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SUSTAINABILITYReport

di Sostenibilità

REPORT

REPORTdi Sostenibilità

2012

SUSTAINABILITYReport

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The key points of our corporate identity

Business development objectives

Evolution of the company organisation

The sustainability strategy: the company’s approach and the Strategic Sustainability Plan

Our stakeholders

Lavazza’s sustainabilityapproach

1.2.1

1.2.2

1.2.3

1.2.4

1.2.5

1

Lavazza Our daily work and our goals

Creating value over time

Vision, Mission and Values of the Lavazza World

Lavazza’s business: markets, products and results Governance and Group structure

1.1.1

1.1.2

1.1.3

p. 20

p. 22

p. 26

1.2

1.1 Working at Lavazza

Turin and Lavazza: shared projects and initiatives

2.2.1

Group Commitment to local communities

Snapshot of Lavazza employees

Responsible approach to employment

Looking to the future

2.1.1

2.1.2

2.1.3

2.1

2.2

2

p. 28

p. 29

p. 30

p. 30

p. 32

p. 20

p. 12

p. 28

p. 41

p. 44

p. 47

p. 52

p. 40

p. 36

p. 52

Lavazza World Our People and our roots in Italy

C O N T E N T S

Coffee origins

3

CoffeeLavazza’s core business

3.1 p. 62

p. 58Introduction p. 6

Report Parameters: Scope of the report

p. 10

The commerce of coffee3.2 p. 68

Certified coffee3.3 p. 70

C O N T E N T S3

Glossary p. 141

IndipendentAssurance Report

p. 150

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Supply chain management

Values and commitments

5.1

5.2

5

p. 108

p. 104

p. 111

Lavazza Suppliers Stakeholder engagement

R I O

Energy and water consumption

6

Respect for the environmentMinimising the impact of production processes

Waste management 6.2

6.1 p. 118

p. 114

p. 122

p. 136

The quality of the products

A sustainable approach

Coffee and climate change

Packaging eco-design

Innovation in closed systems

The “environmental identity card” of our products

4.2.1

4.2.2

4.2.3

4.2.4

4.2.5

Product innovation

The Lavazza Quality System

Research programmes to protect consumer health

Sharing and listening to ensure ongoing improvement

4.1.1

4.1.2

4.1.3

4.1

4.2

4

p. 76

p. 80

p. 83

p. 89

p. 92

p. 94

p. 98

p. 102

p. 76

p. 72

p. 86

The product Excellence and innovation

Investments in the future5.3 p. 112

8

A continuous improvement process Lavazza sustainabilityobjectives

Synergies with other actors in thesupply chain The Coffee & Climate project

7.1.1

7.12

7

p. 132

p. 135

p. 130

p. 126The Commitmentof the LavazzaFoundation Valorizing coffee producing communities

7.1 The Lavazza Foundation’s objectives, approach and projects

2 0 1 2 // A N N O Z E R O I N T R O D U C T I O N76

Sustainability:a family value

in which it operates. Our new headquarters will be a tangible proof of this: built in line with environmental excellence criteria, aimed at requalifying an urban area and creating shared spaces, whilst involving the people who leave in the surrounding in all faces of the project.This document is a whole new chapter in the history of Lavazza, an important, significant and collective part of the journey of our family as well as our business; a chapter that launches us into the future. This Sustainability Report is the first account of our results and of our commitment to continuous improvement and positive change, to giving even greater significance to our story, which we hope will continue long into the future.

Alberto Lavazza, Chairman Luigi Lavazza S.p.A.

Lavazza has a long and vibrant history. It is the history of our family, and it is the history of a company that for almost 120 years has promoted a business vision that focuses on passion for what we do, for the product and for the communities in

which we work. This is the corporate vision that Luigi Lavazza had back in 1895, and four generations of entrepreneurs have worked together to do it justice. The concept of sustainability and the value of respect for those who work and partner with us has been part of our company’s DNA right from the start. Emilio Lavazza called this doing business “with your heart”. It is how we have been able to develop Lavazza over time: our entrepreneurial path is a good example of sustainability in the broadest sense of the term, a value we have built and shared with all our stakeholders. .

The company’s growing size, the evolution of the supply and an increasingly globalised environment have naturally led us to take a more structured approach to sustainability. It is becoming increasingly important to create instruments that can support us as we continue to translate our value system into practice, to face growing internal and external complexities.

We can provide many examples of how shared company awareness has become a path to corporate sustainability, and many of them will be mentioned throughout this document. First, I would like to share two particular experiences.

Lavazza has always been attentive to human, environmental and cultural capital in the countries in which it works. Through the Lavazza Foundation, this attention has taken the form of practical interventions in favour of various communities of coffee growers. The primary goal of the Foundation’s projects is to contribute to transferring technical know-how to small coffee growers, which contributes to reinforcing three hundred and sixty degree to approach to sustainability.

As a responsible business actors, Lavazza is engaged in and aware of the communities

2 0 1 2 // A N N O Z E R O 98

Corporate social responsibility: a driver for business competitiveness

I N T R O D U C T I O N

Lavazza has always given great importance to stakeholder engagement and to the interconnection between economic, social and environmental dimensions. This is crucial for the future of the company.

Our sustainability commitments for the future will be directed to minimising the environmental impactof production processes, valorizing the relations with internal and external stakeholders and guaranteeing product sustainability.

This document is a first step in the sustainability reporting process. Such a significant objective requires the commitment of the entire company, regardless of roles and skills: it is a cross-company project that must involve and impact every business area.

The creation of shared value and the recognition of the common goal of improving the context in which we do business cannot but make us more aware and therefore more competitive, contributing to guaranteeing a solid future for Lavazza.

Antonio Baravalle, CEO Luigi Lavazza S.p.A.

The future is wide open, and it depends on us, on all of us. It depends on what you and I and everyone else does and will do: today, tomorrow and the day after tomorrow. And what we do and will do depends in turn on our thoughts and

desires, our hopes and fears. It depends on how we see the world, and how we view the possibilities of the future, which are open. Karl Popper

This is true for people as well as for organisations and companies, which are called to carefully reflect on how to face the challenges of the future. It is true in all sectors including ours, in which aside from general economic pressures, demand is becoming increasingly sophisticated. Coffee consumers expect a product that combines excellence, innovation, cost-effectiveness and responsibility, which Lavazza can offer thanks to its knowlegde and passion built over the decades.

The Lavazza brand is very well known on an international level and is clearly perceived as a symbol of authenticity, made in Italy, expertise and credibility. This does not mean we should stop; today is increasingly the time to innovate and valorize the opportunities that the future offers.

It is in this context in which Lavazza presents its first Sustainability Report; a significant milestone strictly linked to the definition of the Strategic Sustainability Plan which involved all main stakeholders. This document clearly outlines Lavazza sustainability process thus increasing internal and external awareness on the topic.

Sustainability is part of radical strategic reconceptualisation we have recently undertaken and is integrated in all areas of our business. Sustainability is crucial for company development: it is integrated in the Lavazza’s DNA and is increasingly becoming a competitive advantage.Already in 2012 Lavazza confirmed its solid capital strength and good industrial productivity.

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T o p i c s d i s c u s s e d

The following key sustainability issues are addressed at length in this Report, because they have been deemed most relevant for stakeholders and have the greatest impact for our business development strategies:

product quality and safety for end consumers;

sustainable product innovation and packaging eco-design;

reduction of the environmental impacts of our production processes;

safeguarding employment;

the valorisation of human resources;

the promotion of health and mental and physical well-being at the workplace;

sharing our know-how concerning products and the culture of coffee with customers and trade partners;

collaboration and networking with peers and universities to promote research and innovation;

compliance with human rights principles throughout the supply chain;

projects supporting the development of coffee producing communities;

value creation by the company in the areas where it operates;

strengthening our presence in foreign markets;

Group competitiveness and profitability.

T i m e f r a m e a n d s c o p e

To prepare this Report, we relied on data from 2012.But given that Lavazza is experiencing a time of profound change, it was also considered appropriate to talk about internal evolutions, particularly those relating to sustainability, even if they took place in 2013, to present a more up-to-date snapshot of the company. Lavazza intends to report on its efforts and the results it has achieved in strengthening business sustainability on a yearly basis.

This edition of the Sustainability Report primarily focuses on the activities managed by the head office and the Italian production plants but also contains a few remarks on the foreign subsidiaries and the Group’s non-European activities.The quantitative data provided in the document refer to Luigi Lavazza S.p.A., unless otherwise specified.

Luigi Lavazza SpA includes: - the Turin headquarter and Innovation Center; - production plants of Torino, Gattinara, Verrès and Pozzilli.The quantitative data in Chapter 6 refers to Italy based production plants with the exclusion of Pozzilli, not productive during the reporting period, unless otherwise specified.

The data source is Luigi Lavazza S.p.A., unless otherwise specified.

D o c u m e n t o b j e c t i v e s

This Sustainability Report aims at reporting the company’s achievements and future goals in the areas of economic, environmental and social sustainability.

D e f i n i n g t h e c o n t e n t

Contributions to the planning and writing of this document came from across the organisation. This Sustainability Report is the result of an organized process in which we identified the sustainability issues which impact daily operations and assessed their relevance in terms of our stakeholders’expectations.

We identified the topics to be addressed in the Report by conducting activities in various areas: a close analysis of external sources such as media, consumer analysis and benchmarks of similar businesses;

meetings with the company management issues; international sustainability reporting standards; key themes and performance indicators were selected on the basis of the (Global Reporting initiatives guidelines [GRI 3.0]) were used to structure this report. This approach allowed us to identify key issues and develop performance indicators.

topics that Lavazza is invited todiscuss in academic contexts, feedback from institutional roundtables in which the Group participates, questionnaires received from current and potential customers to address and assess the sustainability of our activities, reports from visits at our suppliers and news articles.

M E T H O D O L O G I C A L N O T E

1

2

3

4

5 6

7

8

Glossary

LAVAZZAOur daily work and our goals

1

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More than 3.600 employees

4

production plants in Italy (Turin, Gattinara, Verrès, Pozzilli) and 2 abroad (Tres Rios, Brazil and Chennai, India)

97% of staff has long-term employment contracts

1st

ranking company in the list of the world’s largest single-product companies

2,4 million bags of green coffee purchased in one year

17 billion cups of Lavazza coffee consumed in the world in one year

47.897

customer and consumer requests responded to by our Customer Care team

86%

of turnover for the purchase of products and services from Italian suppliers (excluding the green coffee supply)

1,185 million euros in investments into the community

Turnover2010 2011 2012 million euros

€ 1.146,8 € 1.268,1 € 1.330,7

HIGHLIGHTS

C H A P . 1 L A V A Z Z A T H E C O M P A N Y1 5S U S T A I N A B I L I T Y R E P O R T // 2 0 1 2 1 4

The history of Lavazza is first and foremost the story of a family that has cultivated a passion for the Italian coffee culture for four generations. This is what it has been doing for almost 120 years, with a relentless desire to innovate.

It was 1895 when Luigi Lavazza took over a grocer’s shop in the heart of Turin and founded the small company that bears his name. Amongst the products for sale, coffee was what intrigued him the most: an exotic product, carrying the splendour of faraway lands, as of yet unknown by most Italians. Luigi Lavazza studied it diligently and soon became interested in the roasting process and tasting techniques. He then had an idea, one which would transform his small grocery into the largest coffee company in Italy: he would blend coffee of various origins to obtain the fullest and most harmonious flavour, and in doing so he revolutionised tastes at a time when it was more common to consume coffee of a single type. In 1914, the Lavazza grocery employed over 40 staff and the Via San Tommaso 10 location soon

became too small. So, Luigi Lavazza purchased land on Corso Giulio Cesare, which would become the headquarters of the first production plant. The company strengthened the production system: it was preparing to become the most well-known and appreciated coffee roaster amongst Italians. Product packaging innovations made it possible to extend coffee shelf life and therefore expand the range of distribution, which gradually reached a national level. Later, a new and innovative production process was introduced in order to support production increase and business development plans.

At the same time, in an effort to make the company name and its product a familiar presence in all Italian homes, an image and brand were created that were to become a veritable icon of Italian popular culture. Already in the 1950s, the company began using the unmistakable Lavazza logo with the slanted letters converging towards the large “A” in the centre, a brand that would soon conquer the hearts and minds of Italians

thanks to the successful Caballero and Carmencita advertising campaign. In the 1960s, Lavazza had already developed its playful and self-deprecating communication style, based on its faith in the value of its product. This style also determined the great success of the next communication campaign, which involved the popular actor Nino Manfredi alongside Nerina Montagnani. Their first spot was in 1977: and that was only the beginning of a long relationship that would last until 1993.

Safe in the knowledge that it had become a household name for most families in Italy, a country that can boast the greatest espresso connoisseurs and consumers, Lavazza also began to make a name for itself abroad. The first evidence of this ambition was its sponsorship of the Moscow Olympic Games in 1980. Soon afterwards, in 1982, the first foreign subsidiary was opened near Paris. This was the first step in the Group’s internationalisation, which continued throughout the nineties and even today remains at the heart of future development strategies.

Abroad, Lavazza is known not only for its products, but also, following the acquisition of the Iberian chain “Il Caffè di Roma” in 1999 and later of the Indian chain Barista, for itsmeeting places dedicated to lovers of the Italian espresso.

In 2010, the futuristic Innovation Centre was built alongside the Turin-based plant. Its 4,000 square metres of laboratories, classrooms and offices are also home to the headquarters of the Training Centre, dedicated to spreading the culture of Italian espresso worldwide. Innovation, which has always guided company strategies, now has its own, extremely modern facility.

In 2011 work began on building the Lavazza production hub abroad, in Sri City (India): a 21.4 million euro investment that led to the construction of an approximately 40 thousand m2 industrial complex.

Lavazza: our history

1

1895Year of establishment

1.2 Continuing to create value over time

Business development objectives Evolution of the company organisationThe sustainability strategy: the company’s approach and the Strategic Plan

1.2.11.2.21.2.3


Vision, Mission and Values of the Lavazza WorldLavazza’s business: markets, products and results Governance and Group structure

1.1.11.1.2

1.1.3

Our stakeholdersLavazza’s sustainability approach

1.2.41.2.5

CONTENTS CHAPTER 11.1

C H A P . 1 L A V A Z Z A1 7

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Corporate (http://www. lavazza.com/en/lavazza_world/ ethics.html), helping to raise awareness of our objectives and values amongst all internal and external stakeholders.

The activity and success of our business are based on these guiding values:

Passion for excellence

We aspire to be considered people who always do their best and achieve excellent quality in everything they do.

Team spirit

As much as we may be individually capable and determined, we achieve more by working together. With this belief, we always guarantee complete willingness to collaborate with our stakeholders.

Recognition

We intend to proactively recognise those who help us to achieve our goals, by always appreciating their contribution and basing relationships on mutual growth.

Transparency

We believe in the value of open communication, because only a real desire for sincere dialogue can lead to the best solutions.

We commit to being honest, open and willing to develop and maintain an atmosphere of mutual trust.

Integrity

We pursue our objectives with honesty and responsibility. Under no circumstances may the pretence of acting

in the Group’s interest justify conduct conflicting with laws, regulations, rules and, generally, honest and serious behaviour.

Caring for the future

The choices of today will impact our future and future generations. With this awareness, we know that we need to strike a balance between satisfying short and long-term needs. Therefore, we will constantly maintain our commitment to looking ahead and preparing for the world of tomorrow, by developing our business within an overall framework of environmental sustainability and respect for others. To leave a lasting legacy.1.1.1

Vision, Mission and Values of the Lavazza World

Our Vision considers our roots, the role we play in the global market today and our ambitious growth objectives: “Leading

premium coffee specialist, leveraging a global brand and authentic Italian coffee expertise and culture”. Alongside this, we have a sustainability Mission, which shapes our goals for the coming years: “Increasingly distinguishing ourselves as a player that actively integrates sustainability within its corporate strategy and activities, making this commitment recognisable inside the company as well as externally to consumers, customers, suppliers, the business community and our reference communities”.In the course of 2012, we

completed the revision of the Code of Ethics to provide those who work in our Group or come into contact with us with a clearer vision of the standards required of those who work in or with Lavazza when carrying out their activities and engaging in professional relationships.

