Sustainability Report

2014 We wish to acknowledge the collective and Since the company’s foundation by Luigi Lavazza, individual efforts of all Lavazza employees, who our entrepreneurial vision has been guided by relentlessly worked to achieve the results which are these values which continue to be a guiding light reported in this important document. thanks to unique and unforgettable people like Emilio Lavazza, who would have strongly believed Everyone, in all areas of the Lavazza business, and shared the concrete and determined efforts everywhere in the world, significantly contributed of Lavazza in every one of these areas, with the to the achievement of ambitious and visionary enthusiasm and the immense humanity that goals with professionalism, competency and characterized him. responsibility.

This document is a further concrete and pragmatic step in reaffirming the values which are at the basis of our work: ethical and economic sustainability, sensibility, commitment, integrity and responsibility. Sustainability Report Luigi Lavazza S.p.A.

2014 Lavazza Sustainability Report 2014 Contents

Sustainability Report CONTENTS 2014 Luigi Lavazza S.p.A.

1. 2. 3.

Luigi Lavazza S.p.A. 17 The commitment 41 A passion 61 Tradition, evolution and revolution of the Lavazza Foundation for excellence

METHODOLOGICAL NOTE 1.1 From Torino to outer space: 19 2.1 The Giuseppe and Pericle Lavazza 43 3.1 Lavazza’s approach to quality 63 120 years of excellence Foundation management Document objectives 10 1.2 Sustainability, the Lavazza way 28 2.2 Precompetitive approach to project 44 3.1.1 Green coffee quality 64 Drafting process and references used 10 management 1.3 Business values, value of the business 31 3.1.2 The quality of the production process 66 Scope of the report 11 2.3 Project Sustainability 49 3.1.3 Certifications 68 Stakeholder Engagement and materiality 11 2.4 Working towards a social business model 50 analysis 3.2 Lavazza’s approach to supplier 72 2.5 Specific projects 52 management Assurance process 15 2.6 Quantitative data 54 3.2.1 Supplier qualification process 74

3.2.2 Creating shared value 76

3.3 The “InnovAtion” programme 79

3.4 Special projects: 80 Lavazza for a sustainable EXPO

4 5 Lavazza Sustainability Report 2014 Contents

CONTENTS

4. 5. 6.

120 years of innovation 83 Human resources development 115 Continuous improvement 143 Lavazza’s sustainability objectives

4.1 Care for the environment 86 5.1 The Lavazza approach to people 117 GRI CONTENT INDEX 146

4.1.1 Minimising environmental impact 88 5.1.1 Training and development: 118 a systemic and shared process GLOSSARY 156 4.1.2 Continuous improvement 91 5.1.2 Leading Change 125 4.2 Focus on special projects 94 5.1.3 Teamwork 128 4.2.1 ISSpresso, coffee in outer space 96 5.1.4 Loyalty and transparency 130 4.2.2 The coffee genome 99 5.1.5 Internal communication 132 4.2.3 Compostable capsules 103 5.1.6 Welfare 133 4.3 Lavazza’s environmental footprint 104 5.1.7 Nuvola: a sustainable project 134 4.3.1 Environmental impact indicators 106 5.1.8 Health and safety at work 138 4.3.2 Environmental performance indicators 108

6 7 Lavazza Sustainability Report 2014 Introduction

ur story is the story of a family and of a Internationalisation is the challenge we are facing ur sustainability pathway is based on a Externally, we share our ethical principles with our business. It is a typically Italian story and now. And it is one that will require our increasing strategic approach designed to create value stakeholders in a virtuous cycle that generates more Oyet a unique one, because it stems from engagement, to secure the financial strength and Oand increase our competitive advantage. It value for everyone. Indeed, our brand value is also the vision of Luigi Lavazza: a pioneer who already forward-looking approach that now, more than is a vision that the family has always believed in, founded on Lavazza’s fair and responsible way of thought in terms of constant improvement and ever, are a pre-requisite for any company. because it reflects the basic principles behind our operating. innovation, 120 years ago. entrepreneurial approach. 2015 is a special year for our company, full of The challenge for 2015 is to further intensify There are some rules that we have to follow, important events: as we celebrate our first 120 years At Lavazza, commitment to sustainability is an our engagement in sustainability as a driver for because they are established by laws and in business, we are also involved in Expo 2015 as intrinsic value, which is not simply dictated by the innovation. The next decade will be absolutely regulations; rules that are mandatory for all citizens the Official Coffee of the Italian Pavilion. market, but responds to a need to create shared crucial, because there can be no real growth if it and businesses. But there are also unwritten rules, value throughout the supply chain: it is an essential is not responsible and sustainable – not only for dictated by our ethics, our education, our moral These occasions will testify how our family and driving force for continuous improvement. companies, but for all of us. sensibility and humanity; rules that we apply and business values are still very much alive and respect out of choice, not obligation. heartfelt and how they translate into goals and This Sustainability Report is a crucial instrument results that, through this Sustainability Report, we to provide all stakeholders with a transparent This is a vision that has been handed down want to share with everyone who is part of the picture of our social, environmental and economic through four generations of the Lavazza family, Lavazza world or wants to get to know us better. performances. whilst keeping pace with the major historical and economic changes of each era. It is a vision that has Perhaps just because they enjoyed one of the 17 Internally, all business units have promoted the enabled us to transform ethical awareness into a billion cups of Italian Lavazza espresso served company’s values by spreading our vision among business strategy for economic, environmental and around the world each year. staff. Today, the importance of sustainability social sustainability. is recognised across all business areas. This is an essential outcome, because it is precisely Italian creativity has always inspired us to invent by building a bridge between shareholders, and innovate, but now our eyes are set on a new Alberto Lavazza management and employees, that a truly Antonio Baravalle horizon: the world. Chairman, Luigi Lavazza S.p.A. sustainable company is created. Chief Executive Officer, Luigi Lavazza S.p.A.

8 9 Lavazza Sustainability Report 2014 Methodological note

METHODOLOGICAL NOTE

Document Objectives Drafting process and Scope of the report Stakeholder Engagement references used and materiality analysis

This is the first edition1 of our Sustainability Report, which will Lavazza’s CSR Manager coordinated the preparation of Lavazza’s manufacturing system is split across six production [G4-18] In accordance with the GRI-G4 guidelines, Lavazza from now on be an annual exercise. the Report, which has been drafted with inputs from the plants: four in Italy (Torino, Gattinara, Pozzilli, Verrès), one has identified the contents of its Sustainability Report company’s entire organisational structure, in accordance with in Brazil and one in India. Lavazza has 3,1003 employees, according to the following principles: The objective of this document is to provide a systematic the Sustainability Reporting guidelines, drawn up in the form operates in more than 90 countries around the world, - stakeholder inclusiveness; framework for the company’s accountability and reporting of an internal procedure in September 2014. covering every continent, both through direct subsidiaries and - sustainability context; initiatives. Specifically, the Report is the primary instrument a large network of distributors. - materiality; for managing and reporting on economic, environmental and The contents of the Sustainability Report have been prepared - completeness. social sustainability initiatives. It is also a transparent way to according to the latest version (GRI-G4) of the Guidelines Domestically, Lavazza reaches its consumers directly interact with and disclose information to stakeholders. (https://www.globalreporting.org/reporting/g4/Pages/default. through operators such as large-scale retailers and public In identifying the structure and content of the Report, Lavazza adopts a strategic approach to corporate social aspx) drawn up by the “Global Reporting Initiative”2 and establishments. Internationally, it is present in various markets Lavazza has therefore taken into account its business responsibility (CSR), which involves the comprehensive the related Food Processing Sector Supplement (https:// through a network of distributors specialised in the ‘at activities (analysis of Lavazza’s sustainability context), the integration of CSR themes throughout the value chain. www.globalreporting.org/reporting/sector-guidance/ home’ and ‘away from home’ channels. Lavazza offers end interests of stakeholders and their expectations. Sustainability, for Lavazza, is therefore an integral part of its sectorguidanceG4/Pages/default.aspx). consumers a vast range of products designed to meet every core business. The level of compliance with the GRI-G4 Standard selected need both at home and away from home. To identify the most relevant aspects to include and discuss by the Lavazza Group is “in accordance – Core.” in the Report, Lavazza has: This vision requires the adoption of precise, measurable To ensure that figures and information are comparable over - identified its stakeholders[G4-25] ; and repeatable key performance indicators (KPIs), whose time, this Report refers to the years 2012, 2013 and 20144. - examined their expectations and main areas of interest achievement is dependent on the involvement of all [G4-17] Quantitative data provided in the document refer to using dedicated channels; company functions and on the definition of guidelines in Luigi Lavazza S.p.A., the parent company based in Torino, - analysed its sustainability context and that of the reference order to create a systemic process. Italy, unless otherwise stated. Luigi Lavazza S.p.A. includes: sector, through benchmarking with its main competitors and - Headquarters and the Innovation Center; analysing subject areas considered relevant to the company’s To this end, in 2011 Lavazza added impetus to this approach - Production plants in Torino, Gattinara, Verrès and Pozzilli. core business; – already adopted by the company in terms of developing a - performed a materiality analysis on the most relevant company culture – by creating a dedicated position whose sustainability issues for the company, by assigning a priority task is to define, implement and coordinate company- to each issue and building a ‘materiality matrix’. wide CSR activities focusing on four main areas: the sustainability of the product and of production processes, and the sustainability of relations with internal and external stakeholders.

1 In 2014, Lavazza published the Sustainability Report 2012. 3 Employee numbers refer to the Lavazza Group. 2 The figures reported in the Lavazza Sustainability Report 2012 refer to 2011 and 2012. The reporting period has been extended from two to three years in 4 The figures reported in the Lavazza Sustainability Report 2012 refer to 2011 and 2012. The reporting period has been extended from two to three years in the Sustainability Report 2014 (2012-2013-2014). the Sustainability Report 2014 (2012-2013-2014) [G4-22; G4-23].

10 11 Lavazza Sustainability Report 2014 Methodological note

Lavazza stakeholder engagement [G4-24; G4-26; G4-27] Customers and consumers Local communities

Communication channels Communication channels • Customer Service • Meetings to develop initiatives on sport, • Social networks culture, young people, education and • Dedicated meetings integration Trade unions/industry • Events associations • Dedicated Meetings

Communication channels • Regular meetings to provide information on the Group’s situation • Negotiations on specific business or production Coffee producing communities issues • Meetings in industry associations Communication channels • Meetings to define and implement sustainability projects • Regular contacts to establish qualitative standards • Regular contacts relating to coffee purchasing • Regular meetings on coffee production related issues

Partners

Communication channels Suppliers • Events and periodic meetings

Communication channels • Regular meetings • Site visits • Improvement plans • Sharing the Supplier Code Of Conduct Press and Digital Media and Code of Ethics

Communication channels • Press releases • Organising press conferences • Social networks • Organising events • Press analysis • Interviews with Lavazza’s board and top management International/national institutions, non-governmental organisations and local institutions

Communication channels Human Resources • Participation in international meetings, such as the International Coffee Organization Events Governance Bodies • Periodic dedicated meetings Communication channels Communication channels • Tailored training programmes • Leading Change • Organising periodic meetings • Workshops • Focus Groups • One-on-one meetings • Questionnaires on specific topics • Employee Code Of Conduct 12 and Code of Ethics 13 Lavazza Sustainability Report 2014 Methodological note

Profitability and economic value Customer Health and Safety

Quality of Green Coffee Materiality Matrix Valorisation of Human Resources [G4-19; G4-20; G4-21; G4-27] Occupational Health and Safety Carbon Emissions

HIGH Inititatives in coffee Packaging producing countries Measuring Customer Climate Change Initiatives for the Satisfaction Local Communities Closed systems innovation and capsules end of life Waste Management Life Cycle Assessment

Supply Chain responsible Economic commitment for environmental aspects Safeguarding biodiversity management

Economic commitment for social aspects Energy Consumption Transparency Water Management MEDIUM Supplier Environmental Assessment

Production of certified coffee (Rainforest Alliance, UTZ, …)

LOW MEDIUM MEDIUM HIGH IINFLUENCE ON STAKEHOLDERS’ DECISIONS AND ASSESSMENT DECISIONS ON STAKEHOLDERS’ IINFLUENCE ECONOMIC/SOCIAL/ENVIRONMENTAL IMPACT

Assurance process

This matrix represents the sustainability aspects The Lavazza Group Sustainability Report has been The results of the audit performed can be found in considered to be most important for the company. subject to a limited-scope audit performed by the the report at the end of this document. These aspects have been analysed by assigning company PricewaterhouseCoopers Advisory S.p.A5. them a priority in terms of their economic, environmental and social impact for Lavazza and their direct influence on the views and decisions of 5Following a competitive procurement procedure, Luigi Lavazza S.p.A. selected PricewaterhouseCoopers Advisory S.p.A. (PwC) to perform assurance stakeholders. activities for the Sustainability Report. Lavazza top management participated in the report assurance process through personal interviews.

14 15 Lavazza Sustainability Report 2014 Ch. I Luigi Lavazza S.p.A. Tradition, evolution and revolution

Luigi Lavazza S.p.A. Tradition, evolution and revolution

16 17 Lavazza Sustainability Report 2014 Ch. I Luigi Lavazza S.p.A. Tradition, evolution and revolution

1.1 From Torino to outer space: 120 years of excellence

The year is 1894. A distinguished companies in the world, with a and he became the master of gentlemen walks into a grocer’s in leading role at the Milan Universal Italian coffee. Just a year after central Torino. He has just bought Exhibition 2015 and would have taking over the grocer’s, Luigi it for 10,000 lira. He does not served an espresso to the first Lavazza was officially created. know yet that 120 years later, that female Italian astronaut more small grocer’s would become one than 400 km away from Earth. of the largest coffee producing The man is called Luigi Lavazza

18 19 Lavazza Sustainability Report 2014 Ch. I Luigi Lavazza S.p.A. Tradition, evolution and revolution

real estate development open to the city, the site forms project – one of Europe’s most part of a complex urban fabric and important – to house Lavazza’s has a social function that aims to new headquarters, which will involve local inhabitants right from occupy 30,000 square metres. the very beginning of the project. The location has been identified according to the best available environmental policies and the building is a candidate for LEED® Gold certification. Beautifully designed by Cino Zucchi and

A Family, a business

Thanks to the passion, curiosity, without chemical solvents, to thanks the creativity of geniuses courage and imagination which the espresso systems designed like Armando Testa and making founder transferred to his family specifically for the home and full use of a revolutionary device and staff, Luigi Lavazza’s grocer high-quality coffee made known as the television. would become the seventh largest using increasingly sustainable Currently, the fourth generation coffee producer in the world. processes. of Lavazza family is engaged in the company, with Manuela, the In the period after World War Meanwhile, Lavazza became an daughter of current chairman II, Lavazza “invented” quality icon of the Italian way of life, often Alberto, joining the board of coffee for mass consumption, leading the way in fashion, trends directors in 2014. thanks to a series of innovations and cultural changes. Indeed, it that changed the rules of the was one of the first companies in In Torino, the city where the game each time: from the first Italy to understand that product company was founded and vacuum-packed coffee and the communication should go hand- developed, Lavazza has engaged first decaffeinated coffee made in-hand with a brand strategy, in a shared and participatory

20 21 Lavazza Sustainability Report 2014 Ch. I Luigi Lavazza S.p.A. Tradition, evolution and revolution

22 23 23 Lavazza Sustainability Report 2014 Ch. I Luigi Lavazza S.p.A. Tradition, evolution and revolution

Evolutions and revolutions The futuristic Lavazza 120 years of first times Innovation Center is established at the Torino factory

Luigi Lavazza creates the Lavazza Lavazza Paulista – the first first coffee blends introduces decaffeinated coffee to be packaged innovative coffee (initially in a vacuum-packed ‘vertical’ called Dec then Dek tin – is launched Lavazza starts processing in 1961) is launched research to design Lavazza launches A Modo a compostable Mio, a new automatic espresso capsule system designed for home use

The Torino production site is opened, at the time the largest single-product facility in Europe

Lavazza wins the tender to be the official coffee of the Italian Pavilion at the Lavazza is the first Universal Exhibition in Milan. The Luigi Lavazza The first Lavazza coffee company Coffee Research Calendar is to draw up a real and Study Centre is published brand strategy in founded Italy

