REPORTSUSTAINABILITY

2016

SUSTAINABILITY REPORT 2016

CONTENTSTHE CHAIRMAN'S LETTER 5

THE ROAD TO SUSTAINABILITY AND REPORTING AT GRANAROLO 13

RELATIONS WITH STAKEHOLDERS 14

THE MATRIX OF MATERIALITY 19

GRANAROLO AND SUSTAINABLE DEVELOPMENT GOALS (SDG) 22

1. COMPANY PROFILE AND CONDUCT 261.1 ABOUT US 30

1.1.1 HISTORY OF THE GRANAROLO GROUP 341.1.2 MISSION, VISION, AND VALUES 361.1.3 ETHICAL CODE 38

1.2 THE GOVERNANCE SYSTEM 401.2.1 CORPORATE GOVERNANCE STRUCTURE 401.2.2 THE ORGANISATIONAL MODEL 43

1.3 THE INTEGRITY OF COMPANY CONDUCT 441.3.1 RISK ANALYSIS AND PREVENTION 45

2. A COMPETITIVE AND SUSTAINABLE BUSINESS MODEL 482.1 THE ECONOMIC CONTEXT 52

2.1.1 THE ITALIAN FOOD AND AGRICULTURE INDUSTRY 532.1.2 MILK: THE INTERNATIONAL AND ITALIAN SITUATION 552.1.3 THE DAIRY MARKET AND NEW MARKET OPPORTUNITIES IN ITALY 58

2.2 GRANAROLO: DEVELOPMENT STRATEGIES AND RESULTS 602.2.1 THE NEW INDUSTRIAL PLAN FOR 2016-2019 602.2.2 POSITIONING IN ITALY AND ABROAD 622.2.3 MANAGEMENT RESULTS FOR 2016 682.2.4 GENERATED AND DISTRIBUTED ECONOMIC VALUE 732.2.5 INDUSTRIAL INVESTMENTS 75

3. OUR COMPETITIVE LEVERAGE 763.1 AN ITALIAN MODEL FOR SUSTAINABILITY: GRANAROLO'S PRODUCTION CHAIN 83

3.1.1 THE COMMITMENT TO SUPPORTING PRODUCERS 903.1.2 INVOLVING AND LISTENING TO FARMER SHAREHOLDERS 943.1.3 THE "PRODUCTION CHAIN CULTURE" IN INTERNATIONALISATION AND DEVELOPMENT 94

3.2 INNOVATION 963.2.1 PATENTS 1013.2.2 CONTRIBUTIONS FOR INNOVATION 102

3.3 PROTECTING THE CHAIN OF VALUE UPSTREAM AND DOWNSTREAM 1033.3.1 SUPPLIERS 1033.3.2 DISTRIBUTION AND COMMERCIAL DEVELOPMENT 106

4. PROMOTING HEALTH AND WELL-BEING 1084.1 BALANCED NUTRITION AND THE ANSWER TO EVOLVING CONSUMPTION 112

4.1.1 ALTA QUALITÀ [HIGH QUALITY] 1164.1.2 YOMO'S POLICY FOR NATURALNESS 116

4.2 GUARANTEEING FOOD SAFETY 117

4.3 ATTENTION TO RESPONSIBLE CONSUMPTION AND TO DIALOGUE 1244.3.1 COMMUNICATING WITH INCREASINGLY CAREFUL CONSUMERS 125

5. APPRECIATING PEOPLE 1265.1 IN DEFENCE OF EMPLOYMENT 131

5.1.1 EMPLOYMENT DYNAMICS 131

5.2 PROFESSIONAL GROWTH 1355.2.1 TRAINING AND CAREERS 1375.2.2 DEVELOPMENT AND RETRIBUTION POLICIES 1375.2.3 COMPANY CULTURE AND COMMUNICATION 138

5.3 HEALTH AND SAFETY IN THE WORKPLACE 1405.3.1 TRENDS IN GRANAROLO S.P.A. 1425.3.3 TRENDS IN SUBSIDIARIES 146

5.4 COMMITMENT TO THE WELL-BEING OF OUR COLLABORATORS 149

6. PROTECTING THE ENVIRONMENT FROM THE STABLE TO DISPOSAL 152

6.1 GRANAROLO'S APPROACH TO ENVIRONMENTAL SUSTAINABILITY 156

6.2 MAIN ACTIONS TO REDUCE ENVIRONMENTAL IMPACT 1646.2.1 REDUCING THE IMPACT OF THE PRODUCTION CHAIN 1646.2.2 REDUCING THE IMPACT OF THE PRODUCTIVE PROCESS 1656.2.3 REDUCING THE IMPACT OF PACKAGING 1806.2.4 EXPENSES, COMPLAINTS, AND ENVIRONMENTAL FINES 1826.2.5 ENVIRONMENTAL TRENDS IN THE GROUP'S COMPANIES 183

7. THE COMPANY'S CIVIC COMMITMENT, AT LOCAL AND GLOBAL LEVELS 1887.1 GRANAROLO IN THE TERRITORIES: A COMMITMENT TO INCLUSION 192

7.1.1 PROJECTS IN FAVOUR OF THE COMMUNITIES 193

7.2 GRANAROLO'S CONTRIBUTION TO MAJOR ISSUES AT NATIONAL AND INTERNATIONAL LEVELS 1997.2.1 THE COMMITMENT TO FOOD INNOVATION 1997.2.2 THE PERMANENT MILK OBSERVATORY 2007.2.3 ACTIVE PARTICIPATION 2017.2.4 PROMOTING SUSTAINABLE DAIRY PRODUCTION CHAINS IN DEVELOPING COUNTRIES 201

8. TABLE OF CORRELATIONS WITH GRI-G4 INDICATORS 202

THE CHAIRMAN'S LETTERThe Italian agro-industrial sector currently exports about 38 billion Euro: consumers all over the world appreciate us. All over the world they study us and, frequently, copy us. It is a common opinion that Italy and products Made in Italy have even greater potential, and that they could play a leading role in the world, reaching 50 billion Euro by 2020. In order to promote this growth, the Ministry of Agricultural, Food and Forestry Policies and the Ministry of Economic Development are converging on shared supporting policies. This strategy is capable of supporting internationalisation in a significant manner. Even though the P.D.O. products that have significantly crossed the national borders can be counted on your fingers, the heritage of our biodiversity and our food safety standards represent a precious driving force in establishing our leading role.This is, therefore, a very important opportunity for a turning point in development, to bring the production chains back to centre-stage. From the earth to the factory, they bring life to the Made in Italy label, as an internationally unique phenomenon. The territorial production chain cannot be replicated, and it is therefore not by chance that a company like Granarolo, which expresses a competitive production chain and size, also has such a driving role at an institutional level.After all, the Granarolo Group is experiencing an internationalisation process that has been going on since 2011, and which, in 2016, involved a further year of consolidation on national and international markets. In fact, Granarolo plays a fundamental role in protecting the Italian milk production chain and the country's livestock farming sector and defending Italian DOP products (PDO - Protected Designation of Origin). Granarolo's production chain model represents an integrated production system in which the group directly controls all phases, from production of the raw material to distribution of the finished product in retail points.

However, 2016 was also a difficult year, starting from the low milk prices, which recovered somewhat at the end of the year. Belonging to a cooperative - in spite of many difficulties - has been, for shareholders, a means of survival. Outside, the drop in the price of milk made covering costs and investments difficult, and many stables were forced to close down. That is why, as a Group, we hope for the application of a national plan for the medium-long term, to help farmers to compensate for these price fluctuations, recovering the possibility of planning the future, to the advantage of the transformation industry itself, containing production costs, which are decisively too high compared to European competitors, and therefore acting on various cost factors. Granarolo has participated in many discussion groups - both in Italy and around Europe, and - internally - has reprogrammed production to guarantee medium-term certainties in terms of production and transformation.

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After two decades of imposition of production quotas as a result of milk quotas, Europe has returned to the free market, and production has shot sky-high just at the most critical time in domestic consumption, when the doors to Russia and China have closed, and as a result the demand for powdered milk has dropped. The entire European milk and cheese system has gone into a frenzy, and Italy has been subjected to the paradox of importing the raw material, while simultaneously - and for most of the year - sitting with a surplus in the districts of excellent production - those areas where milk has never been seen as a commodity, but rather as the foundation for productions with a high added value: Grana Padano, Parmigiano Reggiano, Gorgonzola, and Alta Qualità Milk. As a result of this condition, many industries cancelled their contracts with the stables, and "spot" milk quotations crashed to a historical low.Convinced of the strategic and ethical value of protecting the production chain, we reacted with two levers - export and innovation - to position the milk produced by contributors to the Granlatte consortium, accelerating the industrial plan profitably.In the second half of 2016, also as a result of the measures applied by the European Union, production returned and the price rose again, bringing a serene atmosphere back to the countryside. In reality, the increase in raw material does not match an equal adjustment to the price lists acknowledged by Mass Retail.Granarolo S.p.A. and the Granlatte cooperative have signed a new supply contract, which reinforces protection against the risks of conflict of interest between the principal and subsidiary and, especially, confronts mutual programming - between those who produce and those who transform - in a way that is open to debate, allowing each participant to optimise their own profitability.

For Granarolo, 2016 was the final year of a three-year industrial plan, with its ambitious plan for growth. And, during the year, the Board of Directors approved a new Three-Year Plan ending in 2019: growth, by now, is seen as a strategic standard and no longer as an extraordinary objective. Well aware that the strategies applied and dimensions achieved make the global dimension our true competitive edge. We will deal with the difficulties of an economic situation in which we will need to shed light on the opportunities for a Group that from the start (in 2017 we will celebrate our first 60 years) has never been scared to take on challenges. In order to do this, we will have to continue to work to protect the smaller situations, the biodiversity, and the real economy that underlies our production chains, and the wealth of our extraordinary production, while also finding the right way to offer our products both in Italy and abroad. Granarolo's objective coincides with what the Italian government declared, and it is ambitious: to increase the perceived value of prestigious productions and to support penetration of Italian products abroad. These ideas and lines for development are brought to reality in the new Industrial Plan for 2016-2019: we owe it to our shareholders and we owe it to our stakeholders.

The following is a snapshot of the Granlatte-Granarolo Group on 31 December 2016:• 1,000 farmers in 12 regions in Italy milk their cows every day and, through the largest Italian

cooperative, deliver their milk to Granarolo. We work 850 million litres of milk per year. There is nothing like it.

• 15 plants in seven Italian regions (7 in Emilia Romagna, 2 in Lombardy, 2 in Sardinia, 1 in Tuscany, 1 in Lazio, 1 in Puglia and 1 in Calabria). At the beginning of 2017, a sixteenth one was added, in Lombardy. This is because we are convinced that the quality of regional products cannot be removed from its location. The shortest production chain is the one that brings producers and consumers together, without intermediation, and if our consumers live far away this is not a problem.

• 2 factories in France, 2 in Brazil (with the addition of another one in the beginning of 2017), and 1 in New Zealand.

• 11 companies with as many entrepreneurs that share the Group's prospects with us.• Support for projects for a Dairy Farm in Tanzania that feeds hopes for a better future for 800

micro-farmers, and one in Mozambique that is being organised to give a future to the Beira region.

• The Donated Human Milk Bank in Bologna that serves the S. Orsola and Maggiore Hospitals, the Hospital in Ferrara and, since 2016, also the hospitals in Parma and Imola.

• More than 2,700 employees (in 2009 we had 1,537, and in 2015 just over 2,400). In 2016 we grew even more, especially with the addition of new companies to the Group, both from Italy (Conbio S.r.l., 69 employees - Fattorie Giacobazzi S.r.l., 50 employees - the Pandea Dietetica S.r.l. company branch, with 69 employees), and abroad (Granarolo Baltics OU in Estonia, 12 employees - Matric Italgross AB in Sweden, 41 employees, and Comarsa Commercio Alimentari SA in Switzerland, 47 employees). And at the beginning of 2017, Quality Brands International SA, from Greece.

• A spin-off of about 20,000 families (15,000 in 2014) that get their income from our work.• Just a few years ago we said that - at Granarolo - the shareholders, farmers, workers and

consumers spoke all Italian dialects. Now, we can say that they speak many languages from all around the world. We ourselves are humbled and proud at the same time.

We closed the 2016 financial year close to one billion and 200 million Euro in turnover - a 9.5% increase compared to 2016, further improving the EBITDA and reducing indebtedness. This result was reached only because we decided to take two large steps: we internationalised (today about 24% of our turnover is created abroad), and we innovated - also for the benefit of export processes. In order to reach these objectives, we carried out many acquisition operations and created many new entities. In 2016, we participated in eighteen trade fairs around the world. In 2017 we have already confirmed nineteen trade fairs and we are present - through our products - in sixty-two countries around the world.2017 will be the year of our Sixtieth anniversary. We will celebrate by promoting, throughout the year, various initiatives with the sole objective of affirming the Group as a force capable of representing the best of Italy both here and abroad. A transparent and fair force, committed to increasing the perceived value of our territory - protecting it - brave, innovative, and capable of attracting talent.

The Chairman Gianpiero Calzolari

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GRANAROLO GROUP'S 60TH ANNIVERSARY"OURS IS THE STORY OF SHARECROPPERS WHO JOINED FORCES IN A COOPERATIVE, AGAINST THE WILL OF THE LANDOWNERS, TO GIVE DIGNITY TO THEIR WORK AND TO THEIR FAMILIES. A STORY OF COURAGEOUS PIONEERS, WHO, STARTING FROM EMILIA ROMAGNA, MANAGED TO LOOK FURTHER, AND TO INVEST, AND WHO CONTINUED TO PURSUE AND EXPLOIT KNOWLEDGE, WITHOUT EVER SUFFOCATING THEIR DNA, TO BECOME WHAT WE ARE TODAY: THE FOREMOST ITALIAN-OWNED AGRO-INDUSTRIAL COMPANY IN THE COUNTRY, AND THE LARGEST ITALIAN MILK PRODUCTION CHAIN WITH THE DIRECT PARTICIPATION OF FARMER SHAREHOLDERS IN THE GRANLATTE COOPERATIVE"

THE GRANAROLO GROUP HAS CREATED A PROGRAMME OF INITIATIVES AND EVENTS TO CELEBRATE THE GROUP'S ANNIVERSARY.

A logo dedicated to the anniversary: Inspired by certain concepts, such as unity, transformation, origins, evolution, and future, the logo's design pays homage to the Group's origins, and is reminiscent of the dairy transformation process, and the spinning and the transformation of the raw material which joins the product and the man together, to generate nutrition for the country, growing with him. In the same way, the forward slant of the dynamic design symbolises the company’s projection towards the future and its desire to promote the best of Italy both at home and abroad.

Granarolo visits Pope Francis: On 15 March 2017, Granarolo starts the celebrations for its 60th anniversary by taking more than 800 farmers and employees for an audience with Pope Francis.

Milk Festivals in Italy: A series of extraordinary openings in 5 factories, between June and October 2017, to welcome the local communities.

The @GRUPPOGRANAROLO Instagram channel: A channel dedicated to celebrations for the Group's 60 years, to give a "social" face to Granarolo's historical values, through the publication of photos from the Group's historical archive, in addition to some more recent images.

A travelling photographic exhibition: In the wake of the Instagram account, there will also be a travelling photography exhibition, which will tour the most beautiful piazzas of Italy.

A historical video: A video dedicated to the Sixtieth anniversary, which will narrate, together with the milestones of Granarolo's adventure, the transformations and battles of the entire country.

“Fresco”, a web series in 4 episodes to reveal all the secrets behind a glass of milk and to find all the answers to questions on milk and its production chain.

"A historical book that combines the history of Italian dairy farms with the history of the Country": this will be a book written by two authors - a former President and a talented journalist - with the contribution of the current President. A gift to memory. And there will also be Baggio

A travelling truck that will tour the most beautiful beaches in Italy with the mission of intercepting new trends in consumption outside of the home.

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THE ROAD TO SUSTAINABILITY AND REPORTING AT GRANAROLOOne of the many "challenges" for Granarolo is to reinforce the integration of sustainability in the business model. The culture of social responsibility plays an important role in the company's strategic and operative decisions, and laid the foundations to proceed towards increasing combinations of sustainability and strategical choices.In light of this, Granarolo has progressively brought its reports on non-financial issues to the main international reference standards, establishing each year clear and defined objectives, measuring and monitoring progress, and clearly defining the challenges and objectives for the future.The company is now in its fifth edition of extra-financial reporting. In order to comply with internationally recognised methods and standards, in 2014 Granarolo changed the name of this reporting system, calling it a "Sustainability Report".

Also in 2016, the Sustainability Report was written in compliance with the Global Reporting Initiative standard GRI-G4. Based on the current coverage of indicators associated with material aspects and summarised in the final correlation table, the level of compliance with the GRI-G4 Guidelines is "in accordance - core". The frame of reference for writing the 2016 Sustainability Report concerns the period between 1 January and 31 December 2016 (annual period) both for Granarolo S.p.A. and for its subsidiaries. The information refers to the activities carried out in the 16 productive facilities located in Italy, in addition to some references to activities carried out abroad.In order to write this Sustainability Report, Granarolo - under the coordination of the Communication, External Relations and CSR Department - performed an internal process involving the various company departments that supplied the necessary data and information, according to an approach required by standard GRI-G4, and subsequently checked them according to an internal control process. No provision is made for external assurance of the report.

RELATIONS WITH STAKEHOLDERSThe Granarolo Group takes into consideration the needs and expectations of its stakeholders both in formulating its strategies and in carrying out its activities.

Identifying, mapping and listening to the stakeholders took place according to instructions provided in the AA1000-Stakeholder Engagement Standard - an international standard - which methodically supports stakeholder engagement, so that this can be done in accordance with the relevant and strategic themes for the company.

MEDIA

LOCALCOMMUNITY

CONSUMERS

CIVILSOCIETY

CLIENTS

SUPPLIERS

ECONOMICCOMMUNITYAND SECTOR

ORGANISATIONS

INSTITUTIONS

FINANCIALCOMMUNITY

SCIENTIFICCOMMUNITY

EMPLOYEES

SUBSIDIARYCOMPANIES

MEMBERS /SHAREHOLDERS

• Traditional• Social

• Professional investors and banking system• Public Finance• Factoring Companies

• Producer Cooperatives • Financial backers

• Office Personnel• Factory Personnel• Collaborators• Trade Union Organisations

• Subsidiaries• Associated companies

• Milk and Cheese Industry Competitors• Food industry Competitors• Food and Agriculture Associations• Industrial Associations• Cooperative Movement• Associated Distributors Association

• Suppliers of goods and services • Non-member milk suppliers • Commercial partners

• Mass retail• Food Service• HORECA• Distribution - Abroad (Distribution Companies, Mass Retail, etc.)

• Opinion Leader• Non-profit Associations / NGOs• Environmental Associations and Associations against Food Wastage• Sports and Cultural World • Networks linked with the development of CSR

• Families and people• Consumer Associations• Consumers - Abroad

• Local communities (and the corresponding Representatives and Associations)• Organisations with which we are developing social projects

• Research Institutes and Universities• Medical-Scientific Associations

• Regulating Authorities• Governmental Institutions• Inspection Bodies

MAP OF THE STAKEHOLDERS

16 17

The Group defines specific engagement actions to understand the position of the various stakeholder categories, and also promotes more inclusive initiatives, also thanks to certain listening channels.

WITH EMPLOYEESIn 2016, too, Management has organised meetings with the employees in order to illustrate the scenario in the market in which the Group is operating, as well as the strategies applied in order to confront current and future challenges outlined in the 2017-2019 plan. These are actual company conferences, and are increasingly international. A Gran Voce, the quarterly publication established in 2011 as a platform for employees and shareholder farmers, has been enriched with the work of contributors from outside the Group, on current affairs (for example: the rationale of extraordinary operations, or evolutions in the price of milk at the stable), and the publication has crossed the boundaries of internal communication, reaching the world of non-shareholder farmers in Italy, which thus far had not been as well-catered-to by systematic communication.

Further great success has been achieved in the Archimede project, which has collected contributions and ideas from employees to improve internal processes, innovate products, and recover resources. May 2017 sees the start of Workplace, a new, agile and highly penetrant means of communication on Group productive departments and employees abroad, who are not equipped with company devices.

WITH SHAREHOLDERSBeyond the institutional moments of dialogue with the shareholders, in 2016 the Group Management met with shareholders in the Granlatte cooperative to give them an update on market trends, particularly in relation to milk, and on actuation of the strategic plan. These meetings take place periodically in: Milan, Bologna, Anzio, Benevento-Campobasso, and Gioia del Colle. In December 2016, a monthly informative newsletter was started, aimed at board members in the Granlatte consortium, in addition to a training course on agriculture 4.0. The Boards of Administrators are increasingly seen as opportunities for training.

WITH CONSUMERSIn 2016, Granarolo Group continued to reinforce communication channels that consumers and clients can use to contact the Group companies, with the objective of making relations increasingly quick and easy. In particular, communications take place through a call centre, a website - which provides the opportunity to send emails containing generic reports or reports on product defects, in addition to social networks (Facebook and Twitter, primarily, in addition to YouTube, Instagram and LinkedIn). In 2016, according to what was expressed in the social networks, and verified through the Reputation Manager tool, the number of fans has increased significantly, and we have invested in the application of tools to make content that has stimulated the interaction with consumers on issues they are interested in go "viral".

Finally, also in 2016, a newsletter was re-launched for consumers who are attentive and interested in novelties, in a moment in history in which attention to healthy food is growing exponentially. Also in relation to the relaunching of this newsletter, interactions with consumers have increased significantly.

WITH THE FINANCIAL COMMUNITY Like every other year, the Group met, in Spring 2016, with the reference financial community to present their asset and liability statements. It was also an opportunity to compare notes and updates on the Group's new development plans, with the 98 participants, mainly representing the foremost reference banking institutes.

THE MATRIX OF MATERIALITYThe materiality matrix is the strategic instrument to define more relevant and significant issues for the company and all its stakeholders. All matters that influence decisions, actions and performance levels of an organisation and/or its stakeholders are defined as "material" matters.

Therefore, it is important to define the issues inside the organisation and to activate adequate forms of listening and dialogue with the stakeholders, in order to understand their individual relevance in terms of the identified issues. Starting from the 2013 reporting process, the Company, as a result of the strong commitment of Upper Management, began a strategic reflection process, built around sustainability issues that were relevant for the company's strategy and for the stakeholders, and performed its first materiality analysis. The analysis, updated in the years that followed, directly involved the President and Upper Management in identifying the company's priorities.

In 2016, a process was followed to involve the main stakeholders, intended to collect assessments of the perceived importance of relevant issues. The result of this process is the following materiality matrix, which contains the issues grades higher than 3 in both dimensions.

DIRECTING COMPANY

PROCESSES TO CREATE SHARED

VALUE

APPRECIATING A SUSTAINABLE

BUSINESS MODEL

GUARANTEEING FOOD

SAFETY

GUARANTEEING THE INTEGRITY OF COMPANY

CONDUCT

GUARANTEEING ECONOMIC

SUSTAINABILITY BY REINFORCING

COMPETITIVENESS

PROTECTING AND APPRECIATING

COLLABORATORS

PROMOTING HEALTH AND WELL-BEING

FOR ALL

IMPROVING ENVIRONMENTAL SUSTAINABILITY

FROM THE STABLE TO DISPOSALBEING AN ACTIVE

CITIZEN AT LOCAL AND GLOBAL

LEVELS

RELE

VANC

E FO

R ST

AKEH

OLDE

RS

RELEVANCE FOR THE COMPANY / IMPACT ON STRATEGIES

MATERIALITY MATRIX - FIRST LEVEL ISSUES5

4

33 4 5

18 19

The 9 issues identified as relevant for the company and its stakeholders - and represented graphically in the Matrix - can be defined in the following manner:

• To guarantee the integrity of company behaviour, building culture, processes, and instruments that make the company a reliable and transparent interlocutor for all stakeholders

• To guarantee economic sustainability, reinforcing competitiveness, to continue to create value for shareholders and all other stakeholders involved in Granarolo's activities

• Guaranteeing food safety, as a fundamental commitment for a company that deals with nutrition

• To promote health and well-being for all, relying on the possibility of reaching a large number of customers, offering them healthy and high-quality products, and on the ability to innovate in order to find new needs that have arisen or are arising

• To manage company processes in order to create shared value, defining a prospect for long-term sustainability in managing business and in relations with stakeholders

• Protecting and appreciating collaborators, taking care of their professional growth and well-being.

• To improve environmental sustainability from the stable to disposal, applying even in environmental impact management a production chain protection, and an approach aimed at searching for innovative solutions

• To appreciate a sustainable business model, promoting the cooperative production chain for Italian milk and spreading the principles that are at the foundation of all business experiences in the group

• To be active citizens at a local level and a global level, contributing with our own competence to the international debate on material issues and understanding the situation in the territories where the company works, as well as the situation in the community as a whole.

For each of the issues encountered, the perimeter within which the impacts are generated that make each issue relevant was also considered material, indicating the internal and external stakeholders involved.In the table, Gruppo Granarolo stands for Granarolo S.p.A., subsidiary companies, and their employees.

MATERIAL ISSUE INTERNAL PERIMETER EXTERNAL PERIMETER

Guaranteeing the integrity of company conduct Granarolo Group

• Members/Shareholders• Suppliers• Institutions • Financial community• Economic community

and sector organisations

Guaranteeing economic sustainability by reinforcing competitiveness Granarolo Group

• Members/Shareholders• Associated companies• Suppliers

Guaranteeing food safety Granarolo Group

• Consumers• Clients• Suppliers• Local community• Civil society

Promoting health and well-being for all Granarolo Group

• Consumers• Clients• Suppliers• Local community• Civil society

Directing company processes to create shared value Gruppo Granarolo

• Members/Shareholders• Associated companies• Suppliers• Local community

Protecting and appreciating collaborators Granarolo Group• Members/Shareholders• Associated companies• Suppliers

Improving environmental sustainability from the stable to disposal Granarolo Group

• Members/Shareholders• Associated companies• Suppliers• Local community• Civil society

Appreciating a sustainable business model Granarolo Group• Members/Shareholders• Associated companies• Suppliers

Being active citizens at local and global levels Granarolo Group

• Consumers• Scientific community • Local community• Civil society• Media

20 21

GRANAROLO AND SUSTAINABLE DEVELOPMENT GOALS (SDG)In New York on 25 September 2015, the "Sustainable Development Summit" was held, bringing together the leaders of the governments of the 193 UN member countries. Its objective was to develop and write up a document containing a programme for sustainable development. This document, "Transforming our world. the 2030 Agenda for sustainable development" established 17 objectives and global commitments in terms of sustainable development (Sustainable Development Goals) to be achieved by 2030.

Sustainable development goals represent "shared objectives" to be reached in areas that are relevant to sustainable development, like fighting hunger and poverty, producing clean energy, protecting and preserving water resources, increasing awareness of conscious consumption and promoting access to health and education. "Shared objectives" means that they concern all countries and all individuals: "nobody is excluded, and nobody must be left behind on the path necessary to lead the world on the road to sustainability". The invitation to a collective commitment therefore calls for an active role for companies in contributing to deal with and direct these objectives for sustainable development. In particular, as far as the food sector is concerned, there are some issues, like food safety, improvement of nutrition, promoting sustainable agriculture and applying sustainable production models, which represent fundamentally important commitments for the companies in this sector. In 2016, Granarolo started a targeted process aimed at assessing and studying the contribution that the company can make towards achieving the sustainable development goals. Alignment between the Sustainable Development Goal and Granarolo's activities, was carried out according to the SDG Compass1 model, developed by UN Global Compact, GRI and the World Business Council for Sustainable Development. SDGs identified in this way are connected to material issued for Granarolo and to innovative and social-environmental projects by the Group.

Specifically, the relevant Sustainable Development Goals for Granarolo are:

To end hunger, achieve food safety, improve nutrition, and promote sustainable

agriculture.

To ensure health and well-being for all,

at all ages.

To encourage lasting, inclusive and sustainable economic growth, full and productive employment, and dignified

work for all.

To guarantee sustainable production and consumption

models.

To promote peaceful and inclusive societies, for

sustainable development, and to guarantee access

to justice for all, as well as creating effective, responsible and inclusive institutions at all

levels.

In the following table, the "material" issues - identified by Granarolo Group as the most relevant for the Group and for its external stakeholders through the materiality analysis - are connected to the Sustainable Development Goals (SDG) to which Granarolo believes it can make a contribution through its own activities. Finally, in the central column, there is an indication of the chapter in which the "material" issues - and corresponding SDGs - are discussed.

MATERIAL ISSUES REFERENCE CHAPTERS

SUSTAINABLE DEVELOPMENT

GOALS

Guaranteeing the integrity of company conduct

Chapter 1 "Company profile and conduct"

Guaranteeing economic sustainability by reinforcing competitiveness

Chapter 2 "The excellence of a competitive and sustainable

business model"

Appreciating a sustainable business model Chapter 3 "Our competitive leverage"

Directing company processes to create shared value

Chapter 3 "Our competitive leverage"

Guaranteeing food safety Chapter 4 "Promoting health and well-being"

Promoting health and well-being for all Chapter 4 "Promoting health and well-being"

Protecting and appreciating collaborators Chapter 5 "Appreciating people"

Improving environmental sustainability from the stable to disposal

Chapter 6 "Protecting the environment from the stable to

disposal"

Being active citizens at local and global levels

Chapter 7 "Protecting the environment from the stable to

disposal"

1 www.sdgcompass.org22 23

Parallel to the new campaign entitled "Lo scelgo perché" [I choose it because], which puts consumers and their reasons for choosing Granarolo and its products at the centre, in 2016 the new logo appeared on the products, according to the same approach to increasing appreciation of the Group's distinctive characteristics.

The "g" also represents a renewed commitment, at Granarolo, to promote healthy nutritional choices, in the spirit of the best tradition, and transparency in nutritional labels, in the spirit of responsible marketing.

THE G THAT MADE OUR HISTORY

GREAT IS BACK

As of May 2016, the products are sold with an entirely new look. The new Granarolo logo echoes the "g" that accompanied the Group from the very beginning, revising it in a more modern and stylised version, and includes the slogan "Dal 1957 italiana bontà" [Italian goodness since 1957] to emphasise the 100% Italian DNA.

On the back of the products, a QR-Code has been added, inviting consumers to discover the history of the Granarolo Group's "G".

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COMPANY PROFILE AND CONDUCT

1

THE PROFILE

COMPANY CONDUCT

OBJECTIVES FOR 2017

SDG AND PERTINENT ISSUES

2,770 EMPLOYEES

70VEHICLES

COLLECTING THE RAW MATERIAL

FROM THE STABLE

40 MILLION

CONSUMERS

1,000FARMERS IN 12

ITALIAN REGIONS

OVER

1.2 BLNEURO TURNOVER AT THE END OF

2016

20,000 FAMILIES (ABOUT) WHO GET THEIR INCOME FROM GRANAROLO

SPIN-OFF

16FACTORIES IN 7

ITALIAN REGIONS

850,000TONNES OF MILK PROCESSED/YEAR

62 COUNTRIES

AROUND THE WORLD REACHED

BY GROUP PRODUCTS

6PRODUCTIVE

ESTABLISHMENTS ABROAD

(FRANCE, BRAZIL, NEW ZEALAND)

1,000TRUCKS FOR

DISTRIBUTION TO 50,000 RETAIL

POINTS

VISION "PRODUCING WELL-BEING AND ITALIAN PLEASURE WITH THE BEST MILK. SUCCESSFULLY ANTICIPATING GLOBAL CHALLENGES FOR A SUSTAINABLE SOCIETY AND ECONOMY, PROMOTING THE COUNTRY SYSTEM WITH THE GROUP’S GROWTH."

DEFINITION OF A NEW ETHICAL CODE AND INSTITUTION OF AN ETHICAL COMMITTEE DURING 2016

4 MEETINGS CARRIED OUT BY THE SUPERVISORY COMMITTEE

DISTRIBUTING THE ETHICAL CODE TO SUPPLIERS AND NEW SUPPLIERS OF THE GROUP WRITING THE FIRST ANNUAL ETHICAL REPORT

SPREADING - THROUGH VIDEOS - ISSUES CONCERNING THE ETHICAL CODE

CONTINUING ACTIVITIES TO INVOLVE AND LISTEN TO STAKEHOLDERS

RENEWING APPRECIATION FOR THE FARMER SHAREHOLDERS' MILK FROM AN INTER-GENERATIONAL STANDPOINT

CREATING A PROGRAMME OF INITIATIVES AND EVENTS TO CELEBRATE THE GROUP'S 60TH ANNIVERSARY

MONITORING THE REPUTATIONAL DASHBOARD AND IDENTIFYING THE SUBSEQUENT COMMUNICATION PLANS

GUARANTEEING THE INTEGRITY OF COMPANY CONDUCT

IN SHORT

1.1 ABOUT USGranarolo is the largest agroindustrial group in the country with Italian capital, and includes two different and synergic parts: Granlatte, the milk producers cooperative, operating in the agricultural sector and collecting the raw material, and Granarolo S.p.A., a joint stock company, which transforms and sells the finished product.

The Granarolo Group thus represents the most important Italian milk production chain, with the participation of about 1,000 Italian milk producers/farmers, associated in cooperative form, equipped with 70 vehicles to collect the raw material from the stables, more than 1,000 vehicles for distribution services, which, everyday, serve more than sixty thousand retail points, thus reaching 16 million Italian families with its products.

In 2016, Granarolo has 16 factories spread out throughout the national territory. In addition, it has continued to grow even internationally, by direct presence on markets with its own distribution and production facilities (a total of 6 sites, with 2 in France, 3 in Brazil, and 1 in New Zealand).

The Group's products are therefore present not only in Italy, but also on foreign markets in Europe and throughout the rest of the world.