In fact, we aspire to be valued not only for the quality of our products, but also for being responsible global citizens. The new Code of Ethics was adopted, shared with those working in our Group and published on the website


Passion for excellence

Team spirit

Recognition

Transparency

Integrity

Caring for the future

1.1C H A P . 1 L A V A Z Z A T H E C O M P A N Y2 1


In 2012, turnover rose by 4.9% compared to the previous year (1,330.7 million euros compared to 1,268.1 million euros in 2011). The Group recovered profit margins, closing financial statements with a consolidated profit for the year of 97.1 million euros, a net improvement on the nine million euro loss in 2011 and coming back into line with pre-recession results. The main driver of the 2012 result is the strengthening of

our leadership position in Italy and business development, in terms of both turnover and profit, in Lavazza’s top foreign markets. Considerable attention has been dedicated to limiting costs; the profit for the year also benefited from a decrease in the cost of green coffee.

* The entire Lavazza Group is considered in the economic da

1.1.2Lavazza’s business: markets, products and results

Coffee, particularly espresso, is at the heart of Lavazza’s activities. Italy is the land of espresso and Lavazza is the leading roasting company in the country, committed to spreading the Italian coffee culture worldwide.

The founding values of our brand have always been quality and innovation. In fact, on the one hand, Lavazza offers products that guarantee the utmost level of food safety, also based on its extensive skills and savoir faire in terms of raw materials. On the other, the company has traditionally distinguished itself with its ability to develop a broad product range suited to all price points, continuously enriched and innovated, based on

our understanding of coffee drinkers’ expectations.This work has enabled us to earn our place first and foremost and for over one century in our own land: in Italy (where 65% of coffee is consumed at home) Lavazza coffee is an institution. Just think: almost half of the coffee sold in the retail channel bears our brand (48.4%).

Today, Lavazza products reach the homes of 71% of Italian families.

A total of 54% of Lavazza’s turnover originates in Italy.The top brands in terms of volumes and sale values are:

Qualità RossaCrema e Gusto ClassicoQualità Oro Crema e Aroma

Besides sales for domestic consumption, Lavazza is also involved in “away from home” coffee consumption with products dedicated to food service, i.e., coffee shops and other restaurant channels. In Italy, this market is extremely segmented and Lavazza, along with another four national-scale

coffee roasters, covers 30% of it, while the remaining 70% is covered by local coffee roasters.

Since we began selling in foreign markets in the 1980s, sales outside Italy have gradually increased and now account for 46% of overall turnover. Today, we export to over 90 countries; we have direct subsidiaries in France, Great Britain, Germany, Austria, Sweden, the United States, Brazil, Argentina and India, and a dense network of distributors in other countries.

In 1989, we were the first to launch an office espresso machine using single-serve capsules, the Lavazza Espresso Point. The role of “closed systems” (espresso machines for domestic use and fitting capsules) is gradually becoming more important in our business, in line with the evolution of consumer tastes.

Main economic results (*)

Even within a context of economic recession and a drop in consumption (especially in thedomestic market), the Lavazza Group has been able to achieve positive economic results.

Today, Lavazza products reach the homes of 71% of

Italian families

Turnover growth from 2011 to 2012

71

+4,9

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The foreign direct subsidiaries primarily handle the distribution and sale of products and coffee machines. Lavazza Finance LTD offers financial support to the Group companies; Lavazza Netherlands B.V. is the holding company that controls the Indian companies Barista Coffee Company Ltd, which manages a coffee shop chain, and Fresh &

Honest Cafè Ltd, working in the automatic distribution sector.

The parent company Luigi Lavazza also has some Italian subsidiaries, including:

Cofincaf, providing financial support to customers in the automatic distribution and public service sectors;

Lavazza Coffee Shops s.r.l., a company that works in the coffee shops sector through a franchise network and some directly owned shops.

1.1.3 Governance and Group structure

The governance system

At Lavazza, the stability of the family governance effectively supports an industrial approach oriented not only towards short-term but especially to long-term value creation. This approach makes it possible for the managerial group, which the owners have made responsible for operations management in recent years, to plan medium to long term actions to continue to grow significantly as a global

player in this sector.The parent company has adopted a traditional corporate governance model with the presence of a Board of Directors chaired by Alberto Lavazza, and a Board of Statutory Auditors chaired by Gianluca Ferrero.

The central body within the governance system is the Board of Directors, which is vested with the broadest powers of strategic policy-making for correct and efficient Group management. Aside from the chairman, it includes the vice chairmen Giuseppe and Marco Lavazza, the CEO Antonio Baravalle and the directors Antonella and Francesca Lavazza, Pietro Boroli, Gabriele Galateri di Genola and Antonio Marcegaglia.

The Board of Statutory Auditors is responsible for overseeing compliance with the law and the

Articles of Association, respect for the principles of correct administration and, in particular, the adequacy of the internal control system. The standing auditors are Angelo Gilardi and Giorgio Giorgi.

The governance structure also includes an internal control system and the Company organisation, management and control model pursuant to the Italian Legislative Decree 231/2001.

Group structure

The Group consists of about 30 subsidiaries directly or indirectly controlled by the parent company Luigi Lavazza S.p.A. with registered office in Turin.

LavazzaFinance

LTD100%

Luigi Lavazza

Spa

CofficeSA

96,14%

LavazzaFrance

SAS100%

Moka MidiSA

100%

LavazzaKaffeeGMBH

100%

LavazzaDeutschland

GMBH100%

LavazzaMarocSARL100%

GreenMountain

CoffeeRoaster INC

7,85%

LavazzaSpagna

SL100%

LavazzaNordic

AB100%

Lavazzado Brasil

LTDA99,38%

AlmadaComerciode Café

LTDA100%

CofincafSPA

99%

LeaSRL

99,9%

ImmobiliareInnet SRL

100%

ErcomSPA

100%

LcsSRL

99,82%

Pana-RomSL

99,99%

LavazzaPremium

Cofffes CORP100%

LavazzaCoffee UK

LTD

100%

LavazzaSuisse

SA100%

LavazzaNetherlands

BV100%

EspressoService

ProximitéSA

26%

Fresh &Honest Cafè

LTD99,99%

BaristaLTD

99,99%

BaristaMauritius

LTD100%

BaristaSri Lanka

LTD

70,6%

CDSGMBH

in liquidation

100%

ONDACoffeeBreak

100%

SogepranSA

100%

firstCoffee

LDA80%

Group structure

G R A F I C O N . 1 . 1


slant will continue to be based on some key points that have always distinguished the Lavazza product: Italian-ness, excellent quality and the appeal of espresso culture.

For Italy and other European markets, in which customers are increasingly interested in preparing espresso at home, we will further reinforce our range of coffee machines and single-serve capsules.

Besides developing new products, we also aim to reach new customers abroad. Over the years, the culture of espresso has been spreading, partially thanks to Lavazza. Today the Group is already the eighth largest coffee roaster in the world, and sells its products in more than 90 countries.We will continue to develop market shares abroad, particularly in strategic European markets as well as in North America, China, India and Brazil. In the American market, our partnership with Green Mountain Coffee Roasters, the leader in single-serve systems in the United States, plays a strategic role for Lavazza. The companies have joined forces to offer an innovative solution specially designed for lovers of espresso-based beverages in North America. The Rivo©

automatic coffee machine combines the practical and easy-to-use Keurig capsule technology developed by Green Mountain Coffee Roasters with Lavazza’s great espresso tradition for the preparation of cappuccinos and lattes.

This growth strategy identified must be built on the foundation of a solid and efficient production system, which we believe should remain “Made in Italy”. A 60 million euro investment to install new lines at the Gattinara plant was recently approved, 70% of which will be paid to Italian businesses, thereby generating a positive impact on the country’s economy.

1.2.2Evolution of the company organisation

The company has undergone an internal reorganisation to ensure adequate support to our ambitious development plan.

As part of this renewal process, we have reconsidered the roles and work methods within the Group. All of this aims to achieve greater flexibility and exchange between company departments, to stimulate collaboration and the contribution of diverse skill sets to shared projects.A management team has been formed to support the Lavazza family in running the company.

1.2.3The sustainability strategy: the company’s approach and the Strategic Sustainability Plan

The Group’s development strategies recognise the importance of the concept of “360 degree” sustainability, in which economic, social and environmental aspects must be complementary and form the basis of company policies.The market is increasingly attentive to companies’ role as social actors, which are

1.2.1Business development objectives

The economic and social context has undergone profound changes in recent years due to the extended period of economic recession, which has particularly impacted mature markets.

The coffee segment is actually still growing on a global level. Despite this complex environment, we can look to the coming years confident that we

have prepared ourselves in time to face future challenges.

Lavazza distributes its products in 90 countries

We are encouraged by our ability to anticipate evolving consumer needs and to understand how to respond to them with versatility and creativity. Our innovative

In this complex scenario, we are reassured by our ability to anticipate evolving consumer needs and to understand how to respond to them with versatility and creativity

Creating value over time

1.2 Lavazza distributes its products in 90 countries

90


required to contribute towards meeting global challenges such as climate change and resource availability. Both private and institutional stakeholders are more interested in product quality and safety, production processes and relations with employees and with stakeholders all along the supply chain of the supply chain.

In 2012, Lavazza began defining its Strategic Sustainability Plan, which identifies relevant topics and indicators to monitor the effectiveness of its initiatives. The shareholders and all company departments were involved in preparing the three-year Plan. The sustainability of the product, of production processes and of relations with internal and external stakeholders have been identified as areas for action.

1.2.4Our stakeholders

The sustainability performance reporting process must take into consideration and respond to the requirements and expectations of all stakeholders, with the goal of providing all of the information needed to understand the Group’s strategies.

Therefore, we are addressing:

employees and temporary staff, as well as trade unions;

customers and end consumers;

suppliers; civil society and organisations

engaged in meeting social and environmental challenges;

representatives of local and national Italian public institutions;

the communities in which our production plants are located;

trade associations and other companies that work in the same food and agricultural sector as we do.

1.Product sustainability

3.Stakeholder engagement

2.Production

sustainability

4.The Lavazza

people

The sustainability performance reporting process must take into consideration and respond to the requirements and expectations of all stakeholders

The 4 pillars of sustainability

C H A R T N O . 1 . 2

Vision, mission,

objectives, governance

Sustainability in production pro

cesses

External sta

kehold

ers

Supply chain sustainability

Internal sta

kehol

ders


1.2.5Lavazza and sustainability: a collaborative and engaging approach

In all the challenges in which we are directly involved, we are working to find shared solutions

and maximise the impact of our initiatives by combining all of the skills needed to develop projects that are as effective as they are sustainable over time.

In this commitment, Lavazza would like to highlight its relationship with Slow Food. This organisation is a fundamental partner on the path of sustainability, one with which we share aspirations, ideas and a vision, particularly concerning the need to promote a food model that incorporates respect for the environment, traditions and cultural identities. Good,

clean and fair food: these are the commitments of the Slow Food manifesto, upheld by Lavazza through its attention to raw materials and to the world that grows and transforms them. This relationship has been standing since 1996, enriched on our meetings at the Salone del Gusto food exhibition, of which Lavazza was the first sponsor, and has been reaffirmed at numerous subsequent editions, including in 2012.All other relationships that play a significant role in our growth will be addressed in the dedicated sections of this Report.

Our approach towards defining the Strategic Sustainability Plan was also innovative and participatory. The Lavazza shareholders, top management and the managers of key company departments worked intensely for two days at a Design Shop in order to define Lavazza’s short, medium and long term sustainability objectives together. This challenging work has allowed us to develop a shared vision and map the steps of the path to be taken.

*


For solidarity

To protect the food supply chain

For innovation

For food safety

Cultural Heritage Council

I3P

International Coffee Partners

University of Pollenzo

Torino Internazionale

Torino Wireless

Food and agricultural platform

Polytechnic of Turin

Institute for Scientific Information on Coffee

Italian volunteer associationsand non-profit organisations

International Life Science Institute

Fashion 4 Development

European School of Management Italy

Slow Food

Rainforest Alliance

S U S T A I N A B I L I T Y R E P O R T // 2 0 1 2 3 4

For culture

For the d

evelo

pmen

t o

f co

mm

un

itie

s

Save the Children

Coffee & Climate

Guggenheim MuseumTeatro Regio of Torino

La Scala Theatre

R E A D I N G G U I D E

In this Lavazza sustainability report, we would like to highlight some aspects that do not relate to a single element or theme, but which

characterise our approach across various areas.They are identified with the following symbols throughout the document:

A focus on excellenceTo shed light on the distinguishing factors of our actions, the areas in which

care, passion, skills and creativity make the Lavazza approach unique.

A collaborative approachTo highlight the initiatives in which the Lavazza group demonstrates its

ability to develop partnerships, even with competitors, to find solutions to shared problems.

Skills and transparencyTo highlight complex topics for which there is a need to inform, by

transparently outlining the issues and noting the strengths and limits of possible approaches.

Care for the environmentTo highlight initiatives, programmes and results aimed at improving the

environmental sustainability of products and industrial processes.

IconcineIcona Eccellenza

Lavorare insieme agli altri / oragnizzazione a matrice

Competenza e trasparenza

Cura per l’ambiente





Lavazza’s partnership networks

C H A R T N O . 1 . 3

C H A P . 1 L A V A Z Z A T H E C O M P A N Y3 5

LAVAZZA WORLDOur people and our roots in Italy

1

2

3

4

5 6

7

8

Glossary

2

For Lavazza, the policy of “creating value for the community” has always been at the heart of its business right throughout its 120-year history.

Lavazza as a place where high-quality work is guaranteed with stable employment and a focus on the professional growth and well-being of its staff.

A company that intends to continue to invest in Italy, creating value for the Italian manufacturing industry.

A new Headquarters designed in line with innovative environmental protection criteria and oriented towards the requalification of the urban sorroundings, also through the contribution of the people living in the area concerned.

The desire to play a central role in our area of competency by conceiving and taking part in projects and supporting the achievement of cultural excellence, whilst at the same time participating in cooperation projects to help those in need conditions of hardship.

Lavazza World

2

2.2 Group Commitment to local communities

Turin and Lavazza: shared projects and ideas2.2.1Snapshot of Lavazza employeesResponsible approach to employmentLooking to the future

2.1.12.1.22.1.3

Working at Lavazza2.1CONTENTS

3 9 C H A P . 2 L A V A Z Z A W O R L D

S U S T A I N A B I L I T Y R E P O R T / / 2 0 1 2 C H A P . 2 L A V A Z Z A W O R L D4 14 0

From a small family business to world leader in the coffee roasting industry, we can say that everything has changed at Lavazza: its organisation, its complexity and the challenges that it has to tackle.

There is, however, a common thread in the Group’s activities through all the stages of its history, developed by the four generations of entrepreneurs that have led the company that bears their name. It is a thread of passion, determination,

competence, commitment and love for their work. This, more than anything else, is what has held and continues to hold the Group together, which has more than 3,000 employees.

The Lavazza family’s values and approach to businesshave been passed down constantly and enthusiastically to their employees over the years and today represent a common sentiment among the people who work for the company.

The company’s orientation towards excellence, its commitment to acquire new know-how and skills, its determination to find innovative solutions and pride in its employees’ work are a great asset shared by everyone belonging to the Lavazza world.

