C O R P O R A T E R E S P O N S I B I L I T Y R E P O R T

• To provide individuals an opportunity to earnin support of their well-being and happiness.

• To serve families throughout the worldwith products of the highest qualitybacked by a guarantee of satisfaction.

• To render a service to customers that isoutstanding in its helpfulness and courtesy.

• To give full recognition to employees andRepresentatives, on whose contributionsAvon depends.

• To share with others the rewards of growthand success.

• To meet fully the obligations of corporatecitizenship by contributing to the well-being of society and the environment inwhich it functions.

• To maintain and cherish the friendly spirit of Avon.

O U R G U I D I N G p r i n c i p l e s

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1I am pleased to introduce Avon’s firstCorporate Responsibility Report. This repre-sents a comprehensive overview of key pro-grams that are making a positive impact onstakeholders around the world – our associ-ates, our independent Sales Representatives,our customers and the global communities inwhich we do business.

For more than a century, Avon has demonstrat-ed a deep commitment to empowering womenand a strong belief in the importance of corpo-rate responsibility. This echoes the core princi-ples that our founder, David H. McConnell, setforth when he established the company in1886. These principles still live on in everyaspect of our business today.

One of the many ways we carry out these prin-ciples is through Avon’s efforts in advancingwomen’s issues. For 50 years, the AvonFoundation has been dedicated to the areas ofwomen’s health, education and empower-ment. The Foundation is globally renowned forits work through the Avon Breast CancerCrusade, which as of 2004 has raised anddonated more than $350 million around theworld in the fight against breast cancer. Inaddition, new and exciting philanthropic initia-tives are underway, such as the AvonFoundation’s Speak Out Against DomesticViolence program.

But in recent years, the definition of corporateresponsibility has come to mean far more thanjust philanthropy and community outreach. Intoday’s increasingly complex business environ-ment, corporate integrity has become a keybarometer for a company’s success. To thatend, Avon continues to adhere to the higheststandards of integrity, ethical conduct andgood corporate citizenship.

This report reflects the scope of our overallcommitment to corporate responsibilityaround the world, including: governance,product responsibility, Sales Representatives,associates, safety & health, environment,supply chain, and community outreach

Through these and many other areas and activ-ities, Avon remains dedicated to the goals ofour founder, who believed in meeting “fully theobligations of corporate citizenship by con-tributing to the well-being of society and theenvironment in which it functions.”

These powerful words are woven throughoutthe following pages of this CorporateResponsibility Report and are embedded ineverything we do as a company. Thanks to theoriginal mission of our founder, which is fullyembraced by our millions of SalesRepresentatives and associates around theworld, Avon has emerged as a true force forgood, forever changing the social and eco-nomic landscape for women.

Andrea JungChairman & CEOAvon Products, Inc.September 2005

Chairman’sMessage

is to be the company that best understands and satisfies

the product, service and self-fulfillment needs of women –

O U R v i s i o n

G L O B A L L Y

1 Chairman’s Message

5 Avon Worldwide

11 Governance

15 Product Responsibility

19 Sales Representatives

23 Our Associates

27 Safety and Health

31 Environment

33 Supply Chain

37 Community Outreach

Table of Contents

This report contains information covering the same period asAvon’s 2004 Annual Report. Subjects covered are categorizedby chapter as outlined in the Table of Contents. We have includ-ed U.S. and global data where currently available. Where datais presented that is not global, typically for one region or onecountry, that is indicated. We are presently establishing addition-al processes and developing reporting parameters, some of

which are discussed in this report. We plan to expand on theinformation presented here, as well as to provide additionaldetail over time as these processes continue to develop.

The Global Reporting Initiative (GRI) 2002 SustainabilityReporting Guidelines have been one of a number of resourcesused in the development of this report (www.globalreporting.org).

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Avon Products, Inc. is a publicly traded global compa-ny, with $7.7 billion in annual revenues and nearly48,000 employees. We are listed on the New YorkStock Exchange (symbol: AVP). We have been operat-ing for over a century, and have become the world’sleading direct seller of beauty and related products.Our primary distribution channel is direct sales through4.9 million independent Avon Sales Representatives allover the world. Today, our Representatives serve morethan 300 million customers globally and handle near-ly one billion customer transactions each year.

GLOBAL BRANDSAvon has built a world-class portfolio of trusted brands,all backed by our satisfaction guarantee. We developmore than 1,000 new products every year to meet con-tinually changing customer tastes, and to maintain ourposition as a leading manufacturer and marketer ofbeauty and related products.

In 2004, global beauty sales accounted for 69% oftotal net sales, or $5.2 billion. And for the first time inour history, all four beauty subcategories—cosmetics,fragrance, skincare and toiletries—recorded sales ofover $1 billion each. For the past three years, approx-imately 70% of Avon’s consolidated net sales and 90%of operating profit has come from operations of sub-sidiaries outside of the United States.

Beauty products include Avon Color • Avon Naturals

• Avon Beyond Color • Anew • mark

• Avon Solutions • Skin So Soft • Avon Wellness

• Advance Techniques Hair Care

Beauty Plus products include Fashion Jewelry

• Watches • Apparel • Accessories

Beyond Beauty products include • Home Productsand Gift & Decorative products

AvonWorldwide

To be the company that best understands and

satisfies the product, service and self-fulfillment needs

of women – globally

empowering women throughout the world

Avon’s

global markets:62

North America: Canada Dominican Republic Puerto RicoUnited States* Latin America: Argentina* Bolivia Brazil*Chile Ecuador El Salvador Guatemala* Honduras Mexico*Nicaragua Panama Peru Uruguay Venezuela* Asia Pacific:Australia China* Hong Kong India Indonesia* Japan*

BUSINESS OVERVIEW Avon’s strategic initiatives include a focus onBeauty brands as a key driver of salesgrowth, as well as new product lines suchas Health and Wellness products and mark.Growth is also targeted from further expan-sion of Sales Leadership, a career opportu-nity for Avon Representatives, as well asexploration of geographic opportunities, inparticular China, Central and EasternEurope, Turkey and the Middle East, andthe Andean region of South America.

global portfolio of businesses, mostrecently Vietnam (2004), and Finlandand Macedonia (2005).

COMPANY HISTORY Avon was founded in 1886 by DavidH. McConnell. Mr. McConnell startedhis career selling books door-to-door.To further his business, he decided togive away a special premium to hiscustomers. Since nearly all of them

Direct Investment MarketsAvon’s global and U.S. headquartersare located in New York City. We havesales operations in 62 markets, includ-ing the United States, and distributeproducts in over 60 more through dis-tributorships, appointed SalesRepresentatives and licensees. Our firstmajor geographic expansion was in the1950s into Latin America. Since then,new markets have been added to our

were women, he started to createsmall fragrance samples as gifts.

Because of the success of his fragrancepremiums, Mr. McConnell left book-selling and founded the CaliforniaPerfume Company in a small New YorkCity office. He hired Mrs. P.F.E. Albee,a former colleague from his booksellingdays, as his first general agent (as AvonRepresentatives were originally called)and together, they pioneered the com-

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pany’s direct-selling sales force and pro-vided women with an earnings opportu-nity 34 years before they earned theright to vote.

By 1928, the California PerfumeCompany had expanded across thecountry, and Mr. McConnell felt theoriginal name was too regional. In1929, the company introduced a lineof products under the Avon brandname, and in 1939, the name of the

company was officially changed toAvon Products, Inc. Mr. McConnellchose the name Avon because the landsurrounding the company’s Suffern,New York laboratory reminded him ofWilliam Shakespeare’s legendaryhome, Stratford-upon-Avon.

2004 F INANCIAL PERFORMANCE For full-year 2004, sales rose 13%, or10% in local currencies, to a record

$7.66 billion. Sales of Beauty productsgrew 17%, with increases in all cate-gories: skincare up 20%; fragrance up13%; color cosmetics up 14%; and per-sonal care up 24%. Net income in 2004was $846.1 million, up 27% from$664.8 million in 2003.

Additional information on Avon’s 2004financial performance can be found inour latest annual report atwww.avoninvestor.com.

Malaysia New Zealand Philippines* South Korea Taiwan Thailand Vietnam*Europe: Austria Bosnia Bulgaria Croatia Czech Republic Estonia Finland FranceGermany* Greece Hungary Ireland Italy Kazakhstan Latvia Lithuania MacedoniaMoldova Morocco Poland* Portugal Romania Russia* Serbia Slovakia SloveniaSouth Africa* Spain Turkey Ukraine United Kingdom * Includes manufacturing

Operating Margin %

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00 01a 02b 03c 04c

AVON MEXICO

Celebrates Official Openingof Manufacturing FacilityAvon Mexico’s new facility inCelaya officially opened on April15, 2004. Mexican PresidentVicente Fox and first lady MarthaFox were among the dignitaries tojoin the festivities. After touring thefacility, President Fox noted theimportant contribution of Avon’sfacility to Mexico’s economic recov-ery. This new facility, one of Avon’slargest, is 935,000 square feet andstands on 41 acres. The plantemploys 2,800 people, produces allcategories of beauty product andfills orders for all 400,000 MexicanRepresentatives. The facility pro-duced an estimated 216 millionunits in 2004. Production capacityis approximately 363 million units,which includes products exported toother countries in the region.