Lavazza BLUE marks a watershed moment in automatic distribution with an innovative extraction system In partnership with Argotec, Lavazza develops ISSpresso, the first espresso system Lavazza launches pre- The Automatic ¡Tierra! makes its capable of functioning packaged coffee using Distribution debut: a high- at zero gravity, which “Pergamin”, a package An innovative Internationalisation begins segment is quality coffee will be launched in the composed of two layers vacuum-packed with the opening of the launched, with resulting from the International Space of paper, to keep the bag is introduced French subsidiary the single-serving company’s first Station in 2015 to original flavour of the alongside the tin Espresso Point independent CSR perform research into coffee untouched capsule system project fluid dynamics

24 25 Lavazza Sustainability Report 2014 Ch. I Luigi Lavazza S.p.A. Tradition, evolution and revolution

NUVOLA, OUR NEW HEADQUARTERS WILL OCCUPY A SURFACE OF 30,000 MQ

26 27 Lavazza Sustainability Report 2014 Ch. I Luigi Lavazza S.p.A. Tradition, evolution and revolution

1.2 Sustainability, the Lavazza way

In 1935, Luigi Lavazza embarked human, environmental and of our products is assessed using 5,8 on a journey around South cultural assets of the countries a ‘cradle to grave’ approach: America. He wanted to see for where it operates. from green coffee, to processing million euros of himself where green coffee came in the countries of origin and investments in from, the people who grew it and Lavazza promotes the concept at production plants in Italy, to sustainability the way they lived. During the of integrated sustainability, packaging, coffee machines, trip, he saw entire unsold coffee implemented through a life- transportation of green coffee and harvests destroyed before his cycle thinking approach which finished products, through to the eyes. enables the creation of shared disposal of the product. value throughout the industry, as This experience significantly part of a process of continuous impacted on his entrepreneurial improvement. vision, which he transferred to his family and staff. Since then, For Lavazza, sustainability and Lavazza has always paid close innovation are interdependent. attention to the economic, The environmental performance Increased economic commitment for sustainability

In order to respond effectively to growing expectations in Lavazza’s current and potential markets, our economic € 5,8 million commitment in the three years from 2012 to 2014 has risen from €2.7 million, to €4.1 million and then €5.8 million, demonstrating the strategic importance of sustainability for CSR the Group6. Corporate Social € 4,1 million 2014 Responsibility

6 Lavazza’s funding commitment on sustainability refers to spending in the following areas: CSR, membership of the Institute for Scientific Information € 2,7 million on Coffee (ISIC), consumer health and safety, supplier certification and monitoring, occupational health and safety, the Lavazza Foundation, donations, the environment, sustainable capsule redesign, packaging and 2013 life cycle analysis (LCA).

2012 28 29 Lavazza Sustainability Report 2014 PassionCh. I Luigi for Lavazza S.p.A. excellence Tradition, evolution and revolution Farsightedness

Lavazza governance system 1.3 Business values, value of the business

Board of Board of Statutory Directors Auditors

Internal Supervisory Audit Board Senso di riconoscenza Lavazza family leadership provides a strong of correct management and, in particular, the The synergy between economic recognition, integrity and foundation for an entrepreneurial approach that adequacy of the internal control system. solidity that has been a feature farsightedness – allows for a is oriented towards creating value both in the of Lavazza for 120 years and comprehensive approach to

short term and long term. This allows planning of The Supervisory Board is an independent oversight its value system – passion sustainability. Gratefulness medium and long term initiatives in order to ensure body responsible for monitoring the functioning for excellence, team spirit, continuous growth for the company as a global and observance of Lavazza’s organisational, player in the coffee industry. management and control model (as per Italian Legislative Decree 231/2001) and ensuring that it is Luigi Lavazza S.p.A. adopts a traditional corporate kept up to date7. It plays a central role in corporate governance model with a Board of Directors chaired governance processes, together with Internal Audit, by Alberto Lavazza and a Board of Statutory which reports directly to the Board of Directors and Auditors chaired by Gianluca Ferrero. is responsible for implementing an efficient Internal Control System. The central body in the governance system is the

Board of Directors, which has the broadest powers Internal Audit analyses and monitors the adequacy, Gratefulness of strategic policy-making to ensure correct and regularity, reliability and functionality of internal Integrity efficient Group management. Aside from the administrative procedures (in terms of the chairman, it includes the Vice-Chairmen Giuseppe simplification, optimisation and correctness of Transparency and Marco Lavazza, the CEO Antonio Baravalle and the processes), with a view to efficient business Passion for excellence the directors Antonella Lavazza, Francesca Lavazza, management. Manuela Lavazza, Pietro Boroli, Gabriele Galateri di Genola, Robert Kunze-Concewitz and Antonio Marcegaglia. Integrity The Board of Statutory Auditors is responsible

for overseeing compliance with the law and the excellence for Passion Articles of Association, adherence to the principles Gratefulness

7 The most recent version of Lavazza’s organisation, management and control model, which also covers private-to-private corruption, is published on the company intranet system. Farsightedness Farsightedness Transparency Gratefulness 30 Transparency 31 Integrity Team Spirit Team Team Spirit Team Gratefulness Gratefulness Lavazza Sustainability Report 2014 Ch. I Luigi Lavazza S.p.A. Tradition, evolution and revolution

Luigi Lavazza S.p.A. brands sold in Italy

Away From Home (AFH) Roast&Ground LAVAZZA ESPRESSO POINT, LAVAZZA BLUE, 120 ANNIVERSARIO RETAIL, BOURBON CLASSICO, LAVAZZA FIRMA E BOURBON. CARMENCITA, CLUB, CREMA & GUSTO CLASSICO, CREMA & GUSTO DOLCE, CREMA & GUSTO Food Service ESPRESSO, CREMA & GUSTO ESPRESSO FORTE, 120 ANNIVERSARIO FS, ESPR.CREMA E AROMA CREMA & GUSTO FORTE, CREMA & GUSTO RICCO, FS, BLUE VERY B MAGNIFICO, BLUE VERY B DEK, DEK INTENSO, ESPRESSO FAMIGLIA, GRAN SUPREMO, BLUE ESPR. ROTONDO, BLUE ESPR. AROMA BAR, GRAN CREMA ESPRESSO, PAULISTA, DECAFFEINATO, BLUE ESPRESSO QUALITA’ ORO, QUALITA’ ORO ESPRESSO, DOLCE, BLUE ESPR. INTENSO, BLUE ESPR. QUALITA’ ROSSA, SUERTE, SUPERESPRESSO, RICCO, BLUE ESP. TIERRA INTENSO, BLUE TIERRA e XLONG. ESPRESSO VIGOROSO, DEK BAR, TOP CLASS, GRAND’ESPRESSO, GR.ESPRESSO T.SCURA, Single serve OROPURO, GRAN RISERVA, PIENAROMA RA, A MODO MIO, FIRMA, RIVO, ESPRESSO POINT, SUPER CREMA, GOLD SELECTION, SUPER GUSTO, BLUE e IN BLACK. GRANDE RISTOR. ROSSO, TIERRA 100% ARABICA SELECTION, KAFA e NERO SUBLIME RA.

32 33 Lavazza Sustainability Report 2014 Ch. I Luigi Lavazza S.p.A. Tradition, evolution and revolution

Lavazza Partnership Networks

t F r o o r p c s ip u r sh n l o o t i G u F p u m g r a g e The Lavazza Code of Ethics h e C n n h o e d im e l M b ) f u m l In 2012, we formally set out our values in a Code of Transparency i o L s g a e ( S W a c u li a m Ethics (http://www.lavazza.us/us/about-lavazza/ The best solutions are found through open dialogue l ta a ’I T ethics.html), passing them on to our internal and and exchange. We therefore believe straightforward d h n e e a t external stakeholders through training courses communication is crucial. We commit to being p C r u e O l t u and multimedia tools. The Code of Ethics is also honest, open and available interlocutors in order to r C a o l u H an integral part of all supplier contracts and of our foster and maintain a working environment based n e c r i i l t

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8 In the reporting period Lavazza’s only sanctions were related to taxes for total of 172,000 euro

34 35

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Sustainability also means making an economic to be beneficial in the short term, but actually turn benefit repeatable in the long term, and the drivers out to be so if we adopt a long-term view. that make this benefit repeatable in the long term must in turn be sustainable. Investments – in The entire supply chain, from the processing of particular in industrial assets, brand equity, human green coffee to the end product, must make this capital, innovation – need to generate resources paradigm shift: investing in sustainability depends that can finance those investments. In the long term on the margins it generates. For example, Lavazza this generates a sustainable framework in which invested significantly between 2013 and 2014 to enterprise and stakeholders benefit from the results make its production processes more efficient. This achieved, and allows additional investments to be resulted in reduced energy consumption, reduced planned with greater confidence. use of packaging materials and reduced production of waste, equivalent to a saving of 3.9% in 2014 on If we look at sustainability as an opportunity to the total industrial production costs compared to create value, adopting it as a management model 2013. This saving will be reinvested in the continuous requires a cultural shift. However identifying the link improvement of production process, resulting in between sustainability and value is complex. The a progressive minimisation of the environmental Sustainability value relevance: relationship between the costs and benefits of an impact. creating shared value investment in sustainability can, in fact, appear not “Sustainability must be shared along the entire supply chain, from green coffee to the end product. Lavazza has operated according to these principles since its origins. It is a cultural shift, a leap into the future.” 3,9% Energy, packaging and waste reduction in 2014 compared to the total industrial production costs of 2013

36 37 Lavazza Sustainability Report 2014 Ch. I Luigi Lavazza S.p.A. Tradition, evolution and revolution

k€ 2014 201310 201210 Economic and financial performance of the Lavazza Group

In 2014 the Group continued to implement its safety, thereby reaffirming our presence in Italy, Direct economic value generated 1.405.637 1.417.083 1.456.281 strategic plan, focusing on specific markets and which not only benefits the country, but also local a) Revenues 1.405.637 1.417.083 1.456.281 geographical areas to obtain positive results both in communities. terms of competitiveness and income9. Economic value distributed 1.229.406 1.277.661 1.297.043 The Group remains financially solid with a net b) Operating costs 980.152 980.380 1.024.025 Revenues grew 0.3% compared to 2013, mainly as financial position at the end of 2014 of €340.5 a result of increased net sales. The proportion of million and cash flow from operations of €93.5 c) Wages and benefits 153.826 145.763 147.457 revenues generated in foreign markets increased million. d) Payments to capital providers 14.245 66.106 48.918 from 46.2% in 2013 to 49.6% in 2014, confirming the Group’s increasing internationalisation. e) Payments to government 70.124 77.117 66.214 Operating profit (EBIT) was up €33.2 million f) Community investments 2.566 1.621 1.185 compared to 2013, with a 2.4% increase in the sales margin deriving mainly from favourable changes in g) other the cost of sales. Net profit was €126.6 million, up €17.3 million Retained economic value 176.231 139.422 159.238 compared to €109.3 million recorded in the prior year. The table below shows the economic value generated by the business and distributed to the main stakeholders, and the amount retained within the business. During 2014, we invested heavily in industrial plants 1.344,1 in Italy, renovating them for greater efficiency and Sales revenues in 2014 (M€)

The Lavazza Group generated rising economic value order to mitigate the effects of these fluctuations,

10 over the period 2012-2013-2014. This was made and to the benefit of all stakeholders, the Lavazza M€ 2014 Margins 2013 Margins possible by increasing internationalisation and Group uses hedging instruments to stabilise financial % % the Group’s capacity to innovate, in response to a performance. stagnant domestic market. Sales revenues 1,344.1 100.0% 1,340.1 100.0% The Direct Economic value generated differs from The Value distributed refers to dividends paid to EBITDA 225,8 16,8% 223,5 16,7% sales revenues because it includes the received shareholders, as the Group is largely self-funded. dividends and the extraordinary income, which Value distributed to government mainly refers to the EBIT 156,4 11,6% 123,2 9,2% relates to the change in the method used to payment of income taxes. Net profit 126,7 9,4% 109,3 8,2% measure inventories, from LIFO to average weighted cost. Retained economic value (calculated as generated Net financial position (340,5) (387,2) economic value minus distributed economic value) The Economic value distributed to stakeholders increased over the period. Investments 80,2 44,9 decreased slightly over the three years. In particular, Operating cash flow 93,5 155,3 operating costs include the cost of green coffee, which is subject to significant price fluctuations. In ROS 11,8% 9,3%

ROI 26,8% 20,8% ROE 9,6% 8,6% 1.405.637 Direct economic value generated in 2014 (k€)

9 Barista, the Coffee Shop chain was sold in 2014. The 198 coffee shops, now owned by a company belonging to Amtek Group, continue to offer Lavazza coffee thanks to a long-term supply contract between Fresh & Honest Café Ltd. (FHCL) and Barista. 10 To enable comparison, the figures for 2013 and 2012 have been adjusted to take into account the effects of the change in 2014 in the method used to measure inventories from LIFO (‘last in, first out’) to average weighted cost.

38 39 Lavazza Sustainability Report 2014 Ch. II The commitment of the Lavazza Foundation

The commitment of the Lavazza Foundation

40 41 Lavazza Sustainability Report 2014 Ch. II The commitment of the Lavazza Foundation

2.1 The Giuseppe and Pericle Lavazza Foundation

The Giuseppe and Pericle living in coffee-producing current and future demographic Lavazza Foundation, (the countries; promote, develop trends and helping select policies “Foundation”) is a non-profit and coordinate studies, research that satisfy their needs; finance organisation, established in and other activities aimed at the and deliver annual scholarships 2004. The exclusive purpose protection of the environment, and awards to students/young of the Foundation is to support with a particular focus on the people of all nationalities for charitable initiatives in the fields promotion, dissemination excellence in study and research, of health and social care and and implementation of new and for those who have shown protection of the environment, methodologies to introduce particular commitment in these both in Italy and abroad. the concept of environmental, sectors; and deliver social To achieve its goals, the economic and social assistance and medical care to Foundation aims to: promote, sustainability in the coffee communities and/or individuals develop and coordinate growing and processing industry, in special cases of exceptional initiatives, also through to increase productivity and severity and emergency. partnerships with public and/ economic income; promote or private bodies, designed surveys, research and studies to improve living and working aimed at understanding the conditions for communities socio-economic conditions of and individuals in distress, the populations living in coffee- particularly for populations producing countries, identifying

42 43 Lavazza Sustainability Report 2014 Ch. II The commitment of the Lavazza Foundation

2.2 Precompetitive approach to project management

Tha Lavazza Foundation ensures Projects have a twofold objective: support the development of local ownership of projects in develop productivity through the entrepreneurial skills of small order to implement and promote dissemination of good agricultural producers, who account for 75% projects which are sustainable practices, and promote of coffee production worldwide. over time also thanks to strategic entrepreneurship, irrespective of http://unctad.org/en/Pages/ public-private partnerships. whether or not the producers are Home.aspx Under this approach, the part of the Lavazza supply chain. Foundation identifies the most Some projects have additional suitable partners – both in terms components such as: of skills and resources – in order -gender equality: equality for to achieve effective and lasting both genders in family relations; results. -food security: the commitment to ensuring everyone has access % The Foundation adopts a pre- to adequate nutrition; competitive approach which -reforestation; results in the engagement -minimisation of the 75 of different partners for the environmental impact of coffee of the world coffee production is realisation of the different production. handled by small producers elements of the projects: design and development, a shared In 2014 the Lavazza Foundation long-term commitment, project partnered with the United governance or more technical Nations Conference on Trade and agricultural aspects. and Development (UNCTAD) to

44 45 Lavazza Sustainability Report 2014 Ch. II The commitment of the Lavazza Foundation

Sustainability at the source, sustainability along the entire value chain

ICP Coffee & Climate International Coffee Partnership ¡Tierra!

These projects are aimed These projects are aimed at These projects are directly at providing producers with improving coffee producing developed and managed by skills to manage and mitigate techniques, sharing good the Foundation climate change agricultural practice and developing entrepreneurial skills

The activities of the Foundation vary according to production techniques, as well as encourage the needs of the different operators in the sector, sharing of good agricultural practices and foster and are tailored to respond to those needs as entrepreneurship. These goals are generally effectively as possible, across a range of complex achieved in partnership with the International scenarios. The common factor is collaboration. Coffee Partners (ICP).

