Business Benchmark on Farm Animal Welfare Global Investor Collaboration on Farm Animal Welfare CEO Letter Engagement Update

17th November 2020 Agenda

1. Introduction to the BBFAW Secretariat 2. BBFAW timeline 3. Engagement process overview 4. Company engagement response trends 5. Company responses i. General ii. Covid-19 6. CEO letter responses – next steps 7. Global Investor Collaboration evolution Introduction to the BBFAW Secretariat

Executive Director, BBFAW Manager, Investor Engagement Programme Manager Animal Welfare Specialist

Nicky Amos Robert Black Nathan Rhys Williams Dr Heleen van de Weerd

CEO, Chronos Sustainability Manager, Corporate Director, Corporate Engagement Engagement Rory Sullivan Elisa Tjärnström Darren Vanstone Introduction to the BBFAW Secretariat – wider support

Administration Communications Animal welfare specialists /Technical expertise

Lyndsey Hurley Amanda Williams Dr Steve Webster, Dr Jon Day BBFAW Timeline

• Currently assessing the 150 BBFAW companies as part of the 9th annual benchmark cycle. • Report launch: March/April 2021 • Investor engagement survey: January 2021 • To support the annual BBFAW report we want to better understand investors’ farm animal welfare engagement practices. This would be anonymous. • Annual investor and company survey: May 2021 • Investor Collaboration CEO letters: May 2021 • 10th annual BBFAW assessments August 2021 BBFAW Investor Statement and Collaboration CEO letter engagement overview

Timeline overview

• The impacts of Covid-19 on food businesses in H1 of 2020 were new and significant.

• BBFAW wrote to investors 20th April 2020 informing them of the BBFAW TWG’s decision to delay the assessment period to October / November 2020.

• In consultation with the Global Investor Collaboration the decision was also taken to delay the sending of CEO letters from May 2020 to later in the year.

• Post review by the Investor Collaboration the CEO letters were sent on 21st September 2020.

• Deadline for responses was set for 16th October, with extensions granted when requested. CEO letter engagement overview

Process overview

• 149 companies (i.e. the entire BBFAW company universe, minus Dean Foods). • Change: historically posted, this year BBFAW issued letters by email to existing contacts at the companies and IR teams, where relevant. • Personalised address on each letter to the CEO or equivalent. • A company received a letter from 1 of 6 categories: • Leader • New • Improver • Decliner • Laggard • Non-mover • This year we asked about the impact of Covid-19 on the status of farm animal welfare in the business. • JBS and McDonalds sent personalised letters due to specific engagements in the previous year. Collaboration CEO letter response trends

• Company response rate was significantly higher this year (46%) compared to 25% for 2019 and 39% in 2018. • Majority of responses from publicly listed companies, however, the CEO letters also elicit feedback from privately held companies and cooperatives.

Company response totals to BBFAW CEO letters 150 140 130 120 110 100 90 80 70 60 50 40 30 20 10 0 2020 2019 2018

Total companies Total responses CEO letter responses - summary

Number of companies and responses in each • 69 responses in total. letter category • Positive spread of responses across the letter 50

categories. 65% provided detailed responses and 11 35% gave a brief response or simply an 40 acknowledgment.

30 23 • 4 companies followed up with meetings with Yes BBFAW team members: Chipotle, Dunkin’ 20 39 No Brands, KraftHeinz, Groupe Lactalis. 12 16

10 18

5 10 • For 19 companies this is the one way they have 6 1 3 3 1 engaged with BBFAW so far this year. 0 1 CEO letter responses - summary

• Good response rates in Tiers 1-4. Expectedly lower responses from Tier 5 with Tier 6 companies notably lagging.

• Non responders in Tiers 5 and 6 (43 companies): North America (17), Asia Pacific (14), Europe (7), Latin America (5).

Company responses by 2019 BBFAW Tier 40

35

30 19 3 25 20 11 20 Yes No 15 27

10 12 19 16 12 5 4 4 0 2 1 2 3 4 5 6 CEO letter responses - summary

• Of the 69 responses 36% came from sustainability teams, 24% from animal welfare / sourcing specialists, 22% from board level, and 18% from corporate communication teams. • Board level responders from companies throughout Tiers 1-4. Indicates that for a significant proportion of companies, animal welfare is a critical strategic issue.

