14th Annual Stakeholders Summit May 6, 2015

Kansas City, Missouri

SUSTAINABILITY Our Shared Journey of

Continuous Improvement

FOUNDED

1 9 5 0 s B R A Z I L

IPO

2 0 0 7 B R A Z I L

200,000 T E A M M E M B E R S

W O R L D W I D E

307 PRODUCTION

CONTINENTS

UNITS ON 5

2014 Revenues: $50 Billion+

J B S S . A . At a G l a n c e

1 st

L A R G E S T

GLOBAL PROD UC ER

B E E F & L A M B

L A R G E S T

GLOBAL CATTLE FEEDER

1 st

L A R G E S T

GLOBAL LEATHER PROCESSOR

1 st

L A R G E S T

GLOBAL CHICKEN PRODUCER

1 st

L A R G E S T

P O R K P R O D U C E R

3 rd

G l o b a l M a r ke t L e a d e r

Rank Global Food Companies 2013 2012 2011

1 Nestle SA 70,044 66,923 66,700

2 JBS SA 43,216 38,902 37,024

3 PepsiCo 34,534 33,400 31,921

4 Tyson Foods Inc 34,374 33,055 32,266

5 Unilever NV 30,278 31,079 31,733

6 Mondelez International 29,469 29,172 29,753

7 Danone SA 28,290 26,834 26,898

8 General Mills Inc 17,909 17,774 16,657

9 ConAgra Foods Inc 17,702 15,426 13,367

10 Kraft Foods Group Inc 15,537 15,553 15,649

Top Global Food Companies By Sales ($ Million)

Source: Bloomberg

R e c o g n i z e d G L O B A L L e a d e r

“SUSTAINABILITY”

The Consumer’s View

The Consumer’s View

8

I F We Don’ t Def ine I t…

9

I F We Don’ t Def ine I t…

10

I F We Don’ t Def ine I t…

11

Perspect ive Mat ters

12

Disconnect f rom Modern

Agr icu l tu re

There are over 313,000,000 people living in the

United States. Of that population, less than 1%

claim farming as an occupation (and about

2% actually live on farms).

“We’re inside of

corporate

boardrooms across the

country HELPING

major food retailers

implement policies to

eliminate gestation

crates from their supply

chains.”

Paul Shapiro

Vice President

Farm Animal Protection

HSUS

Act iv i s t P ressure

“We’re inside of

corporate

boardrooms across the

country HELPING

major food retailers

implement policies to

eliminate gestation

crates from their supply

chains.”

Paul Shapiro

Vice President

Farm Animal Protection

HSUS

Act iv i s t P ressure

15

I n c r e a s e d C o n s u m e r A c c e s s

t o “ I n f o r m a t i o n ? ”

16

I want local and natural because it’s better for the environment and my health (But there is no health benefit difference and those systems cannot be scaled

to meet the environmental and food security challenges of future generations)

I don’t want food from conventional, BIG AG because it’s bad for the environment and my health (But modern agriculture represents the most efficient, safest, affordable, seasonally-independent and globally dispersed food supply in the history of mankind)

Consumer Confus ion

“Both humanity’s capacity to innovate and the incentives to innovate are greater today than at any other time in history.”

- Ben Bernanke,

Former Chairman of the U.S. Federal Reserve

Innovat ion i s the Key –

But Can We Use I t?

18

“GOOD FOOD” Vs .

What Exact ly?

A Poor Place From Which To Begin A Conversation

19 Small; But MIGHTY influence

48% under 35 years old

62% Female

46% Parents Income WELL above average

C o n c e r n s o f t h e F u l l

S t o m a c h

20

Perspect ive Mat ters

C o m m e r c i a l R e s p o n s e =

“ S u s t a i n a b l e S o u r c i n g ”

• McDonald’s sourcing “verified sustainable beef” beginning in 2016

21

• WALMART announced “standard of excellence program” that will touch at least 50% of the cattle industry by the close of 2016.

• Beef pilot program that includes environmental criteria and 15% of their beef supply will be sourced under this criteria by 2023.

22

C o m m e r c i a l R e s p o n s e =

“ S u s t a i n a b l e S o u r c i n g ”

23

U . S . G o v e r n m e n t R e s p o n s e

Production intensity and emission intensity are inversely

related though some promote less intense systems as more

“sustainable.”

