THE ABSOLUT COMPANY SUSTAINABILITY REPORT 2018/19 ABOUT THE ABSOLUT COMPANY The Absolut Company (TAC) is one of six brand companies within Pernod . TAC is responsible for production and marketing of the brands in our portfolio, Absolut , Absolut Elyx, and Kahlúa as well as Our/Vodka, Absolut Art and Åhus Akvavit. We are present in more than 140 markets around the world and our main production units and suppliers are predo- minantly found in countries in Europe, South America and the USA. Our plants in Åhus employ around 300 people, and there are around 200 employees at our head office in Stockholm, 20 people working on the Malibu and Kahlúa teams are based in Canada, the USA and Scotland.

Pernod Ricard is the second-largest producer of and spirits worldwide and the owner of The Absolut Company. is the world’s sixth-largest international spirits brand with a production of nearly 100 million litres in fiscal year 2018/19. Malibu is the world’s leading rum-based coconut spirit and the 31st largest spirits brand. Over 31 million litres of Malibu were produced in fiscal 2018/19. Kahlúa is the world’s leading coffee liqueur and the 75th largest spirits brand. Over 14 million litres of Kahlúa was produced in fiscal 2018/19.1

ABOUT THIS REPORT This report applies to the fiscal year 2018/19 and covers the largest brands in the TAC portfolio; Absolut Vodka, Absolut Elyx, Malibu and Kahlúa. The quantity of facts and data varies between our brands. We own and control the production sites for Absolut Vodka and Absolut Elyx and are therefore able to report more information for those brands. Both of those brands are reported under the shared name Absolut. Malibu and Kahlúa are produced in plants that are owned and controlled by other entities within the Pernod Ricard group, as well as third party solutions. We also collect some data from those production units and report basic information on energy, water and waste.

In addition to this, we report relevant data from our own business, including emissions from transport, business trips and energy in our own facilities, as well as HR statistics.

1 Internal production figures

2 THE ABSOLUT COMPANY TABLE OF CONTENTS

INSIDE FRONT COVER 2

ABOUT THE ABSOLUT COMPANY 2

ABOUT THIS REPORT 2

THE YEAR IN BRIEF 4

GLOBAL CHALLENGES AND STAKEHOLDER EXPECTATIONS 6

IDENTIFYING AND ENGAGING OUR KEY STAKEHOLDERS 6

LEARNINGS FROM STAKEHOLDER ENGAGEMENT IN 2018/2019 8

Alcohol – behaviours and attitudes 8

Generation Z 9

Sustainability issues in focus 9

OUR KEY SUSTAINABILITY ISSUES 10

INTERNATIONAL GUIDELINES AND AGREEMENTS 14

THE ABSOLUT COMPANY SUSTAINABILITY STRATEGY 16

NURTURING TERROIR 18

Wheat 20

Sugar 22

Coffee 23

VALUING PEOPLE 24

Employees 26

Diversity 28

Health and Well-being 30

Alcohol and drugs 31

Stress related illness 31

Training 32

Supply chain management 34

Anti-corruption 36

CIRCULAR MAKING 40

Local environmental impact 42

Climate 44

Transportation 46

Circular system 48

RESPONSIBLE HOSTING 50

Employees as ambassadors 52

Responsible marketing 52

SUSTAINABILITY MANAGEMENT AND ORGANISATION 54

RESPONSE TO INTERNATIONAL GUIDELINES AND AGREEMENTS 56

Paris Agreement 56

ILO Conventions 56

UNGP 57

SUSTAINABILITY REPORT 2018/2019 3 THE YEAR IN BRIEF

Valuing Circular PEOPLE MAKING We increase diversity and fairness We minimise waste at every step for all our people and empower by imagining, producing and distributing people across our supply chain. our products and experiences in ways that optimise and help preserve natural resources.

Nurturing Responsible

TERROIR HOSTING We nurture every terroir and its We fight alcohol misuse in society biodiversity and respond to the by taking action on harmful drinking challenges of climate, to ensure and engaging with our stakeholders quality ingredients now and for for real change. generations to come.

eate a more co o cr nvi e t without via ir rld exc l sp o e w a w ss or e a ld W ,

A NEW STRATEGY

Over the past year, we have developed and launched our Sustainability & Responsibility strategy, “Good Times from a Good Place”. With our strategy set, we are heading into 2020 with a clear direction. The next step is to clarify objectives based on the commitments made by the Pernod Ricard group, both for The Absolut Company as well as for our individual brands.

4 THE ABSOLUT COMPANY HIGHLIGHTS FROM 2018/19 We’ve made good progress in further reducing the environmental impact of our production in Åhus, nearly halving climate impact per litre vodka from this production site in 2018/19. 2

ENVIRONMENTAL IMPACT FROM PRODUCTION OF ABSOLUT

ENERGY USE, KWH/LITER OF VODKA

WATER USE, L/LITER OF VODKA

CLIMATE IMPACT, g CO2e/LITER OF VODKA

2,0 4,0 6,0 8,0 10,0 12,0 14,0

2018/19 2017/18

We’ve also improved our understanding of the value chain for Malibu and Kahlúa, both by mapping the value chains and by calculating the water, land and climate footprint of raw materials, packaging, production and transport. A new work stream focused on the “Future of Packaging” has been formalised, a collaboration with packaging experts as well as three other global brands who share our ambition to create more sustainable packaging for the future. Our efforts to reduce stress and improve personal health have produced some results since last year. We have reduced absence due to illness in Stockholm, while numbers for Åhus are negative.

ABSENCE DUE TO ABSENCE DUE TO ILLNESS 2017/18 ILLNESS 2018/19 (PER CENT)3 (PER CENT) 3

STOCKHOLM 2 .6 1.72

ÅHUS 4.9 5.3

2 The data refers to the production sites in Nöbbelöv and Åhus and does not include the bottle or other packaging materials, the production of other input material or transports. 3 The reported figures are days of sick leave after the first day

SUSTAINABILITY REPORT 2018/2019 5 GLOBAL CHALLENGES AND STAKEHOLDER EXPECTATIONS

We operate in a global market, with both production and sales in many countries. We depend on raw materials from farms and natural ecosystems, and through our processes, we affect both environmental- and social systems. Our sustainability strategy is built on our understanding of which issues that are most relevant to our business, as well as the expectations and demands of the world around us, which we determine through regular and robust engagement with our key stakeholders.

IDENTIFYING AND ENGAGING OUR KEY STAKEHOLDERS

We have identified our key stakeholders and we analyse their expectations and demands on us through regular dialogue. By continuously following the expectations and demands from important stakeholder groups, we can update our strategy and sustainability work to make sure we are addressing the most pressing issues. Our stakeholders are first and foremost our shareholders, employees, suppliers, customers and consumers, as well as civil society in the form of stakeholder organisations.

