301-1. Materials used by weight or volume

• Waste and recycling

305-5. Reduction of GHG emissions

Emissions

Notes:

• No specific base year or baseline has been established. A comparison of consumption per unit of production was only made between the years 2018 and 2019.
• The data are obtained from direct measurements, both for electricity and fuel consumption, and are reported by suppliers through consumption bills. All reported emissions were estimated through the use of emission factors corresponding to each type of energy.

• Emissions

305-4. GHG emissions intensity

Given the emissions from plants, distribution centers, and the fleet of tuna fishing vessels, and at the same time considering direct emissions (mobile and stationary sources) and indirect emissions (electricity from non-renewable sources), the intensity of GHG emissions in 2019 is 0.171 tons of CO₂ equivalent per ton produced, which represents a decrease of approximately 8.56% compared to the previous year.

The intensity of GHG emissions is expressed in tons of CO₂ equivalent per ton produced and is based on the sum of direct and indirect emissions reported in the above emission indicators, including emissions from fuel consumption and emissions related to electricity consumption from the CFE network.

305-2. Energy indirect (Scope 2) GHG emissions

https://2019.ia.grupoherdez.com.mx//emisiones/

Notes:

• The gases included in the calculation were CO₂, CH₄, and N₂
• In the case of Greenhouse Gas emissions from indirect sources (due to consumption of greenhouse gases from non-renewable sources), there is currently no single base year, but rather an annual comparison of indicators based on the previous year. Currently, the Group does not have five-year or medium- or long-term goals.
• The emissions that were estimated were those of CO₂ equivalent (based on the emission factor per energy generation reported by the Energy Regulatory Commission {CRE} and published by SEMARNAT on its website).
• With respect to the certainty mentioned in point 3.4, the declared percentage was obtained by making a comparison between the emissions that Grupo Herdez estimated using the emission factors mentioned below and the emissions estimated for the year 2019 using the electronic platform that the GEI Mexico program makes available to those interested in reporting their emissions in said program.
• When comparing the total accounting of indirect emissions for the year 2019, the difference in data was 0.00%; in other words, using the GEI Mexico platform the resulting total indirect emissions were 25,019.39 Tn of CO₂ equivalent in both methodologies. This is because the same emission factors reported by CRE-SEMARNAT were used.

• Emissions

305-6. Emissions of ozone-depleting substances (ODS)

Grupo Herdez does not produce, import or export CFC-11 (R-11), R-14 and R-22 type substances.

The most used refrigerants are R-410A, R-134A, R-407C, R-404A, R-507, R-147, R-427 and R-MO99. In 2016 we launched a campaign to replace and eradicate this type of substance. In 2019 some facilities are still considering monitoring the non-use of R-22 and other banned refrigerants.

305-1. Direct (Scope 1) Greenhouse Gas emissions

Total direct emissions in 2019 were 66,942 tons CO₂ equivalent.

Notes:

• The gases included in the calculation were CO₂, CH₄, and N₂
• Biogenic CO₂ emissions have not been determined at Grupo Herdez for any type of waste or biomass that is generated, because the waste is not sent to incineration and is not used as alternative fuels in our plants.
• In the case of Greenhouse Gas emissions from direct sources (stationary and mobile – due to the use of fuels), there is currently no single base year, so an annual comparison of indicators is made which takes the previous year as a reference.
• For direct and indirect sources, the direct estimation methodology was used using emission factors established in internationally recognized sources, some of which were adopted by SEMARNAT. These, due to the units in which they are expressed, were applied directly to the consumption of each of the reported energy sources, making it possible to estimate the tons of CO₂ This determination is based on the fact that Grupo Herdez has not recorded any direct or accidental emissions or releases (either in the form of leaks or spills) of HFCs, PFCs, SF6 and/or NF3, which could be considered as part of the emissions to the atmosphere.
• For direct sources (stationary and mobile), emission factors were taken from GHG-PI version 4.0 (stationary combustion sources) and 2.3 (mobile combustion sources).

• Emissions

302-4. Reduction of energy consumption

To calculate the reductions observed in the consumption of electrical energy, the criterion applied was consumption in kWh/Ton produced.

The sources consulted are related to the conversion factors used and the calorific value of the fuels.

1. The conversion factors quoted in GJ/m³ were taken directly from the Greenhouse Gas Protocol, version 1.0, 2006, heat units
2. National Energy Balance 2011, Ministry of Energy; Conversion of Energy Units.
3. Forecast of the Liquefied Petroleum Gas Market 2012 – 2026, Ministry of Energy.

• Energy

305-7. Nitrogen oxides (NOX), sulfur oxides (SOX), and other significant air emissions

Notes:

• • The methodology used is that of direct determination using specific emission factors for each type of pollutant as recommended by the Greenhouse Gas Protocol (GHGP) for emissions from both stationary and mobile direct sources.
  • To determine the emission factors to be used, the provisions established by the UK Department for Environment, Food and Rural Affairs (DEFRA), the U.S. Environmental Protection Agency (US EPA) and the Intergovernmental Panel on Climate Change’s 2006 Guidelines for National Greenhouse Gas Inventories were considered, through the Mobile Combustion Greenhouse Gas Emissions Calculation Tools and the Stationary Combustion Greenhouse Gas Emissions Calculation Tools, which can be consulted on the Greenhouse Gas Protocol website.
  • Although the data represents the Group’s concentrate, the estimate is based on specific data provided by each facility, considering the consumption of fuel – measured directly – at stationary and mobile sources of Grupo Herdez. Likewise, unit conversion factors based on the metric system were used to convert kilograms to tons.

302-3. Energy intensity

Energy intensity for 2019 was 147.76 kilowatt-hour/tons produced, 4% less than the previous year.

In relation to fuel consumption, the energy intensity for 2019 was 11.50 m³/tons produced, i.e., 6% less than the previous year.

The total energy intensity of the Group measured in GJ/ton produced was 2.35, 7% less than the previous year.

