Natura: The Challenges in Building a Sustainable Supply Chain

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Information about Natura: The Challenges in Building a Sustainable Supply Chain

Published on June 15, 2012

Author: StanfordBusiness



Joao Paulo Ferreira, VP Operations & Logistics, Natura Cosmetics Brazil

ResponsibleSupply ChainJoão Paulo FerreiraSupply Chain Vice President

Who is Natura?

Salesnet sales of US$ 2.1 billionEBITDA23,8%CAGR (2005 – 2009)18%Market share - CFT22.2% market share in BrazilDirect Sales1,034,000 consultantsEmployees6260 employees in 8 countriesInvestments in R&D HighlightsUS$ 59 millionInvestments in Corporate Social ResponsibilityUS$ 30 millionConsumers50 million consumersBrand strength4th most valued brand in BOVESPA14th most valued brand in Latin America(Interbrand)

reason for being to create and sell products and services that promote well-being/being well well-being is the harmonious, pleasant relationship of a person with oneself, with one’s body being well is the empathetic, successful, and gratifying relationship of a person with others, with nature and with the whole. “The secret is working with inventory, to avoidlosing the magic moment when the person tries the product and falls in love with it.” Ildnéia Cano (left) is a Natura Consultant in Júlia Cunha’s (Sales Promoter, right) team.

visionThrough its corporate behavior, the qualityof the relationships it establishes and the qualityof its products and services, Natura will be aninternational brand identified with the communityof people who are committed to the constructionof a better world, based on a better relationshipwith oneself, with others, with nature of which theyare part of, with the whole. “The things I do for Natura are things I like doing and would do for myself, because they have value, are genuine.” Beto Von Poser, trained as an engineer, set designer by vocation, and Natura supplier for 13 years

beliefslife is a chain of relationships commitment to the truthnothing in the universe exists alone is the route to perfecting the qualityeverything is interdependent of relationshipsit is our belief that the appreciation the greater the diversity,of the importance of relationships the greater the wealth and vitality of theis the foundation of an enormous whole systemhuman revolution in the search forpeace, solidarity and life in all the search for beauty,of its manifestations which is the genuine aspiration of every human being, must be free of preconceivedthe continuous search for improvement ideas and manipulation.promotes the development ofindividuals,organizations, and society 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

differentiated value corporate proposition behavior essenceTransform social andenviromental challenges intobusiness opportunities channel products Delivery of “Triple Bottom Line” Economic Social Environmental › Strong cash flow generation › Wealth creation to consultants › Carbon neutral company › Attractive growth and › US$ 30 million invested in CSR › Utilization of refill packaging profitability 1in 2009 › Sustainable extraction of raw › Consistent dividend payments › Benefits extended to supplier materials communities › Use of recycled and recyclable 1 Corporate and Social Responsibility materials


Channel strength Available consultants (in thousand) Channels differentiations High productivity1 Brazil International Total 2.2 times higher than its peers 1,034 875 850 731 719 632 +21.8% Low Business model Training turnover that generates 583,000 +19.8% consultants 159 36% on income and work average trained 119 86 in 2009 +33.9% 2007 2008 2009 2007 2008 2009 2007 2008 2009 CAGR High satisfaction2 90% in 2009› Consultants are Natura’s first consumers› Drive sales through personal relationships› Channels disseminate Naturas values with consultants acting as agents of social transformation› More than 1 million consultants in 20091 Source: Company, ABEVD (Brazilian Association of Direct Sales Companies)2 HAY Consultant annual opinion poll for consultants satisfaction


Ekossustainable useof biodiversity

Chronosa truly beautifulwoman

Todo Dia(every day)caring for bodyand mind

Mamãe e Bebê(mom and baby)the importance ofthe bond betweenparents andtheir children


The Natura Value Chain Mapping of all direct and indirect emissions of greenhouse gases throughout the product lifecycle and our business chain.1. Extraction and transportation of raw materialsand packaging (direct and indirect suppliers) 2. Industrial and administrative processes105,570 ton of CO2e (extraction and transportation ofraw materials and packaging) 14,767 ton of CO2e 23,606 ton of CO2e (co-makers) 43% 16% Relative Emissions (kg of CO2e/kg of product billed) - 16,1% 3,95 3,82 3,63 24%4. Use of products and 3. Product sales 18%packaging discharge (transportation and distribution) 2007 2008 2009 Challenge: reduce GHG57,873 ton of CO2e 43,980 ton of CO2e relative emissions by 33% over 5 years

The Natura Value ChainStage 1: Extraction and transportation ofraw materials and packaging (direct andindirect suppliers) 43%Related initiatives:- Sustainable development program that includes supplier communities (NGO’s, Government). .- Collaboration with government to Key results in 2009: establish new regulations for accessing the Brazilian biodiversity. Wealth distribution to suppliers: US$ 1.4 billion – 8% growth- Certification program for natural ingredients (Forest Stewardship Council, Supplier satisfaction: 82% Instituto Biodinâmico, Sustainable Agriculture Network). Certified ingredients: 31 Use of vegetal material from- Collaborative product redesign with renewable origin: 79.2% suppliers for reduced LCA- Vegetalization program and beyond. (Ex.: organic alcohol)

The Natura Value ChainStage 2: Industrial and administrativeprocesses. 16%Related initiatives: Key results in 2009:- Manufacturing plant in the Amazon (Benevides – Pará) Distribution of wealth to employees: US$ 321 million – 12% growth- Use of PET with inclusion of 30% Investments in innovation: recycled resin. US$ 59.4 million- Eco-efficient energy and steam Water consumption:0.52 liter per unit sold generation. (increase of 2% since 2007) Energy consumption: 447.3 kjoule per unit sold (reduction of 25% since 2007) Generation of residues: 31.5 grams per unit sold (reduction of 10% since 2007)

