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Traditional Medicinals Inc.

FY2019 Benefit Corporation Report

We connect people to the power of plants

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STATEMENT OF THE BOARD OF DIRECTORS OF TRADITIONAL MEDICINALS, INC.,

a California benefit corporation

REGARDING THE FISCAL YEAR 2019 ANNUAL BENEFIT REPORT

Traditional Medicinals (TM) is committed to sourcing and producing the highest quality herbal

medicine, social justice, environmental activism, and prioritizing sustainability for all stakeholders. The Board of

Directors has reviewed TM’s 2019 annual benefit report. A few examples of TM’s benefit impacts in fiscal year

2019 include:

Sustainable Sourcing. TM bought over 2.6 million pounds of herbs (up 19% from 2018), 99.7% of it certified

organic, including over 35,000 organic pounds from Urban Moonshine ingredients. Fairtrade- or FairWild-

certified herb purchases totaled over 751,000 pounds, led by 178,000 pounds of FairWild licorice root from

Georgia and Kazakhstan.

TM’s brand refresh in 2018-19 coincided with supply issues in some Fairtrade herbs like Chamomile,

Ginger, and Spearmint, which informed a decision to de-couple Fairtrade herb purchases from product

labeling, affecting 11 products. Each pound of Fair-certified raw material purchase contributes a Fair premium

to the producer group regardless of product status, so while allowing for some non-Fair supply in those herbs

to meet quality demand, our continued growth in Fair herb volume represented a projected $237,000 in Fair

premiums to Fair-certified farms and collection groups around the world, up 8% from 2018.

TM Foundation (TMF) continued to lead ethical engagement with producer communities of all types in

our supply chain. The Revive! partnership with WomenServe in Indian senna farming communities has built

554 rainwater catchment tanks for families in the Thar Desert and enrolled 2,465 students in program schools

since 2009. TMF’s project with teabag filter supplier Glatfelter resulted in 920 people with improved access to

clean drinking water, and 56 families in Paraguay harvested almost 450 liters of honey from a beehive

livelihood and biodiversity project with Martin Bauer lemon verbena farming communities.

Renewable Energy TM uses 100% Local, Renewable Electricity for our Sebastopol factory and our Rohnert

Park HQ.

TM bought 750 tons of carbon offsets in 2019 to account for our direct (and some of our indirect)

greenhouse gas emission responsibility. We again bought carbon credits resulting from the strong Biodynamic

composting practices of Ambootia Estates, our Organic, Fair Trade green tea supplier in India, called ‘insetting’

because it invests back in our own supply chain ecosystems. TM also bought offsets from fellow B Corp

NativeEnergy to support a new prairie grasslands conservation project in southeastern Colorado.

Materials Management. TM got a step closer to Zero Waste Certification, managing 86% diversion from landfill

significantly by improving our measurement of packaging reduction, material reuse, and solutions for verified

destruction of obsolete packaging.

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Community TM provided 100% of full-time employees a verifiable Individual Living Wage for the fourth year in

a row. TM offers parental leave support up to 12 weeks and a continuing education subsidy. Research &

Development and Sustainability departments expanded Plant and Planet Education programs for employees.

TM uses the B Corp ‘B Impact Assessment’ (BIA) for certification and analysis, with a 2018 audited score of

125.7, which in 2019 earned Best For The World recognition by B Lab in the Overall category, a reflection of

top 10 % relative score across the Governance, Workers, Community, Environment, and Customers

categories.

After careful review and analysis, it is the Board’s opinion that the Benefit Corporation pursued its general

purpose during the period covered by the report.

In accordance with California Corporations Code §14621, the undersigned directors of the Benefit Corporation

have executed this statement as of the date first set forth above.