Type of responder to the CEO letter 25

20

15

10

5

0 Corporate Board level Animal welfare / sourcing Sustainability / CSR Communications specialist CEO letter responses – tailored letters

• BBFAW sent tailored letters to McDonalds and JBS SA. • The McDonalds letter acknowledged a call BBFAW had conducted with some investors on its approach to broiler welfare.

• In 2018 there were concerns over systemic animal welfare issues at JBS. BBFAW placed a warning flag on JBS in 2018 and following multiple communications and a call in November 2019 removed the flag once it was deemed appropriate remedial actions had been taken. • The CEO letter asked for further updates on improvements JBS was making to its governance processes specifically on:

1. The recruitment of a Global Head of Animal Welfare 2. Assigning individuals with explicit responsibility for animal welfare at its plants. 3. Progress on the animal welfare scorecard initiative 4. Upgrades at key facilities e.g. Grand Island CEO letter responses – Tier changes

• 8 companies fell a Tier in 2019 • We received responses from 5 of these with 2 arranging follow up calls (Dunkin’ Brands and KraftHeinz) to discuss improvements they can make. • Marfrig Global Foods SA has spoken to the BBFAW team about its assessment.

2019 Company Ownership Responded Tier Dunkin’ Brands Inc Public 5 Yes KraftHeinz Public 4 Yes Lidl Stiftung & Co KG Private 4 No Loblaw Companies Limited Public 5 Yes Marfrig Global Foods SA Public 4 No Mondelez International Public 5 No Unilever NV Public 3 Yes Vion Food Group Private 3 Yes CEO letter responses – Covid-19

• 36 companies referred to Covid-19 in their responses, acknowledging the significant impact the Covid- 19 pandemic has had on food businesses. • Responses were mostly positive and confirmed that animal welfare would remain a priority. • Main issues raised were:

1. Companies face challenges related to the supply chain (e.g. having to expand/change suppliers). 2. Companies having difficulties in reporting (e.g. limitations on the ability to audit suppliers). 3. Timelines for commitments may need to be delayed. 4. Companies continue to make improvements on farm animal welfare, despite challenges. 5. Companies haven’t seen or anticipate an impact on their animal welfare practices. CEO letter responses – next steps

• No responses that raise particular concern. We encourage investors to review the responses of those companies that they have holdings and/or engage with. • BBFAW is available to support investors with additional information or to put results in context, if they wish to follow up with a particular company. • We are interested to hear from investors who want a collective response from the collaboration to a company. • The BBFAW Secretariat is going to review company performance trends and wider levels of engagement with BBFAW (i.e. reviewing assessments, responding to consultations, CEO letters) and write a public briefing on corporate engagement. • This research may result in a list of companies that could benefit from targeted engagement, we would share this list with the Investor Collaboration but not publish.

• The CEO letters stimulate companies to review their preliminary assessments (available to companies next month) at which point the BBFAW Secretariat can discuss company specific animal welfare issues. Other BBFAW Investor Collaboration Business

Supporting Investors • Public webinar: Challenges, risks and opportunities for food companies implementing long term sustainability goals: lessons from farm animal welfare.

• January 2021: begin distributing a quarterly bulletin on farm animal welfare for investors.

• January 2021: Investor engagement survey: • To support the annual BBFAW report we want to better understand investors’ farm animal welfare engagement practices. This would be anonymous. • To include questions on how we can improve the BBFAW Investor Collaboration program and support investor action on farm animal welfare. e.g. briefings from experts on animal welfare topics • We are aiming to expand the Global Investor Collaboration and welcome any suggestions on organisations to approach as signatories. Thank you

Any questions?