6 THE ABSOLUT COMPANY The way we monitor these groups varies (Table 1). We maintain an ongoing dialogue with our shareholders for mutual exchange of knowledge and experience, through Pernod Ricard HQ. We monitor our employees, customers and consumers through various surveys and close dia- logue. We also monitor new findings and changes in expectations of stakeholder organisations and research. In addition to this, there are legal requirements, guidelines and various targets that we monitor as part of the work within our management systems and certifications.

TABLE 1: STAKEHOLDER DIALOGUE

STAKEHOLDER GROUP TYPE OF DIALOGUE

Continuous discussion and Shareholders exchange of knowledge (HQ).

Employee survey. Performance Employees appraisals. Workshops and seminars.

Suppliers Close dialogue and joint projects

Consumer and customer research Customers and consumers and surveys.

Civil society: stakeholder Business intelligence. Partnerships and par- organisations and local societies ticipation in events.

Monitoring of updates and news, Authorities continuous dialogue and surveillance.

The analysis of our stakeholders and their priorities and expectations show that similar issues and expectations are highlighted in all groups. Reduced impact on the climate and environment, social and environmental responsibility in the supply chain, health aspects of our products, and sustainable packaging are high priorities in all groups. We have conducted deep dives into some stakeholder groups and issues that we believe are of major significance for our business and therefore give input to how we should prioritise our sustainability work in the future.

SUSTAINABILITY REPORT 2018/2019 7 LEARNINGS FROM STAKEHOLDER ENGAGEMENT IN 2018/2019

ALCOHOL – BEHAVIOURS AND ATTITUDES

Attitudes and behaviours associated with alcohol are of course one of the central issues we need to address. One of our prioritized Sustainable Development Goals, goal 3 Good health and well-being, has indicators and targets relating to alcohol consumption. The World Health Organisation (WHO) highlights the work to reduce the harmful use of alcohol as an important measure. Europe is the continent with the highest alcohol consumption, although statistics from WHO indicate that drinking has decreased slightly in recent years. 9 The Nordic countries have seen a clear downward trend in alcohol consumption among young people in the last 10–15 years. In Sweden, this trend can be seen in all age groups, and alcohol-free is the product category that has seen the most growth in Systembolaget stores.

9 Global Status Report on Alcohol and Health. WHO. 2018.

8 THE ABSOLUT COMPANY GENERATION Z During 2018/2019, we conducted a project in which we studied and mapped attitudes among young adults, also known as Generation Z (centennials). This is a generation that has grown up in a troubled time with virtually unlimited access to information. Generation Z has relatively little trust in businesses and believes in being on the guard against what companies say. They place high demands on businesses in terms of transparency and real action, are quick to “vote with their feet” and take sustainability and trustworthiness into account when making their purchasing decisions. 10

SUSTAINABILITY ISSUES IN FOCUS

People of all ages highlight the issue of climate as one of the world’s most critical issues and expect businesses to act in accordance with research and the Paris Agreement. In recent years, biodiversity and extinction, use of resources, packaging, and plastic littering have also become increasingly important issues in the debate. 11 Many consumers want businesses to make it easier for people to make sustainable purchase choices. They think that businesses are responsible for sustainability along the entire chain, from extraction of raw materials to consumption and waste, and are placing increasingly high demands on businesses to take greater and clearer responsibility for environmental and social issues linked to their business. 12

10 Internal study/dialogue 11 Konsumenterna och miljön 2018 [Consumers and the Environment 2018]. Swedish Consumer Agency. 2018. 12 https://www.forbes.com/sites/solitairetownsend/2018/11/21/consumers-want-you-to-help-them-make-a-difference/

SUSTAINABILITY REPORT 2018/2019 9 OUR KEY SUSTAINABILITY ISSUES

In the context of the challenges the world is facing and our stakeholders' expectations, we have analysed our business to identify how we are affecting ecosystems and local societies. This work is continuous as both our business and society continue to change. The social risks can largely be found at the cultivation and production stages in low-cost countries, but we have also identified health risks that are mainly seen at the consumption stage. The environmental risks can be found all along the value chain, from the production of raw materials to transportation and waste management. In the table below, we describe the primary risks we have identified and how we have assessed the risks based on effects on the environment and societies and effects on our business. The risk assessment forms the basis of our strategy, which we describe in greater detail on the following pages.

10 THE ABSOLUT COMPANY TABLE 2: ASSESSMENT OF SUSTAINABILITY RISKS

RISK DESCRIPTION POTENTIAL IMPACT RISK MANAGEMENT

Climate impact Use of fossil fuels and emis- Higher frequency of extreme Actions to shift to renewable sions from other greenhouse weather conditions, lower and fossil-free energy and gases along the entire value production in agriculture. fuels along the value chain, chain contributes to climate People are losing their liveli- in transports as well as change. hoods. Increase in conflicts production. relating to resources, land Cooperation with suppliers and water. and producers/farmers to Social unrest and extreme reduce the climate impact weather conditions are along the entire value chain. making global trade and the production of raw materials more difficult.

Environmental Intensive methods of Loss of biodiversity and eco- Close partnerships with impact in chemical plant protection, system services, resulting in wheat farmers in Sweden agriculture artificial fertilisers and fossil a deterioration of production (for Absolut), with high energy, as well as changes in agriculture. Unsustainable demands for sustainable in land use in which natural use of water and land, pollu- farming methods. ecosystems are converted into tion of land and waterways Starting to investigate oppor- monocultures . leading to lower yields in the tunities for similar partner- long term. ships with the farmers who Decreased production leads produce our other major to higher prices for raw ma- raw materials (coffee, sugar, terials such as wheat, sugar coconut). and coffee.

SUSTAINABILITY REPORT 2018/2019 11 OUR KEY SUSTAINABILITY ISSUES

TABLE 2: ASSESSMENT OF SUSTAINABILITY RISKS

RISK DESCRIPTION POTENTIAL IMPACT RISK MANAGEMENT

Ineffective use High use of resources for Unsustainable use of natural Improvement of packaging of resources packaging and high energy resources contributes to the material in regards to use of consumption in production degradation and weakening recycled material, recyclability put pressure on ecosystems of ecosystems in the long of the packaging itself and both at the point of extraction term, resulting in deteriora- use of more sustainable and in waste management. tion in production. materials. Continuously working to streamline our production in Sweden in terms of water and energy use. Map and calculate the use of resources and impact along the entire production chain for Malibu and Kahlúa. Establish actions to reduce the impact and use of resources in collaboration with our suppliers.

Unsustainable Poor working conditions Substandard working condi- For Malibu and Kahlua we working conditions with vulnerable workers, low tions in the supply chain can have mapped the first two and working wages and a lack of safety in lead to bad health, injuries stages in our supply chain in environment in low-income countries. and vulnerability for workers, terms of working conditions supply chains which can negatively affect and human rights. We have the company’s reputation identified the main high- among stakeholders. risk areas and have started working on dealing with those risks and improving conditions. For Absolut Vodka we have full visibility throughout the value chain, based on long term partnerships and majority of suppliers based in southern Sweden. All suppliers to sign our Supplier code of conduct and perform audits to secure that the demands are met.

