Sustainability report 2017 NUTS CANDY BRANDS LEADING concept SALES IN SALES PICK & MIX PICK with the goals the with and Cloetta’s business Cloetta’s COUNTRIES 50 The vision, together vision, together The CHOCOLATE strategies, expresses expresses strategies, SEK BILLION MISSION 5.8 Munchy Moments Munchy EMPLOYEES To bring a smile your to To ANNUAL SALES CHEWING GUM 2,467 IN

8

VISION VISION To be most the To PASTILLES Munchy Moments Munchy admired satisfierof FOUNDED

1862 Cloetta Cloetta Netherlands and the region Nordic the in company confectionery – a leading

Cloetta Sustainability report 2017 Cloetta

Sustainability report Sustainability

2017 2017

Cloetta’s strengths • Strong brands and market positions. • Excellent availability in stores enabled by a strong and effective sales and distribution organization. • Good consumer recognition and loyalty. • Innovative product and package development. • Efficient production with high and consistent quality.

Cloetta’s net sales Cloetta’s net sales by category by country Other 8% q Sweden Candy UK 5% u t Other 2% q 34% t Germany 5% u Nuts 4% u 58% Nordic Other countries Chewing gum 7% u The Netherlands 32 % 68 % 14% u Pastilles 12% u Norway 6% u p Finland Chocolate 17% p Denmark p 21% 7%

Categories where Cloetta is among the market leaders

Sweden Norway Denmark The Netherlands Finland Candy Pastilles Pastilles Pastilles Pastilles Chocolate countlines Candy Candy Candy Chewing gum Pastilles Pick & mix Pick & mix Chewing gum Candy Chocolate bags Pick & mix Pick & mix

1 Cloetta

Sustainability report Sustainability A year of change

2017 2017 2017 was a year of change for Cloetta. The acquisition of Candyking and the divestment of Cloetta Italy changed the Group’s structure significantly.

Strategic initiatives support Cloetta’s sustainability com- profitable growth mitment has three components: The confectionery market is characterized greater well-being, reduced by stability. Admittedly growth in Europe environmental impact and sus- is relatively small and individual markets tainable sourcing. Action plans, can show reduced sales in a single month or targets and key performance quarter, but over time annual growth in the indicators are in place for all confectionery market is normally 1 – 2 per prioritized areas. cent. Despite this, Cloetta has not managed Cloetta is a member of the to fully grow in line with the market in recent UN Global Compact and sup- years. We have therefore started a number ports its 10 principles. These are of strategic initiatives that will contribute to also incorporated into Cloetta’s profitable growth. Code of Conduct and thus pro- My key focus for Cloetta is to improve our vide a solid foundation for our competitiveness, thereby driving profitable sustainability work. growth in our main markets and selected In the area of sustainable international markets. We will do this by im- sourcing, proving the competitive power of our brands, Cloetta has prioritized a number improving our ability in partnership with our of raw materials. All cocoa and customers to expand our categories, as well as chocolate that we purchase is improving our performance culture and our UTZ certified. We have now also cost culture. removed palm oil as a glazing The means that we must agent in the majority of our products. For the • have clearer category and brand plans and few products that still contain palm oil, we Despite the challenges improve our working methods when we have started switching to segregated palm oil “ develop, launch and sell our products, which im- we faced during the year, • offer consumers a choice which means that proves traceability. In 2018 we are also start- Cloetta stands on a firm they can choose with sugar, with less sugar ing a programme for sustainable shea butter. foundation. or sugar-free, Cloetta’s long-term environmental goals • be more effective in our marketing and extend until 2020. Following a steady im- ” over time increase our brand investments provement in our environmental key perfor- while providing leading-edge support to mance indicators in recent years, the picture have some of the market’s strongest brands our customers with their online sales of our in 2017 is more mixed. Carbon dioxide emis- and leading market positions. We have one of products, sions per produced kilogram decreased and the best sales and distribution organizations • reduce our cost base both in order to our recovery rate increased, while our total in our main markets. We have experienced, increase profitability and to be able to energy consumption was largely unchanged. skilled and dedicated employees who are finance new brand investments, We therefore need to increase our focus on proud of our company and our products. And • integrate Candyking to create substantial energy efficiency since this is good both for we have a profitable business, which generates synergies and thereby increased profitabil- our environment and our economy. a stable cash flow that can be used for both ity, Our sustainability report (included in acquisitions and dividends. • continue our Lean2020 programme among this annual report) has been reviewed by the I therefore feel confident in the knowl- other things to increase capacity for in- auditing firm KPMG. Since it is our ambition edge that we have the foundation we need to sourcing from Candyking as well as reducing to meet international standards, our sus- further develop and improve Cloetta. This production costs. tainability report is prepared in accordance is for the benefit of customers, consumers, with the Global Reporting Initiative (GRI) shareholders and employees. Enhanced sustainability work guidelines. Cloetta’s aim is to build long-term sustaina- Stockholm, March 2018 ble values by growing as a company while at Cloetta is stable the same time ensuring that the impact on Despite the challenges we faced during the Henri de Sauvage-Nolting both people and the environment is positive. year, Cloetta stands on a firm foundation. We President and CEO

2 Words from the President Cloetta

Sustainability report Sustainability Long-term sustainability targets

Reduced environmental Greater well-being Sustainable sourcing impact

2017 2017

Employees Energy consumption Responsibility for raw material Cloetta has zero tolerance for occupational Energy consumption per produced tonne producers accidents. The target for 2017 was achieved to be reduced by 5 per cent by 2020. • Sustainability programmes will be imple- after more focused working methods. mented for all prioritized raw materials. Energy consumption • By 2020 at the latest, Cloetta’s suppliers Days between occupational accidents MWh/prod. tonne Goal 2020 (number of days between accidents leading to <1.82 of oils and fats shall have a fully traceable >1 day of absence) 2.0 Days pipeline of palm oil fractions back to 30 Goal 2017 known plantations. >24.3 1.5 •  100 per cent of all cocoa and chocolate 25 purchased by Cloetta must be UTZ- certified. 20 1.0 • From July 2018 and onwards, Cloetta 15 will only source sustainable shea butter 0.5 according to the AAK programme, see 10 page 24. Comments on the year’s outcome 5 0.0 2014 2015 2016 2017 • Sustainability programmes have been implemented for cocoa and palm oil. For 0 Waste 2013 2014 2015 2016 2017 shea butter, Cloetta has decided to switch The volume of waste per produced kg to to sustainable shea butter which will In 2017 LTA reached 26.1 days on average be reduced by 25 per cent by 2020. be implemented in 2018. Sustainability between LTAs compared to 16.6 days in Waste programmes for cane sugar, cashew nuts 2016. Kg/prod. kg and gum arabic will be in place by 2020 Great Place to Work – the goal is an 80 Goal 2020 <49.3 at the latest. improved Trust Index compared to the 70 • 100 per cent of the cocoa purchases are previous survey. 60 UTZ-certified.

50 • Cloetta started to remove most of the palm oil from glazing agents at the end 40 of 2017. This means that the majority 30 of Cloetta’s products are palm oil free. 20 Cloetta’s range of chocolate and fudge products still contain palm oil but during 10 LESS SUGAR & the year Cloetta started switching to 0 segregated palm oil in accordance with 2014 2015 2016 2017 SUGAR-FREE RSPO principles. Certification according Consumers – Carbon dioxide emissions to this standard will take place in 2018.

Less sugar/sugar-free CO2 emissions from production per Have a sugar-free alternative for all produced kg to be reduced Cloetta’s key brands by 2020. Carbon dioxide emissions Kg/prod. kg 0.35 Goal 2020 Sustainability <0.25 0.30 programs developed for cocoa, palm and 0.25 shea butter NAFNAC 0.20 No Artificial Flavours & 0.15 No Artificial Colours By 2020 0.10 No artificial colours or flavours sustainability Cloetta is committed to increasing the 0.05 programs in place share of natural ingredients. Cloetta’s 0.00 for prioritized product portfolio will contain no artifi- 2014 2015 2016 2017 materials cial flavours and no artificial colours by Energy consumption and waste decreased in absolute numbers but the targets were not met 2019. due to lower production volumes.

Goals and strategies 3 Cloetta

Sustainability report Sustainability

2017 2017 New strategic priorities for 2017 and 2018

Focus on driving growth

Brand development – Customer and market New markets, initiatives consumer development and concepts Continuously enhance our Be #1 among snack and candy Widen and expand the product brands with a focus on high companies in brand and category portfolio into new geographical quality and local tradition. development. markets.

• Develop international brand plat- • Be available for purchase at all • Strengthen and establish internation- forms and joint innovation across Munchy moments. al market hubs for global development markets. • Build superior shopper insight to of The Jelly Bean Factory brand. • Focus on fewer but bigger brands and become preferred supplier with all • Launch and acquire new products, activities. customers. concepts and brands in existing prod- • Use digital media as a communication • Develop the market’s best ”shop in uct categories in existing or closely platform. shop” pick & mix concept. related markets. • Drive “Choice for you” for the launch • Strengthen the brands in the stores of products that contain less sugar or through wide distribution and high are sugar-free and free from artificial visibility. flavours and colours. • Maintain excellent customer service. • Develop sustainability programmes • Develop e-commerce concepts as a for the prioritized raw materials. way to support the customers.

4 Goals and strategies Cloetta

Sustainability report Sustainability

2017 2017

Focus on Focus on the employees cost-efficiency and organization

Increase profitability and Create the conditions future investments for growth

• Integrate Candyking and insource • Zero tolerance for accidents. production to create synergies. • Create a common agenda and a uni- • Continue the implementation of form way of working. Lean 2020, which leads to increased • Create a winning culture. efficiencies, lower costs and reduced • Optimize Cloetta’s culture with sup- energy consumption, waste and port from ”Great Place to Work ” and emissions. Lean 2020. • Minimize material costs through • Develop leaders and attract, develop systematic value engineering and and retain skilled and competent reduced waste, and indirect costs employees. through value improvement. • Strengthen the organization in brand • Greater efficiency in marketing and category development. activities.

Goals and strategies 5 Cloetta

Sustainability report Sustainability Cloetta’s leading brands Cloetta is the name and symbol of the Nordic region’s oldest confectionery company,

2017 2017 with a very strong local heritage. Cloetta’s brands fulfil the mission »To bring a smile to your Munchy Moments«.

1960 1941

1976 1909 1920 1951 1984 2007 Year 1934 1937 1965 1981 1878 1913 1928 1949 1922 ® 1998

1938

1953

6 Goals and strategies Cloetta

Sustainability report Sustainability

2017 2017

New market, initiatives and concepts

In the spring of 2017 Cloetta acquired Candyking Holding AB (“Candyking”) and its subsidiaries, a leading concept supplier in the pick & mix category in the Nordic region and the UK. Candyking offers retailers a total concept in pick & mix, consisting of products, racks and merchandising as well as in-store and logistics services.

At the time of the acquisition, Candyking Synergies from the acquisition A total of 600 – 800 articles provided some 8,000 sales outlets in seven For several years Cloetta has offered a Following the acquisition of Candyking, countries with pick & mix and had annual similar concept for both regular pick & mix Cloetta now offers a total of 600 – 800 arti- sales of approximately SEK 1,200m. Candy- and natural snacks. In Finland, Cloetta has cles in the pick & mix assortment in the form king’s brands include Candyking and Kara- successfully driven the pick & mix concept of chocolates, gummy candies, hard-boiled mellkungen in the candy market and Parrots Karkkikatu for many years. candies, toffee, foam, liquorice and natural in natural snacks. Today, pick & mix accounts Since Candyking has no in-house pro- snacks. A customer can choose a concept for 30 per cent of the Group’s sales. duction, Cloetta can bring about significant with between 16-200 different articles that synergies through the acquisition. Over consumers can pick in bags or cups. Pick & mix – a vital part of the years, Cloetta has delivered candy to the candy market Candyking and Cloetta has the production Natural snacks Pick & mix accounts for over 30 per cent of capacity to successively insource additional Through the Parrots brand, Cloetta is also a the candy market in Sweden, measured by production. The synergies are created not leading player in the natural snacks market in volume. In the other Nordic countries, the only in production, but also in administra- Sweden and Finland. Parrots is currently the share is between 10 and 15 per cent. tion, logistics and sales, and will be realized only pick & mix brand that is 100% free from In the rest of Europe, pick & mix has a during the years 2017 – 2020. palm oil and includes only UTZ-certified weaker position but is a growing part of the chocolate and natural flavours. candy market.

Goals and strategies 7 Cloetta

Sustainability report Sustainability Cloetta’s value chain

Cloetta’s ambition for creating value is

2017 2017 «To bring a smile to your Munchy Moments».

Through innovative product development, efficient purchasing and high-quality production, as well as good relations with the retail trade and marketing that strengthens the brands, Cloetta creates economic value. At the same time, Cloetta strives to have a positive impact on people and the environment.

Product development Purchasing Production

Value creation • Product development is based on • Cloetta’s total purchasing costs • Cloetta had 2,467 employees during a combination of customer- and amounted to SEK 3,873m, of which 2017 and total personnel costs consumer-driven needs/preferences, SEK 2,575m refers to raw materials amounted to SEK 1,152m. innovation and opportunities in the and consumables. Of these, packaging • Cloetta’s 8 factories had 1,580 existing production network. materials are the largest cost item and employees. account for around 22 per cent. The • During the year, Cloetta produced three main raw materials in terms of 95.6 thousand tonnes of candy, choco- purchasing costs are sugar, cocoa and late, chewing gum, pastilles and nuts. milk powder. Sustainable corporate responsibility

• For several years Cloetta has conduct- • Suppliers to Cloetta’s production Environment ed a long-term programme, NAFNAC are subject to an approval process in • Development of more energy-efficient which both product safety and corpo- (No Artificial Flavours, No Artificial processes and lower CO2 emissions is Colours) aimed at offering a portfolio rate responsibility are evaluated. continually underway. of products that contain only natural • Cloetta promotes sustainable produc- • Waste is sent to material recycling and flavours and colours. tion of prioritized materials: cocoa, energy recovery. • Cloetta is pursuing a project to palm oil, cane sugar and shea butter, • Systematic environmental manage- systematically develop alternative read more on pages 22–24. ment is a natural part of processes in all products that have lower sugar or are factories. sugar-free for the major brands. With- Occupational Health in the “Choice for you” strategy, Red and Safety (OHS) Band in the Netherlands launched • Focus on personal safety. vegetarian, sugar-free and less sugar alternatives during the year. • OHS activities with systematic monitoring are part of the daily follow-up. Sustainability Product Safety programs developed • Product safety system in place in all for cocoa, palm and factories. shea butter • The factories focus on measures to prevent serious product complaints. Read more on page 18.

LESS SUGAR & SUGAR-FREE

8 Goals and strategies Cloetta

Sustainability report Sustainability

2017 2017

Repayment of borrowings

Customers Consumers

• Total net sales amounted to • Cloetta satisfies Munchy Moments. SEK 5,784m. Cloetta’s largest • Feedback about complaints and customer category is the grocery viewpoints. retail trade. The service trade is also a very important customer group. Profit for the year was SEK 402m excluding impact of impairment loss in discontinued operation including income tax effects and other items affecting comparabil- ity. Including items affecting comparability, profit amounted to SEK –97m.

• In general, the customers require • Products of a high quality BRC or ISO certification. are marketed responsibly. • Unnecessary transport packaging is • Offer consumers a wide range of natu- Shareholders avoided and transports are optimized. ral products. A certain share of non-restricted equity is All packaging can be sorted at source. • Programmes to promote sustainable distributed to Cloetta’s shareholders in the packaging. form of dividends, after the operations have been provided with the capital necessary for development. For 2017 the Board has proposed an ordinary dividend of SEK 0.75 per share, which corresponds to 54 per cent of the profit for the period excluding impact Distributed value* of impairment loss discontinued operation Creditors, financial partners 1% qqShareholders 4% including income tax effects and other items Income tax u affecting comparability and a special dividend 4% Employees of SEK 0.75 per share, equal to a total of SEK t 21% Generated 433m, to be paid in 2018. In 2017, SEK 216m value was distributed to the shareholders. Other suppliers u SEK 23% Suppliers of raw 5,790m materials and consumables t 47% Cloetta’s Code of Conduct is the basis for all relation- * Excluding amortization/depreciation, loss in discontinued operation and loss for the year and including paid dividends and net financial items, total SEK 5,531m. ships within and outside the company Economic impact Production and sales of Cloetta’s products generate economic values that benefit the stakeholders.

