ESRS S3 – Affected Communities

Material Impacts, Risks, and Opportunities

The materiality assessment identified negative impacts on indigenous communities exclusively for the Consumer Business Segment. These impacts could result from our business activities and the related supply chains.¹ As a cosmetics manufacturer, Beiersdorf uses substances based on palm (kernel) oil. Palm oil was identified in our sustainability strategy as a high risk raw material, due, among other reasons, to potential negative impacts on the environment and affected communities in the main countries of origin, Indonesia and Malaysia. The expansion of palm oil plantations may be associated with displacement of certain communities and conflicts regarding land rights, among other issues. The early detection and reduction of negative impacts on (indigenous) communities is therefore a fundamental part of our sustainability agenda and the promise of sustainable raw material procurement.

Affected communities in our main palm oil supply regions were identified as material. Pursuant to the ESRS definition, these are communities at one of the endpoints of the value chain (e.g., at the point of harvesting of commodities), and communities of indigenous peoples. Both groups are affected in Beiersdorf’s main supply regions of Indonesia and Malaysia, but cannot be considered separately. The local communities comprise both indigenous peoples and non-indigenous peoples. They will be considered together in the following.

Beiersdorf has implemented various firmly established structures relating to due diligence and human rights requirements along the supply chain. Details are explained in the chapter “ESRS S2 — Workers in the Value Chain”. The strategy development includes and assesses risks and impacts on affected communities.

A detailed overview of all identified impacts, risks, and opportunities and the methodology of the double materiality assessment can be found in the chapter “ESRS 2 — General Disclosures.”

Policies Related to Affected Communities

One of our ambitions for responsible sourcing is to respect the human rights of indigenous communities. Our internal policies, the “Responsible Sourcing Policy” and “Sustainable Palm Policy,” are in line with the relevant international frameworks, guidelines and standards. These include, amongst others, the principles of the United Nations Declaration on the Rights of Indigenous Peoples. We also commit ourselves and our business partners with our Sustainable Palm Policy to compliance with the principles of “Free, Prior, and Informed Consent” (FPIC) along our entire supply chain for palm oil-based raw materials. All of these internal policies include minimum standards for the recognition, protection and promotion of the rights of indigenous communities. These standards concern both individual and collective rights, as well as cultural rights and identity, the right to education, health, employment, language, equal rights, and effective participation in all matters affecting them.

In order to meet these obligations, we require all direct business partners to comply with our internal policies and their requirements in their own business activities and along their entire value chains.

Engagement with affected communities is an important lever to ensure that our requirements for responsible conduct reflect their collective interests along the supply chains. Moreover, the only reliable way to assess compliance with these requirements is via close dialog with all parties involved.

Responsible Sourcing Policy

Beiersdorf sources and uses renewable raw and packaging materials in the further development of its recipes and products. This may result in negative impacts on affected communities, which we address through our “Responsible Sourcing Policy.” This internal policy commits Beiersdorf to compliance with environmental, social, and ethical standards as well as legal regulations along the entire value chain. We want to strengthen the resilience of our supply chains, minimize negative impacts and promote positive effects for people and the environment. The overarching objective of the policy is to support our business partners in complying with the requirements and ensure responsible sourcing throughout the value chain. This includes the following:

• compliance with international, national, and local laws/requirements,
• respect for human rights for all people and groups along the supply chain,
• a halt to deforestation and conversion of natural ecosystems,
• mitigation and minimization of climate impacts, and
• continual and positive environmental and social improvements in key sourcing areas.

The scope of the “Responsible Sourcing Policy” includes in particular palm oil and its derivatives, soybean oil, coconut oil, and paper for primary packaging. It applies worldwide for all products manufactured by Beiersdorf and third party providers. The VP Corporate Sustainability as well as the VP Procurement are responsible for the implementation of the policy.

Sustainable Palm Policy

Palm kernel (oil) derivatives and fractions are important ingredients in Beiersdorf’s skin care products. With the “Sustainable Palm Policy,” we commit to sustainable and deforestation-free sourcing of palm-based raw materials. We aim to achieve the following overarching targets set out in the policy:

• sustainable sourcing of palm-based raw materials via supply chain certification by the “Roundtable on Sustainable Palm Oil” (RSPO),
• transparency and risk mitigation of our palm oil supply chain,
• support for smallholder farmers and landscape projects in the sourcing countries, and
• proactive cooperation with our key partners in the supply chain and in multi-stakeholder initiatives.