STATEMENT TO BE REVIEWED AND RATIFIED MAY 2020

Executive Leadership Team (ELT) FY2019

Blair Kellison, CEO Delia Diaz, Chief Financial Officer

Gary Gatton, VP Sales Vicki Isip

Chief Marketing Officer

Katie Huggins VP Technical Services

Kevin Haslebacher, Chief Operations Officer

Gary Cunningham, Chief People Officer (departed in FY19)

Manufacturing Facility Headquarters Storage Warehouse

4515 Ross Road, Sebastopol, California 95472

1400 Valley House Dr #120 Rohnert Park, CA 94928

975 Corporate Center Parkway, Suite 140 B, Santa Rosa,

California 95407

Traditional Medicinals Website Facebook

Instagram

Pinterest

Twitter

USA traditionalmedicinals.com

CANADA ca.traditionalmedicinals.com TraditionalMedicinals TradMedicinals tradmedtea tradmedicinals

Board of Directors FY2019

Drake Sadler, Chairman Blair Kellison, Chief Executive Officer

Tripp Baird Melanie Dulbecco

John Elstrott Mark Retzloff

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CHAPTER 1 – TRADITIONAL MEDICINALS’ SOCIAL BUSINESS MODEL

GOVERNANCE:

Traditional Medicinals’ majority owner is the Sadler Trust. Traditional Medicinals, previously a C Corporation, became a California Benefit Corporation in 2014 with transparency obligations including to post its Benefit Reports online. Drake Sadler (co-founder) and Blair Kellison (CEO) are board members along with four independent board members in FY2019, meeting quarterly. The Company undergoes an annual independent audit and all employees receive quarterly reports of pertinent financial data from the Executive Leadership Team (ELT), with feedback requested. As a Certified B Corporation since 2010, TM is audited triennially for compliance with rigorous standards of social and environmental performance, accountability, and transparency. A publicly posted impact report (scorecard) is accessible to all stakeholders.

B IMPACT ASSESSMENT & BENEFIT CORPORATION REPORTING

As a certified B Corp, TM is evaluated every three years by B Lab, and self-assess annually as a California Benefit Corporation and SFTA member. Our 2018 B Impact Assessment (BIA) of FY2017 metrics was verified in 2018 for a Verified score of 125.7, up from our previous recertification score of 115. Our self-assessed 2019 BIA score was 116.8, and we apply for recertification based on our FY2020 reporting after completing another self-assessment this year. TM’s B Corp page: https://www.bcorporation.net/community/traditional-medicinals Memberships and Sponsorships: TM is a corporate member of these organizations:

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American Botanical Council (ABC)

California Certified Organic Farmers (CCOF)

American Herbal Products Association (AHPA)

Friend of the Fair Wild Foundation (FWF)

American Herbal Pharmacopoeia (AHP)

Green America®

Green Business Network™

American Herbalists Guild (AHG)

Organic Trade Association (OTA)

Sustainable Food Trade Association (SFTA)

Climate Collaborative

Primary Regions for Sales: Our organic herbal products are sold mainly the USA, Canada, and Mexico.

Reporting Process: Our fiscal year (FY) runs October-September, so all yearly information is fiscal unless otherwise noted. TM publishes highlights from Sustainability reports publicly. All shareholders receive a copy of the California Benefit Corporation report, including our Annual Sustainability Report and this Benefit Appendix. Policy Statements: To streamline reporting, policy statements have been shortened. Our more complete list of policy statements remains in our 2015 report’s appendix: http://www.traditionalmedicinals.com/wp-content/uploads/2016/10/FY2015-Report-Appendix-FINAL.pdf Benefit Director Contact: Ben Couch, Sustainability Manager bcouch@tradmed.com

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CHAPTER 2 - SUSTAINABLE SOURCING

TM is committed to sourcing botanical ingredients that are produced according to independently certifiable standards with ecological, economic, and social sustainability criteria, for both agriculture and wild collection.

2.1 Sustainable-Certified Botanical Ingredients: Organic + Fair

TM defines ‘sustainable’ ingredients as those certified against both Organic and Fair standards.

Organic Agriculture practices are some of the most important things we can do for our planet right now. What is needed is regeneration of our soils and ecosystems, and Organic Certification is the standard we use whenever possible. Adapted from the Organic Farming Research Foundation,

1. Healthy, Carbon-Rich Soils: Organic systems build Soil Organic Matter (SOM), building soil health

a. Carbon Sequestration: organic farms have a higher potential for long-term carbon storage

2. Biodiversity and Ecosystem Preservation: Organic systems create diversified landscapes, supporting pollinator

health and providing predators for potential crop pests.

a. Reducing Harm: Organic systems rely on ecological pest management,

eliminating harmful synthetic chemicals from sourcing ecosystems.

b. Clean Water: Crop rotations and mulching increase soil’s capacity to

store moisture.

