A case about Natura Cosmeticos of Brazil and how they adapted integrated reporting.

2. The Case in Brief
• This Case discusses the Integrated Reporting
process at Natura Cosmetics; a Brazilian
company and a leader in the cosmetics,
fragrance & toiletries market.
• Natura utilizes an integrated management
model that focuses on the economic, social
and environmental throughout the process of
the Company.

4. Geography
• World 5th largest country (area & population)
• Largest country in south America
• 200 indigenous people & 170 languages
• 7,492 km Atlantic coastline
• 15~20% of the world biological biodiversity

5. Politics
• Federal Republic with 26 states
• Capital: Sao Paulo
• Official Language: Portuguese
• 1985 transition from military to civilian rule
(democratically elected representation)
• 2010 nonpermanent seat in UN security
council

6. Economy
• 8th largest economy = France
• $2.17 trillion GDP in 2011
• $10,800 GDP/Capita
• FDI $368.4 billion in 2010
• Average economic growth 4.3% (2011-2020)
• > 1 in 4 Brazilian adults are entrepreneurs
• 49.6% of entrepreneurs are females

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8. Social Development
• 10th worst unequal income distribution
• 26% of population below poverty line
• Poor education
• Inadequate access to healthcare
• High level of corruption (3.7 CPI) (EGY 2.9)
• Ranked 73rd in the human development index
• (EGY 85th)

9. Sustainability
• Signed most major international agreements:
Kyoto, Ozone, Wetlands, whaling,……..
• Many environmental Challenges: Illegal
wildlife, timber trade, ecosystem
degradation,….

11. Natura

12. Natura
Brazilian manufacturer and marketer of beauty
products, household, and personal care, skin
care, solar filters, cosmetics, perfume and hair
care products.
An eco-friendly, sustainable company
A master of “lean innovation”.

13. Quick Facts
• Founded 1969 by Antonio Seabra
• 2004: Natura went public
• 2009: 1.2 Million direct sales consultants
• Markets: Latin America & France
• 23.6% market share in 2010
• 55% household penetration rate
• Nearly 100% Brand recognition level

14. Natura Work Environment
• 7,000 Professionals
• Happy and proud Culture like a college
campus.
• Best Employee benefits (such as bus to work,
onsite lunch, onsite day care, and focus on
health and fitness)
• Huge applicants wait list
“Google of Brazil”

15. Natura Strategy
• A new strategy focused on corporate social
and environmental responsibility and
sustainable development.
• Strategic purpose defined in terms of progress
on Economic, Social & Environmental
performance.
Triple Bottom Line

16. Triple Bottom Line
• A term coined in 1994 by John Elkington
• TBL consists of three Ps: profit, people and
planet.
• TBL measures the financial, social and
environmental performance of the
corporation over a period of time.
• A company that produces a TBL is taking
account of the full cost involved in doing
business.

17. Triple Bottom Line

18. Triple Bottom Line

19. Triple Bottom Line

20. Integrated Reporting @ Natura
• New Strategy requires new integrated
reporting process.
• The integrated reporting process supports
Natura values and defines priorities and
commitments.
• Supports dialogue and mutual collaboration
• Ensures better understanding for all
stakeholders.

21. Integrated Reporting
Integrated Reporting brings together material
information about an organization’s strategy,
governance, performance and prospects in a way
that reflects the commercial, social and
environmental context within which it operates.
It provides a clear and concise representation of
how an organization demonstrates stewardship and
how it creates and sustains value.
An Integrated Report should be an organization’s
primary reporting vehicle.

22. Integrated Report
An integrated report is a concise communication
about how an organization’s strategy,
governance, performance and prospects, in the
context of its external environment, lead to the
creation of value in the short, medium and long
term.

24. Integrated Reporting Benefits
• More efficient capital allocation
This is an opportunity for companies to refocus
investor attention on long term business value.
Greater transparency and focus on strategy and
prospects will help analysts re-align their models
with the business model. The result should be
greater confidence in the organization's risk and
reward and the ‘right-sizing’ of their cost of
capital.

25. Integrated Reporting Benefits
• Enhanced organizational clarity
Internal and external messages aligned under
a clear articulation of the business strategy
and business model. The result should be
improved focus throughout the organization
on those matters most critical to driving
performance or threatening the achievement
of strategic objectives.

26. Integrated Reporting Benefits
• Cost reduction and streamlined reporting
an Integrated Report should by definition be
aligned with management’s own reporting and
data collection systems. Ultimately this means a
single focused reporting mechanism based on a
single data set with corresponding cost benefits.
Efficiency may be further enhanced by the use of
business reporting automation based on
technological innovation such as web-based and
real-time reporting.

