlists Growth by design In 2022, Aesop continued to expand blematic and marked significant to celebrate the new fragrance col- moves for Aesop. In Korea, the new lection. It also brought to life inno- store in Seong-Su features the am- vative sustainability activations such its physical retail footprint, with the plification of regenerative practices as Kyklos in Seoul to explore regen- rollout of stores in new cities such in the design of Aesop spaces across erative practices in conjunction with as Shanghai (China), Madrid (Spain) the globe, evoking a circular vision local artists. For the Festive season, and Cambridge (UK), and by further for future endeavors. Aesop opened its beloved city guides were brought strengthening its penetration in its first European flagship space to life in digital form to showcase existing and fast-growing markets on London’s prominent Regent some of Aesop’s favorite hidden such as Japan, South Korea, Canada, Street. This is now its largest store in treasures in cities like Los Angeles and Australia. By the end of the year, Europe and extends the customer and Sydney. Aesop had a total of 287 signature experience with skincare treatment stores and 107 counters in depart- rooms, as well as a Sensorium to ment stores. host fragrance consultations. Mean- while, in its home city of Melbourne, It was also an important year for the company shifted its 15 year old the Fragrance category, which saw Collins Street presence to a grand a further 50% growth. Alongside new flagship space at the iconic old expanding the range, Aesop con- George’s Building. Complementing tinued to elevate its in-store experi- its physical presence, Aesop contin- ence and customer journey around ued optimizing its e-commerce in Fragrance. A series of dedicated pursuit of a more mobile-friendly The Shanghai store in Xiantandi followed a few weeks after the Dongping Road store opened it's doors. Natura &Co annual report – 2022Our brands80 81 Aesop innovation Eidesis An aromatic journey inspired by the myth of Narcissus, honoring the imaginary worlds be- yond the surface of a mirror. Watery reflections and refractions of resinous sandalwood are juxtaposed against a warm heart of cedar and cumin, with inviting top notes of petitgrain and spicy black pepper. Rick Owens Travel Kit Aesop developed a collaboration with celebrated fashion designer Rick Owens, creating a sophisticated travel kit which included a bespoke fragrance Stoic, along- side favored body and hair care formulations, housed in a sustainable recycled paper pulp case and clad in a cotton jersey wrap. Exalted Eye Serum As Aesop continue to drive the elevation of its Skin Care range, it extended its more premium Skincare Plus+ range with this delightful, light- weight serum. It is Aesop’s most enriched eye product with Vitamins B, C, and E for targeted hydration and luminosity. Aromatique Incense A new range of incense sticks available in three therapeutic scents to bring aromatic peaceful- ness and serenity to one’s home. The Kagerou incense is inspired by the earthy, green, and smoky facets of vetiver. Meanwhile, Sarashina features dry, woody notes of sandalwood and warm, comforting spice. Murasaki brings to life a more resinous and spicy journey with notes of hinoki, a cypress native to Japan and East Asia. Each pack includes a water-soluble pumice holder. Natura &Co annual report – 2022Our brands82 83 Fable Investments Fable is Natura &Co’s investment of the business in partnership subsidiary that supports (with a mi- with Natura &Co’s financial and nority stake) innovative and emerg- expert support. ing businesses within the beauty and wellness arenas. In 2022, Fable’s LOLI: as a beauty industry portfolio had a dynamic year, with veteran, founder Tina Hedges two investments in particular, created the world's first ze- maude and Perfumer H, presenting ro-waste, organic, and MADE outstanding results. SAFE certified skincare brand. LOLI's products are upcycled maude: a modern intimacy from organic food supply, wa- company launched in 2018 to terless, vegan, non-GMO, and disrupt the male-focused legacy cruelty-free. The packages are sexual wellness industry. Found- plastic negative and are made ed by Eva Goicochea, maude of freshly grown mushrooms. offers a unique and inclusive assortment of sex essentials and personal care products Stratia: born from a blog un- der Founder & CEO Alli Reed’s that are body-safe and easy to pseudonym “The Acid Queen” use. In 2022, maude saw a +50% in 2016, Stratia is a company growth rate and successfully obsessed with research and made its debut at Sephora US science-backed ingredients to online as their first sexual well- create skincare that works. Her ness brand. commitment to science means clear labeling, transparent Perfumer H: an artisan fra- ingredient declarations, and a grance brand founded by British commitment to efficacy for a perfumer Lyn Harris, the only wide variety of skin types. Verti- classically trained female nose cally integrated, all products are in the UK. Lyn founded Per- formulated and manufactured fumer H in 2015 with the desire in house. to pioneer naturals and bring craftsmanship back to perfum- ery, creating unconventional fragrances that resonate with life and are integral to her style. In 2022, Perfumer H opened a second store in London and its first in Paris, doubling the size Natura &Co annual report – 2022Our brandsOur Commitment to Life 86 e r o N et Z P r o t e c t the Amazon To Address the Climate Crisis and Protect the Amazon Bio div e r s it y n o i t a r e n e g e R O u r P e o p e l O u r W i d e r N To Defend Human Rights and be Human Kind To Embrace Circularity and Regeneration e t w o r k H u man Rights rit y u l a c r Pa c k a g i n g C i y rit ula For m ula Circ Progressing on many fronts Two years on from the launch of Commitment to Life, our sustainability vision aimed at addressing some of the world’s most urgent and pressing challenges, we are making progress towards reaching some of the targets we set. Despite an organizational transformation in our structure, giving more autonomy to our businesses, we remain