Working at Lavazza

There is a common thread in the Group’s activities throughout all stages of its history, developed by the four generations of entrepreneurs that have led the company that bears their name.It is a thread of passion, determination, competence, commitment and love for their work

2.1

2.1.1Snapshot of Lavazza employees

Although it has operated on an international level for many years, the Lavazza Group maintains deep roots in its country of origin: half of the 3,000 people who work for the company today are based in Italy. This choice is also confirmed in the development plans for the coming years, which include further investments

in Italy, creating value for the manufacturing industry.

The “Made in Italy” label, which marks products strongly characterised by the concept of “Italian-ness”, is a value that the company is determined to maintain.

The Group’s European subsidiaries, of which the French one is the largest, employ 380

The Lavazza Group in 2012 had more than 3000 employees3600


2012

2011

people, mostly permanent staff performing mainly commercial roles.The Group has 1,212 employees working outside Europe, many of whom are based in India. The vast majority of these employees work for the Coffee Shop Barista chain of espresso bars.In 2012, a slight reduction was recorded in the Group’s staff on the previous year as a result of a fall in demand in the various markets in which it operates.Over the past year, the

proportion of people working for the company in Italy has increased compared to its international staff, reaching 50% of the total.

Lavazza group, number of employees by geographical area

C H A R T N O . 2 . 1

The figures include permanent staff and workers under the supervision of the Luigi Lavazza S.p.A. organisation.

Workers employed in Italy by role

C H A R T N O . 2 . 2

Units 100 200 300 400 600 800

Bluecollars

66

2011

2012

64

4445

100100

408430

693689

193188

Office workers

Junior managers

Middle managers

Senior managers

Other roles

Luigi Lavazza S.p.A. organisation, 2011-2012

The number of employees in Italy has basically remained unchanged since 2011

Italy

Europe

Extra-Europe

48%1608 persone

13% 39%

46%1608 persone

15% 39%


Staff employed in Italy by type of contract

C H A R T N O . 2 . 4

5%80 people

2.1.2A responsible approach to employment

The Group makes every effort to establish long-lasting relationships with its employees: we are fully aware that these

are the relationships that will enable our workers to perform their duties with peace of mind and dedicate all their skills and commitment to the company.

The people who work for the Group are almost exclusively permanent Lavazza employees and only a marginal number of temporary work contracts are stipulated.No less than 97% of the Group’s Italian employees have permanent employment contracts.

The ability to establish long-

lasting working relationships is based on the solidity of some fundamentals.In fact, at Lavazza, employees find an environment in which they have opportunities for professional growth, where they choose to remain in order to develop their skills and capabilities: the average number of years service at the company is high and on the rise since 2011 at all levels.

95%1.516 people

4 5

Staff by type of work contract

The figures include permanent staff and workers under the supervision of the Luigi Lavazza S.p.A. organisation, 2011-2012

C H A R T N O . 2 . 3

Employees

Temporary staff

0

400

800

1200

1600

2011

200

600

1000

1400

2012

43 38

Permanent

Fixed-term

Nu

mb

er o

f p

eop

le

Luigi Lavazza S.p.A. organisation, 2011-2012

1461 1478

2012turnover rate

16%

*Overall turnover rate(recrutiments and resignations 2012).Average standing

C H A P . 2 L A V A Z Z A W O R L D


Average no. of years service by role

C H A R T N O . 2 . 5

0

4

8

12

16

20

2011

Senior managers

14,4

2

6

10

14

18

Middle managers

Junior managers

Office workers

Bluecollars

Other roles

15,4

16,5 17,0

15,37 16,0

12,2 12,4

9,3 9,7

16,5 17,5

2.1.3Looking to the future

A period of profound change

Since June 2011, the Lavazza Group has been going through a period of intense restructuring of its organisation.

Under the guidance of the new Chief Executive Officer Antonio Baravalle, the Group’s senior management has been completely renewed, strengthening existing skills with external experiences that have been grafted positively into the solid set of values that characterises Lavazza.The matrix of the work organisation has been reviewed with the aim of promoting the exchange of know-how between functions and the identification of innovative approaches. Today, cross-functional work constitutes the basic condition for developing new company projects.In the first two years of the

renewal process, the focus was on commercial and organisational strategies, laying the bases for the future development of the company. This meant speeding up and radically changing some processes, while others (such as training and internal communication) would receive a new impulse since they are necessary to bring the changes into effect.These are the tools through which the company intends to implement a principle set forth in the Code of Ethics: “We make every effort to create an organisational atmosphere and corporate culture that facilitates the exchange of know-how, experiences and resources, to encourage sharing between people, the various companies of the Group and the partners of the overseas subsidiaries. We will help to create an open work environment in which the objectives are clear, even in the toughest challenges, and in which everyone feels at ease in making proposals or reporting critical events, thus favouring the involvement of everyone in finding the best possible solutions.”

A Lavazza Group with sound principles, which it implements dynamically, is now ready to reach the development

objectives it has set itself.The first half of 2014 will see the formal launch of the “Leading Change” project, on which the company has been working for some time now and whose guidelines are: develop skills, strengthen leadership and cultivate talent.

The project starts with an identification of the technical/professional and managerial/behavioural skills defined specifically for each of the roles performed at the company.

This assessment will enable any skills the company is missing to be identified and thus given priority when making investments in training.

The people strategy for managing change is based on the belief that managers must play a guiding role in this process. The senior, middle and junior managers will thus be involved in assessing their leadership, through a “360 Questionnaire” designed for self-assessment as well as assessment carried out by managers, employees and colleagues. The result will enable leadership profiles for the Lavazza organisation to be elaborated.

2011

2012

Nu

mb

er o

f ye

ars

Luigi Lavazza S.p.A., 2011-2012


The assessment of capabilities and leadership skills will result in the identification of talent, for which special development plans will be drawn up in order to guarantee key skills for the future and favour the succession of managers.

Even in training its employees, Lavazza compares its strategies with those adopted outside the company.A key factor for promoting innovation and the development of skills are partnerships with excellent research and training centres in the city of Turin. Collaboration with the Turin office of the European School of Management Italia (ESMI), a business school with an international reputation, has, over the years, allowed for a profitable exchange of skills between the Lavazza managers, who periodically follow training courses, and talented students in Turin, who are given the opportunity to train at the company.

On the basis of this policy, the Group continues the agreement with the Polytechnic of Turin focused on joint research projects, technological transfer initiatives as well as training and know-how sharing courses.

A heterogeneous workplace that focuses on people

“We strive to give increasing space to the most intelligent and deserving individuals. We make every effort to remove obstacles of organisational, cultural or any other nature that prevent everyone from having the same opportunities in terms of recruitment and career on the basis of merit, irrespective of age, gender and sexual orientation, ethnic origin and country of origin, religious beliefs and political opinions.”The Code of Ethics describes an open work environment based on the meritocracy: the ability to make the most of and integrate differences in gender, culture and age is considered to be a key success factor at Lavazza. This is why

the company adopts a model in which recruitment, career and pay depend exclusively on personal skills and professional performance.The permanent staff is made up of 71% men and 29% women; the proportion between the sexes is substantially the same on all levels of the company’s structure (except for office workers, in which the ratio is almost 50-50). 31% of the company’s senior managers are women.

It is often difficult to measure intangible aspects, but one parameter that gives a good indication of workers’ well-being is the frequency of spontaneous resignations, which is extremely low at Lavazza: about 1% of the entire staff. This is the result of a careful personnel policy aimed at establishing a relationship of trust and dialogue, a fundamental condition for understanding mutual needs and finding effective solutions to reconcile them. The company gives a broad range of benefits to all its staff, including insurance and study grants.


Staff employed in Italy in 2012by role and gender

Blue collars

Office workers

Junior managers

Middle managers

Senior managers

Working under conditions of safety

Lavazza offers its employees a workplace in line with the best occupational health and safety standards. Specific procedures and preventive measures have been elaborated with a view to reducing the risk of accidents, injuries and exposure to potentially hazardous situations for the staff’s health to a minimum.

The strong point in workers’ safety management is training; the training of new recruits and the continuing education of

employees go beyond legal requirements and the results are assessed through tests at the start and end of training courses. Between 2011 and 2012, injuries dropped by 20%, with positive results not only in terms of the overall frequency rate but also of the overall severity rate.

Total no. of men1074

Total no. of women442

C H A R T N O . 2 . 6

10

20

30

40

50

60

0.40

0.60

0.80

1.00

1.20

1.40

1,08

30,438,1

2011 2012 2011 2012

Injury frequency rate Injury severity rate

Ratio between the total number of injuries and the hours worked expressed in millions (INAIL standard).Lavazza Italia, 2011-2012.

C H A R T N O . 2 . 7

Ratio between the lost time due to injury and the hours worked expressed in thousands (INAIL standard).Lavazza Italia, 2011-2012.

C H A R T N O . 2 . 8

0,69

A 20%reduction in the number of injuries was recorded on 2012

32%

27%

31%

25% 75%

53%

68%

73%

69%

47%

Luigi Lavazza S.p.A., 2012

The figures refer to the staff employed at the four production plants in Italy (Turin, Gattinara, Verrès and Pozzilli)

Other roles 0% 100%


2.2.1Turin andLavazza share projects and initiatives

The Group has strong ties with the areas in which it operates, where it maintains a close relationship in order to favour positive changes in the local communities.A concrete example of its attachment to the area in which it operates is the Group’s decision to build its new General Headquarters in Turin in 2016.It is an ambitious project that requires an investment of over 100 million euros and should be finalised in 2016.

The new site will bring together in one single location all the head and operations offices currently distributed in various buildings in Turin, thus facilitating contacts and collaboration between its approximately 500 employees who will have their workplace here; the building has been designed to favour innovation in work organisation methods.

The construction of the new headquarters is not simply a property operation, starting from

A concrete example of its attachment to the area in which it operates is the Group’s decision to build its new General Headquarters in Turin in 2016

Group commitment to local communities

2.2





C H A P . 2 L A V A Z Z A W O R L D5 3

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company playing an active part in organisations that promote the requalification of the local and urban structure of the metropolitan area, including the Cultural Heritage Council, engaged in the restoration of local monuments, and the “Torino Strategica” association, an open network for sharing projects and strategies for the city’s future.The area has enormous potential, seen particularly in the social capital of know-how accumulated over the years, which the network of research and advanced training centres in the city enliven and continue to enrich. The Group undertakes to make the most of these assets and stimulate the circulation of ideas through strategic partnerships with the excellent research centres and most innovative organisations present in the city. In addition to the agreements made with Turin Politecnico and the European School of Management Italia (ESMI), the Group is a member

of the “Amici dell’Università di Scienze gastronomiche di Pollenzo” association, and has thus developed a close relationship of support and collaboration with the first university promoted by Slow Food dedicated entirely to food and gastronomic culture. Lavazza is a strategic partner of the University of Pollenzo and makes a significant contribution to its activities, sharing its commitment and strategies for creating new sustainable scenarios for the production and consumption of food on a national and international level.

The partnership, based on the shared passion for traditional flavours and knowledge, has led to the implementation of many joint initiatives, starting with the provision of the company’s skills and experience in selecting and processing raw materials to the students on the master degree course in coffee production.

the place where the building will stand.

Lavazza has chosen a long abandoned industrial site with the aim of requalifying it across an area of 18,000 square metres.

The operation was marked by proactive discussions with its stakeholders right from the initial phases.

The area was chosen in agreement with representatives from local institutions. Before starting the works, the company discussed the project with the local residents. The characteristics of the project were communicated and inhabitants’ needs in relation to the opening of the work site were collected through the widespread distribution of brochures, the organisation of public meetings, the publication of a special web site (www.nuvola.lavazza.it) and the use of the fenced area of the work site as a space for communication.

The Lavazza project will therefore bring benefit to all residents in the area, who, through the complete upgrading of the former ENEL complex, will receive spaces for public use, including gardens and a car park, in return.The first stage of the works has already been completed; one of the now renovated historical buildings houses the Institute of Applied Art and Design (IAAD), inaugurated on 4th October 2013, where 400 young creative people will study. Via Pisa, the road on which the building stands, , has been defined the “first smart street in Italy”: the section between Via Bologna and Corso Palermo now has gardens, energy-saving LED lighting, benches, bicycle racks and a free Wi-Fi connection. With this project, , the Lavazza family reiterated its desire to “leave its mark” on the area : “We are rebuilding a large area of the city where, between Lavazza and the IAAD, almost 1,000

people will bring the area to life. Innovative cities set themselves the objective of attracting creative young people”. The materials, technologies and architectural solutions adopted will considerably decrease the exploitation of environmental resources and pollution, significantly reducing running costs and improving the level of comfort for the occupants.

The new building is a candidate for obtaining LEED® certification (Leadership in Energy and Environmental Design) – Gold level – a prestigious international recognition for buildings designed and built on the basis of strict environmental sustainability criteria, currently obtained by very few buildings in Italy (it is the first operation of the kind ever to be performed in Turin).Its desire to take part in the development of the city of Turin has also resulted in the





S U S T A I N A B I L I T Y R E P O R T // 2 0 1 2 C H A P . 3 C O F F E E5 95 8

COFFEELavazza’s core business

1 2

3

4

5

6 7

8

G

loss

ary 3


In fact, expertise is the key to Lavazza’s success. We have developed increasingly sophisticated methods to capture all the organoleptic characteristics of coffee from different origins. We know how to find and select coffee varieties with characteristics best suited to our customers’ taste. We process and blend them with great skill, always ensuring outstanding quality and absolute safety.

It is this in-depth knowledge of the raw material that makes us fully aware of the risks involved. It is subject to variability due to atmospheric events and the impact of climate change on the areas

where the coffee plant is cultivated; it is grown in countries with hard working and living conditions, especially for small farmers. We are aware that tackling these challenges is also one of our responsibilities. Improving the sustainability of the supply chain is a strategic factor for us in order to continue our business whilst respecting our values.

Coffee is our raw material and the rationale behind our business: a product we know well and are capable of using to its full potential

Coffee: Lavazza’s core business

3

Coffee originsCONTENTS

3.1

The commerce of coffee3.2

Certified coffee3.3

C H A P . 3 C O F F E E6 1


The botanical variety

Coffee is obtained from the beans of an evergreen tropical shrub belonging to the genus Coffea, a member of the Rubiaceae family.The two most widely cultivated species are:Coffea Arabica, which originates on the plateaus of Ethiopia and accounts for about 60% of world coffee production.It grows at an altitude of between 900 m and 2500 m.It is considered the most

valuable species and comprises many botanical varieties, such as Bourbon, Tipica, and Caturra, grown in the entire tropical zone. The coffee beans are normally green, have a flat, elongated shape and a sinuous groove down the middle.Coffea Canephora – commonly known as Robusta – originates in Western Africa at an altitude of less than 800 m. It costs less to grow, is more resistant to thermal shock and aggression by parasites, and contains twice as much coffee as the Arabica

variety. The beans are yellowy brown, roundish and the groove in the middle is straight.

Cultivation

The times and methods of coffee cultivation depend on the geographical area, the altitude and other specific local features. In general, the cherries normally form within 6-9 months for the Arabica variety and 9-11 months for the Robusta variety after flowering. The mature cherries are red (yellow in the case of

Coffee origins

3.1

the yellow bourbon variety). Every cherry contains two beans with their flat surfaces together, protected by a membrane called the parchment and the sugary pulp of the cherry.

Traditionally, coffee plants are cultivated with other tall plants and thus grow sheltered from the sunlight. On the contrary, in Brazil, coffee plantations are more common and irrigation and machine stripping are widespread.The climatic conditions, the

altitude and the composition of the soil determine the development of the particular organoleptic characteristics of each kind of coffee.

Harvesting

The cherries are normally hand picked except in Brazil where machines are often used.The methods of harvesting are normally distinguished between Picking and Stripping.

