Sustainability Report

Transcription

1 Sustainability Report Frontier Co-op Fiscal Year 2018 PRODUCTS

2 2 On the cover: Turmeric growers in India enjoy a joke with the farm extension agent from our Well Earth partner PDS. Frontier Co-op provided a grant of $31,000 to help develop a farmer-support program for growing high-curcumin heirloom varieties of turmeric.

3 CEO LETTER We first began producing an annual sustainability report in 2005 to publicly provide a detailed look at our sustainability efforts for our members, our employees and the public. In FY16, we adopted GRI Sustainability Reporting Guidelines, the established international criteria for sustainability reporting. The reports comprehensively and transparently detail our co-op s background, our products, how we source, our packaging, the energy we use and the waste we create in our overall operations. It highlights our relationships with employees, customers and communities here at home and around the world. It also shows how we both improve the lives of those in our sourcing communities and ensure product quality through social giving. As in our previous report, we end with a section outlining our sustainability targets, which are the benchmarks we re using to measure our success in the future. Please me at ceo@frontiercoop.com with any comments or questions about the information in our report. You re sincerely invited to get involved with helping Frontier Co-op be as sustainable as possible. Tony Bedard, CEO Frontier Co-op 3

4 PRODUCTS

5 CONTENTS CEO Letter Company Background Products Sourcing Frontier Co-op s Well Earth Initiative Fair Trade Organic Packaging Operations Facilities Overview Utilities Water Emissions Waste Employees Demographics Pay & Benefits Employee Satisfaction Health & Wellness Safety Customers Giving Back Sustainability Targets Appendix GRI Index Page 4: Frontier Co-op Executive Vice President of Operations Cole Daily checks out a field of lavender while visiting our Well Earth supplier in Bulgaria. A NOTE ABOUT THE DATES IN THIS REPORT We report in accordance with our fiscal year, which runs from July 1 to June 30. The fiscal years during which data is collected are named according to their ending calendar year for example, the fiscal year ending 6/30/16 is referred to as FY16. 5

6 6 PRODUCTS

7 COMPANY BACKGROUND M Origin and History Frontier Co-op (originally named Frontier Herbs ) began as a two-person operation in 1976 in a cabin along the Cedar River in Eastern Iowa. The business was originally structured as a cooperative that supplied wholesale herbs and spices to its members, repackaging several hundred varieties of herbs and spices into smaller one- and two-pound bags. Customers then resold these products in bulk to their retail customers. Subsequent growth resulted in the purchase of a ten-acre parcel of Iowa farmland in 1982 near Norway, Iowa, and the construction of a 21,000-square foot facility. Plant expansions in 1984, 1988 and 1993 increased the Norway facility size to over 85,000 square feet. Frontier Co-op now owns an additional 50 acres of land adjacent to the main facility, 22 acres of which are maintained as tallgrass prairie. The co-op has subsequently purchased and remodeled facilities in the nearby Iowa towns of Urbana, North Liberty, and Belle Plaine. In 1988 Frontier Co-op introduced a line of packaged spices that developed into a significant sales contributor and laid important groundwork for the establishment of the Simply Organic brand in Simply Organic quickly became the fastest growing brand in natural seasonings and the leading brand in the explosively growing category of organic seasonings. (Frontier Co-op had been an industry leader in recognizing the value of organic agriculture and promoting organically grown products since the 1980s). In 1981 Frontier Co-op elected its first Board of Directors. Early in its history, Frontier Co-op had accommodated its members by buying bulk quantities of essential oils and rebottling them into.33-ounce glass bottles. This line grew steadily as the concept and practice of aromatherapy became increasingly popular. In 1993 the coop, Frontier Co-op acquired Aura Cacia, a fast-growing essential oils and essential oils-based personal care products company. The brand has grown to become the clear market leader in natural health outlets nationwide. Frontier Co-op has grown steadily over the decades to become a major supplier in the natural products industry with three industry-leading brands: Frontier Co-op, Simply Organic and Aura Cacia. Page 6: The small cabin where Frontier Co-op began in

8 COMPANY M M M M Frontier Co-op Today Frontier Co-op distributes to a wide range of customers: distributors, wholesale members, wholesale non-members, and retail customers that place orders via phone, mail and the co-op s websites. The bulk of Frontier Co-op s sales are to stores in the U.S. and Canada. See the Appendix for more detailed information. Mission and Values Value-Driven We care deeply about our co-op s impact on the world and do business in a way that reflects this. We re committed to and make a special effort to help the communities around the world where our products are grown. These are often disadvantaged agricultural areas struggling with economic and social problems where our relationships have major impacts on quality of life. From our earliest days, we have been committed to doing business the right way, which is reflected in our Values Statement: In all that we do, at all times and with all people, we will conduct our affairs and the affairs of the company with unwavering integrity. We know that sustainability, social responsibility and integrity are important to our co-op members, and we try to advance these values with every decision we make. Co-op Structure Frontier Co-op is a cooperative corporation under the laws of the State of Iowa with Articles of Incorporation that state the Cooperative shall be operated for the primary and mutual benefit of its members as patrons of its goods and services.... (See more detailed info about the co-op structure in the Appendix.) the board of directors Frontier Co-op is governed by a nine-member Board of Directors, made up of six directors elected by the membership on a one-member, one-vote basis for threeyear terms (patron directors), two members elected by the Board for two-year terms (at-large directors) and the Chief Executive Officer (CEO) of the company. The Board s mandate is to provide direction and oversight for the business and affairs of the Cooperative, and to act in the interests of the members. How the Co-op Works Frontier Co-op s member-owners are our wholesale customers who buy and resell our products. Frontier Co-op had about 21,000 active members at the end of FY18. These members provide the capital for the business to operate and are represented as owners of Frontier Co-op through an elected Board of Directors. Each year, they divide the co-op s profits, each member getting a share equal to the percentage that their purchases were of the co-op s total member sales. Frontier Co-op Members stores and organizations reselling our products Profit$ the co-op s profits are shared according to member purchases that year How a co-op works Board of directors Members get one vote each to elect a Board of Directors to represent them in their co-op s decisions 8

9 The Sustainable Vanilla Initiative The Sustainable Vanilla Initiative (SVI) aims to improve vanilla bean farmers livelihoods and assure the long-term stable supply of high-quality natural vanilla. This voluntary initiative brings together manufacturers, traders, exporters and public authorities worldwide to address social, environmental and economic issues in the vanilla industry. Vanilla is an important product for our co-op. We have close ties to many of our suppliers and recognize the challenges facing poor vanilla farming communities. We support vanilla farmers and their communities through our Well Earth program and Fair Trade Certification, but we also recognize that the challenges facing them are far greater than any one company can solve on its own. For that reason, Frontier Co-op became one of the first members of the Sustainable Vanilla Initiative and now also sits on its global Steering Committee. Launched in 2015, the SVI has to date 1) contributed to the development of a code of conduct for Madagascar vanilla market participants that was signed by Madagascar s Prime Minister and more than 40 vanilla exporters, 2) organized a Paris conference of government officials, representatives of growers, exporters and international companies to plan market reform the first meeting of this kind in more than 20 years, and 3) been awarded a $4 million grant by the U.S. Department of Labor to further pursue its work with Madagascar. This is a long-term initiative that will require a lot of hard work over many years, but we feel good to be part of this industry-wide effort to effect change. M M advantages of co-op ownership This special relationship of having our member-owners in direct contact with the people using our products has given us unique insights both into those customers product preferences and, just as importantly, their values. Our co-op structure is at the root of the honest, responsible way we practice business an approach that is increasingly valued among consumers of all kinds. Cooperative ownership allows our business to take a long-term, sustainable approach, rather than being driven by short-term gains, because our members place value on product quality, responsibility, and the long-term viability of the company. Memberships and Organizations This report describes our ongoing efforts to conduct our business in a way that allows Frontier Co-op to make positive contributions to society while minimizing our footprint on the environment. We realize, however, that some problems go beyond the scope of our single business. Therefore, we participate in a variety of industry organizations that are addressing those larger sustainability challenges. Here s a list of these organizations we re participating in at the time of this report: American Herbal Products Association (AHPA) Frontier Co-op is a member. American Spice Trade Association (ASTA) Frontier Co-op is a member. Organic Trade Association (OTA) Frontier Co-op is a member. Sustainable Vanilla Initiative Frontier Co-op was one of the first members and is now on the group s steering committee. Iowa Sustainable Business Forum Frontier Co-op is a founding member and is on the Board of Directors. Sustainable Packaging Coalition Frontier Co-op is a member. GreenBlue Frontier Co-op is a member Natural and Organic Health & Beauty Alliance (NOHBA) Frontier Co-op is a founding member and represented on the Board COMPANY 9

