In 2008, we took important steps to improve our environmental performance. One of the most important was the Carbon Neutral project, a program responsible for reducing our greenhouse gas (GHG) emissions by 33% between 2007 and 2011. We also started to offset carbon emissions by means of support for five reforestation and renewable energy projects., As part of the sustainable management of waste, we focus on recycling projects, including post-consumption recycling. We also implemented new water and energy consumption reduction policies in our units.

Carbon Neutral

The crises arising from climate change require a change in consumption and production patterns. Companies that understand the challenges of their times will make a difference in the future. For this reason, we implemented in 2007 the Carbon Neutral project to reduce and offset GHG emissions in all stages of our production chain – from the extraction of raw and packaging materials, to internal processes and transportation of products, through to their disposal.

The great innovation of this project lies on the fact that Natura committed to a complete plan on three work fronts (inventory, reduction, and offsetting), involving all of its production chain. We are committed to reducing relative emissions by 33% between 2007 and 2011 in relation to total emissions in 2006. In 2008, we achieved the planned internal target and eliminated 3.0% of our emissions, totaling 9.0% in two years.

To realize these reductions and offsets, we put into practice an inventory to quantify our emissions in all stages of the production chain, based on the standards of the Greenhouse Gas Protocol Initiative and the standard of the Brazilian Association of Technical Standards NBR ISO 14064-1, which establishes principles for the conception, development, management, and preparation of company reports on GHG levels. In 2008, we progressed in our monitoring on a four month basis to measure results achieved, and had the annual results verified by independent experts.

In 2008, we were responsible for the emissions of 188,051 metric tons of CO2 equivalent, a rate that is 5.03% higher than 2007, when it was 179,040 metric tons. Our previous report had a different figure: 183,619 metric tons. The change is a result of a revision of consumption data, inclusion of new emission processes, improvement of calculation methods, and an update of emission factors based on international standards.

Thus following the GHG Protocol, the base year was recalculated, thereby maintaining the same basis for comparison over the years, and the emissions for 2006 and 2007 published in this report have been restated.



We undertook in our company initiatives to reduce GHG emissions in all stages of our production chain, such as the use of organic alcohol in formulas, the encouragement of transportation of products by ship, the change in the policies for paying for fuel for our fleet in order to stimulate the use of alcohol, the optimization of packaging, and the expansion of the use of recycled materials.

As it is not possible to reduce all our emissions, we made a commitment to neutralize them and introduce to our customers carbon neutral products. In order to offset the GHGs in 2007, we selected, by means of invitation to bid, five offsetting projects, from different regions of Brazil, two of which are agroforestry efforts to reforest devastated areas (which will be offset in the long term) and three are renewable energy actions (which will be offset in the short term).

Reclaiming the landscape and agroforestry systems – Pontal de Paranapanema (state of São Paulo). In partnership with the Ecologic Research Institute, it aims to reforest and generate income for settled families. Our commitment is to sequester 60,000 metric tons of CO2 in 30 years.

Recovery and preservation of natural resources in rural settlements – Region of Cantão (state of Tocantins). Developed by the Ecológica Institute, this project is focused on the recovery of devastated areas and encouragement of the sustainable use of natural resources. Our commitment is to sequester 60,000 metric tons of CO2 in 20 years.

Use of renewable biomass in the ceramics industry – São Miguel do Guamá (state of Pará), Cristolândia (state of Tocantins) and Paraíso do Tocantins (state of Tocantins). In partnership with Ecológica Assessoria, it replaces the thermal energy arising from the burning of wood from native forests in the ceramics industry by renewable energy such as rice husks and sawdust provided by legal lumber companies. Our commitment is to sequester 60,000 metric tons of CO2.

Cooperatives of Small Hydroelectric Plants – Ijuí (state of Rio Grande do Sul), Erechim (state of Rio Grande do Sul) and Santa Rosa (state of Rio Grande do Sul). The three plants generate and distribute clean energy to rural areas. Our commitment is to sequester 14,000 metric tons of CO2.

Replacement of fuel oil by biomass with sustainable handling – Jaraguá do Sul (state of Santa Catarina). In partnership with AMC Têxtil, this project replaces the fossil fuel used in the textile industry by wood chips, a waste product from the process of transforming biomass extracted by means of sustainable handling. Our commitment is to sequester 30,000 metric tons of CO2.

In 2008, we held a major event to mark the opening of the invitation to bid for the 2009 projects, launched on the Environment Day, June 5, at Natura’s head office in Cajamar. On the same day we launched our reformulated website, with all the requirements and explanations about the invitation to bid, which was open for three months.

We received 61 proposals. They were all internally evaluated with the help of a specialized consulting firm. The best proposals were discussed by the technical team of Natura in a panel of specialists, with external guests helping in a semifinal evaluation. The selection should also consider five projects that reflect the geographic needs and that are different from the projects supported in 2008.

The Carbon Neutral project yielded many positive results, such as the invitation to Natura by the United Nations Environment Programme to participate in the Climate Neutral Network, a global virtual forum on climate change. In Brazil, we were received the Época Climate Change Award of the Época Magazine, which chose us as the company with the best carbon emissions reduction strategy in Brazil. For the second consecutive year, our socioenvironmental data are being validated by Det Norske Veritas.

