Sustainability Scorecard Training

Module 1

Sustainability Overview

Audience: P&G SRO & Supplier

SocialResponsibility

Environmental Responsibility

Sustainability… better quality of life for

everyone, now and for generations to come

P&G Defines Sustainability

Broadly…

At P&G, we define sustainability broadly. It is about ensuring a better quality of life for everyone now and for generations to come. For us that broad definition encompasses both environmental and social responsibility. It’s not just about “green” products tied to a current consumer movement, but a systemic approach covering our total supply chain, from raw materials to manufacturing processes to the Consumer. We believe this more substantive approach is best.

Sustainability is at the heart of P&G’s purpose and is explicit in our commitment to touch and improve lives now and for generations to come.

And, importantly, sustainability efforts must be tied to the bottom line.

Strong Sustainability Heritage

Published our first

environmental safety

publication (1956)

Renewed the Corporate

Sustainability Program (2007)

Introduced global corporate cause: Live, Learn and

Thrive™ (2005)

One of the first corporate sustainability

departments and sustainability report

(1999)

Pioneered the use of Life

Cycle Assessment

(1990s)

Co-founded the Society of

Environmental Toxicology and

Chemistry (1981)

Developed first test to evaluate

chemical biodegradability

(1973)

Sustainability is not new to P&G. We have a rich history and track record of leadership.

Built into the Rhythm of the BusinessSustainability is reflected in our purpose-inspired growth strategy: We can serve more consumers … more completely with a broader mix of sustainability innovations on our leading brands—innovations that require no trade-off between sustainability benefits and performance, value and quality. As we expand geographically to serve more consumers in more parts of the world, we have the responsibility to manage the environmental impact of our products and operations and the opportunity to build relationships, systems and capabilities for future growth as we serve those whose needs are greatest and who can least afford our products today.

Sustainability is integrated into the rhythm of our business. This provides benefits to the Company in two ways:

1. Bottom line cost reductions as a result of literally thousands of innovative efforts across the supply chain.

2. Delivering products to consumers that address their

desire to be more environmentally sustainable WITHOUT tradeoffs in performance.

Our Purpose, Values and Principles

P&G PurposeWe provide branded products and services of superior quality and value that improve the lives of the world’s consumers, now and for generations to come.

P&G PrinciplesWe incorporate sustainability into our products, packaging and operations.

P&G has been working on sustainability-related initiatives for over fifty years. In 2007, we added a focus on sustainability to the Company’s statement of purpose. This is not a move we take lightly.

Our Purpose, Values and Principles are the guidepost for everything we do at P&G—how we conduct business, how we make decisions, how we partner externally, and how we engage our employees. Sustainability is a responsibility, especially for a Company with the scale and consumer reach of P&G. But sustainability is also a business opportunity which makes it important to shareholders.

Building a sustainability mindset into the rhythm of our business and with our employees helps enable the sustainability of our business results.

Leadership Commitment

“Sustainability is at the heart of P&G’s business model. We design our strategies and plans to ensure that the work we do makes a meaningful difference by bringing the power and scale of our brands to solve real problems facing the world.”

Bob McDonaldChief Executive Officer

2012 Strategies

Strategy 1:

Products

Strategy 2:

Operations

Strategy 3:Social

Responsibility

Strategy 4:Employees

Strategy 5:Stakeholder

s

In 2007, P&G established five strategies for sustainability and set goals to be achieved by 2012.

Please refer to www.pg.com/sustainability for more information on each strategy.

Delight the consumer with sustainable innovations that improve the environmental profile of our products.

Improve the environmental profile of P&G’s own operations.

Improve children’s lives through P&G’s social responsibility programs.

Engage and equip all P&Gers to build Sustainability thinking and practices into their everyday work.

Shape the future by working transparently with our stakeholders to enable continued freedom to innovate in a responsible way.

Why does Supplier Sustainability

Matter?P&G’s network of partners and suppliers is critical to our long-term success and in our purpose-inspired growth strategy to touch and improve more consumers’ lives, in more parts of the world, more completely.

