Synlait Milk : Sustainability Report 2021

SUSTAINABILITY REPORT 2021

For personal use only

SUSTAINABILITY REPORT 2021

For personal use only

Synlait's commitment to elevating people and planet to the same level as profit was recognised in June 2020 when we became part of the B CorpTM community.

B CorpTM is a community of leaders driving a global movement of people using business as a force for good. Certified B CorporationsTM consider the impact of their decisions on their workers, customers, suppliers, community, and the environment.

This movement resonates strongly with Synlait's purpose of Doing Milk Differently For A Healthier World.

Learn more about what being a B CorpTM means for our people, our community, and our customers at: synlait.com/bcorp

ABOUT THIS REPORT

WELCOME TO OUR SUSTAINABILITY REPORT.

This sustainability report reviews Synlait Milk Limited's (Synlait) social and environmental performance and achievements for the year ended 31 July 2021.

The scope of this report includes all entities in which Synlait Milk Limited has more than 50% ownership.

In FY21, Synlait Milk Limited fully owned Synlait Milk Finance Limited, The New Zealand Dairy Company Limited, Eighty-Nine Richard Pearse Drive Limited, Synlait Business Consulting (Shanghai) Limited, Synlait Milk (Dunsandel Farms) Limited (incorporated in August 2020), Dairyworks Limited and Dairyworks (Australia) Pty Limited. On December 2020, Synlait Foods (Talbot Forest) Limited was amalgamated into Dairyworks Limited. Sichuan

New Hope Nutritional Foods, in which Synlait has less than 50% shareholding, is excluded from the Sustainability Report's scope.

In FY21, Synlait's manufacturing sites were Synlait Dunsandel, Synlait Pokeno, Synlait Auckland, Talbot Forest Cheese (Temuka) and Dairyworks (Christchurch). Synlait's leased Westney Road warehouse (Auckland) and Dairyworks' leased Gerald Connelly warehouse (Christchurch) have been included in some environmental metrics, such

as electricity, LPG, waste and GHG emissions. Our other sites - Synlait's innovation centre (Palmerston North), China office (Shanghai) and Press House office (Christchurch) - are negligible in terms of environmental impact and are excluded from the scope of all Environment indicators. They are nevertheless (unless otherwise stated), included in the People and Enterprise indicators.

Our on-farm indicators cover all contracted milk suppliers. In FY21, Synlait's direct milk suppliers were in Canterbury and the Waikato. Unless another period is indicated, this report covers the period of Synlait's financial year, 1 August to 31 July annually. Some on-farm metrics are based on the milking season (1 June to 31 May) or on OVERSEER®'s reporting period (1 July to 30 June).

The Synlait Dunsandel farms (acquired in FY20) were leased to a farming business, that operated them and sold the milk back to Synlait, up until May 2021. Therefore, environmental impacts from the farms are included not as scope 1 and 2 (direct impacts), but as scope 3 (supply chain) impacts.

DATA QUALITY

ASSESSMENT

Synlait engaged an independent third party to undertake a review of key elements (marked with an asterisk *) of this report for completeness and accuracy.

PAGE 02 & 03

For personal use only

CONTENTS

SUSTAINABILITY REPORT 2021

About this report	01
Introduction	04
Our Heart, Head, Hands	06
Our sustainability framework	08
How we operate	10
How we create value	12
Our materiality analysis	14
UN Sustainable Development Goals	16
Made With Better Milk	18
Net positive for the planet	22
Climate	24
Water	30
Welfare	36
Circular economy	40
A healthier Synlait	44
Safe workplace	46
Talent attraction and development	50
Diversity and inclusion	54
Culture and community	58
World class value chain	62
Safe food	64
Healthy farming	68
Sustainable supply	74
Transparency	78
Appendix - GRI content index	82

Milk, separated at source, is unloaded into the appropriate silos at Synlait Dunsandel's Milk Reception Bay.

PAGE 04 & 05

only
use	DrJohn Penno,
personalFor	CEO
Hamish Reid,
	Director - Sustainability,
	Brand, Beverages and Cream

Kia ora, and welcome to Synlait's third Sustainability Report.

Our sustainability journey started in 2017, when we realised that business could no longer talk about, and plan for, perpetual continuity. As a business in the food and fibre sector, we could no longer define 'winning' as we had in the past when the health of our climate, soil, biodiversity, water, and animals were suffering.