steadfast in our belief that sustainability is the foundation that unites us. Sustainability data For more information, please refer to our sustainability data which provides additional data, transparency and accountability on our environmental and social performance across our Business Units, from 1 January 2022 to 31 December 2022, in line with global reporting frameworks. Natura &Co annual report – 2022Our Commitment to Life 88 To Address the Climate Crisis and Protect the Amazon After more than two years of looking into GHG emissions, we now have a much clearer vision of the challenges towards our NetZero carbon emissions target for the Group. In 2021, we set our baseline for the category 12 (end of life). Excluding of greenhouse gas were no longer four Business Units, consolidating the use phase, Natura &Co Latin being released into the atmosphere Climate Strategy Natura, we identified four climate tion Pathway – RCP scenarios), with risk factors (threats), principal- forecasts ranging from worst case, the organizational footprints of America accounts for 64% of emis- in 2022. These vehicles are also In 2021, we began the development ly related to transition: Market, in which nothing is done to limit scope 1, 2, and 3 carbon emissions. sions, Avon International for 24%, capable of running on biomethane, of a project that will permit the Reputational, Regulatory and global warming to the less extreme our science-based target to SBTi followed by The Body Shop with a biofuel generated from organic group to evolve in the Risk Manage- Technological. In terms of phys- scenario, in which there are signifi- (Science Based Targets Initiative) and approximately 11% and Aesop with waste, which further reduces the ment and Strategic pillars of the Task ical risks, the four main threats cant cuts in greenhouse gas (GHG) are in the process of validating the 1%. At a brand level, Avon accounts impact of this particular activity on Force on Climate-Related Financial identified were floods, forest fires, emissions worldwide by 2030. We submission. After the verification, for most of the emissions, with the environment. The projection is Risks (TCFD) and will lead to greater droughts and heat waves. Exam- also considered future economic we will follow the pathway toward approximately 72%, while Natura to reduce emissions by up to 82% as integration of climate-related risks ples of climate risks mapped are: and population growth trajectories curbing our emissions in accor- is responsible for close to 16%. For the supply of biofuel expands in the and opportunities into the global technological restrictions and the and climate feedback. dance with the 1.5oC scenario. For more details on 2022 GHG emis- country. risk matrix. increased cost of products per unit; the first time, we have also included sions please see the Sustainability a carbon reduction target as a long- appendix. term incentive key performance This will also drive advances in the and development; and damage to opportunities takes into account process of co-responsibility among infrastructure and product stocks; these scenarios on a time horizon increased expenditure on research The analysis of transition risks and indicator (KPI) for our Executives. One example of the actions taken to the risk management, finance and among others. The analysis included up to 2030 – for physical risks there reduce emissions was Natura’s deci- sustainability areas in managing the modelling of scenarios taking are three periods (2030, 2050, 2070). We remain measuring our GHG sion to use new trucks powered by emissions including scopes 1, 2 and natural gas, which have been used 3. ON scope 3, category 1 (pur- to transport the brand's finished chased goods and services: product products. With this initiative, we and non-product) remains the lead- have emitted 16% fewer pollutants ing category, followed by category compared with the diesel-powered 4 (upstream transportation) and fleet. As a result, more than 18 tons climate-related risk, in addition to into account different contexts to The possibilities of a determined risk including such risks in the process- evolve understanding of the tran- occurring used the same proba- es of other areas such as strategic sition and the physical risks. As bility ruler used at Natura, and the planning and product development. a reference we used the climate different impacts that arose in each scenarios established by the IPCC scenario will be used as inputs for In a risk and opportunity mapping (Shared Socioeconomic Pathway - strategic decisions. process conducted previously by SSP and Representative Concentra- Natura &Co annual report – 2022Our Commitment to Life90 Pushing the global agenda We have an Advocacy function en the legal aspect of sustainable versity Framework, including man- whose role is to take a stand on development and provide a legal things which matter, to join forces underpinning for environmental with others and to work towards and climate justice; to enhance datory corporate assessment and disclosures of impacts on nature. Natura &Co and Avon signed an systems level change. We took part transparency and accountability by open letter to the COP27 Presiden- in the Convention on Biological Di- supporting harmonized ESG stan- cy and Leadership team calling for versity (CBD) meeting in Geneva in dards. March 2022, an important milestone towards the CBD COP15 UN Bio- In September, we attended Cli- diversity Conference. Natura &Co mate Week NYC 2022, where we greater accountability and transpar- ency on male/female parity on the Egyptian COP27 leadership team. was part of the business delegation, discussed issues ranging from the The Body Shop continues to build advocating for a stronger Post-2020 importance of bringing nature into on the work of founder Dame Anita Biodiversity Framework. During the debates on carbon, to appreciat- Roddick and to use its business to event, we offered a statement on ing that it is an integral component campaign for social and environ- behalf of the Finance for Biodiversi- and enabler of a net-zero world. ty Foundation and the Business for We