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Grupo Bimbo Materiality

In 2019, Grupo Bimbo updated its materiality study to learn more about the new requirements and needs related to sustainability and our stakeholders' priorities.

Valora Sostenibilidad e Innovación was the consulting firm responsible for conducting the study. The materiality study encompassed six countries: Mexico, Colombia, Chile, Brazil, Spain and the United States, which stood out due to their relevance in the Grupo Bimbo market and are representative of the progress of its sustainability initiatives.

In developing the materiality analysis, the principles established through the Global Reporting Initiative (GRI) were considered in order to determine the content of the reports: Participation of interest groups, Context of sustainability, Exhaustiveness, and the principle of Materiality itself.

The material issues are determined based on the identification of a list of potentially relevant issues, through which the most significant issues (materiality) are prioritized, taking into account the perspective of stakeholders and the strategic outlook for the company.

The results obtained from this materiality study are the following:

From this matrix, the 10 priority points are the following:

  1. Responsible management practices in the supply chain. (2)

  2. Innovation of healthy products. (6)

  3. Sustainable packaging and circular economy. (39)

  4. Ethics and integrity. (20)

  5. Human rights in the supply chain. (5)

  6. Water management and protection. (33)

  7. Energy efficiency and renewable energies. (36)

  8. Waste management. (37)

  9. Adaptation to and mitigation of climate change. (35)

  10. Product safety and quality. (11)

Among the issues that were determined to be material, Grupo Bimbo has a specific management approach, with the exception of “Human rights in the supply chain.” While Grupo Bimbo has always acted in support of and with respect for human rights, we do not yet have current requirements related to this issue. Our routine management has always been through the application of our philosophy. These new times require a more specific management process, with a defined scope and clearer alignment with our sustainability strategy. For this reason, Grupo Bimbo has committed to working on the corresponding framework in 2020 in order to begin its implementation in 2021.

While they are at different stages of development, the remaining issues already have more definition with regard to their management approach.

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The reasons why these specific issues were determined to be material are explained below. For the sake of practically, the 10 top-priority material issues will be presented. If you wish to review the entire matrix, you may consult the full version of the Grupo Bimbo 2019 Materiality Report, available atwww.grupobimbo.com.

Material issues and their thresholds:

In the following graph, the limits of materiality and their definition structure by country are presented:

  1. Responsible management practices in the supply chain. (2)

Due to the size of our operations, responsible management of the supply chain has an impact on every market in which we operate, related to the sustainable management of supplies, work opportunities and the contribution to the local economy, as well as the work conditions for local employees. The most relevant markets for Grupo Bimbo at this time are: The United States of America, Mexico and Latin America.

The issue of Responsible management practices in the supply chain was material due to the following factors:

From the analysis of sectoral documents from the food and beverage industry that were taken as input for analysis and trends, this issue is key and it is a clear requirement for considering a company’s level of commitment to its community and stakeholders.

Another relevant factor is the emergence of legislation related to the responsible management of the supply chain, as in the case of the European Union, where they are aiming to disrupt a trend towards corruption and slavery within the global supply chains.

Therefore, the scope and impact are global, especially because many of our supply chain operations are global in supply.

The management of this issue is the responsibility of the Purchasing division, which through constant dialogue with collaborators has developed a methodology to evaluate the suppliers with regard to their practices and sustainable performance. Support is provided through the DESEO program, which is explained in the Value Chain section, and which serves as a methodology for maturity and development of sustainable business.

  1. Innovation in healthy products. (6)

As a leading baking company, Grupo Bimbo is sensitive to food regulation issues. In many countries, taxes have arisen for packaged sweetened products. Even though regulation is not yet widespread globally, there have already been initiatives and the implementation of taxes in countries such as Mexico, Chile, Ecuador and the United States. While success has been variable, it is expected for these regulations to continue growing in the future in their attempt to promote healthier eating habits and sustainable consumption.

From the point of view of the consumers, a healthy product is one that has eliminated additives, chemicals and pesticides from its formulations.

In Spain, the consumer places an emphasis on gluten-free, low-sugar, and low-fat products which represent a guideline for development in the bread market. The value of the product increases when it is sustained by the promise of naturalness and freshness.

In the United States, gluten-free options are a trend among the consumers, as they look for natural ingredients in brands such as Sara Lee.

The direct impact of Grupo Bimbo’s actions related to innovation and reformulation is reflected in the company’s perception as an active agent in the battle against major diseases like obesity, diabetes, anemia and cardiovascular diseases that greatly affect countries such as Mexico, the United States and some countries in Latin America.

