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SUSTAINABILITY & RESPONSIBILITY (S&R) PROTECTING THE PLANET

3.5.5.4

Reducing the indirect CO 2

emissions

reducing, recycling and recovering waste on industrial sites with the ● aim of achieving the “zero waste to landfill” target and reducing the amount of waste incinerated. The circular economy is a key area of Pernod Ricard’s environmental strategy. In 2017, the Group made a commitment to the French Association of Private Enterprises (Association française des entreprises privées – AFEP) to take concrete measures to address this issue alongside around 30 other companies. Limit food waste 3.5.6.2 The Group estimates that few agricultural raw materials are wasted throughout its production chain: in upstream agriculture, the Group contributes to reducing food ● waste by reusing the by-products from the production of certain foods, such as broken rice in India or sugarcane molasses in Cuba, to produce alcohol. Moreover, the majority of agricultural raw materials used by the Group comes from the agricultural sector of developed countries which have high-quality agricultural infrastructure and short supply routes, enabling us to make use of the products without generating significant losses. In these conditions, cereals are very unlikely to perish. Grapes, however, are generally produced in short product chains (grapes, must or wine are delivered directly to our wineries by growers) which – again – limits the losses in the supply chain; on our production sites, the transformation of raw materials creates ● various types of organic by-products: spent grains, vinasses and grape pomace. More than 99% of these are recycled to manufacture animal feed, produce biogas, make farm compost or for other industrial purposes; at the consumer level, waste is very low as the wine and spirits ● generally have very long shelf lives compared to other food products, and the packaging is designed to be completely emptied. Implementing eco-design principles 3.5.6.3 The Group introduced its eco-design process in 2006 and it has now been rolled out through the following drivers: the Environmental Policy, which defines the Group’s eco-design ● commitments and which is implemented through the Environment Roadmap, specifying the action to be taken by 2020; an interactive eco-design tool for Marketing, Product Development ● and Procurement teams; monitoring of key indicators to track the implementation of the ● process: weight of glass and cardboard, adjusted for litres of bottled product; product Life Cycle Analysis software that enables the main Brand ● Companies to evaluate the environmental impact of their products and new developments; ongoing collaboration with Pernod Ricard suppliers and customers to ● improve the environmental impact of packaging throughout its life cycle. The main materials used in packaging are glass and cardboard. In FY18, the total amount of glass purchased totalled 902,879 tonnes and cardboard was 82,657 tonnes. These figures are significantly higher than those reported in previous years, which did not include glass and cardboard for third-party contract packers.

of our suppliers (Scope 3) As packaging accounts for 30% of the Group’s CO 2 footprint (mainly glass and cardboard), initiatives related to the eco-design of products contribute significantly to the reduction of Scope 3 emissions. This is particularly the case for the reduction of packaging (see paragraph “Implementing eco-design principles for packaging”). The second area in which the Group helps to reduce its indirect emissions is transport. It is estimated that around 80% of the transport used to distribute products from the Brand Company warehouses to direct customers is by sea. Optimising land transport reduces the impact of the business activities, for example by implementing better loading of vehicles, schedule adjustments, or even using an efficient system of rolling stock. In the USA, Pernod Ricard is a member of the Smartways association, which aims to reduce these emissions. In Europe, The Absolut Company is a member of the Clean Shipping Project. The Group plans to continue these initiatives in the future, particularly by strengthening its eco-design actions along the supply chain. Other emissions into the atmosphere 3.5.5.5 Other gas emissions in the atmosphere likely to affect our environment: these include emissions from cooling gases, some of which damages ● the ozone layer. Some of these gases also increase the greenhouse gas effect. A programme to eliminate the most environmentally harmful refrigerant gases has been ongoing for a number of years, resulting in the complete elimination of CFCs. The programme aims to reduce the proportion of HCFC gases, with the aim of eliminating them completely by 2020; nitrogen and sulphur oxide emissions (NOx and SOx) contributing ● indirectly to the greenhouse effect and environmental acidification. These compounds are produced by fossil fuel combustion. As emissions of these atmospheric pollutants for the alcoholic beverages sector are low compared to worldwide emissions, they appear to have no material impact for Pernod Ricard, and the Group does not consider it appropriate to monitor such emissions on an annual basis. However, the major distilleries ensure that they comply with the legal limits set for discharge of these pollutants. Acting for the circular economy 3.5.6 Challenges and strategy 3.5.6.1 The impact of our activities on the environment begins with the design of the products and continues throughout their life cycle. For this reason, Pernod Ricard implements eco-design principles when developing new products or packaging in order to reduce its overall environmental footprint, paying particular attention to the waste generated along the entire production chain. We know that consumers expect our brands to be sustainably managed, providing them with the highest quality while respecting the environment. To achieve this, our strategy is based on the following elements: optimising the use of our agricultural raw materials to avoid food ● waste; the implementation of eco-design principles to optimise packaging ● and reduce unnecessary consumption; participation in systems for the collection of used packaging in ● support of recycling;

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