focused on the importance of mental justice. Be Seen Be Heard is a collaboration between The Body Nature coalition at the Opening governance in our engagements, Shop and the Office of the United Plenary, urging policy makers to referencing the B Corp legal re- Nation’s Secretary General’s En- & services; the equitable sharing adopt a more ambitious Post-2020 quirement for companies to update voy on Youth to promote political of benefits from nature, ensuring Global Biodiversity Framework. their Articles of Association. There participation by young people and traditional knowledge of Indigenous was a critically important theme to amplify young voices in public People and Local Communities is We were also present at Stockholm around the question of a fair tran- life and has now been launched protected; the secure adequate +50, in June 2022, an internation- sition - ensuring that the rights and across 80 countries. The Body Shop means of implementation, making al conference that took place five livelihoods of all people, particularly was present at COP27, where the them equitably accessible to all decades after the 1972 United the most vulnerable, are protected campaign urged decision-makers to parties. In the coming years, we will Nations Conference on the Human in efforts to address climate change push for greater efforts to be made continue to build on our already Environment and 30 years after and nature loss. As part of the week, to include young voices in climate strong track record of adhering to The United Nations Conference Natura &Co represented TNFD (Task- negotiations. on Environment and Development Force for Nature Disclosures) as one the UN Convention on Biological Di- versity and will expand this practice (UNCED), also known as the Rio de of its founding members in two At CBD COP15 in December, we de- by enforcing the Nagoya Protocol Janeiro Earth Summit. During the events with the financial sector. fended the halting and reversing of and Access and Benefit-sharing meeting, our team intervened with nature loss as a global agenda; one (ABS) payments to prevent biodiver- the following pledges: to address During COP27, in November, we that must have mainstream promo- sity loss, reaching a total of R$ 9.6 perverse incentives and to promote signed pledges to limit the tem- tion and awareness; long term goals million. reform on obtaining economic perature increase to 1.5°C as the of the Agreement on Nature, such rights by committing to environ- best chance of avoiding the worst as the protection of natural eco- mentally harmful subsidies as a part impacts of climate change. We systems and the sustainable use of of an ambitious Global Biodiversity endorsed a campaign led by the biodiversity, halting the extinction of Framework; to secure the universal We Mean Business Coalition (WMB) threatened species; the sustainable human right to a healthy, clean and called All in for One Point Five. We use of biodiversity, maintaining and sustainable environment, meaning advocated for the adoption of an enhancing nature’s contribution to that we must urgently strength- ambitious Post-2020 Global Biodi- people and ecosystem functions Natura &Co annual report – 2022Our Commitment to Life92 93 Fair trade to promote change The Body Shop formed its Com- munity Fair Trade program in 1987 (then called ‘Trade Not Aid’). This approach remains at the heart of the business today, with high-quality ingredients and accessories sourced from 18 sup- pliers from 14 countries, helping to provide a fair and predictable income for 13,500 producers, farmers and artisans. The Body Shop’s shea butter, for example, has been handcrafted by women from the Tungteiya Women’s Association in north- ern Ghana since 1994. The latest collaboration with the Lorna Young Foundation, Solidaridad and other organizations has enabled the launch of a ‘Farmers Voice Radio’ project in Ghana. The radio is an essential resource to people in the community, sharing information to help with shea nut collecting and butter processing, and addressing key issues they face in their work. The broadcasts are now trans- mitted on 2 radio stations, esti- mated to reach 400,000 people. A voice for the Amazon influencers and new leaders com- mitted to protecting the rainforest, as well as other members of civil society. Another important mobilization movement that we initiated in Brazil was the collection of signatures for the Amazonia de Pé Bill, a popular In September, Natura relaunched initiative law, coordinated by the the PlenaMata portal, in partnership non-profit NGO Nossas. In 2022, we with Mapbiomas, InfoAmazonia collected more than fifty thousand and Hacklab. The platform col- signatures between September lects real-time data on monitoring and December. Among the new of deforestation in the Brazilian features are unpublished contents Amazon, using data updated daily and reports, a technical glossary, by the monitoring systems of INPE campaigns, and public petitions to (National Institute for Space Re- protect the region. To drive aware- search). These include the number ness, the portal discloses editorial of trees felled minute by minute contents that contextualize the and the total area deforested in the advance in deforestation and its Brazilian Amazon. PlenaMata is now consequences but also underscores accessible in three languages – Por- the positive conservation and re- tuguese, English and Spanish – and generation initiatives undertaken in has become a key source of mobili- the region. zation for preserving the forest. Ple- namata is part of the Amazônia Viva PlenaMata (DETER/INPE) detected Network, a community of people 0.2 m ha deforested in Q4, an in- from inside and outside the Ama- crease of 12% YoY. In 2022, an area of zon, which includes Natura Beauty 1 m ha was deforested (equivalent to Consultants, employees, experts, approximately 580 million trees). Natura &Co annual report – 2022Our Commitment to LifeNatura &Co annual report – 2022 Our Commitment to Life 94 95 Biodiversity and the Amazon Program and the middle Juruá Extractive where the company gathers and/or Reserve. supplements existing data