Goals and strategies 9 Cloetta

Sustainability report Sustainability Cloetta’s main markets

2017 2017 Cloetta’s main markets are the countries where the Group has its own sales and distribution organization, and consist of Sweden, Finland, the Netherlands, Denmark, Norway, Germany and the UK.

Main markets – countries where Cloetta has its own • organization. Countries where Cloetta’s products are sold • primarily through distribution agreements. • Share of Cloetta’s sales* ee la oa 21

e ete e la 7 ea 1 ea

te aet

*Pro forma excluding Cloetta Italy including Candyking full year.

10 Goals and strategies Cloetta

Sustainability report Sustainability Success factors for the sales organization

2017 2017

The right products Good relations with Good visibility for to the right customer customers at the Cloetta’s products Selling the right products to the right central and local levels High visibility in stores, and particu- customer generates profitability for both larly at the checkout stands, is vital for Through good relations with the retail Cloetta and for the customer. Cloetta’s growth in sales. In order to maximize the trade and in-depth knowledge of the sales force is large and effective, which visibility of Cloetta’s products, the sales industry, market and products, Cloetta provides good opportunities for a pres- force also works actively to increase the can present attractive sales solutions ence in many different sales points. number of display points in the stores. that support each customer’s business objectives.

Effective sales Ensure compliance with Boost sales campaigns in coopera- central agreements By being where consumers are found, it tion with the customers with the retail trade is possible to increase sales. The task for Cloetta’s sales organization is to contin- Marketing campaigns are typically com- The sales force ensures compliance with uously seek new non-traditional sales bined with sales promotional activities in central agreements and that the agreed points for selected parts of the product the stores. The sales force helps retailers range of products is found in the stores. range, but also to increase display space to display these. and sales in existing stores.

Goals and strategies 11 Cloetta

Sustainability report Sustainability

2017 2017

Cloetta’s sustainability commitment

Cloetta’s overall goal for corporate responsibility is to build sustainable long-term value. For Cloetta, sustainable value is about growing as a company while at the same time ensuring that the people and environments that are affected by Cloetta’s operations or products are positively impacted.

GREATER GREATER REDUCED SUSTAINABLE WELL-BEING WELL-BEING ENVIRONMENTAL SOURCING EMPLOYEES CONSUMERS IMPACT Employee well-being is guaran- Consumer well-being is ensured Environmental impact from Cloetta complies with the ten teed through an attractive and through high and consistent Cloetta's factories to be reduced. principles of the UN Global

safe working environment in quality and sustainable product Focus on Energy, CO2 and Waste. Compact. accordance with the UN Global development, with a greater Compact. share of natural raw materials More environmentally friendly Key suppliers to be approved and less sugar or sugar-free and sustainable packaging to be from a sustainability perspective. products. developed. Sustainability programmes are in place for prioritized raw materi- als from developing countries.

Cloetta’s sustainability commitment func- Cloetta’s work with corporate respon- sustainability report in accordance with tions as the road map for building long-term sibility is governed by the Code of Conduct the Swedish Annual Accounts Act chapter 6, sustainable value. Based on stakeholder and the four Cloetta values Focus, Passion, consists of pages 1–12, 16–18, 20–29, 33, dialogues and a materiality analysis, Cloetta Teamplay and Pride. 41–48. The GRI Index is on pages 46–47. The has identified four areas which are of key Corporate responsibility section on pages importance for Cloetta to fuel sustainable Sustainability reporting 41–45 describes the basis for sustainability growth. For all four areas, long-term goals Cloetta’s integrated annual and sustainability work in more detail as well as how this is have been identified and matched with clear report is prepared according to GRI G4 Core governed and organized. How Cloetta has action programmes and follow-up systems. level standards. The reviewed sustainability defined materiality issues is also described report which is equivalent to the statutory here.

12 Cloetta’s sustainability commitment Cloetta

Sustainability report Sustainability 6 distinct consumer trends

2017 2017

Genuine raw materials Greater On-the-go There is a continued interest in natural individualization More and more often, we are eating and genuine raw materials. Additives of outside the home on our way to and from Consumers are seeking satisfaction of various types and artificially produced different activities. Greater availability their individual needs to a greater extent. substances are being questioned in favour and different solutions allow consumers This means that they want the option of of natural materials. E numbers are being to satisfy their needs immediately. choosing products, but also to have access replaced with the name of the additive in to products and services that are individ- plain language. Natural sugar or stevia ualized and can be adapted to different are preferred over artificial sweeteners. occasions. Pick & mix is a good example of a concept that is individualized.

Responsibility for Health and less sugar E-commerce and the environment and People are increasingly seeking raw social media gaining working conditions materials with positive health effects. importance Cloetta’s product range includes One key trend is an interest in the effects nuts, which are rich in vitamins and min- E-commerce is growing rapidly across all of food production on the environment erals. Xylitol, which is found in chewing sectors, including the grocery retail trade. and social conditions. Suppliers and gum and chewy pastilles, is good for Both grocery retailers and food producers retailers have responded to consumer de- dental health. are building up their own e-commerce mand for information, above all about the Cloetta’s Red Band offers choices capacity to sell their goods online, and raw materials’ origins, quality and culti- with one totally sugar-free variant, one new players are also capitalizing on the vation methods by introducing different with 30 per cent less sugar and a vegetar- powerful growth of online sales. Alongside types of labelling and certification. ian option. e-commerce, direct communication with consumers via the social media is emerg- ing as one of the most important channels for further developing the brands’ person- alities and capturing trends.

Cloetta’s sustainability commitment 13 Cloetta

Sustainability report Sustainability

2017 2017

Consumer well-being

Cloetta’s responsibility for consumer well- find sugar-free products, products with less being starts with high and consistent quality sugar or those that are naturally free from together with correct and detailed content la- sugar in Cloetta’s assortment. belling. Besides these fundamentals, Cloetta By 2020 all Cloetta’s key brands will is also running a programme with the ambi- have a sugar-free alternative or an alternative tion to meet increasing consumer demand for with a reduced amount of sugar. more healthy products. No artificial flavours, Cloetta offers choices no artificial colours (NAFNAC) Sugar plays an important role in Cloetta’s There is an increasing consumer interest in assortment when it comes to delivering great natural ingredients. Different types of addi- taste, pleasure and enjoyment to our con- tives and chemically produced substances are sumers. Sugar is also important in bringing being questioned from a health standpoint. structure and preservative properties to the Cloetta is therefore conducting a programme products. aimed at removing artificial flavours and GREATER Cloetta’s mission is to bring a smile to colours from the assortment. consumers’ munchy moments, something that By 2019 Cloetta will use only flavours WELL-BEING should also include products with alternatives and colours derived from natural sources. CONSUMERS to sugar. Consumers must therefore be able to

Oers No choices – Artificial sugar-free for key brands Flavours (NAF) or by 2020. NAFNAC Colours (NAC) LESS SUGAR & No Artificial Flavours & by 2019 SUGAR-FREE No Artificial Colours

14 Cloetta’s sustainability commitment Cloetta

Sustainability report Sustainability Responsibility for consumer well-being

2017 2017

Fewer calories with Nuts – Dental benefits stevia loaded with nutrients with xylitol In order to offer products with a reduced Nuts are a natural source of many vital Production of the sweetener xylitol, calorie content, stevia plays a key role for nutrients and also contain antioxidants. which has fewer calories than natural Cloetta’s products. Stevia is a plant native Cashew nuts are rich in iron, folic acid sugar, was originally started in Finland to South America whose leaves contain and zinc. Peanuts (which are actually in the 1970s through extraction from an intense and natural sweetness. seeds) are rich in protein and contain birch sap. Today xylitol is manufactured Cloetta uses stevia extract in products high levels of Vitamin B3. Almonds from various deciduous trees and maize. such as Läkerol, chewing gum and select- (which are actually seeds) are rich in Xylitol is found in several of Cloetta’s ed offers of packed confectionary from Vitamin E and pistachios are very rich in chewing gum products, such as Jenkki Red Band. antioxidants. and Mynthon and the pastille Läkerol DentaFresh.

Natural raw materials Clear declaration High quality and Goody Good Stuff and The Jelly Bean of ingredients product safety Factory are two examples where Cloetta works continuously to develop High quality and product safety are Cloetta has implemented the idea of responsible and clear information about vital in food production and are strictly 100 per cent natural ingredients. All the contents of the products via packages adhered to in every step of Cloetta’s artificial colours and flavours have and the website. production processes, from inspection of been replaced by natural fruit and raw materials to finished products. First plant extracts and all other food addi- class raw materials, correct handling tives have been removed. and processes according to the recipes create the right flavour, appearance and consistency and eliminate any risks to the consumers.

Goal and outcome for complaints/returns, see page 18.

Cloetta’s sustainability commitment 15 Cloetta

Sustainability report Sustainability

2017 2017

Supply chain

At year-end 2017 Cloetta had 8 factories in Sweden, Slovakia, the Netherlands, Belgium and Ireland. All in all, Cloetta produced approximately 95,600 tonnes of candy, chocolate, chewing gum, pastilles and nuts in 2017.

Cloetta’s supply chain is responsible for hout, Belgium, and one person was injured. production, purchasing, planning, logistics, This led to production capacity constraints, quality, technology and safety. The top prior- and significantly lower volumes were pro- ities during the year have been to implement duced after the incident. It also created ripple and drive the Lean 2020 programme in order effects in the factory network when new shifts to increase efficiencies, prepare and initiate were set up in some factories and produc- the insourcing of volumes from Candyking, tion was outsourced to compensate for lost drive the safety culture and to finalize the volumes. This led to higher complexity and integration of the factories that came with the additional cost. The effects of the incident acquisition of Lonka in 2015. impacted the factory network in the second half of 2017 through production of lower vol- Fire in factory umes. A new production line is expected to be In June 2017, an explosion and a fire de- installed during the second quarter of 2018. stroyed one of the lines in the factory in Turn-

95.6 thousand Lean tonnes 1,580 produced FACTORY 2020 2017 8 EMPLOYEES

16 Supply chain Cloetta

Sustainability report Sustainability

Changes in the production structure 2012–2017 2012 2017

Gävle Aura

Ljungsbro 2017 Alingsås

Sneek Roosendaal Turnhout

Levice

Gordona Cremona San Pietro in Casale unsbro Silvi Marina

elsinbor

2016 Snee ublin oosenaal urnout

Ljungsbro

eie Helsingborg

Dublin Sneek Dieren Roosendaal Turnhout

Levice

Gordona Cremona San Pietro in Casale

Silvi Marina

Closed factory Acquired factory Sold factory

Production rationalizations ty. The focus is on a program to improve the to contractors and use Lost Time Injury Rate and transfers safety culture that will alter the attitudes and (LTIR) as the primary safety KPI (LTIR is Between 2012 and 2014 Cloetta implemented behaviour of employees. Cloetta also works the number of occupational accidents (an a factory restructuring programme in which with continuous injury and risk reduction employee’s work stopped more than 24 hours) three factories were closed and production programmes based on real safety data that is arisen during a 12-month period for each was insourced from third-party suppliers. translated into specific safety projects with a million hours worked by a group of employees Moving a production line is a complex pro- focus on employee involvement. By increas- or workers) instead of LTA. This indicator cess that requires extensive documentation, ing safety awareness and encouraging good allows Cloetta to make internal comparisons careful planning, knowledge transfer, tech- safety behaviour by everyone in the organi- and external benchmarks. The Lost Time nical adaptations and fine-tuning. A physical zation, Cloetta will continue to transform its Injury Rate target for 2018 is 4.6. relocation of machinery is often required. In safety culture and performance. The numbers presented for 2016 and total, the restructuring programme meant In 2017, the number of occupational 2017 exclude the Italian factories. that 40 per cent of the total volume in the injuries fell and the interval between LTAs (Lost-Time Accidents resulting in absence of Days between occupational accidents Group was transferred in some way. (number of days between accidents leading to During 2017 the integration of the facto- more than one day) improved by 57 per cent >1 day of absence) ries that came with the acquisition of Lonka to an average of 26.1 days, compared with 16.6 Days 35 Goal 2017 was finalized. days in 2016. This outperformed the target >24.3 In September 2017, Cloetta sold its of 23.4 days. In total, there were 13 LTAs in 30 Italian business including the four factories. 2017, compared with 21 in 2016. The focus for 25 Most of the production in the Italian factories 2018 will continue to be the top four safety was intended for the Italian market, but risks: machine isolation, hazardous chemical 20 the products produced on behalf of Cloetta management, fork lift trucks and ATEX (EU are still being made in the Italian factories Directive regarding explosive atmospheres 15 but now under a contract manufacturing such as flammable gas and dust, in Cloetta’s 10 agreement. case dust from flour, for example). The new safety tools and training developed in 2017 5 will be deployed to support the factories in Occupational safety 0 Employee safety is fundamental to Cloetta their work with daily risk reduction. In 2018, 2013 2014 2015 2016* 2017* and the top priority in every production facili- Cloetta will also start to track injuries linked *Excluding the sold Italian operations.

Supply chain 17 Cloetta

Sustainability report Sustainability

Management systems Cloetta has a central management system to ensure standardized working methods in its operations. Each production unit has a locally adapted management system that is linked to the central system. Central policies, goals and

2017 2017 procedures are broken down and implement- ed at the factory level. The management systems cover occu- pational health and safety, quality, product safety and the environment. These systems are based on international standards (BRC Global Standard for Food Safety, ISO 14001 and OHSAS 18001), recurring risk assess- ments and continuous improvements. One important aspect of this working method is a systematized meeting structure for monitoring of results against targets, to detect both positive and negative deviations. Goals and results are visualized for exam- ple on displays in the facilities to provide knowledge about the current situation, which contributes to promoting awareness and engagement among the employees. Action can be taken immediately in the event of devia- Planning and logistics to the same high quality standards that apply tions and systematic follow-up creates scope Effective production planning leads to lower to production in Cloetta’s own factories. for proactive improvements. capital tied up in the form of inventories of External manufacturers are evaluated and Read more about Cloetta’s environmen- both raw materials and finished products, at tested regularly. tal work on pages 20–21. the same time that it increases the service level. Delivery reliability is one of the most Consumer and customer feedback Quality and product safety critical parameters for the retail trade. Feedback from individual consumers is Cloetta places rigorous demands on quality Cloetta has a well-developed planning system extremely valuable in Cloetta’s pursuit of and product safety. First class raw materials that integrates the entire value chain from continuous improvements. and correct treatment and processing meth- supplier to production and final customer. Each market has a Consumer Service ods are essential for manufacturing of high The system also integrates financial planning unit that receives, investigates and responds quality confectionery. and prices. to consumer and customer feedback and com- Continuous efforts are made to ensure Cloetta works continuously to optimize plaints. In case of possible quality defects, that the products meet the requirements and its flows and working methods, both internal- Consumer Service always contacts the facto- expectations of consumers and retailers. ly and externally, together with customers ry in question. The affected factory then uses For each product there is a quality specifica- and suppliers. the information provided by the consumer to tion describing the required flavour, aroma, systematically find the root causes of any de- appearance, consistency and package. No Purchasing fects and thereby eliminate them. Many of the azo food colourings are used in Cloetta’s Cloetta’s largest cost items in production, complaints are related to the mix of products products. accounting for around 70 per cent of total in the bags and damaged packaging. All of Cloetta’s factories are certified costs, are raw materials, finished goods and according to the BRC Global Standard for packaging. Food Safety. BRC is a standard for assurance Raw materials are purchased only from Complaints, feedback per million sold consumer units of product safety and quality, and is one of suppliers that can be verified against Cloetta’s the cornerstones of Cloetta’s quality man- ethical, quality, product, safety and environ- Number Goal 2017 <6.2 agement. mental requirements. Suppliers to Cloetta 8 The product safety work is based on the are evaluated and approved before they are 7 HACCP method (Hazard Analysis Critical permitted to deliver raw materials to the 6 Control Points). With the help of the HACCP factories. The process varies depending on method it is possible to analyze potential the type of supplier and the type of material 5 risks to the consumer. This provides a basis delivered. Certain suppliers are physically 4 for steering and control of the entire process, audited at regular intervals by Cloetta. 3 from purchasing of raw materials to delivery Cloetta collaborates closely with its of finished products, in order to eliminate and largest raw material suppliers, among other 2 minimize all conceivable consumer risks. things through automated order and delivery 1 Both the BRC standard and EU food processes that are adapted to raw material 0 product legislation require traceability of raw consumption in each factory. 2013 2014 2015 2016* 2017* materials and products. This traceability has Cloetta’s range includes products that are *Excluding the sold Italian operations. been assured and is tested regularly. Cloetta produced by other manufacturers. External The result for 2017 was an improvement compared has a detailed action plan to enable rapid production is outsourced only to manufactur- to last year due to an increased focus on Cloetta’s recall of a product from the market if needed. ers following approval by Cloetta, according product quality management system.

