2021 MATERIALITY MATRIX REPORT - WHAT MATTERS TO OUR STAKEHOLDERS

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2021 MATERIALITY MATRIX REPORT - WHAT MATTERS TO OUR STAKEHOLDERS
2021 MATERIALITY MATRIX
 REPORT
 WHAT MATTERS TO OUR STAKEHOLDERS
Responsible and sustainable business involves engaging with our stakeholders to refine our strategy. This
year, we have renewed our materiality matrix, a key tool to deliver on our One Planet. One Health frame of
action, identifying our priorities according to their importance for external and internal stakeholders as well
as their impact on Danone’s business success.

An updated list of 35 key topics that have been identified in collaboration with our stakeholders are shown
in our latest matrix below. Covering environmental, health, social, business and governance aspects, these
issues have been evaluated to determine sustainability challenges and opportunities for Danone.

 MATERIALITY METHODOLOGY
In order to refine our understanding of the key challenges and address them strategically, we followed a
rigorous two-step process which built on the inaugural global materiality assessment in 2017:

   •   Identification: Using the 2017 list of topics as a basis, we undertook a review of the most recent
       literature to identify any new or emerging issue to be included in 2021, and to understand the
       relevance of existing issues based on their evolution in recent years. This enabled us to set an
       exhaustive list of 35 topics that are directly or indirectly connected to Danone’s business and
       stakeholder interests.
   •   Assessment and prioritisation: A quantitative survey was conducted worldwide, involving more than
       150 Danone employees, 230 professional stakeholders and key customers. This survey allowed us to
       prioritise and assess material issues, and to identify the top tier topics that Danone must focus on.
       The topics were ranked based on their perceived impact on Danone’s business success according to
       Danone employees, and on their perceived importance for external stakeholders (i.e.,
       representatives from NGOs, academia, business, government, as well as representatives from
       Danone’s business partners such as retailers).

   •   Forecasting: Given the sustainability agenda is fast-moving, we added a new element to our
       materiality assessment this year whereby we invited survey respondents to tell us which material
       topics they forecast will become more important in the next five to ten years (on the next page,
       visualised through the size of topic bubbles).
UNDERSTANDING THE MATERIALITY RESULTS

   •   Topic tiering: The topics’ distribution on the materiality matrix, across three distinct tiers,
       provides useful insights on how to understand and manage each topic in the short, medium,
       and long term:
         o      The first tier is made up of the 12 priority topics that are the most material to both
                Danone’s external stakeholders and the company’s business success. These topics
                are intimately linked to Danone’s evolving business model. They are core to the
                activation and delivery of Danone’s One Planet. One Health.
         o      The second tier is a cluster of major topics for creating medium- and long-term
                value. Many of these topics are already being addressed by Danone through policy
                development, target setting, local project management, etc.
         o      The third tier of topics includes compliance-driven matters and emerging topics.
                These topics are to be addressed through compliance, monitoring and ongoing
                management.

       •     Interdependence of topics: Material topics do not exist independently; they are linked
             to one another and their position on the matrix should be understood accordingly. For
             instance:
           o     There is high level of interconnection between environmental issues, most of them
                 being located in the first tier. While water stewardship is thus located lower within
                 this first tier, it is closely linked to climate change – which is among Danone’s most
                 material issues. Similarly, sustainable farming and land use, which remains at the
                 very top of the matrix in 2021, also very much depends on rural/farmer
                 development, located further down within the first tier.
           o     This interdependency also applies to health issues. While product safety and quality
                 and the nutritional value of Danone’s product portfolio are, similarly to 2017,
                 considered as most important, they cannot be addressed in isolation. Indeed, they
                 very much depend on new consumer-related issues (new consumption patterns,
                 consumer behaviour change), which are what Danone’s business success will
                 ultimately depend on.
Exploring the interdependence of these topics helps us identify the necessary system-wide
approaches to put in place in order to drive progress on our One Planet. One Health frame of action.

       •     Materiality of single-axis topics: It is also important to highlight that some topics may
             be crucial only externally (to stakeholders) or only internally (to business success). As a
             consequence, Danone considers them as key, and they are addressed strategically even
             though they may not be located in the first tier of the matrix.

