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1. Introduction 2. Background 3. Nespresso Commitment 4. AAA Supplier Partner Commitment 5. AAA Commitments in action 6. Shared Commitment Formalization 7. Reference Documents

The “Shared Commitment” document created by Nespresso, describes the shared commitments between Nespresso and its AAA Supplier Partners, supported by the Nestlé Corporate Business Principles and the Nestlé Supplier Code (Reference Documents one and two). This document is aimed at facilitating and improving the implementation of the AAA Program, while increasing transparency and ensuring a long-lasting sustainable partnership. Nespresso encourages consistency in the suppliers’ actions and processes throughout the coffee supply chain, based on the framework of the “AAA Shared Commitment”. All the AAA Supplier Partners must be informed and apply the guidelines within the AAA Shared Commitment and its Reference Documents, including local representatives of the suppliers working directly with Nespresso. All the persons related to the implementation of the AAA Program will be responsible to understand and apply the commitments within this document throughout the coffee supply chain. This document has five sections and a series of additional reference documents. Such structure was conceived to facilitate the update of specific components of the “AAA Shared Commitment”. The following sections make part of this document: 1. Background: It includes the historical information of the Nespresso AAA Sustainable Quality™ Program. 2. Lexicon: important terms referring to the Nespresso AAA Sustainable Quality™ Program. 3. Nespresso Commitments: States the responsibilities and the scope of Nespresso’s commitment within the framework of the

AAA Sustainable Quality™ Program. 4. AAA Supplier Partners Commitments: Includes the AAA Supplier Partners responsibilities, expected actions and general

guidelines to follow when working with Nespresso in the AAA Sustainable Quality™ Program. 5. AAA Commitments in Action: Detailed practical guide to implement Nespresso’s and Supplier’s commitments described in

the document. This practical guide must be fully applied when working on the AAA Sustainable Quality™ Program throughout the coffee supply chain.

6. Reference Documents: Annexes containing detailed implementation guidelines and templates part of the “AAA Shared Commitment”.

7. Shared Commitments Formalization: States the formalization of the “Shared Commitment” document. This section must be signed by the AAA Supplier Partners, by Nespresso and by all the partners within the coffee supply chain. It states all parties have a clear understanding and have agreed to their roles and responsibilities within the AAA Program.

AAA Database: the AAA Database compiles all the information related to the AAA Program, including Clusters, farm

information, TASQ™ results, traceability results, geographical information, etc. It is the official tool of the AAA Program to compile and analyze information, therefore all related data and results must be uploaded in a continuous basis to the AAA Data Base.

Cluster: is a geographic region where AAA coffee is selected on the base of cup taste and aroma profile. Only specific farms in this selected region or Cluster are AAA, once they start the Nespresso AAA Sustainable Quality Program™. The Cluster will be exclusively managed by a specific Nespresso partner. Sub-Clusters may be created to define sub-regions in the Cluster.

Cluster Manager: the Cluster Manager is the responsible entity for the AAA Program’s implementation and results in an specific or specific Clusters.

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Cluster Evaluation Cycle: It’s the Clusters evaluation process and calendar. They are planned according to the coffee crop calendar per Cluster.

Hoja de Seguimiento y Control (HSC) 80%: The HSC 80% Tool takes into account the current sustainability situation of each farm, group or Cluster and evaluates the minimum aspects for a farm to achieve an 80% qualification in the RA standard. The HSC 80% is used as an internal evaluation tool for groups and for farms that are Rainforest Alliance Certified or that are preparing for certification.

KPIs: Key Performance Indicators

Qualitivity™: the AAA Program is focused on supporting farmers in achieving Qualitivity™. This means working together with farmers to improve coffee quality at the same time as increasing productivity in a sustainable way. This is achieved by helping farmers increase their income through improved productivity and quality, while at the same time reducing their costs through production efficiencies.

Qualitivity™ Guides: The Qualitivity™ Guide is a tool for technicians in the AAA Program to teach, train and generate adequate action plans for farmers. The Guide contains all the necessary information to fulfill the TASQ™ critical criteria, focusing on the implementation of best quality, economic, and agricultural practices. Its structure allows field technicians to have a support document as well as to carry out trainings sessions with farmers.

Qualitivity™ Tasting Kit: The guide also contains a tasting kit, to show farmers the main quality profiles and defects that their coffee presents. The tasting kit, should be used to improve quality knowledge and to explain the actions that can improve the quality of their coffee.

Rainforest Alliance (RA): Rainforest Alliance is an international leading environmental NGO founded in 1987, working to conserve biodiversity and ensure sustainable livelihoods by transforming land-use practices, business practices and consumer behavior.

Tool for the Assessment for Sustainable Quality - TASQ™: The Tool for the Assessment of Sustainable Quality™ (TASQ™) sets the guidelines to evaluate farms participating in the Nespresso AAA Sustainable Quality™ Program.

TASQ™ Cycle: The TASQ™ Cycle for continuous improvement is the roadmap for strengthening the coffee supply chain and for farm improvement.

SAN Partners: The Sustainable Agriculture Network (SAN) promotes efficient and productive agriculture, biodiversity conservation and sustainable community development by creating social and environmental standards. The SAN is a coalition of leading conservation groups that links responsible farmers with conscientious consumers by means of the Rainforest Alliance Certified™ seal of approval. Our collective vision is based on the concept of sustainability, recognizing that the well-being of societies and ecosystems is intertwined and dependent on development that is environmentally sound, socially equitable and economically viable. The SAN develops, manages and owns the Sustainable Agriculture Standard.

Self-Assessment: The Self-Assessment is a set of criteria and information of each farm interested in entering the AAA Program. It is filled in by farmers themselves. A farm is considered AAA when its information and self-assessment or TASQ™ Assessment results are uploaded in the AAA Database. Self-Assessment is structured, for the farmer to easily fill in topics related to quality, economic, environmental, social practices and productivity information on his farm.

Coffee Price Coffee Fixation Price: price at which the coffee is fixed in the New York Exchange. – NY “C”. AA Premium: quality premium for the green coffee paid by Nespresso. This premium is paid once the coffee profile matches

that required by Nespresso. Country Differential: average country differential traded. AAA Related Premiums:

AAA Premium: premium for farmers in the AAA Program for sustainable quality. This premium should be entirely paid to farmers and must be clearly identified in the coffee purchase invoice

Nespresso Special Bonus (BEN): this bonus is attributed to farmers that are RA certified when they sell coffee to Nespresso.

Price paid to farmer: final price paid to farmer, including coffee price and additional premiums, such as: country differential,

AA Premium, AAA Premium and BEN.

The Nespresso AAA Sustainable Quality™ Program was launched in November 2003 at Sintercafe in Costa Rica, with the

support and endorsement of Nestlé, green coffee suppliers, Rainforest Alliance and the Sustainable Agriculture Network-SAN.

In the intervening period, the green coffee suppliers have cooperated strategically towards the sourcing of AAA coffees. In 2009 Nespresso stated a clear sourcing objective for 2013 as part of its Ecolaboration Platform. By then 80% of its green

coffee shall be sourced from the AAA Program.

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As a result of these important actions, since 2003, the scope of the Program has increased significantly, stretching from one country to eight and encompassing more than 29 Clusters.

It has become clear that importance of mutual collaboration on the AAA Program has brought a new definition of the role of green coffee suppliers to Nespresso. This change developed the relationship between Nespresso and its suppliers towards the creation of strategic partnerships. The new role of green coffee suppliers is described in the following table:

PAST NOW AND FUTURE

Take long or short position acting as buffer Ensure continues supply based on long term cooperation

Possibility to hedge price risk through terminal market transaction Minimized back to back pricing based on open book

No possibility for physical hedge Secure physical coffee against long term contract

Invest in regions without knowing who will be interested in the coffee Focused investment in agreed AAA regions

Deliver coffee Develop efficient supply chain

Some pre-financing Support continuous improvement at farm level

Seeking trading opportunities Locating and retaining with long term view

Customer loyalty through price Customer loyalty through collaboration supported by price

Difficult to plan longer term Predictable partner allows for long term view

No added value Added value through differentiation and innovation

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4.1 Nespresso’s Long Term Commitment Nespresso is committed to the sourcing of AAA green coffees. AAA coffee is selected on the basis of cup taste and aroma

profile, and is sourced from farms belonging to a defined Cluster that are measured with TASQ™- The Tool for the Assessment of Sustainable Quality™ (Reference Document three).

Nespresso is committed to long-term relationships and agreements in specific regions. Thus, seeking to build and enhance long-term relationships with individual Clusters supported by coffee suppliers.

Nespresso is committed to sharing value across its AAA supply chain as part of its corporate social responsibility. 4.2 Nespresso’s Quality and Sustainability Commitment Nespresso believes in the importance of the highest quality and sustainability in the green coffee it sources. The selection of

farms, Clusters and intermediaries is made according to these beliefs. The Nespresso quality requirements are specified for individual countries and regions, within the scope of the Green Coffee

Purchasing Specifications supplied by Nespresso’s Green Coffee Quality Department (Reference Document four). Nespresso is committed to a pragmatic approach in the application of the AAA Program and TASQ™ and places the farmer’s

interests as its main focus. The TASQ™ Cycle and tools, integrate the best practices of the Rainforest Alliance indicators, as well as Nespresso’s own quality philosophy (Reference Document three).

Nespresso has established and supports a process of continuous improvement, based on gap analysis and technical support, through a yearly implementation of the TASQ™ Cycle.

Nespresso is open to the process of on-going review of the TASQ™ and seeks feedback from stakeholders with the goal of enhancing its pertinence and efficacy.

Nespresso develops training and communication materials to ensure improvement related to AAA and TASQ™, as well as workshops to transfer knowledge and improve performance of the different Clusters and AAA farms.

Nespresso ensures and supports clearly defined action plans for each Cluster to generate continuous improvement based on TASQ™ assessment.

Nespresso enables and finances internal assessments made by local technicians and independent 3rd

party verification of the TASQ™ by the Rainforest Alliance and the Sustainable Agriculture Network.

If a group of more than 5 farms in the AAA Program is willing to obtain the Rainforest Alliance certification, Nespresso finances the first year certification audit fees in common agreement with the Cluster Administrator.

4.3 Nespresso’s Commercial Commitment Nespresso does not require commercial exclusivity from AAA farms. Nespresso agrees to pay a premium price to farmers for highest Sustainable Quality™ AAA coffee and is committed to

driving economic transparency. Nespresso follows the Nestlé Corporate Business Principles throughout its coffee supply chain (Reference Document one). Based on mutually agreed objectives for the year, Nespresso will carry out annual performance reviews with supplier-

partner’s managing directors and relevant staff. The green coffee volumes required by Nespresso will be set out on an annual basis and negotiated with supplier partners

accordingly.

4.4 Nespresso’s Improvement Commitment Nespresso is committed to support Clusters in the AAA Program by appointing a responsible local manager. When appropriate, Nespresso participates with resources for Cluster management - field investments - to be invested in

AAA-related activities (e.g. AAA management, provision of agronomists, data collection, events, etc). The exact amount is fixed jointly with the AAA and green coffee procurement team on an annual basis.

Nespresso is committed and engaged in attracting external development funding to help Clusters improve in TASQ™, Sustainability and Qualitivity™ performance.

Nespresso supports development projects related to the outcomes of TASQ™ in specific regions and Clusters and in agreement with relevant parties and stakeholders. It partially funds such projects on a case-by-case basis.

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5.1 Supplier Partner’s Business Management Commitment AAA Program suppliers shall behave consistently; with ethics and integrity. The farmer is the “raison d’être” of the AAA

Program. Farmers must be treated with respect, transparency and trust. Supplier partners shall engage with professionalism in a spirit of continuous improvement. Nespresso encourages supplier

partners to develop innovative ideas that continuously improve and enhance the AAA Program and any specific element of the TASQ™ Cycle.

Suppliers will work towards objectives and plans defined and agreed on an annual basis. Nespresso expects supplier partners to hit pre-agreed annual objectives and to participate actively in the annual performance reviews Nespresso carries out.

Nespresso expects supplier partners to treat Nespresso’s Intellectual Property, confidential information and all the works developed within the Nespresso AAA Sustainable Quality™ Program with confidentiality and respect. This includes information, specifications, processes, methodologies, concepts, tools, as well as the Nespresso brand.

Nespresso expects that AAA suppliers become ambassadors of the Nespresso AAA Sustainable Quality™ Program. They should seek positive coverage of the program at expert conventions, or in the press, and may benefit from their role in so doing.

Supplier Partners shall not enter into conflict with other Clusters, specifically regarding the commercialization of coffee to be supplied to Nespresso under the AAA Program.

5.2 Supplier Partner’s Commercial and Procurement Commitment According to their business intent, suppliers are encouraged to present new potential AAA coffees from new countries or

regions that may fulfill the quality standards required by Nespresso. The commitment to support Nespresso in securing coffee volumes to fulfill its sourcing targets should be in line with the

business growth plans of suppliers. Supplier partners shall account for green coffee’s physical and economic traceability, as well as provide full transparency

related to field investments. Suppliers shall ensure competitive coffee prices in the different regions where they are working with Nespresso and then

complement them with the AAA Premium. Suppliers must always target the highest coffee prices paid in the region and be known for doing so.

Supplier partners shall ensure transparency of the Nespresso AAA price towards farmers in the buying points and through purchase receipts. These should clearly inform Nespresso coffee price and premiums (Reference Document five).

Supplier partners shall have as a target to pay at least 80% of Nespresso’s FOB purchase price directly to the farmer. The achievement of this target will be verified by the process that enables economic traceability (Reference Document five).

Suppliers must equally be open to Nespresso, Nestlé, or third parties audits related to the above points. 5.3 Supplier Partner’s Sustainable Quality Commitments Supplier partners are expected to use the TASQ™ Cycle and Tools to improve quality and sustainability throughout the

coffee supply chain. Supplier partners are expected to invest in the ongoing upgrade of facilities and quality control at origin across the supply

chain. Supplier partners are expected to ensure green coffee sold to Nespresso complies with the Green Coffee Purchasing

Specifications supplied by Nespresso’s Green Coffee Quality Department (Reference Document four). Supplier partners are expected to ensure alignment with the Nestlé Quality Control Centre at origin (NQCC). Supplier partners are expected to decrease their Quality Rejection Rate –QRR- on a yearly basis (Reference Document six). Suppliers are responsible for covering all the re-certification costs and for the renewal of each group’s certification costs.

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5.4 Supplier Partner’s AAA Implementation Commitments Supplier partners must undertake farm assessments and action plan implementation according to the TASQ™ Cycle and

Tools (Reference Document three). This information must be contained and updated accordingly in the AAA Database. Supplier partners are expected to ensure open communication with its responsible Nespresso AAA local manager. They

should inform of all sustainability and quality activities in the Cluster to guarantee alignment with its Cluster specific strategy.

Nespresso requires a progress report of the Cluster every four months to be sent to the responsible local manager, to ensure complete transparency.