• 2019:35 GJ/ton produced
• 2018:52 GJ/ton produced
• 2017:64 GJ/ton produced

This energy intensity considers the sum of the electrical energy from the Mexican Federal Electricity Commission (CFE; Comisión Federal de Electricidad) and the energy from the wind power generation project.

Note: The energy intensity is expressed based on the tons produced. In the case of units presented in kWh/ton produced, electricity and fuel consumption are reported separately. In the second case, although the total sum of fuels considers the consumption of the fleet of vessels for tuna fishing and of the distribution centers, energy intensity is obtained only from the sum of the production of all the plants, as the fleet and the distribution centers do not manufacture finished products.

In the case of total energy intensity expressed in GJ/Ton, both electricity and fuel consumption are standardized in caloric units.

302-1. Energy consumption within the organization

During 2019, the total consumption of energy products was 1,261,522 gigajoules, including fuel and electricity, representing a decrease of 1.6% compared to the previous year.

Our calculation methodology is based on the conversion of consumption in m³ of fuels to heat units (gigajoules) and of the kWh consumed of electrical energy to gigajoules using conversion factors for domestic application. Information on the operation of our fleet of tuna fishing vessels with respect to fuel and electrical energy is included. Also considered is the conversion of the electrical energy data from kWh to MWh.

Note: In 2018, for operational reasons, the distribution centers began to report their production in tons displaced instead of tons billed, to ensure the most representative environmental performance indicators with respect to their operations.

• Energy

415-1. Political contributions

As required by our Code of Ethics, which establishes the obligation to maintain a strictly neutral position on political and religious matters, we at Grupo Herdez and subsidiaries do not make financial and/or in-kind contributions to political parties or related institutions, nor do we receive financial assistance from the Government.

We have an Ethics Committee made up of six members from different areas, who join forces with our directors to provide advice in favor of ethical and legal conduct. Our Code of Ethics can be consulted at the following link: https://grupoherdez.com.mx/sustentabilidad/codigos-y-politicas/

205-3. Confirmed incidents of corruption and actions taken

Incidents related to non-compliance with the Code of Ethics in aspects of corruption and human rights violations are reported confidentially through the Grupo Herdez Ethics line.

This line is monitored by an external provider, which periodically prepares a consolidated report delivered to the Human Resources and the Internal Audit departments. The Internal Audit area is in charge of following up on all complaints, investigating them and giving a resolution, from a verbal or written reprimand to dismissal from the Company and legal follow-up of the case.

Taking into account this procedure, during the year 2019:

• 11 cases of corruption were confirmed.
• In addition, 29 employees were dismissed from the Company as a result of complaints made; there was one warning and five cases are still pending.

303-1. Interactions with water as a shared resource

Collection

Consumption

Discharges

Note: The quality of wastewater discharges sent to receiving bodies is monitored for compliance with maximum permissible limits established by the respective Mexican Official Standards.

Basins from which water is extracted by the organization:

Related impacts

Water targets are established based on water consumption and wastewater discharge indicators for each facility. Each facility has identified several areas of opportunity in its processes and made estimates of the potential savings that can be generated. Subsequently, an achievable annual goal is defined. These goals are not related to the local context of the locations themselves.

Analytical, holistic or deep-seated approaches to identify possible impacts are not followed. In contrast, only some of the possible impacts of both the extraction of consumption volumes from water sources and the number of contaminants present in wastewater discharged into receiving water bodies are intuitively considered.

205-1. Operations assessed for risks related to corruption

The Human Resources Department, jointly with the Internal Audit Department, is responsible for monitoring all reports of non-compliance with the Code of Ethics, including complaints and allegations of corruption and money laundering, as well as aspects related to human rights violations, workplace violence and psychosocial risks.

We do not conduct a formal risk analysis related to these issues. However, through this monitoring it is possible to detect the major incidents: abuse of authority, abuse of trust, preferential treatment, theft of assets and conflicts of interest. Thus, we are able to establish the necessary measures to prevent improper actions.

During 2019, the Human Resources Department made the following training and communication efforts:

1. Culture of Legality Program. This program is divided into two types of sessions:

a) 24-hour training for Ambassadors of Legality.

b) six-hour training for the rest of the collaborators, known as “replicas.”

7,932 hours of training in the Culture of Legality program were provided. Of this amount, 4,956 are endorsed by the United Mexico Association Against Crime (Mexico Unidos contra la Delincuencia), which is due to the balance as of July 2019.

2. Code of Ethics Induction Sessions. Classroom training sessions lasting between 1 and two hours were held to provide information on the Code of Ethics, its importance, and the various guidelines and values it embodies. In total, 201 face-to-face sessions were given in different locations, involving 2,452 employees. The sessions represented 2,963.5 hours of training.

403-8. Workers covered by an occupational health and safety management system

The Environmental Control, Safety and Hygiene (CASH, Control Ambiental, Seguridad e Higiene) Department is responsible for monitoring our Health and Safety management systems in operation at all Grupo Herdez’s facilities, including plants, distribution centers, stores and corporate offices. Such monitoring is equally applicable to all personnel working at or within our facilities.

The occupational health and safety management systems implemented apply to all employees and third-party workers who work within the Group.

The following information only represents the number and percentage of workers who are not employees of the Group, but whose work and/or workplace is controlled by the Company.

403-7. Prevention and mitigation of occupational health and safety impacts directly linked to business relationships

Grupo Herdez has a policy of Industrial Safety. This guideline is applicable to any person working with the Group or within the Group’s facilities, including personnel hired or subcontracted by third parties. The Industrial Safety Policy can be consulted at the following link: https://grupoherdez.com.mx/conocenos/codigos-y-politicas/

403-6. Promotion of worker health

At Grupo Herdez, we facilitate workers’ access to medical and health services. To this end, we implemented the mechanisms mentioned below:

In addition, we offer volunteer services and programs for non-work-related health promotion:

All workers’ medical information is treated in strict confidence. Our Code of Ethics is a tool that allows us to ensure that this is followed.