3. Organic is Non-GMO: No GMO seeds, feed, or ingredients allowed

4. Farmworker Health: Organic systems protect farmworkers from exposure to

pesticides

Fair labor and trade practice is an essential priority for fulfillment of our social justice mission. Because of our quality requirements, we rely on supplier-processor relationships to source our herbs internationally, so we truly value our farmer and collector organizations who choose to implement Fairtrade and FairWild standards and the suppliers that support those fair trade relationships. We believe Fair Trade has several key components, among others:

1. Pricing:

a. Collaborative Cost Calculations,

b. Minimum Price protections, and

c. Long-Term Planning

2. Fair Premium Fund for Workers

a. Fair Premium Fund Contributions to Producers

b. Democratic Decisionmaking on Premium Fund

3. Fair Labor Conditions

a. Nondiscrimination & Social Equality

b. Maternity Leave

c. Overtime

d. International Labor Organization (ILO) supported protections

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2.2: Ethical Trade: Verifying and Building Sustainability in Supply Chains

Traditional Medicinals Foundation develops and supports community engagement projects and other programs, including community development and water treatment programs with the Rainforest Alliance (RA)-certified cooperatives who grow abacá, a fibrous cousin of the banana plant which, along with Forest Stewardship Council (FSC) certified wood pulp, comprise our teabag filter paper. Some sources are part of ethical trade programs that include both social investments and a defined price premium, which we include in our developing Ethical Trade model, including the organic Schisandra from a World Wildlife Fund for Nature (WWF) project in China. The organic Senna Leaf in our Smooth Move laxative products from Traditional Medicinals Foundation and WomenServe partner project communities had severe drought and frost issues over multiple years, in addition to evolving cultivation and

supply management during those years, such that while the social development and water, health, and food security work continue in our longtime source communities, the specific premium program is no longer in place. We continue to support organic farming to meet our quality requirements and continued partnership under WomenServe’s leadership. Our cultivated Fairtrade herbs such as Ginger or Chamomile come from Fairtrade International (FLO) certified producers. Many of our ingredients are wild-collected and certified under the FairWild standard, such as Licorice or Raspberry Leaf.

Sustainable (Org + Fair) & Ethical Botanical Ingredient Purchases

2015 2016 2017 2018 2019 % of Total

Change Pounds

Total Botanicals Purchased 1,743,287 1,746,569 2,019,404 2,251,736 2,667,283 100% 18%

Organic Certification (only) 1,075,131 1,054,418 1,267,779 1,602,418 1,903,768 71% 19%

Fairtrade + Organic 216,714 249,819 307,566 331,789 418,065 15.7% 26%

FairWild + Organic 244,773 249,194 240,068 285,095 333,430 12.5% 17%

TMF Revive! Organic Senna 165,860 138,730 196,055 8,082 N/A 0% -N/A

Hunza Roshni Organic Licorice 23,568 38,580 - - - 0% 0

Panda-Friendly Organic Schisandra ? 3,748 7,937 4,850 3,086 0.1% -36%

Organic Botanicals Purchased 1,726,047 1,730,741 2,012,184 2,232,234 2,658,348 99.7% 19%

Conventional - Not Organic 17,240 18,828 7,220 19,502 8,148 0.3% -58%

ORGANIC + FAIR (Sustainable Sourcing)

461,488 499,013 547,634 616,884 751,494 28.2% 22%

ORGANIC + TM ETHICAL TRADE 189,428 181,058 203,992 12,932 3,086 0.1% -76%

TOTAL ORGANIC + FAIR OR ETHICAL 650,916 680,071 751,625 629,816 754,580 28.3% 20%

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2.2 Organic + Fair Products

Case-Equivalent (CE) Sales 2015 2016 2017 2018 2019 %

Change

Total CE Sold 3,894,412 4,390,443 4,940,320 5,257,075 5,905,177 12.3%

Organic CE Sold (>70% organic)

3,862,867 4,233,667 4,910,454 5,254,798 5,930,008 12.9%

Organic Case Equivalent % 99.2% 99.3% 99.4% 99.5% 99.6% 0.1%

2.3 Wellness Products: Fair, Organic, and other Certifications

Total Herbal Products with Fair + Organic Labeling (USA)

