2013reportNAtUrA

Our Reason for Being is to create and sell products and services that promote well-being/being well.Well-being is the harmonious and pleasant relationship of a person with one’s body.being Well is the empathetic, successful, and gratifying relationship of a person with others, with nature and with the whole.

Because of its corporate behavior, the quality of the relationships it establishes, and the quality of its products and services, Natura will be an international brand, identified with the community of people who are committed to building a better world, based on better relationships with themselves, with others, with nature of which they are part, and with the whole.

life is a chain of relationships. Nothing in the universe exists alone. Everything is interdependent. We believe that valuing relationships is the foundation of an enormous human revolution in the search for peace, solidarity, and life in all of its manifestations.Continuously striving for improvement develops individuals, organizations and society. Commitment to the truth is the route to perfecting the quality of relationships. The greater the diversity, the greater the wealth and vitality of the whole system.The search for beauty, which is the genuine aspiration of every human being, must be free of preconceived ideas and manipulation.The company, a living organism, is a dynamic set of relationships. Its value and longevity are connected to its ability to contribute to the evolution of society and its sustainable development.

reAsoN for

beiNg

VisioN

beliefs

eDitoriAl

Acess the website www.natura.net/relatorio

OnlineDownload a QR code reader and photograph the code

SMARTPHOne

Integrated communIcatIonNatura has innovated in the way it presents the com-pany in this report. In continuation of a change initiated in 2013, we have chosen the internet as the main chan-nel for disclosure, both because of its reach and the reduced environmental impact it enables.

On our webpage (www.natura.net/relatorio), you will find all Natura’s economic-financial, social and envi-ronmental results, as well as detailed descriptions of the ways in which the company relates to its different stakeholders. We have sought to show how we create value for these stakeholders in the short, medium and long-term.

From this edition, we have adopted the fourth genera-tion (G4) of GRI (Global Reporting Initiative) guidelines, launched in 2013. Just as we were early adopters of the GRI guidelines in 2000, believing in the importance of an international model to report on sustainability, we are now on engaging in the new global communication standard proposed by the IIRC (International Integra-ted Reporting Council). We believe that the integrated reporting of financial and non-financial information re-presents an important advance in the communication of corporate performance.

For the first time, we are also presenting the general lines of Natura’s Sustainability Vision. This expresses our ambition of generating a positive impact in all our areas of activity – a challenge that may only be met through the ongoing engagement and collaboration of our enti-re relationship network.

I hope you enjoy it!

marcelo Bicalho Behar Director of Corporate Affairs

and Government Relations

profile Who we are p. 04 How we operate p. 05external context p. 06international operations p. 07 Message from the founders p. 08Message from the executive Committee p. 09

strAtegy strategy p. 10sustainability Vision p. 12

bUsiNess CoNDUCt governance and transparency p. 14risk management p. 15Valuation of impacts p. 15people management p. 16

proDUCts AND CoNCepts innovation p. 17launches p. 18Climate change p. 20 socio biodiversity p. 22Water p. 24solid waste p. 25

relAtioNsHip NetWork Commercial model p. 26sustainability entrepreneurship p. 28Quality of relationship p. 30

iNDex

// 05//04

value and impacts

generated

enviROnMenTAl 2011 2012 2013Relative GHG gas emissions

(kg CO2e/kg product invoiced)1 2 3.12 2.99 2.79Absolute GHG gas emissions (000’s of metric t)2 265 280 313

Water consumption (l/unit produced) 0.40 0.40 0.40Waste generation (g/unit produced) 20 26 22

SOCiAl (%) 2011 2012 2013Climate survey – Employee Favorability8 70 72 78NC Loyalty Brazil9 19 24 23NCA Loyalty Brazil9 24 40 38Supplier Loyalty Brazil9 27 23 30

Consumer Loyalty Brazil9 66 51 52Believing is Seeing revenue Brazil (R$ MM) 8.4 12.8 17.1

OTHeRS 2011 2012 2013

Number of NCs 1,421 1,573 1,657Innovation Rate (%) 64.8 67.2 63.4

Employee Training (hrs/emp.) 85.2 87.6 90.3Overall evaluation in brand

image survey in Brazil10 73 79 78

*Does not include Aesop. **estimated

for brazil based on brazilian household pe-

netration indicator. 1. Co2 e (or Co2 equivalent): mea-

sure used to express greenhou-se gas emissions, based on each

one’s global warming potential. the 2012 result was restated due to changes

in the brazilian electrical energy emission fac-tor. 2. includes gHg protocol scopes 1, 2 and 3. 3.

represents operating cash generation before the effects of changes in working capital and Capex. 4. source: bloomberg

5. Considers Natura and partners. 6. including Aesop, io share in 2013 was 16.1% 7. the amounts represent the dividends and interest on own

equity effectively paid out to shareholders. 8. Climate survey: Hay group. 9. loyalty survey: ipsos institute. 10. brand essence survey: ipsos institute.

eCOnOMiC (R$ MM) 2011 2012 2013Consolidated net revenue 5,591.4 6,345.7 7,010.3

Consolidated ebitda 1,425.0 1,511.9 1,609.0Consolidated net profit 830.9 874.4 842.6Internal cash generation3 964.0 1,018.9 1,102.3

Free cash generation 410.4 878.8 378.1Average daily share trading volume4 43.7 54.3 61.1 Funding for extractivist communities 10.0 12.1 11.2Business volume in Amazon region5 n/a 121.8 201.5IO revenue as a percentage of total revenue (%)6 9.0 11.6 14.4

WEALTH dISTRIBuTION (R$ MILLION) Shareholders7 763 855 856Consultants 2.906 3.211 3.390Employees 634 803 917Suppliers 4.363 4.837 5.425Government 1.472 1.743 1.804TOTAL 10.138 11.449 12.392

value proposition

PROduCTS And COnCePTS with innovation to promote well being well

RelATiOnSHiP neTWORk through which we commercialize our products

buSineSS COnduCT

oriented to sustainable

development

profile

HoW We OPeRATeNatura’s objective of promoting well being well guides the way in which the company operates, its commercial model, product and concept develop-ment, and the way in which it relates to its stakehol-ders. there follows a description of the main resour-ces used, operating differentials and value created.

buSineSS COnduCT

>> Sustainability topics determined in conjunction with stakeholder groups and incorporated into company

processes by means of the Natura Management System: quality of relationships; climate change; social biodiversity; solid waste;

water; sustainable entrepreneurship; and education.

PROduCTS And COnCePTS

>> innovation process encompassing all aspects of the business: product and concept development, evolution of commercial model and quest for new busines-ses. >> open innovation platform with a network of around 180 partners. >> research and development centers in Cajamar (São Paulo) and Benevides (Pará), knowledge center in Manaus (Amazonas) and an innovation center in New York (uSA).

RelATiOnSHiP neTWORk

>> commercial model based on generating value in conjunction with consultants, involving incentives for personal and human development and sustainable entre-preneurship in network.