10 10 PRODUCTS

11 PRODUCTS M M OUR PRODUCTS Frontier Co-op provides botanical and botanically based products that support a natural lifestyle. Our product objective is to provide safe, high-quality branded products that are compliant with all regulations while meeting the needs of our customers. Brands and Businesses Our products fall into two categories or business units: Foods & Flavorings and Essentials. Foods & Flavorings includes Frontier Co-op bulk spices, herbs, food ingredients, teas, and seasonings and Frontier Co-op and Simply Organic brands of bottled spices, seasonings and flavors. Essentials includes Aura Cacia essential oils, bath products and other botanical-based aromatherapy personal care products. We also maintain our own distribution business that services natural product stores, buying clubs and other retailers with more than 7,300 products across more than 345 brands, as well as 1,500 of our own branded Foods & Flavoring and Essentials products. M Full Ingredient Disclosure The FDA does not require that ingredients be listed for many of our products, but our commitment is to be transparent about everything we are putting in our products. We provide a complete list of all ingredients for all our items in our wholesale catalog and on our labels and we answer all inquiries about ingredients openly. M Genetically engineered (GMO) ingredient elimination and animal health. We believe genetically engineered crops, as currently regulated, constitute a significant risk to organic agriculture and may have other risks to long-term biodiversity and to human Between organic certification (which prohibits use of GMOs) and non-gmo verification through the Non-GMO Project, 59% of our Foods & Flavorings products are organic certified and 49% are Non-GMO Project verified. On the Essentials side, 21% of our Aura Cacia essential oils are organic certified and 15% are Non-GMO Project verified. For the remaining products, we have vendor statements stating that ingredients are not derived from GMOs and we are working to get thirdparty verification of these statements. Page 10: A selection from the extensive variety of products offered in Frontier Co-op s three brands. 11

12 PRODUCTS M Allergen control As the awareness of various allergens continues to increase, we ve taken steps to improve our allergencontrol processes. We have strict procedures in place to prevent cross-contamination. When we process products that have any FDA-defined allergens including milk, fish, tree nuts, wheat and soybeans we do a special cleanup to eliminate crosscontamination. Eggs, peanuts, and shellfish are not allowed at all in our manufacturing facilities due to the large number of people with extreme allergic reactions to these products. We carry a number of Simply Organic brand items that are certified gluten-free by the Gluten Free Certification Organization (GFCO). M Non-irradiation, non-eto, and other prohibited ingredients Herb, spice and other food ingredients we source for our products must meet strict standards we have defined for individual ingredients. Our product standard covers post-harvest treatment and processing. We do not purchase any herbs or spices that have been treated with irradiation or chemicals such as ethylene oxide (ETO), and there are a number of other ingredients and processes that are not allowed. For more information, including a list of ingredients and processes we don t allow, see the section Product Standards in the Appendix. Standards prepped for high-performance liquid chromatography constituent analysis. 12

13 M Product Quality and Safety In addition to our standards for product ingredients, we have made commitments to product quality and food safety. Here are the principles we ve set out for product quality and safety: We will not compromise on the safety of a product under any circumstance. Compliance with all relevant laws and regulations is not negotiable. People and equipment will be made available to ensure the safety and quality of our products. We will support the continued development, maintenance and improvement of our quality programs. Learn more about our quality and food safety programs, including our clean pasteurization system in the Quality and Food Safety section of the Appendix. PRODUCTS Pink Himalayan Salt being bottled. 13

14 14 PRODUCTS

15 SOURCING M SOURCING One of the sustainability values championed by Frontier Co-op is impact sourcing purchasing our botanical products in a way that creates a positive impact on people and communities. M Our purchases from co-ops and other socially and environmentally responsible sources help support and spread the positive values of their businesses. We continually seek out opportunities to invest in sources that create social and environmental value. Beyond that, we provide grants for infrastructure and business training, invest time and share our years of expertise to help responsible suppliers meet our requirements and those of certification agencies. Rumi Spice Saffron Saffron is an example of how our sustainable sourcing has a positive impact. Much of our saffron is purchased from Rumi Spice, a business formed by U.S. military veterans who served in Afghanistan and went back to help the farmers they had met develop saffron as an export crop. We ve worked closely with Rumi Spice to improve the quality of their saffron production this has included funding for equipment, quality assurance training and supervision, as well as extensive testing and the implementation of continuous improvement systems. By sourcing directly from rural Afghan farmers and reinvesting profits there, Rumi Spice provides impoverished farmers with otherwise unavailable economic opportunities. Page 14: Some of the world s best saffron is grown in Afghanistan. We have worked with our Well Earth partner, Rumi Spice, to provide new opportunities for struggling Afghan farmers. Our grant of $76,000 for infrastructure and job training in Afghanistan created hundreds of jobs for local women. 15

16 PRODUCTS Oregon, USA Peppermint Spearmint Alfalfa Catnip Echinacea Skullcap Washington, USA Ginseng Goldenseal California, USA Garlic Onion OUR CURRENT WELL EARTH PARTNERS New Mexico, USA Chili Peppers Peru Ginger Cacao Nibs Cocoa Paraguay: Chia Seed Guatemala Cardamom Allspice Turmeric Morocco Chamomile, Neroli, & Rosemary Argan Oil Essential Oils Haiti Vetiver Essential Oils Senegal Baobab Spain Olive Leaf Rosemary Saffron Stevia Thyme (+6 other botanicals) Tunisia Dill Weed Parsley Turkey Anise Cumin Fennel Oregano Poppy Bay Winter Savory Albania Sage Uganda Vanilla Ethiopia Sesame Madagascar Vanilla Vetiver Ylang Ylang Extra Essential Oil Bulgaria Blackberry Coriander Thyme (+35 other botanicals) Afghanistan Saffron Nepal Wintergreen Essential Oil India Turmeric Black Pepper Green Peppercorns Jasmine Absolute Oil Peppermint Oil Cayenne Red Chili Peppers Cumin Fenugreek Seed Cloves China Garlic Australia Sandalwood Vietnam Black Pepper Cinnamon Star Anise Sri Lanka Cinnamon Cloves Ginger Lemongrass Mace Nutmeg White Pepper Tumeric Gotu Kola Black Pepper Well Earth is our proactive program to find and develop ethical sources of high-quality botanical products. Focusing on business building (improving suppliers infrastructure and product quality) and community building (investing funds in supplier communities in-country), we have provided more than $1.5 million to fund projects since the program s inception. These include investing in organic crop trials in India and the US, expanding organically cultivated land in the US, providing training to help organic and fair trade suppliers work more efficiently in India and Sri Lanka, building and funding schools in Madagascar and Vietnam, bringing clean water to communities in Africa and Asia, funding a dental clinic in Guatemala, and providing training to farmers and growers in the United States. (See more about our support of grower communities in the Giving Back section.) An important Well Earth benefit to farmers is the ability to enter into long-term contracts with Frontier Co-op and confidently plan their production and sustainable operations. We also invest in infrastructure and continue to support growth in sustainable agricultural practices. For example, we help suppliers improve their processing capabilities and train staff. At the end of FY18, we had 33 suppliers in our Well Earth program. See more about our Well Earth program in the Sourcing section of the Appendix. 16

