2022 UDA Cooperative Sustainability Report (CSR)

Cooperative Sustainability Report

2022

Table of Contents

Message From our Leaders

01

Materiality

03

Sustainable Development Goals

06

U.S. Dairy Stewardship Commitment

08

2030 Targets

09

People & Community

10

Plant Metrics

12

On Farm Metrics

18

Animal Well Being

19

Scorecard

20

Conclusion

21

About this Report

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Message from our leaders As we look back on a year of challenges and triumphs, we remain proud and inspired by the collective efforts of our team to promote a more sustainable environment and community.

It is with great pleasure that we present the 2022 Sustainability Report and share the milestones and advances we've made this past year.

In this report, you will find detailed information about our sustainable initiatives, from environmental care to social impact and animal wellbeing. It is a testament to our ongoing commitment to improve and ensure we remain considerate of our impact on society and the environment.

We realized early on that businesses have a crucial role to play in preserving the planet and improving society. As such, we've ingrained sustainability into the very fabric of our organization, ensuring that we create value for all our stakeholders without compromising the future.

Thank you for your unwavering support and for joining us on this journey. We hope that our efforts inspire you as they do us. Let's continue to write our sustainability story, demonstrating that business success and a sustainable future are not mutually exclusive, but inherently intertwined.

Robert Chesler CEO

Craig Caballero Chairman of the Board

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Materiality Recognizing and prioritizing the subjects that significantly affect our organization remains a cornerstone of our sustainability process.

Upholding an atmosphere of openness, responsibility, and mutual trust is fundamental to UDA and all our stakeholders.

As a long-standing member of the Innovation Center for U.S. Dairy and adoptee of the U.S. Dairy Stewardship Commitment, we align with the materiality assessment conducted by the Innovation Center in 2021.

This assessment includes valuable feedback from various sector stakeholders and serves as a milestone towards enhancing our sustainability practices.

The spectrum of sustainability evolves continuously, shaping both our own industry and those beyond. This constant transformation necessitates frequent revisions to our sustainability approach. In line with this, UDA will conduct a comprehensive and formal materiality assessment in 2024, following the standards set in the GRI Universal Standards (GRI 3: Material Topics 2021) and GRI Sector Standards (GRI 13: Agriculture, Aquaculture, and Fishing Sectors 2022). We will publish the outcome of this evaluation later in the same year. The insights garnered from this exercise will enable us to streamline our efforts and ensure we stay on track to meet our sustainability goals.

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Materiality At UDA, we believe that sustainability lies at the heart of everything we do, shaping our strategy and operations to ensure a better future for the dairy industry, our farmers, employees, communities, and the planet.

Holistic Perspective

Stakeholder Engagement

Supply Chain Transparency & Traceability

We view sustainability as a holistic concept that encompasses environmental, social, and economic dimensions. We recognize that a balanced approach is vital for longterm success and aim to integrate sustainability across all aspects of our business.

We actively engage with our stakeholders, including producers, employees, consumers, customers, local communities, NGOs, and regulatory bodies, to understand their concerns, expectations, and aspirations. This collaborative approach enables us to align our sustainability goals with their needs and create shared value.

We prioritize transparency and traceability throughout our supply chain to ensure the highest standards of sustainable sourcing. We work closely with our producers and suppliers to promote responsible farming practices, animal welfare, and ethical sourcing.

We have developed a comprehensive framework that integrates sustainability into our everyday operations, enabling us to set sustainability goals, monitor progress, and drive continuous improvement. This framework includes key performance indicators (KPIs) to measure and track our sustainability performance, helping us identify areas for improvement and define appropriate actions.

Governance and Leadership Our Board of Directors, comprising experienced professionals from the dairy industry, provides oversight and guidance on sustainability matters. Our senior management team ensures that sustainability is embedded in our business strategy and day-to-day decision-making processes.

Certifications and Reporting We seek certifications through partners like EcoVadis to validate our commitment to sustainability and demonstrate our adherence to recognized standards.

This report is an annual sustainability report aligned with leading frameworks set and recommended for the agriculture industry to provide transparent and credible information on our sustainability performance, goals, and continuous improvement efforts. This report seeks to comply with the GRI Sustainability Reporting Standards and sector guidance, and Sustainability Accounting Standards Board (SASB) Standards for Agricultural Products; Meat, Poultry, and Dairy.

The Assessment Covers Four Themes

Environment

Ethics Labor & Human Rights Sustainable Procurement

In March of 2023*, we were honored to receive a GOLD Ecovadis sustainability rating!

With a 33% increase from the year prior, this rating is a true testament to how hard we are focusing on sustainability initiatives throughout the organization. *Based off data gathered in 2022.