18 Supply chain Cloetta

Sustainability report Sustainability Success factors for production

2017 2017

Engaged employees Employee safety Flexibility Good communication about processes A safe working environment is a funda- A production line is often used for several and goals creates engaged employees who mental right for each employee. Being different products. Rapid changeovers understand the business and how their and feeling safe on the job is essential in and cleaning are vital for high machine work contributes to the Group’s overall order to develop and perform well in the capacity utilization. Flexibility also results. workplace. means that each employee is able to work on more than one line.

High and Delivery reliability Cost-efficiency consistent quality Good production planning is decisive for Cloetta’s sales are based on large effective production and low warehousing volumes. Cost-efficiency is necessary in The goal is to always deliver safe products costs, but also for delivery reliability to order to stay competitive. with the right flavour, appearance and the customers. consistency according to their respective specifications.

Supply chain 19 Cloetta

Sustainability report Sustainability

2017 2017

Reduced environmental impact

The Paris Agreement was signed in 2016. The Cloetta’s Lean programme, where the vision agreement provides a pathway and a direction is to benchmark against world class produc- not only for governments but also for compa- tion with the aim of achieving operational nies around the world. excellence. It also sends a signal that it is urgent – we All of Cloetta’s production units conduct must act now to avoid serious climate change systematic environmental management for future generations. that includes action plans and monitoring in several different areas. Fighting climate change By 2020 Cloetta will reduce energy

Cloetta´s primary focus in the fight against consumption and CO2 emissions in relation climate change is within the following three to produced volume (MWh/tonne) by 5 per areas: cent and the volume of waste in relation to • reduction of greenhouse gases, produced volume (kg/tonne) by 25 per cent. • increased energy efficiency and Sustainable packaging REDUCED • reduction of waste. Waste is also generated in the final stage of the life cycle of a Cloetta product – disposal of ENVIRONMENTAL The scope of reducing Cloetta’s environ- packaging material. To reduce the environ- mental impact lies within the production mental impact of this final stage, Cloetta has IMPACT network – the emissions and waste generated defined a sustainable packaging programme. by Cloetta’s operations. By 2020 all PVC will be phased out and For the three areas above, Cloetta has by 2025 all of Cloetta’s packaging material defined long-term goals to be reached by will be 100% recyclable/recoverable. By 2019 2020. The action programme in place to Cloetta will launch its first bio-based packag- reach the 2020 goals is incorporated into ing material.

100% 5% 5% 25% recyclable/ energy CO2 waste recoverable reduction reduction by reduction packaging by 2020 2020 by 2020 material by 2025

20 Supply chain Cloetta

Sustainability report Sustainability Environmental key performance indicators Energy sources 20171 20161 2015 2014 Gas Electricity 34%u t 38% Total energy consumption, GWh2 179 180 215 216 Energy consumption per produced tonne, MWh2 1.85 1.80 1.85 1.88 Total CO per produced kilo, kg2 0.29 0.30 0.35 0.34 2 GWh Waste per produced tonne, kg3 67 64 67 66 179

Recycled waste, %3 82 81 81 80 2017 Wastewater per produced tonne, m3,3 1.7 1.5 2.9 2.9 District heating COD* per produced tonne, kg3 14.2 15.0 17.6 16.6 5%u p Steam 23% 1) Excluding the sold Italian operations. Roosendaal Borchwerf is included as of 2016. For this reason, the Group’s targets have been adjusted slightly. 2) Compared to the 2016 report, comparative figures for 2014 and 2015 have been adjusted, since Roosendaal Borchwerf is now included. 3) The factories in Dublin, Helsingborg and Roosendaal Borchwerf are included as of 2016.

Energy and CO2 emissions Energy consumption Carbon dioxide emissions Alongside efforts to reduce energy consump- MWh/prod. tonne Goal 2020 Kg/prod. kg <1.82 tion, Cloetta is also working to choose energy 2.0 0.35 Goal 2020 <0.25 types with the smallest possible negative 0.30 impact on the environment. For that reason, 1.5 the total amount of energy used is converted 0.25 to the amount of CO2 equivalents generated 0.20 by the chosen energy types. 1.0 As a result of efficiency improvements the 0.15 total amount of energy used in the factories 0.10 decreased. Due a lower produced volume 0.5 during the year the energy consumption per 0.05 produced tonne increased to 1.85 MWh/ 0.0 0.00 tonne (1.80). In 2017 Cloetta had emissions 2014 2015 2016 2017 2014 2015 2016 2017 of 0.29 kg CO2 per produced kg (0.30). CO2 emissions within scope 1 (direct emissions) Waste Recycled waste amounted to around 11,700 tonnes in 2017, Kg/prod. kg % while the corresponding figure for scope 2 80 Goal 2020 100 <49.3 (indirect emissions) was 16,600 tonnes in 70 2017. Cloetta purchases renewable electricity 80 60 for some of the factories, and assumes 0 kg in 50 CO2 emissions for this power. During the year 60 a large proportion of renewable energy was 40 purchased which, despite a lower produced 30 40 volume, means that the amount of CO2 per produced kg fell. 20 20 10 Transports 0 0 Cloetta calculates CO2 emissions from trans- 2014 2015 2016 2017 2014 2015 2016 2017 ports that Cloetta is responsible for. In 2017 Wastewater COD* 38 kg of CO2 were released per transported 3 tonne. To reduce both freight costs and CO M /prod. tonne Kg/prod. tonne 2 3.0 20 emissions, Cloetta uses stackable pallets and chooses transporters that have a higher load 2.5 capacity and who use a combination of road/ 15 rail/water transports, when possible. If viable, 2.0 without jeopardizing product quality, refrig- erated transports are avoided. 1.5 10

Waste management 1.0 5 All of Cloetta’s production units pre-sort their 0.5 waste. A reduction in raw material waste has a positive impact on both the environment and 0.0 0 the Group’s total costs. Due to more efficient 2014 2015 2016 2017 2014 2015 2016 2017 sorting, 82 per cent (81) of waste is recovered/ * COD (Chemical Oxygen Demand), is a measure of the amount of oxygen consumed in complete recycled. The volume of hazardous waste is three prioritized goals, Cloetta is working chemical decomposition or organic compounds very minor and consists of fluorescent light to improve the wastewater quality. Cloetta in water. tubes and similar. rates this quality among other things in terms of COD (Chemical Oxygen Demand), which routines have reduced COD emissions in re- Wastewater measures the amount of oxygen consumed in lation to produced volume. There are several The volume of wastewater was 1.66 m3 complete chemical decomposition or organic projects in progress to improve the quality of (1.51) per produced tonne. In addition to the compounds in water. More efficient cleaning the wastewater.

Supply chain 21 Cloetta

Sustainability report Sustainability

2017 2017

Sustainable sourcing

By incorporating sustainability aspects into Conduct for suppliers is based on the 10 prin- the sourcing strategy, Cloetta creates a plat- ciples in the UN Global Compact. form for ensuring the supply of high quality raw materials to the factories while at the Sustainability programmes same time improving opportunities for the for prioritized raw materials growers in the countries of origin to develop Secondly, sustainable sourcing at Cloetta is sustainable farming methods. aimed at directly addressing different types of social, environmental and economic chal- Supplier approval process lenges in the countries of origin for prioritized First of all, sustainable sourcing at Cloetta is raw materials. Cloetta’s sustainable sourcing about having control one step back in the sup- programme for prioritized raw materials is ply chain, i.e. to the first line of suppliers. Raw based on external certifications and/or veri- materials are purchased only from suppliers fication according to the guidelines defined in that can be verified and approved against Cloetta’s Code of Conduct. Cloetta’s Code of Conduct for suppliers. So far, Cloetta has a sustainability SUSTAINABLE Based on a risk assessment, certain sup- programme in place for cocoa, palm and pliers are physically audited according to an shea butter. By 2020, Cloetta will also have SOURCING established schedule. Cloetta’s Code of sustainability programmes in place for cane sugar, gum arabic and cashew nuts.

Goal By 2020 100% sustainability suppliers approved programs in place according to Sustainability for prioritized the principles programs developed of UN Global materials Compact for cocoa, palm and shea butter

22 Supply chain Cloetta

Sustainability report Sustainability

Sustainable cocoa farming through UTZ Source: UTZ impact report 2016 report impact UTZ Source: Cocoa is cultivated by Through UTZ the cocoa farmers around 5 million farm- are given

• Training in new farming methods. ers and employs some 2017 • Support in buying better plants, 40 million people, of which leads to a higher yield. whom close to 70% are • UTZ-certified cocoa growers found in West Africa, produce more than growers not primarily Ghana and affiliated with UTZ. COCOA Cote d’Ivoire.

UTZ-certified cocoa growers A better life for cocoa growers Greater knowledge results in produce more in Cote d’Ivoire higher quality crops Cocoa farmers in 92% of UTZ certified farmers • UTZ-certified cocoa farmers Cote d’Ivoire experienced positive changes in Cote d’Ivoire have higher from certification. knowledge levels than those UTZ-certified who are not UTZ-certified, and 82 % mentioned living condi- 83% have shared this knowl- 467 kg/hectare tions had improved. edge with their families, their 49 % of UTZ farmers use employees and others. Not UTZ-certified increased cocoa revenues to 315 kg/hectare send their children to school.

Sustainable cocoa Sourcing of cocoa Low productivity for the cocoa farmers Since 2014 Cloetta buys only sustainable co- West Africa accounts for around 70 per cent The West African cocoa farmers face a coa from UTZ-certified farmers. For Cloetta of the total global harvest of cocoa beans. number of economic, social and environmen- it is vital to address the challenges facing the Local intermediaries then distribute the tal challenges, of which low productivity on cocoa growers in West Africa. By switching to raw materials to the international cocoa the farms is one of the most critical. Limited sustainable cocoa from UTZ-certified farm- wholesalers, after which the cocoa is sent to knowledge about how to grow high quality ers, Cloetta creates a platform for securing a Europe. Every year, Cloetta buys approxi- cocoa in an efficient manner is a root cause supply of high quality cocoa to the factories mately 3,000 tonnes of cocoa in the form of behind the farmers’ low productivity. The while providing better possibilities for West cocoa liquor, cocoa butter and cocoa powder farmers are also struggling with aging cocoa African cocoa growers to develop sustainable from suppliers in Europe. trees and declining soil fertility at the same farming. time that they often lack the means to finance investments in new plants, fertilizers, etc.

Bonsucro certifies for sustainable sugarcane production

Bonsucro’s global standard Source: Bonsucro outcome report 2017 for sustainable sugarcane is based on 1. Legal compliance. 2. Biodiversity and environmental impact. 3. Human rights. 4. Production and processing. 470 5. Continuous improvements. Members SUGARCANE

Better yield Over Worker wages are An analysis performed on on average Brazil’s Centre-South 800,000 productivity has shown that certified mills in the region hectares 19% achieve on average are certified according higher than to Bonsucro’s standard minimum wage 18 % (at farms and mills) higher yields compared to non-certified mills.

Sugarcane peoples and the work environment also exist. origin and comes originally from sugar beets. There are a number of sustainability chal- To address the sustainability challenges As a result of the current market dynamics in lenges in the sugarcane industry. Deforest- found in the sugarcane industry, Cloetta has Europe, Cloetta also buys sugar derived from ation is one of the most acute, but other become a member of Bonsucro. Most of the sugarcane. problems related to the rights of indigenous sugar purchased by Cloetta is of European

Supply chain 23 Cloetta

Sustainability report Sustainability

Sustainable palm oil through RSPO-certification

In certain regions, cultivation of palm oil has caused and

8 2017 2017 principles that growers continues to cause destruc- must respect tion of rain forest. 1. Commitment to transparency. By respecting eight key prin- 2. Compliance with laws and regu- ciples, it is possible to reduce lations. the negative impacts of palm oil 3. Commitment to long-term cultivation on the environment economic and financial viability. PALM OIL and communities. 4. Use of appropriate best practices by growers and millers. 5. Environmental responsibility and Where is palm oil conservation of natural resources RSPO-certified and biodiversity. Around produced? palm oil Others Others 6. Responsible consideration of q 18% 15% q 82% q employees, and of communities and individuals affected by 85% growers and mills. of all palm oil in 7. Responsible development of new the world comes from plantings. Malaysia and 8. Commitment to continuous im- Indonesia. provement in key areas of activity. Malaysiap pIndonesia 32% 53%

Palm oil Cloetta’s palm oil policy requirement not to permit palm oil extraction Some of Cloetta’s products contain small In order to improve traceability, Cloetta in primary forest, peatlands, areas with pro- amounts of palm oil. However, Cloetta does started moving to 100% RSPO-segregat- tected forest or areas where slash and burn not buy pure palm oil but only oils and fats ed palm oil in 2017 in Cloetta’s chocolate farming is used in plantation operation. that contain derivatives of palm oil to a vary- and fudge range. Certification towards the In 2017, the majority of the amount of ing extent. standard will be done in 2018. This means palm oil that is found in Cloetta’s glazing that Cloetta will know which mills, and agents was also replaced. This means that the related plantations, the palm oil comes from. vast majority of Cloetta’s products were free Cloetta’s suppliers must accept Cloetta’s from palm oil at the end of 2017.

Sustainable shea butter – empowering women in rural West Africa

Women organized in groups More than 100,000 women engaged. SHEA BUTTER

In 2017 Cloetta decided to partner up with who give the women the status of price-takers Another important benefit for the women AAK (a specialist in oils and fats solutions) in the market. is the possibility of obtaining pre-financ- for sustainable shea butter. In a number of One prerequisite for the programme ing. At the beginning of the season, AAK West African countries, AAK has set up a is that AAK helps the women to organize extension officers visit the producer groups to sustainability programme for direct sourcing themselves into producer groups, normally discuss the women’s outlook for the season. of shea kernels that empowers rural women. consisting of women from the local village. Part of the volume is then pre-financed and The partnership means that from July By organizing the women in producer groups, the women are paid this money at a time of 2018 and onwards, Cloetta will only source AAK can build a direct buying relation- year when they have little or no other source segregated and traceable shea butter that falls ship with the women. AAK then trains the of income. It is also a guarantee that AAK will under the scope of the AAK direct sourcing women in business management and in good come back and buy all their shea kernels. The programme. post-harvest practices. The main advantage pre-financing is interest-free – it´s an advance for the women is a higher return, as they will payment, not a loan. The programme setup be paid the same price that AAK would oth- The programme has been running From Tamale (Ghana), AAK is running erwise have paid to the middlemen. It is also a since 2009 in Burkina Faso and since 2015 a programme office for sustainable shea guaranteed outlet for all of their shea kernels. in Ghana. More than 100,000 women are kernels. The basic principle of the programme The advantage for AAK and Cloetta is a more engaged in the programme, which has had a is to establish a direct relationship with the secure, transparent and sustainable supply major impact on the lives of the many women rural West African women. Traditionally, the chain with increased opportunities to impact and their families. supply chain contains a series of middlemen the quality of the shea kernels.