PRESENCE ON THE NATIONAL AND INTERNATIONAL MARKET

G.USA

COMMERCIAL

G. Iberica S.L.

COMMERCIAL

G. UK Ltd.

COMMERCIAL

G. France S.A.S.

2 PLANTS

EuropeanFoods Ltd.

1 PLANT

G Baltics OÜ

COMMERCIAL

G. China

COMMERCIAL17 PLANTS

Comarsa SA

COMMERCIAL

QBI Greece

COMMERCIAL

Matric Italgross AB

COMMERCIAL

G.Chile S.p.A.European Foods India

COMMERCIAL (10%)Yema e Allfood

3 PLANTSCOMMERCIAL

Update June 2017

In its 60 years of history, Granarolo has managed to win over a strong presence on the market, and an excellent position, thanks to recognisable brands and high-quality products, in Italy and abroad. The absolutely unique characteristics of the Granarolo milk production chain continue to represent a precious tool to carry on attracting clients and consumers.

In order to continue to be an attractive company in the eyes of clients and consumers, Granarolo must offer high quality, safe, and sustainable products. It is therefore necessary for production and processing raw milk to continue to satisfy the growing needs of the market and of collectivity in terms of quality, safety, sustainability and transparency.

Today, Granarolo Group is the most important producer of fresh milk in Italy: around this food, the Group has built product lines that reflect the three main business areas.

GRANAROLO GROUP'S MAIN BUSINESS AREAS

41%

37%

22% Milk and Beverages (Fresh and UHT)

Cheese and Butter

Other

But the Group's offer is growing significantly, and as of 2015 it includes products that are not derived from milk, such as vegetable-based drinks. By diversifying the products in the portfolio, Granarolo's mission abroad is to export the traditional excellence of the Made in Italy label, also going beyond the boundaries of dairy products, positioning itself as one of the main groups of reference for Italian agro-industrial products.

30 31

Update: July 2017

Intesa SanPaolo Granlatte Scarl Cooperlat

77,48% 2,74%

GRANAROLO S.p.A.

Granarolo International S.r.l.

19,78%

THE GRANAROLO GROUP COMPANY STRUCTURE

100%

ZEROQUATTRO S.R.L.

GRANAROLO UK LTD

ZEROQUATTRO LOGISTICA S.R.L.

GRANAROLO BALTICS OÜ

AMALATTEA ITALIA S.R.L.

QUALITY BRANDS INTERNATIONAL GREECE

GENNARI ITALIA S.R.L.

GRANAROLO IBERICA S.L.

FATTORIE GIACOBAZZI S.R.L.

COMARSA SA CH

CASEARIA PODDA S.R.L.

GRANAROLO FRANCE S.A.S.

PASTIFICIO GRANAROLO S.R.L.

MATRIC ITALGROSS AB SWEDEN

SAN LUCIO S.R.L.

CENTRALE DEL GUSTO S.R.L.

CALABRIALATTE S.P.A.

CONBIO S.R.L.

100%

51%

60%

55%

50%

50%

100%

100%

66%

100%

65%

100%

50%

50%

60%

100%

50%

60%

ITALY

EU

REST OF THE WORLD

ALLFOOD IMPORTAÇÃO INDÚSTRIA E COMÉRCIO SA BRAZIL

EUROPEAN FOODS LTD NZ

YEMA DISTRIBUIDORA DE ALIMENTOS LTDA.

GRANAROLO USA CORP.

GRANAROLO CHILE S.P.A.

GRANAROLO CHINA COMMERCIAL RELATIONS OFFICE

60%

100%

60%

100%

100%

34 35

2014TOP ITALIAN FOOD AND AGRICULTURE COMPANY. ITALIAN MILK CULTURE AROUND THE WORLDEstablishment of Pinzani 1969;

Establishment of Amalattea Italia;

Establishment of Gennari Italia;

Establishment of Granarolo China.

••••

1972La Granarolo (belonging to Legacoop) and Felsinea Latte (belonging to Confcooperative) merge and give life to a larger entity: Cerpl, the first unitary consortium created in Italy.

2000FROM A REGIONAL MODEL TO A NATIONAL ONEGranarolo becomes a national player in the fresh milk sector

2000-2003LEADER ON THE ITALIAN MARKETReaches a leading role in the high quality fresh milk market in Italy, with 24.3% of market shares.

2004-2011NEW PRODUCTIVE SEGMENTSAcquires 10% of market shares for yoghurt and 9% for fresh cheeses.

1970sThe new consortium continues to grow: it adds new cooperatives from the region and acquires a private

company - Sanbon - which is later transformed into a yoghurt factory.

1980sAcquisitions continue, throughout the country: from

Modena (Dilat), to Foggia (Daunia Natura), including Anzio (Sogecla) and Novara (Latte Verbano), to Versilia (Centrale

Latte di Camaiore).

1990sThe Consortium establishes a joint stock company

(Granarolo S.p.A.) into which it transfers all the industrial and commercial assets. The Granlatte name maintains

complete control.

from 2000The acquisition campaign continues:

Centrale del Latte di Milano, Calabrialatte S.p.A. (50% of shares), in 2006 the companies of the former

Yomo Group.

1957 The Bologna Consortium of Milk Producers (Cbpl) is established, soon known to all as “la Granarolo”.

2012-2016TOP ITALIAN FOOD AND AGRICULTURE COMPANYThe Granarolo 2016 project begins.

2015INTERNATIONALISATIONDIVERSIFICATION OF PRODUCTS AND MARKETS INNOVATIONEstablishment of Granarolo Chile

Establishment of Gennari Italia

Acquisition of Pastificio Granarolo

Transfer of minority shares of Zeroquattro Logistica

Acquisition of European Foods Ltd.

Acquisition of Yema Distribuidora de Alimentos Ltda. (Brazil)

Acquisition of a distributor in Estonia, which became Granarolo Baltics OÜ

2016Acquisition of Conbio

Acquisition of Matric Italgros AB - Sweden

Acquisition of Comarsa SA - Switzerland

Pinzani S.r.l. is merged into Granarolo S.p.A.

Acquisition of Fattorie Giacobazzi

Establishment of Granarolo USA

Acquisition of European Foods India

Increase in shares in European Foods Ltd.

Acquisition of Pandea Dietetica S.r.l.

Acquisition of San Lucio S.r.l.

1

1.1.1 HISTORY OF THE GRANAROLO GROUP

2011-2012Establishment of Granarolo Iberica S.L.

Acquisition of Lat Bri, the third Italian player in the fresh cheese sector.

Acquisition of Casearia Podda: Granarolo enters the hard cheese

market for the first time.

••

•

2013Merger of Latticini Italia into Granarolo

Establishment of Granarolo International

Acquisition of CIPF CODIPAL: 2nd player on the French market of Italian cheese products

Transfer of CSL

Increased Capital of Granarolo International

Establishment of Centrale del Gusto

Partnership with Amalattea

Establishment of Granarolo UK Lt.

•••

•••••

•••••••

••••••••••

1.1.2 MISSION, VISION, AND VALUESIn 2012, Granarolo redefined its Mission and Values, with a process of reflection and analysis, which involved the Board of Directors of both Granlatte and Granarolo S.p.A., the Group Management and a few employees representing all company categories.

VISION"Producing well-being and Italian pleasure with the best milk. Successfully anticipating global challenges for a sustainable society and economy, promoting the Country System with the Group’s growth".

MISSION"We are the largest Italian milk and cheese group with a cooperative structure, which offers the best milk and the best dairy products that nature and technological progress can give.

We respond to the needs of people and their taste, we are aware of their health and quality of life. With good, authentic, safe products that respect the environment, we favour healthy eating, positive lifestyles and more informed nutritional choices.

We work alongside shareholders and producers to improve their abilities, their techniques, and their efficiency, and to increase the perceived value of their milk. We increase their ability to stay on Italian and foreign markets, investing in innovation, technology, and research.

We believe in the people who work for us, committed and participating in constantly exploring new developmental horizons. A sense of responsibility, dialogue and courage are the principles that inspire our work.

We contribute to social progress and the well-being of the communities we work in, and we protect the environment and the territory. We favour dialogue and collaboration between the economic and social stakeholders, building stable relations based on ethics, trust, transparency, respect for the rules and coherent behaviour."

THE VALUES the Group and its people must aspire to are:

Client satisfactionThis will increasingly become the element that can make a difference. Already today, marketing experts estimate that one loyal client is worth five new clients. A company that intends to affirm its market leadership can never hope to do so by betting on a high turnover rate among its clients. The milk of the future will be given by an unbreakable synergy between the product and a large service component. Creativity and imaginationThe role of creativity is increasingly important in a company that intends to stand out in terms of innovation. Everyone involved must be capable of contributing to the creation of company value through their ability to relate known elements in an original manner, thus driving the company towards change. Team SpiritBeing a team: having common objectives in mind, interacting with all the components of the company and sharing methods and results, also in the name of organisational efficiency. Team spirit is the means by which a company becomes "convincing", capable of expressing charisma and attractiveness towards external interlocutors, and at the same time attributing the meaning of "common victories" to successes.

Personal growthThe soul of the company is made up of the people that live and work in it, blending within the differences and unity not only their own destiny, but that of the entire organisation. Without these people, the company is nothing - or too little - if the moral and professional quality of those people do not breathe life into it, to make it an increasingly perfectible organisation. Positive atmosphere and quality of lifeThe physical horizon that surrounds an individual in the workplace always influences the quality of their performance. This influence is not only psychological or emotional, but also biological. Caring for and improving the work environment, therefore, means giving everyone better opportunities to spend the main hours of their day in harmony with the external context.

EthicsA value to be understood as respect for people - above and beyond the company roles they fulfil - and which is intended to be translated into easier conditions in interpersonal relationships, and into a mutual commitment to using dialogue as the preferential element, before using authority. Professional growth and meritProfessional growth is achieved by transparency and awareness regarding activities and decisions in the short, medium and long term, and the acknowledgement of professional merits. All of this makes it possible to increase the active contribution and responsibility of each one, of operative cohesion, the assessment and constant control of work practices, avoiding overlapping and wastage, centrifugal tendencies unleashed by shared economic and managerial objectives. Participation and listeningTo be understood as passionately communicating and listening. Communicating in the workplace and in decisions means always having the ability - both individually and collectively - to keep the everyday experience under control, to reflect on it and to increase its effectiveness and level of reciprocity, trust, and motivation. This means reducing distances and conflicts, understanding common problems, sharing team values and also transmitting them to the outside.

36 37

COMPOSITION OF THE ETHICS COMMITTEE

A MEMBER APPOINTED BY THE BOARD OF DIRECTORS.

TWO EXTERNAL MEMBERS SELECTED ON THE BASIS OF AN ACKNOWLEDGED MORAL INTEGRITY, TOGETHER WITH GOOD KNOWLEDGE OF THE OPERATIVE MECHANISMS OF BODIES AND ORGANISATIONS.

AN EXTERNAL MEMBER PRESIDES OVER THE ETHICS COMMITTEE, SELECTED ON THE BASIS OF AN ACKNOWLEDGED MORAL INTEGRITY, TOGETHER WITH GOOD KNOWLEDGE OF THE OPERATIVE MECHANISMS OF BODIES AND ORGANISATIONS. HE/SHE REPRESENTS THE INTERESTS OF THE STAKEHOLDERS, GUARANTEEING EQUAL AND TRANSPARENT APPLICATION OF THE CODE. THIS FIGURE MAY COINCIDE WITH ONE OF THE TWO EXTERNAL MEMBERS

The Ethical Code and the institution of the Ethical Committee were approved by the Board of Directors in their meeting on 14 July 2016

SPREADING THE ETHICAL CODE WITHIN THE GROUP

During 2016, the new Ethical Code was defined - made known to all stakeholders by publication on the website - and it was distributed to all Group employees, both in Italy and abroad. Furthermore, it was made available on the company Intranet and on the Group website, and it is provided, in hard copy, to all newly hired employees. In 2017, it will be distributed to all of the Group's suppliers and new suppliers.

To make the Ethical Code a living instrument, capable of feeding positive behaviour, and therefore of improving life at Granarolo, in 2017 provision is made for a mini video series for internal use, useful to represent situations in which employees are likely to find themselves dealing with ethical

problems (e.g. what do I do if I find myself confronted with a supplier who... ?). Representing the situations will be the employees themselves, selected through a real "ethical casting". The mini video series will then be shared on the new company Intranet (Workplace), and external CSR channels, for the benefit of other companies.

To consult the Granarolo Group's ethical code, please consult the designated section of the company website, at http://www.gruppogranarolo.it/azienda/corporate-governance

1.1.3 ETHICAL CODEFor the Granarolo Group, the Ethical Code represents the pact that the company makes with its human resources and with the main external interlocutors.

The Group launched its first project for an Ethical Code in June 2002. Between 2014 and 2015, Granarolo worked on reviewing its Ethical Code with the objective of updating the contents to the evolution and growth of recent years, turning it into an instrument capable of supporting the choices that the Group's people make every day in their work activities. The code also contains important novelties, which update it and turn it into a reference document in the event of calls for tenders and audits.

According to the democratic nature of the Group, the participative route was considered the most coherent. That is why an inter-departmental work group has been set up. In fact, the Ethical Code belongs to the entire Granarolo Community:

created by the people to serve the people, based on values, to allow everyone to generate and spread value. To guarantee the efficacy of the Code, an Ethics Committee has been established, for employees to turn to make their reports. The Ethics Committee, made up of three members, two external and one internal, will provide an annual Ethical Report starting in 2017. The Ethics Committee's main duties are:

• to supervise Code training and communication activities, in synergy with the Communications & CSR department;

• to research the cases subjected to the committee through hearings with the involved parties; • to decide on sanctions to be applied on the basis of instructions written up by the member

nominated by the Board of Directors and working on the concept of restorative justice;• To propose updates and changes in the Ethical Code to the Board of Directors.

38 39

1.2 THE GOVERNANCE SYSTEMThe Granarolo Group is aware that applying an efficient company governance structure contributes to increasing the competitiveness of the company and the sustainability of its development.In fact, the principles of corporate governance, organising a structure of departments and responsibilities, and developing an adequate control system, guarantee the application of conscious managerial choices, in addition to effective monitoring and management of business risks. It is possible in this way to limit the costs derived from managing risks, thus establishing the production of greater income and value for all stakeholders.

1.2.1 CORPORATE GOVERNANCE STRUCTUREThe corporate governance structure applied by Granarolo S.p.A. is inspired by the recommendations and standards contained in the code of self-discipline applied by listed companies, which the company - even though it is not listed in the Stock Exchange - has decided to apply in order to ensure a greater level of transparency and efficiency of its own company governance. Granarolo S.p.A. applies the "traditional system" of administration and control, its main entities being the Board of Directors, the Board of Auditors, and the Assembly of Shareholders.

Legal auditing of the company is entrusted to the KPMG S.p.A. auditing firm.

GOVERNANCE AT GRANAROLO S.P.A.

Internal Audit

Assembly

Board of Directors

Chairman

Board of Auditors

Committee for Remuneration

Auditingfirm

Control and Risk Committee

Supervisory Committee 231

GOVERNANCE DI GRANLATTE SCARL

Assembly

Board of Directors

ChairmanSupervisory Committee 231

Board of AuditorsAuditingfirm

The Board of Directors at Granarolo S.p.A. is made up of 11 members, 3 of which are executive (the Chairman and Vice-chairman, equipped with power of attorney), and 8 non-executive, in office under a three-year mandate, until the date of the assembly for approval of the asset and liability statements for the 2018 business year.

POSITION NAME AGE

Chairman Gianpiero Calzolari 62

Vice-chairman Danio Federici 55

Vice-chairman Camillo Nola 49

Vice-chairman Gianluca Ferrari 44

Directors

Adonis Bettoni 50

Giuseppe Dotti 66

Michele Di Marziantonio 55

Giovanni Giambi 54

Giovanni La Croce 66

Amedeo Giovanni Maria Nodari 57

Filippo Pisani 62

40 41

In compliance with the company Articles of Association, the Board of Directors is vested with full powers for ordinary and extraordinary management of the company. The Board meets at least every three months: in 2016 there were eleven meetings.

For the purposes of effective and efficient management of the Company, the Board has given the Chairman powers of ordinary management without expense limitations, to be exercised within the annual budget approved by the Board of Directors and in application thereof. However, the board reserves the right to approve a forecast budget for each business year, as well as the right to indicate, during approval of the annual forecast budget, which operations - not only concerning extraordinary issues - included in the budget, must be subjected, for actuating decisions during the financial year, to examination and specific approval by the Board itself

ADVISORY BOARDSThe Board has established two internal Boards, with consultation and proposal functions, and which perform a practical role - which is substantiated in the creation of proposals, recommendations and opinions - in order to allow the board itself to apply its decisions with a better understanding of the situation:

Control and Risk Committee This is made up of three non-executive directors, the majority of which are independent: Giovanni La Croce in the role of Chairman, and in possession of suitable experience in accounting and financial matters, Adonis Bettoni and Giovanni Giambi. The Risk Control Committee was established with the task of supporting, with practical, consulting and propositional functions, the assessments and decisions of the Board of Directors concerning the Internal Control and Risk Management System, and the routine financial reports. The Committee also supervises the Internal Audit activities, on which the Committee may request routine inspections on specific operational areas.

Committee for Remuneration This is made up of three non-executive directors, the majority of which are independent: Giovanni La Croce in the role of Chairman, and in possession of suitable experience in financial matters, Adonis Bettoni and Giovanni Giambi.The Committee is tasked with formulating proposals to the Board of Directors on remuneration for the Directors and Managers with strategic responsibilities, as indicated in the Self-Discipline Code.

Board of Auditors The meeting on 10 April 2015 renewed the Board of Auditors, nominating three statutory auditors and two alternate auditors, with a term of three financial years, until the meeting to approve the annual statements on the financial year that ends on 31 December 2017.

POSITION NAME

Chairman Roberto Chiusoli

Statutory auditorsChiara Ragazzi

Franco Colombo

Alternate auditorsPaolo Foschini

Enzo Grimaldi

This board oversees compliance with current laws and with the Articles of Association, compliance with the principles of correct administration and, in particular, the adequacy of organisational, administrative, and accounting structure applied by the Company, as well as its proper operation. All auditors are legal auditors registered in the designated register.

1.2.2 THE ORGANISATIONAL MODELThe Granarolo Group's organisation chart, on 30/05/2017, is the following:

Governance Risk Mngt. Compliance

DE SANTIS

Legal Affairs

DEL DUCA

Communication, External Relations and CSR

FINOCCHIARO

General Management

CORBARI

Quality, Innovation, Safety and Environmental Management

ZAMBRINI

Board of Directors --------------------

Chairman

CALZOLARI

Committee for internal control

Business Unit Direction

Italy

MARCHI

Business Unit Direction

Non-European Countries

MARCHI

Operations Direction

CANTARELLI

Human Resources & Organization

Direction

MORSELLI

Chief Financial Officer

PALMIERI

Business UnitDirection

European Countries

FRACCAROLI

BU DirectionTraditional

Channel Business Diversification &

Supply Chain

ZAGLIO

At the end of 2015, the organisational model of commercial responsibilities was defined for market development, divided into four Business Units: the "Italian Market BU", responsible for the domestic market for Mass Retail channels, as well as Private Labels and centralised Food Service, and the "Normal Trade and Diversification BU", responsible for overseeing Normal Trade and independent Ho.Re.Ca on the Italian market and, with responsibilities, in this cross-channel case, for non-dairy products (pasta, balsamic vinegar, cold meats, etc.), in addition for the "European Markets BU" and the "Rest of the World Markets BU".In 2016, a few important operations were carried out to reorganise and strengthen the two BUs overseeing the Italian market: the "Italian Market" BU - with an extensive revision of the top responsibilities - and the "Normal Trade and Diversification" BU, which incorporated industrial clients, and in which the marketing and buying structures were revised.Further organisational operations concerned the Group reorganisation processes, such as the merger in Granarolo S.p.A. of Pinzani 1969 S.r.l., and, above all, its development through acquisitions in Italy, also achieved through the appreciation of internal and foreign management, which, finally, redefined the organisation of the "European Markets" BU.

42 43

1.3 THE INTEGRITY OF COMPANY CONDUCTFollowing the entry in force of the Italian Legislative Decree 231/2001, the Company has applied the "Organisation, management and control model" (or "Model 231") aimed at preventing the infractions indicated in this law. A Code of Conduct was also created to identify the guidelines for all those operating in the company's name or on the company's behalf in managing relations with the main company stakeholders.

The creation of company entities that are integrated between each other - in accordance with the instructions in the Self-Discipline Code and the Code of Conduct - makes it possible to satisfy the expectations of all stakeholders (from employees, to consumers, to clients, to the communities Granarolo works in) in the best possible way.The Model was approved by the Board of Directors on 29 March 2005 and updated in terms of formulation and compliance with current regulations with subsequent deliberations on 16 November 2010, 14 July 2011, 25 January 2013, and 29 November 2013.

On 13 April 2016, the Board of Directors renewed the appointment of the Supervisory Committee for the Company for the 2016-2018 period, that is until the board meeting to approve the financial statements for the business year that ended on 31 December 2018, naming:

• Mr Pierluigi Morara (Lawyer), as an external member in the role of Chairman; • Dr Giuseppe Carnesecchi as an external member ; • Dr Francesca De Santis, Governance Risk and Compliance Supervisor.

The Supervising Body's activity concerns the verifications required by the audit plan approved by the Board of Directors, and the examination of information flows sent periodically by the designated company departments.

In 2016 the Supervisory Committee held 4 meetings.

The subsidiaries of Granarolo S.p.A. also approved their own Organisation and Management Model, relevant for the purpose of preventing crimes, in compliance with Legislative Decree 231/2001, and named their own Supervisory Committee.

To consult the organisational management model and the members of the supervisory committee for Granarolo Group's subsidiaries, please consult the company website in the section: http://www.gruppogranarolo.it/azienda/corporate-governance

1.3.1 RISK ANALYSIS AND PREVENTIONThe Granarolo Group is aware that applying an efficient company governance structure contributes to increasing the competitiveness of the company and the sustainability of its development. Corporate Governance, organising the departments and responsibilities and developing a control system, guarantees conscious management choices, as well as effective monitoring of business risks. In this way, costs derived from risk management are limited, thus leading to greater production of value for all stakeholders.

The correct operation and good execution of business in Granarolo is guaranteed by a system of internal controls organised and managed both autonomously by the individual operative managements and in a centralised manner. In particular, the control system is divided into three levels:

INTERNAL CONTROL SYSTEM AND RISK MANAGEMENT

INDEPENDENT DEPARTMENTInternal Audit

SUPPORTING DEPARTMENTQuality assurance and food safetySafety and the EnvironmentManagement control

OPERATIVE DEPARTMENTSDepartments directly involved in the various processes

3rdLEVEL

2ndLEVEL

1stLEVEL

• "Line" (or "first level") checks: these are the checks on operating processes to ensure correct execution of operations that require specific skills, on risks and pertinent regulations, entrusted to operating departments or incorporated in the company's daily operating procedures;

• "Second level" checks: these are entrusted to structures other than the operating ones (Safety and Environment, Quality Assurance and Food Safety, Management Control, etc.) intended to monitor and manage typical company risks (e.g. operative, financial, market, non-compliance, etc.);

• "Third level" checks: these are carried out by a department that is independent from the operating ones (Internal Audit), performing a general inspection activity on the structure and functionality of internal checks.

The Internal Auditing department reports hierarchically to the Chairman of the Board of Directors, and functionally to the Control and Risks Committee, who monitors their independence, efficacy and efficiency, and to whom the Committee can request the performance of inspections on specific operating areas. The Internal Auditing department activities are carried out in accordance with the international standards for professional Internal Auditing. Annual audits scheduled in the audit plan concern the Operational and Financial areas, as they are Compliance objectives according to Legislative Decree 231/2001, subject to verification by the supervisory committee 231. Critical elements encountered during the course of audits are shared with management, and a plan of action is defined to remove said elements. The Internal Audit department monitors and controls correct and prompt execution of the plan of action by means of follow-up operations. Company management, the Control and risks Committee and the Board of Auditors are informed of the outcome of the activities carried out, and of progress in the plan of action. The company has identified risk or uncertainty factors that may significantly condition the activities of the company and its subsidiaries, assessing for each one the severity in terms of impact (even on reputations) and identifying which processes and company activities are capable of overseeing them and mitigating them. The following are

44 45

the main factors of risk or uncertainty that may have a significant effect on activities at Granarolo S.p.A. and its subsidiaries. Additional risks and events that are uncertain, currently unpredictable or considered improbable at this time, may still influence Granarolo Group's business, the economic and financial conditions, and the prospects.

RISKS LINKED WITH THE COMMERCIAL ACTIVITYThe Group works in the milk and cheese sector, characterised by a high level of competition and the presence of a large number of operators. The main competitors are large international groups in the concentration phase, often equipped with greater financial resources, as well as greater diversification both in terms of brand portfolio and geographical presence, in addition to commercial distributors that operate with their own brands (Private Labels) and actuate aggressive competitive strategies.Competitive positioning for Granarolo Group - in a position of leadership or just before the market leader, makes exposure to risks typically linked with the competitiveness of the market particularly significant. In order to deal with this risk, the Group pursues policies focusing on differentiation in terms of the product offer, quality/price, and commercial positioning.

RISKS LINKED WITH CONFORMITY AND SAFETY OF THE PRODUCTS PUT ON THE MARKET FOR CONSUMPTIONFor the Granarolo Group, product quality is a fundamental objective. There are control procedures that guarantee conformity and safety, in terms of quality and healthiness of the products, in coherence with current legal requisites, as well as voluntary certification standards. In addition, guidelines have been defined to manage accidents, including processes for withdrawing products from the market.

RISKS ASSOCIATED WITH THE PRICE OF RAW MATERIALSThe Group is exposed to risks associated with the price of raw materials. As far as management of this risk is concerned, the Company does not resort to financial markets for coverage, but applies policies for partial coverage of the risk of oscillations in the price of the raw material - milk - by means of contracts established with suppliers, which include fixing valid prices on a periodical basis (every three/six months).

RISKS LINKED WITH THE ENVIRONMENTAL POLICYThe Group's industrial activity does not imply particular risks linked with environmental policy. However, the Granarolo Group pays particular attention, through designated personnel, to safety, prevention of environmental pollution, and disposal of waste and water.

RISKS LINKED WITH EMPLOYED PERSONNELRelations with employees are regulated by collective labour agreements and current regulations. Any reorganisations, if they are found to be strategically essential, are defined on the basis of plans agreed on and shared with the workers' representatives. The Group constantly monitors contracts and safety in the workplaces and implements procedures and investments to constantly reduce the rate of occupational injuries in the plants.

FINANCIAL RISKThe Group's main financial instruments include short and medium-long term bank loans, financial leases and bank deposits. The objective of these instruments is to support the operative activities of the Parent Company and its subsidiaries. Granarolo S.p.A. has various other financial instruments, such as commercial debts and credits, derived from operating activities. In addition, operations have

been carried out in financial instruments derived from coverage - mainly swaps and caps on interest rates - with the purpose of managing the risk of oscillations in the interest rates themselves. The Granarolo Group does not hold derived instruments of a speculative nature.The risks linked with the financial instruments used by the Group are: the risk of interest rates, the risk of exchange rates, price risk, credit risk, and the risk of cash flow.

THE INTEREST RATE RISK The Group - which currently has loans with a variable interest rate - considers itself to be exposed to the risk of a possible rise in interest rates, which would increase financial expenses. In order to mitigate this risk the Group has stipulated certain derived coverage contracts that cover a part of the debt and include the exchange of a differential between a variable rate and one or more set fixed rates applied to a reference notional, or that establish a maximum ceiling to the variable rate.

THE EXCHANGE RATE RISKThe company's exposure to exchange rate risks is considered limited, due to the relatively low number of transactions made in foreign currency - for both purchases and sales. In 2016, certain operations were carried out for coverage on the British Pound, which made it possible to mitigate potential losses derived from the oscillations of this currency following the prospected scenarios of the United Kingdom's exit from the European Union.

THE CREDIT RISK The credit risk represents the Group's exposure to potential losses derived from failure to fulfil commitments taken on by its clients. The Group's exposure to this risk is mitigated by the fact that commercial relations mainly concern known and reliable clients, particularly with mass retail operators. The Group is equipped with credit control processes, that provide client reliability analyses, also through external sources, the attribution of guarantees, and constant control of client exposure. Clients with turnover below a minimum threshold have mostly been asked to pay on delivery. Beyond credit control, the process also contains an administrative function which manages and processes client complaints, allowing quicker problem solving and therefore quicker collection. The Group, within its own policy for financial diversification, currently has a credit securitisation programme and two agreements for transfer of commercial credits pro soluto, with two important national mass retail clients. The credit risk concerning other financial activities, including the availability of cash flow and equivalent means, has a maximum value equal to the accounting amount of these activities in the case of the client's insolvency.

THE LIQUID ASSET RISK The liquid asset risk represents the risk that the financial resources available to the company are not sufficient to cover the company's financial obligations within the established terms and expiry dates. The Group optimises management of financial resources by maintaining suitable levels of liquid assets, obtaining adequate credit lines, and by ongoing surveillance of prospective liquid asset conditions, also in order to avoid allowing unexpected cash payments to represent critical elements in the short term. For a part of the debt, provision is made to comply with financial covenant referring to income indicators (EBITDA), net indebtedness, net assets and liabilities, and financial burdens, as defined in the specific agreements. This obligation is not considered a threat to the Group's financial stability, and was met in 2016. Furthermore, the short-term part of bank debt is covered by liquid assets, while the medium and long term part is evenly distributed over future years.

46 47

A COMPETITIVE AND SUSTAINABLE BUSINESS MODEL

2

IN SHORTCOMPETITIVE AND SUSTAINABLE BUSINESS

18 PARTICIPATIONS IN

TRADE FAIRS AROUND THE WORLD

19 mln/Euro EURO INVESTED IN

INDUSTRIAL PROPERTY (OF WHICH 15% IN SPECIFIC

INVESTMENTS DEDICATED TO INNOVATION)

LEADING ITALIAN-OWNED

GROUP IN THE FOOD AND AGRICULTURE

SECTOR

FOREMOST PLAYER IN THE FRESH MILK

SECTOR

1

GROWTH LEADER IN ITALY IN THE

VEGETABLE YOGHURT AND DRINK SECTOR - THE THIRD PLAYER ON

THE MARKET.

FOREMOST PLAYER IN SEASONED ITALIAN CHEESES, BUFFALO MOZZARELLA AND RICOTTA IN FRANCE

SECOND PLAYER IN THE FRESH CHEESE

SECTOR IN ITALY, FRANCE, AND OTHER

EU COUNTRIES

24% TURNOVER ACHIEVED

ABROAD (+4% COMPARED TO 2015)

2

23 mln/Euro IN NET PROFIT

(+28% COMPARED TO 2015)

1,181 mln/EuroIN PROFIT

(+10% COMPARED TO 2015)

81 mln/EuroIN EBITDA

(+16% COMPAREDTO 2015)

42 mln/EuroIN EBIT

(+42% COMPARED TO 2015)

10 NEW M&A OPERATIONS CARRIED OUT IN 2016

(+3 OPERATIONS COMPARED TO 2015)

88 mln/EuroIN DEBT

(NET FINANCIAL SITUATION)

NEW INDUSTRIAL PLAN FOR 2016-2019

OBJECTIVES FOR 2017

SDG AND PERTINENT ISSUES

FOLLOWING THE 2016-2019 INDUSTRIAL PLAN

APPRECIATING THE SHAREHOLDER MILK PRODUCTION CHAIN THROUGH THE "QUATTROCENTO" PROJECT

AT LEAST 3 OPERATIONS ABROAD INTENDED TO EXTEND THE NUMBER OF COUNTRIES REACHED SIGNIFICANTLY BY THE GROUP'S PRODUCTS

PARTICIPATION IN 19 TRADE FAIRS AROUND THE WORLD (ONE MORE THAN THE PREVIOUS BUSINESS YEAR)

AT LEAST 30% OF GROWING TURNOVER ACHIEVED ABROAD (24% IN 2016)

PLANNING SPECIFIC TRAINING FOR SECOND GENERATION FARMER SHAREHOLDERS IN MANAGEMENT AND TECHNOLOGY (AGRICULTURE 4.0) IN ORDER TO CONFRONT NEW MARKET CHALLENGES IN PURSUIT OF DIFFERENTIATION TO IMPROVE QUALITY

GUARANTEEING ECONOMIC SUSTAINABILITY BY REINFORCING COMPETITIVENESS

PROFIT EBITDA EBITNET PROFIT

9 mln/EuroDIVIDENDS TO

SHAREHOLDERS

DEBT

Granarolo's history bears witness to the ability to keep together the sustainability of the business model in all its forms (economic, social and environmental) with the competitiveness that has led the company to its leading role in the internal market.The challenge at the moment and in the near future is to continue to make sustainability a central element in the company's competitiveness, in a context in which growth is often created through acquisitions and internationalisation activities that have a deep effect on the company structure. Granarolo will continue along the path of change, both in terms of business dimensions and in terms of culture, and approach to the business itself, notwithstanding the commitment to maintaining a leading role in the core areas of milk and dairy products, where the Group expresses significant excellence and originality. Granarolo firstly works with milk produced by farmers that are shareholders in the cooperative, and sells it at an adequate price, in order to create value in a sustainable, long-term manner for the farmer-shareholders themselves and for the community. Every day, it provides products rich in milk's precious nutrients to millions of consumers around the world. The quality of every single phase of the production chain is decisive for the production chain as a whole and, as a result, for Granarolo's own success. In order to give adequate responses in terms of Granarolo's offer, in addition to making significant investments each year in research and development, the company has already started an acquisition process, together with all the commitments this process entails.

2.1 THE ECONOMIC CONTEXTIn international terms, 2016 was the year of identity and political crises - the year of "Brexit" and the American elections. It was the year of migrations, marked with the blood and terrorism that feeds the populism that closes borders. It was the year of bank crises and, in Italy, of the constitutional referendum that resulted in a new structure of the national Government.