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11At Avon, our actions are guided by our Values, Principlesand Mission. Our core standards have become an inte-gral part of our culture throughout our entire corporationand have acted as our guide for good corporate gover-nance. We believe that good corporate governance alsoserves as a foundation for corporate social responsibility.Our focus on our core standards has contributed to Avonbeing included in Fortune magazine’s annual ranking of“America’s Most Admired Companies” for more than adecade. And for six consecutive years we have beennamed among the “100 Best Corporate Citizens” byBusiness Ethics magazine, becoming one of only 19 cor-porations selected for this list every year since its incep-tion in 2000.

We are committed to continually improving our gover-nance policies and practices, as well as the transparen-cy and accountability of management. As a testament toour continued commitment to corporate social responsi-bility, we have appointed a corporate social responsibil-ity officer who reports to the chief executive officer. Wealso have created a cross-functional corporate responsi-bility team, comprised of senior managers and vice pres-idents from all functions across the organization, to assistin producing this report. This team will also address avariety of social responsibility issues and align Avon’sinitiatives with the company’s stated values.

BOARD OF DIRECTORSAvon is guided by the wisdom and support of our out-standing Board of Directors. For the past five years, atleast 80% of the members of Avon’s board have beenindependent, ensuring a level of objectivity essential forproviding effective oversight. We are also proud that45% of our board currently consists of women, and dur-ing the past three years, women have made up over50% of our board.

The board has four standing committees (AuditCommittee, Compensation Committee, Finance andStrategic Planning Committee, and Nominating andCorporate Governance Committee) comprised solely ofindependent directors.

GovernanceTo set a proper “tone at

the top” by promoting goodcorporate citizenship

and responsible business practices

monitors financial controls and procedures worldwide; our seniormanagement team who stresses the importance of living our corevalue of Integrity through individual responsibility and accountabili-ty; and an independent and engaged audit committee of the Boardof Directors. Further, as a public company, Avon’s financial state-ments and internal controls are audited by PricewaterhouseCoopersLLP, an independent registered public accounting firm. Their mostrecent report is included in Avon’s 2004 Annual Report.

Strong Internal Control EnvironmentAvon has a comprehensive and well-documented set of internalcontrols that provide reasonable assurance that our financial trans-actions are recorded accurately and completely, and our assets aresafeguarded. It is management’s responsibility to monitor the con-trol environment through quarterly and annual self-assessments andindependent monitoring from internal audit. In fact, every singlefinancial reporting location participates in an annual internal con-trol self-assessment and is asked to certify that their control environ-ment is designed and operating efficiently.

Sarbanes-Oxley legislation in the U.S. requires that CEOs andCFOs of publicly traded companies certify annually as to the effec-tiveness of their internal control over financial reporting. To fulfillthis task, Avon created an internal team of global accounting andauditing professionals to work together to coordinate and assistAvon’s worldwide associates in the identification, documentation,and review of over 12,000 internal controls across all markets andkey functions. This first annual certification of 2004 controls wassuccessfully completed in early 2005.

DISCLOSURE COMMITTEEIn 2002, we formalized a Disclosure Committee consisting of sen-ior financial, legal and operating management who meets regular-ly and is responsible for ensuring that material information is iden-tified and considered for completeness and reliability, especially inthe context of our Securities and Exchange Commission filings;coordinating with management and the board, as appropriate, inmaking determinations concerning materiality and required disclo-sure obligations; and evaluating Avon’s disclosure controls andprocedures.

Further information on Avon’s Corporate Governance Guidelines,Code of Business Conduct and Ethics, the Board of Directors andthe Board Committees can be found on Avon’s corporate websiteat www.avoninvestor.com.

Our new directors are expected to participate in Avon’s orienta-tion program. This involves meetings with senior management tofamiliarize the director with Avon’s business model, propertiesand operations, strategic plans, significant financial and account-ing issues, and compliance programs. The board and its commit-tees conduct an annual self-assessment to determine whether theyare functioning effectively. At least once a year, the board holdsan extended meeting to review Avon’s short-term and long-termstrategic goals and initiatives, and other significant issues that areexpected to affect Avon in the future. Also, at least once a year,the board holds an off-site meeting to review management devel-opment which includes CEO performance, compensation andsuccession planning.

RESPONSIBLE BUSINESS PRACTICES AND ETHICSIn 2003, Avon formalized a comprehensive Code of BusinessConduct and Ethics that governs business behavior and ethicalconduct at the company, and applies to each member of theboard and to every associate in every country in which Avondoes business. The code describes Avon’s policies and prac-tices, which collectively are intended to promote ethical andlawful behavior, and deter wrongdoing and improper conduct.For instance, the policies include compliance with regulationsin all countries where we operate; the prohibition of conflictsof interest, improper payments and bribery; equal opportunity;and fair dealing.

A key priority on Avon’s 2004 Operating Agenda was to provideethics education based on this code for associates worldwide.Avon created a cross-functional Ethics Education Team who devel-oped a comprehensive set of ethics education training materials.Avon plans to have all 48,000 associates worldwide trained bythe end of 2005.

All Avon associates are required to report a violation of the code.They are encouraged to speak to management and/or report theviolation directly and confidentially to the Compliance Committee—which consists of senior financial, legal and human resource man-agement—via the Compliance telephone or e-mail Hotline.

FINANCIAL REPORTINGAvon is committed to providing timely, accurate and completeinformation to our investors. This commitment is reflected in Avon’spolicies and procedures, as well as an internal audit group that

The Global Beauty Leader

The Women’s Choice for Buying

The Premier Direct Seller

The Best Place to Work

The Largest Women’s Foundation

The Most Admired Company

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Consumer safety is Avon’s number one priority. We arecommitted to selling only safe products, using only safeingredients in our cosmetic products and complying withapplicable regulations in every county in which Avon prod-ucts are sold. We closely monitor all existing, new and pro-posed regulations governing the sale of our productsthroughout the world to ensure that we are fully informedand in compliance with the law.

GLOBAL PRODUCT SAFETY STANDARDWe adhere fully to all regulations governing the sale ofall our products in each country where we do business.Although regulatory requirements may differ around theworld, Avon has a single, global product safety standard,irrespective of the country in which products are sold:

• The safety of every product must be substantiated prior toproduct introduction. We will be vigilant in monitoring thesafety of our products in the hands of consumers. We willremove any ingredient from our cosmetic products should newevidence emerge that would no longer support its safe use.

COSMETICS SAFETY MANAGEMENTAND GOVERNANCEResponsibility for the determination of the safety and integri-ty of all cosmetic products sold by Avon anywhere in theworld lies with Product Safety & Integrity, a division ofGlobal Research & Development. The Group Vice President& Chief Scientific Officer, Global Research & Development,is the senior executive in charge of global cosmetic productsafety. The Vice President, Product Safety & Integrity, is theexecutive responsible for day-to-day operations.

COSMETICS SAFETY REVIEWPROCESSAvon has a formal review process to evaluate the safetyand integrity of all cosmetic ingredients and products:

• Every ingredient must undergo a thorough review of allavailable safety information by our toxicologists before itis considered for use in a product formulation.

ProductResponsibility

To maintain the confidenceof our customers in the safety of our products

Global Research & Development Center, Suffern, NY.

or not the material can be used safely. Among other consid-erations, the concentration of material in the product andhow the product is typically used are equally important. Asan example: a normal dietary intake of sodium chloride—table salt—poses no threat to health, but a high intake canlead to hypertension.

Risk assessment is a fundamental scientific principle used insafety evaluation by government agencies and by independ-ent scientific organizations throughout the world. In determin-ing safety, risk assessment considers not only inherent toxico-logical potential, but also actual or anticipated human expo-sure. Risk assessment is a critical tool in determining the con-centrations of ingredients that can be used safely (i.e., at con-centrations significantly below those expected to cause anyadverse effect).

• Avon is committed to the use of scientifically based risk assess-ment in all our determinations of ingredient and product safety.

Product Safety & IntegrityProduct Safety & Integrity is the Corporate Center ofExcellence within Global Research & Development withresponsibility for cosmetic product safety and cosmeticproduct quality standards. Our highly qualified scientistshold PhDs in disciplines ranging from pharmacology andtoxicology to chemistry, cell biology and microbiology.The most up-to-date information and state-of-the-art tech-niques are used to both safeguard our customers, as wellas maintain their confidence in the quality of our products.

Product Safety & Integrity’s role is to:

• Ensure new & existing cosmetic products are safe andmeet regulatory requirements

• Develop & implement cosmetic product quality standards(ingredient/product specifications, test methodology &manufacturing controls)

• Ensure product claims based on clinical testing are ade-quately substantiated

• All products are carefully formulated (e.g., through the use ofeffective preservative systems) to ensure they present no risk ofcontamination by microorganisms. Each production batch mustbe tested and meet our stringent product specifications as partof routine manufacturing quality assurance procedures.

• Product safety substantiation includes assessment of skin com-patibility, including determination that the final product formula-tion will not cause irritation.

• Clinical testing is conducted to confirm skin compatibility(mildness) and to substantiate product clinical claims.