ANALYSING THEMATERIALITY RESULTS

       •     Our most material issues in 2021: Two major issue themes emerge from the top tier of
             the matrix: health and the planet. These are very much aligned with our One Planet.
One Health frame of action and stand as further evidence of our responsibility in
            addressing these as a priority. In addition to these key pillars, two other topics stand
            out in the first tier: integration of sustainability into the business, and responsible
            procurement and supply chain management. These topics are strategic enablers that
            prove to be essential in driving progress. Indeed, action on key planet and health issues
            calls for business transformation and, consequently, further integration of sustainability
            into the business, at product and category level. At the same time, acting on those
            topics requires deep sustainability integration at the procurement / supply chain
            management level.

      •     What has changed since 2017: While a few planet issues (circular economy, sustainable
            farming and land use) were already highlighted as important in 2017, they have been
            joined by multiple other issues: climate change, water stewardship, and local sourcing
            and rural development have indeed jumped to the first tier since our last materiality
            assessment. Although located in the second tier, other planet issues have also gained
            importance – including biodiversity protection and regeneration. This reminds us of our
            ever-growing responsibility to set the bar high in our One Planet agenda. Meanwhile,
            our One Health agenda is proving more relevant than ever, with a new set of consumer-
            related issues (new consumption patterns, consumer behaviour change) joining our
            pre-existing health priorities (product safety and quality, nutritional quality of overall
            product portfolio, food and water access and affordability) in 2021.

      •     What to expect in the next 5-10 years: Consistent with the evolution which has taken
            place since 2017, environmental issues are expected to gain the most traction in the
            next 5 to 10 years. While sustainable farming and land use, circular economy and
            climate change are thus expected to continue their rise to the top of the agenda, other
            environmental issues will also gain ground (water stewardship, biodiversity protection
            and regeneration, and food loss & waste).When it comes to health, consumer-related
            issues are expected to grow in importance in the next 5-10 years, with rising
            expectations for Danone to show the way through new offerings, consumer education
            and the promotion of healthier and more sustainable alternatives.

LEVERAGING THE MATERIALITY RESULTS

The materiality results are communicated and spread within Danone in order to activate the One
Planet. One Health frame of action across our businesses. The core purpose of this materiality
analysis is thus to provide guidance for us to better prioritize sustainable strategic topics, to better
meet stakeholder expectations and to better implement commitments and policies towards a
sustainable business and society.
In addition to an overview of the global landscape, this year’s materiality assessment was taken to
the next level to enable a deeper understanding of regional trends as well as expectations towards
each of our business lines. This thorough process, beyond its highly strategic nature at corporate
level, allows us to capture actionable insights and to formulate tailored recommendations at local
and category level.
Action on public health issues             Animal health and welfare                     Biodiversity        protection          and
         through specialised portfolio                                                            regeneration
         •   Addressing      malnutrition    and    •   Animal health (e.g. use of antibiotics,   •   Plant and seeds biodiversity
             undernutrition                             etc.)                                     •   Species extinction
         •   Addressing nutritional deficiencies    •   Animal welfare (e.g. adherence to         •   Soil & nutrient depletion
         •   Supporting kids and infant health          best practice standards)                  •   Insect pollination in agricultural crops
         •   Supporting ageing / fragile            •   Animal testing                            •   Ecosystem regeneration
             populations, patients care and
             recovery,     through      immunity
             protection
         •   Supporting      specific     medical
             conditions (allergies, epilepsy…)
         •   Supporting maternal health
         •   Addressing mental health