In terms of the conditions of the global economy, 2016 showed a slight improvement, while 2017 seems to be showing a reverse tendency, in spite of uncertainty. There is a lot of expectation in terms of measuring the internal and external effects of the protective measures applied by the new American government, and China seems to be heading for a slower growth. Russia returned to a growing dynamic. Today, a lot of interest is paid to India and South East Asia.

In the Euro area, growth continues at a moderate pace, although it has shown gradual improvement. The slow recovery of the Italian economy continued, as proven by the trends in industrial production, electrical consumption, and cargo transport, as well as the business trust indexes, which are positioned at high values, on average. The economic activity was stimulated by a return of investments and an increase in family expenses, although this did not happen in equal measure in all areas. Projections for the Italian economy, updated according to the most recent trends, indicate that, on average, GDP has increased by 0.9% in 2016. Growth will continue at around 0.9% in 2017, and 1.1% in 2018 and 2019. The GDP level in 2019 will still be about 4% lower than 2007.

THE INTERNATIONAL, EUROPEAN AND ITALIAN SCENARIO

The conditions of the global economy have improved slightly, in spite of the economic and political uncertainty.

INTERNATIONAL CONTEXT+ 3.2%GDP 2016

COMPARED TO 2015

In Europe growth continues at a rhythm that is moderate, but increasing.

EUROPEAN CONTEXT+ 1.7%GDP 2016

COMPARED TO 2015

The Italian economic context shows signs of a slight expansion.

ITALIAN CONTEXT+ 0.9%GDP 2016

COMPARED TO 2015

2.1.1 THE ITALIAN FOOD AND AGRICULTURE INDUSTRYThe Italian agro-industrial sector - an opportunity for the country: Internal demand is stagnant (-0.5% in 2016 - source Banca d'Italia), and is characterised by sobriety in purchases and attention to saving. There is a confirmed negative trend in the purchase of meat, cured meats, eggs and certain dairy products, while drinks are almost stable, fresh products are on the rise, while packaged products and allergen free products (gluten, lactose, salt, etc.) are growing at a rate in double figures. The world of vegetables is doing very well.

TREND IN THE ITALIAN FOOD AND AGRICULTURE SECTOR

Source: Nomisma Agrifood Monitor

N° businesses 2016

56,412

Production

+1.1%

N° employed 2016

426,075

Turnover 2016

125 bln€

Ranking in manufacturing sector

2nd

The Italian food and agriculture sector currently exports 38 billion Euro. Consumers appreciate Italian products all over the world. The territorial production chain, however, cannot be replicated. It is a common opinion that Italy has even greater potential, and that products made in Italy could play a leading role in the world, reaching 50 billion Euro by 2020. In order to promote this growth, the Ministry of Agricultural, Food and Forestry Policies and the Ministry of Economic Development are converging on shared supporting policies.

2 Sources: Granarolo Group consolidated financial statements, IAS/IFRS, PFN accounting standards net of Factoring and Securitisation pro soluto IAS compliant52 53

Indicators - particularly those for exports (+9.6%) - prove how the resources provided by Italian and European promotion programmes - OCM, Made in Italy Extraordinary Plan - which, in recent years, have supported internationalisation, have been used well by businesses in the sector, as well as consortia and groups that were created to deal with markets in other countries.

TREND IN MADE-IN-ITALY AGROINDUSTRIAL EXPORTS AROUND THE WORLD

27

2010 2011 2012 2013 2014 2015 2016

3031

3334

3738

Data in bln€

This strategy is required to support a strong internationalisation project, based on the narrative of a country that has made millions of men and women around the world love its landscapes, art, culture, and food. Although it is important to remember that there are less than ten P.D.O. products that significantly cross national borders.

2.1.2 MILK: THE INTERNATIONAL AND ITALIAN SITUATION

In 2016, world consumption of dairy products continued to increase, as already recorded in the previous years. Estimates indicate an overall increase of 1.1% compared to 2015, although with different trends depending on the product groups: the butter market grew by 2.4%, cheese by 1.5%, milk by 1.2%, while the market of powdered milk - both full cream and skimmed - slowed significantly, dropping to 1.6%. (Source: FAS – USDA – GTIS; Trend in value).

THE MILK AND CHEESE MARKET: 2016 TREND - WORLD

Consumption of milk and dairy

Consumption of cheese

+1.5%

Consumption of powdered milk

-1.6%

Consumption of butter

+2.4%

Source: FAS USDA – GTIS; Trend in value

COMPARED TO 2015

COMPARED TO 2015

COMPARED TO 2015

COMPARED TO 2015

+1.2%

In 2016 - too - international demand had an effect on the volume of milk produced, particularly in the first part of the year, while from June onwards production decreased progressively.The geographic areas that recorded the highest increases in milk production are the same ones that recorded an increase in consumption, and that depend the most on imports.

TREND IN MILK PRODUCTION COMPARED TO 2015 (VOLUME)

US+1.8%

Mexico+1.7%

Brazil0.0%

Chile+1.3%

Argentina(13.4%)

EU+0.7%

India+6.3%

Russia+1.8%

China+1.2% Japan

(0.5%)

Australia(1.0%) New

Zealand(2.0%)

+0.8%COMPARED

TO 2015

Production trend - world

Production trend - Italy

+2.5%COMPARED

TO 2015 Importing countries

Exporting countries

54 55

In terms of production, last year was the first entirely free of the "milk quota" system in Europe, the abolition of which - on 1 April 2015 - allowed farmers to plan their own production, without pre-established conditions, but only on the basis of their real entrepreneurial capabilities. In the first half of 2016, Europe marked a record in milk production, recording, in some periods, a 10% increase compared to the year before. On the other hand, in the second part of the year, there was a drastic drop in production, recording, at the end of the year, production in line with the previous year (+0.7%).

As far as the Italian context is concerned, since 2010 milk consumption has dropped by about 320,000 tonnes, just under 20%. In terms of production, in 2016 the monthly trend remained about the same as the previous years, with a higher production compared to historical figures, in the first half, slowing to more limited values in the rest of the year. The average annual increase compared to 2015 was equal to 2.5%, a higher increase compared to what took place in Europe (+0.7%), and in the rest of the world (+0.8%).

In 2016, the average price of milk at the stable in Italy was equal to 34.6 Euro/hl, a decrease compared to previous years, mainly owing to an increase in production derived from the end of the milk quota regime. The "spot" price of milk, which reflects the dynamics of demand and offer, since it is the result of daily contracting, followed a similar trend, but with more extreme values: the minimum price, recorded in April, was the negative record of recent years, at 23.46 Euro/quintal, when there was more milk available, which then increased significantly, at the end of the year, to 42.40 Euro/quintal (+91% compared to the minimum), with a yearly average that is still significantly reduced (32.86 Euro/quintal, -7.2% compared to 2015).It is difficult to say how much the price at the stable and the "spot" price influence one another.

MILK PRICE TREND AT THE STABLE - ITALIAN YEARLY AVERAGE

0

9

18

27

36

45

20162015201420132012201120102009

€ per 100 litres

32.3%35.2%

39.6% 38.5%40.8% 41.9%

36.2% 34.6%

4.3%

Source: CLAL

Even in the rest of Europe, the progressive decrease in the price of milk at the stable, which began in 2015, did not result in downsizing in the production of milk. On the contrary, in the period between 2015 and the summer of 2016, production was very high, contributing to further decreases in price. The reasons behind the constant and progressive reduction in the price of milk can be identified in the reduction in quotations on milk commodities, which reached their highest levels in 2014, and in the increase in production derived from the end of the milk quota regime and the attraction of remuneration derived from high prices.Towards the end of 2016, like in Italy, the price trend also began to recover in France and Germany.

MILK PRICE TREND AT THE STABLE 2009-2016 (€ PER 100 LITRES)

2009

32.3

27.1

25.527.8

31.9

34.636.2

31.2

31.1

2010 2011 2012 2013 2014 2015 2016

Source: CLAL, ZMP, FRANCEAGRIMER REPORTS

56 57

2.1.3 THE DAIRY MARKET AND NEW MARKET OPPORTUNITIES IN ITALYThe negative trend in the dairy market is confirmed, both in volumes and in values, showing a decrease in average prices in all the main market segments. Among those segments in which Granarolo is a competitor, the decrease affected fresh and UHT milk the most - with an aggregated segment value decrease of 5.6% compared to 2015. Even the fresh cheese market decreases (-2.4% value and -0.8% volume), as well as the yoghurt market (-1.4% value and -0.4% volume). In an opposite trend, on the other hand, is the vegetable market, which was found to have grown 11.6% in value and 12.5% in volume, reaching a total value in the vegetable yoghurt and drink segment equal to 230 million Euro in 2016.

ITALIAN DAIRY MARKET TREND: DELTA % 16-15

UHTMILK

*Vegetable products include: Vegetable yoghurt and drinks Source: IRI I+S+LSP

(5.2) (5.8)(2.4) (1.4)

(5.5) (2.7)(0.8) (0.4)VA

LUES

VOLU

ME

FRESHCHEESES

FRESHMILK

YOGHURT

(11.6)

(12.5)

VEGETABLE*

(2.0)

(1.8)

MARKETTOTAL LACTOSE FREE

The lactose-free sector is an area of strategic growth in the Dairy market.

Source: Nomisma processing of Nielsen-IRI data + internal estimate

FC2021FC201720162015

538427

388342

MARKET VALUE (mln €)

ORGANICOver the next 5 years we expect a significant increase in organic consumption in the Dairy sector.

Source: Nomisma processing of Nielsen-IRI data + internal estimate

FC2021FC201720162015

150125110

86

MARKET VALUE (mln €)

VEGETABLEThe market of vegetable-based products will continue to grow in a significant manner through the development of new sectors.

Source: IRI, TOT Italy, October 2016 + internal estimate

FC2021FC201720162015

559

408364320

MARKET VALUE (mln €)

GLUTEN FREEThe gluten-free market is growing constantly, with prices and profits above average, while consumption is moving progressively from the pharmacy channel to Mass Retail.

Source: Nielsen, TOT Italy, September 2016 + internal estimate

FC2021FC201720162015

444320291269

MARKET VALUE (mln €)

LOW FAT - LOW SALTConsumers are increasingly attentive to avoiding consumption of excessive amounts of fat, sugar, and salt.

Source: Nielsen Consumer Survey

VALUE TREND

+11%compared to 2015

VOLUME TREND

+9.8%compared to 2015

CHEESE SNACKThe snack market has a potential of more than 150 mln € in Italy alone, with growing sales trends.

Source: Nielsen Trade*Mis – Iper+Super +Libero Servizio+Discount – AT February 2016

CORN AND DAIRY EXTRUDED SNACKS

VALUE TREND

+1.3%compared to 2015

DAIRY SNACK KIDS VALUE TREND

+88%compared to 2015

58 59

2.2 GRANAROLO: DEVELOPMENT STRATEGIES AND RESULTSFood-grade milk - and fresh milk in particular - is subject to a localised phenomenon, protected by regulations that acknowledge the value of proximity between the times of milking and consumption. For a few decades, the success of Alta Qualità milk drove the category, allowing correct remuneration to farmers and the industry. Recently, competition between distribution chains focused on promotional policies on milk and other daily consumption products, offering clients low prices at the expense of the producers, subtracting a quota of 25-30% of the market from brands. Numerous consumers are turning to vegetable-based protein, to the detriment of animal-based proteins: from 2010 to the present day, fresh milk consumption decreased by 30% and, in terms of prospects, in 2020 a value of -50% should be reached, compared to 2010. In the case of milk, the drop in national consumption cannot be compensated with exports. Therefore, it is necessary to find alternative uses for the raw material. In short, it is necessary to diversify products and markets.

The Granarolo Group is experiencing an internationalisation process that has been going on since 2011, and which, in 2016, involved a further year of consolidation on national and international markets.This process took place not only in terms of product, but also in terms of factories, people, systems and processes. The objective is to build a common culture, between Granarolo and the newly purchased companies in Italy and abroad.

2.2.1 THE NEW INDUSTRIAL PLAN FOR 2016-2019In 2015, Granarolo completed the fifth year of the development plan that began in 2011. The five-year plan was based on four pillars:

• dimensional growth• product diversification• market diversification• country diversification

In May 2016, in light of the great changes in the market, Granarolo's Board of Directors were presented with the Industrial Plan for the 2016-2019 period, which aims the Group's new development phase at even more challenging objectives. The plan is based on three strategic pillars and, in continuity with the path that began in 2011, is aimed at combining protection of the national market with increasing openness towards foreign markets.

In addition to remaining firmly concentrated on its core business - and therefore on the traditional range of dairy products - which makes the best use of the production chain's raw material, where the Group expresses a significant area of excellence, originality and innovation, Granarolo aims to promote the extension of its business activities beyond the dairy sector.

On one hand, the skills and synergies found in the group's production chain project, combined with understanding of the new growing trends in consumption (for example, in reference to allergen free products), are essential in continuing along the path to diversification of the product portfolio. Granarolo therefore approaches the market as a large Italian agroindustrial company, which, thanks to its history and high penetration in Italian families, is particularly credible in health-conscious sectors and emerging needs. To this purpose, the 100% Vegetale range - launched in 2015 - reinforces Granarolo's role as a fundamental player in the Italian food and agriculture sector, balancing out the drop in milk consumption by winning over market quotas in vegetable based drinks.

On the other hand, the diversification process that the company has already started (think of access to the Gennari Group, Pastificio Granarolo, and Fattorie Giacobazzi) may lead Granarolo to become

not only the company that brings Italian milk and cheese products to the world, but also a company that exports a platform of products made in Italy.

ITALIAN DAIRY PRODUCTSThe traditional range of dairy

products, including milk, yoghurt, and fresh and aged cheeses, is innovated each

year, responding to new needs (one example is the

creation of Maestri del Latte, a range of dairy specialities with a strong bond with the

territory).

"HEALTHY" PRODUCTSWith increasing attention to quality food with a healthy connotation, allergen-free

products grow significantly, as well as the demand for products from an organic production chain, and one that respects the animal's

well-being.

ITALIAN SPECIALITIESParticularly abroad,

Granarolo is increasingly perceived as a range of

Italian products, which are often successfully combined

(for example, cheese and balsamic vinegar), or are seen as the expression of biodiversity (Prosciutto di Parma DOP), or a delicacy

(egg-based pasta).

ITALIAN

PRODUCTSDAIRY

ITALIAN

PRODUCTSHEALTHY

ITALIAN

FOODSSPECIALITY

60 61

2.2.2 POSITIONING IN ITALY AND ABROADThe company's strategic positioning took place, and will continue in the future, through consolidation of international markets, both by solid organic growth and by M&A operations, suitable to generate strong synergic entrepreneurial value, with operators of non-optimised dimensions.

Growth that occurred through the M&A process has consolidated a team with very strong and diverse managing and business capabilities, which will form the foundation for success of the future plan.

GRANAROLO GROUP'S M&A PATH

1957 2000 2004 2011 2012 2013 2014 2015 2016

Among the most relevant acquisitions made in 2016, it is worth mentioning the Group's increased investment in the range of vegetable and organic products through acquisition of 60% of Conbio, the leading company, in Italy, in the production of a wide range of vegetable and organic food products. Conbio S.r.l., established in 1998, is specialised in the production of vegetable proteins and organic and vegan ready-made dishes, sold with the "Bio Appetì" and "Conbio" labels, and with productions for Mass Retail (private label).

Towards the middle of the year, the Group's diversification was enriched by entry on the Modena Balsamic Vinegar market, through acquisition of 66% of Fattorie Giacobazzi. This acquisition is part of the diversification plan promoted by Granarolo, intended to build a distribution platform as an international reference point for excellent Italian products and specialities.

At the end of 2016, the Group continued to diversify its offer by entering the bakery sector, with the acquisition of Pandea Dietetica S.r.l., a company specialised in the production of baked goods with or without gluten. Acquisition of this historical company - which has been operating in Parma since 1946 - is part of our industrial plan aimed at further diversifying our product portfolio intended for domestic and foreign consumers, who are increasingly inclined to use healthy food products.

Also towards the end of 2016, the Group announced acquisition of 30% of San Lucio S.r.l., the company that owns GROKSÌ!, a brand linked with an innovative snack made from oven-cooked cheese, obtained through a patented method, and naturally lactose and gluten free. This acquisition, too, is intended to increase the Group's offer to include food products that are useful for health purposes, combining the Group's typical dairy tradition with the modernity of a unique snack, capable of meeting the needs of a market that has an increasing demand for diet products or products for consumers with food allergies.

As far as the Group's internationalisation process is concerned, in January 2016 it purchased Vinaio OÜ - renamed Granarolo Baltics OÜ - a company operating in the sector of selling dairy products and importing quality Italian products to the Estonian market. In addition, the Group has acquired two important distributors. Specifically, it purchased 50% of Matric Italgross AB, a Swedish company that distributes Italian brands, and a leader in its category, and 60% of Comarsa SA, a company that distributes Made in Italy food products in Switzerland. Finally, in July, Granarolo USA was established, and in October the European Food Ltd. company in New Zealand came under the control of Granarolo International S.r.l.

GRANAROLO GROUP'S ACQUISITIONS

2011 2012 2013 2014 2015

Establishment of Granarolo Iberica

Acquisition of Lat Bri

Establishment of Granarolo International

Acquisition of Codipal Group France

Transferof CSL

Lease on Assolac Branch

Establishment of Centrale del Gusto

Establishment of Granarolo UK

Establishment of Granarolo Chile

Establishment of Gennari Italia

Acquisition of Pastificio Granarolo

Transfer of Minority Shares in Zeroquattro Logistica

Acquisition of European Foods NZ

Acquisition of Yema Distribuidora de Alimentos

Acquisition of Granarolo Baltics OÜ

2016

Acquisition of Conbio

Acquisition of Matric Italgros AB - Sweden

Acquisition of Comarsa SA - Switzerland

Pinzani S.r.l. is merged into Granarolo S.p.A.

Acquisition of Fattorie Giacobazzi

Establishment of Granarolo USA

Acquisition of European Foods India

Increase in shares in European Foods Ltd.

Acquisition of Pandea Dietetica S.r.l.

Acquisition of San Lucio S.r.l.

Acquisition of Amalattea Italia

Acquisitionof Pinzani 1969

Representative Offices in China

Acquisition of Podda

845

32 102 174 212 288

813 816 816 825 790

408

773

918

COREBUSINESS

M&A

990 1.037

1.1811.078

mln Euro

NO. OPERATIONS 2 NO. OPERATIONS 1 NO. OPERATIONS 6 NO. OPERATIONS 3 NO. OPERATIONS 7 NO. OPERATIONS 10

Even for the coming years, the Group's strategies will continue along the path to opening to new markets and diversifying the product portfolio.

In 2016, too, Granarolo confirmed its position among the leaders in the Dairy sector, always positioning itself on the podium among the main market segments.

62 63

PLACEMENT ON THE ITALIAN MARKET

Notes (*) Competitive positioning (excluding Private labels) Source: Nielsen I+S+LSp (YTD December 2016)

FRESH MILK

FRESH CHEESES

UHT MILK

YOGHURT

37.2

23.5

20.5

18.8

1ºOthers

Parmalat

PL

29.0

36.1

10.2

24.7

2º

2º31.9

30.6

18.9

18.6

3º9.8

20.1

14.0

56.1

Others

Lactalis

PL

Others

Parmalat

PL

Müller

Danone

PL & Others

Source: IRI INFOSCAN – December 2016 I+S+LSP - Shares in value

PL & Others

3º

11.1

23.2

17.9

47.8

In the Yoghurt and Vegetable Beverage sector

Growth leader in the market, both in value (+4.6 pp) and in volume (+4.0 pp)

THE GRANAROLO 100% VEGETALE RANGE (IN ITALY)

GRANAROLO'S MAIN CLIENTS IN ITALYGranarolo's main clients in Italy are represented by Mass Retail Channels, Normal Trade and Food Service. In Italy, Mass Retail continues to record a decrease in turnover in the dairy market, while product categories with a healthier connotation continue to grow. Starting from these assumptions, the Granarolo Group has accelerated its diversification process by entering non-dairy categories (vegetable drinks, vegetable gastronomy, gluten-free products, balsamic vinegar...) and developing new health segments in the dairy market (Accadì lactose-free range, Oggi Puoi range with limited salt and fat content, Biologico organic range).

Managed commercially in Italy by Zeroquattro S.r.l., the "Normal Trade" channel - that is to say traditional retail and out-of-home consumption - in 2016 saw the development of activities and turnover in its core business (milk, yoghurt and fresh cheeses), in the seasoned cheese market (grana padano and pecorino), and completion of assortments, selling products from large brands, reaching 23% of the total turnover expressed by the Group in Italy (+3% compared to 2015).

In 2016, Granarolo created more solid supply relations with its main suppliers in both collective and commercial catering (Food Service channel), thus positioning itself not only as a supplier of standard products, but also of those that best match emerging consumption trends (organic products, lactose-free products and vegetable-based products).

NET Turnover FOR ITALY 2016

• Brand and private Mass Retail 69%• Normal trade 23%• Food service 7%• Industrial 1%

64 65

TOP PLAYERS IN THE FOOD & BEVERAGE SECTOR IN ITALY

1° 1,748 mln€

2° 1,492 mln€

3° 1,423 mln€

4° 1,391 mln€

5° 748 mln€

6° 727 mln€

+ 1 POSITION COMPARED TO

2015

Source: Sales Value €/mln IRI Infoscan Total Italy ISLSP – YTD Dec. 2016

As far as the French cheese market is concerned - the second in terms of volumes and turnover after Italy - Granarolo Group confirms its first place in the sales of ricotta and hard cheeses, and second place in the mozzarella and mascarpone segment.

PLACEMENT ON THE FRENCH MARKET

Notes (*) Competitive positioning (excluding Private labels) Source: Nielsen I+S+LSp (YTD December 2016)

RICOTTA

MOZZARELLA

HARD CHEESES

MASCARPONE

6.7

22.7

20.2

50.4

1ºOthers

PL

2º12.0

29.4

11.8

46.8

Others

PL

1º18.2

18.0

10.3

53.5

Others

PL

2º4.5

28.3

16.8

50.4PL

Others

66 67

PLACEMENT ON THE EUROPEAN MARKET

ItalyCATEGORIES RANKING

Fresh milkUHT milkYoghurtFresh cheesesUHT cream

1°2°3°2°3°

FranceCATEGORIES RANKING

Hard cheesesRicottaItalian mozzarellaBuffalo mozzarella

1°1°2°1°

GreeceCATEGORIES RANKING

Fresh cheesesOrganic milk

1°1°

RomaniaCATEGORIES RANKING

Fresh cheeses 1°

Lithuania/EstoniaCATEGORIES RANKING

Fresh cheeses 1°

SpainCATEGORIES RANKING

Fresh cheeses 4°

Belgium and Luxembourg

CATEGORIES RANKINGFresh cheeses 2°

Scandinavian AreaCATEGORIES RANKING

Fresh cheeses 1°/2°

SwedenRANKING 2°

SwitzerlandRANKING 2°

As far as diversification of the product portfolio is concerned, Granarolo is continuing to develop a number of diversification projects. The most important one is Granarolo 100% Vegetale, which covers drinks, yoghurt and ice cream, and - as of 2016 - the entire vegetable-based gastronomic sector. It is therefore confirmed that, in addition to remaining firmly concentrated on its core dairy business, Granarolo also approaches the market as a large Italian agroindustrial company, which, thanks to its history and high penetration in Italian families, is particularly credible in health-conscious sectors and emerging needs.

2.2.3 MANAGEMENT RESULTS FOR 2016Consolidated turnover for 2016 reached 1,181 million Euro - a 9.5% increase compared to the previous year.

The results reached in 2016 are, under all points of view - increase in turnover, diversification of the contribution of various product lines, effect of the turnover produced abroad - confirmation of the strategies and their positive execution.

DEVELOPMENT OF TURNOVER BY GEOGRAPHIC LOCATION (2011-2016)

NET SALESFY 11

ITALY

ABROAD

ITALY

ABROAD

96%

4%NET SALESFY 1624%

76%

TURNOVER DIVIDED BY PRODUCT LINE (2015-2016)

NET SALESBY BU FY 15

MILK AND BEVERAGES

CHEESE AND BUTTER

OTHERS

43%

40%

17% NET SALESBY BU FY 16

22%

37%

41%

MILK AND BEVERAGES

CHEESE AND BUTTER

OTHERS

Italy represents Granarolo's historic market, where the company makes 76% of its turnover, which dropped 4% compared to the previous financial year, and is constantly dropping in recent years. As shown in the graph below, the Group's profit from the Italian market has decrease by 20 percent in the last five years, in favour of an increase on the European market (+16%) and international markets (+4%).

GROUP PROFITS BY GEOGRAPHIC MARKET (2000-2016)

98%

515 mln €

2000

1%

1%

845 mln €

96%

1%

3%

2011

1,078 mln €

80%

17%

3%

2015

1,181 mln €

76%

19%

5%

2016

The increase in turnover at a constant perimeter (+2.6%) is mainly derived from the results obtained by the Group's strategy for geographic and product diversification, in addition to ongoing innovation and attentive distribution policies in the core business, which have made it possible to effectively compensate for the difficulties that continue to affect the Italian market for fresh milk (-5.2% sales in value compared to 2015) and UHT milk (-5.8% sales in value compared to 2015).2016 showed complete consolidation of financial results for Pastificio Granarolo S.r.l. - which entered

68 69

consolidation on 1 June 2015 - in addition to Yema Distribuidora de Alimentos Ltda (Brazil) and European Foods Ltd (New Zealand), both consolidated on 31 December 2015, in addition to various company mergers completed in 2016:

• Granarolo Baltics OU (Estonia), consolidated on 1 February; • Conbio S.r.l.(Italy) and Matric Italgross AB (Sweden) consolidated on 1 May;• Comarsa SA and Angira SA (Switzerland) consolidated on 1 June;• Fattorie Giacobazzi S.r.l. (Italy), together with Giacobazzi UK and Giacobazzi USA,

consolidated on 1 July;• The company branch of Pandea Dietetica S.r.l. in bankruptcy proceedings (Italy), consolidated

on 1 December.

The Group's EBITDA is around 81.0 million Euro, equal to 6.9% of profit, growing, compared to 2015, by 10.0 million Euro (+16.1%). Profits have improved both due to the increase in revenues, as described above, and to the changed mixture of products and careful policies to optimise the buying and production costs.

The EBIT reaches 42.1 million Euro, 3.6% of sales revenue, up by 12.6 million Euro on the previous year. The net profit for the business year is equal to 22.6 million Euro, a 4.6 million Euro increase compared to the same figure on 31 December 2015.

As far as the financial and asset situations are concerned, the Group improved its Net Financial Position by 12.5 million Euro, closing the 2016 business year with a Net Financial Position equal to 87.6 million Euro. The Net Assets increased by 24.5 million Euro, reaching 256.7 million Euro.

GRANAROLO'S RECLASSIFIED PROFIT & LOSS ACCOUNT

(THOUSANDS OF EURO) 31/12/2016 31/12/2015 VARIATION

Sales revenue 1,180,703 100% 1,078,087 100% 102,616 9.5%

Direct costs of production (858,162) -72.7% (783,167) -72.6% (74,995) 9.6%

Contribution Margin

322,541 27.3% 294,921 27.4% 27,620 9.4%

Sales, marketing and commercial costs (161,864) -13.7% (152,704) -14.2% (9,160) 6.0%

Indirect labour cost (48,087) -4.1% (42,249) -3.9% (5,837) 13.8%

Other structural costs (27,287) -2.3% (25,633) -2.4% (1,654) 6.5%

Other income and charges (4,314) -0.4% (4,599) -0.4% 285 -6.2%

EBITDA 80,990 6.9% 69,736 6.5% 11,253 16.1%

Amortisation of brands (4,982) -0.4% (5,554) -0.5% 572 -10.3%

Amortisation other intangible assets (7,596) -0.6% (4,682) -0.4% (2,914) 62.2%

Amortisation of tangible assets (22,511) -1.9% (19,961) -1.9% (2,550) 12.8%

Impairment (515) 0.0% (411) 0.0% (104) n.s.

Extraordinary Income (3,288) -0.3% (9,592) -0.9% 6,303 n.s.

EBIT 42,096 3.6% 29,537 2.7% 12,559 42.5%

Financial income / (charges) (10,000) -0.8% (10,208) -0.9% 208 -2.0%

Costs for the actualisation of benefits for employees

(285) 0.0% (271) 0.0% (14) -5.1%

Income / (charges) on shares 64 0.0% (61) 0.0% 125 n.s.

Earnings before taxes

31,875 2.7% 18,997 1.8% 12,878 67.8%

Income taxes (9,274) -0.8% (958) -0.1% (8,316) 868.0%

Net profit for the financial year

22,601 1.9% 18,039 1.7% 4,562 25.3%

70 71

GRANAROLO GROUP’S RECLASSIFIED ASSET & LIABILITY STATEMENT

(THOUSANDS OF EURO) 31/12/2016 31/12/2015 VAR.

Brands 86,371 86,134 237

Goodwill 62,560 60,243 2,317

Intangible assets 37,450 15,349 22,101

Tangible assets 326,141 304,867 21,274

Shares 3,327 2,321 1,006

Other non-current assets 1,974 1,643 331

Total assets 517,823 470,557 47,266

Inventory 101,898 88,774 13,124

Commercial credit 145,158 146,577 (1,419)

Commercial debt (371,823) (343,657) (28,166)

Debts towards personnel and social security institutes (30,832) (21,385) (9,447)

Other assets 21,862 24,339 (2,447)

Other liabilities (10,490) (7,774) (2,716)

Tax debts and credits and deferred taxes 13,244 25,699 (12,455)

Total other Assets and Liabilities (130,983) (87,427) (43,556)

Severance pay (21,182) (25,186) 4,004

Provisions for risks and charges (28,166) (25,854) (2,312)

Total funds (49,348) (51,040) (1,692)

Net invested capital 337,492 332,090 5,402

Assets and liabilities destined for sales 6,793 153 6,640

Overall net invested capital 344,285 332,243 12,042

Fully paid-up capital 157,939 157,939 -

Reserves, profits carried forward 76,134 52,163 19,971

Profit (loss) for the period 22,601 18,039 4,562

Equity 256,674 232,141 24,533

Medium/long-term financial indebtedness 188,966 162,837 26,129

Short-term financial indebtedness 70,458 56,939 13,519

Financial activities and cash (171,813) (119,674) (52,139)

Net financial assets 87,611 100,102 (12,491)

Equity and net indebtedness 344,285 332,243 12,042

2.2.4 GENERATED AND DISTRIBUTED ECONOMIC VALUEIncome from typical operations (sale of products and services) and from accessory operations (shares and other financial activities) represent the economic value generated by the company, which is mostly distributed among the stakeholders with which the Group has various types of relations in its everyday activities.

This wealth is used to pay stakeholders who have had economically relevant relations with the company and have contributed resources such as work, investments, loans, public utility services, socially useful programs, etc., contributing to generate Granarolo's economic wealth. The main stakeholders to whom the Group redistributes economic value are:

• employees and freelance personnel with salaries and other costs;• shareholders, with the distribution of profits, and other backers and capital lenders paid with

the interests on the debt;• Public Administration with the taxes and duties we pay;• the Community and the territory, by using resources for socially and culturally useful projects.

The economic value left over is withheld by the company system itself, by setting aside the resources necessary to develop the organisation (reserves and amortisation). Growth takes place by self-financing.

These calculations show to what extent the Group stakeholders are involved in the positive distribution of the produced value.

Granarolo performed calculations of the generated and distributed values according to the setting established by the GRI-G4 guidelines. It defines and provides details on the five dimensions of the distributed value: operating costs, retribution and benefits, payments of capital to suppliers, payments to public administration, and investments in communities.

The data on the generated economic value is derived from the financial statements for the business year.

As far as the 2016 financial year is concerned, the directly generated economic value is equal to 1,185 million Euro, while the distributed economic value is equal to 1,138 million Euro.

TARANTA SOLIDALEDa luglio a ottobre nei centri di ascolto della Caritas di Otranto che sostengono italiani e stranieri in difficoltà, donne e minori migranti approdati sulle coste salentine e provenienti da paesi colpiti da guerra e povertà, latte e pasta saranno offerti da Fondazione La Notte della Taranta e Granarolo, unite nel segno della solidarietà. Creare un sistema di sostegno per i più deboli è un segno di speranza per tutti.

Se vuoi saperne di più o vuoi far parte del sistema d’accoglienza vai su:www.lanottedellataranta.it

Label devised for the Taranta Solidale Granarolo project, organised in collaboration with the Notte della Taranta Foundation to support immigrant families in Otranto

72 73

GRANAROLO GROUP’S RECLASSIFIED PROFIT & LOSS ACCOUNT

UOM 2015 2016 ELEMENTS CONSIDERED IN THE ITEM

Directly generated economic value

(mln €) 1,084.6 1,185.2

a) Revenue (mln €) 1,084.6 1,185.2 Net sales plus revenue from financial investments and the sale of assets

Distributed economic value

(mln €) 1,034.06 1,138.0

b) Operating costs (mln €) 879.2 961.9This includes, among other things, payments to suppliers, royalties, payment facilitations

c) Retribution and benefits (mln €) 126.5 136.9

Monetary payments for employees (including corresponding expenses, provided vehicles, and healthcare, but not including expenses for training and similar activities)

d) Payment to capital suppliers (mln €) 14.7 23.3 All payments to suppliers with the

organisation's capital

e) Payment to Public Administration (mln €) 12.6 14.9 Gross taxes

f) Investments in the communities (mln €) 1.0 1.0

Voluntary contributions and investments in community funds (including donations, financing to political parties, etc.)