2012 2013 2014 2015 2016 2017 2018 2019 %

Change

Total Herbal Products 52 53 61 59 61 64 65 87 34%

with Fairtrade Labeling 18 21 24 22 24 24 21 9 -57%

with FairWild Labeling 9 10 10 10 10 10 9 7 -22%

Products with Fair + Organic Labeling

27 28 30 28 30 30 26 16 -38%

% of Products with Fair + Organic Labeling

52% 53% 49 % 48% 49% 47% 40% 18% -54%

As noted, volume and quality requirements meant for us to keep customers in stock during tea season of some key products like Chamomile with Lavender, Nighty Night, and Turmeric with Meadowsweet & Ginger, we had to accept some new non-fair-certified supply for those products. Fair labeling requires 100% of a Fair-certified ingredient on a labeled product to contain 100% Fair materials, and with the breadth of products and supply issues, we didn’t feel comfortable managing a broad exemption, so we temporarily removed the Fair Trade label from 11 products, two of which retained FairWild labeling.

17,240 18,828 7,220 19,502 8,148

1,075,131 1,054,418 1,267,779 1,602,418

1,903,768 216,714 249,819

307,566

331,789

418,065

244,773 249,194

240,068

285,095

333,430

189,428 181,058 203,992

12,932

3,086

FY2015 FY2016 FY2017 FY2018 FY2019

Organic + Ethical SourcingFair-Certified and TMF Ethical Trade

Conventional - Not Organic Organic Botanicals Purchased Fairtrade + Organic

FairWild + Organic ORGANIC + TM ETHICAL TRADE

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FT-Delabeled Products

Chamomile with Lavender

Nighty Night

Turmeric w/ Meadowsweet & Ginger

Chamomile

Ginger

Spearmint

Ginger with Chamomile

Pregnancy Tea (FW)

Cup of Calm

Healthy Cycle (FW)

Tulsi with Ginger

2.4 Product Labeling Table

Product Labeling Statistics (USA, Fiscal Year) 2013 2014 2015 2016 2017 2018 2019 % of Total

Total Number of Herbal Products in U.S. Market

53 61 59 61 64 65 87 100%

# Products labeled > 20% Fair Trade Ingredients 21 24 22 24 24 21 9 10%

Products labeled > 20% FairWild Ingredients 10 10 10 10 10 9 7 8% Non-GMO Project Verification 52 60 58 60 63 63 70 80%

>99% Organic 44 52 48 52 55 56 77 74% >95% Organic 47 54 52 54 57 60 81 78%

> 70% Organic Ingredients 52 59 57 59 62 63 85 82% < 70% Organic Ingredients 1 2 2 2 2 2 2 1%

# w/ TM Ethical Trade Ingredients (REVIVE! Senna or Panda-Friendly Schisandra)

6 6 6 6 6 6 1

1%

Sustainable Certification Standards accepted by TM for Sustainable Ingredient Supply Chain Strategy

Fairtrade International (FLO) Fairtrade Standards (Hired Labour & Small Producer, Herbs, Herbal Teas & Spices) FairWild Foundation (FWF) FairWild Standard (FWS) EcoCert Group Fair For Life Standard Fair Trade USA (FTUSA) Agricultural Production Standard Instituto Biodinâmico de Desenvolvimento Rural (IBD) EcoSocial Standard Control Union (CU) Fair Choice Social and Fair Trade Standard Fair Trade Sustainability Alliance (FairTSA) Consolidated standards

0

20

40

60

80

100

2012 2013 2014 2015 2016 2017 2018 2019 (TM+ UM)

Fair Product Labeling - # US Products

with Fairtrade Labeling with FairWild Labeling

Products with Fair + Organic Labeling Total Herbal Products

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CHAPTER 3 - SUSTAINABLE OPERATIONS

Traditional Medicinals’ Sebastopol factory has certified by the California Green Business Program, a state initiative helping businesses operate in an environmentally friendly manner, since 2013 and was re-certified in 2017. To become certified, a business must have written policies and implemented practices that focus on environmental efforts such as waste reduction, water conservation, energy conservation, and pollution prevention.