To this end, our policy sets out basic principles such as compliance with requirements, regulations, and principles relating to environmental and social matters. The policy also includes our “Sustainable Palm Roadmap” and sets out the specific steps towards sustainable sourcing.

Further information about the Sustainable Palm Policy can be found in the chapter “ESRS E4 — Biodiversity and Ecosystems.”

Beiersdorf uses various implementation strategies to meet the specified obligations for responsible sourcing. We aim to ensure respect for human rights and consideration of the interests of all affected communities, including indigenous peoples. In addition to the measures described in the chapter “ESRS S2 — Workers in the Value Chain,” we conduct an annual supply chain transparency analysis to understand the sourcing regions and land distribution of our core raw materials.

Processes for Engaging with Affected Communities

Beiersdorf has an effect in particular on communities and indigenous peoples living and working in the most important countries of origin of palm-based raw materials – albeit indirectly. This is because of the multi-tier supply chain between Beiersdorf, direct suppliers and the palm oil mills and plantations. Together with ASD, we were able to identify Indonesia and Malaysia as our main supply countries based on our annual transparency analysis. The results showed that we source 95% of our palm-based raw materials derivatives from Indonesia and Malaysia. A relatively large proportion of the populations of both countries are indigenous peoples (transparency analysis performed in 2024 with volumes from 2023).

Although Beiersdorf has not defined any strategic procedures for involving affected communities, it supported smallholder palm oil farmers in the identified main supply countries in the reporting year.

In Indonesia, Beiersdorf is collaborating with Evonik and the WWF to support approximately 350 smallholder palm oil farmers (as of November 2024) in the West Kalimantan province in the Indonesian part of Borneo. Beiersdorf supports the transition to sustainable management of oil palm trees according to RSPO criteria.

In Malaysia, we are also supporting a landscape project with our supplier Evonik and the WWF in Tabin, Sabah, in the Malaysian area of Borneo. The desired certification according to the RSPO standard and the establishment of an ecological corridor are intended to reduce conflict between humans and animals in the long term.

Beiersdorf supports both projects financially and is involved in decisions about the measures that the WWF implements in Indonesia and Malaysia in close cooperation with the respective target groups. All relevant target groups are consulted as part of an FPIC before the project starts. This included that the project idea and planned measures were discussed and coordinated with the small farmers. During the project implementation, WWF Indonesia and WWF Malaysia are in regular contact with the target groups and other relevant stakeholders.

The WWF reports on the progress of the projects, any delays, and if necessary adjustments to the activities. The effectiveness of the cooperation with smallholder farmers is measured using predefined metrics. The WWF’s “Environmental and Social Safeguards Framework” provides an institutional mechanism to address the environmental and social risks associated with the work of the WWF, contributes to better nature conservation results, and improves the social well-being of local communities where the WWF is active. The project progress is reported annually to the Vice President Corporate Sustainability who is operationally responsible for including the findings of the projects in the business concept.

Channels for Affected Communities to Raise Concerns

We are actively committed to preventing or minimizing breaches of our standards of conduct and negative influences along our supply chain. Further information is provided in the chapters “ESRS S2 — Workers in the Value Chain” and “ESRS G1 — Business Conduct.” This grievance channel is also available in the Bahasa Indonesia language for the affected communities in our main sourcing countries Indonesia and Malaysia; this language is spoken and understood in both Indonesia and Malaysia. The affected communities were not directly consulted in the process of establishing the channels. In the event of any negative impact on affected communities, a defined procedure for incident documenting and reviewing is applied by the Responsible Sourcing team and a collective complaints procedure is used in cooperation with the ASD.

Actions Related to Affected Communities

Joint projects with the WWF

Beiersdorf is working with the supplier Evonik and the WWF on the two projects in Indonesia and Malaysia described in the section “Channels for Affected Communities to raise Concerns.” The actions and measures set out below are formally approved by Beiersdorf and Evonik and operationally implemented by the WWF.

Both projects address the material negative impact identified on the affected communities area. Through official legalization and subsequent certification of smallholder farmers’ land areas in line with the RSPO standard, negative effects associated with the FPIC principles can be counteracted.

