PACKAGING POLICY

CO-BUILD THE CIRCULAR ECONOMY OF PACKAGING

BY SOURCING SUSTAINABLE MATERIALS AND CREATING A SECOND-LIFE FOR ALL PLASTICS

October 2016

CONTEXT AND CHALLENGESWE COMMIT TO CREATING A CIRCULAR ECONOMY OF PACKAGING

At Danone, our business is food and beverages and our mission is bringing health through food to as many people as possible.

Packaging has an important role to play by protecting the nutritional benefits and quality of our products and allowing them to be stored, transported and used safely.

However, packaging also presents some challenges. It uses valuable resources in its creation and generates waste when not recycled.

To address this ambition Danone aims to create a second life for all plastics and source our packaging materials from sustainable resources. We want to move to a circular economy model where packaging becomes a resource at end-of-life. Moving away from a linear economy requires a different approach and broader thinking to leverage collaborations, share knowledge and create partnerships with sectors and organisations that may not have otherwise come together.

We also want to ensure that our packaging is made from sustainable materials and enhances the sustainability of our essential resource cycles.

Therefore, this policy is our plan for creating packaging that is fit for a healthier future. To build a future where people, nature, and the business can all thrive we will need to make changes to the way we interact with our resources. Sourcing materials responsibly to protect the ecosystems we rely on is critical, and using those materials more than once means we can do more with less.

THE ROLE OF PACKAGINGThe fundamental role of packaging is to deliver a product to the consumer in perfect condition. For Danone packaging plays a core role in protecting the nutritional benefits and quality of our products, so they can best enhance health and enjoyment.

THE KEY FUNCTIONS OF PACKAGING• Protect food, ensure food safety and show evidence of tampering• Provide consumers with relevant information• Enable convenient transportation, storage and usage• Promote and market the product to consumers• Support healthy portion sizes

THE CHALLENGES OF PACKAGINGPackaging uses natural resources and often ends up back in nature as waste. This is an unsustainable impact for packaging and great efforts worldwide are already underway to close that loop. There is still much work to do and plastics is a main concern.

• According to WEF (World Economic Forum) New Plastics Economy report, 40 percent of the plastic used worldwide is still disposed of in landfill.

• Approximately 10–20 million tons of plastic also ends up in the oceans each year negatively impacting marine biodiversity and creating areas of floating garbage.1

• Most plastic packaging is used only once and then send to landfill. That lack of reuse is costing the global economy $80 - $120 billion annually2.

• In developing and emerging economies demand for packaged products is superior to waste or recycling infrastructure.

• Many of the natural materials used for packaging (fibres for paper and board) are not sustainably sourced worldwide damaging natural resources and ecosystems.

Danone acknowledges these challenges and believes the solution is to remove the concept of ‘waste’ from the packaging formula.

The solution to the resource challenges and also the waste problem is to use renewable resources for packaging, and turn waste into valuable resources.

Sources1 World Watch Institute 20152 World Economic Forum: The New Plastics

Economy Report2

OUR RESPONSIBILITYThe environmental impact of packaging is a fundamental concern.

Danone uses more than one million tons of packaging worldwide each year of which 27% is made from recycled materials and 8% from renewable materials. Our packaging footprint includes 625K tons of plastic and 350K tons of paper and board.

An independent survey by Deloitte estimates that while already approximately 40% of our packaging is recycled at a global scale - more than half of Danone’s post-consumer packaging still does not have a second life – with a higher ratio of non-recycling in developing countries.

Our responsibility is to resolve the challenges presented by packaging by finding smarter solutions to enhancing the benefits of packaging, whilst reducing its cost and environmental impact.

The key to a sustainable packaging future is turning waste into resources by ‘closing the loop’- ensuring that all materials are recaptured and re-used. This can be broken down into two major areas of focus:

RESOURCES USED

In order to reduce the use of valuable resources, our packaging needs to be made from more renewable and recycled resources.

END OF LIFE

In order to allow the creation of systems that ‘close the loop’ our packaging needs to be made from material that are capable of being recycled.

The packaging also should be designed to facilitate easier recovery and recycling through easy separation of different materials.

Closing the loop also requires effective waste collection and processing systems. Around the world, infrastructure to collect and process packaging varies considerably, from countries with highly advanced recycling infrastructures through to those with little ability to ensure even low levels of recycling. Developing economically viable and context-specific solutions is important.

Danone Packaging Life CycleOur packaging is made from a mixture of recycled materials, fossil sources (such as oil) and bio-materials (which are derived from natural plant materials).

After use, a growing percentage of packaging waste is recovered for recycling or creating energy, but over half still goes to landfill.