• Avon requires that all finished products comply with applica-ble cosmetic and/or other (e.g., drug) regulations includingthose governing product composition (e.g., ingredient restric-tions, VOC content, etc.) and special packaging requirements(e.g., child-resistant packaging for certain products containinglow-viscosity hydrocarbons).

• Our scientists participate in industry-wide and profession-al scientific organizations in order to access and evaluatethe latest information to ensure the continued safe use ofindividual ingredients.

In addition to our internal safety reviews, we consult with inde-pendent, recognized experts in relevant scientific fields toensure that our evaluations are appropriate and state-of-the-art.

ONGOING COMMITMENT TO COSMETICINGREDIENT AND PRODUCT SAFETYA guiding precept at Avon is that the safety of cosmetic ingre-dients and products is substantiated prior to introduction to themarketplace. Occasionally, publication of new information orscientific data may be cause for a reassessment of the use of aningredient for some or all cosmetic applications.

• Avon continually evaluates information relevant to the safeuse of ingredients. If we determined that an ingredient could nolonger be considered used safely, we would discontinue its use.

It is important to note that not all reports of adverse effects asso-ciated with a particular ingredient are scientifically support-able. Even if scientific evidence supports identification of a haz-ardous material, this is only the first step in determining whether

COMMITMENT TO SCIENCE… RESPECT FOR ANIMAL WELFAREOn June 2, 1989, Avon announced a permanent end to all ani-mal testing of our products, including testing done in outside lab-oratories. Avon was the first major cosmetic company in theworld to end animal testing.

• Our approach to safety evaluation utilizes data from in vitro(test tube/cell culture) or clinical tests (on human volunteers), aswell as referencing existing animal-testing data.

• Avon does not conduct animal testing on any of its products orraw ingredients, and does not require that suppliers of raw ingre-dients and finished products produced for Avon conduct animaltesting on our behalf.

• Avon will conduct animal testing only when required by law,at the request of government health or medical authorities, andonly after having first attempted to persuade the requestingauthority to accept non-animal test data.

Avon has been at the forefront of the development and implemen-tation of alternative test methods since the 1980s. Our effortswere recognized in 1993 at the World Congress on Alternativesand Animal Use in the Life Sciences: Education, Research andTesting. In 1993, Avon was also presented with a RecognitionAward from the Johns Hopkins University Center for Alternatives toAnimal Testing. We received this award for our commitment anddedication to the principles of the 3 R’s (refinement, reduction,replacement) and the use of alternative tests for safety evaluation.

DEVELOPMENT OF NON-ANIMAL(ALTERNATIVE) TESTSAvon will continue in our leadership role to support the developmentand validation of new alternatives to animal testing. To this end,Avon is a partner with other cosmetic companies in efforts organ-ized by the European cosmetic industry trade association (COLIPA),to identify and develop new alternatives. Similarly, Avon is a long-time supporter of research into alternatives conducted by the Fundfor the Replacement of Animals in Medical Experiments (FRAME) inthe U.K. and the Center for Alternatives to Animal Testing at JohnsHopkins University in the U.S. Ongoing research on new/existingalternative methods is conducted by scientists in our Cell Biologyand In Vitro Toxicology Laboratory at our Global Research &Development Center in Suffern, New York.

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A Global Beauty LeaderFor over a century, a commitment to product innova-tion, high quality standards and consumer safety havebeen the hallmarks of Avon’s products.

More than 300 scientists and technicians with expert-ise in chemistry, biochemistry, pharmacology, molecu-lar modeling, chemical engineering and formulationcreate nearly 1,000 products every year, and theirinnovative efforts have resulted in numerous technologybreakthroughs. For example, as a pioneer in skincare,Avon was the first company to use AHA technology inthe mass market and the first to stabilize both vitamin Aand concentrated vitamin C in anti-aging treatments.

Today, this innovation continues in Avon’s new $100million Global Research and Development Center.Opened in 2005 and constructed on the existingSuffern, New York site, this facility represents Avon’scontinuing commitment to deliver leading-edge, tech-nology-based cosmetic products to the 300 million cus-tomers we serve all over the world.

Avon’s Global Satellite R&D Program provides addi-tional product development and technical support inkey markets. Critical functionspertaining to cosmetic safety,product integrity and finalproduct approval remain thedirect responsibility of GlobalResearch & Development.

A video on our new R&Dfacility is available at avon-company.com/brands/index.html.

For information on R&Dexpenditures, please seeAvon’s 2004 Annual Report.

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Avon was founded by a male entrepreneur who believedwomen had the right to economic empowerment 34years before they were granted the right to vote. Wehave always emphasized that we are more than just theproducts we sell. We are also about providing a mean-ingful earnings opportunity for all of the SalesRepresentatives who agree to sell our products. OurSales Representatives are primarily women and are allindependent contractors. Their number has grownsteadily over the years from three million in 2000 to 4.9million in 2004 and Avon is committed to SalesRepresentatives as its primary distribution channel. Oneof our corporate Key Performance Indicators is the“Change in Active Representatives,” which is the numberof active Sales Representatives submitting orders. Wework intensively with and for our Sales Representativesbecause their success is our success too.

SALES MODELAvon’s direct-selling business model has been the basisof our business since our founding. For nearly 120years, this model has created work for millions of womenaround the world, empowering them to fulfill their entre-preneurial aspirations and to satisfy their desire for eco-nomic self-sufficiency. Worldwide in 2004, our SalesRepresentatives earned a total of $3 billion.

Sales Representatives are the heart of our global busi-ness and the drivers of our primary distribution chan-nel, direct sales. Through a variety of programs andinteractions—such as dedicated websites, conferences,training programs, award and recognition programs,surveys and many other initiatives—Avon consistentlyseeks the input, feedback, advice and unique knowl-edge of our Sales Representatives to help us continual-ly evolve and improve our direct-selling channel.

SalesRepresentatives

To provide individuals an opportunity to earn in

support of their well-being and happiness

Rita NaarDelanzUPATA, VENEZUELA

Rita has been selling Avonproducts for 36 years andhas 200 customers. Being anAvon Sales Representativehas meant a lot to Rita.Because of Avon, she is awell-respected resident in herhometown, has purchasedher apartment and a car,and helped support her chil-dren’s education. She’s doneall this with the money shehas earned running her ownAvon business.

In 2001, Avon launched a retirement savingsprogram to enable our independent SalesRepresentatives in the U.S. to save a portion oftheir earnings in a tax-deferred retirementplan. Structured as a 401(a) retirement sav-ings plan, it offers individuals a convenientway of saving for retirement by investing theirearnings on an after-tax basis in a variety ofinvestment choices. Avon was the first direct-selling company in the industry to offer aretirement savings plan to independent SalesRepresentatives.

From time to time, local governments and oth-ers question the independent legal status ofRepresentatives in regard to possible coverageunder social benefit laws that would requireAvon (and in most instances, Representatives)to make regular contributions to governmentsocial benefit funds. Although Avon generallyhas been able to address these questions, thematter has not been fully resolved in all coun-tries. If there should be a determinationadverse to Avon in a country, it might makethe conduct of business overly expensive forAvon, and we could consider discontinuingoperations there.

Creating Social andEconomic Value Through OurBusiness ModelWe feel that our direct-selling business modelcreates value not only for the company and itsshareholders, but also for our millions of Avonindependent Sales Representatives by providingthem with an earnings opportunity that trans-lates into social and economic value for them.The average income of a Sales Representativevaries widely and is contingent on many vari-ables, including the amount of time and effortthe Sales Representative puts into her business.

Avon’s business model creates an income—sometimes a significant income—for the inde-

pendent entrepreneurs that are our SalesRepresentatives, many of whom live in devel-oping countries. In many emerging and devel-oping countries, a Sales Representative’searnings can make a significant contributionto her household. World Bank data and casestudies in the developing world show thatwhen women earn money, the funds tend tobe spent on housing and education. Theseinvestments have high and long-term socialand economic value for the families andcommunities where our SalesRepresentatives live and work. In this sense,they are key stakeholders in our corporateresponsibility platform: Avon provides eco-nomic opportunity for millions of women; inturn, many of our Sales Representatives haveadded significant additional economic andsocial value where they live and work. Weare proud that our business model ofempowering women around the world is cre-ating positive social and economic value.

Sales ManagersAvon provides a level of field managementsupport to our Sales Representativesthrough District, Zone and AreaManagers. Managers are distributed geo-graphically to ensure adequate coverage

U.S. Sales RepresentativeEarnings*In the United States, multilevel earningsfrom bonuses in the Leadership programrange from an average of $120,000 ayear at the Senior Executive Unit Leaderlevel to an average of $1,300 at the UnitLeader level. Single-level earnings fromproduct sales can range from an average of$50,000 at the President’s Council andInner Circle levels, to an average of$4,000 a year at the President’s Club level. *Actual earnings may vary.

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Sue MazzaN A P E R V I L L E , I L

Sue was a full-time stay-at-homemother on limited means whowanted a more secure future forher family. Prompted by her loveof cosmetics and the memory ofher own mother’s enjoyment ofAvon bubble bath, Sue estab-lished herself as an Avon SalesRepresentative. Today, she is aSenior Executive Unit Leader withannual unit sales of $1.8 million,and received the Avon Womanof Enterprise Award in 2005.“Where else but Avon can youstart a successful business foronly $10?” said Sue. “I tell myDownline Representatives that if Ihave done it, they can too!”

per number of households. In many mar-kets, primarily our mature markets, theseare salaried employees.