12 THE ABSOLUT COMPANY RISK DESCRIPTION POTENTIAL IMPACT RISK MANAGEMENT

Consumer Misuse of alcohol can lead to Misuse of alcohol can We promote responsible health physical and mental health negatively affect the health drinking through our com- issues, as well as having of consumers, especially munications and projects/ negative socioeconomic those in certain risk groups partnerships. We follow strict effects such as pregnant women marketing guidelines and or people who are under never target consumers that age. There is also a risk of are within said risk groups third-party injury linked to with our marketing. driving under the influence.

Our employees Work safety and stress related Heavy workload and frequent We have tailored solutions health issues. business trips can lead to for employees who need stress and increased absence support or help to reduce due to illness which can stress. We have programs lead to higher costs and in place to handle rehabili- lower productivity. tation. Work place accidents at Routines and processes in production sites. place to minimize risk of accidents.

SUSTAINABILITY REPORT 2018/2019 13 INTERNATIONAL GUIDELINES AND AGREEMENTS Finally, for sustainability work to be relevant and successful, it should be anchored in international guidelines, agreements and goals. The most important agreements and guidelines for our business the Paris Agreement, the ILO Conventions and the UN Guiding Principles on Business and Human Rights (UNGP).

PARTICULARLY RELEVANT GLOBAL GOALS GLOBAL GOALS FOR SUSTAINABLE DEVELOPMENT In particular, the UN Sustainable Development Goals have taken on a central role in sustainability work all over the world. We see this as a positive step that many actors are now coming together and working towards the same goals. All the goals are equally important, and they are all interconnected, but as part of Pernod Ricard, we have identified eight Global Goals that are particularly relevant to our activities. 13

13 www.globalamalen.se. https://www.globalgoals.org/

14 THE ABSOLUT COMPANY PARTICULARLY RELEVANT GLOBAL GOALS

• Goal 3 Good health and well-being

• Goal 5 Gender equality

• Goal 8 Decent work and economic growth

• Goal 12 Responsible consumption

and production

• Goal 13 Climate action

• Goal 14 Life below water

• Goal 15 Life on land

• Goal 17 Partnerships for the goals

SUSTAINABILITY REPORT 2018/2019 15 THE ABSOLUT COMPANY SUSTAINABILITY STRATEGY

Our ambition in The Absolut Company is to be the progressive leader of the spirits industry within Sustainability & Responsibility, while supporting corporate priorities and building long term resilience into our business model. We have based our updated Sustainability and Responsibility (S&R) strategy on that of Pernod Ricard – ‘Good Times from a Good Place” – which was launched in 2019. The essence of Good Times from a Good Place captures an idea that sits at the heart of our heritage as company – a simple commitment to do the right thing, whether it is for each other, our consumers, our business, our society, or the environment [See Figure 1].

FIGURE 1: GOOD TIMES FROM A GOOD PLACE

FOUR BIG AMBITIONS THAT REFLECT OUR S&R FOOTPRINT AND Valuing Circular CONNECT US TO THE GLOBAL SUSTAINABLE DEVELOPMENT AGENDA PEOPLE MAKING NURTURING TERROIR: WE WILL NURTURE EVERY TERROIR AND ITS BIODIVERSITY AND RESPOND TO THE CHALLENGES OF CLIMATE CHANGE TO ENSURE QUALITY INGREDIENTS NOW AND FOR GENERATIONS TO COME.

VALUING PEOPLE: WE WILL INCREASE DIVERSITY AND FAIRNESS FOR ALL OUR PEOPLE AND EMPOWER PEOPLE ACROSS OUR SUPPLY

CHAIN. Nurturing Responsible

TERROIR HOSTING CIRCULAR MAKING: WE WILL MINIMISE WASTE AT EVERY STEP BY IMAGINING, PRODUCING AND DISTRIBUTING OUR PRODUCTS IN WAYS THAT OPTIMISE AND HELP PRESERVE NATURAL RESOURCES.

eate a more co RESPONSIBLE HOSTING: WE PROMOTE RESPONSIBLE DRINKING IN o cr nvi e t without via ir rld exc l SOCIETY BY EVOLVING OUR BUSINESS AND OUR MARKETING, TAKING sp o e w a w ss or e a ld W , ACTION ON HARMFUL DRINKING AND ENGAGING WITH OUR STAKE - HOLDERS FOR REAL CHANGE.

Good Times from a Good Place covers four strategic pillars: Nurturing Terroir, Valuing People, Circular Making and Responsible Hosting, which are underpinned by a wide range of topics within each focus area. The strategy represents a holistic approach that reflects the entire value chain [See Figure 2].

16 THE ABSOLUT COMPANY FIGURE 2: VALUE CHAIN WITH FOCUS AREAS

END OF ARGICULTURE SUPPLIERS PRODUCTION TRANSPORT USER LIFE / WASTE

FOCUS AREAS FOCUS AREAS FOCUS AREAS FOCUS AREAS FOCUS AREAS FOCUS AREAS PARTNERSHIP FOR INCREASE MINIMIZE CLIMATE MINIMIZE CLIMATE RESPONSIBLE INCREASED SUSTAINABLE SUSTAINABILITY IN IMPACT BY ENERGY IMPACT INCREASE DRINKING RECYCLING FARMING METHODS PACKAGING EFFICIENCY AND THE USE OF RENE- POSTPONE MINORS MINIMIZE CLIMATE IMPACT SOCIAL MINIMIZE CLIMATE RENEWABLE WABLE FUELS AND ALCOHOL DEBUT. RESPONSIBILITY IMPACT SOCIAL ENERGY DEC.REASE PHASE OUT FOSSIL RESPONSIBLE AND HUMAN RESPONSIBILITY WATERUSE INCRE- FUELS MARKETING RIGHTS AND HUMAN RIGHTS ASE CIRCULARITY AND DOSE LOOPS

During 2018/19, we explored the topics within each pillarof the updated S&R strategy, to discuss our specific ambitions and areas to prioritise. During late 2019/early 2020 we will be finalising our priority areas, the goals and objectives for each of these areas. Cross-functional groups will also be working to develop and implement detailed roadmaps. Once finalised the strategy will set out a clear and ambitious future direction for S&R at The Absolut Company – one that we believe will deliver on our leadership ambitions within the spirits industry and build on our accomplishments so far.

SUSTAINABILITY REPORT 2018/2019 17 NURTURING TERROIR We will nurture every terroir and its biodiversity and respond to the challenges of climate change to ensure quality ingredients now and for gene- rations to come.”