PickingThis practice consists in picking ripe cherries so that each tree may be picked several times during the season.

StrippingThis practice consists in stripping the tree of all its cherries, ripe and unripe, at the same time. The subsequent selection stage in which the ripe cherries are separated from the unripe ones will determine the quality of the coffee. Once harvested, the cherries


are separated from all foreign bodies (stones, sticks, leaves, etc.).

Processing of the cherries

The skin and pulp of the cherries are removed to obtain the coffee beans, which at this point are called green coffee, using one of the following three main methods.

Wet (washed) processingCoffee processed in this way is called washed. The cherries are immersed in basins of water and the skin and pulp are subsequently removed by mechanical methods. The beans, which are still inside their membrane (the parchment) and with the remaining pulp are immersed in water for a period of time of between 12 and 36 hours. This time is called fermentation, a process in which many of the organoleptic characteristics of the coffee develop. Coffee processed in this way normally has a strong aroma and high acidity. Once fermentation is complete, the

beans are washed with water. The residual pulp is eliminated and the beans in their parchment are left to dry in the sun for a few days.Subsequently, the parchment is eliminated by various methods (friction, rolling and percussion), thus obtaining the green coffee, ready for processing to meet the needs of the purchaser and then packed in bags and shipped to the roasting facility.

Dry (natural/unwashed) processingCoffee processed in this way is called natural. The cherries are left to dry in the sun (or in ovens) for three weeks or more, until the skin, pulp and beans are completely dry. This method generally produces milder coffees (the sugary substances in the pulp are transferred to the beans as they dry) but with less aroma than washed coffee.The hulling machines then free the beans of their skin and pulp, thus obtaining the green coffee, which, once selected, is ready to be packed in bags.

Semi-washed processingThis method is only used in some

countries. It is a combination of the wet and dry methods. The beans are immersed in basins of water and are separated (those with defects or unripe remain on the surface while the ripe ones sink). The pulp is then mechanically separated from the parchment and the beans. The beans are then dried in ovens or on patios in the sun.

Selection of green coffee

Green coffee in every producing country is subdivided into classes regulated by official bodies recognised by the government (e.g. U.C.D.A in Uganda, Coffee Board of India). Lavazza purchases a large proportion of its green coffee on the basis of its own quality standards; where this is not possible or unnecessary, the company refers to the international standards of the coffee industry.

For example, Brazil is one of the first countries in which Lavazza has established its own quality standard.The quality standard enables a single profile to be created


for a given quality of green coffee through a description of its physical and organoleptic characteristics. The use of quality standards has enabled the particular features of Lavazza blends to be defined and maintained over the years.Coffee is a natural product, so it is subject to the climatic differences between the regions in which it is cultivated, including the amount of rainfall and sunlight. Its organoleptic profile may therefore vary considerably from season to season.

In fact, Lavazza visits the principal countries of origin at harvest time to re-establish, year after year, the quality standards of the various places of origin and always ensure the same organoleptic profile for its blends.

The blends

Creating a blend requires in-depth knowledge of the single ingredients of which it is made. Every coffee has distinctive characteristics (body, mildness, aroma…), which are combined in a harmonic blend in order to enhance each characteristic of the coffees from the various places of origin, creating a unique organoleptic profile.

The natural variability of the ingredients in the blend requires constant product monitoring, to guarantee that each blend always has the same organoleptic characteristics. The final result, in the cup, of a high-quality coffee also depends on roasting technology, which must be studied and personalized for each blend, according to the coffee’s end use. In fact, the consumption method, be it filter, moka or espresso coffee, requires different roasting cycles.Finally, correct packaging will ensure that the product maintains its fragrance throughout its life.

Tasting

Sensory analysis represents the principal method for establishing the places of origin to be chosen, to ensure the required quality standards and quality control. The product’s organoleptic characteristics are assessed during the various phases of transformation, from the raw material to the finished product.Green coffee is generally tasted using the international or “Brazilian” method (one

common to all countries of origin for the preparation of the drink).Lavazza tastes green coffee to establish the standards and choose new types in the countries of origin, and later in its laboratories, to check its conformity and quality.Lavazza coffee tasters taste the finished product in order to both create new blends and to monitor the production process.

All Lavazza blends have a distinctive organoleptic profile, characterised by specific attributes, generally represented on a “spider chart” (see page to the right).

6 7

Aroma

Body

Mildness

Acidity

Boldness

After-taste

109876543210

Spider chart

C H A R T N O . 3 . 1

The “spider chart” is a graphical representation commonly used in sensory analysis and shows the principal distinguishing factors and their scores.The attributes may depend on the various types of coffee, the method of preparation and the degree of complexity to be reached in the description of the blend.

Sensory analysis represents the principal method for establishing the places of origin to be chosen, to guarantee the required quality standards and quality control

C H A P . 3 C O F F E E


Coffee cultivation, practised by about 25 million producers, has a major social impact on the areas concerned: coffee producers are often small farmers that collect just a few bags of coffee a year. In this setting, some countries, such as Brazil, represent an exception in that its producers tend to be larger and adopt an industrial approach to their business.

The marked fragmentation of production and the vast geographical dispersion of coffee plantations complicate and increase the risk of direct supply from the producer, with inadequate volumes for the coffee roasting company. For this reason, the Group turns to experienced and reliable international intermediaries who have an in-depth knowledge of the places where it is cultivated and a great deal of experience in the sale of food raw materials.

The purchase price of coffee is based on stock exchange quotations on reference markets: the Arabica variety is traded on the New York stock exchange, while the Robusta variety is traded on the London stock exchange.

Central America

Afric

a South America

3.2Countries of origin of the coffees processed by the Group

We purchase coffee from leading producer countries such as Brazil, Vietnam, India, Colombia, Honduras, Guatemala, Mexico, Peru, Indonesia, Tanzania and Uganda.

The commerceof coffee

MexicoGuatemala

HondurasEl SalvadorNicaragua

CubaHaiti

Costa RicaPanama

IndiaThailandLaosMalaysiaVietnamIndonesiaJavaPapua New Guinea

BrazilColombia

PeruEcuador

Venezuela

GuineaLiberiaIvory CoastGhanaTogoNigeriaBenin

CameroonC.A.RCongoAngolaZimbabweMalawiMadagascar

TanzaniaKenyaUgandaEthiopia

Asi

a


One of the tools for ensuring that there are production practices that conform to workers’ rights and respect the environment is to purchase raw materials from plantations certified according to sustainability standards.

Of the many existing certifications, we at Lavazza chose two that are capable of guaranteeing compliance with strict environmental and social sustainability criteria in the coffee

supply chain: Rainforest Alliance and UTZ. These certifications are based on some common principles such as compliance with the International Labour Organisation (ILO, www.ilo.org) conventions.These coffees meet the requirements of most markets, thus satisfying the needs of our strategic customers.

Rainforest Alliance certifies that the coffee comes from plantations that comply with

the strict environmental and social sustainability standards, integrating the conservation of the ecosystem, the improvement of productivity and of the living conditions of the producers.

UTZ guarantees the traceability of the origin of the coffee, transparency in commercial practices along the supply chain, as well as compliance with the I.L.O. conventions on workers’ rights and, in particular, the exclusion of child labour.

Certified coffee

3.3

For ten years we have been partnering with Rainforest Alliance.

With this non-governmental organisation we share the ambition of adopting a business model based on the safeguarding of biodiversity, helping farmers in third-world countries to become more professional and competitive on the market.

Our collaboration is expressed first of all through ¡Tierra!, the programme for intervention in the communities where coffee is produced, which sees Lavazza, through its Foundation, work together with local stakeholders to reach ambitious objectives: to improve the area’s social conditions through the construction of facilities at the community’s service, but also to facilitate communication between small local producers and set up a commercial links. The producers involved in the initial phase of ¡Tierra! (in Peru, Colombia and Honduras) have obtained Rainforest Alliance certification.

¡Tierra! is also a range of products containing coffees cultivated exclusively on Rainforest Alliance certified plantations. In this way, a direct link is established between

coffee countries of origin and end customers, with products capable of creating value for all players in this network of exchanges.

Lavazza takes the opportunities presented by popular and widely publicized events to increase people’s awareness of these topics, to share the company’s aims and make positive changes all over the world.A case in point is the 2012

Salone del Gusto food exhibition where, together with Lavazza, Rainforest Alliance and Slow Food described what has been done concretely and consistently over the past few years to sustain the coffee production chain.

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THE PRODUCTExcellence and innovation

1 2

3

4

5

6 7

8

G

loss

ary 4


The quality that we guarantee for people who drink Lavazza coffee is the fruit of our experience in choosing and processing the raw material that we have purchased

and developed over our long history. Passion and the desire to do business responsibly stimulate us to acquire even more know-how, by taking part in major scientific research programmes in collaboration with other actors in the sector.

Our innovation pathway started in the distant past; we have been pioneers in our sector many times over.Having invented its blends, in 1923 Lavazza put packaged coffee on the market for the first time, using parchment, a material made of paper that improved the conservation of the product. The coffee maintained its fragrance for longer and could be transported more easily, thus allowing the company to broaden its field of action.In 1958, Paulista coffee was invented and put on the market in an innovative vacuum-packed tin. This

technology allows the coffee to be preserved free of air and thus further increases product distribution possibilities.

The effectiveness of the method of conservation was combined with practicality in 1969 when the new blends Qualità Rossa and Qualità Blu were put on the market in 200 g vacuum packs. Lavazza was the first company in the sector to exclusively adopt this light and handy format, designed to meet the logistical needs of purchasing consortiums that were being established at the time.

In the Eighties, it produced the innovative multi-packs, the first introduced on the Italian market.In 1989, it was the first company to launch an office espresso machine using single-serve capsules, the Lavazza Espresso Point; an approach to coffee preparation that 25 years later continues to spread and is popular with consumers all over the world.

The distinguishing factors of our work are quality and innovation, applied with passion to coffee, a product to which we have completely dedicated ourselves for 120 years, our ambassador in houses and on tables all over the world.

4

In 2003 Lavazza put the innovative Lavazza BLUE system on the market, exclusively for automatic distribution, thus operating in the vending sector. For Lavazza, this was a major technological change, a new production and brewing process that introduced a self-protected capsule to broaden its range of products. In 2007, Lavazza opened a new business segment with A Modo Mio, the new automatic espresso system designed especially for the home, which used capsules that could be purchased at the supermarket.

Our draw towards innovation is the result of curiosity, inventiveness, a deep-rooted ability to understand and anticipate consumers’ needs and expectations. Today, it is a structured approach that enables us to compete in many different social and cultural settings.We realize that meeting the needs of consumers with different tastes and degrees of sensitivity means adopting a versatile approach.

In this way, we can continue to spread the passion for Italian coffee overseas; it is the excellence of high-quality Italian espresso coffee, not distorted but developed to please increasingly broader segments of consumers.Quality and innovation form an integral part of the sustainability of a business. At Lavazza, the development of new products necessarily requires an assessment of the sustainability of the solutions found, through the adoption of a strict scientific method.

The Product

4.2 Product innovation

A sustainable approachCoffee and climate changeInnovation in closed systemsPackaging eco-design

4.2.14.2.24.2.34.2.4


The Lavazza Quality SystemResearch programmes to guarantee consumer healthSharing and listening to ensure continuous improvement

4.1.14.1.24.1.3

The “environmental identity card” of ourproducts.

4.2.5.CONTENTS

4.1

C H A P . 4 - T H E P R O D U C T7 5


4.1.1The Lavazza Quality System

Quality has always been one of the fundamental objectives pursued by the Lavazza group: a long-standing commitment that guarantees the excellent quality of our products day after day. One of the fundamental factors of this approach is the selection of coffee as a raw material. Its coffee purchasing policy and raw material assessment criteria are among the company’s points of excellence. Quality controls are performed

on 100% of processed coffee batches.

The quality of Lavazza coffee is obtained not only through careful selection and tasting of the raw material and the choice of consolidated suppliers, but also through specific procedures that lay down the frequency and methods of the controls and the chemical-physical and organoleptic tests to be carried out on both green coffee samples taken from the customs

Its coffee purchasing policy is one of the company’s points of excellence


4.1

warehouses and the finished product.

Checks are made on the shape, size and colour of the beans and the presence of foreign bodies.Quality is also the leading criteria in the production processes. For one of its fundamental stages, the roasting process, use is made of convection technology

which, through modulated flow of hot air over the beans, avoids direct contact with the heat source. This process ensures more gradual and uniform roasting than the traditional contact method.

Over the years, Lavazza has achieved unrivalled competence in managing this type of coffee

roasting machines and has designed specific roasting cycles that enhance the body, mildness and fragrance of every blend. Once the roasting and grinding phases have been completed, checks are made on the colour of the blend and the particle size of the coffee powder. The coffee is vacuum-packed or packaged






ISO 9001:2008 quality management systemThis certification ensures that products and processes conform to verifiable quality standards, by requiring documentation for all controls performed and the adoption of procedures that clearly define the roles and responsibilities involved. It guarantees that all non-conformities are identified and eliminated, and checks, trainings and updating courses carried out.The production plants in Turin, Verrès and Pozzilli are certified in accordance with this standard.

HACCP system certification in accordance with CODEX ALIMENTARIUSThis certification guarantees the reliability of the HACCP system in terms of the customer and end consumer.The Turin production plant is certified in accordance with this standard.

EMAS - Eco Management and Audit Scheme reg. 1221/2009This certification defines the requirements that an environmental management system, adopted voluntarily by an organisation, must possess to perform effective monitoring of the environmental impacts of its business, orienting its activities towards ongoing improvement (e.g. increase in energy efficiency, reduction in the consumption of natural resources and the production of waste, etc.).EMAS registration entails a verification of the company’s conformity with the EC regulation 1221/09 by a certification body or public institution.The Verrès production plant is registered in accordance with this standard.

BIO and NOP (National Organic Programme)These certifications ensure the conformity of production processes with specific requirements for processing organic raw materials, starting with prevention of contamination with other uncertified raw materials.The Pozzilli production plant is certified in accordance with this standard.

KosherThis standard guarantees that the food product has been processed using procedures and ingredients that conform with the dictates of the Torah and is issued by the rabbinate.The Turin, Gattinara, Verrès and Pozzilli production plants are certified in accordance with this standard.

UTZ Good Inside e Rainforest AllianceThese standards certify the conformity of production processes with raw material processing certified in accordance with the two sustainability standards, that is, having taken all the necessary measures to avoid contamination with non-certified raw materials. The Turin and Gattinara production plants are certified to process Rainforest Alliance certified raw materials. The Turin production plant is certified in accordance with the UTZ standard.

THE GROUP’S PRODUCTION PROCESS CERTIFICATIONS

in a modified atmosphere to guarantee the product maintains long lasting fragrance.

In order to ensure the safety and quality of the product, the packaging materials used to conserve the coffee are also subject to strict tests, paying particular attention to the materials in direct contact with the coffee.Such a high quality and sophisticated control system is guaranteed above all by a structured organisation well aware of customers’ needs, legal provisions and the best reference standards, recognised

on an international level.

Lavazza has adopted a coded system of strict procedures and methods that control every step of the process.This is guaranteed by highly specialized staff which is equipped with suitable work tools and financial resources. In 2012, the Group spent and invested 2.9 million euros in food safety and quality control.

In 2012, a restructuring process was undertaken with a view to further strengthening Lavazza’s activities aimed at spreading the Culture of Quality and constantly

improving its products and processes in terms of consumer safety.