In the event of detecting any situation considered illegal or unethical, any participant in our stakeholders can report these breaches through the use of the following anonymous systems:

• 01800 number (01800 CONFIANZA – 01800 266342692).
• E-mail (confianza@herdez.com).
• Suggestion Box.

These systems are available 24/7.

403-5. Worker training on occupational health and safety

403-2. Hazard identification, risk assessment and incident investigation

Identification

The main process we follow to identify work-related hazards, as well as to carry out risk assessment, is through the internal system known as the Comprehensive Administration System for Environmental Control, Safety and Hygiene (SAI CASH).

This system is based on giving an adequate legal standardized follow up, including preventive observation on how to act. Therefore, we carry out training activities on the 5S method and conduct a Task Safety Analysis (TSA).

Follow up

To ensure proper compliance with SAI CASH, measurements are taken to determine strategic indicators, which are reviewed on a weekly, monthly and annual basis. Based on the monthly and annual measurements, work plans for the following year are designed and these plans must be approved by local management, CASH management, and the Supply Chain Department.

Continuous Improvement

The results of the CASH measurements and indicators are translated into areas of opportunity, which are part of future work plans. Likewise, meetings with safety leaders are conducted every week, and the progress achieved is presented, along with the punctual follow-up that corresponds to each identified area of opportunity.

Report of identified hazards

The main reporting process is presented through letters deposited in mailboxes, documented reports through checklists, and reports from the Health and Safety Commission.

The three reports discussed are confidential. A Review Committee participates in the reporting process and, with the participation of Management, provides specific support to the case.

Incident policies and processes

We have Health and Safety Management committees to follow up on each of the relevant aspects described below:

Additionally, we have formal local agreements established with unions for the benefit of workers with respect to Occupational Health and Safety. These relate to emergency brigades; evacuation and fire brigades; occupational diseases and accidents; health and safety campaigns; and an occupational risk prevention system; as well as all those required by Mexican laws, regulations and official standards.

403-1. Occupational health and safety management system

The Environmental Control, Safety and Hygiene (CASH) Department is responsible for monitoring our health and safety management systems. These systems are applicable to all of Grupo Herdez’s facilities, including plants, distribution centers, stores and corporate offices. In addition, these systems are focused on all personnel working or located in our facilities.

The occupational health and safety management systems implemented for employees, as well as for those third-party workers who are not part of the Grupo Herdez workforce (but whose responsibilities and/or workplace are controlled by the Company) are as follows:

We seek to safeguard the integrity and well-being of operational personnel. Likewise, we seek to prevent and mitigate incidents that affect the environment, and to maintain an appropriate culture of safety and risk prevention to ensure the continuity of our operations.

407-1. Operations and suppliers in which the right to freedom of association and collective bargaining may be at risk

We respect the legal guidelines for exercising freedom of association and collective bargaining at all Grupo Herdez’s facilities. For more information, visit: https://grupoherdez.com.mx/sustentabilidad/codigos-y-politicas/

406-1. Incidents of discrimination and corrective actions taken

Any form of harassment and discrimination against someone because of that person’s race, religion, national origin, gender identity, sexual orientation, marital status, age, disability, or any other reason is prohibited in all work activities carried out in our Company. In this regard, our Code of Ethics and applicable policies can be consulted at the following link::  https://grupoherdez.com.mx/sustentabilidad/codigos-y-politicas/

During 2019, no cases of discrimination were registered.

405-2. Ratio of basic salary and remuneration of women to men

Following our commitment to gender equity, and in line with the fifth Sustainable Development Goal (SDG), we calculate the ratio of the basic salary of women to men, a measurement that allows us to determine actions to be taken to close the existing gap in remuneration.

303-2. Management of water discharge-related impacts

The minimum standards established for the effluent discharge quality of Grupo Herdez are as follows:

* NOM-001-SEMARNAT-1996. Establishes the maximum permissible limits for discharges of wastewater dumped into national waters and goods, as well as discharges dumped into the soil.

* NOM-002-SEMARNAT-1996. Establishes the maximum permissible limits of contaminants in the discharges of wastewater to the urban or municipal sewer systems.

* State Technical Standard NTE-SLP-AR-001/05. Establishes specific conditions for the discharge of wastewater into the drainage and sewer systems in the municipalities of San Luis Potosi, Soledad de Graciano Sanchez, and Cerro de San Pedro.

*Specific conditions of discharge established by federal authorities according to Article 140 of the Regulations of the National Water Act.

303-3. Water withdrawal

Water

Total water withdrawal for each facility in water-stressed areas (megaliters)

Notes:

1. The volumes of extraction of groundwater, surface water, from the municipal sewer network or wastewater from another organization, are the result of direct measurements at plants and distribution centers.

2. Bills paid for consumption or water supply service are also a primary source of information.

3. Rainwater consumption is the only metric that is estimated with the help of data on the storage capacity of the facility’s rainwater system, time of use, and capacity of the pumps used.

• Water

419-1. Non-compliance with laws and regulations in the social and economic area

For Grupo Herdez the significant fines are those that exceed or equal the amount of $1 million Mexican pesos. During 2019, there were no incidents that led to non-compliance with social and/or economic laws or regulations and which resulted in significant fines.

307-1. Non-compliance with environmental laws and regulations

During 2019, there were no cases of non-compliance with environmental regulations. https://grupoherdez.com.mx/file/2018/09/Pol%C3%ADtica-Ambiental.pdf

206-1. Legal actions for anti-competitive behavior and monopoly practices

During 2019, no lawsuits related to monopoly or antitrust practices were filed. However, although no such cases have been filed in recent years, we nonetheless have an Antitrust and Competition Policy.

https://grupoherdez.com.mx/file/2018/11/Pol%C3%ADtica-de-competencia-econ%C3%B3mica-vf-firmada.pdf

303-4. Water discharge

Discharge of water by source

Discharge by water type

Note: Criteria for determining water stress were taken from the Aqueduct Water Risk Atlas 2019, as it is an internationally recognized tool for that purpose. In the case of Chiapas and Mérida, however, the CONAGUA criteria were considered, as it is more in line with the reality in those regions.