Among the projects designed to minimise the http://www.coffeeandclimate.org/ effects of climate change are the projects from the http://www.coffee-partners.org/ Coffee & Climate initiative, which focus on providing coffee producers with the tools to manage these effects (see box). These projects seek to improve

46 47 Lavazza Sustainability Report 2014 Ch. II The commitment of the Lavazza Foundation

2.3 Project Sustainability

All projects are assessed according to a series of Key Performance Indicators (KPIs). Once these have been identified, project activities are then monitored over time to ensure their effectiveness. With a collaborative and pre-competitive approach, the Foundation shares KPIs with the other parties involved in the projects. The Foundation also works with other partners, including the ICP, Instituto Centroamericano de Administración de Empresa (INCAE, Costa Rica), a leading business school, to research and formulate KPIs, identifying common metrics for analysis. KPI Key Performance Indicator

All projects are assessed according to a series of Key Performance Indicators (KPIs). The Lavazza Foundation does not unilaterally identify KPIs.

48 49 Lavazza Sustainability Report 2014 Ch. II The commitment of the Lavazza Foundation

2.4 Working towards a social business model

Many of the activities within (assessing the quality of green Vietnam, with the goal of creating the Foundation’s projects are coffee) and marketing of the end a nursery for the production developed from a social business product. of Robusta coffee plants in perspective. These are projects partnership with the local focused on a product/service Like soil analysis, coffee grading community (cooperatives and with a social value, where profit is an activity with a social value, the Vietnamese government, who is reinvested to the benefit of the in that it helps producers to provided the land for cultivating local community. develop a sense of the intrinsic these coffee seedlings). Net value of their product. Buying revenue associated with the sale Examples of the application of fertiliser also has a social value. of these plants is reinvested in this model include the creation, As the Group purchases together, training activities for producers as part of the project launched in bargaining power is increased. from the cooperatives, focused India in 2013, of an organisation In addition it provides an on minimising the impacts of for small producers called MAS, opportunity to develope more climate change. aimed at providing services for effective fertilisation techniques. members and for third parties, A further example of the social including soil analysis, fertiliser business criteria in action is purchasing, coffee grading the project launched in 2013 in

Vietnam Creation of a nursery for the production of Robusta coffee plants in partnership with the India local community. Net revenue associated with the sale of these plants is reinvested in Creation of MAS, a small producers organization aimed at providing services for members training activities for producers from the cooperatives, focused on minimising the impacts and for third parties, including soil analysis, fertiliser purchasing, coffee grading (assessing of climate change. the quality of green coffee) and marketing of the end product.

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2.5 Specific projects Coffee & Climate: Sharing Best Practices

Climate change is a fundamental issue for coffee The Coffee & Climate projects seek to identify and growers. In order to identify new strategies develop strategies to help the coffee industry adapt to minimise the impact of climate change, to climate change. Dominican Republic 1.230 406 824 the Foundation participates in international Total coffee Women Men precompetitive round-table discussions along with Launched in Brazil, Tanzania, Guatemala, Honduras, producers other key players in the coffee industry. El Salvador and Vietnam, Coffee & Climate aims to study the influence of climate change on Specifically, in collaboration with several members coffee production, to transfer key knowledge and of the International Coffee Partners association technologies to growers that respond effectively to and other institutional partners, such as the constantly changing conditions. Commonwealth Agricultural Bureaux International During 2014, Coffee & Climate carried out a series (CABI) and the public-private initiative for financing of technical and scientific activities that, in 2015, will sustainability projects, Initiatief Duurzame Handel lead to the introduction of an online toolbox for (IDH), which is supported by the Dutch and producers. In 2015, the Milan Universal Exhibition Swiss governments, and is responsible for the will provide a new context for the Coffee & Climate Haiti Sustainable Coffee Program (SCP), the Foundation initiative, giving it special importance with regard to 2.208 773 1.435 has supported the launch of the Coffee & Climate the development of these important themes. Total coffee Women Men project, which sees the direct involvement of producers Giuseppe Lavazza as Chairman and Mario Cerutti (Green Coffee & Corporate Relations Partner, Lavazza), as a member of the Steering Committee.

Oxfam Italy and the Lavazza activities of the two countries as de Productores y Productoras Foundation have launched a far as possible, to create a south- de Café de la Sierra de Neyba). binational project supporting south relationship. In Haiti, the project involves small coffee producers in 2,208 producers: 773 women the Dominican Republic and Particular attention is paid to (35%) and 1,435 men (65%), who Haiti which, through several gender dynamics, to empower are members of the Réseau cooperatives, involves 2,200 women by involving them in key des Coopératives Agricoles et families and small producers in decision processes, both within Caféières (RECOCAS). Haiti and 1,230 in the Dominican households and within the Republic. The project adopts a community of coffee producers. particularly innovative approach: it foresees for the replanting of In the Dominican Republic, the a million coffee plants a year Oxfam project aims to engage in each country, for a total of 6 around 1,230 coffee producers: million plants over a three year 406 women (33%) and 824 men period. Another highly innovative (67%), all of whom are members aspect is the integration of the of Cooprocasine (Cooperativa

52 53 Lavazza Sustainability Report 2014 Ch. II The commitment of the Lavazza Foundation

2.6 Quantitative data

€ 2.000.000 In the three year period from 2012- 2014, the Foundation intensified its efforts. Donations to the € 1.220.000 Foundation increased significantly (+166.67%), from €750,000 in 2014 2012 to €2,000,000 in 2014. In € 750.000 the three year period from 2012- 2014, the Foundation carried out 2013 34 projects in 11 countries, across 3 continents, involving more than 2012 65 thousand coffee producers. A growth of 125,52% has been recorded since 2012.

More than 3 11 65.000 continents countries coffee producers

54 55 Lavazza Sustainability Report 2014 Ch. II The commitment of the Lavazza Foundation

¡Tierra! and International Coffee Partners projects 2012-2014 India - Sakleshpur and Trifinio Mudigere Guatemala Honduras El Salvador

Vietnam - DakLak

Guatemala

Indonesia - Sumatra

Perù

Brazil - Lambarì

Tanzania - Mbeya Tanzania - Kirua Uganda Ethiopia - Amaro

Brazil - Minas

56 57 Lavazza Sustainability Report 2014 Ch. II The commitment of the Lavazza Foundation

Kilimanjaro Karnataka Minas Gerais Vietnam Tanzania India Brazil

The objective The objective The objective The objective

To improve production systems for 5,000 farming To increase the competitiveness of smallholders using In general terms, to contribute to increase the income of The project aims to provide the tools necessary to better families over a 3 year period. To maximise revenues, cash sustainable practices, through direct support to 400 small growers in the state of Minas Gerais. The specific manage climate change. The Lavazza Foundation is flows, capital growth, food and nutrition security in a coffee farmers and smallholders and their families. objective of the project is to improve access to the market involved in the programme via a project which finances sustainable manner. and provide support in dealing with climate change for a the creation of a plant nursery, the profits of which are The main results for 2014 small group of growers in the Lambari region, in the south channelled into training on specific themes, such as The project was activated in partnership with: HRNS of Minas Gerais. efficient management of water, fertilisers and composting. (Hanns R. Neumann Stiftung) , TCFA (Tanzania Coffee • Composting activities have been launched (a Farmers Alliance), Kirua Children combination of practices for nutrient management The main results for 2014 The project was launched in October 2014, results will and support for the construction of around 75 worm therefore be available in the next reporting period. The main results for 2014 composting bins and composting units); • 820 farmers have been engaged in training sessions • Links have been strengthened with the Indian Institute centred on organisational strengthening, good agricultural • Two classes were set up in the MaseRing Nursery of Horticultural Research (IIHR) and Central Coffee practices, marketing skills and adapting to climate change; School, which was constructed in 2012 and is directed Research Institute stations; • the first Coffee Quality competition was conducted (see by father Peter Kylasara, thanks to the Foundation’s • A training manual has been designed on Good box); partnership with the Kirua Children association, in the Agricultural Practice (GAP); • € 220,227 of added value was generated through the Kirua area (Maande village); • A new treatment against the white stem borer (a coffee collective selling of coffee (directly to exporters) and € • 14 Rural Primary Cooperative Societies (RPCS) have been plant parasite) has been developed and tested in Arabica 52,933 from the collective purchase of inputs; engaged; coffee plantations; • the Coffee & Climate approach was introduced in 6 • 1,971 families of coffee producers have become involved • The MAS farmer’s company was established in 2013, Farmer Field Schools (FFS), promoting practices focused in our projects (+774 compared to 2013), and have been in order to channel the flow of services required by the on implementation and adaptation. 150 farmers are now organised into 75 Producer Organisations (POs); around 400 producers participating in the programme, using at least 2 adaptation practices. • access to suppliers, including banks, has been made grouped into local organisations at village level, each easier; numbering around 20. The shareholders are the • 28 producers have adopted diversification techniques producers themselves who have subscribed the company over 180.5 hectares of farmed land, to ensure new capital, via a range of local organisations. sources of income.

The goal of MAS is to offer a range of services to both shareholders and non-shareholders, with a view to gradually expanding their capacity to provide efficient The Coffee Quality competition and useful services to coffee producers; for example: In 2014, as part of the Minas Gerais project, in which • central purchasing of fertilisers and other inputs; Lavazza is engaged via the Foundation, a competition • quality control and product analysis; was organised to reward the best quality coffee, - humidity control; with a view to incentivising excellence in coffee - classification; preparation and promoting quality products from - green coffee sifting; small producers on the international market. • coffee marketing and information on the market 394 micro-lots of coffee were entered into the information and the value of the producer’s coffee; competition. 16 of the 35 finalists were from the Minas • soil analysis; Gerais project, and some of the most successful lots • development of activities designed to promote were bought by Lavazza at auction. diversification and increase added value.

58 59 LavazzaBilancio diSustainability Sostenibilità Report Lavazza 2014 2014 Ch. III A passion for excellence

A passion for excellence

Day after day, we pursue excellence with passion, customers and consumers, who are increasingly commitment, determination and dedication, also recognising the value of the brand, synonymous thanks to the contribution of our stakeholders, with with leading-edge coffee technology and whom we build relationships based on trust, and consistently high quality and food safety standards. with whom we share our values.

Thanks to the attention to their needs, Lavazza has consolidated its leadership in Italy and on international markets. This effort is appreciated by

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Lavazza Sustainability Report 2014 Ch. III A passion for excellence

3.1 Lavazza’s approach to quality management

At Lavazza, we are well Once the organisational structure Guidelines on key aspects of aware that the quality of our established, in 2014 we revised the production chain, such organisational and production the strategic and operational as structural standards, plant processes is fundamental to aspects, which are based on and equipment, maintenance, ensure excellence in coffee three pillars. The Food Quality transport and storage, and production on a day-to-day and Safety Policy was the first of process and training utilities basis. these to be revised. The senior were also updated. The management team redefined establishment of a centralized In 2012, to enhance the impact the guiding principles driving customer claim system is the of our activities aimed at the company and, in particular, third pillar. The project, which spreading culture of quality those working in the technical was launched in 2014, has been and continuous improvement and production areas. The implemented across all Italian of products and processes publication of the new edition market channels, and will now to guarantee the safety of of the Good Manufacturing be extended to subsidiaries consumers, we initiated a Practices, the second pillar, and foreign distributors. The process of organisational review. was the next step. In the project will enable the monitoring The first step in this process manual, mandatory regulatory of customer and consumer was the establishment of the requirements regarding food satisfaction and will form the Group Quality Management safety were updated, along basis for all improvement plans Department in 2013,whose task with good practice procedures for products and processes. is to ensure that all products on to be followed during the the market meet the high food implementation of new initiatives and safety quality standards that or for the improvement of current characterise Lavazza11. activities.

11 In the three year period from 2012-2014, there were no cases of non-compliance with laws/regulations or voluntary codes with regard to health and safety issues.

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Coffee quality control green coffee samples. We collect meet the requirements of the the beans from the customs Lavazza procurement policy as We carry out quality controls warehouses and examine their set out in the Code of Ethics. which encompass all key shape, size and colour, the parameters on 100% of the presence of foreign bodies, In 2014, 6,489 analyses were batches processed using the chemical and physical performed on green coffee. standardised procedures, which characteristics and presence respond to precise assessment of chemical and biological and verification criteria, contaminants, and the cup setting the frequency, control profile. procedures and analytical In 2014, all our raw materials were parameters to be applied to the purchased from suppliers who 6,489 Analyses were performed on green coffee in 2014 3.1.1 Green coffee quality

The excellence of Lavazza coffee stable quality of our coffee, reliability both in terms of product is the result of a highly complex and, consequently, to create quality and country risk. and specialised quality control “excellence”. Lavazza’s approach system, which ranges from the to buying coffee goes beyond the Alongside the purchasing careful selection of green coffee requirements of the applicable process, Lavazza also conducts through to the tasting by our regulations. The key elements research, tests and trials with experts. are testing the product in the potential new suppliers, in order field and additional testing and to ensure the stability of the cup validation procedures, carried profile. Buying coffee – out on 100% of the batches of the Lavazza system coffee we buy.

The establishment of a When purchasing coffee, we use structured, organised system for exporters with whom we have coffee purchasing12 has allowed worked previously, selecting us to guarantee higher and more those most able to guarantee

12 Green coffee is transported by ship from the countries where it is produced. The product is then stored in various Italian warehouses and transported to the production plants. The other raw materials come from various different suppliers, most of whom are Italian. The three plants that produce the finished product are in Torino, Gattinara and Verrès. The other products sold by Lavazza have various origins, with a significant proportion of our coffee machines manufactured in China. Distribution is organised into three main logistics hubs in Italy and a central warehouse for each subsidiary. All movements of goods between central warehouses are made using fully-loaded vehicles, using inter-modal transport where possible. Secondary distribution is entrusted to specialised logistics operators.

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3.1.2 The quality of the production process

Quality is one of the guiding Over the years, Lavazza has those which come into direct principles, and this is expressed acquired unrivalled expertise contact with coffee, thereby at the highest level in our in managing these types of ensuring 360 degree food safety production processes. roasting machines, using specific for all our consumers. One of our key production roasting cycles to bring out the processes is roasting, for which characteristic notes of each Finally, coffee is vacuum- we have adopted all the best blend. packed or packaged in modified technologies known and available atmosphere, thus ensuring on the market that combine At every stage of the production that the valuable organoleptic both convection and conduction process, our experts check a wide characteristics of the blend are heating. range of product and process mantained until consumption. parameters, including two of the These different stages of most significant: thecolour of the processing allow us to develop blend and the particle size of the organoleptic and aromatic coffee powder. profiles that are unique to each product type and meet the We also submit packaging specific needs of our target materials to rigorous tests, markets. dedicating special attention to

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3.1.3 Certifications

The Lavazza quality Rainforest Alliance This certification confirms that management system is assured the production processes used with certified green coffee by the adoption of national Halal CONFIDA procedural guidelines comply with sustainability Guarantees that ingredients This document identifies and international voluntary standards, and that all and food products have high-level quality parameters certifications and standards, reasonable measures have been been processed and handled in addition to those already taken to avoid contamination which are applied both to the according to Islamic law. This established by law, relating to with non-certified green coffee. company’s management systems applies both to the products the functional quality of roasted themselves and to quality control coffee used in vending machines. and to the product itself. procedures. CERTIFIED PLANTS: Torino and Gattinara CERTIFIED PLANTS: Quality management Torino system ISO 9001:2008 CERTIFIED PLANTS: Ensures that products Torino, Gattinara, Verrès and and processes Pozzilli UTZ Good Inside meet verifiable UTZ certification (UTZ means “good” requirements. in Quiché, a Mayan language) ensures Stipulates that the social and environmental quality checks conducted standards in coffee production are met. must be documented The chain of custody requirements and that identifies criteria and checks for the traceability of UTZ-certified products. procedures must be carried HACCP system certification CERTIFIED PLANTS: out with clear roles in accordance with CODEX Torino and responsibilities. ALIMENTARIUS Ensures that any non- This certification ensures the compliance is identified reliability of the Hazard Analysis and resolved, as well and Critical Control Points as checking that staff (HACCP) system with regard to receive adequate the end customer/consumer. training and refreshers.