Supplier partners shall follow Nespresso’s Guidelines on Safety, Health and Protection of the Environment guidelines (Reference Document seven).

Supplier partners shall follow the Nestlé Supplier Code (Reference Document two). This Supplier Code specifies and helps the continued implementation of the Corporate Business Principles (Reference Document one) by establishing certain non-negotiable minimum standards that we ask our suppliers, their employees, agents and subcontractors to respect and to adhere to when conducting business. The Suppler Code is aligned with this AAA Shared Commitment, and it is the supplier’s responsibility to educate its employees, agents and subcontractors accordingly.

Supplier partners shall commit to ensuring strong surveillance on child labor which contravenes ILO and/or local legislation on farms within their Clusters. When found, child labor must be communicated and addressed according to TASQ™ and Child Labor procedure (Reference Document eight).

Nespresso requires each supplier partner to co-invest in the implementation of the AAA Program, notably by providing resources to ensure the smooth implementation and management of the AAA Program. These investments will be evidenced on the Field Investment Template (Reference Document 10).

AAA Program suppliers are expected to generate and maintain farmer loyalty through the AAA Program by price positioning, technical assistance, and communication strategies.

AAA supplier partners are responsible for communicating about the AAA Program to their farmer supply base, following the communication guidelines validated by Nespresso (Reference Document nine).

AAA supplier partners will be expected to collaborate closely at a national and international level to leverage funds into the projects developed in individual Clusters.

Supplier partners will also be expected to share best practices related to AAA implementation with other AAA suppliers from other regions and other countries to ensure best practice alignment and a spirit of improvement of the coffee and the communities that produce it.

Supplier partners are expected to send relevant staff to Nespresso AAA, and/or Rainforest Alliance, stakeholder conventions and forums.

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The following section shows how the AAA commitments should be applied in practical way by Nespresso and its supplier partners. The Key Performance Indicators used as basis to evaluate the AAA implementation and their evaluation process are shown on Reference Document six. 6.1 Pre-requisites to enter the AAA Program Geographic location: Farms must be located inside the Nespresso validated geographical Cluster.

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Quality: Only coffee farms producing coffee complying with the Nespresso quality standards should be considered as AAA Program candidates.

Approval: Once candidate farms comply with the previous points, suppliers need to submit all requests for farms to enter the AAA Program for Nespresso’s approval. Results are to be sent to the AAA Local Manager

AAA Commitment: for a farm to enter the AAA Program, it must first commit to the AAA Program’s philosophy and objectives by understanding and signing the commitment statement on the Self-Assessment. It must also be registered in the AAA Database (by filling the farm’s information and self-assessment or TASQ™ Assessment). It must be committed to improving on its quality, sustainability, and productivity practices. Farms that are not registered in the AAA Database will not be considered AAA.

Channel exclusivity: AAA farms can be registered only under one unique supplier and coffee can only be sold as AAA through this same supplier.

Child labor: Supplier partners shall commit to ensuring a strong surveillance on child labor which contravenes ILO and/or local legislation on farms within their Clusters. When found, child labor must be communicated and addressed according to TASQ™ and Child Labor (Reference Document eight).

6.2 AAA Sourcing Supply commitment: Once a Cluster has been created, suppliers must commit to exclusively supply AAA coffee from it and

to fulfill Nespresso’s contracts as a priority. Additional AAA volumes: suppliers shall ensure that farmers in the Cluster may produce up 20% additional coffee in one

harvest under the AAA Program; to cover additional agreed volumes. Reducing quality rejections: Supplier partners are expected to invest in the ongoing improvement of quality standards by

upgrading facilities, quality control and training at origin across the supply chain and aligning with the regional NQCC. Suppliers must report the rejection rates in the different points where quality is checked (Reference Document four).

Loyalty: Loyalty is calculated by a farmer’s year on year’s sales. AAA Program suppliers are expected to increase farmer loyalty with the AAA Program through commercial, technical and communication strategies.

Price positioning and transparency towards farmers: supplier partners must ensure AAA coffees always target the best prices paid in the region, while Nespresso is in its buying window. When selling their coffee, farmers should be informed of the coffee base price, and the different Nespresso AAA premiums. The coffee price and premiums should be clearly displayed at the different purchasing stations through informative panels. For every sale of AAA coffee, farmers must receive a receipt, informing the volume sold, the Nespresso AAA denomination and the premium paid for the coffee, including AAA and Certification Premiums (Reference Document five).

Price distribution: Supplier partners shall have as a target to pay at least 80% of Nespresso’s FOB purchase price directly to the farmer. This will be evidence on the process that enables economic traceability. The purchase price includes all the related Quality, AAA and Certification Premiums (Nespresso’s Special Premium). Suppliers will not use the Nespresso AAA premiums as a component of the base price paid to farmers. The premiums will always be clearly separated and must come on top of the base price of the coffee (Reference Document five).

Cost breakdown: Suppliers shall be able to provide a clear breakdown of the coffee price paid by Nespresso per coffee contract, as follows:

1 Varietal clusters may be an exception: in agreement with Nespresso and in case additional coffee volumes are required, farms

from other regions could also be included in the Cluster.

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Coffee price: Base price, quality differentials, AAA premiums, AAA+RA premiums, and total price paid directly to farmers. Other costs: overhead, export and processing costing, etc. Templates supplied by Nespresso indicate the exact information needed (Reference Document five).

5.3 Traceability AAA coffee segregation: AAA and RA coffee must be completely segregated during all steps within the coffee supply chain

up to the Nespresso factories. Only in case of new Clusters and low AAA volumes, may exceptions to this commitment be discussed.

Traceability information: Supplier partners are expected to give an account of full economic and physical traceability for AAA Clusters through the AAA Database, using Nespresso’s traceability template, for each coffee contract delivered to Nespresso. The minimum required information is shown in Reference Document five.

Retroactivity: a retroactivity of six months for non AAA coffee that becomes AAA will be accepted by Nespresso, if the process of farm admission is duly followed, validated and if farms are registered in the AAA Database. In this case, AAA Premiums can be claimed and shall be duly transferred to farmers.

6.4 Cluster Management Resources: Every Cluster is expected to present its AAA organizational chart. The chart must include: one AAA Cluster leader

and a main point of contact, a AAA team for the Cluster, the % of time they are working for AAA and a description of their responsibilities (Reference Document ten).

Field Investments: On a yearly basis, the AAA field investments will be planned and budgeted with Nespresso. Each supplier will send the planned budget to Nespresso using the field investment template by December of the preceding year. Once the field activities for the year have been executed, the field investment template will be updated to show the actual investments executed on the field. The template must be delivered before the end of February of the following year (Reference Document ten).

Coordination with Nespresso: All communication between each supplier and Nespresso should be done directly through the AAA Local Manager. An activity report every four months must be sent to the local AAA Nespresso manager.

AAA Database: All information regarding the Cluster such as: farm information, self assessments, farm visits, TASQ™ results, training, health and safety, traceability and projects information must be uploaded in the AAA Database on a regular basis (at least once per month). Nespresso may require additional information to be included in the AAA Database.

Cluster management: each supplier is responsible for farm improvement, Cluster segmentation and continuous certification process. A segmentation plan (based on farm’s improvement, loyalty, geographic localization, etc.) must be designed for each Cluster by supplier partners to advance on the agreed objectives. The segmentation plan must be planned with Nespresso and revised on an annual basis.

Specific projects: Specific projects to improve the AAA farming community may be defined and co-financed with Nespresso with prior approval of all parties. Nespresso agrees to partially fund AAA projects on a case by case basis especially in Clusters where the suppliers have their own sustainability financing vehicles. Nespresso and its suppliers will seek to develop initiatives that have financial or technical co-investment (Reference Document eleven).

Exclusion of a farm from the AAA program: A AAA farm should be excluded from the program2:

a) if it fails a major critical criteria, including but not limited to illegal deforestation, illegal minors employment or fraud; b) if it does not comply with all the underperforming criteria in the TASQ™ three years after entering the AAA Program, and/or c) if a farm is not commercially active with the program for more than three years.

To exclude a farm from the AAA Program, the supplier must follow the AAA Farm Exclusion Procedure (Reference Document twelve). Suppliers may have additional exclusion measures, which must be validated with Nespresso.

6.5 The TASQ™ Cycle implementation Self Assessment: The Self-Assessment™ is the document required to subscribe to the AAA Program. It is filled in by farmers

themselves. A farm is considered AAA when its general information and self-assessment or TASQ™ Assessment results are uploaded in the AAA Database and when the signed agreement on its Self-Assessment has been made.

TASQ™ Inspection: Every year, an internal audit will be carried out by local technicians and coordinated by the Cluster Manager. For the audit, a sample of the farms in each Cluster will be inspected according to the TASQ™ guidelines. Inspection results must be uploaded and a report must be created in the AAA Database within a month after the inspection takes place (Reference Document three).

Action Plans: The Cluster Manager must create a general action plan for each group, sub-Cluster, and Cluster on a yearly basis. Each action plan must be based on the results of the yearly inspections and must be entered into the AAA Database.

2 Exceptions may apply when officially validated by Nespresso

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Every visited farm in the Cluster must have an improvement action plan. The action plan must contain the necessary actions, the person responsible and the deadline for the action for improvement. Additionally, each individual action plan must include all the critical criteria found in the farm, with a description of why the farm is not complying with them and a proposed solution.

TASQ™ Verification by SAN partner: An external audit (verification) of the Cluster is carried out by the local SAN partners on a yearly basis. Verification results must be uploaded and a report must be created in the AAA Database within one month of the verification taking place. Nespresso reserves the right to carry out unannounced Cluster audits.

Farm Visits: In addition to the TASQ™ inspection and verification, supplier partners must ensure each AAA farm is visited at least once per year. Every visit’s finding should be uploaded in the AAA Database.

Rainforest Alliance Certification by SAN partner: Every Cluster should have a group(s) working towards obtaining the Rainforest Alliance certification, following the objectives set out in the Cluster’s annual meeting.

Rainforest Alliance certified farm’s follow up: Rainforest Alliance certified farms must be followed up to ensure the certificate renewal. This monitoring can be done through the different tools found in the AAA Database, and should be done at least once a year. Always ensuring the Rainforest Alliance certified volume targets, supplier partners can, as much as possible, foster the transfer of administrator ownership to farm groups themselves. In order to optimize certification costs and to create group empowerment, groups are encouraged to merge and become larger groups.

6.6 Communication AAA ambassadors: suppliers must ensure that the name of Nespresso and its logos is present in all the activities carried out

on the field, and that farmers have a clear idea of Nespresso’s role within the coffee supply chain. Communication Guidelines: suppliers must follow Nespresso Communication Guidelines when developing communications

material within their Clusters (Reference Document nine). Communication plans and materials must be always validated jointly with Nespresso.

Image rights: Nespresso encourages all AAA supplier partners to consolidate photographic material from farmers and from the implementation of the program in the field. As a reminder of best practices, all photos containing persons must have a signed permission of utilization (this is a legal requirement for their usage). The images present in the AAA Database are for internal use only and should not be used unless previously authorized (See Reference Document 9).

6.7 Nespresso Events AAA Workshops: Nespresso organizes AAA workshops in order to align with partners, share best practices, and collect

feedback. Suppliers will be expected to send relevant staff to the Nespresso AAA workshops. Coffee Forums: Nespresso carries out coffee forums to develop and align the general sourcing strategy of Nespresso with all

the AAA supplier partners. Suppliers will be expected to send relevant staff to the Nespresso coffee forums. RA trainings: Supplier partners must ensure that all the AAA Program implementing staff is trained by the SAN partners in

the implementation of the AAA Program. Supplier’s workshop: Supplier partners are expected to conduct training and workshops to improve the quality,

sustainability and productivity of the Cluster’s farms, and consequently the results of TASQ™. During the supplier’s annual review, the result of TASQ™ will be assessed among other KPIs.

6.8 External Audits External Audit: Any or all the points above will be subject to external audits performed by Nespresso or a third party.

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The Reference Documents linked to the “AAA Shared Commitment” document are the following:

Reference Document 1 The Nestlé Corporate Business Principles

Reference Document 2 The Nestlé Supplier Code

Reference Document 3 The TASQ™ Cycle and Tools

Reference Document 4 Ensuring Economic Traceability

Reference Document 5 Key Performance Indicators for Suppliers and AAA Evaluation Cycle

Reference Document 6 Guidelines on Safety, Health and Protection of the Environment

Reference Document 7 TASQ™ and Child Labor

Reference Document 8 Nespresso Legal Framework and Communications Guidelines

Reference Document 9 Guidelines for Field Investment

Reference Document 10 Managing Projects within the AAA Program

Reference Document 11 Exclusion of a Farm from the AAA Program

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NESTLE NESPRESSO S.A.,

Av. de Rhodanie 40 1007 Lausanne

Switzerland

And

Complete with: COMPANY Address

City, Zip code Country

IN WITNESS WHEREOF, the Parties have signed this Agreement in MM/DD/YYYY effectively immediately. By: NESPRESSO Date: ___________________ Name: Guillaume Le Cunff Title: Head of International Marketing and Sustainability

By: COMPANY Date: ___________________ Name: Fill in the name of the legal representative of the Company Title: Job/position within Company

By: NESPRESSO Date: ___________________ Name: Christophe Dupas Title: Head of Procurement

By: COMPANY Date: ___________________ Name: Fill in the name of the legal representative of the Company Title: Job/position within Company

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The Nestlé Corporate Business Principles are at the basis of our company’s culture, which has developed over the span of 140 years.

Download the fully revised new version of the Nestlé Corporate Business Principles (pdf, 2Mb) Also available in more than 50 languages.

Since Henri Nestlé first developed his successful infant cereal “Farine Lactée”, we have built our business on the conviction that to have long-term success for our shareholders, we not only have to comply with all applicable legal requirements and ensure that all our activities are sustainable, but additionally we have to create significant value for society.

At Nestlé we call this Creating Shared Value.

The latest version of our Corporate Business Principles, updated in June 2010, has been handed over to our employees around the world and accompanied by basic learning and training tools.

Since 2011, a systematic and comprehensive modular training programme is being rolled out on the various components of the Corporate Business Principles. The depth and focus of the trainings is established in accordance with the materiality for the different functions within the company. For example, in 2011 the first step of the training on the human rights components focused on managers and employees in countries of higher human rights risks as a priority. In 2012 and 2013, major efforts were made on training programs related to Management and Leadership, Conditions of Work and Employment and Compliance.

Our Corporate Business Principles will continue to evolve and adapt to a changing world, our basic foundation is unchanged from the time of the origins of our Company, and reflects the basic ideas of fairness, honesty, and a general concern for people.