Our factory uses electricity from our own solar panels and purchased from CalPine’s Big Geysers local geothermal facility, and other local solar facilities, through Sonoma Clean Power (SCP), reported here along with natural gas purchased from PG&E, which we offset with certified Carbon Offsets from Soil & More International (SMI), derived from verified practices at Ambootia Estates, our green tea leaf producer, and from NativeEnergy, a fellow B Corp (and Burlington, VT neighbor to our Urban Moonshine team), supporting biodiversity and grasslands conservation in 6,900 acres of southern Colorado prairie. Photo credit NativeEnergy.

3.1 Energy Use: Local Renewable Electricity and Natural Gas

Our 1,450 solar panels on the Sebastopol factory roof are the first part of our renewable power. While the world may be warming, we’re not seeing increases in electrical yield. We buy Sonoma Clean Power’s 100% local and renewable EverGreen electricity, for the rest of our demand factory and warehouse demand. Individual metering for TM’s Rohnert Park HQ isn’t available, so we use standard office space estimates for our usage there, from SOMO Village’s 3.5-megawatt solar array on the roof. Another tenant uses a non-renewable mix, but having confirmed we are on the solar array, we’ve adjusted our renewable power reporting as below.

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Renewable Energy (Fiscal Year) 2014 2015 2016 2017 2018 2019

kWh produced from own solar panels 460,883 413,397 443,668 422,896 407,352 397,000

% total electricity from TM solar panels 49% 42% 42% 24% 21% 32%

kWh of RECs 525,000 190,000 N/A 83,930

116,732 100% Renewable % of total electricity offset by RECs 55.40% 19.40% 10.30%

100% renewable kWh purchased 0 375,415 625,017 629,836 938,201 917,951

Total kWh of electricity used (all facilities) 947,600 977,139

1,068,684

1,181,065

1,237,754

1,226,018

Renewable energy, generated & purchased (kWh)

985,883 978,812 1,097,135

Therms of natural gas used (all facilities, Offset with Carbon Credits)

11,531 8,553 8,852 10,950 12,960 8,908

Total Energy Renewable & Non, Millions of BTUs

4,386 4,190 4,531 5,125 5,168 5,342

Renewable energy, generated + purchased (MM BTUs)

1,573 2,692 3,647 3,744 4,353 5,254

Total percentage of renewable energy 35.90% 64.20% 80.50% 70% 68.50% 98.3%

0

500000

1000000

1500000

2000000

2012 2013 2014 2015 2016 2017 2018 2019

TM 100% Renewable PowerOwn Solar, Local Renewable, and Renewable

Electricity Certificates

TM Solar kWh 100% renewable kWh purchased RECs

0

200000

400000

600000

800000

1000000

1200000

1400000

1600000

2012 2013 2014 2015 2016 2017 2018 2019

TM Renewable Power (kWh)Factory Solar + 100% Local Renewable

Purchase

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3.2 Packaging and Marketing Materials Material usage outgrew sales for the second year in a row, after three years of relatively flat consumption. Our 2018-19 rebrand efforts may be the biggest drivers of this, scrapping some old packaging and building up new supply with customers and distribution centers. Numbers below reflect US tea production (except the two Probiotic line teas), all at our Sebastopol factory, and packaging for Urban Moonshine products and TM Smooth Move Capsules. Some numbers, italicized, are projected from relevant volume figures for lack of exact annual measurements.

Comments

• Zero Waste assessments showed 460,000 pounds of reduced material usage from a previously implemented lighter case shipping box. Without that reduction, our usage would be more than 10% higher, over 4.5 million pounds.

• Boxes of tea are light products – it’s just dried herbs in a natural fiber bag wrapped in thin envelopes, designed to protect the medicinal grade quality inside. Our Urban Moonshine (UM) bitters and tinctures are on the other end of the spectrum, with a liquid dosing form that also needs protection, this time in glass or plastic. We’ll let you know what we learn about the relative carbon footprints of our tea vs various food products as we continue to assess our operations.

• As we upgrade our tea machines at the Sebastopol factory, we use more machines that simply use knotted cotton string to attach our paper tags instead of aluminum staples on the bag and tag. Our Operations team works smart to get the most productivity and life out of our more mature machines, however, so customers will still see staple bags for a while. They should have no issues in industrial compost.