>> leadership development program completed by 57% of company managers. >> company-developed relationship and benefit sharing policy with

communities supplying socio biodiversity ingredients. >> supplier development program based on environmental,

social and financial criteria with tracking of indicators such as CO2 emissions, water consumption and

investments in employee education, among others.

how natura adds value

essence

main resources

WHo We AReNatura believes in the potential of relationships and in the power of cosmetics to expand people’s consciousness, helping them connect with their own body, with the surrounding environment and with other people. this way of thinking and acting is expressed in business conduct aligned with sustainable development, with the creation of products and concepts that promote well being well and the strong connection Natura maintains with its relationship network.

this network comprises approximately 7,000 employees, 1.6 million Natura Consultants (NCs) and almost 14,000 Natura Consultant Advi-sors (NCAs) – in addition to more than 5,000 suppliers and outsourced suppliers (companies manufacturing products on behalf of Natura) and 32 extractivist communities. this network reaches around 100 million consumers and is present in 58.5% of brazilian homes at least once du-ring the course of a year.

today, Natura is the largest company in the personal hygiene, perfumery and cosmetics sector in brazil and also in the direct selling sector. based in Caja-mar (são paulo), the company has a strong presence in latin America, with operations in Argentina, Chile, Mexico, peru, Colombia and france. Com-pany products are commercialized in bolivia through local distributors. the structure is completed by eight distribution centers in brazil and six in the international operations, which handle around 62,300 NC orders per day.

the brand is the leader in consumer preference in its segment, with a rate of 44%. in the international operations, Natura is growing in awa-reness and preference in all the countries in which it operates. in the last five years, the company’s sales network has expanded, with net revenues growing on average 13% a year.

eCOnOMiC >> a publicly-traded company listed on BM&FBo-

vespa, with 59.83% of company shares held by the con-trolling group, 39.10% outstanding and 1.07% held by managers and

the treasury.>> strong cash generation and low net indebtedness, corresponding to 0.73

times Ebitda.>> net revenue of R$ 7.01 billion (+10.5% compared with 2012).

>> Capex of R$ 553.9 million.>> Ebitda of R$1.61 billion (+6.4% compared with 2012).

infRASTRuCTuRe>> eight distribution centers in Brazil.

>> factories in Cajamar (São Paulo) and Benevides (Pará), as well as third-party production in Brazil, Argentina, Mexico and Colombia. >> the company also owns the Australian brand Aesop, commercialized in 11 countries in Oceania, Asia, Europe and North America.

enviROnMenTAl ReSOuRCeS >> biodiversity ingredients, a major brand differential.>> water used in the production process and in the use and disposal of products by consumers.

HuMAn CAPiTAl>> almost 7,000 employees*: Brazil, Argentina, Chile, Peru, Mexico, Colombia, France and New York (uSA).

inTelleCTuAl CAPiTAl>> innovation rate of 63% (share in sales of products launched within the last two years).>> R$ 181 million invested in innovation (3% of net revenue).

OuR RelATiOnSHiPS>> network of more than 1.6 million NCs in Brazil, other Latin American coun-

tries and France, as well as 14,000 NCAs.>> 100 million consumers **.

>> almost 5,000 suppliers.>> 32 extractivist communities.

>> communities surrounding our operations.

// 7//06

ACCelerAteD, PROfiTAble groWtH intensified in 2010, the acceleration of the company’s in-ternationalization strategy is producing significant results. since 2012, the operations under consolidation (Argentina, Colombia and Chile) have been profitable – meaning the company’s investments are beginning to produce positive returns. the operations being implanted (peru and Mexico), have already reached breakeven.

“our results in terms of revenue, profitability, service levels and increased brand preference are robust in all the coun-tries in which we operate”, says erasmo toledo, vice presi-dent, international businesses.

the international operations’ share of company revenues reached a record of 14.4% in 2013 – 17% if Aesop, the Aus-tralian company acquired in 2012, is taken into account. Ave-rage growth since 2009 has been 40% per year.

ebitda (proforma) (r$ MM)

2011 2012 2013Countries under consolidation1 43.0 78.4 139.0

Countries under implantation2 (24.2) (8.2) 8.4

total international operations3 (51.1) (11.8) 38.1

gross revenue (r$ MM) Countries under consolidation1 441.5 649.7 886.8

Countries under implantation2 172.9 263.5 363.1

total international operations3 636.9 936.6 1,273.5

1. group consisting of the operations in Argentina, Chile and peru.2. group consisting of the operations in Colombia and Mexico.3. includes the operations under consolidation, being implanted and other internatio-nal investments (the operation in france and the international corporate structure based in buenos Aires).

international operations

2005 2006 2007 2008 2009 2010 2011 2012 2013 -

200

400

600

800

1000

1200

+173.3%

BOVESPA INDEX

NATU3FOLLOW ON31/07/2009R$ 22.47

NATU325/05/2004R$5.61

+638.1%

NATU330/12/2013R$ 41.37

+38.0%+27.7%

+51.2%+32.9%

-41.4%+43.7%

+18.0%-41.2%

+77.7%+63.9%

+36.7%+1.1%

-20.4%-18.1%

+69.0%+7.3%

-26.6%-15.5%

NATU3: 2004

+87.3%+38.9%Ibov:

the cosmetics, personal hygiene and perfumery market grew 10% in 2013, according to sipatesp (são paulo perfumery and beauty products industry Association) and Abihpec (brazilian Cosmetics, fragrances and toiletries industry Association). less sensitive to eco-nomic fluctuations, the sector is more associated with consumers’ disposable income, which continues to grow, but at a slower pace than in previous years.

Share performance

TOTAL 11,486

10,111

594

781

88%

5.2%

6.8%

brazilian legal entities

private individuals

foreign legal entities

Shareholder profile

external context With a more challenging environment in brazil, Natura’s market sha-re saw a retraction of 1.2 p.p. during the year. the loss in market sha-re was concentrated in cosmetics and fragrances, while share in the personal hygiene market remained practically stable, driven mainly by the launch of the sou sub-brand. in latin America, the market continues to grow at rates above the global average.

the direct selling segment in brazil is the fourth largest worldwide, ac-counting for 9% of global door-to-door sales volume. According to AbeVD, the brazilian direct sales association, the model grew 7.2% in the year. in the other countries in which Natura operates in latin Ame-rica, the direct sales model is at different levels of maturity, with the company’s NC network growing on average 24% per year since 2009.

“this context reinforces our conviction that we have room and opportunities to expand our businesses, responding to the challenge of operating in an increasingly competitive marketplace”, says Ales-sandro Carlucci, Natura’s executive president.

source: bloomberg.

2009 4,242.1

2013 7,010.3

+ 13%

2009 292

2013 1,130.1

+ 40%2009 1.37

2013 1.99

+ 10%

2009 1,038.9

2013 1,656.5

+ 12% 2009 3.55

2013 2.79

- 6%

Total net revenue(R$ MM)

Dividends(R$ per share)

Net revenue IOs1

(R$ MM per share)

Number of NCs(in 000s)

Relative CO2 emissions(kg of CO2e/kg of product)

1. International Operations. The 2013 �gure includes Aesop.

gROWing iN A CoMpetitiVe eNViroNMeNt

// // 98

MessAge froM tHe foUNDers

CoMMitMeNt to WHAt is eSSenTiAl

“tHe groWtH of eQUAlity DeMANDs soMetHiNg More tHAN eCoNoMiC groWtH, eVeN tHoUgH it presUppo-ses it. it DeMANDs first of All ‘A trANsCeNDeNt VisioN of tHe persoN’…i AM CoNViNCeD tHAt froM sUCH AN opeNNess to tHe trANsCeNDeNt A NeW politiCAl AND bUsiNess MeNtAlity CAN tAke sHApe, oNe CApAble of gUiDiNg All eCoNoMiC AND fiNANCiAl ACtiVity Wi-tHiN tHe HorizoN of AN etHiCAl ApproACH WHiCH is trUly HUMANe… i Ask yoU to eNsUre tHAt HUMANity is serVeD by WeAltH AND Not rUleD by it.”