U.N. Sustainable Development Goals Supporting the United Nations Sustainable Development Goals (SDGs) is not just a responsibility, but a necessity for envisioning a world embedded in sustainability, equity, and prosperity. These 17 interconnected goals provide a universal blueprint that calls action across all sectors of society—governments, private sector, civil society, and individuals—to halt and reverse the harm inflicted on our planet, while also building a future where no one is left behind.

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End poverty in all it’s forms everywhere.

End hunger, achieve food security and improved nutrition and promote sustainable agriculture.

Ensure availability and sustainable management of water and sanitation for all.

Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all.

Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation.

Make cities and human settlements inclusive, safe, resilient and sustainable.

Ensure sustainable consumption and production patterns.

Take urgent action to combat climate change and its impacts.

Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss.

U.S. Dairy Stewardship Commitment United Dairymen of Arizona is a proud adopter of the U.S. Dairy Stewardship Commitment, affirming to our customers, our consumers, and the global marketplace UDA’s pledge to responsible dairy production as we nourish the communities we serve. We join other dairy cooperatives and companies around the country in working hard to assure best practices in important areas like animal welfare, workforce development and safety, community impact, and product safety and quality.

We strive to continually improve as we listen to end engage with our diverse stakeholders about what is most important to them. And we pledge to contribute to U.S. dairy’s ability to rack and report progress – from farm to table – in the global market place.

8

2030 Targets In 2022, we joined the fight against climate change with a validated science-based target for carbon reduction.

Science-based targets provide companies with a clearly defined roadmap to reduce emissions in line with the Paris Agreement goals. More than 3,000 businesses worldwide are already partnering with the Science Based Targets initiative (SBTi).

A company’s ability to achieve its sustainability goals is only as strong as the data that sets the baseline and the detailed plan that provides the pathway to achieving those goals.

To ensure UDA collected the most meaningful data, team members from across the business collaborated to establish an accurate baseline. Once UDA established the baseline, the team worked on gathering a complete carbon inventory and creating sustainability targets in four areas.

V al

ed id a t i SBT

CARBON

REDUCE SCOPE 1 & 2 GHG EMISSIONS BY 50%; GENERAL SCOPE 3 REDUCTION

ENERGY

WATER

INCREASE THE USE OF RENEWABLE ENERGY MIX AT PLANT AND FLEET

REDUCE WATER WITHDRAWAL PER MILLION POUNDS PROCESSED BY 15%

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WASTE

MAINTAIN 99% DIVERSION RATE OF WASTE FROM LANDFILL FOR NEXT 10 YEARS

People & Community Employee Safety At UDA, employee safety is a core priority. In 2022, we carefully maintained and improved safety protocols and procedures, resulting in our Average DART (Days Away Restricted or Transferred) rate of 2.4, compared to the industry average of 3.8*. This decrease testifies to our successful safety enhancement projects across our facilities.

Cases per 100 full-time employees

Days Away Restricted Transferred Rate

5 4 3 2 1 0

4.5

2.8

2.4

2018

2020

2022

Employee Metrics

347

Total Employees in 2022

Benefits:

To keep our talent, UDA offers a robust set of benefits that include: Health insurance (with employer contributions) 401k retirement (with employer match) Onsite Market Employee wellness programs Onsite gym Onsite health clinic

*Rate as published by the U.S. Bureau of Labor Statistics for Dairy Product Manufacturing (NAICS Code 3115) for 2022.

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Community Engagement In 2022, our organization took remarkable strides in our commitment to giving back to the local community. We are proud to share that our employees dedicated nearly 200 hours to various causes, demonstrating their passion for making a positive impact and commitment to social responsibility.

Our Community Giving Campaigns contributed significantly to the local food banks, where the need for milk and other food products is substantial. We donated over $40,000 in products and food to organizations such as United Food Bank and Tempe Community Action Agency, among others.

Organizations Supported

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Plant Metrics In analyzing our plant operations over the past few years, we can observe considerable improvements in both energy use and Greenhouse Gas (GHG) emission intensities.

Our sustainability report reflects the progress we've made in reducing our plant's energy use and greenhouse gas (GHG) emissions intensities over the past few years.

We experienced a small increase in energy use intensity at the end of the last decade, but since then, we've made significant strides in improving energy efficiency. By 2022, we've drastically cut down our energy use intensity compared to the baseline set in 2018.

Similarly, our reports show progressive improvement in reducing our onsite GHG emission intensity. After a minor decrease at the start, we followed with major reduction strategies, resulting in a noticeable drop by 2022.

These changes not only underscore our dedication towards lightening our environmental footprint but also represent the success of modifications made in our plant operations. Our focus is to keep amping up energy efficiency and muscle down GHG emissions even further.