Sebastopol Factory Material Usage, FY pounds

2015 2016 2017 2018 2019 %

change

Product Cartons 1,121,202 1,007,568 1,039,679 1,064,543 1,375,282 29%

Teabag Overwraps 781,722 719,230 495,119 917,282 1,036,266 13%

Teabag Paper Tags 96,534 91,202 143,480 117,587 163,108 39%

Teabag Filter Paper 125,073 119,452 134,145 169,272 193,986 15%

Teabag Cotton string 22,302 30,672 31,120 22,356 25,709 15%

Aluminum staple wire 8,672 9,164 6,040 5,940 3,000 -49%

Corrugated Shipping Boxes 621,066 592,486 923,326 1,030,080 1,055,975 3%

Shipping Labels 28,812 32,359 36,565 39,600 45,381 15%

Store Display Cardboard 55,170 87,256 63,173 43,958 86,809 97%

Smooth Move Capsule Bottles

2,479 2,630 2,923 3,249 12,220 376%

Urban Moonshine (UM) Glass Bottles

N/A

61,142

N/A UM Bottle Tops - Plastic 4,810

UM Bottle Tops - Mixed 2,226

UM Bottle Labels 1,487

Product Packaging Materials (Lbs)

2,863,191 2,692,019 2,885,166 3,413,867 4,067,402 19%

Total Shipping Materials 24,350 27,347 31,333 32,072 36,748 15%

Total Marketing Materials 10,369 8,748 10,023 10,259 11,755

Material Usage by Fiscal Year 2015 2016 2017 2018 2019 %

change

Packaging and Marketing Materials 2,897,801 2,728,114 2,926,522 3,456,198 4,115,948 19.1%

Pounds of Product Sold 4,210,059 4,728,227 4,728,227 5,878,256 6,735,322 14.6%

Total Product Sold (Case Equivalent) 3,894,412 4,390,443 4,390,443 5,274,075 6,043,050

Material Usage Lbs. Per lb. of Product Sold

0.688 0.577 0.619 0.588 0.611 3.9%

Material Lbs Per Case Equivalent 0.744 0.621 0.667 0.655 0.681

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Sustainable Operations Policies & Practices:

TRUE Zero Waste Certification Goal

CALIFORNIA GREEN BUSINESS INFO

Spare The Air Employer Program Transportation Benefits Program:

$5/day for carpoolers and public transit-ers

Energy Efficiency Policies – Energy Star appliances, Sleep Timers

Company Bicycles & Racks, maps & transit info

Dedicated carpool and long-time employee parking spaces Electric Vehicle Charging

at TM Factory and Headquarters

3.3 Materials Management Our sources of waste include dry herbal materials, scrapped tea bags, folding cartons, corrugated boxes and other packaging materials. Cardboard and flexible plastic, including various bags for herbal shipments and blending, tea cartons, and corrugated boxes, are recycled through a local company. We track our waste throughout the entire production process. In 2018 we implemented “Total Resource Use & Efficiency (TRUE) Advisor” training and began preparations to apply for TRUE Zero Waste Certification. In 2019 we advanced our Materials Reduction analysis, including the decrease in cardboard usage from our conversion to a thinner case shipping box in 2014, increasing our baseline performance closer to our 90% diversion goal. Clarification and Comments:

• The 230 tons of Reduction measurement is updated from our main 2019 Sustainability Report, which omitted some component types and volumes. The 18 ton Reduction increase allocates to our Total Materials as well as the Diversion calculation, so the Diversion impact was only 0.3%, from 86.1% to 86.4%.

• 2018 data show we actually fell in Diversion from 2018-2019. This is in large part from two impacts: o 2018-2019 rebranding created at least 13 tons of measurable landfill as we destroyed some finished

goods and packaging with the old logo, some of which could otherwise have been recycled as usual. o At the end of 2018 we removed the compost pile at our Sebastopol factory, which not only created a huge

compost haul-off that increased our measurements, but highlighted a possible over-estimate of our compost pile size and/or weight. Our compost now goes out every other week with Recology, our recycling and landfill service provider, in smaller (and dryer) amounts that we index against EPA volumetric weights for leaves/trimmings and food waste.

