The latest report by Brazil’s Natura comes in a strange two-part structure, and the company must start moving towards its ambitious goals if it wishes to remain a sustainability leader
Natura, though little known in the US and unevenly available in Europe, is a significant force in Brazil and in the global personal care and cosmetics industry, as well as a leader in sustainability reporting and actions.
Impressively, Natura follows International Integrated Reporting Council (IIRC) guidelines, which means its financial, social and environmental results are blended into a single report. Integrated reports are supposed to give a holistic picture of a company’s performance, prospects, strategy and governance, and Nature has evolved this style of integrated reporting since it became the first company in Brazil to produce an integrated report in 2002. Natura has used IIRC’s guidelines since their debut in 2013. The company also has used the GRI reporting framework since 2000.
How well does this work? On the one hand, reading Natura’s 22-page summary – what it calls the “annual report” – of its economic, social, and environmental results is an easier and more coherent experience than reading the giant sustainability reports that are becoming normal for large multinationals.
On the other hand, the brevity of the main report means there is a 100-page “Indicators” addendum needed for the G4 Global Reporting Initiative indicators that are essentially the data “meat” of the Natura sustainability story.
Whatever the pluses and minuses of the reporting format, though, what shines through is Natura’s transparency and its ambitious goals. Natura has already garnered many awards for being one of the globe’s most ethical big companies, and at the end of 2014 it was the first publicly traded (and largest) multinational to be awarded B-Corp certification. Last year the company refreshed its sustainability vision, and the new vision is described in the report as aiming to generate “positive impact” for society. The vision includes business directives for the next 35 years and goals through 2020.
Materiality makeover
An updated materiality matrix in this 2014 report puts six areas at the top of the company’s sustainability priority list – solid waste, climate change, social biodiversity, water, transparency and product origins, and education. (One complaint here – some areas that are of high stakeholder and internal concern on the matrix are shown as dots but are not identified.)
The goals set in the new vision are thus far proving challenging for the company. In use of post-consumer recycled material in packaging, for example, the 2020 goal is 10%, while 2014’s performance stands at just 1.2% and is moving backward from 2013’s 1.4%. Greenhouse gas emissions reductions are set at 33% by 2020 (that’s Scope 1, 2 and 3) yet in 2014 emissions increased 2.2%. In water consumption the company is undergoing a rigorous water footprint analysis that will be completed this year. In the meantime, however, consumption rose from 0.4 litres per product produced in 2013 to 0.45 litres per product produced in 2014.
Overall the 2014 report implies some growth pains for Natura, and perhaps unrealistic expectations for balancing economic imperatives with desired “positive impact”. In 2014 the three-person founding team was supplanted with a new CEO, in part, according to press reports, to deal with a small loss of market share in Brazil (-1.1%) last year as well as declining profitability. Net revenues for 2014 were $1.9bn, slightly higher than 2013’s $1.8bn but Natura’s profits have continued to slide in 2014 and the first three quarters of 2015, with the company citing weak demand, higher expenses and rising debt costs.
On the good news side the report details a couple of environmental wins: the release of 100% post-consumer PET bottles for refills of the Ekos Frescores line of fragrances, reducing the product’s carbon footprint by 72%. Another highlight is Natura’s pan-Amazonian strategy. The company has a 2020 goal to buy 30% of its raw materials and ingredients from Brazil’s Amazon region (it is currently at 13.3%). In 2014 it opened its “Ecoparque” in the Amazonian city of Benevides. A soap factory founded on circular economy ideals and producing the company’s Ekos soap, Ecoparque has a wastewater filtering garden, and geothermal and ventilation features to supplement conventional air conditioning.
As Unilever has suggested, Natura intimates that an extreme focus on short-term profitability is detrimental to companies’ longer-term sustainability goals. Now it just remains to be seen whether the company, whose slightly circular tagline is “well being well” (“bem estar bem” in Portuguese) can weather Brazil’s recent economic turbulence and its internal global challenges and keep plugging away at a well-developed sustainability vision.
Snapshot
Follows GRI? Uses G4 guidelines, provides a separate G4 “indicators report”.
Assurance? Not specified – Ernst & Young in previous reports.
Materiality analysis? Yes.
Goals? Yes.
Targets? Yes.
Seeks feedback? Not directly.
Key strength: Succinct, pleasant layout.
Chief weakness: Separation of GRI indicators in a separate report makes for a short and sweet yet lightweight main report.
Pleasant surprise: Far better readability than the company’s 2013 report.
Level of integration: (1 to 5): 4.75