SUSTAINABLE DEVELOPMENT GOALS IN FOCUS: GOAL 13 CLIMATE ACTION GOAL 15 LIFE ON LAND

We affect ecosystems around the world where the raw materials we use are cultivated. Modern agriculture is associated with sustainability challenges because of high use of resources such as water, energy and land, plant protection chemicals and fertiliser, and emissions of greenhouse gases, residual products and pollutants. We have chosen not to use organic wheat because many studies have shown that they require more land and that the climate gains are limited.14 Instead, we have chosen to work on increasing sustainability performance in other ways for our main raw materials: wheat, sugar, coffee and coconut. Our work is aimed at reducing the climate impact of farms, protect and strengthen ecosystems and biodiversity, streamline the use of water, reduce eutrophication of land and waterways and maintain the fertility of the land. We have long been working on ensuring that the wheat we purchase to produce Absolut Vodka and Absolut Elyx comes from sustainable systems. This work is described in detail below. In 2018/19, we strengthened our knowledge of the value chain for the crops we depend on to produce Malibu and Kahlúa: sugar, coconut and coffee. In the analyses, we have quantified volumes and environmental impacts throughout the entire value chain. We have obtained more in-depth knowledge of the parts of the chain and the raw materials that have the largest environmental footprint. We are now working to put actions in place to reduce en- vironmental impact and manage risks and challenges that the analyses have brought to light.

14 https://www.forbes.com/sites/stevensavage/2015/10/09/the-organic-farming-yield-gap/#74f4127f5e0e https://www.nature.com/articles/nature11069?WT.ec_id=NATURE-20120510

18 THE ABSOLUT COMPANY SUSTAINABLE DEVELOPMENT GOALS IN FOCUS:

SUSTAINABILITY REPORT 2018/2019 19 WHEAT Absolut Vodka is made from wheat. In 2018/19, we bought more than 107,000 tonnes of wheat, equivalent near 20 percent of all wheat produced in southern Sweden, from around 400 farmers. 15

We buy as locally as possible, and always Swedish, to give back to the region in which we operate, to make it easier to develop close relationships with the farmers, and because Swedish agriculture observes high sustainability standards. 16 Absolut Vodka and Absolut Elyx are produced from winter wheat, which is rich in starch, a prerequisite for high-quality vodka. It is also hardier than summer wheat and therefore does not need as much fertilisers or plant protection chemicals. We work in partnership with farmers to source high-quality wheat that meets our sustainability criteria. We have developed a concept that sets out our guidelines and expectations in terms of wheat quality and sustainable farming methods, including reduced use of fertilisers and plant protection chemicals, and responsible use of resources. Alongside this, we provide training and monitoring to ensure that our requirements are met, and we provide a bonus to farmers whose production meets our expectations. Over the years, we have digitised our data collection on farming. All farmers now report data relating to yields, fertilisation and use of plant protection chemicals in a digital system by Posi- tion Green. This makes it easier for us to analyse the data, monitor trends and provide feedback to the farmers, both on their performance and potential improvements. After the drought in summer 2018, we temporarily deviated from our rule of always buying locally by also buying wheat from farmers in other parts of southern Sweden. We made sure that the farmers we bought from met our fundamental quality and sustainability requirements.

15 Internal data, Åhus production figures 16 https://www.lrf.se/politikochpaverkan/marknad-och-mervarden/mervarden/

20 THE ABSOLUT COMPANY CASE STUDY: SUSTAINABLE FARMING ALL YEAR ROUND

As part of identifying new methods to improve sustainability performance in farming, we've been part in a study carried out in partnership with NBR (Nordic Beet Research) and SLU (the Swedish University of Agricultural Sciences). On one of the farms that produce winter wheat, various "intermediate crops" were planted to keep the land in use before planting sugar beets in the autumn. This is part of our work to contribute to a good system of crop cultivation in Sweden. The study evaluates how the intermediate crops affect for example incidence of weeds, soil humus and nutrient content.

SUSTAINABILITY REPORT 2018/2019 21 SUGAR

We use sugar from sugar cane to produce Malibu and Kahlúa, cultivated and refined in Central and South America. There are significant risks that sugar cultivation drives deforestation, and the results of this were clear to see last year when forest fires intensified across Brazil, the wor- ld’s largest producer of sugar. Furthermore, conventional methods of cultivation have other ne- gative environmental impacts, including loss of biodiversity and destruction of soil and erosion. As the first step in our work to ensure sustainably produced sugar, we work with Bonsucro, a non-profit organisation that focuses on improving conditions in the sugar cane industry. The organisation’s work is based on its two standards: the Bonsucro Production Standard, which certifies conditions in sugar cane farming and farms, and the Bonsucro Chain of Custody Stan- dard, which ensures the traceability of sugar cane products and tracks sustainability claims along the supply chains. 17 We do not yet buy certified sugar, for the simple reason that certified sugar is only available in very limited quantities in the countries where our production is located. We hope that our part- nership with Bonsucro will lead to increased availability and it is our ambition to buy certified sugar in the future.

We are also looking at other possibilities for developing partnerships with sugar growers to secure access to sugar that is produced to a high standard of sustainability.

17 www.bonsucro.com

22 THE ABSOLUT COMPANY COFFEE

Coffee is one of the crops we depend on to produce Kahlúa. We have been working on increased traceability and sustainability performance for several years because we identified coffee as a crop with high sustainability risks at an early stage. We have developed partnerships with coffee farmers in Veracruz, Mexico, where we buy our coffee

CASE STUDY: LIFE-CHANGING COFFEE

Together with a non-profit organisation in Mexico, we have developed a project involving a few villages. The overall aim is to help lift the residents of those villages out of poverty by providing them with sustainable methods of farming, increasing yields by improved farming techniques, renewal of old coffee plants replacing them with more climate change resistant varieties and, by extension, increase the farmer income. Since the initiative launched, more villages have access to clean water and sanitation, and the women of the villages have been empowered by the additional income they can bring in. From an environmental perspective, we have focused on reforestation and seen an increase in biodiversity and an improvement in soil quality. Our ambition is to strengthen the Kahlúa coffee project in the region and to buy all our coffee from the villages involved in the project.

SUSTAINABILITY REPORT 2018/2019 23 VALUING PEOPLE

Our company has a long history of working for equal rights, inclusion and diversity, of challenging norms and combating generalisations. Goes back to our founder L.O. Smith who was a progressive thinker and cared for workers’ rights, well-being and suffrage. We want to leave a positive mark on the local communities in which we operate. One way how we do this is through the coffee project described on previous pages and through our involvement in “Fryshuset”. We also have a concrete influence on Åhus, where Absolut Vodka and Absolut Elyx are distilled and bottled. In 2016, we carried out a study to identify and quantify the effects of our business on the local community. 18 It showed that, through our activities, we are an important employer, providing around 2,000 jobs. We play a key economic role, both locally and regionally, by making 90 percent of our purchases locally and regionally. In 2018 we opened a new visitor centre in Åhus, Absolut Home. It represents a significant investment and a move into the hospitality industry. Research by the University of Lund indicates that the investment is well received locally by inhabitants and economic operators. 19

18 TAC Åhus – Economic Footprint. Halvarsson and Halvarsson. 2016. 19 Värden som uppstår genom besökscentret Absolut Home i Åhus, ISBN 978-91-7895-119-2

24 THE ABSOLUT COMPANY SUSTAINABILITY REPORT 2018/2019 25 EMPLOYEES

The Absolut Company has a little over 500 full-time employees, primarily based in Sweden. We have nearly 300 people working in Åhus and about 200 employees at our head office in Stockholm and among these 20 employees working with Malibu and Kahlúa are based in Canada, the USA and the UK.20 We make every effort to provide support and benefits that are tailored to the needs of each individual. To promote engagement among our employees and to give back to society, we have initiated a program for our employees in Stockholm, ‘Giving Back’. Within that, our employees have the opportunity to take two days’ paid leave per year to carry out voluntary work, for example with a charity of their choice.