There is no agreed upon definition for sustainability nor

a common methodology by which to measure

sustainable outcomes.

Excludes lean meat; Allows for

moderate alcohol consumption

2050 GLOBAL TRENDS

• Global Income

• Global Population

• Global Consumption

3 Billion in Middle Class Growth

• Currently consume 1.5x Planet’s Available Resources

• By 2050, Will Need 70% More Food

• Consuming 3x the Planet’s Available Resources

25

Cl imat ic Changes &

Impacts on Agr icu l tu re

26

Water , Water and LESS

Water

27

HOW DO WE MEET THE

CHALLENGE?

U.S . Beef Sus ta inabi l i ty :

The Real S to ry

U.S . Beef Sus ta inabi l i ty :

The Real S to ry

30

From 1959 to 2009, U.S. Pork Producers Significantly Reduced Their Environmental Impact

U.S . Pork Sus ta inabi l i ty : 5 0 Y e a r s o f I m p r o v e m e n t

31

I t ’ s A l l A b o u t t h e E n v i r o n m e n t ,

R i g h t ?

Many people assume

that the term sustainability only relates

to “preserving the

environment.” This is not true.

Sustainability is a much

broader discipline that involves improving short-

and long-term

profitability by managing

economic, societal, and environmental factors to

meet the challenges of

tomorrow.

32

Responsibly meeting the needs of the present while improving the ability of future generations to responsibly meet their own needs…

SUSTAINABIL I TY

S imply De f ined

L i m i t T h e S c o p e ; L i m i t

O p p o r t u n i t y

33

SOCIAL PILLAR: Addressing animal welfare, worker safety, human rights, community involvement, property rights, beef safety, beef quality, consumer trust and food waste.

ECONOMIC PILLAR: Addressing profitability, shareholder return, capital investment, food affordability, license to operate, efficiency and innovation.

ENVIRONMENTAL PILLAR: Addressing water, air quality, deforestation, conservation, land management, waste, energy, greenhouse gas emissions and biodiversity.

Limited Focus If your sole focus is on one pillar or only on environmental metrics on the farm, you negate the shared responsibility of and the shared opportunities for the entire global beef value chain.

This holistic approach to sustainability forces stakeholders to

view the beef value chain comprehensively rather than

focusing on their “issue du jour.”

34 34 Source: Schlange & Co. Copyright BASF

Re

leva

nc

e o

f is

su

es

fro

m

ex

tern

al s

tak

eh

old

ers

’ pe

rsp

ec

tive

1 2 3 2,5 1,5

2

1

3

2,5

1,5 medium

high

A

C

B

D

E

A

C

B

D

A

C B D

E F

A

C

B D

G

E

Relevance of issues from the company’s perspective

Economic issues

A Business ethics & business integrity B Community investment C Company transparency D Compliance with law E Local sourcing

Product responsibility issues A Consumer health & safety B Consumer information & education C Technology in agriculture

D Value chain transparency (traceability)

Social issues

A Animal health & welfare B Human rights C Impact on community D Labor rights E Workers’ health & safety

Environmental issues

A Biodiversity B Emissions to air C Emissions to water D Energy use E Land management F Waste G Water use

M A T E R I A L I T Y : R a n k i n g t h e

H O T S P O T S

Global Reporting Initiative (GRI) Categories

These are the traditional categories most people associate with

sustainability

Global Reporting Initiative (GRI) Categories

The social pillar is critically important.

Within this pillar arguably lies the

greatest opportunity to demonstrate and align

our values with those of the consumer.

37

• All systems can be sustainable • Continuous Improvement • Consumer choice • Convey sustainable message to consumer • Consumer wants license to feel

good about products already enjoy

• Successfully intensified production over time BUT

• Aging producer base • Supply constraints • Producing out-of-spec • Regulatory pressure • $$ barriers to entry • Technology an option?

Sustainable Challenge – More with Less?

Sustainable Protein? • 7.18 B Global Consumers. 9+ B by 2050; • 2B in the middle class; 4.9B by 2030; • Consumption of animal protein to

increase; • 99% want choice; • Food evangelists: 22% • 1% vocal radical –reduce choice.