80.42%84.76% 87.35% 86.43%

50%55%60%65%70%75%80%85%90%95%100%

-

100

200

300

400

500

600

700

800

2016 2017 2018 2019

Sebastopol Factory Materials Management

Reduction Reuse

Recycling Compost

Landfill Hazardous Waste*

Waste Diversion % 90% Diversion Goal for Zero Waste

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Factory Materials (Tons) 2016 2017 2018 2019 % Change

Reduction Un-available 212 180 230 28%

Reuse 35 39 133 134 1%

Recycling 180 194 185 208 12%

Compost 56 72 89 27 -70%

Landfill 66 93 85 94 11%

Hazardous Waste* 0.1 0.4 0.2 0.2 -11%

Total Materials 337 610 672 693 3%

Total Material Diversion from Landfill 271 517 587 599 2%

Landfill 19.6% 15.2% 12.6% 13.9% 10%

Waste Diversion % 80.42% 84.76% 87.35% 86.43% -1%

Waste per sq. ft.; 72,949 sq. ft. 0.0046 0.0084 0.0092 0.0095 3.12%

3.4 Climate Change and Emissions In our fifth decade as a business, we are no longer just a small family herbal tea company in west Sonoma County. With sales and sourcing travel all around North America and site visits to manage quality and relationships in 35 different countries, we cover a lot of ground.

• As a California Green Business, we offset our Scope 1 & 2 Emissions; from energy consumed onsite and offsite to power our company, such as Solar Power, Geothermal Power, Natural Gas, and Company Car & Truck fuel.

• 80% of our emissions are from Scope 3, the emissions burden of the materials, energy, and process for our business activities outside our own fuel & energy use.

• Our three largest corporate emissions sources (excluding materials supply) are: 1. Scope 3: Business Travel (43% or 294,629 kg CO2e) 2. Scope 3: Commuting (33% or 225,660 kg CO2e) 3. Scope 2: Natural Gas & 100% Renewable Electricity (11% or 134,239 kg CO2e)

TM has worked with Soil & More International (SMI) to measure ingredient carbon footprints from origin through TM production, including a corporate carbon footprint.

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3.5 Annual Water Use We use well water at our main location in Sebastopol and municipal water at our Santa Rosa warehouse and Rohnert Park HQ. Our factory is a dry process facility in both production and cleaning procedures. We track well water usage at our primary Sebastopol facility but not at our leased Rohnert Park or Santa Rosa warehouse locations. The table below shows the total amount of well water used at our Sebastopol facility during 2019. We’re glad to see water use leveling off.

Water Consumption (Sebastopol) 2015 2016 2017 2018 2019 %

Change Total well water consumed (gallons) 240,231 222,413 164,343 210,265 176,421

-16% Gal. per sq. ft. (72,949) 3.293 3.05 2.25 2.88 2.42

Gal. per Sebastopol employee* 1,922 1,648 1217 1,558 1,306

Gal. per employee per day (249) 7.7 6.6 4.9 6.3 5.2

3.6 Distribution & Sourcing:

Product Shipment 2014 2015 2016-2019

% shipped by truck 99% 99% 99%

% intermodal - rail & truck 0% 64% 61%

% by air (projected) 1% 1% 1%

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CHAPTER 4 – COMMUNITY: LABOR, GOVERNANCE, LOCAL STAKEHOLDERS

4.1 Transparency & Stakeholder Community Engagement TM has always worked to promote transparency throughout its organization and network of producers and suppliers. The Company is always focused on its stakeholders, which range from herb collectors around the world, to processors that cut the herbs to TM’s office and manufacturing personnel, to its distributors and retailers to the shoppers who purchase its herbal tea in stores.

Traditional Medicinals, Inc. is committed to investing in the communities we operate in, from the villages where our herbs are harvested to the cities where our employees live and work. We donate a percentage of operating income annually to approved non-profit registered 501(c)3 organizations or to equivalent registered organizations outside of the United States, as well as to some non-registered organizations.

4.2 TM Employee Metrics TM Human Resources department continues to assess internal and external KPIs in support of TM’s Mission and Core Values and is re-evaluating data and KPIs. We’ve temporarily removed the following KPIs for reporting and will update our HR KPIs in 2020.