To learn more about the details of the carbon offsetting projects we support, please access www.natura.net/carbononeutro.

Our NOx and SOx gas emissions are not significant and, for this reason, we did not monitor their emissions. Neither have we used substances that destroy the ozone layer.

Biodiversity

One of the main vectors of innovation is the sustainable use of biodiversity. This approach leads to the creation and development of new products, using native and exotic species and ecological models of plant production, our program for the certification of inputs and partnerships with rural suppliers, such as traditional communities and family farmers who may contribute to preserving biodiversity. We work to establish a new regulatory framework for the access to Brazilian biodiversity to protect the national genetic heritage and ensure favorable conditions for research and development.

After months of study, we prepared and approved, at the end of 2008, the Policy of Sustainable Use of Biodiversity and Traditional Knowledge, which will be fully implemented in 2009. The policy seeks to comply with the precepts of the Convention on Biological Diversity signed by Brazil during the 1992 Earth Summit.

This document establishes the use of biodiversity as a vector of sustainable development, the appreciation of ethical and transparent relationships with the many stakeholders, the application of the well-founded principle of prior consent, the harmonious use of traditional knowledge and scientific rigor in the development of products, stakeholder engagement, establishment of networks, appreciation of cultural heritage and traditional knowledge as elements of local and global socioenvironmental sustainability, minimization of impacts, sustainable handling, certification, and the sharing of benefits, appreciation of work, and fair price based on value chain analysis.

Certifications

To ensure that the inputs used as raw materials in our products are extracted in a sustainable way that benefits the extracting communities, we prepared the Program for the Certification of Plant Raw Materials in 2008. Its objective is to promote sustainable cultivation and handling by means of the certification of plantation areas and native forests.

The program is an important instrument for developing civic awareness because it includes groups of family farmers and traditional communities in Natura’s business chain, generating income and stimulating local organization. Based on the uniqueness of each region and production area, it adopts three different certification models - organic, forestry, and sustainable farming - while observing the criteria of the Instituto Biodinâmico (Biodynamic Institute), the Forest Stewardship Council and the Sustainable Agriculture Network.

We achieved the target set for 2008 to certify another four ingredients, among which is Palo Santo, certified in Ecuador by Ecocert Equador. The other three are organic certificates in partnership with the certifying agency IDB. Therefore, we ended the year with 26 certified ingredients. From the total number of certified ingredients, two have been excluded: the essential oil of rosewood, which is now synthetic, and the tonka bean, which will not continue to be supplied due to difficulties in obtaining production volumes.



Two species used in the production of inputs acquired by Natura – the Brazil nut (Bertholletia excelsa) and yerba mate (Ilex paraguariensis) – are on the list of endangered species compiled by the Brazilian Institute of the Environment and Renewable Natural Resources (Ibama) and the International Union for the Conservation of Nature and Natural Resources. In order to reduce possible impacts on the populations of these species, we acquire these inputs from areas certified by the FSC, which not only attests to their compliance with legislation, but also with other socio-environmental criteria.

In 2008, we financed a study, in partnership with the Brazilian Company of Agriculture and Cattle Raising, on the populational and genetic structure of these two species, enhancing knowledge that may be used for their preservation.



Our partnerships extend to many regions of the country. Some suppliers live and carry out their extractivist activities in areas protected by the National System of Preservation Units, such as the communities in the Central Juruá River Extractivist Reserve, in the state of Amazonas, and the São Francisco Community, located in the Sustainable Development State Reserve of Iratapuru, in the state of Amapá. There, where the Brazil nut, copaiba and breu branco are handled, the extraction areas occupy approximately 4,000 hectares of the reserve’s total 842,000 hectares. In the Extractivist Reserve of Central Juruá, on the other hand, which covers an area of 253,000 hectares of protected land, the extraction of andiroba and murumuru palm takes place in an area of less than 1% of the total area.

The land on which Natura’s headquarters are located in Cajamar, state of São Paulo, is in an Environmental Protection Area. The Itapecerica da Serra Unit on the other hand, is located in a Protection and Recovery Area of the Springs of the Water Basin of Guarapiranga and includes a permanent preservation area. In these areas, there are administrative offices and manufacturing and production activities. These operations are in compliance with the applicable legal requirements.

Environmental Impacts of Products

In order to evaluate the environmental impacts of the packaging of Natura’s products, we have since 2001 been using Life Cycle Assessment (LCA), a tool that quantifies the environmental impacts of products in the stages of extraction of raw materials, production, use, and final disposal. In 2008, we continued to progress in the reduction of environmental impacts related to Natura’s packaging, which are measured by our LCA indicator per kilogram of billed product. We achieved our reduction goal thanks to three factors:

  • Reduction of related masses and better eco-efficiency of commercial support materials, such as the Natura Magazine, which was reformulated in 2008;
  • Design of packaging that includes a constant focus on the reduction of impacts in the development of new products. We changed, for example, the specification of the Natura bag, which at the beginning of 2008 started to be produced from 100% post-consumption recycled paper;
  • Positive effects of the product mix sold, with the faster growth of products with less impact, such as the soap bars.