INVESTING IN OUR SALESREPRESENTATIVES The recruitment and training of SalesRepresentatives are the primary responsi-bilities of Sales Managers and LeadershipRepresentatives. In most markets, SalesManagers are Avon employees, and arepaid a salary and a sales incentive basedprimarily on the increase over the prioryear’s sales of Avon products by SalesRepresentatives in their district. In a fewmarkets, recruiting and training SalesRepresentatives are handled by independ-ent contractors.

One-to-one relationships with customersare key to the success of our direct-sellingmodel. Many Sales Representatives, andassociates had their first contact with Avonthrough a neighbor or a relative who wasan Avon Sales Representative or customer.There is a high turnover rate among SalesRepresentatives, a characteristic of thedirect-selling industry, and it is continuallynecessary to recruit and train new SalesRepresentatives. Ours is a relationshipbusiness. Personal contacts of our currentSales Representatives are a major channelfor recruiting new Sales Representatives.

Sales RepresentativeEarningsIn addition to the traditional single-levelearnings from the sale of Avon product,Sales Representatives have the opportunityto obtain earnings from bonuses based onsales made by Sales Representatives theyhave recruited and trained. This multilevelcompensation program, known as the

Sales Leadership program, limits the num-ber of levels on which bonuses can beearned to three. Earnings from Avon’sSales Leadership program are derivedsolely from the sale of product, unlike othermultilevel earning structures, sometimesreferred to as “pyramids.” Development ofthe Sales Leadership program throughoutthe world is part of Avon’s long-termgrowth strategy.

TrainingAvon provides world-class training materi-als and tools at nominal cost to our SalesRepresentatives. In 2004, Avon completeda comprehensive global framework ofdirect-selling best practices to empowerour Sales Representatives to reach moreconsumers and to extend the benefits of theAvon brand to more women everywhere.This framework is now being rolled outglobally in conjunction with the implemen-tation of the Sales Leadership program.

Recognition and AwardsProgramsAt Avon we often refer to our SalesRepresentatives as the lifeblood of ourcompany. As the key driver of our pri-mary distribution channel, it is vitallyimportant that Avon recognize andreward our Sales Representatives not onlyfor their individual achievements, but alsofor the success that their efforts bring tothe company. Throughout the Avon world,we provide a variety of award and recog-nition programs to continually motivateand inspire our Sales Representatives, aswell as to demonstrate our appreciationfor their hard work.

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Avon is committed to our associates, the nearly 48,000men and women behind “the company for women,” whoare an integral part of who we are as a company.Associates work in over 60 countries around the world, inmanufacturing; sales management and support; market-ing; customer service; research and development; legal;finance and other departments.

Avon’s associates support our global network of independ-ent Sales Representatives. Avon also employs district salesmanagers (zone or area managers), who are primarilyresponsible for recruiting and training Representatives.

Overall, global headcount has grown steadily. Our head-count in the U.S. has declined slightly over the past fewyears, and climbed slightly outside the U.S. This reflectsour operations that are increasingly global and also somestreamlining of corporate headcount in the U.S. with ourtransformation activity.

THE COMPANY FOR WOMENFollowing concerted efforts to bring women into manage-ment, Avon is now a corporate leader in the integration ofwomen into executive positions and management.Currently, women hold 83% of the company’s profession-al positions. Moreover, as the labor market has becomemore competitive, Avon’s leadership program has focusedeven more on nurturing the talent and meeting the needsof our women leaders.

In 2003, we hosted our first-ever company-wide leader-ship conference for senior and high-potential women.Traditional marketing and professional development ses-sions filled the agenda, but the conference also providedroom for sharing concerns and issues, such as womenexecutives on expatriate assignments. This gave them anopportunity to discuss issues they were not comfortableraising in any other environment.

To create exceptional opportunities for professionalgrowth so that all associates

fulfill their highest potential

OurAssociates

Number of Avon Associates

2002 2003 2004

U.S Associates 9,200 9,400 8,900Full Time Equivalents

Non-U.S Associates 36,100 36,500 38,800

Total 45,300 45,900 47,700

Percent Female Representation (U.S. only)

2002 2003 2004

Senior Managers 27 36 38

Officers & Managers 84 83 83

Associates 73 73 73

Throughout our human resource pool, associates have moreemployment opportunities than ever before. Many are lookingfor job enrichment and professional fulfillment in their work.Avon strives to create a workplace where all associates can per-form to their highest potential. Our commitment on this front wasrestated at our 2004 Worldwide Management meeting. On amarket-by-market basis, we want to ensure that associates under-stand Avon’s commitment to providing a great work environ-ment. We acknowledge that there may be different requirementsand different country or regional practices, so our global com-mitment is reflected in various country programs.

External RecognitionIn 2004, our workplace practices were recognized for excellenceby awards from government and trade associations in Taiwan, thePhilippines, the Czech Republic, Slovakia, Italy, Poland, Spainand India. In the U.S., Avon has been recognized for its commit-ment to associates by a variety of publications including Fortune,Latina Style and Working Mother, among others.

Avon Spain • 2004 “Best Place to Work” award by the Great Placeto Work Institute for the second consecutive year.Selection criteria includes independent analysis of com-panies for credibility, respect, fair treatment, pride andfellowship and employee surveys.

• 2004 “Work Life Balance Award” in recognition of AvonSpain’s role in improving the quality of life for women.

Compensation and Benefits PhilosophyOur compensation package is highly competitive and relat-ed to individual and business performance. This “pay forperformance” approach is the cornerstone of the TotalRewards program. When developing a Total Rewards pro-gram, a country/operating business unit bases its designon three elements:

• Individual performance - An associate’s performance is meas-ured at least annually, taking into account potential and experi-ence. Seniority should not influence performance decisions,unless required by law or local agreements.

• Business performance - Compensation is based on businessgoals (short-term and long-term). Compensation programs and

salary budgets are evaluated in terms of affordability, anticipated financialperformance and sustainable market value. When appropriate, Avon mayextend the variable pay component of compensation to associates so theymay fairly share in the company’s financial success. Compensation levelsvary based on the internal value of positions.

• Economic and external factors - Compensation packages are evaluat-ed at regular intervals to ensure they are competitive with programs atpeer companies and generally positioned at the median of the market.Exceptions may be justified in some markets. Compensation programsalso take into consideration local regulatory provisions, such as seniorityrules or overtime.

Within the framework of its Total Rewards program, Avon provides a por-tion of compensation through benefits coverage. Our total pay packagehas a greater value than cash alone and also communicates critical mes-sages about our values, shared responsibility and success. In addition,benefits coverage enables the company to provide compensation for asso-ciates in the most tax-effective manner.

Each country develops benefits programs that support the local operat-ing environment and business strategies.

In the U.S., associates are given several choices for medical, dental andvision coverage, and various life and disability insurance options. Theseprograms include family-friendly packages such as health care and eldercare flexible spending accounts, an employee assistance program,LifeCare®, adoption assistance benefits and paid maternity,paternity/secondary care giver and adoption leave.

Workplace Policies We have many policies that support our associates in the workplace,including:

• Code of Business Conduct and Ethics• Equal Opportunity Employer and Diversity• Professional Conduct• Workplace Violence

These policies are corporate-wide and apply to all locations. In countrieswhere local laws are more stringent, the local laws supersede.

Career Development and TrainingWe invest in training and career development for our associates, and overthe last several years we have focused on three main areas: LeadershipEdge Competencies, Career Development Programs and Building Talent.

ment pipeline. This network voluntarily disbanded in the early1980s because its key goals and objectives had been met byAvon’s management.

DiversityDiversity involves setting a tone of respect and appreciation for oneanother, and is truly an embodiment of our core values of Trust,Respect, Belief, Humility and Integrity.

Managing diversity at Avon means creating an inclusive work envi-ronment that breaks down cultural barriers and appreciates differ-ences of ethnicity, race, language, place of origin, gender, age, reli-gion, sexual orientation, tenure and level within the organization.

Our goal is to set the norm of “an equal playing field” that giveseveryone the chance of success based on merit and results.

In the U.S., where diversity is typically measured by women andminority representation in management, we track diversity data.(See page 23 for female representation)

Diversity Achievements:• Young Adult Institute/National Institute for People WithDisabilities (YAI/NIPD) 2004 Corporation of the Year Award.

• Fortune magazine 50 Best Companies For Minorities.

• National Association for Female Executives (NAFE) Top 30Companies for Executive Women. Avon has been rankedNo.1 for seven consecutive years.

• Hispanic Magazine Hispanic Corporate 100.

• Latina Style magazine 50 Best Companies for Latinas.

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Our Leadership Edge Competencies have established the founda-tion for our standards at Avon around the world. These compe-tencies (Emotional Intelligence, Global Builder, Passionate Driverand Talent Nurturer) are reinforced through our leadership devel-opment training programs for the top 100 positions, and fordirector and middle managers around the world. Supporting thiscurriculum is a performance management process in which wefocus on goals, objectives and results, and on how these resultsare delivered.