Excerpt from Pope francis’ message to the World Economic Forum,January 17, 2014.

eVer MORe nATuRA

exeCUtiVe CoMMittee

executive Committee

standing, from left to rightRoberto Pedote, vice president, finance and institutional relationsJosie Romero, vice president, operations and logisticsAlessandro Carlucci, executive president Lilian Guimarães, vice president, people and CultureRobert Chatwin, vice president, New businessesJosé Vicente Marino, vice president, brands and businesses

seated, from left to rightAgenor Leão, vice president Digital technologyJoão Paulo Ferreira, vice president, CommercialGerson Pinto, vice president, innovationErasmo Toledo, vice president, international operations

board of directors

standing, from left to right

Julio Moura Neto Guilherme Peirão Leal

Luiz Ernesto Gemignani Marcos Lisboa

Pedro Luiz Barreiros Passos Antonio Luiz da Cunha Seabra

Raul Gabriel Beer Roth

seated

Plínio Villares Musetti and Roberto Oliveira de Lima

our results in 2013 strengthened our conviction that Natura should ex-tend its frontiers far beyond its current operations. our value proposition, based on promoting well being well, on relationship selling and on business conduct aligned with sustainable development, has more than shown its potential for conquering new markets and consumers, be it in the countries in which we already have a presence, be it in others. the robust results in our latin American operations reinforce this perception. by the end of 2013, these accounted for 14% of our business, growing at over 30% annu-ally in recent years, and now showing a significant increase in profitability. in Mexico, we reached the landmark of 100 thousand consultants in January 2014, proving the power of our brands in these markets.

in brazil, 2013 was a year of recovery, with a slow start and a resump-tion in growth from the second half. increased productivity in our ne-twork will be driven by growth in purchase frequency and in the num-ber of categories consumers acquire. this will be supported by a series of initiatives implanted in recent years: the redesign of the company’s production and distribution capacity and investments in marketing and innovation capacity, among other factors.

faced with ever growing competition, we are confident we have laid the foundations upon which our consultants will increase their business volume with Natura. Here a fundamental element is the quality of the service Natura provides, with new records in order fulfillment and delivery times in 2013.

We ended 2013 with net revenues of r$ 7.01 billion, r$ 1.61 billion in ebitda, and a net profit of r$ 842.6 million – results which were obtained amidst a vigorous cycle of investment in our operations, in our logistics model and, increasingly, in information technology.

in this respect, 2013 will also be remembered for the birth of the Na-tura Network, employing digital technologies and connectivity as levers for direct selling. tested successfully in são paulo state, the Network will

be expanded to other regions in brazil throughout 2014. this is one of the first results of a strategy in which we envision a Natura that ser-ves consumers through different media and categories. A Natura that extends beyond cosmetics, fragrances and hygiene products, beyond the borders of latin America, with brands occupying spaces in distinct markets – as is the case with Aesop, an Australian company that we acquired at the beginning of 2013 which proposes a new dimension in urban beauty, operating in market spaces which are new for us.

similarly, Natura reaffirms the importance of sustainability as a driver of innovation and new business. the company retains its focus on a sustainable development model with key targets, initiated in 2007 with the decision to reduce greenhouse gas emissions by 33%, a landmark that was reached in December 2013.

to capture new opportunities in the market and in its relationship network, Natura implanted a new organizational design and expanded the executive group, advances that coincided with the best result ever in the organizational climate survey since its inception in 1994. Natura also recognizes that the transformations occurring in society affect the world of work, accelerating the quest for new forms of relationship between people and companies and promoting an indispensable align ment between societal zeitgeist and well being well. even against this backdrop of constant change, which by its very nature generates a high degree of uncertainty, we believe that every day the company is growing in the knowledge and in the competencies that that will help it achieve its ambitions. We look forward to being part of the germination of a new cycle of development in which, paradoxically, the company will be substantially different in the coming years in order that, above all, it may be ever more Natura.

Alessandro Carlucci executive president

in brazil and worldwide, we are experiencing a growing desire for chan-ge. Amidst the absence of global leaders capable of offering viable al-ternatives to address the uncertainties our society faces, the words and presence of pope francis are emblematic. irrespective of creed, the stance adopted by the first latin American pope rapidly attracted global attention with its simplicity, its advocacy of essential issues and a quest for common good. it is significant that his historical reminder to the leaders of the world’s major economies that our civilization is locked in a production model insensitive to fundamental societal ques-tions demanding responsible solutions should have come from a spiri-tual leader.

pope francis’ unexpected and transformational strength brings to mind the famous phrase of the french thinker André Malraux: “the 21st cen-tury will be spiritual or will not be”. irrespective of the interpretations religiousness or spirituality may inspire, it seems clear that a transcen-dent vision of mankind is linked fundamentally with the renewal of ethical principles. A much needed mindset that guides individual, social, business and government actions in the light of altruism. And that revi-ves hope, driving an effective quest for new, more humane and suppor-tive forms of managing public and private activities.

As an organization that has always been committed to life, Natura iden-tifies with this yearning for transformation, enabling forms of develop-ment capable of addressing our current economic, social and environ-mental challenges. our governance model has evolved, enabling us to face the future with greater confidence. our contribution is reflected not only in our business conduct, but also in the concepts behind our products. in this context, innovation has been, is and will continue to be key to our strategy. the expression of Natura’s identity, it drives evo-lution in every aspect of the company’s activities. this is evident in the company’s new research center in New york, complementing the exis-ting centers in Cajamar (são paulo) and in the Amazon region. Natura is also commemorating the first year of its integration of the Australian brand Aesop, which has blended perfectly into our culture, introducing new creative approaches to the Natura universe and boosting our po-tential to impact new audiences and geographies.

it has become increasingly evident that we have an enormous oppor-tunity to take our value proposition to new frontiers. the significant results and the recognition our operations have gained in latin America are encouraging, but we are aware that our continued success will de-pend on the development of new capabilities throughout the decade.

in brazil, we undertook major investments to prepare Natura for a fur-ther cycle of business evolution, with the inauguration of new facilities in são paulo and the ecoparque, an industrial park located in pará, aimed at attracting companies interested in developing sustainable businesses, as well as fomenting local enterprise.

based on our results and our promising initiatives in 2013, we reaffirm our conviction that Natura will continue to seek responses to the con-cerns which drive our commitment to well being well. We wish to join forces with all those who share these same ideals so we may build a world in which quality of life is simply essential.

Antonio luiz da Cunha Seabra guilherme Peirão leal Pedro luiz barreiros Passos founding partners

// // 1110

the strategy drafted in recent years to drive a new growth cy-cle is based on Natura’s major asset: its relationship network. the company’s ambition is to expand its reach, exploiting the potential of the relationship network built up over the years through the use of digital technologies and connectivity. the mainspring of this evolution will be promoting well being well through the expansion of the company’s value propositions for consultants and consumers.

in the short term, this strategy is aimed at reinforcing the strengths of the current business. in brazil, sales expansion will be driven by increased consultant productivity. Many ini-tiatives already underway will support this objective, including the implantation of new relationship and segmentation tools, significant innovations driving the constant evolution of the commercial model, as well as higher service levels and redu-ced delivery times, resulting from recent investments in logis-tics infrastructure. in the international operations, the focus will be on maintaining the accelerated growth rate through an expanded consultant network and brand building, with ever higher service and profitability levels.

Natura is planning to expand the spaces in which its network acts through the introduction of new product categories and new brands, as well as new forms of relationship with custo-mers. “We are about to enter a new era, with innovative mo-dels and ways of doing business which will help the network to increase sales. All company investments over the last five years have been aimed at this”, says Alessandro Carlucci, pre-sident of Natura. An example is the Natura Network, which enables NCs to sell products through their internet pages and gives consumers the flexibility to access company products through different purchase models.

in 2013, Natura concluded an important cycle of preparation and investment in logistics infrastructure which resulted in an impressive improvement in service quality for NCs and the re-duction of order delivery times from 5.1 to 4.5 days, with 35% of orders delivered in up to 48 hours. this effort includes the inauguration of a new administrative and distribution center in são paulo, and the ecoparque industrial complex in benevides (pará), opened in March 2014 – as well as increased production capacity at Cajamar (são paulo). from 2014, investments will be concentrated more on information technology.

based on the belief that the value and longevity of a company depend on its capacity to contribute to the development of so-ciety, Natura also reviewed the role sustainability plays as a bu-siness driver. “We have already done a great deal to ensure that company practices reflect the inspiration of working towards a better society and sustainable development, but there is still a lot for us to do”, explains Denise Alves, director of sustainabi-lity. for this reason, Natura has developed a new sustainability Vision for its businesses, defining where it wants to get to and which impacts it intends to generate over the coming decades.