Wastewater treatment

The standards that the Grupo Herdez’s facilities comply with to respect the discharge limits of priority substances are:

• • NOM-001-SEMARNAT-1996. Establishes the maximum permissible limits for discharges of wastewater dumped into national waters and lands, as well as discharges dumped into the soil.
  • NOM-002-SEMARNAT-1996. Maximum permissible limits of contaminants in the discharges of wastewaters to the urban or municipal sewer networks;
  • State Technical Standard (NTE-SLP-AR-001/05). Specific conditions of wastewater discharge to the drainage and sewer systems of the municipalities of San Luis Potosi, Soledad de Graciano Sanchez and Cerro de San Pedro; and
  • Specific Discharge Conditions established by federal authorities in accordance with Article 140 of the National Water Act, which establishes that, in order to determine the specific conditions of discharge, the Commission shall take into account the parameters and maximum permissible limits contained in the Official Mexican Standards issued by the authorities for discharges of wastewater and for the treatment of water for human use or consumption, as well as the parameters and maximum limits derived from the Declarations of Classification of National Bodies of Water published under the terms of Article 87 of the Act.

• Water

207-4. Country-by-country reporting

Grupo Herdez’s tax jurisdiction is Mexico.

* BEPS (Base Erosion and Profit Shifting) figures are reported with a year’s delay. All company results are aggregated and eliminations for consolidation method of financial information is not followed. Therefore, the BEPS and consolidated figures are not comparable.

207-3. Stakeholder engagement and management of concerns related to taxes

At Grupo Herdez we do not have compliance agreements with the tax authorities nor do we participate in the promotion of fiscal policies and regulations.

207-2. Tax governance, control and risk management

The Deputy Chief Management Officer and the Tax Management Department of Grupo Herdez are jointly responsible for complying with the taxpayer obligations.

The mechanisms to ensure compliance with this type of obligations are:

• Control and registration of compliance with tax obligations;
• Tax compliance rulings on federal and state matters;
• Financial reporting;
• Strategic matrix and control for domestic and international Transfer Pricing;
• Continuous training of personnel in tax matters; and
• External legal and fiscal advisers.

Similarly, our anonymous reporting systems are available at:

• 01800 toll-free number (01800 CONFIANZA – 01800 266342692);
• E-mail (confianza@herdez.com); or
• Suggestion Box.

These systems are available 24/7.

207-1. Approach to tax

At Grupo Herdez we fully comply with the applicable domestic and international regulations.

201-4. Financial assistance received from government

At Grupo Herdez we do not receive any financial assistance from the government.

201-1. Direct economic value generated and distributed (EVG&D)

102-51. Date of most recent report

The last report issued covered Jan. 1 to Dec. 31, 2019.

102-45. Entities included in the consolidated financial statements

102-43. Approach to stakeholder engagement

102-36. Process for determining remuneration

The Corporate Practices Committee is the body responsible for validating the compensation package for the Company’s top executives, including the Chief Executive Officer.

102-35. Remuneration policies

In accordance with the Company’s bylaws, the monetary compensation of each member of the Board of Directors is based on the granting of three gold coins of $50.00 Mexican pesos (centenarios) or its equivalent for the director’s attendance at each Board meeting. This remuneration is not subject to the Group’s own performance.

303-5. Water consumption

Total water consumption per facility in water-stressed areas (megaliters)

Water

Notes:

• • Reported consumption is measured directly by measuring instruments that are monitored and, in certain cases, certified by federal, state and municipal authorities. This consumption is reported to the authorities through various formats and reporting mechanisms.
  • The volume of rainwater is an estimated amount that indicates what the El Duque Complex, the Mexico plant, and the Mexico distribution center recover and use for garden irrigation.
  • Because we do not use rainwater in our production processes, a separate report will be provided.

• Water

102-29. Identifying and managing economic, environmental and social impacts

The Board of Directors meets on a quarterly basis. It has intermediate bodies responsible for monitoring the management and execution of the Company’s objectives. During the Board meetings, a report on the performance of the Company in regard to sustainability is presented, which includes aspects related to the economic, social and environmental performance.

102-25. Conflicts of interest

For the purpose of avoiding conflicts of interest, each director must sign a declaration that guarantees the absence of conflicts. Each Committee has its own regulation, which establishes the functions of the directors and the relationship they will have with the Board of Directors.

We also have a Code of Ethics and a Conflict of Interest Policy, which are binding documents and must be observed by all employees. Both can be consulted at the following link: https://grupoherdez.com.mx/sustentabilidad/codigos-y-politicas/

102-24. Nominating and selecting the highest governance body

The ratification procedure for the members of the Board of Directors is carried out by being voted on at the Shareholders’ Meeting each year. To be designated, directors must meet the following requirements:

(i) Have professional training in economic–administrative practices, preferably with a postgraduate degree in those same areas;

(ii) At least 20 years’ professional expertise in executive positions in consumer companies and/or within the financial sector;

(iii) Expertise as members of the Board of Directors in companies in the manufacturing industry and/or the financial sector; and,

(iv) Currently serving in Corporate Governance bodies.

102-23. Chair of the highest governance body

The Chairman of the Board of Directors also serves as the organization’s Chief Executive Officer.

102-22. Composition of the highest governance body and its committees

Background and skills

Héctor Hernández-Pons Torres

Chairman of the Board of Directors

Chief Executive Officer

A graduate of the Universidad Anahuac’s School of Law and the National University in San Diego, California, where he obtained a Master of Business Administration. He joined Grupo Herdez‘s legal department in 1978 and has since held various positions within the Company. In 2004, he was appointed Chairman of the Board of Directors and Chief Executive Officer.