With respect to the sale of refills, we ended 2008 with a better result than the target of 18.5%.





Water and Effluents

In 2008, we reduced the consumption of water per unit billed by 8.91%. Therefore, we had a reduction of 2.05% in absolute consumption, achieving the target proposed in the previous year. As we consider water a highly important resource, not only for Natura, but also for society at large, we plan to intensify our efforts in this field from 2009 onwards.

We developed a number of approaches to save this natural resource. At the plants, for example, we optimized consumption by means of an awareness raising effort in the process of washing reactors. We also implemented an emergency service to manage, in the short-term, water leakages.

At the Itapecerica da Serra unit, we requested the São Paulo Water Company to install individual meters to allow us to separate our water supply system from that of the neighboring district. Water saving, as well as energy saving, was included as a global target in the company’s collective and individual evaluation for profit sharing. The Water and Energy committees, created to meet the targets, work on a multidisciplinary basis to develop studies, projects, and technologies for the purpose of obtaining greater energy and water efficiency in our processes, by means that do not impair the quality of our products.

All the water we use is extracted from the water table, from whence we withdraw a maximum of 80% of what we are permitted to use, respecting the natural reestablishment of the resource.





In 2008, 280 liters of sodium hydroxide were spilled at our unit in Cajamar, leaking from a container with a damaged valve that was delivered by one of our suppliers. We conducted an environmental assessment of the possible environmental damages and did not find any indications of pollutants in the river drainage system. In order to avoid problems like this we developed an action plan for improvements at the chemical products loading and unloading areas, as well as to assess the risk in other potentially vulnerable areas.





Energy

By means of a multidisciplinary committee created in 2008, we intensified the monitoring of electric energy consumption by area, establishing priorities, and implementing new conscious consumption technologies. During the year, we held the awareness week, Saving with Full Energy, which involved around 3,000 employees. Another important factor was the drop in the average temperature for the year, allowing for a reduction in the use of air conditioning, a big energy consumer. We had a reduction of 16.88% in the total consumption of energy per unit billed in 2008.









Our suppliers are oriented to apply apportionments to their consumption of energy and water and waste generation, taking into consideration the production percentage for Natura. In 2008, indicators of 61 companies from different categories were taken into consideration: gifts, packaging, printing, fragrances, chemicals, third parties, service centers and distribution centers. In 2007, the last two categories were not considered and the total number of suppliers was 57. The figures related to outsourced employees include the main 12 companies in this category. This is the first year these data are reported separately.

The data below are estimates collected on a quarterly basis from our suppliers. For these figures to be more reliable, we compare the spreadsheets submitted by the same supplier during the year, in order to prevent discrepancies.



Waste

The solid waste generated at Natura is managed by a systematized process covering the stages of separation, classification, storage, collection, transportation, and final destination. These activities are planned and developed prioritizing actions for the reduction, reuse and recycling of waste in order to reduce the environmental impacts of these processes. Although total waste generation has been accompanying Natura’s growth - in 2008, for example, it increased 8% from the previous year - production per unit billed has been falling, down 6.95% in 2008 to 22.4 grams per unit from 24.1 in 2007.

We incorporate waste management policies and procedures into all units, multiplying the sustainable ways of managing solid waste. In 2008, we prepared in partnership with the Supplier Quality Management the requirements for distribution centers and transportation companies, which include procedures for the proper management of waste in these units. Additionally, we improved the composting process that is internally conducted at the Natura Cajamar unit, where the waste from the preparation of food is turned into organic composts used as fertilizer in the unit gardens.

Our commitment to recycling of the waste we generate has been consolidated over the years. In 2008, we developed more robust processes for the separation of materials from obsolete cosmetic products to ensure that more waste goes for composting. The efforts to change the final disposal methods and the training of employees on the importance of the proper separation of waste, of recycling, and reducing the consumption of materials have been showing below-expectation results. The percentage of waste recycled was 0.3 percentage points below the target set for the year.

We also established a Waste Committee, a multidisciplinary group whose purpose is to develop projects for the reduction, reuse, and recycling of waste, as well as awareness-raising actions and training in the collection and proper disposal of solid waste.









The drop in the use of materials in kilograms is explained by the outsourcing of the mass product lines, such as soaps, shampoos and colognes. The increase in liters is explained by the creation of new colognes and the gradual increase in the sale of these items.







Since 2007, we have maintained the Reverse Logistics Recycling project, which was first implemented in Recife and São Paulo. In order to reduce the environmental impact of the packaging of our products, this project works in partnership with our consultants, transporting companies and local garbage collectors cooperatives. The work starts with the consultants who encourage their customers to keep the packaging of Natura products. In almost two years of work, 13,608 participated consultants and we have raised 210,00 kilos of recyclable materials, 70% of which is paper and cardboard.

In 2008, the recycling pilot project with consultants was expanded to some regions of São Paulo. Between 2007 and 2008, the percentage of participants dropped due to the increase in the potential customer base and the difficulty collecting the boxes of consultants who live in buildings and gated communities. For cases like these, we are studying alternative models of participation.