27. Integrated Reporting @ Natura
• Early years (2000-2006)
• Current State
• Future challenges

28. Early Years
Integrated Management Culture
• Asking employees to think about the impacts
of their decision sin three dimensions
(economic, social & environmental)
• 2000: Adopting GRI principle and framework.
• 2004: Integrated management culture
matured and GRI Indicators are part of
performance goals of all operating units.

29. Early Years
Key Perfromance Indicators
• GRI guidance to define and measure non-
financial KPI’s
• 1st reports with only 12 (economic, social &
environmental)
• 2006: All material KPI’s defined by GRI are
included in the integrated report.

30. Early Years
Reporting & Communication
• 2002: Financial & Non-financial combined in a
single report.
• 2006: The report went online to be available
to general public
• Feedback obtained and report sections were
created focusing on specific groups (e.g.
employees & suppliers)

31. Early Years
Stakeholder Dialogue
• Develop a culture of dialogue and
transparency within the organization.
• Understand the implications of management
decision outside the organization.
• A systematic process was developed to engage
with stakeholders, to record their inputs and
to analyze performance on an ongoing basis.

32. Current State
New Strategic Intent
Identification of opportunities for improvement
and mobilizing people to action.
• A more integrated report should be created to
promote the actions needed to develop and
implement innovative solutions to
sustainability challenges facing Natura.

33. Current State
Integrated Management Culture
• Emphasizing on solutions and the defining of
six Sustainability priorities.
• The Challenge: Developing multidimensional
valuation models that would assist
management in making better integrated
decisions
• Examples, 30% Handicapped and Organic
alcohol.

34. Current State
Stakeholder Dialogue
• The need to broaden stakeholders base and
change nature of engagement to achieve
Natura’s objectives.
• Existing channels: website, Customer service
center and internal employee network.
• 2007: New Communication department

35. Current State
New Communication department
• Relationship managers for: Suppliers, Direct
sales force and Different Communities
• Engagement Panels (e.g. palm oil)
• Roundtable discussions
• Result: better communication and enriched
experiences
• Records available to the public

36. Current State
Digital Platfroms
• 2009: virtual social network (Natura Connecta)
• Increased Engagement (8,000 people registered)
• Stakeholders participate in the WikiReport which
in included in the final integrated annual report.
• Virtual debates and Web-cast
• Identification of opinion leaders

37. Current State
Reporting & Commuincation
• Non-financial information became mores
specific and audited by DNV.
• Suppliers impacts included in the process.
• To increase relevance to readers, the format
becomes less technical and more narrative.
• More human perspective of the Organization’s
strategy and performance.

38. Future Improvement
• How could Natura Increase society participation
in the collaborative effort to develop new
solutions to today most challenging problems?
• How could the report provide a clearer
representation of the organization’s strategy and
its ability to create and sustain value over the
long term?
• How could web based technologies be used to
promote the organization's integrated reporting
and sustainable development objectives?

39. Future Improvement
Inspire
The report should tell an inspiring
story about the a journey all would
want to take
“From informative to transformative”

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41. Question 1
How do you define an integrated report,
and what are the primary differences from
conventional reporting?

42. Integrated reporting < IR>
IR is a process that results in communication,
about value creation over time. An integrated
report is a concise communication about how
an organization’s strategy, governance,
performance and prospects lead to the
creation of value over the short, medium and
long term.

43. Integrated reporting < IR>
The process includes four components, each of
them is performed as part of a continuous cycle.
1- Integrated management culture.
2- Key performance indicators.
3- Communication plan.
4- Stakeholder dialogue.
The information from each step provided the
needed inputs for the subsequent step in the
process.

44. Conventional Reporting
• A document containing information organized
in a narrative, graphic, or tabular form,
prepared on ad hoc, periodic, recurring,
regular, or as required basis. Reports may refer
to specific periods, events, occurrences, or
subjects, and may be communicated or
presented in oral or written form to provide
information.