Nestlé is committed to the following Business Principles in all countries, taking into account local legislation, cultural and religious practices:

1. Nutrition, Health and Wellness

Our core aim is to enhance the quality of consumers lives every day, everywhere by offering tastier and healthier food and beverage choices and encouraging a healthy lifestyle. We express this via our corporate proposition 'Good Food, Good Life'. Nestlé Nutritional Profiling System (pdf, 524 Kb)

2. Quality Assurance and product safety

Everywhere in the world, the Nestlé name represents a promise to the consumer that the product is safe and of high standard. Nestlé Quality Policy (pdf, 85 Kb)

3. Consumer Communication

We are committed to responsible, reliable consumer communication that empowers consumers to exercise their right to informed choice and promotes healthier diets. We respect consumer privacy. Nestlé Consumer Communications Principles (pdf, 2 Mb). Nestlé Policy and Instructions for Implementation of the WHO International Code of Marketing of Breast-milk Substitutes (pdf, 2 Mb).

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4. Human rights in our business activities

We fully support the United Nations Global Compact’s (UNGC) guiding principles on human rights and labour and aim to provide an example of good human rights’ and labour practices throughout our business activities. International Labour Organisation

5. Leadership and personal responsibility

Our success is based on our people. We treat each other with respect and dignity and expect everyone to promote a sense of personal responsibility. We recruit competent and motivated people who respect our values, provide equal opportunities for their development and advancement, protect their privacy and do not tolerate any form of harassment or discrimination. Nestlé Management and Leadership Principles (pdf, 533 Kb), Nestlé Code of Business Conduct (pdf, 76 Kb) and Guidance on Nestlé's Commitment against Bribery and Corruption (pdf, 750 Kb).

6. Safety and health at work

We are committed to preventing accidents, injuries and illness related to work, and to protect employees, contractors and others involved along the value chain. Nestlé Policy on Health and Safety at Work (pdf, 2 Mb)

7. Supplier and customer relations

We require our suppliers, agents, subcontractors and their employees to demonstrate honesty, integrity and fairness, and to adhere to our non-negotiable standards. In the same way, we are committed towards our own customers.

8. Agriculture and rural development

We contribute to improvements in agricultural production, the social and economic status of farmers, rural communities and in production systems to make them more environmentally sustainable. Nestlé Policy on Environmental Sustainability (pdf, 349 Kb)

9. Environmental sustainability

We commit ourselves to environmentally sustainable business practices. At all stages of the product life cycle we strive to use natural resources efficiently, favour the use of sustainably-managed renewable resources, and target zero waste. Nestlé Policy on Environmental Sustainability (pdf, 349 Kb)

10. Water

We are committed to the sustainable use of water and continuous improvement in water management. We recognise that the world faces a growing water challenge and that responsible management of the world’s resources by all water users is an absolute necessity. Nestlé’s commitment to Water, Creating Shared Value.

Nestlé continues to maintain its commitment to follow and respect all applicable local laws in each of its markets.

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18

Our aim is to ensure that vendors work according to the same principles and values that we do ourselves.

In our Corporate Business Principles, Nestlé commits to foster responsible practices in our supply chain. The Nestlé Supplier Code (pdf, 2Mb) and its Appendix (pdf, 1Mb) helps to implement this commitment. We want to ensure both responsible sourcing and supplier relationships that deliver a competitive advantage.

The Nestlé Supplier Code establishes non-negotiable minimum standards that we ask our suppliers, their employees, agents and subcontractors to respect and to adhere to at all times when conducting business.

The Nestlé Supplier Code is an integral part of all purchase orders, supply contracts and is being integrated into all other commercial agreements. The Nestlé Supplier Code is implemented in each market and business and is applicable to all suppliers. Read more about how we implement the code worldwide through our Traceability and Responsible Sourcing Audit Programme.

You can also read more about our supplier base, that includes approximately 165 000 direct suppliers and 680 000 individual farmers, who deliver materials to Nestlé’s buying stations, in our sourcing overview.

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20

1. Introduction 2. The TASQ™ Cycle 3. The Self-Assessment 4. TASQ™ Inspections 5. TASQ™ Verification 6. TASQ™ Follow-up Tool: HSC 80% 7. Qualitivity™ Guide

The AAA Program is built on three strategic drivers – a commitment to quality as a pre-requisite for inclusion and a focus on improving productivity and social and environmental sustainability. Both philosophically and practically the farmer is always placed at the very centre of the approach:

Quality Sustainability Productivity

To improve in each of the AAA Program’s strategic drivers, Nespresso has created the TASQ™ - The Tool for the Assessment of Sustainable Quality

TM. It

sets the guidelines to evaluate farms participating in the Nespresso AAA Sustainable Quality

TM Program through time. The TASQ™ Cycle sets the ground

for AAA implementation. This document gives a pragmatic view of the steps and the scope of the TASQ™ Cycle, as well as the tools Nespresso has developed to support its implementation. The Sustainability TASQ™ version 2012 includes the Rainforest Alliance standard stated in the SAN’s April 2009 Standards for Sustainable Agriculture. It is the outcome of a careful and detailed homologation process to produce a generic document that aims at facilitating the application of the standards in different regions of the world.

The TASQ™ Cycle for continuous improvement is the roadmap for strengthening the coffee supply chain and for farm improvement, it contains the following steps: Step Actions to be taken Tools

1. Definition/ Expansion of a Cluster

Estimate potential production of the farms in the Cluster Generate a traceability analysis Determine the AAA implementation capacity Determine the region’s competitiveness level Create a detailed supply chain description Validate the Cluster with Nespresso Develop the “training of trainers” with a SAN partner

After having received validation from Nespresso for the coffee quality, the Supplier and Nespresso will develop an analysis of the region or Cluster to determine if it is adequate to implement the AAA Program and if coffee volumes match those needed by Nespresso.

2. TASQ™ Self-Assessment

Promote the initial contact of the farmer with the AAA program Introduce the farmer to the AAA Program Define the Cluster’s management structure Generate the Cluster’s general Action Plan

Fill in the TASQ™ Self-Assessment for each new farmer entering the Program

Register all the new farm’s information in the AAA Database

3. Farmer Club Member

Include farmers in the AAA Farmer Club. AAA farmers become Club Members once they fill in the Self-Assessment.

Generate a segmentation plan for the Cluster

All AAA farms must be registered and updated in the AAA Database

Each farm must receive an ID number and

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ID Card

4. TASQ™ Assessment

Carry out the TASQ™ assessment on a yearly basis by following the sample formula described in this document. AAA field technicians must carry out this internal assessment of the farms.

All TASQ™ assessments must be registered on the AAA Database. Using: AAA Database Application for tablets

TASQ™ in Excel HSC 80%

5. TASQ™ Action Plan

Define and validate with Nespresso the actions related to the improvement of quality, sustainability and productivity within the Cluster.

Generate a specific yearly Action Plan for the Cluster and register it in the AAA Database.

Create a detailed action plan per farm, to generate continuous improvement strategies within the Cluster.

Register all the Cluster, Sub-Cluster and farm action Plans in the AAA Database.

Use the Qualitivity™ Guides to generate solutions for critical criteria in the Cluster.

Use the Qualitivity™ Tasting Kits to improve quality knowledge within the Cluster.

6. TASQ™ Verification Support the yearly Verification by SAN (Sustainable Agriculture Network).

SAN partners must register the results of the verification in the AAA Database using the TASQ™

7. Action Plan Implementation

Carry out workshops and specific training strategies to improve the Cluster.

Support the continuous improvement of the Cluster with local AAA technicians that visit the farms on a continuous basis.

Ensure best practice implementation. Carry out infrastructural projects in line with the Custer’s needs

regarding TASQ™.

Training of Trainers Field Investments Qualitivity™ Guides Qualitivity™ Tasting Kits

The Self-Assessment is a set of criteria and information of each farm interested in entering the AAA Program. It is filled in by farmers themselves. A farm is considered AAA when its information and self-assessment or TASQ™ Assessment results are uploaded in the AAA Database. Self-Assessment is structured, for the farmer to easily fill in topics related to quality, economic, environmental, social practices and productivity information on his farm. The responsibilities of the Cluster Manager regarding Self-Assessments are:

Define and validate with Nespresso strategies to gather the information on the Self-Assessment according to the size

and complexity of the Cluster.

Perform a complete collection of sustainability, quality and productivity information of AAA farmers.

Upload the Self-Assessment results in the AAA Database.

Guarantee that no farms have super critical underperforming practices (including but not limited to child labor and

deforestation, etc.) and do not present fraud.

Analyze the results of the collected information, to have a global picture of the real situation of the farms in the Cluster

and identify the different areas where the farmers need more support or technical assistance.

Develop an action plan to define the improvements required for the farms in the AAA program.

Ensure the original Self-Assessment booklet is delivered to the farmer; this will serve as a support to improve the

practices carried out in the farm, and as a first reference document related to Nespresso and the AAA Program.

Every year, an internal audit will be carried out by local technicians. For this audit, a sample of the farms in each Cluster will be inspected according to the TASQ™ guidelines. Inspection results must be uploaded and a report must be created in the AAA Database within a month after the inspection takes place. Nespresso has designed a specific sample methodology for the AAA and Rainforest Alliance certified groups and for AAA groups that have already been audited internally with the HSC 80% tool (TASQ™ follow-up tool). If these groups have updated information for the HSC80% tools in the AAA Database, they may be excluded from the TASQ™ inspection. Else, these groups should be taken into account when determining the TASQ™ inspection sample.

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4.1 AAA + RA certified groups For these groups, the Cluster Administrator may use the HSC 80%. All the farms in the group should by internally evaluated with the HSC 80%, these results must be uploaded in the AAA Database. All the farms that have complied with the HSC 80%, according to the results in the AAA Database, will not be part of the TASQ™ Inspection’s sampling process. These groups will be externally verified by the SAN partners on a yearly basis.

4.2 AAA groups or Sub-Clusters The AAA groups or Sub-Clusters will use the following formula for the TASQ™ Inspections:

FBAT=√𝑭𝑺 + 𝟏𝟎% 𝑭𝑨𝑳𝒀 + 𝑳𝑭

FBAT: farms to be assed with TASQ™

FS: farms with self assessment

FALY: farms inspected the previous year

LF: large farms

Country Brazil Colombia Costa Rica Guatemala India México Nicaragua

LF (Coffee hectares) 500 20 35 50 500 50 35

The result of this formula must be distributed in a proportional way between the Sub-Clusters or groups already defined by the Cluster Manager.

The local SAN partner will verify the AAA farms in the Cluster plus additional AAA+RA certified farms to monitor the continuous

improvement of the Cluster. The following formula will be used by SAN partners:

FTV: [(√𝑨𝑨𝑨 + 𝑹𝑨 … . ) ∗ 𝟎. 𝟐] + (𝑭𝑩𝑨𝑻 ∗ 𝟎. 𝟓)

FTV: farms to be verified

[(√𝑨𝑨𝑨 + 𝑹𝑨 … . ) ∗ 𝟎. 𝟐]: These farms are 20% of the RA audit sample. The number of farms obtained 20% of

the RA audit sample will be taken by auditor’s random total AAA + RA groups.

This formula applies for already RA certified groups.

FBAT: farms to be assed with TASQ™

The result of this formula must be distributed in a proportional way between the Sub-Clusters or groups already defined by the Cluster Manager. In the case of certified groups, the SAN auditor will choose the farms to be visited. The following table describes an example for a TASQ™ Inspection and Verification sample:

Group Farms Sample: TASQ™

Assessment Sample: RA audit

Verification Total

AAA+RA AAA Verification

AAA+RA Group No. 1 100 -- 10 2 --

17 AAA+RA Group No. 2 250 -- 16 3 --

AAA group for RA certification 60 -- 8 2 --

AAA Farmers 300 19 -- -- 10

5.2 Sampling for Colombia

Due to unique conditions of the Clusters in Colombia, the sampling formula is different and more adapted to the reality

observed in the field:

Larger numbers of AAA farms per Cluster

Both processes (AAA verification and RA audits) are taking place at the same time.

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As a consequence, farms that are part of the RA audit will be also included as AAA verified farms. This may be seen through a

practical example as follows:

Group Farms Sample: TASQ™

Assessment Sample: RA audit

Verification Total

AAA+RA AAA Verification

AAA+RA Group No. 1 100 -- 10 10 -- 65 – (10+16)= 39 farms to be verified

AAA+RA Group No. 2 250 -- 16 16 --

AAA Farmers 14.000 130 -- -- 65

The HSC 80% Tool takes into account the current sustainability situation of each Cluster and evaluates the minimum aspects for

a farm to achieve an 80% qualification in the RA standard. The HSC 80% is used as an internal evaluation tool for groups and for

farms that are Rainforest Alliance Certified or that are preparing for certification.

6.1 When to use HSC 80%? The HSC 80% Tool, may be used in the following cases:

Selection of RA certification candidates: when applying the HSC 80% to the AAA farms preparing for RA certification and if

farms have fulfilled all the criteria in the tool, they may be chosen as a candidate for RA Certification.

Internal evaluation of certified farms: the tool may also be used for monitoring AAA farms that are not part of the

inspection or verification sample.

The Qualitivity™ Guide is a tool for technicians in the AAA Program to transmit, train and generate adequate action plans for

farmers. The Guide contains all the necessary information to fulfill the TASQ™ criteria, focusing on the implementation of best

quality, economic, and agricultural practices. Its structure allows field technicians to have a support document as well as to carry

out trainings sessions with farmers.

The guide also contains a tasting kit, to exemplify to farmers the main quality profiles and defects that their coffees present. The

tasting kit should be used to improve quality knowledge always referring, positive and negative aspects of coffee quality, back to

the process ad practices applied in the farm. The training and tasting are encouraged to be performed multiple times, so the

farmers will have an opportunity to follow up the evolution of the quality of their coffees.

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1. Introduction 2. Economic Traceability Process 3. Economic Traceability Documents 4. Cost Brake-Down 5. Economic Traceability Templates 6. Payment of Nespresso Premiums

Nespresso is committed to long-term relationships and agreements in specific regions. Thus seeking to build and enhance long-term relationships with individual Clusters supported by coffee suppliers. To achieve this, Nespresso agrees to pay the AAA premium on top of the coffee price to farmers for highest quality coffee produced under the Nespresso AAA Sustainable Quality™ Program, and is committed to driving economic transparency through the coffee supply chain and with its commercial partners. Consequently, suppliers must account for green coffee’s physical and economic traceability. They must also ensure competitive coffee prices in the different regions where they are working with Nespresso and then complement them with the AAA Premium. The AAA Supplier Partners must always target the highest coffee prices paid in the region and be known for doing so. Supplier partners shall have as a target that at least 80% of Nespresso’s FOB purchase price goes directly to the farmer. The Nespresso FOB Price includes: fixed NY”C” price plus differential traded with Nespresso (handling and management fees, Country-Region differential, Nespresso Green Coffee Quality specifications, AAA Premium, BEN). This measure will ensure coffee farmers receive an adequate price for their high quality coffee to keep investing on their farms and achieve best agricultural practices.

