Mondelēz International’s Corporate Social Responsibility Program

PROGRESS Program for Responsible Sourcing

Mondelēz International’s Corporate Social Responsibility Program

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WHAT IS PROGRESS?

PROGRESS

Program for

Responsible

Sourcing

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Responsible sourcing is the process of

purchasing goods & services without

causing harm to, or exploiting, humans

or the natural environment.

CORE RESPONSIBLE SOURCING STANDARDS & PRINCIPLES

1.Legal Compliance

2.Forced Labour

3.Wages and Benefits

4.Hours of Work

5.Freedom of Association

6.Child Labor

7.Discrimination

8.Abuse of Labor

9.Health and Safety

10.Environment

11.Bribery and Corruption

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AIM-PROGRESS Global forum of consumer goods manufacturers and suppliers

assembled to enable & promote responsible sourcing practices

Sponsored by the Grocery Manufacturers Association (GMA) and the European Brands Association (AIM)

30+ Companies

Representing > USD$ ½ Trillion annual revenue

www.aim-progress.com

AIM-PROGRESS OBJECTIVES

To promote responsible sourcing through common, or mutually accepted

Supply Chain Standards

To increase efficiency by sharing data – “an audit for one is an audit for all”

To seek convergence with other similar initiatives

Purpose

• Reduce Audit Fatigue through mutual

recognition of assessments • Reduce duplicative costs throughout

supply chain • Align standards and share best

practices

Mondelēz International’s Corporate Social Responsibility Program

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WHY IS RESPONSIBLE SOURCING IMPORTANT ?

Builds & protects reputation with:

Consumers

Regulators

Investors

Increases employee morale and productivity:

Improves retention rates

Lower overtime

Reduces health and safety incidents

Reduces quality rejections

Is a sustainable foundation for growth

Is “the right thing to do!”

The reputation of our brands is hard to build but easy to lose…and when lost, the entire supply chain suffers!

How do we ensure CSR & Responsible Sourcing are embedded into how we do business?.....

Mondelēz International’s Corporate Social Responsibility Program

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Mondelēz International’s CSR SUPPLIER EXPECTATIONS

All Business Partners must agree to the Mondelēz International’s CSR Supplier Expectations

All Directs (Packaging, Ingredients & Commodities), External Manufacturers and Promotional Goods Supplier Sites must register in SEDEX, complete the self-assessment questionnaire (SAQ), which should be reviewed and updated annually & give access to Mondelēz International

Upon request by Procurement, Directs (packaging & ingredients) and Promotional Goods Supplier Sites must obtain (or provide access to an existing) CSR (SMETA) Audit and post the AUDIT to SEDEX and complete any required corrective actions

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Mondelēz International’s Corporate Social Responsibility Program

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SEDEX Process Flow at Mondelēz International

• The SEDEX system

automatically assigns a

HIGH/MEDIUM/LOW risk

rating to each completed

SAQ

• Assessments are

reviewed with the

suppliers as necessary to

understand factors

driving high risk ratings

Risk Assessment

• Suppliers complete SAQ: Self

Assessment Questionnaire in

SEDEX for each manufacturing

site supplying to Mondelēz

• The SAQ provides a foundation

awareness for ethical practices

and is a pre-audit capability

building exercise

Supplier Site SAQ

• Buyers engage Suppliers to

register in the third party SEDEX

database –

• Suppliers link their manufacturing

sites to Mondelēz International

• Cost to the Supplier ~$55 US

per site annually

Supplier On-Boarding

1.Buyers communicate the audit

requirement to Suppliers

2.Suppliers schedule and

engage with approved third

party auditors

3.Auditors upload results into

the SEDEX system

4.Suppliers are to inform Buyers

upon completion and share

results

• Suppliers pay for all audits

Ave cost: ~$3000 US/audit

3rd party Audits

• Suppliers work with

Auditors to address

identified issues. Re-audits

are scheduled by suppliers

as needed

• Unresolved audit non-

conformances are

addressed by Mondelēz

International Buying Teams

and Businesses

Corrective Action

The Self Assessment

Questionnaire (SAQ)

covers four areas of

CSR:

• Labor

• Health and Safety

• Environmental

• Business Integrity

Appendix – detailed process description

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PROGRESS and SEDEX Commitment

• As Mondelēz International we, along with our major customers, consumers, and investors, expect high standards for corporate social responsibility (CSR) and ethical sourcing. We expect the same level of commitment from our suppliers.

• Suppliers hear about our expectations related to PROGRESS and SEDEX through several channels including (click links for more detail):

• Our SQE manual (2013 update)

• Company website – supplier expectations

• Supplier forums and training events

• Contractual agreements

• AIM-PROGRESS website

• SEDEX website

• Our approach to CSR continues to involve the SEDEX process as a industry standard for assessments and ethical trade audits. One major benefit of the SEDEX process is one audit for all versus custom audits for each group which requests.

7.1.4 Corporate Responsibility

Mondelēz Global contract provides the core commercial

terms and also incorporates our corporate responsibility

expectations such as legally enforceable provisions on child

labor and worker safety among other expectations.

To assess the Supplier’s Corporate Responsibility, MG

partners with other companies in an initiative called

PROGRESS. This industry initiative allows a supplier to

provide common information to its customers so each

customer can independently reach business decisions in

accordance with its own corporate responsibility standards.

For more information about the broader industry initiative on

PROGRESS, visit www.aim-progress.com.

Under this Program, Suppliers must submit the information

and assessments requested to the SEDEX database

(www.sedexglobal.com). The Suppliers selected to register in

PROGESS will receive further communication from MG

detailing the actions that must be taken.