• Want to make supply chain claims; • Make sustainable supply chain demands

on immediate supplier; • React to 1% pressure.

• Packer/Processor sits between retailer & producer;

• Animal Welfare responsibility; • Food safety responsibility; • Labor, Worker Safety responsibility; • Technology user; • Low margin operator.

• Make demands on retailers and farm operations – land management

• Cannot influence 7.18 B consumers but influence more than 1%

• Cannot influence the millions of family farmers and growers;

• Can leverage vulnerabilities of large entities in middle;

• Make unrealistic demands that prevent us from meeting the global

challenge

Global Consumers

Retailers

Packers/Processors/Integrators

NGOs/Activists

Producers/Growers/Feeders • Focus of many supply chain demands; • Environmental responsibility; • Technology user; • Used by corporations as best message

vehicle for consumers.

C u r r e n t P l a y i n g F i e l d – R i s k o r

O p p o r t u n i t y

38

GRSB Has Chosen A

Di f fe ren t Approach

39

M a n y K n i g h t s ; N o H e a d

40

Original NGO paradigm: Convince large European and U.S. multinationals to make market-based decisions to adopt eco-labels, standards or certifications as a means to address environmental concerns like climate change and sustainability; and socioeconomic issues such as trading conditions for farmers and slave labor.

R o u n d t a b l e s a s a M e a n s f o r M a r ke t Tra n s f o r m a t i o n

41

A H i s t o r y o f R o u n d t a b l e s

1988 (Europe) – Coffee, Cocoa, Sugar, Tea, Bananas, etc.

2006 (Netherlands) – Global Standard, certification audit, 5 Principles, 90+ indicators

2004 (Europe) – Global Standard, Certification audit, 8 Principles, 130+ indicators

2008 (Europe) – Global Standard, Certification audit, 6 Principles, 55+ indicators

2005 (Europe) – Standard System, Self-assessment, audits, 6 Principles, 45 criteria

2013 (Switzerland) – Global Definition, No Global Standard or Certification, 5 Principles, 45 criteria, 0 Global Indicators???

42

Ro u n d t a b l e s = M a r ke t i n g

Original Roundtable paradigm: Corporations, in their zeal to proclaim their product offerings as “sustainable,” would leverage Roundtable certifications, seals, standards, etc. to market their products as environmentally friendly and socially responsible.

Have we lost focus on our ultimate goal in the process?

43

W h at A r e We C r e at i n g ?

Competitive Niche?

Or Precompetitive Norm?

44

S u s t a i n a b l e B a s e l i n e P r e c o m p e t i t i v e V s . D i f f e r e n t i a t i o n

Commercial Differentiation Opportunities for Innovation &

Product Differentiation beyond GRSB baseline

Precompetitive Sustainable Beef Demonstrated Commitment & Performance

based on GRSB Principles & Criteria

45

A n E n t i r e S U S TA I N A B L E M E AT C A S E R a t h e r t h a n S u s t a i n a b l e & N o t S u s t a i n a b l e

T r a d e - O f f s

46

A r e We M o v i n g t h e C u r ve ?

Innovators will readily adopt sustainability

measures based on market opportunity

But how do we get average to low-performing producers to improve

performance? With 100 KPIs required for certification in a “no premium”

context?

47

A r e We M e e t i n g t h e Key C h a l l e n g e s ?

“Warren Buffett found it 'extraordinary' that academics studied such things. They studied what was measurable, rather than what was meaningful. 'As a friend said to him, ‘To a man with a hammer, everything looks like a nail.’ ”

Roger Lowenstein, Buffett: The Making of an American Capitalist

“If a measurement matters at all, it is because it must have some conceivable effect on decisions and behavior. If we can’t identify a decision that could be affected by a proposed measurement and how it could change those decisions, then the measurement simply has no value.”

Douglas W. Hubbard

“We tend to OVERVALUE the things we can measure and UNDERVALUE the things we cannot.”

John Hayes

48

1 o u t o f 3 C a l o r i e s WA S T E D

1,160 Pounds of Annual Average Food Loss for a U.S. Family of Four

49

N o O n e Wa n t s t o “ C e r t i f y Po ve r t y ”

By some estimates, less than HALF of certified sustainable agricultural products are SOLD as certified

sustainable products.