17 M Sustainable Sourcing Our objective is to continually increase the volumes of sustainably sourced botanicals. We define sustainably sourced botanicals as those that are certified organic, Fair Trade certified, or sourced from our own Well Earth partners. We are committed to increasing the amount of sustainably sourced crops we purchase every year from more than 50 countries around the world. Agriculture has a significant impact on the quality and availability of water, climate change, biodiversity and soil quality. There are also unfair labor practices and small farmers rights problems around the world. We believe that sustainable and organic crop production are imperatives for creating a healthy and just world. Since FY12 we have increased the pounds of sustainably sourced product from 4.6 million pounds to more than 7 million pounds, raising the percentage of total pounds of product that is sustainable from 57% to 66%. Due to certain inventory control measures, this weight can vary from year to year. See details on the year-by-year growth of our sustainable sourcing in the Sourcing section of the Appendix. M Fair Trade We offer 55 Fair Trade Certified products, including green and black teas, sugar, cocoa, vanilla, spices and herbs, coconut oil, and cocoa butter. We were the first supplier to offer Fair Trade spices and vanilla extract in the United States. Fair Trade products ensure fair wages and working conditions for farmers and workers, and there s also an additional premium generated that s used for projects that benefit the community at large. Fair Trade premiums are reported by calendar years. The figures available at the time of the report show we paid total Fair Trade premiums of just under $300,000 for 2015 through The premiums on Fair Trade products help communities in many ways. In Sri Lanka, the premiums have enabled the construction of clean water sources and schools, as well as funded scholarships, education programs and a vast array of other beneficial projects. Fair Trade premiums paid to the small co-op of cocoa farmers in the Dominican Republic that supplies our organic Fair Trade Certified cocoa powder helped build community centers and dig wells for potable water in their communities. In rural India, the premiums from Fair Trade tea were used to build a school and fund teacher salaries and scholarships, start a reforestation program, construct a wind farm to provide power for the community and build a modern hospital powered by methane gas recovered from animal waste to provide healthcare to tea farm workers and their families. Our total pounds of Fair Trade products sold has grown substantially since FY12 with the increase in Fair Trade matching the pace of our overall growth. For more about Fair Trade and the details of the year-by-year growth of our Fair Trade sourcing, see the Sourcing section of the Appendix. SOURCING 17

18 SOURCING M Organic Certified organic products are at the heart of our sustainable sourcing efforts as they have been since We believe organic agriculture is a crucial element in building a safe and sustainable international food supply and that the basic values of organic agriculture concern for people and the environment are crucial to the well being of us all. Any of our branded products Aura Cacia, Frontier Co-op or Simply Organic that are sold as organic are third-party certified organic in compliance with the National Organic Program (NOP). Both our products and manufacturing facilities are certified organic by Quality Assurance International (QAI). Our early and continued efforts supporting organic agriculture have made Frontier Co-op an established leader in organic selection and quality. In FY18, organic products made up nearly 69% (by weight) of our food and flavorings products sourced. The steady growth in the organic products we source has led our suppliers to expand their certified organic production. We re working to build a market for organic crops to ensure farmers have an outlet for those crops once they switch to organic growing methods. In addition to encouraging organic production with our purchases, we invest in our suppliers to help them expand and strengthen their organic production. Read more about Frontier Co-op s long-term commitment to organics and see the details of the year-by-year growth in our organic sourcing in the Sourcing section of the Appendix. Above: The dried inner bark of cinnamon trees curled into cinnamon sticks. 18

19 What is Organic? For many people, the word organic means without chemicals but that s not entirely true. Organic products, which include a standard for non-gmo, must be grown on land that has not had synthetic fertilizers, growth regulators, insecticides, or herbicides applied to it for a minimum of three years. This is one of many conditions that must be met by organic growers and manufacturers in order to meet the federal government standards for organic certification. But there s more to it than that. The values of organic agriculture extend well beyond the rules governing certification. Organic farmers are committed to the health and well being of workers, the environment, and consumers. They work continually to restore, maintain and enhance the environment, respecting the delicate balance of nature and the integrity of the products being cultivated. They are advocates of sustainable agriculture growing practices that enrich the land for the crops of the future rather than deplete it. As the National Organic Standards Board explains it, the goal of organic agriculture is to optimize the health and productivity of interdependent communities of soil life, plants, animals and people. PRODUCTS 19

20 20 PRODUCTS

21 Page 20: A snapshot of a Frontier Co-op warehouse production area. PACKAGING We track the impact of our packaging with three metrics recyclability, amount of recycled content and the total amount of packaging material we use. In 2015, we revised our tracking methodology this involved revising our classification of packaging materials and, at the same time, improving our ability to track materials in-house. After joining the Sustainable Packaging Coalition, we have closely followed industry discussions on what can be reasonably deemed recyclable. The best practice is shifting towards a measurement of recyclable packaging that includes only material likely to actually make it through the recycling stream based on both size and material, rather than just the packaging material alone. Given these criteria, we no longer include small plastic packaging components (e.g., plastic caps) in our calculation of total recyclable packaging. Due to this new calculation change and our ability to more accurately collect data regarding the materials we use, we made FY15 our baseline and now report and compare packaging sustainability data starting with that year. M Data We track a variety of data related to packaging: packaging intensity (pounds of packaging per 1000 units sold), percentages of recyclable content and the percentage of our packing that is recyclable. PACKAGING DATA FY15 FY16 FY17 FY18 Total lbs (millions) Intensity (lbs/ 1,000 units sold) % recycled content 35% 36% 36% 36% % recyclable 88% 88% 88% 89% 21

22 22 PRODUCTS

23 Page 22: Bottles queued up for filling. OPERATIONS We conduct analysis of the sustainability of Frontier Co-op business operations using extensive recordkeeping and a variety of metrics. We assess steps in our manufacturing process from the perspective of sustainability to continually reduce the overall environmental footprint of our operations. 23

24 OPERATIONS URBANA NORWAY NORTH LIBERTY M Facilities Overview Our headquarters in Norway, Iowa, is home to our corporate offices, our Customer Service and Sales Departments, and wholesale distribution. The original building in this complex was remodeled in 2010 to provide a new entryway and to provide expanded and improved space for our Co-op Café, departmental offices and labs. The remodel was awarded Silver Leed status in Our sustainably managed 56-acre Norway site includes 14 acres of connected building space and parking lot, a restored wetland, a small wildlife pond, a restored tallgrass prairie, a restored barn (our barn is a rural landmark), and several stands of trees. All of the landscape is managed organically, and the buildings and parking lot are greenscaped they are planted with hardy native trees and shrubs that need minimal care and no watering. The parking lot is designed to handle most rainwater runoff through bioswales that flow into the wetland. Our Aura Cacia plant, located in Urbana, Iowa, is a remodeled coffee facility that sits on 4.9 acres. The facility is home to Aura Cacia s manufacturing and Quality Assurance. We purchased a warehouse building in 2011 in North Liberty, Iowa, and repurposed it for raw material storage and processing of our herbs and spices. This added space has allowed us to operate more efficiently and safely, and has also allowed us to focus on our food safety initiatives. In 2015, we purchased a building that had sat relatively unused for five years in the small town of Belle Plaine, Iowa, and repurposed it into a distribution facility, restoring the building and bringing jobs back to the area. Numerous sustainability initiatives were included in the repurposing of the building (see sidebar Built-in Sustainability). BELLE PLAINE 24

25 M Utilities We try to use energy as efficiently as possible, not only for the cost savings that result, but also to make our operations as sustainable as possible. A full 100% of our non-solar electricity usage is offset with Green-e RECs purchased from Iowa wind farms. As the company grows, increased production in our facilities, along with incremental transition to more efficient lighting and HVAC equipment, drives more efficient use of utilities. However, this is counterbalanced with the need to maintain best-in-class food safety practices through steam pasteurization and more frequent washdown cycles. As we continue to meet high standards for food safety, we hope to be able to identify ways to increase efficiencies in utilities consumption at the same time. Here s the data on our energy use for the last six years: Utilities as reported on utility bills ENERGY FY15 FY16 FY17 FY18 Electricity total kwh 4,868,325 5,087,440 4,833,931 4,673,503 Electricity intensity (kwh/1,000 units sold) Natural gas (therms) 116, , , ,652 M Water The majority of the water we use is in the operation of our steam pasteurization units and equipment washdowns. Steam pasteurization is the only natural pasteurization process in the industry and the only one allowed for certified organic products. In addition, the highly controlled process of steam injection in a vacuum minimizes impact on the taste, color and aroma of the spices. The most common alternatives, irradiation and ethylene oxide treatment, pose other risks beyond just their use of natural resources. A look at our water usage over the previous six years: Water usage as reported on municipal water bills WATER FY15 FY16 FY17 FY18 Gallons Used 6,045,000 7,775,000 8,490,000 7,737,000 Water usage intensity (gal/ thousand units) Note: The metrics went up in FY16 when we added steam pasturization operations and increased the number of water washdowns in order to meet the highest food safety standards. OPERATIONS Natural gas intensity (therms/1,000 units sold) Notes: 1) Electricity: The improved efficiency in our electrical consumption is due to increased productivity of our equipment, along with ongoing lighting and HVAC improvements. 2) Natural gas: Our overall efficiency decreased here due to increased consumption for food safety procedures steam pasteurization and hot water washdowns. 25

