Sustainability Review of 2013

2013 sustainability highlights 3 innovative, nutritious foods launched into retail and Out of Home markets (for more details see pages 6 & 7)

50% reduction in cleaning water used at Haverfordwest creamery (see page 9) 1.46 pence per litre average margin improvement by focus farms in forage working groups (see page 10) 422,000 less kilometres travelled by tankers through milk swaps and depot relocations (see page 8) Threefold increase in the number of farmers in the mastitis working group hitting the top cell count band (see page 11) 75% of our tanker fleet have recycled tyres, saving 68 litres of oil per new tyre (see page 8)

35% reduction in carbon footprint of Lake District creamery through installation of clean-burn gas (see page 9)

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Achieved zero process waste to landfill from our manufacturing sites (see page 9)

Words from Kate Allum, chief executive At First Milk, our aim is to provide safe, responsibly produced, nutritious foods. We must do this by providing sustainable margins for our farmer owners, while protecting natural resources for future generations.

We launched our Sustainability programme in late 2012. It has five workstream areas that look right along the supply chain.

During 2013, we made progress across the board with a broad range of activities, in most cases working alongside great partners including NestlĂŠ and Fonterra. Picking out just a few examples of what we did in 2013:

Our innovation pipeline is moving fast with three great tasting, nutritious brand launches.

Incentivised farmers supplying all our creameries to produce milk solids. This rewards milk quality by focusing payments more on the protein and butterfat content of milk, and less on volume. We are now paying out some of the highest milk prices in the UK to these farmers.

Invested in membrane technology at our Haverfordwest creamery to allow us to recover water from our farmers’ milk. We use this to clean the site, reducing our reliance on mains water by 50%.

Reduced the carbon footprint of our Lake District site by 35% by the replacement of traditional boilers with clean burn gas technology.

Worked with Edinburgh University Vet School to improve animal health by better management of diseases such as mastitis. Participating farmers have been rewarded with higher bonuses and we have seen an improvement in milk quality.

Partnered with Natural Resources Wales on an innovative approach to offset effluent discharge levels at our Haverfordwest creamery, by working in collaboration with our farmers to reduce nutrient run off from their farms. The Welsh Government are now using this as a case study throughout Wales.

We look to constantly improve the economic, environmental and ethical sustainability of our supply chain – learning from best practice in dairy around the world and in other industries. We are also involved in a number of pan-industry initiatives, the leading role we played in the latest version of the Dairy Roadmap (www.dairyroadmap.com) is just one example.

As a farmer owned business we naturally look right along the supply chain from farm inputs right through to the packaging and foods that we deliver to consumers. We will continue working alongside our partners in 2014 to increase the pace and breadth of our activities.

Our 2020 commitments Against each programme area we have set long-term goals to define the kind of business we want to be by 2020. Sitting here in 2014, each of these goals is very challenging. However, we are committed to working with our farmers, employees and external partners to measure progress year-on-year and ultimately achieve these targets.

Food for the Future

Create great tasting, nutritious food.

Wheels, Yields & Deals

All our farmers are rewarded for sustainability activities.

Reduce, Renew, Recycle

All the energy that our sites use comes from renewable sources. All the packaging materials we use are recyclable or compostable.

Feed for the Future

Majority of our milk to come from forage and other locally grown energy sources.

Cow & Calf

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We have long lived cows that are the healthiest in the industry.

Our approach In order to have sustainability integrated into the heart of our thinking, each workstream is led by a senior manager, making it central to everyone’s job.

We recognise the need for change is universal. As a farmerowned co-operative, we believe that we are best placed to work with the industry and individuals.

Our governance Our activities are governed by our Sustainability steering group, chaired by one of our nonexecutive directors. Members include our chief executive and directors from relevant business functions such as Manufacturing, Communications, Membership and Strategy. The steering group meets six times a year to track performance against our targets and to discuss key issues and strategies.

Each of our five workstreams has a working group feeding into the steering group. These teams meet on a regular basis to coordinate and discuss key issues, and decide on any items that need to be elevated to the steering group.

FAI Farms provide strategic consultancy support to the steering group.

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Pages Page 82 / 9

Page Page 10 2 / 11

We hope that you find this report interesting and informative. If you have some input or views on our Sustainability programme, or would like to be kept up to date on what we are doing in this area, please contact us at communicationsteam@firstmilk.co.uk or on +44 (0)141 847 6786.

www.firstmilk.co.uk/sustainability

March 2014