Retained economic value

(mln €) 50.5 47.2

2.2.5 INDUSTRIAL INVESTMENTS

Investments in capital goods reached - in 2016 - about 19.0 million Euro, divided by type of investment in the following manner:

INVESTMENTS IN CAPITAL GOODS BY TYPE

15%

1%

68%

7%5% 4%

SAFETY

QUALITY ASSURANCE

NEW PRODUCT DEVELOPMENT

PRODUCTIVITY

MAINTENANCE

ENVIRONMENT

The majority of investments - 68% of the total - concerned maintenance of industrial efficiency, through extraordinary maintenance operations on existing systems.Specific investments dedicated to innovation and an increase in productivity are therefore significant: in particular, in Bologna on the hard cheese production lines and in the crescenza department. In Soliera and Parma, the packaging lines were reinforced.In all Group factories, investments were made - or are in progress - aimed at more automated management of the productive processes.

Structural and infrastructural upgrades to the main factories continue. This makes it possible to comply with the requisites for exports set by British and Far East markets.Another essential element, every year, are the investments in systems and structures in all productive sites to improve and guarantee safety in the workplace, the quality of products, and respect for the environment. In Usmate Velate, the first step water purification project (flotation) was completed.

In Bologna, work was completed to build the new plenary conference room adjacent to the management building, which is home to the Granarolo S.p.A. offices.Also worth mentioning is completion, at the end of 2016, of the new factory, with the subsequent transfer of production lines from the previous factory, for Conbio S.r.l., which became part of the Group in 2016.

OUR COMPETITIVE LEVERAGE

3

IN SHORT

OBJECTIVES FOR 2017

SDG AND PERTINENT ISSUES

GROWTH IN THE GRANLATTE PRODUCTION CHAIN, EVEN OUTSIDE OF THE AREA OF COW'S MILK THROUGH THE AGROFOOD BUSINESS INNOVATION CENTER (A BUSINESS ACCELERATOR), TO GENERATE NEW PROJECTS INTENDED TO IMPROVE SUSTAINABILITY IN ALL PHASES OF THE PRODUCT, EVEN BY TAKING ADVANTAGE OF THE CIRCULAR NATURE INHERENT TO THE PRODUCTION OF DAIRY PRODUCTS (JUST THINK OF THE WHEY DERIVED FROM THE PRODUCTION OF CHEESE, USED TO MAKE RICOTTA, OR THE SCOTTA - THE WHEY DERIVED FROM THE PRODUCTION OF RICOTTA...).

50,000 TONS ORGANIC MILK (TARGET 2019)

DIRECTING COMPANY PROCESSES TO CREATE SHARED VALUE

APPRECIATING A SUSTAINABLE BUSINESS MODEL

SUPPLIERS AND DISTRIBUTION NETWORK

9,649TOTAL SUPPLIERS

MORE THAN

1,000VEHICLES FOR DISTRIBUTION, WHICH SERVE MORE THAN 50,000 RETAIL POINTS EVERY DAY

GRANAROLO'S PRODUCTION CHAIN

5,687,294 Hl HECTOLITRES OF MILK PROVIDED BY FARMER SHAREHOLDERS (EQUAL

TO 70% OF THE TOTAL AMOUNT OF MILK PROCESSED BY

GRANAROLO)

1000FARMERS IN

12 ITALIAN REGIONS

5,853,955 €IN QUALITY BONUSES

AWARDED TO SHAREHOLDERS

FOR THE MILK THEY PROVIDED (ALTA QUALITÀ,

ALIMENTARE, AND BIO)

INNOVATION

94 Mln / €IN NET TURNOVER

ACHIEVED IN 2015-2016 BY THE NEW PRODUCTS

12START-UPS THAT COULD

BE SELECTED BY THE AGROFOOD BIC

1 START-UP ACCELERATOR

WAS CREATED (AGROFOOD BIC)

20,000 TONS OF ORGANIC MILK

(UPDATE MARCH 2017)

634FARMERS BROUGHT

TOGETHER IN THE GRANLATTE COOPERATIVE

Self-produced energy in plants

Product and process innovation also aimed at sustainability

Green logistics and control of the cold chain

Retail point control to protect consumers

Periodical tests on consumers

Advanced research on functional products in collaboration with universities, hospitals, international research centres and pharmaceutical companies

Projects for local communities and international cooperation

Nutritional education

Protection and appreciation of human capital

Care for the environment:! Traceability of the environmental impact of the product's entire life cycle ! Ecopackaging

Finished products: quality control and surveillance plan on contaminants and residue

Animal well-being

Proximity of raw materials

Technical and veterinary assistance

Systematic audits on stables

Production chain certification

Biogas production

Incentives to producers in relation to the quality of the milk they provide

Inbound raw materials: quality control and surveillance plan on contaminants and residue

Georeferencing stables

GRANAROLOFactories and distribution

Control and traceability of feed suppliers14 visits

496 visits 300 stables visited together with CSQA

250 checks/day per parameter

more than 500,000 analyses

2,000,000 analyses

24 certification visits

836 visits

GRANLATTEStables

A UNIQUE PRODUCTION CHAIN IN ITALY

80 81

Protecting the Italian milk production chain (a production chain that produces 850 million litres of milk per year) is a priority for the country. Italian farmers are working in increasingly difficult conditions compared to their European colleagues. The milk produced in Italy, on average, has the highest price due to the morphology of the territory, the difficulty of procuring raw materials and feed, the cost of energy, and the trend in prices of Grana Padano and Parmigiano Reggiano. The subsequent differential on the milk price compared to the milk produced in Germany and France has a significant effect on remuneration to farmers. In the last 10 years, 10,000 of them left the system, which has become impoverished as a result. This is even more true with the end, in March 2015, of the European "milk quotas" system: those who invested in quality and typical traits must now compete on an uneven plain with certified European milk on the Italian market at much lower prices.

In this scenario Granarolo plays a fundamental role in protecting the Italian milk production chain and the country's livestock farming sector and defending Italian DOP products. Granarolo's production chain model represents an integrated production system in which the company directly controls all phases, from production of the raw material to distribution of the finished product in retail points.

Overseeing the entire production chain makes it possible, on one hand, to improve appreciation of the producer and of Italian milk - thus protecting the territory and the national food and agricultural heritage - and on the other to obtain high quality standards, in addition to ensuring consumers a product that is collected, processed and distributed while minimising environmental impact throughout the entire cycle.In the coming years the worldwide demand for milk and cheese products is expected to increase, therefore having a guaranteed milk production chain will be strategically significant. All the large European groups know this, and they are preparing to have guaranteed supplies.

3.1 AN ITALIAN MODEL FOR SUSTAINABILITY: GRANAROLO'S PRODUCTION CHAIN Granarolo's Italian production chain is made up of about 650 farmers, united in the Granlatte Cooperative, which is also a majority shareholder in the company, in addition to numerous cooperatives linked with Granarolo. The company's commitment is therefore strongly aimed at significantly appreciating the milk produced by its own farmers/shareholders.

It all started back in 1957, with the foundation of the Bologna Consortium of Milk Producers, established with the purpose of producing, transforming and trading milk. Changes in almost 60 years, both inside and in the outside context of the company, have obviously been very deep, but the production chain that Granarolo and its shareholders are a part of continues to promote a company model that is democratic, fair, and inter-generational, starting from these values as the foundations on which to build competitiveness and development. In fact, Granarolo accompanies its shareholders throughout their growth, without leaving anyone behind.

The milk supplied by Granlatte partner-farmers reached 5,687,294 hectolitres, and represented 70% of the total amount of milk processed by Granarolo.

ORIGIN OF RAW MATERIALS MILK (HECTOLITRES)

20150

2000000

4000000

6000000

8000000

10000000

2016

102

816

32

813

GRANLATTE MEMBERS

OTHERS

88% of the raw material is provided by 329 producers - half of the Granlatte shareholders. This is owed to transformation of the social foundation and the increase in the weight of medium and large sized producers out of the total number. Producers that are shareholders in the cooperative represent 5.20% of the production of food-grade milk in Italy, but already that figure is expected to reach 5.30% (5,833,000) in June 2017.

Distribution of the shareholders' contributions by daily production range confirms the decrease of shareholders with smaller daily milk contribution volumes (up to 1000 l/day), and a constant increase, over time, of higher-volume contributors.

82 83

DIVISION OF SHAREHOLDER CONTRIBUTION BY DAILY PRODUCTION RANGE

PRODUCTION 2012 2013 2014 2015 2016

Lower than 300 l/day 136 137 120 118 109

From 301 to 1000 l/day 256 233 226 210 197

From 1001 to 3000 l/day 168 179 176 188 182

More than 3000 l/day 123 125 133 141 147

Total producers 683 674 655 657 635

DIVISION OF PRODUCERS BY RANGE OF DAILY PROVISION (l)

2010200920082007 2011 2012 2013 2014 2015 20160

50

100

150

200

250

300

N° P

RODU

CERS

<300 301 - 1000 1001 - 3000 >3000

It is with the Granlatte cooperative shareholders that Granarolo has built and continues its path to appreciating the excellent quality of raw materials, also thanks to an incentive system - introduced in 1982 - which involves variable remuneration to the producer, in relation to the quality parameters obtained (protein content, fat percentage, somatic cells, bacteria content) and award mechanisms for individual choices.

In particular, this made it possible to create the "Alta Qualità" high quality range. All fresh "Alta Qualità" products are made exclusively with Italian milk coming from farm companies that are selected and constantly controlled, where the heads of cattle are fed naturally and the highest levels of excellence are followed in milking and collecting processes, and in all phases of product production and distribution.

The Alta Qualità milk is a product that excels in terms of nutritional properties, freshness, goodness and safety standards. It is the first milk in the world to have an Environmental Product Declaration - registration EPD S-P-00118 - to measure the environmental impact of the entire production chain (www.environdec.com). In addition to the "Alta Qualità" production chain, all fresh Granarolo milk is 100% Italian milk.

For 22 years, the Granlatte cooperative, which brings together all Granarolo shareholder-farmers, organises a "High Quality Milk Festival", during which farmers are awarded for obtaining the best productive results - in terms of quality and continuity - in the previous year. Three milk categories are awarded: Standard, Alta Qualità and Organic. It is worth reporting that the 2016 plan includes an important conversion of certain stables from Alta Qualità to Organic, to double production in relation to the increasing demand for organic milk and dairy products coming from the market (we are dealing with around 50,000 tonnes of organic milk in the production chain).

In 2016, Granlatte awarded shareholders a total of € 5,853,955 in awards for Alta Qualità, Standard, and Bio [organic] milk (with an incidence of € 1.2967/hl).

AWARDS FOR QUALITY TO PRODUCERS IN 2016

TYPE INCIDENCE OF 2016 PREMIUMS

Alta Qualità Milk 1.5492 €/Hl

Normal Milk 1.1615 €/Hl

Organic Milk 0.6225 €/Hl

84 85

NORTH

CENTRE

SOUTH

20162015

SHAREHOLDER FARMERS COMPARED TO THE TOTAL CONTRIBUTED MILK3,964,877 HL

SHAREHOLDER FARMERS COMPARED TO THE TOTAL CONTRIBUTED MILK4,206,235 HL

57% 57%

71% 74%

SHAREHOLDER FARMERS COMPARED TO THE TOTAL CONTRIBUTED MILK287,417 HL

SHAREHOLDER FARMERS COMPARED TO THE TOTAL CONTRIBUTED MILK333,910 HL

7% 7%

5% 6%

SHAREHOLDER FARMERS COMPARED TO THE TOTAL CONTRIBUTED MILK1,302,852 HL

SHAREHOLDER FARMERS COMPARED TO THE TOTAL CONTRIBUTED MILK1,147,149 HL

36% 36%

24% 20%201620155,555,146 FROM GRANLATTE SHAREHOLDERS

2,860,116 FROM OTHERS

5,687,294 FROM GRANLATTE SHAREHOLDERS

2,482,725 FROM OTHERS

GRANAROLO'S SHAREHOLDERS ARE SPREAD OUT ALL OVER THE NATIONAL TERRITORY. The same goes for the Group's plants - of which there are 16 in Italy - which are spread out throughout the territory to bring the principle of proximity to reality: on average, the distance between the stables and the plants is about one hour, and usually lower than 100 km.From this point of view, the Granarolo model is very different from the one applied by European competitors, who develop much larger turnover in just one or two plants. In Granarolo's idea of quality, milk must be packaged and consumed near the stables that produce it in order to guarantee freshness. That is why we keep plants located at a regional level, to bring the producer closer to the consumer, making the production chain as short as possible.

ORIGIN OF RAW MATERIALS

HECTOLITRES OF

MILK AND CREAM

86 87

PASTURAGO (MI) Fresh milk Yoghurt and desserts UHT milk

USMATE VELATE* (MB) Fresh cheeses

SOLIERA (MO) Esl Milk UHT milk Latte Baby

GIOIA DEL COLLE (BA) Fresh milk UHT milk

ANZIO (RM) Fresh milk Fresh cream

CASTROVILLARI (CS)Hard cheeses Fresh cheeses Fresh milk

MONTEMICCIOLI (PI) Hard cheeses

BOLOGNA Fresh milk Fresh cheeses Esl Milk Fresh cream Pasta

FACTORY FRESH MILK

UHT MILK

FRESH CHEESES

HARD CHEESES

YOGHURT AND

DESSERTS

PROSCIUTTO DI PARMA DOP PASTA

VEGETABLE-BASED GASTRONOMIC

PRODUCTS

BALSAMIC VINEGAR

CHEESE SNACKS

Bologna " "Bologna "Soliera (MO) " "Nonantola / Bomporto (MO)

"

Brescia "Pasturago (MI) " " "

Anzio (RM) "Gioia del Colle (BA) " "Usmate Velate (MB) "Castrovillari (CS) " " "

Sestu (CA) " " " "Villagrande Strisaili (OG) " " "Montemiccioli (PI) "

Parma "Lesignano (PR) "

Rimini "

1 17

2

316

155

6

7

8

910

11

4141312

2017

PLANTS AND PRODUCTION IN ITALY 2016THE GROUP OPERATES VIA 16 PRODUCTIVE FACILITIES

1

2

7

8

9

VILLAGRANDE STRISAILI (OG) Fresh cheeses Hard cheeses Yoghurt Desserts

10

SESTU (CA) Hard cheeses Fresh cheeses Milk Yoghurt

11

6

4 5

RIMINI Vegetable Gastronomy

15

3

BRESCIA (2017) Cheese snacks

17

Update May 2016

PARMA Hard cheeses Prosciutto di Parma DOP Baked goods with and without gluten

13 1412

NONANTOLA/BOMPORTO(MO) Balsamic Vinegar of Modena IGP

16

88

3.1.1 THE COMMITMENT TO SUPPORTING PRODUCERSThe Granlatte-Granarolo Group works alongside the shareholders and producers to improve their capability, their technique, and their efficiency and to increase the perceived value of the excellence of their milk as much as possible. It also works to increase their ability to remain on the Italian and foreign markets, by investing in innovation, technology, and research. Farmers, for their part, are constantly called to deal with a complex and ever-evolving scenario, faced with which it becomes essential to know how to monitor the "health" of one's own company and to identify actions that can be useful to guarantee continuity and, if at all possible, growth.

Aware of the growing challenges to the agro-industrial production chain by the current economic scenario, the Group works alongside the farmers, both by appreciating their production in the best possible way, and by designing services and tools by which to invest in the future, and "build it" together. In this sense, it is necessary to reflect on the role of the cooperative in relation to the company, and to redefine some of the objectives concerning milk as a raw material.

For several years, furthermore, Granlatte has started, together with the farmers, the process of obtaining certain product certifications, and in particular:

• certification on Alta Qualità and Biologico milk, according to the standard defined by the CSQA's DTP (Technical Production Discipline) n° 035, which involves almost 300 farms;

• certification on traceability in compliance with standard UNI EN ISO 22005:08 on normal milk, which, as of 2013, thanks to the AQ Production Chain project financed by MIPAAF, was achieved for all farms in the cooperative. ;

• certification of animal well-being in the farms that produce organic milk, in compliance with the standard defined by DTP n° 078 (24 farms);

• certification according to standard GT/B 119630-2005, for accreditation and sale of organic milk in the People's Republic of China (10 farms);

• registration and acknowledgement of 20 farms for the production of milk suitable for Grana Padano DOP;

• registration and acknowledgement of 10 farms for the production of milk suitable for Squacquerone di Romagna DOP;

• registration and acknowledgement of 5 farms for the production of milk suitable for Taleggio DOP;

• registration and acknowledgement of 5 farms for the production of milk suitable for Quartirolo Lombardo DOP;

• registration and acknowledgement of 18 farms for the production of milk suitable for Gorgonzola DOP.

Compliance with the various standards and the corresponding certifications are checked and issued by the CSQA of Thiene (VI), by the CERMET of Bologna for Squacquerone di Romagna DOP, and by CERTIPRODOP for Taleggio PDP and Quartirolo Lombardo DOP. At least once a year, the cooperative's technicians verify that the registrations are upheld, as required by the disciplinary documents. During 2016, all the companies that produce Alta Qualità and Biologico milk were checked. During these inspections, 85 non-conformities were encountered, according to the various chapters of the inspection check list.

ANIMAL WELL-BEING

In 2016, a project was started to systematically assess the well-being of animals in the Granlatte shareholder farms. The purpose of this initiative is, above all, to acquire an understanding of the level of well-being throughout the production chain and, then, to provide farmers with suitable instructions on how to improve these conditions, well-aware of the fact that animals in good farm conditions are better off, and produce more, improving the quality and safety of the milk they produce.In this way, in addition to improving the performance of the farm, we also cater to the expectations of the consumer, who is increasingly demanding in terms of sustainable and ethically produced food.

Since 2008, Granlatte achieved the first certification of animal well-being on farms that produce milk by organic methods. The assessment analyses various aspects of farm management:

• staff training and company management with particular regard for hygiene and cleanliness in the various areas;

• livestock farming structures and equipment used on the farm to guarantee the best animal comfort;

• measurement of the impact that these aspects show directly on the animals - for this reason the cows' nutritional conditions are analysed, as well as their cleanliness, any skin lesions, the health conditions of their udders, and of the farm in general.

Improvement of the health conditions of the cows by applying farming systems based on animal well-being indirectly implies a reduction in the use of pharmaceuticals, which is considered one of the factors responsible for the phenomenon of antibiotic resistance. This path will lead, in the 2017-2018 period, to obtaining certification of animal well-being on all farms in the production chain.

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The Group - through the Granlatte Cooperative - has for many years provided several services to support the shareholder farmers. Among these services, technical assistance represents an element of great value, intended to improve the quality of the milk provided by shareholders, particularly concerning attention to reducing the somatic cell count, since this parameter, if properly managed, makes it possible to achieve significant improvements in the profitability of the farm: it has been proven that animals with a lower somatic cell count have fewer health and management problems, and they produce more and are more fertile.Therefore, in the national territory, there are 8 technicians (veterinarians or animal production scientists) who, viewing the results of analyses carried out on the milk by the farmers assigned to them, promptly intervene to give them advice on how to improve the quality of their milk. This service, highly appreciated by shareholders and certified by CSQA, has made it possible to achieve significant improvements in the quality of all the milk collected by the cooperative.

As far as the Alta Qualità and Biologico controlled production chains are concerned, in 2016 interventions were carried out on 46 farms (83 in 2015), with 55 corrective actions (compared to the previous 123) and 125 inspections (109 of which were for somatic cells). Therefore, the number of inspections for somatic cell counts on Alta Qualità milk dropped by 92.As far as standard milk is concerned, the technical assistance service operates not only for quality improvement, but also to support farmers in complying with parameters indicated in Regulation CE 853/04, which contains specific regulations on hygiene in foods of animal origin. In 2016, 130 farms were supported by means of 371 inspections, for a total of 168 corrective actions (147 for somatic cells and 20 for germs). Therefore, on this type of milk, the Group has found that the number of inspections, compared to the previous year, decreased by 159.

Overall, therefore, compared to 2015, 97 fewer stables were followed, with a reduction in the number of interventions by 250 visits. This is definitely a highly important indicator of the improvement obtained in 2016.Another fundamental issue, faced with a farmer population with a very high average age, is to plan and support the transition of skills from one generation to the next.In this case too, for several years now Granlatte has provided certain amounts for Scholarships for the children of shareholder farmers attending high school or university, to study subjects that are useful in developing and appreciating their livestock farms. For 2016, too, 3 scholarships were provided in favour of students of secondary schools, and 3 scholarships for university students. The students who won these scholarships were awarded during the Granlatte Assemblies and in the Financial Statements Meeting, held between April and May 2016.

To support an increase in the farmers' skills, the Granarolo-Granlatte Group periodically organises informative meetings for the farmers. In 2016, these were the topics discussed:

• "Points of attention in managing a farm": 6 meetings, with the participation of a total of 230 farmers, spread throughout the various milk collection areas;

• "Milking techniques and animal well-being": 2 meetings held in Gioia del Colle (BA) and Oppido Lucano (PZ), with the participation of a total of 207 farmers;

• "Milk production with the organic method": 4 meetings, with the participation of 62 companies;• "PSR [Rural Development Plan] Production Chain Projects": 3 meetings involving 61

shareholders; • specific and experimental training with the members of the board of directors in order to begin

a more complex reflection on the benefits to be derived from introducing an "agriculture 4.0", projected to the near future.

ORGANIC AS AN OPPORTUNITY FOR DEVELOPMENT

In response to significant growth in the demand for organic milk and dairy products, with a 20% increase every year in Italy, in 2015 the foundations were laid to allow many Granlatte stables to start organic milk production. Therefore, it is necessary to go from the current 20,000 tonnes of organic milk to at least 50,000 tonnes. We will intervene on the herds, but also on converting cultivations intended for animal feed from traditional to organic methods, thus eliminating the use of herbicides and chemical fertilisers, setting up crop rotations through a process that will be completed over a period of 3 years.

As far as cattle farming is concerned, the change will cause a change in feed, which will be derived only from organic agriculture. The result, for those who intend to transition to organic farming methods, will be lower productivity per head of cattle, but also higher remuneration for their milk (+20 cents per litre in March 2016).

Additionally, there is the economic support that comes from community and national policies, by actuating Rural Development Programs (RDP), which accompany and integrate income during the transitory conversion phases.Granlatte is currently running a campaign to convert 10% of its stables to organic production.Production by organic Granlatte shareholders went from 212,000 hl in 2015 to 256,000 hl in 2016.

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3.1.2 INVOLVING AND LISTENING TO FARMER SHAREHOLDERSBeyond the institutional moments of dialogue with the shareholders, in 2016 the Group Management met with shareholders in the Granlatte cooperative to give them an update on market trends, particularly in relation to milk, and on actuation of Granarolo's Strategic Plan. These meetings take place, periodically, in Milan, Bologna, Anzio, Benevento-Campobasso, and Gioia del Colle. In December 2016, the monthly informative newsletter was created, aimed at the members of the board of directors of the Granlatte cooperative. In particular, the newsletter, sent by email, contains the milk production trends around the world and in Europe, trends in the monthly milk price - also compared to competitors, the trend in the price of corn and soy, the incidence of the cost of feeding in Euro/hectolitre, and a few suggestions on the trends in the market for milk-based products, as well as initiatives that the Group has put into practise.

In the early months of 2017, finally, a process began to involve members of the boards of directors of Granlatte and Granarolo, in order to redefine the Cooperative's Strategic Plan for the 2018-2028 period. The activity, also in relation to the great changes in progress and the significant internationalisation in the Group, is intended to stimulate, within the Cooperative and among the shareholder farmers, a growth and development process that is coherent with the company's strategies, in order to make the future path of all stakeholders more coherent and interconnected, as they contribute to build the most important Group in the dairy sector.

3.1.3 THE "PRODUCTION CHAIN CULTURE" IN INTERNATIONALISATION AND DEVELOPMENTGrowing on international markets is essential for Granarolo to continue to develop.The path to internationalisation creates value for the shareholders first and foremost because Granarolo has the objective of increasing the perceived value of high quality Italian milk.In fact, an important part of the development plan includes offering products made with Italian products, abroad. This is particularly true for DOP hard cheeses and production chain cheeses, which due to their preservation methods can be exported to distant markets, which represent high added value for those who provide raw materials with the necessary qualities.This is evident in the acquisition of Yema Distribuidora de Alimentos Ltda, acquired by the Group on 31 December 2015, in addition to the agreement with All Foods Brazil at the beginning of 2017: both have the main activity of producing and selling dairy products in Brazil, and importing traditional Italian products, particularly hard cheeses.

Over the years, Granarolo has developed a true "production chain culture", a skill in managing and appreciating agricultural production, which creates added value and will accompany the future development of the company in its diversification activities.This is true at a product level, where Granarolo intends to extend its production chain approach to the various areas it operates in, both inside (for example: goats' milk cheese) and outside (for example: vegetable-based product) the milk and cheese sector.The same can be said in terms of geographic diversification. In the markets that Granarolo is approaching, it is acknowledged as a company capable of appreciating existing situations and bringing specialised skills, which are very interesting especially in contexts where there is no developed agricultural culture.

THE ITALIAN MILK PRODUCTION CHAIN IN THE ITALIAN FARM FACTORY (F.I.CO.)

November 2017 will bring the opening of F.I.Co. (Fabbrica Italiana Contadina - Italian Farm Factory) Eataly World Bologna - the largest centre in the world to celebrate the beauty of Italian food and agriculture, which will be located in the current CAAB area (Food and Agriculture Centre in Bologna).F.I.CO. will tell the whole world about Italian food and wine excellence, presenting in a single location the culture of high-quality food and the competence of people who have always worked in the agroindustrial sector. The objective is to attract more than 6 million visitors per year.

In this case, too, the Granarolo Group will be present, bringing its knowledge of the Italian milk and cheese production chain, spreading the culture of high quality applied to its products.Granarolo's products include: pasteurized milk in glass bottles, yoghurt in glass bottles, cow and buffalo milk mozzarella varieties, and ricotta. Behind the production, it will be possible to visit a stable.

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3.2 INNOVATION Granarolo operates in a highly competitive market and competes with very large international players. Innovation becomes an essential lever in guaranteeing the satisfaction of consumers, as well as ongoing growth in the company. At Granarolo, innovation is a planned and firmly structured process.

GRANAROLO GROUP'S PRODUCT INNOVATION PROCESS

01IDEA

06LAUNCH

03DEVELOPMENT

02EXPLORATION

04CREATION

05IMPLEMENTATION

• Identification of unsatisfied consumer needs

• Definition of gaps in Granarolo's offer

• Analysis of critical aspects of Granarolo's business

• New target or product ideas

IDEA

• Issue of HACCP and control plans

• Issue of specifications

CREATION

• Definition of the project's economic objectives

• Conceptual consumer test

• First theory of commercial conditions

• First theory of packaging

EXPLORATION

• Validation and commercial plan

• Product and packaging specifications

• Risk management

IMPLEMENTATION

• Experimental tests of product and package development

• Analysis of ingredients• Definition of durability• List of ingredients,

nutritional label, retail name, allergens

• Economic-financial feasibility study

• Technical-industrial feasibility study

DEVELOPMENT

• Approval of the launch plan

• Industrial start-up• QISA approval• Launch

LAUNCH

TURNOVER 2016 PRODUCTS LAUNCHED IN THE LAST 5 YEARS

122mln / Euro

Sell-out turnover

Sales in value mln/Euro Source: IRI Infoscan and Nielsen

Over the years, Granarolo has created "true innovation" - the only player on the milk and cheese market to add 11 products to the market in just 2 years. Net turnover created by new products in 2011-2016 amounted to 122 million Euro.

Innovation is one of the key elements of the strategic plan for the 2011-2016 period. The entire company is focused on identifying new targets, new markets, or new sectors in which to appreciate the excellence of the production chain's raw material: at the foundation, there is the ability to interpret and record - possibly even anticipate - needs, by listening to the consumers. This is a difficult and challenging task which, for each product launch, lasts from a few months to more than a year, depending on the project.

Innovation in the 2015/2016 period is worth 12% of turnover in the Mass Retail channel, reaching a value of about 94 million Euro.

The Research and Development laboratories are located in the facilities in Bologna, Pasturago and Usmate Velate, and are enriched every year with new systems and equipment to support the Group's activities. Furthermore, at the facilities in Bologna there is a Pack Laboratory, with equipment capable of characterising the performance levels of materials and packaging, in addition to using a 3D printer to create prototypes.The study of issues concerning nutrition and health, microbiology and biotechnology - particularly in fermentation - is an ongoing effort to improve the productive processes and innovate the Group's products. There are constant activities to optimise the quality of products and ingredients, the technological parameters of the processing lines, and product shelf life verification.

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At Granarolo, there are 16 people specifically dedicated to research and development, and who deal with all areas of analysis of an innovative project: feasibility, costs, investment, food safety, the choice of ingredients, labelling, basic work orders, product specifications, and all typical phases of an innovative project, from the idea to its implementation, development and launching a new product, and to accompanying products after launching them.The execution of an innovative project requires the creation of a work group, with the involvement of all the main company departments involved (particularly Marketing, Technical Management, Purchasing, Manufacturing, and Quality Assurance), for verification and definition of the industrial, economic, commercial and distributional feasibility.

R&D PROJECT TYPES - YEAR 2015

47%

19%

25%

7% 2%

PILOT PLANT MANAGEMENT

INDUSTRIAL/QUALITY OPTIMISATION

ABSOLUTE INNOVATION

OPTIMISATION

INNOVATION

THE AGROFOOD BIC (BUSINESS INNOVATION CENTER) PROJECT

In coherence with its strategic plan, Granarolo has the goal of being an innovative player in the agroindustrial sector. In spite of its high turnover derived from innovative products and the structured internal R&D department, over the years it has not been possible to take advantage of interesting entrepreneurial opportunities, owing to the lack of a network of complementary R&D skills and structures, to support the entire project.

The idea behind the project: To create a start-up accelerator (AgroFood BIC), where the skills of various businesses - leaders in their own sectors - can be brought together, to make a combined effort to seize and make use of precious business opportunities.

The objective, therefore, is to build a pole for the acceleration of promising start-ups in the food&beverage and agroindustrial sectors (and therefore the entire food production chain "from farm to fork", including related businesses, such as packaging, biomedical, and IT).

Description of the project: The process for selecting start-ups - who respond to a call launched by one or more companies in the Agrofood BIC - takes place by handing in a request for admission to the project, and a subsequent further selection of innovative start-ups that will be subjected to intensive training (an accelerator period of 4 weeks), in order to reinforce skills and translate the offer in the project into a business model. Finally, at the end of the acceleration programme, the start-up teams will present their projects during a "Demo Day", in front of the AgroFood BIC Technical-Scientific Committee, who will select the most promising ideas.

As far as the businesses and partners participating in the project are concerned, provision is made for an initial investment equal to the subscription of a quota of the AgroFood BIC Srl company stock, in addition to an annual contribution. Start-ups involved in the project will receive an entry bonus to support initial expenses. They will be guided by tutors in managing daily activities, and by business mentors, and they will have pilot facilities, materials and structures available to them.

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BENEFITS FOR THE VARIOUS STAKEHOLDERS REVOLVING AROUND AGROFOOD BIC

For selected start-ups: • Operational and financial support for business growth from leading Italian businesses• Mentorship from highly qualified individuals• Visibility and quick expansion• Networking

For businesses and partners participating in the project:• Scouting for new entrepreneurial opportunities• Possibility of innovating their own business, with financial returns• Synergy of the network of participating businesses• Integration with their own business / diversification• Positive effect on their image

For the community and the territory:• Development of the entrepreneurial fabric• Bologna is the city of food, where the main players in the Food Economy converge• Supporting the agroindustrial production chain both in Emilia Romagna and at a national level• Retaining businesses rather than letting them escape elsewhere• Attracting new investments

3.2.1 PATENTSGranarolo owns 5 registered patents, 4 of which concern products and processes (milk and vegetable matrix fermented products, use of probiotic micro-organisms, fruit-based fresh cream food, lactose removal from milk using immobilising enzymes) and 1 concerning packaging (PET multi-layer pre-form, used in the production of long-life milk bottles), for which the request for an international patent has been filed. Granarolo also possesses 3 pending patents: one concerning the process and systems (procedure for preparing mozzarella discs and the corresponding production plant - "mozzarillo", designed for McDonald), one concerning the use of special aromatic enzymes for the production of traditional mozzarella, and one concerning packaging (a container for food products with a removable label). Another two patents were registered in 2013: the first described a quick field method for identifying myco-toxins in milk and dairy products, while the second concerns symbiotic nutraceutical foods and preparations, with an effect on the immune system. The following is a list of the patents Granarolo owns (granted) and those for which a request has been filed (pending). The table contains patents divided by type, among those linked with product and/or productive process innovation and those for which the innovative aspect concerns the packaging.

TYPE DESCRIPTION STATUS COUNTRY

Product/Process

Procedure by hydrolysis for lactose in the milk, by contact of the latter with a solid material

supporting enzymes, a system for the realisation of this procedure and the enzyme support

material used in the aforementioned system

Granted Italy

Productive procedure for dairy products, particularly mozzarella and similar cheeses

Pending Canada

Pending EPO

Granted Italy

Granted USA

Method for the detection of mycotoxins in milk, its derivatives and cheese products Granted Italy

Aromatic mixture for the production of mozzarella cheese

Pending EPO

Granted Italy

A composition comprising L. rhamnosus GG.