20 Internal statistics

26 THE ABSOLUT COMPANY SUSTAINABILITY REPORT 2018/2019 27 DIVERSITY The Absolut Company's ambition is to be a fair employer that provides its employees with equal rights and opportunities. We do not tolerate any form of discrimination based on gender, age, ethnicity, religion, sexual orientation, trade union membership or political affiliation. Diversity work is necessary for a strong and dynamic organisation, and we are continuously working on these issues. There is a clear plan of action in place to combat harassment and discrimination. We have set high targets to achieve balanced teams. At our head office, the target is to achieve a 50:50 gender balance at the senior management level and to have balanced teams at all levels. We also strive to achieve diversity in terms of other criteria, such as age, background and nationality. Our goal is for the nationality of 25 percent of our employees to be different from the location of their daily place of work. For our production in Åhus, diversity targets are yet to be defined. We achieve our diversity targets by, for example, strengthening support for female leadership and by working for diversity in employee recruitment and training. The recruitment process has been developed to promote diversity, and we are always looking for candidates to increase diversity within the organisation. We ended 2018 with a half-day workshop on diversity and inclusiveness in Stockholm. This dealt with issues such as how to be aware of our prejudices and how not to act based on pre- conceptions. The workshop aimed at showing the way with our diversity work within the Pernod Ricard Group, and it resulted in (distributors of amongst other the brand

Jameson for Pernod Ricard in Ireland) following our example and holding a similar workshop. TABLE 5: PERSONNEL IN STOCKHOLM We have achieved our targets for international diversity at our head office in Stockholm. There, the nationality of 28 percent of employees is different from their daily place of work. Of the 211 employees at our head office, 58 represent 30 nationalities other than Swedish. This is an increase of three percentage points compared with the previous year. At senior management level, we have achieved our target of a 50:50 gender balance in some areas. At other levels, we are continuing our work on reducing the difference.

28 THE ABSOLUT COMPANY TABLE 3: COMBINED RESULTS FOR STOCKHOLM AND ÅHUS

TAC SENIOR People managers All employees LEADERSHIP TEAM (per cent) (per cent) (PER CENT)

WOMEN 67 41 47

MEN 33 59 53

TABLE 4: PERSONNEL IN ÅHUS

OPERATIONS People managers All employees LEADERSHIP TEAM (per cent) (per cent) (PER CENT)

WOMEN 50 26 36

MEN 50 74 64

TABLE 5: PERSONNEL IN STOCKHOLM

People managers All employees (per cent) (per cent)

WOMEN N/A 52 64

MEN N/A 48 36

SUSTAINABILITY REPORT 2018/2019 29 HEALTH AND WELL-BEING

We are consciously working to ensure that our employees feel involved and committed, and we strive to safeguard the health and well-being of everyone. Working conditions for production employees are different from those of office employees, and therefore require different types of action. For those of our employees who travel a lot for business, we try to provide a good work-life balance by offering flexible working hours and the option to work from home if doing so is compatible with their responsibilities. For our production employees, we focus more on the physical working environment.

ALCOHOL AND DRUGS We sell alcoholic beverages and our employees are therefore surrounded by and constantly reminded of alcohol. It is therefore of primary importance to us to offer help and support for those with alcohol related problems. This also applies to employees with drug addictions. We have a service agreement with a company that specializes in training and addiction therapy. Any employee that need support will get help from them, and managers also have access to a support line staffed by experts who can provide advice and guidance on employees’ problems with alcohol, drugs and gambling addictions.

STRESS RELATED ILLNESS

We are continuously arranging training on unhealthy stress and stress management for managers and employees, and managers are encouraged to set sustainable rules of conduct regarding emails outside working hours, for example. In general, we work proactively with employees who experience stress-related symptoms to find ways to reduce stress and combat absence due to stress-related illness. The employees taking part in these actions return to work with the tools and knowledge to handle a stressful working environment. One of our stress-related challenges is a large number of business trips. As a global company, trips are important for the operation of our business, but we are aware that many people find it exhausting to be away from home and we are therefore working actively to ensure we only send employees away on trips when necessary.

30 THE ABSOLUT COMPANY CASE STUDY: LISTENING TO OUR EMPLOYEES

We are continuously arranging training on unhealthy stress and stress management for managers and employees, and managers are encouraged to set sustainable rules of conduct regarding emails outside working hours, for example. In general, we work proactively with employees who experience stress-related symptoms to find ways to reduce stress and combat absence due to stress-related illness. The employees taking part in these actions return to work with the tools and knowledge to handle a stressful working environment. One of our stress-related challenges is a large number of business trips. As a global company, trips are important for the operation of our business, but we are aware that many people find it exhausting to be away from home and we are therefore working actively to ensure we only send employees away on trips when necessary.

TABLE 6: ABSENCE DUE TO ILLNESS

ABSENCE DUE TO ABSENCE DUE TO ILLNESS ILLNESS HOURS (PER CENT) 2

STOCKHOLM 4,656 1.72

ÅHUS 24,350 5.3

SUSTAINABILITY REPORT 2018/2019 31 TRAINING

We continuously invest in our employees by offering different types of training and tools for development in the workplace. Training is available to employees at all levels within the business. Diversity and gender are always taken into consideration in training and development programmes. We make sure that our training budget is distributed evenly between genders. Over the financial year, we have offered training and skills development in a range of areas, including IT and digital tools, leadership and personal development, technical skills, security and the environment. Every employee is regarded as a talent, and every year they are given the chance to sit down with their manager and draw up a personal development plan that includes skills development and training.

TABLE 7: TRAINING HOURS

TRAINING HOURS, Hours per employee TOTAL

STOCKHOLM 3,120 15.1

ÅHUS 4,368 15.2

32 THE ABSOLUT COMPANY SUSTAINABILITY REPORT 2018/2019 33 SUPPLY CHAIN MANAGEMENT

A large proportion of our impact on the environment and society derives from the supply chain – at farmers, packaging manufacturers, carriers and other suppliers. We are continuously working on increasing our knowledge and reducing our negative impact throughout our value chain. The primary responsibility for this work lies with TAC HQ, but the operational work is carried out at the brand level.

CASE STUDY: ONE SOURCE

Our concept for Absolut, which we have evolved to perfection, is One Source. One Source means Åhus in Southern Sweden. To ensure consistent high quality, every drop of Absolut Vodka is produced here. Our raw material, winter wheat, is grown in the fields surrounding us. Our experience from many years of vodka production has shown that winter wheat makes the best vodka, by far.