CERTIFIED PLANTS: BIO and National Organic CERTIFIED PLANTS: Torino Program (NOP) Torino, Verrès These programmes ensure that and Pozzilli production processes comply with specific requirements for to the processing of raw Kosher - Orthodox Union materials of organic origin, with Guarantees that ingredients and a view to preventing the risk of food products comply with to the contamination by other non- teachings of the Torah, and have certified raw materials. been approved by Eurokosher.

CERTIFIED PLANTS: CERTIFIED PLANTS: Pozzilli Torino, Gattinara, Verrès and Pozzilli

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Focusing on customer and consumer requirements

Lavazza has always focused its attention on the expectations and needs of our customers and consumers. The “Customer Service” department is dedicated to listening to feedback from customers The Bar channel and consumers, as well as measuring satisfaction levels. In 2014 alone, more than 270,000 contacts were registered.

In the 2012-2014 period: - Lavazza conducted research focused, for example, In order to strengthen the company’s relationship on buyers of the A Modo Mio coffee machine, as well with baristas, and to foster loyalty among this as on the Bar channel of the business; customer sector, Lavazza has used this research to: - In order to ensure that the privacy of its consumers -measure the level of satisfaction among its is respected, Lavazza accepted requests received customers regarding the service provided; from customers to withdraw consent for the -identify the strengths and weaknesses in the processing of their personal data (2012: 339; 2013: relationship and pinpoint areas on which to focus in 770; 2014: 383). order to improve service quality. As part of this research, conducted by TNS for Lavazza: -621 telephone interviews were carried out to measure the level of satisfaction of baristas, comparing Lavazza with other competitors; -14 specific interviews were conducted in order to gain an understanding of the key aspects of the relationship with the coffee supplier and to A Modo Mio information which can be compared over time, identify expectations with regard to optimal levels regarding: of service. - overall satisfaction and satisfaction per machine in terms of machine and capsule cost, machine The results of the research revealed that Lavazza This project was implemented to perform regular reliability and technical assistance provided, as well was in line with the leading competitor. checks on certain key aspects of the relationship as machine operation, aesthetics and coffee quality; between consumers and the A Modo Mio system. - the use of the A Modo Mio system: the The research is crucial in allowing the company consumption of capsules generated; to track the development of the system on the - trends and reasons for abandoning the system. market (coffee machines and capsules), and to put corrective actions in place where critical issues are The total level of satisfaction was measured using encountered. the average score (1-10) provided by respondents and the cumulative percentage of respondents Research was conducted through 1,360 telephone who gave a score of between 8 and 10. The results and face to face interviews with representative obtained from the research showed a high level buyers in terms of geographical area and length of customer satisfaction with the A Modo Mio of ownership, and participants were given a machines, amounting to 82.6% (Ipsos Customer questionnaire drawn up in collaboration with Ipsos. Service benchmarks: “Result classed as excellent if This monitoring activity has provided timely above 76%”).

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Total purchasing expenses 3.2 Lavazza’s approach to supplier management by geographic area (%) 2014 Being able to depend on a reliable This approach is demonstrated the investment of approximately supply chain is key to the quality through the goods and services €60 million into the production of our products and the reputation (green coffee excluded) purchased plant at Gattinara, to which 70% Europe of the company. This is why we by the company over the past of the total value was entrusted favour the creation of long-term three years, which, although it has to Italian companies. % 11,1 relationships with our suppliers. risen to support the growth of the business across foreign markets, Over the years, Lavazza has is still focused on Italian suppliers, benefited from a number of consultants and partners. stable and mutually-beneficial partnerships, most of which with Our appreciation of the expertise local companies, which we aim to of Italian companies, and the maintain in a changing environment relationships we have developed of growth and internationalisation. with them, is also confirmed by

Purchasing expenses for goods and services 2012-2014 (green coffee excluded)

% 7,4 Italy Outside Europe % Year TOT € Million € Million % € Million % € Million % 81,5 2012 332,3 281,8 84,8% 43,7 13,2% 6,8 2,0%

2013 346,0 286,1 82,7% 44,1 12,8% 15,8 4,5%

2014 426,0 347,1 81,5% 47,5 11,1% 31,4 7,4%

Italy Europe Outside Europe

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Optimising purchasing processes and evaluation of suppliers

New purchasing Improved qualification procedure criteria based on the principle of separation of roles has based on a predefined set of requirements been introduced, which enhance the skills of the which are indicative of industrial and financial various business functions with regard to technical, capacity; economic and qualitative evaluation of offers,

3.2.1 reducing the risk of potential conflicts of interest; Supplier qualification process Implementation Centralised purchasing of a performance In 2012, Lavazza redefined optimised, purchasing processes the purchasing and supplier were centralised and the supplier procedure monitoring system evaluation processes to ensure base and relative qualification that involve foreign subsidiaries in strategic (Vendor Rating), which ensures that verifies consistency, transparency, clarity and monitoring criteria were decisions made at HQ, raising awareness of issues continued implementation of selection of requirements and selection streamlined. relating to quality and sustainability; requirements, rewards deserving suppliers, and criteria. As part of this, procedures provides support in areas for improvement; and contracts were also

Supplier Contracts management that reiterate, along with the terms and conditions, in the most fragmented categories, improving cost the importance of Lavazza’s principles and values efficiency, quality and opportunities for innovation; in relationships with the supply chain.

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3.2.2 Creating shared value

A relationship of mutual trust Code of Conduct13. In concrete The integration of Corporate Social is built by sharing values and terms, this is also translated in Responsibility in the supplier qualification by committing to respect both the inclusion of Corporate Social process people and the environment. This Responsibility aspects in the is why we incorporate Corporate supplier qualification process. Social Responsibility principles in Even during the qualification stage we take our relationships with suppliers. CSR principles into consideration, including the Lavazza shares its values with adoption of a Code of Ethics, the preparation of a the entire supply chain, via the Sustainability Report and the possession of relevant Code of Ethics and the Supplier environmental and social certifications. These elements, along with the principles established in the

13 The Lavazza Code of Ethics and Supplier Code of Conduct have been prepared in reference to: Supplier Code of Conduct, are formally checked in - the International Labour Standards (ILO) the audit phase, with a view to: http://www.ilo.org/global/topics/lang--en/index.htm - UDHR, Universal Declaration of Human Rights http://www.un.org/en/documents/udhr/index.shtml • supporting the company in choosing suppliers who demonstrate a commitment to developing their business in a responsible way, with the same technical-economic-qualitative conditions;

• enabling the development of joint improvement The Supplier Code of Conduct plans, containing precise commitments and objectives, to be monitored over time.

As part of any contractual relationship14, Lavazza Where critical strategic analysis requires an in- requires that suppliers accept the Code of Ethics, depth check to be carried out, Lavazza performs pledging to abide by these rules to avoid the supplier audits on site at its suppliers, through a termination of the contract. In addition, Lavazza cross-functional team. This enables a 360 degree also focuses particular attention to the supply assessment of the supplier to be completed, chain, communicating expectations concerning followed by plans for improvement, to be developed the behaviour of its business partners through the in partnership, where necessary. Supplier Code of Conduct. The introduction of CSR as an audit topic is being The Supplier Code of Conduct, which was published extended to all suppliers of direct materials on the company website, clearly defines the values (packaging materials, food products not including that guide the relationship between Lavazza and its coffee, products made by contracted third parties, suppliers: passion for excellence, ethical behaviour, company promotional and advertising materials) and sense of gratitude, respect for human and labour of machinery and parts, regardless of their location. rights, farsightedness and transparency.

14 The principles of environmental and social sustainability are set out in the Lavazza Code of Ethics and as such, must be respected by all stakeholders including suppliers. In the 2012-2014 period, all Lavazza suppliers accepted the Code of Ethics.

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3.3 The “InnovAtion” programme

Corporate business objectives programme aims to generate and the proposals will allow suppliers demand a high level of flexibility implement technical proposals to to receive a positive evaluation as and production capacity, as well reduce costs and/or improve the part of the Vendor Rating system, as willingness to change and products and services purchased based on proactive behaviour, innovate, even in the context in terms of performance, quality providing access to financial of long-term relationships with and sustainability. rewards or media visibility where partners: in light of this, in 2014 appropriate. we created a Programme of Suppliers involved will be able to Proposals for Improvement and share their expertise, presenting Innovation, which sees suppliers product re-engineering solutions, as an active part of a system using alternative materials and designed to foster and promote technologies, and optimising sharing of results. production/logistic processes and delivery of services. To emphasise this, we chose to call it “innovAtion”: with Selected on the basis of their roll-out planned for 2015, the technical and financial feasibility,

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Sustainable EXPO - our commitment

• Suppliers were selected on the basis of the compostable or biodegradable; guarantees they provided in terms of corporate • the espresso machines and electrical appliances social responsibility; chosen are the most innovative on the market, with • partners for the catering service were selected low energy consumption and minimal environmental for their ability to provide environmental friendly impact. services, by appropriately managing staff, waste, cleaning products (ecological), supply logistics, and safety aspects; • the structure of the Lavazza area was conceived 3.4 to combine creative design and respect for the Special projects: environment, it will be reusable for subsequent Lavazza for a sustainable EXPO events, and has been constructed with materials having reduced emissions and coming from certified and renewable sources; OFFICIAL COFFEE PARTNER • merchandising products are either reusable or PADIGLIONE ITALIA

Coffee is one of the icons of procurement with regard to the Italian lifestyle worldwide. organisation, staging of the In 2014, Lavazza was chosen as event and the purchase of the official partner ofEXPO 2015 goods and services required, Italian Pavilion. capitalising the knowledge This gave us the opportunity gained in these areas in recent to explore themes of green years.

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120 years of innovation

We believe innovation is a crucial asset to ensure The three-year period 2012-2014 was marked by a growth and provide adequate support to our significant process of change, which initially involved internationalisation objectives. the integration of corporate functions and later the switch from an integration concept to a system- Our strategic business plan aims to bring highly based concept. Environmental sustainability plays a innovative products to the market, capable of vital role in this approach, because it integrates the responding, not only to market requirements in company’s ethical values with its strategic business terms of technology, production diversification objectives 15. and quality, but also to the increasing customer awareness of environmental matters.

15 Lavazza incurred in the following environmental-related expenses in the three-year period 2012-2014: €1.4 million in 2012, €2.1 million in 2013, €2.7 million in 2014.

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Patent portfolio

We commit to continuous product innovation attention to the disclosure and protection of to respond promptly and with ever increasing generated intellectual property. efficiency to consumer expectations. In recent years coffee consumption has grown considerably, Our “patent portfolio” is composed of 332 in an ever changing and increasingly multicultural intellectual property rights (261 patents for scenario; it has therefore become more and more inventions, 68 drawings and models, 3 utility important to offer a wide and diversified range of models) granted nationally and internationally products on all markets. and 295 under examination, of which 15 are new applications filed in2014 . The capacity to create value for the local communities and areas where we operate and for our stakeholders through a strong focus on innovation has also been demonstrated by serious

332intellectual property rights 295 Patents field over the last three years by category under examination 18

6 other (components) system 4 recognition design 2

bio 0 2012 2013 2014

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4.1 Care for the environment

Lavazza is working to enable sustainability objectives. Finally, Lavazza is also taking the implementation of part in national and international environmental sustainability Lavazza is working with the round tables within the scope of goals in line with national and European Commission and the activities of trade associations international policies. We are the Italian Ministry of the in the coffee industry. The convinced that the adoption of Environment and Protection purpose is to identify and benchmark standards is of vital of Land and Sea, to define develop suitable preventive importance for developing and standards aimed at quantifying measures to ensure an adequate offering environmental-friendly environmental impact of coffee level of environmental protection products that are internationally using shared methodologies and to promote the selection recognised and guaranteed. and processes. In this context, and implementation of the best Lavazza participates to national available techniques. We also believe that the working groups for the Product quantification and communication Carbon Footprint/Products of the environmental footprint Category Rules (CFP/PCR), and of our products can increase is collaborating at European level transparency towards consumers. in the Products Environmental Footprint (PEF) programme. In this perspective, information on In addition, also in partnership the environmental performance with the Italian Ministry of the of products allows us to increase Environment and Protection the awareness and sensitivity of Land and Sea, Lavazza is of consumers, sharing virtuous mapping and certifying the behaviours and consumption environmental impact of its major styles that are in line with products.

CO2

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4.1.1 Minimising environmental impact

Lavazza constantly strives to System for Occupational dissemination of guidelines that mitigate the environmental Health and Safety, Energy can be applied in all operations. impact of production processes, and Environment, structured The principles that guide activities, services and products in according to internationally the company in managing a life cycle perspective. recognised standards, based environmental matters are in on the principles of prevention line with the Corporate Policy for Lavazza adopts a precautionary and preventive action against Occupational Health and Safety, approach for the purpose of potential damage caused to the Energy and the Environment. environmental protection based environment. on its capabilities. This approach is set out in the Corporate Policy Environmental matters are for Occupational Health and overseen at corporate level by Safety, Energy and Environment specific functions that work to whose implementation ensure a standardised approach involves the definition and and comparability of data, also implementation of a Management through the development and

Corporate Policy for Occupational Health and Safety, Energy and Environment

• Communication and the regulations of the various countries in which we dissemination of the culture of operate; occupational health and safety, • Promotion and utilisation of the energy saving and care for the environment to internal and external stakeholders, working best available tecniques actively on projects with academic bodies, industry in order to achieve continuous improvement in organisations and public authorities; performance with regard to occupational health and safety, protection of the environment, energy saving and the balanced use of natural resources. • Identification and assessment of the environmental impacts, including the consumption of natural and energy resources, activities, products and services, in order to eliminate or minimise them, in compliance with

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4.1.2 Continuous improvement

As part of the activities aimed with a focus on electricity Occupational Health and Safety, at the continuous improvement consumption, at the Torino, Energy and the Environment, are of environmental performance Gattinara and Verrès plants; monitored by multifunctional of production processes, in the team of internal auditors. three-year period 2012-2014 • adoption of Best Available Lavazza undertook specific Techniques (BAT) in all Italian Lavazza has also implemented actions, including: Lavazza plants, aimed at innovative solutions within the minimising environmental closed systems designed to • efficiency improvement/upgrade impact related, in particular, to minimise energy consumption of the thermal power stations and atmospheric emissions. and component use, as well as compressor rooms at the Torino optimising delivery. and Gattinara plants; Improvement activities, together with all the corporate • enhancement of the energy processes pertaining to Lavazza’s consumption monitoring systems, Management System for

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3% 5%

28% Percentage of types of packaging materials used Plastic Eco-design packaging by Lavazza in 2014 Paper and Cardboard 64% Steel Out of the approximately Aluminium 20,200 tonnes of material used in total for the production of packaging, the main contribution comes from plastic with around 13,000 tonnes, followed by paper and cardboard with approximately 5,700 tonnes. Lavazza promotes and supports packaging eco- The most significant actions, in terms of packaging design in order to integrate its primary function of eco-design, have been aimed at reducing plastics, protecting and safeguarding the product, whilst, at the cardboard and layers of aluminium in non-primary same time, minimising its environmental impacts. polylaminates. Examples include: Packaging eco-design operates along 5 fundamental lines, with regard to product quality, • saving of approximately 11% in the material used for technical and technological requirements and the production of capsules as a result of optimising marketing: the thermoformage process;

• reducing packaging and removing non-essential • reducing paper and wooden pallets for a total of In terms of environmental impact, Greenhouse Gas Emissions [GHG] - Packaging components; 41 tonnes of paper and 467 platforms, thanks to the the trend is improving essentially elimination of non-essential packaging components 120.000 as a result of the reduction in 1,0 • reducing the weight or volume of materials used for Roast&Ground; the use of plastic in secondary while maintaining the same product shelf life; packaging and in capsules. 0,9 • achieving 90% of recycled materials in cartons. 100.000 0,86

• simplifying structures to increase the use of 0,80 recycled materials thereby reducing the use of virgin 0,8 80.000 material; 0,74 eq] 2 eq/t]

0,7 2 [t CO • increasing the amount of recycled materials in 60.000 [t CO packaging which is not in direct contact with food 0,6 products; 40.000 0,5 • experimenting and implementing new materials to valorise the end of life of the packaging and GHG Packaging Emissions 20.000 0,4 introduce packaging designed to facilatate separate GHG Packaging Emissions Index waste collection. 2012 2013 2014

The indicators were calculated on the basis of packaged kilos of coffee, taking into consideration the most represented formats within product families for both capsules and Roast & Ground.

