Table of Contents OUR ESSENCE 3 Reason for being 3 Vision 3 Beliefs HOW WE GOT HERE OUR MOMENT 5 6 7 8 13 14 WHAT WE AIM FOR 19 20 22 25 28 29 WHO WE WORK WITH 32 37 49 54 58 60 64 67 69 WHAT FOOTPRINT WE LEAVE 74 Creation of social value 81 Creation of environmental value 94 Creation of economic value FINANCIAL STATEMENTS 97 Quality of relationships Employees Consultants and NCAs Consumers Suppliers Supplier communities Surrounding communities Shareholders Government Prospects Collective construction High-priority sustainability topics Development of our commitments Natura Management System Innovation Message From the Chairmen Message From the Executive Committee Profile Awards and Recognitions Natura Value Chain Governance 4 OUR ESSENCE REASON FOR BEING Our Reason for Being is to create and sell products and services that promote well-being/being well. Well-being is the harmonious, pleasant relationship of a person with oneself, with one’s body. Being well is the empathetic, successful, and gratifying relationship of a person with others, with nature and with the whole. BELIEFS Life is a chain of relationships. Nothing in the universe exists alone. Everything is interdependent. We believe that valuing relationships is the foundation of an enormous human revolution in the search for peace, solidarity, and life in all of its manifestations. Continuously striving for improvement develops individuals, organizations, and society. Commitment to the truth is the route to perfecting the quality of relationships. The greater the diversity, the greater the wealth and vitality of the whole system. The search for beauty, which is the genuine aspiration of every human being, must be free of preconceived ideas and manipulation. The company, a living organism, is a dynamic set of relationships. Its value and longevity are connected to its ability to contribute to the evolution of society and its sustainable development. VISION Because of its corporate behavior, the quality of the relationships it establishes, and the quality of its products and services, Natura will be an international brand, identified with the community of people who are committed to building a better world, based on better relationships among themselves, with others, with nature of which they are part, with the whole. . DNV REPORT 134 ABOUT THE REPORT 136 GLOBAL COMPACT PRINCIPLES 137 GRI INDEX 138 EDITORIAL TEAM 142 HOW WE GOT HERE naturaannualreport 2 1969 Luis Seabra founds Natura in São Paulo. The company has naturaannualreport included plant ingredients in the composition of its products from the very beginning. 1970 The first Natura store opens on Oscar Freire street, in the city of São Paulo; Seabra himself works behind the counter. 1973 Natura’s plant is inaugurated in São Paulo. At the time, seven employees produced approximately 600 units per month of hair, face, and body treatment products. 1974 Natura decides to invest in customized consulting and starts to operate using the direct selling system. 1979 Natura enters the men’s cosmetics market with the launch of the Sr. N line. The Natura System is established with the participation of many companies. 1981 Natura pioneers in the creation of a toll-free customer service. 1982 Natura starts operations in Chile, the first initiative of the company abroad. 1984 In a pioneer initiative, the refill product alternative was launched. The Erva Doce line is born, one of Natura’s major successes. 1986 The Chronos line, an anti-aging facial cream, that brings together the major technological evolutions in cosmetics, arrives on the market. 1988 Natura begins to sell its products in Bolivia. 1989 In the 1980s, Natura grows 35-fold, and merges with four companies of the Natura System and emerges as the largest Brazilian cosmetics company. 1990 Natura publishes its Reason for Being (commitment with well-being/being well) and its Beliefs: the importance of relationships, commitment to truth, ongoing improvement, stimulation to diversity and appreciation of beauty without stereotypes, and the company as a promoter of social development. 1992 The Natura Escola (Natura School) Project is created: the company’s first social project, developed in association with the Matilde Maria Cremm State School in Itapecerica da Serra, state of São Paulo. Natura arrives in Argentina and Peru. 3 1998 By means of environmental impact analyses of all of its processes, Natura begins to systematically monitor and manage the environmental impacts of its activities. Natura’s Board of Directors is created. OUR MOMENT MESSAGE FROM THE CHAIRMEN 40 YEARS SOWING OPPORTUNITIES Joys and hopes amidst the precarious balance of the world. That was how we lived 2009. The impressive results Natura produced renewed our energies and encouraged us in facing the known but complex challenges posed to the global society. 2000 Launch of the Natura Ekos line, which sustainably uses ingredients from Brazilian biodiversity. Natura begins the Program for the Certification of Ingredients. 2001 The Natura Plant in Cajamar (state of São Paulo) is inaugurated. It encompasses factories, warehouses, logistics, and administrative activities in a building that complies with the most advanced environmental requirements. 2003 The Natura Tododia line is created to turn the routine of body care into a special ritual. 2004 Natura goes public on the São Paulo Stock Exchange (Bovespa). The company obtains the NBR ISO14001 environmental certification. 