The Green Coffee traceability process for AAA coffee should be followed thoroughly for all the coffee delivered to Nespresso. It contains the following components: 2.1 AAA Coffee Volume Forecast

AAA Suppliers must send the available volume forecast for the following three years for AAA and AAA+RA coffee every year by September, for each AAA Cluster they manage. The forecast includes coffee volumes, number of existing and projected new AAA farms, hectares, and new areas, when it applies. Nespresso will provide guidance on the estimated volume growth for the same period of time.

2.2 AAA Coffee Information

Suppliers must compile all the traceability information for the AAA coffee bought at origin. All the coffee transactions compiled should be kept in the units and currency utilized at origin to buy coffee.

Suppliers must have in place a data recollection system where they follow and store all the information of the coffee bought from coffee farmers for Nespresso. This system should consolidate all the coffee traceability information, linking the coffee sold by each farmer within the AAA Program to its unique AAA ID and to each Nespresso green coffee contract. It must show in a transparent way, the Coffee Price, AAA Premium and BEN (when applicable) for every coffee transaction.

The compiled information will be introduced to Nespresso’s traceability template. This information must be sent to Nespresso or uploaded in the AAA Database for each coffee contract arriving to the Nespresso factories. Nespresso encourages and will support the development of system extraction (queries) in the supplier’s system to avoid excessive manual data handling.

The traceability information may be audited by Nespresso or by a third party on a yearly basis. The scope of the audit will be informed to the AAA Supplier Partner 3 months in advance.

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2.3 Traceability for Coffee Contracts

Every four months, the traceability information for coffee contracts delivered to Nespresso shall be compiled in the traceability template and uploaded to the AAA Database by the Cluster Administrator.

The AAA Rainforest Alliance certified coffee must be included in the same traceability template as the AAA coffee. AAA farms and AAA + RA certified farms should be updated in the AAA Database so the coffee sold by them may be

considered as such.

2.4 Retroactive AAA Premiums

When delivering AAA coffee, if AAA Premiums and/or BEN have not been included in the contracted Coffee Price with Nespresso, AAA Supplier Partners commercialize and validate with Nespresso the volumes and traceability information. After validation, they shall issue a debit note related to this coffee simultaneously with the traceability information to procurement and AAA operations. These premiums shall be entirely transferred to farmers.

Retroactive AAA and AAA+RA coffee must be compiled in the traceability templates and uploaded as soon as the self-assessment/certification process has been successfully completed.

The following documents should be kept at origin (for at least three years after each coffee transaction has been made) as supports for the green coffee traceability:

Nespresso Contracts: signed contracts for the coffee bought by Nespresso. Purchase receipts: receipts for all the coffee purchased at origin. Both the supplier and the farmer must store a copy of

the receipt. This document should state clearly the following information: Receipt number, date, weight, coffee form, coffee price, quality description (Nespresso AAA), AAA Premium, certification premium (when applicable). This point also applies for retroactive transactions.

3

The green coffee cost brake down must be sent by suppliers to Nespresso on a yearly basis describing all the price components and the amount of money the farmer receives at origin. This information will be revised during the yearly KPI meeting between Nespresso and suppliers to verify and adjust the values for green coffee costs. The price break-down is the tool to ensure that at least 80% of Nespresso’s FOB purchase price is being delivered to AAA farms at origin. This includes: coffee price, country differential, AA quality premium, AAA premium and BEN (if applicable). The result of this exercise will be verified with the results of the economic traceability information files sent by the Cluster. This information may be subject to external audits. Only costs related to green coffee should be considered within the cost brake down. The cost brake down for green coffee may include the following items (see enclosed template):

Average market price: average price at which the coffee is bought in the New York Exchange. – NY “C”. Country Differential: average county differential traded. Milling costs: wet milling, drying, dry milling, etc. AA Premium: quality premium for the green coffee paid by Nespresso. This premium is paid once the coffee profile

matches that required by Nespresso. AAA Premium: premium for farmers in the AAA Program for sustainable quality. This premium should be entirely paid

to farmers and must be clearly identified in the coffee purchase invoice. Nespresso Special Bonus (BEN): this bonus is attributed to farmers that are RA certified when they sell coffee to

Nespresso. Logistics: all the activities required to transport, process, palletize, and package coffee up to FOB. Taxes: taxes paid for the coffee exportation. Operations Margin: includes overhead, risk coverage, and export operations margin for green coffee. Price paid to farmer: final price paid to farmer, including coffee price and additional premiums, such as: country

differential, AA Premium, AAA Premium and BEN.

3 This procedure is also valid for other purchase documents like invoices or business confirmation signed by the producer

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5.1 Green Coffee traceability Template

Every coffee transaction must be linked to a farmer in the AAA Program; this includes farmers who have entered the AAA

program with a retroactivity of 6 months, once their self assessment is uploaded into the AAA Database. All the coffee that receives AAA premiums should be included in the information of coffee purchased at origin. This

includes coffee which is later rejected for physical or quality reasons but that has been bought as AAA. All the information in the traceability template must reflect local coffee transactions, including: local currency, units and

coffee form used at the moment of the coffee purchase. Green Coffee Traceability

Field Description How to fill the field?

Cluster Cluster name as in the AAA Database Name

Currency Currency used to pay coffee at origin

Currency acronym: BRL-COP-CRC-GTQ-MXN-NIO-USD

Coffee Specie Coffee Specie purchased: develop a separate form for Arabica and for Robusta Arabica - Robusta

Farm Information

Farm's ID Number Nespresso’s farm identification number registered in the AAA Database No. In the AAA Database Farm's Name Farm Name Name RA Certification Is the farm Rainforest Alliance certified or not? Yes or No

Purchase Point Information

Purchasing Point ID No. Purchasing point’s identification number ID of the purchase point Location Geographic location where the coffee has been bought City or Municipality or Region Purchasing Date Date when the coffee was sold at the purchasing point Year-Month-Day Weight / Volume Weight of the coffee purchased per transaction in the local units Purchased coffee quantity Unit Unit in which the coffee is bought locally International unit acronym

Coffee Form State of the coffee when it is bought locally from the farmers

Fresh Cherry - Dry Cherry - Parchment - Green

Receipt Number Identification number for the receipt linked to the coffee purchase Receipt No. Exchange Rate Daily exchange rate used for transaction, comparing local currency to USD daily ratio USD/local currency

Unitary Base Price Local base price for coffee per unit as in the “Unit” field (price paid to non AAA coffee growers) Base price/local units

AA Nespresso Payment Total amount paid for the coffee, in the selected currency (without AAA or AAA+RA premiums) (Nespresso price)*(weight)

AAA Premium Payment Total AAA premium paid for the coffee purchased, in the selected currency (AAA premium)*(weight)

NSB Nespresso's Special Bonus: Total RA premium paid for certified coffee purchased, in the selected currency (RA premium)*(weight)

Contract Information

Contract Number Reference of the Nespresso contract for which this coffee has been bought Nespresso contract ID Dilution rate Dilution rate for the contract, resulting from the final sorting from green to Nespresso AAA Green coffee/AAA coffee ICO Mark Lot number to which the coffee is assigned ICO Mark ID Shipment Date Date in which the boat containing the coffee lot leaves the port of origin Year-Month-Day

5.2 Cost Brake-Down Template

Cost brake down should always reflect the information paid to farmers at origin. Cost brake down should be accountable for within the economic traceability of the Cluster. Field name Description How to fill it

Cluster name The name of the Cluster you manage Please make one file per Cluster Supplier name The name of the company managing the Cluster Please use local name Harvest year The year of the period in question Crop's year

Price paid to farmer Total price paid at origin to farmer validated through the economic traceability file In ct/lb Price paid to farmer relative to FOB Percentage of the total price paid to farmer at origin - should be more that 80% In ct/lb

Average Market Price Average price at which the coffee is bought in the New York Exchange. – NY “C”. In ct/lb Country Differential Average county differential traded. In ct/lb

AA Premium quality premium for the green coffee paid by Nespresso. This premium is paid once the coffee profile matches that required by Nespresso. In ct/lb

AAA Premium premium for farmers in the AAA Program for sustainable quality. This premium should be entirely paid to farmers and must be clearly identified in the coffee purchase invoice. In ct/lb

BEN this bonus is attributed to farmers that are RA certified when they sell coffee to Nespresso. In ct/lb

Logistics All the activities required to transport, process, palletize, and package coffee up to FOB In ct/lb Taxes Taxes paid for the exportation of the coffee In ct/lb Operations Margin includes overhead, risk coverage, and export operations margin for green coffee In ct/lb

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The payment of AAA Premiums to farmers shall be used as a management tool; it must be clearly recognized by farmers as a reward for their additional efforts. The payment of premiums should be:

Fully made to AAA farmers Clearly separated from coffee price Clearly communicated in the purchasing points, with visual signs and clear information Always be linked with the name of Nespresso Ideally paid in a separate event, celebrating the achievements farmers have made

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29

1. Introduction

2. Objective

3. Definitions

4. Cluster Evaluation Cycle

5. Annual Supplier Meeting

6. Key Performance Indicators

Throughout the last 10 years, the Nespresso AAA Sustainable Quality™ Program has been implemented in 8 countries. Since

then, it has evolved and matured. It has been proving to be successful in securing its main objectives, and it has been challenged

by new business context development, technologies, and constraints.

Not everything that has been developed through the AAA Program can be measured. Relationships, collaboration, and

friendship are, and will remain, the spirit of the Program. However, the continuous improvement nature of our activities calls for

measurement of the different areas of action, and their intrinsic processes. This document intends to clarify to supplier partners

the basis for Coffee Quality, Procurement, and Cluster performance measurement. It is to be seen as the way to improve the

AAA Program, and to further serve farmer’s interest.

Explains the Key Performance Indicators used as basis to evaluate Coffee Quality, Procurement, and the AAA implementation, and the evaluation process.

KPIs: Key Performance Indicators. Please note that some KPIs relate to the crop calendar, others to the Gregorian calendar.

Cluster Evaluation Cycle: It’s the Clusters evaluation process and calendar. They are planned according to the coffee crop

calendar per Cluster.

Every Cluster/Supplier will have a fixed date yearly to meet with Nespresso Green Coffee team. The Green Coffee Procurement Department will organize the meeting dates in two different periods of the year, depending on the Cluster harvesting cycles, and the availability of participants. The review will cover all the Clusters managed by the same supplier, in one or more countries, whenever possible. In some cases, two meetings with the same supplier per year can be scheduled.

September/October Brazil and Colombia East Africa and India

April/May Central America

Annual Supplier Meeting

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Participants: Nespresso encourages that the country managers or a replacement be present in the meeting, together with their European commercial counterparts. Other participants, as Quality Managers, and Sustainability Managers are also welcome.

5.1 Objectives of the meeting

1. Get together, and establish contact persons 2. Evaluate suppliers performance in 3 dimensions: Quality, Procurement, and AAA. 3. Discuss topics of interest, issues, and new developments.

5.2 Agenda The meeting should last for at least 2 - 3 hours. It will include at least the agenda topics below: 1. Market and crop update, projects, and challenges – suppliers

2. Review of KPIs and discussion – Nespresso presents, then open discussion

3. Agreement on new KPIs

4. Final discussion on general topics, envisaging continuous improvement

5.3 Preparation and Action Plan As this meeting is KPI intensive, and should not take more than 3 hours, a good preparation is key. Both Nespresso and Suppliers will need to have: 1. Filled table of KPIs, according to templates provided in this document, sent by Nespresso in advance.

2. Suppliers must discuss the results of this table with the responsible Local Manager, at least one week in advance of the

annual supplier meeting to fully align with the Cluster’s results.

3. Cluster managers will meet with Nespresso in Switzerland to review the results of the AAA implementation process for the

previous year. Please prepare a 15-minute presentation on Cluster(s) and country(ies) overview.

4. Justification for variations in the expected results should be prepared by suppliers, jointly with Nespresso local managers.

5. A proposal with the new set of KPIs for the following year will be set jointly.

6.1 Presentation Overall supplier performance is presented by a spider chart:

Cluster XYZ

PROCUREMENT On time delivery 2.5

Overall Commercial Performance 4

Back office & Logistics 4.1

GC QUALITY Rejection Rate 4.4

Batch traceability 4.5

Vendor Audit Management 4.5

AAA AAA Management 5

Farm Support 3.6

Physical and Economic Traceability 4.8

0 – 2 : immediate action needed 2 – 4 : attention required 4 – 5 : good performance

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6.2 KPI Definitions and Template

# KPI Definition Medium-term

target Short-term

target Measurement Calendar Unit Weight

Year Result (0 to

5)

Target year next

Data Source

Quality

1 Quality Rejection Rate

Pre-shipment, pre-transport, and arrivals rejection rate on calendar year

Less than 2%. <2% = score card >4

Pre-shipment evaluation: <10% Pre transport evaluation: <5% Arrivals: 0%

Greg % 1 Green Coffee Quality Dep.

2 Batch traceability

Before Go-Live SAP supplier was not confirming ICO and container on time. Main issues with confirmation of info to NQCV and K+N

Less than 5% <5% = score card >4

Quantity of samples not contracted after arrival of coffee in factories per year (% of samples where association with PS samples couldn’t be done). Includes samples were batch number was impossible to track.

Greg % 1

Green Coffee Quality Dep.

3 VAM Vendor Audit Management “High-Performing”

Minimum “Emerging” final score

Qualitative – Number of positive answers on a total applicable by vendor site

Greg % 1 Green Coffee Quality Dep.