In addition to his responsibilities within Grupo Herdez, he has held various positions at business and industrial organizations, such as regional board member for Banamex and Nacional Financiera; Vice President of the Confederación de Cámaras Industriales de México (CONCAMIN); President of the Board of Directors of Papalote Museo del Niño and of the National Chamber of the Canned Food Industry (CANAINCA). He is currently President of the Herdez Foundation, a member of the Board of Directors of Papalote Museo del Niño and CANAINCA. Mr. Hernández-Pons is a member of the board of trustees of the Mexican Business Council (Consejo Mexicano de Negocios) and the Communication Council (Consejo de la Comunicación).

Enrique Hernandez-Pons Torres

Vice Chairman of the Board of Directors

Deputy Chief Executive Officer

Mr. Hernández-Pons holds a bachelor’s degree in Business Administration with an international postgraduate degree in Marketing and Business Administration. He joined Grupo Herdez in 1971 and served in the Company’s Sales, Marketing and Accounting areas, among others. Currently, he acts as Vice Chairman of the Board of Directors and Deputy Chief Executive Officer of Grupo Herdez, as well as Chairman of the Board of Directors of MegaMex in the U.S.

Anasofía Sánchez Juárez Cardoze

Independent Director

A graduate of the Monterrey Institute of Technology (ITESM) with a major in Marketing, Ms. Sánchez earned a master’s degree in Communications, Advertising and New Media from the Institute National Supérieur D’Études Economiques et Commercial (INSEEC) in France. She has also studied at HEC Paris and the Wharton School of Business at the University of Pennsylvania. She is a professor in the Master of Internet Business program at the Instituto Superior para el Desarrollo de Internet (ISDI) and serves as Chief Executive Officer of Waze Mexico. Previously, she acted as Business Manager in Facebook‘s Mexico and Central America operations, a position she held for more than five years, as well as Brand Solutions Manager for Google and Business Leader for YouTube Mexico.

Enrique Castillo Sánchez Mejorada

Independent Director

Mr. Castillo holds a bachelor’s degree in Business Administration. He began his professional career at Banco Nacional de México. He held various executive positions in Mexico at Nacional Financiera, Casa de Bolsa Inverlat, Seguros América, Inverméxico/Banco Mexicano and Credit Suisse México. He was Chairman of the Board of Directors of IXE Grupo Financiero, as well as Vice President and President of the Mexican Bank Association. Currently, he serves as Chairman of the Board of Directors of Maxcom Telecomunicaciones and is Chairman of the Non-Executive Board of Directors of Banco Nacional de México. Mr. Castillo is a member of the Board of Directors of Grupo Alfa, Southern Copper Corporation and Médica Sur.

Eduardo Ortiz Tirado Serrano

Independent Director

Mr. Ortiz holds a bachelor’s’ degree in Business Administration from the Anáhuac University. He began his professional career at Grupo Herdez, where he worked in the Marketing department. Later, he collaborated in the Marketing department of Richardson Vicks and Procter & Gamble for six years. In 1988, he joined SC Johnson and Son as responsible of the Marketing department. In 1992, he participated in an international sales associate training program in Los Angeles, California. In 1993, he acted as Commercial Manager of SC Johnson Mexico and in 1995 was promoted to General Manager of SC Johnson’s Mexico and Central America operations. In 2001, he was appointed the company’s corporate Vice President and Chief Executive Officer of Mexico and Central America. In Jan. 2013, he retired from SC Johnson. He was a member of the Council of Self Regulation and Advertising Ethics (CONAR, Consejo de Autorregulación y Ética Publicitaria), the Mexican Center for Philanthropy (CEMEFI), and the Advisory Council of Great Place to Work^® – México.

Currently, Mr. Ortiz is the Chief Executive Officer of Grupo Zapata and a member of the Board of Directors of Grupo Herdez, where he serves in the Audit Committee. He is also a board member of the Un Mañana para la Comunidad Foundation and a member of the Advisory Council of the Xochitla Foundation.

José Roberto Danel Díaz

Independent Director

Mr. Danel is a Public Accountant graduated from the Iberoamericana University. He has postgraduate studies in Management at the Mexico Autonomous Institute of Technology (ITAM), in Senior Management at the IPADE Business School, in Corporate Governance at the Yale School of Management, at the Stanford Graduate School of Business and at Harvard Business School.

As an independent director, he is a member of the Board of Directors and chairs or acts as a member on various committees, as well as in publicly traded and private companies and financial institutions. He is a member of the Public Accountants Association of Mexico (Colegio Mexicano de Contadores Públicos) and the Mexican Institute of Public Accountants (Instituto Mexicano de Contadores Públicos). He also participated as a partner at the Mexican Institute of Finance Professionals (Instituto Mexicano de Ejecutivos de Finanzas).

Mr. Danel is the Chairman of the Best Practices Committee on Corporate Governance of the Business Coordinating Council (CCE), as well as a member of the Latin American Institute of Corporate Governance (OECD-World Bank), the National Association of Corporate Directors (U.S.), and the International Corporate Governance Network (UK), including the latter’s Risk Committee.

Luis Rebollar Corona

Independent Director

Chemical engineer graduated from the National Autonomous University of Mexico (UNAM). He has served as Chief Executive Officer and Chairman of several boards in manufacturing and telecommunications companies. He is currently a member of the boards of Grupo Gigante, Grupo Sanchez and Grupo Industrial Mexicano. He participated in the restructuring of Satélites Mexicanos, serving as the company’s Chairman of the Board.

Michael Bernhard Jost

Independent Director

A financial professional with a degree in Business Economics from the University of Bern with more than 25 years of business expertise in the Latin American region. During the last 17 years of this time he has held the position of Chief Financial Officer in various Nestlé Group entities. Mr. Bernhard has also led various M&A transactions; implemented corporate restructuring; and supported strategic planning and business risk management processes. He has served as a member of the Remuneration Committee and the Compliance Committee of Nestlé Brazil and Nestlé Mexico.