The majority of our suppliers of both packaging and raw material are located near us, and we’ve built long and close relationships with them. It is very important for us to be part of a larger context and contribute to the community. Today we spend more than 1.5 billion SEK with Swedish suppliers which creates jobs for thousands of people and families in the area. All suppliers working with The Absolut Company comply with our Supplier CSR commitment. It is based on Amfori BSCI’s code of conduct and contains requirements that are in line with the ILO Conventions, the UN Universal Declaration of Human Rights, the UN Conventions on the Rights of the Child and on the Elimination of All Forms of Discrimination Against Women, the UN Global Compact and the OECD Guidelines for Multinational Enterprises. We continue to have some small suppliers that have not yet signed the code, but the larger suppliers, which have a significant impact on our business, have accepted and signed the code.

34 THE ABSOLUT COMPANY CASE STUDY: BLUE SOURCE

To minimize CSR risks Pernod Ricard have implemented a process, Blue Source. Blue Source is a 7 step-process that offers solutions to include CSR into our activities, especially into the procurement processes and to help us work with the best suppliers. The main objective of Blue Source is to reduce our CSR risks. This objective will be reached by:

• Identifying the potential CSR risks that our suppliers could re present. • Reducing our CSR risks by and/or implementing solutions to help suppliers reducing their own risks and/or selecting our suppliers.

We work with CSR-experts EcoVadis in this process.

POINT OF SALE We have identified the production of coffee, sugar and coconut and the production of point of sale (POS) material as the parts of our supply chain with the most significant risks in terms of social issues and human rights. Our work with farmers and producers of agricul- tural products is described in more detail on previous pages. Point of sale (POS) material is used to market products. The value chain for these products involves several steps which are not under our direct control, risks in terms of the environ- ment, human rights and other social aspects can occur along the value chain. We strive to reduce our use of resources and implement more circular models, we are more restrictive with the quantity and production of POS material to make them more sustainable. Three of our suppliers of POS material were awarded a gold level rating in the EcoVadis assessment, an improvement on the previous year when only one supplier achieved the same level.

SUSTAINABILITY REPORT 2018/2019 35 ANTI-CORRUPTION

An important part of our sustainability work is taking action against corruption, bribery and unethical business practices. As our customers are primarily sales companies within the Pernod Ricard Group, our biggest risks lie not in sales but rather in procurement and contacts with governments and public authorities. To manage our work here, we follow the Pernod Ricard Code of Business Conduct (the “Code”) and related policies such as the Pernod Ricard Group Anti-Bribery Policy. The Code proscribes how we as a company and our employees and partners shall act and includes rules and procedures around anti- corruption, competition law and insider trading. All employees are required to be aware of and comply with the Code and related policies to enable them to make informed decisions. To ensure awareness, Pernod Ricard have designed a comprehensive online training on the Code, including sections on anti-corruption, competition law and insider trading. The training includes facts and examples as well as a set of test questions. All employees are required to complete the online training and it is part of the on-boarding program for new employees. This year, we have no reported incidents of corruption or bribery, still we will continue to focus on this area.

36 THE ABSOLUT COMPANY SUSTAINABILITY REPORT 2018/2019 37 CASE STUDY: EMMAUS – RESPONSIB’ALL DAY Every year The Absolut Company, like all other affiliates within Pernod Ricard, participates in “Responib’All Day”. A day when all employees around the world leave their regulars responsibilities and focus on sustainability and responsibility related activities. In 2019 Emmaus Stockholm was TAC’s partner for the day. A collection box was placed at head office where employees could leave clothes and textiles they were no longer using. During the week before Responsib’All day, we collected 326 kg of clothes and textiles, which would save 4,000,000 litres of water compared with producing the same amount of new textiles. 21 The Absolut Company wanted employees to take away both practical and theoretical knowledge, and Emmaus held four workshops with employees on matters such as circularity, the sharing economy and tips on how to extend the life of clothing.

21 Information from Emmaus Stockholm

38 THE ABSOLUT COMPANY SUSTAINABILITY REPORT 2018/2019 39 CIRCULAR MAKING “We will minimize waste at every step by imagining, producing and distributing our products in ways that optimize and help preserve natural resources.”

SUSTAINABLE DEVELOPMENT GOALS IN FOCUS: GOAL 12 RESPONSIBLE CONSUMPTION AND PRODUCTION GOAL 13 CLIMATE ACTION GOAL 14 LIFE BELOW WATER GOAL 15 LIFE ON LAND

We own and therefore have full control over, our production of Absolut Vodka and Absolut Elyx in Åhus, where we have been working intensively for a long time to improve our environmental work. We have reduced the use of energy, water and resources continuously and have also improved our waste management. We are driven by curiosity and a desire to keep improving our services and are continuing to step up all our processes to achieve our vision of a circular system.

40 THE ABSOLUT COMPANY SUSTAINABILITY REPORT 2018/2019 41 LOCAL ENVIRONMENTAL IMPACT

Malibu and Kahlúa are produced in plants that we do not own or control. Our work to streamline and improve production processes is therefore different for our different brands. For Malibu and Kahlúa, this work is done in dialogue with suppliers. Our ambition is to make the processes for all brands completely circular.

DIAGRAM 1: LOCAL ENVIRONMENTAL PERFORMANCE

ENERGY USE, KWH/LITER OF VODKA

WATER USE, L/LITER OF VODKA

CLIMATE IMPACT, g CO2e/LITER OF VODKA

2,0 4,0 6,0 8,0 10,0 12,0 14,0

2018/19 2017/18

WASTE, ABSOLUT 2017/18 2018/19 (TONNES)

RECYCLED WASTE 993 2,537

WASTE FOR INCINERATION 316 190

WASTE TO LANDFILL 7 1

42 THE ABSOLUT COMPANY CLIMATE IMPACT AND WATER USE IN PRODUCTION, MALIBU AND KAHLÚA

CLIMATE IMPACT SCOPE 1 + 2, 34,886 TONNES OF CO2e

CLIMATE IMPACT, g CO2e/LITRE 742

WATER CONSUMPTION, M3 501,600

WATER EFFICIENCY, L/LITRE 11

* Incl. Pernod Ricard production facilities

WASTE FROM PRODUCTION, MALIBU AND KAHLÚA (TONNES)

RECYCLED WASTE 1,210

WASTE FOR INCINERATION 38

WASTE TO LANDFILL 16

* Incl. Pernod Ricard production facilities

SUSTAINABILITY REPORT 2018/2019 43 CLIMATE Climate change is critical to our business - our value chain is dependent on a stable climate and our stakeholders stress the importance of proactive climate work. We emit greenhouse gases through the cultivation of raw materials, the manufacture of our products and packaging and the process of transporting them. We are working to reduce climate impact in all these areas to ensure we are in line with the Paris Agreement and science-based targets. We have focused mainly on our production of Absolut, packaging and transportation, but we have also begun to investigate opportunities to decrease emissions in other parts of the chain. We have reduced our local emissions over the years both effectively and in total volume, but we are aware that we need to continue that work and reduce emissions significantly, particularly in farming, in the production of Malibu and Kahlúa, packaging production and in the transportation chain.