Resolving this challenge will require us to work within our direct scope of responsibility as well as co-create solutions where “shared responsibility” is required (from upstream raw materials to post-consumer end-of-life)

WASTE HIERARCHY

FOSSIL RESOURCES

ENERGY RECOVERY

LANDFILL

RECYCLed materials RECYCLING OPEN

LOOPClosed LOOP

Bio-SOURCED

Virgin fibre & Bio plastics

DIRECT RESPONSIBLILTYSHARED RESPONSIBLILTY SHARED RESPONSIBLILTYRESOURCES DESIGN & MANUFACTURING END OF LIFE

52%

6%

8%

65%

27% 42%

625kt 350kt

Source: Danone Packaging Reporting 2015

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OUR GUIDING PRINCIPLESThese Packaging Policy Principles are based upon our vision to bring healthier diet to more people whilst using natural resources sustainably. We believe packaging has a core role to play in reaching that vision. (See Danone Climate Policy).

1. WORK FROM UPSTREAM TO DOWNSTREAM ALL ALONG THE PACKAGING LIFE CYCLE

Packaging has an essential role, from protecting upstream resources to responsible end-of-life practices, and connecting products and brands with consumers. Danone’s vision of packaging is built on a circular approach from the use of resources through to consumer behaviors. Through Eco-Design principles, we will seek to minimize the challenges and maximize the benefits from every part of packaging – from design to sourcing, retail and disposal.

3. BUILD COALITIONS TO SCALE-UP LOCALLY RELEVANT WASTE MANAGEMENT SOLUTIONS

Danone has learnt much about the critical importance of building coalitions of partners across the chain to be able to turn packaging waste back into a resource. In countries that lack formal management systems but are experiencing rapid consumption growth, the challenge is to develop locally relevant, socially inclusive waste collection and recycling systems to turn packaging waste into a resource.

2. COMBINING CONTINUOUS IMPROVEMENT AND BREAKTHROUGH INNOVATION

The fundamentals of food safety, quality and regulatory compliance underpin all our packaging solutions. We take into account consumer expectations from the act of shopping to the act of consuming the product and then disposing of waste. Packaging plays a significant role at every stage. We believe optimal performance is achieved when our products and packaging are designed together from conception, and take into account the full life cycle of the packaged product.

CASE STUDY - BUILDING COALITIONS TO SUPPORT WASTE RECYCLING IN BRAZIL

Danone created the Ecosystem Fund in 2009 which, among other projects acting all along Danone value chain, created socially inclusive waste collection and recycling initiatives in 5 main countries. In Brazil the fund has developed the Novo Ciclo project with Nenuca Institute for Sustainable Development and its local business units to improve working conditions for waste pickers and waste management and resource recovery by companies.

In addition to creating waste management centres and setting up sale and resale cooperatives, Novo Ciclo trains waste pickers in management. This enables waste pickers to manage their own business independently and will help professionalize the waste picking industry. Novo Ciclo project in Brazil

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OUR COMMITMENTS AND GOALSCO-CREATE THE

CIRCULAR ECONOMY OF PACKAGING

Danone’s strategy is to promote the circular economy of packaging by supporting the development of processes and systems that ‘close the loop’. We believe in a circular future for packaging.

This strategy is based on 5 commitments that span the cycle of our packaging* from the choice of raw materials upstream to consumer behaviors downstream.

1. USE SUSTAINABLE RESOURCES

Because the transition to sustainability requires systemic change, we believe solutions will come through collaborative platforms to accelerate and scale. Danone aims to be a catalyst between brand owners, suppliers and technologies to accelerate the emergence of ‘new generation’ plastics materials.

We believe it is possible to substitute traditional fossil materials with packaging materials sourced from bio-based resources. Food security being of critical importance, Danone continues its cooperation initiatives with experts and partners to contribute to the emergence of new generations of materials that are not in direct competition with foodstuffs and allow for a more efficient use of land and resources.

CASE STUDY: NEW VOLVIC BOTTLE

BIOPLASTICS FEEDSTOCK ALLIANCE (BFA)

The first of its kind in France, Volvic’s new 1.5L bottle is made from up to 20% plant material.

Danone co-created the Bioplastic Feedstock Alliance with the World Wildlife Fund to encourage responsible development of plastics made from bio-sourced materials.www.biofeedstockalliance.com

OUR GOALS

Paper & board: eliminate deforestation within our supply chain by 2020. Danone is committed to a strategy of eliminating the deforestation risks of its virgin paper & board packaging supply chain with 3 concrete objectives: • Actively reduce the weight of paper and board

packaging for each product.• Prefer the use of recycled fibers. • Where this is not possible, prefer FSC certified

virgin fibers.

Plastic: seek to increasingly use bio-materials, lead consortium to foster new generations of packaging materials and co-create consensus on bio-feedstock choices. See Danone footprint policy.