GOING BEYONd OFFSETTING IMPACTS

Natura’s sustainability Vision expresses its desire to go beyond simply reducing or offsetting the effects of its activities and ensuring that the company gene-rates a positive impact on society. this means actively promoting social, environmental and economic wel-fare, rather than just neutralizing the impacts caused by the business. “We believe that a company’s reason for being is to build a better planet and society”, says Natura’s president Alessandro Carlucci.

the vision is based on internal analyses, the review of global trends in sustainability and numerous dia-logs with Natura stakeholders over recent years. organized in three pillars (our brands and pro-ducts, our Network and our Management and organization), the vision sets forth guidelines for the construction of positive impacts in 2050. it also encompasses public ambitions for 2020, which will challenge the company and provide a roadmap for the journey (see table on next page).from the launch of this strategy in 2014, Natura will enga-ge its relationship network in a process of ongoing, transparent dialog to drive constant improvement throughout the company, and to update its materia-lity matrix based on these strategic internal choices.

NeW CyCle Of exPAnSiOn

NAtUrA is eNteriNg A NeW pHAse of bUsiNess groWtH, fUrtHer exploitiNg tHe

poteNtiAl of its relAtioNsHip NetWork AND exteNDiNg tHe reACH of WEll bEing WEll WitH NeW proDUCt CAtegories, brANDs

AND WAys of relAtiNg to CoNsUMers

strAtegy

// // 1312

SuSTAinAbiliTy VisioN ambitions

for 2020We Will geNerAte positiVe soCiAl, eNViroNMeNtAl

AND eCoNoMiC iMpACts, DeliVeriNg VAlUe for oUr eNtire relAtioNsHip NetWork, tHroUgH All

oUr bUsiNesses AND brANDs AND iN All tHe geogrApHies iN WHiCH We operAte, by MeANs of

oUr proDUCts, serViCes AND sAles CHANNels

the expression of our brands will drive the emergence of new values and the behaviors necessary to build a more sustainable world; the brands will be a reference in cutting edge innovation based on sustainable technologies.

We will work through an eco-effective1 production and distribution model focused on local development and the generation of positive socio-environmental value throughout our value chain.

We will make a positive contribution to the human development of our relationship network and will foment entrepreneurship through collaborative platforms.

We will integrate triple bottom line (tbl)2 management into all company processes, with innovative, leading edge business practices that inspire others, making Natura a role model in business conduct.

strAtegy strAtegy

forMUlAtioN>> 30% of Natura’s inputs in value will come

from the Pan-Amazonian region (13.4% in 2013).

pACkAgiNg>> use at least 75% recyclable material in total mass of packaging

(56% in 2013).>> use at least 10% post-consumption recycled material in the total

mass of packaging (1.43% in 2013).>> 40% of the Natura units invoiced will have eco-efficient packs3

(21.5% in 2013).

CArboN>> reduce relative carbon emissions by 33% (2020 x 2012) (33.2% reduction from 2006 to 2013).

WAste>> implant a reverse logistics system that enables the collection of 50% of the waste generated by company packaging.

soCio bioDiVersity>> reach 10,000 families in Pan-Amazonian production chains (2,188 families in 2013).>> reach a business volume4 of R$ 1 billion in the Amazon (from 2010 to 2020) (R$ 388 million in 2010-2013).

WAter>> implement a strategy to reduce and neutralize impact based on

measuring the company’s water footprint throughout Natura’s value chain.

eNergy>> implement a strategy to increase consumption

of renewable energy.

CoNsUltANts

>> increase NC and NCA real avera-ge income significantly.

>> stimulate interest in lifetime learning and provide a broad educational offering that meets the needs of this

stakeholder group. >> create an indicator to measure the human development of

Natura consultants and build a strategy to improve this significantly.

eMployees >> have women occupying 50% of leadership positions (29% in 2013). >> have a work force in which 8% have some kind of disability (4.3% in 2013). >> leverage employee potential for achievement and enterprise through engagement in company culture.

CoMMUNity>> grow community human development indices and build a plan to bring about significant improvements in this reality.

>> develop a strategy for the socio biodiversity territories in the Pan- Amazonian region and the surrounding communities by means of dialog and collaborative construction in conjunction with local populations

and actors.

sUppliers>> ensure the traceability of 100% of the inputs produced

by direct manufacturers (last link in the manufactu-ring chain) by 2015, and implement a traceabi-

lity5 program for the remaining links in the chain by 2020.

MANAgeMeNt MoDel

>> implement the valuation of socio-envi-ronmental externalities, considering the positive

and negative impacts of our entire production chain to drive improvements in TBL management.

stAkeHolDer eNgAgeMeNt >> support public discussion and debate of questions that

are important for the common good of society and its sustainable development, providing support for solutions and alternatives in the markets in which we operate.

CoMMUNiCAtioN, etHiCs AND trANspAreNCy >> institutionalize a governance model with external engagement, ensuring stakeholders have a permanent voice in the evolution of company management and strategy. >> implement radical transparency in the supply of

product information and in the implantation and evolution of the Sustainability Vision.

1. eco-effectiveness is an approach aimed not only at minimizing environmental im-pact but also seeking to reuse all the materials consumed in manufacturing a product in its own production process. this methodology addresses not only environmental, but also social and economic impacts linked with the value chain. 2. the triple bottom line (tbl) concept was created by John elkington in 1994. it repre-sents the expansion of the traditional business model to a new one which takes a com-pany’s environmental and social performance into account as well as its financial indicators. 3. eco-efficient packs: for Natura, eco-efficient packs are those that represent a reduc-tion of at least 50% in weight compared with a similar regular pack; or which consist of 50% post-consumption recycled material and/or renewable material, as long as there is no increase in mass.4. business volume in the Amazon region: funds distributed by Natura in the region 5. traceability plan with scope to be defined.

relationship network

brands and products

organization and management

// // 1514

governance and transparency

ReMuneRATiOn POliCy

Natura has a fixed and variable remuneration system designed to prevent distortions in com-pany performance. The system is projected to balance short, medium and long-term earnings and engage executives in driving growth and value generation.

The variable remuneration program offers se-nior management a share purchase option or stock subscription plan. This is linked with the executive’s decision to invest at least 50% of the net proceeds from the company’s profit share scheme in the acquisition of Natura shares.

The profit share scheme is based on economic, social and environmental targets (see below), and total volume may not exceed 10% of Natu-ra’s net profit.

bonus criteriaeconomic: Consolidated ebitdaSocial: Organizational climate and NC loyalty rate (Brazil)environmental: Carbon emissionsOthers: Non-Service Rate (products unavailable when consultant orders are received)

in April last year, plínio Villares Musetti was elected chairman of the Natura board of Directors, putting an end to the co-chairmen mo-del exercised historically by the controlling shareholders. yet ano-ther step towards the professionalization and the institutionaliza-tion of governance in the company, the change reinforces Natura’s long-standing commitment to best practices, initiated 16 years ago when it voluntarily instituted a board six years before going public.

the controlling shareholders and founders of the company Antônio luiz seabra, guilherme peirão leal and pedro passos remain on the board. their focus now, however, is on overseeing the evolution of the organization, with support for the development of new execu-tive leaders, aimed at consolidating a vibrant corporate culture that will perpetuate the company’s values and inspire its strategic vision. “in addition to being good corporate practice, this change will gua-rantee the dedication necessary to drive our future growth”, says Natura’s director of Corporate governance, Moacir salzstein.

oNgoiNg evOluTiOn

oN tHe lookoUt for OPPORTuniTieS

When Natura reviewed its future vision, it identified an opportunity to develop its direct selling model, expanding the company’s reach and transformational power based on digital tools – this was the beginning of the Natura Network (read more on page 25).

this is an example of how risk management links with new opportu-nities and drives innovation throughout Natura. the business model is part of the company’s risk matrix, which also periodically monitors capacity to generate innovation, develop new partnerships, questions related to taxes, product quality, as well as socio-environmental aspects, such as biodiversity.

integrated into strategic planning, risk management at Natura takes into account economic, social and environmental questions and is divided into two main groups: strategic risks, those which may affect business targets and continuity; and operational ones, related to internal processes.

the entire process is linked with risk mitigation action plans and is tracked by Comex (executive Committee). through its diverse com-mittees, the board of Directors also accompanies the evolution of the company’s strategic risks.