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4.2 Focus on special projects

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Coffea

4.2.1 ISSpresso, coffee in outer space

ISSpresso takes its name from and a European leader in the interest with regard to projects the International Space Station preparation of healthy food to and activities to be conducted (ISS), on which the first single be consumed in outer space. It on the International Space serve espresso machine capable is a masterpiece of technology Station though public-private of working in the extreme and engineering, capable of partnerships. conditions of space was installed. producing a perfect espresso ISSpresso is the result of the in the absence of gravity. This is partnership between Lavazza and why it was chosen by the Italian Argotec, the Italian engineering Space Agency to be used on company specialised in the board the ISS, as part of the design of aerospace systems Agency’s ongoing expression of

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4.2.2 The coffee genome

In recent years the coffee industry sequencing, each containing has faced new challenges. separate genome segments, The study made it possible to Climate change is affecting obtained through the Bacterial identify the origins of the plant cultivation in different areas of Artificial Chromosome (BAC) and pinpoint the genes that the world, just when demand technique. confer a particular resistance to is increasing in many markets. disease or infection, as well as Getting to know more about The research was conducted in the ripening times for the fruits, the coffee plant is therefore five phases. In the first phase, size of the plant and adaptation becoming a key factor to ensure a BAC library was created, a to difficult conditions. The sufficient quantity and high genomic library of over 175,000 caffeine content, thickness and quality also in the future through clones. In the second phase, solubility of cell walls, which, sustainable methods. the physical sequencing of the in turn, affect the extraction of DNA of the BACs was carried the beverage from the ground In this scenario, Lavazza and out, while in the third phase coffee, are all aspects directly or Illy have worked together to the physical sequencing of the indirectly under the control of the support a project to sequence entire genomic DNA. The fourth genes. Having a good knowledge the Coffea arabica genome. The phase included the computerised of the plants’ genetics is therefore research was conducted by the reconstruction of the sequences a vital requirement for obtaining a Universities of Padua and Trieste and the final, fifth phase involved high-quality product. and by the Istituto di Genomica the annotation and identification Applicata of Udine, coordinated of codified genes. In September 2014, in Colombia, by Professor Giorgio Graziosi of a paper was presented at the DNA Analytica Srl, a spin-off of In this way, it was possible to 25th international conference on the University of Trieste. decode the genetic base of the science of coffee organised A 100% italian project, this this species of coffee, which by Association for the Science complex study looks at genome accounts for 70% of global and Information on Coffee sequencing of a vegetable production. The results obtained, (ASIC)16. organism produced by crossing organised systematically, were http://www.asic2014colombia. two different species, which made available for possible org/en/index.html made the reconstruction for agricultural and industrial pairs of similar, but non-identical applications responding to the genes even more difficult. This need to increase production, was made possible using an continuously improve quality, and innovative hybrid strategy increase biodiversity to mitigate combining traditional direct the adverse effects of global sequencing with clone-based warming.

16 ASIC is an independent, non-governmental association established in Paris in 1996 with the aim of mapping scientific studies and applied knowledge regarding coffee. ASIC currently defines itself as the only totally independent organisation in the world with a scientific vocation specifically aimed at the entire coffee chain, from the plant to the beverage.

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“Sequencing will allow to increase the resistance Solving the Coffea Arabica puzzle

of the plants to disease and infection, making sure What does sequencing a genome mean? And what’s combinations of four molecules, called bases. they can adapt in the best possible way to climate the use of doing it? These “building blocks” are the same for all: it is the All living beings on our planet share the same way enormous number of possible combinations that conditions. The quality in the cup, controls of of coding genetic information, i.e. all the information produces the incredible biodiversity that we see caffeine levels and increase of specific aromas which is transmitted from one generation to another every day on Earth. to determine the “construction” and functioning of will also improve.” organisms. The messages are translated into various

“Coffea Arabica is a world of plants, fruits and coffee. A complexity that The genome is the collection of all of an organism’s 140 centimetres, more or less the height of a ten- needs protecting, because genetic material. Sequencing it means calculating year old child. To give a frame of reference, human doing so also means the exact order in which all its “building blocks” are beings, which at first sight appear to a much more safeguarding the future of arranged: this offers scientists precious clues to its complex organism, do not have much more than 3.2 our companies and the characteristics and biological behaviour. An obvious billion bases. And that’s not all. The arabica variety people working for them.” advantage for mankind, in the case of cultivated comes from the crossing of two different species plants. (believed to be Coffea canephora and Coffea Coffea arabica was posing a particularly difficult eugenioides) and as a result its genome, as it has challenge. Its genome actually includes 2.6 billion been described by the scientists involved in the bases: placed alongside one another, they span research, is “like a puzzle”.

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Prepare an espresso Enjoy the Lavazza 100% with the Lavazza Arabica coffee, certified by the A Modo Mio NGO Rainforest Alliance. Compostable Capsule.

Eco-design and Innovation: New resource for the earth: The capsule is made of The compost obtained can be Mater-Bi®. used as a natural soil fertilizer.

Certified Coffee: End-of-life sustainability: Two fine coffee blends The capsule obtained the certified by the NGO certification released by AIB- Rainforest Alliance. The Vinçotte according to the UNI In a few months the perfect match between EN 13432 and EN 14995 (OK Collect the capsule becomes quality and sustainability. Compost). compostable 4.2.3 compost. capsule together Compostable capsules with the organic waste. A new development paradigm the life cycle of the product: capsule bears the Ok Compost based on coffee and a 100% the end of life. To date, in the Vinçotte logo – and marks a vital Italian compostable espresso “production-consumption- step in the evolution of systems capsule: this is the result of the disposal” linear model, waste is towards making consumers more project in which two examples of sent to landfills or for incineration. aware of the environment. Italian excellence, Lavazza and Applying the circular economy Novamont, were involved for the principle of zero waste, Lavazza These capsules will contribute Organic waste is collected and sent to the past 5 years. and Novamont created a capsule significantly to reducing composting plant which can be collected with greenhouse gas emissions The capsule will be made of the organic waste and sent for thanks to the environmental Mater-Bi®, compatible with the industrial composting, where performance of the material. entire range of “A Modo Mio” the capsule and used coffee are systems, and available in two recycled together as compost, a selected 100% Arabica blends, natural fertilizer for soil. certified by theRainforest Alliance 17 Benefits The compostable capsule for Italian NGO . Lavazza’s compostable capsules espresso, designed by Lavazza and comply with compostability • Incentive to home sorting of waste developed in a partnership with With this innovation, Lavazza certification in accordance with focused on a precise stage of standard UNI EN 13432 – the • Reducing quantity of mixed waste to Novamont, ensures a unique and be sent to incinerator or landfill sustainable coffee experience. 17 Rainforest Alliance is an international non-governmental organization (NGO) which certifies the origin of the coffee from plantations which rigorously • Production of compost to be reused comply with environmental and social sustainability standards, integrating ecosystem conservation, productivity improvement and living conditions of for agricultural purposes growers.

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4.3 Lavazza’s environmental footprint

Lavazza has, for several • Global Warming Potential (GWP Life Cycle Assessment (LCA) years, been evaluating the - IPCC 2007 100-year method, with the aim of addressing environmental performance of calculated as Kg CO2 equivalent) matters related to environmental its major products, with a “cradle - impact on global warming of sustainability from a holistic to grave” Life Cycle Assessment the Planet through the direct and perspective. approach, in accordance with indirect emission of greenhouse Lavazza is therefore working reference standards ISO 14040 gases; towards systematically collecting / 14044 / 14064 / 14067. This data as a vital step in the proper will help quantify the impacts • Gross Energy Requirement assessment and analysis of along the value chain and (GER) – total energy used; impacts related to its activity, develop new solutions, which products and services, in the combine quality and product • ILCD - International Life Cycle belief that this approach is guarantee, innovation and eco- Data System, standardised crucial to setting challenging compatibility, increasing the method for quantifying the goals in terms of environmental awareness and commitment of overall impact according to 16 sustainability. all players involved in the supply impact indicators. chain. With this in mind, Lavazza In order to assess environmental is promoting an integrated impact throughout the life approach which includes cycle, Lavazza has identified 3 Corporate Social Responsibility important methodologies in the (CSR), Environmental most sensitive areas: Management System (EMS) and

electric energy for the operations of the Italian production plants comes from renewable sources

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Lavazza greenhouse gas emissions

Emissions linked to production sites 100 6,00 and offices 13% 14% 14% 4.3.1 Environmental impact indicators Raw Material Food Coffee 90 Coffee Disposal after use 80 16% 16% 15% Finished product distribution 5,50% 5,50 Plastic Raw Material and Packaging 70 Overall Emission Index 60

Scope Greenhouse gas emissions considered (GHG - Green House Gases) 5,11% /t]

50 5,00 2eq [%] 4,90% [tCO 40 Scope 1 Direct emissions from the combustion of natural gas for the generation of thermal energy, for 60% 64% 65% Direct Emissions heating and processes 30 4,50 20 Direct emissions from the combustion of diesel fuel for proprietary vehicles used for moving 1% goods within plants and the fleet of company vehicles 10 1% 1% 10% 0 5% 5% 4,00 Emissions resulting from the production of electricity from renewable sources 2012 2013 2014

As highlighted by the indicators, the most significant impacts are generated in the cultivation stage and in the production of packaging. The emission indexes have dropped in the three-year reporting period.

Scope 2 Emissions resulting from the consumption of electricity from the national electricity grid Indirect Emissions

The graphs below show the CO2 the administrative headquarters emissions, expressed in absolute equivalent tonnes related to both and the sales premises located in terms, is even more significant if Scope 3 Emissions resulting from the production of green coffee Other Indirect Emissions direct and indirect emissions, in Italy, and by the company vehicle you consider the growing annual Emissions resulting from the production of plastic raw materials and packaging absolute terms and in relation to fleet. production volumes. the amount of coffee processed in With regard to direct emissions, Emissions resulting from the consumption of water in production plants and at administrative headquarters tonnes. the emission indicator for Direct emissions are represented tonnes of coffee processed in Emissions resulting from waste management and disposal by the thermal energy 2014 dropped by 17% compared

Emissions resulting from the disposal of used coffee consumption of production plants, to 2012. The reduction in CO2 Emissions resulting from the distribution of the finished product

Direct Emissions - Scope 1 Indirect Emissions - Scope 2

30000

0,4 45000 0,35 25000 0,35 40000 0,3 0,3 35000 20000 0,25 30000 0,325 0,25

15000 0,23 0,22 25000 0,2 0,2 eq/t] 2 eq] eq] 2 eq/t] Distribution in percentage of Lavazza’s greenhouse gas emissions 2 2 20000 0,19 [t CO

[t CO 0,15 [t CO 10000 0,15 [t CO

15000 0,1 0,1 The graph on the next page The system boundary include boundary does not include the 5000 10000 0,05 0,022 0,020 0,05 shows the trend, in the three- the administrative headquarters, consumption stage, i.e. both the 5000 0 0 year reporting period, of CO2 the sales premises and the Italian process of manufacturing coffee 0 0 equivalent emissions according production plants of Torino, machines and their use. 2012 2013 2014 2012 2013 2014 to the GWP indicator (Global Gattinara, Verrès, and Pozzilli, Total Direct Emissions Direct Emissions Index Total lndirect Emissions lndirect Emissions Index Warming Potential – IPCC 2013). including the flows of coffee raw Environmental impact is materials, plastic raw materials, represented as a percentage of packaging and the distribution As far as indirect emissions are concerned, there was a sharp reduction in greenhouse gas emissions between 2012 and 2014. Mainly due to the purchase, the entire value chain. of the finished product. The from 2013, of “green energy”, particularly from hydroelectric sources.

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Electricity consumption Thermal energy consumption

Electricity consumption within the production Thermal energy consumption for the production plants depends on the operation of the plant plants depends on the operation of the plant and and equipment, production lines and ancillary equipment, specifically the coffee roasting and 4.3.2 Environmental performance indicators services such as, for example, the generation of decaffeination lines, and the generation of heat for compressed air. heating the buildings.

300.000 3 The data relating to energy The conversion factors used in 280.000 consumption refers to the calculating the energy indicators 2,5 400.000 4 administrative headquarters, refer to the “Indicator Protocols 260.000

240.000 350.000 3,5 the Italian production plants Set Environment (EN) Food 258.049 258.760 268.315 2 of Torino, Gattinara, Verrès, Processing Sector Supplement 220.000 2,07 300.000 3 1,98 Pozzilli, and to the sales premises Version 3.0 FPSS Final Version”. 200.000 1,5 2,66 [GJ]

1,90 [GJ/t] 2,53 250.000 2,5 located in Italy and include: 180.000 [GJ]

2,21 [GJ/t] 331.801 electricity consumption, thermal 1 329.536 160000 200..000 2 energy consumption and fuel 311.999 140.000 consumption for the fleet of 0,5 150.000 1,5 company vehicles. 120.000

100.000 0 100.000 1

2012 2013 2014 2012 2013 2014

Pozzilli Simulation Total Electricity Consumption Electricity Consumption Index Pozzilli Simulation Total Thermal Energy Consumption Thermal Energy Consumption Index

In the three-year reporting period specific In the three-year reporting period thermal energy electricity consumption dropped by 8% as a result consumption in absolute terms dropped by of energy efficiency measures, improvements in approximately 6% and in specific terms over 17%. the management and monitoring of consumption The main contribution to the improvement in energy and efficiency at the production plants. performance came from the structural revamping On the other hand, absolute electricity of the thermal power stations a the Torino and consumption increased by around 4% due to a Gattinara production plants. gradual increase in production and consumption at the Pozzilli production facility, which was only partly operational in the two-year period 2012-2013. The graph shows the normalised consumption difference assuming the Pozzilli facility at full operation.

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Total energy consumption Water collection Water discharge Water reuse and recycling

Overall, taking into consideration electricity Most of the water consumption of Luigi Lavazza S.p.A. The total volume of waste water discharged at the Water for industrial use is used for the consumption, thermal energy consumption and is related to the production plants, specifically the Italian production plants and at head office flows humidification of coffee to be decaffeinated, the the fuel consumption of company vehicles, in the coffee roasting process, the cooling of the machinery into the drainage system. cooling of coffee during the roasting stage and the three-year reporting period a fall in consumption used for the production of compressed air and cooling of ancillary machinery (e.g. compressors). was recorded in absolute terms (approximately 1%) sanitation and hygiene facilities. Water consumption In the first two cases, the water cannot be recycled or reused because it comes into direct contact and in relative terms (over 12%). relating to the coffee decaffeination process at the 3 3 Total (m ) and partial (m /t) volumes of discharged waste water with the coffee and evaporates. The water used in Pozzilli plant is particularly significant. This detail 2,00

clearly emerges from the analysis of the respective 140.000 cooling the systems is recirculated in closed circuits 700000 5,2 1,80 environmental indicators which show a significant to ensure the minimum consumption of resources. 5,02 120.000 1,60 5 increase corresponding to the gradual return to full The water is therefore not recycled or reused, but, 600000 1,40 operation of the Pozzilli plant following the production 100.000 where technically possible, recirculated. 1,20 4,81 4,8 91.100

87.509 /t] 500000 halt which took place between 2012 and 2013. 80.000 0,23 1,00 3 [m3] 0,22 [m The reporting scope of the environmental indicators 76.618 0,19 4,6 60.000 0,67 0,80 [GJ] [GJ/t] 0,61 400000 relating to water collection and discharge also includes 0,65 0,60 40.000 4,38 4,4 the Italian production plants of Torino, Gattinara , 0,40 626.203 627.259 617.428 Verrès and Pozzilli , plus the head office in Torino. 300000 20.000 4,2 0,20

0 0

200000 4 2012 2013 2014 2012 2013 2014 Total disposed Water consumption index Pozzilli Simulation Total Energy Consumption Energy Consumption Index Water consumption indexes (m3/t) divided between civil use and industrial use 1,20

1,00 1,02 0,94 0,80 0,82

0,69 0,75 /t] 3 0,60

[m 0,56

0,40 0,25 0,26 0,27 0,20

0 Total Civil Industrial

2012 2013 2014

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Waste Substances that are harmful to the ozone layer The figures on waste refer to the Headquarters and The tonnes of Hazardous Waste (H-W), Non-Hazardous Waste (NH-W) The graphs below show the indicators relating Some equipment (heat pumps, refrigeration and generated per tonne of processed coffee to the Innovation Center, the 4 Italian production to the kg of waste generated per tonne of coffee conditioning systems) requires the use of refrigerant plants of Torino, Gattinara, Verrès, Pozzilli and 12000 processed. In 2014, for every tonne of coffee gases containing substances, which are potentially include production waste, waste generated by 10.644 10.783 processed 66.4 kg of waste was produced, of which harmful to the ozone layer (HCFCs). 9.661 9.754 administrative and promotional activities with the 10000 66.2 kg is non-hazardous and 0.2 kg is hazardous. exception of urban solid waste. 9.326 9.361 These systems are regularly maintained by Lavazza is continuously striving to reduce the 8000 specialized third parties, who record activities and amount of waste it generates both in the production materials used on special forms. In the three-year

[t] 6000 plants and in the headquarters by optimising Hazardous waste index Non-hazardous waste index reporting period, the maintenance activities required processes, progressively adopting more effective 4000 a moderate use of refrigerant gas equivalent to 47 2,0 100 management methods aimed at rationalising the kg. temporary storage areas, and raising awareness of 2000 85,4 1,1 74,1 139 92 35 staff. 1,0 50 66,2

0 [kg/t] [kg/t] In the three-year reporting period there was an 0,7 [H-W] [NH-W] [Total W] overall reduction in the amount of waste produced 0,2 Significant spills of potentially pollutant of more than 13% with almost all of it (more then 0,0 0 2012 2012 2013 2014 2012 2013 2014 liquids 99% of total waste products) classified as “non- Hazardous waste index Non-hazardous waste index hazardous”. 2013 2014 In the three-year reporting period there were no The indicator related to waste management in the significant spills of potentially pollutant liquids past-production phase, demonstrates that 90% of either in the soil or in water; no fines were imposed waste is sent for recycling. and no formal warnings were received related to environmental impact issues.