Processed green coffee

Tonnes

C H A R T N O . 4 . 1

Number of direct controls carried out by Lavazza on green coffee

C H A R T N O . 4 . 2

146.472

50.000 100.000 150.000 200.000

150.380

2011

2012

4.700

1.000 2.000 3.000 4.000

4.600

2011

2012

5.000


4.1.2Research programmes to guarantee consumer health

The primary focus of the Lavazza business model has always been to offer extremely high quality and perfectly safe products along the entire value chain, from the procurement of raw materials to the distribution of the product, the points of sale and the consumer’s

home. In order to maintain this commitment, Lavazza not only develops and implements the best available technologies and manages an effective control system, but it also promotes the continuous search for new scientific knowledge on coffee, its effects on public health and the environment. From this point of view, Lavazza constantly pursues innovation in its production processes with the triple aim of maintaining quality, improving food safety and reducing the impact on the ecosystem.

The company has chosen to conduct research in partnership with research institutes and other companies and to encourage the discussion and

sharing of stimuli and resources on extremely important issues. In this spirit, a five-year agreement has been stipulated with the Polytechnic of Turin; an important place in the partnership is occupied by the joint research programme to improve traceability systems, product quality and the optimization of the production cycles and materials used.

Investigations into the fundamental research topics for Lavazza are also conducted within the scope of the Piattaforma Agroalimentare Piemontese (Food and Agricultural Platform of Piedmont), a network that brings several actors from the region together in innovation projects

The company has decided to conduct research in partnership with research institutes and other companies and to encourage the discussion and sharing of stimuli and resources on extremely important issues

in the food and agricultural sector, with the support of public funding from the Regional Council.

Lavazza is the leader of the “ITACA” (Technological Innovation, Automation and new Analytical Tests) project, which focuses on the identification and preparation of new technologies for improving the quality and safety of food, without neglecting the environmental and energy sustainability of the processes examined or the consumer well-being.

The following issues were analysed:

a series of contaminants already at the centre of attention

of control authorities and manufacturing companies due to the complexity of the problems involved (how to detect them, the mechanism behind their formation, technologies for their control in the production phase);

the optimum conditions for conserving semi-finished and finished products, both at the warehouse and in relation to the shelf-life of the products sold;

the development of increasingly reliable methods for the control, improvement and certification of food, which are quick, simple to use and give a result that is easy to interpret.Due to their very nature, the complexity of the measures

to be taken and solutions to be designed required a multidisciplinary approach, in which the industrial and agricultural production component has played an extremely important role and has given advantages over the traditional contribution made in similar cases by the exclusive presence of research institutes.

In the framework of this regional programme, the Group also takes part in “Eco Food” (Research and Innovation for Improving the Sustainability of the Food and Agricultural chain), a project coordinated by Soremartec Italia S.r.l., whose aim is to increase the environmental and energy sustainability of


companies on the continent in this sector (Lavazza, Illy, DE Master Blenders 1753, Nestlé, Paulig, Mondelez International and Tchibo). The ISIC finances research into the effects of coffee on health and develops coffee information programmes. It also monitors scientific communication on coffee all over Europe.

Both the ILSI and the ISIC adopt a strict policy to guarantee the independence of the researchers involved and impartiality in the scientific evidence collected, with an obligation to publish the studies even if the results are not positive for the sector.

4.1.3Sharing and listening to ensure ongoing improvement

It is important that “Lavazza Quality” is fully understood and appreciated also outside home. That is why Lavazza pays great attention to its customers on the “away from home” channel, to make sure they are well aware of the characteristics of the products and can be the ambassadors of the Italian culture of the genuine espresso coffee as produced by Lavazza. With this aim in mind, the Group offers training courses designed mainly for operators in the

sector, through its network of Training Centres, which form an integral part of the company’s quality system. The first centre offering “coffee education” was opened in Turin in 1979 and became a model for the other 57 Training Centres opened all over the world. About 30,000 users a year – including Food Service channel operators, sales agents, chefs, new Lavazza recruits, opinion leaders, journalists and buyers – attend courses on how to prepare a perfect Italian espresso coffee and discover the Lavazza food design experiments, new ways of preparing coffee proposed by prestigious and revolutionary chefs such as Ferran Adrià, Davide Oldani and Carlo Cracco. Skills to be shared and communicated but also opinions, suggestions: all this completes Lavazza’s approach to improving the quality of

some food and agricultural supply chains in Piedmont, safeguarding food safety and quality of the products, with a significant benefit in terms of competitiveness for the food and agricultural supply chains in the region.

Lavazza also engages on an international level to ensure consumer safety, through membership of the principal networks that study food contaminants and technological solutions for mitigating risk.In this regard, the Group is

a member of the ILSI – the International Life Science Institute, playing an active part in the Process-related Compounds and Natural Toxins working group, whose objectives are to broaden the understanding of the substances examined and assess the risk/benefit ratio for public health.

The principal topics taken into consideration are: toxicity, exposure, attenuation of impact and analytical aspects; these topics are discussed in neutral areas of debate in which Industry, the European Commission and Research institutes exchange their most significant information.

Lavazza is also active in the ISIC – the Institute for Scientific Information on Coffee, an association that follows scientific research on coffee and comprises the leading

The effects of coffee on the human body mainly concern the presence of caffeine, an alkaloid that affects our physiological functions. A cup of coffee normally contains an average quantity of 100 milligrams. If taken with moderation (300 – 400

mg a day) – or a little less during pregnancy – coffee has no contraindications for most healthy adults. The scientific evidence collected, rules out the risk of caffeine at lower

doses than 400 mg causing an increase in heart rate or arrhythmia and thus increasing the risk of cardiovascular disease. Its consumption, in the short term, causes a slight increase in minimum blood pressure, an increase comparable to that of other everyday activities such

as climbing steps or speaking in public.

A correlation between the consumption of coffee and liver disease has been ruled out and numerous recent studies indicate that it actually has positive effects

on health, due to the antioxidants present in the drink. Coffee favours the production of saliva and gastric secretions, thus strengthening the digestive

process after meals, and it also has a positive effect on the memory and concentration. Recent studies have revealed that coffee has

a preventive and protective activity in individuals with type 2 diabetes and Parkinson’s disease.

COFFEE AND HEALTH

Skills to be shared and communicated but also opinions, and suggestions: this competes Lavazza’s approach to improving the quality of the products and services offered.






the products and services offered. The Group meets up regularly with its customers in all market segments and provides communication channels that are always open with a view to collecting their comments and discovering their needs.

Our customers pay close attention to and are curious about the Lavazza products they buy. In 2012, Lavazza Customer Service answered 59,920 phone calls and 17,773 e-mails, collecting 143,897 requests and comments on various aspects:

sales information, requests for technical support, administrative issues and details on how to dispose of our products.In this intense interaction with our customers, only 505 complaints (0.35% of all contacts) about our products were received.A survey is conducted twice a year to find out the opinion of users of the A Modo Mio system, involving 1,000 people. In 2012, the level of overall satisfaction with the product and satisfaction with the main aspects that make up the system

– which include the quality of the coffee, the operation of the machine and technical support – remained stable and 58.7% of the interviewees indicated the highest level of appreciation, declaring their “full satisfaction”.

The first centre offering “coffee education” was opened in Turin in 1979 and became a model for the other 57 Training Centres opened all over the world

There are 58Lavazza Training Centres in the world

Lavazza is an active member of Italian and European coffee roasters’ associations. In Italy, the AIIPA (Italian Food Processors’ Association) – an association made up of 6 associations in the sector and 24 goods categories – including coffee – comprises 300 companies which include small to medium-sized firms and large national and multinational businesses. Lavazza’s Mario

Cerutti is Chairman of AIIPA Caffè. On a European level, Lavazza is a member of the ECF (the European Coffee Federation), which represents the entire coffee chain (green, roasted and soluble) to tackle the problems associated with this supply chain together.

T r a d e a s s o c i a t i o n s58


a national and international level and 196 currently being examined, of which 17 new applications were filed in 2012.

The technical innovation is driven predominantly by the coffee machine sector for professional or home use, the various kinds of capsules and, to a lesser degree, by patents concerning methods for processing and/or roasting coffee.

Lavazza’s commitment to continuous innovation of its products has the ultimate aim of responding promptly and increasingly effectively to consumers’ needs and expectations. Over the past few years, there has been a significant increase in coffee consumption in an ever-changing and multicultural setting; for Lavazza it will therefore be increasingly important to offer a broad and diversified range of products both to its traditional and emerging

customers.

The ability to create value for the areas in which it operates and for its stakeholders through a market orientated towards innovation is also demonstrated by the great attention it pays to the distribution and protection of the intellectual property created. Lavazza’s “patent portfolio” consists of 263 intellectual property items (201 invention patents, 59 ornamental designs and 3 utility models) granted on

For Lavazza, it will be increasingly important to offer a broad and diversified range of products both to its traditional and to emerging customers, in order to effectively pursue a market expansion strategy

Product innovation

4.2

Number of applications filed by year and type

C H A R T N O . 4 . 3

0

2

4

6

8

10

12

2011 2012

14

16

18

Ap

plic

atio

ns

file

d

Utility models

Ornamental designs

Patents

A method that enables all the actors in the supply chain to be informed and involved so as to increase their awareness and commitment in following a shared sustainability pathway


4.2.1A sustainable approach

In order to guarantee the high quality and sustainability standards of its products, for some years now Lavazza has undertaken a process for assessing the environmental performance of some key products with a “cradle to grave” approach: starting from the raw material coffee, moving on through the processes in the countries of origin and the production plants in Italy, to the packaging materials, the coffee machines, the transport of the raw materials and finished products, right down to the disposal of the coffee.Lavazza measures the environmental impact of its products using the Life Cycle Assessment method, in accordance with the ISO 14040 / 14044 standards.On the basis of these standards, the impacts along the entire value chain are quantified

and new solutions capable of combining product quality and guarantee with innovation and ecocompatibility are developed. A method that enables all the actors in the supply chain to be informed and involved so as to increase their awareness and commitment in following a shared sustainability pathway.

In the primary data recovery phase, managing the life cycle entails studying numerous processes carried out outside the Group, involving all the actors in a diversified and complex supply chain: coffee plantations all over the world, packaging material and coffee machine suppliers, several production sites and distribution chains in more than 90 countries.Lavazza has selected four significant indicators in the most sensitive areas of the supply chain:

Global Warming Potential (GWP - IPCC 2007 method over 100 years, calculated in Kg of CO2 equivalent) – impact on the global warming of the Earth through the direct and indirect emission of greenhouse gas;

ReCiPe (End Point method)(H) V1.05/ Europe Recipe H/A) – sole indicator for quantifying the overall impact expressed

in terms of three categories of damage: to human health, to the ecosystem and to resources;

Gross Energy Requirement (GER) – total amount of energy consumed;

Global Water Consumption (GWC) – direct and indirect water consumption.

The results of environmental impact studies on the main products are in the process of being certified in the framework of the Italian Ministry of Environment programme (see page 102). Lavazza plans to include results of Life Cycle Assessment Studies (LCA) in the next edition of the Sustainability Report.

2 0 1 2 // A n n o z e r o C a p . 4 - I l p r o d o t t o9 99 8

21,8%

3,3%

9,7%

18,8%

1%

45,4%

Sistema capsula “A Modo Mio”Contributi degli impatti per un singolo caffè espressoMetodo ReCiPe

G r A f I c o n . 4 . 5

Sistema capsula “A Modo Mio”Contributi degli impatti per un singolo caffè espressoCarbon Footprint

G r A f I c o n . 4 . 6

Sistema MokaContributi degli impatti per un singolo caffèCarbon Footprint

G r A f I c o n . 4 . 7

Sistema MokaContributi degli impatti per un singolo caffè Metodo ReCiPe

G r A f I c o n . 4 . 8

I processi di maggiore impatto sono relativi alla fase di coltivazione e lavorazione del caffè verde nei Paesi di origine e alla fase di consumo, sottolineando la necessità di ampliare la prospettiva di ciclo di relativa considerando non solo i processi produttivi degli stabilimenti ma integrando le fasi a monte e valle.

16,4%

1,3%

6,6%

16,6%

0,8%

58,3%

CARBONFOOTPRINT

Transformation

End of life packaging

Raw materials

PACKAGING CAPSULE

Transports

DISTRIBUTION END OF LIFE COFFEE

1

2

5

6

3

4

End of lifecoffee machine

Degassing

Utilities

Transports

Use consuption(energy, water)

Roasting

Grinding

Internal product handling

Raw materials

Product packaging

CONSUMPTION

MANUFACTORING

Nursery

Farm process

Transports

PackagingCultivation

GREEN COFFEE

23,9%

3,8%

4,1%

2,5%1,1%

64,5% 23,9%

3,8%

4,1%

2,5%1,1%

64,5%

Caffè verde Processi di trasformazione Packaging Trasporto al centro di ditribuzione

Fase d’uso Smaltimento caffè

Caffè verde Processi di trasformazione Packaging Trasporto al centro di ditribuzione

Fase d’uso Smaltimento caffè

LIFE CYCLETHINKING

MANUFACTURING



4.2.2Coffee and climate change

The elaboration of a common standard to measure the carbon footprint of green coffee

The Lavazza Group has also played an active part in the project for defining the PCRs

(Product Category Rules), within the environmental certification system EPD (Environmental Product Declaration), for developing guidelines for calculating the carbon footprint of green coffee. The project originated from Lavazza’s contribution to the project of Sustainable Trade Initiative (IDH), SAI Platform, Illycaffé, Nestlé, Tchibo, Mondelez, D.E. Master Blenders 1753 and Coffee Standards setting organisations. Lavazza played an active part in both the management committee and the technical work group of the project.The ultimate aim of the project is not simply to elaborate and share the guidelines but also to create a virtuous circle to help everyone operating along the supply chain to adopt increasingly effective solutions to conserve

the quality of the raw material. In particular, the project will focus on increasing awareness among coffee producers all over the world and involving them directly in collecting all the information necessary to map the carbon footprint of green coffee in the various geographical areas in which they are located.

Lavazza’s sustainable approach permeates the entire value chain, as it is of fundamental importance to conserve the Planet and sustain business and economy of scale, on which the various actors depend.










simplification of structures with a consequent saving of virgin raw materials and production costs;

increase of the percentage of recycled material of all

cardboard not in direct contact with food;

end of life valorisation through experimentation with new materials and new structures that enable the packaging to be managed with added value at the end of its life, with a view to increasing thepackaging that can be recycled.

As of 2012, Lavazza has decided to add a voluntary environmental mark to its

new packages to indicate the materials and whether they may or may not be recycled, in conformity with the ranges and regulations of the countries to which they are shipped.The possibility of introducing another mark on some products to indicate the final disposal destination of the packaging is currently being assessed.

In relation to this, Lavazza has developed a specific internal tool for calculating environmental impacts, the “Package Expert”, to assess and quantify various solutions from the environmental impact point of view and to take concrete action. The group is working actively

to promote and favour a consolidated approach as early as the preliminary design phase,by integrating the environmental aspects with the primary function of the packaging to protect and guarantee the quality and safety of the product.

100%

Standard solution

98,2%

1 operation

Lightening of heatshrink wrap

86,5%

2 operations


Switch to single material for overpackaging

82,9%

3 operations


Switch to single material for overpackaging

Elimination of print from primary packaging

Pallet + stretch wrap

10

20

30

40

g C

O2

eq

Heatshrink wrap Overpackaging Primary packaging

Improvement of the environmental performance of the packaging: the ground coffee pack – 2x250 g multipack

Case study on this type of product and packaging The analysis considers: primary, secondary and tertiary packaging. The comparison between various improvement solutions is expressed in grams of CO2 equivalent, in accordance with the IPCC method.

