April 17th 2013
To our stakeholders:
I am pleased to confirm that Oriflame Cosmetics reaffirms its support of the Ten Principles of the United Nations Global Compact in the areas of Human Rights, Labour, Environment and Anti-Corruption.
In this annual Communication on Progress, we describe our actions to continually improve the integration of the Global Compact and its principles into our business strategy, culture and daily operations. We also commit to share this information with our stakeholders using our primary channels of communication.
Sincerely yours,
Magnus Brännström
CEO and President

Responsible business practices are the key to Oriflame’s success and future growth. Whether in the day-to-day business activities or the impact of the products, Oriflame is committed to achieving ever higher standards of social and environmental performance to accelerate its long-term vision of becoming a sustainable company.

Oriflame has a responsibility towards the people whose lives are touched by its operations. The company therefore takes a strong stance on social and ethical issues, and adheres to the Universal Declaration of Human Rights as well as to the Global Compact principles.

As part of advancing the Company’s efforts on Human Rights, Oriflame joined the Swedish Network for Business and Human Rights in 2012 – a business network focusing on exchanging best practice in areas relating to Human Rights.
Oriflame is also looking at the formal implementation of the Ruggie principles in the Company’s policies and procedures.
In our Code of Conduct we state:

"We believe that corporations have the same ethical responsibilities as individuals. That is why we adhere to the Universal Declaration of Human Rights and the Global Compact Principles on Human Rights and Labour Standards
We act according to the following fundamental principles and beliefs:
- Everyone is to be given an equal chance. All employees are to be treated equally, fairly and with respect, regardless of race, gender, age, national origin, religion, sexual orientation or political affiliation.
- Oriflame strictly opposes child labour and other forms of exploitation of children and minority groups. Oriflame does not employ staff who are below the national minimum age for employment. Employment of underage workers by a supplier, either directly or as outworkers constitutes grounds for the termination of Oriflame's trading relationship with that supplier.
- Oriflame is highly committed to the safety of its workers and customers. We respect all international laws and regulations concerning employment principles such as minimum wage, working hour requirements and wage equality. Local and national standards of health and safety in the workplace are also adhered to.
- At Oriflame, we respect all international laws and regulations concerning information provided to, and cooperation with, work councils and unions. By promoting good relationships with the representatives of our employees, Oriflame aims to create an atmosphere of open communication and fair treatment
- We consider privacy as a fundamental human right. All business activities shall respect international and national privacy laws, employee data will be strictly confidential and all information data shall be guided by the principles "need to know" and "need to do".
- Oriflame is strongly opposed to and does not tolerate any form of sexual harassment, meaning all unwelcome behaviour of a sexual nature which violates the integrity of the employee.
- Oriflame is also strongly opposed to and does not tolerate "mobbing", meaning a situation in which one or more employees in the workplace show hostile behaviour and moral harassment towards another employee. Constant or repeated ignoring of a co-worker is also defined as mobbing."
...and:
"Social responsibility:

We at Oriflame contribute to the communities in which we operate, not only by providing income opportunities through its distribution method, but also through charity programmes on a regional and global level. "

Oriflame Consultants
Oriflame’s view of corporate social responsibility includes applying a responsible business model, which empowers people and provides them with tools to enrich their lives. One of Oriflame’s founding principles was to give people an opportunity to “make money today and fulfil their dreams tomorrow”, thus to earn extra income or run their own business and, in so doing, improve their lives. Oriflame offers an attractive business opportunity for its Consultants around the world, with low entrance fees and no stock required, making it easy and risk-free to join. An extensive portfolio of innovative beauty products, exciting catalogues and reliable systems for ordering, delivery and payment are tools which enable Oriflame Consultants to build a successful business. Through paying out bonuses and other forms of recognition, Oriflame distributed close to €400 million directly to Consultants in 2012, the majority of which are women in developing markets. Besides making money from the first day of operations, being an Oriflame Consultant means personal growth and development through free training and belonging to a company with a human touch and a friendly, dynamic and fun global community. When joining, Oriflame Consultants get the chance to run their own business – setting their own targets, planning income and working hours – thereby improving and in some cases even completely changing their lives. The majority of people who join Oriflame shop merely for themselves, their families and a few friends, while others go on to make a full career with Oriflame, building a business and recruiting other Oriflame Consultants to their networks. However, Oriflame’s direct contact with each and every one of its Consultants is important for ensuring the spirit and passion of the sales force.

Oriflame Consultants operate according to the Rules of Conduct for Independent Sales Consultants. The rules outline a set of principles for appropriate business behaviour, honesty and truthfulness, fair, thoughtful and responsive treatment of customers and high integrity and responsibility standards.

Oriflame offers a variety of training programmes for its Consultants, focusing on both personal development and business skills including product knowledge. Advanced training is provided through the Oriflame Academy. The core training of the Oriflame Academy is conducted by the leaders in the networks, while more advanced modules are predominantly managed by Oriflame’s employed sales management representatives. Oriflame has developed and implemented online versions of these training courses and these e-learning courses are now important complements to physical meetings.