Our career development process enhances the performance man-agement process. The talent management process is the founda-tion for our global succession planning. Identifying, developingand retaining talent for worldwide positions is underpinned by ourPerformance Management and Career Development Processes.

Employee RelationsOur employee relations’ practices vary by country. We have directrelationships with associates in most of our markets. However, thisdoes vary across the world in some of our manufacturing opera-tions. In Europe, one manufacturing operation is covered by unionrepresentation. In Asia Pacific, most of our manufacturing facilitiesare covered by unions or collective bargaining units. In LatinAmerica all of our manufacturing facilities are covered by unions.

DIVERSITY AND INCLUSION IN THE U.S.

Networks at AvonIn the U.S., employee networks play an important role in supportingan inclusive organization. We support three active networks: theAsian Network, the Black Professional Association, and the Gayand Lesbian Network. Other associate networks that have beenactive within Avon for many years and have played a vital roleinclude the Parents Network, created to address issues of work/lifebalance, and the Hispanic Network.

These networks promote and enhance the career potential of theirmembers through educational programs and seminars, informationsharing, member support activities and community support events.

In the early 1970s, as more women entered the workplace, womenwithin the company created a forum to liaise with management todiscuss their concerns and professional aspirations. The AvonWomen’s Network helped the company create the policies and pro-cedures necessary to incorporate more women into the manage-

Percent Minority Representation (U.S. only)

2002 2003 2004

Officers 19 21 22& Managers

Associates 32 32 33

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Our associate’s health and safety are of paramountimportance to Avon, across our operations in manufac-turing, distribution and research, and development facil-ities, as well as in our offices. Supplier issues are han-dled in the chapter on Supply Chain. Policies on associ-ate safety, accident prevention and operational efficien-cy are inseparable, and guide our plans and actions.

CORPORATE SAFETY POLICYOur Corporate Safety Policy reflects our commitment toour associates and to our working environment. Avon’spolicy has three components:

• Avon will provide a safe and healthful work environ-ment for all associates, and protect our property fromdamage or destruction.

• Keeping accidents to an absolute minimum will beaccomplished through the establishment of sound safetyprocedures, and the support and cooperation of all asso-ciates in accident prevention.

• Associate safety, accident prevention and efficiency ofoperations are inseparable, and will guide our plansand actions.

SAFETY GOVERNANCE AND MANAGEMENTThere are three major health and safety program areaswithin Avon:

• Safety• Occupational Health• Property Loss Control

The senior executive in charge of Global Safety, Healthand Loss Prevention is the Senior Vice President, GlobalFinance and Treasurer, who reports to the ChiefFinancial Officer. Reporting to the senior vice presidentis the Director of Global Risk Management, and report-ing to that post is a corporate-level Senior Manager,Global Safety, Health and Loss Prevention.

At the local level, each manufacturing, distribution, andresearch and development facility has a designee who isresponsible for safety and property loss. In some of ourlarger sites, there is a safety professional whose mainresponsibility is health and safety (in some cases, thisalso includes environment). In North America, we havethree regional safety managers who report to the VicePresident of Supply Chain.

Facility-level occupational health programs typicallyreside in the facility nurse’s offices. The nurses report toour human resources department. Each of our facilitieshas an occupational health unit staffed with nurses, and,where required by law, physicians. These facilities con-duct health screenings for cholesterol, blood pressureand breast cancer, as well as health screenings asrequired by regulation.

Safety &Health

To ensure associate safety, accident prevention and

efficiency of operations are inseparable and will guide

our plans and actions

Facility Safety CommitteesSafety Committees meet at least quarterly at each facility toprovide a forum for associates to actively participate as apartner in the safety process of their location. Each commit-tee develops its own methods of member selection and com-mittee size to ensure a diverse team that is representative ofthe workforce. The committee establishes its own mission andis responsible for managing issues brought to its attention.

SAFETY TRAININGWe educate our associates on safe work practices in anumber of ways. We developed a Global Safety, Healthand Loss Prevention Manual to unify our safety manage-ment programs across all our locations, and to serve as aworking tool to develop excellence in safety programs. TheManual is available on our Intranet and is distributed to allAvon locations worldwide.

The Manual provides each associate with an overview ofsafety and health management at Avon, and procedures thateach site uses to develop its own tailored safety and proper-ty loss prevention program.

Each new hire participates in an orientation that includessafety training. Avon associates worldwide are trained regu-larly in their respective areas of responsibility in:

• Chemical Safety/Hazard Communication • Energy Lockout/Tagout• Emergency Response• Personal Protective Equipment• Confined Space Entry• Forklift Safety• Electrical Safety• Ladder Safety/Working From Heights• Laboratory Safety

Additional training is provided when needed to perform aspecific job function or when required by law.

SAFETY, HEALTH AND PROPERTYLOSS AUDIT PROGRAMProperty loss control audits assess the operational status offacility equipment, such as boilers and machinery, andwhether our buildings meet fire codes.

In 2004, 24 of these audits were conducted worldwide byfire protection engineers from our insurance carriers.

In prior years, sites conducted their own safety audits atplanned intervals. Beginning in 2005, we are supplement-ing this with more comprehensive safety audits that will beconducted by our corporate internal audit group. The safe-ty portion of these audits focuses on compliance with safe-ty and health regulations. Two to four sites will be auditedannually by the senior manager as part of this program.Any issues found during the course of these audits are tobe corrected in 30 days where possible.

In addition, two audits of our occupational health units are per-formed annually by our corporate consulting medical director.

NY Improves EmergencyResponse ProgramFour locations in the metropolitan New York areaidentified a gap in their emergency response proce-dures. There was a potentially long lag timebetween the time a person was injured or became illand when an ambulance arrived. After conferringwith the senior manager in our corporate office, theteams at the New York locations were trained in firstaid, cardiopulmonary resuscitation (CPR), cardiacdefibrillation and oxygen delivery. The teams of vol-unteers became certified and are able to provideemergency first aid until an ambulance arrives.

Facility Safety AssessmentsAvon evaluates the effectiveness of the safety and health pro-grams at each facility through a comprehensive safetyassessment. This assessment is designed to evaluate the per-formance of each location against the safety standards out-lined in the Global Safety, Health and Loss PreventionManual. The assessment provides facility management withvaluable information on the status of their safety programs.

Our safety assessment evaluates each facility on its per-formance in the following areas:

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• The assessment scores in each of these areas arebased on whether the facility is meeting regulatory obli-gations or going beyond compliance and implementingbest practices.

• The safety assessment was developed and tested inselect U.S. facilities in 2001 and was successfully pilotedacross all North American business units in 2004. It willbe rolled out to two international locations in 2005. Theassessment is now an integral part of mapping Avon’ssafety process.

U.S. HEALTH AND SAFETY DATAAvon monitors health and safety in our operations aroundthe world, on a facility basis. We report health and safetydata in the U.S., against categories defined by the U.S.Occupational Safety and Health Administration (OSHA).While we have not included non-U.S. data in this firstreport, we hope to begin to do so in the future.

The charts presented here show the number of workersout of 100 that reported an injury (U.S. Total InjuryCase Rate), and the number of workers out of 100 thatwere seriously injured and lost work time (U.S. LostWorkday Case Rate). These rates include all U.S. loca-

tions, including manufacturing plants, distribution cen-ters, the research and development site, and adminis-trative offices.

Our health and safety results have historically been bet-ter than industry average. We are pleased to report that2004 saw significant improvement over 2003 results.

OSHA RECORDABLE INCIDENTSAn OSHA Recordable Incident is defined by OSHA asan injury or illness that (1) is work-related, (2) is a newcase and (3) meets one or more OSHA general record-ing criteria, i.e., it results in death, days away fromwork, restricted work or transfer to another job, medicaltreatment beyond first aid or loss of consciousness.

The OSHA Recordable Injury Case Rate measureshow frequently OSHA Recordable Injuries occur forevery 200,000 hours worked or for approximatelyevery 100 employees.

Lost Workday Case is the number of non-fatal injury andillness cases that (1) satisfy OSHA requirements forrecordability, (2) occur in the current year and (3) resultin at least one day away from work. The OSHA LostWorkday Case Rate measures how frequently new LostWorkday Cases occur for every 200,000 hours workedor for approximately every 100 employees.

Best Practices

• Asbestos management

• Bloodborne pathogens

• Confined space entry

• Crane, hoist andslingsafety

• Electrical safety

• Hazard communication

• Hot work permit

• Lockout/ tagout

• Personal protectiveequipment

• Powered industrial trucks

• Regulatory inspections

Safety Management

• Accident reporting, investigation and analysis

• Associate job safety training

• Contractor safety considerations

• Emergency response

• Occupational health program

• Property protection

• Safety and health committees

• Safety inspections

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Caring for the environment is deeply rooted in theprinciples that have guided Avon for more than acentury. At our locations worldwide, we remainfocused on ensuring compliance with environmen-tal regulations, as well as reducing our globalenvironmental footprint by reducing waste, recy-cling, and conserving energy and water. Theseefforts are not only good for the environment butalso make good business sense. Avon strives tocontinuously improve our environmental gover-nance and management systems, as a catalyst forinnovation and improved performance.