26 OPERATIONS M Emissions We monitor carbon emissions and offset a major portion of those directly related to our business. M Our calculation methodology: We offset 100% of our non-solar electricity consumption (Scope 2 emissions) through the purchase of Green-e RECs (renewable energy credits). Additionally, we purchase VERs (voluntary emissions reductions) to offset 100% of the emissions generated by energy produced on-site through the burning of natural gas and diesel (Scope 1 emissions), and the emissions generated by our distribution shipping (Scope 3 emissions). In 2015 we began including distribution emissions in our emissions calculation and offsetting them. Because of this change in calculation methodology, we are using FY15 as a new baseline and not reporting or comparing data prior to that year. Here s our emission data for the prevoius four fiscal years: EMISSIONS FY15 FY16 FY17 FY18 Total Emissions (metric tons CO2e) Emissions Intensity (CO2e/ thousand units) Tallgrass Prairie 2, , , , In 1992, Frontier Co-op employee volunteers re-established the native tallgrass prairie on 21 acres our Norway, Iowa, headquarters site by hand-sowing the seeds of prairie grasses and native wildflowers and planting a border of sheltering shrubs. The prairie is part of the United Plant Savers Botanical Sanctuary Network, a group dedicated to restoring and preserving natural habitats and native plants. In 2014, the prairie was dedicated as the Kathy Krezek Larson Tallgrass Prairie in honor of retiring Vice President of Sustainability Kathy Larson, who championed the effort to re-establish tallgrass prairie on the land. Solar Energy PHOTO FOR SOLAR For more than two decades Frontier Co-op has been purchasing renewable energy credits (RECs) as a way of supporting green energy. We have greatly reduced the RECs we will need to buy in the future by installing solar arrays at three of our four Iowa facilities to generate our own renewable energy. Electricity generated by solar provides about 90% of the usage at our Belle Plaine facility, 10% of our Norway usage of, and 30% of our Urbana usage. (Our solar production is limited by capacity restrictions of our rural electric cooperative.) Together the sites will generate over 500MWh of our energy per year, providing an environmental benefit equivalent to avoiding burning 5,429 tons of coal or consuming 1,136,586 gallons of gas on the road. Frontier Co-op was built on the belief that we have a responsibility to people and planet. Every day, we make a conscious effort to be mindful of our actions and the impact we have on our world. Our transition to solar energy is just one more way for us to effectively reduce our footprint, and make our impact more positive. Frontier Co-op CEO Tony Bedard. 26

27 OPERATIONS Built-in Sustainability When Frontier Co-op restored a former car parts/service equipment manufacturing facility and turned it into a distribution center for our co-op, it brought back jobs to the small (pop. 2,500) community of Belle Plaine, Iowa. Hundreds of jobs had been lost when the automotive manufacturing company left town and the building sat empty for five years seemingly fated for slow deterioration. We took advantage of the opportunity to upgrade the sustainability of the building during restoration. Here are some of measures taken to the improve the building s sustainability: lights in the building, which were originally high All pressure sodium lights installed in the 1980s, were replaced with motion-activated LED lights. This reduced energy consumption, lowered the noise level and doubled light brightness. The roof of the building was coated with white spray foam insulation that reflects light to reduce energy use for air conditioning. An infrared survey was done to measure the building s heat and electrical energy loss and the areas needing attention were addressed. A system was developed to pump water away from the building and into retention ponds, and a new channeling system was installed to distribute rain water from the roof more evenly. The runoff systems were developed with the help of the Department of Natural Resources and Corps of Engineers as part of a flood mitigation system to avoid any potential impact on the Iowa River or neighboring land. The system involves a combination of natural grass being planted in the flood plain, pumps and filters to capture sediment and any potential contaminants, and diversion of the runoff into retention ponds. All the work on the warehouse was done through local contractors, bringing more work to the community. Frontier Co-op s Belle Plaine facility. 27

28 28 PRODUCTS

29 WASTE M M WASTE MANAGEMENT We recognize minimizing waste and handling it responsibly are crucial components of sustainability. We recycle at all four of our facilities and have food and other organic waste from our two food processing facilities composted. In 2016, we began working with Iowa Waste Exchange, a non-regulatory program of the Iowa Department of Natural Resources, to investigate additional opportunities to divert waste from the landfill. Along with these diversion efforts, we also recognize the need to reduce growth in overall tonnage of waste, even as our production continues to increase. Tracking Methods We have three major waste streams: landfill, compost, and recycling. In 2015, we revamped our tracking systems to improve accuracy and increase our focus on the overall landfill diversion rate. The sum of recycled material and compost tonnage equals our waste diverted from the landfill, and the diversion rate is this number divided by the total tonnage of all of the waste we generate. Because this is a change in calculation methodology from our previous system, we are using FY15 as a new baseline and don t show data calculated with the old methodology prior to that year. It s a challenge to work on initiatives to reduce and divert waste while our size and production are increasing. We are actively searching for ways to address our waste generation as our company continues to grow. M WASTE Data Here is Frontier Co-op s waste data as drawn from trash, compost, and recycling disposal data. Due to new methods of calculation, we made FY15 our baseline and report and compare packaging sustainability data beginning that year. WASTE FY15 FY16 FY17* FY18 Total Waste (tons) , , Waste Intensity (tons/ thousand units) Landfill Diversion Rate (%) 65% 63% 97% *Due to improvements in our waste tracking, we believe FY17 data may be unsubstantiated and has therefore been omitted from this report. LANDFILL TRASH COMPOST RECYCLING Page 28: Our packing peanuts are made from a food byproduct and are 100% compostable. 29

30 PRODUCTS M NEW Photo USE one of Alicia s Earth Day volunteer pictures 30

31 EMPLOYEES It s our objective to provide our employees with a safe working environment, opportunities for growth and development, and a high level of job satisfaction. We emphasize open and honest communication with and among employees and respect and consider their needs in our decisions. M Demographics We keep detailed information on our workforce demographics as a metric of our diversity with regard to women and minorities in our workforce. (Detailed tables of demographic info are included at the end of this section.) EMPLOYEE DEMOGRAPHICS FY14 FY15 FY16 FY17 FY18 Employees in Iowa Employees Outside of Iowa % Women in Workforce % Women in Management % Minorities in Workforce Page 30: Frontier employees ham it up for a group picture while volunteering at Indian Creek Nature Center for Earth Day. 31

32 EMPLOYEES M Pay and Benefits Our pay is structured to keep us competitive in our community and is reviewed regularly against published state and county data. Pay raises are merit-based. All employees are eligible for a bonus based on meeting specified company-wide performance goals. We offer a wide variety of benefits which are also reviewed regularly against the available data to ensure they remain competitive for our community. Full benefits are offered to all full-time employees defined as employees regularly working at least 30 hours a week. 99% percent of employees qualify for benefits, which include health insurance and dental insurance; fully paid life, disability and vision insurance; a medical and dependent care flexible spending plan; 401(k) savings plan with 4% company match; paid time off; and a number of other self-administered programs, such as tuition reimbursement, interest-free computer-purchase loans and adoption assistance. A Health Savings Account is an option for those with a high-deductible health plan. Total health benefits costs covered by Frontier Co-op average 74%. Here are three notable benefits that were established shortly after our co-op s founding that are still popular today: Childcare At our Norway facility, we operate a state-licensed childcare center that serves around 70 children. Frontier Co-op subsidizes about half the cost employees pay $2.00 per hour for infants and $1.70 per hour for older children. Employees children (up to age 12) can enjoy day camp fun during their summer break from school. Employees at other locations are provided a subsidy for licensed childcare for their children. Organic Café The mission of our Co-op Café, located at our Norway headquarters, is to offer healthy, low-priced organic meals that appeal to as many employees as possible. The Café serves hot lunches made from fresh ingredients, tasty breakfast items, meat and vegetarian options, a salad bar and fresh-baked cookies and desserts. The Co-op Café is an employee benefit and is subsidized to keep prices affordable. (Entrees are $2.85.) Product Purchases Employees are able to purchase all the products we sell at or near our cost. This provides an easy and costeffective way for everyone to buy natural and organic products for use at home and to try products we sell that they might not normally purchase. 32