Granted Italy

Pending Brazil

Pending EPO

Pending Canada

Pending USA

Composition for feed use comprising lyophilized live lactic bacteria

Granted

Italy, Austria-Belgium-Switzerland, Germany, Denmark,

Spain, Finland, France, United Kingdom, Republic of Ireland,

Luxembourg, Netherlands, Sweden

Granted USA

Packaging

Preform, method for manufacturing the preform, and container

Granted

Italy, Austria-Belgium-Switzerland, Germany, Denmark,

Spain, Finland, France, United Kingdom, Republic of Ireland,

Luxembourg, Netherlands, Sweden

Granted Italy

Granted Hong Kong

Process for the preparation of mozzarella from portions of curds frozen with IQF technique Pending Italy

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3.2.2 CONTRIBUTIONS FOR INNOVATION The impulse to innovate may be initiated not only by those who deal with research "professionally", but also by those who, every day, perform other functions in the company with care and passion.This is why, again in 2016, Granarolo launched and completed the Archimede project, which is intended to collect contributions from whoever, in the company, has a useful idea to help improve processes or attack the market with a new product.Two of the projects that won the award for 2015 were already implemented in April 2016.Given the constant commitment from everyone, the level of contribution and appreciation for the project, the initiative will continue in 2017, for the fifth consecutive year.

25 projects were received. There were several cross-managed projects on which numerous people worked. In April 2017 Granarolo awarded the most innovative projects, after careful consideration by the Judging Committee. Out of the 3 awards given, 2 of the presented projects (the first and the second in the table below) have been considered worth implementing.

AWARD IDEA NAME AND SURNAME OF THE WINNERS

1st Vegetable Mozzarella Raffaele De Marco

2nd Store Locator Claudia Silvagni

3rd Bicomp Fresh milk Marcello Zullo

3.3 PROTECTING THE CHAIN OF VALUE UPSTREAM AND DOWNSTREAM The competitive edge of Granarolo's actions is guaranteed by careful attention to the phases of the chain of value concerning supplies - upstream - and product distribution - downstream.

3.3.1 SUPPLIERSGranarolo's approach to selecting suppliers is based on certain principles that are observed in the combined work between the purchasing department and the management offices that are the recipients of goods or services. The company outlook includes selecting suppliers transparently, assessing the qualitative standards and professional fairness, consolidating relations through partnerships, attention to quality and integration with skills, and establishing and respecting clear conditions with everyone, with a mutual commitment to make the necessary information available.The acquisition and internationalisation process has led to significant impact in this field as well.In terms of culture and competence, in this process a single Group Purchasing Department was created, in which colleagues from different companies and countries take part, in order to favour collective and even evolution of the company approach. Management of this increased complexity has led the company to apply more structured procedures, in order to guarantee constant application of those principles that have always marked the purchasing method at Granarolo. Spreading structured procedures to all operative contexts has, first of all, the purpose of always allowing the facility to show evidence of transparency in the technical choices made when making a purchase.Another essential element in overseeing the supply chain is the auditing activity performed both when qualifying suppliers and when carrying out their contractual relationships, and which concerns quality aspects linked with supplies and organisation, together with those concerning safety in the workplace and care for the environment..

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NUMBER OF SUPPLIERS BY TYPE 2014 2015 2016

Motor vehicles 398 401 404

Suppliers of awards and competitions 111 117 137

Foreign services 28 31 47

Packaging 269 280 303

Routine maintenance of plants 1892 1997 2114

Raw materials abroad 100 113 118

Spare parts 493 503 507

Finished products abroad 50 56 61

Finished products Italy 209 254 341

Sales agents 662 673 683

Advertising 584 628 650

Professionals/Consultants 767 826 922

General services 1717 1886 2035

Computerised systems - Data Centre 200 208 220

Transport 1228 336 365

Utilities 54 58 61

Other suppliers within the Group 351 391 681

SUPPLIERS BY GEOGRAPHICAL DISTRIBUTION 2014 2015 2016

North 6,106 5,868 6,335

Centre 1,276 1,226 1,515

South 1,002 963 1,025

Abroad 729 701 774

In addition to the Group employees (about 2,500) and shareholder farmers, Granarolo's activities also involve a spinoff affecting hundreds of suppliers of products and services, which means tens of thousands of other workers.Growth in Granarolo's turnover therefore has positive occupational impact on a production chain that is largely Italian, which includes the production of products and materials supporting agriculture, feed, packaging and services.

COSTS FOR THE PURCHASE OF GOODS AND SERVICES 2014-2016 (IN MLN OF EURO)

TYPE 2014 2015 2016

Goods 666,796 680,403 723,977

Raw Materials and Semi-finished products purchased 399,739 359,095 367,702

Finished products and Semi-finished products manufactured 171,526 223,422 253,229

Other materials 95,531 97,886 103,046

Services 172,645 189,469 204,702

Transport 51,106 53,780 62,040

Commissions 30,581 33,771 38,003

Utilities 26,846 25,718 25,088

Outsourcing 19,566 20,590 21,703

Marketing and Services from clients 9,150 14,402 12,576

Maintenance 11,676 12,140 12,524

Porterage 7,010 8,388 9,141

Environmental and safety services 4,452 5,293 6,307

Consulting and other professional expenses 4,499 5,017 5,357

Other Services 7,759 10,370 11,963

Use of third party goods 16,898 19,126 18,993

Total 856,339 888,998 947,672

As a result of the diversification and extension of the product portfolio, it has become necessary to work in a more accurate manner to select suppliers of raw materials other than milk (e.g. soy, rice,...). We have decided to only use certified Italian suppliers, from certain areas (an example of this system is the soy from Friuli), with whom we are working to select exclusive varieties that have characteristics that meet the quality levels required by Granarolo R&D. At the same time, some farmers are also evaluating the idea of extending their contributions, including crops that are of interest for the Group.

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3.3.2 DISTRIBUTION AND COMMERCIAL DEVELOPMENTLooking "downstream", the distribution phase is extremely important for Granarolo, since they reach their Italian clients through a widespread and complex network of retail points, which come in a variety of types.That is why, in 2010, the Zeroquattro company was founded, with the intention of giving entrepreneurial independence to the logistical and distribution system from a market point of view. In July 2014, a company demerger project was approved, which resulted in two separate operating companies as of January 2015:

• Zeroquattro Logistica S.r.l. deals with managing depots, platforms and primary and secondary transport towards mass retail. It includes more than 150 directly employed people, 8 central platforms and 32 transit points in Italy, equipped with cold rooms to serve the facilities in mass retail channels on a daily basis. In light of logistical asset reorganisation, the Granarolo Group has identified BCube S.p.A. as an important logistical player with whom to develop a partnership relationship: for these reasons, in October 2015 Granarolo transferred 40% of shares in Zeroquattro Logistica S.r.l. to BCube S.p.A.

• Zeroquattro S.r.l., on the other hand, is assigned by the Granarolo Group not only to the distribution service, but also to commercial management of Normal Trade channels, users, and independent Ho.Re.Ca. The company, continuing service to the channels assigned to it, also works on new businesses (particularly pasta and vinegar) in a global and cross-referenced manner compared to the various distribution channels. This company is also entrusted with a part of commercial development with the objective of creating a pre-sales force capable of introducing new products and developing new clients. In April 2015, 20 pre-sales agents have been dispatched throughout the territory, giving priority to the metropolitan areas of the central and northern regions, and subsequently along the Adriatic Riviera, and finally, towards September, to the area around Rome, with the objective of putting 50 agents on the market by 2018. Zeroquattro S.r.l. will be assigned to revising the business model, while simultaneously and significantly increasing their own turnover during the next three years.

This model will therefore allow Granarolo to carefully oversee this phase, which will continue according to an approach based on culture and values, in line with what is practised within the Group.

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PROMOTING HEALTH AND WELL-BEING

4

IN BREVEIN SHORT SDG AND PERTINENT ISSUES GUARANTEEING FOOD SAFETY

PROMOTING HEALTH AND WELL-BEING FOR ALL

PROMOTING HEALTH AND WELL-BEING

EXTENSION OF THE PRODUCT RANGE UNDER THE "GRANAROLO

100% VEGETALE" LABEL.

LAUNCHING THE NEW @GRANAROLO INSTAGRAM

CHANNEL

CONVERSION OF ABOUT 10% OF GRANLATTE PRODUCTION TO

ORGANIC

40,000GUIDES TO BALANCED

NUTRITION DISTRIBUTED TO SUPPORT THE "GUADAGNARE

SALUTE" CAMPAIGN

ATTENTION TO RESPONSIBLE CONSUMPTION AND TO DIALOGUE

GUARANTEEING FOOD SAFETY

2.73 COMPLAINTS FOR EVERY MILLION UNITS SOLD AMONG GRANAROLO GROUP PRODUCTS

IN ADDITION 14,000 CHECKS TO GUARANTEE THE QUALITY OF RAW MATERIALS AND OF THE PRODUCTION PROCESS.

LAUNCH OF THE "OGGI PUOI" RANGE, WITH FRESH CHEESES

WITH A LOWER % OF FAT (-50%) AND SALT (-30%) COMPARED

TO SIMILAR PRODUCTS ON THE MARKET.

USING FACEBOOK TO PROMOTE CONCEPTS LINKED WITH

PERSONAL HEALTH AND WELL-BEING IN THE VARIOUS TIMES

OF THE DAY, AND IN REFERENCE TO THE SEASONAL NATURE OF

CERTAIN FOODS

OBJECTIVES FOR 2017CONTINUING TO CONVERT STABLES TO ORGANIC METHODS

REDEFINING, IN A STRICTER MANNER, GRANAROLO'S STRATEGY ON ANIMAL WELL-BEING

REDUCING THE PERCENTAGE OF SUGAR IN YOMO AND GRANAROLO YOGHURTS

DISTRIBUTING NEW GUIDES TO BALANCED NUTRITION

LAUNCHING THE GRANAROLO FRESCO PROJECT, A WEB SERIES INTENDED TO PROVIDE NUTRITIONAL INFORMATION FOR CONSUMERS, AND ALSO TO BE MADE VIRAL BY SPREADING CONTENTS ON FACEBOOK

LAUNCHING THE NEW @GRUPPOGRANAROLO INSTAGRAM CHANNEL

Promoting quality, sustainability of production, traceability, food security, correct nutrition, and balanced lifestyles are some of the topics that are considered relevant in the Granarolo Group.

Granarolo is convinced that, beyond institutions and individuals, the companies must provide support - with technology and competence, but also with actions to increase awareness and information - to the search for a balance between availability and consumption of resources.

4.1 BALANCED NUTRITION AND THE ANSWER TO EVOLVING CONSUMPTIONResearch and innovation activities intended to develop new products start from careful analysis of the consumers' needs, taking into account the specific needs of segments of population and, increasingly, the peculiar features of the various contexts in which the product is to be sold.

For years, Granarolo has maintained stable scientific collaborations with universities, research centres, pharmaceutical companies, and hospitals, both in Italy and abroad, with the purpose of studying functional products that can be a concrete support to the well-being of multiple people with very different needs, bringing an Italian approach to food innovation to reality.

In addition, Granarolo is positioned among the reference companies on the European market for three reasons:

• possessing a production chain can guarantee continuity in the milk supply;• compared to other competitors, Granarolo can intervene at the stable, on the nutrition of the

cows. This extends the chances of creating products that are truly different and aimed at specific needs;

• Granarolo works with the scientific community to define functional foods, aimed at responding to the growing needs of ever-changing populations.

In writing the Industrial Plan for 2016-2019, Granarolo performed a detailed analysis of how consumption is evolving, identifying the new areas of commitment in coherence with need-based targets.

Sustainability and health-consciousness, the search for new flavours and a better knowledge of the product, as well as the intention to avoid waste, are all factors that guide the consumer, at a global level, affecting purchase-related choices:The vegetable sector, D.O.P. foods, and those that have a distinct territorial identity, organic food and antique varieties, allergen-free foods (gluten, lactose), and foods with a low calorie content are all growing markets.

With a value of food&beverage consumption equal to 230 billion Euro in 2015, Italy is one of the main consumer markets in Europe. From 2015 to the present day, these values have increased by 13%, and the reason can be identified in an increase of consumption outside of the home (+30%) (AgriFoodMonitor).

Between 2015 and 2016, expenditure for fruit, vegetables and fish has increased, while sales of meat (-4.2%), dairy products and cheese (-2.7%) have decreased.

Italian consumers are increasingly conscious of buying products that come from Italy (26%), or that have a D.O.P. label. The price factor is next, and appears to be the main driving force behind consumers, in addition to the ingredients and raw materials (20%) (AgriFoodMonitor).

GOOD FOR YOU Products for a healthy lifestyle

SERVICE Products that

make life easier

NATURAL

ORGANIC

34% FOR A HEALTHY

LIFESTYLE

Highly Digestible/Lactose-free +7.1% Soy foods +23.6% Soy milk +6.4% Rice milk +28.6% Almond milk +43.3% Rice cakes +23.4% Whole-grain +14.1%

Smoked cold meats +13.2%

Fresh ready-made dishes• Main courses +36.6%• Salads +23.5%

Snacks/Sandwiches +36.8%

Fresh fruit +11.3%

Dried fruit +9.6%

Dried cereal/legumes +10.7%

Organic Products +20.8%

23% WITH NATURAL INGREDIENTS

29% THAT MAKE LIFE EASIER

15% CONVENIENT TO USE

28% ETHICALLY

SUSTAINABLE

28% ECO-FRIENDLY

WHICH PRODUCTS WOULD YOU LIKE TO FIND ON THE SHELVES?

VALUE TREND FOR THE YEAR, ENDING IN MAY 2016

THE PRODUCTS ITALIANS LOOK FOR THE MOST: NEW AND "VALUABLE"

Source: Nielsen, Nomisma, Crif

Lactose-intolerant consumers have increased by 12%, and Granarolo's Accadì range - milk, but also yoghurt, cream, mozzarella and ricotta - is winning over significant market quotas. In the same way, there is an increase in consumers who prefer organic products, and Granlatte, under Granarolo's input, is converting about 10% of its production to organic. In addition, the Group is launching a low salt and fat content range, which will be capable of satisfying the needs of new targets, as is the case of the 100% vegetale range, dedicated to vegetable-based drinks that replace milk, as well as vegetable-based gastronomic products.

In addition, studies are also in progress to develop new products that will cater to the needs of specific consumer ranges, like the elderly and athletes. In order to face the future, it is necessary to come up with a personalised project for the future and, in Granarolo's case, it is necessary to share it with the producers and the consumers. The production chain is a true strategic asset, because it responds, in real time to the requests of millions of families in Italy and abroad. Every day, requests become input for industrial transformation and for the farming production chain, as a result of planning that requires shared intentions.

In order to respond to the specific needs of consumers, Granarolo Group, in 2016, began a new process intended to provide a response to emerging needs, particularly in the health food area.

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OGGI PUOI – “100% ITALIAN MILK WITH LOW FAT AND SALT CONTENT”

In 2016, Granarolo launched a new range of fresh cheeses with a low salt and fat content - 30% and 50% less, respectively, compared to traditional versions.

Excessive salt consumption, in fact, may favour the development of arterial hypertension or cardiovascular and kidney disorders.

According to the WHO, an individual should not consume more than 5g of salt per day. On average, an Italian consumes twice that much. Most of the salt consumed is already found in purchased products. It is often referred to as "hidden salt".

• reducing the content of salt and fat

GOAL

Research & Development activities are dedicated, in particular, to:

• Granarolo 100% Vegetale: the range was extended, in single-portion formats, to soy-based products (125 and 250 g portions), with new flavours: mango and turmeric, elder and red fruits, ginger and cinnamon. Acquisition of Conbio S.r.l. has made it possible to enrich the range with gastronomic dishes (burgers, ready-made dishes, tofu, seitan);

• Linea Biologica [organic range]: the project involved several products: ESL milk, fresh and seasoned cheeses, and yoghurt, for which a new paper/plastic tub was created, with a lower environmental impact;

• “Oggi puoi”: in October 2016, Granarolo launched a new range of fresh cheeses with 50% less fat and 30% less salt than the average of similar products available on the market;

• Infants' Formula: UHT milk for early infancy and development for Asian markets;• High-digestibility: the range under the Accadì label was extended, with the addition of

organic milk and gluten-free béchamel, while the "Sdrink" product range was enriched with lactose free milk in vanilla, chocolate, chocolate and coconut, and chocolate and hazelnut flavours;

• Yoghurt: a new range of 400 g white yoghurt, also including a variety with stevia, the new 125 g Yomo Golosi di Caffè and Alta Qualità "Chicchi di bontà" (vanilla with buckwheat, linseed and sunflower seeds, pomegranate, quinoa and poppy seeds, honey with amaranth, almonds and sunflower seeds), in the 250 g format.

It is therefore confirmed that, in addition to remaining firmly concentrated on its core dairy business, Granarolo also approaches the market as a large Italian agroindustrial company, which, thanks to its history and high penetration in Italian families, is particularly credible in health-conscious sectors and emerging needs.

QUATTROCENTO – “MORE THAN 400 LITRES OF MILK TO MAKE A WHEEL””

In 2017, with the objective of making better use of the milk provided by shareholders in the Cooperative, a hard cheese was launched - 100% Italian and from the production chain - called "Quattrocento" (like the four hundred litres of milk required to make one wheel). This cheese will allow Granarolo to reach the Italian and foreign markets with a very high quality product, made through a proprietary, controlled production chain, full of flavour, and at an affordable price.

This product is also designed for those who follow a vegetarian diet, since it is made with microbial whey. It is a very tasty cheese, since it reaches the market after 9 months of seasoning.

• vegetarians

GOAL

Even the foreign markets required a significant research and development activity. This is because, on one hand, it is necessary to define products that meet the needs and tastes of consumers outside of Italy, while on the other it is necessary to define the best conditions for the product to be exported, maintaining its features in terms of quality and safety.Taking into account this dual need, in 2016 we developed specific references for specific international markets such as liquid milk for infants and for toddlers for Asian markets, like lactose-free UHT growth milk and gluten-free béchamel. Many technological and productive solutions have also been studied to extend the shelf-life of soft cheeses (mascarpone). The new IQF (Individual Quick Freezing) range was validated, allowing the freezing of individual portions of mozzarella and other portioned cheeses, guaranteeing better quality and service for those who use these ingredients.

Following consumption trends in several countries, specific products were also developed to make good use of Granarolo cheeses, such as mozzarella for pizza, DOP buffalo mozzarella for pizza, and aromatic cheese snacks for the US market.Finally, Halal and Kosher certification is being obtained for many products (vegetable-based gastronomic dishes, etc.), particularly for the Arab and American markets.

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4.1.1 ALTA QUALITÀ [HIGH QUALITY]For Granarolo, "Alta Qualità" [high quality] is above all a range, which symbolises the Group's commercial offer, which is based on milk with quality features well above the standards required by the category.

ALTA QUALITA' FRESH MILKLAW ON HIGH QUALITY GRANAROLO MILK IN THE STABLE

Fat content must not be less than 3.60%. +3.90%

* protein content not less than 3.20% +3.45%

• Inhibitory substances must be absent Absent

* somatic cells (or cytological index) must have a value lower than or equal to 300,000 cells per ml of milk (the geometric average calculated over a period of three months)

223,000 cells per ml

* the bacterial content must have a value lower than or equal to 100,000 germs per ml of milk (geometric average calculated over a period of two months, with at least two checks per month)

13,000 germs per ml

* the cryoscopic temperature must be lower than or equal to -0.520 °C -0.520°c

The "Alta Qualità" range has been extended over the years and, besides milk, now also includes cheese, yoghurt, desserts and ice-creams. With Alta Qualità, Granarolo made a bet with a part of the shareholder-farmers in the production chain, who are constantly committed to guaranteeing raw materials with the required quality levels, in return for which the company provides adequate remuneration, committing in turn to increase its market value, in a context where consumers are very aware of the price factor. It has been 20 years since its launch, and to this day - with recent extensions to the portfolio - it is one of Granarolo's best-selling ranges.

4.1.2 YOMO'S POLICY FOR NATURALNESSQuality, healthiness and nutritional balance are objectives for Granarolo in all products. Specific attention is paid to the products under the Yomo brand, for which Granarolo has defined a "Naturalness Policy", which lists the principles by which both suppliers of raw materials, ingredients, semi-finished products, and the finished Granarolo product must abide in the production of:

• no preservatives;• no thickeners;• no colourants or natural colourants only;• no flavourings, or natural flavourings only.

Compliance with these commitments and simple and essential recipes are emphasised by the "100% naturale" claim on the labels. In 2015, the "Less Sugar" project began, with the objective of reducing the amount of sugar added to yoghurt, starting from the Yomo light yoghurt range. Reducing the amount of sugar in food products is an area in which Granarolo is concentrating efforts, as it has been proven that high consumption levels of simple sugars increases the risk of being overweight or obese, and having cavities.

4.2 GUARANTEEING FOOD SAFETYEvery year, Granarolo Group invests resources and commitment to reinforcing the management system to guarantee food safety. In recent years a significant portion of this commitment was aimed at integrating companies that have become a part of the Group into this approach, which involves the utmost care.

Furthermore, the food safety guarantee system requires complete supervision, from the production chain to internal processes, to the distribution and logistics phases. In fact, the Group's main effort is to guarantee its factories, but it also involves suppliers, who are required to apply the same rigour, and with the support of national and international external consultants and bodies, who certify the levels of quality assurance and safety.

Examples of this are BRC, IFS, ISO 9001, and ISO 22.005 certifications, production chain certification, organic certification, and GMO-free certification (DTP030) for vegetable products, Halal certification for several products (Grana Padano, milk, mozzarella, mascarpone), in addition to a few specific certifications required by important Italian and foreign clients, including the "100% Italian milk" indication, which involved a number of the Group's stables and factories.Even in 2016, the Group continued the path to applying, in its factories, the FSSC 22000:2010 model - an international standard for certification of food safety management systems. Factory worker training on hygiene and product safety matters is a constant.

During 2016, the plan to secure supplies of mainly branded raw materials and finished products was intensified. For all raw milk-based materials (raw and pasteurised milk, cream and whey), the technical specifications were met, with restrictions concerning delivery times after collection in the stable (the "milk age" parameter). In order to have greater control over ingredients, in collaboration with suppliers, a collection of all necessary information and details was completed, in order to write up technical specifications for production.

In addition, activities to check packaging continued, particularly in relation to the sealing film, and a risk analysis continued, starting from verification of the data concerning solvents, heavy metals, and aromatic amines, defining a minimum inspection plan. The same approach was activated for all containers that come into direct contact with the product.

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Greater guarantees in terms of quality of raw materials, ingredients, and subsequently finished products can be identified in the ongoing search for new methods of analysis in the central laboratory, for the search for pharmacological residue, in the application - in factories - of quick identification of the total bacterial content in milk and cream on arrival, in the constant use of systems to quickly identify mycotoxins, in the increased number of analyses on contaminants, and in the constant application of geo-referencing milk productions by mapping the production sites of the raw materials and possible environmental risk sources near the farms.

As far as aflatoxin (AFM1) monitoring is concerned, factories carry out checks on acceptance of all raw milk tanks, on arrival, and - for analyses carried out under a self-control programme with a fifteen-day cadence on mass milk - an alert level of 30 ppt has been set, which is more stringent than the limit defined by the Controlling Authority.

In the spirit of close collaboration with milk suppliers, the Central Laboratory has made itself available to Granlatte farmers in order to identify the mycotoxins found in their milk when the livestock feed is changed, or in the case of new lots of corn, silo-stored foods, or fodder. In fact, in addition to focusing attention on product analyses, Granarolo Group goes up the production stream and assesses the factors which, at the outset, have an influence on the quality of products. Additionally, since it can count on control over the entire production chain, control systems on raw materials are found to be more stringent and efficient.

Every year, the Group follows an audit to qualify and confirm its suppliers, also defining technical specifications, with restrictive constraints in terms of chemical, microbiological and sensory parameters. A strict Surveillance Plan is applied, concerning both the raw materials and the production process. As a result of this plan, more than 14,000 inspections have been carried out during the year, 600 of which to monitor pesticides, dioxins, PCBs and heavy metals.

The strategies developed to meet Food Safety requirements must be integrated with specific actions in terms of Food Defence (the Food Defence project), which means defining a food defence policy and carrying out structural and managerial interventions in order to make factories safer, with corrective actions to be put into practise in the case of intentional attack or deliberate tampering.

Complaints from consumers and clients on Group products are constantly decreasing, and the ambitious objective of 2.73 complaints per million units sold has been reached.These figures, and the implemented activities, reinforce the awareness that, for Granarolo, quality is a fundamental company asset, to be kept under constant surveillance, as well as the subject of ongoing improvement.

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ISO 45001 1st accreditation LAB PLQ

ISO 9002 Location: Anzio (Milk) ISO 9002 Location: Soliera (Milk) ISO 14001 +Reg EMAS Location: Castel S. Pietro 1st*

ISO 9001:00 Location: Bologna (Milk) ISO 9001 Location: Centrale Latte Milano Milk traceability and production chain certification + Yoghurt + Alta Qualità Dairy ISO 14001 + Reg EMAS Location: Bologna

ISO 9002 Location: Castel S. Pietro 1st (Yoghurt)*

ISO 9002 Location: Novara (Milk)*

ISO 9002 Location: Bologna (Cheese) ISO 14001 + Reg EMAS Location: Soliera

ISO 9002 PLQ Laboratory Bologna

CERTIFICATION HISTORY

19972000

2002

1992

1996 1999 2001 2003

Product Certification Alta Qualità yoghurt ISO 14001 Location: Anzio (Milk)

ISO 14001 Location: Gioia del Colle ISO 9001:00 Location: Rimini (Milk)*

Granarolo and CLM brand Egg Traceability Certification

2004

2005

ESL Più Giorni Milk Traceability Certification

EPD certification Bottled BIO [organic] milk EPD certification Bottled fresh milk

Certification FSSC 22000:2010 Castrovillari BRC Certification Casearia Podda

BRC Certification Location: Bologna

BRC Certification Location: Usmate

Traceability and production chain certification Baby food products

Certification FSSC 22000 PAS 220 Factory: Soliera

EPD certification Bottled ESL BIO PS Milk

Integrated certification OHSAS 18001 + ISO 140001 Locations: Soliera Pasturago

ISO 17035 2nd accreditation LAB PLQ BIO [organic] milk Animal Well-Being Certification Bottled AQ Fresh Milk EPD Certification

Integrated Certification OHSAS 18001 + ISO 140001 Locations: Anzio and Bologna ISO 14001 Location: Pasturago Certification FSSC 22000 PAS 220 Location: Anzio Bologna Gioia del Colle Product Certification Yomo 100% natural yoghurt Certification of Traceability Yomo yoghurt

Multi-site certifications ISO 9001, FSSC 22000, OHSAS 18001, ISO14001 Certified EPD System

GMO-FREE Product Certification for 100% vegetable-based products DTP 30 of the CSQA.

2006 2010 2014

2012

2007 2011 2013 2015

* Production discontinued

Certification FSSC 22000:2010 Amalattea

Upgrade Certification 22005 and DTP 035 Location: Usmate Velate

Conversion to Granarolo model and Certification BRC and IFS Pastificio Granarolo

2016

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CERTIFICATION AMALATTEA ANZIO BOLOGNACASTROVILLARI

- CALABRIALATTE CONBIOGENNARI PARMA

GIOIA DEL COLLE

ISO 9001 : 2008 " " " " "

FSSC 22000 " " " " "

BRC " " " "

IFS " " "

UNI EN ISO 22.005:2008 TRACEABILITY IN FOOD AND AGRICULTURE PRODUCTION CHAINS

" " " " "

PRODUCT CERTIFICATION

PRODUCT CERTIFICATION DTP 030(GMO-FREE SOY/CORN)

ORGANIC " " "

HALAL

NOTESGoat’s milk

CERTIFICATION PANDEAPASTIFICIO

GRANAROLO PASTURAGO PODDASAINTE

COLOMBESAINT OMER

ISO 9001 : 2008 " "

FSSC 22000 "

BRC " " " "

IFS " " " "

UNI EN ISO 22.005:2008 TRACEABILITY IN FOOD AND AGRICULTURE PRODUCTION CHAINS

"

PRODUCT CERTIFICATION

"(100% Natural)

PRODUCT CERTIFICATION DTP 030(GMO-FREE SOY/CORN)

"

ORGANIC " "

CERTIFICATION SOLIERAUSMATE VELATE

VOLTERRA ( EX ) PINZANI HEADQUARTERS

ISO 9001 : 2008 " " " "

FSSC 22000 " " " "

BRC " "

IFS " "

UNI EN ISO 22.005:2008 TRACEABILITY IN FOOD AND AGRICULTURE PRODUCTION CHAINS

" " "

PRODUCT CERTIFICATION

PRODUCT CERTIFICATION DTP 030(GMO-FREE SOY/CORN)

"

ORGANIC " " "

HALAL

" The list of certified products, code and brand, is included

in the certificate

NOTES22005 also for

goat's milk

AUDITS ON SUPPLIERS NUMBER 2016

Milk and cream 48

Ingredients 26

Finished products 19

Packaging materials 9

TOTAL 102

GRANAROLO INDICATOR 2014 2015 2016

Number of controls performed according to the Residue and Contaminants Surveillance Plan 13,710 10,186 12,327

Number of analyses performed on the raw material 62,239 88,530 93,477

Number of analyses performed on the ingredients 353 394 489

Number of analyses performed on the finished products 776 617 673

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4.3 ATTENTION TO RESPONSIBLE CONSUMPTION AND TO DIALOGUEFor a large company dealing with nutrition, helping people to make their nutrition and lifestyle more balanced is an important part of the mission, in addition to being a required and appreciated commitment for many categories of stakeholders. Granarolo makes a commitment in this sense in a variety of ways. Granarolo believes it is important to put consumers in the condition of being able to understand the characteristics of the products that they purchase and be reassured of their quality and healthiness. That is why we guarantee maximum transparency in relation to the raw materials used for each product. If the milk we use is entirely produced in Italy, this is highlighted by specific wording on the package, both for products sold in Italy and for those sold abroad.

Granarolo is an active educator in terms of healthy consumption and spreading awareness of the importance of healthy lifestyles. That is why we have a vocation for providing safe foods in hygienic and nutritional terms and, at the same time, for making suggestions on correct nutrition. A social commitment of significant importance, which for some time has included an initiative which was renewed in 2016: the distribution of pamphlets to support the Guadagnare Salute [Gaining Health] campaign. 40,000 pamphlets were distributed at various events and initiatives. These pamphlets contain guides for balanced nutrition for children and adolescents, the elderly and sportsmen, intentionally written in simple and educational language, backed by valid scientific data. They are sponsored by the Ministry of Health. They are intended to provide help for all reference targets. The pamphlets, which can be downloaded for free from our website - www.gruppogranarolo.it - are distributed in schools, at sporting events that Granarolo supports, and in centres for the elderly. Particular attention is paid to the 0-3 year age group, by distributing a designated pamphlet, the creation of a Granarolo Bimbi website - with contributions and responses from a scientific committee - and the Granarolo Bimbi Facebook page (with responses from nutritional experts and paediatricians). Another essential lever for a balanced lifestyle is physical activity. Granarolo is committed to promoting it at all levels, particularly in reference to the communities where we work, in order to increase awareness of the importance of applying virtuous habits to favour physical activity in people of all ages, discouraging smoking habits and reducing alcohol abuse. That is why the company guarantees its support to numerous sports initiatives, such as the Giro dell'Emilia, Stramilano, Trofei di Milano, Virtus Pallacanestro Sezione Giovanile and Bologna Calcio Sezione Giovanile.

Attention to promoting virtuous behaviour patterns is also extended to initiatives against wasting food. Since 2012, Granarolo has been a partner in the project entitled "A year against waste”, a campaign promoted by Last Minute Market, which has the purpose of increasing awareness among citizens, companies and institutions of the importance of managing food carefully. In particular, Granarolo supported the organisation of "dinners against wasting", sponsored and took part in events to spread information and awareness and, since 2013, has acted as a channel for "pills against food waste" through milk bottles, an initiative that was much appreciated by those purchasing our products.In line with these experiences, in 2016 the company outlet activity has been consolidated. These are outlet shops where you can buy products nearing their expiry date at advantageous prices, also in the spirit of reducing food wastage. In fact, the outlets are open to employees and to the local communities in Bologna and Gioia del Colle, in addition to having special agreements with several local companies and institutions.

Total volumes of products sold at the outlets in 2016:

• Bologna 1,295 quintals• Gioia del Colle 675 quintals

38 agreements were implemented in 2016 with local companies to facilitate employed personnel.

4.3.1 COMMUNICATING WITH INCREASINGLY CAREFUL CONSUMERSIn recent years, as a result of the mass distribution of mobile devices and Social Media, relations between companies and consumers has changed radically. Until not long ago, interactions took place mainly by telephone or email. Today, on the other hand, the consumer reveals impressions, tastes, satisfaction and dissatisfaction through Social Media, which are becoming an increasingly important element in Granarolo's communication strategy. For these reasons, in 2016, Granarolo Group continued to reinforce communication channels that consumers and clients can use to contact the Group companies, with the objective of making relations increasingly quick and easy. In particular, communications take place through a call centre, a website - which provides the opportunity to send emails containing generic reports or reports on product defects, and, increasingly, through social networks (Facebook and Twitter, primarily, in addition to YouTube, Instagram and LinkedIn).

FACEBOOK www.facebook.com/granarolo.it/

TWITTER www.twitter.com/granarolo

YOUTUBE www.youtube.com/user/SpotGranarolo

INSTAGRAM www.instagram.com/granarolo

LINKEDIN it.linkedin.com/company/granarolo

GRANAROLO AND THE SOCIAL NETWORK

In 2016, according to what was expressed in the social networks, and verified through the Reputation Manager tool, the number of fans has increased significantly, and we have invested in the application of tools to make content go "viral". In 2016, a newsletter was re-launched for consumers who are attentive and interested in novelties, in a moment in history in which attention to healthy food is growing exponentially. It is increasingly evident that the process for choosing and acquiring consumers also goes through an activity of involving people who - either randomly or by choice - become interlocutors with the Group. In addition to the technology, there are people and their decision-making processes: it is not, therefore, merely a matter of finding effective solutions to generate engagement, but above all a matter of increasing dialogue, curiosity, and satisfaction among interlocutors. The objective for digital initiatives in 2016, especially on social networks, was precisely to intercept questions and doubts among people met online, attempting to provide an articulate and exhaustive answer and, at the same time, to understand the reasons that lead consumers to choose the Group's labels. One example is the "#loscelgoperchè" campaign, but also - from a more global perspective - the consumer dashboard project - a dashboard that offers a snapshot of interactions between Granarolo and its consumers.