Suppliers
In 2011, Oriflame’s supplier requirements were reviewed and a new comprehensive Supplier Code of Conduct was developed. This code was rolled out to all key suppliers in 2012. The work to improve the complete supplier management process, which was initiated in 2011, will continue in 2013 when the new strategy will be finalised.
Through audits and close co-operation with suppliers, Oriflame works to ensure compliance with labour standards and principles. Besides Oriflame’s own guidelines, international standards are used as a basis for audits performed. For non-cosmetic suppliers, Oriflame works in co-operation with established trading houses that conduct annual audits of their subcontractors. In addition to these audits, Oriflame conducts audits to “check the auditor” to ensure compliance with Oriflame’s Supplier Code of Conduct, and that necessary actions are taken for any non-compliance. Oriflame has staff located in both China and India dedicated to conducting audits of working conditions and environmental matters. In 2012, Oriflame audited approximately 30 percent of global non- cosmetics suppliers, thus exceeding the 25 percent target.

Consumers
Oriflame’s products are designed to make consumers feel good about themselves, whether through the use of Oriflame cosmetics or wellness products. Moreover, consumers can at all times rest assured that all products are safe to use.

For Oriflame, the safety and wellbeing of its consumers are crucial. All cosmetic products are formulated to be safe in accordance with the provisions of the European Cosmetics Regulation (EC No 1223/2009) and other major international regulations. In markets where regulations are less developed, Oriflame applies the European regulation requirements for safety as a minimum.

A step-wise approach to safety evaluation of cosmetic products is employed at Oriflame and performed throughout the product development process. First, Oriflame’s teams rigorously evaluate all new raw materials to ensure they meet our purity and quality requirements and are safe for use. A safe concentration for each ingredient in each product type is then evaluated before the safety of each final product is confirmed by testing at independent specialized laboratories using human volunteers and non-animal testing methods. The safety evaluation process continues even after the product has been launched by actively collecting feedback from consumers and using it to further bolster product safety.

The above safety evaluation process applies to 100 percent of Oriflame’s cosmetic products and certificates of safety are present for all of the Company’s products on the market – over 1,000 products in total. The same stringent safety measures also apply to the wellness products. All ingredients in the Wellness by Oriflame range are of the highest food grade purity, fully approved internationally for use in food, and selected for optimum safety and efficacy.

Wellness products are formulated to comply with EU Regulation (EC No 178/2002) which lays down the General Principles and Requirements of Food Law and other related European legislation. In addition to this, they are also formulated in accordance with global health authorities’ recommendations, including the World Health Organisation, the Institute of Medicine and the Nordic Nutrition Recommendations. To further ensure the safety of the range, products are evaluated by reputed Swedish experts in the field of medical science and nutrition.

In 2012 there were no incidences of non-compliance with regulations and voluntary codes concerning the health and safety effects of Oriflame’s cosmetic or wellness products during their life cycle in any market.

Oriflame Foundation
In order to reach its full potential, all of Oriflame’s community work is gathered under one umbrella – the Oriflame Foundation. The Foundation is an independent Luxembourg Foundation founded by Oriflame Cosmetics S.A. with the aim of increasing the overall level and quality of community investment provided across Oriflame markets. This will be achieved through financial support, dedicated resources and global coordination. Guiding and structuring all community investment activities in this way enables improved impact, best practice sharing and increased overall community investment across different markets.

The Oriflame Foundation partially underwrites local Oriflame markets’ charity activities. The Foundation will consider grants from its own funds when appropriate and possible. In 2012, methods to report the reach and impact of Oriflame’s community engagement were established and will be introduced going forward as a means of monitoring efforts. Better structured reporting and assessments of initiatives will be regularly conducted in each market.

Oriflame seeks to contribute to efforts and projects that create longterm positive effects for people and their communities. Providing education is one of the most effective ways of achieving this. The primary mission of Oriflame’s community involvement is therefore to help children and young women by means of a wide range of
educational initiatives, providing them with opportunities to change their lives for the better and enabling them to fulfil their dreams. This firm commitment to supporting self-help is the guiding principle of Oriflame’s community involvement, and is also in line with its business model.

Efforts are focused on various activities which also go beyond traditional classroom-based education, and range from building social skills and mentoring to supporting orphans and foster families. Examples of existing projects include Livslust, an organisation that provides vocational schools for disadvantaged young people in Latvia, helping their rehabilitation into society, and Love is Blind by the Bethel Foundation, an organisation supporting blind and visually impaired orphans in China.

From the beginning, Oriflame has strived to support NGOs and charity organisations around the world. These include the World Childhood Foundation, founded by HM Queen Silvia of Sweden and co-founded by Oriflame and the Af Jochnick Foundation a relationship which continues to this day with contributions from the Company and the Oriflame Foundation. To identify the right projects to support, the Oriflame Foundation has recognised SOS Children’s Villages as its preferred global NGO partner. SOS Children’s Villages is an international social development organisation focusing on family-based, long-term care of children who can no longer grow up with their biological families. One such example is the co-operation with SOS Children’s Villages in Latin America, which includes all Oriflame’s Latin American markets and has led to successful fundraising and a high level of involvement from both Oriflame Consultants and employees. The partnership includes both a long-term contribution to the SOS Children’s Villages’ work and special initiatives for the children. Where it is not possible to form a local partnership with SOS, the markets work with carefully selected NGO partners who meet the criteria laid out in the Oriflame Foundation Charter.