Waste recovered

100

90 94,7 92,8 93,5 80 [%] 70

60 2012 2013 2014

[Rec/R Tot]

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Human resources development

114 115 Lavazza Sustainability Report 2014 Ch. V Human resources development

5.1 The Lavazza approach to people

The development of human map all the competencies and people who participate. In 2014, resources is a strategic aspect for professional skills within the the company selected a panel of the pursuit of excellence. company. students from the University of Gastronomic Sciences in Pollenzo We grow as a company if people This model, designed with along with people from the and their skills grow. Our tradition the contribution of over 60 production plants and enrolled of transferring professional skills colleagues acting as SMEs them on a “coffee taster” training from experts to new employees (subject matter experts), course. has become systemic with the was accompanied by the establishment of structured implementation of evaluation courses and tools for professional mechanisms that will allow us training and development. We to create effective development design these courses beginning structures and career from a detailed analysis of programmes for talents. training needs, involving staff from the initial analysis. Training Finally, our staff can also grow is a key point to support the by pursuing skill development processes of change which are programmes related to green under way. coffee and product tasting. In 2014 the company adopted Years of experience go into the a model of leadership change development of these skills and and a professional system to it is a unique opportunity for the

116 117 Lavazza Sustainability Report 2014 Ch. V Human resources development

the highest world rankings for Workforce by category and gender In parallel, the company’s internationalism and excellence).

Manual Worker Office Worker partnership with the management Supervisor Manual Worker Supervisor school ESCP Europe, which in Travelling Stuff Apprentice Office Worker Apprentice Office Worker 2004 included a contribution Senior Manager Apprentice Manual Worker to the creation of its fifth Middle Manager Senior Manager campus in Torino, continues Office Worker Middle Manager to enable Lavazza to offer “prestige” management training 2012 programmes, giving five managers a year the opportunity to pursue Total Women: 480 Total Men: 1.100 the General Management Total 2012: 1.580 Programme (which corresponds 22.892 to 40% of an MBA with one of hours of training in 2014 2013

Total Women: 498 Total Men: 1.091 Total 2013: 1.589 Hours of training by category and gender

2014 Manual Worker Manual Worker Supervisor Supervisor Travelling Stuff Total Women: 502 Total Men: 1.085 Apprentice Office Worker Apprentice Office Worker Senior Manager Senior Manager Total 2014: 1.587 Middle Manager Middle Manager Office Worker Office Worker 2012

Women Men Hours Women: 6.677 Hours Men: 11.135 Total hours 2012: 17.812

5.1.1 Training and development: 2013 a systemic and shared process Hours Women: 7.445 Hours Men: 11.705 Total hours 2013: 19.150 The catalogue of professional skills significant organisational changes initiatives in support of innovation and model of change leadership in response to the business and platforms (inter-functional 2014 is the reference Lavazza uses to objectives of internationalisation groups that work together to identify areas for improvement and interoperability. define/develop the product and offer targeted training and plan), creating a culture of project Hours Women: 7.393 Hours Men: 15.449 development initiatives in order Aware of the need to face these management. In particular, in Total hours 2014: 22.892 to develop peoples’ abilities and challenges, the company has 2014, training programmes were skills. boosted its investments in provided for the development training activities. 2014 saw an of 29% of the capabilities and Moreover, during the reporting increase in skills development 41% of the skills contained in the period, Lavazza underwent training programmes and new company skills catalogue. Women Men

118 119 Lavazza Sustainability Report 2014

Lavazza Training Centers

Lavazza is aware that training is a key asset to The Training Centers’ activities are aimed at baristas, support the excellence of its product. catering staff, sales force, distributors, Lavazza employees, consumers, journalists and opinion Lavazza has been spreading coffee culture and the leaders. art of its preparation since 1979 through the activities of the Centre for Studies and Research into Coffee, Lavazza also organises induction days for new now called the Training Center. staff. This learning experience seeks to convey the company’s philosophy, telling the story of With 48 branches around the world, the Lavazza coffee from the plantation to the product in the Training Center is the largest Italian and international cup and sharing all the principles that guide our coffee study centre. It trained30,000 people in entrepreneurial approach. 2014 alone.

48 Lavazza Training Centers in the world

30.000 is the total number of persons trained in 2014 in Lavazza Training Centers

120 121 Lavazza Sustainability Report 2014 Ch. V Human resources development

Organisational change: towards Lean Manufacturing

Since 2012, Lavazza has undergone a period of profound organisational change. To ensure more flexibility and efficiency, we initiated a project to develop staff multifunctionality, to switch from specialised production for each plant (traditional coffee at Torino and Verrès and coffee capsules at Gattinara) to multiproduct and multifunctional production following the principles of Lean Manufacturing. To help integrate the principles of Lean Manufacturing, we have implemented a plan to develop the know-how of all operational staff using leading experts to run specific training sessions.

The implementation of Lean Manufacturing included targeted actions to simplify processes, as well as: • Training middle managers for their role as links between senior management and manual workers; • Improving packaging processes; • Training on production line quality

The organisational change at the Verrès, Gattinara and Torino centres included the introduction of contracts with specific remuneration clauses, to reward employees for the added value deriving from their work.

122 123 Lavazza Sustainability Report 2014 Ch. V Human resources development

5.1.2 Leading Change

In the more general context process enabling them to identify organigramme. of the change in progress, we strengths and weaknesses. To support continuous implemented the Leading development over the next three Change project in 2013 in order Skills: the catalogue defined years, we intend to complement to structure talent management in 2014 includes over 180 skills the current MBO system with processes and to launch a and 21 capabilities that cover all a performance management number of engagement and company skills. For the first time, system that also includes communication initiatives in over 1,200 employees completed qualitative objectives and the support of the change. a skills assessment process. The valorisation of professional skills. process has been extended with a The new system will affect office Leading Change was developed training initiative for all managers workers as well as managerial along three main axes: (including of subsidiaries) to staff (senior managers, junior leadership of change, skills and develop a culture of feedback and managers and middle managers). performance. the “boss” as a coach.

Leadership of change: Performance of Management: this values and promotes recently modified, our development actions to performance management strengthen accountability, system involves the managers’ integration, leading people and population and includes the innovation. These elements Group objectives and individual should be characteristic of all objectives in relation to specific managers. In 2014, all managers indicators. The Management by were evaluated not only by Objectives (MBO) programme is, their own managers, but also by therefore, a system in which both colleagues and employees using types of objectives are inversely an objective and transparent proportional to the company’s

124 125 Lavazza Sustainability Report 2014 Ch. V Human resources development

The MBO programme

In 2014, 204 people, or 12.85% of the total workforce, were involved in the MBO programme. 204 employees involved in 2014 in the MBO Programme

People involved in the MBO Programme 2012-2014

Gender Category 2012 2013 2014

Women Senior Managers 17 20 18 Thanks to Leading Change, the Lavazza system so that it can Human Resources is grow over time. In this context, it Middle Managers 11 12 15 consolidating its role as business is essential to strengthen middle partner and “agent of change”. management by providing tools Junior Managers 29 33 32 and clear processes under the Lavazza corporate policy is governance of Human Resources Total Women 57 65 65 guided by the principle of and Property & Facility. Men Senior Managers 40 52 52 transparency. Leading Change is establishing this value within Middle Managers 23 32 37

Junior Managers 52 51 50

Total Men 115 135 139

Total 172 200 204

126 127 Lavazza Sustainability Report 2014 Ch. V Human resources development

5.1.3 Teamwork

Involving people is one of the This does not mean scattering process and ensures that the basic keys to success. We thus responsibility but rather ensuring product respects deadlines and seek the most effective ways a coordinated progress that quality standards. Teamwork to promote inter-functional generates higher added value. benefits production staff and processes through the integration involves everyone in identifying of different skills and professional The industrial system follows problems and improvement expertise. similar guidelines. Today, in actions. all plants in Italy and abroad, The clearest example of this are processes are managed by a the platforms – interfunctional departmental operating team. A teams working on different highly integrated group of people projects. follows the entire manufacturing

128 129 Lavazza Sustainability Report 2014 Ch. V Human resources development

Percentage of fixed The ratio between the average the sum total of annual gross The figures confirm a stable 2014 2% and permanent contracts Employees with fixed term annual gross remuneration received remuneration received by women employment situation in the Group contracts by female employees and the by the annual gross remuneration with a growth of office worker average for men is around 92% of men, for each category. and junior manager categories in for middle managers, 98% for In the three years covered by the line with Lavazza’s processes of junior managers and 94% for office report 2012-2014, 93 employees professional development. workers. The remuneration for took parental leave (78 women and Moreover, all employees of Luigi female manual workers exceeds 15 men). The rate of return to work Lavazza S.p.A. are covered by that of men by more than 2.5%. and reinstatement in their jobs was national collective agreements18. This ratio is obtained by dividing 100%.

98% 2013 2012 Permanent employees Hires and exits by position

98% 96% Manual Travelling Staff Office Worker Worker Manual Supervisor Supervisor Worker Travelling Staff Appr. Office Worker Appr. Office Worker Senior manager Appr. manual worker Total Turnover Middle Manager Senior manager Office Worker Middle Manager 2012 Hires 8,1% 13,0% Total 2012: 11,5% Total Hires: 81 Total Exits: 101 Exits 11,4% 8,2% Total 2013: 9,3%

9,0% 6,5% Total 2014: 7,3% 2013

Total Hires: 78 Total Exits: 69

Women Men 2014 The 11.5% figure for 2012 differs from the 16% shown in the 2012 Sustainability Report because it is calculated on different source data in terms of staff and number of hires and exits. Total Hires: 57 Total Exits: 59

5.1.4 Loyalty and transparency In the period 2012-2014, Luigi hours, trade union rights or its Lavazza S.p.A. received no management of labour relations complaints relating to the with the exception of a case in The percentage of employees importance is also reflected in national labour contract. The infringement of workers’ rights, 2013 that led to a legal dispute with permanent contracts – reduced staffturnover figures, ratio between company average the proper regulation of working that the company won. which grew from 96% to 98% which dropped from 11.5% in annual remuneration for women in the period 2012 to 2014 – is 2012 to 7.3% in 2014. Average and the minimum wage is 25% consistent with the importance annual remuneration in Lavazza higher than the national labour that Lavazza gives to establishing is about 30% higher than the contract. The corresponding 18 Lavazza does not resort to forms of collective bargaining for the definition of the notice periods except for changes of shifts within the production sites. lasting relationships. This minimum wage as set by the figure for men is 32%. In these cases, the notice period established by contract (CCNL- national labour contract) is two weeks.

130 131 Lavazza Sustainability Report 2014 Ch. V Human resources development

5.1.5 Internal communication

Lavazza believes that internal and Property & Facility. use a bottom up logic to activate communication is as important as Over the course of the year, the mechanisms of listening external communication because communication activities and involvement of employees it allows to communicate particularly focused on strategy on important issues such as company strategy involving, sharing and support for the welfare, the new headquarters, motivating and listening to staff. organisational changes in and the definition of Leadership progress, for the first time behaviour through corporate The process of organisational systematically involving a storytelling. change has made it necessary significant number of managers to strengthen the activities and employees in meetings with These programmes will be active and methods of internal top management. and further increased in 2015 . communication. In 2014, the company created a dedicated In parallel, we began to design function within Human Resources communication programmes that

5.1.6 Welfare

The diverse nature of the by initiating a process triggered workforce requires the by the conclusion of the implementation of a bottom- Headquarters’ supplementary up approach to ensure that contract. Lavazza thus designed everyone’s needs are listened a participatory process with to when defining a practical and focus groups and a questionnaire efficient welfare plan. involving all staff in the definition In this context, Lavazza has of a welfare plan. addressed welfare and benefits

132 133 Lavazza Sustainability Report 2014 Ch. V Human resources development

2016 The new Lavazza Headquarters will be inaugurated 100 million euro 5.1.7 Nuvola: a sustainable project invested

Nuvola, the new Lavazza this project, Lavazza aims to Applied Arts and Design), where LEED® headquarters will be inaugurated make a strong urban statement over 400 young creative talents LEED® (Leadership in Energy and in 2016. Designed by Architect and, at the same time, to create are enrolled in a university- Environmental Design) certification Cino Zucchi, the new premises a functional and innovative level course. When the project Gold level respect the highest sustainability workplace for more than 500 is completed, more than 1,000 and innovation criteria and are employees. The new Lavazza people every day will breathe life candidate for the LEED® Gold office spaces were designed to into this new area reclaimed for certification. promote new ways of working the city. The project also includes that stimulate teamwork, one of Torino’s first smart streets The chosen location is also in line encourage the exchange of with low energy LED lighting and with sustainable principles. The information, and strengthen free wifi, as well as greenery, new headquarters will infact be multifunctionality with a view benches and cycle racks, creating opened in an old industrial area, to fostering innovation and a meeting space at the service of bringing new life to the district continuous improvement. the university and the district. by preserving historically and architecturally valuable existing All stakeholders from local The work has also brought to light buildings. Institutions to private citizens the remains of an early Christian were involved in every step of basilica of the fourth and fifth The design also includes a the project, thus ensuring highly centuries AD, which, after the garden, a public underground participatory approach. project is completed, will also be car park as well as the Lavazza valorised. Museum and the corporate The district that will house the historical archive. new Lavazza headquarters is also By investing € 100 million19 in home to the IAAD (Institute of

19 The total invested in the new headquarters in 2014 will be over €33 million.

134 135 Lavazza Sustainability Report 2014 Ch. V Human resources development

Sustainable from the outset

The Nuvola project has been designed to be sustainable right from its earliest stages. For the entire duration of the work Lavazza will take every necessary and appropriate action to protect the environment and reduce any inconvenience for people living and working nearby.