• Corporate Governance

102-20. Executive-level responsibility for economic, environmental and social topics

A sustainability performance report is presented during the quarterly Board meetings. This report must address environmental performance and display the Quality of Life indicators of our employees. In this regard, the members of the Board responsible are as follows:

• Eduardo Ortiz Tirado Serrano – Labor Practices

• Luis Rebollar Corona – Environmental Practices
• José Roberto Danel Díaz – Chairman of the Corporate Practices and Audit Committee

102-18. Governance structure

• Corporate Governance

102-15. Key impacts, risks and opportunities

In 2019, the Environmental Control, Safety and Hygiene Department, with the collaboration of the Risk Management area and the Strategic Consulting Group, created a comprehensive Crisis Management System for Grupo Herdez.

An operational risk matrix and a crisis manual were developed, establishing the most important risks to which the Company is exposed, based on specific categories, as follows:

• Industrial (fires, leaks, environmental impact, community opposition)
• Product contamination or serious defect, adulteration
• Transport (road accidents, roadblocks, suppliers)
• Social (demonstrations, blocking of facilities, social activism)
• Natural disasters (hurricanes, earthquakes, droughts and frosts)
• Safety (safety of persons and assets, theft)
• Information Technology (Disaster Recovery Plan [DRP] for computer systems, telecommunications)

102-13. Membership in associations

Industrial:

• Mexican Association of the Coffee Production Chain (AMECAFE; Asociación Mexicana de la Cadena Productiva del Café)
• National Chamber of Metal Containers (CANAFEM; Cámara Nacional de Fabricantes de Envases Metálicos)
• Mexican Association of Biscuit and Pasta Manufacturers (AMEXIGAPA; Asociación Mexicana de Industriales de Galletas y Pastas)
• National Association of the Food Supplements Industry (ANAISA; Asociación Nacional de la Industria de Suplementos Alimenticios)
• National Chamber of the Canned Food Industry (CANAINCA; Cámara Nacional de la Industria de Conservas Alimenticias)
• National Chamber of Milk Industries (CANILEC; Cámara Nacional de Industriales de la Leche)
• Mexican Council of the Consumer Products Industry (ConMéxico; Consejo Mexicano de la Industria de Productos de Consumo)
• National Agricultural Council (CAN; Consejo Nacional Agropecuario)
• National Council for Organic Production (CNPO; Consejo Nacional de Producción Orgánica; chaired by SAGARPA)
• International Federation of Organic Agriculture Movements (IFOAM; Federación Internacional de Movimientos en Agricultura Orgánica)
• Mexican Organic Movement

Business:

• Mexican Association of Standards for Electronic Commerce (AMECE; Asociación Mexicana de Estándares para el Comercio Electrónico)
• Canadian, British, Spanish and American Chambers of Commerce of Mexico
• Confederation of Industrial Chambers (CONCAMIN; Confederación de Cámaras Industriales)
• Business Coordinating Council (CCE; Consejo Coordinador Empresarial)

Sustainability:

• Mexican Center for Philanthropy (CEMEFI; Centro Mexicano para la Filantropía)
• Commission of Studies on the Private Sector for Sustainable Development (CESPEDES; Comisión de Estudios del Sector Privado para el Desarrollo Sustentable)
• Business Commitment to Integrated Solid Waste Management (SUSTENTA; Compromiso Empresarial para el Manejo Integral de Residuos Sólidos)
• Basin Councils (Consejos de Cuenca chaired by CONAGUA; Comisión Nacional del Agua)
• Nonprofit Environmental Association (ECOCE)
• Global Environmental Management Initiative (GEMI)
• United Nations Global Compact

102-11. Precautionary Principle or approach

Aware of the environmental, safety. and quality risks, Grupo Herdez executes all its operations with rigorous adherence to the principle of Safety First in the Department of Environmental Control, Safety and Hygiene (CASH; Control Ambiental, Seguridad e Higiene), to thereby ensure the physical integrity of the employees and our facilities. This Department encourages compliance with applicable regulations and promotes the protection of our assets, thus ensuring the continuity of the Group’s operations.

The work program within each of our locations is subject to meeting the objectives of Grupo Herdez with respect to CASH.

Prevention plans

We have a World Class Manufacturing scheme, which manages our Continuous Improvement Process in each of our plants. This program allows us to:

• Achieve more competitive costs;
• Improve productivity levels;
• Ensure quality standards;
• Achieve world-class management and operations; and
• Take advantage of effective information systems.

Grupo Herdez also has a properly structured major emergency plan. This plan has been designed to provide an adequate response to any type of contingency in our plants and distribution centers. Communication between the affected areas and the corporate headquarters is supported by brigades that work in a coordinated manner at all times.

Participation in Associations

We participate in the Employers Confederation of the Mexican Republic (COPARMEX; Confederación Patronal de la República Mexicana), an organization for which we provide advice and act as advisers in matters of Safety, Hygiene and Environment. Likewise, we are an active member of the Safety Committee of the Mexican Council of the Consumer Products Industry (ConMéxico; Consejo Mexicano de la Industria de Productos de Consumo).

Certifications

Environment

• Clean Industry Certification, which is issued by the Federal Environmental Protection Agency (PROFEPA; Procuraduría Federal de Protección al Ambiente);
• Environmental Quality Certification for two of our tuna fishing vessels, issued by the Ministry of Environment and Natural Resources (SEMARNAT; Secretaria del Medio Ambiente y Recursos Naturales); and
• Certification from the Marine Stewardship Council (MSC), a body that establishes the principles and criteria for the implementation of sustainable fishing, as well as the traceability of fish products.

Safety

• Safe Industry Certification issued by the Ministry of Labor and Social Welfare (STPS; Secretaria del Trabajo y Previsión Social).