to esti- mate the value chain-wide impacts Since 2018, the Ekos product line and dependencies on nature. This The Natura Amazonia Program was has been certified by the Union for leads to a list of potential issue areas created to enhance positive impact Ethical BioTrade, an organization to and value chain locations for target in the territories of the agro extac- which Natura has been a member setting. The subsequent steps in the tivist communities where we have since 2007. There are two certifi- process are: interpretation and pri- established relationships. This was cation processes. The first authen- oritization; measurements; sets and built upon the actions that we had ticates the supply chain (supplier disclosures; and action and tracking. already initiated in the area since communities and other commercial the inception of the Natura Ekos partners) for all the natural biodiver- During Step 1A of the SBTN frame- product line over 20 years ago. The sity ingredients and derivatives used work, the analysis focused on a program comprises three compo- in the Ekos line to ensure that they materiality assessment conducted nents. The science, technology and are managed with a due diligence at the sectoral and company levels. innovation component correspond system that complies with the This was in addition to upstream to our research and development principles of ethical sourcing. The activities and the direct operations. strategy to increase the use of and second authenticates the effective- After using the recommended tools social biodiversity ingredients in ness of our due diligence system, and conducting a survey among key our portfolio. The social biodiver- called the Social Biodiversity Chain stakeholders, it was concluded that availability issues is Cajamar. The locations and value chain activities zation list, the Caepim, Cofruta and sity production chain component Verification System, through which the most relevant environmental water quality analysis prioritized assessed in Step 1 to determine Reca communities supply Ucuuba relates to our relationship strategy we conduct field audits of the sup- pressures in the upstream activities Cajamar in the direct operations which areas require the most urgent and/or Brazil nut, which are threat- with supplier communities, orient- plier chains. These audits assess the were “terrestrial ecosystem use and and Camtaua for upstream as the action. Upon ascertaining which ened species recognized by the ed to the generation of work and organizational management of the change in use” and “GHG emis- locations with higher risk. Although areas have the greatest negative IUCN ‘Red List of Threatened Spe- income and to their social and eco- communities involved, the imple- sions”. In contrast, “water use”, “GHG the SBTN guidelines recommend impacts, target setting is prioritized cies’. Although Natura already has nomic development. With regard to mentation of good production and emissions” and “solid waste” were the prioritization to be based on wa- accordingly. the institutional reinforcement com- biodiversity conservation practices, the more notable pressures for the ter quality and water quantity, the actions in place for the sustainable harvesting of these raw materials, ponent, we network with partners as well as questions related to labor, direct operations. analysis was extended to a review of Due to the homogeneity of these such as innovative management with a view to consolidating the occupational health and safety general “state of nature” indicators: results, prioritization was made by systems and the implementation of bioeconomy, leveraging socioeco- and the non-employment of child, Step 1B focused on the value chain the MSA (Mean Species Abundance), taking into consideration deforesta- a circular economy, it is important nomic prosperity for communities forced or slave labor. assessment of Natura’s high-risk STAR (Species Threat Abatement tion periods of five and ten years, to emphasize that these commu- and reinforcing environmental con- commodities: Cupuaçu, Murumuru, and Restoration Metric), and a pro- between 2015-2020 and 2010- 2020 nities require redoubled attention servation and regeneration. In line with its commitment to im- Brazil nut, Ucuuba and Andiroba. posed deforestation indicator. respectively, together with the MSA to their production systems so as plement the Science Based Target Eighteen supplier communities metric. Hence, the communities in not to increase the threat pressure Together with our partners, our ac- Network (SBTN) framework – a five- that collect/produce and process The START (Threat abatement which it is necessary to focus efforts exerted on them. tivities in the Amazon contribute to step process that companies can these raw materials were identi- STAR) and STARR (Restoration STAR) to reduce environmental pressures the conservation of 2 million hect- follow to supplement their current fied and analyzed according to the score for each community supplier on nature are: Camta, Camtaua, ares. Our goal is to reach 3 million. strategy for addressing environ- framework, using a combination of ranked low or very low. However, Coomflona, D'Irituia and Reca. If the In addition to the areas of agro- ex- mental issues or to begin exploring different tools. low scores do not mean that there MSA metric filter is removed from tractivist community suppliers, the these issues for the first time – we are no threatened species present, the prioritization, then Coopavam methodology takes into account the made the decision to conduct a It was concluded that there are no rather that the abatement and res- is the community with the high- complete area of three conservation study of the Natura Ekos product water quality issues in the commu- toration potential is low with regard est deforestation in both periods units: the Uacari and Rio Iratapuru line in Brazil. The five-step process nities, or Natura Ecoparque. How- to the global scale. Step 2 allows us considered. Additionally, taking into Sustainable Development Reserves includes an assessment phase ever, the only location facing water to