CASE STUDY: CLIMATE NEUTRAL DISTILLERY is an energy-intensive activity. This has put energy- efficiency among our top priorities throughout the years, and today, our distillery is one of the most energy-efficient distilleries in the world. According to a benchmarking study by BIER (Beverage Industries Environmental Roundtable) based on 2017 figures, the energy consumption per litre of alcohol distilled at our distillery was 60 percent less than the average distilleries worldwide. One of the main reasons for this is that we installed energy-efficient equipment in 2004 that radically reduced our energy consumption. The energy consumption per litre of vodka produced has dropped by 45 percent since then. Today, approximately 90 percent of the energy we use at our facili- ties comes from renewable sources. This, combined with the energy- efficiency of the distillery, is the reason why the CO2-emissions per litre of alcohol distilled at our distillery were 98 percent lower than the corresponding figure for the average distillery in the benchmarking study mentioned above. The CO2-emissions per litre of vodka from the energy used at our facilities have dropped by 80 percent since 2004.

44 THE ABSOLUT COMPANY In 2018/19, we introduced ethanol combustion, i.e. fuel burner waste spirits, at the distillery. This is a step in phasing out the remaining fossil fuels, becoming a fossil free distillery. We have continuously been reducing emissions per litre of vodka produced, and for 2018/19 we achieved 6.6 grams of CO2e/litre of vodka. We have not yet eliminated all use of fossil fuels in the distillation process, but since 2013 we offset the remaining emissions by investing in the climate project Scolel’te a reforestation and forest management project in Mexico, certified by Plan Vivo. 22 Our emission figures are part of the annual reporting to Pernod Ricard, and audited by a third party. 23

22 http://www.planvivo.org/project-network/scolelte-mexico/ 23 Internal data

SUSTAINABILITY REPORT 2018/2019 45 TRANSPORTATION We produce and sell our products all over the world, one consequence of this is significant greenhouse gas emissions from transportation and business travel. To reduce our climate footprint, we have so far focused on the parts of the transport chain that we control, mainly transportation to and from production facilities in Sweden. Our goods are transported from the production facilities to some 140 different markets around the world. Our international shipping is carried out by sea. To help make our ship- ping more sustainable, we are a member of the Clean Shipping Index, an independent labelling system for the environmental performance of vessels, which works across the entire maritime industry. For transportation by land we primarily use trucks, but sometimes also trains. As part of our efforts to reduce our climate impact, we are working to find alternatives to fossil fuels for these transport operations. Since 2017, all transportation from Åhus to distribution centres in Sweden has used fossil-free fuel. We also carry out a lot of local transportation in Åhus, mainly of wheat from farmers to the distillery and from the distillery on to the bottling plant in Åhus, and today around 80 percent of this transport runs on HVO.24 We have a HVO refuelling station at our distillery.

CLIMATE IMPACT 2017/18 2018/19 (TONNES OF CO2e)

TRANSPORTATION (FROM 12,250 12,025 ABSOLUT FACILITIES)

BUSINESS TRAVEL (TAC) 2,703 2,002

CASE STUDY: QUIETER AND CLEANER DELIVERIES During the past year, parts of our local deliveries between distillery and bottling factory has been done on a hybrid electric truck. In addition to the reduction in greenhouse gas emissions, the vehicle is also silent and less disturbing to residents in Åhus. The vehicle is a Scania pre-production lorry, one of a small number on the roads, and the only one in Skåne. It can drive 10 km running on electricity, carrying a total weight of 32 tonnes. The lorry will be transporting vodka between the factories and port warehouse and returning with shipping pallets.

24 Internal data

46 THE ABSOLUT COMPANY WATER We are lucky to have our production of Absolut based in Sweden, in an area where water is not a scarcity. Still, we have put a lot of effort into minimizing water use and ensuring excellent water quality. Through technical solutions and more effective methods, we have reduced water consumption in our production, and we are continuing to work hard to reduce this further. Since 2001, we have reduced the water we consume per litre of vodka produced by more than 20 percent. Our target for 2020 is to achieve 5.4 litres of water per litre of vodka, and for 2018/19 we have further reduced water consumption to 5.91 litres of water per litre of vodka. Nearly half of the water we use is returned to the farmers as animal feed (stillage), a by-product of the distillation process.

WATER CONSUMPTION, 2017/18 2018/19 ABSOLUT

TOTAL, M3 635,493 597,540

EFFICIENCY, L/LITRE VODKA 6.32 5.91

SUSTAINABILITY REPORT 2018/2019 47 CIRCULAR SYSTEM One of the challenges for the world is the unsustainable use of natural resources, where increasing consumption has placed a lot of pressure on the planet’s ecosystems as more extraction/cultivation has been required to meet demand, and the quantity of waste has in- creased as a result. We are making efforts to achieve circularity in the value chain – to use less energy and other resources and reuse waste and residual products. One example of this is the way stillage are handled. These are rich in nutrients and can be used by farmers in the local area to feed their livestock. In recent years, the stillage from our production have fed a quarter of a million cows and pigs per year.

PACKAGING

Our use of packaging materials; glass, cardboard and plastic have a significant environ- mental footprint due to the use of natural resources, production and waste. We aim to increase the proportion of recycled material in our packaging and to increase the reuse of our bottles in all markets. We are also continually working on improving the sustainability performance of all our packaging through our choice of materials and design.

PURCHASED PACKAGING MATERIAL, ABSOLUT (TONNES)

GLASS 68,727

CARDBOARD 4,565

PURCHASED PACKAGING MATERIAL, MALIBU/KAHLÚA (TONNES)

GLASS 24,359

CARDBOARD 2,911

48 THE ABSOLUT COMPANY We work closely with our supplier of Absolut Vodka bottles to increase the use of recycled glass. Absolut Vodka bottles are made from over 40 percent recycled glass. More than 90 percent of bottles in the Swedish market was recycled by Svensk Glasåtervinning. Of all the clear glass recycled by Svensk Glasåtervinning, 100 percent is sent to Ardagh, and one third of this is used for Absolut Vodka bottles. Cooperation and innovation are required to make real progress, increase recycling and develop sustainable materials. We work closely with our supplier Ardagh to reduce the energy and resources used to make Absolut Vodka bottles. The production of glass bottles for this year's End-of-Year campaign used biogas instead of natural gas. This was a measure to directly reduce the climate impact of glass production, but also a way to evaluate whether this could be part of a future climate strategy for Absolut. We have also reduced the amount of cardboard used in our packaging, for example by testing an octagonal box, which has a stronger structure that provides the same functionality even when made with thinner cardboard.