24 Supply chain Cloetta

Sustainability report Sustainability

2017 2017

Employees

Greater well-being, employees Working environment Cloetta is driven by a conviction that value Efforts to improve and develop the working is created by the employees, and that the environment are a natural aspect of opera- ability to attract, retain and develop the best tional development and the goal is to create and most competent people is crucial for the a good physical working environment and a company’s success. It is also very important healthy working climate where everyone can that the safety of our employees is continu- feel secure and pursue personal development. ously improved. One essential part of a secure working environment is to ensure that no one is sub- Safety first ject to discrimination or sexual harassment. In production, employee safety is always the Cloetta aims to be a workplace where diversi- top priority. Feeling safe in the workplace is a ty and the different qualities, knowledge and prerequisite for performing well. For this rea- skills of all employees are respected regard- son, all factories carry out continuous risk as- less of gender, religion, ethnic background, sessments to minimize the risk for accidents. age, race and sexual orientation. GREATER All incidents and injuries are followed up and reported. The Lean method is used to prevent An attractive workplace WELL-BEING and minimize production-related occupa- To create an attractive workplace for all em- tional injuries. Thanks to these systematic ef- ployees, it is essential that there is a genuine EMPLOYEES forts, the number of occupational injuries has interest in understanding how the employees been reduced in recent years. The metric for see their place of work, i.e. what they appre- occupational accidents with effect from 2018 ciate and what they find lacking or are simply will be Lost Time Injury Rate (LTIR), that is dissatisfied with. On a bi-annual basis Cloetta the number of accidents resulting in absence. therefor conducts the Great Place to Work LTIR is defined as the number of occupation- survey, where the results are analyzed and al accidents (measured as 24 hours absence) corrective action plans are set into place. for each million hours worked by a group of employees or contractors. The Injury Rate target for 2018 is 4.6.

Zero Improve accidents < 4.6 vision Lost Time Great Place FACTORY Injury Rate to Work SAFETY by 2018 trust index PROGRAMS SAFETY

Employees 25 Cloetta

Sustainability report Sustainability

2017 2017

Cloetta is driven by a conviction that value is created by the employees, and that the ability to attract and retain the best and most competent people is decisive for the company’s future.

Cloetta works determinedly to create an conducted the recurring employee survey methods and communication. This is an attractive workplace for all employees and “Great Place to Work” in the supply chain. important collaboration with joint respon- promote the development of a high-perform- The response rate was as high as in 2014, sibility between managers, employees and ing organization by continuously developing when 80 per cent of the employees participat- trade unions. and training its staff, designing competitive ed. One thing that is certain is that the results To improve handling and communication remuneration systems, upholding an inspir- in the production organization are lower than related to the survey and to maintain the ing corporate culture and building a clear in the commercial units, where the survey focus on ongoing improvement initiatives, the corporate identity. was conducted last year. This is not unique survey is conducted every other year in the to Cloetta. The combined result for Cloetta’s commercial units and every other year in the Employee survey production units was lower than the previous supply chain. – Great Place to Work measurement since the so-called Trust Index So, in 2018 it is once again time for the To create an attractive workplace for all em- result amounted to 46 per cent compared commercial units to carry out their “Great ployees, it is essential that there is a genuine to 52 per cent. In general, the production Place to Work” survey. The base will be some- interest in understanding how the employees organization faced challenges in 2017 and what different at that time, since Candyking see their place of work, i.e. what they appre- also worked hard with changes where the will be included in the different countries. ciate and what they find lacking or are simply efficiency improvement tool and training in The goal is to improve the Trust Index for the dissatisfied with. various Lean tools were in focus. This climate commercial units by 2 per cent per country. According to Great Place to Work, the of change has had an impact on the results for best workplaces are built through day-to-day Great Place to Work. Relationship between the company relationships. From the employees’ perspec- and the employees tive, a good workplace is one where you: Follow-up Cloetta strives to uphold a relationship of • trust the people you work for, In 2017 Cloetta has therefore made an in- mutual respect and trust between the com- • have pride in what you do, and depth analysis of each factory’s and depart- pany and its employees. This also steers the ment’s results for ”Great Place to Work”. company’s way of working with the European • enjoy the people you work with. This work has been done to ascertain the Works Councils, local company councils and The goal is that Great Place to Work – the underlying factors for the current results trade unions organizations. Cloetta complies Trust Index will be in line with or exceed the and what can be improved ahead of 2018 and with the applicable laws and regulations in previous year’s level. During the year Cloetta onwards with regard to attitudes, working the countries where the Group is active and

26 Employees Cloetta

Sustainability report Sustainability respects local norms and values. In addition, in 2016 and the target was not met. A new the Group’s principles are consistent with the safety standard was therefore drawn up for relevant International Labour Organization immediate implementation in all factories, an (ILO) conventions. effort that has had high priority in 2017. This Cloetta encourages a good balance be- paid off during 2017 and led to a decrease tween professional and personal life. It is im- in occupational injuries compared to 2016.

portant to help both men and women combine Read more on page 17. 2017 2017 the demands of their jobs with responsibility In the past two years the “Cloetta En- for home and family. The Group therefore ergy” programme was rolled out in certain supports flexible work arrangements like flex- parts of the organization – a health promotion time and part-time hours, when possible. program utilizing different activities that Cloetta’s whistleblower service gives all include lectures and training with a focus on of Cloetta’s employees the opportunity to exercise, diet and sleep as key components for report, either anonymously or via a manager, achieving a healthy work/life balance. This concerns about conduct that is not in line with programme will continue in 2018. the company’s values or ethical principles. Read more on page 43. Diversity One vital part of a safe working environment A good and safe working is that no one should be subject to discrim- environment ination or sexual harassment. Cloetta aims Efforts to improve and develop the working to be a workplace where diversity and the environment are a natural aspect of opera- different qualities, knowledge and skills of all tional development and the goal is to create employees are respected regardless of gender, a good physical working environment and religion, ethnic background, age, race and a healthy working climate where each indi- sexual orientation. Questions about whether Gender distribution vidual can feel secure and pursue personal anyone feels that they have been harassed 31 December 2017 development. or discriminated against are included in the In production, employee safety is always employee survey “Great Place to Work”. the top priority and all of the factories 47 % 53 % perform continuous risk assessments to min- The right expertise imize the risk for accidents. All incidents and Cloetta is committed to continuously renew- injuries are followed up and reported. The ing and utilizing the Group’s aggregated ex- Lean method is used to prevent and reduce pertise. Competent employees that are given production-related occupational injuries. scope to realize their full potential create the Managers are responsible for preventing conditions for Cloetta to maintain its position occupational illnesses and accidents through as an attractive and innovative partner not monitoring and active measures. Cloetta’s only for the employees but also for customers, HR department has developed a tool that suppliers and business partners. A learn- Employee categories makes it possible, together with managers ing-driven organization that works in project 31 December 2017 that have staff responsibility, to detect early form and the use of cross functional team- signals that can lead to illness and thereby work in day-to-day activities are important 46% 54% indicate a risk for long-term sickness absence. components of Cloetta’s skills development. After a couple of years with a steady decrease All skills development is designed to support Blue-collar White-collar in occupational injuries, the trend was broken Cloetta’s strategies, to be business-oriented workers workers and to promote the individual’s professional interests and needs. The main focus areas are to develop the right people for the right jobs and to contin- uously clarify and improve roles, responsi- Days between occupational accidents (number of days between accidents leading to bilities and working methods throughout the >1 day of absence) organization. In recent years there has been Age distribution* Days a major initiative, primarily in production, to Number of employees 30 Goal 2017 800 >24.3 work according to Lean. 700 25 Employer branding 600 20 Cloetta strives to be an attractive employer in 500 the markets where the company is active and 15 thereby retain valuable employees. 400

All recruitment takes place locally with 300 10 the support of centrally developed tools that 200 include both skills tests and self-assessment 5 tests. For all positions, the selection is based 100 on a job description with specific set of com- 0 0 2013 2014 2015 2016* 2017* petencies against which the candidates’ <20 21–30 31–40 41–50 51–6061–65> 66> *Excluding the sold Italian operations. * Excluding Candyking

Employees 27 Cloetta

Sustainability report Sustainability

2017 2017

performance is measured, in combination by Cloetta for no more than one year were platform for communication about Employer with analysis of the various tests and inter- invited to take part. The results show that Branding, which is planned to be launched view material. a majority of employees feel they have been in 2018. In 2016 an internal survey was conducted given far-reaching personal responsibility with questions about why people have chosen and scope to work independently. Cloetta’s leadership to work at Cloetta and what makes them With the help of feedback from the As a leader, it is vital that you dare to trust in want to stay. People who have been employed internal survey, Cloetta has initiated a joint both your own leadership and in others. It is

Cloetta’s HR wheel

UPDATE OF JOB DESCRIPTIONS EMPLOYEE EVALUATION and preparations for the upcoming • Individual goals evaluation process • Individual development measures J • Employee survey DEC AN F V E O B SKILLS DEVELOPMENT N TARGET LEVELS ESTABLISHED with a focus on the organization’s M T A challenges for the coming year C R

O

S

E R

P P STRATEGIC PLAN A SALARY REVIEW A U Y G A M J SEMI-ANNUAL FOLLOW-UP UL JUN OF EMPLOYEE EVALUATION

MANAGEMENT REVIEW • Succession planning • Identification of new and follow-up of existing talents Cloetta’s HR work follows an annual cycle of activities aimed at building and raising the level of expertise in the organization. Most of the activities in Cloetta’s HR wheel as described apply primarily to salaried employees.

28 Employees Cloetta

Sustainability report Sustainability also essential to understand each other and In 2016–2017, 100 managers were employees are covered by collective agree- why different individuals act differently in trained in Cloetta’s Leadership Dimensions ments. The employees at Cloetta’s factory in similar situations. at the central level, where the Group Man- Levice, the factory not covered by a collec- For some time Cloetta has worked with agement Team also took part. Since then, the tive agreement, are instead covered by a the leadership tool Management Drives, focus has been on the ongoing local rollout in separate agreement. Of the average number which is based on the use of a questionnaire a number of countries. Cloetta’s Leadership of employees, 46 per cent are employed under

that among other things identifies the drives Dimensions, connected to Management collective agreements and 54 per cent are 2017 2017 for each employee, what energizes them and Drives, have given Cloetta a common lan- salaried employees. what drains them of energy. By using this guage and working tools that can be handled In production there are certain periods leadership tool, both managers and employ- in areas such as development, conflict man- with a higher workload, such as the spring ees are made aware of their own profiles and agement and team building activities. run-up to Easter and the autumn run-up to thereby which working methods suit them Christmas, when extra staff is hired. Other best. In 2016 the company further developed Framework for remuneration areas of operation also use temporary and its leadership tool through the launch of One major factor in how employees perceive extra staff. Temporary staff accounted for Cloetta’s Leadership Dimensions. the attractiveness of their workplace is the approx. 9.7 per cent. feeling that they are fairly paid and that there Cloetta’s Leadership Dimensions is a well-designed salary structure in the Flat organization for shorter • Visionary Leadership company. decision-making processes • People Leadership For several years Cloetta has made Cloetta has employees in 14 countries who comparisons with other companies to ensure are active in sales and marketing, production, • Entrepreneurial Leadership a clear framework and strategy for Cloetta’s innovation and support functions. Cloetta’s • Structured Leadership remuneration/ salary structure. All positions head office is located in Stockholm. • Committed Leadership at Cloetta have been evaluated and plotted on Cloetta is organized according to • Trusted Leadership a matrix where comparable jobs are ranked function and its commercial activities are similarly regardless of company or function. organized separately from the supply chain Each dimension is briefly described with the This has then been supplemented with a organization. As of 2018, finance and human help of several competencies and behaviours salary structure that is benchmarked against resources will report by function and not that are tied together with Management other consumer goods companies in each directly in the line organization. One of the Drives. By combining the concepts in Man- country. The results provide an excellent foremost tasks is to build and strengthen agement Drives with Cloetta’s Leadership basis for upcoming salary reviews, where the uniform processes and routines. Responsi- Dimensions, the company has created a set of existing salary level and the year’s perfor- bility for business development, corporate concepts that show who Cloetta’s employees mance are key parameters in the framework communications, business control, marketing are and what type of leaders and employees that has been established. strategies, HR and certain financial activities Cloetta wants to be. Good leadership is essen- like tax, financial administration, insurance tial in inspiring maximum motivation and Number of employees and financial control are handled by central performance in the various teams and plays The average number of employees in 2017 staffs. a vital role in realizing Cloetta’s vision and was 2,467 (2,115). 70 per cent of the goals.

Employees by country Norway 3%q Ireland 3%q qOther 1% Denmark 4%q t Slovakia Belgium 5%u 30% UK 5%u

Finland 7%u

Netherlands 17%u Sweden t 25%

Average number of employees and sickness absence

The Employees Slovakia Sweden Netherlands Finland UK Belgium Denmark Ireland Norway Italy Germany Other Total

Average number of employees 744 610 415 168 128 124 104 83 67 10 8 6 2,467 – of whom, women 502 315 129 132 86 24 52 34 31 6 3 5 1,319 Sickness absence, %* 8.4 4.8 5.4 2.3 0.0 6.2 1.7 2.0 6.8 0.0 2.4

* Excluding Candyking

Employees 29 Cloetta

Sustainability report Sustainability Frequently asked questions to Cloetta

Why don’t you sell product X or Y anymore, and This means that over time, Cloetta will hopefully most honest, since all consumers are aware that do you have any plans to launch product Z? avoid the impact of cost trends on raw materials. they contain sugar. Furthermore, for those seeking If we no longer sell a product, this is unfortunately Sometimes we also adjust prices in connection an alternative to products with sugar, Cloetta offers

2017 2017 often due to insufficient demand for the product in with initiatives such as new product launches or options such as nuts, chewing gum with xylitol and question. In certain cases, it could also be because changes in packages. pastilles. In addition, we are developing candy with the product’s profitability has been too low or even lower sugar and no sugar. negative. The launch of new product types can Do you plan to make additional acquisitions, sometimes be difficult if we lack a brand that can and if so, in which countries? How big is the risk that various sugar taxes will carry them, at the same time that the necessary We aim to pursue acquisitions that are consistent be introduced, and how will that affect you? marketing investments would be so high that the with our Munchy Moments strategy. This means In general, we have to reckon with the possibility products wouldn’t be profitable. that we acquire companies with impulse-driven that different countries will both introduce and brands that are well suited to our categories and abolish sugar and confectionery taxes from time to How will you meet your margin target? our distribution chain. time. When different taxes are introduced it natural- Profitable growth and increased cost efficiency ly affects our sales, but only to a fairly minor extent will contribute to higher earnings. The integration Will you use the strong cash flow for acquisi- since our products are of a type that consumers of Candyking will create substantial synergies and tions, to reduce debt or to pay dividends to the want, and can afford, to treat themselves to despite we are currently also implementing the Lean 2020 shareholders? price increases. programme in the supply chain that will help to In 2017 we reached our targeted net debt/EBITDA boost profitability. ratio of 2.5x and we feel that we have the capacity Why do you use palm oil in your products? for both acquisitions and share dividends. The divi- As of 2018, we will have eliminated palm oil from all When will you meet your 14 per cent margin dend payout ratio should be 40 – 60 per cent of net products with the exception of certain chocolate target for adjusted operating profit? profit. However, we see no reason to reduce the net and fudge products and some products from the In the last few years we have gradually strength- debt/EBITDA ratio to a level much lower than 2.5x. recently acquired Candyking. In those products ened our margin, although it declined in 2017 due where there is no satisfactory alternative to palm to the inclusion of Candyking and a lower EBIT as How is Cloetta affected by the ongoing debates oil, mainly chocolate, we will use RSPO-segregated a result of lower production volumes. Our EBIT about sugar, health and childhood obesity? palm oil. margin target remains intact, but we have never set The major challenge in this context is hidden sugar, a specific timeline for reaching the target. i.e. the sugar hidden in everyday food products like breakfast cereals, yoghurt, bread, etc., and to What is your pricing strategy? a certain extent also carbonated beverages. The We adjust our prices based mainly on fluctua- discussion should focus on consumption of these tions in raw material costs and exchange rates. “sugar traps”. Cloetta’s products are among the

Share price performance during 2017

Closing price, SEK No. of shares, thousands 40 16,000 Cloetta B share No. of shares traded, thousands per week

36 12,000

32 8,000

28 4,000

24 0 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Source: SIX 6 July 7 July Cloetta to divest its Marcel Mensink appointed 18 January Italian operation and President Operations Strategic review impairment of Cloetta 10 October 17 October 13 December and impairment of Italy Certain employees Cloetta.com Announcement of Cloetta Italy 4 April 5 April 13 July in Cloetta under awarded best changes in Cloetta AGM The Swedish Competition Interim report Q2 management 1 February investigation for corporate website Authority approves Cloetta’s share sales Interim report Q4 9 March acquisition of Candyking Publication of 2017 15 February 5 September 14 September 25 October annual report Cloetta completes the Cloetta’s EBIT to Interim report Q3 Henri de Sauvage-Nolting took 28 February 21 April up duties as President and CEO Interim report Q1 divestment of its Italian be negatively im- AB Malfors Promotor operations pacted by mainly 17 February converts certain A 28 April short-term issues Cloetta acquires shares to B shares Cloetta completes problem Candyking the acquisition of Candyking

30 Frequently asked questions to Cloetta Cloetta

Sustainability report Sustainability Risks and risk management 2017

Uncertainty about future events is a natural part of all business activities. Future events can have a positive impact on operations through opportunities to create increased value, or a negative impact through risks that can have an adverse effect on Cloetta’s business and results.