Volunteering and fundraising
To support communities, Oriflame’s employees and Consultants are encouraged to engage in local volunteering projects and each employee is offered one day per year of paid leave to volunteer for good causes in their markets. Volunteering initiatives can range from different types of community service activities to fundraising. All Oriflame’s markets have the opportunity to take part in local volunteering initiatives, which are run in conjunction with the markets’ local NGO partners or as bespoke projects developed by the markets themselves. 2012 marks the second year in which markets had the opportunity to have their employees take part in volunteering activities. While small at first, the number of Oriflame markets participating in volunteering is steadily growing.

Oriflame also supports projects in different markets through the sale of specially developed global accessories, and regionally selected cosmetic products. This is supplemented by local fundraising events organised by Oriflame employees and Consultants.

- During 2012, responsibility for Human Rights issues were identified as sitting within the newly formed Sustainability Team.
- In 2012 Oriflame joined the Swedish Network for Business and Human Rights in order to share ideas with other engaged companies, identify areas of action and get assistance in finding ways to formally implement the Ruggie Principles in the Company’s systems.
- We have incorporated Sustainability and Human Rights risks into our normal business risk assessment process, and are taking actions to manage them accordingly.
- We train / inform employees on human rights issues and the Oriflame policies and Code of Conduct via the Oriflame Academy Training programme
- We have a confidential email address to which employees can email any concerns they may have. The owner of this email address is Corporate HR and emails sent to this address will be treated confidentially and will not be forwarded to anyone without the approval of the sender. This email can be used when in doubt regarding any issues relating to Oriflame policies / code of conduct etc.
- We have initiated dialogues with various stakeholder groups to better understand the expectations of all our stakeholders. They range from consultant meetings and consumer questionnaires to investor dialogues. In addition, cooperation with non-governmental organisations (NGOs) to discuss sustainability challenges and receive regular feedback on the Company’s efforts is seen as vital for accountability and continuous improvement. In 2012, Oriflame continued to meet with NGOs in individual meetings as well as in industry meetings focusing on specific environmental and social challenges.
- In 2011, Oriflame’s supplier requirements were reviewed and a new comprehensive Supplier Code of Conduct was developed. This code was rolled out to suppliers in 2012. The work to improve the complete supplier management process will continue in 2013 when the new strategy will be finalised.
Through audits and close co-operation with suppliers, Oriflame works to ensure compliance with labour standards and principles. Besides Oriflame’s own guidelines, international standards are used as a basis for audits performed. For non-cosmetic suppliers, Oriflame works in co-operation with well-established trading houses that conduct annual audits of their subcontractors. In addition to these audits, Oriflame conducts audits to “check the auditor” to ensure compliance to Oriflame’s Supplier Code of Conduct and that necessary actions are taken for any non conformance. Oriflame has staff located in China and India dedicated to conducting audits of working conditions as well as environmental matters.

Oriflame monitors performance regarding human rights in numerous ways.
- Sustainability is a regular point at Executive Committee meetings as well as on the annual budget and target discussion.
- When it comes to human rights and ethical issues among our suppliers, we conduct our own audits, focusing mainly on our highest risk suppliers to ensure that they comply with our ethical policies. In 2012, Oriflame audited approximately 30 percent of global non-cosmetics suppliers, thus exceeding the 25 percent target.

Our three core values within the company are Togetherness, Spirit and Passion.

Our five operating principles are:
- Respect people
- Focus on Customers
- Demand Quality
- Seek simplicity and Cost Efficiency
- Pursue Sustainability and Long-term Growth

In our Code of Conduct we state:
"We believe that corporations have the same ethical responsibilities as individuals. That is why we adhere to the Universal Declaration of Human Rights and the Global Compact Principles on Human Rights and Labour Standards
We act according to the following fundamental principles and beliefs:
- Everyone is to be given an equal chance. All employees are to be treated equally, fairly and with respect, regardless of race, gender, age, national origin, religion, sexual orientation or political affiliation.
- Oriflame strictly opposes child labour and other forms of exploitation of children and minority groups. Oriflame does not employ staff who is below the national minimum age for employment. Employment of underage workers by a supplier, either directly or as outworkers constitutes grounds for the termination of Oriflame's trading relationship with that supplier.
- Oriflame is highly committed to the safety of its workers and customers. We respect all international laws and regulations concerning employment principles such as minimum wage, working hour requirements and wage equality. Local and national standards of health and safety in the workplace are also adhered to.
- At Oriflame, we respect all international laws and regulations concerning information provided to, and cooperation with, work councils and unions. By promoting good relationships with the representatives of our employees, Oriflame aims to create an atmosphere of open communication and fair treatment
- We consider privacy as a fundamental human right. All business activities shall respect international and national privacy laws, employee data will be strictly confidential and all information data shall be guided by the principles "need to know" and "need to do".
- Oriflame is strongly opposed to and does not tolerate any form of sexual harassment, meaning all unwelcome behaviour of a sexual nature which violates the integrity of the employee.
- Oriflame is also strongly opposed to and does not tolerate "mobbing", meaning a situation in which one or more employees in the workplace show hostile behaviour and moral harassment towards another employee. Constant or repeated ignoring of a co-worker is also defined as mobbing. "
... and:
"Diversity
-Diversity is a source of our strength. Embracing and actively working to sustain diversity, Oriflame aspires to be a company that reflects the globally diverse audience whom we serve. In addition to hiring best talent, we believe that our diversity of gender, nationalities and cultures leads to the creation of better perspectives, ideas and products. The diversity of our employees and partners serves as the foundation of better service for our customers and stakeholders all over the world. "
In our Supplier Code of Conduct, which is a condition for any agreement or contract between Oriflame and a supplier, we set demands on our Suppliers to ensure that they operate in accordance with internationally recognized standards.