Another great success were the operations with prizes and competitions that took place on the digital platform, in terms of both the number of participants and the number of online registrations. The Group's web-based offer is increasingly extensive. The "institutional" website is now accompanied by several other sites to communicate with consumers and clients, such as granarolo.it, casa-azzurra.fr, granarolo.com.cn - a web channel for China, both B2B and B2C - and granarolobiologico.it.Finally, among the latest additions is the @granarolo Instagram channel: still life images of products in suitable settings, recipes, recipe videos, and graphics, describing the products in a way that brings consumers closer.

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APPRECIATING PEOPLE

5

IN SHORT

HUMAN RESOURCES

17%EMPLOYEES UNDER 40 IN MANAGERIAL

POSITIONS (MANAGERS AND

DIRECTORS)

25%WOMEN EMPLOYEES

IN MANAGERIAL POSITIONS

(MANAGERS AND DIRECTORS)

38%INJURIES IN THE

GRANAROLO S.P.A. PRODUCTIVE

FACILITIES (-63% COMPARED TO 2007)

0.30INJURY SEVERITY INDEX

IN GRANAROLO S.P.A. PRODUCTIVE FACILITIES

(COMPARED TO THE INAIL SEVERITY INDEX FOR THE FOOD INDUSTRY SECTOR

EQUAL TO 2.31).

19.8INJURY FREQUENCY

INDEX IN GRANAROLO S.P.A. PRODUCTIVE

FACILITIES (COMPARED TO THE INAIL FREQUENCY

INDEX FOR THE FOOD INDUSTRY SECTOR EQUAL TO 26.41).

6FACTORIES INVOLVED AND 7 PREVENTION AND PROTECTION

SYSTEM SUPERVISORS INVOLVED IN THE

"GRANAROLO ERASMUS" PROJECT.

UPDATED THE ETHICAL CODE AND ESTABLISHED THE

ETHICAL COMMITTEE

2,770EMPLOYEES OVERALL

(+11% COMPARED TO 2015)

112NEW EMPLOYEES

(-0.7% COMPARED TO 2015)

30,123HOURS OF TRAINING PROVIDED TO 1,600 EMPLOYEES (+5%

COMPARED TO 2015)

18.8HOURS OF TRAINING,

ON AVERAGE, PER EMPLOYEE

OBJECTIVES FOR 2017

SDG AND PERTINENT ISSUES

THE ARCHIMEDES PROJECT IS CONFIRMED FOR 2016 AS WELL

THE MERIT SCHOLARSHIPS INITIATIVE WAS ALSO RENEWED IN 2016

CONFIRMATION OF SUPPORT FOR EMPLOYEES IN THE PERIODS WHEN SCHOOLS ARE CLOSED (CHILDREN IN THE GROUP FACTORIES DOING PLAY-EDUCATIONAL ACTIVITIES, EVEN IN THE SUMMER PERIOD).

LAUNCHING A WORKPLACE BY FACEBOOK PROJECT, IN ORDER TO ALLOW ALL GROUP EMPLOYEES TO RECEIVE INFORMATION IN REAL TIME

NUMBER OF CONSECUTIVE DAYS WITHOUT INJURY (BEST PERIOD) ≥ 100 DAYS

INCREASING THE NUMBER OF MEETINGS ON THE TOPIC OF SAFETY AND TRAINING FOR CRITICAL TASKS IN TERMS OF SAFETY

INCREASE IN REGISTRATION OF NEAR MISSES ON THE GRANAROLO CSR TOOL

EXTENSION OF THE OHSAS 18001 MULTI-SITE CERTIFICATION TO THE VOLTERRA FACILITY

EXTENSION OF THE "ERASMUS - GRANAROLO" PROJECT, INCREASING THE NUMBER OF PARTICIPANTS FROM 7 TO 10

PROTECTING AND APPRECIATING COLLABORATORS

In 2016, Granarolo Group continued its development process, characterised by an important transformation of horizons and business objectives, and at the same time of a cultural change shared at all levels of the organisation. Therefore, the commitment continued to accompany people in this cultural process, in order to support the group in the process of growing in terms of dimensions and of internationalisation. In the same way, attention to company situations that have gradually entered or are becoming part of the Group remains central, in order to favour effective integration, even in terms of the commitments and values with which Granarolo characterises its way of doing business.

On conclusion of the 2012-2016 Industrial Plan, and, for continuity, with the beginning of the new Group Development Plan, the strategic themes of these last few years are confirmed:

• management of the organisational complexity, in terms of both costs and of the efficacy of managerial action, deriving from growth in subsidiary companies, in Italy and abroad, and from diversification in new markets / products;

• the cultural change initiated by the internationalisation processes, in terms of contamination and enrichment of the company cultures, in addition to effective integration of the new foreign companies in the Group organisation, of which a significant role is played by the possibility of international professional experiences and paths, even crossed and not necessarily in a single direction;

• new organisational aspects that favour a more direct focus on the needs of external and internal clients and which, innovating and blending consolidated functional plans, favour a more effective management of the complexity.

Considering a market context that is increasingly difficult and changing - to the point of making the organisation's ability to adapt an essential skill - entrepreneurship, even in terms of personally taking new professional risks, is confirmed as a key managerial skill to be supported and developed at all levels of the organisation, promoting possible professional opportunities, even in new contexts (the challenge/opportunity of the company's internationalisation process is emblematic), ensuring an organisational framework focused on punctual business objectives, supporting new personal challenges with coherent company policies - in terms of both training and the remunerative and professional acknowledgement system.

In terms of training, these concepts must be translated in the strong programmes - also lasting several years - capable of having an effect on the core skills of the individual resources and of professional groups, as required by the company's changes (the language training programme is, by now, a classic example), in addition to adequate internal communication and involvement support policies. In the same way, the retribution policy is more focused on those business objectives that require entrepreneurial evolutions in each individual's commitment. In terms of industrial relations - in the presence of a rearrangement of Italian work rules, and a substantial change in the system of social safety nets that supported previous plans to rationalise the productive and logistical-commercial structures in the Group - an increasingly important key factor in success is the ability to manage reorganisations and/or productive re-focusing plans, necessary to accompany acquisitions, in close correlation with the plans to develop new products/markets, also in order to ensure socially sustainable procedures. This cannot be done without the objective of a shared company culture that is coherent with the changing business model, required by competitive evolution of the market, where traditional values of quality and safety of Granarolo's products remain essential factors for success, but must also be combined with the efficiency and profitability necessary to ensure balance in the resources required by development plans.

Finally, Human Resources Management will also be increasingly required to take on the challenge - exciting and complex - of having to deal with a context of rules, practises and problems involving the work in countries other than Italy, both in Europe and, increasingly, outside of Europe.

5.1 IN DEFENCE OF EMPLOYMENTIn 2016, work in Italy continued to represent a significant social problem. In fact, the European Council has pointed out all the problems in our country: public debt, unemployment, difficulties in our banks (only Greece and Portugal did worse than us), not to mention the fact that the Italian economy is destined to grow less than the economy in other countries.In particular, data from December 2016 concerning unemployment show that it is stable at around 12%, but unemployment among young people has climbed to above 40%, and records a definite lack of prospects for the new generations.

The Group development strategies, aimed at increasing the sale of Italian products abroad, thus contributing to compensate the phase of significant decrease in internal consumptions, have a significant impact on employment in the company and throughout the production chain.The company still considers it essential to guarantee efficiency of its own productive structure, organising it so that it is capable of responding to the strategic objectives defined and the market demands. It is therefore necessary to ensure productive reorganisation/refocusing in coherence with the synergies/efficiencies to be pursued in a constantly changing Group, as acquisitions and/or the development of new markets continue.

5.1.1 EMPLOYMENT DYNAMICS On 31 December 2016, the Group can boast a significant increase in employees - 2,770 employed staff compared to 2,489 people on 31 December 2015. The increase in personnel is largely owed to the acquisition of the Pandea Dietetica S.r.l. company branch (72 employees) by Granarolo S.p.A., as well as the addition to the Group of new subsidiaries, both in Italy - with Conbio S.r.l. (69 employees) and Fattorie Giacobazzi S.r.l. (50 employees) - and abroad - Granarolo Baltics OU (12 employees), Matric Italgross SA (41 employees), and Comarsa SA (47 employees).

Another contribution to this increase was the conclusion in processes to stabilise personnel working in Italy, combining operative requirements with opportunities to benefit from the cost advantages ending at the end of the year (44 employments/stabilisations in 2016 that benefit from partial tax exemptions). These employments were only slightly compensated by reorganisation processes that were concluded in some of the Group's facilities (Amalattea Italia S.r.l. and Gennari Italia S.r.l.). Turnover management - 100 people leaving and 112 arriving, overall - contributed to a positive balance of 12 people. The number of individuals hired dropped: 112 compared to 120 in 2015, and of these, 70 were hired with permanent contracts (82 in 2015). The reverse trend in the employment figures for Granarolo Chile, following termination of productive activities in the country.

130 131

The following are the main trends for the Group on 31 December 20.

COMPANY 2015 2016 VARIATION

Granarolo S.p.A. 1,297 1,410 113

Calabrialatte S.p.A. 56 60 4

Zeroquattro S.r.l. 356 358 2

Zeroquattro Logistica S.r.l 153 154 1

Centrale del Gusto S.r.l. 8 8 -

Casearia Podda S.r.l. 40 40 -

Amalattea Italia S.r.l. 31 24 (7)

Gennari Italia S.r.l 44 50 6

G Food S.r.l 5 - (5)

Pastificio Granarolo S.r.l 26 26 -

Fattorie Giacobazzi S.r.l - 50 50

Conbio S.r.l - 69 69

Pinzani 1969 S.r.l. (*) 18 - (18)

Italy 2,034 2,249 215

Granarolo Iberica S.L. 4 3 (1)

Comarsa Commercio Alimentari SA - 47 47

Parma Frais S.A.R.L. 8 8 -

S.A.S. CIPF Codipal 31 34 3

S.A.S Granarolo France 36 35 (1)

S.A.S. Les Fromagers de Saint Omer 55 57 2

Matric Italgross AB - 41 41

Granarolo Baltics OÜ - 12 12

Europe 134 237 103

Granarolo Chile S.p.A. 105 56 (49)

European Foods Ltd. 33 30 (3)

Yema Distribuidora de Alimentos Ltda. 183 198 15

Rest of the world 321 284 (37)

Granarolo Group Total 2,489 2,770 281

*broken down for merger with Granarolo S.p.A.

NUMBER OF EMPLOYEES BY GENDER

CATEGORY MEN WOMEN TOTAL

Directors 48 11 59

Managers 136 50 186

Office workers 750 384 1,134

Factory workers 1,187 204 1,391

Group Total 2,121 649 2,770

NUMBER OF EMPLOYEES BY NATIONALITY

CATEGORY UE EXTRA UE TOTAL

Directors 50 9 59

Managers 168 18 186

Office workers 1,040 94 1,134

Factory workers 1,082 309 1,391

Group Total 2,340 430 2,770

EMPLOYEES BY AGE GROUP (2016)

CATEGORY 20-30 30-40 40-50 50-60 60+ TOTAL

Directors 0 4 22 26 7 59

Managers 6 32 67 65 16 186

Office workers 105 222 327 414 66 1,134

Factory workers 123 319 459 419 71 1,391

Group Total 234 577 875 924 160 2,770

132 133

Since, in the Granarolo Group, there were two main National Collective Labour Agreements in force - which were substantially similar, in written agreements with the national Trade Unions and with the Group Trade Union Representatives, on 24 May 2017, the Group decided to apply the Food Industry CCNL (National Collective Labour Agreement) as the only reference contract, also maintaining the most favourable conditions for those who already had them, in relation to the terms of notice in the case of termination or resignation.By changing over to the Food Industry CCNL, it was also agreed that all Granarolo Group employees would be registered with the FASA contractual healthcare fund (also replacing the company healthcare policy, which has become obsolete in terms of guaranteed services), as well as the Life Risk fund, as further insurance coverage extended to all employees.

In 2016, the Group carried out a project entitled Granarolo Young 2016 - Sales & Marketing Development Program, aimed at high-potential graduates, to be initiated to a development process aimed at building professional figures for the future, within the commercial and marketing structure. Recruitment actions, combined between communication on social networks and involvement with universities, have led to the receipt of 1,677 curricula from graduates, mainly in economic/statistical fields (67%), and an average age of 25 years. After group tests and motivational interviews, 128 candidates were selected for the assessments, and subsequently a first group of 5 high-potential graduates was chosen. They were offered an opportunity for experience and professional growth within the sales department.

In terms of industrial relations, negotiations continued to support the renewed organisational and productive needs linked with evolutions in the company Industrial Plan.In addition to the usual agreements concerning management of Group productive facilities, during acquisition of the company branch of Pandea Dietetica S.r.l., site agreements consolidated in the past were entirely renegotiated, and forms of incentivisation were introduced, linked with parameters of productivity and organisational efficiency that were coherent with the Group's traditions. During 2016, reorganisation operations were concluded for subsidiaries Gennari Italia S.r.l. (active in portioning/grating hard cheeses and processing Parma ham), and Amalattea S.r.l. (central administration offices in Rome), completing centralisation at the Group Leader's offices for the administration activities and management of the corresponding personnel.

In the various productive sites and countries, there has been no episode involving personnel striking against the company.

In 2018, provision is made to renew and/or begin the process of certifying the main service contracts within the Granarolo production sites, leading to a substantial conclusion to the path that began in 2015 with certification by an authorised third party for the most relevant contracts in Usmate Velate and, later, Pasturago.

5.2 PROFESSIONAL GROWTH

POLICIES FOR PERSONNEL IN THE GRANAROLO GROUP

TRAINING AND CAREERS

RETR. POLICIES AND DEVELOPMENT

CULTURE, COMPANY COMMUNICATION AND

ETHICAL CODE

5.2.1 TRAINING AND CAREERSThe Granarolo Group considers people and their professional abilities the true strategic lever in competitiveness and supporting the business. All efforts are aimed at appreciating and reinforcing the team, through organisational and training solutions that favour development of the pool of company skills, and are simultaneously aimed at attracting new talent to be inserted in the company context.Within the Group, roles, capabilities, activities and technical/specialised knowledge are ordered and collected in a professional system that supports and aims the worker in relation to the expected results for the organisation, the professional area, and the level of responsibility.

Training within the Group involves all levels and professional families, and is marked by ongoing training, which supports our team in the fundamental steps of the work process, in addition to ad hoc training, which is the result of specific needs, often linked with rapid changes in scenario. Training operations therefore range from strictly technical content to managerial topics with a broader scope, therefore capable of supporting organisational and cultural changes.

Traditional training in the classroom - carried out with the support of a network of high-profile external consultants - is accompanied by alternative and complementary methods, like individual forms of coaching, guided self-development systems, work experiences in project groups, forms of tutorship with the involvement of internal and external experts. The expertise of external lecturers makes it possible to capture stimuli and changes in the market, and is reinforced and integrated by perspective from within the company, favouring sharing, spreading, and capitalisation of know-how and good practises for those who carry out the work on a day-to-day basis.

134 135

In 2016, Granarolo confirmed its growing trend in the investment in training employees. Overall, Granarolo Group carried out training activities and inter-departmental learning operations for a total of 30,123 hours, about 5% more than in 2015, involving a company population of more than 1600 employees, with an annual average of 18.8 hours per person.

TREND IN TRAINING HOURS IN THE 2014-2016 PERIOD*

20000 22200 24400 26600 28800 31000

2014

2015

2016 30123

28658

28326

AVERAGE NUMBER OF HOURS OF TRAINING PROVIDED BY QUALIFICATION AND GENDER

QUALIFICATION GENDER 2016

DIRECTORSMen 32

Women 21

MANAGERSMen 31

Women 39

OFFICE WORKERSMen 8

Women 16

FACTORY WORKERSMen 8

Women 5

As far as the topics are concerned, activities continued to focus on itineraries which, in addition to transferring specialised content in relation to the role, also transmitted skills that were functional to Granarolo Group's internationalisation process, such as:

• training on quality, safety and the environment;• technical/specialised and managerial training;• language training.

The Group's constant attention to protecting product quality is further confirmed in its significant commitment to training on food safety issues. More specifically, it is worth mentioning the training project divided into various courses, all concerning the more generic topic of pest management, which involved a total of 142 workers, between personnel in headquarters and in the individual factories, reaching a total of 1,811 hours.

In terms of safety, the Threat Awareness Program training plan was also promoted, intended to increase awareness among employees of the Group in Italy - and particularly in the productive area - of security management issues (120 operators involved). In 2016, specific initiatives were promoted for the various professional families, intended to reinforce and update the pool of technical-specialised skills in the role. In Sales, training activities concerned behaviour and the transmission of concrete tools, intended to optimise performance levels in negotiations among top sales figures, reaching a total of about 300 hours.

In Operations, in addition to continuing training as an integral part of the ongoing improvement project promoted by the Group (2,840 hours of training involving 36 participants), a training operation was also carried out on the acquisition of economic and financial knowledge (520 hours, 30 participants). The Group's commitment to developing language skills continued. It was implemented with the provision of a total of 6,573 hours of individual or group training (equal to 22% of the total hours of training). English significantly represents the chosen language (more than 150 participants and 5,901 hours, equal to 90% of the hours of language training), with the addition of Spanish (growing to 360 hours) and French (312 hours).

TYPE OF TRAINING PROVIDED IN 2016*

52%

26%

22%

LANGUAGES

TECHNICAL/SPECIALISED/EXECUTIVES

QUALITY, SAFETY AND ENVIRONMENT

5.2.2 DEVELOPMENT AND RETRIBUTION POLICIESGranarolo Group has implemented several activities to support the development of human capital, which, in addition to including training activities, also provides for learning opportunities through participation in inter-departmental project groups, insertion and professional qualification programmes for graduates, and assessment and appreciation processes for key company positions, in a "work fit" and "work alignment" logic.

The company actuates ongoing growth processes to assess and integrate new resources and, more generally, to assign new duties and responsibilities to many company collaborators, accompanying their professional development with suitable policies supporting their skills and motivation. Many company managers were asked in their recent experience to take on management of new companies/businesses or strategic projects, even ones that are significantly different from their previous experience. To this purpose, among the innovative elements in the key management skills, entrepreneurial ability is increasingly important, in terms of personnel taking on new professional risks in addition to distinctive proactivity and courage in defining points of view for innovative managerial action.

A very large portion of the company was involved in the management of integration processes which, protecting the strengths of the acquired companies, managed to insert them synergically in the Group network, in the approach to new markets - in both geographic and product terms - with specific rules in terms of business sustainability, in the restructuring of the companies organisations in relation to new needs.

* Data referring to training for Group personnel in Italy136 137

This has also had an impact on the retribution policies, focused according to the critical aspects of the business and the expected results, with a further effort aimed at getting culturally different situations from Granarolo involved in these directions. This has also guided a strategy for ongoing adaptation in the company organisation, in order to ensure promptness in integration processes and organisational balances that are strategically aimed at cost synergies and increased effectiveness in processes that are further focused on business results.

To support growth and appreciation of people, Granarolo offers particularly deserving employees the chance to follow the Group's development and internationalisation process.

As far as retribution policies are concerned, the Group uses a retribution system that takes into account assigned responsibilities, and is capable of "rewarding" merits and contributions from each individual to reaching company objectives. Group remuneration systems, in fact, take into account internal equity, the level of responsibility assigned to people, and parameters and practises that are the result of sector, national, and local compensation reviews. In detail, the remuneration system is divided into different solutions, and offers a retribution package structured around a fixed amount, to which a variable amount is added depending on the results of the individual and of the company as a whole. Directors, managers, and strategic figures that contribute directly to the company's results participate in an "MBO" - an individual incentive system that is based on clear assignment of company and personal targets, the level of fulfilment of which determines the bonus amount paid.

Included in interventions supporting the development of human resources is the process to appreciate organisational roles, carried out on 151 key positions in Granarolo Group (5.5% of the total number of employees). Through the consolidated Hay method, based on analysing positions in terms of purpose, required skills, expected results and corresponding impact on the company economics, the framework of remuneration positions was updated in relation to the role played in the Group's development strategies. The set of assessments provided a representation of the fundamental organisational structure, in order to assess the efficacy and alignment of organisation and human capital with the company strategy (work fit and work alignment).

Depending on the level of qualification or in relation to affiliation with specific professional families, finally, specific tools are assigned to facilitate work and to reach company objectives.

5.2.3 COMPANY CULTURE AND COMMUNICATION Internal communication and the positive and challenging professional climate represent the premise for shared company objectives. That is why Granarolo pays special attention to activities to improve ways of communicating with workers, in order to create strong collaborative relations between the people, thus increasing their sense of belonging and spreading the values of company culture. In particular, the strategical reorganisation that the Group is going through makes it increasingly necessary to activate direct and transparent communication channels with collaborators, in order to keep everyone informed and participating in the paths the company is following.To this purpose, several instruments are used to favour involvement of employees in the life, strategies and business of the company. These include the Newsletter, house organ, intranet, conventions, inter-departmental seminars, multimedia kiosks and monitors (called "Granarolo Info"), positioned in productive facilities and on distribution platforms, as well as actual days dedicated to socialisation to present the company to the families of Group employees, making it possible to share the spirit, information, and best practises. In addition to these tools, there is also A Gran Voce, the Group's quarterly publication, as well as Facebook, Twitter, Instagram and Youtube.

The main comparison initiatives developed in 2016 include meetings between Management and employed directors and managers, to illustrate the market scenario in which the Group is operating, as well as the strategies applied to deal with present and future challenges outlined in the 2017-2019 plan. In detail, directors and managers of the Granarolo Group met in Bologna at the beginning of December to share the data for 2016, in addition to the strategical plan that begins in

2017. Subsequently, employed directors and managers organised meetings, in which other Group employees participated, to discuss the content of the plenary meeting at the end of December.

In addition, during the year A Gran Voce, the quarterly publication established in 2011 as a platform for employees and shareholder farmers, has been enriched with the work of contributors from outside the Group, on current affairs (for example: the rationale of extraordinary operations, or evolutions in the price of milk at the stable), and the publication has crossed the boundaries of internal communication, reaching the world of non-shareholder farmers in Italy, which thus far had not been as well-catered-to by systematic communication.

For details on the new Ethical Code and on the establishment of the Ethics Committee, please consult the chapter entitled "Company profile and conduct", and the paragraph entitled "About Us - The Ethical Code"

The most important novelty in 20173 will be the introduction of a platform that will also allow personnel not equipped with a PC to access an information archive shared through “Workplace”, a social network designed by Facebook for companies, to facilitate work within companies and to create a greater sense of community. It will include company news, groups dedicated to project teams, text messages and audio/video calls, direct messaging, live video for streaming, a search engine, and the trend section, to highlight the hottest topics. Access may take place both from the desktop and from a specific mobile application, which will allow workers from all countries to participate in the company life, even outside of the office. All of this, obviously, will take place within the company firewall, guaranteeing privacy and security of information. It will be a new way of communicating, more in line with the innovation and internationalisation process actuated, and better suited to new means of communication and of experiencing the company for employees.

2016 saw the consolidation of the experience of company outlets where employees can purchase, at advantageous prices, products approaching expiry, with an immediate economic advantage, while contributing to reduce food wastage. This is one of the reasons why the outlets were opened to the local communities in Bologna and Gioia del Colle, in addition to having special agreements with several local companies and institutions.

3 It will be active as of 31 May 2017138 139

5.3 HEALTH AND SAFETY IN THE WORKPLACEGranarolo's commitment to protecting health and safety in the workplace is encoded in the multi-site policy, which has proven its worth and pertinence in 2016 in relation to the Group's productive needs, without requiring any changes. The Group's policy is also punctually shared with and applied among newly acquired subsidiaries. In 2016, the Group guaranteed maintenance of multi-site certification for the occupational health and safety management system, based on OHSAS 18001:2007 certification. With Granarolo S.p.A. absorbing all the subsidiary companies, the Group is also committed to including the new companies in the field of OHSAS 18001:2007 certification within 6 months of the official merger. Company management punctually analyses Group and factory performance indicators, assesses the level of completion of the activities in the improvement plan, and establishes - or if necessary repeats - and approves objectives in terms of improvement. In particular, Group objectives take into account significant occupational safety aspects, corresponding compliance obligations and results of risk assessments. Improvements defined in this way, in coherence with company policy, are measured through specific performance indicators, monitored periodically and communicated to all those concerned, both inside and outside the company.

In the period included between September and December 2016, several key resources were trained for the safety system within the factories (in particular, the Factory Directors, Prevention and Protection Service Supervisors (RSPP), Prevention and Protection Service Workers (ASPP), and Technical Management as Safety Supervisors), in order to guarantee skills and competence on critical aspects for health and safety in the sector.Overall, the hours dedicated to training on quality, safety, and the environment, for Italian Group employees, amounted to about 16,000.

In order to guarantee ongoing updates on applicable regulations in Group facilities, use - in said factories - of software containing the occupational safety and environment data bank was reinforced. In particular, the spreading and use of the customised software was reinforced for facilities, capable of generating a General Risk Assessment Document, in addition to the improvement plan for prevention and protection in the individual factories and the corresponding Consolidated Interferential Risk Assessment Documents (DUVRI) for services under contract and entrusted to outside companies.The software is also used to collect the data for the individual factories (employees, tasks, roles and equipment), and to make it possible to manage delivery of Personal Protective Equipment (PPE), health check-ups, health surveillance planning, and schedules for training on this topic.

During the year, the Granarolo CSR Tool was developed and implemented. This tool makes it possible to collect data on safety, the environment, and non-conformities, and makes it possible to calculate specific performance indicators, for Group systems and for National and International subsidiaries. The purpose is to facilitate and reinforce the flow of information and to lighten the workload dedicated to processing data by hand, eliminating the possibility of error.The software contains a section dedicated to findings derived from audits carried out by the parties involved (certification authorities, internal Group directors, and control bodies), and guarantees correct management of the findings themselves.For safety aspects, the CSR tool makes it possible to record injuries, near misses, and professional illnesses that occurred in the factory, and to obtain monthly and annual reports - containing injury trends and the level of achievement of Group objectives.

THE “ERUSMUS GRANAROLO” PROJECT

USMATE BOLOGNA GIOIA

DEL COLLE

ANZIO

PASTURAGO SOLIERA

In June 2016, the “ERASMUS – GRANAROLO” project was carried out. It was created in response to a need to allow Prevention and Protection System Supervisors (RSPP) to get to know factories other than their own, to increase their technical knowledge, as well as the technical knowledge of their company.

The project concerned exchanging places among Group RSPPs for three working days, during which the "guest" RSPP in the factory carried out inspections in the departments, filled out safety and environmental management check lists, met the workers' safety representative, and held meetings on safety/the environment with workers.The project was significantly successful, and made it possible for the individual resources to bring added value to their own work, observing how factories other than their own are managed.

In all, 6 factories were involved and 7 RSPPs participated, for a total of 24 hours of training each.The project will be repeated in 2017, increasing the number of participants from 7 to 10.

The Group safety performance indicators are defined annually, in compliance with standard UNI 7249, and concern the number of injuries (excluding those in progress), the Severity Index, and the Frequency Index. The injury case aggregation criterion is linked with the date of the event, and takes into consideration a period of time (∆t) that can be either monthly or annual.

Hours worked: considering scheduled work hours and overtimeActual days of temporary inability: calendar days starting from the first day of absence (not including the day of the event). Therefore, this includes uninsured days, holidays, compensative rest and any other interruption in company work activities.

SEVERITY INDEX = x 103Days of temporary inability caused by injuries in Δt

Working hours in Δt( )

FREQUENCY INDEX = x 106Number of injuries in Δt

Working hours in Δt( )The overall indicator (Delta) is calculated by comparing annual objectives, defined in the Group review, with indicators calculated in the time period to be monitored.The CSR tool makes it possible to write up monthly reports on safety, containing a comparison of the value taken on by the performance indicators in the period of interest with the objectives established for Granarolo and subsidiary facilities (including international companies). The report is sent to the company departments involved, and makes it possible to consult Heinrich pyramids, including an indication of injuries divided by duration, and the number of near misses (with or without medication) in the same period. The events (injuries and near misses) are analysed by individual factory, in reference to their characteristics (average duration, days lost, body part, type of lesion, how it happened, causes, role).

140 141

The safety report, for the period between 01/01/2016 and 31/12/2016, generated by the CSR tool shows performance indicators and a comparison with goals for 2016, according to the following legend:

GREEN: indicator that does not pass the annual objective;

RED: indicator passes the goal.

GRANAROLO S.P.A. FACTORIES - SAFETY OBJECTIVES 2016 (UPDATED ON 31/12/2016)

PLANT

NUMBER OF INJURIES FROM 1/01/2016 TO 31/12/2016

OBJECTIVE 2016

DELTA(∆ %)

SEVERITY INDEX FROM

1/01/2016 TO

31/12/2016OBJECTIVE

2016DELTA(∆ %)

FREQUENCY INDEX FROM

1/01/2016 TO

31/12/2016OBJECTIVE

2016DELTA(∆ %)

Anzio 0 1 0.00 0.35 0.00 19.42

Bologna 10 8 25%

0.30 0.34 -12%

29.27 18.67 57%

Gioia del Colle 1 1

0%0.08 0.22

-64%11.39 11.99

-5%

Pasturago 4 4 0%

0.36 0.17 112%

10.24 9.61 7%

Soliera 8 6 33%

0.63 0.37 70%

28.04 20.59 36%

Usmate Velate 15 8

88%0.42 0.36

17%37.13 19.73

88%

Total production plants

38 28 36%

0.39 0.30 30%

24.35 16.70 46%

Bologna (offices) 4 1

300%0.11 0.03

267%10.64 2.86

272%

Pasturago (offices) 1 0

-0.13 0.00

-8.91 0.00

-

Sales 0 0 -

0.00 0.00 -

0.00 0.00 -

Total offices 5 1

400%0.09 0.02

350%8.19 1.53

435%

Total Granarolo S.p.A.

43 29 48%

0.30 0.22 36%

19.80 12.45 59%

5.3.1 TRENDS IN GRANAROLO S.P.A.The perimeter of injury statistics for Granarolo S.p.A. concerned, in 2016, the factories of Anzio, Bologna, Gioia del Colle, Pasturago, Soliera and Usmate. It also did not consider the factory in Volterra (seventh Granarolo factory as of June 2016), nor the factory in Parma (eighth Granarolo factory as of December 2016). For 2016, the total number of hours worked in the productive departments is equal to about 1,500,000 hours, while the administrative personnel, divided into the two offices of Pasturago and Bologna (with the addition of travelling personnel), worked for a total of about 600,000 hours. The total number of hours worked was therefore 2,100,000 hours, with 576 days lost for injuries (519 involving productive personnel), which decreased compared to the 743 in 2015 (of which 731 concerning operating personnel).

As far as production workers are concerned, in 2016 the number of injuries was equal to 38. There were two more injuries compared to 2015 (36 injuries). The challenging goal for 2016, equal to 28 injuries, was therefore not reached. For the same number of worked days compared to 2015, the number of days missed still decreased by 25%. The average duration of injuries in productive areas was 16 days, compared to the 21-day average of 2015.

COMPARISON OF INJURY DATA FOR PRODUCTIVE WORKERS IN THE GROUP (YEARS 2015/2016)

PLANT YEARN°

INJURIES

N° INJ. <= 3 DAYS

N° INJ. 3 < DAYS

<= 30

N° INJ. > 30 DAYS

DAYS MISSED

AVERAGE DURATION OF DAYS MISSED

OVERALL COSTS (€)

Anzio2015 2 0 1 1 164 82.0 9,885

2016 0 0 0 0 0 0.0 0

Bologna2015 10 2 5 3 236 24.3 14,400

2016 10 2 7 1 103 10.3 4,752

Gioia del Colle

2015 0 0 0 0 0 0.0 0

2016 1 0 1 0 7 7.0 216

Pasturago2015 4 0 3 1 74 18.5 4,176

2016 4 0 2 2 75 40.0 4,536

Soliera2015 11 3 8 0 96 8.7 4,320

2016 8 0 5 3 164 22.4 9,504

Usmate2015 9 1 5 3 161 19.7 9,072

2016 15 3 10 2 170 11.3 8,352

Total Granarolo S.p.A.

2015 36 6 22 8 731 20.9 41,823

2016 38 5 25 8 519 16.3 27,360

Key: Objective reached Objective not reached

In relation to administrative personnel, in 2016 five injuries were recorded, compared to only one in 2015. The number of days lost was 57 compared to 12 in 2015. The average duration of injuries equal to 11 days was in line with the trend for 2015 (12 days).

142 143

GROUP INJURIES BY DAY OF ABSENCE IN 2016

ANZIO

0

0

0

0

5

BOLOGNA

1

11

2

9

90

GIOIA DEL COLLE

0

1

0

3

2

PASTURAGO

2

3

0

7

96

SOLIERA

3

5

0

8

78

USMATE VELATE

2

10

3

3

121

GRANAROLO S.P.A.

8

30

5

30

392

NUM. OF INJURIES WITH DAYS OF ABSENCE >30

NUM. OF INJURIES WITH 3 < DAYS OF ABSENCE ≤ 30

NUM. NEAR MISSES WITH MEDICATION

NUM. NEAR MISSES WITHOUT MEDICATION

NUM. OF INJURIES WITH DAYS OF ABSENCE ≤3

In relation to the 43 injuries recorded for the Group, it is found that the main cause of the event (20%) concerns "operations on machinery", meaning the actual productive phase on machinery, and therefore not including maintenance operations on the machinery in question. Injury-related events are mainly linked with a lack of precaution or attention. The most commonly affected body parts are the wrists, hands, and fingers (42%).

