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Sustainability Report2017

Almarai Sustainability Report 2017

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At Almarai,ensuring ethical andsustainable sourcing

means promotingresponsible practices

across our value chain.

Ensure ethical and sustainable

sourcing

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Almarai is the Middle East’s leading food and beverage manufacturer and distributor and is the world’s largest vertically integrated dairy company. Almarai believes that, in order to continue on our path as pioneers in sustainability, we must work with our suppliers to ensure that they act ethically and responsibly.

Through our direct control of our supply chain, we have the unique opportunity to ensure the quality and safety of our products to our consumers. We source a wide range of goods and services, including raw materials and ingredients, finished products, equipment and ingredients. These come from numerous internal and external local, regional and international suppliers. At Almarai, we are working to improve our procurement processes to ensure that our product ingredients and other inputs are sourced according to the highest ethical, environmental and social standards.

We are committed to safeguarding the health and well-being of all animals within our care, as this impacts not only the animal’s quality of life, but also the quality and safety of the food we produce. We pledge to ensure that the animals we raise to produce our products are properly and humanely treated throughout their lifecycle.

Sustainable procurementEmploying sustainable procurement practices is not only the right thing to do, but it also stimulates sustainability performance improvements for the entire company and supply chain. Responsible sourcing is key to ensuring a sustainable future for our business, and we believe that we have a duty to our consumers to ensure that the materials and services we use are ethically and responsibly sourced.

Consumers and stakeholders have increasing concerns about their personal health, not only with regards to their consumption of products, but also to the impact that the products may have on the factors of production, including workers and resources.

As a market leader in the food and beverage industry in the region, we are committed to ensuring our suppliers behave in a socially, environmentally and ethically responsible manner. We have an Employee and a Supplier Code of Conduct.

Suppliers play an integral role in our ability to deliver on our commitments to sustainability. At Almarai, we believe that to become a more sustainable company, we must work with our suppliers to ensure they act ethically and responsibly. In light of this,

Material issues Ambitions

Sustainable procurement To ensure our supply chain is free from unethical, illegal or irresponsible practices that harm people and the environment.

Sustainable land use and biodiversity protection To protect the natural environment in areas where we operate.

Animal welfare To set and maintain a high welfare standard for animals in our care.

Almarai is working actively with our suppliers to ensure they behave ethical and responsibly.

Ensure ethical and sustainable sourcing

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we are investigating appropriate parameters for a supplier screening and approval process that takes into account sustainability performance, code of conduct, prohibition of child labor and forced labor, and working conditions.

In 2018, we will develop and publish a Sustainable Procurement Policy, outlining our comprehensive approach to ensure our supply chain is free from unethical, irresponsible and harmful activities that negatively impact people and the environment.

Through our own initiatives and ambitions we seek to contribute to the NTP 2020 initiatives and targets:

• SAR 6.0 million government budget for identification of possible opportunities for the development of key sectors and value chains

• SAR 49.9 million government budget to launch an initiative to improve the Kingdom’s ranking with regards to “Made in Saudi Arabia” index

• SAR 250.0 million government budget to deploy initiatives led by the government to support the development of small and medium enterprises

54

52

50

48

46

44

42

40

Spending on local suppliers of goods and services Locally based suppliers engaged

52

50

5150

2014 2015 2016 2017

46

44

Local procurement (%)

50

51

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Sustainable land use and biodiversity protectionWe strive to ensure that our product ingredients and other inputs are sourced to the highest ethical, environmental and social standards. This includes reducing our impact on land resources and

biodiversity from our farming and manufacturing operations. As of 2017, our farms in KSA covered 25,300 hectares.

Almarai’s manufacturing plants are mostly located in rural desert areas.

Animal welfareWe are committed to safeguarding the health and well-being of all animals within our care, as this impacts not only the animal’s quality of life, but also the quality and safety of the food we produce. We pledge to ensure that the animals we raise to produce our products are properly and humanely treated throughout their lifecycle. We follow the World Organization for Animal Health (OIE) guiding principles on animal welfare, as well as the universally recognized ‘Five Freedoms’ for animals under human control.

Almarai’s farms look after our livestock to an exceptionally high standard, ensuring maximum yields and quality. Our Holstein dairy herds have 24-hour support from professional veterinary teams, year-round shaded housing, and air cooling and showering. Cows are fed a highly nutritious diet that is specifically formulated for their needs.

We go to great lengths to ensure the right ration of feed using high quality ingredients sourced from well managed farms. Poultry flocks receive best-in-class care, from highly nutritious feed to best-quality water in a climate-controlled cage-free environment.

A preventative approach is taken to maintain the health of our dairy herds and poultry flocks and to minimize the use of medical treatments. When treatment is required, animals are only returned to production after they are fully healthy and they have no traces of the treatment remaining. Our ongoing monitoring program ensures that all products leaving our farms meet the highest quality standards.

In 2018, we will develop and publish an Animal Welfare Policy, outlining our comprehensive approach to safeguarding the health and well-being of the animals under our care.

Our performance summary 2014 2015 2016 2017

Number of incidents of non-compliance with environmental laws and regulations 0 0 0 0

Through our own initiatives and ambitions we seek to contribute to NTP 2020 initiatives and targets:

• Strategic objective to safeguard the environment and natural resources, through improved land utilization and management in the agricultural sector and preservation of vegetation and forests

• SAR 230.4 million government budget for the sustainable development of pastures, forests and fighting desertification

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Our performance summary 2014 2015 2016 2017

Number of incidents of non-compliance with laws and regulations, and adherence with voluntary standards related to transportation, handling, and slaughter practices for live terrestrial and aquatic animals

0 0 0 0

Animal Housing

Percentage of cows in enclosed housing with resting areas 100 100 100 100

Percentage of chickens in enclosed cage-free housing 100 100 100 100

Through our own initiatives and ambitions we seek to contribute to NTP 2020 initiatives and targets:

• Increase the percentage of livestock and fish resources covered by veterinary services from 20% to 70%

• Increase the percentage of farms covered with pest prevention and control from 25% to 50%

• Control all 21 top veterinary diseases in the Kingdom• Increase the percentage of self-sufficiency in broiler production

from 42% to 60%

150,000

100,000

02014 2015 2016 2017

Number of chickens processed (000's)

72,129 90,785 107,377123,889

200,000

150,000

100,000

02014 2015 2016 2017

Number of cows

151,616 164,621 180,868 187,677

Almarai CompanyExit 7, North Ring Road

Al Izdihar DistrictPO Box 8524

Riyadh, 11492Saudi Arabia

E-mail: sustainability@almarai.comWebsite: www.almarai.com/sustainability