Oriflame’s success is created by the people in and around the Company – employees around the world, Consultants with their businesses, suppliers who produce raw materials, components or products and of course the customers who buy the Company’s products. Each individual is important in making Oriflame the leading beauty company selling direct. It is therefore natural that Oriflame acts responsibly and with respect towards all the people affected by its operations.

In its four regions, Oriflame offers a truly global working environment with around 7,500 employees located in offices all over the world, and approximately 3.4 million independent Oriflame Consultants selling to and serving customers in over 60 countries. Moreover, Oriflame’s operations provide employment to a great number of people at external production sites in the Company’s supply chain.

CORPOR ATE CULTURE
Oriflame’s people are the reason for its success. Diversity among employees and Consultants, and indeed among customers, is a key factor in the Company’s great creativity and constant development. Oriflame operates in a multitude of languages on four continents where values, religious beliefs and political convictions vary tremendously from region to region. At such a global company, a strong and distinct corporate culture is key to the strong sense of belonging which characterises Oriflame – and also to the Company’s success through the years.

Oriflame’s culture is based on entrepreneurship and respect for and belief in people’s capabilities. Oriflame strives to become the number one workplace with an inspiring corporate culture, by paying attention to the dreams and goals of both employees and Oriflame Consultants. The aim is for everyone joining Oriflame to experience a stimulating and dynamic work situation that makes them grow as people and professionals. Oriflame’s core values derive from the team-playing, passionate people in the organisation, characterised by the pursuit of new solutions and excellent results. Three guiding core values shall permeate all relationships and actions at Oriflame – Togetherness, Spirit and Passion.

Oriflame works hard to ensure that everybody involved in the Company’s mission understands the core values and principles of the Oriflame culture. For employees, besides the Code of Conduct which is rolled out to all employees, the Oriflame Way is a one-day seminar presented by senior managers for this purpose. The seminar is given in English, Russian and Spanish to fully reach the target audience, and CEO and President Magnus Brännström has personally conducted several of these training sessions. As of 2012, the Oriflame Way seminar is available as an e-learning version for all employees for increased access. For Oriflame Consultants, the Company’s core values are presented and discussed in the business opportunity presentation, at conferences and other gatherings and are embedded in all Oriflame Academy training and modules.

CREATIVITY FROM DIVERSITY AND EQUALITY
Oriflame aspires to reflect the globally diverse audience that it serves. In addition to hiring the best talent, Oriflame believes that diversity of gender, nationality and culture leads to the creation of better perspectives, ideas and products. With offices worldwide, each is a venue for diversity and shared experience. Oriflame’s policy is to offer competitive and objective remuneration. Salary mapping is one way of ensuring the Company is compliant with equal opportunity law and policy in terms of gender-based differentiation. Such a salary analysis was conducted in 2012 in one of the Group Support Offices. The results show that the Company is reaching its objectives in this area. Oriflame always strives for representative distribution with regard to gender and ethnicity for all categories of employees. Oriflame’s overall workforce is predominantly female and it therefore also aims to have a higher share of women in management positions. In 2012, women represented 44 percent of the global management team, constituting the Company’s top 400 managers.

WORKING ENVIRONMENT
Oriflame is committed to providing a safe and healthy working environment for all employees. The Company strives to reduce risks of ill health and accidents and to improve the working environment at all offices and factories. Internal human resource policies aim to ensure compliance with all international laws and labour standards.