Risks can arise as a result of events or deci- Identification of risks minimized through proactive measures. sions that are beyond Cloetta’s control, The identification of risks and proactive Alternatively, risks can be transferred for but they can also be an effect of incorrect measures to limit them or prevent them from example through insurance or agreements. handling within Cloetta or among its suppli- materializing and having a negative impact However, certain risks are not possible to be ers or customers. on operations are of fundamental importance eliminated or transferred. These are often an for operations and are a central part of every active part of business operations. Organization for risk management manager’s responsibility at Cloetta. Cloetta Cloetta’s Board of Directors is responsible to works continuously to assess and evaluate the Risk overview the shareholders for handling the company’s risks to which the Group is, and can be, ex- In Cloetta’s risk management process, a risk management. Decisions regarding risks posed. All events that could affect confidence number of risk areas have been identified. associated with business development and in Cloetta or lead to operating disturbances A selection of these and a brief description of long-term strategic planning are prepared are vital to monitor and minimize. This takes how each risk area is handled are presented and discussed by the Group Management place among other things through business on the following pages. The Group’s financial Team and decisions are made by the Board of intelligence and dialogue with various stake- risk management is described in more detail Directors. holders. on page 72 and in Note 29, on page 122 in The Group Management Team contin- Cloetta’s annual report. uously reports to the Board of Directors on Risk management Pages 82–83 in the annual report contain risk areas such as the Group’s financial status Effective handling of risks is an integral a description of the internal control processes and compliance with the Group’s finance part of Cloetta’s management and control. and risk assessment aimed for preventing policy. The operational risk management that Rapid distribution of relevant information misstatements in the financial reporting. is handled at all levels in the organization is is ensured via the company’s management Management of risks in the working regulated by Cloetta’s Code of Conduct and a structures and processes. If possible, risks environment is described on page 17. number of central policies. are eliminated and undesired events are

Risks and risk management 31 Cloetta

Sustainability report Sustainability Industry and market-related risks

Cloetta works continuously to assess and evaluate the risks to which the Group is, and can be, exposed. Critical external risks are handled both strate-

2017 2017 gically through business and product development and operationally through day-to-day purchasing, sales and marketing activities.

Risks Management Probability Impact

Financial crises can have a negative impact on consumption From a historical perspective, the confectionery market has patterns. Operations are affected in that Cloetta’s customers been comparatively mildly affected by market downturns are suffering from lower profitability, which leads to price among consumers. This applies to a large extent to Cloetta’s Market climate pressure. products, which most people can afford to buy. To support the customers’ business and promote sound price development, Cloetta cooperates with the customers among other things through in-store sales activities.

The confectionery market is highly competitive with several Cloetta competes in the market through active pricing, product major players. Furthermore, grocery retailers offer private innovation, product quality, brand recognition and loyalty, labels that compete with certain Cloetta products. This com- marketing and the ability to predict and satisfy customer prefer- petition can limit Cloetta’s opportunities for price increases to ences. compensate for higher raw material costs. It is important that Cloetta’s products are perceived as provid- Competition Cloetta may also need to increase its investments in marketing ing the consumers with greater value added than the cheaper and product development in order to maintain or expand its alternatives. market shares. Cloetta strives for effective marketing. Cloetta is a significant player in pick & mix, which by nature of- Cloetta strives to offer the best pick & mix concepts with regard ten consists of multi-year contracts that must be continuously to the customer and consumer experience. Furthermore, the renewed. Competition from other players, including the grocery integrated production chain enables Cloetta to be cost-effec- retail chains, can cause Cloetta to lose major contracts. tive in pick & mix.

The European grocery and service trade has undergone a Cloetta’s strong brands and market position, together with process of consolidation leading to the establishment of large, a strong sales force and close cooperation with the trade, sophisticated players with substantial purchasing power. These contribute to its ability to maintain good relations with the retail Retail trade major players are not necessarily dependent on individual trade. Cloetta also works actively with new sales channels. development brands and can hold back price increases and demand higher Cloetta has a relatively wide and diversified customer base. In investment in marketing initiatives. They can also take over 2017 Cloetta’s ten largest customers accounted for around 42 shelf space that is currently used for Cloetta’s products for their (43) per cent of the Group’s total sales. own brands.

Changes in consumer behaviour give rise to both opportunities Health trends have not affected confectionery sales to a great and risks. Health trends and the debate on health, weight and extent, since confectionery is often eaten as a small luxury in sugar can have a negative impact on confectionery consump- everyday life. Cloetta works continuously to satisfy consum- tion. The health trend has also spurred a growing interest in er preferences. In addition, Cloetta offers both sugar-free natural raw materials. products and products with less sugar, as well as products Consumer trends In the wake of rapid globalization, individual consumers are that promote dental health. In the long-term, Cloetta’s goal is Health more aware of how their consumption patterns affect the for all products to be free from artificial colours and additives Social responsibility environment and social/ethical conditions around the world. (NAFNAC). Consumers want to know more about product origins, manu- Cloetta strives to include supplier codes of conduct in all facturing methods and raw materials. Information that Cloetta, agreements as far as possible, but as an individual company or Cloetta’s suppliers, are not taking adequate environmental or Cloetta is unable to influence international development on its social responsibility could damage Cloetta’s brand. own. Cloetta’s goal is to be open and, through cooperation with other confectionery producers and via various organizations, to identify problem areas and contribute to improvements.

Cloetta conducts operations through companies in a number of Cloetta continuously assesses legal issues in order to predict countries. New laws, taxes or rules in various markets may lead and prepare its operations for possible changes. The introduc- to limitations in operations or place new and higher demands. tion of confectionery taxes and fat taxes often has a short-term Laws and taxes There is a risk that Cloetta’s interpretation of the applicable tax impact on sales. laws, tax treaties and regulations in the different countries is Provisions for legal disputes, tax disputes, etc., are based on not entirely correct or that such rules will be changed, possibly an estimation of the costs, with the support of legal advice and with retroactive effect. based on the information that is available.

Price development for raw materials is steered mainly by Cloetta continuously monitors the development of raw material supply and demand, and is beyond Cloetta’s control. The prices prices and all purchasing is carried out through a central on sugar and many of the other raw materials purchased by purchasing function. To ensure access and price levels, Cloetta Cloetta are also affected by agro-political decisions in the normally enters into supplier contracts that cover the need for Raw material prices EU regarding quotas, support, subsidies and trade barriers, raw materials for a period of 6–9 months forward. If the aver- but also by rising living standards and the activity of financial age raw material prices had been 10 per cent higher/lower at 31 investors on the commodities exchanges. December 2017, profit before tax for the year would have been around SEK 150m lower/higher. Cloetta’s policy is to compensate for higher raw material costs by raising prices to its customers.

32 Risks and risk management Cloetta

Sustainability report Sustainability Operational risks

Operational risks can often be influenced, for which reason they are normally regulated by policies, guidelines and instructions. Operational risks are part of Cloetta’s day-to-day work and are handled by the operating units.

The operational risks include among others risks related to the brand, relocation of production, insurable risks and 2017 environmental, health and safety-related risks.

Risks Management Probability Impact

Demand for Cloetta’s well known brands is driven by the Cloetta takes a proactive approach to its sustainability respon- Business ethics and consumers’ association of these with positive values. If Cloetta sibility by implementing a Code of Conduct, ethical guidelines brand risks or any of the Group’s partners takes any measures in conflict and routines. with the values represented by the brands, the Cloetta brands could be damaged.

Cloetta uses several raw materials originating from countries As far as possible, Cloetta strives to include supplier codes of with risks regarding the working environment, social conditions conduct in all agreements. and corruption. In addition, political instability can have a nega- Cloetta has evaluated all raw material groups and prioritized tive impact on costs. them based on the existing sustainability challenges and Cloetta’s opportunities to address these challenges. Cloetta purchases UTZ-certified cocoa for its entire range of chocolate products. All products aside from parts of the chocolate and fudge range Sustainability risks in are free from palm oil (parts of the range from the recently the supply chain acquired Candyking are not yet free from palm oil). During the year Cloetta started switching to segregated palm oil in accordance with RSPO principles in the entire range of chocolate and fudge products. Certification according to this standard will take place in 2018. During 2018 Cloetta will change over to sustainable and trace- able shea butter. Cloetta is a member of Bonsucro, which is a multi-stakehold- er initiative that works to achieve a sustainable sugarcane industry.

Handling of food products places high demands on traceability, Cloetta works with first-class raw materials and in accordance hygiene and safety. In a worst-case scenario, inadequate con- with international quality standards. Analyses through chemical Product safety risks trol can lead to contamination or allergic reactions. Deficiencies and physical tests are performed on both raw materials and in handling of food products can lead to lower confidence in finished products. Issues of importance for product safety are Cloetta and the Group’s brands. gathered in special policies and there are plans for information or product recalls in the event of deficiencies.

Assets such as factories and production equipment can be Cloetta has an insurance programme, among other things for seriously damaged, for example in the event of a fire or power property and liability risks, and works systematically to reduce Insurable risks outage. Product recalls can give rise to substantial costs, the risk for incidents and to have robust contingency plans in resulting from both direct costs and of damage to Cloetta’s place to limit the effects of any incidents. reputation.

To optimize efficiency, Cloetta continuously monitors capacity Cloetta has an experienced and efficient organization with Relocation of utilization in production. Moving production from one factory well-established routines for handling relocation of production production lines to another is a complex process that can result in disruptions lines. and delays in production, which can in turn lead to delivery problems.

To a large extent, Cloetta’s future is dependent on its capacity Cloetta endeavours to continue to be an attractive employer. Access to the right to recruit, retain and develop competent senior executives and Employee development and follow-up plans, together with expertise other key staff. market-based and competitive compensation, contribute to Cloetta’s ability to recruit and retain employees.

Environmental risks arise mainly through water and energy Cloetta sets environmental requirements for its production and Environmental risks consumption, wastewater emissions, raw material and packag- regularly monitors the company’s impact on the environment, ing waste, production waste and transports. and conduct systematic efforts to reduce its environmental impact.

Risks and risk management 33 Cloetta

Sustainability report Sustainability Corporate governance

2017 2017 report

The purpose of corporate governance is to ensure that the company is managed as effectively as possible in the interests of the shareholders, but also that Cloetta com- plies with the applicable rules. Corporate governance is also aimed at creating order and systems for both the Board and the Group Management. By having well defined structures, rules and processes, the Board can ensure that the Group Management and employees are focused on developing the business and thereby creating share- holder value.

Cloetta AB (publ) is a Swedish public limited of class B and 5,735,249 were of class A. Each information confirming that notification company, with corporate identification class B share corresponds to one vote and has taken place shall be published in Dagens number 556308-8144, whose class B shares each class A share to ten votes, although Industri. Every shareholder has the right are traded on the Mid Cap list of Nasdaq all shares carry equal entitlement to the to request that a matter be taken up at the Stockholm. The company is domiciled in company’s assets and profits. The number AGM and in such case must submit a written Ljungsbro, Linköping, and its head office is of shareholders at 31 December 2017 was request to the Board. In order to be taken up in Stockholm. 20,125 (compared to 16,236 at 31 December at the AGM, the request must be submitted to 2016). On 31 December 2017 AB Malfors the Board no later than seven weeks prior to Framework for corporate Promotor was Cloetta’s largest shareholder, the AGM. In accordance with Chapter 7, 32 §, governance with a holding corresponding to 36.7 per cent of the Swedish Companies Act, all share- Cloetta’s corporate governance is regulated of the votes and 25.4 per cent of the share holders have the right, at a general meeting by external steering instruments that include capital in the company. For more information of shareholders, to pose questions to the the Swedish Companies Act, the Swedish about Cloetta’s shares and shareholders, see company about the matters that are taken up Annual Accounts Act, Nasdaq Stockholm’s section “Share and shareholders” on pages at the meeting and the financial situation of Rules for Issuers and the Swedish Corporate 56–60 in Cloetta’s annual report. the company and the Group. Governance Code, as well as internal steering instruments such as the Articles of Associ- 2 General meeting Attendance at AGMs/EGMs ation, instructions, policies and guidelines. of shareholders Votes, % The Swedish Corporate Governance Code is 100 91.1 available at www.bolagsstyrning.se, where The general meeting of shareholders is a description of the Swedish model for cor- Cloetta’s highest decision-making body. At a 80 69.4 porate governance is also provided. During general meeting, all shareholders have the op- 63.9 59.6 59.4 the year, Cloetta complied with Nasdaq portunity to exert an influence over the com- 60 Stockholm’s Rules for Issuers and good stock pany by exercising the votes attached to their 174 158 199 275 203 market practice. respective shareholdings. The powers and 40 duties of the general meeting are regulated Application of the Swedish among other things by the Swedish Compa- 20 Corporate Governance Code nies Act and the Articles of Association. In 2017 Cloetta complied with the Code. Cloetta’s financial year runs from 1 Jan- 0 uary to 31 December. The Annual General 2013 2014 2015 2016 2017 1 Share and shareholders Meeting shall be held within a period of six ● No. of people months after the end of the financial year. (shareholders, proxies, assistants and guests) The class B shares in Cloetta AB (publ) have The date and location of the AGM shall be been listed on Nasdaq Stockholm since 16 communicated on the company’s website at 2017 AGM February 2009 and are traded on the Mid the latest in connection with publication of The latest AGM was held on 4 April 2017 in Cap list since 2 July 2012. However, Cloetta the third quarter report. Notice of the AGM Stockholm. The AGM was attended by 203 was originally introduced on the stock ex- shall be given no earlier than six weeks and individuals representing 59.4 per cent of the change in 1994 and has since then been listed no later than four weeks prior to the AGM votes in the company. The President/CEO, in a number of different owner constellations. through publication in Post- och Inrikes the majority of the Board members, the com- The number of shares at 31 December 2017 Tidningar (the Swedish Official Gazette) and pany’s independent auditor, the chairman of was 288,619,299 of which 282,884,050 were on the company’s website. At the same time, the nomination committee, and the Group’s

34 Corporate governance report Cloetta

Sustainability report Sustainability Governance structure 1 Shareholders

Vote at the general meeting

Information

General meeting 3 Auditor 2017 2 of shareholders 7 Elects the auditor Appoints the nomi- Proposes the Board, auditor and nomi- nation committee nation committee ahead of next AGM

3 Nomination committee1

Elects the Board of Directors 5 Audit committee Board of Directors2 The members of the Board are appointed Information 4 by the AGM. Employee representatives and deputy representatives are appointed by the employee organizations. The members of the audit and remuneration committees are appointed by the Board. 5 Remuneration committee

Goals, strategies, policies, steering instruments, External steering instruments core values, Important external steering instruments that provide Reports, remuneration structure the framework for corporate governance are: 8 internal control • The Swedish Companies Act. • The Swedish Annual Accounts Act. • Nasdaq Stockholm’s Rules for Issuers. 1 The nomination committee prepares proposals • The Swedish Code of Corporate Governance. for decision that are presented to the AGM. The Internal steering instruments President/CEO AGM decides on principles for appointment of the 6 Important binding internal control documents nomination committee. include: 2 The Board installs the committees and appoints • The Articles of Association. their members. • The Board’s work plan. 3 The auditor is responsible, on behalf of the • Instructions for the President/CEO, the audit com- shareholders, for auditing Cloetta’s annual report, mittee, the remuneration committee and financial accounts and the administration of the Board of 6 The Group reporting. Directors and the President/CEO. Reports to the Management Team • Policies. Board of Directors and the shareholders.

