100%

MadeofNew

Zealand|

6 July 2016

Silver Fern FarmsPresentation to Sustainable Business Council Jane Taylor – Independent Director

“Sustainability is one of those words meaning everything and nothing at the same time”

LordJohnBrowne– formerCEOofBPfrom1995to2007

[Thisaddressdraws heavilyfromtheinsightsofLordBrowne,whohascommentedextensivelyontheroleofbusinessanditsnecessaryconnectiontosociety]

100%

MadeofNew

Zealand

A lesson from history….

3

• ThelifeexpectancyofleadingUScompaniesinthe1920swas67years;todayitisonly15years.By2020itisestimatedthatmorethanthree-quartersoftheS&P500willbecurrentlyunknown firms.

• NZstatistics(anecdotally)tellasimilarstoryforlistedcompanies.

• Reasonsoftencitedfortheincreaseintherateofcorporatefailuresincludethepressuresofglobalisationandincreasingcompetition,accesstocapital,changingconsumerpreferencesinrapidlyevolvingmarketsanddisruptivetechnologies.Indeed,allofthesearerelevantfactors.

• However,recentstudiesofthehistoryofcorporatefailurehavefoundthatlongtermsurvivalisdirectlyrelatedtoacompany’sabilitytoconnecteffectivelywithexternalstakeholdersandcontributepositivelytosociety.

100%

MadeofNew

Zealand

What do we mean by corporate sustainability?

4

• Theessenceofcorporatesustainabilityisthattosurviveandgrowoverthelongterm,companiesmustcreatevalueforbusinessANDforsociety.Todothissuccessfully, companiesmustembedsocietalvaluesintotheircorepurposeandstrategy.

• Purposeiscritical:aclearpurposewillensurethatacompany’sproductsorservicesmeettheneedsofthesociety itengageswith.Toachievethis,acompany’spurposeneedstoconsiderwhatvaluethecompanywillcreateforsociety.Inotherwords,itshoulddefinethecontributionthatthebusinesswillmaketosociety– whatthecompanybelievesandwhatitstandsfor.Bydefiningcontributioninthisway,acompanycanformulateaclearengagementstrategywithexternalstakeholders.

• Indefiningpurpose,focusonlyontheissuesthataremostrelevanttothecompany’scorecommercialactivity.Winswillonlybeobtainedinalimitednumberofenvironmentalandsocietalareas.Aimtomeetminimumstandardsinareasthatarelessapplicable.

• Sustainabilityisthelifebloodoflongtermbusinessprosperity,growthandultimatelysurvival.Itisasintegraltostrategyaspurposeandstrategyaretocorporatesuccess.

100%

MadeofNew

Zealand

“Corporate Social Responsibility” is not enough

5

• CorporateSocialResponsibility(CSRorESG)haslargelyfailedtodeliversustainablebusinessesbecauseitsinitiativesareusuallydisconnectedfromacompany’scorepurposeandstrategy. Asaresult,theeffectivenessofCSRincreatinglongtermvalueforeitherbusinessorsocietyisseriouslyindoubt.

• ExecutivesoftenviewESGascomprising“fluffy”andlargelyirrelevantprojectsthatnegativelyimpactthebottomline. ESGprojectsoftensurviveatthewhimofseniorexecutivesratherthanbecauseofthevaluethattheycreateforthebusiness.

• Astutestakeholders increasinglyconsiderESGreportingtobemeaninglesspropagandaatbestor,atworst,anoutrightattemptbycompaniestomasktheirfailuretoresponsiblyaddressrealenvironmentalorsocialissues.

• ThespectaculardemiseofEnronillustratesthedangersthatcanbeassociatedwithCSR.

100%

MadeofNew

Zealand

Sustainability delivers a competitive advantage

6

• Astrongconnectionwithsocietyis“thenewfrontierofcompetitiveadvantage”.

• Connectingeffectivelywithsocietycandifferentiateabusiness inmanyways,fromthegenerationofnewrevenuestreamstoreducedregulatoryrisk,marketaccessandlowerresourcecosts. Forgingaconnectionwithsocietyimpactspositivelyonacompany’sreputationthroughbuildinga‘reservoirofgoodwill’thatcanbeaccessedwhenitinevitablymakesacriticalmistake.

• ReputationisnotanartificialconstructcreatedbycleverPRoradvertising;itisanoutcome thatisdeterminedbyhowwellacompanymeetssociety’sdemandsintheconductofitsbusinessactivities.Companiesthatintegrateexternalengagementintocorestrategyarefarbetterpositionedtoacquireastrongreputationandmorelikelytosurviveaproductsafetycrisis,aseriousenvironmentalincidentoracorruptionscandal.

• Acompany’sreservoirofgoodwillultimatelydeterminesitscompetitivenessand,inamajorcrisis,viability.Itisoneofthemostvaluableassetsabusinesspossesses.