         Business ethics and integrity              Brand activism                                Climate change
         •   Anti-bribery, fraud and corruption     •   Brand activism / advocacy for             •   Air pollution
         •   Anti-counterfeiting                        progressive causes                        •   Climate partnerships & advocacy
         •   Anti-trust / Anti-competitive          •   Brand engagement with consumers           •   GHG emissions from agricultural and
             behavior                               •   Brand partnerships with NGOs and              food production value chain
         •   Compliance                                 other civil society organisations         •   GHG emissions from transportation
         •   Protection of intellectual property                                                  •   Energy efficiency
                                                                                                  •   Renewable energy
                                                                                                  •   Carbon offsetting
                                                                                                  •   Carbon capture and sequestration
                                                                                                  •   Climate-friendly technologies (e.g.
                                                                                                      phasing-out HFC gas)
                                                                                                  •   Climate-friendly        science-driven
ISSUES                                                                                                solutions (e.g., food complements to
                                                                                                      reduce methane emissions
NAMES
         Circular economy, packaging and            Consumer behaviour change                     Corporate advocacy on public policy,
  &      waste                                                                                    stakeholder    engagement      and
                                                                                                  partnerships
         •   Single-use plastic packaging waste     •   Consumer education on healthier           •   Responsibility and transparency on
 SUB-    •   Returnable,       reusable,    and         lifestyles and diets                          public policy / advocacy activities
             refillable packaging (i.e. new         •   Partnerships with local authorities       •   Stakeholder listening and dialogue
TOPICS       business models like Loop)                 and groups (sports, etc.) to                  (incl. with critics)
         •   Biodegradable/bio-based                    encourage healthier lifestyles            •   Multi-stakeholder coalitions (e.g. One
             packaging                              •   Partnerships with retailers to offer          Planet Business for Biodiversity
         •   Recycled content in packaging              better choices to consumers,                  [OP2B], Business for Inclusive Growth
         •   Recyclability of packaging                 through promotion of healthier                [B4IG], etc.)
         •   Collection of packaging (e.g.              options                                   •   Collaboration with the public sector
             deposit return schemes)                                                                  (e.g.       national      governments,
         •   Reduction of fossil fuel use in                                                          international organisations)
             packaging                                                                            •   Partnerships along value chain (e.g.
                                                                                                      suppliers,       customers,    business
                                                                                                      partners)

         Data security and privacy                  Deforestation                                 Employee engagement in governance
         •   Protection of data against             •   Zero deforestation (incl. palm oil        •   Inclusive    governance    (employee
             malicious attacks and improper             sourcing)                                     participation in company decisions)
             use, i.e. cybersecurity                                                              •   Employee accessibility to financial
         •   Responsible / compliant lifecycle                                                        ownership (e.g. company shares)
             management of data privacy                                                           •   Employee engagement opportunities /
         •   Rights of data subjects &                                                                programmes
             information self-determination
Employee security, health, safety           Food and water             access     and     Food loss and food waste
           and wellness                                affordability
           •   Occupational health & safety (zero      •   Affordable price of nutritional           •   Food loss at agricultural level
               accidents)                                  products                                  •   Food loss at manufacturing level
           •   Employee mental health &                •   Availability of nutritional products      •   Food waste at retail level
               wellbeing (incl. work-life balance)         (incl. in most disadvantaged              •   Food waste at consumer use level
           •   Employee physical health and non-           communities)
               communicable diseases (e.g.             •   Affordability    of      life-essential
               cancer, diabetes, obesity, etc.)            products (e.g. water, infant formula)
           •   Employee security (e.g. external)       •   Access to safe drinking water in
                                                           communities

           Fair relationships and pricing with         Fair working conditions and wages             Human rights in supply chain
           farmers
           •   Stable, long-lasting partnerships       •   Living wage                               •   Child labour
               with farmers                            •   Working hours                             •   Forced labour / modern slavery
           •   Fair remuneration / shared value        •   Working conditions                        •   Informal labour in the value chain (e.g.
               with farmers                            •   Access to basic services                      waste pickers)
           •   Ongoing technical support /                                                           •   Temporary workers
               knowledge transfer (esp. to                                                           •   Indigenous people’s rights against land
               smallholder farmers)                                                                      grabbing and to freedom of association
                                                                                                     •   Migrant workers & trafficking
                                                                                                     •   Sexual exploitation

           Integration of sustainability into          Labour relations                              Local sourcing and rural / farmer
           the business (incl. B Corp and                                                            development
           Entreprise à Mission)
ISSUES
           •   Integrating sustainability priorities   •   Social dialogue                           •   Sourcing of locally produced raw
               and principles in the company's         •   Grievance       procedures     and            materials / local origins
NAMES          corporate      governance       (e.g.       whistleblowing mechanisms                 •   Respect to cultural / local farming
               Entreprise à Mission)                   •   Management of layoffs                         practices
&          •   Creating sustainable business           •   Freedom of association & collective       •   Making farming more attractive to
               models aligning profits with social         bargaining                                    young people
               / environmental goals (e.g. B Corp                                                    •   Improving farm economics and
    SUB-       certification)                                                                            capacity among farmers
           •   Measuring / rewarding sustainable
TOPICS         performance and impact