To make this commitment even more transparent, • Telling people in advance about any inconvenience we have codified it in a “Handbook of Sustainable or changes to the road system; Construction” that includes: • Responding promptly to reports sent to the email address [email protected]; • Limiting the emission of dust as much as possible; • Giving periodic progress updates through www. • Preventing any form of soil and water pollution; nuvola.lavazza.it and the free electronic newsletter. • Recovering the greatest possible quantity of waste; • Avoiding the soiling of public roads; • Maintaining the state of the perimeter of the construction site; • Making sure vehicles enter and exit at walking pace; • Ensuring that all workers behave responsibly while on the building site;

136 137 Lavazza Sustainability Report 2014 Ch. V Human resources development

5.1.8 Health and safety at work Training hours OHS by job title and gender Manual worker Manual worker Supervisor

In accordance with legal and trained to operate and • Workers’ safety representatives, Apprentice office worker Apprentice office worker requirements, Luigi Lavazza S.p.A. perform their respective activities • Managers and staff assigned to Senior Manager Senior Manager has a health and safety at work in complete safety. prevention and protection, Office worker Prevention and Protection Service. Over this three-year period each • Tasks that may expose workers Office worker worker was given the statutory to specific risks that require The duties and responsibilities training and specific training recognised professional skills, 2012 for health and safety at work courses were identified for the specific experience, adequate Hours women: 1.512 Hours men: 5.419 are clearly defined in all following roles: education and training. organisational business units Totale ore 2012: 6.931 Middle Manager through a system of delegation of • Safety managers (pursuant to Supervisor Middle Manager functions from top management Article 2 of Italian Legislative to the Plant/Function Decree 81/2008), 2013 management teams. • Safety officers (pursuant to Apprentice office worker The company makes sure that Article 2 of Italian Legislative Hours women: 3.649 Hours men: 7.695 every worker is informed about Decree 81/2008), Total Hours 2013: 11.344 company health and safety • Fire emergency and first aid policies, and is properly taught team members, 2014 Hours women: 376 Hours men: 4.902 Total Hours 2014: 5.278

Women Men

In the 2012-2014 period, Lavazza employees have a wide work equipment always meets the organisation via an internal range of personal protective regulatory requirements and that communication system that equipment (PPE) available for the best available techniques are enables each plant to ascertain the specific risks identified. adopted, providing appropriate the possible presence of similar 23.553 These enable the minimisation training campaigns to respond to conditions or criticalities and training hours on Occupational of risk where technical and changes in technology. thus to avoid or at least reduce Health and Safety (OHS) organisational measures cannot the possibility of recurrence were delivered involving ensure an acceptable level, A standardised Operations level of an incident that has already considering the regulatory procedure was implemented from occurred somewhere else. 2.006 provisions as minimum 2014 for the analysis of incidents The results of analyses and people. requirements. (accidents and near accidents) in trends of accidents at work, order to identify their root causes. monitored by means of injury The company pays particular The results of this analysis have rates recording the frequency attention to ensuring that been distributed throughout of occurrence and severity of

138 139 Lavazza Sustainability Report 2014 Ch. V Human resources development

the injury, are the subject of staff and throughout the whole (comparable to road accidents). regular meetings with company organisation. The working hours used for the management and staff. At these The injury frequency rate calculation of the injury rates meetings, the results of the represents the number of include the regular and overtime analyses are presented along accidents per 1,000,000 hours hours of workers at Luigi Lavazza with the state of implementation worked. S.p.A.’s Italian plants and sales of the corrective actions taken premises, Innovation Centre and and the level of implementation The injury severity rate represents Headquarters. of the projects and of the the number of days lost due improvement activities. to accidents per 1,000 hours worked. The trend for accidents at The calculation of the injury rates work, monitored through injury considers events that happened frequency and severity rates, to staff resulting in an absence helps to define the set of from work of more than one objectives for management, its day, net of “in itinere” injuries

Injury frequency rate 2012-2014 Injury severity rate 2012-2014

2012 2013 2014 2012 2013 2014

60 1.20

50 1.00

40 0.80 0,51 30 0.60 16,05 0,30 20 0.40 10,7 10 0.20 9,2 0,27

The data is referred to employees working in the four Italian production plants, in the commercial branches and in the Torino headquarters.

140 141 Lavazza Sustainability Report 2014 Ch. VI Continuous improvement . Lavazza’s sustainability objectives

Continuous improvement Lavazza sustainability objectives

142 143 Lavazza Sustainability Report 2014 Ch. VI Continuous improvement . Lavazza’s sustainability objectives

Monitoring of suppliers In 2014, as part of a joint programme of the Lavazza objectives 2015-2018 Purchasing and Quality Departments for the monitoring of suppliers, the 2015 system audit plan was drafted up according to a new methodology. In addition to the verification of the reliability of processes, quality and safety systems, this methodology also includes the preliminary A performance management system linked to verification of CSR aspects. The objective is to Compensation evaluation mechanisms based on performance, review at least: &Benefit skills and qualifying aspects, will run alongside the • 25% of direct material suppliers (representing at current MBO (management by objectives) system least 60% of the annual purchase turnover of this over the next three years. The new system will affect category); office workers as well as managerial staff (senior • 50% of machinery suppliers (representing at managers, junior managers and middle managers). least 75% of the annual purchase turnover of this category);

Definition and implementation of the Health, Health, Safety, Safety, Energy and Environmental Management Quality Environment System in compliance with ISO 14001, ISO 50001 and Energy and OHSAS 18001.

Definition of a welfare plan, based on a segmented offer, adapted to the varied nature of the workforce; Implementation of a platform for the management of conventions and “flexible benefits”. Training and Internal Communications

Welfare

Implementation in 2015 of a Lavazza training The activities aimed at continuous improvement suppliers of raw materials, semi-finished products, portal to ensure better management reporting of products and processes include, for the period finished products and packaging, thus providing and a direct link between the business areas and 2015-2019, the implementation of additional operational units with extremely reliable and subsidiaries. “pillars” to ensure product quality and safety: effective partners; Creation of the Lavazza training portal for all the Centralisation of the receipt and handling of The upgrade of certification standards to the employees; complaints from all over the world, completing new market demands, in particular with the ISO Creation of the new Lavazza intranet as a means the work already started in Italy. This will ensure 22000 certification for all production plants, of communication with employees, subsidiaries, greater proximity to all our consumers and a better which represents a natural evolution towards and business areas. understanding of their needs and how they perceive higher standards than the current HACCP system, the quality offered by Lavazza; required by law, and already certified or undergoing The start of a process of systematic and codified certification at the Group’s main plants. assessment of the activities and processes of all

144 145 Lavazza Sustainability Report 2014 GRI Content Index

GRI Content Index In Accordance - Core Option

The following table shows the list of indicators set out by the GRI-G4 standard, reported by Lavazza to ensure a level of compliance “in accordance-Core”. There is a page reference number in this document for each GRI indicator. Identified Material Aspects and Boundaries The table also shows a number of additional GRI indicators for food production (“Food Processing Sector Supplement”). G4-17 p. 11 Yes; pp. 153-155

G4-18 p. 11 Yes; pp. 153-155

G4-19 p. 14 Yes; pp. 153-155 GENERAL STANDARD DISCLOSURES

G4-20 p. 14 Yes; pp. 153-155 General Page Number (or Link) Limited standard External G4-21 p. 14 Yes; pp. 153-155 disclosures Assurance p. 154 G4-22 p. 11 Yes; pp. 153-155

Strategy and Analysis G4-23 p. 11 Yes; pp. 153-155

G4-1 pp. 8-9 Yes Stakeholder Engagement

Organizational Profile G4-24 p. 12 Yes; pp. 153-155

G4-3 p. 11 Yes G4-25 p. 11 No

G4-4 pp. 32-33 Yes G4-26 p. 12 Yes; pp. 153-155

G4-5 p. 11 Yes G4-27 p. 12; p. 14 Yes; pp. 153-155

G4-6 p. 11 Yes Report Profile

G4-7 p. 30 Yes G4-28 p. 11 Yes

G4-8 p. 11 Yes G4-29 p. 10 Yes

G4-9 p. 11; p. 118 Yes G4-30 p. 10 Yes

G4-10 p. 11; p. 118; pp. 130-131 Yes G4-31 p. 10 Yes

G4-11 p. 131 Yes G4-32 p. 10; p. 15; p. 146 Yes

G4-12 p. 64 No G4-33 p. 15 Yes

G4-13 p. 38 Yes Governance

G4-14 p. 88 Yes G4-34 p. 30 Yes

G4-15 p. 34; pp. 76-77 Yes Ethics And Integrity

G4-16 p. 35 Yes G4-56 p. 34 Yes

146 147 Lavazza Sustainability Report 2014 GRI Content Index

GRI Content Index In Accordance - Core Option

SPECIFIC STANDARD DISCLOSURES Material Aspect: Water

Disclosure on Page Number (or Link) Limited G4-EN8 pp. 106-113 Yes

Management External Approach Assurance G4-EN10 pp. 106-113 No

(DMA) p. 154 Material Aspect: Emissions CATEGORY: ECONOMIC G4-EN15 pp. 106-113 Yes

DMA p. 37; p. 72; pp. 134-135 Yes G4-EN16 pp. 106-113 Yes

Material Aspect: Economic Performance G4-EN17 pp. 106-113 Yes

G4-EC1 p. 39 Yes G4-EN18 pp. 106-113 Yes

Material Aspect: Market Presence G4-EN19 pp. 106-113 Yes

G4-EN20 pp. 106-113 No G4-EC5 p. 130 Yes

Material Aspect: Effluents And Waste Material Aspect: Indirect Economic Impacts G4-EN22 pp. 106-113 No G4-EC7 pp. 134-135 Yes

G4-EN23 pp. 106-113 Yes Material Aspect: Procurement Practices G4-EN24 p. 113 No

G4-EC9 p. 72 Yes Material Aspect: Products And Services CATEGORY: ENVIRONMENTAL G4-EN27 pp. 106-113 Yes

DMA p. 37: pp. 76-77; p. 88; pp. 91-92 Yes Material Aspect: Compliance Material Aspect: Materials G4-EN29 p. 113 Yes

G4-EN1 p. 93 Yes Material Aspect: Transport Material Aspect: Energy G4-EN30 pp. 106-113 Yes

G4-EN3 pp. 106-113 Yes Material Aspect: Overall

G4-EN4 pp. 106-113 Yes G4-EN31 p. 83 Yes

G4-EN5 pp. 106-113 Yes Material Aspect: Supplier Environmental Assessment

G4-EN6 pp. 106-113 No G4-EN32 pp. 76-77 Yes

148 149 Lavazza Sustainability Report 2014 GRI Content Index

GRI Content Index In Accordance - Core Option

Material Aspect: Environmental Grievance Mechanisms SUG4-HR1 p. 76 Yes

G4-EN34 p. 113 No Material Aspect: Supplier Human Rights Assessment

G4-HR10 pp. 76-77 Yes CATEGORY: ENVIRONMENTAL Material Aspect: Human Rights Grievance Mechanisms DMA p. 43; p. 63; p. 70; pp. 76-77; p. 117; pp. 130-131; pp. 138-139 Yes

G4-HR12 p. 131 Yes SUB-CATEGORY: LABOR PRACTICES AND DECENT WORK SUB-CATEGORY: SOCIETY Material Aspect: Employment Material Aspect: Local Communities G4-LA1 pp. 130-131 Yes G4-SO1 p. 54 Yes G4-LA3 p. 131 Yes

Material Aspect: Anti-Corruption Material Aspect: Labor/Management Relations G4-SO4 p. 30 Yes G4-LA4 p. 131 No Material Aspect: Compliance Material Aspect: Occupational Health And Safety G4-SO8 p. 34 Yes

G4-LA6 p. 141 Yes SUB-CATEGORY: PRODUCT RESPONSIBILITY Material Aspect: Training And Education Material Aspect: Customer Health And Safety G4-LA9 p. 117; p. 139 Yes G4-PR2 p. 63 Yes

G4-LA10 p. 117; p. 125 Yes Material Aspect: Product And Service Labeling G4-LA11 p. 126 Yes G4-PR5 p. 70-71 Yes

Material Aspect: Equal Remuneration For Women And Men Material Aspect: Customer Privacy

G4-LA13 p. 131 Yes G4-PR8 p. 71 Yes

Material Aspect: Supplier Assessment For Labor Practices FOOD PROCESSING G4 - SECTOR DISCLOSURE

G4-LA14 pp. 76-77 Yes CATEGORY: ECONOMIC Material Aspect: Labor Practices Grievance Mechanisms Material Aspect: Procurement/Sourcing Practices

G4-LA16 p. 131 Yes G4-FP1 pp. 76-77 Yes

SUB-CATEGORY: HUMAN RIGHTS

Material Aspect: Investment

150 151

INDEPENDENT REPORT ON THE LIMITED ASSURANCE ENGAGEMENT OF THE OF THE SUSTAINABILITY REPORT 2014

To the Board of Directors of Luigi Lavazza S.p.A.

We have carried out a limited assurance engagement on the Sustainability Report as of 31 December 2014 (hereinafter the “Report”) of Luigi Lavazza S.p.A. (hereafter the “Lavazza” or “Company”).

Responsibility of the Directors for the Report

The Directors are responsible for preparing the Report in compliance with the G4 Sustainability Reporting Guidelines defined in 2013 by the GRI - Global Reporting Initiative (the “G4 Sustainability Reporting Guidelines”), as indicated in the paragraph “Methodological note” of the Report, and for that part of internal control that they consider necessary to prepare a sustainability report that is free from material misstatement, whether due to fraud or unintentional behaviours or events. The Directors are also responsible for defining the sustainability performance targets of Lavazza, for reporting the sustainability results, as well as for identifying the stakeholders and the significant aspects to be reported.

Auditor’s responsibility

We are responsible for the preparation of this report on the basis of the work performed. We conducted our engagement in accordance with “International Standard on Assurance Engagements 3000 – Assurance Engagements other than Audits or Reviews of Historical Financial Information” (“ISAE 3000”), issued by the International Auditing and Assurance Standards Board for limited assurance engagements. The standard requires that we comply with applicable ethical requirements, including professional independence, and that we plan and perform our work to obtain limited assurance that the Report is free from material misstatement. The procedures consisted in interviews, primarily of Company personnel responsible for the preparation of the information presented in the Report, analysis of documents, recalculations and other verification procedures.

The procedures we performed on the Report consisted in verifying its compliance with the principles for defining the content and the quality of a sustainability report set out in the “G4 Sustainability Reporting Guidelines”, and are summarised as follows:

PricewaterhouseCoopers Advisory SpA

Sede legale: Milano 20149 Via Monte Rosa 91 Tel. 02667201 Fax 0266720501 Cap. Soc. Euro 3.700.000,00 i.v. - C.F. e P.IVA e Iscrizione al Reg. Imp.Milano n° 03230150967 – Altri Uffici: Bari 70122 Via Abate Gimma 72 Tel. 0805640311 Fax 0805640349 - Bologna 40126 Via Angelo Finelli 8 Tel. 0516186211 - Firenze 50121 Viale Gramsci 15 Tel. 0552482811 Fax 0552482899 - Genova 16121 Piazza Piccapietra 9 Tel. 01029041 - Napoli 80121 Via dei Mille 16 Tel. 08136181 - Padova 35138 Via Vicenza 4 Tel. 049873431 Fax 0498734399 - Palermo 90141 Via Marchese Ugo 60 Tel. 0916256313 Fax 0917829221 - Roma 00154 Largo Fochetti 28 Tel. 06570831 Fax 06570832536 - Torino 10122 Corso Palestro 10 Tel. 0115773211 Fax 0115773299- Treviso 31100 Viale Felissent 90 Tel. 0422315711 Fax 0422315798 –Trieste 34125 Via Cesare Battisti 18 Tel. 0403480781 Fax 040364737 – Verona 37135 Via Francia 21/C Tel. 0458263001

Società soggetta all’attività di direzione e coordinamento della PricewaterhouseCoopers Italia Srl 152 www.pwc.com/it 153

 comparing the economic and financial information and data reported in paragraph “Economic and Conclusion financial performance of the Lavazza Group” of the Report with those included in the Group’s consolidated financial statements as of 31 December 2014 on which other auditors issued an audit Based on the work performed, nothing has come to our attention that causes us to believe that the opinion, in accordance with article 14 of legislative decree n° 39 of 27 January 2010, on 10 April Sustainability Report of Luigi Lavazza S.p.A. as of 31 December 2014 has not been prepared, in all 2015; material respects, in compliance with the “G4 Sustainability Reporting Guidelines” defined in 2013 by  analysing, through inquiries, the governance system and the process for managing the the GRI - Global Reporting Initiative as disclosed in the paragraph “Methodological note” of the sustainability issues relating to the Company strategy and operations; Report.  analysing the process aimed at defining the significant reporting areas to be disclosed in the Report, Other Aspects with regard to the methods for their identification, in terms of priority for the various stakeholders, as well as the internal validation of the process findings; We point out the following aspects that we confirm the Company should consider in view of a  analysing the processes underlying the generation, recording and management of quantitative data continuous improvement in the next years: strengthening of the reporting system and use, in the included in the Report. In detail, we carried out: calculation of the total energy consumption, the most suitable conversion factors based on the selected - meetings and interviews with management of Lavazza to achieve a general understanding of company structure and, consequently, of the Country of reference. the information, accounting and reporting systems in use to prepare the Report, as well as of the internal control processes and procedures supporting the collection, aggregation, processing and submission of the information to the function responsible for the Report preparation; Turin, 26 May 2015 - a sample-based analysis of the documents supporting the preparation of the Report, in order to obtain evidence of the reliability of processes in place and of the internal control system underlying the treatment of the information relating to the objectives disclosed in the Report; PricewaterhouseCoopers Advisory SpA  analysing the internal consistency of the qualitative information described in the Report and its compliance with the guidelines identified in the preceding paragraph “Responsibility of the Signed by Directors for the Report”;  analysing the stakeholders engagement process with regard to the methods used and the analysis of Paolo Bersani the existing documentation concerning the significant matters arisen during the Company’s (Partner) dialogue initiatives;  obtaining a representation letter, signed by the Chief Executive Officer of Luigi Lavazza S.p.A., on the compliance of the Report with the guidelines identified in the paragraph “Responsibility of the Directors for the Report”, as well as the reliability and completeness of the disclosed information. This report has been translated from the original, which was issued in Italian, solely for the convenience of international readers. Data and information subject to our limited assurance procedures are included, as required by the “G4 Sustainability Reporting Guidelines”, in the “GRI Content Index” of the Report.