The Natura Value ChainStage 3: Sale of products(transportation and distribution). 18%Related initiatives: Key results in 2009:- Crer para Ver (Believing is Seeing) Educational Program. Wealth distribution to consultants: US$ 1.15 billion – 15% growth- Natura Movement: reverse logistics, and Sales channel: education towards citizenship (EJA). 1 million consultants – 18% growth- Secondary pack optimization program Sales channel satisfaction: 88% Product launches: 103 – 600 SKUs Total collected on the Crer Para Ver program:US$ 1.9 million

The Natura Value ChainStage 4: Use of products and dischargeof packages. 24%Related initiatives: - Use of refill. - Product Lifecycle Analysis (ACV). Key results in 2009: - Environmental Labelling. Percentage of refills over sold items: 18,4% Environmental impact per product quantity:69.5 mPt/kg – (reduction of 5% since 2007)

our supply chain

Direct Selling – Supply Chain Post Sales CAN, SNAC, Suppliers Credit and Collection > Ingredients from biodiversity sustainably extracted from communities in the forest; Production CN Order Cycle Plants 21 days sale cycles> 66% of renewal forproducts less than 2years old> 50% volumepromoted Distribution> Promotions > 1 million PODleverage: 8-15x Sorting Picking Cajamar & DCs

Our operations France Mexico Colombia Peru Brazil Bolivia Argentina Chile

Main numbers› Manufacturing Plants: 4› Hubs: 1› Distribution Centers: 10› Points of delivery: 1 million› Units sold: 384 million› SKUS: 1,200› Kilometers traveled: 1.6 million› Total orders/year: 12.8 million› Employees: 3,000› Raw materials and packaging suppliers: 200› Co-makers: 20

New initiatives› WWF Program Defenders of the Climate: reduce absolute GHG emissions by 10% (scopes 1 and 2) between 2008-2012;› Co-makers collaborative environmental program;› Supplier relationship program: QLICAR (quality, logistics, innovation, competitiveness, service, and relationship);› New international manufacturing network: 28% reduction in CO2 relative emissions from international flows;› New boilers - ethanol and biomass;› Enlargement of the Amazon Industrial Unit: increased number of benefitted families;› Introduction of biopolymer plastic;› Water footprint;› New picking technology to increase inclusion of disabled employees;› New distribution network: 25% reduction in CO2 relative emissions from distribution;

biodiversity asstrategy

Opportunities› Innovation - Union between scientific and traditional knowledge› Value creation for stakeholders› Competitive advantage› Positive environmental impact

Sustainability ofsupplier communities› Access agreements for genetic resources & traditional knowledge that includes sharing benefits in non-monetary ways (e.g. certification, technology transfer packages) as well as % of net revenues› Financial support for sustainable local development projects, preservation of biodiversity and building local institutions› Program for rural supplier qualification – BioClicar supplier partnership that includes support to production and harvesting and links to third-party processors

the chain ofrelationships Certification Bodies › Value addition › Forest management › Ethnobotanic Traditional plan › Studies Academic Community › New concepts › Scientific Community › Innovative In the approach products chain’s heart › Production Process › Ethical integrated supply chain Governments › Legal framework cooperation Suppliers

Location of the Communities, Number of Families and Raw materials MALVAS CAMTA IRATAPURU VER AS ERVAS CAMPO LIMPO (Ecuador) Cupuaçu, Açai Brazil nut, Breu Branco, Flatsedge, Capitiu Palo Santo palm, Passion fruit, Breu Branco, Cumaru, Flatsedge Cacao Copaiba and Jambu COFRUTA Murumuru COTIJUBA palm Flatsedge, Ucuuba BOA VISTA Flatsedge, Capitiu, Tower tree 25 32 COOPAESP 102 16 Babaçu 14 100 23 500 35 PALMEIRA DO 70 PIAUÍRESEX MÉDIO Buriti palmJURUÁAndiroba, 50Murumuru palm 226 50 ONÇA Guarana 300 COOPROCAM 32 Urucum, Sapucainha RESEX CHICO 140 MENDES RECA Jatoba, Dragon’s Cupuaçu, Brazil CABRUCA Supplier of raw materials and blood nut, Açai palm, Cacao access provider (Genetic Cumaru Resource and/or Traditional Knowledge) 32 Supplier of raw materials 7 only APROCOR 50 CTM/Proter Passion fruit Sweet passion fruit, Cow-foot leaf, Supplier of access only Yerba Mate (Genetic Resource and/or Traditional Knowledge) TURVO Surinam cherry, N N=number of families Chamomile, Melissa, Lemongrass, Mint, Carqueja

Distribution of wealth tosupplier communities (US$) 2007 2008 2009 Supply 375,498 973,122 1.378,000 Use of image 16,669 4,455 7,000 Funds and support 328,315 292,097 568,000 Benefit sharing from the 141,180 493,920 528,000 access to genetic resource or traditional knowledge Families benefited (number) 1,684 1,895 2,084

Ecological 36 native speciesand Socio-Economic + 38 exoticimpacts Amazon Industrial Unit + Suppliers 34 providers 2,084 families 50 million 56 raw consumers materials 8 Countries 1 million consultants 812 products


Supply Chain from Natura‘s lenses› Inclusion of social and environmental drivers improves supply chain decision making framework› It is possible to drive outstanding value out of a sustainable supply chain› Collaboration and Service pushed to new limits› Enhanced professional supply chain skills required

thank you! João Paulo Ferreira

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