As far as the 422 near misses are concerned, the main events refer to tripping or knocking movements, operations on the machine, maintenance, and washing the systems with chemical products. Also, when analysing near misses we find that the roles most at risk are maintenance staff and operators assigned to packaging lines, owing to greater contact with machinery, systems, and equipment. As far as Granarolo S.p.A. is concerned, in 2016 there was only one fine, in the factory in Pasturago.

According to instructions in the company integrative contract, at Granarolo provision is made for a comparison on the plans and projects concerning Safety and Environment Systems, within National

In relation to 2016 trends for individual facilities, the following results were found:

• Anzio and Gioia del Colle: objectives fully met. In particular, in Anzio no injuries were recorded for 2016.

• Bologna: the goal for the severity index was reached, but not those concerning the number of injuries and frequency.

• Pasturago: objective for the number of injuries reached, but not those concerning the severity index and frequency.

• Usmate Velate, Soliera and the offices (Bologna and Pasturago), no objective reached.

The severity index for the Group in 2016 was equal to 0.30 (Ig2015 = 0.35 previous year), while the frequency was equal to 19.80 (If2015 = 17.56).

FREQUENCY AND SEVERITY INDEX FOR INJURIES AMONG PRODUCTIVE WORKERS IN THE GROUP (YEARS 2007/2016)

02007 2008 2009 2010 2011 2012 2013 2014 2015 2016

5

10

15

20

25

30

35

40

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

Injury frequency index ( If07-16 ) Injury severity index ( Ig07-16 )

For the individual factories, the figures concerning the severity index are:

• in the case of Anzio, Bologna, and Gioia del Colle, lower than both the annual objective and for the INAIL sector reference value4;

• in the case of Pasturago, Soliera, Usmate and the offices, above the annual goal, but below the INAIL value for the sector.

For the individual factories, the figures concerning the frequency index are:

• lower both than the objective and than the INAIL reference value for the sector5, for Anzio and Gioia del Colle;

• higher than the goal for Bologna, Pasturago, Soliera, Usmate Velate and Offices, but lower than the INAIL value for the sector.

The following is a detailed representation, in relation to 2016, for all the Group factories, considering all the workers (production and administration).

4 INAIL severity index for the food industry sector is equal to 2.31 5 INAIL frequency index for the food industry sector is equal to 26.41144 145

The following are the performance indicators and a comparison between the objectives for 2016 for subsidiaries in 2016.

SUBSIDIARY FACTORIES - SAFETY OBJECTIVES 2016 (UPDATED ON 31/12/2016)

COMPANY

NUMBER OF INJURIES FROM 1/01/2016 TO 31/12/2016

OBJECTIVE 2016

DELTA(∆ %)

SEVERITY INDEX FROM

1/01/2016 TO

31/12/2016OBJECTIVE

2016DELTA(∆ %)

FREQUENCY INDEX FROM

1/01/2016 TO

31/12/2016OBJECTIVE

2016DELTA(∆ %)

Amalattea Italia S.r.l. 1 1

0%0.17 0.47

-64%21.79 26.38

-17%

Calabria latte S.p.A. 0 1

-0.00 0.27

-0.00 14.88

-

Casearia Podda S.r.l. 0 1

-0.00 0.32

-0.00 17.87

-

Gennari S.r.l. (Lesignano) 0 0

-0.00 0.00

-0.00 0.00

-

Gennari S.r.l. (Parma) 1 1

0%0.27 0.93

-71%17.12 51.61

-67%

Pastificio Granarolo S.r.l.

0 1 -

0.00 0.39 -

0.00 21.89 -

Zeroquattro Logistica S.r.l.

2 1 100%

0.33 0.19 74%

7.59 3.79 100%

Zeroquattro S.r.l. 15 16

-6%1.06 1.28

-17%24.70 25.53

-3%

Total productive and logistic facilities

19 23 -17%

0.60 0.48 25%

15.12 19.06 -21%

In 2016, only Zeroquattro Logistica failed to reach their objective, both in terms of the number of injuries and in terms of the severity and frequency indexes. In addition, the severity index objective was not reached if one considers the subsidiaries as a whole group.In most of the 19 injuries, the main way the injuries occurred was when handling material. The main cause of injury seems to be a lack of precaution and attention. In this case, too, the most affected body parts are wrists, hands, and fingers.As far as the 11 near misses are concerned, the main events refer to operations on the machine, handling material, or objects or people falling from above.

Foreign subsidiaries obtained a good result except for Les Fromagers de Saint Omer, the productive factory at Campagne - lès Wardrecques, which reached a total of 3 injuries compared to the target value of 2. It is also worth mentioning that the CIPF Codipal company, with administrative headquarters in Metz, recorded one injury in 2016, even though their objective was 0.

Coordination of RSU, with the participation of 23 internal trade union representatives, chosen from among the RSU and RLS representatives for the various sites, and observers from newly-acquired subsidiaries, in addition to members of the national secretariats of the Trade Unions. Cgil-Cisl and Uil.In addition, dialogue between the RSU and Plant Management on Environmental and Safety issues is organised independently (always from the integrative system).In addition, the company integrative system includes a designated section that increases the value of the role of the RLS compared to legal requirements. In particular, the following is established:

• Greater involvement of the RLS in writing the DVR (risk assessment document).• Greater involvement of the RLS in work-related stress surveys, in particular in examining

organisation of work as a whole.• Specific training on work-related stress for RLS, which may also be integrated on request.• 15 additional hours of leave for each RLS linked with activities specifically referring to the role.• Annual joint analysis of the occupational illness situation.• Joint company-RLS annual structured survey (with questionnaire) to assess compliance with

safety standards and the use of PPE.• Policies and programs to improve safety, aimed at the "zero injury" objective subject to joint

examination with OO.SS.• Application of the multi-site OHSAS 18001 system, with the active involvement of the RLS in

system and specification audits.

5.3.3 TRENDS IN SUBSIDIARIESThe perimeter of injury statistics for Italian subsidiaries in 2016 includes all Group subsidiaries except for Conbio, Centrale del Gusto and Fattorie Giacobazzi. At the same time, it is necessary to consider that Italian subsidiaries include the factory in Volterra (as a former subsidiary of Pinzani).

For 2016, the number of hours worked in subsidiaries amount to about 1,300,000 hours, while days lost to injuries amounted to 1,000, a decrease compared to the 1,424 in 2015. The 424 days of injury less than 2015 are linked with the lower number of injuries recorded, and to the lesser severity of the injuries themselves. In fact, the number of injuries for 2016 was equal to 19, compared to the 29 injuries of 2015. The goal value of 23 injuries was therefore fully achieved. The average duration of injuries was 39 days.

The severity index for subsidiaries in 2016 was equal to 0.60 (Ig2015 = 1.17), while the frequency was equal to 15.12 (If2015 = 29.64).

FREQUENCY AND SEVERITY INDEX FOR INJURIES AMONG WORKERS IN SUBSIDIARIES (YEAR 2016)6

0.60

15.12Injury severity index (Ig 2016)

Injury frequency index (If 2016)

6 The figure is indicated only for 2016, since it cannot be compared to the previous year, since the reference perimeter has been extended.146 147

5.4 COMMITMENT TO THE WELL-BEING OF OUR COLLABORATORSCompany welfare is a part of the non-monetary total reward, aimed at the personal well-being of company collaborators and their families. That is why the Granarolo Group is increasingly stimulated to identify strategies to promote well-being and to create models that balance work and family life within the company, through an organisation that is increasingly aimed at the true needs of employees, in harmony and synergy with the services offered by the territory.In order to favour the quality of life of the people who work in the company, Granarolo has created, over time, several initiatives to reconcile work and family life, and equal opportunities:

• a programme supporting maternity and paternity, which includes reintegration of new parents with specific plans to facilitate family life;

• permitting horizontal and reversible part-time schedules, in support of parenthood, up until the child's third year;

• 2 days of paid leave to working fathers for the birth of their child, and in the case of an adoption or foster care situation;

• increasing from 8 to 10 days the available personal leave in order to look after sick children between the ages of 3 and 8 years;

• allowing changes to timetables in order to facilitate accompanying children during their first days at a crèche;

• indirect agreements with crèches that also allow special financial agreements;• the possibility of a flexible timetable for assistance to elderly people;• special arrangements for student-workers.

As far as health and prevention are concerned, Granarolo has provided an integrative healthcare policy.

2016 saw the renewal of initiatives like the competition to provide Merit-based Scholarships supporting the right to an education, additional paid leave to working mothers and, in Bologna, entertainment days for the children of employees during periods when schools were closed. One example of this is the initiative entitles "Una Pasqua a sorpresa" [A surprise Easter], which took place on 24 and 25 March 2016 in Bologna, during the period of the Easter holidays: some of the factory spaces were used to welcome employees' children during working hours. Entertainment activities were organised, with designated personnel, throughout both days (for example, tours of the factory, creative workshops, magic shows, etc.), and employees and their children had lunch together, in the company's shared cafeteria. Considering the significant participation, proving the usefulness of the business, and the enthusiasm shown by young and old, another two similar events were organised: Finiamo l'estate in bellezza [Let's finish summer beautifully] for 8 days in September, and Aspettando la Befana [Waiting for the Befana] for 3 days in January 2017.

SUMMER WITH GRANAROLO

Given the success of initiatives that opened the Group's facilities, with the purpose of welcoming employees' children during working hours, in 2017 provision was made for another initiative during the summer period (June-September). Specifically, Granarolo - in collaboration with the Dolce social cooperative - sees to organising a few summer centres, for Group employees' children, within the working area of the factory in Bologna.

Another experiment, in the period between April and July, was to offer a yoga course - also at the factory in Bologna - which was extremely successful, and represented a pilot project for the organisation, within company spaces, of more courses, which can optimise management of one's time and represent an opportunity for socialising and exchanging opinions. In light of this, the Granarolo company band was formed, called Vamolàt - the name is derived from a local expression,

BRIEF INJURY REPORT - INTERNATIONAL SUBSIDIARIES (FROM 1 JANUARY TO 31 DECEMBER 2016)

PRODUCTION AND DISTRIBUTION OFFICE

COMPANY

BALANCE FROM

1/01/2016 TO 31/12/2016

OBJECTIVE FOR 2016

DELTA(∆ %) COMPANY

BALANCE FROM

1/01/2016 TO 31/12/2016

OBJECTIVE FOR 2016

DELTA(∆ %)

Comarsa SA 0 0 CPF

Codipal 1 0

European Foods 0 N.D. - Giacobazzi

UK 0 0

Giacobazzi US 0 0 Granarolo

Baltics 0 0

Granarolo France 1 3 Granarolo

Chile 0 N.D. -

Les Fromagers de Saint Omer

3 2 Granarolo France 0 0

Matric Italgross N.D. 0 Granarolo

Iberica 0 0

Yema Andrelandia N.D N.D. - Granarolo

UK 0 0

Yema Guarel N.D. N.D. - Parma

Frais 0 0

148 149

Vàmolà, a contesting exclamation both to reinforce the sentence one is saying, or to express approval for something someone else has said, combined with "latte" [milk]. They performed for the first time on 4 November 2016 during the inauguration of the new auditorium in Bologna, and again on 18 December, at a Christmas aperitif organised in a club in the city centre. Made up of 8 members from various departments, it definitely contributed to warming the atmosphere during company events, and represents a source of stimuli and an important starting point for initiatives involving colleagues.

Resolutions for 2017 include offering new Merit-based Scholarships - now reaching the fourth edition - which represent a concrete way of supporting income, as well as relaunching the Archimede Project, in addition to offering initiatives and services in a more structured and targeted manner, which respond to the needs of the various members of our Group. In order to do this, it was necessary to intercept proposals and real needs in Granarolo's community, and that is why, at the end of the year, an online questionnaire was offered.

For details on the Archimede Project, also see the chapter entitled "Our competitive leverage", in the paragraph entitled "Innovation".

150 151

PROTECTING THE ENVIRONMENT FROM THE STABLE TO DISPOSAL

6

IN SHORT

PROTECTING THE ENVIRONMENT

1NEW FACTORY

CERTIFIED BY SGS WITH THE INTEGRATED

QUALITY, SAFETY AND ENVIRONMENT

MANAGEMENT SYSTEM

11NEW EPD ISSUED FOR 18 NEW PRODUCTS

58%SELF-PRODUCED

ELECTRICAL ENERGY, OUT OF

THE TOTAL ENERGY CONSUMPTION

99.3%NON-HAZARDOUS

WASTE DESTINED FOR RECOVERY

OBJECTIVES FOR 2017

SDG AND PERTINENT ISSUES

EXTENSION OF THE EPD ENVIRONMENTAL DECLARATION TO A NEW SERIES OF PRODUCTS, WHICH CAN BE TRACED BACK TO PRODUCTS USED BY CAFETERIAS AND RESTAURANT SERVICES (FOOD SERVICE).

IMPROVING ENVIRONMENTAL SUSTAINABILITY FROM THE STABLE TO DISPOSAL

REDUCTION IN THE WEIGHT OF MOZZARELLA

PACKAGING FROM NYLON/PE 60 MY TO

PET/PE 42 MY

REDUCTION IN THE WEIGHT OF YOMO

YOGURT TUB FROM 5.5G TO 5.3G

FURTHER REDUCTION IN THE WEIGHT OF

MILK BOTTLE FROM 25G TO 23G

REDUCTION IN BLACK AND WHITE COLOURS ON MULTILAYER UHT

LITRE BOTTLE

REDUCTION IN THE THICKNESS OF THE ALUMINIUM CAP ON ALL THE YOGHURT

MADE IN PASTURAGO FROM 38 MY TO 30 MY

MORE THAN

2.2 MLN / EURO

MILLION EURO IN ENVIRONMENTAL

PROTECTION EXPENDITURE

LIFE CYCLE ANALYSIS APPLIED TO THE MILK PRODUCTION CHAIN: SYSTEM BOUNDARIES

In 2016, in coherence with the commitment to extending EPD declarations, another 11 new EPDs (Environmental Product Declarations) were implemented and published, for Granarolo brand products particularly in reference to soy/rice bases UHT products, and products in the cheese sector under Granarolo and Accadì labels.

Going into greater detail, the products for which these EPDs were written up are mascarpone, ricotta, Alta Qualità stracchino, soy/rice based UHT drinks (conventional Soy drink, enriched soy drink, organic soy, and rice) and for the Accadì range, fresh milk, UHT cream, mascarpone, ricotta and stracchino.

INDU

STRI

AL

PROC

ESS

Use phase

End of the primary packaging's life cycle

Pasteurisation

Packaging

Raw material packaging

Production of caps - PET pre-forms

Cattle Farming

Farms

Stable sewage WasteEnteric Fermentation

Emissions

Feed Water Detergents Energy Consumption

1

3

RAW MILK PRODUCTION

4Transport to logistical platforms

TRANSPORT

PROCESS/TREATMENT

2PACKAGING PRODUCTION

Energy

Energy

Water

Energy

UPST

REAM

PRO

CESS

DOW

NSTR

EAM

PR

OCES

S

The Group's objectives in terms of environmental sustainability are:

• to prevent, control and reduce environmental impact, by defining concrete and measurable objectives in all phases;

• to make the entire production chain more sustainable, starting from the procurement of raw materials (farms), up to disposal of packaging materials (the end of the product's life);

• to increase environmental awareness among stakeholders, including consumers, by means of: ∠ training programmes; ∠ environmental commitment communication activities at product (EPD) and process levels

(CSR Report); ∠ sharing the results of environmental management through clear and accessible

communication.

In pursuing these objectives - in addition to promptly adopting all relevant legal requirements - the Granarolo Group adopts and maintains management systems in order to improve its environmental performance levels. By applying the LCA method, Granarolo has developed a life cycle analysis for a few products, in order to support environmental improvement programs applied to the processes and production chains. At the same time, by developing EPD® Declarations, the company declares the environmental performances levels of certain reference products (e.g. Milk, yoghurt, cheeses, etc.9 to the concerned parties (www.environdec.com). LCA studies and results published on the EPD® represent one of the elements that Granarolo used over the years to identify the priority areas that require intervention to reduce the impact of their products. The implemented actions involve the main elements of the production chain.

In 2016, for the facilities involved, voluntary "multi-site" certifications were renewed, in compliance with standards UNI EN ISO 14001 and OHSAS 18001, in addition to European EMAS registrations (Factories in Bologna and Soliera). For production sites acquired in extraordinary operations, the objective is to certify them in compliance with OHSAS 18001 and UNI EN ISO 14001 within 6 and 12 months respectively. In 2016, activities began for transition to the new edition of UNI EN ISO 14001:2015, and provision is made for the corresponding management systems to be upgraded by February 2018, the date set for certification inspections (carried out by an independent third party authority) in all factories.

6.1 GRANAROLO'S APPROACH TO ENVIRONMENTAL SUSTAINABILITYFor several years now, Granarolo has applied a strict scientific approach to developing careful analysis of environmental performance in their products, over the entire life cycle, and to clearly identify improvements to be implemented in order to reduce environmental impacts of the products themselves. Therefore, based on the LCA - Life Cycle Assessment method, and in compliance with standards ISO 14040 and 14044, they assess environmental impact starting from production of raw materials (milk, semi-finished fruit products, soy/rice based preparations, etc.). They then continue to analyse the procedures for processing (e.g. pasteurising milk), packaging, transport and distribution, right up to the phase of use and the end of the product's life cycle.

So far, 27 EPD certifications have been issued, for a total of 52 Granarolo products7.

Granarolo has set the objective of applying a strict scientific approach to communicating environmental performance levels of its products, aimed at both "professionals" and consumers: EPD certifications are, in fact, Type III Environmental Declarations (Environmental Declarations - Principles and Procedures - ISO 14025), based on the LCA method (product life cycle analysis). The main objective of these declarations is to provide relevant, verified and comparable information concerning the environmental impact of a product or service.

7 The number of products is higher than the number of EPD certifications issued, since each certification may match multiple references and multiple product form156 157

EPD PROJECTS 2016EPD CERTIFICATION PROJECTS AND THE CORRESPONDING REFERENCES

2013• Granarolo Organic Eggs (4 eggs) • Mozzarella Granarolo Alta Qualità (125g, 3 x 125g, 3 x 100g, 4 x 100 g

and 5 x 100 g)• ESL Organic Half-Skimmed Milk (1L)

2010• ESL Organic Whole Milk (1L)• Piacere Leggero Fresh Milk (0.5L, 1L and 1.5L)

2007 • Granarolo Alta Qualità Fresh Milk (0.5L, 1L and 1.5L)

2016 • ACCADI cream (3x100 ml)• UHT soy drink and Enriched UHT soy drink (0.5 l and 1 l)• BIO Soy drink (1 l)• UHT Rice Drink (1 l)• ACCADI Fresh Milk (1 l)• ACCADI Stracchino (100 g and 6 x 100 g)• ACCADI Mascarpone (250g)• ACCADI Ricotta (2 x 100 g)• Granarolo Stracchino (100g, 170g, 320g and 1000g)• Granarolo Mascarpone (250 g and 500 g)• Granarolo Ricotta (2 x 100g and 250g)

2015 • Granarolo Alta Qualità White Yoghurt (2 x 125 g, flavours: white cream

and sweetened white)• Prima Natura Bio regular and light yoghurt (2 x 125 g)• Granarolo Alta Qualità fruit-flavoured yoghurt (2x125 g, flavours:

banana, strawberry, vanilla and lemon)• ACCADI yoghurt (2x125g. flavours: white, strawberry and coffee)• ACCADI UHT Whole Milk (1 l Prisma and carton bottle)• ACCADI UHT Half-Skimmed Milk (0.5 l Prisma and 1 l Prisma and

carton bottle)• ACCADI UHT skimmed milk (1 l carton bottle)

2014• ACCADI Mozzarella (100 g)• ESL ACCADI Cream (250 g)• Prima Natura Bio Fruit-flavoured Yoghurt (2x125 g, flavours: pear,

banana, strawberry and apricot)

N° EPD FORMATS/PRODUCTS

N° EPD

27 52

N° EPD FORMATS/PRODUCTS

N° EPD

16 34

N. FORMATI / PRODOTTI EPD

N° EPD

9 20

N° EPD FORMATS/PRODUCTS

N° EPD

6 14

N° EPD FORMATS/PRODUCTS

N° EPD

3 7

N° EPD FORMATS/PRODUCTS

N° EPD

1 3

158 159

ENVIRONMENTAL FOOTPRINT FOR ONE KG OF ALTA QUALITÀ RICOTTA

ECOLOGICAL FOOTPRINT CARBON FOOTPRINT VIRTUAL WATER CONTENT

Raw materials

8.5 2.6 2,600

Packaging

2.1 0.3 <10

Auxiliary materials

0,1 <0.1 <10

Process

0.6 0.2 10

Distribution

0.2 0.1 <10

Domestic preservation

2.0 0.7 <10

End of packaging life cycle

0.1 <0.1 <10

TOTAL 13.7 global m2/kg 4.0 kg CO2 eq/kg 2,620 litres/Kg

In 2016, Granarolo maintained the “EPD Process Certification”, achieved in 2014 (assessed and validated by a third party), with the purpose of certifying that the entire process of preparation, verification and publication of environmental product declarations was carried out in compliance with International EPD® System requisites (www.environdec.com). This systemic approach makes it possible to simplify and accelerate the path to updating existing EPD® analyses and publishing new ones in relation to new products.

All declarations can be downloaded from the gruppogranarolo.it website.

During the Management Review for 2016, concerning the EPD Process Certification, new certification projects were established, to be implemented in 2017. The references for which the EPD will be developed can be traced back to products used by cafeterias and Food Services, for which the purchase Minimum Environmental Criteria (CAM) are applicable, in addition to the subsequent acknowledgement of an additional score if calls for tenders are won.

The indicators presented in the EPD® also include environmental footprints expressed in terms of Carbon Footprint, Ecological Footprint and Virtual Water Consumption. As an example, the following are the impact values calculated for 1 Kg of Alta Qualità mascarpone and for 1 Kg of Alta Qualità ricotta, published on the 2016 EPDs8.

ENVIRONMENTAL FOOTPRINT FOR ONE KG OF ALTA QUALITÀ MASCARPONE

ECOLOGICAL FOOTPRINT CARBON FOOTPRINT VIRTUAL WATER CONTENT

Raw materials

15.7 4.6 6,080

Packaging

1.5 0.2 <10

Auxiliary materials

0.2 0.1 <10

Process

1.3 0.5 20

Distribution

0.2 0.1 <10

Domestic preservation

4.4 1.6 <10

End of packaging life cycle

0.1 <0.1 <10

TOTAL 23.5 global m2/l 7.1 kg CO2 eq/l 6,110 litres/l

8 http://www.environdec.com/en/Detail/?Epd=11413 http://www.environdec.com/en/Detail/?Epd=11412160 161

EPD CERTIFICATION PROJECTS FOR 2017 AND THE CORRESPONDING REFERENCES

162 163

ORGANIC YOGHURT NEW FORMAT

YOGHURT SOY BASIC REFERENCES

YOMO FOOD SERVICE YOGHURT

ACCADÌ - PS ESL MILK

REFERENCES FOR FOOD SERVICE PASTA (Pastificio Granarolo)

SOY BASIC REFERENCES FOR ESL VEGETABLE DRINK

REFERENCES FOR UHT MILK PRISMA PACK

SOY BASIC REFERENCES - CREAM

6.2.2 REDUCING THE IMPACT OF THE PRODUCTIVE PROCESS

ENERGY128,651 MWh of electrical energy • of which 58%

self-produced

17,311,408 m3

of technological methane

174,436 litres of LPG

GREENHOUSE GAS EMISSIONSScope 1 equal to 96.169 tonnes of CO2 equ

Scope 2 equal to 26,628 tonnes of CO2 equ

MATERIALS807,578,000 kg of materials, of which:• 97% from

milk raw material• 1,5% from

other raw materials

• 1,5% from auxiliary materials

WASTE14,371,758 kg of waste, of which:• 99% sent to

recycling

WATER5,188,013 m3 of water used, of which: • 87% from well• 13% from

aqueduct

WATER DISCHARGE4,225,833 m3 of water

In 2016, the Group worked in 16 productive sites spread out over the Italian territory. 7 of these share the Integrated Quality, Safety and Environment Management System, certified by SGS (for the Volterra facility, only the OHSAS 18001 Safety Management System), while in the factory in Parma the certification process is in progress, and certification is expected by Spring of 2018.

At the same time, we have laid the foundations to be able to introduce, in other companies belonging

6.2 MAIN ACTIONS TO REDUCE ENVIRONMENTAL IMPACTLCA studies and the results published in EPDs® represent one of the elements that Granarolo has used to identify priority areas on which to intervene to reduce impact throughout the products life cycle. Identified areas of action concern the entire production chain, and supervision and relations with raw material suppliers - typical of the "Granarolo model" - make realisation easier. Among the actions that have been identified it is worth mentioning:

• improvement of agricultural practices (also through the distribution of Guidelines for farmers who provide raw milk, already written in 2014 and strongly linked to the theme of environmental and non-environmental sustainability);

• promoting operations to improve energy efficiency in stables, also through the creation of systems based on renewable sources;

• promoting operations to improve energy efficiency by creating cogeneration systems in the plants;

• reducing packaging materials (and the corresponding environmental impact) for the products (for example, introducing Ecodesign criteria to processes for selecting materials to improve the environmental impact of products, also through designated calculation tools).

Granarolo - in addition to the specific actions on the production chain and in order to improve the level of control over environmental performance levels - has developed and implemented a software system to manage information linked with environmental indicators, in order to be able to monitor the main indicators (KPI) of the various plants in real time, and to create the corresponding reports for comparison with company objectives.

6.2.1 REDUCING THE IMPACT OF THE PRODUCTION CHAIN Analyses on the life cycle of Granarolo products show how the phase of production of raw materials represents one of the most relevant elements in terms of environmental impact (for example, for milk references the farming/production phase contributes by 50/60% to the impact in terms of carbon footprint). Reducing the impact of the production chain is therefore a work area in which it is a priority to improve the environmental sustainability of Granarolo products.

To this purpose, guidelines were created for sustainable stable management, emphasising the actions that should take priority over the others, in addition to other suggestions.That is why, already in 2015, a process was started to share these guidelines, starting from a pilot group of farms, who tested the approach. The first farms to apply them were those that produce the raw materials for the Alta Qualità and Granarolo Biologico labels. In 2016, the conversion of many farms to organic methods renewed the commitment and spread good practises which, especially today when we are facing agriculture 4.0 (more milking robots and stables rotating around the robots, with animal wellbeing as the main objective), become an essential working condition.

In addition, in 2011, Granarolo began an environmental risk assessment project for the places in which the raw material (milk) is produced. All the stables that provide milk to Granarolo are now mapped by means of a geo-satellite system, in order to assess possible environmental risk sources, derived from the presence of polluting sources (such as incinerators, thermoelectric stations, motorways, industrial plants, etc.), which may influence the quality of the milk. The project, established in collaboration with the University of Bologna, is still the only one of this kind in Italy, and involves every stable in the Granarolo production chain.

164 165

ELECTRICAL ENERGY: SELF-PRODUCED AND PURCHASED (%) 2016 GRANAROLO S.P.A.

PURCHASED

SELF-PRODUCED

58%42%

The mixture of sources of the electrical energy consumed in the various factories varies significantly, considering the fact that in Anzio and Volterra, energy is entirely purchased from the grid, while in the factories equipped with cogeneration systems, a significant part of the energy is self-produced.

Between 2016 and 2017 Granarolo intends to complete the feasibility studies to increase efficiency in all the main refrigerator systems for the plants (along the lines of the current project at Pasturago) and to recover residual heat from the new cogeneration systems.

However, the overall figure does not take into account the variations in the individual factories. In fact, the energy consumption figure is closely linked with the trend in production volumes. This is shown by the production site in Usmate Velate, where the trend (+4%) in energy consumption is, however, in line with internal production concerning the same time period (+12%). For the factory in Gioia del Colle, on the other hand, this trend - although increasing - is linked with the insertion of new product references and with the commissioning of a new production line (bottled UHT), which resulted in an increase in electrical energy consumption in the factory.

to the Group, management systems with simplified and streamlined procedures, instructions and registration forms, in order to obtain certification of the integrated management system. In addition, the two factories in Emilia Romagna (Bologna and Soliera) maintained their EMAS Registrations.

This paragraph described the main environmental impact indicators associated with the productive processes, concerning the 7 plants belonging to Granarolo S.p.A. At the end of this chapter, there is a specifically designated chapter containing the environmental data for 2016 linked with the productive processes of some of Granarolo Group's subsidiaries, for which it was possible to obtain the data for the entire year (namely, Calabrialatte, Casearia Podda, Pastificio Granarolo, Amalattea, Gennari Parma and Gennari Lesignano).

ENERGYIn 2010, Granarolo S.p.A. started a medium-long term process in the field of energy efficiency, with the primary objective of self-producing more than 50% of the electrical energy necessary for the requirements of productive facilities. In recent years, the most significant interventions have been those concerning cogeneration - systems that recover thermal energy at low temperatures, reused for washing and heating process systems. The company then decided to equip all its largest factories - which consume large quantities of energy - with cogeneration systems, with technology that is now consolidated in the sector, and which allows average savings of 6-7% per year in terms of consumption of energy and environmental resources.

For 2016, the most significant operations for energy efficiency concerned:• commissioning the third cogeneration motor in the factory in Bologna, installed in 2015,

which brought maximum power up to about 15 MW, equal to the consumption of about 5,000 homes.

• agreements with E.ON Connecting Energies S.r.l. - part of the German E.ON Group, among the largest in the world in the energy sector, concerning the supply of self-produced electrical and thermal energy for the factories in Usmate Velate, Pasturago, Soliera, Bologna, and Gioia del Colle. These agreements involved transfer of the company branches involving cogeneration from Granarolo S.p.A. to E.ON Connecting Energies S.r.l., which will be fully effective during 2017.

• Completion of activities for the systems in the factories of Vernate and Usmate Velate. More specifically, in Pasturago di Vernate, the new heat recovery system (installed in 2015, and which uses the residual heat produced by the cogeneration plant, using it for productive processes like the automatic washing systems and the production room heating system), has made it possible to save, so far, a quantity of energy equal to the energy contained in more than 1,900 tonnes of oil, and a saved CO2 volume - not emitted into the atmosphere - equivalent to the work of more than 48,000 trees per year. A similar system will allow an equivalent saving in the factory in Usmate Velate, thanks to the new cogeneration system, operating as of April 2017.

• Currently in the study phase are two multi-site projects, concerning improvement of the efficiency of the ammonia refrigeration plants, and the low-temperature heat recovery circuits, which represent two of the greatest energy vectors used within the factories.

• Complete replacement of the lights in Usmate Velate with new, more efficient lights (LEDs), both inside the productive departments and in the outside areas, which guarantee the same level of light, while consuming significantly less, and optimised in relation to the actual productive needs of the factory. Replacement of the more than 2,800 light bulbs will, in 2017, ensure a 57% reduction in the electrical consumption dedicated to lighting, and this figure has been confirmed during the first months of operation. With the system operational, the saving is expected to reach about 770,000 KWh/year, equivalent to 303 tonnes/year of CO2. The project offered the opportunity for a complete redesign of the lighting engineering aspect, allowing an improvement in the quality of the working environments, currently lit in a uniform manner, and with suitable lighting in each productive area.

Also thanks to this operation, at Granarolo S.p.A. self-produced electrical energy represents about 58% of the total energy consumed, with a 2% increase compared to the previous year.

166 167

In relation to the consumption of technological methane, there has been a decreasing trend throughout the Group compared to the same figure for 2015, owing mainly to the implementation of the cogeneration systems and the corresponding heat recovery systems, which produce thermal energy in the form of steam and hot water, which allows the traditional thermal systems to work less.In Gioia del Colle, there was an increase in consumption in 2016 owing to the introduction of a new production line (bottled UHT).

TECHNOLOGICAL METHANE (M3) 2016 GRANAROLO S.P.A.

0

5000000

10000000

15000000

20000000

25000000

ANZIO BOLOGNA GIOIA DEL COLLE

USMATE - VELATE

PASTURAGO SOLIERA VOLTERRA GRANAROLO S.P.A.

Data on 31/12/14

174,552 4,384,508 1,602,207 3,742,709 5,422,572 5,366,310 N.D. 20,692,858

Data on 31/12/15

170,323 3,355,397 1,679,668 3,586,387 4,556,288 3,246,217 N.D. 16,594,280

Data on 31/12/16

158,567 2,914,370 1,788,797 3,939,788 4,575,862 3,934,024 N.D. 17,311,408

ELECTRICAL ENERGY (MWH) 2016 GRANAROLO S.P.A.

0

26000

52000

78000

104000

130000

ANZIO BOLOGNA GIOIA DEL COLLE

USMATE - VELATE

PASTURAGO SOLIERA VOLTERRA GRANAROLO S.P.A.

Data on 31/12/14

3,918 28,505 10,777 28,161 34,568 18,358 N.D. 124,285

Data on 31/12/15

3,889 27,639 10,026 31,705 34,400 17,257 999 125,915

Data on 31/12/16

3,740 26,540 10,988 32,883 34,870 18,336 1,294 128,651

ENERGY INTENSITY IN TEP/TONNE GRANAROLO S.P.A.

0

50

100

150

200

250

ANZIO BOLOGNA GIOIA DEL COLLE

USMATE - VELATE

PASTURAGO SOLIERA VOLTERRA GRANAROLO S.P.A.