2005 The Natura House in Paris, France, is inaugurated. Operations start in Mexico. Natura obtains the NBR ISO9001 certification from the Brazilian Association of Technical Standards. The company begins to produce soaps using ingredients from plants. The Moviment Natura (Natura Movement) is launched. 2006 The first Natura House in Brazil is opened, in Campinas, state of São Paulo. Animal testing ends in all of the company’s research practices. The first agreement for the sharing of benefits from access to traditional knowledge is signed. 2007 The Carbon Neutral Program is launched. Natura undertakes to reduce its greenhouse gas emissions by 33% within five years and fully offset the emissions that cannot be avoided. The first Natura plant outside São Paulo is opened with the inauguration of the Benevides Industrial Plant in the state of Pará. Natura starts operations in Colombia. All Natura’s products start to present an environmental table. 2008 Natura begins to implement the Natura Management System, a model of organization based on management by process, catering to Business Units and Regional Units. In order to streamline the relationship with our consultants (sales representatives), Natura expanded the Natura Consultant Adviser (NCA) model in Brazil. 2009 After 40 years in business, Natura reaches the historical milestone of 1 million consultants. Natura Conecta (Natura Connects) is launched: a virtual community that brings our stakeholders closer to Natura. naturaannualreport In a year characterized by the global economic crisis and the frustrating impasse in negotiating an agreement on global climate change, we celebrated our 40 years of existence with some important achievements, and the enthusiasm of more than 1 million consultants helped drive our market share and increased the number of customers served. We fulfilled the commitments assumed two years ago by remodeling Natura’s management and starting a new growth cycle. As a result, we created more value for shareholders and for the long chain of people and institutions connected to our business model. We had important, positive social impacts and, among other environmental advances, we continued to reduce our relative carbon emissions. Our strategy enjoyed the trust of shareholders and investors, a fact demonstrated in the secondary offering of shares, which increased Natura’s liquidity and its value. We look at the future of our business over the next 10 years with confidence.The third largest cosmetic market in the world, Brazil signals that it is entering a virtuous cycle of prosperity. Our strong identification with its soul and development cheers us; we will continue with our efforts to build a beautiful business and a fairer society that is more ethically committed to future generations. We also believe that if we improve our ability for dialogue with the cultural diversity that makes up Latin America, which is so receptive to our products, values, and business opportunities, we will be able to maintain high growth rates, in addition to contributing to the creation of socioenvironmental value. In more geographically and culturally distant regions, we will continue to carefully evaluate new opportunities. Our civilization is experiencing a crisis that requires major transformations. The challenges related to climate, energy, water, food, health, security, and conservation of biodiversity and cultural diversity cannot be avoided. We want Brazil to be one of the leading countries in the development of an agenda of macro-changes, fully committed to the need for urgent progress in climate negotiations at the end of 2010 in Mexico. We are convinced that we have an important role to play: the Natura brand, more so than our business, is helping to build this new era, offering us the opportunity to innovate, to constantly reinvent our work. Thus we will fulfill our vocation to strive to create economic, social, and environmental value. The respect and value of our brand are based on the quality of the relationships we have with each and every one of our stakeholders. We recognize the need, and we reaffirm here our commitment, to invest in the excellence of our services, in particular for our consultants. Our Reason for Being, to promote Well-Being Well, whose essence is serving with excellence, listening to yourself, others, and the world, is and will always be our great inspiration in our persistent search for better and stronger relationships with our many stakeholders: the most legitimate means of increasing the recognition of our brand. This is how it has been since 1969, when a white rose delivered to each of our first customers symbolized our pleasure to serve and our desire to contribute to the search for peace. MAIN HIGHLIGHTS OF THE YEAR Economic 2008, increasing in both foreign operations and in Brazil. according to the Brazilian Association of Cosmetic, Toiletry and Fragrance Industry (Sipatesp/Abihpec). 2009, exceeding our forecast for a minimum rate of 23% for 2008, 2009, and 2010. AWARDS AND RECOGNITIONS RECEIVED 1995 The Crer Para Ver (Believing is Seeing) Program is created to help improve public education in Brazil. BY NATURA IN 2009 COMUNICATION RECOGNITION ORGANIZATION CATEGORY AWARDED 1993 Launch of the Mamãe & Bebê line, which helps strengthen the bond between parents and children. Pedro Luiz Barreiros Passos Guilherme Peirão Leal Antonio Luiz da Cunha Seabra Co-Chairmen of the Board of Directors 1996 The first campaign using the Truly Beautiful Woman concept is created for the Chronos line, expressing the idea that a woman’s beauty does not depend on her age. PLACE 4 naturaannualreport 5 ABERJE Communication Award Aberje (Brazilian Association of Corporate Communication) Best Governmental Relations case study on the topic Professionalism and Transparency in Relationships. 