33 M Employee Satisfaction We are committed to make working at Frontier Co-op a good job one that not only meets the financial needs of the employee, but also provides a satisfying and enjoyable work experience. We have a number of programs and track a variety of metrics to ensure we meet that commitment. Turnover Turnover is one measure of how well we meet our employees needs. We calculate our turnover by dividing the total number of separations in a 12-month period by the average number of employees for that time. Our goal is to keep our turnover at less than 15%. Percent of turnover is highest among new employees, so we also use average years of service of the workforce at the end of each fiscal year as a metric in this area. (The ongoing drop in average years of service is due primarily to strong, steady growth in the number of new hires.) TURNOVER FY14 FY15 FY16 FY17 FY18 % Turnover Average Years of Service To reduce new employee turnover, we provide competitive starting pay and benefits, frequency of pay increases and availability of vacation time (we award vacation on the employee s anniversary date rather than throughout the year as it is earned). We also emphasize Frontier Co-op s culture of communication (see Employee Communication), having each new employee meet with the CEO within 30 days of hiring and encouraging new employees to communicate openly with co-workers and managers. Employee Satisfaction Surveys We gauge our employees job satisfaction annually via our Employee Satisfaction Survey. We define high employee satisfaction as a score of 4.0 (on a scale of 1 to 5) or higher on the survey questions. Our average score has been 3.9 or higher all but one year of the survey. The survey is completed anonymously online. Everyone is encouraged to fill it out, and paid time is allotted for those who do. In FY17, we received our highest score since the survey was implemented. Surveys are now being done every other year, with the next one in scheduled for EMPLOYEE SATISFACTION SURVEY FY13 FY14 FY15 FY16 FY17 Scores (1-5) In addition to the numerical survey score, we conduct focus group meetings. This information is the basis for addressing issues and making improvements in a variety of areas from benefits and training to communication and supervisor performance. Employee Communication It is our belief that an engaged and communicative workforce is best for everyone. Managers at Frontier Co-op, including the CEO, have an open-door policy that invites employees to speak freely, ask questions, and offer ideas. Employees can also volunteer to work on company teams such as Safety, Wellness, the Green Team and Community Giving. Other avenues of communication include departmental and interdepartmental meetings; quarterly company-wide meetings; and a weekly newsletter covering company news, culture, current events, employee recognition and new employee profiles. Financial results, information about key initiatives, new product launches, and company changes are shared with all employees in our quarterly meetings. Twice a month, CEO Tony Bedard holds a Breakfast Meeting with varying groups of employees to answer questions and discuss issues. EMPLOYEES 33

34 EMPLOYEES M Employee Satisfaction (continued) Training and Development Opportunities for growth and development are key aspects of job satisfaction. We encourage employees to develop new skills and to continue their education both for advancement at Frontier Co-op and for personal growth. We provide a yearly reimbursement, up to $5,250 ($10,000 for a Masters program), for class tuition and book costs for employees engaged in higher learning. Employees with one year or more of service are eligible for the program. Many employees interested in acquiring new skills or career advancement create yearly development plans with their supervisors. Actions that end up on development plans (besides classes and seminars) include tours of other companies, books and other materials to read, involvement with various community or professional groups, and work on cross-functional team projects. Our key metric for measuring our employee development success is the number of positions filled through promotions from within the company. Our goal is to fill at least 33% of our open positions with current employees. TRAINING AND DEVELOPMENT METRIC % positions filled by promotions from within FY14 FY15 FY16 FY17 FY Educational Assistance at Work Justin Lorenzen is a Production Manager at our Urbana facility. He started at Frontier Co-op in 2011 as a Warehouse/Receiver in North Liberty and became 1st Shift Team Lead there later that same year. After assuming his current position in 2013, Justin began work toward his Bachelor of Business Administration degree with his tuition paid by the Frontier Co-op Educational Assistance program. He graduated in December We talked with him about his experience. Q: Why did you decide to take advantage of Frontier Co-op s Educational Assistance program? I enjoyed working at Frontier Co-op and the people I was working with, so I wanted to stay and grow within the company. I saw getting additional education as a way to open new opportunities, and Frontier Co-op paying my tuition made going back to school financially possible. I knew when I first heard about it that it was something I wanted to do. Q: How did you integrate going back to school with your work and home life? I went to a community college for a year to update my math, language and other required courses. I realized there that it didn t really work to be a traditional student. I was older than my fellow students with different obligations and motivation. I heard about a small college with a program for working adults that had fiveweek courses requiring one 3-hour class per week and gave it a try. The day of the class, I had to come home from 3rd shift, sleep, go straight to class and then go right back to work after the class but I had the rest of the week with my family. (Justin had an 18-month old daughter when he started the course he had added two sons to his family by the time he graduated.) Q: What did you gain from attending classes and earning your degree? One of the most valuable aspects of the classes was sharing experiences with other professionals taking the courses. Although we came from different businesses, many of the experiences we were having and problems we had to solve were very similar. It was very helpful to get other perspectives on how to handle things. The experience was really useful to me, and it s very likely I ll go back and get my MBA with the help of the Frontier Co-op Educational Assistance program. 34

35 M Health and Wellness We want our employees to be healthy so they will not only feel and perform better at work, but have more satisfying lives outside of work. We encourage healthy life practices in a variety of ways. Our volunteer employee Wellness Team sets up a variety of activities and educational opportunities throughout the year to promote and support healthy lifestyles for our employees and their families. The Wellness Team also provides a Wellness Tip each week for the company newsletter. Employees have free access to a gym and fitness area during the workweek and on weekends at our Norway facility. A variety of organized classes and activities take place in the gym throughout the year. There s also a mile-long walking trail around our 22-acre prairie. Our wellness program, launched in 2010, is aimed at supporting employees healthy lifestyles. A variety of health-improvement options, such as individual coaching and online tools, are available through our wellness partner. There is also the opportunity to work with a professional to develop individual improvement plans. Reduced insurance premiums are a reward for those who meet health improvement goals. Spouses are encouraged to participate in the program as well. M Safety We consider the safety of our workers as important as anything we do, and we have placed increased emphasis on safety as our business has grown. We have a full-time Safety Manager, make safety a key component of our employee orientation and training, continually update safety programs, utilize outside safety audits and post key safety stats weekly. We have also increased safety accountability and implemented consequences for repeated safety violations or unsafe behaviors and continue to work to engage employees in all our safety programs. The main safety metric we track is the OSHA Incident Rate (OIR), which measures the accident rate as a percentage per 100 employees. (OIR is calculated by multiplying the number of injuries by 20,000 and dividing that by the total hours worked.) We also track the total number of OSHA incidents. SAFETY DATA FY14 FY15 FY16 FY17 FY18 OIR Recordable Incidents EMPLOYEES 35

36 EMPLOYEES M Detailed Employee Demographic Tables Here are additional tables we use to track detailed employee data over time. They provide a more detailed breakdown of our employee demographics. TURNOVER DEMOGRAPHICS FY18 UNDER MALE FEMALE MALE FEMALE MALE FEMALE TOTAL IOWA-BASED EMPLOYEE DEMOGRAPHICS FY18 UNDER MALE FEMALE MALE FEMALE MALE FEMALE TOTAL White Non-white Total White Non-white Total FY17 UNDER MALE FEMALE MALE FEMALE MALE FEMALE TOTAL FY17 UNDER MALE FEMALE MALE FEMALE MALE FEMALE TOTAL White Non-White Total White Non-White Total FY16 UNDER MALE FEMALE MALE FEMALE MALE FEMALE TOTAL White Non-White Total FY16 UNDER MALE FEMALE MALE FEMALE MALE FEMALE TOTAL White Non-White Total NON-IOWA BASED EMPLOYEE DEMOGRAPHICS FY18 UNDER MALE FEMALE MALE FEMALE MALE FEMALE TOTAL White Non-white Total