Procurement

1 On-time Delivery Compliance to shipping period or delivery month of the contract

100% defined yearly

Shipped in time / delivered in time = ensure green coffee stock coverage vs. utilisation

Crop % 1 Supply chain

2 Overall Commercial Performance

Assessment of work collaboration with supplier

excellent

Defined yearly (gaps and risks)

Internal meetings within procurement and stakeholders / benchmark with other suppliers

Crop % 1

Procurement & Finance

3 Back-office and Logistics

Facilitate fluent exchange of data on follow-up of contracts

excellent Fluent exchange of data

Internal meetings with stakeholders / benchmark and good practices with other suppliers

Crop % 1 Procurement & Supply Chain

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AAA

1. AAA Management

1.1 Shared Commitment

Commitment of all tier suppliers, except farmers, to the AAA Program and its implementation requirements

100% NA

% of the supply-chain partners who signed the Shared Commitment. The Shared Commitment must be signed by 1

st, 2

nd, 3

rd tier

NA % 1 proof of signature

1.2 Farmer Commitment

Commitment of all AAA farmers to the AAA Program and its implementation requirements

100% defined yearly

% of self-assessments signed/total number of farmers

NA % 1

AAA DB

1.3 Cluster size management (farms)

Capacity to add / reduce farms to the AAA Program according to yearly defined targets

According to communicated strategy

defined yearly

% of achievement according to defined target

Crop % 1 AAA DB

1.4 % AAA Capacity to deliver AAA coffee according to defined targets

100% defined yearly

% AAA = total volume of AAA coffee / total volume (exported)

Crop % 1

Green Coffee Position

1.5 % AAA RA Certified

Capacity to deliver AAA, Rainforest Alliance Certified coffee according to defined targets

According to communicated strategy

defined yearly

% AAA RA = total volume of AAA RA coffee exported / total volume

Crop % 1 Green Coffee Position

2. Farm Support

2.1 TASQ™ Compliance

Capacity get farms to comply with the minimum TASQ™ criteria in terms of Quality and Sustainability practices

According to cluster strategy

defined yearly

# AAA farms > 1-year, with all minimum TASQ™ in quality and sustainability / divided total # AAA farms > 1-year * 100

Crop % 1 AAA DB

2.2 Cluster Improvement

Capacity to increase the overall score of the Cluster in Quality and Socio-Economic practices

According to cluster strategy

defined yearly

Difference between Quality and Socio-Economic practices score (%)

Crop % 1

AAA DB

33

2.3 Farm visits

Capacity to effectively visit and assist every farmer in the program, every year, as a minimum requirement

100% defined yearly

# farm visits / total # farms Crop % 1 AAA DB

2.4 Training Capacity to deploy pertinent and large-scale training to farmers

According to cluster strategy

defined yearly

# farmers trained / total # farmers

Crop % 1

AAA DB

2.5 AAA Database usage

Effective usage of the AAA Database by the technical body and management of the Clusters

100% defined yearly

# mobile equipment in use Crop % 1 AAA DB

% updated info through AAA Database

3. Traceability

3.1 Coffee & Economic Traceability

Capacity to deliver proof of traceability for 100% of the AAA coffee

100% 100% presentation of coffee and economic traceability, filled according to template

Crop y/n 1

AAA DB

3.2 Cost Breakdown Capacity to deliver transparence in the cost building for the AAA coffee

100% 100% presentation of cost building sheet properly filled and according to template

Crop y/n 1 AAA DB

3.3 Farmer Premium

Capacity to deliver proof of payment of the AAA Premium and BEN for all AAA coffee according to defined targets (auditable)

100% 100% presentation of AAA premium template duly filled. Farmers receive payment proof.

Crop y/n 1

AAA DB

3.4 Field Investment Capacity to effectively use the field investment to get results

According to cluster strategy

defined yearly

presentation of duly filled field investment templates, and respect to requirements (auditable information)

Crop y/n 1 AAA DB

3.5 Loyalty Capacity to create loyalty among farmers towards the AAA Program

>90% >90% # AAA farms that recorded sales to Nespresso in the 2 previous years / total # AAA farms * 100.

Crop % 1

AAA DB

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1. Introduction 2. Objective 3. Definitions 4. SHE improvement procedure 5. SHE Historic Template

People are our most valuable asset. Nestlé Nespresso S.A. believes that all injuries and occupational illnesses should be prevented and that no job is worth performing in an unsafe way. Therefore, Nestlé Nespresso S.A. is committed to provide a safe, injury-free and healthy workplace for all employees, visitors, partners and consumers by integrating safety and health into its daily business decisions and processes. In alignment with Nespresso’s holistic approach of sustainability all along its supply chain, suppliers conducting business with Nespresso are required to implement and apply proactive measures for Safety, Health and protection of the Environment (“SHE”) in order to ensure: Zero incidents Compliance with all laws, regulations and instructions Processes for continuous improvement Nespresso seeks to extend this commitment to coffee growers through the AAA Sustainable Quality

TM Program. By

working with specific communities, ensuring AAA price premiums, and providing technical assistance, Nespresso aims to achieve better livelihood conditions for farmers to help build an ethically correct and safe coffee culture.

Following Nestlé Nespresso S.A. policy, suppliers are expected to comply with the SHE requirements with all their stakeholders. Within the AAA framework, Cluster administrators are responsible for helping AAA farmers to implement and apply proactive SHE measures through technical assistance. The objective of the present annex is to clarify the procedure to follow in order to use the AAA tools in an efficient way and protect AAA farmers and their employees from injuries and occupational illnesses. The TASQ

TM allows identifying risk or hazards present on the farm and setting up an action plan to correct the situation.

The management area of the TASQ™ (25) includes criteria that assess this topic in particular. Additional criteria deal with more specific SHE measures, covering agrochemical storage and handling for example. Therefore, the usual methodology of assessing, implementing an action plan and monitoring the farm that follows the TASQ™ cycle, applies perfectly to improve SHE requirements. As it is a topic of special concern for Nespresso, additional care is required when recording information and monitoring the implementation for best practices. Comments and re-visits are required when a SHE criteria is not in compliance in one of the AAA farms of the Program. When using the AAA mobile application, a picture should be taken before and after the implementation of the action plan.

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SHE: Safety, Health and protection of the Environment (SHE) are separate practice areas, however they are often linked. The reason for this is typically to do with organizational management structures; however there are strong links between these three disciplines. One of the strongest links between these is that a single risk event may have impacts in all three areas, albeit over differing timescales. RISK: is the potential that a chosen action or activity (including the choice of inaction) will lead to a loss (an undesirable outcome). The notion implies that a choice having an influence on the outcome exists (or existed). Potential losses themselves may also be called "risks". Almost any human endeavor carries some risk, but some are much more risky than others. HAZARD: is a situation that poses a level of threat to life, health, property, or environment. Hazards are generally of three types, physical hazards, chemical hazards and biological hazards.

Safety, Health and protection for the environment are topics one must truly understand and commit to in order to be effective. Therefore, in the AAA Program context, special care will be made in order to implement the process of continuous improvement together with the farmer, benefitting from his experiences and knowledge, but also training him on the methodology and scope of SHE. This process may be done at individual or regional level, depending on the complexity of the Cluster. The following process should be followed: 4.1 Establish the SHE incident historic

Identify which accident may have occurred to the farmer, his family or community and register this information in

the SHE historic template. The SHE historic shall be checked or updated every time the farm is visited. 4.2 Analyze the risks and hazards of the AAA farmer activities

During the farm’s annual visit, Inspect the farm together with the farmer, and register risks or hazards. When a TASQ™ criteria related to SHE is non-complying, the agronomist shall describe the situation in the

comments. Take a picture of the non-complying situation, using the AAA mobile application. 4.3 Define and implement preventive measures and procedures

It is mandatory to make an action plan for any SHE criteria that is identified to be non-complying. 4.4 Monitor and review the SHE implementation

A follow-up visit is advised within the next 12 months to follow the action plan, it can coincide with the next annual visit.

Describe any change or improvement in the criteria’s comments and in the SHE records if an incident happened. Take a picture for every visit, using the AAA mobile application. As a general guidance, the “basic behavior for Safety Leadership” can be found at the end of this document.

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The SHE historic template has been developed in order to establish the historic of accidents that have happened in the farm. Knowing the historic is of great help to identify the major risks or hazards present in the farm, convince the farm owner of the need to avoid them, as well as to create more general training for the region/Cluster. The SHE historic template registers the following information: To whom it occurred? Name of the person What is the farmer’s relationship with this person?

The farmer himself or herself His/her family (wife/ husband, children and close family) Workers / employees Visitors (friends, neighbors, …) When it occurred?

The date when it happens Type of incident?

Fall Intoxication Tool and machinery … How it occurred?

Description of what happened and how What are the consequences?

Near miss (a dangerous situation existed but no injury generated) Light injury (a superficial cut, concussion, …) Serious injury (that required a medical intervention) Death What followed?

Actions put in place to avoid it happen again (in case there were)

Name? Relationship? When? Type? How? What? Action plan?

First and last name

The farmer, his / her family, a worker, a visitor?

Date Description of what happened

Gravity of the injury

Actions put in place to avoid it happen again

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1. Introduction 2. Nespresso’s views on Child Labor 3. Key Terminology 4. Children’s Rights Regarding Work 5. Young Workers 6. Nespresso’s Regulations Regarding Child Labor 7. Child Labor Control Template 8. Local Legislation Regarding Child Labor

Nestlé Nespresso seeks to guarantee ethical integrity throughout its coffee supply chain by protecting and ensuring adequate conditions for all the actors involved in it, including children who have a connection with coffee. Nespresso aligns with ILO conventions, and considers Child Labor as a breach of human rights, which harms children physically and emotionally while also “impedes children’s access to education and/or skills training and limit their possibilities of economic and social mobility and advancement in later life”

4.

Although many organizations are concerned and actively seek to stop child labor, it is still a reality in many communities in the developing countries. The causes of Child Labor are complex, linked to specific cultural backgrounds, and to deep economic and social issues affecting entire communities around the world. According to ILO: “The prevalence of child labor in this sector [Agriculture] also undermines decent work, sustainable agriculture, rural development and food security as it perpetuates a cycle of poverty where household income for both farmers and waged workers is insufficient to meet their economic needs”

1.

Nespresso has taken into account this problematic within the AAA Sustainable Quality™ Program. By working with specific communities and ensuring AAA price premiums, while providing technical assistance to improve social practices within the coffee supply chain. This way Nespresso has set up the framework to achieve better livelihood conditions for farmers and for their children to help build an ethically correct coffee culture. The following scheme shows a global view of the main challenges, drivers and actions Nespresso is currently considering within the AAA Program:

4 Tackling hazardous child labor in agriculture; Guidance on policy and practice. International Labor Organization – 2006.

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No person or organization may guarantee that child labor is not a concerning issue within the coffee supply chain, but Nespresso can guarantee that it is taking consistent actions that are contributing to the creation of a solution through its AAA Program.

Nespresso has a zero tolerance approach to: Child Labor which contravenes ILO convention on farms within the AAA Program. All types of hazardous child labor, with a limited exception of “young workers” – as stated in Article 16 of the ILO

Convention on Safety and Health in Agriculture, 2001 (No. 184).

The key terminology within this document has been extracted directly from ILO’s glossary of terms. ILOs key terms for Child Labor are described as follows: Child: Article 2 of the ILO Worst Forms of Child Labor Convention, 1999 (No.182) states that “the term ‘child’ shall apply to all persons under the age of 18.” Child Labor: Child labor is work that harms children's well being and hinders their education, development and future livelihoods. Child labor is work which, by its nature and/or the way it is carried out, harms, abuses and exploits the child or deprives the child of an education. The term “child labor” does not encompass all work performed by girls and boys under the age of 18. Child labor is not children doing small tasks around the house, nor is it children participating in work appropriate to their level of development and which allows them to acquire practical skills. Young people legitimately undertake work, paid or unpaid, that is appropriate for their age and level of maturity. By so doing, they learn to take responsibility, they gain skills, they add to their families’ and their own well-being and income, and they contribute to their countries’ economies. Worst forms of Child Labor: the following points describe the worst forms of Child Labor following ILOs definition: All forms of slavery or practices similar to slavery; The use, procuring or offering of a child for prostitution, for the production of pornography or for pornographic

performances; The use, procuring or offering of a child for illicit activities; Work which is likely to harm the health, safety or morals of children.

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Hazardous Child Labor (HCL): HCL is work in dangerous or unhealthy conditions that could result in a child being killed, or injured and/or made ill as a consequence of poor safety and health standards and working arrangements. Such as: Work which exposes children to physical, psychological or sexual abuse; Work underground, under water, at dangerous heights or in confined spaces; Work with dangerous machinery, equipment and tools, or which involves the manual handling or transport of

heavy loads; Work in an unhealthy environment which may, for example, expose children to hazardous substances, agents or

processes, or to temperatures, noise levels, or vibrations damaging to their health; Work under particularly difficult conditions such as work for long hours or during the night or work where the child

is unreasonably confined to the premises of the employer.

Nespresso agrees with ILO’s regulations regarding “Children’s Rights with Regard to Work”, which states that: “All adults and children are entitled to certain rights by virtue of being human, and it is recognized that children have rights of their own. Children need to know their rights, including the right to work in a safe and healthful workplace environment where hazards have been identified, risks assessed and appropriate prevention or control measures put in place. This includes a right to know about the dangers and risks to their own health and safety and the consequences of working on their education and futures. They need to learn how to protect themselves and which laws exist specifically for their protection and whom they can turn to for help. Young workers should also have the right to refuse dangerous work tasks and conditions and should receive workers' compensation in the event of work injury or illness”.

Nespresso agrees with ILOs definition and regulations for young workers. Additionally it takes into account local legislation standards, and applies in each country where it is working whichever standard is stronger. ILOs definition for young workers states that: “Young workers are female and male adolescents below age 18 who have attained the minimum legal age for admission to employment and are therefore legally authorized to work under certain conditions. Under this Convention, the minimum age for employment or work should not be less than 15 years, but developing countries may fix it at 14. A number of countries have fixed it at 16.” Young workers should not be engaged in hazardous work at any point and should have access to health, safety and education. In general, girls and boys aged 13-15 are permitted to carry out “light work” under the ILO Minimum Age Convention No. 138. Article 7, when girls and boys perform tasks that are: Not likely to be harmful to their health or development; and Not such as to prejudice their attendance at school, their participation in vocational orientation or training

programs approved by the competent authority or their capacity to benefit from the instruction received.

Nespresso and its supplier partners commit to eliminate Child Labor within the AAA coffee supply chain by taking the following measures: 6.1 Prevention

“Prevention means identifying children at potential risk, keeping them out of hazardous work and stopping them from becoming child laborers in the first place. To ensure that parents see schooling as the best option for their children, families need, among other things, income security and social benefits, like health insurance, to survive short and long-term crises.”

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Nespresso works on preventing Child Labor by: Paying additional AAA Premiums for AAA Coffee. This way, it is improving the income of farmers in the AAA

Program, which in turn increases the economic and social benefits of families within the Program. In the long run, this measure contributes to preventing children from working for economic reasons.

Financing training within each Cluster in the AAA Program, which includes best on-farm social practices, helping to understand and prevent such situations as Child Labor.

Developing the TASQ™, and clearly stating Child Labor as a critical underperforming practice (specifically criteria 16c, 16d, 19a and 19b).

Additionally, Nespresso has created the AAA Shared Commitment, to be implemented throughout the entire coffee supply chain, which clearly communicates and sets out the grounds for the commitments of Nespresso and its partners to work towards eliminating child labour.

Nespresso has also engaged with expert partners to work together and ensure skilled advice, support and a responsible approach to find adequate and tailored solutions for every specific region in the AAA Program.

Supplier partners must work on preventing Child Labor by: Targeting that 80% of total FOB purchase price goes directly to the farmer. Ensuring complete transparency, and

strengthening the famer’s net income. Creating a team of AAA agronomists that train and help farmers and their families to understand and apply best

social practices within their farms and in their community. Work directly with each AAA Cluster and it s communities it to assess any risk situation regarding Child Labor. 6.2 Withdrawal

If ever Child Labor is found on a AAA farm, the following procedure must take place: 1. The Cluster Administrator must immediately fill a report following template for Child Labor Control (section 7

within this document). Additionally to this, the information regarding criteria 16c, 16d, 19a and 19b of TASQ™ on the farm must be immediately updated in the AAA Database to show the finding in the farm.