Source: Lavazza and 2B Consulenza Ambientale, who supported the conduction of the LCA studies

C H A R T N O . 4 . 9

Primary packaging1 pack

Overpackaging2 packs

Heatshrink wrap20 packs

Tertiary packaging(pallet + stretch wrap)2,400 packs

1 packet = 250 g

4.2.3Packaging eco-design

The packaging forms an integral part of the product because it must protect and guarantee the quality of the food for its entire shelf life, limiting also food waste and its environmental and social impact.As Lavazza is well aware of the importance of packaging, it has created a special inter-functional

structure – the Packaging Group – with the mission of designing packages efficiently, focusing on the quality of the raw materials, the environmental aspects and information to the consumer.

The Lavazza strategy for eco-design is developed along 5 main axes, always in compliance with the quality of the product, marketing needs as well as technical and technological needs:

removal of the packaging and non-essential components;

reduction of plastic materials, cardboard and sheets of aluminium in non-primary multilayer packaging



for the office and vending sector in frequented public places, while the A Modo Mio system is designed for the domestic segment.

Each system carries with it the design and production of the machines, the production of single-serve pods and a service for supplying pods to offices or distribution in supermarkets. There are over 3,000 distributors all over the world, in almost 90 different countries with an estimated 30,000 people involved in distribution and service activities.

4.2.4Innovation in closed systems

The products

Lavazza has always worked with creativity and innovation to provide

customers on all sales channels with one of their excellent Made in Italy products: espresso coffee. Today, an ever-increasing number of people want the aroma and convenience of the coffee served at the bar in their own homes or at their workplaces, and thus choose coffee pods prepared using closed-system espresso machines.The company first identified this segment, which today is growing at a double-figure rate, back in 1989 when – after a lively experimental phase – it launched its first closed system and first machine.

In over twenty years of business, the company has produced four espresso machine systems and a vast range of single-serve coffee products to enable espresso coffee to be made in the office, in public places and, since 2007, also in the home, through the sale of closed systems in large-scale retail channels.

The commitment towards industrial innovation and the search for customized solutions for each type of customer led to the design of the Espresso Point and Lavazza Blue systems and more recently the Firma system

The results3 million machines in offices and homes all over the world, of which 2 million locations on the OCS and Vending channel and 550,000 machines purchased for domestic use;

2 billion capsules supplied in one year.





Today, an ever-increasing number of people want the aroma and convenience of the coffee served at the bar in their own homes or at their workplaces and thus choose coffee pods prepared using closed-system espresso machines

223

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In all, the company has created 19 models of DIY espresso machines with 211 variants in accessories, colours and functions involving in their design some of the most important Italian and international designers – including Savino Balzano, Mauro Zona, Pininfarina, Studio01 Design, Hiroshi Ono and Jürgen Seifert – and having the machine produced with the technical and production expertise of major industrial partners.

All Lavazza machines are designed and produced to have a long life. In fact, most of them are still in production, apart from 3 or 4 secondary models, and as many are still in use after 20 years, thanks to a support service that guarantees the maintenance and repair of all machines produced. The Matinée model, for example, a development of the first capsule espresso system made in 1989, was the first capsule machine

to be installed on high-speed trains in Italy and France and is still in perfect working order in a wide variety of settings.

In autumn 2010, the Group established a partnership with Green Mountain Coffee Roasters Inc. – a company listed on the Nasdaq stock exchange and leader in single-serve coffee systems in the United States – for the production and sale on the North American market of a machine for preparing espresso and cappuccino coffee, Keurig Rivo; this was an extremely significant and strategic move in its pursuit of the objective of development on international markets in a rapidly growing segment.

In the development of new solutions that mitigate the environmental impacts of closed systems, Lavazza combines a rigorous scientific method and a search for innovative technologies, to effectively meet the needs of consumers

S U S T A I N A B I L I T Y R E P O R T // 2 0 1 2 C H A P . 4 - T H E P R O D U C T1 0 31 0 2

Source: Lavazza and 2B Consulenza Ambientale, who supported the conduction of the LCA studies

Lavazza is working to create an “environmental identity card” for its products, an essential base for elaborating and monitoring improvement plans, to spread outside the company fundamentally important information and the results of the company’s commitment to reducing its environmental impacts, supporting the company in identifying new solutionsIconcine

Icona Eccellenza




4.2.5The “environmental identity card” of our products

Lavazza is working to create an “environmental identity card” for its products, an essential base for elaborating and monitoring improvement plans, to spread outside the company fundamental information and the results of the company’s commitment to reducing its environmental impacts, supporting the company in identifying new solutions.Bearing this in mind, Lavazza is taking part in the project financed by the Ministry of the Environment and Protection of Land and Sea, whose aim is to calculate the Carbon Footprint and reduce the greenhouse

gas emissions of consumer products, with a view to playing an active part in elaborating and implementing a method shared on an Italian and international level.The project will lead to the environmental certification of all products included in the studies conducted and the application of a logo and a QR code containing environmental information validated by the Ministry of the Environment, in line also with the needs and requirements coming from other countries.This will promote the adoption of a uniform methodological approach shared by companies and will result in a single standardized mark on a national level, in order to guarantee transparent, coherent and correct information for the consumer.

The Lavazza LCA studies are exhibited at the Science and Technology Museum in Milan

When confronted with a challenge like responding to climate change, information with a solid scientific base, capable of

increasing awareness in people’s consumption decisions must be spread.This is why Lavazza has taken part in the preparation of a new interactive exhibition area for explaining the concept of a product’s life cycle to visitors, in the “Leonardo da Vinci” National Science and Technology Museum in Milan. The new room called “One thing leads to another. The product life cycle” houses a description of the environmental, economic and social impact of various everyday products, throughout their life cycle, from production to disposal.In the new area, Lavazza exhibits the LCA study on a cup of coffee prepared using the automatic “A Modo Mio” machine, in order to increase awareness of these issues on a broader scale, thus contributing to train a “public with scientific know-how”.

LCA of a cup of coffee made prepared using the A Modo Mio system

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LAVAZZA SUPPLIERSExcellence and sustainability

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Being able to count on a reliable supply chain is key factor of success for safeguarding the quality of products and the loyalty of the company’s stakeholders.

Over the years, we have established stable and profitable partnerships which we intend to maintain.

With this in mind, we have revised:

the purchasing strategies and procedures to ensure homogeneity, transparency, clarity of needs and selection criteria; the Supplier code of conduct, so that our values and expectations in commercial relationships with our suppliers are clear and shared beforehand, in line with the principles of integrity and loyalty expressed in the Code of Ethics;

the rules for drawing up contracts so that, together with conditions of the agreement, they underline how important the principles and values are to us in relations with the supply chain;

the organisation of the Purchasing department, in order to focus on the business objectives and ensure that all procurement guidelines are followed

Lavazza Suppliers

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5.3 Investments for the futureSupply chain management5.1CONTENTS

Values and commitments5.2

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Commercial relations create work, produce know-how, stimulate innovation and competitiveness, and develop the ability to interact with the outside environment.Throughout its history, Lavazza has established long-lasting relationships.

In 2012, apart from green coffee, Lavazza purchased good and services for 332 million euros. Most of its suppliers (excluding

the green coffee supply) operate in Italy: 85% of the purchases of goods and services are made in Italy, 13% in Europe and 2% outside Europe.In 2012, in light of the market challenges, the company revised and developed the existing processes to favour the achievement of the business growth objectives.First of all, an assessment was made of the number as well as the strategic and critical

importance of the suppliers so as to re-elaborate the qualification, selection and monitoring methods and criteria. The process undertaken follows the guidelines set forth below:

rationalization of the number of suppliers to optimise overall costs and searching continually for innovative, efficient and quality solutions;

centralization, standardization and greater formalization of the purchasing processes; an approach in which all the functions concerned take part in the selection of suppliers, providing their skills, sharing the objectives and playing

different roles. The decision-making process is more rational, the responsibilities are allocated clearly and the continuous discussion between the Purchasing department and other departments reduces risks and protects against conflicts of interest. The guidelines

whereby the Headquarters coordinates the purchasing activities of overseas subsidiaries while allowing them adequate levels of autonomy have been formalized;

transparency, impartiality, meritocracy and

Throughout its history, Lavazza has established long-lasting relationships

Supply chain management

5.1

332In 2012, apart from green coffee, Lavazza purchased good and services for 332 million euros


5.2Values and commitments

The Supplier code of conduct

The mutual trust that lies at the root of the relationship between the customer and the supplier is achieved by sharing values and commitments with respect for people and the environment.Following the revision of the Code of Ethics, Lavazza decided to focus on the supply chain, specifically indicating the aspects expected of their trade partners.

The Supplier Code of Conduct, published also on the company’s web site (http://www.lavazza.com/en/lavazza-world/ethics.html), describes the prerequisites for becoming Lavazza suppliers: passion for excellence, ethical behaviour, sense of gratitude, compliance with human rights and workers’ rights principles, far-sightedness and transparency. The Group expects all its suppliers to adopt these principles and to encourage their trade partners to do likewise.The Supplier Code of Conduct forms an integral part of the contractual relationship and its violation justifies the termination of the agreement.

The integration of CSR aspects in supplier qualification activities

It is increasingly important for Lavazza to know the approach of its suppliers to sustainability topics. This is why the following

Corporate Social Responsibility elements have been added to the request for information made during the supplier qualification phase:

the adoption of a Code of Ethics;

he elaboration of a Sustainability Report;

the possession of environmental and social certifications.

This helps the company to assess the attention that suppliers pay to the responsible development of its business as well as their technical, economic and qualitative characteristics.

The supply chain supervision methods

The Supplier Code of Conduct sets forth that Lavazza can carry out inspections at suppliers’ sites and commission third-party audits from specialized organisations.

excellence, through clear and shared supplier qualification, selection and monitoring guidelines, as fundamental elements for a homogeneous and rewarding approachThe qualification criteria are used to assess suppliers objectively, based on a predefined set of requirements and parameters

indicating their industrial and financial capabilities. The selection process, performed in close collaboration between the Purchasing department and other departments, enables the choice to be made on the basis of the technical, economic and qualitative characteristics of the offers received. The

performance monitoring model is based on the use of a set of indicators, also subject to joint assessment, capable of reflecting the supplier’s reliability over time, the maintenance of its suitability and its orientation towards innovation, as business competitiveness and sustainability elements.

Purchases of goods and services by geographical area of origin

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This enables the company to directly monitor suppliers which, on the basis of its strategy and criticality analyses, need support to guarantee satisfaction of the minimum requirements laid down by the applicable regulations.These operations are performed in compliance with international standards of the sector, considering however the specific features of the areas in which the suppliers operate.The results of these operations form the basis for developing joint improvement plans characterised by specific commitments and objectives, the implementation of which is monitored over time.

5.3Investments in the future

Lavazza will continue to invest resources in order to improve the structure of the systems in place for selecting suppliers, monitoring their performance and their ability to propose innovative ideas to support product improvement and optimization of costs.

Lavazza committs not only to consolidating long-standing partnerships, but also to creating synergies with new entrepreneurial initiatives.

In collaboration with I3P, the enterprise incubator of Turin Politecnico, start up companies working on technological innovation are linked to Lavazza research and innovation department.

Lavazza also takes part in the circuit of the Fondazione Torino Wireless (Turin Wireless Foundation) to facilitate the application of information and communication technologies for the food and agricultural sector, through collaboration with the most active organisations at the forefront in the region of Piedmont.

The valorisation of know-how and its partnerships with Italian companies is confirmed by the Group’s development plans: the investment of about 60 million euros to be made in the production plant of Gattinara, for example, will be commissioned from Italian companies to the tune of 70% of the total value.

Lavazza committs not only to consolidating long-standing partnerships but also to creating synergies with new entrepreneurial initiatives.

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RESPECT FOR THE ENVIRONMENT

Minimising the impactof production processes

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Respect for the environment

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Lavazza has started a process for monitoring and increasing the efficiency of its performance in terms of direct environmental impacts. The environmental focus is also considered in the industrial plans for the coming years.

Irrespective of the brewing method used, studies on the life cycle of a Lavazza espresso demonstrate that all processes in the supply chain – from the cultivation of the raw material to its eventual disposal – have major impacts in terms of energy consumption and greenhouse gas emissions. In this setting, the manufacturing activity carried out by Lavazza, which consists in transforming green coffee into roasted coffee ready for consumption,

contributes to direct and indirect environmental impacts, which include consumption of resources such as electricity, natural gas and water, the production of atmospheric emissions, wastewater, waste and noise into the outside environment. These impacts are monitored constantly and managed in accordance with a system of internal procedures with a view to minimizing them, as far as technically possible.

Energy and water consumption6.1

CONTENTS

Waste management6.2

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In 2012, the overall energy requirement of Lavazza’s main production plants was 543,982 GJ, with a stable energy consumption per tonne of coffee on the previous year of 4.5 GJ/tonne. The heat consumption for heating rooms and operating roasting machines accounted for 57% of the energy consumption recorded, while electricity consumption accounted for the remaining 43%.

The figures refer to the consumption of the Verrès, Turin and Gattinara plants.

The water consumption of the production plants and administrative offices are also monitored by the Group in order to identify the most effective measures for reducing it. Most of the consumption in the production plants is related to the use of water in the coffee roasting process, the compressors and for

sanitary purposes. In 2012, a total amount of 83,512 cubic metres of water was consumed, with a reduction of about 17% compared to the previous year. This reduction is attributable principally to operations aimed at rationalizing the use of this resource in the production process: optimization of the compressors, switching from an open-cycle system to a closed-cycle system.

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Lavazza nella sua storia ha favorito la creazione di rapporti di lunga durata e ha contribuito allo sviluppo di un indotto importante

Energy and water consumption

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Overall energy consumption

The figures refer to the consumption of the Verrès, Torino and Gattinara plants.

Index calculated as a ratio between overall consumption and tonnes of packed product leaving the plants.GJ [Gigajoules] for consumption, GJ/tonne of finished product for consumption index

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122.288 tonnes of finished product

115.800 tonnesof finished product


Expenditure and investments in environmental management

The figures refer to the consumption of the Verrès, Turinand Gattinara, 2012

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When put into relation with the finished product, water consumption during production has a minimal impact: about 0.7 m3 per tonne of coffee produced.

Lavazza is concentrating its efforts, in terms of monitoring and reducing its direct impacts due to energy consumption, on the production processes with a more intense use of energy: green coffee roasting and product packaging.In order to stably reduce consumption, the Group is implementing programmes to rationalize and optimize the use of electricity and natural gas by replacing the compressors, recovering heat from the roasting

process in several production cycles and modifying the office air-conditioning system.A plant for recovering the heat produced by the roasting machines as a source of heating for the production rooms of the Turin plant is also being designed.Efforts are also being made to reduce the amount of climate-altering gases emitted into the atmosphere by combining operations aimed at improving energy efficiency with the use of sources and technologies with a lower environmental impact: the Gattinara plant has a photovoltaic system for the production of electricity.With a view to increasing the efficiency of environmental

management, over the past few years the Verrès plant has maintained EMAS certification, granted in recognition of the implementation of an effective environmental management system aimed at continuously improving the site’s environmental performance.

In 2012, Lavazza invested around 800 thousand euro in activities aimed at reducing the environmental impacts of its operations in the production plants of Verrès, Gattinara and Torino. These activities were mainly related to emissions and noise impact.

Waste

Emissions

Waste discharge

Noise

Other

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Total water consumption

The figures refer to the consumption of the Verrès, Turin and Gattinara plants.Index calculated as a ratio between total consumption and tonnes of packed product leaving the plants.m3 for consumption, m3/tonne of finished product for the consumption index

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The Group encourages sustainable management of the waste generated from production and administration activities by performing a series of operations within the scope of the waste reduction, reuse and recovery strategy.

Reducing the waste produced

Production processes are being optimized with a particular focus on limiting the amount of coffee waste.

The number of printers in the offices has been streamlined by connecting the workstations to network printers, making efforts also to reduce the amount of special waste produced and paper consumed. In the canteens, the set of water jugs has reduced the consumption of plastic water bottles.