1º FINANCES RECOGNITION ORGANIZATION CATEGORY AWARDED PLACE activities in Argentina, Chile, and Peru reached a proforma EBITDA of R$ 8.9 million. higher than in 2008. net indebtedness corresponded to 0.2 times EBITDA for the year. did not evolve as much as we wanted in the quality of the delivery of our products, either with respect to timeframes or availability. Agência Estado Distinguished CompaniesAgência Biggest and Best Best of Dinheiro Conjuntura Econômica Magazine: XVIII FGV Corporate Excellence Award ABRASCA Award Capital Aberto Ranking IR Magazine Awards Agência Estado media group Exame magazine IstoÉ magazine Getúlio Vargas Foundation and Conjuntura Econômica Magazine Abrasca (Brazilian Association of Listed Companies) Capital Aberto magazine in partnership with Stern Stewart IBRE – Brazilian Institute of Economics and FGV – Getúlio Vargas Foundation Valor Econômico newspaper The Brander and Modern Consumer magazine Natura came 1st in all categories: General Ranking of the 10 Best Companies Listed at Bovespa, Sustainability Category and New Markets Index. Natura was named the best company in the Consumer Goods category; Natura was voted the Company of the Year in the Biggest and Best Ranking. Best company in the Pharmaceutical, Hygiene and Cleaning industry Natura was voted the Best Company of the Year in the Perfumery Category. 1º 1º 1º 1º Social by 20.5% in Brazil and 33% in foreign operations. Trilhas (Trails) Project, within the Crer Para Ver (Believing is Seeing) Program, in 210 Brazilian municipalities, reaching approximately 200,000 students from public schools (learn more on page 61). Crer Para Ver (Believing is Seeing) Program – our contribution to improving the quality of public education – in all Latin American operations. fell to 7.5% in 2009 from 12.4% in 2008. among employees (to 74% from 72%) and suppliers (to 82% from 74%). Natura was named the Industry’s Highlight in the “Retail and Wholesale” segment. Natura ranked 1st in the “Best Companies for Shareholders 2009” award in the category of companies with a market value between R$ 5 and R$ 15 billion. Winner in the Best Socio-Environmental Sustainability Category. 1º 1º 1º Valor 1000 Brazil’s Intangibles Awards (PIB) Best Company in the Hygiene and Cosmetics Industry Intangibles Award: We obtained the award in Sustainability Assets and in the Non-durable Consumer Goods. 1º 1º Environmental by 5.2% by means of the Carbon Neutral Program. product formulas: 79.2%, in comparison with 77.5% in 2008. the consumption of water per unit billed by 8.7%. Ekos Safra Açaí (Açaí Berry Harvest) line, which disseminates awareness of cycles of nature. target of 19%. INSTITUTIONAL RECOGNITION ORGANIZATION CATEGORY AWARDED PLACE Most Admired – Carta Capital Carta Capital magazine naturaannualreport 8 1º Most Admired Company in Brazil Sustainability is a cornerstone of Natura’s Strategic Planning approved by the Board of DirecMost Admired Companies in the Hygiene, Cosmetics and 1º tors. We have also included socio-environmental indicators in our strategic targets. We want Perfumery Industry. to be innovative regarding social and environmental demands in the present and in the future Most Admired Companies in Key Factors: Commitment to HR, attentive1º the risks and opportunities that in all countries in which we operate, and we are to Respect for Consumers,climateThe Most Committed to and scarcity of natural resources. involve Ethics, change, social inequality, Sustainable Development and Social Responsibility. Every two years, we reflect on the most important aspects of the business in these regards, including impacts on our stakeholders (more information on page 112). The Sustainability naturaannualreport Committee reports on these aspects to senior management, 9 which discusses the risks and opportunities related to them. The sustainability management process includes the sustainable use of biodiversity and the quality of relationships, which covers all our efforts on education about the relationship and dialogue with stakeholders. The Sustainability Office, which is linked to the Office of the Senior Vice President of Organizational Development and Sustainability, is responsible for safeguarding this management process, acting as a mobilizer, instructor and disseminator of the practices to the whole company and ensuring that all have social and environmental indicators and targets when conducting the company’s day-to-day business. We are also including and harmonizing our sustainability practices in our international operations. In 2009, we created the Sustainability Office for Latin America in order to strengthen sustainability management in the other Latin American countries where we operate. To encourage more people to engage in the process, we distributed to the people registered in Natura Conecta forms via e-mail with questions on the adherence of Natura’s actions regarding the high-priority topics, opportunities, and improvements. In addition to the discussions that took place in the forums, we considered in the analysis the 320 replies sent