CFO and SVP Corporate Communications Lilian Fossum Biner as Chairman of the • Rules for the nomination committee; and Investor Relations were also present at Board. Former Board member Hans Porat • Guidelines for remuneration to the Group the AGM. The AGM approved the proposals resigned in connection with the AGM. Aside Management Team; of the Board and the nomination committee from the members elected by the AGM, the • The implementation of a share-based long- regarding: employee organizations PTK and LIVS term incentive plan. • Adoption of the balance sheet and the profit each appointed an employee representative The complete minutes from the AGM can and loss account; and a deputy representative to the Board; be viewed at www.cloetta.com. • Board fees were set at SEK 620,000 for the • Appropriation of the earnings of the com- Board Chairman and SEK 285,000 for each pany through a dividend of SEK 0.75 per 2018 AGM of the other Board members elected by the share; The 2018 AGM will be held on Monday, 16 AGM. Fees for work on the Board com- April 2018, at 3:00 p.m. at Stockholm Water- • Discharge from liability for the Board of mittees were set at SEK 100,000 for each front Congress Centre, Nils Ericsons Plan 4, Directors and President/CEO; member of the audit committee and SEK in Stockholm. The Notice of the Annual Gen- • That the number of Board members elected 100,000 for each member of the remunera- eral Meeting was published in March 2018 by the AGM shall be seven, with no deputies; tion committee; and contained the Board’s proposals. For • Re-election of sitting Board members Lilian • Fees to the auditor are to be paid according more information, see www.cloetta.com. Fossum Biner, Camilla Svenfelt, Adriaan to approved account; Nühn, Mikael Svenfelt, Lottie Knutson and • Re-election of KPMG AB as the company’s Mikael Norman. Mikael Aru was elected auditor to serve for the period until the end as new Board member. The AGM elected of the next AGM;

Corporate governance report 35 Cloetta

Sustainability report Sustainability 3 Nomination committee Shareholder proposals Knutson, Mikael Norman, Adriaan Nühn, All shareholders have the right to contact the Mikael Svenfelt, Camilla Svenfelt and Mikael Work of the nomination committee nomination committee to propose candidates Aru. In addition, the employee organization The task of the nomination committee is to for election to the Board. Proposals shall LIVS appointed one employee representative prepare recommendations to be put before be sent to the chairman of the nomination to the Board, Lena Grönedal, and one deputy the AGM for decisions regarding election of committee by e-mail to representative, Shahram Nikpour Badr.

The employee organization PTK appointed 2017 2017 Board members and the Board Chairman, [email protected]. fees to the Board of Directors, potential one employee representative to the Board, remuneration for committee work, election of Meetings of the nomination committee Mikael Ström, and one deputy representative, a chairman of the AGM, election of auditors, During 2017, the nomination committee Christina Lönnborn. All Board members auditing fees and rules for the nomination ahead of the 2018 AGM held one meeting. have attended Nasdaq’s stock market training committee. The Board Chairman presents an No fees have been paid for work on the com- course for board and management. The aver- annual evaluation of the Board’s performance mittee. age age of the Board members elected by the during the year to the nomination committee, AGM was 54 at year-end 2017, and three of which provides a basis for the nomination 4 Board of Directors the seven are women. For information about committee’s work together with the provi- the Board members’ assignments outside the sions in the Swedish Corporate Governance Work of the Board Group and holdings of shares in Cloetta, see Code and Cloetta’s own company-specific The primary task of the Board is to serve the pages 84–85 in Cloetta’s annual report and requirements. The nomination committee’s interests of the company and the sharehold- cloetta.com. recommendations for election of Board ers, appoint the President and ensure that members, Board fees and auditors are pre- the company complies with the applicable Diversity policy sented in the notice to attend the AGM and at laws, the Articles of Association and the Through the nomination committee, Cloetta www.cloetta.com. Swedish Corporate Governance Code. The applies rule 4.1 of the Swedish Corporate Board is also responsible for making sure that Governance Code as its diversity policy to Composition of the nomination the Group is suitably structured so that the propose election of directors to the Board. committee Board can optimally exercise its governance According to this rule, the board composition In accordance with the decision of the AGM, over the subsidiaries and that the company’s must be set with regard to appropriateness to Cloetta’s nomination committee shall consist financial accounting, financial management the company’s operations, phase of develop- of at least four and at most six members. Of and financial circumstances in general can ment, and must collectively exhibit diversity these, one shall be a representative of the be controlled satisfactorily. At least once a and breadth of competence, experience and Board and three shall be members appointed year the Board shall meet with the company’s background among the directors elected by by the three largest shareholders in terms of auditor without the presence of the Group the annual general meeting. An equal balance voting power. The members appointed may Management Team, and shall continuously between the genders is strived for. The ob- themselves appoint one additional member. and at least once a year evaluate the perfor- jective of the diversity policy is to underline mance of the President/CEO. the importance of appropriate diversity Independence of the nomination within the Board with regard to gender, age, committee Composition of the Board nationality and experience, professional The majority of the nomination committee’s According to the Articles of Association, background and business expertise. The members shall be independent in relation Cloetta’s Board of Directors shall consist of nomination committee has confirmed that to the company and its Group Management, at least three and at most ten members that the Board of Cloetta has an almost equal and at least one of these shall also be inde- are elected annually at the AGM for a period gender balance and an appropriate composi- pendent in relation to the company’s largest until the next AGM has been held. The AGM tion in general. shareholder in terms of voting power. Of the on 4 April 2017 resolved that the Board shall appointed members, all four are independent have seven members appointed by the AGM. Independence of the Board in relation to the company and its Group To serve for the period until the end of the In accordance with the Swedish Corporate Management and three are independent in next AGM, to be held on 16 April 2018, the Governance Code, the majority of the Board relation to the company’s largest shareholder AGM on 4 April 2017 elected Board members members elected by the AGM shall be inde- in terms of voting power. Lilian Fossum Biner (Chairman), Lottie pendent in relation to the company and its Group Management and at least two of these shall also be independent in relation to the company’s major shareholders. Of the Board’s seven members, all are independent in rela- tion to the company and its Group Manage- ment and five are independent in relation to the company’s major shareholders.

Nomination committee ahead of the 2018 AGM

Share of votes at Member Appointed by Independent1 31 Dec. 2017, %

Olof Svenfelt, Chairman AB Malfors Promotor No 36.70% Dan Riff Wellington Management Yes 8.60% John Strömgren Carnegie Fonder Yes 1.10% Lilian Fossum Biner The Board of Cloetta AB Yes 0%

1) Independent from the company and its Group Management/from the company’s largest shareholder in terms of voting power

36 Corporate governance report Cloetta

Sustainability report Sustainability auditor, quorum, conflict of interest, the work Instructions and policies of the committees, internal and external re- Organization for porting, routines for notice to attend general sustainability work meetings, Board meetings and minutes. In addition, the Board has issued and adopted a The Board reviews and adopts the following Code of Conduct and policies for corporate instructions and policies on a yearly basis: The overall strategies for Cloetta’s corporate

communications and IR, finance, HR, insid- • Work plan for the Board. responsibility work are adopted by the Group 2017 • Instructions for the President. ers, insurance, internal control, IT security, Management Team and are controlled and • Instructions for financial reporting. mergers and acquisitions, fraud and whistle- monitored through business planning process- • Work plan and instructions for the audit blower, trade controls and anti-bribery and es at several levels in the company. Ultimate committee. responsibility for corporate responsibility • Work plan and instructions for the remu- -corruption. matters lies with Cloetta’s President/ CEO. neration committee. • Code of Conduct. Evaluation of Board performance Cloetta’s sustainability work is overseen by • Corporate Communications and IR policy. the Director Corporate Responsibility, who The performance of the Board is evaluated • Finance policy. functions as a spokesman for issues related • HR policy. yearly in order to develop the Board’s working to corporate responsibility and is responsible • Insider policy. methods and efficiency. The Board Chairman for identifying prioritized areas, acting as the • Insurance policy. is responsible for carrying out the evaluation stakeholders’ link to the management and • Policy for internal control. supporting the implementation of Cloetta’s • IT security policy. and presenting the results to the nomination corporate responsibility strategy. Environ- • Mergers and acquisitions policy. committee. The purpose of the evaluation is mental and occupational health and safety • Fraud and whistleblower policy. to gather the Board members’ views on the managers are found at all of the factories. (anonymous reporting of violation of laws, Board’s performance, what measures can be the Code of Conduct or other rules at Cloetta). taken to improve the efficiency of board work, • Anti-bribery and -corruption policy. and whether the Board has a well-balanced & IR, who is also the Board Secretary, take • Trade control policy. mix of competencies. The evaluation provides part in the Board’s meetings. Other members valuable input for the nomination committee of the Group Management Team take part ahead of the AGM. In 2017 the Chairman as needed as rapporteurs for special items of conducted a written survey among all Board business. members including the employee representa- The Board’s instructions and policies tives. The results of the evaluation have been 5 Board committees On a yearly basis, the Board reviews and reported to and discussed by both the Board adopts a work plan for its own activities and and the nomination committee. Audit committee those of the Board’s audit and remunera- In 2017 the Board audit committee consisted tion committees. The Board also adopts Board meetings of members Mikael Norman (chairman), instructions for the President/CEO and In 2017 the Board held eight scheduled meet- Camilla Svenfelt and Adriaan Nühn. The instructions for financial reporting. Among ings, of which one statutory meeting, and four majority of the committee’s members shall other things, these regulate the segregation extra meetings and two per capsulum meet- be independent in relation to the company of duties between the Board of Directors, the ings. President/CEO, the CFO and the Senior and its Group Management, and at least one Board Chairman, the President/CEO and the Vice President Corporate Communications of these shall also be independent in relation

Board meetings in 2017 JANUARY Extra Board meeting: potential acquisition of Candyking and impairment loss in Cloetta Italy. Extra Board meeting: Strategic review of Cloetta Italy and potential acquisition of Candyking. DECEMBER Scheduled Board meeting: year-end report, draft annual Scheduled Board meeting: budget/business report, matters ahead of the AGM, report from the audi- plan for the coming year, bonus targets, tor, incentive scheme. business strategy. FEBRUARY Extra Board meeting: per capsulum EC JAN relating to reclassification of D A shares. F V E O B OCTOBER N MARCH Extra Board meeting: per capsulum relating to M Scheduled Board meeting: annual report, raw material contracting. T A notice to attend the AGM. C Scheduled Board meeting: interim report R for the period from January to September, O Board evaluation, business strategy. S APRIL E R P P Annual General Meeting SEPTEMBER A Statutory meeting: decision on authorized signatories, adoption of instructions and Extra Board meeting: visit to Cloetta’s A U Y policies, election of the remuneration com- office in Turku, review of the commercial G A operations in Finland as well as customer visit M mittee and audit committee, appointment J of a Board representative to the nomination and review of business strategy. UL JUN Extra Board meeting: evaluation of investiga- committee, decision on dates and locations for tion relating to some share sales prior to profit the upcoming scheduled Board meetings, the warning. AGM and reporting dates. Scheduled Board meeting: strategy, interim report for the period from January to March. JULY JUNE Scheduled Board meeting; interim report for the period from Extra Board meeting: potential divestment of Cloetta Italy and January to June. integration of Candyking.

Corporate governance report 37 Cloetta

Sustainability report Sustainability to the company’s major shareholders. At be independent in relation to the company 6 President and least one member shall be independent and and its management. Of the remuneration Group Management Team have accounting or auditing expertise. Of committee’s members, all are independent in the audit committee’s three members, all are relation to the company and its management. The President/CEO is appointed by the independent in relation to the company and The work of the remuneration committee Board and supervises operations according to its management, and two are independent is regulated by special instructions that are the instructions adopted by the Board and is

in relation to the company’s major share- adopted by the Board as part of its work 2017 2017 responsible for day-to-day management of the holders. The work of the audit committee is plan. The main tasks of the remuneration company and the Group in accordance with regulated by special instructions that have committee are to prepare recommendations the Swedish Companies Act. In addition, the been adopted by the Board as part of its work to the Board for decision on remuneration President/CEO, together with the Chairman, plan. The audit committee is responsible principles, remuneration levels and other decides which matters are to be dealt with for ensuring the quality of the financial terms of employment for the Group Manage- at Board meetings. The Board regularly reporting and the effectiveness of the com- ment, to monitor and evaluate programmes evaluates the President/CEO’s duties and pany’s internal control and risk management for variable remuneration completed during performance. The President/CEO is respon- regarding financial reporting. In brief, the the year and ongoing programmes for the sible for ensuring that the Board members audit committee, without affecting the other Group Management as adopted by the AGM are supplied with the necessary information tasks and responsibilities of the Board, shall and of the current remuneration structures and decision data and presents reports and regularly meet with the company’s auditors and levels in the Group. The remuneration proposals at Board meetings regarding issues to stay informed about the focus and scope committee shall meet at least twice every dealt with by the Group Management Team. of the audit. The company’s auditor shall be financial year. In 2017 the committee held The President/CEO regularly informs the invited to participate in the meetings of the five meetings. Board and Chairman about the financial audit committee. The audit committee shall position and development of the company meet at least four times every financial year. Board Chairman and the Group. Henri de Sauvage-Nolting At least once a year, the committee shall meet The Board Chairman shall be elected by has been President/CEO of Cloetta since without the presence of any member of the the general meeting of shareholders, and 15 February 2017, and until this date Danko Group Management. All meetings of the audit the AGM on 4 April 2017 elected Lilian Maras was Interim President/CEO. At 31 De- committee are minuted. The audit committee Fossum Biner as Chairman of the Board. The cember 2017, aside from the President/CEO, shall inform the Board about the matters Chairman shall supervise the work of the the Group Management Team consisted of dealt with by the committee. In 2017 the Board and ensure that the Board discharges the three regional presidents, the President committee held five meetings. its duties, and has special responsibility for Operations (which includes purchasing and ensuring that the work of the Board is well production) and the five heads of the central Remuneration committee organized and effectively executed and for staff functions Finance/IT, Marketing, HR, The remuneration committee shall have no monitoring the Group’s development. The Corporate Communications & IR and Chief more than four members who are appointed Chairman oversees the effective implementa- Pick & mix officer. For information about the by the Board on a yearly basis. One of the tion of the Board’s decisions and is respon- President/CEO and other members of the members shall be chairman of the committee. sible for ensuring that the work of the Board Group Management Team, see page 40 and The Board’s remuneration committee con- is evaluated yearly and that the nomination pages 86–87 in Cloetta’s annual report. sists of members Mikael Svenfelt (chairman), committee is informed about the results of Lottie Knutson and Lilian Fossum Biner. The this evaluation. majority of the committee’s members shall

Organization*

President/CEO

Finance/IT HR

Corporate Corporate Development/M&A Communications & IR

Marketing Pick & mix

Netherlands/ Operations Sweden Denmark/Norway Finland International/UK Germany

* This organization chart applies from 1 March 2018.