Consumers around the world rely on P&G brands for their superior performance and value. For that reason, we want agencies, suppliers and other business partners to participate with us in open innovation, and to help us improve competitive advantage and maintain standards of excellence for both companies. At P&G, successful partnerships require a respect for the environment and sustainability, and we seek those values in our agencies, suppliers and other business partners.

In the area of social sustainability, we expect suppliers to comply with our Sustainability Guidelines for Supplier Relations (see http://www.pgsupplier.com/sustainability-guidelines for more details). High-risk suppliers (defined by country of operation or potential hazard) are audited periodically to ensure compliance.

On the environmental front, we collaborate closely with suppliers across the entire supply chain. Suppliers are P&G’s key source of materials, packaging, systems, services and ideas for sustainable innovation products. We view suppliers as critical partners in improving the environmental sustainability of our end-to-end supply chain. We also learn from each other’s best practices as we navigate the emerging field of environmental sustainability together.

P&G’s Supplier Sustainability

Approach

Supplier Collaboration

is Key to Delivering P&G’s

Sustainability Goals.- In Our Products, Operations &

Across Our Supply Network

Benchmark with suppliers to identify best practices and reapply across the supply chain. Leverage our P&G Supplier Sustainability Board to guide our efforts and tap opportunities. Connect supplier capabilities to deliver unique sustainability improvements. Create a shared library of best practices and success stories. Partner with suppliers to influence how Consumers and Stakeholders define success. Proactively influence key industries to drive end to end sustainability improvements and

value creation. Create forums to share insight, trends and approaches and ensure common understanding

and approach.

Link and Leverage to Drive Best Practices

Suppliers are P&G’s key source of materials, packaging, systems and ideas for sustainable innovation products.

Suppliers bring sustainable business practice innovation—how we communicate with consumers, how we go to market and how we run our operations.

Suppliers deliver sustainability innovations with better value and no trade-offs.

Sustainability success requires strong collaboration across suppliers and key internal P&G customers – R&D, Marketing, Product Supply.

Commercialize 360 Sustainable Innovation

Measure Progress in a Simple, Consistent Way Use a few simple measures where P&G and

suppliers can make a meaningful difference. Leverage existing approaches and data. Measures are based in science and include

full life cycle analysis. Measures support total best value – improving

sustainability without trade-offs. Suppliers feel rewarded for collaborating to

improve P&G’s sustainability (via business allocations, etc.)

Sustainability is part of our sourcing value equation and integrated into our sourcing strategies.

Supplier Sustainability: Two New

ProgramsTo further collaborate with suppliers in sustainability, we are introducing two new programs in 2010:

1. Third-Party Supplier Audit Program (Social Sustainability)We are transitioning from our current internal system of auditing to use third-party auditors and will subscribe to the SEDEX database where audit results can be shared by

suppliers with all customers to save costs and resources.

2. Supplier Environmental Sustainability Scorecard (Environmental Sustainability)We are launching the scorecard to measure the sustainability of our suppliers in four key areas: energy use, water use, waste disposal and greenhouse gas emissions—as well as their contributions to key P&G sustainability activities. Developed by a global team of P&G and Supplier experts, the scorecard is organized to flexibly measure sustainability improvement at the scope (corporate, site, product, etc.) suppliers can report now; while encouraging them to develop the capability to measure end-to-end supply chain sustainability for specific P&G materials and services—consistent with business/industry initiatives and sound science. The scorecard (and rating system) specifically focuses on whether each supplier is making year-on-year improvement; creating an actionable evaluation matrix and collaboration tool—regardless of a supplier’s size or current capability.

P&G Purchasing Supplier Relationship Owners (SROs) will use the scorecard to determine their supplier’s sustainability rating in P&G’s annual supplier performance measurement process. SROs/Buyers may also use components of the scorecard as a template to gather comparable sustainability measures to use in best total value business award decisions.