between February 4 and 10, 2010, by employees, consultants, consumers, and suppliers. We found that much of what has been offered by our stakeholders was in line with our thinking. This activity represents an opportunity to evolve our process of dialogue with our stakeholders and to include their voices in Natura’s management. Systematizing responses led to the collective development of the text on the following page, which was validated by our stakeholders through the virtual platform. We thank all the participants and invite our readers to engage in our dialogue. THE NATURA WE SHARE We recognize that Natura is a company that is committed to social and environmental issues, concerned with the impacts of its products, and open to dialogue. We notice its respect for nature and regional culture, its vanguardism in the sustainable use of raw materials and biodiversity, and in the creation of value to suppliers, consultants, and the people who live in the Amazon. For this reason, we expect from Natura more efficiency in its actions and support its playing a greater lead role in bringing awareness to society. We believe that Natura is an example for people and the market, and it has a role in shaping opinions, bringing awareness to the corporate segment, promoting and disseminating its good practices, and mobilizing the creation of an innovative movement that involves other companies, suppliers, universities, non-governmental organizations, and public authorities. Therefore, communication is an important focus of attention, whether in the way Natura communicates its value proposal to society by means of the media, or the service to stakeholders through the communication channels that have already been established, such as the website, the Natura Customer Service (NCS), and the Natura Service Center (NSC). We understand that Natura’s communications with its consultants, and their communications with consumers, can be improved, as well as the communications with those inside the company. The existing channels can be further explored, mobilizing society and encouraging sustainability actions. There are opportunities for improvement on many other fronts. We suggest that Natura expand its sustainable work in the use of biodiversity to other regions of Brazil. We verified that its actions are concentrated on the Ekos line, which uses raw materials from the Amazon rainforest, and we see the possibility of expanding these actions to other product lines and geographic areas. We support the search for new technologies and the constant improvement of products and packaging, as well as the investment in reverse logistics, which collects empty packaging after use and properly forwards them for recycling. We suggest that Natura increase investments in the training of consultants so that they will have more opportunities to engage in socio-environmental projects and disseminate them to society, expanding the company’s influence network. We believe that the actions and projects related to education are not sufficiently publicized and need more investments, but we recognize the importance of initiatives such as the Crer Para Ver (Believing is Seeing) Program. Finally, we believe that Natura seeks to improve its interaction with its different stakeholders. And we share the view that this is the way to make lasting relationships.. Participants of the Natura Conecta ABOUT THIS REPORT This is our tenth sustainability report prepared based on Global Reporting Initiative (GRI) guidelines. For the third consecutive year, we declared the A+ application level, with external verification conducted by Det Norske Veritas (DNV) and data checked by GRI itself. We present information on all our operations, but most indicators still refer to the Brazil-ian operations. The progressive consolidation of data on all operations helps us continually improve the report.The criterion for selecting the information for the printed version focused on the relevance of the topics for Natura and its stakeholders. COLLECTIVE CONSTRUCTION In line with our strategy to increasingly involve our stakeholders in the development of the desired future, we began for the first time in 2009 to prepare a Wiki Report, the content of which is being developed collaboratively with our stakeholders. The main objective of the process was to start a journey to transform the Annual Report into a living document, to serve as communication and continuous dialogue with stakeholders. To this end, six virtual discussion forums were held by means of the Natura Conecta platform, one for each high-priority sustainability topic: Amazon, Biodiversity, Education, Greenhouse Gases, Impact of Products, and Quality of Relationships. The results were included in this report and will be considered in the preparation of our Strategic Planning. Stakeholders were invited to visit the discussion forums on high-priority sustainability topics and post their messages. Each forum had an introductory text, an invitation to reflection, in addition to a video film produced by Natura on the respective topic. The video explained why the topic is important to society and to Natura, presented the actions we develop that are related to the topic and asked the participant: What do you think about this matter? Do we manage to make a positive contribution with respect to this topic? How can we improve? naturaannualreport 22 naturaannualreport 23 www.blacksunplc.com © Black Sun Plc 2011 49