CASE STUDY: FUTURE OF PACKAGING In our Future of Packaging program, we work to develop the pack- aging of tomorrow – circular packaging with new functions. The first step on this journey has been the “Paper Bottle Project” together with BillerudKorsnäs, ecoXpac and Alpla. The initial prototype for a biode- gradable, bio-based, recyclable bottle was presented to our consumers at Way Out West in August 2019, and was well received.

SUSTAINABILITY REPORT 2018/2019 49 RESPONSIBLE HOSTING “We promote responsible drinking in society by evolving our business and our marketing, taking action on harmful drinking and engaging with our stakeholders for real change.”

SUSTAINABLE DEVELOPMENT GOALS IN FOCUS: GOAL 3 GOOD HEALTH AND WELL-BEING

Responsible Hosting is about taking responsibility for our products at the consumer end of the value chain. We produce and sell alcohol, and the vision of the Pernod Ricard group is to be “Createurs de Convivialité” meaning we want our products to be part of a nice and meaningful time among friends. Still, we work in a variety of ways to reduce the risk of our drinks being used in harmful ways, that work looks slightly different depending on cultural context. At TAC we have chosen to focus our efforts on strictly following regulations responsible marketing as well as investing in programs intended to delay the introduction to alcohol for young people.

50 THE ABSOLUT COMPANY SUSTAINABILITY REPORT 2018/2019 51 EMPLOYEES AS AMBASSADORS All our employees are our ambassadors and are therefore role models for responsible and moderate drinking. We train all our employees in how to behave when it comes to alcohol in a business context, and we have drawn up guidelines which all our employees familiarise themselves with and are expected to follow. In brief, they involve responsible and moderate consumption, no drinking and driving and to always offer alcohol-free alternatives at events and representations.

RESPONSIBLE MARKETING We reach people around the world through our marketing. We have developed rules for responsible marketing for all our products, which comply with the international guidelines applied by most companies in the industry. All advertisements and marketing communica- tions are reviewed by senior management to make sure the rules are being followed. One of the cornerstones of the guidelines is that advertisements can only be placed in media where at least 70 percent of consumers are over the legal drinking age. Also, all models used in our advertisements must be at least 25 years old to avoid encouraging young people to drink. There are also rules on advertisements not linking alcohol use to risky activities, social or sexual success or performance.

CASE STUDY: PARTNERSHIP WITH FRYSHUSET

In Sweden, the focus is on preventing alcohol consumption by minors. Part of this work is done in partnership with “Fryshuset”. Our support goes to a section of “Fryshuset” called “Frysbox”, who runs groups doing martial arts and conversation. Friday nights are spent on training and coaching where they talk about issues that are important to young people today. The idea is for young people to have access to meaningful activities in their free time. Many of those who take part build their sense of self-esteem and belonging and meet new friends without using alcohol. A positive side effect is that training often leads to a healthier lifestyle. They realise that they can manage more if they eat well, stop smoking and skip the alcohol.

52 THE ABSOLUT COMPANY SUSTAINABILITY REPORT 2018/2019 53 SUSTAINABILITY MANAGEMENT AND ORGANISATION

Many of our employees show interest in the company’s work on sustainability, which is something that is encouraged. The ambition is to have a company where sustainability is fully integrated into all processes. We have kicked off a steering group for S&R topics that consist of people from senior manage- ment and experts from operations. We also have workgroups for each brand and one for issues relating to The Absolut Company as a whole.

We are part of Pernod Ricard and observe group-wide guidelines and requirements. The basis for our sustainability work includes policies, guidelines and management systems to manage and monitor our sustainability work. Our production sites for Absolut Vodka and Absolut Elyx in Nöbbelöv and Åhus are ISO certified, as are our suppliers of packaging materials and distilleries and our bottling sites for Malibu and Kahlúa.

54 THE ABSOLUT COMPANY FACT BOX: POLICIES

• PR Environmental Policy: Group wide policy with guidelines related to environmental questions, aiming to reduce our negative impact on the environment. • PR Code of Business Conduct: Group wide policy covering matters related to anti-corruption, data protection, competition law, insider trade, etc. • PR Group Human Rights Policy: Group wide policy covering rules and expectations regarding human rights aspects, applicable to suppliers and employees. • PR Code for Commercial Communications: Group wide policy to ensure compliance with industry commitments on responsible marketing of alcohol. • PR Supplier Standards: Group wide code of conduct to ensure suppliers comply with expectations within the field of human rights, health & safety, sustainability, responsible alcohol consumption, etc. • TAC Policy for Equal Opportunities and Diversity: Local TAC policy covering matters related to workplace diversity, including action plans in case of harassment or discrimination. • TAC Proactive Drug Management - Alcohol and Drug Policy: Local TAC Policy covering internal guidelines on responsible consumption of alcohol.

SUSTAINABILITY REPORT 2018/2019 55 RESPONSE TO INTERNATIONAL GUIDELINES AND AGREEMENTS

PARIS AGREEMENT

The climate issue is central to our sustainability work. It is linked to issues of fairness, security, stable ecosystems, productive agriculture and the chances of a good life for future generations. At the climate conference in Paris in 2015, the countries of the world agreed to reduce emissions of greenhouse gases and to support those most affected by climate change. The agreement states that the global temperature increase should be kept well below 2 degrees and that efforts should be made to limit the increase to 1.5 degrees. 27 We want to remain in line with these goals and we are in the process of strengthening current targets and setting new goals that are in line with scientific recommendations, as well as identifying actions to continue to reduce our emissions.

ILO CONVENTIONS

The International Labour Organisation (ILO) draws up conventions that are ratified by states and often referenced in corporate policies. The ILO identifies eight conventions as being particularly fundamental for ensuring that human rights are not violated in the workplace, and the ILO programme Decent Work for All describes how to implement the core conventions. 28 Some parts of our value chain are located in countries and industries with a risk of poor working conditions. Our suppliers sign our Supplier CSR policy and we carry out regular follow up of our supply chain to secure that our demands are being met.

27 https://unfccc.int/process-and-meetings/the-paris-agreement/the-paris-agreement 28 https://www.ilo.org/global/standards/introduction-to-international-labour-standards/conventions-and- recommendations/lang--en/index.htm

56 THE ABSOLUT COMPANY UNGP

In 2011, the UN Guiding Principles on Business and Human Rights were drawn up to clarify the human rights responsibilities of states and businesses. A fundamental element of this frame- work is that businesses need to produce risk analyses on human rights all along their value chains and to formulate policies and strategies to handle the risks that are identified.29 We have analysed parts of our value chain with a focus on social issues and human rights, and we have identified the areas where the risks are highest. Those areas are subject to change and constant monitoring is needed, but there are still risks of violations in parts of the value chain. We deal with this, and reduce the risks, by establishing open and long-term relationships with our producers and suppliers.

29 https://www.business-humanrights.org/en

SUSTAINABILITY REPORT 2018/2019 57 THE ABSOLUT COMPANY SUSTAINABILITY REPORT 2018/19