           New consumption patterns and                Nutritional quality of overall product        Product traceability and labelling
           planetary diet                              portfolio
           •   Encouraging flexitarian diets vs        •   Reducing sugars, sodium, and fat          •   Product       traceability      (e.g.
               pure meat-based / dairy-based               content                                       provenance       of     ingredients,
           •   Providing a diverse product             •   Reducing ultra-processed foods                conditions of production)
               portfolio in line with local            •   Optimizing portion sizes
                                                                                                     • Transparency over ingredients in
               consumer diets and cultural             •   Encouraging healthy hydration
                                                                                                         products (e.g. GMOs, colorants
               preferences                                 (water over other types of drinks)
                                                                                                         and flavourings, allergens, etc.)
           •   Being suitable to consumers with        •   Creating plant-based alternatives to
               different religion-induced diets            existing products
                                                                                                     • Nutritional labelling (e.g. Nutri-
                                                                                                         Score in Europe)
                                                                                                     • Environmental footprint / impact
                                                                                                         labelling
           Product safety and quality                  Responsible        leadership         and     Responsible management of the
                                                       governance                                    Future of Work
           •   Food safety risks management            •   Internal controls and auditing            •   Protecting gig economy workers (e.g.
               (accountability and governance)         •   Board composition, independence,              temporary, flexible, freelance, and
           •   Food safety standards and audits /          and effectiveness                             Uber-like jobs)
               certifications                          •   Executive compensation                    •   Managing / anticipating the impact of
           •   Product authenticity                    •   Roles and responsibilities of                 automation on the company’s own
           •   Additives, preservatives, artificial        Chairman vs CEO                               operations
               ingredients                             •   Succession planning                       •   Managing / anticipating the impact of
                                                       •   Performance management                        automation across the supply chain
•   Pesticides in consumer foods and     •   Transparency and accountability to
               beverages                                stakeholders
           •   Chemical compounds in packaging

           Responsible marketing                    Responsible procurement and supply            Sustainable farming and land use
                                                    chain management
           •   Marketing to children                •   Supply chain management and               •   Transition to organic farming
           •   Marketing to other vulnerable            procurement procedures                    •   Adoption of agro-ecology practices
               groups                               •   Supplier payment terms                    •   Soil health protection, fertility
ISSUES     •   Infant formula / breast milk         •   Supplier capacity building / training         conservation and restoration
               substitutes (BMS) ethics and             programmes                                •   Support to farmers in their transition
NAMES          marketing                            •   Collaboration / co-innovation with            to more sustainable farming
           •   Responsible use of nutritional and       suppliers
&              health claims

           Talent attraction, retention and         Tax and local economic development            Water stewardship        (incl.   bottled
    SUB-   growth                                                                                 water)
           •   Employee remuneration                •   Fair and transparent tax contribution     •   Water quality
TOPICS     •   Pension & social security            •   Local job creation                        •   Water discharge / pollution reduction
           •   Employee training & learning /       •   Payment, financial and in-kind            •   Water use in agriculture
               career development                       support to suppliers                      •   Water abstracted for production of
           •   Talent management & succession       •   New ventures / acquisitions                   bottled-water products
               planning                             •   Contribution to and promotion of          •   Natural water resources protection,
           •   Maternity & paternity protection         local      development,       around          through watershed conservation
               (e.g. parental leave policy)             production sites                          •   Conflict and competition over water
                                                                                                      resources
           Workplace diversity and inclusion        Vulnerable communities’
                                                    empowerment in value chain
           •   Gender diversity/inclusion           •   Supporting smallholder farmers by
           •   Racial diversity/inclusion               providing equipment and training in
           •   Sexual orientation (LGBTQI+)             sustainable     and      regenerative
               diversity/inclusion                      practices, or by providing stable
           •   Disability diversity/inclusion           contracts
           •   Age diversity/inclusion              •   Helping vulnerable populations (e.g.
           •   Other forms of diversity/inclusion       women from underprivileged areas)
                                                        become              micro-distribution
                                                        entrepreneurs
                                                    •   Helping waste pickers to improve
                                                        their working conditions, wages,
                                                        social protection
                                                    •   Supporting      and      empowering
                                                        caregivers,     through       training,
                                                        financial support, etc.
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