Grupo Bimbo's Innovation division is responsible for developing the strategy and achieving results in the development of new products and their formulation.

  1. Sustainable packaging and circular economy. (39)

Climate change, waste and the amount of waste that is generated in the world have given rise to legislation which includes the circular economy as a process for reducing trash, waste and emissions from landfills. In 2018, Europe passed measures that aim to prevent waste and significantly intensify the recycling of municipal and packaging waste. It aims to gradually eliminate landfills and promote the use of economic instruments, such as extended producer responsibility plans.

In the United States, only some cities like New York have implemented circular economy regulations. Nevertheless, this shows how the trend in congested cities is becoming a priority.

Countries like Mexico, Chile and Brazil are beginning to create legislation regarding the issue and establishing new principles, objectives and instruments for solid waste management.

In countries like Spain, the younger population is critical of products with excess packaging, and since consumers’ value direct actions related to the reduction of pollution, the reduction of resources such as plastic, and actions focus on recycling.

Grupo Bimbo’s impact is found in post-consumer packaging. While the caliber of packaging has been reduced and biodegradable alternatives have been explored, work is still being done to recycle and reuse packaging as raw material for other products. Grupo Bimbo has continued its actions in the research and creation of alternatives for managing its post-consumer packaging.

  1. Ethics and integrity. (20)

The investors are the primary stakeholders that materialized this issue. As part of the companies’ priorities, there is the need to have a portfolio of companies that respect the rights of their partners, employees, suppliers and customers, and also for their relationship with them be based on ethics. A company that has unresolved problems with any of these issues suffers punishment from the potential investors.

  1. Human rights in the supply chain. (5)

Grupo Bimbo must foremost guarantee that its principles and guidelines necessary for promoting and respecting the human rights of people associated with the direct operation of the Group have the appropriate definitions and structure to be able to extend it to the supply chain. Stakeholders request this condition, and consequently it is an issue that is material for the company. Our philosophy contains the necessary elements that guarantee the human rights of people associated with the company. Nevertheless, the issue has evolved and a documentary update is necessary which allows for better monitoring and reporting.

Stakeholders are interested in having best practices, especially related to the protection of people, extend to the entire value chain and are not exclusively within the company. For this reason, the work that Grupo Bimbo does with its entire value chain is important.

Some countries in which we work are facing social challenges; consequently the protection of human rights is a key factor for countering many of the issues and creating more appropriate conditions for both development and wellbeing.

  1. Water management and protection. (33)

The water stress that is experienced globally makes this issue material for all types of industries, including the food industry to which we as Grupo Bimbo belong. In recent years, we have experienced an increase in regulations and more awareness about the use of this essential resource.

  1. Energy efficiency and renewable energies. (36)

Suppliers consider the issue to be relevant due to the protection of the environment involved and due to the savings that they generate for the business.

  1. Waste management. (37)

One of the biggest concerns globally are the plastics that are generated through the use of packaging, primarily in the post-consumer phase, and that have an impact on the natural capital and fauna throughout the world. Concern about the pollution of oceans saturated with plastic has raised people’s solidarity and concern for the species that inhabit these ecosystems. The materiality exercise is sensitive to this concern and generalized expression regarding the use of plastics and we are listening to it carefully in order to provide a solution to this situation.

In addition, concern is being expressed about food waste. Stakeholders have expressed their concern about the waste of food, which is also an issue that we are listening to carefully and we are providing a solution through an improvement to our processes and collective efforts with our value chain.

  1. Adaptation and mitigation of climate change. (35)

Climate change is a reality and we have started to see a sample of its effects. Multiple stakeholders are demonstrating their concern with regard to Grupo Bimbo’s ability to adapt to this reality. For example, investors want to feel certainty that the risk is measured and there is an adaptation plan to ensure the operation of the business and its viability in spite of this reality. The customers also require the support of a plan that ensures that their business will continue receiving our products, especially at medium-sized businesses that depend on this supply for their longevity.

  1. Product safety and quality. (11)

The Grupo Bimbo portfolio of products must be adapted to the market’s requirements. Stakeholders are expressing their interest in a diverse portfolio that offers healthy options among the variety of products that we offer. They want to know about the impacts of the different products on their health and their safety.

In addition to these issues, Grupo Bimbo is considering 30 additional issues that our stakeholders ranked as less relevant even though they expressed their interest in the company taking them into account to address them as part of the sustainable agenda.

These issues are shown in the general matrix with the corresponding prioritization.