The key actions taken by our company to implement labour policies, reduce labour risks and respond to labour violations include:
- The Oriflame Academy Training programme which focuses on our Code of Conduct as well as all our HR policies, covering all relevant labour issues
- The confidential email address to which employees can email any concerns they may have. The owner of this email address is Corporate HR and emails sent to this address will be treated confidentially and will not be forwarded to anyone without the approval of the sender. This email can be used when in doubt regarding any issues relating to Oriflame policies / code of conduct etc.
- In 2011, Oriflame’s supplier requirements were reviewed and a new comprehensive Supplier Code of Conduct was developed. This code was rolled out to suppliers in 2012. The work to improve the complete supplier management process will continue in 2013 when the new strategy will be finalised. Through audits and close co-operation with suppliers, Oriflame works to ensure compliance with labour standards and principles. Besides Oriflame’s own guidelines, international standards are used as a basis for audits performed. For non-cosmetic suppliers, Oriflame works in co-operation with well-established trading houses that conduct annual audits of their subcontractors. In addition to these audits, Oriflame conducts audits to “check the auditor” to ensure compliance to Oriflame’s Supplier Code of Conduct and that necessary actions are taken for any non conformance. Oriflame has staff located in China and India dedicated to conducting audits of working conditions as well as environmental matters.
- In 2012, employee surveys were carried out for the first time, covering a large part of the Oriflame population. The results form a valuable basis for the future development of the Company’s human resource strategies and tools. The employee surveys will be repeated regularly.

- Oriflame monitors performance regarding labour issues in numerous ways.
- Senior management review all relevant statistics / people concerns / labour issues etc. annually during the Global People Review
- When it comes to labour issues among our suppliers, we conduct our own audits, focusing mainly on our highest risk suppliers to ensure that they comply with our ethical policies. In 2012, Oriflame audited approximately 30 percent of global non-cosmetics suppliers, thus exceeding the 25 percent target.

As a multinational company Oriflame has a significant impact on the surrounding world. At a time when the planet is facing serious threats from climate change, loss of biodiversity and resource scarcity, Oriflame has an important role to play in pursuing more sustainable business models in all parts of its operations.

Oriflame’s environmental sustainability strategy is based on results from a lifecycle assessment of the Company’s operations; from raw material extraction to production and disposal, focusing mainly on the carbon footprint. The study identified Oriflame’s most significant environmental impacts and the actions taken today are aimed at reducing these impacts.

FOUR K EY AREAS
The strategy contains a series of commitments across four key impact areas: sustainable sourcing, climate change, water and waste. The aim is to reduce environmental impact through a number of priorities across these areas: sourcing of sustainable natural resources, such as paper, palm oil and other ingredients; reduction of greenhouse gas emissions; reducing water consumption and emissions to water and minimising waste throughout the supply chain. In 2012, Oriflame continued to roll out a series of improvements designed to embed sustainability principles into every part of the business.

PRODUCT DEVELOPMENT
To successfully improve the environmental profile of Oriflame’s products, sustainability must be fully integrated into the entire product development process. When formulating new concepts, Oriflame strives to design innovative products that, where possible, use ingredients with a low environmental impact and are ethically sourced. Many Oriflame products are inspired by nature, and the aim is to incorporate plant ingredients and actives in the product formulations. Materials from protected or endangered flora and fauna species are not used. All raw materials go through a sustainability r eview process, and scientific r eports on environmental issues are continuously monitored. This enables the Company to take action and, where possible, phase out the use of certain ingredients that may have negative impact on the environment and replace them with alternatives with lower impact. For example, all Oriflame’s primary surfactants, primary conditioning agents and preservatives have a good biodegradability profile. Oriflame’s key packaging materials consist of paper, plastics and glass. The Company is continuously working on initiatives to reduce the components’ environmental impacts, for example by
selecting materials from renewable sources, by reducing the total materials used, making sure that as many packaging components as possible are recyclable and finally by gradually increasing the share of recycled materials. One main initiative involves gradually introducing PCR (Post Consumer Recycled) plastics into bottles, tubes and jars. In addition, recycled glass has been introduced, but the supply situation of this material is proving challenging due to a very low total market demand.

Oriflame is continuously launching new products under its Ecobeauty brand. The lessons learnt from developing Ecobeauty are now being used in the development of other Oriflame products. Oriflame views Ecobeauty as an innovation “laboratory” and a symbol of the Company’s wider commitments to implementing more sustainable business practices. It is also being used as a tool to educate Oriflame Consultants about sustainability issues.

SUSTAINABLE SOURCING
A large proportion of the environmental impact of Oriflame’s products occurs beyond the direct scope of the Company’s operations. Sourcing of raw materials, such as paper and palm oil is therefore a critically important impact area.

PAPER GUIDELINE
Paper and wood-based products are Oriflame’s number one raw material, used in packaging materials as well as in publications, especially catalogues. In 2010, Oriflame started working in collaboration with the Rainforest Alliance, a global conservation organisation, to develop a responsible paper sourcing strategy and set ambitious sustainability targets. A paper guideline has been rolled out to all Oriflame catalogue and folding box suppliers globally and data on use and statistics on sources were gathered. In the 2012 catalogues,84 percent of the paper used came from credibly certified sources with an intact chain of custody, a significant increase from 55 percent in 2011. An additional 13 percent were sourced from non-controversial sources (2 percent in 2011). The first mapping of our global folding box suppliers showed that 53 percent of the material sourced in 2012 came from FSC certified sources and thereby complies with our guideline. Implementation of the guidelines for main corrugated board suppliers has been started and will be further rolled out in 2013. The ultimate aim is to ensure that all Oriflame paper and board packaging and publications are sourced from credibly certified sources and/or from recycled origins.