50

S i m p l i c i t y & Fo c u s

Focus on Performance not Prescriptive Practices

Promote Innovation over Compliance

Communicate, Communicate & Communicate

Prioritize the Challenges & Create & Measure Impact

51

Globa l Roundtab le fo r

Sus ta inab le Bee f

52

The Global Roundtable for Sustainable

Beef (GRSB) is a global, multi-stakeholder

initiative with a mission to

advance continuous

improvement in the

sustainability of the global

beef value chain through

leadership, science and

multi-stakeholder

engagement and collaboration.

Who We Are

53

“A top-down, corporate fascist regime controlling every entity in the beef supply chain, including and specifically targeting cow-calf producers….”

Who We Are NOT

54

VIS ION

We envision a world in which all aspects of the beef value chain are

environmentally sound, socially responsible and economically viable.

CIV

IL S

OC

IETY

C

OM

MER

CE

& P

RO

CES

SIN

G

RET

AIL

PR

OD

UC

ER

OB

SER

VIN

G

RO

UN

DTA

BLE

S

Dr. Judith Capper Dr. Holly Gibbs Dr. Kate Varela

Jack Hanson, Willow Creek Ranch Tom Hogan, Snappy Jack Cattle Dr. Sandra Jepcott

Dr. Laurie Marker, Elandsvreugde Mt. Brisbane Pastoral Company

PR

OD

UC

ER

M U LT I - S TA K E H O L D E R M E M B E R S H I P

56

W h at A r e We Tr y i n g t o A c c o m p l i s h ?

A balanced, science-based approach to beef sustainability that

empowers rather than punishes and stimulates innovation and adoption

of best practices.

Global Roundtable established

2011 2012

Legal Registration

GRSB

Mgmt Structure & TWG

operational

2010 2013 2014

Principles & Criteria

Finalized

Articles & Bylaws Revised

for new governance

structure

2015

GRSB TIMELINE

PLANET, PEOPLE, ANIMALS & PROGRESS

Release of FIRST GLOBAL

DEFINITION for Sustainable Beef

58

2 0 1 4 G l o b a l C o n f e r e n c e o n S u s t a i n a b l e B e e f

The 2014 Global Conference on Sustainable Beef was held November 2-

5, 2014 in São Paulo, Brazil.

Nearly 300 participants

from 21 different Nations attended.

96%+ approval rate from

membership.

Adoption of Global Definition

59

Globa l De f in i t ion in

Summary

We define sustainable beef as a socially responsible, environmentally sound and economically viable product

that prioritizes Planet, People, Animals and Progress.

60

F ive P r inc ip les fo r

Sus ta inab le Bee f

GRSB has worked hard to

combat the notion that

technology CANNOT be a

part of the solution to the

sustainability challenge.

61

L o c a l S o l u t i o n s ;

G l o b a l I m p a c t

Global

Definition

Regional

Application

62

R e c o g n i z i n g & C e l e b r a t i n g P r o g r e s s

PLANET, PEOPLE, ANIMALS & PROGRESS

Promoting Consistency & Transparency in GRSB’s

Recognition of Successful Regional Applications of the Global

Definition

Regional Roundtables remain empowered to achieve sustainable

outcomes leveraging GRSB Principles & Criteria based on their

system’s specific challenges

63

USRSB Membership (65)

Blythe Family Farms, LLC

Great Plains Cattle Feeders

Tejas Feeders Ltd.

64

Responsibly meeting the needs of the present while improving the ability of future generations to responsibly meet their own needs…

S t a y i n g F o c u s e d o n t h e S u s t a i n a b l e C h a l l e n g e

65

These wonderful people could be our customers, but they are not our sole customers

S u s t a i n a b l e P r o d u c t & S u s t a i n a b l e S y s t e m s f o r A l l

These wonderful people also need to eat. Both groups deserve sustainable choices more than sustainable marketing.

Will the decisions we make as sustainable beef roundtables make sustainable beef accessible to all or promote the

creation of another unscalable niche?

66

67

www.grsbeef.org

www.jbssa.com