HoW risk MANAgeMeNt trACks CritiCAl QUestioNs AND DriVes iNNoVAtioN At NAtUrA

NeW MoDel reAffirMs CoMMitMeNt to gooD CorporAte prACtiCes

proJeCt Will MeAsUre tHe soCiAl AND eNViroNMeNtAl iMpACt geNerAteD by

NAtUrA AND its VAlUe CHAiN

risk management

COMex exPAnded

To ensure even greater focus on company strategy and achie-vement of its proposed targets, the Natura’s Executive Com-mittee (Comex) was expanded in 2013, incorporating a larger number of company leaders. Today it comprises representa-tives of the fundamental functions (Finance and Institutional Relations, Innovation, People and Culture, digital Technology, Operations and Logistics), and the businesses (Natura Brazil, International Operations and New Businesses).

Natura also reviewed its organizational structure, which is now based on three major pillars:

brands and businesses: responsible for product develop-ment, innovation, marketing and new businesses;

networks: responsible for the commercial model, logistics, operations in Brazil and overseas;

Corporate functions: activities permeating the whole business, including Finance, People, Operations and digital Technology.

bUsiNess CoNDUCt

valuation of impacts

in 2010, Natura invested in developing a methodology to quan-tify its socio-environmental impacts, that is, to establish the mo-netary value of the positive and negative impacts caused by the company’s main suppliers in function of demand from Natura. this analysis generated indicators that were incorporated into the platform for selecting and managing these business partners. in 2013, the company also applied a valuation methodology to compare the more sustainable production of the Amazon palm (plant from which palm oil is derived) with the traditional pro-duction model.

based on experiences such as these, in 2014 Natura will initiate a new cycle to expand impact valuation. the intention is to assess the externalities generated by the company and its value chain, encompassing environmental and social questions, and driving progress in tbl (triple bottom line) management. based on a systemic vision, this information will influence decision making and risk and opportunity assessment in the company, helping to define new strategic and business paths.

inTegRATed MANAgeMeNt

Sou business unit employees

bUsiNess

// // 1716

it is important for trainees to as-sume responsibility for their care-er and believe that they are in an organization that will offer many opportunities.

How did the change in area benefit your career?

this broad view of the company, going beyond products and ca-tegories to encompass the sales network and other sectors, was very important in complemen-ting my development as a busi-ness manager.

Natura has a formal tool, which is its succession pipeline. the career paths of the employees who have the potential to occupy more senior positions are tracked by their managers. Additionally, the recruitment process is open, all vacancies are posted and em-ployees are encouraged to apply for them if they are interested.

from trainee to director, Denise Coutinho’s successful career at Na-tura has been built based on broad-based experience in the company and alignment with its values.

What has your career path been like?

i joined Natura in 1997, soon after graduating. i loved the company’s culture, beliefs and values, which helped make up my mind.

i worked in marketing and spent 11 years in the perfumery category. to have a new kind of experience i moved to Human resources, which was an extre-mely rich period, professionally. in August 2013, i was promoted to director of this business unit.

Was starting as a trainee important for you?

it is a privilege to join the com-pany through the trainee program. these are people the company has selected at the beginning of their career in a very compe-titive recruitment process, and the focus is on developing them.

people management

Career path values experience in different company areas

iMPROveMenT in ORgAnizATiOnAl CliMATe

in 2013, the Natura favorability rate was 78%, the best ever result in the climate survey since it was initiated in 2006. the 6 p.p. increase in the indicator reflects the changes implemented in the people management area not only in 2013, but also in previous years

in general, the results were good in important survey items and among the administrative and operational staff, as well as the sales force.

for the coming years, the intention is to further improve climate survey methodology to enable more in-depth, detailed analyses of employee satisfaction.

1. equivalent to the percentage of employees giving a score of 4 and 5 (top2box) for the items surveyed, on a scale from 1 to 5 points.

Climate survey Favorability level (%)1

2013

2011

2012

70

72

78

nATuRA CulTuRe

CHAlleNges iNClUDe eNsUriNg eMployee eNgAgeMeNt AND

iNtegrAtioN iN CoMpANy proCesses AND CUltUre, As Well

As DeVelopiNg tHe CoMpeteNCies NeCessAry to DriVe groWtH plANs

Natura revealed a growth plan with targets for the coming years that include new product categories, new brands and a commitment to developing the direct sales model, among others. to meet these chal-lenges, the company needs to continually reinforce leadership and de-velop the skills and competencies required for this evolution.

over the last two years, Natura has made changes in management structure, such as the reformulation of the people and Culture area, pre-viously part of the sustainability structure, and the creation of a Digital technology area to guarantee focus on technology investments.

to ensure continuous evolution, the people and Culture area will conclude a new planning process in 2014. “We want to ensure that company values are driven further and further into the whole team’s activities. We also want to streamline and integrate all company pro-cesses”, says lilian guimarães, vice president, people and Culture.

the changes already established include a review of performance and remuneration strategy (read more about compensation on page 15). “today, employees value questions that go beyond mo-ney. Aspects such as flexibility, benefits and engagement need to be taken into account to offer the kind of environment and ways of working that people want”, lilian concludes.

employee development is part of Natura’s essence. in 2010, the company launched Cosmos, a program to drive the development of leadership competencies. so far, almost 800 leaders, 57% of the company’s managers, have completed the program.

the Natura trainee program is also an important gateway to and a development opportunity for employees (read the following interview).

bUsiNess CoNDUCt

the Natura innovation model permeates the entire organi-zation transversally. it is present in our commercial strategy, in the pursuit of new business opportunities, in biodiversity ingredients stewardship and extraction techniques and in our industrial and logistics operations.

to ensure an integrated vision, with agility and focus on inno-vation, in 2013 projects were focused on three major rese-arch and development fronts: Well-being and relationships, sustainable technologies and Cosmetics technologies.

in addition to using internal resources, to finance this stra-tegy Natura receives support from foment agencies such as finep (empresa financiadora de estudos e projetos – study and project financing Company), which will provide r$ 205.8 million in funding for the company’s research and projects over the next two years.

Natura also formed a partnership with the foment institu-tion fapesp (fundação de Amparo à pesquisa do estado de são paulo – são paulo state research support founda-tion) for the creation of the Center of Applied research in Well-being and Human behavior.

With a scheduled investment of r$ 20 million over a ten-year period, divided equally between the two organiza-tions, the center will promote scientific and technological research aimed at assessing the benefits of well-being in different areas, such as neuroscience, positive psychology and psychometrics. “the aim is to understand cultural and social standards which will then be applied to new pro-ducts, concepts and services”, says luciana Hashiba, innova-tion Management and Networks manager.

the center will select researchers from private and public institutions in the state of são paulo through an open ten-der launched at the end of 2013.