38 Corporate governance report Cloetta

Sustainability report Sustainability The Group Management Team conducts the Group’s financial reporting and internal Awards for financial management meetings at regular intervals control and regularly monitor and evaluate communication and held ten meetings in 2017. The meetings operations. The task of the audit committee Webranking by Comprend are focused on the Group’s strategic and oper- is to support the Board in assuring the quality Cloetta was named the best ative development and financial performance. of the company’s financial reporting. How- website in Comprend’s In addition to these meetings, the members of ever, the audit committee deals not only with Webranking survey among

the Group Management Team work in close the Group’s financial reports and significant

100 largest Swedish listed 2017 daily cooperation regarding various matters. accounting matters, but also matters related companies. to internal control, compliance, material 7 Auditor uncertainty in reported values, events after Best Annual Reports in the balance sheet date, changes in estimates the World by Reportwatch The auditor is elected by the AGM for exami- and judgments and other conditions affecting Cloetta took first place in Reportwatch’s com- nation of the company’s annual accounts and the quality of the financial reports. petition “Best Annual Reports in the World” accounting records and the administration The President/CEO ensures that the fi- among all global companies in the food and of the Board of Directors and the President/ nancial accounting in the group companies is beverage sector. CEO. The auditor’s reporting to the share- carried out in compliance with legal require- holders takes place at the AGM through pres- ments and that financial management is con- Additional information entation of the auditor’s report. The AGM on ducted in a satisfactory manner. Cloetta AB’s At www.cloetta.com, information such as 4 April 2017 re-elected the certified auditing President/CEO is a member of the boards of the following can be found: The Articles of firm KPMG AB as the company’s independ- all operating subsidiaries. Every month, the Association, the Code of Conduct, infor- ent auditor to serve during the period until Group prepares a closing of the books that is mation from previous AGMs and corporate the end of the next AGM. Authorized Public submitted to the Board and the Group Man- governance reports from previous years. Accountant Tomas Forslund is Auditor in agement Team. For each upcoming financial Charge. year, a profit, balance sheet and investment budget are prepared for the Group and are 8 Financial reporting adopted at the scheduled Board meeting in December. External financial information is The Board of Directors is responsible for regularly provided in the form of: ensuring that the company’s organization is • Interim reports structured in such a way that the company’s • The annual report financial circumstances can be controlled • Press releases about important news that is satisfactorily and that external financial in- assessed to have a potential impact on the formation such as interim reports and annual share price reports to the market is prepared in accord- ance with the legal requirements, relevant • Presentations for financial analysts, inves- accounting standards and other require- tors and the media on the date of publication ments applicable to listed companies. The of the year-end and interim reports tasks of the Board are to oversee the Group’s • Meetings with financial analysts and financial development, assure the quality of investors

Press releases 2017

January April September • Strategic review and impairment of • Annual General Meeting. • Cloetta has completed the divestment of Cloetta Italy. • The Swedish Competition Authority ap- its Italian operations. February proves Cloetta’s acquisition of Candyking. • Cloetta’s EBIT to be negatively impacted • Interim report Q4, • Interim report Q1, January – March 2017. by mainly short-term issues. October – December 2016. • The acquisition of Candyking completed. October • Request to convert A-shares to B-shares. • Nomination committee appointed ahead July of 2018 Annual General Meeting of Cloetta • Proposal by the Nomination Committee • Cloetta to divest its Italian operations. regarding the Board of Directors of AB (publ). • Marcel Mensink appointed President Cloetta AB. • Certain employees under investigation for Operations. • Cloetta acquires Candyking. share sales. • Interim report Q2, April – June 2017. • Notice of the Annual General Meeting. • Cloetta awarded best Swedish corporate website 2017. March • Annual report 2016. • Interim report Q3, July – September 2017. November • Management changes in Cloetta.

Corporate governance report 39 Cloetta

Sustainability report Sustainability Board of Directors

Elected by the AGM Nationality Year elected Born in

Chairman Lilian Fossum Biner Swedish 2016 1962 Member Camilla Svenfelt Swedish 2016 1981

2017 2017 Mikael Aru Swedish 2017 1953 Lottie Knutson Swedish 2015 1964 Mikael Norman Swedish 2015 1958 Adriaan Nühn Dutch 2012 1953 Mikael Svenfelt Swedish 2008 1966

Group management team

Nationality Employeed year Born in

Henri de Sauvage Nolting Dutch 2017 1962 Danko Maras Swedish 2010 1963 Jacob Broberg Swedish 2010 1964 Regina Ekström Swedish 2004 1963 Johnny Engman Swedish 2012 1977 Dani Evanoff Lebanese and Swedish 2017 1976 Ewald Frenay Dutch 2000 1963 Marcel Mensink Dutch 2017 1971 Christian Boas Linde Danish 2013 1968 Ville Perho Finnish 2004 1979 Lars Påhlson Swedish 2008 1959 Erwin Segers Belgian 2010 1967

Glossary

Brand extension Totally new products developed under an established brand. BRC Global Standards for A leading safety and quality certification programme. Many European and global retailers will only consider business Food Safety with suppliers that have been certified according to the BRC Global Standard. Contract manufacturing Manufacturing of external brands, i.e. insourcing production of products from external parties. GRI Global Reporting Initiative A network-based organization whose founders include the UN. GRI has pioneered the development of a framework for the structure and content of sustainability reporting. ICC International Chamber of Commerce. ILO International Labour Organization, United Nations agency dealing with labour issues. ISO 9001 and ISO 14001 International Organization for Standardization. ISO 9001 addresses quality management and ISO 140001 addresses environmental management. Line extension New packaging, sizes and flavours for an established brand. OHSAS 18001 International occupational health and safety management system specification. Polyols Sugar alcohols that resemble sugar and are used as sweeteners. Pick & mix concept Cloetta’s range of candy and natural snacks that are picked by the consumers themselves. UTZ Certified standards for sustainable farming with a number of social and environmental criteria.

40 Corporate governance report Cloetta

Sustainability report Sustainability Corporate responsibility

2017 2017

Core values Cloetta has four core values that guide the way of working and acting, both within and outside the company. These core values are Focus, Passion, Teamplay and Pride.

Focus Passion Teamplay Pride

is about doing the fundamentals is about “going the extra mile”, is about mutual responsibility, is about being proud of our with self-confidence, ambition being positive and having fun. doing your part and supporting company, our brands, and a “will do” attitude. each other. our products and our personal contribution.

Sustainability 41 Cloetta

Sustainability report Sustainability Long-term sustainability

2017 2017 Cloetta’s overall goal for corporate respon- However, the journey to a sustainable Scope sibility is to build sustainable long-term society will not end in 2020. Cloetta is Cloetta’s sustainability work primarily covers value. For Cloetta, sustainable value is about therefore working continuously to evaluate the company’s own operations, meaning growing as a company while at the same time the achieved results and improve its working Cloetta’s direct impact on the environment ensuring that the people and environments methods in order to continuously improve our and people. However, Cloetta’s commitment that are affected by Cloetta’s operations or corporate responsibility work. to corporate responsibility is integrated products are positively impacted. Cloetta’s goals for 2020 are shown under throughout the entire value chain. the respective headings; Greater well-being, This means that aside from taking re- Steered by Code of Conduct and Reduced environmental impact and Sustain- sponsibility for the aspects that are under the core values able sourcing. company’s direct control, Cloetta also takes Cloetta’s work with corporate responsibility a certain responsibility for indirect aspects is steered by the Group’s Code of Conduct. Sustainability every day outside of its direct control, i.e. from raw The Code of Conduct is a set of guidelines and Cloetta’s continuous striving for sustainable material supplier to the recyclability of the principles for the way in which the company development is daily focused on respect for product packages. conducts operations and the employees’ the employees’ health and development, actions in relation to consumers, customers, control of raw materials and first line suppli- Sustainability and Cloetta’s suppliers, shareholders and colleagues. They ers, manufacturing safe products, handling overall strategies are based on Cloetta’s core values; Focus, complaints/returns effectively and reducing Cloetta’s sustainability commitment sup- Passion, Teamplay and Pride. the Group’s environmental impact. ports and is firmly grounded in the company’s Measures to achieve day-to-day sustaina- overall strategies: Long-term undertaking bility are described in this report within the Cloetta’s sustainability commitment is a targeted areas, such as product safety in the Focus on driving growth long-term undertaking. Cloetta has therefore Supply Chain section and efforts to create a By creating sustainability programmes for formulated a number of goals that extend good working environment in the Employees the prioritized raw material groups and com- until 2020. and Production sections. municating these programmes on Cloetta’s

Cloetta’s Code of Conduct

From raw materials Cloetta’s commitment to cherished brands to product content Cloetta works with responsibility throughout When it comes to product content and the supply chain, from raw material to finished quality, Cloetta is subject to a number of product. Cloetta supports the relevant ILO national and international laws and rules. conventions and complies with the laws However, Cloetta wishes to take its re- and rules in the countries where it conducts sponsibility further and is a forerunner in operations. The same requirements are placed developing the content of the products. For on the suppliers, and in order to become an example, Cloetta is conducting an internal approved supplier to Cloetta, the supplier long-term programme called NAFNAC must undergo an approval process and accept (No Artificial Flavours, No Artificial Cloetta’s general supplier requirements. Colours), which is aimed at offering a port- The Code of Conduct covers the entire folio of products that contain no artificial value chain, from raw material to consumer, Cloetta – every day flavours or colours. and applies to all activities in all markets Cloetta has clearly defined guidelines for and countries where Cloetta is represented. mutual respect and a shared set of core values. Cloetta’s environmental impact The principles in the Code of Conduct are Cloetta has joined the UN Global Compact Systematic environmental management consistent with: and works to promote its ten principles in provides a foundation for Cloetta’s efforts • The UN’s Declaration of Human Rights the communities and environments where to minimize its environmental impact. • ILO conventions the company conducts business. Cloetta’s environmental work is aimed at complying with the applicable laws • Organisation for Economic Co-operation Special emphasis is placed on: and rules, engaging the employees and and Development (OECD) guidelines for • Equality and non-discrimination focusing on continuous improvements in multinational enterprises • Freedom of association and collective the environmental area. Cloetta’s foremost bargaining • The ICC framework for responsible environmental impact arises through marketing of food and beverages • Occupational health and safety water and energy consumption, wastewater • European Brand Association • Working hours emissions, waste and transports.

42 Sustainability Cloetta

Sustainability report Sustainability

2017 2017 packages, the brands are further strength- Cloetta’s sustainability work is overseen engagement is mainly focused on considera- ened among customers and consumers. by the Director Corporate Responsibility, tion to the local environment where Cloetta’s UTZ-certified cocoa and palm oil certified who functions as a spokesman for issues production facilities are based, but can also according to the Roundtable on Sustainable related to corporate responsibility and is consist of other activities. Cloetta maintains Palm Oil (RSPO)’s principles are two such responsible for identifying prioritized areas, an ongoing dialogue with local authorities in examples. acting as the stakeholders’ link to the man- the locations where it has factories, as well agement and supporting the implementation as with the media and schools/universities, Focus on cost-efficiency of Cloetta’s corporate responsibility strategy. among others. Efforts to continuously reduce the company’s Environmental and occupational health and environmental impact go hand in hand with safety managers are found in all factories. Whistleblower service lower costs. Lower energy use and waste vol- Cloetta’s whistleblower service that gives all umes from the factories contribute to greater Independent verification Cloetta employees the opportunity to report cost-efficiency. and assurance concerns about conduct that is not in line with Cloetta has commissioned KPMG to make a the company’s values or ethical principles. As Focus on the employees limited review and assure the sustainability a first course of action, Cloetta’s employees and organization report. The independent review focuses on are encouraged to contact their manager. If Cloetta works determinedly to create an the most significant aspects of sustainability, an employee feels unable to openly disclose attractive workplace for all employees and as well as assurance that the report satisfies the information, Cloetta offers an opportuni- promotes the development of a high-perform- reporting criteria in line with Global Report- ty to report their concerns anonymously. ing organization by continuously developing ing Initiative (GRI) G4. See page 46. All reports are treated confidentially. and training its staff, designing competitive Personal data relating to violation of laws is remuneration systems, upholding an inspir- Cloetta supports handled only by key persons or individuals in ing corporate culture and building a clear Cloetta is involved in projects primarily in its management positions. Two cases were noti- corporate identity. local markets but also takes part in initiatives fied in 2017 and none in 2016. Neither related at the global level. These can include environ- to corruption or fraud. Organization for sustainability work mental projects driven within the framework The overall strategies for Cloetta’s corpo- of Cloetta’s sustainability work and projects Anti-bribery and rate responsibility work are adopted by the to promote an active and healthy lifestyle. -corruption policy Group Management Team and are controlled and monitored through business planning Community engagement processes at several levels in the company. The local commitment to sustainable devel- Ultimate responsibility for corporate respon- opment is aimed at strengthening the sur- The anti-bribery and -corruption policy sibility lies with Cloetta’s President/CEO. rounding community but also Cloetta’s brand is closely related to Cloetta’s Code of both within and outside the company. This Conduct, and together they are designed to ensure compliance with the appli- Strategic components cable principles to combat bribery and Policy and prioritized areas Cloetta’s overall strategy and operational policy. Code of Conduct. corruption. Responsible marketing. Materiality analysis and Cloetta’s sustain­ The policy applies to all of our ac- ability commitment. tivities in all markets and the principles Goals and KPIs Overall financial targets. Goals and KPIs have been defined for each outlined in this document apply to our part of Cloetta’s sustainability commitment. relationships with employees, customers, Data See entire sustainability report. consumers, suppliers, competitors, offi- Management systems, pro- Lean 2020, IFRS. Cloetta’s leadership platform. BRC, ISO 14001, grammes and certifications UTZ and RSPO. cial authorities and Non Governmental External statutes or initiatives UN Global Compact and other relevant ILO conventions. Organizations (NGO). EWC (European Works Council). The policy summarizes key features of anti-bribery and corruption control principles in order to prevent bribery and Tax information Taxes paid corruption within Cloetta. It explains Cloetta paid SEK 1,177m in various Other 1% q compliance procedures to be followed Corporate income tax q 4% by all Cloetta employees, along with taxes in 2017. These were mainly Value-added tax information about applicable report- value-added tax, sugar taxes and em- t 39% ployment-related taxes. Considering Employment- ing and record keeping, and penalties related taxes u the reported profit before tax, the 24% Total for non-compliance with the policy. It amount of corporate income tax paid SEK 1,177m applies to Cloetta, all of its employees, is relatively low due to the availabili- and all persons engaged to perform work ty of tax losses carried forward. The for Cloetta, including temporary agency majority of the remaining tax losses Sugar tax u personnel, contractor personnel, and carried forward are expected to be 32% non-employee agents acting on its behalf. utilized in the near future.

Sustainability 43 Cloetta

Sustainability report Sustainability Stakeholders and materiality issues

2017 2017 The areas that are prioritized in Cloetta’s sustainability commitment have been defined through a materiality analysis. Every year, Cloetta performs a materiality analysis based on the sustainability issues that have been identified in discussions with Cloetta’s stakeholders.