analyze and prioritize the list of consideration the previous prioriti- Rock the Amazon Sustainability translated into finance The power is in our hands To raise awareness of the impor- 57 million ha of public forests to Natura launched its Integrat- tance of keeping the Amazon ensure the survival of the biome ed P&L (IP&L), a management alive and standing, Natura par- and requires 1.5 million signa- tool that allows the company In addition, members of the Taskforce on Nature-related Financial Disclosures, which Between September 5th, which society that it is still possible to is known as Amazon Rainforest restore the Amazon through Day, and October 2nd, the largest conscious consumption, so- ticipated in the Rock in Rio Music tures. Festival with Amazon-themed to account for its impact in the Natura &Co is proud to be a part digital panel in Latin America, cial mobilization, and political environmental, social, and human of, gathered in London to discuss situated at Conic, an iconic engagement. Additionally, the brand activations. ‘NAVE’ offered In 2022, we increased revenue dimensions, in addition to finan- some key remaining design issues location in the Brazilian capital, brand heightened its efforts to a sensorial experience showcas- streams with one additional bio- cial results. For instance, it means in preparation for the coming showcased deforestation data raise public awareness about ing a diverse and contemporary ingredient, totaling 42 in our list. taking into consideration invest- iterations of the TNFD beta frame- and posed questions about effec- the issue through airing content Amazon with music performanc- Additionally, we shared R$ 42.97 ments in Amazon communities, work, the full framework that will tive measures for preserving and across free-to-air TV and social es and video projections. ‘Portal million in value with communities carbon neutral programs and launch in September 2023. restoring the Amazon rainforest. networks. Natura’ was a kinesthetic experi- as part of our commitment to high level consultants. According ence that enabled the public to share at least R$ 60 million (up to the IP&L, summing up all the While the 34 Taskforce Members, This urban intervention was an connect to the forest in a surpris- from R$ 33 million). Further, Na- positive impacts in the human, who come from all five continents, initiative by Natura, aimed at ing and unexpected way. Visitors tura signed an agreement for the social and natural fields, and serve in an individual capacity, raising public awareness about to the pop-up store were able to supply of Cupuaçu butter from subtracting the negative impacts, they represent corporations, deforestation while also urging learn about the production pro- Colombian communities for at for each US$ 1 in revenue, financial institutions, and market political authorities and candi- cess of Natura Ekos while shop- least three years, a cooperation Natura generated US$ 1.5 in posi- intermediaries with US$19.4trn in dates to take effective actions ping for products from the Ekos that created the first supply chain tive impact for society in 2021. assets and a footprint in over 180 towards the conservation and and Faces line. 175,000 attend- from this region of the Amazon. countries. TNFD’s goal is to devel- regeneration of the forest. ees visited Natura’s area in the The arrangement establishes the More information about the IP&L op and deliver a risk management festival and had the opportunity supply of the input for a period management tool can be found and disclosure framework for Natura's campaign ‘O Poder Está to sign a petition to transform of at least three years, which may on page 61. organizations to report and act on nas Nossas Mãos’ (The power is Amazonia de Pé Bill into regu- be extended in the future. In all, lation. This a popular initiative 70 families will be involved in the law proposes the protection of initiative. evolving nature-related risks. in our hands), sought to remind Natura &Co annual report – 2022 Our Commitment to Life 98 99 Defend human rights and Human-kind In 2022, we took important steps towards ensuring that all our associates in more than 100 countries receive a living wage or above by 2023. By this, we mean a salary that enables a worker to afford a basic but decent or even higher standard of living through employment. After two years of studies, we have established a methodology to achieve this target, and have made great advances. The current percentage of associates receiving a living wage is 99% 1 Adult (1A). We are confident that we will reach our goal of 100% ahead of the target date. objectives of our Commitment launched to promote racial literacy a combined membership of over to Life sustainability vision and for Avon employees and to raise 450 globally. The Aesop Women is inspired by the Antiracist Avon awareness among leaders. Employee Resource Group led the Compromise that was launched launch of Aesop’s first Global Meno- in 2020. Some of the actions that Avon continues to focus on inclusive pause Policy which includes offering support our efforts to promote this hiring to accelerate diverse repre- paid benefits/leave to colleagues transformation include the Avante sentation at all levels, as well as on who are going through the meno- Program, created with the goal of building an inclusive culture through pause. This policy launch offered accelerating the careers of employ- our employee networks and educa- awareness sessions and training ees self-declared as Black. The aim tional events throughout the year. clips for all employees. is to increase the presence of Black In 2022, Avon also continued to people in managerial positions in strive for an inclusive and equitable Aesop have established strong Brazil, valuing and increasing their culture through eliminating bias foundations to inclusive Talent power in a careful, assertive, and and discrimination in our practices Management—the way Aesop hire, responsible way. and policies – committing to equally develop and nurture talent is an honoring all family structures and important step on its Diversity, Eq- Natura also