100%

MadeofNew

Zealand

A sustainable approach

7

• Thelongtermsuccessofacompanywilldependonitsrelationshipswiththeexternalenvironmentthatitoperatesin– which includescustomers,suppliers,investors,employees,regulators,politicians,NGOs,theenvironmentandtechnology.

• Foracompanytobesuccessfulintoday’sworld,societaldemandsmustbeincorporatedintocommercialstrategyandoperationsateverylevelofthebusiness.

• Choicesmadethroughoutthebusiness,fromtheboardroomtothefactoryfloor,affectacompany’srelationshipswithitsexternalstakeholders. ForSilverFernFarmstodeliveronitsstrategy,everyoneofour7,000employeesand16,000farmersuppliersmusttakeresponsibilityforsocialissues.

• Buildingthetrustandconfidenceofallstakeholdersisvitaltothesuccessofanybusinessstrategy.Institutionaltrustisoneofthemostpowerfultoolsacorporatecanhave.

• Strongleadershipisrequiredtofocusontheissuesthatdefinethecompany’scorepurpose,ofwhichthecompany’srelationshipwithsocietyisoneofthemostfundamental.

100%

MadeofNew

Zealand

About the companySilverFernFarmsisNewZealand’sleadingprocessor,marketerandexporterofpremiumqualitylamb,beef,venisonandassociatedproducts.

IncorporatedasthePrimaryProducersCo-operativeSociety(PPCS)in1948,thecompanyre-brandedtoSilverFernFarmsin2008,heraldingitstransformationfrommeatprocessortoconsumer-drivenfoodproducer.Whilethestrategyhasevolved,thecompanyhasretaineditsco-operativestatus,todayrepresentingmorethan16,000sheep,beefanddeerfarmersthroughoutNewZealand.

Produces Started in

Over

Sheep,beefanddeerfarmerpartners

BecameSilverFernFarmsin2008

PlantsthroughoutNewZealand

Staffinthepeakoftheseason

2.4

OfallNZLamb,BeefandVenison

30% 1948

16,000

7,000

19

100%

MadeofNew

Zealand|

Annualsales

Billion

Silver Fern Farms – a work in progress

9

• Followingtwoyearsinsurvivalmode,SilverFernfarmsisfirmlyfocusedonsecuringanenduring,sustainablefuturebyembeddingsustainabilityprinciplesandgoalsintoitscoreoperationalstrategyandbusinessmodelataverypracticallevel.

• Thestepsinvolvedcomprised:(i) Re-evaluationofourpurpose,beliefsandvaluesinlightoftheprinciplesofsustainability.(ii) Identificationofthekeymaterialissuesthatmightaffecttheachievementofthecompany’s

purpose,deliveryofitsstrategy,orimpactaccesstocapital.Thisstepinvolvedcanvassingawiderangeofinternalandexternalstakeholderstorankwhattheyperceivedtobethekeymaterialissues.

(iii) Sustainabilitygoalswerethenidentifiedforthe9keymaterialissues.(iv) Thenextstep(currentlyunderway)istointegratethesustainabilitygoalsintothecorebusiness

strategythroughappropriateinitiatives,tosetrelevantKPIsandtoestablisharobustmeansofmeasuringandverifyingachievementagainstthebusinessplan.

• Itisnocoincidencethatthematerialissuesidentifiedcorrelatetothekeystrategicrisksfacingthecompany.Sustainabilityandriskmanagementgohandinhand.

• Thefollowingslideisanearlydraftofourkeymaterialissuesandassociatedsustainabilitygoals,asanillustration.

100%

MadeofNew

Zealand

Governance observations…..

11

• Thepositiveimpactofsustainabilityonorganisationalcultureshouldnotbeunderestimated.

• ExamplesfromSilverFernFarmsinclude:(i) ThebeneficialimpactofourORAhealthandsafetyinitiativeonemployeeengagement(which

pre-datedthepresentsustainabilityinitiative)hasbeensignificant.Employeesthatfeelcaredforandlistenedtoaremuchmorelikelytobeproductiveandinnovative.

(ii) TheCOO-ledenergysavinginitiative,inpartnershipwithECCA,hasresultedinveryearlywinswithout theneedforsignificantcapitalexpenditure.

(iii) Theseniormanagementinspired2020goalofachievingasustainabilityawardforwatermanagementwouldnotpreviouslyhavebeenconsideredachievable.

• Alloftheseexamplesdemonstratethepositiveeffectthatincorporatingtheprinciplesofsustainabilityhavenotonlyonculture,whichiscriticaltothesuccessofacompany,buttooverallcorporateperformanceincluding,inparticular,financialperformance. 10

0%M

adeofNew

Zealand