2. The Cluster Administrator must clearly inform the farmer about Nespresso’s zero tolerance approach regarding: Child Labor which contravenes ILO and/or local legislation on farms within the AAA Program. All types of hazardous child labor, with a limited exception of “young workers” – as stated in Article 16 of the

ILO Convention on Safety and Health in Agriculture, 2001 (No. 184).

3. The AAA farm will be temporary put aside from the AAA Program until it demonstrates to comply with Nespresso’s views and position on Child Labor.

4. A follow-up visit will be scheduled by the Cluster Administrator in one month’s time to verify if the farm has taken corrective actions so as to: Guarantee no children are at potential risk, keeping them out of hazardous work and stopping them from being child labourers while making sure they have adequate schooling and life conditions. During this visit the Cluster Administrator will file a findings report and will update the farm’s TASQ™ information regarding criteria 16c and 16d.

If a new farm postulating to enter the AAA Program has Child Labor it will receive information on Nespresso’s position of this topic and it will be asked to comply with it before entering. That is to say, a new farm must not have Child Labor to be able to enter the AAA Program in the first place. Given many types of uncontrollable coffee related set ups, for example the use of seasonal workers, it is not possible to undertake audits on these sites or monitor hiring practices at all times. To minimize this risk, Nespresso requires all Cluster Managers to be responsible for the labor practices of the AAA farms within the Cluster. This means that the Cluster Managers must have internal controls to guarantee that hired child labor does not occur and if children are working they are doing so in a manner that is defined within the standards set up by: Nespresso, ILO and local legislation.

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If a AAA farm does not comply with TASQ™ criteria 16c and 16d, please fill the following template (please include the information of all the children working on the farm):

GENERAL INFORMATION

Cluster

Farm’s Name

Farm’s ID Number

Technician responsible for the report

FINDINGS

Date

Visit during school time? Yes/No

Was the visit announced? (if yes please give the reason) Yes/No

Name of the child working on the farm

Is the child below 15 of in between 15 and 18 years old? Yes/No

Is he/she part of a vulnerable group? Yes/No

Name of his/her legal guardian(s)

Work he/she performs on the farm (including duration & conditions)

Is it a case of Worst Form of Child Labor?

No (None-hazardous tasks) Hazardous tasks Slavery or Forced Labor Trafficking or prostitution Illicit activities

How long has he/she been working on the farm?

CORRECTIVE ACTIONS

What actions will be taken to withdraw and rehabilitate the minor working in the farm?

When is the withdrawal of the child going to take place (before a month’s time)?

Nespresso will annually review the local legislation regarding child labor by country, this section has a link to the current legislation for AAA Countries:

Brazil Colombia Costa Rica Ethiopia Guatemala India Nicaragua Mexico Sudan (temporarily as reference for South Sudan)

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1. Introduction

2. Key Terminology

3. Principles

4. Trademark Guidelines

5. Data Protection

6. Anti Trust

7. IMAGE RELEASE FORM: Authorization – Personality Rights

8. RELEASE FORM: Authorization – Photo and Video

The objective of this document is to guide the Nespresso AAA Suppliers on how to communicate internally or externally about the Nespresso AAA Sustainable Quality Program

TM to all stakeholders involved.

2.1 Communication Communication is considered to be a process whereby information is exchanged.

2.2 Corporate Reputation An individual’s collective representation of past images of an organization (induced through either communication or past experiences) established over time.

3.1 Usage of Nespresso’s Logos Any internal or external communication about the AAA Program must be validated with Nespresso before its distribution. All communications shall be timely and relevant to the improvement of each individual Cluster within the framework of the AAA Program. The use of Nespresso and AAA Program logos is encouraged but shall respect the company standards and be validated by the Marketing Department, especially for external use. A guide on how to use the Nespresso logo follows this document.

3.2 Internal Communication Internal communications include all forms of communications between the Cluster administrator, the agronomists and the farmers inside the Cluster. All relevant internal communications that affect the commitments stated in the AAA Shared Commitment should be notified to the Nespresso Local Manager. Communications material or staff costs related to communications are supported by Nespresso within the field investments when the communication is 100% related to AAA and for AAA farmers exclusively. These costs may not

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exceed 10% of the total field investments of the Cluster. This amount must be used to communicate or train the AAA farmers such as: leaflets, panels, books, videos, etc.

3.3 External Communication External communications are defined as all forms of communication between the Cluster, Nespresso and external stakeholders as general public, journalists and any type of media, community organizations, employees or local authorities. AAA Program suppliers must be aware of the responsibility of any external communications involving Nespresso, especially when dealing with journalists and media.

3.4 Nespresso Ambassador All AAA Program actors including farmers, Suppliers, Cluster Administrator and Agronomists, can become and act as Nespresso ambassadors. Nespresso and AAA Program information shall be distributed and be always available. All suppliers must ensure that Nespresso is present in all the activities carried out on the field, and that farmers have a clear idea of Nespresso’s role within the coffee supply chain. The level of Nespresso awareness might be externally verified.

3.5 Responsibility for Communication Every participant of the AAA Program is responsible for the communication of the AAA Program and Nespresso; nevertheless the communications must respect the following flow:

Nespresso↔ Nespresso Local Manager ↔Cluster Administrator↔ Agronomist↔ Farmer

The suppliers are responsible for the distribution of Nespresso AAA information to all active farmers registered in the Cluster. Changes and updates concerning AAA procedures must be informed to all participants.

3.6 Transparency The Nespresso AAA Suppliers shall commit to open and maintain a transparent communication channel with the local manager. The communications shall be clear, true and respectful.

3.6 Crisis Communication

Critical situations must be communicated immediately through the Local Manager or Nespresso HQ if pertinent. Critical situations include major issues as defined in the AAA Shared Commitment, media releases involving the AAA Program or Nespresso and any other specific local issues.

3.7 Image Use and Legal Rights As demanded by Law, all photos, videos or images containing persons must follow a signed authorization by the registered person or the respective legal representative (see the Authorization template in sections 7 and 8).

3.8 Confidential Disclosure Agreement All information must be treated as confidential and can only be divulged after receiving Nespresso’s formal authorization. Confidential Information means: “any information imparted by Nespresso, any The Company of the Nestlé Group, any third party related to Nespresso such as Nespresso’s suppliers, partners, service providers or consultants. In addition, the Works and any and all results of the activities realized within the framework of the Nespresso AAA Program of Sustainable Quality™ shall be deemed to be Nespresso’s Confidential Information. Confidential Information shall also include the existence and content of this document and the relationship between the Parties.” Template of NDA can be provided upon request.

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3.9 Intellectual Property Rights "Intellectual Property Right" means any intellectual property right, whether registrable or unregistrable, and whether registered or not, including patents, industrial designs, utility models, designs, plant certificates, semi-conductor layouts and corresponding applications, computer programs, including any source and object codes, as well as copyrights, know-how and trade secrets.

All Nespresso trademarks are registered in the name of Société des Produits Nestlé S.A.Please identify our trademarks and their owner. As a general principle, the ® symbol should be used with every registered trademark appearing on labels, packaging, printed materials and advertising of all kinds. Where we have no registered trademark and we wish to indicate that we are claiming rights on a particular mark, the use of the ™ symbol should be considered. Because trademark rights are linked to territories, please check with the Legal Counsel Brand IP if and where the trademark is registered and the symbols ® or ™ should be used. The statement of ownership should also always appear on the packaging as follows: ® Reg. Trademark of Société des Produits Nestlé S.A. (The statement of ownership can also be translated into local language in case of need. Exceptions to this rule are subject to approval of the Intellectual Property Department.) For words, for which we do not have a trademark protection, but which we have created. The following terms should be followed by TM: Ecolaboration

TM, AAA Sustainable Quality

TM, TASQ™, Qualitivity™.

Nestlé Nespresso respects the privacy of individuals and, therefore, protects their personal data. This includes the right of individuals to be informed and, in principle, to make decisions about the collection, transfer, use, disclosure, retention, changing, erasure and any other operation (“Processing”) of information concerning (including but not limited to e-mail address, date of birth etc.) an identified or identifiable individual (“Personal Data”). The Privacy Policy sets out minimum standards that must be complied with by all employees and contractors of Nestlé group companies (“Nestlé”) when Processing Personal Data. The 7 basic privacy principles of the Nestlé Privacy Policy

Personal Data must only be processed for specific and legitimate business purposes Personal Data must be processed fairly and lawfully Personal Data should be properly managed Processing of sensitive Personal Data is subject to additional restrictions Personal Data must be protected against unauthorized processing and damage Personal Data collections must be accessible Personal Data must not be transferred to 3

rd parties or other countries without adequate safeguards

These minimum privacy standards are non-negotiable and are set out in more detail in the below Nestlé Privacy Policy.

Nespresso reminds its suppliers of the prohibition of anti-competitive conduct such as any communication on topic such as prices, costs, customer terms, business plans, or other confidential information in your communications with competitors, customers or suppliers, in meetings, telephone conversations, e-mails and faxes.

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Nestlé Nespresso, its subsidiaries, affiliates, divisions, successors and assigns and those acting under its permission and on its authority wishes to integrate certain videos and photos into a database about the Nespresso AAA Sustainable Quality™ Program *, and Nestlé Nespresso may also wish to use such videos and photos for publications, presentations, and promotions of the Nespresso AAA Sustainable Quality™ Program project or any other sustainable project (hereinafter “Nespresso AAA Sustainable Quality™ Program”). * Nespresso AAA Sustainable Quality™ Program is the current name of Nestlé Nespresso’s sustainable program. The purpose is to help to tackle key issues facing cocoa farmers, their families and communities in order to create a better future for coffee farming. The web site is currently available on http://www.nespresso.com / I hereby grant permission to Nespresso to publish and distribute my image and my voice along with my name, within the Nespresso AAA Sustainable Quality™ Program, for free, for an unlimited duration and worldwide, concerning the shooting of :

Photographs; Videos; and/or Sound recording.

TO BE FILLED OUT AND SIGNED BY CONCERNED PERSON AND FILED TOGETHER WITH HIS/HER PICTURE(S)/VIDEO(S) I have read and understood the conditions (above), and I agree with these conditions. This authorization is worldwide, for the maximum duration of the protection afforded under any applicable statute, regulation or convention, or reproductions thereof. This Authorization is granted for the reproducion, representation, adaptation, performance and display of my image and likeness appearing in the photo(s) or video(s) in whole or in part, in composite or distorted character or form or as otherwise changed, in colour or otherwise, with a real or fictitious name on any digital media or other media, for an unlimited number of broadcasts and copies, for a commercial or promotional use, including:

TV in all its forms, whatever their mode of broadcasting (terrestrial, satellite, digital or all means of image processing known or unknown as of today’s date)

Any digital network and system of transmission and/or telecommunication, such as Internet, extranet, websites and social medias Internet community sites (Facebook, Lindekin, Twitter, Youtube, Dailymotion, etc.) and any other site belonging to Nestlé Nespresso.

By means of video including video-cassettes, video-disks, DVD or any other digital or analogue media for sale or hire for private use by the public

By all means of radio and film media By all means of press and printed material: white paper forum, outdoor signs, posters, postcards, press,

leaflets, brochures, mailings, all types of publishing material, etc.

Date (shooting):…………….………………………place………………………………..…………………………………………….. Last name: (in capital letters) First name: Address: Profession: Date: Signature:

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Nestlé Nespresso, its subsidiaries, affiliates, divisions, successors and assigns and those acting under its permission and on its authority (hereinafter “Nespresso”) wishes to integrate certain videos and photos taken by suppliers, employees and other people who have a relationship with its business into a database on Nespresso Internet web site and or Blog about the “Nespresso AAA Sustainable Quality™ Program *(with accompanying text), and Nespresso may also wish to use such videos and photos for publications, presentations, and promotions of AAA Sustainable Quality Program or any other sustainable project (hereinafter “Nespresso AAA Sustainable Quality™ Program”). * Nespresso AAA Sustainable Quality™ Program is the current name of Nespresso sustainable program. The purpose is to help to tackle key issues facing coffee farmers, their families and communities in order to create a better future for coffee farming. The web site is currently available on http://www.nespresso.com I ________________________ undersigned, hereby declare that I own the copyright in the photo(s)/video(s) supplied to Nestlé Nespresso, and that I hereby authorize Nespresso free of charge for the maximum duration of the protection afforded under any applicable statute, regulation or convention on the protection of intellectual property, including any future provision thereof, to use, reproduce, distribute, make available, publish or broadcast by any process, means or media, including the Internet worldwide, in whole or in part the photo(s)/video(s) set out in the appendix for all promotions in connection with the Nespresso AAA Sustainable Quality™ Program.

The rights mentioned above comprise and include the following rights: - To fix all or part of the photo(s)/video(s) (black and white or coloured images) by any process and on any numerical, optical, magnetic, electronic supports, including online reproduction (Internet), made fully available to the general public. - To integrate all or part of the photo(s)/video(s), on various printed material. To download, to display, to perform, to transmit and to stock the photo(s)/video(s), -To adapt, to convert, to arrange, to reduce, the photo(s)/video(s) and to reproduce such results; - To publicly display, communicate, perform, authorise the broadcasting of the photo(s)/video(s) in its original version, dubbed or subtitled, partially or in its entirety, by any process especially by television broadcasting, satellite transmission, cable transmission; online transmission (Internet); - To utilise or have utilised as a promotional or commercial product the photo/video for use in manufacture or production or postcards, posters displays, promotional CD or stickers etc…and more generally all applications in the name of merchandising.

I have not granted any right to any third party that could impair or restrict Nestlé Nespresso ability to carry out the rights granted hereunder. I hereby warrant that I have full power and authority to grant all authorizations and rights conveyed herein and hereby waive any and all rights I may have to inspect and/or approve such photos, negatives, film/videos and/or reproductions. I further agree that this authorization shall be binding on my heirs, successors, executors, administrators and assigns. TO BE FILLED OUT AND SIGNED BY CONCERNED PERSON AND FILED TOGETHER WITH HIS/HER PHOTO(S)/VIDEO(S) I have read and understood the conditions (above), and I agree with these conditions. (Attached are the concerned pictures). – Date of initial usage: ____________________ Last name: .................................................................................(in capital letters) First name: ............................................................................................................. Address: ............................................................................................................. Date: Signature

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1. Introduction 2. Field Investment Process 3. Nespresso’s Action Plan Guidelines 4. Nespresso’s Field Investment Guidelines 5. Organizational Chart 6. Field Investment Template

Nestlé Nespresso seeks to implement and improve the AAA Sustainable Quality™ Program through the funding of field investments in each AAA Cluster. Field investments are an important contribution from Nespresso and are directly linked to the AAA field implementation on each Cluster. Field investments are exclusively related to the implementation of AAA activities. They are not related to the trading, commercialization, logistics or supply chain management, as these costs are covered by Nespresso in the coffee price paid to its suppliers. Suppliers shall present a valid action plan describing the AAA activities that will be carried out over the year to fulfill the Cluster’s objectives. The field investments shall cover the implementation the Cluster’s action plan. These two documents respond to specific needs within the Cluster and may vary on a yearly basis. Once both the Action Plan and the Field Investments are validated by Nespresso, the Cluster Manager and Nespresso will follow-up on the results towards the achievement of the set KPIs for each year (see Reference Document six). Additionally, Nespresso requires each supplier partner to co-invest in the implementation of the AAA Program, notably by providing human and financial resources to ensure the smooth implementation and management of the AAA Program. Therefore, Nespresso expects suppliers to partially fund field investments in the Clusters they manage to achieve joint results within the framework of the AAA Program. This Reference Document specifies the processes, guidelines, templates and additional information to be followed by every Green Coffee Supplier that is participating in the AAA Program to ensure the correct planning and implementation of Nespresso’s field investments.