TheEnvironment

To conduct our operations in a manner that

demonstrates our respect for the environment

ENVIRONMENTAL POLICY Avon’s environmental policy emphasizes our commit-ment to safeguarding the environment. Our policyrequires that we:

• Conduct our operations in a manner that demonstrates ourrespect for the environment through the efficient use of naturalresources, waste minimization, reuse and recycling practices;

• Meet or exceed all environmental laws and regulationsof the countries and communities in which we operate;

• Continue to develop processes, practices and proce-dures that improve the environmental quality of ouroperations and our products across their life cycle,from initial design to ultimate disposal; and

• Continuously improve our environmental manage-ment system and measure progress towards environ-mental goals.

Avon’s Environmental Policy is also available at:www.avoncompany.com/responsibility/environment.html.

ENVIRONMENTAL GOVERNANCEAND MANAGEMENT The Global Supply Chain Council (GSCC), comprisedof senior operations executives, is the most senior bodyin charge of environmental affairs at Avon. Avon’sEnvironmental Leadership Team (ELT), comprised ofregional vice presidents and the Senior Manager,Global Environmental Affairs, reports to the GSCC.The ELT convenes several times a year to establishAvon’s environmental agenda, which the GSCC thenapproves and appropriates necessary resources.

The Senior Manager, Global Environmental Affairs,directs the overall environmental program, and pro-vides technical support and guidance to senior man-agement, and regional and local environmental staff.The local environmental designee at each Avon facili-ty implements the specific environmental activities andprocesses at the operating site level.

Environmental Management Systems

Avon’s manufacturing plants have environmental manage-ment systems that generally are modeled after theInternational Standard ISO 14001.

In July 2004, Avon China’s manufacturing facility receivedISO 14001 certification from the China Quality CertificationCenter. The facility has also received ISO 9001 certificationfor its quality management system. This facility was estab-lished outside Guangzhou in 1998 and has 27 productionlines. Avon plans to pursue ISO 14001 certification at threeadditional locations in the near future.

Furthermore, our Mexico operation is in the process of beingcertified in the Clean Industries Program run by the federalenvironmental agency.

Global Environmental Audit ProgramAvon retains leading environmental consultants to conductaudits of our global manufacturing operations. All manufactur-ing locations are audited every three years. The scope of theaudit includes environmental compliance and may alsoinclude management systems. Audit findings are documentedand communicated to management. If necessary, correctiveactions are implemented and monitored to resolution.

GLOBAL ENVIRONMENTAL METRICSWe track our environmental performance in four key areas:compliance, waste management and recycling, energy effi-ciency, and water management. We report here on manufac-turing plants only. Our data for Asia in 2000 and 2001includes Japan and the Philippines; our operations in Chinaand Indonesia began reporting in 2002. Data for our newestmanufacturing plant in Russia, which began operating in2004, is not included in this report.

ComplianceAvon’s policy requires locations to meet or exceed all environ-mental laws and regulations of the countries and communities

in which we operate. Our target for non-compliance violations iszero. The aforementioned Global Environmental Audit Programhelps us manage compliance.

In 2004, four of Avon’s manufacturing plants received one non-compliance violation each, all involving wastewater treatment. Allfour violations have been corrected. Total monetary penaltiesassessed in 2004 totaled $50.

Waste Management and RecyclingIn 2004, the quantity of waste generated at all manufacturinglocations increased 5% to 81.8 million pounds, compared to 77.9

million pounds in 2003. Whenmeasured against productionlevels, the quantity of waste gen-erated decreased 9.6% per unitproduced. At our U.S. locationssince 2002, we have reducedthe quantity of waste generatedby 19% per unit produced. Ourtarget is to reduce the quantityof waste generated by a further20% per unit produced by theend of 2008.

In 2004, 54% of total wastegenerated at Avon’s manufactur-ing plants worldwide was recy-cled. The recycling rate hasincreased 4% above 2000 lev-els. Avon achieved this improve-ment in recycling rates byincreasing recycling of corru-gate and paper, as well as plas-tics and solvents such as alco-

hol. Recycling efficiency is determined by calculating the ratiobetween the amount of waste generated that is recycled, to thetotal amount of waste generated. Our target is to increase recy-cling efficiency by 25% to 67.5% by the end of 2008.

AirIn the U.S., Avon has not had any air releases that are reportableto the U.S. Environmental Protection Agency since 1998, andthese are, therefore, not reported here.

2002 2003 2004

Number of Violations 9 1 4

Fines $6,600 $2,500 $50

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Avon’s Global SupplierCode of Conduct willarticulate our historicalcommitment to ethicalbusiness standardsAs a global manufacturer and marketer of beautyand related products, Avon relies on company-owned manufacturing facilities and on third-partymanufacturers to source our products for con-sumers in the global market. Sixty-nine percent ofour product line—cosmetics, fragrances, skincareand toiletries—is manufactured in Avon-ownedfacilities around the world.

The remaining 31% of our product line consists ofnon-beauty products—Beauty Plus and BeyondBeauty. Avon utilizes a variety of third-party manu-facturers and suppliers to source these products.

SUPPLIER SOCIAL ACCOUNTABILITYDuring the process of developing and executing ourintegrated supply chain transformation initiatives,we began to look at more efficient and effectiveways to manage and monitor our supplier socialaccountability program.

EnergyIn 2004, total energy consumption at Avon’s manufacturing plants increasedby 24,500 billion BTUs. This was largely due to increased energy usage inour Asia plants resulting from increased production levels. When normal-ized against production levels, energy efficiency has improved 32% since2000. Our target is to improve our energy efficiency by a further 10% perunit produced by the end of 2008.

Water ConsumptionIn 2004, total water consumption was up 11% to 539 million gallons, ver-sus 486 million gallons in 2003. Total water used per unit produceddecreased 7.4%. Our target is to reduce water consumption by a further10% per unit produced by the end of 2008.

Greenhouse GasesAs part of our environmental action plan, we established a goal to address ourgreenhouse gas emissions data from direct and indirect energy use from all ourmanufacturing plants in 2005. We plan to build on this data in future years.

PACKAGINGAvon’s Package Development Group hasbeen, and continues to be, focused onreducing the environmental impact ofpackaging in accordance with widelyaccepted packaging principles.

These principles include source reduc-tion, and use of recycled material andrecyclable packaging. Some recentexamples of source reduction include:

• Reducing the weight of the bubble bathpackage by 11%, saving 7.6 tons ofplastic;

• Reducing the weight of the hook bottleused in personal care, fragrance andspecialty bath (shower gels) by 13%, sav-ing 8.9 tons of plastic; and

• Redesigning the Skin So Soft bottle,resulting in a 28% weight reduction.

We continue to focus on improvements inthis area and look forward to reportingfuture success stories.

Previously, Avon had drawn upon aspects of external resources,such as the SA8000 workplace standard. However, as our supplychain function continued to evolve, it became clear that creating amore customized initiative better suited to our expanding globalbusiness and unique business model would be more effective.

Therefore, in 2004, Avon retained an external compliance andauditing firm to assist us in the development of a more comprehen-sive compliance and social accountability program.

We identified several objectives to help establish a managed risksupply chain that would help to minimize social and ethical con-cerns. Initiatives to support our objectives included:

• Supplier compliance with legal and ethical standards, including thedevelopment of a new Avon Global Supplier Code of Conduct;

• Mitigate risk and protect Avon assets throughout the supply chain;• Address shareholder and consumer concerns;• Establish and support sustainable compliance practices through-

out the supply chain;• Maintain appropriate working conditions for the people who

manufacture Avon’s products;• Gather performance metrics.

The initial scope of this initiative focused on Avon’s North Americanoperations, with the program scheduled to roll out in the secondhalf of 2005. The program, however, has been designed to sup-port all Avon regions, and we are planning future phased rolloutthroughout global operations starting in 2006.

Key elements of Avon’s program include:

Avon Global Supplier Code of ConductIn 2004, development began on an Avon-specific Global SupplierCode of Conduct to better reflect the company’s core values andunique corporate culture, and to facilitate its application into the com-pany’s integrated supply chain transformation initiative. Scheduledfor launch in 2005, the Avon Global Supplier Code of Conduct willapply to all Avon-owned manufacturing facilities and to all third-partysuppliers that produce goods for Avon. All suppliers will be requiredto sign an acknowledgment of understanding of, and compliancewith, the Avon Global Supplier Code of Conduct.

The Avon Global Supplier Code of Conduct will articulate our historicalcommitment to ethical business standards such as Avon’s “zero toler-ance” position on child labor practices that violate International LaborOrganization (ILO) guidelines. Specifically, the Avon Global SupplierCode of Conduct will set forth mandatory requirements covering:

• Adherence to local laws and regulations• Child labor laws consistent with ILO guidelines• Prohibition on forced labor• Discipline• Hours Worked• Wages/Benefits• Anti-discrimination• Freedom of Association/Collective Bargaining• Health & Safety• Subcontractors• Communications• Monitoring & Compliance• Ethical Practices

Consistent with our past policy, Avon will terminate the company’s rela-tionship with any business or facility that is unwilling or unable to meetthe standards of the Avon Global Supplier Code of Conduct.