45. Integrated reportConventional reportCriteria
IntegratedIsolatedThinking
All form of capitalFinancial capitalstewardship
Past and future connected
strategies
Past financialfocus
Short, medium and long termShort termtimeframe
Responsive to individual
circumstances
Rule boundadaptive
Concise and materialLong and complexconcise
Technology enabledPaper basedTechnology

46. Question 2
Who benefits from integrated reporting? And
who is potentially at a disadvantage?

47. Beneficiaries
• Primary stakeholders:
Customer- employees –suppliers- shareholders.
• Secondary stack holders:
Community –competitors- government-general
public
• At Natura the secondary stakeholders are
considered as important as primary stakeholders
because the company considers the implication
of their management decision on all stakeholders

48. Potentially at a disadvantage
Those that the reports does not reach them and
cannot give their voice and engage and show
their opinions

49. Question 3
How do you think integrated reporting might
change behavior or decision making of
Companies?

50. Answer 3
• It leads to a better understanding of how the
organization will create value over time that
results in a clear communication of values and
better relationship between the business and
the stakeholders.
• It will result in more informed decision making
which will lead to better business decisions.

51. Answer 3
• As illustrated in the case, employees were
asked to think of any decision implications in
three dimensions (Social, economical &
Environmental) which are addressed in the
integrated report.
• Accordingly, sense o responsibility towards
business surroundings shall be reinforced.

52. Answer 3
• Business decision maker shall look at decision
in a more holistic approach in the light of the
reported information.
• Integrated Reporting can ultimately ensure
that better, more effective long-term decisions
can be made.
• It shall promote innovative solutions to
sustainability problems.

53. Question 4
Do you think Natura exhibits any different
characteristics compared to the companies we
have studies so far and other companies that
you know?

54. YES, it does
• Natura was different for three main reasons:
1. The innovation
2. The balance they made between economic,
social and environmental values.
3. They were pioneer in the Integrated
reporting process.

55. Innovation
Natura understands innovation as a process that should cross
permeate all its activities.
• It is at the core of their value creation and is expressed not
only in their products, but also in their commercial model,
management system and the relations they establish with
their stakeholders and society as a whole.
• Elected the 8th most innovative Company in the world by
Forbes Magazine, in a survey published in July 2011.
• The only Brazilian Company ranked among the 50 most
innovative companies, Natura was placed close to global icons
in innovation such as Apple (5th place) and Google (7th
place).

56. The balance between economic ,
environmental and social values
Economic :
 Strong cash generation
 Growth and profitability
 Consistent dividend payout
Environmental
 Carbon neutral
 Use of refill packaging
 Sustainable extraction
Use of recycled and recyclable materials

57. The balance between economic ,
environmental and social values
Social:
Wealth creation for consultants
Benefits shared with communities and involved
in extractive activities

58. A Pioneer in INTEGRATED
REPORTING
• Since 2002, Natura has published its sustainability and
financial reports in a single document encompassing all
dimensions of the business: economic and financial,
social, environmental and governance.
•The integrated report, a global trend, is aimed not only
at combining financial and non-financial documents in
the same publication but at reflecting a business
strategy that incorporates all dimensions of the
business in its management and analysis of risks and
opportunities.

59. A Pioneer in INTEGRATED
REPORTING
• To learn and to grow in this area, Natura is involved
in the main global forums discussing integrated
reporting.
• It sponsors the development of the fourth generation
of GRI indicators, designed to further integrate
financial and non-financial information.

60. A Pioneer in INTEGRATED
REPORTING
• The Company also participates in the International
Integrated Reporting Council (IIRC), comprising global
leaders of companies, investors, academic
institutions, industry associations, regulatory and
standardization bodies seeking to create a global
standard for integrated reports.
• The IIRC global committee is engaged in defining
global indicators and principles. Natura is one of the
companies involved in the pilot project

61. Question 5
Would you recommend that the company you
work for adopts integrated reporting?

62. Yes, without hesitation
• Real estate development has social and
economical and environmental implications
that are often overlooked.
• Reporting such implications will benefit the
organization and all stakeholders
(shareholders, the government, the
neighborhood residents and even home
owners)

63. We recommend IR
• Also, as illustrated before, decision-making
process will be supported with more
information which will lead to better
decisions.
• Integrated reporting with its emphasize on
social and environmental implications of
company decisions shall strengthen the
company reputation and may increase brand
loyalty.

64. References
• Road to integrated reporting
• Integrated%20reporting%20systems%20(1).pdf (Integrated reporting a
guide )
• deloitte_integrated_reporting.pdf (Integrated reporting navigating your
way to a truly integrated report
• http://www.conference-board.org/retrievefile.cfm?filename=TCB-DN-
V3N23-11.pdf&type=subsite (The Role of the Board in Accelerating the
• Adoption of Integrated Reporting)
• https://www.globalreporting.org/information/current-
priorities/integrated-reporting/Pages/default.aspx
• http://www.naturacosmeticos.com.ar/