37 FY17 UNDER MALE FEMALE MALE FEMALE MALE FEMALE TOTAL MANAGER DEMOGRAPHICS (continued) FY16 UNDER MALE FEMALE MALE FEMALE MALE FEMALE TOTAL EMPLOYEES White Non-White Total FY16 UNDER MALE FEMALE MALE FEMALE MALE FEMALE TOTAL White Non-White Total MANAGER DEMOGRAPHICS (manage 1 or more employees) FY18 UNDER MALE FEMALE MALE FEMALE MALE FEMALE TOTAL White Non-white Total White Non-White Total NEW HIRE DEMOGRAPHICS FY18 UNDER MALE FEMALE MALE FEMALE MALE FEMALE TOTAL White Non-white Total FY17 UNDER MALE FEMALE MALE FEMALE MALE FEMALE TOTAL White Non-White Total FY17 UNDER MALE FEMALE MALE FEMALE MALE FEMALE TOTAL White Non-White Total FY16 UNDER MALE FEMALE MALE FEMALE MALE FEMALE TOTAL White Non-White Total

38 38 PRODUCTS

39 CUSTOMERS M Customers are important in any business, but as a cooperative owned by businesses that sell our products, and an online retailer ourselves, we place special value on our customer interactions. Who Our Customers Are Wholesale The vast majority of our wholesale customers are member-owners of Frontier Co-op. Our products go through several channels to reach our wholesale customers. About 81% of Frontier Co-op products reach retail stores and businesses via full-line distributors with their own delivery systems. We distribute the rest (plus a variety of products from other manufacturers) directly to our wholesale customers through the distribution part of our business using FedEx or other carriers. Of our thousands of direct wholesale customers, most are members of Frontier Co-op members account for 95% of our wholesale sales. These members include natural food stores, restaurants and bakeries, health food and herb stores, co-ops, buying clubs, schools and training centers, all of which use our products. Retail Our non-member, direct-to-consumer business is less than one percent of our total company sales, but it provides increased product access to consumers and an opportunity to interact with the people who use our products. This gives us insight into product selection, quality, ingredients, packaging and more. We currently maintain four retail websites. We also provide a store locator online to provide consumers with information about purchasing our products at members stores. Page 38: A customer shopping for spices at displays featuring Frontier Co-op brands. Right: Screen shots from wholesale.frontiercoop.com and websites 39

40 CUSTOMERS M Customer Communication Good communication with the people who buy and use our products is a strength that has contributed to our success since our founding in Interactions with customers, whether routine conversations with customers on the phone, s or social media exchanges, provide us with valuable information. Our decades of experience provide us with knowledge about botanical products that we are happy to share with customers both in response to questions and through educational materials. We utilize the web and social media extensively, especially for hands-on usage information and recipes using our products. Our overall communications with both wholesale and retail customers are far-ranging, utilizing direct phone conversations, our retail and wholesale websites, numerous newsletters to both retail and wholesale customers, various social media and print publications (such as in-store Bulk Savvys providing consumer tips and info), CEO letters that accompany catalogs and member mailings, and the Aura Cacia Noteworthy online community for women to connect. We also consider our Sustainability Report a strong statement of our commitment to communicating with wholesale and retail customers as well as our member-owners, employees, suppliers and the general public. We believe this report, in which we try to give a balanced and accurate portrayal of our sustainability efforts, examines an important aspect of Frontier Co-op. M Customer Satisfaction Satisfying our members and customers is critical to us. Key components to achieving high satisfaction are service, product quality and product information and communication. Our customer service metric is a weighted average of the components of a 100% perfect order fulfillment: in-stock rates, order accuracy, and orders arriving undamaged, on time and complete. CUSTOMER SERVICE METRIC FY16 FY17 FY18 FACILITY GOAL ACTUAL GOAL ACTUAL GOAL ACTUAL Norway Belle Plaine Note: When we opened our Belle Plaine facility in FY16, we shifted all distribution to Belle Plaine and stopped doing distribution from North Liberty and Urbana. Out-of-stocks are the largest contributor to not meeting our customer service goals. In FY12, we added the North Liberty facility to handle additional growth requirements and reduce off-site storage rental space. In FY16, we purchased and converted another facility in the nearby town of Belle Plaine for warehouse storage. All of our herb and spice processing now occurs in North Liberty. Improvements in production efficiencies and higher finished good inventories should help us improve in-stock rates. Our main challenge and what keeps us from hitting 100% is product availability. A combination of extreme weather, disasters and economic and political stability around the world can impact the availability of all types of crops. Also, crop quality depends on the weather conditions during the growing season, and that can vary from year to year. This sometimes leads to product being rejected because it doesn t meet our quality standards, which then affects our in-stock rates. 40

41 In terms of internal improvements, we are focusing on doing a better job of purchasing and contracting for products, increasing the efficiency of manufacturing processes with faster changeovers, increasing safety stock inventory levels and improving our forecast accuracy. Accuracy in shipping orders is another important component of our customer satisfaction metric and an area of emphasis across all purchasing and operations. Making product information easily available to customers is another customer satisfaction priority. Our customer service representatives are able to answer most of the questions they receive. They are backed up by a customer service information specialist and by other experts in the company who can help answer questions. We receive over 7,000 phone calls and engage in about 1,000 chats per month. We answer over 85% of questions we can t answer on the spot and all s within 48 hours. We address a common customer concern regarding sustainable packaging with starch-based biodegradable peanuts as a sustainable method of packing and protecting products. Member Survey Every two years, we conduct a Member Survey through a third-party service. The last survey was conducted in FY16. One of the key measures in the survey is the Net Promoter Score (a widely used metric that quantifies overall performance by exploring how likely the respondent would be to recommend Frontier Co-op to a friend). Our Net Promoter Score (NPS) has been extraordinarily high since we began the surveys, reaching a highpoint of 89% in our 2016 survey. Our most recent score was 83.3%. This NPS is at the very top of the range for businesses of any type scores in the 60% range are considered high. We again received good results for service, quality and price, and, importantly, on the values of our business. Less than 1% of our members feel Frontier Co-op lags behind other vendors in understanding and sharing their values. The most common written response to the 2018 survey question The one thing Frontier Co-op absolutely has to improve or do better is... was Nothing (29% of respondents). Here are the issues of concern that were raised in more than 2% of survey responses: Products/product selection issues (20%) Many of these comments center on the need for more, with responses such as more product variety, more brands, more product categories, etc. Also included here are requests to not discontinue favorite products. It s often difficult to respond to these issues because there is no significant consensus as to the product categories or brands involved. Website issues (13%) These comments focus on the Frontier Co-op website. Search functionality is a common theme in these comments, with members requesting an easier to use, more robust search system. Other suggestions encompass usability issues, such as website navigation, layout, usage, etc. These issues rose in concern due to some technical difficulties with our websites. Price issues (12%) Comments center on pricing, especially with regard to the order threshold required to qualify for free shipping. Ordering issues (8%) Back orders and out-of-stock situations are one of the most prevalent themes in this category, particularly involving sale items. It also includes requests for an improved ordering process, improved payment system, and other issues related to product ordering. Shipping issues exclusive of cost (8%) Comments most often concern packaging issues, such as breakage/spillage, overloaded boxes, and the packaging materials used. Enhanced descriptions/information/photos (3%) Comments include requests for more/better product pictures, and more information related to product usage, product composition and ingredient lists. The complete results for each survey are reviewed by our management team. They create a list of actionable items to address respondents concerns and assigns tasks to appropriate areas for implementation. CUSTOMERS 41