Cloetta’s primary stakeholders are custom- the expectations and requirements of each • The impact perspective – i.e. the direct ers, consumers, employees, shareholders/ stakeholder group. impact a specific issue can have on Cloetta investors, business partners/suppliers and the The methodology behind Cloetta’s from a financial perspective, goodwill, etc. local communities. These groups are directly materiality analysis is aimed at classifying critical for Cloetta’s long-term survival. different types of sustainability issues on the The issues that are classified as being of In addition, there are a number of other basis of two parameters: critical importance from both a stakeholder important stakeholders. These are shown • The stakeholder perspective – i.e. what and impact perspective are those that have in the illustration below in the outer circle. importance a specific issue has for Cloetta’s the highest priority for Cloetta. It is these sus- Cloetta has a continuous, open dialogue above stakeholders. tainability issues and areas that are defined in all with the primary stakeholders based on Cloetta’s sustainability commitment.

Cloetta’s stakeholders

organizationsUnion Consumer organizations organizations Industry ees Sup oy pl pl ie m rs E

Government

s s

r r e e

universities

m

Schools/ m u

o

s t

n s

o u C C

L o Non-profit s c r organizations a e l c d o ol mm h unity hare Media S

Stockholm Banks/ financial stock exchange players

44 Sustainability Cloetta

Sustainability report Sustainability

Materiality analysis

2017 2017

Fulfill Prioritize • Social, environmental and economic challenges in • Follow the health-related issues surrounding artificial developing countries for prioritized raw materials Very important ingredients. (sustainable sourcing). • Environmental impact in Cloetta’s operations. • Laws and conventions. • Employee safety and well-being. • Product safety and quality. • Sugar-free alternatives.

Administrate Monitor and supervise • Charity. • Combat corruption and fraud. • Local community engagement. • Social, environmental and economic challenges in • Tax issues. countries of origin for other raw materials. • Responsible marketing. • Ensure diversity. Importance for Cloetta’s stakeholders Cloetta’s for Importance Important High Very high

Impact on Cloetta

The stakeholders’ key sustainability issues

Stakeholder Key issues – sustainability Communication and cooperation

• Product safety and quality. • With consumers via annual surveys and via websites • Clear declaration of ingredients. and social media. • Eco-friendly packages. • With customers through personal customer and sales meetings Customers/ • Cloetta takes responsibility for the environment on a tertial basis and via customer surveys, but also collaborative Consumers and working conditions. initiatives for eco-friendly transports. • Ethical issues in general. • Efficient transports to the retail trade.

• Good and stimulating working conditions. • Daily meetings to discuss occupational health and safety • A safe working environment. in the factories. • Health and fitness activities. • Annual performance reviews with all employees. Employees • Ethical issues in general. • Systematic skills development activities. • Good financial development for the company. • Up-to-date information provided monthly, e.g. via managers, the intranet and union representatives. • Employee survey “Great Place to Work” every other year.

Shareholders and • Sustainable long-term financial value growth. • Annual report, website, analyst and investor meetings, investors • Ethical issues in general. interim reports and annual general meeting.

• Ethics and business codes in procurement. • Collaborative projects for sustainability. • Product safety. • Annual supplier evaluations, sponsorship evaluations and Suppliers • Sustainable long-term development. development projects. • Support of human rights among raw material producers.

• Cloetta takes responsibility for the environment and • Continuous contact with the local communities/municipalities working conditions as far as possible. around Cloetta’s factories with regard to the local environment. • Laws, regulations and standards. • Continuous contact with public authorities in areas related to Local communities, • Cloetta makes a positive contribution to development of occupational health and safety, environmental and product the public/society society, including the local environment. responsibility, schools and universities. • Annual audits by Certification bodies for ISO and BRC. • Continuous contact with key opinion leaders.

Sustainability 45 Cloetta

Sustainability report Sustainability GRI-index

Strategy and Analysis Page G4-1 Statement from the most senior decision-maker of the organization 2

2017 2017 Organizational Profile G4-3 Report the name of the organization Inside back cover G4-4 Report the primary brands, products and/or services 6 G4-5 Report the location organization’s headquarters 34 G4-6 Report the number of countries where the organization operates, and names of the countries where the organization has significant operations 10, 17, 29 G4-7 Report the nature of ownership and legal form 34 G4-8 Report the markets served 10 G4-9 Report the scale of the reporting organization Inside front cover G4-10 Total number of employees by employment type, employment contract, region and gender 27–29 G4-11 Report the percentage of total employees covered by collective bargaining agreements 29 G4-12 Describe the organization’s supply chain 8–9, 22–24, 33 17G4-13 Report any significant changes during the reporting period regarding the organization’s size, structure, ownership or supply chain 2, 11, 17 G4-14 Report whether and how the precautionary principle is addressed by the organization 20–21, 42 G4-15 List externally developed economic, environmental and social charters, principles, or other initiatives to which the organization subscribes or which it endorses 42–43, 48 G4-16 List of memberships of associations and national or international advocacy organizations 48

Identified Material Aspects and Boundaries G4-17 List all entities included in the organization’s consolidated financial statements or equivalent documents 47 G4-18 Explain the process for defining the report content and the Aspect Boundaries 44–45, 47 G4-19 List all the material aspects identified 45 G4-20 For each material Aspect, report the Aspect Boundary within the organization 42, 47 G4-21 For each material Aspect, report the Aspect Boundary outside the organization 42, 47 G4-22 Report the effect of any restatements of information provided in previous reports Divestment of and the reasons for such restatements Cloetta Italy G4-23 Report significant changes from previous reporting periods in Scope and Aspect Boundaries 2, 17

Stakeholder Engagement G4-24 Provide a list of stakeholder groups engaged by the organization 44 G4-25 Report the basis for identification and selection of stakeholders with whom to engage 44 G4-26 Report the organization’s approach to stakeholder engagement 45 G4-27 Report key topics and concerns that have been raised through stakeholder engagement 13

Report Profile G4-28 Reporting period for the information provided 1 January – 31 December 2017 G4-29 Date of most recent previous report 9 March 2017 G4-30 Reporting cycle Calendar year G4-31 Provide the contact point for questions regarding the report or its content 47 G4-32 Report the GRI Content Index in accordance with GRI G4.0 Core requirements and report the reference to the External Assurance Report 46–47, 49 G4-33 Report the organization’s policy and current practice with regard to seeking external assurance for the report 49

Governance G4-34 Report the governance structure of the organization, including committees, and Board responsibility for economic, environmental and social topics 34–39, 43

Ethics and Integrity G4-56 Describe the organization’s values, principles, standards and norms 41–43

46 Sustainability Cloetta

Sustainability report Sustainability Performance indicators

GREATER WELL-BEING – SAFE EMPLOYEES WITH GOOD WELL-BEING Working conditions Scope Comments Page G4-DMA Occupational health and safety 17, 25–29, 35, and absenteeism 41–42 G4-LA6 Occupational injuries, lost days, Includes Cloetta ODR, IR, LDR replaced by days 3, 25, 27, 47

and absenteeism between occupational injuries 2017 that lead to sick leave and ab- senteeism. Occupational injuries are not reported by region and gender. Absenteeism is reported by gender G4-LA12 Composition of governance bodies and break- The indicator is not reported by 25–29, 40 down of employees by gender and age group minority groups GREATER WELL-BEING – CONSUMERS Product responsibility G4-DMA Customer health and safety 14–15, 16–19, 33, 37, 41–45 G4-PR1 Evaluation of products and services with regard Includes Cloetta’s 3, 14–15, 16–19 to consumer health and safety customers Own Consumer complaints/returns 18 REDUCED ENVIRONMENTAL IMPACT – FROM OWN OPERATIONS Environment G4-DMA Energy consumption, waste and carbon dioxide 20–21, 33, 35, emissions 40–45 G4-EN3 Energy consumption inside the organization Includes Cloetta 3, 20–21 G4-EN15, Direct and indirect greenhouse gas emissions, Refers to Cloetta and the 20–21 G4-EN16 by weight (Scope 1, Scope 2) supply chain G4-EN22 Total water discharge by quality and destination Refers to Cloetta’s 20–21 supply chain G4-EN23 Total weight of waste, by type and disposal No detailed information about 20–21 method disposal method. Reported in percentage, not weight. Own Recycling of materials 20–21 G4-EN30 Transports Refers to transports within Reported only in kg CO2 per 20–21 Cloetta’s supply chain transported tonne.

SUSTAINABLE SOURCING Human rights G4-DMA Supplier human rights assessment 17–19, 22–24, 33, 35, 41–45 G4-HR 10 Percentage of new suppliers that were Refers to Cloetta’s suppliers No percentage available. 22 screened using human rights criteria Own Results of sustainability programmes for Refers to Cloetta’s suppliers 22–24 prioritized raw materials

ECONOMIC PERFORMANCE AND ANTI-CORRUPTION G4-DMA Economic performance 41–45 G4-EC1 Direct economic value generated and Refers to Cloetta and 9 distributed external stakeholders G4-DMA Anti-corruption 36–37, 41–43 G4-S05 Confirmed incidents of corruption Cloetta’s employees or third Measured through incidents re- 0 incidents party acting on behalf of ported to whistleblower service. page 43 Cloetta.

Cloetta reports in accordance with the Global Reporting Initiatives (GRI) Contact for Sustainability Reporting Guidelines, G4, Core. Cloetta’s sustainability reporting sustainability covers all of its operations unless otherwise stated. The most recent sustain- ability report was presented on 8 March 2017. The table of contents above information contains all standard disclosures and the specific disclosures that have been Thomas Wiesgickl identified as the most relevant in view of Cloetta’s long-term sustainability Director Corporate targets. The specific disclosures and other contents of the sustainability report Responsibility and Special Sales have been selected based on Cloetta’s materiality analysis on page 45. The Telephone: +46 73 026 16 33 focus of Cloetta’s sustainability work and therefore also the reporting is on the E-mail: well-being of employees and consumers, reduced environmental impact and [email protected] sustainable sourcing. The key performance indicators have been collected with the help of internal reporting systems. KPMG has performed limited assurance procedures on Cloetta’s sustainability report, see page 49.

Sustainability 47 Cloetta

Sustainability report Sustainability Membership of organizations

2017 2017 Cloetta is active in a number of collaborative initiatives aimed at promoting more sustainable cultivation of raw materials and improving the conditions for growers in developing countries. The following collaborations are the most important.

World Cocoa Foundation Round Table on Caobisco (WCF) Sustainable Palm Oil

The World Cocoa Foundation (WCF) Caobisco (Chocolate, Biscuit & Confec- The Round Table on Sustainable Palm manages a range of programmes aimed tionery Industries of the EU) supports Oil (RSPO) is committed to promoting at increasing the cocoa farmers’ incomes International Cocoa Initiatives, for the growth and use of sustainable palm and promoting sustainable cultivation. example through the development of oil worldwide. Examples of initiatives include teacher control and certification systems for training programmes, training in cocoa cocoa production. processing, micro loans for cocoa grow- ers and health-related issues.

UN Global Compact UTZ Bonsucro

The UN’s Global Compact is a strategic UTZ Certified stands for sustainable With more than 400 members from 32 policy initiative for businesses that are farming and better opportunities for countries that represent all parts of the committed to aligning their operations farmers, their families and our planet. delivery chain, Bonsucro is an organi- and strategies with ten universally The UTZ programme enables farmers zation that has the resources to realize accepted principles in the areas of to learn better farming methods and to its vision: “A sugarcane sector that is human rights, labour environment and improve their working conditions and continuously improving and verified as anti-corruption. the environment. sustainable”.

Global Shea Alliance Industry organizations

The GSA is a nonprofit organization • Bord Bia, Irish Food Board, • FNLI (The Dutch Food Industry that promotes sustainability in the shea (Irish industry association). Federation). industry. The GSA’s mission is to design, • Chokofa is a Swedish industry • HSH (The Federation of Norwegian develop and propose strategies that pro- association. Commercial and Service Enterprises). vide a foundation for a competitive and • Choprabisco, Belgium. • VBZ (Association of the Dutch Bakery sustainable shea industry worldwide, • DI (Danish Chocolate and and Confectionery Industry), and to support and empower the rural Confectionery Industries). the Netherlands. African women and their communities. • ETL (Finnish Food Industries’ Federation).

48 Sustainability Cloetta

Sustainability report Sustainability Auditor’s Limited

Assurance Report 2017 on Cloetta ABs Sustainability Report and statement regarding the Statutory Sustainability Report

To Cloetta AB (publ), Corp. id. 556308-8144

Introduction Sustainability Report has been conducted in accordance with FAR:s We have been engaged by the Board of Directors and the CEO of accounting standard RevR12 The auditor’s opinion regarding the Cloetta AB to undertake a limited assurance engagement of Cloetta Statutory Sustainability Report. A limited assurance engagement and ABs Sustainability Report for the year 2017. Cloetta AB has defined an examination according to RevR 12 is different and substantially the scope of the Sustainability Report on page 12 in this document, less in scope than an audit conducted in accordance with International the Statutory Sustainability Report is defined on page 68 in Cloetta’s Standards on Auditing and generally accepted auditing standards in annual report. Sweden. The firm applies ISQC 1 (International Standard on Quality Responsibilities of the Board of Directors Control) and accordingly maintains a comprehensive system of quality and the Executive Management control including documented policies and procedures regarding The Board of Directors and the Executive Management are respon- compliance with ethical requirements, professional standards and sible for the preparation of the Sustainability Report including the applicable legal and regulatory requirements. We are independent of Statutory Sustainability Report in accordance with applicable criteria Cloetta AB in accordance with professional ethics for accountants and the Annual Accounts Act respectively. The criteria are defined in Sweden and have otherwise fulfilled our ethical responsibilities in on page 47 in the Sustainability Report, and are part of the Sustaina- accordance with these requirements. bility Reporting Guidelines published by GRI (The Global Reporting The limited assurance procedures performed and the examination Initiative), that are applicable to the Sustainability Report, as well as according to RevR 12 do not enable us to obtain assurance that we the accounting and calculation principles that the Company has devel- would become aware of all significant matters that might be identified oped. This responsibility also includes the internal control relevant to in an audit. The conclusion based on a limited assurance engagement the preparation of a Sustainability Report that is free from material and an examination according to RevR 12 does not provide the same misstatements, whether due to fraud or error. level of assurance as a conclusion based on an audit. Our procedures are based on the criteria defined by the Board of Auditor’s responsibility Directors and Executive Management as described above. We consider Our responsibility is to express a conclusion on the Sustainability these criteria suitable for the preparation of the Sustainability Report. Report based on the limited assurance procedures we have performed We believe that the evidence obtained is sufficient and appropriate and to express an opinion regarding the Statutory Sustainability to provide a basis for our conclusions below. Report. We conducted our limited assurance engagement in accordance Conclusions with ISAE 3000 Assurance engagements other than audits or reviews Based on the limited assurance procedures performed, nothing has of financial information. A limited assurance engagement consists of come to our attention that causes us to believe that the Sustainability making inquiries, primarily of persons responsible for the preparation Report is not prepared, in all material respects, in accordance with the of the Sustainability Report, and applying analytical and other limited criteria defined by the Board of Directors and Executive Management. assurance procedures. Our examination regarding the Statutory A Statutory Sustainability Report has been prepared.

Stockholm 7 March 2018

KPMG AB

Tomas Forslund Torbjörn Westman Authorized Public Accountant Expert member of FAR

Sustainability 49 Cloetta, founded in 1862, is a leading confectionery company in the Nordic region and the Netherlands. In total, Cloetta products are sold in more than 50 countries worldwide. Cloetta owns some of the strongest brands on the market, such as Läkerol, Cloetta, Candyking, Jenkki, Kexchoklad, Malaco, Sportlife and Red Band. Cloetta has eight production units in five countries. Cloetta’s class B shares are traded on Nasdaq Stockholm.

Cloetta AB (publ) • Corp. ID no. 556308-8144 • Solna Business Park, Englundavägen 7D, PO Box 6036, SE-171 06 Solna, Sweden. • Tel +46 8-52 72 88 00 • www.cloetta.com