Encouraging reuse

Lavazza has a pallet hiring

system for transporting products from the plants to the distribution centres, thus enabling the platforms to be continually reused, rather than being destroyed or reused in less efficient ways.

Recovering waste

The Group recovers 95% of the waste produced in its production plants and in its offices, disposing of the rest. In fact, nearly all (99%) of

Lavazza nella sua storia ha favorito la creazione di rapporti di lunga durata e ha contribuito allo sviluppo di un indotto importante

Waste management

6.2

Dedicated recovery chains

Other types of disposal

Waste production index

Waste production

The figures refer to consumption on the Verrès, Turin and Gattinara plants.Index calculated as a ratio between total consumption and tonnes of packaged product leaving the plants in the area. Tonnes of waste, tonnes of waste/tonne of finished product for the waste production index

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Emissions

Noise

Other9%

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Expenditure and investments made in environmental management

The figures refer to the consumption of the Verrès, Turinand Gattinara, 2012

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the waste is non-hazardous, consisting mainly of coffee waste composted to become fertilizer.

The strong commitment to the recovery of the waste produced, confirmed by the expenditure and investments made in this field, is supplemented by a constant search for more effective technical solutions for making good use of the waste.This was also behind Lavazza’s participation in the EcoFood project, which is coordinated by Soremartec Italia S.r.l. with

the intention of increasing the environmental sustainability of some food and agricultural chains in Piedmont, through the energetic valorisation of waste and sub-products produced during the production cycle.

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THE COMMITMENTOF THE LAVAZZA

FOUNDATION

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Valorizing coffee producing communities


Lavazza is aware of the major social repercussions of coffee growing and harvesting activities in growers’ communities, as well as the role it can play in terms of creating value in the areas where it operates through its supply chain.

Coffee growing is concentrated in developing, emerging countries and is performed above all by farmers – approximately 2/3 of all producers in the world – who have small plantations, less than

two hectares on average, and coffee picking is often the only source of income for entire families.

The Lavazza Foundation invests its resources in iniziatives in favour of coffee producing communities. The aim of these activities is to increase their know-how by transferring agronomical and management concepts and technologies to them, thus helping to improve their living and working conditions.

Valorizing coffee producing communities

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CONTENTS The Lavazza Foundation’s objectives, approach and projects7.1

To stregthen the impact: synergies with other actors in the supply chainThe Coffee&Climate project

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The Giuseppe and Pericle Lavazza Foundation NPO was set up in 2004.

On the basis of its Mandate, “the Foundation directly or indirectly pursues exclusively social solidarity aims in the field of health care, welfare services and protection of nature and the environment both in Italy and

overseas, without making any profit.”

In order to reach its social solidarity aims, the Foundation:

promotes, develops and coordinates, in some cases in collaboration with public and / or private organisations, initiatives whose aim is to improve the living and working conditions of communities and people living under conditions of hardship, with

particular reference to the populations of coffee producing countries;

promotes, develops and coordinates studies, research and other activities aimed exclusively at protecting and increasing the value of the environment and, in particular, promotes, spreads and implements new

methods of introducing the concept of environmental, economic

The ¡Tierra! programme, plays a central role within the iniziatives of the Lavazza Foundation. In this programme, the Foundation actively participates indefining projects, partners, and monitoring of results

The Lavazza Foundation’s objectives, approach and projects

7.1

and social sustainability in the cultivation and processing of coffee and improving their production and economy;

promotes surveys, research and studies with a view to finding out more about the socio-economic conditions of the populations of coffee producing countries, determining their current and future demographic evolutions and helping to find policies that meet their needs;

finances and awards annual study grants to young people/students of any nationality that distinguish themselves for their studies, research work or commitment in the aforesaid fields;

provides welfare services to the society and/or individuals in special, serious and urgent cases.

The Lavazza Foundation adopts an inclusive approach, discussing

openly with other actors and encouraging collaboration in order to find more effective solutions.

The Foundation therefore is committed to act as a collector and facilitator of joint projects in the places where it operates.In order to focus its efforts on topics of real interest to the communities involved and obtain a high degree of local ownership, all the operations are designed with direct involvement of the actors concerned.










This framework also includes the ¡Tierra! programme, in which the Foundation participates directly in the entire project cycle, including monitoring of implementation and results obtained.The first project, concluded in 2009, involved the coffee producing communities in Honduras, Peru and Colombia, and then in 2010 moved towards new areas in Brazil, India and Tanzania.

The projects consist of social, economic and environmental operations. In Brazil, the project in progress is for the benefit of small coffee producers in the communities of southern Minas Gerais, in the Lambarì area.Here, the Lavazza Foundation, in partnership with Hans R. Neumann Stiftung, Emater, the Fundação do Banco do Brasil and the Cooperativa Agropecuária de Lambarí, provides training in sustainable coffee production for the benefit of small producers in the municipality of Lambarì and surrounding areas.The project is based on creating a favourable environment for the development of family coffee production, to make it more efficient, in harmony with nature, and to obtain higher quality coffee.

In the state of Karnataka in India, the ¡Tierra! project supports 400 Robusta coffee producers. The project, which was launched in 2011, is implemented in collaboration with the German investment corporation (DEG, Deutsche Investitions- und

Entwicklungsgesellschaft). In Tanzania, since 2010, the Foundation has been engaged in a large-scale project for providing technical support to coffee producers in the Kirua area (ca. 700), on the slopes of Mount Kilimanjaro. In the same area, in 2012, the ¡Tierra! programme and collaboration with the Kirua Children association resulted in the construction of a playschool, the MaseRing Nursery School, directed by Fr. Peter Kylasara in the village of Maande (Kirua region, at an altitude of 1,200 metres on Mount Kilimanjaro).

The contributions that Lavazza makes to the Foundation every year are entirely focused on activities and projects in coffee producing countries. In 2012, about one third of the funds at the Foundation’s disposal was allocated to financing ¡Tierra! projects.The “second generation” of ¡Tierra! projects is being supplemented with a third; in 2013, projects were launched in Ethiopia and Vietnam.

7.1.1Strengthening our positive impact: synergies with other actors in the supply chain

The economic empowerment of coffee producing communities represents a complex challenge of notable proportions. It requires action to be taken by various players, from the national and international institutions to non-governmental organisations and companies, each within their own role and with their own objectives.For a major coffee roasting company like Lavazza, supporting coffee growers in this sustainable growth process is certainly a matter of ethical responsibility, but also of far-sightedness and protection of its business. In fact, it is in its own strategic interest to be able to count on solid grower communities capable of offering adequate quantities and qualities of raw materials over time.

Aware that greater benefits can be obtained if the various actors in the supply chain are coordinated to create synergies and to strengthen the impact of the operations performed, through the Lavazza Foundation we have supported International Coffee Partners (www.coffee-partners.org), whose Steering Committee members include Giuseppe Lavazza, Vice Chairman of Luigi Lavazza S.p.A., and Mario Cerutti, Green Coffee & Corporate Relations Partner. This coordinating body brings together major European

The Lavazza Foundation’s partnership with Save the Children to combat child malnutrition

In 2012, the Lavazza Foundation renewed its support for Save the Children, the international non-governmental organisation that defends children’s rights, by financing a programme against malnutrition in India, West Bengal, as part of the Save the Children EVERY ONE international campaign. The aim of the project is to reduce the infant mortality rate by preventing and curing malnutrition. Determining factors to this aim were the Save the Children operation aimed at informing and increasing awareness in local communities of the importance of adopting correct eating habits and healthy and hygienic practices, activities for improving the system for identifying and handling cases of malnutrition at a community level, and discussions with local institutions with a view to elaborating adequate local health policies. To date, after a period of three years, 25,000 children and 10,000 mothers have received direct support, more than 500 health operators have attended the training courses and 45,808 people have benefited indirectly from them.










coffee roasting companies (Joh Johannson Kaffe AS from Norway, the Swedish company Löfbergs Lila AB, Gustav Paulig Ltd. in Finland and Tchibo GmbH from Germany, as well as Lavazza) and the trading company Neumann Gruppe GmbH in projects promoting the sustainability of coffee supply chains. The vision of ICP is to make small coffee growing farmers sustainably more competitive over time.

The aim of the operations is therefore, also in this case, to accompany communities of small coffee growers in improving their living and working conditions by promoting more sustainable farming practices and setting up networks for coordinating farmers. The projects are implemented in partnership with international organisations for development (such as the EU, USAID, the German GIZ, the French AFD and non-governmental organisations such as Oxfam) and local partners, to maximize their impact.

With this approach, together with the International Coffee Partners, the Foundation has

supported 16 projects in 11 countries, involving over 60,000 beneficiaries. In 2002, ICP projects were concentrated in Tanzania, Uganda, Brazil, Guatemala, El Salvador and Honduras.

7.1.2Synergies with other actors in thesupply chain

In order to elaborate strategies for adapting to climate change in the coffee supply chain, the Lavazza Foundation takes part in international pre-competitive working groups to make the most of their efforts and tackle the challenges ahead.

To this aim, together with some members of the International Coffee Partners - the Commonwealth Agricultural Bureaux International (CABI) and the German development agency GIZ - the Lavazza

Foundation supported the launch of the Coffee & Climate project (www.coffeeandclimate.org). The project sees the direct involvement of the Vice Chairman Giuseppe Lavazza as Chairman of the project, and Green Coffee & Corporate Relations Partner, Mario Cerutti, as a member of the Steering Committee. The objective of the project is to study the influence of climate changes on coffee production with a view to transferring to growers the know-how and technologies that can enable them to respond effectively to constantly changing climatic conditions. The project is already under way in Brazil, Tanzania, Guatemala, Honduras, El Salvador and Vietnam.

Cecafé

The Foundation has cooperated for many years with Cecafé, the Brazilian coffee exporters association, in the “Criança do café na escola” project, which involves the construction of IT laboratories in primary schools in coffee growing areas (40 laboratories have been built so far).

For a major coffee roasting company like Lavazza, supporting coffee growers in the sustainable growth process is certainly a matter of ethical responsibility, but also far-sightedness and protection of its business

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A CONTINUOUS IMPROVEMENT PROCESS

Lavazza sustainability objectives

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3 Pursue the commitment towards coffee producing communities

2 Minimize the environmental impact of products and processes and continue tomonitor health and safety at theworkplace

4 Promote supplier innovation and sustainable development

5 Strengthen transparency and dialogue with our stakeholders

T H E T O O L S

T H E T O O L S

T H E T O O L S

T H E T O O L S

T H E T O O L S

Adopt new tools to strengthen new employees’ sense of belonging to Lavazza.

Implement the “Leading Change” project, to develop the system for valorizing skills and competencies.

Continue the training process according to the needs that emerge from the skills assessment.

Continue with projects for supporting coffee producing communities within the framework of the ¡Tierra! programme and the iniziatives of the International Coffee Partners network.

Increase the ability to measure and monitor our environmental performance, also in relation to the requirements of principal international standards, to facilitate the development and implementation of targeted improvements and the comparability of our data.

Continue the product packaging revision process with a view to reducing its environmental impact.

Continue to apply the environmental labels to the packaging of our products.

Continue with the activities aimed at continuously improving our performance in terms of environmental protection and workplace safety.

Extend the application of the Supplier Code of Conduct to all suppliers that work with Lavazza.

Progressively implement a supplier qualification system that takes Corporate Social Responsibility aspects into consideration.

Publish the first Sustainability Report distributed outside the company, with reference to the 2013 data.

Strengthen external communication on sustainability, also through the project launched with the contribution of the Ministry for the Environment.

1 Provide a working environment fostering the development of skills and valorisation of diversity

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Accountability

An organisation is “accountable” if it is organized in such a way as to report periodically and communicate its approach, objectives and results transparently to its stakeholders (see stakeholder).The level of accountability of an organisation and the content of its reports have a significant impact on stakeholders’ perception of the organisation, thus affecting its reputation. Accountability is therefore a base on which the relationship of trust between a company and its stakeholders is built and strengthened.

Audit

An audit is an assessment of the performance of an organisation on the basis of preset criteria, using tools that guarantee their objectivity.Audits are generally conducted by carrying out inspections at the offices of the company whose behaviour is to be verified. The areas of assessment and the requirements to be checked are generally defined by commercial agreements between the two organisations (if, for example, the audit is conducted within the scope of a supply contract and it

is the customer, directly or through a third-party auditor, to verify compliance with the requirements), or by standards to which the organisation has chosen to conform (as in the case of certifications).An audit may reveal aspects of company processes that fall short of the requirements, in which case corrective measures to be taken are proposed.Failure to eliminate non-conformities may result in commercial relations being terminated, if this is laid down in contracts with suppliers.

Sustainability ReportA document drawn up periodically in which an organisation analyses its social, environmental and economic performance, describing its ability to:

- maintain the quality and reproducibility of natural resources;- guarantee conditions of wellbeing and opportunities for growth in compliance with human rights and workers’ rights ;- create income, profit as well as stable and lasting work.

The Sustainability Report is a voluntary document, and therefore its realisation carries no legal obligations.

There is, however, a standard that defines its structure and contents, to ensure it provides the information in which stakeholders (see stakeholder)are interested. This is the GRI standard (GRI), which is recognised on an international level and used by leading organisations in the world for reporting on sustainability.In 2013, the European Parliament and Council issued a proposal for a directive on the “communication of non-financial information and diversity data by some companies and some large groups“.The purpose of the Directive is to introduce the obligation, for listed and unlisted European companies that employ more than 500 employees, to publish a declaration containing “at least the essential environmental and social information concerning staff, compliance with human rights principles, and the fight against active and passive corruption” in the management report.

Biodiversity

The variability between living organisms within a single species (genetic diversity), between different species and between ecosystems. The Convention on biological diversity, approved by the European Community, affirms the need to anticipate, prevent and combat at the source the causes of any significant reduction or loss of biological diversity, in consideration of its intrinsic value as well as its ecological, genetic, social, economic, scientific, educational, cultural, recreational and aesthetic values.

Organic

Organic farming is a method of growing raw materials in compliance with a set of coded principles, which excludes the use of chemicals in all stages of agricultural production.The term “organic” is also used to indicate a certification standard for raw materials, which guarantees their provenance from supply chains that comply with the principles of organic farming.For companies operating in Europe, the technical regulations that formalize

the characteristics of organic farming are laid down in community legislation; there are also Supervisory bodies authorized by the Italian Ministry of Agricultural and Forestry Policy to make inspections on the farms and certify organic production processes.

Best Available Technology (BAT)

The most efficient and advanced technology industrially available and applicable under technically valid conditions capable of guaranteeing a high level of protection of the environment as a whole.

Carbon Footprint

A measurement of the impact of human activities (be they products, services, processes, …) on the environment, in terms of the total quantity of carbon dioxide (CO2) and other greenhouse gas emissions associated with its entire life cycle.

Code of Ethics

A measurement of the impact of human activities (be they products, services, processes, …) on the environment, in

terms of the total quantity of carbon dioxide (CO2) and other greenhouse gas emissions associated with its entire life cycle.

Environmental compatibility

Indicates the fact that a project has been implemented or a product has been produced without having any negative impact on the environment.

Industrial composting

Industrial treatment of the wet fraction of solid urban waste and biodegradable farming and industrial waste to obtain compost that can be sold. The waste is treated by means of a biological process in the presence of oxygen.

CO2 equivalent

Emissions of any greenhouse gas converted – in accordance with the IPCC standard – on the basis of their contribution to the greenhouse effect, using carbon dioxide CO2 as the reference gas. For example, the effect of natural gas (CH4) on global warming is equivalent to 21 times that of carbon dioxide CO2.