launched the CorageN relationships through our equity uity & Inclusion (DE&I) journey. The Natura Trainee Program, an affirma- and inclusion position and our glob- launch of Aesop’s Inclusive Hiring tive action program for Black people al menopause policy, supporting Principles plays an important role in Brazil, which aims to develop women through peri menopause in promoting inclusive mindsets, talents to act strategically in the or- and menopause with optimized instilling objectivity and de-bias- ganization's challenges and become working conditions, flexible working ing in its practices in how talent is future leaders in the company. and additional paid leave. hired. To support all colleagues with Since 2019, the Internship Program their understanding, awareness One of the greatest challenges in We are also pleased to say that program provides employment has aimed to attract at least 50% of Aesop is dedicated to supporting and embedding of D,E & I into its our Commitment to Life is the am- we have closed our ‘unexplained’ for those who are often left behind self-declared Black college students. the communities in which it oper- culture, Aesop designed a global bition for 30% inclusion of under- gender pay gap one year ahead of economically. In a partnership with Natura also launched a racial litera- ates and giving back in meaningful D, E & I learning and development represented groups across all man- our target. Further, we have made over 20 global charities and NGOs, cy services for Consultants and the ways that create greater opportu- program, which saw over 1,400 agement levels in all the company’s a significant reduction in our ‘raw’ the program has been expanded to Movement against Racial Violence, nities for historically excluded and Aesop colleagues participating in a business units. Our goal is to reflect gender pay gap, though we know include some permanent consultant which includes psychosocial ser- marginally groups. Establishing series immersive learning opportu- the societies in which we operate we have more to do in developing roles. Open Hiring is now used in vices and legal guidance. Aesop’s Employee Resource Group nities centered on its global learning in our workforce. As a large global and appointing women to senior the UK, US, Canada and Australia for (ERG) program has helped strength- priorities of inclusion, psychological organization, this is not an easy task roles which attract higher salaries. all seasonal hires in stores and dis- Meanwhile Avon Latin America has en inclusion and belonging at Aesop safety, unconscious bias and inclu- as it involves capturing sensitive tribution centers, as well as at other taken a significant step towards through fostering safe spaces for sive customer experiences. personal data in accordance with The Body Shop continued to expand times in the year. The move high- greater diversity in its workforce colleagues with shared lived expe- data protection laws and anonym- its Open Hiring Program, a systemic, lights The Body Shop’s commitment with the September launch of its riences, support historically and ity requirements in all jurisdictions. fair approach to attracting, recruit- to fair and inclusive hiring, focusing Divas in Leadership program. Part systemically excluded communities, However, we are committed to ing, selecting, and onboarding em- on a person’s potential rather than of a partnership with Profissas, a acknowledge and celebrate key progress and, as such, we partnered ployees through the elimination of their history. with external experts to conduct common barriers to employment, diversity and inclusion consultancy, cultural and religious moments in the project aims to develop the ca- the year and drive awareness and our first global D&I study so that we such as background checks, drug In November, Natura launched its reers of Black women and support improvement about important can track progress against our goals screening, and previous experience. Antiracist Commitment with goals progression to leadership positions issues and topics. Aesop’s ERGs are in this area. With 4,500 new recruits joining the and commitments for employees within the business. Additional- all formed and led by colleagues business through Open Hiring, the and consultants that align with the ly, UniDiva and a book club were from around the world and with 101 Our responsibility in human and environmental rights As in all industries, there is potential we adhere to for ourselves and for human rights infringements at others while assessing risks that the various stages of the creation and business might cause. sale of products, from employment and sourcing raw materials to The statement is a collective en- manufacturing and marketing. In deavor, validated and supported 2021, we identified these key risks as: by different internal areas, such as harassment; forced labor; gender procurement, operations, legal, and equality; discrimination; privacy compliance, as well as with stake- and integrity; decent & safe working holders like trade unions, suppliers, conditions including freedom of as- employees, consultants, and repre- sociation and collective bargaining; sentatives. It is referenced in internal minorities and communities’ rights; training, where employees are also land rights; fair wages & economic encouraged to use the Ethics line for empowerment; child labor; and all internal matters. right to a healthy environment. After two years of intense research, In 2022, we mapped our gover- our Board of Directors approved nance and accountability processes our Human Rights statement in ready to update them in 2023. We December 2021. The following year, also analyzed our current ways of we began to roll out the policy assessing human rights risks and in- across Holding company and the ternally raised the profile of the risks Business Units. we face. Each of our businesses now has a prioritized list of recommend- Our end goal was to have an in- ed actions to create better internal Aesop Queer Library In June, Aesop celebrated Pride spiring, rights-respecting culture, risk assessments and, therefore, to month by presenting