Arla Foods Annual Report 2020

Management Review Our Strategy Our Brands and Commercial Segments Our Responsibility Our Governance Our Performance Review Our Consolidated Financial Statements Our Consolidated Environmental, Social and Governance Data CONSOLIDATED ENVIRONMENTAL, SOCIAL AND GOVERNANCE DATA Sustainability at Arla Sustainability is a cornerstone of Arla's strategy. Arla aims to deliver healthy and nutritious dairy products to consumers globally and is committed to doing so with a constantly reduced environmental impact. In 2019, Arla launched a comprehensive sustainability strategy to achieve these goals. To signify our commitment to the sustainability agenda, and to increase accountability towards the goals Arla set, the group decided in 2019 to report on figures describing Arla's environmental, social and governance performance in the Annual Report, and received limited assurance on these figures from EY. In 2020, Arla aimed to improve ESG data quality and strengthen the reporting process. The effort was guided by EY's requirements for reasonable assurance, which Arla received on most of the ESG KPIs in 2020. Due to various reasons primarily related to lack of standardisation in reporting across farms and the external validation process of self-reported climate data slowed down by the Covid-19 pandemic, scope 3 emissions on farms were assured at the limited level in 2020. Read more about the external asssurance on page 134. ESG figures in the following section were chosen according to their materiality, and following the most recent reporting guidelines published by the CFA Society Denmark, FSR - Danish Auditors, and Nasdaq. Maturity and quality of data was also taken into consideration when selecting the figures presented in this section. Therefore, some of the KPIs recommended by the above-mentioned professional bodies are not part of the current report. Most notably, Arla is not reporting on water consumption, mainly due to the fact that the majority of the company's water consumption relates to farms, where it is currently not measured at a satisfactory level. Arla's biggest environmental impact relates to indirect scope 3 CO₂e emissions, more precisely to milk production on farm (86 per cent of total CO₂e emissions). From 2020, Arla's farmer owners were offered an incentive of 1 EUR-cent/kg of milk to have climate checks performed on their farms, which resulted in a significant increase in farm-level emissions data as 93 per cent of active owners completed the detailed climate questionnaire. For more information on the Climate Check programme go to page 34, and for more information on measuring scope 3 at Arla go to page 124. In 2019, Arla's emissions targets were officially approved by the Science Based Targets initiative as aligned with climate science. Our Science Based Targets: ■Reduce scope 1 and scope 2 greenhouse gas emissions by 30 per cent in absolute terms from 2015 to 2030 ■Reduce scope 3 greenhouse gas emissions by 30 per cent per kg of raw milk and whey from 2015 to 2030 Beyond the Science Based Targets, Arla also announced the ambition to become carbon net zero by 2050. In 2020, following the group's restatement policy and the guidelines of the Science Based Targets initiative, Arla restated the baselines for our Science Based Targets due to significant methodological changes and the widening of the reporting scope. Read more about these changes on page 124. Details of Arla's restatement policy can be found on page 133. Arla also publishes a Responsibility Report annually, where the group presents in-depth analyses on the progress towards environmental, social and governance targets. A sub-set of the figures presented in this report can be found there. Find the Responsibility Report and further information about our sustainability efforts on Arla's webpage. Five-year ESG overview Environmental data CO2e scope 1 (mkg) CO₂e scope 2-location-based (mkg) Scope 2-market-based (mkg) CO₂e scope 3 (mkg)* Total CO₂e (mkg) Total CO2e-location-based (mkg) Co₂e scope 3 per kg of milk and whey (kg)* ESG note 2020 2019 2018 2017 2016 474 463 490 492 474 237 274 263 313 334 277 399 456 438 466 18,479 18,243 18,411 18,528 18,644 1.1 19,230 19,105 19,357 19,176 18,977 19,156 19,337 19,458 19,584 19,456 1.21 1.21 1.20 1.22 1.22 -24% -12% -4% -5% -4% -16% -14% -12% -6% -6% -7% -7% -7% -6% -6% 122333 31% 35% 33% 32,975 33,713 27% 34,600 24% 21% 32,608 32,192 Percentage of farmer owners reporting on animal welfare (%) 1.4 100% 89% 82% CO₂e reduction (scope 1 and 2) market-based CO₂e reduction (scope 1 and 2) location-based Progress towards 2030 CO₂e reduction target (scope 3 per kg milk and whey)* Renewable energy share (%) market-based Renewable energy share (%) location-based Solid waste (tonnes) Social data Full-time equivalents (average) 2.1 Total share of females (%) 2.2 Share of females at director level or above (%) Share of females in Executive Management Team (%) Gender pay ratio, white-collar 222 222 20,020 19,174 19,190 18,973 18,765 27% 27% 27% 26% 26% 2.2 26% 26% 23% 22% 22% 2.2 14% 29% 29% 29% 29% 2.3 1.05 1.05 1.06 2.4 10% 12% 12% 11% 14% 2.5 1 4 2 10 6 2.6 5 6 8 10 11 (male to female) Employee turnover (%) Food safety number of recalls Accident frequency (Per 1 million. working hours) Governance data Share of females, Board of Directors (%)** Board meeting attendance (%) 3.1 13% 13% 13% 12% 7% 3.2 99% 96% 99% 99% 98% 122 ARLA FOODS ANNUAL REPORT 2020 Scope 3 emissions from farm subject to limited assurance in 2020 ** Including all board members, those elected by the general assembly, employee representatives and external advisors, the share of females was 20 per cent as of 31 December 2020

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