Contact us: [email protected] [email protected] APPENDIX: Company response rates by country

50

45

40

35 19

30

25 Yes No 20

15 13 25 10 8 2 4 5 2 3 9 1 7 4 6 4 5 4 4 1 3 2 3 1 2 2 1 2 0 1 1 1 1 1 1 1 1 1 1 1 1 APPENDIX: Country breakdown of 2019 BBFAW Tier ranking 20

18

16

14

12

10

8 Total 6

4

2

0

UK UK UK UK UK

USA USA USA USA USA

Italy Italy Italy

Chile Chile

Spain

Brazil Brazil Brazil Brazil

China China

Japan

France France France France

Ireland

Taiwan

Mexico

Canada Canada Canada Canada

Norway Norway

Sweden Sweden

Belgium

Portugal

Thailand

Australia

Denmark Denmark

Germany Germany Germany Germany

China/USA

Switzerland Switzerland Switzerland

Netherlands Netherlands Netherlands New ZealandNew 1 2 3 4 5 6 CEO letter responses – Covid-19

1. Companies face challenges related to the supply chain (e.g. having to expand/change suppliers).

Marks and Spencer “Though our volume needs grew considerably during the initial lockdown, and have settled into a new higher norm, we were pleased that there were only a handful of occasions where we had to step outside of our tried and tested A List and Select Farm structures. On those occasions we opted to stock recognised and leading brands to ensure our customer was clear on our offer. Clearly we face into more uncertain COVID territory gain, but we have grown our Select Farm base within the relevant livestock sectors to try and mitigate the need to use guest brands. You’ll appreciate that our priority is to support the UK population without compromising on our brand standards and we are proud in what we achieved in that ask.”

Nestle “Through effective planning and resource allocation, we have kept our operations running without significant disruption – however the virus has had a big impact on some supply chains, including the meat industry in the United States. The pandemic reminds of the critical need to ensure high levels of safety and quality throughout our value chain”

Autogrill SpA “[Animal Welfare] is part of the business agenda of the Group, however the impact of Covid-19 on the business has been devastating. In 2020 the main priority of the Group was managing the pandemic, guaranteeing food safety and health and safety of employees and customers. The new projects related to animal welfare, as well as other business priorities, have been temporarily postponed. Please consider that Autogrill operates in North US, Europe, Asia, Australia and New Zealand and in all these countries we had to close many Point of Sales during the pandemic.” CEO letter responses – Covid-19

2. Companies having difficulties in reporting (e.g. limitations on the ability to audit suppliers).

Aldi Nord “Nevertheless, we have found that the pandemic has presented us with major challenges, particularly with regard to the transparency of the supply chain and thus our reporting on the requirements set. It took longer to answer enquiries, audits had to be postponed or even cancelled and the interest of society has also shifted (e.g. in slaughterhouses from the question of animal welfare to the question of social standards). This does not mean that we are paying less attention to animal welfare, but it does mean that we cannot meet our desired timeframe everywhere and in some places we have had to postpone projects until 2021.”

Sysco “During the COVID-19 pandemic, most of Sysco’s suppliers are continuing to conduct animal welfare audits, while some third-party audits have been delayed. Currently, Sysco and our suppliers are making the decision to conduct animal welfare audits based on company stance and local conditions.”

Compass Group “…our plans to increase the reporting of farm-level animal welfare performance data this year were significantly impacted. We have therefore decided to re-prioritise our efforts on accelerating progress against our existing timebound public commitments within the responsible sourcing space, including our global commitment on cage free eggs and regional commitments around higher welfare chicken.”

Whitbread “We also recognise there are global and national challenges that continue to unfold with the global pandemic, such as local lockdowns causing a lack of access to sites for activities such as animal welfare audits. However, we are continually reviewing as to where we can make targeted progress in these times, and where we can innovate to use remote solutions.” CEO letter responses – Covid-19

3. Timelines for commitments may need to be delayed.

Sainsburys “we were able to maintain high animal welfare standards in the face of unprecedented demand, such as maintaining our cage free commitment on 100% shell and ingredient eggs. Unfortunately, we did have to delay our commitment to source 100% free range shell eggs, originally planned for April 2020, due to a lack of free-range eggs in the marketplace because of increased demand. However, I can assure you that we intend to deliver fully on this commitment and are working closely with our supply base to secure enough free-range eggs to meet our requirements going forwards.”