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Plant Metrics GHG Emissions Intensity by Scope Scope 1

GHG Emissions per Million Pounds Processed

Scope 2

35

35 25

11.69

10.71

30

9.38

20 15 10

23.19

24.05

MT CO2e

MT CO2e

30

18.69

20 15

34.88

34.76

28.07

2018

2020

2022

10 5

5 0

25

2018

2020

0

2022

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Plant Metrics Water Withdrawal In 2022, our organization set forth on an ambitious path to better manage our water usage, with the goal of lessening our overall water withdrawal compared to our levels back in 2020. To achieve this, we rolled out some new strategies, like optimizing our water recovery and reusing processes, investing in water-saving tech, and stepping up our game with employee training. The effort surely paid off!

That said, when we step back and look at the bigger picture from 2018 to 2022, we notice an interesting trend; we actually saw an overall increase in our water withdrawals. It's a small increase, but still something we will continue to monitor.

While we've made noteworthy strides in managing our water withdrawal in recent years, this discovery puts things into perspective. It's clear that we need to dial up our efforts and tackle these challenges head on.

Freshwater Use Intensity Gallons/MM lbs. processed 140 120 100 80 60

115.83

134.38

119.20

2018

2020

2022

40 20 0

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Project Desert Water In 2022, we launched "Project Desert Water," a dedicated cross departmental group committed to conserving the precious resource of water.

Through scrutinizing water usage data, this proactive initiative aims to ascertain and establish both short- and long-term solutions designed to optimize water use efficiency.

Operating under the principles of the 4Rs – Recycle, Reduce, Reuse, and Replenish, the project captures ample benefits from water conservation, both environmentally and financially. The overarching objective is to bolster UDA's knowledge and commitment to sustainable practices.

15

Plant Metrics Waste Diversion We strive to maintain a waste diversion rate of over 99%, minimizing our environmental footprint. How do we do it? We've adopted an innovative, circular approach to waste utilization that benefits not only our operations but also our planet.

A significant portion of our by-products are repurposed as nutritious feed for our cows.

This eco-friendly practice allows us to create a sustainable cycle of resource usage - the waste generated during milk production returns to the cows, contributing to their growth and wholesome milk production.

Nevertheless, cow feed isn't the final destination for all of our by-products. Anything that doesn't go towards nourishing the cows is sent to an anaerobic digester - a device that breaks down biodegradable material in the absence of oxygen. Digesters transform by-products into electricity to power homes and businesses.

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Cows: The Ultimate Recyclers in Food Waste Management Cows, the unassuming environmental catalysts on our dairy farms, contribute to a fascinating, circular food waste recycling chain by consuming food byproducts that might otherwise end up as waste.

From Byproducts to Bovine Banquet Dairy cows have a diverse diet incorporating byproducts from several industries.

Almond Hulls — The almond industry leaves behind plenty of hulls which are a tremendous source of fiber.

Cottonseed — The cotton industry, too, produces residues; leftover cottonseeds provide our cows with valuable fat and protein.

Expired Produce — Some of the 'less than perfect' produce from grocery stores are an excellent source of sugar for dairy cows.

From Bovine Banquet to Fertilizer (and more) An equally remarkable component of this waste management cycle is cows' manure.

Our Arizona dairy farmers ingeniously use this manure as fertilizer for crops. The very feed that cows consume springs from the crops, seamlessly bringing the cycle full circle.

To sum it up, cows eat the crops, produce milk (and manure) from their feed, and we use the milk for various dairy products. The manure then goes back to help fertilize the next round of crops or to a methane digester to create power for homes and businesses.

DID YOU KNOW?

~30% OF A COW’S DIET IS MADE UP OF FOOD BYPRODUCTS.

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On-Farm Metrics

Energy & Green House Gas Emissions In 2022, UDA's member farms took major leaps forward in cutting down energy consumption and Greenhouse Gas (GHG) emissions intensity within their operations.

When it comes to energy use intensity (based on a cool metric called Fat and Protein Corrected Milk or FPCM), we saw a considerable decrease compared to our 2018 levels.

Even though we experienced a slight increase in 2022, we still came out on top with an overall reduction compared to our baseline.

The progress in managing on-farm GHG emissions was even more remarkable—emitting fewer CO2 equivalents per pound of FPCM. They managed to bring those emissions down significantly between 2018 and 2020, and despite a small uptick in 2022, we still achieved a substantial overall reduction from our baseline level.

This progress underscores the dedication to embracing eco-friendly practices and shrinking our carbon footprint. It also highlights the success of our energy efficiency and GHG emissions reduction initiatives that are already in place, and we're eager to keep the momentum going!