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Use sustainable resources

2 Optimize weight and move towards 100% circular by design

Zero plastics to landfill for our industrial waste

Innovate to ease life of consumers and engage them to sort & recycle

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4

5

FOSSIL RESOURCES

ECO DESIGN

CLOSED LOOP

RECYCLING

COLLECTIONWASTE

CONSUMER

LANDFILL

OPENLOOP

RENEWABLE MATERIALS

* Quality and food safety remaining an absolute priority in everything we do, our packaging commitments often do not apply to our Advanced Medical Nutrition products packaging.

Create a second life for all plastics

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2. OPTIMIZE WEIGHT AND MOVE TOWARDS 100% ‘CIRCULAR BY DESIGN’

We develop full packaging systems to provide an ideal product experience for the consumer. Core to this approach is the optimal use of materials for industrial scale operations whilst significantly lowering carbon emissions. This approach will ensure all our newly designed or adopted packaging can maximise circularity by design.

We have developed an Eco-Design Tool and process for packaging. This tool guides packaging designers on developing packaging with the lowest level of impact on the environment, and also easing life of consumers whilst reducing food waste.

Danone reduced the weight of its Actimel bottles by 50% over 5 years, resulting in a C02 reduction of 130K tons.

CASE STUDY: ACTIMEL

4. INNOVATE TO EASE LIFE OF CONSUMERS AND ENGAGE THEM TO RECYCLE

3. ZERO PLASTICS TO LANDFILL FOR OUR INDUSTRIAL WASTE

Our packaging must both delight consumers every day, encourage them to recycle and inform them on how to recycle it. Danone is committed to develop new products and packaging with the minimum of packaging quantity while ensuring the lowest rate of food waste and the best consumer satisfaction.

By using development tools including consumer research, modeling and simulation, market analysis and physical performance test methods we can ensure we are in the “green zone” – the point at which products are neither ‘underpacked’ (not fit for purpose) or ‘overpacked’ (creating excess waste). We will use the ability of our meaningful brands such as Villavicencio to connect with consumers to actively engage them in recycling.

OUR GOALS:

• We will improve ease of life from packaging at every step; from purchase through to recycling, and optimize the level of convenience that packaging offers consumers.

• We will use the outreach of our brands and our marketing science to inspire our consumers to

sort and recycle their waste. We will continue informing consumers about the potential value and uses of empty packaging, and how it can be turned into something useful again through re-use or recycling. We will measure the success of these campaigns and utilize the latest academic research on behavior change.

OUR GOALS:

• We will monitor our packaging weight ratio (weight of packaging materials / weight of products sold per consumer use) across our product ranges to seek ways to optimize packaging performance at lower weights to help drive design to value.

• We will seek to develop the concept of Recyclable by design with external experts, especially by taking in to account the specific context of local post consumer end of life capabilities.

• We will use our Eco Design Tool on a systematic way for all our packaging (innovations and renovations).

In 2015, Villavicencio — one of Danone’s natural mineral water brands in Argentina — launched Rebotella, the first 100% recyclable bottle made with 50% recycled plastic. The launch was backed with a television campaign that starred popular Argentinian actor Ricardo Mario Darín promoting the importance of waste collection and recycling.

CASE STUDY: VILLAVICENCIO

During our product manufacturing processes we might generate waste packaging materials, including scrap surplus material, by-products and broken, contaminated or otherwise ruined material.

In 2015 we generated 133,000 tons of packaging waste and so far 83% of the packaging waste from our factories is recycled or incinerated for energy recovery.

As we aim to build better solutions through partnerships and alliances, our factories have already started the work with our partners to maximise their plastics recovery rate. For example, the French dairy factory Le Molay is working with Veolia to optimise waste management system and to implement a solution for every type of packaging waste.

OUR GOALS:

• Zero plastics to landfill for our industrial waste by 2020 in countries with developed collection systems and by 2025 in all our factories.

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5. CO-CREATE A SECOND LIFE FOR ALL PLASTICSPackaging waste can be re-connected with the efficient use of resources, creating positive environmental, economic and social value. We are aiming at creating a second-life for all plastics we use as we believe they should be used as a resource at least twice with a clear priority to re-use and recycling. Around the world, our packaging is recycled at widely varying rates driven by differing waste recycling infrastructures and cultural and social differences which fall into two main groups:

Creating a system that enables all plastics to have a second life will require a ‘shared responsibility’ approach, with consumers, local authorities, governments, waste professionals, NGO’s and brand owners all playing their part in the recycling chain.

GROUP 1: INFORMAL RECYCLING SYSTEMS

No formal collection infrastructure with recycling occurring through informal collection systems involving individuals picking and selling waste into recycling operations.

Danone’s opportunity is to work in partnership with local communities to improve standards in informal waste collection, with government to strengthen recycling infrastructure and encourage behavior change amongst consumers.