ephem- creating positive human rights better address human rights. We eral queer libraries in stores all impacts throughout our businesses also benchmarked our risk assess- over the world, offering compli- and relevant partners, while ad- ment processes against some of our mentary books for each visitor. dressing negative ones. The state- peers to help us understand indus- From Taipei to Berlin, from Mel- ment clarifies our position, ensuring try norms and what we can learn. bourne to New York, the stores consistency across the group, in line replaced Aesop products with with best practices such as the UN The next steps include embedding books that elevate the voices Guiding Principles on Business and human rights monitoring in differ- and disseminate stories from Human Rights. Highlighting inter- ent business areas and advancing LGBTQIA+ communities around national law for the protection of grievance and remediation pro- the world. Over 34,000 compli- people and the planet, it articulates cesses as recommended by the UN mentary books were handed out. the human rights standards Guiding Principles. Policies and plans for critical supply chains In line with Natura &Co’s goal to enforce full traceability and/ or certification by 2025, we launched six publicly available critical materials policies, laying out our position and plans for supply chains of palm, soya, ethanol, mica, cotton, and pa- Reaching out to our community 103 According to the survey, nearly one ners in Australia and expanded its in 10 women is at increased risk of reach completing its first full year breast cancer due to having never of global grantmaking. In addition undertaken a self- check. to our planned grants program, the Foundation also responded to two True to its roots in activism, tirelessly emergency situations. In March pursuing social and environmental we donated USD$100,000 in sup- justice, The Body Shop launched the port of those affected by the war Be Seen. Be Heard campaign, which in Ukraine. The same amount was aims to amplify and empower granted in support of reproductive young voices in public life to influ- justice in May following the fall of ence government decision-making Roe vs. Wade in the United States. across over 75 countries. With this To support the work of the Foun- per. One of the crucial steps for Being an organization that nurtures Mexico and continued to estab- Cross. Avon also continues to help campaign, the brand promotes dation we also launched a global achieving our target involves beauty and relationships for a better lish the bases of the programs in women and their families in Ukraine change with a specific call to action matched giving program, which creating policies that require way of living and doing business Colombia and Peru. In these coun- through donations of its products. to empower youth voices in each of saw every $1 donated by Aesop suppliers to provide accurate means giving back to our surround- tries, it benefited 165,000 people. Our other brands are also providing its markets. The goal is to stimulate employee’s generosity matched by information on ingredient and ing communities. In 2022, Natura The Natura Institute also supports support for the people of Ukraine. policy and legislative change in a another $1. material origin and to deliv- &Co invested in causes whose main Consultants in their development The Body Shop has been donating period of three years, from develop- er them with independent objectives were to help our broader and education. In 2022, it reached to Children on the Edge and raising ing leadership skills in young people third-party certification. network. These investments tackled more than 319,000 Consultants with funds for humanitarian aid. The to lowering the voting age. issues related to the climate crisis, university scholarships, financial Aesop Foundation donated a total including the protection of the Am- education courses and language of USD$100,000 across four human- During COP 27, The Body Shop used azon, education, support for wom- proficiency courses. itarian organizations working in the the campaign to advocate for more en, Human Kind actions, diversity region. and inclusion, animal welfare, circu- In 2022, Avon announced US$ 1 people to be involved in the climate negotiations through the establish- larity and regeneration, cultural and million in grants to more than 35 In October, during Breast Cancer ment of national youth councils. In local development initiatives. NGOs around the world working Awareness Month, Avon launched five months, the campaign achieved to end gender-based violence. The several fundraising products to raise one Supreme Court win in New Zea- The Natura Institute continued to business unit partnered with the money for Avon’s breast cancer land and one legislative change in aim at ensuring that all children and global charity NO MORE to raise charity partners – helping Coppa- Pakistan; it received 770 letters, sup- youth attend high quality schools in awareness of the signs of abuse, to Feel! to encourage, educate and port from four Lords, and one call- Brazil and in other countries in Latin empower everyone to speak out empower women to undertake reg- out in the UK parliament. Addition- America. against gender-based violence, and ular breast checking, and support- ally, because of the campaign 37,000 Throughout the year, the institute those experiencing abuse. well-being and beauty workshops and 44,724 petitions were signed in consolidated and amplified its for those undergoing cancer treat- Greece, India, Japan, South Korea, education agenda in Latin America. The grants included a donation of ment. 100% of the profits from these and New Zealand. to signpost vital support services for ing Look Good Feel Better with its young voters registered in the US, Its presence in Brazil grew from 11 to US$ 162,000 to the United Nations products were split equally and 17 states, increasing the number of Population Fund in Ukraine, which donated to the two charities. Avon During 2022 the Aesop Foundation students benefiting from 2.3 million supports women impacted by gen- also