EFFICIENCY IN OPERATIONS
Increasing the sustainability profile of Oriflame’s own facilities and operations is a key priority. During 2011, a new greenhouse gas reduction target was set. This target aims to reduce Oriflame’s greenhouse gas emissions by 50 percent by 2020 relative to turnover, and applies to all our own production sites, offices and logistics operations, as well as business travel. During 2012, an implementation strategy was developed focusing on how to further reduce emissions within the Company’s three main emission areas; building energy (representing 42 percent of measured greenhouse gas emissions), global distribution of products (26 percent) and travel (26 percent). The implementation plans will continue to be rolled ut during 2013. Oriflame reports its emissions to the Carbon Disclosure Project.

PRODUCTION SITES AND OFFICES
In 2012, roll-out of a new audit program started at internal production sites, warehouses and offices, focusing on energy efficiency and reducing greenhouse gas emissions. At all Oriflame’s production sites, there are detailed programs with the aims to reduce not only energy and greenhouse gas emissions but also waste and water consumption. Each of these areas is the subject of targets to be met by 2015. A proportion of the Company’s electricity demand has been moved to certified renewable sources. At the Swedish and Polish production sites, 100 percent of the electrical energy will be sourced from renewable sources by 2013. In addition, significant technical improvements have been implemented, such as retrofitting building management systems and introducing reduced or low energy manufacturing processes. The new distribution and production facilities under construction in Moscow are being LEED™ Green Building certified prior to completion, with the aim of making them among the very few industrial projects in Russia to gain such an independent certification. Oriflame is also implementing a strategy for improving the environmental profile of all its offices worldwide. This is seen as a way
to engage employees and Oriflame Consultants in the Company’s sustainability work. It includes the provision of manuals for all office managers and guidelines for employees regarding energy use, recycling and other sustainability tips. The office initiative has successfully been rolled out in all regions, and has seen a high degree of employee engagement. Implemented actions range from smaller items such as starting recycling initiatives and installing motion sensors, to larger investments in energy efficiency or renewable materials when refurbishing or moving offices. During 2012, an internal guide aimed at reducing the impacts of Oriflame conferences was developed and implemented for a first time during the Stockholm Gold conference.

LOGISTICS
Oriflame’s overall supply strategy is to move the sourcing of products and printing of catalogues closer to the current and future Group Distribution Centre facilities and major markets. The aim is to improve transportation routes and thereby reduce greenhouse gas emissions and energy consumption. Regional sourcing activities in the CIS region have during 2012 helped reduce the distances shipped by almost one third for these markets. Oriflame works to limit air shipments to the greatest extent possible and products shipped by air decreased by 30 percent during 2012. The vast majority of the Company’s shipments are conducted by sea and truck freight. The packaging and loading routines for ship containers and trucks are continuously being reviewed to optimize space usage, thereby reducing energy consumption. During 2012, utilisation was further improved by 11 percent in ship containers and 16 percent in trucks compared to 2011. Compared with our 2010 baseline, the figures represent a total improvement of 36 percent for ship containers, and 28 percent for trucks. Oriflame aims to select road carriers utilising Euro 4, 5 and 6 standard trucks wherever possible, thus reducing particle emissions. During 2012, approximately 46 percent of Oriflame’s total road transportation was conducted by Euro 4, 5 or 6 certified trucks (up from 35 percent during 2011). A new requirement for road carriers is to use only vehicles less than 8 years old in order to further limit impact.

Key initiatives to implement environmental policies, address environmental risks and respond to environmental incidents include:

Environmental Training
In the Company’s internal education programme, the Oriflame Academy, a section dedicated to sustainability issues is now included for all levels. For key management there is also a workshop programme on the integration of sustainability into everyday business processes. This is complemented by ongoing communication through the Oriflame intranet and other channels.

Organising for Sustainability
A plan that targets the Company’s key impact areas has been developed. As part of the plan, ethical and environmental risks are continuously being identified, assessed and addressed. Oriflame has also published a range of commitments and targets designed to improve performance. The plan is regularly updated, with new commitments added and existing standards raised. Oriflame’s goal is one of continuous improvement and during 2013 the plan will be reviewed and particular emphasis will be placed on clarifying the direction on social issues. Clear commitments and targets will be presented. Oriflame’s sustainability plan is overseen by the Chief Executive Officer and the Board of Directors. The responsibility of fulfilling Oriflame’s ambitious commitments also sits firmly within every part of the organisation. To ensure that the sustainability agenda permeates all parts of the business, a section dedicated to sustainability issues is now included for all levels of the Company’s internal education programme, the Oriflame Academy. This is complemented by on-going communication through the Oriflame intranet and other channels. Oriflame is also working on new ways to engage employees as well as our 3.4 million Oriflame Consultants globally on these crucial issues.

Environmental Commitments:
As part of its renewed sustainability strategy, Oriflame has unveiled a series of commitments across its key impact areas. Oriflame reports regularly on its progress in meeting these commitments, and will add new targets and commitments in the years ahead.

