SUSTAINABILITY REPORT 2018 1 Contents

Sustainability Report FOR THE YEAR ENDING 31 JULY 2018 FONTERRA CO-OPERATIVE GROUP LIMITED Working together, for tomorrow. We are working together, for tomorrow. By improving how we dairy, we can make a positive impact on the world. That means caring about nutrition, for our environment and for our communities. FONTERRA SUSTAINABILITY REPORT 2018 1 Contents 04 04 10 14 18 20 Letter from Our approach About Fonterra Reporting what’s Our contribution Our Approach Chairman and CEO and progress and our value important to UN SDGs creation 22 28 34 36 37 Health and Food safety In-school Trusted Our Nutrition wellbeing and quality nutrition Goodness 38 48 54 62 66 Water Climate change Packaging Animal health Our Environment and waste and biosecurity 68 74 78 80 82 88 Doing what’s right Health, safety Human rights Responsible Supporting our Our Community by our people and wellbeing procurement communities 90 90 92 94 GRI standards Assurance Associations and Appendices statement memberships About this report This report covers the activities of Fonterra Co-operative In certain sections throughout the report, we have included This report has been prepared in accordance with the An independent assurance of the report has been completed Group Limited and of joint ventures under Fonterra’s data relating to periods prior to FY18 where such data is Global Reporting Initiative (GRI) Standards: Core option. We have by Bureau Veritas. This provides assurance that the report management control. It covers economic, social and relevant to, or useful context for the reader. Where we have included an index of disclosures against the GRI standards on complies with GRI Standards and provides an accurate and environmental impacts for the year ending 31 July 2018 – done so, we have made it clear which year(s) the data page 90. fair representation of Fonterra’s sustainability performance. ‘FY18’. This report sits alongside our 2018 Annual Review relates to. Refer to the Assurance Statement on page 92. The GRI Standards are the world’s most widely used standards for which sets out our financial performance. This is our second stand-alone sustainability report (our first sustainability reporting, enabling organisations to measure and We understand the importance of understanding www.fonterra.com/annualreview2018 was in 2017) and we intend to continue this reporting on an report their most important sustainability topics. For more stakeholder perspectives so we’d appreciate your feedback on annual basis. information see: this report and our performance. Please email us at [email protected] www.globalreporting.org 2 FONTERRA SUSTAINABILITY REPORT 2018 FONTERRA SUSTAINABILITY REPORT 2018 3 Letter from the Our Values We’re an organisation that spans many countries and cultures, and values are hugely important to us. But when you boil Chairman and newspix.co.nz Credit: it down, there are just four simple things that guide us. And it doesn’t matter who or Chief Executive where we are within Fonterra, these are the values we all share. John Monaghan, Chairman and Miles Hurrell, Chief Executive Officer The Sustainable Co-operative is one External perspectives are invaluable, and we are looking forward We launched our Cared for Cows Standard, bringing an to both guidance and challenges from our newly formed independently verified certification to the way our farmers treat of three core platforms for Fonterra’s Sustainability Advisory Panel. We expect them to be part of our their herds every day. Consumers care about animal welfare as strategy and in many ways is the most conscience as well as a constructive critic. much as our farmers, so it is important we can verify our claims that we care. vital as well as the most challenging. This is our second independently assured sustainability report. It acknowledges that while we are making good progress across our Consumers can also be reassured that New Zealand has among Our Co-operative has a strong heritage of respecting environmental, social and economic goals, some of the progress the lowest greenhouse gas emissions per litre of milk collected our natural resources and working with them to produce 1 will be hard won. We have set industry-leading targets in many in the world at 0.87 kgCO2-e/kg FPCM. This too underlines our quality pasture-based milk. areas, and these need to be challenging, not easy. Where we have commitment to play a leading role in supporting New Zealand to We have changed as times have changed, recognising the tried, but not quite made the mark, we say so. Where we have reach our carbon reduction goals, while also reinforcing we have importance of sustainability and the role it plays in ensuring reached a milestone, we acknowledge it. more work to do to bring our manufacturing emissions down. our economic contribution, as well as our contribution to In many of our priority areas, such as nutrition, the environment Sustainability embraces environmental, economic, ethical and healthy