2.1 Planning The defined field investment amount for each Cluster will be planned and budgeted with Nespresso, specifically with local managers in the AAA Program. The Action Plan will reflect the Cluster’s needs as well as specific goals within Nespresso’s general strategy. The planning of field investments must be made on a yearly basis, using the Nespresso field investment and Action Plan templates. Additionally, the Cluster Manager must deliver the KPI template (see Reference Document six) with a planned set of KPIs for the year, and enclose a plan of action to achieve these set KPIs. The Action Plan together with the field investments will be approved by the responsible local manager.

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The relevant contact information regarding field investments in Nespresso is: Name Title Email Responsibilities within GC traceability

Paulo Barone Green Coffee Operations Manager Paulo.Barone@Nespresso.com - Strategy and accountability for process, results and audits - Approval of field investment plans, execution, and invoices

Guilherme Amado Local Manager for Brazil Guilherme.amado@Nespresso.com - Supports the development of the Field Investment implementation budget. - First analysis and corrections of any discrepancy - Approval of field investment plans, execution, and invoices

Santiago Arango Local Manager for Colombia Santiago.Arango@co.nestle.com

Juan Diego Roman Local Manager for Costa Rica, Guatemala, Nicaragua and Mexico

Juan.Roman@cr.nestle.com

Alexandre Couesnon Local Manager for East Africa Alexandre.Couesnon@Nespresso.com

Manu Jindal Local Manager for India Manu.Jindal@nespresso.com 2.2 Implementation Once the Cluster’s Action Plan and Field Investment have been approved by Nespresso the following process should take place: The payment will follow Nespresso’s administrative process as follows

Once the field investment template, set KPIs, and action plan for the year are validated with Nespresso, the Cluster Manager will split the yearly payments into three installments. To charge these amounts to Nespresso, the Cluster Manager will send a follow-up report of the achievements in the previous term of the action plan.

Based on this information the supplier will send a Quotation to Nespresso, which will in turn assign a Purchase Order Number for the total amount of the field investments.

The Cluster Administrator will charge field investments every four months to Nespresso. Invoices must be sent using the authorized PO Number to: the responsible Local Manager, the Green Coffee Operations and Nespresso Accounting Department in Switzerland.

Nespresso shall pay the agreed field investments within sixty (60) days after receipt of invoice to the bank or post account indicated in the invoice. Nespresso shall not be responsible for any amount which exceeds the Maximum Total Amount specified in the invoice unless previously approved in writing by Nespresso.

All the activities in the planned field investments should be implemented in the Cluster within a period of one calendar year.

2.3 Follow-up

Nespresso requires a progress report every four months on the field implementation developed on the Cluster. This report must be sent and discussed by the Cluster’s Administrator with the responsible Local Manager.

Once the yearly execution has been finalized, the Cluster Administrator must send the Local Manager a full report of the financial and technical execution of the Cluster’s field investments. This report will also be revised in the KPIs annual meeting in Switzerland.

Should any resources be left unused, the Cluster Manager must plan how to use them with Nespresso taking into account the Cluster’s needs and Nespresso’s strategic goals.

3.1 Definition of the Cluster objectives

Due to the specificity and status of each Cluster, the objectives for technical assistance must be fixed and approved by Nespresso on a yearly basis. They will reflect the following main KPI’s, considering the historic and potential of the Cluster:

AAA Management

Farm support

Traceability

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For Clusters that contain several Sub Clusters, the main objectives should be adjusted to the Sub Cluster’s needs or

strategy, in order to implement the technical assistance in the most efficient way.

3.2 Set up of the Action Plan

Once the objectives are established, the Cluster administrator must set up the Action Plan that will be implemented during the year in order to reach these objectives. The Action Plan should show the organization of AAA activities in space and time, ensuring an efficient resource management. These activities must include as a minimum requirement:

At least one visit to every farm (year visit) in order to assess the critical criteria.

Inspections: full TASQ™ assessment according to the sampling formula.

Continuous improvement: based on the previous inspection results and agronomist Cluster’s knowledge, the

action plan must include the specific areas that will be tackled in each Sub Cluster.

Verifications: facilitation of the external audit by SAN partners when assistance is required.

Traceability: updates every four months of the traceability file of the coffee shipped to Nespresso.

3.3 Continuous review of the Action Plan

Within the Action Plan’s implementation, new information, issues or opportunities may appear. Therefore, the Cluster’s Action Plan should be continually revised and fine tuned reach or overcome the Cluster’s objectives. 3.4 Monitoring of the Action Plan implementation

The Action Plan implementation must be monitored in order to follow the different activities status and their impact regarding the completion of the Cluster’s main objectives. The AAA Database allows the monitoring of every individual activity in the Action Plan, and consequently should be constantly updated. 3.5 Evaluation of the Action Plan

At the end of the year, the Action Plan implementation will be reviewed and evaluated through the Cluster’s KPIs. This evaluation will serve as a base for the following year’s Action Plan and field investment amount definition.

Field investments were created to support the farmers in the achievement of specific goals. They should be seen as a co-investment in the coffee region, from Nespresso, and its supplier partners. This way, both Nespresso and its partners ensure an advancement of the Cluster in the long term. Only costs related to the AAA Program’s implementation and development should be considered field investments. No profit margins should be made from the field investment payments. Additionally, no exportation costs linked to the coffee or supply chain management should be charged to the field investments in any AAA Cluster. All the field investments within the AAA Sustainable Quality™ Program should follow these guidelines: 4.1 Field Investment Account Management

Field investment account: a separate account must be created to host the field investment payments from Nespresso.

Account balances: all unused balance should be maintained in the account and reported back to Nespresso in the follow-up and yearly meeting. Both teams will then decide on how to use the balance of the account at the end of each implementation year.

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4.2 Technical Assistance Costs

Personnel Costs Agronomists or Field Technicians: the time of agronomists or field technicians may be included fully in the field

investments proportionally to the time they spend implementing the AAA Program. These costs should at least represent 65% of the total field investments.

Sustainability Coordinator: Sustainability Coordinator or Sustainability Director’s time may be included into the field investments; as long as it is included proportionally to the time the Sustainability Coordinator works directly for the AAA Program. These costs may not exceed 5% of the total field investments.

Quality Keeper: Quality Team’s time may be included into de field investments as long as the people involved are developing specific AAA related programs or projects; their time and costs must be included proportionally to the time spend directly with the AAA Program. These costs may not exceed 5% of the total field investments.

Traceability Coordinator: time may be included into the field investments; as long as it is included proportionally to the time the Traceability Coordinator works directly for the AAA Program. These costs may not exceed 5% of the total field investments.

Any changes above the maximums required in the percentages of personnel costs must be defined jointly with Local Managers and validated with Nespresso HQ. Support and Tool Costs Equipment Costs: cost of the equipments given to AAA personnel to specifically implement the AAA Program on

the field. This equipment includes tablets for the AAA Database implementation, computers, GPS, beamers. Other equipment costs must be validated together with Nespresso.

Transport Costs: cost of the transport needed for the AAA personnel to carry out specifically related AAA Program activities.

Hotel costs: cost of hospitality needed for the AAA personnel to do specifically related AAA Program activities. 4.3 Events and Communications Material

Events: Event costs are supported when the events are 100% related to AAA and for AAA farmers exclusively. These events may be directed to training, premium payments and socializations for AAA farmers.

Communications material: Communications material or staff costs are supported when the communication is 100% related to AAA and for AAA farmers exclusively. This amount must be used to communicate or train the AAA farmers such as: leaflets, panels, books, videos, etc. All events and Communications material must be linked to a specific need of the Cluster and must include a justification. These costs may not exceed 10% of the total field investments. They should follow the communication guidelines in Reference Document nine.

4.4 Other Costs

Administrative costs: Overhead investment to partially cover administrative costs in the Cluster that may be necessary when managing the AAA Program. These costs may not exceed 5% of the total field investments. This already includes financial, taxes, accounting, administrative and contingencies costs.

Logistics costs: Total logistics cost directly related to AAA coffee: Cluster expansion, separation of the coffee, traceability support, and initial infrastructure related to AAA Quality coffee. This cost must be discussed and approved by Nespresso.

4.5 Costs Not Covered by the AAA Field Investments

General management’s time or salaries of employees not directly linked to AAA. Administrative support related to general coffee exporting, such as: supply chain management, coffee price fixing,

commercial costs, exportation costs, trading costs, or any cost that is usually part of non AAA coffees. Costs to start new businesses, such as trips, sample recollection or management, etc. Trips to Europe or to countries of origin, even if they include visits to Nespresso or to AAA Clusters. Field investments related to infrastructure improvement at farm level should be defined with Local Managers and

managed separately as AAA projects.

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Certification and recertification costs for AAA farms, such as audits and farm follow up may not be included in the field investment.

All the Field Investments made in the Cluster must be supported with invoices and expense reports. This information should be kept for at least 3 years, in case it is needed for a financial audit of the Cluster.

An organizational chart of the Cluster must be updated on a yearly basis, explaining thoroughly how the Cluster’s framework has been set and who are the main contacts with Nespresso:

Additionally to the Organizational Chart above, Clusters should fill in the following information:

Name Job Description Description of the work developed within the AAA Program

Please fill in General Manager

Please fill in Cluster Administrator Please fill in

Please fill in Sustainability Coordinator Please fill in

Please fill in Agronomist Please fill in

Please fill in Quality Keeper Please fill in

Please fill in Traceability Coordinator Please fill in

Please fill in Communications Coordinator Please fill in

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This template includes all the information of the AAA personnel and expenses that are directly linked to the implementation of the AAA Program at origin. The field investments should be expressed in USD. The following components make up the field investment template:

Summary

Field name Description How to fill it

Cluster The name of the Cluster Please make one file per Cluster Execution Year The year of the period in question Calendar year Responsible The name of the Cluster Manager Name of responsible manager

General Description

Field name Description How to fill it

Type of Activity Type of activity to be developed/developed Technical Assistance; Events; Communications; Administrative; Logistics; Certification

Description Additional details regarding the type of activity Ex. Training event for quality improvement

Name-Personnel Name of responsible/personnel hired if applicable Name in the AAA Database

Quantity Quantity of events, certified farms, months a person is hired if applicable

Number

Period of Implementation

Field name Description How to fill it

Start Date Date when the activity starts DD/MM/YY

End Date Date when the activity ends DD/MM/YY

Budget

Field name Description How to fill it

NN Budget Approved Nespresso budget for the activity In US$ CA Budget Approved Cluster Administrator’s budget for the activity In US$ Total Budget Total budget for the activity Automatic calculation

Execution

Field name Description How to fill it

NN Execution Executed/spent Nespresso budget for the activity In US$ CA Execution Executed/spent Cluster Administrator’s budget for the activity In US$ Total Execution Total executed quantity for the activity Automatic calculation

Balance

Field name Description How to fill it

NN Balance Balance of Nespresso budget for the activity Automatic calculation CA Balance Balance of Cluster Administrator’s budget for the activity Automatic calculation Total Balance Total balance for the activity Automatic calculation

All additional fields are automatically calculated

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1. Introduction 2. Priority Focus

3. Project Cartography: Building the Global Picture 4. Budget Allocation: Financial Planning and Follow-Up 5. Project Construction and Implementation Processes

This document containing Nespresso’s guidelines for managing projects within the AAA Program is directed at securing information flow, ensuring alignment of the parties interested, facilitating implementation and guarantying follow-up for projects in the Ecolaboration™ Platform and the AAA Program. Nespresso’s projects steering committee will be created to plan and follow up the projects being developed on the field. It will meet at least once every two months to ensure continuity of the projects planning and deployment. The committee will have representatives from the following areas: AAA Operations

AAA Projects

Ecolaboration™ Manager

Additionally, other members may be invited to participate in the steering committee, such as: AAA Local Managers

AAA Farmer communications

Ecolaboration™ Communications

Project Partners

This section gives a detailed description of the main focus categories for the projects developed through the AAA Program and Ecolaboration™. Each category includes a detailed scope of the projects and their content so that Nespresso may develop initiatives that ensure covering strategic objectives for the AAA Program. Five main focus categories for project development within the AAA Program have been defined by Nespresso: AAA Core Strategies

AAA Pillars

Pioneering

Monitoring and Evaluation

Communication

A project may be contained in one or more of the priority focus categories, but it must be included at least in one of the

main project priority focus areas to be considered for its development.

2.1 AAA Core Strategies

Increases in demand and risks and challenges in coffee producing countries pose a threat to the long term stable supply of highest quality coffee. This is why the main and core focus of the AAA Program will be to secure the supply of the best coffee for Nespresso in the long term.

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Additionally to the AAA Program, Nespresso has created the Ecolaboration™ platform, which enables key partners and Nespresso to work together to manage the social and environmental impacts of its business, while improving the lives of coffee farmers and their communities. Through Ecolaboration™™, Nespresso has also committed to sourcing 80% of its coffee from the Nespresso AAA Sustainable Quality™ Coffee Program, including Rainforest Alliance certification by 2013, and 100% in 2020. 2.2 AAA Pillars

The AAA Program is built on three strategic drivers – a commitment to quality as a pre-requisite for inclusion, a focus on improving social, environmental and productivity aspects of the farm. Both philosophically and practically the farmer is always placed at the very centre of the AAA approach. Quality improvement: projects that will ensure or improve the coffee quality through the supply chain. That is to

say: 1) projects that support the improvement of quality performance at farm level to comply with the AAA

Program’s TASQ™ Tool (Tool for the Assessment of Sustainable Quality), 2) projects that help building strong

quality teams at origin, 3) projects investing in the strengthening of the quality results throughout the coffee

supply chain.

Social and Environmental improvement: refers to complying with the TASQ™ underperforming practices, ensuring

coffee sourcing and controlling all potential environmental and social risks for Nespresso. Projects should be

directed at: 1) supporting the improvement of social and environmental performance at farm level to comply with

the AAA Program’s TASQ™ Tool (including Rainforest Alliance Certification) 2) protecting ecosystems, ensuring

mitigation and adaptation to climate change 3) developing strategies for carbon offset.