SUSTAINABLE SOURCING

- Palm oil: Purchase all our palm oil from certified sustainable sources, initially through the purchase of green palm credits and ultimately through certified segregated sources.
Progress: On plan. Green palm credits purchased to cover our full 2012 volume. This initiative will continue in 2013. In 2012 Oriflame became the first company in the world to produce a foaming product (Swedish Spa Refreshing Shower Gel 21876) that contains RSPO segregated certified sustainable palm oil. We aspire to increase our commitment and use over the next few years to demonstrate our support towards RSPO certified sustainable palm oil in order to contribute to the preservation of our natural resources.

- Paper: Source 75% of the wood fibre used in our publications and our paper and board packaging from credible certified sources and/or recycled origin by 2015. By 2020, our goal is 100%.
Progress: On plan. Catalogue paper: Achieved. With the support of the Rainforest Alliance we conducted a
supply chain analysis of our catalogue suppliers. F or the 2012 catalogue,84 percent of paper used is fully compliant with our paper commitment, i.e. sourced from a credibly certified source with an intact chain of custody (up from 55 percent last year). An additional 13 percent also meet Oriflame’s minimum requirements. Our catalogue paper has therefore already achieved the 2015 goal. We keep working to ensure that all our paper is proven acceptable by our policy of intact chain of custodies.

- Catalogue paper: Source 100% of catalogue paper from credible certified origin by 2016. Progress: New.

- Animal Welfare: Never use ingredients in our cosmetics formulations derived from dead animals or which cause harm or suffering to animals.
Progress: Previously achieved / Ongoing

- Packaging: By year-end 2011, all newly specified cosmetic display packaging cartons and leaflets will be FSC certified.
Progress: Achieved 2011.

- Packaging: Source 75% of all our display packaging cartons and leaflets from FSC-certified sources by 2013.
Progress: On plan. With the support of Rainforest Alliance we conducted a first supply chain analysis of our packaging cartons and leaflets purchased during 2012. 53 percent of material used was FSC™ certified. In total 68 percent was compliant with Oriflame’s general paper guideline and an additional 7 percent also met Oriflame’s minimum requirements. We are well on track to meeting the 2013 target. We gradually started labelling our Ecobeauty products with the FSC™ logo during 2012.

CLIMATE CHANGE

- Greenhouse Gas Emissions: Reduce greenhouse gas emissions from Oriflame operations by 50% by 2020 (relative to turnover, 2010 baseline).
Progress: On plan. During 2011 total greenhouse gas emissions from Oriflame’s operation decreased by 3 percent in absolute terms, and 2 percent relative to turnover. Progress for 2012 will be published online in Q2 2013.

- Greenhouse Gas Emissions: Reduce emissions from our factories by 20% by 2015 (per unit produced based on the 2010 baseline)
Progress: On plan. A number of GHG reduction initiatives were implemented in 2012. Despite this, emissions per unit have increased since 2010 due to a drop in units produced. In absolute terms however, a decrease of 4 percent since 2011, and 7 percent since 2010, was achieved. We are still working to meet the 2015 target.

- Energy Use: Reduce energy use at our factories by 15% by 2015 (per unit produced based on the 2010 baseline).
Progress: On plan. Energy use per unit has increased since 2010 due to a drop in units produced. In absolute terms a decrease of 5 percent since 2011, and 9 percent since 2010, was achieved.

- Travel: Roll out an online communication tool to all office employees to help reduce travel, by year end 2011.
Progress: Previously achieved / Ongoing. Online communication tools are available to all relevant employees and training on how to use this takes place on an on-going basis. Systems are gradually being upgraded.

- LEED certification: Reduce future greenhouse gas emissions at our new facilities by pursuing LEEDTM green building scheme certification for all our new production facilities.
Progress: On plan. We are in the process of LEED™ certifying the Noginsk Facility that is under construction outside Moscow.

WATER

- Responsible Water Use: Reduce water use at our factories by 10% by 2015 (per unit produced based on the 2010 baseline).
Progress: On plan. Water consumption per unit has increased since 2010 due to a drop in units produced. In absolute terms a decrease of 8 percent since 2011 and by 16 percent since 2010 was achieved.

- Biodegradability: To reduce environmental impact at the product end-of-life, only use readily biodegradable primary surfactants and primary conditioning agents in our cosmetic formulations.
Progress: Not achieved. All rinse-off products (where these materials enter the water system) are compliant. A limited number of performance leave-on products have been formulated using conditioning agents that are biodegradable rather than readily biodegradable. The strategy will be reviewed during 2013.

- Education: To reduce environmental impact during the use phase and at the end-of-life, we will start to communicate with our 3.4 million Oriflame Consultants on issues relating to water consumption and pollution.
Progress: Behind plan. Initiatives to educate Oriflame Consultants have been launched through information in service centres, conferences and online media but roll-out has been slower than planned. Ecobeauty is being used as a tool to educate Consultants about these issues.

- LEED Certification: Reduce water use and emissions to water at our new facilities by adopting new manufacturing systems design and pursuing LEEDTM green building scheme certification for all our new production facilities.
Progress: On plan. We are in the process of LEED™ certifying the Noginsk Facility that is under construction outside Moscow.