GROUP 2: ORGANIZED RECYCLING SYSTEMS

A formal and regulated approach exists with regards to packaging recycling infrastructure with professional systems for recovering and re-using waste.

Danone’s opportunity is to promote “shared efforts” to continue improving waste collection schemes efficiency and the power of our brands and marketing to engage consumers in raising recycling rates even further than current levels.

Country Average Recycling Rate

Tota

l Pac

kagi

ng V

olum

e

Belgiuil Japan

South

SpainTurkey

50% 60% 70% 80%0% 10% 20% 30% 40%

Mexico

DANONE Packaging per country

OUR GOALS:

• We will seek to build demand for recycled materials by maximizing closed loops. By 2020, Danone will use at least 25% of recycled PET in its water and beverages plastic bottles in countries where local standards and regulations allow for it. Danone will also seek to increase further to reach 33% by 2025 in the countries where allowed.

• By end of 2017, at least 10 priority countries will have developed and published their plans and roadmaps to co-create a second life for plastics.

Group 1: Informal recycling systems

Group 2: Organized recycling systems

Source: Deloitte Study 2014

Argentina

IndonesiaFrance

China

SHARED RESPONSIBILITY

CONSUMERS

LOCAL AUTHORITIES

GOVERNMENTS

WASTE PROFESSIONALS

NGO’S

BRAND OWNERS

Dan

one

aver

age

recy

clin

g ra

te

Germany

BrazPolandMorocco

Russia

Africa Canada

UK

m

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These goals and targets are ongoing and form the basis of our Packaging Policy. Many of them will take years until we can claim to have met them. We will publically report on our achievements, successes and difficulties in our journey in our Integrated Report. Danone has a dedicated ‘plastic cycle’ organisation to manage the fulfillment of this policy in plastics. A dedicated team, led by a company Vice-President, will manage purchasing, research & development and end-of-life issues related to plastic and packaging.

Please visit www.danone.com/sustainability for further information and to access our Integrated Report in which we track our performance against our policies.

GOVERNANCE

Biodegradable: A biodegradable material is one that is capable of being slowly decomposed by bacteria or other living organisms and thereby avoiding pollution.

Bio-sourced materials: A bio-sourced material is a material intentionally made from substances derived from living (or once-living) organisms. Bio-sourced plastics are typically made from plant-based materials such as agricultural crops.

Circular by design: Every packaging developed to be easily reusable, recyclable, compostable or biodegradable by using Eco-design guidelines adapted to the local collection, sorting, recycling or composting infrastructure.

Circular economy: An economy in which the materials are designed to be recycled (they circulate without entering the biosphere) or are built with bio-sourced materials which can re-enter the biosphere safely. This circular economy protects the environment, reduces GHG but also supports economic growth and creates jobs.

Closed loop: The packaging is collected and recycled to manufacture the same packaging.

Ecodesign: An approach to designing products with special consideration for the environmental impacts of the product during its whole lifecycle

Inclusive recycling: There are millions of people working in waste management globally, the majority of them in the informal sector. They provide a public service. Despite this valuable contribution to their community and the environment, millions of these waste pickers are still marginalized and exploited even as they create value. Inclusive recycling is about being more transparent and efficient by recognizing the waste pickers as an essential link in the chain of value creation. Only then will the recycler’s labor and human rights be respected, and steps taken to provide fair pay for their services.

Open loop: The product is collected and is recycled into other products.

Recyclable: Packaging and materials that have been designed to be compatible with existing collecting and recycling process for a second usage.

Renewable resource: A resource that can be regrown or replenished naturally over time, such as paperboard-based packaging and bio-based polyethylene.

GLOSSARY

ABOUT DANONE

Dedicated to bringing health through food to as many people as possible, Danone is a leading global food company built on four business lines: Fresh Dairy Products, Early Life Nutrition, Waters and Medical Nutrition. Through its mission and dual commitment to business success and social progress, the company aims to build a healthier future, thanks to better health, better lives and a better world, for all its stakeholders—its 100,000 employees, consumers, customers, suppliers, shareholders and all the communities with which it engages.

Present in over 130 markets, Danone generated sales of €22.4 billion in 2015, with more than half in emerging countries. Danone’s brand portfolio includes both international brands (Activia, Actimel, Danette, Danonino, Danio, evian, Volvic, Nutrilon/Aptamil, Nutricia) and local brands (Oikos, Prostokvashino, Aqua, Bonafont, Mizone, Blédina, Cow & Gate).

Listed on Euronext Paris and on the OTCQX market via an ADR (American Depositary Receipt) program, Danone is a component stock of leading social responsibility indexes including the Dow Jones Sustainability Indexes, Vigeo, the Ethibel Sustainability Index and the FTSE4Good Index.

To find out more about Danone Packaging Policy: www.danone.com/publications

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