Currently, the Natura project and concept development network involves more then 200 partners, including ins-titutions, companies and foment agencies. they interact through Natura Campus (www.naturacampus.com.br), the company’s collaborative open innovation program.

fUNDAMeNtAl for CoMpANy’s strAtegy, tHe CreAtioN of NeW

CoNCepts AND proDUCts reQUires A systeMiC VieW of tHe eNtire bUsiNess

expANDiNg tHe boUNDAries of innOvATiOn

STAying AbReAST Of TRendS

to capture worldwide trends, the company has an increasin-gly global innovation process. in 2013, Natura inaugurated the innovation Hub in New york (UsA) and since 2012 has been part of the Media lab, a digital research laboratory at Mit (Massachusetts institute of technology) in boston, UsA. the company also has partnerships in france and in Australia, the latter the result of the Aesop acquisition.

in brazil, Natura maintains its global research center in Caja-mar, the largest in the cosmetics area in latin America, and NiNA (the Natura Amazon innovation Center) in Manaus.

denise Coutinho business unit director

3% of revenues is Natura’s approximate annual

investment in innovation. in 2013, investments totaled R$ 181 million

Mariana de Melo lima employee

proDUCts AND

// // 1918

NeW sUb-brAND HigHligHts More CoNsCioUs forMs of

CoNsUMptioN AND proposes NeW proDUCtioN MetHoDs

tHAt Are NoW beiNg ApplieD to otHer NAtUrA proDUCt liNes

“Why do you need what you don’t need?” for five years, this question was formulated and reformulated countless times by dozens of people in the different Natura areas involved in the development of a new sub-brand. the challenge was to launch a product line for daily use in which the company believed there was a great opportunity for products linked with Natura’s es-sence and its commitment to sustainable development.

this led to the launch of the sub-brand sou in June 2013, which made a significant contribution to company sales and environ-mental results in the second half of the year.

“it was very clear in company research that the consumer al-ready understands the value of sustainable products, but still does not want to or can’t pay more for this. Conscious con-sumption is nothing more than focusing on what is truly neces-sary. so we star ted to ask: how can we make a product focused on what is essential from the consumer’s viewpoint?”, says fabi-ana pellicciari, business unit director.

this led to the development of a formula contain-ing fewer ingredients and 80% vegetalized. the single pack for the 27 items in the line adopts a pouch format that uses 70% less plastic than conventional ones and permits consumers to use every last drop of the product. the new pack also generates gains during the distribution phase, permitting a greater number of products to be transpor ted per vehicle.

Natura acquired exclusive manufacturing equipment for the line, enabling a reduction in energy consumption, green-house gas (gHg) emissions and waste generation at all stages of production.

the development of the sou line has already led to changes in other company sub-brands. in 2013, Natura launched new refills for the Natura plant hair care line in pouch format.

SOU iNtegrAteD

resUlts

the important things remain: moisturizing,

involving texture and delicious fragrance

efficient process: less waste, less time to

manufacture and less energy

New pack: 70% less plastic and 60%

fewer pollutant gas emissions

No excess in formula: with vegetable

ingredients and no coloring agents

every last drop: the pack permits every

last drop of the product to be used

proDUCts AND CoNCepts proDUCts AND CoNCepts

new products

// // 2120

Relaunch of Ekos line with

reformulation of cartons and packs to reduce environmental impact. GHG emissions from the line were reduced by 45% compared with previous years.

Creation of method for valua-tion of environmental impacts in the company’s supply chain.

Reduction of number of pages and change in format of Natu-ra magazine.

2011Revision of relative emis-

sions reduction target from 2011 to 2013.Launch of Less Carbon, More Productivity program. Carbon calculator helps ma-nagers to estimate emissions before producing new product. New guideline: launch deci-sions should prioritize lower or similar impact to equiva-lent products.

2010New target set: 10% reduction

in absolute emissions from 2008 to 2012.Construction of methodo-logy to identify each pro-duct’s carbon footprint.Reduction in energy use with generators at Cajamar (São Paulo).

2009

NAtUrA ReduCeS gHg eMiSSiOnS by A tHirD

climate change

in 2006, Natura generated the equivalent of 4.18 kg de Co2 for each kilogram of product invoiced. by 2013, this rate had been reduced by 33.2%, reaching 2.79 kg of Co2e/kilogram of product invoiced. With this reduction, the company honored the commitment assumed in 2007 to reduce its carbon emis-sions by one third throughout the product life cycle – from the extraction of raw materials through the disposal of packaging by consumers.

this is an example of how an environmental challenge may be overcome when it is incorporated into a company’s strategic planning and decision making processes. the challenge of redu-cing emissions led to a series of innovations and generated a great deal of learning for Natura. launched in 2007 as a framework for reduction initiatives, the Carbon Neutral program led to the creation of a management system for every stage in the product development, manufacture and commercialization process.

“When we assumed this commitment, unheard of in brazil, we initiated a transformation in business management. We conducted an emissions inventory throughout the value chain, working with the people involved at every stage and with su-ppliers, the aim being to identify potential reductions”, says sustainability director Denise Alves.

from 2010, product development was aided by the introduc-tion of a carbon calculator, which provides an excellent exam-ple of how the challenge of reducing emissions can generate innovation. the sou sub-brand launched in 2013 generates sig-nificant sales volume and represents Natura’s lowest relative carbon emissions.

“Natura is an example of how it is possible to produce at scale while controlling Co2 emissions, based on investment in alternatives that reduce carbon footprint and add value in sus-tainable production chains. We hope the company continues on this course”, states André Nahur, interim coordinator of WWf-brazil’s Climate Change program.

leARning CUrVe Main emissions reduction innovations

Carbon Neu-tral program,

based on a complete plan, with three action fronts: in-ventory, reduction and com-pensation, involving the com-plete production chain.Commitment to reduce rela-tive emissions by 33% by 2011.Introduction of organic al-cohol in perfumery.

2007

-3.9% -15.1% -21.2% -25.4% -28.4% -33.2%Natura beco-mes carbon

neutral by offsetting all emis-sions that cannot be avoided in the production process through the purchase of car-bon credits.Increase in use of organic al-cohol in formulations.Incentives for maritime pro-duct transportation.Stimulus to use ethanol in com-pany sales force vehicle fleet.Optimization of packaging and increased use of recy-cled materials.

2008 Replacement of diesel powe-

red boiler with biomass mo-del at Benevides (Pará).

2012 Launch of Sou line of skin and

hair products with reduction of up to 60% in GHG emissions.Relaunch of Aquarela make up line, with reformulated pack.use of ethanol-powered buses for employee transportation at Cajamar (São Paulo).Operation of first two etha-nol-powered truck trailers in Latin America.Beginning of tests with electric vehicles, including cars, tricycles and bicycles, for logistics.

2013

Relative CO2 emissions (kg of CO2e/kg of product invoiced)

2011

2013

2012

3.12

2.99

2.79

Extraction and transportation of raw materials and packaging (process and transportation to direct suppliers)

Product sales (transportation and distribution)

Direct suppliers (process and transportation

to Natura)

Industrial and internal process

Product use and packaging disposal

41.1%

16.5%

11.0%

7.8%

23.6%

emissions in the value chain (%)

proDUCts AND CoNCepts proDUCts AND CoNCepts

-8.6%use of smaller boxes to opti-mize deliveries to NCs.

Substitution of LPG with etha-nol in Cajamar boiler.

Consolidation of revision of logistics network, with expan-sion of distribution centers in Brazil and increase in overseas production, reducing interna-tional product transportation.

// // 2322

COMMiTMenT to tHe AMAzoNNatura’s relationship with the Amazon began 15 years ago when the company made a key strategic decision: to incor-porate brazilian biological ingredients, in great part from the Amazon region, into its products, combining science and tra-ditional knowledge with the generation of work and income opportunities for hundreds of extractivist families.

this led to the birth of the ekos line, which encouraged the com-pany to develop innovative concepts and oriented its research and development strategy in the region, resulting in a large number of ingredients and product technologies.

socio biodiversity

sustainable supply ChainsThe Ecoparqueinaugurated at the beginning of 2014, Natura’s new soap factory repla-ces the old one and provides other companies with the opportunity to operate in the area. the objective is to develop a cooperative network to share resources and articulate joint alternatives for fomenting the generation of sustainable businesses in the Amazon region, reinforcing the Amazônia program launched in 2011.

the complete Natura soap production process will be concentrated in the new factory. this will enable the company to triple soap production by 2015, increase the use of local ingredients, and reduce costs by having the industrial process installed near the supply chain.

the region will gain a higher added value operation, fomenting the de-velopment of the local economy and generating new business oppor-tunities, as well as employment.

in addition to Natura, the international fragrances and raw materials manufacturer symrise has confirmed its participation in the ecoparque.