Quality

• Certification issued by the Federal Commission for Protection against Sanitary Risks (COFEPRIS; Comisión Federal para la Protección contra Riesgos Sanitarios).

Civil Protection

• Every year we carry out the Internal Protection Program, which is reviewed by the Civil Protection authority and focused on the implementation of risk prevention measures addressing fires, spills and leaks, among other contingencies.

102-10. Significant changes to the organization and its supply chain

In 2019, two significant developments at the operational level took place at Grupo Herdez:

1. The San Luis Potosi tea plant began operations.
2. A tuna fishing vessel that was part of our marine fleet was sold.

102-8. Information on employees and other workers

Distribution of employees by gender

Distribution of employees by employment contract

Distribution of employees by region

The main operations of Grupo Herdez are carried out in the following locations: tuna fishing vessels, distribution centers, offices, plants and stores in Mexico.

We maintain no personnel under part-time contract. All employees, including those temporarily employed, have been directly hired by the Company. There are no reduced work hours.

• Workforce
• Diversity and inclusion

102-7. Scale of the organization

The Group’s infrastructure consists of:

• 14 plants (13 in Mexico and one in the U.S.)
• 24 distribution centers (CEDIS; 22 in Mexico and two in the U.S.)
• 6 tuna fishing vessels
• 679 stores under the brands Nutrisa, Lavazza, Cielito Querido Café, and Moyo.
• 9,870 employees
• 22.420 billion Mexican pesos in Net Sales
• 3.818 billion Mexican pesos in EBITDA
• 1.93% of net income is spent on Social Investments

The Company was founded in 1914, and its shares have been listed on the Mexican Stock Exchange since 1991 under the ticker symbol HERDEZ*.

102-6. Markets served

Grupo Herdez’s main operations are concentrated in Mexico.

102-5. Ownership and legal denomination

We are a corporation whose shares are listed on the Mexican Stock Exchange (BMV, Bolsa Mexicana de Valores) since 1991 under the ticker symbol HERDEZ*.

Our shares are part of the BMV Sustainable Price and Quotations Index, which is integrated by issuers with the best practices in the Social, Environmental and Governance matters.

• About this report

306-1. Water discharge by quality and destination

Treated wastewater is discharged into federal and municipal receiving bodies, in full compliance with the maximum permissible limits established in Official Mexican Standards NOM-001-SEMARNAT-1996 and NOM-002-SEMARNAT-1996, as applicable.

Grupo Herdez’s water treatment plants have been designed to satisfy each facility and the type of water effluent to be treated. This infrastructure is used to treat appropriate process water and, where relevant, sanitary water.

Discharged water quality

Estimated quantities of effluents treated by Grupo Herdez in 2019 (expressed in tons) are as follows

• Fats, Oils, and Grease (FOG): 4.03 tons
• Biological Oxygen Demand (BOD): 19.82 tons
• Chemical Oxygen Demand (COD): 115.90 tons
• Total Suspended Solids (TSS): 26.69 tons
• Total Dissolved Solids (TDS): 119.36 tons
• Suspended Solids (SS): 0.15 tons

306-2. Waste by type and disposal method

Waste and recycling

Total weight of hazardous waste by disposal method

Total weight of non-hazardous waste by disposal method

Total amount of waste generated in the last 4 years

A number of Grupo Herdez’s plants have established waste reduction goals, but no environmental objectives have been set for the Group or by each business division. With the strategic alignment due to the Sustainable Development Goals (SDGs), we are committed in the short term to establish the respective goals.

• Waste and recycling

301-2. Recycled input materials used

Waste and recycling

% Materials recycled in 2017 = 3.03

% Materials recycled in 2018 = 3.47

% Materials recycled in 2019 = 2.59

• Waste and recycling

306-3. Significant spills

In 2019, no spills of any material, waste, substance and/or liquid were observed.

306-4. Transport of hazardous waste

In 2019, approximately 71 tons of hazardous waste were sent to waste depots in Mexico.

Grupo Herdez does not transport, import, export or treat hazardous waste. The waste generated by the Group is sent to collection and/or controlled confinement centers.

306-5. Water bodies affected by water discharges and/or runoff

Residual water from the Grupo Herdez’s facilities is mainly discharged into the municipal drainage network. In cases of discharge into surface water bodies or federal channels, we do not have technical evidence to measure their impact. However, all water discharged is previously treated, and the discharge volumes are low and medium.

102-3. Location of headquarters

Our headquarters are located at Monte Pelvoux 215, Lomas de Chapultepec, Mexico City, C.P. 11000, MEXICO.

308-1. New suppliers that were screened using environmental criteria

Audits of new suppliers were not carried out in 2019. However, the tracking of raw materials and the relationship with our suppliers are essential elements for us to guarantee that our products reach our consumers’ table in due time and form, and with the quality standards of the Company.

Agricultural Sustainability Program

To give continuity and validity to the progress made under the Agricultural Sustainability Program, we have a work team made up of six internal auditors. These professionals evaluate and follow up on the state of the fields and monitor whether suppliers are operating in ecologically sensitive areas and whether the measures that producers implement for land protection are effective. They also assess the appropriateness of measures taken to improve soil quality, increase recycling and reduce waste generation. This is done by checking pre-determined tasks to quantify progress and identify areas in each supplier.

Each agricultural producer is audited according to the guidelines of the Guidelines of Good Health Practices for Agricultural Products, with the main emphasis on the Guidelines of Good Agricultural Practices and the Agricultural Sustainability Plan.

In 2019, 45 suppliers were evaluated, 15% of which were new suppliers.

416-1. Assessment of the health and safety impacts of product and service categories

The Research and Development Department of Grupo Herdez is in charge of making the necessary modifications in terms of health, safety, quality, and nutrition to our wide existing product portfolio. Likewise, this unit is responsible for designing products that anticipate or adapt to the changing lifestyles and needs of our clients and consumers.

We have a Quality and Safety Management System which is certified under the FSC22K standard and meets the requirements of customers and government entities in Mexico (COFEPRIS) and with respect to exports to the U.S. (US FAD).