Training Seminars for Avon StaffTraining seminars for Avon North America Beauty and Non-Beautysupply chain functions will be scheduled during 2005. These sessionswill focus on communicating program roles, procedures and documen-tation, the Avon Global Supplier Code of Conduct, grading methodol-ogy, industry issues, instruction of program tools using our web portal,and evaluation of results and reporting.

Training for Avon Suppliers Training seminars have been scheduled in 2005 for core NorthAmerican Beauty and Non-Beauty suppliers. The sessions are designedto communicate supplier requirements, the audit process and supplierresponsibilities regarding remediation. The Avon Global SupplierCode of Conduct will be distributed, along with a “Starter Kit” that willprovide a step-by-step guide on the verification process, and providesuppliers with self-assessment checklists to prepare their factories tomeet Avon requirements. Suppliers attending these sessions will berequired to provide Avon with a list of all of the factories that are cur-rently manufacturing for the company.

Program Process and AdministrationAvon’s external compliance and auditing firm will manage programadministration including supplier communication, supplier payment,and scheduling of audits and re-audits. Avon will review program infor-mation on a monthly basis to evaluate the progress and performanceof our suppliers.

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Audits and VerificationAll North American Beauty and Non-Beauty suppliers and their facto-ries/subcontractors will be assessed for audits in 2005. Avon’s primarycompliance and auditing firm, and two additional monitoring firms, willconduct initial audits. Audits will be supplier paid.

Remediation ProcessSuppliers will be responsible for reviewing their Corrective ActionReport and managing the remediation process under the guidance ofAvon’s compliance auditor, who will report results to Avon.

As our auditing program becomes fully integrated within our globaloperations, and we develop the appropriate metrics to evaluate andreport on supplier performance, we will make this information availablein future reports. We anticipate including data such as: number of fac-tories audited and corresponding audit results, corrective action takenand remediation results.

NORTH AMERICAN SUPPLIER DIVERSITYAvon defines Supplier Diversity as a proactive business process thatseeks to provide all certified and qualified suppliers equal access to pur-chasing opportunities. Avon understands the integral relationship thatpartnering with the multicultural and woman-owned business communi-ty brings to the mainstream of American business. We encourage sup-plier participation that is representative of the demographics of our asso-ciates and Sales Representatives in the communities in which they live.

From the launch of our Supplier Diversity program over 30 years ago,Avon has recognized that a key contributor to our success is the commit-ment to excellence of the woman and minority-owned businesses fromwhom we purchase our goods and services.

There are two main objectives of Avon’s Supplier Diversity program:

• To afford certified, qualified and competitive diverse business own-ers the opportunity to do business with Avon

• To advance the economic empowerment of diversity businesses andthe communities in which they live

In 2002, Avon appointed a Director of Supplier Diversity and SocialAccountability to continue to strengthen the company’s ongoing strate-gy of enhanced inclusion of diverse suppliers in sourcing opportunitieswithin the company’s North American business units.

In 2003, Avon launched a web-based data portal to proactively identi-fy and store information on certified minority- and women-owned busi-

nesses across the United States. The portal allows suppliers to register theirbusinesses by completing a Supplier Profile as the first step in establishinga relationship with Avon.

Avon uses the Supplier Profile forms as the main vehicle to evaluate thesuppliers’ qualifications, capabilities, geographic capacity, financial sta-bility and years in business. Once the evaluation is complete, the supplierbecomes part of Avon’s database and is notified of appropriate sourcingopportunities open for bid.

Avon requires all minority- and women-owned businesses to be certifiedby at least one of the following organizations: the National MinoritySupplier Development Council, the Women’s Business EnterpriseDevelopment Council or the Small Business Administration.

For more information on our supplier diversity program, please visitwww.avonsupplierdiversity.com.

Further, through the Office of Supplier Diversity, Avon maintains aninternal council of purchasing professionals from each of the compa-ny’s North American locations, whose role is to ensure inclusion ofminority- and woman-owned businesses in the procurement process intheir locations. This council is the foundation of the company’s internalSupplier Diversity effort. Each Avon location has specific goals andobjectives to meet, and the respective council member’s performanceagainst these objectives is measured and accountable through theirannual individual performance reviews.

Avon’s Office of Supplier Diversity continually works with individuals,organizations and communities to develop and increase opportunities fordiverse business owners (i.e., minority- and women-owned). For example,in 2003, Avon’s North American Supply Chain placed $53 million, or12%, of its total addressable purchasing spend (i.e., spend for goods andservices that has been identified, benchmarked and is considered influen-tial) with over 400 diverse suppliers and increased spend in 2004 to nearly$79 million, or 13%.

Going forward, with the help of enhanced electronic tools and report-ing capabilities, we will report on total corporate purchasing spendbeginning in 2005. Further, over the next five years, Avon is committedto increasing diversity purchasing spend with diverse suppliers to anestimated $400 million.

Avon North America is a Corporate Member ofthe Women’s Business Enterprise NationalCouncil and the National Minority SupplierDevelopment Council.

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Avon’s founding principle “to meet fully the obligations of cor-porate citizenship” is exemplified through our active globalcommunity outreach. Avon has raised funds and awareness forbreast cancer and women’s empowerment in some 50 coun-tries worldwide. Our best-known activity in this area is throughthe work of the U.S.-based Avon Foundation, a 501(c)(3) pub-lic charity, and its Avon Breast Cancer Crusade program.

Further, the Avon Foundation acts as a “center of excellence”establishing corporate philanthropic guidelines. It also supportsinitiatives in other countries by providing its expertise and insti-tutional experience in an advisory capacity, when needed.

However, a more complete description of our total communityoutreach activity should also take into account significant con-tributions from corporate, regional and country initiatives andby Avon associates and Sales Representatives worldwide. Forexample, in the United States, the Team Avon Helping HandsProgram, an initiative of the Avon Foundation, develops andpromotes volunteer opportunities for associates interested inbecoming involved in community activities.

Avon’s major philanthropic and community activities are: • Breast Cancer Crusade;• Speak Out Against Domestic Violence;• Women’s Empowerment/ Educational Scholarships; and• Responding to National and International Emergencies.

“AVON BREAST CANCER CRUSADE”The best-known program under the umbrella of Avon’s globalcommunity outreach is the Avon Breast Cancer Crusade. TheCrusade funds breast cancer education and awareness, screen-ing and diagnostics, support services, access to care and med-ical research, with a focus on the medically underserved,including low-income individuals, minorities, the elderly andthose without adequate health insurance. The goal is to breakbarriers and make medical care accessible for all, while seek-ing to eradicate breast cancer. The Avon Breast CancerCrusade receives support from Avon Products, Inc., includingthe sale of Pink Ribbon Products by Avon Sales Representatives.Both Avon Products, Inc. worldwide and the Avon Foundationundertake public fundraising through events and programs,including the U.S. Avon Walk for Breast CancerSM.

CommunityOutreach

To meet fully the obligationsof corporate citizenship by

contributing to the well-beingof society and the environ-ment in which it functions

Originally launched in 1992 in the United Kingdom withthe creation of a breast cancer fundraising pin, the AvonCrusade through 2004 raised and awarded more than$350 million worldwide for “access to care and finding acure” for breast cancer. In countries such as Australia,Brazil, Chile, China, Czech Republic, India, Italy, Japan,Malaysia, Mexico, Russia, Spain and the U.S., Avon pro-duces walks, runs, concerts and other special events, andfundraising products. These raise much-needed funds,increase awareness of the issue of breast cancer and earlydetection, and mobilize hundreds of thousands of peopleto take personal action in the fight against breast cancer.In some cultures such action, especially among women, isnovel and groundbreaking.

Our work on breast cancer has been recognized by externalorganizations in several countries. Examples are:

• Avon Central America received the 2004 Contribucióna la Communidad (Contribution to the Community)Award from the American Chamber of CommerceGuatemala for contributions to the development andsocial welfare of women

• In the Czech and Slovak Republics, Avon was recog-nized for groundbreaking outdoor advertising (billboards)that brought new and unprecedented focus on the issue ofbreast cancer, a traditionally taboo subject. In both coun-tries, startling visuals and bold copy challenged viewersto face the issue of breast cancer and take personalaction for early detection

In addition to awards from external health and civicorganizations, the internal Avon Vision Award annuallyrecognizes the Avon country that best represents the goalsand principles of giving back to society. In 2004, the win-ner was Avon Spain in recognition of its long history ofleadership in both women’s health and empowerment,including funding for breast cancer programs and awardsfor women leaders.

In the U.S., funds raised by the Avon Crusade currently sup-port more than 100 community-based organizations, adozen leading cancer centers, hundreds of researchersand much more.

“SPEAK OUT AGAINST DOMEST IC V IOLENCE SM ”In July 2004 the Avon Foundationannounced a new initiative, “Speak OutAgainst Domestic ViolenceSM,” whichexpands and coordinates Avon’s longstand-ing support for local programs that seek tocombat violence against women. We sup-port awareness, education and prevention,and direct service programs for victims. As

with the Avon Breast Cancer Crusade, the goal is to expand theprogram worldwide and mobilize Avon resources to help end thesilence and break the cycle of violence against women. We recog-nize that this campaign may be controversial in some countriesand cultures, but it is our belief that a woman’s right to safety is auniversal human right.