TOTAl AReA: 172 hectares, equivalent to

240 soccer fields

investment of R$ 200 million in building the factory

production of 12 me-tric tons/month of oils and butters

500 million bars of soap annually by 2015 – 80% of the company’s soap production

eMPlOyMenT OPPORTuniTieS240 direct work posts (the old benevides plant employed 60 people)

98% of the work force and 70% of services contracted locally

inveSTMenTS

total investments in the region were r$ 201.5 million, beating the r$ 190 million target for the year ; this was due mainly to investment in the ecoparque.

During 2013, Natura spent r$ 11.1 million on the purchase of raw mate-rials and on benefit sharing payments. the target for the year was r$ 13.6 million, but the result was affected by the use of stocks formed in 2012 when sales of products using these ingre-dients were lower than projected.

science, technology and innovationInnovation in the forestinaugurated in 2012, NiNA (the Natura Amazon innovation Center) defined the first 17 projects it will provide direct support for, invol-ving 134 scientists and entrepreneurs. to provide further incentives, the company launched the Natura Campus Amazônia call for proposals, selecting an additional six projects to be supported by the company.

in addition to their environmental focus, the projects offer great eco-nomic potential via generation of increased demand for products from local extractivist activities.

NiNA was created to identify opportunities to increase the sustainable use of Amazon region biodiversity ingredients in Natura products (read more about innovation on page 17).

institutional reinforcementTransformation for new generationsinvestment in education is one of the main thrusts of the institutional rein-forcement pillar of the Amazônia program. in 2013, Natura promoted a series of measures in the region in partnership with the instituto Natura:

Alternating schools: support for regularization of the Casas familiares rurais (Cfrs or rural family Homes), whose teaching methodology al-ternates classroom and community learning. With provisional recognition from the Ministry of education and the pará state education council, 24 schools are now qualified for funding to operate in 2014. the project involves a partnership with the Ngo gestão de interesses públicos.

rede de Apoio à educação (education support Network or rAe in the portuguese acronym): involving 30 municipalities in priority areas for Natura in the Amazon region, the network consists of specialists and municipal representatives who will implement and monitor the development of two instituto Natura projects in these areas: Conviva educação, a digital platform designed to enhance municipal education management, and trilhas de leitura (reading trails), focused on literacy.

proDUCts AND CoNCepts proDUCts AND CoNCepts

diffeRenTiAlS

geothermal chilling (air is captured by pipes located underground where the temperature is lower. this supplies cooler air to the air conditioning system, increasing energy efficiency).

NATuRAL VENTILATION ANd ILLuMINATION IN THE BuILdINGS

REuSE OF RAINWATER IN BuILdING

MAINTENANCE

PAVING MAINTAINS SOIL

PERMEABILITY

eCOnOMiC dATA

INTERNAL TRANSPORTATION

eleCtriC biCyCles AND CArs

FILTERING GARdENS TO TREAT WASTEWATER

the plant roots decompose pollutants with no need for chemical products

// // 2524

Waste generation (g/unit produced)

water

solid waste

A tool tHAt CAlCUlAtes WAste AND DeJeCt geNerAtioN is oNe of tHe iNNoVAtioNs iN

NAtUrA’s iNitiAtiVes to MANAge soliD WAste

An environmental impact calculator is one of the allies the Natura innovation team relies on in the new product development phase. Used since 2010 to measure greenhouse gas emissions, the tool has evolved and now also provides key information on waste generation.

by including information about the materials to be used in a product, it is possible to compare the impact of different technologies and raw materials, using this information for decision making in the product development process.

“Waste management is a complex issue for all companies. our challenge in the future will be literally to close the life cycle for all our products, ensuring that the waste generated returns to our chain or to one having similar or greater added value”, gabriela fleury, sustainability manager, explains.

the basis for building the strategy was the waste genera-tion inventory developed by Natura to quantify the volu-me of waste generated in three of the main phases of its chain: manufacturing processes (internal and third party); product distribution; and use and disposal by consumers. With data collected from three consecutive years, it is now possible to identify the kind of waste generated at each stage of the value chain and how it is disposed of.

the strategy is aligned with brazil’s national solid waste poli-cy. in addition to its own initiatives, Natura supports measu-res promoted by Abihpec, the brazilian cosmetics, fragran-ces and toiletries industry association, to ensure compliance with the policy.

NeW MetHoDology Will iNClUDe AssessMeNt of proDUCt Use iMpACt

since 2010, Natura has intensified its effort to identify the real impacts its business causes on water consump-tion. As with greenhouse gas (gHg) emissions and so-lid waste generation, the goal is to quantify consumption throughout the value chain and develop an efficient water management strategy.

in 2010, Natura calculated its water footprint using the Water footprint Network (WfN) methodology which maps impacts at every stage of the production chain. this indicated that the most significant impact (45.9%) for Na-tura occurred during product use by the consumer.

from this point, the company focused on finding the most accurate methodology to identify its impacts on consump-tion and wastewater generation. “the existing methodo-logies, including water footprint, are based on international premises which frequently do not apply to the brazilian reality, such as a lack of basic sanitation facilities and the unequal distribution of water (the most heavily populated regions are further away from water sources)”, explains luciana Villa Nova, sustainability manager.

in 2013, after assessing four methodologies, the company chose the most appropriate one for its purposes. this me-tric includes a more complete analysis of the potential product impact, evaluating biodegradability and ecoto-xicity levels, that is the effects products discharged into the environment may cause on living organisms. in 2014, Natura will start to extend this mapping process to the entire product portfolio to determine its water footprint.

proDUCts AND CoNCepts proDUCts AND CoNCepts

Water consumption (liters/unit produced)

2011

2013

2012

0.40

0.40

0.40

2011

2013

2012

20

26

22

iNitiAtiVes to MeAsUre COnSuMPTiOn

DoiNg OuR SuMS

// // 2726

A major transformation is underway in Natura’s com-mercial processes. the goal is to extend the concept of direct selling to new platforms, enabling consumers to choose how and when to experience the brand and to acquire company products, as well as to leverage rela-tionships – one of the Natura brand’s key attributes – through the intensive use of technology.

the Natura Network is the first experience in this strategy, with each consultant having her own inter-net page through which she may relate to consumers and sell products. “We are connecting the offline and online worlds. We maintain the fundamental role the consultant plays in the sale, based on the relationship she establishes with her customers, while offering con-sumers yet another alternative”, explains João paulo ferreira, Natura’s Commercial vice president.

in 2013, a pilot program was run in Campinas and then extended to são José dos Campos in a second phase. both are large cities in são paulo state. in 2014, work will begin on extending the initiative nationwide.

the example of rosi Da Dalto illustrates the new tool’s potential. A Natura representative for more than 20

years in the Campinas region, she increased her cus-tomer base and income by 50% using the internet to complement her work. “the other day i asked a friend of mine who had bought a product via my virtual space to publicize the novelty among her contacts. soon after, a friend of hers became my customer”, says rosi.

in são José dos Campos, the trial evolved to attract new NCs, with no prior Natura consulting experien-ce. this led to the incorporation of younger consul-tants more at home in the digital universe into the sales network.

With this model, the consultant no longer has to wor-ry about logistics and charging her customers; she is free to focus all her attention on the relationship and is thus able to serve a larger number of customers in her network. in addition to being able to place the or-der whenever they like via the internet, consumers can now choose to receive the product via direct delivery from the company’s distribution centers. expanded since 2010 and equipped with high technology, the Natura logistics system is prepared to receive this new order flow and speed up delivery times for consumers.

IN A PROJECT THAT WILL BE ExTENdEd IN 2014, NATuRA SEEkS TOOLS TO

COMPLEMENT THE WORk dONE BY NCS WITH A VIEW TO BOOSTING

SALES ANd FINdING NEW WAYS OF INTERACTING WITH CONSuMERS

eVolUtioN iN diReCT Selling

commercial model

relAtioNsHip NetWork

tWo-DAy DeliVery

More than 35% of the orders placed in brazil are now delivered to the NC in up to 48 hours. the average delivery time has decreased from 5.1 to 4.5 days. this rate is the result of investments that have been undertaken since 2010. in 2013, the new Natura administrative and distribution center was inaugurated in the city of são paulo. the high technology used in the distribution center enab-led the company to pick a record 4.5 million items in a single day.

