Sustainability Scorecard Training

Module 1

Sustainability Overview

Audience: P&G SRO & Supplier

P&G Defines Sustainability Broadly

Sustainability
better quality of life for everyone, now and for generations to come

Social Responsibility

Environmental Responsibility

At P&G, we define sustainability broadly. It is about ensuring a better quality of life for everyone now and for generations to come. For us that broad definition encompasses both environmental and social responsibility. Its not just about green products tied to a current consumer movement, but a systemic approach covering our total supply chain, from raw materials to manufacturing processes to the Consumer. We believe this more substantive approach is best. Sustainability is at the heart of P&Gs purpose and is explicit in our commitment to touch and improve lives now and for generations to come. And, importantly, sustainability efforts must be tied to the bottom line.

Strong Sustainability Heritage

Sustainability is not new to P&G. We have a rich history and track record of leadership.

Published our first environmental safety publication (1956)

Developed first test to evaluate chemical biodegradability (1973)

Co-founded the Society of Environmental Toxicology and Chemistry (1981)

Pioneered the use of Life Cycle Assessment (1990s)

One of the first corporate sustainability departments and sustainability report (1999)

Introduced global corporate cause: Live, Learn and Thrive (2005)

Renewed the Corporate Sustainability Program (2007)

Built into the Rhythm of the Business

Sustainability is reflected in our purpose-inspired growth strategy: We can serve more consumers more completely with a broader mix of sustainability innovations on our leading brandsinnovations that require no trade-off between sustainability benefits and performance, value and quality. As we expand geographically to serve more consumers in more parts of the world, we have the responsibility to manage the environmental impact of our products and operations and the opportunity to build relationships, systems and capabilities for future growth as we serve those whose needs are greatest and who can least afford our products today. Sustainability is integrated into the rhythm of our business. This provides benefits to the Company in two ways: 1. Bottom line cost reductions as a result of literally thousands of innovative efforts across the supply chain. 2. Delivering products to consumers that address their desire to be more environmentally sustainable WITHOUT tradeoffs in performance.

Our Purpose, Values and Principles

P&G has been working on sustainability-related initiatives for over fifty years. In 2007, we added a focus on sustainability to the Companys statement of purpose. This is not a move we take lightly. Our Purpose, Values and Principles are the guidepost for everything we do at P&Ghow we conduct business, how we make decisions, how we partner externally, and how we engage our employees. Sustainability is a responsibility, especially for a Company with the scale and consumer reach of P&G. But sustainability is also a business opportunity which makes it important to shareholders. Building a sustainability mindset into the rhythm of our business and with our employees helps enable the sustainability of our business results.

P&G Purpose We provide branded products and services of superior quality and value that improve the lives of the worlds consumers, now and for generations to come. P&G Principles We incorporate sustainability into our products, packaging and operations.

Leadership Commitment
Sustainability is at the heart of P&Gs business model. We design our strategies and plans to ensure that the work we do makes a meaningful difference by bringing the power and scale of our brands to solve real problems facing the world.

Bob McDonald
Chief Executive Officer

2012 Strategies
In 2007, P&G established five strategies for sustainability and set goals to be achieved by 2012.

Strategy 1: Products
Delight the consumer with sustainable innovations that improve the environmental profile of our products.

Strategy 2: Operations
Improve the environmental profile of P&Gs own operations.

Strategy 3: Social Responsibility

Improve childrens lives through P&Gs social responsibility programs.

Strategy 4: Employees
Engage and equip all P&Gers to build Sustainability thinking and practices into their everyday work.

Strategy 5: Stakeholders
Shape the future by working transparently with our stakeholders to enable continued freedom to innovate in a responsible way.

Please refer to www.pg.com/sustainability for more information on each strategy.

Why does Supplier Sustainability Matter?

P&Gs network of partners and suppliers is critical to our long-term success and in our purpose-inspired growth strategy to touch and improve more consumers lives, in more parts of the world, more completely.
Consumers around the world rely on P&G brands for their superior performance and value. For that reason, we want agencies, suppliers and other business partners to participate with us in open innovation, and to help us improve competitive advantage and maintain standards of excellence for both companies. At P&G, successful partnerships require a respect for the environment and sustainability, and we seek those values in our agencies, suppliers and other business partners. In the area of social sustainability, we expect suppliers to comply with our Sustainability Guidelines for Supplier Relations (see http://www.pgsupplier.com/sustainability-guidelines for more details). High-risk suppliers (defined by country of operation or potential hazard) are audited periodically to ensure compliance. On the environmental front, we collaborate closely with suppliers across the entire supply chain. Suppliers are P&Gs key source of materials, packaging, systems, services and ideas for sustainable innovation products. We view suppliers as critical partners in improving the environmental sustainability of our end-to-end supply chain. We also learn from each others best practices as we navigate the emerging field of environmental sustainability together.

P&Gs Supplier Sustainability Approach

Commercialize 360 Sustainable Innovation
Suppliers are P&Gs key source of materials, packaging, systems and ideas for sustainable innovation products. Suppliers bring sustainable business practice innovationhow we communicate with consumers, how we go to market and how we run our operations. Suppliers deliver sustainability innovations with better value and no trade-offs. Sustainability success requires strong collaboration across suppliers and key internal P&G customers R&D, Marketing, Product Supply.

Measure Progress in a Simple, Consistent Way

Use a few simple measures where P&G and suppliers can make a meaningful difference. Leverage existing approaches and data. Measures are based in science and include full life cycle analysis. Measures support total best value improving sustainability without trade-offs. Suppliers feel rewarded for collaborating to improve P&Gs sustainability (via business allocations, etc.) Sustainability is part of our sourcing value equation and integrated into our sourcing strategies.

Supplier Collaboration is Key to Delivering P&Gs Sustainability Goals.

- In Our Products, Operations & Across Our Supply Network

Link and Leverage to Drive Best Practices

Benchmark with suppliers to identify best practices and reapply across the supply chain. Leverage our P&G Supplier Sustainability Board to guide our efforts and tap opportunities. Connect supplier capabilities to deliver unique sustainability improvements. Create a shared library of best practices and success stories. Partner with suppliers to influence how Consumers and Stakeholders define success. Proactively influence key industries to drive end to end sustainability improvements and value creation. Create forums to share insight, trends and approaches and ensure common understanding and approach.

Supplier Sustainability: Two New Programs

To further collaborate with suppliers in sustainability, we are introducing two new programs in 2010: 1. Third-Party Supplier Audit Program (Social Sustainability) We are transitioning from our current internal system of auditing to use third-party auditors and will subscribe to the SEDEX database where audit results can be shared by suppliers with all customers to save costs and resources. 2. Supplier Environmental Sustainability Scorecard (Environmental Sustainability) We are launching the scorecard to measure the sustainability of our suppliers in four key areas: energy use, water use, waste disposal and greenhouse gas emissionsas well as their contributions to key P&G sustainability activities. Developed by a global team of P&G and Supplier experts, the scorecard is organized to flexibly measure sustainability improvement at the scope (corporate, site, product, etc.) suppliers can report now; while encouraging them to develop the capability to measure end-to-end supply chain sustainability for specific P&G materials and servicesconsistent with business/industry initiatives and sound science. The scorecard (and rating system) specifically focuses on whether each supplier is making year-on-year improvement; creating an actionable evaluation matrix and collaboration toolregardless of a suppliers size or current capability. P&G Purchasing Supplier Relationship Owners (SROs) will use the scorecard to determine their suppliers sustainability rating in P&Gs annual supplier performance measurement process. SROs/Buyers may also use components of the scorecard as a template to gather comparable sustainability measures to use in best total value business award decisions.