CSRCorporate Social Responsibility

Set of policies adopted voluntarily by a company to integrate social and ecological issues in its commercial operations and relations with stakeholders. A company is socially responsible if it goes beyond its statutory obligations by investing in human capital, the environment and relations with its stakeholders.This is the definition of CSR given by the communication issued by the European Commission in October 2011 “A new 2011-2014 strategy for corporate social responsibility”, according to which CSR is “a process that integrates social, environmental, ethical and human rights issues in the company’s activities and strategy in close collaboration with its stakeholders, with a view to:

- maximising the creation of shared value for partners/shareholders, the other stakeholders and the community in a broader sense, through a long-term strategic approach to CSR and the development of innovative products, services and business models;

- identifying, preventing and mitigating its possible negative impacts”.

Diversity Management

Careful approach to the management of diversity within the organisation, whether related to gender, age, cultural background, ethnic origin, sexual orientation, religious belief, etc..The aim of this approach is to reduce conflicts and make the most of the differences as a way of bringing innovation and improving company performance.

Eco-design

The design of a product that has the lowest possible impact on the environment during its production, use and disposal.

Greenhouse effect

Natural effect amplified by the results of human activities, which regulates the ability of the Earth’s atmosphere to withhold energy from the sun through a semi-transparent layer consisting of greenhouse gases that “trap” the sunlight.

Energy efficiency – Energy savingSet of actions for programming, planning and adopting work tools, technologies and operating methods that enable energy to be saved without reducing the production or services offered.

EMASEco-Management and Audit Scheme

A voluntary tool created by the European Community that organisations can voluntarily adopt to indicate that:

- they apply environmental management systems;- the performance of these systems are assessed systematically, objectively and periodically;- information on environmental performance is given;- their environmental performance is reported to the stakeholders.

Environmental labelling

Symbol that distinguishes a product with a better environmental performance than its competitors; manufacturers use it to encourage consumers to purchase products with a low impact on the environment.Examples of environmental labels include:

- Ecolabel, a European ecological quality mark;- the marks of the sector, such as Energy Star for products with high energy efficiency and FSC for products containing wood from responsibly managed forests.

Fair Trade

Certification standard for farming raw materials, which guarantees their provenance from supply chains managed on the basis of fair trade principles, which include the payment of a guaranteed minimum purchase price to farmers.

Non-renewable energy sources

Energy sources that come from resources that tend to run out on a human time scale, becoming too costly or too polluting for the

environment, unlike renewable sources, which are naturally replenished within a relatively short period of time. Examples of non-renewable energy sources include fossil fuels (coal, oil and natural gas) and the minerals used to produce nuclear energy (uranium and plutonium).

Renewable energy sources

Energy sources capable of regenerating themselves at the same speed at which they are consumed, therefore never running out. These sources include: solar energy, wind energy, biomass, tides, ocean currents and rainfall (which may be used through a difference in level of watercourses).

Global Compact

Network of national and international companies and organisations coming from all areas of the world on the basis of a proposal made by the Secretary-general of the United Nations for the promotion of a sustainable global economy. Participating companies must demonstrate that they comply with human and workers’ rights, protect the environment and combat corruption.

Global Reporting Initiative (GRI)

A non-profit, multi-stakeholder organisation recognised on an international level, whose mission is to establish guidelines for drawing up sustainability reports and to encourage the adoption of this report as a way of contributing to sustainable development.Since its foundation in 1997,the GRI has issued a series of editions of its own reporting standards, each representing an evolution of the previous one to adapt to changes in the setting and to better meet stakeholders’ expectations in terms of the information provided (see stakeholder).The new edition of the standard “G4”, which focuses reporting on the concept of “materiality”, was presented in mid 2013 (see materiality).

Greenwashing

The dishonest behaviour of companies or organisations whereby they simulate the adoption of environmental and social policies in order to gain advantages in terms of image and to distract attention away from their responsibility for negative impacts or simply to boast reductions in impact that have not actually been achieved.


Ecological footprint

An index that measures how much ecologically productive area of land and sea is required by a population or an activity in order to produce all the resources consumed and to absorb all the waste produced using the predominant technologies and management methods.

ISO 14001

A voluntary international standard, applicable to all types of companies, which serves to assess and certify the adoption of an environmental management system (EMS), capable of guaranteeing compliance with all regulatory provisions and the commitment to ongoing improvement of their environmental performance.

ISO 22000

A voluntary standard for certifying safety management systems in the food sector. It is applicable to all companies operating directly or indirectly in the food and agricultural sector, including packaging producers, and serves to assess and demonstrate the compliance and food safety of products, also

guaranteeing effective control of the risk factors.

ISO 9001

An international standard that defines the requirements of a corporate quality management system. This standard provides the guidelines for improving efficacy and efficiency in producing the product and providing services to enhance customer satisfaction and loyalty.

LEED

LEED (Leadership in Energy and Environmental Design) is a system for classifying the energy efficiency and ecological footprint of American buildings, developed by the U.S. Green Building Council (USGBC).The system provides voluntary certification applicable to buildings, demonstrating their environmental sustainability in terms of energy and the consumption of all resources involved in the production process.

Life Cycle Assessment (LCA)

Method defined by the ISO 14040:2006 standard. The LCA is an objective process for assessing the environmental effects of a product, process or activity, carried out by identifying and quantifyingthe energy, materials andwaste released into the environment in order to assess the impact of the same andto identify and fulfil opportunities for environmental improvement. The assessment includes the entire life cycle of the product, process or activity, including the extraction and processing of raw materials, production, transportation and distribution, use and eventual disposal.

Materiality

Materiality means the significance that a given topic (economic, management, social or environmental) has for the company and its stakeholders (see stakeholder).The “materials” are the aspects that reflect the organisation’s significant economic, social and environmental impacts or that substantially influence the assessments and decisions made by the stakeholders.

Organisation and Management Model(in accordance with Italian Legislative Decree no. 231/2001)

An organisational system, defined through a deed adopted officially by the company, designed to prevent cases of criminal liability laid down in Legislative Decree no. 231 of 8 June 2001. The decree lays down the “administrative liability” of organisations for specific kinds of crimes attempted or actually committed by administrators and employees in the interest or to the advantage of the organisations.This means that if an individual representing the company or, in any case, acting in its interests commits a specific kind of crime from which the company benefits, the criminal liability of the individual also becomes the responsibility of the organisation, which responds directly also through its assets.The purpose of the organisation and management model is to activate the processes and tools necessary to prevent the types of crimes indicated in the decree, thus relieving the organisation of all liability if these crimes are actually committed.

Strategic Sustainability Plan

A document in which the company sets forth its vision, objectives and activities with a view to increasing the level of satisfaction of stakeholders’ expectations and improving its environmental performance within specific times, guaranteeing the integration of sustainability requirements with the organisation’s overall strategic objectives.

Scope

With reference to sustainability reporting, it indicates the various entities (e.g. controlled companies, joint ventures, suppliers) whose performance is included in an organisation’s sustainability report. As reporting is voluntary, the company can define its own reporting scope; the degree of accountability of the organisation depends on the breadth of its reporting scope and the proportion of its activities included in it (see accountability).

Rainforest Alliance

Rainforest Alliance is a non-governmental organisation founded in 1986 with the mission

of conserving biodiversity, improving the living conditions of farmers and promoting sustainable farming practices (www.rainforestalliance.org). The certification standard is based on compliance with the following 9 principles: protection of the local flora and fauna, protection of the ecosystems, protection of the soil, protection of water resources, fair treatment of workers and good working conditions, good relations within communities, integrated waste management, integrated pesticide management, and the monitoring and promotion of peace.

Global warming – Climate change

Expression used to indicate the increase in the average temperature of the Earth’s atmosphere and oceans due to natural causes. More recently it has been used to mean the increase in temperature caused by man.The principal climate altering gas is carbon dioxide (CO2), which accounts for about 80% of global warming. The other principal gases, regulated also by the Kyoto protocol, are natural gas (CH4), nitrogen protoxide (N2O), halogenated compounds (PFC), hydrofluorocarbons (HFC) and sulphur hexafluoride (SF6).


i composti alogenati (PFC), gli idrofluorocarburi (HFC) e l’esafluoruro di zolfo (SF

6).

SA 8000

An international certification standard (where SA stands for “Social Accountability”), for certifying some aspects of business activity related to Corporate Social Responsibility. In particular, the management aspects certified by the standard are compliance with human rights and workers’ rights principles, protection against child labour and the guarantee of health and safety at the workplace.The standard is based on the principles established in some fundamental international documents such as the ILO conventions, the Universal Declaration of Human Rights and the International Convention on the Rights of the Child; the aim is to improve working conditions on a global level.

Stakeholder and multistakeholder

Stakeholders are groups or individuals that are expected to be significantly interested in the activities, products and/or services of the organisation or whose actions may influence

the organisation’s ability to successfully implement its strategies and reach its objectives.In accordance with the AA1000SES standard (elaborated by the English organisation AccountAbility and recognised as a reference on an international level), an organisation may give priority to its stakeholders or groups of stakeholders on the basis of each of their relevance. Relevance is an attribute determined by a joint assessment of the degree of dependence, urgency and influence that each stakeholder has on the organisation, or other aspects that characterise the relationship between the stakeholder and the organisation.The multi-stakeholder approach is when a given topic is tackled with the participation and collaboration of actors that have different interests in the topic and therefore different requirements. They may, for example, be the various actors in a production chain, representatives of institutions, companies and non-profit organisations etc. The strong point of the multistakeholder approach is the fact that its outcome is based on a balanced situation in which stakeholders’ different requirements and interests are all taken into account.

Sustainability and sustainable development

The most common definition of the concept of sustainable development is contained in the “Brundtland Report” of the World Commission on the Environment and Development (named after its chairman Gro Harlem Brundtland), drawn up in 1987. Sustainable development indicates a development model “that satisfies current needs without stopping the future generations from satisfying their needs”. Sustainability is thus an approach (to society as well as business) orientated towards guaranteeing a balance between current and future requirements, balancing economic and financial requirements with social and environmental ones.

Staff turnover

Staff turnover is represented by the ratio between persons joining the organisation and those leaving it.

UTZ

UTZ is a non-profit association based in Amsterdam, founded in 2002 with the mission of promoting sustainable farming

practices.The certification standard is based on principles such as the transparency of commercial practices, the traceability of raw materials and compliance with the International Labour Organisation conventions (ILO, www.ilo.org).

Corporate welfare

System of voluntary services provided by a business to its employees in response to specific needs and economic and social interests. This definition covers a wide range of operations, including benefits to meet social security and health care needs (for example, contributions to health care plans) and goods or services provided to the employees to help them reconcile work and family life.

4C - Common Code for the Coffee Community Association

4C is a multistakeholder association that has developed a system for verifying minimum sustainability standards for the production of coffee through a pre-competitive approach.Today, the association comprises about 300 organisations, including some major coffee roasting companies.


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analysis, through meetings and interviews with the team in charge of the preparation of the Report, of the collection and management of quantitative and qualitative data, in order to understand the process and the tools in use;

on-site verifications at the Settimo Torinese (TO) plant.

c) analysis, on a sample basis, of the documentation supporting the Report, in order to confirm the reliability of data and information collected through meetings, interviews and on-site verifications and to confirm they were properly managed;

d) obtaining a representation letter, signed by the legal representative of the Company, relating to the completeness and reliability of the Report and of the information and data included in it, as well as to the compliance with the process and the information identified in paragraph 1 of the present document.

A limited assurance engagement is less in scope than a reasonable assurance engagement carried out in accordance with ISAE3000 and, as a consequence, it provides a lower level of assurance that we became aware of all the significant events and circumstances that a reasonable assurance engagement could have identified.

4 Based on the procedures carried out, nothing came to our attention that causes us to believe that the Sustainability Report as of 31 December 2012 of Luigi Lavazza SpA is not in compliance, in all material respects, with the process and the information that are detailed in paragraph "Methodological note" of the Report.

5 We point out that the Company, in consideration of the existing continuous improvement process

and of the opportunity to adopt the Sustainability Reporting Guidelines – GRI G4 for the next years, should consider how to strengthen the reporting system, to include in the reporting scope other Group relevant entities and to report using a more complete set of key performance indicators in the relevant reporting areas.

Turin, 28 July 2014 PricewaterhouseCoopers Advisory SpA Signed by Paolo Bersani (Partner) This report has been translated from the original, which was issued in Italian, solely for the convenience of international readers.

PricewaterhouseCoopers Advisory SpA Sede legale: Milano 20149 Via Monte Rosa 91 Tel. 02667201 Fax 0266720501 Cap. Soc. Euro 3.200.000,00 i.v. - C.F. e P.IVA e Iscrizione al Reg. Imp.Milano n° 03230150967 – Altri Uffici: Bari 70124 Via Don Luigi Guanella 17 Tel. 0805640311 Fax 0805640349 - Bologna Zola Predosa 40069 Via Tevere 18 Tel. 0516186211 - Firenze 50121 Viale Gramsci 15 Tel. 0552482811 Fax 0552482899 - Genova 16121 Piazza Dante 7 Tel. 01029041 - Napoli 80121 Piazza dei Martiri 58 Tel. 08136181 - Padova 35138 Via Vicenza 4 Tel. 049873431 Fax 0498734399 - Palermo 90141 Via Marchese Ugo 60 Tel. 0916256313 Fax 0917829221 - Roma 00154 Largo Fochetti 28 Tel. 06570831 Fax 06570832536 - Torino 10122 Corso Palestro 10 Tel. 0115773211 Fax 0115773299- Treviso 31100 Viale Felissent 90 Tel. 0422315711 –Trieste 34125 Via Cesare Battisti 18 Tel. 0403480781 Fax 040364737 – Verona 37135 Via Francia 21/C Tel. 0458263001 Società soggetta all’attività di direzione e coordinamento della PricewaterhouseCoopers Italia Srl www.pwc.com/it

INDEPENDENT REPORT ON THE LIMITED ASSURANCE ENGAGEMENT OF THE SUSTAINABILITY REPORT 2012 To the Board of Directors of Luigi Lavazza SpA 1 We have carried out the limited assurance engagement of the Sustainability Report as of 31

December 2012 (hereafter the “Report”) of Luigi Lavazza SpA (hereafter the “Lavazza” or “Company”) following the verification procedures summarized in paragraph 3 of the present document. The Directors of Lavazza are responsible for the preparation of the Report in accordance with the process and the information that are detailed in paragraph "Methodological note" of the Report. The Directors are also responsible for the definition of the Company’s objectives regarding the sustainability performance and the reporting of the achieved results. We are responsible for the preparation of this report on the basis of the work performed.

2 Our work has been conducted in accordance with the principles and guidelines established by the ”International Standard on Assurance Engagements 3000 - Assurance Engagements other than Audits or Reviews of Historical Financial Information” (ISAE3000), issued by the International Auditing and Assurance Standards Board. ISAE3000 requires the compliance with ethical principles (“Code of Ethics for Professional Accountants”), including professional independence. It also requires that our work is planned and performed with the aim of obtaining a limited assurance, rather than a reasonable assurance, that the Report is free of material errors. A limited assurance engagement of the sustainability report consists in interviews, primarily with company’s personnel responsible for the preparation of the information included in the sustainability report, in the analysis of the sustainability report and in other verification procedures.

3 The verification procedures performed on the Report are summarized as follow:

a) comparison between the economic and financial information and data included in the Report with those included in the financial statements of the Company as of 31 December 2012 or, when necessary, with the consolidated financial statements of the Lavazza Group on the same date;

b) analysis of how the sustainability issues were identified and how the underlying process to identify them and the reporting data is designed. In particular, we have carried out the following procedures: meetings and discussions with management representatives of Lavazza to achieve a

general understanding of the information, accounting and reporting systems in use to prepare the Report, as well as of the internal procedures supporting the collection and transmission of data and information to the department responsible for drawing it up;

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