No serious problems or incidents concerning human rights relating to the affected communities were reported in the reporting year. Nor were there any significant negative impacts on the project villages, meaning that no specific remedial actions were necessary. Instead, preventive measures were implemented and further developed. The effectiveness of these measures is reviewed through regular dialog with the project managers.

WWF project in Indonesia

Description: The smallholder association “Asosiasi Mitra Bersama” (AMB) was formed in the West Kalimantan, Indonesia project area with the support of the WWF in the first phase of the project. WWF Indonesia has been and will continue conducting various activities to support the association and its members, including training on more sustainable farming methods, occupational health and safety, fire prevention and other topics. This has enabled the smallholder farmers to acquire knowledge and build capacity to operate their plantations more sustainably and in line with the RSPO requirements. AMB was certified in early 2024 with 201 members. The RSPO certification confirms that the smallholders operate their palm oil plantations more sustainably and with due consideration for occupational health and safety, respect for human rights, and environmental factors in line with the RSPO requirements.

Scope: Direct measures are aimed at a total of 350 smallholders who are being trained in sustainable production and receive support in the RSPO certification process.

Time horizon: The planned period for the measures extends from September 2018 to June 2025.

Expected outcome: The objective of the project (phase 2: 2022 – 2025) is to support at least 200 smallholder palm oil farmers in obtaining RSPO certification of their land and establishing direct market access to a mill.

WWF project in Malaysia

Description: WWF representatives hold regular meetings with the smallholder farmers in the project region of Tabin, Malaysia, to inform the communities about sustainable farming practices and the advantages of RSPO certification, and to offer support in the certification process. The WWF team and the affected communities also work together to support conflict avoidance between humans and animals exacerbated by palm oil plantations.

Scope: The project covers part of the Tabin region, Malaysia, and is aimed primarily at the communities of small and medium-sized farmers living there, who own a total cultivation area of around 15,000 hectares.

Time horizon: The planned period for the measures extends from September 2020 to October 2026.

Expected outcome: The aim is to have trained the small and medium-sized farmers in the project region in sustainable farming practices and to have helped them through the RSPO certification process by 2026. The plan is to have a total of 15,000 hectares of cultivation area certified under the RSPO standard.

Transparency analysis of the palm (kernel) oil supply chain

Description: Beiersdorf aims to be able to trace the origin of its palm-based raw materials (palm and palm kernel oil and their derivatives) throughout the supply chain as far as refineries, mills and plantations. To achieve this transparency, Beiersdorf became a founding member of the cross-industry initiative “Action for Sustainable Derivatives” (ASD), which has been promoting transparency and sustainability in palm oil derivative supply chains since 2019. ASD obtains comprehensive information on the upstream supply chain through direct queries submitted to suppliers in order to achieve transparency along the entire palm oil supply chain.

Scope: This transparency analysis covers the entire palm-based raw material supply chain and includes all direct suppliers that supply Beiersdorf with palm and palm kernel oil-based raw materials. It includes all tiers, from refineries, through mills, right down to plantations, to provide in-depth knowledge of the supply chain structures and players.

Time horizon: The supply chain transparency analysis is performed once per year.

Expected outcome: The ASD initiative enables systematic tracing of the supply chain for palm and palm kernel oil, as well as its derivatives, in order to identify all actors down to the plantation level and create transparency across the entire supply chain. Beiersdorf was able to trace 98% of the production volume back to the level of refineries, 97% to mills, and 71% to plantations in the reporting year. This transparency in the supply chain as well as satellite monitoring of changes on lands in the main reference regions can directly address the actual occurrence of the impact identified as significantly negative for affected communities. Identifying individual actors allows Beiersdorf to take targeted measures to address violations of corporate requirements to protect communities.

Targets Related to Affected Communities

Although Beiersdorf has not defined strategic targets as regards affected communities, it measures the effectiveness and progress of its actions and projects using quantitative indicators.

Another of Beiersdorf’s overarching targets is to source 100% certified palm (kernel) oil-based raw materials. This target has been achieved in 2020, by purchasing palm (kernel) oil exclusively in accordance with the RSPO’s “Mass Balance” model. By sourcing 100% RSPO-certified goods, we also contribute to compliance with the FPIC principles, which form part of the RSPO principles and criteria.

¹ No impacts, risks or opportunities were identified in this area for tesa, so the chapter “ESRS S3 - Affected Communities” relates solely to the Consumer Business Segment.