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Animal Wellbeing Our Focus: Our dairy farmers understand that when they take good care of their cows, they get high-quality milk. To achieve this, they collaborate closely with veterinarians and nutritionists to keep cows healthy and comfortable. Regular check-ups, vaccinations, and prompt treatment of illness are all part of our comprehensive healthcare approach. When cows need antibiotics, they are separated from the herd during treatment to ensure their milk doesn't enter the milk supply.

Since warm weather in Arizona can be challenging, member dairies are equipped with sophisticated cooling systems to keep the cows comfortable. They also work with dedicated cow nutritionists to formulate well-balanced diets for their dairy herds.

Standards: 100% of our member farms participate in the National Dairy FARM animal care program – a nationwide, verifiable animal well-being program that brings consistency and uniformity to on-farm animal care and production practices.

In addition, we’ve committed to using the DairyKind training platform to assist in training all of our dairy employees.

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Scorecard 2018 FARM Energy use intensity

2020

2022

Change from baseline year (2018)

2.65

2.29

2.43

-8.2%

1.22

1.04

1.05

-13.6%

506.79

517.47

434.54

-14.3%

34.88

34.76

28.07

-19.5%

115.83

134.38

119.20

2.9%

Percentage of re-claimed water used in the plant

27.98%

47.57%

36.37%

30.0%

Percentage of total waste stream diverted from landfill

99.06%

99.35%

99.38% 0.32%

Percentage of total waste stream sent to landfill or incineration without energy recovery

0.94%

0.65%

0.62%

-34.1%

Number of jobs supplied.

300

307

347

15.7%

DART rate

4.5

2.8

2.47

-45.1%

FARM ES Program Participation

71%

85%

100%

40.8%

(MMBTUs/lb. FPCM)

FARM GHG emissions intensity (lb. CO2e/lb. FPCM)

PLANT Energy use intensity

(MMBTUs/million lbs. processed)

PLANT GHG emissions intensity

(metric tons CO2e/million lbs. processed)

Freshwater use intensity* (Gallons / million lbs. processed)

*In furtherance of our commitment to transparency and accuracy, we have updated the water withdrawal data for 2018 and 2020. Initially, we relied on meter readings for water usage measurements, but found inconsistencies.

To maintain integrity in reporting, we have shifted to using data from our utility provider. The previously-stated figures for 2018 and 2020 were underestimated due to metering discrepancies. We have corrected these figures to more accurately reflect water usage for both years.

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Conclusion Looking back, 2022 was a crucial year in UDA's ongoing quest for sustainability.

On the Farm Member farms achieved remarkable progress in lessening both energy consumption intensity and greenhouse gas (GHG) emissions across their operations.

At the Plant UDA proudly cut its energy consumption by a noteworthy 19% compared to the previous year, marking a significant accomplishment.

In the domain of water management, efficient recovery and reuse processes were embraced, along with the integration of cutting-edge water-saving technologies and a strong emphasis on employee training and engagement. These efforts led to impressive savings. Although some increases in water usage were observed in the broader timeline, opportunities remain for amplifying conservation efforts.

While the progress made in 2022 is highly encouraging, UDA recognizes the importance of forward momentum. Achieving year-over-year improvements is essential, but so is consistently comparing results to the established baseline, which offers an accurate representation of UDA's progress in sustainability and environmental impact.

Moving forward, UDA plans to redouble its efforts in embedding sustainability at the heart of its operations. The organization remains steadfast in its commitment to bolster energy efficiency and further curtail GHG emissions. As part of this ongoing pledge, water management practices will be spotlighted to ensure that progress in water conservation persists on an upward trajectory.

In conclusion, 2022 fortified UDA's dedication to a greener future. The organization is now more determined than ever to seize the opportunities and tackle the challenges that lie ahead on the ambitious path toward sustainability.

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About this

Report This report is the United Dairymen of Arizona’s fifth Cooperative Sustainability Report (CSR).

The sustainability efforts at United Dairymen of Arizona (UDA) are aligned with the U.S. dairy industry efforts presented in the Innovation Center for U.S. Dairy’s Stewardship and Sustainability Framework.

Our on-farm sustainability data include the full range of material environmental and animal care measures. Sustainability performance data from our processing plant reflect the full range of material environmental, community, and employee topics. This report summarizes the full calendar year of 2022.

We have attempted to follow scientific protocols that are used as the basis of industry measures, and those emerging as recommended standards within the dairy industry. We have taken significant efforts to ensure the accuracy and reliability of this information. However, this information has not been audited and is not guaranteed.

UDA does not have direct control over its member farms. The report is not intended to be a solicitation or advertisement of UDA dairy products. This report does not include specifications, characteristics, uses, or benefits of UDA’s dairy products and cannot be relied upon for such purposes. Forward-looking statements, opinions, valuations, and estimates provided in this report are based on assumptions and contingencies, which are subject to change without notice.

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2022 Cooperative Sustainability Report