released its inaugural annual donated USD$2.3M to a range of to 3 million. The institute reinforced der-based violence during the war, ‘Boob Census’, raising awareness charitable partners. The Foundation its activities in Argentina, Chile, and as well as US$ 200,000 to the Red of the importance of self-testing. continued to support key part- Natura &Co annual report – 2022Our Commitment to Life104 105 Embrace circularity and regeneration In the past two years, we have analyzed various solutions to achieve our circularity and regeneration targets. We have advanced in some areas, especially in metrics on life cycle assessments, and we still face challenges in others. Sourcing realities are different around the world; therefore, we are trying to define a common solution that is readily adaptable. One of the key achievements for Natura in this area was the introduc- tion of the new Kaiak line packaging made with new, improved and more sustainable packaging, including caps containing 20% less plastic and 50% material derived from recycled waste retrieved from the Brazilian coastline by social cooperatives. The brand also launched refill options for Essencial, its prestige fragrance from Casa de Perfumaria do Brasil. The refill option generates 35% less waste and 56% less carbon than the regular packaging. Addi- Our participation in the creasing the numbers of stores par- tionally, up to 45% of the glass in the EcoBeautyScore Consortium has ticipating in Recicle com a Natura, original bottle is recycled, while the also been advancing toward estab- which is present now in more than lid is made from 100% post-consum- lishing common and comparable 650 own stores and Aqui Tem Natura er recycled plastic. references. Our discussions with franchises in more than 280 Brazil- other members of the consortium, ian cities. This is an increase of more The Body Shop has continued to such as Unilever, L’Oréal, and LVMH, than 540 points compared to 2020, strengthen its Community Fair have been contributing towards when the program was launched. In Trade partnership with Plastics for the design of a system based on the new dynamics of Recicle com a Change in India. This unique part- science-based methodology that Natura, for every five empty pack- nership pioneered a fresh approach will allow consumers to compare ages of products from any of our to tackle the plastic pollution crisis, The Body Shop ended 2022 with num bottles with hair care products, the environmental impact of cos- brands delivered to participating addressing both the human and over 800 Activist Maker Workshop shower gels, or hand washes. So far, metics within the same category. stores, customers and consultants environmental impact. In 2022, we stores around the world. These our 793 refill stations have avoid- We reached 11.5% of recycled plastic gift and a 10% discount on purchases. waste collected from the streets and able materials wherever possible. 605,000 plastic bottles (12.5 tons of will gain different benefits, such as a purchased 617 metric tons of plastic new concept stores use sustain- ed the disposal of approximately content in all the plastic used in coastline of India, which is being This means using less virgin plastic, plastic). 2022. Today, 82.3% of our packaging Customers can choose how to integrated into our recycled plastic FSC-certified wood and paper, and material is reusable, recyclable, and redeem the discounts according to packaging. 2,000 waste collectors fittings that can be broken down In 2022, Aesop launched its first compostable. Our goal is to reach their preference. They can redeem were engaged in our partnership, at the end of their life. The stores refill station in its South Yarra store, 100% by the end of the decade and them at a Natura or The Body Shop with access to more sanitary work- permit customers to interact with in Melbourne, Australia. Customers to reduce the overall amount of store or online. Coupons may also ing conditions and a fair price for the products while learning how to bring their empty glass bottles to packaging material that we use. be used for purchases in the brand's the plastic waste they collect. We impact the world positively. One of the store and exchange them for digital channels or in the beauty purchased 435.6 tons of Community the features available in these stores a full one at a discounted price. Natura Latin America expanded its consultants’ or representatives’ Fair Trade recycled plastic retrieved is the refill station, where customers reverse logistics program by in- spaces. from the streets of Bengaluru. can reload their recyclable alumi- Natura &Co annual report – 2022Our Commitment to Life Natura &Co annual report – 2021 Credits 106 107 Credits Natura &Co VP Sustainability & Group Affairs Marcelo Behar Natura &Co Latin America Michel Blanco, Renata Vieira and Head of External Communications (Interim) Yvonne Lardner Ana María Lee Avon Jo Newark Additional thanks to Victoria Ford, Jonathan Lloyd White, Lushantha Kuppusamy, Chris Davis, Renato Winnig, Charmian Love, Zoe Carton and Alexandre Franca. Internal Communications Generalist Nathália Santos de Freitas Alves Sustainability Director Keyvan Macedo Sustainability Alisha Syal, Roberta Roesler and Pins Brown The Body Shop Alexandra Fulton and Lily Canon Aesop Kelly Lambrou and Catherine O'Dea Special thanks to Luiz Seabra, Guilherme Leal, Pedro Passos, Fábio Barbosa, Guilherme Castellan, Itamar Gaino, Beth Powell, Angela Cretu, João Paulo Ferreira, David Boynton and Michael O’Keeffe. Investor Relations Helena Villares and Ana Sartori Lopes Contributors Corporate Governance Moacir Saltzstein and Aline Klein Legal Daniela Anversa Strategy Christiana Souto Risk Management Mercedes Stinco Ethics &Compliance Richard Davis Consulting, Copy and Translation Report Sustentabilidade Fernanda Mori, Livia Frossard, Ana Souza, Fabio Cirino Design Agency Danki Amsterdam David Pino, David Wadström Design contributor Bruna Foltran Photography Paulo Vitale Seventy7 Avon, Natura &Co LatAm, The Body Shop and Aesop, will release their reports in 2023 

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