SELF-ASSESSMENT & DATA EXCHANGE

SEDEX Members

• Online tool that enables global suppliers to share assessments and audits on ethical and responsible practices with their customers and avoid duplication

• Common tools to enable companies to analyse and assess risks:

– SAQ – self assessment questionnaire

– SMETA – Sedex Members Ethical Trade Audit

Non-SEDEX Members

• Company Protocols

• Benchmarked against each other and SMETA

– For Instance, The Coca-Cola Company uses The Supplier Guiding Principles (SGP)

Sedex does not… • set policy

• pass, fail, certify, or score suppliers

• conduct social audits

• issue certificates

• promote suppliers

www.sedexglobal.com

RESPONSIBLE SOURCING CONTINUUM

Step 1:

Suppliers Engaged

by A-P Company

Step 2:

Supplier Self

Assessment (if

applicable)

Step 3:

3rd Party

Assessment

Step 4:

Corrective Action

Plan

Independent Activity

Independent

Activity

Creates synergies: data can be shared among various customers, since AIM-

PROGRESS members mutually recognize 3rd Party Assessment to avoid duplication

Common Activity

Common Activity

SUPPLIER SELF-ASSESSMENT

A self-assessment questionnaire is a useful tool to help suppliers and buyers assess overall capabilities and ensure processes are in place to manage.

If applicable, the Sedex self-assessment covers the following:

Site Profile

Labor Policy & Standards

Health & Safety, Hygienic Assessment

Business Integrity (anti-corruption)

Environmental Stewardship

Step 2:

Supplier Self

Assessment

ASSESSMENT OVERVIEW – 4 PILLARS

Labor Standards

Health & Safety

Environment Business Integrity

LABOR COMPLIANCE

Common Assessment Topics:

Examples of Common Findings:

• Workers do not receive rest days

• Excessive overtime – hours worked exceed legal limits

• Insufficient overtime pay

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Forced Labor Hours of Work

Wages & Benefits Freedom of Association

Child Labor Discrimination

Abuse of Labor

HEALTH & SAFETY Common Assessment Topics:

Examples of Common Findings:

• Exit doors and aisles are blocked or locked

• No fire alarm system or system is inadequate

• Personal Protective Equipment (PPE) not provided or not used

• No emergency lighting

• Inadequate safety training

• Machines do not have safety guards

• Unmarked emergency exits

• Fire extinguisher issues

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H&S Training Chemical Handling

Blocked Aisles/Exits PPE /First Aid

Licenses/Certificates Electrical Safety

Emergency Preparedness

ENVIRONMENT Common Assessment Topics:

Examples of Common Findings

• Improper waste management

• Permits/Licenses not available

Common Assessment Topics:

Examples Finding:

• Bribe offered to auditor or local authority

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BUSINESS INTEGRITY

Air Emissions Hazardous Material

Waste & Waste Water Trtmt Inspections

Evidence of Bribes Evidence of Fraud

Grievance Procedure Policies/Procedures

3rd PARTY ASSESSMENTS

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• Audits are conducted by independent, accredited professionals (examples include Intertek, UL, SGS, BV, Level Works)

Who conducts the audits?

• Auditors are independent and impartial professionals trained to evaluate compliance to laws and responsible sourcing standards.

What is the role of the auditor?

• Suppliers pay for the audits as this allows them to own the data and share the reports with multiple customers through AIM-PROGRESS

Who pays for and owns the audit?

• Process and protocols are in place to ensure no personally identified information leaves the facility.

• Goal of assessment is to protect employees not infringe on privacy

Does an audit adhere to Privacy Protection laws?

• There is no comprehensive standard (yet) that covers all the 4 Pillars

• Standards that are relevant to an individual pillar e.g. OHSAS 18001, would be taken into account during the audit process

• Other audit protocols e.g. SA8000, may be acceptable if conducted by an independent 3rd party auditor and within a reasonable timeframe.

• Check with your customer for specifics

Are other standards acceptable (ISO, SQF, SA8000, etc)?

Step 3:

3rd Party Assessment

Common Method

3rd PARTY ASSESSMENTS

Time Assessment Process Key Staff

45 Min Opening Meeting

Explanation of the audit scope, deliverables and process

Review of your self-assessment information off SEDEX

Review of the document request list

Identification of documentation to be prepared for review

Site Manager, HR

and EHS Manager

1 hour Site Inspection: Understanding site areas Site & EHS Manager

2 hours Document Review

Review of management documentation

Review of employee personnel files

Review of wages and payroll related information

HR Manager

Payroll Clerk

EHS Manager

3 hours Interviews with production employees Floor Staff only

30 min Secondary Site Inspection/Misc None

30 min Preparation of Onsite Report None

30 min Presentation of Onsite Report to Management Site, HR, EHS Manager

Step 3:

3rd Party

Assessment

Common Method

• Assessment duration varies depending on size of facility and scope of production. In general, two auditors spend one day in a facility, but can take up to 4 person days

How long does the audit take?

CORRECTIVE ACTION PLAN

Non-compliances identified must be addressed through Corrective Action Plans

Timeframe and follow-up methods depend on the type of issue and the severity

Desk based verification vs. follow-up visit

Critical, Major, Minor categorization of issues

Individual buying companies determine the corrective action plans

Step 4:

Corrective

Action Plan

CONCLUSION

Responsible Sourcing is a growing movement and is critical to maintaining a positive reputation and meeting customers demands.

This as an opportunity to grow our business together with our suppliers in a sustainable and responsible manner.