Our business is dependent upon natural systems and we are seeing them decline. On the one hand, over past 70 years since the industrialisation of food, our industry, has done brilliantly at feeding billions of people cheaply, but this has come at a cost.

Agriculture is responsible for 30% of the world's greenhouse gas emissions (GHG) and 70% of freshwater use. As humans we have been responsible for 60% of patuanuku's (mother nature's) deforestation and 40% of biodiversity loss. We cannot continue along this path - 10 billion people's lives and millions of other species depend on us to make a course correction.

So, since 2017, we have chosen to pivot, building, and delivering on, our sustainability strategy. We have bold 10-year targets across our on-farm and off-farm operations. We have work plans across 12 sustainable innovation platforms, and we are making some encouraging progress which is set out in this report.

As we published this report, we also announced Synlait's on-farm emissions intensity, per kg of milk solids, reduced 5% over the past year or 10% compared to our FY18 base year when targets were first established. Total off-farm (scope 1 and 2) emissions have remained stable since last year, however, the emissions intensity, per kg

of product, has reduced by 24% compared to FY18. We have a long way to go - as a company, as an industry, and as a country, but we are determined to change, and to inspire others to join us.

The commercialisation of our sustainability strategy is extremely important. If we can secure premiums for our products off the back of our investment in sustainability initiatives - that can be reinjected into further gains.

As you will read in this report, we are again making good progress in this space. By way of example, in April, we launched Made With Better Milk, a value-add premium ingredients offering that brings together three propositions:

1. Synlait's best practice Lead With Pride™ farming system.
2. Our modern processing facilities with the industry's most ambitious sustainability strategy being implemented.
3. Our corporate purpose which is symbolised by our B Corp™ certification.

New Zealand-made milk nutrition ingredients are well known for quality and safety; however, we need to keep differentiating ourselves. Made With Better Milk provides our global customers with the opportunity to differentiate the products they market to consumers based on a supply chain that takes better care of people and animals, and generates better outcomes for climate, water, soil, and biodiversity.

This is the future we are working toward - New Zealand made food respected for being good for people and the environment. And, accordingly, we, as a commercial business, will be rewarded for the value of that. I hope you find our progress encouraging.

Ngā manaakitanga.

Dr John Penno,

CEO

Hamish Reid,

Director - Sustainability,

Brand, Beverages and Cream

SUSTAINABILITY REPORT 2021

KEY

HIGHLIGHTS

215,000MT

FY21 PRODUCTION*¹

$1,367.3M

FY21 REVENUE

86,820kgMS

FY21 CONTRACTED MILK SUPPLY* ('000)

1,264

FY21 TOTAL EMPLOYEES*

277

FY21 MILK SUPPLIERS*

• Indicates that data quality was reviewed by an independent third party.

1 Production figures for FY18-FY20 were restated following a change in the reporting system used. This has led to minor variations in the FY18-FY20 intensity metrics disclosed throughout this report.

PAGE 06 & 07

only	OUR HEART, HEAD, HANDS
		HEART OUR PURPOSE HEAD OUR AMBITION HANDS OUR STRATEGY

SUSTAINABILITY REPORT 2021

In FY21 Synlait restructured its organisation into four business units:

use	DOING MILK	2	Ingredients
DIFFERENTLY
personal
FOR A HEALTHIER
WORLD	$2 billion in revenue		MILK DOING DIFFERENTLY
	+	Nutritionals
	Beverages
	and Cream

INGREDIENTS

An efficient and focused business that manufactures high-quality whole and skim milk powder and milk fat products from a differentiated milk supply for leading multinationals and large Chinese customers.

BEVERAGES

AND CREAM

A growing business focused on product development and innovation to manufacture high-specification,long-lifeconsumer-packaged beverages, foodservice cream products, and ready to feed infant formula.

Net +ve impact on
planet and communities
+ve place to grow with	Consumer
100% engagement	Foods
ZERO	Net Positive for	FOR
the Planet
For	A Healthier	HEALTHIERA WORLD
Value Chain

Zero injuries	Synlait
Zero defects
Zero losses
	World Class

NUTRITIONALS

Offers a whole of supply chain solution for large-scale, world- class, multinational brand owners of infant, children, and adult formulated nutritional powders. This business also manufactures specialised nutritional ingredients such as base powders for others to blend and package, and lactoferrin as a high value ingredient.

CONSUMER

FOODS

A manufacturer of consumer fresh milk, cheese, butter, and yogurt products in the New Zealand and Australia domestic markets under our own and/or private label brands.