Order delivery in 48 hours (%)

2012

27%

2013

35%15%

2011

greAter proDUCtiVity

in 2013, average NC productivity grew by 1.4% and by 6.2% in the last quarter. this increase was driven by investments in information technolo-gy, by a series of actions to gradually increase the range of products consumers buy, by pro-duct and concept innovation, as well as changes in sales force incentives, among other initiatives. this effort will be maintained in 2014, with the development of new cellular telephone applica-tions to assist in business management and to map the practices used by the most productive consultants and disseminate them to the rest of the network, among other measures.

relAtioNsHip

Sandra Hidaka relationship manager

erica Santos de Moura Natura employee and consultant

// // 2928

Carolina Mojica perzaval, 36 years old, lives in Veracruz, a Mexican port with just over 500 thousand inhabitants. she has been a Na-tura consultant since 2010 and already has more than 600 other consultants in her sales network. she is an excellent illustration of the Natura international operation that saw the highest growth in NC numbers in 2013: 32%, reaching the landmark number of 100,000 at the beginning of 2014. this performance is the result of the evolution of a differentiated commercial model that Natura designed exclusively for Mexi-co and started to deploy in 2011: the sustainable relationship Network. this is a multilevel direct selling model incorporating inclusion and sustainability-related concepts to promote actions that will generate positive local development impacts. “our family income has practically doubled in this time. i became interested in Natura because i liked the products and i identified with the company’s philosophy, which extends beyond cosmetics to environment care and personal relationships”, Carolina explains.A presence in Mexico is strategic for Natura, because the cosme-tics market is big– the second largest in latin America after brazil. it is worth Us$ 9.9 billion a year, and 24% of the transactions are via direct sales. “it is a country that has a strong relationship selling culture, and Natura has a 1% share in this market. this illustrates our huge growth potential in the country”, says vice president of international businesses, erasmo toledo.in the Natura system, the Mexican consultants may rise through eight hierarchical levels and are offered many training tools. in addition to attracting new members to their network, helping to develop the consultants in their group and training new leaders, consultants need to engage in socio-environmental causes and actions in their community to be promoted to the highest levels of the structure.

number of nCs1 (000s) 2011 2012 2013

Brazil 1,175.5 1,268.5 1,290.0Argentina 63.7 74,9 94.6Chile 37.9 52,1 59.6Mexico 58.5 74,3 97.8Peru 54.9 63,6 70.6Colombia 27.1 37,0 42.3France 3.1 2,6 1.7Total 1,420.7 1,572.9 1,656.5

1. this refers to the number of consultants in activity at the end of the year.

sUstAiNAble eNtrepreNeUrsHip iN MexiCo

relAtioNsHip NetWork relAtioNsHip NetWork

Working with Natura, consultants discover new personal qualities. this is what i like most: helping others to discover things they did not know about themselves, to un-leash their potential and help them develop a broader world view. that is what happened to me.

What sustainability mea-sures do you promote with your network?

Water contamination is an area of concern, and we decided to collect cooking oil from homes and deliver it to a company that transforms it into biodiesel. this was the way we found to help mitigate the problem.

is being a consultant good for you in financial terms?

My family income has practically doubled in this time, we have bou-ght a car, remodeled our home and i help to pay for family trips.

Why did you decide to work with natura?

i had never worked in sales and i saw an advertisement in a maga-zine. i was interested in Natura because i like the products and i really appreciate the company’s philosophy, which encompasses environmental care and perso-nal relationships.

How did you manage to form a group of 600 consultants?

i attend every workshop the company gives and i have done all the internet programs. i want to be fully prepared to pass in-formation on to the consultants in my network. i also organize workshops on motivation, sus-tainability, internet tools, finance, among others.

Seeking a broader world view

Carolina Mojica Perzaval Natura Consultant

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2011 2012 2013Climate survey – employee favorability1 70 72 78NC loyalty brazil2 19 24 23NCA loyalty brazil2 24 40 38supplier loyalty brazil2 27 23 30Consumer loyalty brazil2 66 51 52

in its essence, Natura expresses the value of relationships by de-fining everything in the universe as interdependent. At a moment when the prevalence of virtual relationships over personal contact is the subject of debate, the company reaffirms its belief in the power of interaction and connection between people, be it em-ployees, consultants, suppliers or society as a whole. the power of relationships is a fundamental element in Natura’s sustainability Vision and will permeate its growth strategy for the coming years. the Natura Network model, established to connect consultants via the worldwide web and bring them closer to their consumers, is one of the key innovations in the company’s direct selling model.

to nurture these relationships, Natura tracks satisfaction and loyalty indicators among its priority stakeholder groups. the 2013 results show important progress, with advances in the employee climate survey, which reached the highest rate since the survey began, as well as growth in supplier loyalty.

the results also highlight the need for constant attention to the-se relationships. After growing significantly in 2012, NC and NCA loyalty remained practically stable during the year, falling short of company targets.

Natura believes it is part of a relationship ecosystem and that, in a network, it may expands its reach and its contribution to the evolution of society and to sustainable development. for this rea-son, Natura reaffirms its commitment to upholding the quality of relationships and to investing continually in its entire network, with a special focus on education and sustainable entrepreneurship.

quality of relationship

tHe iNterACtioN STRengHT

relAtioNsHip NetWork

1. Climate survey: Hay group. 2. loyalty survey: ipsos institute.

THE USE OF MORgAn STAnlEY CAPiTAl inTERnATiOnAl inC.’S (“MSCi”) TRADEMARKS AnD inDEX nAMES DOES nOT COnSTiTUTE A SPOnSORSHiP, EnDORSEMEnT OR PROMOTiOn bY MSCi, AnY OF iTS AFFiliATES, AnY OF iTS inFORMATiOn PROViDERS OR AnY OTHER THiRD PARTY inVOlVED in, OR RElATED TO, COMPiling, COMPUTing OR CREATing AnY MSCi inDEX. THE MSCi inDEXES ARE THE EXClUSiVE PROPERTY OF MSCi. MSCi AnD THE MSCi inDEX nAMES ARE TRADEMARKS OF MSCi OR iTS AFFiliATES AnD HAVE bEEn liCEnSED FOR USE FOR CERTAin PURPOSES bY nATURA.

This font used in this report is gillSans; the report was printed on matt Couché paper. Total print run: 1,500 in

Portuguese, 400 in Spanish and 200 in English.

finance and institutional Relations roberto pedote

Corporate Affairs and government Relations

Overall coordination Marcelo bicalho behar Cristina Amadio Molini

and Jaqueline NichiSupport

Mônica frohlich e francisco Higa (Valuepoint)

Corporate financeFinancial information Alexandre Nakamaru,

José Wanderley and Mauro MoraesSupport

lígia silveira

Market relations fabio Cefaly and tatiana bravin

Sustainability Denise Alves, luciana Villa Nova,

Juliana pasqualini and thaís ferraz

Art direction and infographics Wilson spinardi Junior

graphic design and layout Modernsign Design e inovação

Photography Wilson spinardi Junior,

Daniela giorgia and Natura archive

Copy and sustainability consulting report sustentabilidade

EditingÁlvaro Almeida (Mtb 45.384/rs)

Michele silva (Mtb 11.829/rs) and talita fusco (Mtb 11.615/Mg)

Reportinggabriela scheinberg and otávio Nazareth

Project and relationship managementAna souza

Materiality and indicator analysisthaís Colpaert, karina simão

and fabíola NascimentoRevision

Cesar ribeiroPrinting stilgraf

For the full version access: www.natura.net/relatorio or download a QR code reader and photograph the code.

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