Employee Metrics, Fiscal Year 2013 2014 2015 2016 2017 2018 2019

Temporary Employees 17% 10% 20% 13% 13% 13% 8%

Part-Time Employees 3% 2% 3% 4% 2% 1% 2%

Female Managers 36% 42% 42% 36% 44% 50% 49%

Internal Promotion Rate 40% 38% 37% 43% 33% NA NA

FT Employees Making Living Wage 100% 98% 99% 100%

FT Employee Health Insurance Enrollment* 100% 100% 91% 96% 100%

Employee Turnover Rate 10% 9% 12% 11% 14% 18% 22%

OSHA Recordable Incident Rate (Coffee Tea IR) NA 2.7 3.3 (3.4) 4.2 (2.8)

*Full-time, eligible employees; some elect coverage through a spouse. POLICIES & GUIDELINES Equal Opportunity Employer: The company does not discriminate on the basis of race, color, religion, creed, sex, national origin, age, ancestry, medical condition, physical or mental disability, genetic characteristics or information, marital status,

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gender, sexual orientation, gender identity or gender expression, pregnancy, childbirth, breastfeeding or related medical conditions, military or veteran status, or any other status protected under federal, state, or local law. 4.3 Social Business Investment & Charitable Contributions

Type of Social Business contribution 2014 2015 2016 2017 2018 2019

Contributions to 501(c)3 organizations and some international groups like FairWild Foundation,

some non-registered $266,097 $215,364 $265,178 $329,100 $117,141 $762,250

Memberships in 501(c)3 organizations like American Botanical Council

$79,537 $67,250 $50,728 $51,480 $31,410 $14,698

Total Social Contributions $345,634 $282,614 $315,905 $380,580 $160,152 $776,948

Traditional Medicinals’ $1.76 MM FY19 Social Business Investment spending was up 70% from FY18’s $1.04 MM total. Clarification and comment:

- We reorganized and increased our funding of Traditional Medicinals Foundation in our strategic partnership; some previous funding came from the Sadler Trust, majority owner of the company.

- Continued support of WomenServe projects supporting senna farming communities in Rajasthan, India The remainder represents investments such as:

Traditional Medicinals Sustainability Department Budget Carbon Footprint Reporting and Consulting and other Professional Services Inspection, Certification and Licensing Fees of third-party such as B Corp, Fair Trade, FairWild, Kosher, Organic; Purchase of Carbon Offsets and Renewable Energy Certificates; Fairtrade social premium fund amounts and budgeted fairtrade price markups for FY2019 purchases of Fairtrade

certified and FairWild certified ingredients. Fair trade is transparent. We know in total the pounds and dollars spent with fair producer groups through our supplier-processors, who manage multiple fair producers for many of our fair trade ingredients such as ginger, chamomile, or licorice. We don’t always know the exact pounds per year by producer group, whether a Sri Lankan or Indian fairtrade spice cooperative, or a Bosnian or Hungarian collector brigade, through various harvests and subsequent batches during a supply year. We are working with suppliers to improve this traceability. In some cases the price mark ups and social premium fund amounts are not broken out of invoiced price. Many producers with multiple certifications (e.g. fair, kosher, quality system, organic) will calculate a price mark-up that takes into consideration the costs of implementing all standards that have annual inspection and certification fees.

THANKS FOR BEING A STAKEHOLDER TO OUR MISSION TO CONNECT PEOPLE TO THE POWER OF PLANTS! BE WELL

$- $200,000 $400,000 $600,000 $800,000

$1,000,000 $1,200,000 $1,400,000 $1,600,000 $1,800,000

2014 2015 2016 2017 2018 2019

Sustainability $222,876 $241,696 $85,791 $84,460 $77,197 92,092

Voluntary Standards $88,146 $98,243 $106,189 $123,445 $130,237 $180,688

Global Community Investment $163,204 $245,113 $288,057 $282,364 $193,627 185,829

Supply Chain Premiums $178,807 $160,000 $179,640 $200,000 $220,000 237,600

Supply Chain Investment $546,989 $406,364 $783,676 $554,027 $420,008 1,066,017

TM Social Business Investment