Our limited assurance work was less in scope than a reasonable assurance engagement performed in accordance with ISAE 3000 and, consequently, it does not provide us with a sufficient level of assurance necessary to became aware of all significant facts and circumstances that might be identified in a reasonable assurance engagement.

154 2di3 3 di 3 155 Lavazza Sustainability Report 2014 Glossary

Accountability these shortcomings may result temperature of the Earth’s Glossary An organisation is accountable in commercial relations being atmosphere and oceans due to if it is organised in such a way terminated, if this is allowed for natural causes. It is also used as a as to provide its stakeholders under the supplier contracts. synonym for global warming: the (see stakeholder) with periodic rise in temperatures caused by reports and communications Best Available Technology human activities. on its approach, objectives (BAT) and results. The level of The most efficient and advanced Code of Ethics accountability of an organisation technology, industrially available http://www.lavazza.com/en/ and the content of its reports and applicable under technically lavazza-world/ethics.html have a significant impact on valid conditions, capable of stakeholders’ perception of guaranteeing a high level of CSR the organisation, which in protection of the environment as Corporate Social Responsibility turn affects its reputation. As a whole. Set of policies adopted such, accountability provides voluntarily by a company to a foundation for building and Biodiversity integrate social and ecological strengthening trust between a The variability between living issues with its commercial company and its stakeholders. organisms within a single species operations and relations with (genetic diversity), between stakeholders. A company is Audit different species and between socially responsible if it goes An audit is an assessment of the ecosystems. The Convention on beyond its statutory obligations performance of an organisation biological diversity, approved by investing in human capital, the on the basis of pre-defined by the European Community, environment and relations with its criteria, using systems that affirms the need to anticipate, stakeholders. ensure objective results. Audits prevent and combat at the source This is mirrored by the definition generally involve inspections at the causes of any significant of CSR in the European the premises of the entity whose reduction or loss of biological Commission Communication conduct is being assessed. The diversity, in consideration of of October 2011 “A renewed EU areas of assessment and the its intrinsic value as well as strategy 2011-2014 for Corporate requirements to be checked are its ecological, genetic, social, Social Responsibility”, according generally defined by commercial economic, scientific, educational, to which CSR is “a process to agreements between the two cultural, recreational and integrate social, environmental, organisations (if, for example, aesthetic values. ethical, human rights and the audit is conducted within consumer concerns in to their the scope of a supply contract Carbon Footprint business operations and core and it is the customer, directly A measure of the impact of strategy in close collaboration or through a third-party auditor, human activities (products, with their stakeholders, with the that is verifying compliance with services, processes, etc.) on the aim of: requirements), or by standards environment, in terms of the - maximising the creation of to which the organisation has total quantity of carbon dioxide shared value for partners/

chosen to conform (as in the case (CO2) and other greenhouse gas shareholders and for their of certifications). emissions associated with its other stakeholders and society An audit may reveal aspects of entire life cycle. at large, through a long-term company processes that fall strategic approach to CSR and short of requirements, in which Climate change the development of innovative case corrective measures are Expression used to indicate products, services and business proposed. Failure to resolve the increase in the average models;

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- identifying, preventing and Ecological footprint defined criteria, evaluating the adherence to human and workers’ reductions in impact that have packaging manufacturers, and mitigating their possible adverse An index that measures the area entire product life cycle; rights, environmental protection not actually been achieved. aims to assess and demonstrate impacts”. of ecologically productive land - ISO 14021(Type II): self- and fighting corruption. product compliance and food and sea required by a population declaration about specific Industrial composting safety, while also guaranteeing Corporate welfare or an activity to produce all the characteristics of the product Global Reporting Initiative (GRI) Controlled biological effective control of risk factors. System of voluntary services resources consumed and to (ex. Recyclability, compostability, A non-profit, multi-stakeholder decomposition using oxygen, provided by a business to its absorb all the waste produced etc.); organisation recognised at of organic waste. This process ISO 50001 employees in response to specific using prevailing technologies and - ISO 14025 (Type III) : international level, whose generates a material similar to International Standard specifying needs and economic and social management methods. environmental product mission is to establish guidelines humus, named compost. The the criteria necessary to create, interests. This definition covers a declaration, developed through for preparing sustainability composting process can be maintain and improve an energy wide range of operations, including EMAS an LCA methodology and reports and to encourage their realised at the industrial level management system . This benefits to meet social security and Eco-Management and Audit compliant with a series of use as a way of contributing to through specific plants, and at system should enhance an healthcare needs (for example, Scheme pre-defined criteria (ex. PCR – sustainable development. Since a limited scale, through house organisation to continuously contributions to healthcare plans) Voluntary scheme developed Product Category Rules ) its foundation in 1997, the GRI composters. improve its performance in terms and goods or services provided to by the European Community has issued a series of editions of energy efficiency and energy employees to help them achieve which can be voluntarily adopted Energy saving of its reporting standards, each ISO 9001 use and consumption, through a work-life balance. by organisations (companies, A set of actions to programme, representing an evolution of An international standard systematic approach. public administration, etc.) for plan and adopt energy-reducing the previous one to adapt to setting out the requirements two purposes: evaluating and mechanisms, technologies and changing scenarios and to meet of an organisation’s quality ® CO2 equivalent LEED Emissions of any greenhouse improving their environmental practices, without reducing stakeholders’ expectations management system. The LEED (Leadership in Energy gas converted – in accordance performance; providing the output or services offered. more effectively in terms of standard provides guidelines and Environmental Design) is a with the IPCC standard – on the public with information about the information provided (see for improving efficacy and system for classifying the energy basis of their contribution to the their environmental management Environmental compatibility stakeholder). The new edition efficiency in making a product efficiency and ecological footprint greenhouse effect, using carbon system. The “Fifth Programme Indicates that a project has been of the standard, the “G4”, which and providing services, and for of buildings in the United States, dioxide (CO2) as the reference of action for the environment” carried out or a product has focuses on the concept of enhancing customer satisfaction developed by the U.S. Green gas. For example, the effect is among the existent voluntary been made without any negative “materiality”, was released in mid and loyalty. Building Council (USGBC). It of natural gas (CH4) on global tools. impact on the environment. 2013 (see materiality). provides voluntary certification warming is equivalent to 21 times The main objective of EMAS is ISO 14001 for buildings that demonstrate that of carbon dioxide (CO2). that of favouring an economic Fair Trade Greenhouse effect A voluntary international their environmental sustainability development which is Certification standard for A natural effect, amplified by the standard, applicable to all in terms of energy and the Diversity Management sustainable, focusing on rules and agricultural raw materials, which results of human activities, which types of companies, which consumption of all resources A conscious approach to responsibilities of companies. guarantees that they come from regulates the ability of the Earth’s serves to assess and certify the involved in the production managing diversity within an supply chains managed according atmosphere to withhold energy adoption of an environmental process. organisation, in terms of gender, Environmental Labelling to fair-trade principles, including from the sun through a semi- management system (EMS), age, cultural background, ethnic Environmental labels apply paying a guaranteed minimum transparent layer consisting of capable of ensuring compliance Life Cycle Assessment origin, sexual orientation, to a product or a service. purchase price to farmers. greenhouse gases that “trap” the with all regulatory provisions and (LCA) religious belief, etc. The aim of Their aim is that of supplying sun’s rays. the commitment to continuous Methodology defined by the this approach is to reduce conflict information about the Global Compact improvement of environmental ISO 14040:2006 standard. The and leverage differences as a way environmental performance of Network of national and Greenwashing performance. LCA is an objective process for to drive innovation and improve the company, or one or more international companies and The dishonest behaviour of assessing the environmental company performance. specific environmental aspects. organisations from all over the companies or organisations ISO 22000 effects of a product, process or Environmental labels can be world, based on a proposal by whereby they pretend to A voluntary standard certifying activity, carried out by identifying Eco-design identified as follows: the Secretary-General of the have adopted environmental safety management systems in and quantifying energy, materials Product design that has -ISO 14024 (Type I): United Nations for the promotion and social policies in order to the food sector. It is applicable used and waste released into the the lowest possible impact environmental label based on of a sustainable global economy. distract attention away from to all companies operating environment in order to assess on the environment during third-party reviews. The label Participating companies must their responsibility for negative directly or indirectly in the food their impact and to identify manufacturing, use and disposal. is released on the basis of pre- demonstrate that they operate in impacts or simply to claim and agricultural sector, including and grasp opportunities for

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environmental improvement. Organic social or environmental) corporate social responsibility. or services of the organisation requirements are integrated into The assessment includes the Organic farming is a method has for the company and its In particular, the management or whose actions can influence the organisation’s overall strategic entire life cycle of the product, of growing raw materials in stakeholders (see stakeholder). aspects certified by the standard the organisation’s ability objectives. process or activity, including compliance with a set of coded Material issues are those are respect for human rights, to successfully implement the extraction and processing principles, like the one forbidding that reflect the organisation’s respect for workers’ rights, its strategies and reach its Sustainability and Sustainable of raw materials, production, the use of chemicals in all stages significant economic, social protection against child labour, objectives. Development transportation, distribution, use of agricultural production. The and environmental impacts and occupational health and In accordance with the The most common definition and final disposal. term “organic” is also used to or substantially influence safety guarantees. AA1000SES standard (developed of the concept of sustainable indicate a certification standard stakeholder assessments and The standard is based on the by the UK-based organisation development is contained in the Non-renewable energy sources for agricultural raw materials, decisions. principles established in some AccountAbility and recognised “Brundtland Report” of the World Energy sources coming from which guarantees that they come fundamental international as an international benchmark), Commission on Environment resources expected to terminate from supply chains that comply Rainforest Alliance documents such as the an organisation may give priority and Development (named on a human time scale, becoming with the principles of organic Rainforest Alliance is a non- International Labour Organisation to its stakeholders or groups after its chairman Gro Harlem too costly or too polluting for the farming. governmental organisation (ILO) conventions, the Universal of stakeholders on the basis Brundtland), produced in 1987. environment, unlike renewable For companies operating in founded in 1986 to preserve Declaration of Human Rights and of the relevance of each of Sustainable development sources, which are naturally Europe, the technical rules biodiversity, improve the living the International Convention on them. Relevance is an attribute indicates a development model replenished within a relatively establishing the characteristics conditions of farmers and the Rights of the Child; the aim is determined by a joint assessment “that meets the needs of the short period of time. Examples of of organic farming are laid down promote sustainable farming to improve working conditions at of the degree of dependency, present without compromising non-renewable energy sources in EU legislation. Moreover, practices (www.rainforestalliance. a global level. influence, and priority that the ability of future generations include fossil fuels (coal, oil and supervisory bodies authorised by org). The certification standard each stakeholder has with the to meet their own needs”. natural gas) and the minerals the Italian Ministry of Agricultural is based on compliance with Scope organisation, or other aspects Sustainability is therefore an used to produce nuclear energy and Forestry Policy also exist to the following nine principles: With reference to sustainability that characterise the relationship approach (to society as well as (uranium and plutonium). carry out inspections on the farms protection of local flora and reporting, “scope” indicates the between the stakeholder and the to business) orientated towards and certify organic production fauna, protection of ecosystems, various entities (e.g. subsidiaries, organisation. guaranteeing a balance between OHSAS 18001 (Occupational processes. protection of the soil, protection joint ventures, suppliers) whose Through the multi-stakeholder current and future needs, and Health and Safety Assessment of water resources, fair treatment performance is included in an approach a given topic is balancing economic and financial Series) Organisation and Management of workers and good working organisation’s sustainability addressed with the involvement requirements with social and International Standard identifying Model conditions, good relations report. As reporting is voluntary, and collaboration of entities environmental needs. the criteria for a “Management (in accordance with Italian within communities, integrated the company can define its own that have different interests in System for Occupational Health Legislative Decree 231/2001) waste management, integrated reporting scope; the broader the topic and therefore different Sustainability Report and Safety”. This system should An organisational system, pesticide management, the scope and if all or a large requirements. Examples of these A document drawn up identify the dangers and risks established through an official monitoring, and the promotion of proportion of the company’s stakeholders could be the various periodically in which an of activities, products and company document, designed to peace. activities are included in it, the entities in a production chain, organisation analyses its social, services of an organisation in prevent cases of criminal liability more the company is accountable representatives of institutions, environmental and economic order to ensure the continuous established in Italian Legislative Renewable energy sources (see accountability). companies and non-profit performance, describing its ability improvement of the safety Decree 231 of 8 June 2001. Under Natural sources capable of organisations, etc. to: performance as well as the the decree, organisations are generating thermic and electric Staff turnover - maintain the quality and compliance with the above- subject to “corporate liability” energy. These sources include: Staff turnover is the ratio between Strategic Sustainability Plan reproducibility of natural mentioned criteria. This for specific kinds of offences solar energy, wind energy, staff joining the organisation and A document in which the resources; standard can be used to obtain committed by administrators and biomass, tides, ocean currents. those leaving it. company sets forth its vision, - guarantee well-being and the certification from a third employees in the interest or for the objectives and activities to meet opportunities for growth in party, and/or to define a self- benefit of the organisations. SA 8000 Stakeholder and multi- stakeholders’ expectations accordance with human and declaration, or as a guideline in An international certification stakeholder more effectively within a workers’ rights; order to establish, implement and Materiality standard (where SA stands Stakeholders are groups or defined time limit and improve - generate income, profit, and improve a management system Materiality means the for “Social Accountability”) individuals that are expected its environmental, social stable and lasting jobs. for occupational health and relevance that a given topic for certifying some aspects to be significantly affected by and economic performance, The Sustainability Report is a safety. (economic, management, of business activity related to the activities, products and/ ensuring that sustainability voluntary document, so it is not

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subject to any legal obligation. There is, however, a standard that sets out its structure and contents, to ensure it provides the information in which stakeholders (see stakeholder) are interested. The GRI standard (see Global Reporting Initiative - GRI) is recognised on an international level and used by leading organisations around the world for sustainability reporting20.

UTZ UTZ is a non-profit association based in Amsterdam, founded in 2002 to promote sustainable farming. The certification standard is based on principles such as the transparency of commercial practices, the traceability of raw materials and compliance with ILO conventions (www.ilo.org). The name of the association derives from Utz kapeh, which means “good coffee” in the Mayan language Quiché.

20 The EU Directive published on 6 December 2014 on “disclosure of non-financial and diversity information by certain large companies and groups” calls for listed and unlisted European companies with more than 500 employees to publish a declaration annexed to the management report, no later than 2017, containing “key information relating to at least environmental, social and employee matters, respect for human rights and the fight against corruption”. The directive is currently being transposed into national law by the EU member states.

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