In the first year of Speak Out, Avon developed a fundraisingbracelet to raise awareness and funds for domestic violence; part-nered with actress and film producer Salma Hayek on a fundrais-ing film premiere; created educational literature and public serviceannouncements; and awarded grants for education, awarenessand services for victims. The Speak Out program will continue toexpand within the U.S. and worldwide.

WOMEN’S EMPOWERMENT/ EDUCATIONAL SCHOLARSHIPSAnother element of Avon’s community outreach is women’s empow-erment through education, which has been the cornerstone of theAvon Foundation since its founding in 1955. We have funded arange of women’s empowerment causes, including career develop-ment seminars, mentoring, educational support, counseling and life-skills training for both women and girls. Since public recognition andcultural acceptance are also important platforms for women’sadvancement, Avon recognizes leading women entrepreneurs withWomen of Enterprise Awards. In countries such as Poland andRussia, these awards identify and celebrate women who have over-come obstacles and built successful entrepreneurial businesses,paving the way for greater success for the women who follow them.Since 1979, Avon Japan has honored women who have made sig-nificant contributions to social causes with the Avon Awards forWomen program. Similarly, Avon Spain recognizes women whoexcel in science and sports through the Women In Action award.

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In the U.S., the Avon Foundation has a college scholarshipprogram for the children of Avon associates and for inde-pendent Avon Sales Representatives. A college scholarshipprogram is also available for children and grandchildren ofSales Representatives who are President’s Club members.

RESPONDING TO NATIONAL ANDINTERNATIONAL EMERGENCIESIn immediate response to the tsunami tragedy in Asia in lateDecember 2004, Avon awarded $50,000 to relief andrebuilding efforts, and laid plans for substantial global pub-lic fundraising in 2005. Support was focused on women andchildren through long-term aid organizations that providemedical care, shelter, food distribution, education for chil-dren, and help to reunite families and create stronger com-munities. The Heart of Asia pin was launched in more thana dozen countries to help raise funds. Over $1 million wasraised and donated for relief efforts, including a $500,000additional donation from Avon and $600,000 raised frompin sales, and the fundraising is ongoing.

In response to the military action in Iraq and Afghanistan,Avon established the Yellow Ribbon Fund in 2003 with fundsraised through the sale of a Yellow Ribbon pin by Avon SalesRepresentatives. The nearly $3 million raised was awardedby the Avon Foundation as direct financial assistance to fam-ilies who have lost loved ones in the line of duty, and to helpwith the construction of “Fisher Houses” on the grounds ofmilitary medical centers, which provide free housing for thefamilies of service personnel undergoing medical treatment.

In an effort to assist the victims of the September 11, 2001tragedies, the Avon Foundation established its Heart ofAmerica Children's Charity in 2001. The nearly $7 millionraised by sales of the Heart of America pin were directed toeducational institutions, after-school programs and children'sprograms that provide counseling, safety education, andchildcare, as well as direct financial gifts to the spouses andchildren of those killed in the terrorist attacks.

As a global corporate citizen, Avon will continue to apply ourresources to disasters and emergency situations in the future.

Avon Hungary Walks for LifeIn early June 2004, Avon Hungary sponsored its fourthannual One Day Walk for Life, a unique event for Hungaryinspired by successful Avon Walks in the U.S. The walkbegan in Szentendre and followed the Danube River, end-ing in Budapest. Individual participants were asked to col-lect at least 6,000 HUF ($30 U.S.); teams of 10 walkerswere asked to collect 50,000 HUF ($250 U.S.).

The event drew more than 2,800 walkers who raised 11 mil-lion HUF (almost $54,000 U.S.), making this the most suc-cessful walk since its inception. The funds raised supported thepurchase of a replacement mammography machine for oneof the largest screening centers in Hungary—the Hospital ofZala County—where mammography had not been performedsince 2003 when their only machine broke down.

In May, Avon Hungary donated 50 million HUF ($250,000U.S.) for breast cancer research. To further support medicalresearch, Avon Hungary is partnering with the EuropeanAcademy of Gynecological Cancer to offer professional sci-entific groups in Hungary the opportunity to compete foradditional breast cancer funding grants. Avon Hungary alsosponsored an edition of From Breast Cancer to Everybody,a book on breast cancer geared toward all women that waspublished in October to help advance much-needed breastcancer education and awareness.

Avon Mexico Supports 10 Years of Fighting Breast CancerIn 2004, the Avon Mexico Crusade Against Cancer inWomen celebrated its 10th anniversary. Two fundraisingwalks to mark the anniversary, one in Mexico City and onein Monterrey, attracted more than 8,500 women partici-pants. Avon Mexico awarded funds to the Fundación Cima;Grupo Reto; the Mexican Association for the Fight againstCancer; the National Cancer Institute; and the HealthDepartment. To date, Avon Mexico has raised over 74 mil-lion pesos (about $6.3 million) that have been directly chan-neled to the fight against women’s cancers.

Increasing Awareness by Wearing our Heartson our SleevesFor many years, Avon has utilized special products around the world tohelp generate the funds for our philanthropic campaigns such as breastcancer, tsunami relief and similar causes. We develop pins, bracelets,necklaces and other products that help our customers to communicatetheir commitment to a cause, while giving them the ability to support thecause through the purchase of affordably priced products.

One very successful model has been the “Pink Ribbon Products” of theAvon Breast Cancer Crusade. We manufacture and market these productsto consumers through our Sales Representatives and on our websites. All(100%) of the net proceeds from sales of Avon Crusade fundraising prod-ucts support the Avon Crusade mission to fund access to care and findinga cure for breast cancer. For example, 87% of the purchase price of theAvon Breast Cancer Crusade Pink Ribbon Necklace is returned to thebreast cancer cause, with 13% covering the cost of goods.

Avon makes no profit from the sale of these products, and Avon SalesRepresentatives have foregone their commission so that the maximumamount can be donated.

THE AVON FOUNDATIONThe Avon Foundation, a 501(c)(3) public charity, was launched inthe U.S. in 1955 with an initial scholarship of $400. In 2005 theAvon Foundation will mark its 50th anniversary, dedicated to themission to improve the lives of women. In 2003 and 2004 alone,the Foundation grants for breast cancer, domestic violence and inter-national emergencies totaled nearly $53 million. Beneficiariesranged from leading cancer centers to community-based nonprofitprograms. With the launch of Speak Out Against DomesticViolencesm, the Avon Foundation’s efforts to combat domestic vio-lence will increase.

U.S. fundraising programs are driven by an effective partnershipbetween the Avon Foundation and Avon Products, Inc., which devotesextensive resources to the Avon Foundation and donates all net proceeds(above cost of goods) from fundraising products to the Avon Foundation.

The range of U.S. fundraising programs include the Avon Walk forBreast Cancersm series, special products, an annual gala event, ben-efit events produced by outside parties, and corporate and individ-ual donations. Much of the Foundation’s overhead, includingsalaries, office space and operating expenses, is covered by AvonProducts, Inc., and Avon corporate staff provide a variety of criticalservices at no cost to the Foundation. While the Foundation is a U.S.entity, Avon’s global community outreach, including the mission,strategy and program concepts, are guided by the Foundation toensure focused and consistent efforts.

The Avon Foundation also fosters a culture of giving and philanthro-py at Avon through a number of internal initiatives. In addition to theTeam Avon associates volunteer program, there is a matching giftprogram to match personal charitable donations by Avon associatesto qualified organizations, and an annual Avon Associate GivingProgram that promotes and coordinates charitable donations byAvon associates.

The Avon Foundation adheres to strict standards in financial reportingas part of its responsibility to public funds and public trust. The AvonFoundation engages an outside auditing firm that specializes in auditsof not-for-profits. Upon completion of its audit, the outside auditingfirm expresses an unqualified opinion on the Foundation's financialstatements. The Avon Foundation also has an active audit committeeto oversee the integrity of the Foundation's financial statements, con-trols, disclosures, compliance with legal and regulatory requirements,and the qualifications and independence of the Foundation's internalaudit functions and its independent accountants. The AvonFoundation Board of Directors reviews interim financial statements ona regular basis. Details on Avon Foundation programs, grants, finan-cial reports and guidelines can be found at www.avonfoundation.org.

for reading Avon’s first Corporate Responsibility Report. We hope it hashelped illustrate how our commitment to the well-being of society isengrained in our values, helping us balance short-term returns with long-term goals. By making the world a better place we ensure that, ultimately,we have a better place in which to conduct business and live our lives. For Avon, corporate citizenship isn’t just about our obligation to be a goodneighbor and a productive member of the global community; it is a way for us to improve the lives of women and their families.

We welcome your feedback on this report. Please contact us via our corporate website at www.avoncompany.com/responsibility or write:

Avon Products, Inc.Corporate Responsibility Report1345 Avenue of the AmericasNew York, NY 10105

Thank you

Kathleen WalasCorporate Social Responsibility Officer, Avon Products, Inc. and President, Avon Foundation

avoncompany.comAvon 2004 Corporate Responsibility Report

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