42 42 PRODUCTS

43 GIVING BACK Giving back at Frontier Co-op takes a variety of forms project and program grants, donations to a variety of organizations and charitable causes, sponsorships, product donations and volunteer time. A primary focus of our giving is helping the communities we are part of near and far, large and small with special attention to both the local communities where our employees live and work and the oftenpoor communities of our Well Earth sourcing partners. A significant portion of our giving is dedicated to improving life in grower communities through our Well Earth sourcing program. Since its inception in 2005, Well Earth has facilitated funding of more than $1.5 million for projects in our grower communities. M Giving Funds We have also created charitable giving programs for each of our three brands to help to help support communities we have particular passion for: The Frontier Co-op Giving Fund primarily supports social, educational, and environmental causes in our grower communities. This fund has given millions to a variety of charities and organizations since it was created in The Simply Organic Giving Fund has provided more than $1.5 million of support to organic causes since 2001 and is having a remarkable impact. The Aura Cacia Positive Change Project supports organizations that help women of courage and determination overcome barriers and transform their lives. Founded in 2016, the Project has funded over $500K in grant requests. Page 42: Children in a preschool near the village of Ambohimena, Madagascar laugh while having their picture taken. Frontier Co-op, through its Aura Cacia brand, built the school so women picking ylang ylang flowers for our essential oil could have their children nearby. Helping Build a Dental Clinic In Guatemala, Frontier Co-op helped fund an expansion of dental services provided by Fedecovera, our Well Earth partner for cardamom and allspice. We contributed to the building, equipping and staffing of a modern dental clinic in the town of Cobán. The new clinic will serve 25,000 growers and their families from 41 co-ops that are members of the larger Fedecovera cooperative. The expanded services are part of Fedecovera s ongoing program to provide medical and dental care for the mostly indigenous Mayan grower communities, which are in remote mountainous regions without easy access to medical and dental services. 43

44 GIVING BACK Social Giving Impacts We try to develop respectful and supportive relationships with all the communities affected by our co-op. Here are some examples of our social giving and its impacts. Farmers We support the next generation of organic farmers here in the U.S. with a perpetual scholarship for an apprenticeship at The Center for Agroecology and Sustainable Food Systems at the University of California Santa Cruz. Each year, one participant in the sixmonth hands-on apprenticeship at the Center receives a full tuition scholarship. The Center teaches organic farming techniques from the greenhouse to the market, and provides education on relevant issues such as inequality in the food system and how to transform it. Farming Communities Above and beyond our Well Earth sustainable sourcing investments, we feel that it is important to support our supplier partners communities in ways that improve quality of life. To this end, some of the social giving projects we supported in FY15 and FY16 include support of schools, a library, and a dental clinic. One such project is in Vietnam, where we source cinnamon from a number of remote villages in a mountainous region. We provide books, desks, beds, and room and board so children from these communities can attend regional schools. Our Well Earth partners help us identify and implement programs to help their communities. Fair Trade Premiums Fair trade premiums, which go to support farming communities, are tracked by Fair Trade USA, our fair trade certification agency, by calendar years so we must note them separately from our own fiscal year reporting. We provide here the Fair Trade information we ve received for the last three calendar years. The premiums Frontier Co-op contributed with our purchases of Fair Trade Certified products were $97,371 in calendar year 2015, $102,402 in calendar year 2016 and $95,340 in calendar year (For details on the Fair Trade program and our participation in it see the Sourcing section of this report.) Food and Nutrition Being a company devoted to fostering wellness, we strive to promote healthy lifestyles and access to healthy, nutritious and affordable food as well as improved welfare for communities in need. Our support of organizations working to promote healthy food and nutrition totaled $170,000 in FY16, $221,000 in FY17 and $196,796 in FY18. Some of the organizations we made grants to included the North Liberty Community Pantry, Table to Table, and Feed Iowa First. Community Giving Team A portion of our local giving is managed by our employee-run Community Giving Team. The team is allocated a $10,000 budget each year. With these funds, they are able to more directly address funding requests submitted by employees on behalf of organizations in their communities. We also strongly encourage employees to volunteer in their local communities. We offer eight hours of paid volunteer time for each employee to be used for a charitable event or project of the employee s choosing. There is a bank provision so people can donate unused hours for others to borrow for volunteer service. 44

45 M Giving Categories It s a core value at Frontier Co-op to better lives in all the communities our co-op is a part of from the smallest villages to the world community. We break down our social giving for tracking purposes into five groupings research; organizations promoting organics and sustainability; our Well Earth sustainable supply chain program, organizations empowering women to make transformative changes in their lives, and local giving. The chart below shows the amounts for each grouping. It s notable that about a third of our contributions go directly to support our sustainable suppliers through our Well Earth program. We also pay Fair Trade premiums for many products, which directly help grower communities, but they are not tracked here. Dollars Giving by Category for the Last Three Years: CATEGORY FY16 FY17 FY18 Research 93, ,500 90,500 Organizations Promoting Organics & Sustainability 338, , ,000 Well Earth 146, , ,525 Positive Change 25, , ,000 Other Giving 218, , ,378 TOTAL 821,422 1,465,411 1,195,403 Chart does not include Fair Trade premiums as noted above. Aura Cacia Positive Change Project The Aura Cacia Positive Change Project works to support organizations that partner with women and girls who have made a commitment to life more purposefully, and positively transform their lives. These programs help women and girls overcome barriers to become more stable, self-sufficient and confident. In FY18, Aura Cacia provided $250,000 through the Positive Change Project to six organizations that are helping women move their lives forward: Thistle Farms Catherine McAuley Center DEFY Ventures Girls Education & Mentoring Services Lotus House Women s Bean Project 45

46 46 PRODUCTS

47 SUSTAINABILITY TARGETS FOR FY19 The list below summarizes our most significant planned sustainability actions for FY19 and the impact we expect them to have. Our next Sustainability Report will detail our performance against these goals. M Sustainable Sourcing: Increase pounds of Well Earth sourced botanicals by 12% M Packaging: M M M Maintain recycled content of packaging at 36% Maintain recyclability of packaging at 88% Other Sustainability Projects Explore Zero Waste certification options Complete implementation of new bulk packaging material Maintain energy consumption in our plants Social Giving: Contributions of $1.185M - representative of 5% of our pre-tax profit Page 46: Scenes from the restored prairie on the site of our headquarters in Norway, Iowa. 47

48 48 APPENDIX

49 APPENDIX COMPANY BACKGROUND M Co-op Structure Frontier Co-op s member-owners are our wholesale customers who buy and resell our products. As of 6/30/18, the cooperative had about 21,000 active members. These members provide the capital for the business to operate and are represented as owners of Frontier Co-op through an elected Board of Directors. Each year, they divide the co-op s profits, each member getting a share equal to the percentage that their purchases were of the coop s total member sales. M the board of directors Current Frontier Co-op Board members are Lindy Bannister (President), Tom Stokes (Vice President), Frontier Co-op CEO Tony Bedard (Secretary/Treasurer), Leah Bailey, Jesse Singerman, Pedro Garcia, Dean LaVallee, Phil Meldrum, and Kevin Malchoff. The Chief Executive Officer is hired by and reports to the Board. Tony Bedard has served as the company s CEO since He leads a seven-person management team. The nine-person Board of Directors is organized into three standing committees: Executive, Audit and Finance, and Governance. A committee of seated Board members nominates board election candidates. Candidates are nominated based on qualifications and ability to contribute to the governance of the cooperative. We strive for a diverse Board with skills across all strategic aspects of the business (such as finance, strategic planning, sustainability) so the Board can, as a whole, protect the interests of the members and contribute to the growth and development of the organization. As a mechanism to ensure fair and open access to Board participation, candidates may also be nominated by petition. Here is the current demographic makeup of the Board: AGE/ GENDER MAKEUP OF 9 MEMBER BOARD Ethnicity Male Female White Other Page 42: A bulk display of Frontier Co-op products. 49

50 50 APPENDIX

51 APPENDIX OUR PRODUCTS M Quality and Food Safety In order to ensure quality in our products, we set high quality specifications and buy from responsible, sustainable sources in many cases certified organic. We have developed the resources to ensure products contain no adulteration, fillers or questionable ingredients, and we never make false or empty claims about products. We have always practiced ingredient transparency. We have a steadfast commitment that all of our brands provide safe, wholesome products and that we are completely open about the ingredients in our products. Our labels reflect exactly and completely what s in the package there are no hidden fillers or additives. We handle product carefully from receiving to shipping to maintain quality and do extensive product testing to guarantee safe, high-quality products. M Handling Once herbs and spices arrive at Frontier Co-op, every aspect of their handling is done with quality in mind. Climate-controlled storage (70 degrees Fahrenheit and relative humidity typically between 45% and 65%) is used to preserve freshness and chemically active plant constituents in our Foods & Flavorings raw materials and manufacturing warehouses. Strict sanitation rules are enforced through regular inspections by Quality Assurance. Product handling, processing and packaging systems are set up to maximize the quality of the final product. Exposure to moisture and heat is minimized whenever possible. Grinding of spices and herbs is done cryogenically at temperatures below -20 degrees Fahrenheit. Our enterprise resource planning (ERP) system manages a large portion of our operations, from purchasing raw material to tracing finished good inventory in our warehouse and to our customers. Herbs and spices are packaged in materials that ensure the optimum quality of a product foil laminate pouches, glass bottles or plastic bags. Frontier Co-op does not use irradiation or ethylene oxide (ETO) for pasteurization. We utilize safe and effective steam treatments for pasteurization. Processes are in place to prevent allergen contamination. Products containing allergenic ingredients are identified on the product label. Each of our items is freshness dated to ensure maximum flavor. Page 50: Our line utilizes x-ray technology to help ensure our products meet purity and food safety standards. 51