All the products that make up our local and export portfolio are subject to Health and Safety evaluations in order to promote their improvement.

• The health and safety impacts of products

416-2. Incidents of non-compliance concerning the health and safety impacts of products and services

During 2019, there were two cases concerning Health and Safety in our products in Nutrisa stores.

In two branches (Cancun and State of Mexico), product was immobilized due to its expiration, resulting in two minor administrative sanctions and fines.

IP-9. Health and Nutrition Care Strategy Development

The Technical Management’s Scientific and Regulatory Affairs area validates that the products developed by Grupo Herdez contain permitted ingredients and complies with the chemical content indicated by the applicable regulation for each product category. In addition, this area determines the nutritional icons that the Front Label must contain, so that the consumer has the information of the nutritional value provided through the consumption of the product.

As far as international markets are concerned, the innovation, development, and reformulation of existing products follow the recommendations of the World Health Organization (WHO) as regards aspects of nutrition and healthy diet.

In Mexico, the Official Mexican Standards NOM-086-SSA1 (Foods and Nonalcoholic Beverages with a Modified Composition) and NOM-051-SCFI/SSA (General Labelling Specifications for Prepackaged Food and Nonalcoholic Beverages) are considered.

We developed specific strategies related to Health and Nutrition care in the canned vegetables segment in 2019:

Reduced in sugar:

• • Pea
  • Pea and carrot
  • Vegetable salad
  • Pulse salad

Reduced in sodium:

• Corn kernels

408-1. Operations and suppliers at significant risk for incidents of child labor

Strict control is exercised over our hiring processes, along with a Supplier Code of Conduct, which each supplier must sign when establishing a business relationship with Grupo Herdez.

Within the code, clauses prohibiting the hiring of child labor or forced labor are included. The above is done as a measure to avoid the risk of employing child labor throughout our value chain, with emphasis on the most vulnerable sectors, such as agricultural and fishing practices. The Supplier Code of Conduct can be consulted at the following link: https://grupoherdez.com.mx/sustentabilidad/codigos-y-politicas/

409-1. Operations and suppliers at significant risk for incidents of forced or compulsory labor, including child labor

Our Supplier Code of Conduct includes the minimum guidelines that our current and potential suppliers must satisfy in terms of social and environmental conditions for the development of their own operations and services.

This document has been constructed based on the norms of the International Labor Organization (ILO) and the Ten Principles of the United Nations Global Compact, as well as the Human Rights Policy and the Code of Ethics of Grupo Herdez.

417-2. Incidents of non-compliance concerning product and service information and labeling

During 2019, no incidents regarding the labelling of our products took place.

417-3. Incidents of non-compliance concerning marketing communications

During 2019, no incidents of non-compliance with marketing communications took place.

IP-1. Clients and consumers relationship

Grupo Herdez has various communication channels to attend to the comments and needs of clients and consumers.

Contact channels:

01-800 number. Each of our brands has a toll-free number assigned through which the consumer can resolve quality issues, make a complaint, or make suggestions about a certain product.

Websites and Social Media. We have official websites for most of our brands, through which consumers and customers can obtain information about them. In addition, we have more than 20 brand profiles on social networks where, via Q&A interaction, information can be obtained about our achievements, including the concerns and doubts of our consumers.

• Energy

IP-8. Consumer Communication Policies and Practices

Labelling requirements

The regulatory labelling requirements for each market vary according to the product category and in the case of the Mexican market the specific Official Mexican Standard (NOM) is applied. In the absence of any standard, general ordinances and regulations will be applied, such as the Sanitary Control of Products and Services; the General Health Law regarding the sanitary control of activities, establishments, products and services; the agreement determining the additives and adjutants in food, beverages and food supplements, their use and sanitary provisions; and the agreement determining the plants prohibited or allowed for Dried Tea, Herbal Tea, Herbal Infusions, and Edible Vegetable Oils; among others.

In the case of export products, the specific regulation in each international market will be applied.

As a voluntary practice that is stricter than legal requirements, we review the sub-ingredients of the raw materials included in the formula in order to find evidence of any additive or contaminant that could affect the safety of the product. In addition, some suppliers are requested to provide results from tests and analysis of contaminants depending on the nature of the ingredient or product and, in particular, for products that are exported to the U.S.

Information on product content and ingredients

All our products within the Foods, Nonalcoholic Beverages, and Food Supplements categories indicate on their labels both the list of ingredients they contain and the corresponding nutritional information.

• For Food and Beverages, the energy content, protein, total fat, saturated fat, carbohydrates, total sugars, dietary fiber and sodium are mandatorily included.
• For food supplements, the energy content, protein, total fat, carbohydrate and sodium are included, both per serving and per 100 grams of product.

The main source of nutritional information is the product label itself. However, this information is available on some of the Company’s websites. In addition, updated nutrient information is available to consumers through the Company’s 01800 toll-free number for each of the food and nonalcoholic beverage brands.

All label claims must be supported by scientific evidence, a requirement that must be satisfied for nutritional information to be included on labels, thus complying with applicable regulations for the product and the market.

Because of our internal guidelines, the label must state:

• • Whether the dye is artificial or natural;
  • If the flavoring is natural, artificial or nature-identical, where hydrolyzed protein and monosodium glutamate (MSG) are declared as such;
  • There is no policy for a Genetically Modified Organism (GMO) according to the domestic legislation;
  • Sweeteners are declared as required by the International Food Additives Council (IFAC);
  • All allergens and those that may be present in the product are declared;
  • None of our products are fortified unless, on a practical basis, it is a regulatory requirement; and
  • Methods used in food processing to maintain food safety are indicated.

IP-7. Innovation Management

Research and Development (R&D) expenditure over the last four years is shown below:

102-1. Name of the organization

Grupo Herdez, S.A.B. de C.V.

• Corporate Governance
• Sustaintability strategy