lifestyles, can be both grown and maintained. and the community, we are proud to report good progress, as well community concerns and it can often be a difficult balancing act In some areas, such as the proactive steps taken from as the work yet to be completed. to align them all. In the year covered by this report, our farmers the early 2000s to fence waterways and better manage have weathered some very difficult climatic conditions, from For example, we now have 71% of our everyday and advanced nutrient losses, we have shown leadership from within drought to floods, and they have seen production and anticipated nutrition products meeting our Food and Nutrition Guidelines, Fonterra. In others, such as our alignment and commitment incomes fall. endorsed by the New Zealand Nutrition Foundation. This is to the United Nations Sustainable Development Goals significant progress towards our target of 75% by 2020 and Despite the tough year, they have continued to set their sights (SDGs), we are joining forces across sectors and society underlines our commitment to ensuring dairy remains an essential high and to carry a significant share of our sustainability workload. to contribute to a healthier planet and the lifestyles of the and affordable part of a healthy diet for all ages. It is especially They more than anyone recognise it is important to their families, people on it. pleasing that we can now electronically trace 92% of our products their community, our country and the planet. They deserve and back to the source of our milk – this is a level of reassurance have our thanks. We also appreciate the work of our Fonterra consumers expect and meets our Trusted Goodness promise. employees, our suppliers, partners and customers for their contribution to this year’s progress. Sustainability is not a long-term goal – it is an infinite one. Every year of work that we report represents a small step along the way. John Monaghan Miles Hurrell Chairman Chief Executive Officer 1 FPCM – Fat-and-protein-corrected milk. FONTERRA SUSTAINABILITY REPORT 2018 FONTERRA SUSTAINABILITY REPORT 2018 4 5 Approach Our OUR APPROACH Global Context The Earth’s climate has experienced warming of approximately .°C during in the last century and ood-related disasters have increased by in the More than in adults last years. Not only does agricultural are obese, placing them food production need to help reduce A GROWING at much higher risk of greenhouse gas emissions, it must acute and long-term also adapt to the increased variability POPULATION health problems. in weather patterns. Around the world, the way food is produced and consumed is at the .°C centre of many of the sustainability ,,, challenges facing society. The future of food will be shaped It is estimated that by there by the global response to will be another one billion people, these challenges. placing the Earth’s resources under even more pressure. billion people are already suering from ‘hidden hunger.’ Micronutrient deciency or Over of children ‘hidden hunger’ is estimated under ve are still aected to aect two billion people. by stunting, which can The insucient intake of key impact cognitive micronutrients such as iron, development and iodine and vitamins can impact school achievement. development and exacerbate disease, and the impacts are not always visible. Severe food insecurity was higher in than it was in in every region except northern America and Europe. FONTERRA SUSTAINABILITY REPORT 2018 FONTERRA SUSTAINABILITY REPORT 2018 6 7 Approach Our OUR APPROACH The global population is expected Access to nutrition, education, to grow by one billion by 2030, employment and income continue food production overall is depleting to be significantly influenced by a natural resources and rural person’s social background, their communities are migrating to cities ethnicity and gender identity in search of better livelihoods. or expression. An inclusive and Our respectful world is essential for a How do we transform our food fairer and sustainable future. system to produce sufficient good Challenges nutrition, while regenerating the How do we eliminate social environment and returning decent inequity, not just directly in livelihoods to farmers?” our own workplace but through Carolyn Mortland our influence on the supply Director Social Responsibility chain and the wider society The world needs good nutrition to we interact with?” meet the demands of an expanding Susan Doughty global population and rising rates GM Diversity, Inclusion of malnutrition. and Talent The way the world is collectively producing food is depleting natural resources and creating waste faster than our planet can cope with. We believe the global food system must shift from compounding the problem to being part of the solution. With New Zealand’s natural environment and some of the Sustainable diets will involve world’s most effective farmers, we’re well positioned to lead different food sources fulfilling change.

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