52 APPENDIX M Testing Our experienced Quality unit a team of technicians, analysts and scientists led by Ravin Donald, Ph.D. tests products thoroughly upon their arrival and throughout their processing and packaging here at our facility. Here are some of the tests we use to ensure we re providing customers with the best products available: HPLC (high performance liquid chromatography) testing measures active constituent levels in herbs. Microanalysis reveals cellular structure of plants to determine identity and adulteration. Microbiological testing detects yeast, mold and bacterial pathogens. Organoleptic testing consists of taste, smell and sight tests to determine quality and screen out adulterated product. In addition to maintaining extensive internal systems, our storage and processing facilities are audited to Safe Quality Food (SQF) standards, a Global Food Safety Initiative (GFSI) standard, by an independent 3rd party. M Steam Pasteurization A key safeguard of product safety is pasteurization to eliminate pathogens such as Salmonella. We employ a state-of-the-art steam pasteurization system that allows us to offer safe spices to our customers and meet all food safety standards without using irradiation or ethylene oxide (ETO). Steam pasteurization is ideal for us because most other pasteurization methods, including irradiation and ETO, which can leave a harmful chemical carcinogenic residue and cannot be used on certified organic products. Also, the highly controlled process of steam injection in a vacuum minimizes degradation of the natural taste, color and aroma of the spices. Of course, our lab tests each batch of steam-pasteurized spices to confirm the effectiveness of the pasteurization. 52

53 M Frontier Co-op Product Standards All products sold under any of the three Frontier Co-op brands Frontier Co-op, Simply Organic, Aura Cacia must meet certain selfimposed standards. INGREDIENTS NOT ALLOWED Artificial colors ALTERNATIVES ALLOWED Colors derived directly from botanical sources such as turmeric and beets APPENDIX These standards cover post-harvest treatment, ingredients and processing. We do not purchase any herbs or spices that have been treated with irradiation or chemicals such as ethylene oxide, and there are a number of other ingredients and processes that are not allowed: Artificial flavors Synthetic chemical preservatives and antioxidants such as BHA, BHT, TBHQ, benzoates and nitrates Flavors derived directly from botanical sources Non-synthetic preservatives such as vitamins C and E Artificial sweeteners such as aspartame and saccharine Sweeteners derived directly from botanical sources such as brown rice syrup, stevia and cane sugar Artificial flavor enhancers such as MSG and guanylate Flavor enhancers derived directly from botanical sources such as spices and citric acid Synthetic, free-flowing/anticaking agents such as tricalcium phosphate Silicon dioxide (found in water, plants, animals, minerals, spices, citric acid, and yeast products) for conventional products and organic rice concentrate for organic products. PROCESSES NOT ALLOWED ALTERNATIVES ALLOWED Chemical pasteurization such as ethylene oxide, or propylene oxide Steam pasteurization Treatment with irradiation Steam pasteurization Methyl Bromide for pesticide treatment Any process using petrochemicals such as benzene for extraction CO2 Extraction processes using botanically derived extractants such as alcohol. Physical processes such as cutting, grinding, blending, cooking, and baking. Simple chemical processes such as fermentation, acidification and hydrolysis. 53

54 APPENDIX SOURCING M Well Earth Product WELL EARTH PRODUCT FY14 FY15 FY16 FY17 FY18 lbs 2,581,410 2,518,875 3,225,459 2,239,434 4,489,467 % total 29% 23% 27% 20% 40% The Well Earth Program The five focus areas of Well Earth sustainability are: 1) worker safety and fair treatment 2) sustainable growing and production practices 3) environmental impact 4) community impact 5) product safety and quality. Each of these areas includes specific evaluation criteria such as child labor, wages, impact on waterways and recycling of wastes. Potential Well Earth suppliers fill out an extensive questionnaire and that information, combined with an onsite inspection, is used to identify suppliers who are committed to excelling in these five areas. The partnership insures fair prices, long-term commitment, access to information, development funds and community support for the growers. Frontier Co-op benefits by working directly with our partners to improve product quality, reduce out of stocks, and to gain a deeper knowledge of each botanical and how it is produced. In many cases, we are able to reduce our costs while paying more to the farmer by cutting out middlemen. We also find that our Well Earth partnerships generate mutual understanding and trust. M Fair Trade Product FAIR TRADE PRODUCT FY14 FY15 FY16 FY17 FY18 lbs 499, , , ,956 * % total 6% 5% 6% 5% * * Fair Trade info is supplied to us on a calendar year basis, and was unavailable before the Sustainability Report was completed. The Fair Trade Program Fair Trade certification provides farmers and farm workers with guaranteed minimum prices, decent work conditions and fair wages to prevent their exploitation. Without Fair Trade, farmers often have no alternative but to take whatever small amount is offered for their products, and farm workers may be subject to harsh working conditions, discrimination, and other abuses. With Fair Trade certification, farmers and farm workers can earn living wages for the crops they grow. The certification requires humane work conditions, encourages sustainable farming practices and supports direct trade to eliminate exploitative middlemen. For certification, Fair Trade USA requires farmers to be organized into a self-governing body, so that workers have a voice and make decisions as a group. These organizations also come into play in terms of how the product is sold. A minimum price is set for Fair Trade goods that guarantees producer groups are compensated fairly for their crops. When the market price is higher than the established minimum price, the buyer pays the market price. 54

55 Without Fair Trade, the farmer would go by himself to a local village to sell his own crops, where middlemen could take advantage of him. Now farmers sell through their farmer organizations and know the market rates. This gives them more bargaining power, which means they receive a fairer price for their crop. It also cuts out the middleman, so more money ends up directly with the farmers, and they are less likely to be cheated out of fair payment. There s also an additional premium paid on top of the minimum price that farmers and workers invest in social, environmental and economic developmental projects for their communities. They decide democratically by committee how to invest this premium the people making these decisions know the needs of their communities. Throughout the world, communities with local control over how their Fair Trade premiums are spent are using the funds to meet their needs and create better lives for themselves. M Organic Product ORGANIC PRODUCT In 2010, we provided the Small Organic Farmers Association a 2,043-member cooperative of small-scale, organic farmers in Sri Lanka with a $25,000 grant for the construction of an organic training center. We ve worked for decades with growers in the U.S. and around the world to help expand organic agriculture. Organic products are at the core of our Well Earth ethical sourcing program, which promotes organic and sustainable agriculture along with product quality and social responsibility. We ve also established the Simply Organic Giving Fund to support training and community projects for farmers where our spices are grown, as well as a variety of other organizations that promote organic and sustainable agriculture. And we continue to offer customers new organic alternatives that give them an opportunity to use their buying power to support the environmental and social values of organic agriculture. We have a deep and long-standing commitment to organics at Frontier Co-op, and we re proud to have been and to continue to be a leader in our support of organic agriculture. APPENDIX FY13 FY14 FY15 FY16 FY17 FY18 lbs 5,000,898 5,468,958 6,419,241 7,666,839 6,586,338 7,096,534 % total 56% 61% 58% 65% 60% 63% A Long-Term Commitment to Organics Frontier Co-op was the first U.S. supplier to offer organic spices and the first to be certified as an organic processor. We carried our first organic products in 1978, and became a certified organic processor as soon as that program was available a few years later. We supported the 2001 National Organic Program in fact, we had already established internal organic standards at Frontier Co-op that exceeded those required by the program. In 2002 we established the all-organic Simply Organic brand, which quickly became the fastest growing brand in natural seasonings and the leading brand of the explosively growing category of organic seasonings. 55