Camst “The sectors that have been impacted the most are those of school and B&I catering. These two happen to the sectors where cage-free and cage- free liquid eggs are used the most. Thus, for the time being, we don’t expect any further improvement in our ranking. In view of this, we feel it would be better to postpone our liquid egg target (to reach 100%) to 2023 instead of 2022.”

4. Companies continue to make improvements on farm animal welfare, despite challenges.

Danish Crown “…. In spite of these sometimes considerable pressures, this has not resulted in any deviation from our commitment to animal welfare. On the contrary, this year, we have strengthened resource both centrally and in elements of our business, established a Sustainable Farming Board, and introduced other initiatives with a clear welfare focus.” CEO letter responses – Covid-19

5. Companies haven’t seen or anticipate an impact on their animal welfare practices.

Perdue farms “While COVID-19 has certainly presented many business challenges, it has not affected our commitments to animal care. Much of the credit for that goes to our farm families, who share responsibility with us to ensure that our animals are safe and comfortable while in their care. In a survey of our farmers, they told us that COVID-19 has had little impact on their operations.”

Cranswick “Whilst the COVID-19 pandemic has created new challenges for Cranswick, please be assured that our industry leading policies and ways of working have not changed when it comes to our approach to animal welfare and the production of food of animal origin.”

Domino’s “The COVID-19 pandemic has obviously posed numerous challenges for how we operate as a business. However, there has been little direct impact on our ability to carry out our animal welfare management practices.”

Vion Food Group “I do not believe the priority given to animal welfare will diminish. It is such an integral part of the production of food from animal origin that I cannot think of modern supply chains, in which transparency will increase even more, being sustainable if the priority for farm animal welfare would shift the wrong way.” CEO letter responses – Tier 5 and 6 non-responders 2019 Assessed Assessed Company Ownership Country Company Ownership Country 2019 Tier Tier since since Habib’s Private Brazil 6 2018 Bimbo Public Mexico 6 2018 Cooperativa Centrale Aurora Alimentos Cooperative Brazil 5 2018 Industrias Bachoco Public Mexico 6 2018 Couche-Tard Public Canada 6 2018 Umoe Gruppen AS Public Norway 5 2012 Cencosud Public Chile 6 2018 Mercadona SA Private Spain 5 2012 Yonghui Superstores Public China 6 2016 Dicos/Ting Hsin International Group Public Taiwan 6 2018 Wens Foodstuffs Group Private China 6 2017 Mars Inc Private UK 6 2012 New Hope Liuhe Co Ltd Public China 6 2016 US Foods Public USA 6 2018 Lianhua Supermarket Holdings Co Public China 6 2017 Seaboard Corp Public USA 5 2018 China Resources Vanguard Public China 6 2017 Sanderson Farms Public USA 5 2017 China Yurun Group Limited Private China 6 2018 Mondelez International Public USA 5 2013 Chuying Agro-Pastoral Group Private China 6 2018 BJ’s Wholesale Club Holdings Public USA 6 2018 CNHLS Public China 6 2018 Bloomin’ Brands Inc Public USA 6 2017 Zhongpin Inc Public China/USA 6 2016 C&S Wholesale Private USA 6 2018 E Leclerc Cooperative France 5 2016 JAB Holdings Public USA 5 2019 Muller Group AG Private Germany 6 2012 Inspire Brands, Inc Private USA 5 2019 Kerry Group Public Ireland 5 2018 Hershey Co Public USA 5 2018 Conad Consorzio Nationale Cooperative Italy 6 2018 Chick-fil-A Private USA 5 2016 Aeon Group Public Japan 6 2017 H E Butt Company Private USA 5 2018 Seven & i Holdings Public Japan 6 2017 CKE Restaurants Private USA 5 2018 Nippon Ham Public Japan 6 2018 Cracker Barrel Public USA 5 2018 Maruha Nichiro Public Japan 6 2018 ConAgra Brands Inc Public USA 5 2015 Cooke Seafood Inc Private USA 6 2018