Productivity improvement: projects directed at generating an improvement in the productivity of farms in the AAA

Program. That is to say, projects linked to increasing yields, farming technologies, productivity practices and

productivity tools that will ensure an increased productivity, additional Real Farmer Income™ and secure AAA

coffee sourcing in the future.

2.3 Pioneering

Out of the box projects generate a space for innovation, exploration, development of new concepts, solution seeking and benchmarking through the different countries in the AAA Program. These projects generate bigger trends for Nespresso, the AAA Program and Ecolaboration™ as a whole as they are pilots that can be scaled up and utilized for deployment in the field. They are the stepping stones for future developments while maintaining the AAA Program at heart. Examples of these projects are as follows: New Technologies

Competence building

Real Farmer Income™ development

Research

Developing new concept

2.4 Monitoring and Evaluation

Projects for monitoring and evaluation within the scope of the AAA Program and Ecolaboration™ will be based in the measurement, follow-up, audit and evaluation of the results gained through AAA and Ecolaboration™ projects at origin. They will be focused at collecting, consolidating and analyzing data to monitor and evaluate the impacts, initiatives, actions, projects, activities and results gained throughout the years. The following monitoring and evaluation projects may be developed: Longitudinal M&E: monitoring and evaluation initiatives directed at obtaining base line and/or evolution analysis

for the AAA Program’s execution at origin. These initiatives are independent and measure global results of the

Program on the field, to ensure transparency by including the verification of an independent party.

M&E integrated to projects: projects that have been or are being developed will be monitored and evaluated by

Nespresso. Nespresso may seek a third party to collect, measure and analyze the project’s results to get to

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conclusions, generate knowledge, evaluate the pertinence of scaling up projects and confirm hypothesis that were

made at the beginning of each project.

2.5 Communication

Communication through the AAA Program and Ecolaboration™ ensures all the members of these platforms are aligned, receive feedback, learn about new initiatives and be aware of the achievements and breakthroughs within the scope of AAA Projects. The following communications projects may be developed through the Nespresso Projects Methodology at origin: Communication for farmers: projects bringing specific Nespresso communications to farmers, directed specifically

at: introducing and communicating about Nespresso (including the AAA Program, Ecolaboration™ and the benefits

of being a AAA farmer), increasing loyalty to the AAA Program and facilitating the implementation of adequate

agricultural practices.

Communication for AAA teams at origin: projects directed at giving effective communication tools for technicians,

cuppers and AAA Program’s ambassadors at origin, so they may translate the Nespresso concepts to AAA farmers.

The project’s steering committee and the Local Managers for the AAA Program abroad will define Nespresso’s Project’s Cartography, which will show the strategy, background and opportunities for each Cluster to develop project initiatives: It reflects Nespresso’s strategy in each country and region, to develop new areas of expertise, reach AAA goals and

expand initiatives that have been successful within the Program.

It uses the AAA Database to find and analyze each Cluster and region to determine: urgent needs, improvement

opportunities and strengths.

It is enriched with the updated background of each Cluster in the AAA Program, which includes: achievements,

results for pilot projects, current project initiatives, etc.

It contains cooperation and funding opportunities for each region. These funding opportunities will be either

connected to Nespresso’s global investment or to specific projects on each Cluster.

The project’s cartography will be revised annually to include new opportunities, additional information, lessons learned from previous projects and generate solutions that support the implementation of the AAA Program. Additionally, bench marking opportunities within countries of origin will also be one of the main focuses of Nespresso’s cartography. Focus strategy: Main Challenges Nespresso is addressing in each Country and Cluster

General information: maps, partners in the Cluster, Cluster’s inception, AAA farms, Persons dedicated to the AAA

Program, certification status, cultural background.

Historic information: farmers per year, TASQ™ performance per year.

Productivity information: coffee hectares, renovation status, fertilization status.

Supply chain information: process of the coffee supply chain, coffee commercialization process.

Opportunities: greatest strengths, geographic opportunities.

Challenges: difficulties, barriers.

Cultural information: particularities in the region, farmer and suppliers descriptions.

Governability: role and responsibilities matrix.

Current projects under deployment: projects, investments and partners.

Projects history: Projects or investments developed in the past, including: results, conclusions, partners,

beneficiaries, etc.

Cooperation: National and international funding opportunities that may be matched or supported by Nespresso,

Scaling up Nespresso’s investments to find global partners willing to invest in different countries

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Project’s budget is allocated by the steering committee every 4 months, based on the results of the phases of Priority Focus and Project Cartography. The budget execution and allocation for running projects or for projects which have duration of more than one semester will be analyzed and revised in the steering committee meeting. The project’s budget will be assigned globally for each category in the priority focus step and then specifically for individual projects taking into account the counterparts for each initiative or project. The budget allocation process takes into account: 1. Project’s priority and feasibility: each category in the focus document will have a weighted priority linked to

factors such as: importance in Nespresso’s yearly strategy, needs, opportunities, continuity, external funding, etc.

2. To be allocated (TBA): the steering committee will define budget buffers that will enable to secure unforeseen

projects or to have access to new leverage opportunities.

3. Budget execution chronogram: the steering committee will create a budget execution chronogram; the

chronogram will contain the planned budget execution, including maximum utilization dates for the budget buffers.

The disbursements made by Nespresso will follow the guidelines described in the following points:

Payments: Nespresso’s disbursements for each project will be made in at least two or more payments, following

the expected execution of the project. The disbursements will only de made according to the signed agreement

between the parties and will follow Nespresso’s payment guidelines.

Payment process: all the payments disbursed by Nespresso will be linked to a follow-up report. The project’s

executor will send a follow-up report and a quotation for the value of the disbursement for the project. Nespresso

will revise this information and assign a Purchase Order (PO) number for the executor to generate a debit note.

Nespresso will pay the final invoice 60 days after the accounting department has received it.

Advances and budget execution: the projects executor may request a 30% advance of Nespresso’s contribution to

the project. For Nespresso’s second disbursement, at least 80% of the previous payment must have been executed.

This must be reflected in the follow-up reports submitted in the project’s execution committee (see project

implementation section for templates). All the project’s expenses must be kept by the project’s executor for a

term of at least three years after the project has been executed for audit purposes.

Project idea validation: all parties involved in the project will define the idea to be developed. This idea will be

linked to Nespresso’s project’s focus and will take into account the project cartography. It will be validated with the

AAA Local Manager and the project’s steering committee, through an Executive Summary of the project. The

executive summary must be translated to an English version. See the Executive Summary template5.

Projects proposal: once all the parties involved on the project decide to develop the idea, the project’s executor

will develop a formal proposal: a detailed Project Brief. The project’s brief may be submitted in the original

language of origin. See Project Brief template.

Analysis and fine-tuning: The projects steering committee will analyze each project brief to allocate the project’s

budget and define the start-up date of the project. The Local Manager will communicate the results of this process

to the projects executor and to other parties directly related to the project.

5 In case the project is being developed with a third party that has developed a project formalization process, including templates, the parties will agree on the final process to be used in the project to fulfill its requirements.

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Agreement and contract: once the project’s brief is validated by all parties, they will sign a formal agreement to

make the project execution official. The project’s agreement must be translated to an English version. See the

Agreement Template.

Project’s Kick-Off: once the project formalization process has been carried out, the official kick-off of the project

commences. This stage will include responsibilities and expectations for the rest of the project are clear, all the

parties are aligned, the final document is approved and signed by all the partners involved. It may also include a

formal launch of the project or press releases (with previous consent of the parties).

Execution committee: An execution committee for the project will be created to support and follow its execution.

This committee will carry out bimonthly working sessions to discuss all the projects advancements compared to the

initial expectations. One representative of each of the parties involved in the project will make part of the

execution committee.

Reporting: this stage will consist of a report containing technical, financial and communications execution status of

the project’s deployment. A tri-monthly follow-up report will be delivered by the project’s executor to all the

parties involved in the project. See follow-up report template.

All the supporting documents and information, such as presentations, written reports, assistance lists, videos,

photos, case studies, executive summaries, surveys, base line studies, should be included as an annex for the

follow-up reports. All the communications material such as videos and photo coverage will also make part of the

support inputs for the follow-up of the project.

Closure: the project’s results, key performance indicators, lessons learned and next steps will be clear to finalize its

execution. All the knowledge and results from the project will be integrated to Nespresso’s Project Cartography as

valuable experience for future projects. A closing Executive Summary for the project must be handed in as a closing

step for the project.

Develop a continuous improvement spirit: once the project is closing, the parties should have clear idea of the

additional responsibilities required to ensure all the results obtained through the project will have continuity.

Official communication: all verified and validated data, photos, videos and testimonies from each project that has

been developed will be available for the parties’ official communications. External communication on the executed

projects will be made based on the technical and financial results of each project. All the information

communicated to the public must be auditable and should be supported with concrete examples of the results on

the field.

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1. Objectives 2. Definitions 3. Process 4. Exclusion Principles

The objective of this document is to guide suppliers on how to exclude farms that are not complying with the Nespresso AAA Sustainable Quality

TM Program guidelines.

Inactive Farm: Status given to a farm due to commercial and/or technical performance. An inactive farm can’t

participate in the program, either selling coffee or receiving technical assistance. Excluded Farm: Farms unable to comply with MAJOR underperforming practices, and which cannot participate in

the AAA Program. Fraud: Dishonest action intended to result in financial or personal gain. Slash and burn: Practice for controlling weeds by leaving the soil completely denuded. Tilling: Clearing the weeds with hoe or shovel. No-tilling is a best practice.

This section of the document describes the general process that must be followed for the exclusion of a AAA farm in the Program:

The Cluster Manager must design an exclusion policy for the Cluster, taking into account the local conditions where the Cluster operates. The principles included in this document must clearly be a part of this policy.

The Cluster Manager must submit the developed policy to the Nespresso Local Manager for approval.

Once the policy is mutually approved it should be part of the Cluster’s Internal Management System. Additionally, the Cluster Manager will be responsible to effectively communicate this policy to farmers in the Cluster, to ensure all AAA farmers are aware and understand the contents of the policy. For farmers entering the AAA Program, this information has been communicated before the filling of their Self-Assessments.

Should a farm not comply with the Exclusion Principles described in this document, during any type of

assessment within the TASQ™ Cycle or during a farm visit, it shall be inactivated on spot. For doing so, the Cluster Manager must firstly inform the farmer the reasons why he/she is losing the ability to participate in the AAA Program; as a second step, the Cluster Manager shall inactivate the farm in the AAA Database and include a detailed description of the non-compliant practices the farm presented, directly in its assessment. As a consequence, an inactive farm can’t sell coffee to Nespresso and though receive premiums. The farm will stop receiving technical assistance, and participating in trainings related to the Program. Investment related to the AAA Program in the inactivated farm should therefore stop.

Additionally to this process, the AAA Database will automatically flag a farm that still has underperforming

practices one and three years after entering the Program, according to the Exclusion Principles in this document to check for compliance. The implementation of this requirement will start in January 2014 counting with the farms that entered into the program in the year 2013.

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Once a farm has been inactive in the AAA Program, it may be reactivated by the Cluster Manager, who must re-fill the farm’s assessment. The farm must comply with all underperforming criteria according to the Exclusion principles in this document, to be considered active again.

The follow up of the status of the farms in each Cluster must be made through the AAA Database reports.

The Cluster’s exclusion policy must contain a set of minimum requirements that each AAA farm must comply with within a period of three years after entering the Program. These principles are described in this section 4.1 Underperforming Practices

Of all the underperforming practices of TASQ™, some of them, due to their high impact to the environment, or because of their human rights unacceptable nature, are eligible to motivate the exclusion of a farm from the AAA Program:

Criterion #

Underperforming Practices

7b Evidence of natural ecosystem alteration (deforestation or burns). This situation refers to productive activities carried out since November 1, 2005.

15a Evidence of forced labor, aggression or mistreatment, as well as the use of workers who are prisoners.

15d Extortion, indebtedness, threats, sexual abuse or harassment, or any other physical or psychological measure are used to force workers to work or remain on the farm, or as a disciplinary action.

16c Direct or indirect hiring of minors under 15 years of age.

39c The cutting of forest, the use of slash and burn techniques, and the use of soil disinfectant products to prepare lands are not allowed.

Some other underperforming practices, once identified, should have a 1-year period to be solved by the farmer, with concrete evidence:

Criterion #

Underperforming Practices

7c Absence of impact analysis and mitigation plans for farms that cause alteration of or destruction to natural ecosystems, for the period November 1, 1999 to November 1, 2005.

10a Presence of hunting, logging and animal and plant species extraction practices. For cultural or ethnic groups these activities are carried out illegally and for commercial uses, placing the viability of one or more species at risk.

11a Hunting, logging and extraction of plant and animal species, which are threatened or endangered.

11b Hunting and collection of species by cultural or ethnic groups involving endangered species.

15b Partial or complete retention of salary, benefits or worker documents in order to force workers to work or remain on the farm, or as a disciplinary action.

15e Evidence of discriminatory practices.

15f Equal conditions for remuneration, training opportunities, advancement and benefits for the same kinds of work are not offered to all personnel.

15g Influence is exerted on the political, religious, social or cultural convictions of the workers.

19a Workers between 15 and 17 years of age work more than 8 hours per day and 42 hours per week. The work schedule interferes with educational opportunities.

19b Workers between 15 and 17 years of age are carrying out hazardous activities (agrochemical handling and application, or tasks that require intense physical effort).

The other critical criteria in Quality and Sustainability TASQ™ need to be resolved in a period of three years from the farm’s entrance to the program.

4.2 Major Faults

Major faults are situations that due to their importance and implications are considered causes to exclude farms from the AAA program:

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Any type of fraud a farm incurs in. For example: a farmer who would sell coffee from a non-AAA farm as coming

from his own AAA farm.

The plantation of a botanical coffee variety that doesn’t meet Nespresso’s cup profile, in farms where there is no

mechanism to separate the coffee during the post-harvest process. For example: growing Costa Rica 95 in

Colombia where farms don’t have infrastructure to separate it in the milling process.

4.1 Commercial performance

Farms that stop selling coffee to Nespresso for a period of three consecutive years should be reviewed. Cluster

Managers will guarantee that Nespresso is among the best buyers in the region, if not the best. A farmer belonging to

the AAA Program, receiving technical assistance and a premium for his/her coffee must have information-rich reasons

not to sell to Nespresso. Cluster Managers should investigate the reasons and correct them if possible/plausible. A AAA

farm voluntarily deciding not to sell coffee to Nespresso will be considered inactive and will be excluded from the

Program. The AAA Database will identify farms that do not register coffee sales to automatically flag them for revision.

Cluster Managers who find farms that due to technical reasons (such as phytosanitary problems or renovation processes) do not sell their coffee to Nespresso for a certain period of time should inform such situations to the local Nespresso Manager so these farms do not get inactivated. Farms may be activated again after a written request from the Cluster Manager explaining the reasons and demonstrating the commitment of the farmer with the Program.

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