WASTE

- Manufacturing waste: Reduce waste at our factories by 10% by 2015 (per unit produced based on the 2010 baseline).
Progress: On plan. Waste produced per unit has decreased by 10 percent since 2010, in absolute terms this represents a decrease of around 30 percent.

- Recycled Plastic: Increase the use of post-consumer recycled plastic (PCR) in our cosmetic packaging materials. From 2011, all new coloured PET bottles will specify PCR material.
Progress: On plan. PCR content is continuously being introduced in all new PET bottles and also gradually rolled-out in other tubes and jars.

- Education: To encourage end-of-life recycling of our packaging materials and catalogues, we will start to communicate with our 3.4 million Oriflame Consultants on environmental issues relating to waste.
Progress: Behind plan. Initiatives to educate Oriflame Consultants have been launched through information in service centres, conferences and online media but roll-out has been slower than planned. Ecobeauty is being used as a tool to educate Oriflame Consultants about these issues.

- Facilitate recycling: Increase the availability of recycling facilities at our service centres worldwide, as part of the roll-out of the upgrade of our service centres starting 2011.
Progress: Behind plan. The green office guide has successfully been rolled out to all regions. The majority of Oriflame’s offices have implemented recycling facilities and roll-out into service centres has started, but the initiative is taking longer than planned.

- LEED certification: Reduce construction waste at our new facilities by pursuing LEEDTM green building scheme certification for all our new production facilities.
Progress: On plan. We are in the process of LEED TM -certifying the Noginsk Facility under construction outside Moscow.

The sustainability plan contains a series of commitments across four key areas: sustainable sourcing, climate change, water and waste.
These areas are regularly discussed by the Executive Committee during their monthly meetings as well as during annual budget and target reviews.
Performance according to our indicated commitments is reported on annually and described in detail in the previous chapter.

In our Code of Conduct we state:

- Legal Compliance: Wherever we do business we comply with existing laws. In situations where local or national laws do not provide adequate guidance, Oriflame applies its own policies and procedures.

- Corruption and Bribery: Oriflame adheres to the UN Global Compact Principle 10; "Businesses should work against corruption in all its forms - including extortion and bribery". All forms of compensation to external parties shall refer only to justified products or services. Gifts and other favours as elements of expected hospitality must not exceed local customs and must be in line with local laws.

- Outside business interests: Engaging in business with any firm that is owned / managed by or employs an Oriflame employee or a close relative of an Oriflame employee, constitutes a conflict of interest. Holding an undisclosed financial interest in any firms that is doing or seeking to do business with Oriflame, or that is a competitor of Oriflame, constitutes a conflict of interest. However, ownership of less than one percent of securities of a publicly traded company shall not be deemed contrary to this policy.

- Communications: We strive to be transparent, accurate and proactive in our communications. The people with whom we are interacting should have confidence in us and find our communications reliable, trustworthy and correct. We want to show that we are a credible, open, honest and responsible company.

- Independent Oriflame Consultants: There are also separate rules for the conduct of Oriflame Independent Consultants. It outlines a set of principles for proper business behaviour; being honest and truthful, treating customers in a fair, thoughtful and responsive manner, demonstrating high standards of integrity and responsibility, not marketing products other than Oriflame products, not selling to any retail outlet and respecting local laws and regulations.

All employees receive the Oriflame Code of Conduct

If in doubt regarding any issues in the Oriflame Code of Conduct employees are encouraged to email to a separate email address. The owner of this email address is Corporate HR and emails sent to this address will be treated confidentially and will not be forwarded to anyone without the approval of the sender. This email can be used when in doubt regarding any issues in the Oriflame Code of Conduct.

Training regarding the Code of Conduct and Oriflame Policies are an integral part of the Oriflame training system, The Oriflame Academy. A session on the Code of Conduct is held as part of this training.

Governance and anti corruption issues are ultimately owned by our CEO, but in practice sit under our CFO.
Oriflame is a member of the Direct Selling Association (www.dsa.org) where our CEO is vice chairman, which works to promote ethical business practices in the direct selling industry.

Compliance and Non Compliance Procedures

Reporting Procedures: Conduct or actions that are, or may for good reasons be perceived as, infringements of National Laws or the Oriflame Code of Conduct, are to be reported. Employees are encouraged to report any such conduct or action to their superiors, or, if the superior is involved in the situation or will not act upon it, to the next level in the organisation. We expect superiors/ managers to treat reported matters seriously and in compliance with Oriflame's policies and values. If employees are in doubt about the interpretation or application of any law or regulation, they are encouraged to contact the Corporate Legal Department. In accordance with the Code of Conduct, no one will be discriminated against or punished for reporting, in good faith, actual or suspected infringements.

Employees are also able to send confidential emails to a separate email address. The owner of this email address is Corporate HR and emails sent to this address will be treated confidentially and will not be forwarded to anyone without the approval of the sender. This email can be used when in doubt regarding any issues in the Oriflame Code of Conduct.