Data on 31/12/14

22.4 71.2 43.4 226.5 66.1 36.4 N.A. 61.6

Data on 31/12/15

25.2 66.4 44.5 214.4 64.4 34.0 N.D. 62.7

Data on 31/12/16

28.0 66.1 50.3 198.9 63.8 40.8 N.D. 66.1

In general, we can see that the energy intensity for the Granarolo S.p.A. plants remains in line, or slightly increases, compared to the values for 2014. This tendency is guided by the fact that, between 2015 and 2016, there was a reduction in less energy-hungry productions (milk) and a simultaneous increase in cheese productions, which require a greater quantity of electrical energy and steam per product unit.In the factories where this decreasing trend is less noticeable (Pasturago), or where production is growing (Usmate Velate), or where the productive mixture has remained more or less the same (Bologna), the energy intensity index is stable or decreasing.

WATERThe main actions carried out in 2016 for water saving concentrated on:

• Washing lines and systems, where the use of single product sanitisers was introduced, which do not require a second rinsing, and which allow significant savings in volumes of water;

• Investments in reverse-osmosis systems: in the business year that has just finished, the volumes of water recovered and reused through these systems represent about 5% of the overall water requirements for a factory;

• Installing, in several Group factories, specific meters for measuring consumption in the various phases of the process, in order to identify the areas that most urgently require intervention.

In relation to water saving operations, it is necessary to mention operations to measure water consumption in the various productive departments by installing meters, in order to optimise consumption and define targeted operative strategies, as well as operations linked with the washing phases on the production lines and in systems that use sanitising products (so called single product) that do not require a second rinse, with significant savings in terms of water volume.In a context of increasing water-related stress, and particularly in relation to problems involving over-use and pollution of acquifers in Italy, Granarolo intends to quantify and communicate this type of environmental impact, and to optimise productive processes.

The energy intensity rate is an indicator of energy required by a production system. It is calculated as a correlation between the total yearly energy consumption (technological methane, methane for the cogeneration system and electrical energy purchased from the network) and the company's overall annual production.

ENERGY INTENSITY (ELECTRICAL ENERGY + METHANE) (MJ/KG) 2016 GRANAROLO S.P.A.

0

2

4

6

8

10

ANZIO BOLOGNA GIOIA DEL COLLE

USMATE - VELATE

PASTURAGO SOLIERA VOLTERRA GRANAROLO S.P.A.

Data on 31/12/14

0.5 2.7 1.8 10.0 3.0 1.4 N.D. 2.6

Data on 31/12/15

0.6 2.7 1.8 9.5 2.8 1.4 N.A. 2.6

Data on 31/12/16

0.7 2.9 2.1 8.3 2.8 1.6 N.A. 2.7

170 171

WATER DISCHARGE (M3) 2016 GRANAROLO S.P.A.

0

1000000

2000000

3000000

4000000

5000000

ANZIO BOLOGNA GIOIA DEL COLLE

USMATE - VELATE

PASTURAGO SOLIERA VOLTERRA GRANAROLO S.P.A.

Data on 31/12/14

46,742 932,036 322,009 1,134,786 1,100,000 560,233 N.D. 4,095,806

Data on 31/12/15

47,383 925,281 308,516 1,261,196 1,025,600 585,290 12,000* 4,165,266

Data on 31/12/16

49,016 897,993 312,486 1,284,983 1,025,726 639,116 16,513 4,225,833

At the productive site in Bologna, between 2012 and 2013, we created a plant to recover industrial water, used as supplementary water in the evaporation towers ("non-noble" uses). In 2016, volumes of recovered and reused water represent about 6% of the plant's overall water requirements. In the plants in Soliera and Pasturago too, initiatives were created to reuse washing water in recovery percentages of 2% in Soliera and 5% in Pasturago9.

The following is a representation of water consumption levels for the 2014-2016 period.

WATER USED (WELL + AQUEDUCT) (M3) 2016 GRANAROLO S.P.A.

0

1000000

2000000

3000000

4000000

5000000

6000000

ANZIO BOLOGNA GIOIA DEL COLLE

USMATE - VELATE

PASTURAGO SOLIERA VOLTERRA GRANAROLO S.P.A.

Data on 31/12/14

57,971 876,302 321,919 1,194,512 2,119,457 678,280 N.D. 5,248,441

Data on 31/12/15

57,244 866,565 308,516 1,385,904 1,928,546 604,266 40,000* 5,191,041

Data on 31/12/16

57,862 816,467 312,484 1,412,070 1,904,911 651,797 32,422 5,188,013

In general, water consumption levels in the last three years show a decrease in wastage, in correlation with the development of significant education among designated personnel on washing activities, in addition to more punctual monitoring of consumption levels in order to identify further areas to be improved.

Exceptions are the factories in Usmate Velate - in 2016 an increase of 1% was recorded, owing to the increase in production of mozzarella - Gioia del Colle - recording the same percentage increase as a result of the addition of new systems - and Soliera, with the addition of new items requiring greater quantities of water in the production recipe, like almond and coconut milk.

9 Estimated figure * Estimated figure172 173

The diminishing trend in volumes of hazardous10 waste is justified, since in 2016 no exceptional movements of hazardous waste deriving from emergency situations were recorded. In Usmate-Velate, on the other hand, the 54% increase in non-hazardous waste is owed to the production of new waste, referred to as "sludge from purification system", derived from commissioning of the purification system, starting in November 2016 (this waste, therefore, was never produced in the past). Finally, a 49% increase in hazardous waste in Gioia del Colle refers to the extraordinary disposal of apparatus and filters during maintenance operations.

DESTINATION OF WASTE 2016 GRANAROLO S.P.A.

WEIGHT IN KG % OF COMPOSITION

Of which for disposal 20,070 39.0%

Of which for recycling 31,413 61.0%

Total hazardous waste 51,483 100%

Of which for disposal 104,577 0.7%

Of which for recycling 14,215,698 99.3%

Total non-hazardous waste 14,320,275 100%

It is also worth mentioning that the quantity of non-hazardous waste is significant in terms of mass, since it includes the sludge derived from water purification processes. On average, this waste represents more than 50% of the total. However, it is necessary to keep in mind that, since it contains a very high percentage of water, it significantly increases the overall weight.The sludge, which currently represents the main non-hazardous waste substance derived from the productive cycle, is mainly destined for production of biogas through an anaerobic digestion process, relying on companies authorised for this recovery operation.

WASTE IN KG/TONS OF FINISHED PRODUCT 2016 GRANAROLO S.P.A.

0

10

20

30

40

50

60

70

80

ANZIO BOLOGNA GIOIA DEL COLLE

USMATE - VELATE

PASTURAGO SOLIERA VOLTERRA GRANAROLO S.P.A.

Data on 31/12/14

8 56 7 28 13 14 N.D. 22

Data on 31/12/15

9 66 9 28 13 13 N.A. 24

Data on 31/12/16

10 60 10 39 15 13 N.A. 24

WASTEWe have continued our commitment to differentiated waste collection among Granarolo plants, reinforcing the waste fraction (mainly paper and plastic) sent to recycling centres to reuse or recover the material. The activity in question is also developed through the definition and signing of specific contracts with companies specialised in recovering these materials.Thanks to specific management software for waste management purposes, used in all plants - ISO 14001 certified - Granarolo has started a process to monitor trends in waste production, in order to assess possible areas of intervention and improvement.

WASTE PRODUCED (KG) 2016 GRANAROLO S.P.A.

PLANT TYPE OF WASTEDATA ON 31/12/15

DATA ON 31/12/16 VARIATION %

BOLOGNA

Total hazardous waste 11,275 10,578 -6%

Total non-hazardous waste 7,983,542 6,951,932 -13%

ANZIO

Total hazardous waste 1,676 1,344 -20%

Total non-hazardous waste 305,876 299,983 -2%

SOLIERA

Total hazardous waste 15,267 3,607 -24%

Total non-hazardous waste 2,265,485 2,113,976 -7%

PASTURAGO

Total hazardous waste 29,616 10,540 -36%

Total non-hazardous waste 2,039,367 2,326,835 +14%

USMATE VELATE

Total hazardous waste 16,834 17,350 +3%

Total non-hazardous waste 1,187,998 1,834,815 +54%

GIOIA DEL COLLE

Total hazardous waste 4,299 6,414 +49%

Total non-hazardous waste 665,015 685.314 +3%

VOLTERRA

Total hazardous waste 3,893 1,650 -58%

Total non-hazardous waste 105,337 107,420 +2%

GRANAROLO S.P.A.

Total hazardous waste

82,860 51,483 -38%

Total non-hazardous waste

14,552,620 14,320,275 -2%

10 Hazardous as defined by Regulations on environmental matt174 175

CO2 EMISSIONS - SCOPE 1 (TONNES OF CO2) 2016 GRANAROLO S.P.A.

0

20000

40000

60000

80000

100000

120000

ANZIO BOLOGNA GIOIA DEL COLLE

USMATE - VELATE

PASTURAGO SOLIERA VOLTERRA GRANAROLO S.P.A.

Data on 31/12/14

457 18,998 7,837 38,061 30,371 17,401 N.D. 113,125

Data on 31/12/15

446 19,110 8,029 25,028 27,356 13,111 166 93,246

Data on 31/12/16

415 20,567 8,546 23,397 27,760 15,184 300 96,169

A slight increase in CO2 emissions was recorded for 2016, equal to 3% compared to 2015. This increase is justified, as Scope 1 CO2 emissions are directly linked with the consumption of methane gas which, as shown in the paragraph dedicated to energy consumption, in 2016 increased slightly compared to 2015. On a three year basis, on the other hand, Scope 1 CO2 emissions are found to decrease by 15,000 equivalent tonnes.

In relation to indirect greenhouse gas emissions linked with energy sources acquired for self-consumption by the organisation (Scope 2), we calculated those concerning the purchase of electrical energy from the network.

In the year in question there were no significant spills or accidents in any of the factories considered.

EMISSIONSWith the implementation of the computer tool for collecting and processing environmental data for the factories (Granarolo CSR TOOL), the Organisation has reinforced its ability to measure and report on its impact, also in terms of CO2 emissions. As far as CO2-equivalent emissions are concerned, associated with Granarolo processes/activities, the following main elements are monitored, as indicated in the GHG Protocol:

• Scope 1: direct emissions coming from sources owned or controlled by the company;• Scope 2: emissions linked with energy sources acquired for self-consumption by the

organisation.

CO2-EQUIVALENT EMISSIONS 2016 GRANAROLO S.P.A.

CO2eq : 122,797 t

ELECTRICITY PURCHASED:

54,344,876 kWh

METHANE: Nm3 36,605,395

LPG: L 174,436

CO2 emissions in 2016 reached 0.21 Kg of CO2/Kg of product (this does not include the calculation for the factory in Volterra, since the low value of production would not provide a significant contribution), calculated according to Scopes 1 and 2.The increase in the value of Scope 1 (for Scope 1, emissions increase between 2015 and 2016 by 2,923 tonnes), is justified by the increase in self-produced electrical energy, starting from methane, while the decrease in Scope 2 (in Scope 2, emissions decrease by 1,002 tonnes compared to the previous year) is owed to the decrease in electrical energy purchased from the external grid.

In detail, as far as direct greenhouse gas emissions are concerned - coming from sources owned or managed by the organisation (Scope 1) - the graph shows the figures for each plant concerning CO2.

176 177

Calculated indirect emissions that occur outside of the organisation (Scope 3), refers to a part of the product transportation, the part carried out by the primary fleet, in addition to employees' trips during the execution of their work for Granarolo (excluding transport to and from work).

The table shows that the 2016 values for Scope 3 emissions - associated with Transport of Finished Products - are in line with the values obtained in 2015.

GRANAROLO 2016 WASTE DESTINATIONS

CALCULATING CO2 EMISSIONS - SCOPE 3 PRODUCT TRANSPORTATION 2014 VALUE 2015 VALUE 2016 VALUE

MEASUREMENT UNIT

Emissions from Product Transportation 26,898 25,032 25,570 Tonn.CO2

Average emissions (KgCO2/Km) 1.5 1.4 1.4 kgCO2/km

Emission per Kg of product 0.12 0.12 0.12 kgCO2/kg

A particularly interesting element in terms of emissions derived from transporting products with the primary fleet concerns the composition of the vehicle fleet, which has been updated since 2015. In particular, in 2016, in response to a decrease in the percentage of EURO 4 vehicles, there was a significant increase in EURO 5/6 vehicles.

% TYPE OF FIGURE 2014 2015 2015

% EURO0 vehicles 0.2% 0.0% 0.0%

% EURO1 vehicles 2.5% 2.4% 2.9%

% EURO2 vehicles 15.4% 10.9% 12.8%

% EURO3 vehicles 42.4% 41.9% 42.8%

% EURO4 vehicles 31.8% 36.0% 28.6%

% EURO5/6 vehicles 7.6% 8.8% 13.0%

Total 100.0% 100.0% 100.0%

Applying hybrid technology to heavy vehicles, in Granarolo's assessment, does not appear to be entirely effective. In this sense, we may pay attention mainly to vehicles with a lower capacity, where we are applying specific solutions aimed at reducing impact and emissions. For example, Granarolo has decided to use methane powered vehicles for deliveries in historical centres.

As far as employee transport is concerned, Granarolo annually monitors the kilometres travelled by car, ship and train by personnel, during their operating activities. The table provides a summary of equivalent CO2 emissions (Scope 3), according to the means of transport used.

CALCULATING CO2 EMISSIONS - EMPLOYEE TRAVEL 2016 INDICATOR MEASUREMENT UNIT

Emissions from Car Transport 1223 CO2 equ. tonnes

Emissions from Train Transport 47.17 CO2 equ. tonnes

Emissions from Ship Transport 0.003 CO2 equ. tonnes

CO2 EMISSIONS - SCOPE 2 (TONNES OF CO2) 2016 GRANAROLO S.P.A.

0

5000

10000

15000

20000

25000

30000

ANZIO BOLOGNA GIOIA DEL COLLE

USMATE - VELATE

PASTURAGO SOLIERA VOLTERRA GRANAROLO S.P.A.

Data on 31/12/14

1,920 9,012 2,685 4,354 4,887 6,680 N.D. 29,538

Data on 31/12/15

1,906 6,608 2,552 5,393 5,289 5,393 489 27,630

Data on 31/12/16

1,832 4,049 2,706 6,840 5,052 5,515 634 26,628

Unlike the direct CO2 emissions - calculated in Scope 1 - in this case we see a reduction in indirect CO2 emissions (equal to about -4%).The most significant variations can be observed for the factory in Bologna (-39%) - which can be explained by the reduction in internal production and with the increase in self-produced electrical energy (+28%), following the commissioning of the third cogeneration motor.

In the factory in Usmate-Velate, the increase in productive volumes in 2016 (+12%) required a greater quantity of electrical energy in absolute values (+4%), which, combined with a lower self-production value for the old cogeneration system (-9%), resulted in a need to use a greater quantity of electrical energy taken from the grid (+27%), with the subsequent increase in emissions (+21%).For 2017, we expect a reversal in this trend, and a decrease in indirect emissions at the Usmate factory, following activation of the new cogeneration system, which took place in April 2017.

178 179

In collaboration with their suppliers and startups, Granarolo regularly participates in national research projects intended to study and develop biodegradable polymers, in order to use them to replace traditional plastic packaging materials. In 2017, a research activity began on bio-plastics, with a start-up in Puglia called Eggplant, which has developed and patented an innovative technology to reuse wastewater from the food and agriculture industry to produce PHA (Polyhydroxyalkanoates) bio-plastic. PHAs are the components of a 100% natural and biodegradable, high-performance bio-plastic, to replace traditional plastic materials derived from fossil fuels (PE, PP, PET).

Also in 2015-2016, operations were carried out to reduce greenhouse gas emissions involved in the production of packaging materials for certain products, which are added to those already carried out in previous years, and which are listed in the following table.

PRODUCT INTERVENTION

Fresh Milk in Tetra TopNew Tetra Top package gives the consumer clear and transparent information on the procedures for separating the plastic part from the paper/PE polylaminate material.

UHT Milk in TEA (Carton Bottle)

New TEA package gives the consumer clear and transparent information on the procedures for separating the plastic part from the paper/PE/ALU polylaminate material.

Yoghurt New Paper/PE cup which makes it possible for the consumer to separate the paper from the PE (operative from 2016).

CENTRALE DEL LATTE MILANO AND THE TETRA TOP® SMART CONTAINER

In response to doubts as to where to throw food containers made of multiple materials, like in the case of milk cartons made of paper and plastic, the Centrale del Latte Milano offers an interesting solution developed in collaboration with the international leader in packaging, Tetra Pak. The historical brand from Milan, in fact, for the one litre fresh milk packs offers an innovative system to recycle paper and plastic separately, using the new Tetra Top container that allows consumers to separate the polyethylene (plastic) cap from the rest of the polylaminated packaging (polyethylene/paper).

On the Italian market, there are about 200 million containers called Tetra Top, of which 80% have the top end that can be separated, allowing the parts to be disposed of in the designated plastic and paper containers. Today, products packed with this innovative container include fresh milk, yoghurt and cream.In 2017, provision is made for a further extension for this environmentally-friendly container to other products as well.

The Tetra Top container is subject to a patent.

6.2.3 REDUCING THE IMPACT OF PACKAGINGActivities to optimise packaging materials are ongoing, aimed at saving, export, and shelf-life activities. Granarolo's commitment to reducing environmental impact in packaging led to the industrialisation of important projects in 2016. In particular, there was a reduction in the quantity of plastic used in milk packaging, both by decreasing the thickness of the PE film (bottle weight from 50 micron to 45 micron), and by standardising the weight of fresh milk preforms (from 22.3 g to 21.7 g).

NUMBERS FOR THE PROJECT TO REDUCE THE THICKNESS OF PE FILM

Considering the overall volumes of production in 2016, and quantifying the pack savings in terms of weight, we have simulated the potential decrease in environmental impact, which can be generated by applying the project to the factories of Anzio, Bologna, Podda, Castrovillari, Gioia del Colle, Pasturago and Soliera.

The saving that can be generated by the project would be equal to:" Saving 59,665 Kg of film" Saving 204 tonnes of CO2 " Saving 1,357,276 Km by car (equivalent to 34 times around the equator)" Lighting a city with 3,341 inhabitants" Covering the annual consumption of gas for 118 families

There is also a series of projects in the prototyping and as yet un-industrialised stage, which have received particular mentions/acknowledgements even from third parties. The following are worth mentioning::

1. "Fully-compostable Cassava-based milk bottle", in which all components of the package (bottle, label and top) are obtained from the same raw material;

2. "Bio Bottle", using 25% recycled PET;3. "Cold shrinking of packages", which requires using a very thin film and a cold wrapping

machine. This new technology allows a 90% energy saving, owing to elimination of the use of furnaces, and a saving of about 50% in the quantity of plastic used;

4. PLA yoghurt tub.

In order to continue this path, in 2017 we will be working on important projects intended to reduce packaging. In particular:

1. weight reduction in ESL preform, from 25 g to 23.75 g.; 2. weight reduction in Multilayer 1/2 l preform, from 25.6 g to 23 g;3. reduction in black and white colours on the Multilayer UHT litre bottle, which involves

a reduction in the white colour from 1.77 g to 1.36 g, and in the black colour from 0.32 g to 0.19 g.;

4. a reduction in the thickness of all yoghurt capsules, from 38 my to 30 my; 5. weight reduction in Yomo yoghurt tub from 5.5 g to 5.3 g; 6. weight reduction in mozzarella sachets. The 60 my Nylon/PE composition will be changed to a

42/50 my PET/PE composition.

Finally, the internationalisation process requires ongoing changes to primary and secondary packaging, to support specific distribution procedures.The central Research and Development laboratory in Bologna is enriched every year with new equipment capable of characterising the performance of materials and packaging, and checking their environmental sustainability. In the Pack Laboratory, there is also a 3D printer to create prototypes.

180 181

6.2.5 ENVIRONMENTAL TRENDS IN THE GROUP'S COMPANIESThe following is a presentation of the trends in the Granarolo Group subsidiaries, partially presented already in the previous Sustainability Report, for 2015, and partially the result of the most recent acquisitions. Subsidiaries whose data is not indicated, and whose trends are not discussed, became part of the Group during 2016. Therefore, we will need to wait for the 2017 edition of the Sustainability Report, in which the companies will be compared with the others.The difference between the subsidiaries concerns both the type of production and the size of the plants. Therefore, the data indicated below are to be considered only as trends for each of them, and do not allow for comparisons between performance levels. The following graphs provide some information on shared consumption, between electrical energy, methane (including the part that powers the company cogeneration systems) and other sources (fuel oil and LPG).

ELECTRICAL ENERGY (MVH)

0

5000000

10000000

15000000

20000000

SubsidiariesGennariLesignano

GennariParma

AmalatteaPastificioGranarolo

PoddaCalabria Latte

5,707,440

2,662,0811,584,971 1,833,367 2,031,873 1,529,798

15,349,530

METHANE (M3)

0

300000

600000

900000

1200000

1500000

SubsidiariesGennariLesignano

GennariParma

AmalatteaPastificioGranarolo

PoddaCalabria Latte

746,414

372,173

253,784

125,782

1,498,153

6.2.4 EXPENSES, COMPLAINTS, AND ENVIRONMENTAL FINES In relation to expenses for environmental protection, equal to 2,236,460 € in 2016, the main costs were for water purification11 (70%) and waste disposal (30%). Environmental investments increased compared to 201512, going from about 1,420,000€ in 2015 to about 1,770,000 €, thus confirming the Group's commitment to sustainably managing natural resources, waste, and pollution.

As far as Granarolo S.p.A. plants are concerned, in 2016 we recorded an environmental fine for the Pasturago plant, related to an event that occurred in 2012: exceeding a parameter in the purification system output. As far as complaints concerning environmental impact are concerned - presented through formal complaint mechanisms - no external complaints were recorded for 2016 on environmental aspects concerning the various plants. In spite of the fact that the industrial activity at Granarolo S.p.A. does not involve risks linked with the environment, the risk prevention and control activity (environmental pollution, waste disposal, waste water treatment, etc.) remains one of the pillars of the company policy.

11 Calculations of the main costs sustained for water purification considered only the costs of factories that have an internal purifier, or that have a waste water discharge into the public sewage system. 12 The most important item concerns the second step in reinforcing the purification system in the Usmate Velate factory.

182 183

Then there are other indicators of environmental impact, such as CO2 emissions (Scope 1 and 2), waste water and waste produced, compared to overall production. For both CO2 emissions and waste water emissions, it is possible to see how the values for Calabria Latte stand out compared to the others, in line with the productive activity, which is about ten times higher than in other companies.

EMISSIONS (Ton CO2)

SCOPE 1 SCOPE 2

0

1000

2000

3000

4000

5000

6000

7000

8000

SubsidiariesGennariLesignano

GennariParma

AmalatteaPastificioGranarolo

PoddaCalabriaLatte

3,357

1,780

9591,304

975 777494

898 665996

329750

6,7796,506

FUEL OIL (KG) & DIESEL FUEL (L)

0

50000

100000

150000

200000

250000

300000

350000

400000

SubsidiariesGennari LesignanoGennari ParmaAmalatteaPastificio GranaroloPodda

254,630

127,090

5,000 5,000

381,720

FUEL OIL (KG) LPG (L)

ENERGY INTENSITY(ELECTRICAL ENERGY + METHANE) (MJ/KG)

0

5

10

15

20

Gennari LesignanoGennari ParmaAmalatteaPastificio GranaroloPoddaCalabria Latte

2.4

6.5

16.5 17.1

4.5 4.9

The energy intensity varies depending on the company and its specific productive activity, reaching higher values for Pastificio Granarolo and Amalattea, where production is found to require higher energy consumption levels.

184 185

WATER DISCHARGE (M3)

0

50000

100000

150000

200000

250000

300000

350000

SubsidiariesGennariLesignano

GennariParma

AmalatteaPastificioGranarolo

PoddaCalabria Latte

232,773

69,756

2,906 8,769 11,864 12,784

338,852

WASTE KG / TONS OF FINISHED PRODUCT

0

50

100

150

200

250

300

SubsidiariesGennariLesignano

GennariParma

AmalatteaPastificioGranarolo

PoddaCalabriaLatte

3345

60

278

52

237

54

186 187

THE CORPORATE CITIZENSHIP, AT LOCAL AND GLOBAL LEVELS

7

IN SHORT

CORPORATE CITIZENSHIP

25,000STUDENTS REACHED THROUGH

THE FREE DISTRIBUTION OF 1,000 KITS DEDICATED TO THE MILK PRODUCTION CHAIN AND TO CONSCIOUS CONSUMPTION

566.9 TONNES OF PRODUCTS DONATED

TO 8 ASSOCIATIONS IN THE TERRITORY DURING 2016, FOR A THEORETICAL NUMBER OF 1,135 EQUIVALENT MEALS

DONATED DURING THE YEAR

30%MORE, COMPARED TO 2015, FOR INITIATIVES AIMED AT

AREAS WHERE THE BRAND IS NOT TRADITIONALLY PRESENT

3,000COPIES OF "LA VIA LATTEA" [THE MILKY WAY] SCHOOL

GUIDANCE PAMPHLET, DISTRIBUTED TO SECONDARY

SCHOOL STUDENTS

1 MICRO PRODUCTION

CHAIN FOR MILK CREATED IN TANZANIA WITH RAW

MATERIALS FROM 800 LOCAL FARMERS (=WORK FOR MANY FAMILIES) AND SAFE MILK FOR

26,000 CHILDREN

1HUMAN MILK BANK SERVING

THE SANT'ORSOLA AND MAGGIORE HOSPITALS IN

BOLOGNA + THE HOSPITALS IN FERRARA, PARMA, AND IMOLA. 2,196 LITRES OF HUMAN MILK

COLLECTED

6,740 VISITORS WELCOMED TO

THE GROUP'S FACTORIES IN 2016, FROM 19 DIFFERENT

COUNTRIES (INCLUDING STUDENTS)

25,000 CHILDREN WHO RECEIVE FREE

MILK EVERY WEEK

OBJECTIVES FOR 2017

SDG AND PERTINENT ISSUES

REACHING AT LEAST ANOTHER 5,000 FAMILIES WITH THE FESTE DEL LATTE [MILK FESTIVALS] AND EXTRAORDINARY FACTORY OPENINGS

PROMOTING KNOWLEDGE OF THE NUTRITIONAL VALUE OF MILK THROUGH THE GRANAROLO FRESCO PROJECT, IN ITALY AND ABROAD

ORGANISING AN EXTRAORDINARY PROMOTION OF THE DONATED HUMAN MILK BAN

WORKING ON FOOD SAFETY BY REINFORCING THE AGRICULTURAL/FARMING SECTOR IN MOZAMBIQUE IN THE PROVINCES OF GAZA AND SOFALA (AFRICHAND PROJECT)

TO OPEN AT LEAST 2 NEW COMPANY FACTORY STORES SELLING SHORT EXPIRY PRODUCTS

BEING ACTIVE CITIZENS AT LOCAL AND GLOBAL LEVELS

THE NUMBERS OF THE "TARANTA SOLIDALE" PROJECT

On 1,800,000 bottles of milk under the labels of Granarolo and Perla - a historical milk label in Puglia - a label appeared, telling people about the "Taranta Solidale" project, and inviting consumers to contribute actively, in order to overcome indifference towards the suffering of both Italian and foreign families in difficulty.

7.1.1 PROJECTS IN FAVOUR OF THE COMMUNITIESGranarolo invests in projects with social content, to which, traditionally, it brings not only resources, but also specific skills, linked with the sector in which we work, as well as the knowledge acquired over time. In this way, as a Group we believe it is possible to achieve development through dialogue with the territories, as an element of mutual awareness.

BREASTFEED ME - ALLATTAMIEvery year, in the city of Bologna, 100 children are born prematurely, and fight every day against innumerable difficulties, infections, and severe complications, that can compromise their ability to make it. The science is conclusive: human milk increases the chances of survival among premature newborns, and favours their growth and development. Unfortunately, however, due to great physical and psychological stress, the mothers of these infants have little or no milk whatsoever. In order to respond to this need, in 2012 Granarolo and the S. Orsola Polyclinic founded "Allattami" [Breastfeed Me] - the Donated Human Milk Bank in Bologna. "Allattami" selects the donor mothers, collects their milk directly from their homes, preserves it in absolutely safe conditions and supplies it to the city hospitals.

"Allattami" Donor Mothers - selected by the doctors at the Sant'Orsola Polyclinic, receive all the information they need and are equipped with the necessary apparatus to extract and preserve the milk, without any expense or inconvenience for them. In fact, a specialised Granarolo technician comes by to collect the donated milk directly from the donor's house once or twice a week. In 2016, the project also involved former female employees - now on pension - and unemployed youths, who contributed to collecting the milk and distributing it, after pasteurisation, to the hospitals.

The milk is taken to the facility that houses the Donated Human Milk Bank, which is located near the Granarolo Plant in Bologna, in an independent area. There is no promiscuity with the areas where cow's milk is produced, or even with the offices, in order to guarantee the highest safety standards. Once they arrive at the Milk Bank, the bottles are sealed and heat treated with a light pasteurisation, in order to make them as safe as possible for the newborns that will receive them. They are then stored in designated refrigerators. Each of the bottles' steps is tracked: from when they are delivered - empty and sterile - to the donor's home, to when they reach the Neonatal Intensive Care unit that requested them.

ALLATTAMI 2016

153TOTAL DONORS

18,301BOTTLES COLLECTED

2,196LITRES OF MILK (considering an average of 120 ml per bottle)

7.1 GRANAROLO IN THE TERRITORIES: A COMMITMENT TO INCLUSIONThe commitment to and vicinity of territories on which the Granarolo Group is brought to reality through the presence of its farmers and plants, and is inspired by the value of inclusion, which, over time, has taken on an even stronger value. In fact, as a result of mapping of the social initiatives carried out in the first half of 2015, which showed a significant imbalance in favour of the regional territories of Emilia-Romagna and Lombardia - fruit of the still recent past and a natural inclination to invest the most in the regions that are home to the head offices and a high number of productive plants, the Group's Board of Directors opted for a political and social revision to favour redistribution of the resources, to include the increasing number of local communities in the Group.

If, then, in 2016 initiatives in favour of Emilia-Romagna and Lombardia represented 72% of total investments (80% in 2015), with the remaining 38% of resources distributed to support initiatives in the rest of Italy, the declared objective for 2017 is to balance initiatives, with about 60% aimed at the original territories and 40% to the rest of Italy, particularly focusing on two areas defined by the Board for the coming year, namely the territories of Puglia and Sardinia, like last year.

In light of this, in 2016 we created new initiatives aimed at the principle of inclusivity, even in relation to the most recently added territories, described briefly below.

• Support for Made in Carcere, a project to bring employment to women in prisons in Lecce, Milan and Trani: small gadgets given as gifts to visitors to Granarolo facilities, are now the fruit of the labours of the Made in Carcere women, and made from recycled fabrics.

• The publication entitled "Io non volevo andarmene da casa" [I didn't want to leave home] by Jaja Pasquini, with texts by Francesco Guccini, a book telling children the dramatic story of emigration through the eyes of a child. The book is distributed free of charge to all elementary school students encountered in visits to the company facilities or through local initiatives.

• Support for Fondazione Notte della Taranta, in Puglia: the Granarolo Group - with the collaboration of this institution that supports the heritage and development of folk music, and with the help of the Caritas volunteers - supported the Otranto migrant hospitality centre by distributing significant quantities of milk and pasta, to support migrants who land on the Salento coastline between June and October 2016.

• Active participation in Time in Jazz in Berchidda (Sardinia) - a free folk music event created by Paolo Fresu, to promote knowledge of and love for music among young people. This initiative will continue in 2017.

Among the many initiatives planned for 2017, it is worth mentioning:

• Donation of a refrigerated van and a refrigerator to Cucine Popolari, a service that provides meals for the homeless and other people in difficulty.

• Support for the docu-film entitled "Son Morto che ero bambino" [I died when I was a child], covering a trip to Aushwitz with Francesco Guccini and Monseigneur Zuppi, with a group of middle-school students.

• Promoting visits to museums on milk labels.

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EDUCATION AND CONSCIOUS CONSUMPTIONEvery year, Granarolo organises family workshops called "Milk for all tastes" at the Museum of Science and Technology in Milan. These are practical workshops for children from the age of 8 up, in which they can experience the qualities of milk and dairy products, discovering how pasteurisation takes place and what its benefits are.

Granarolo is also among the promoters of "La Casa di Lola - Da Cosa Nasce Cosa" - an educational kit for classes in the fourth and fifth years of elementary school, dedicated to the milk production chain and to conscious consumption. Use of the kit has the purpose of creating classroom itineraries dedicated to healthy and balanced nutrition from an early age.

In 2016, the project continued for primary school students (in the fourth and fifth year), and was highly appreciated. Overall, 1,000 free sample kits are distributed to schools around the country, equal to about 25,000 children reached.In addition, in 2016 we began a school orientation project for secondary school students, with the distribution of 3,000 copies of "La Via Lattea" to the kids.

EDUCATION AND CONSCIOUS CONSUMPTION IN NUMBERS:

25,000 students in primary schools reached through the free distribution of 1,000 educational kits dedicated to the milk production chain, and to conscious consumption.

3,000 copies of “La via lattea”, a school orientation pamphlet, distributed to kids in secondary school.

In 2016 we continued the initiative called "Guadagnare Salute” [Gaining Health]: through a series of events, we distributed about 40,000 pamphlets. These are intended as guides to balanced nutrition for children and adolescents, elderly people and athletes, written in simple and conversational language, but validated by scientific data and the patronage of the Ministry of Health. They are intended as a help for all reference targets.

SUPPORTING SPORT AND CULTUREGranarolo has always supported certain sports and cultural initiatives in the communities where we work, under the conviction that healthy food is not enough to nourish the body, and that sport and culture - in a broad sense - are also necessary. That is why we have taken on the role of facilitators in this sense in our communities.

That is why we support and promote sponsorships supporting sports initiatives in the territory (including the Giro dell'Emilia, the Stramilano, and the Trofei di Milano in Lombardia).In 2016, Granarolo also confirmed its partnership with the Italian Gymnastics Federation through the Yomo brand.

In addition, in September 2016 Granarolo Group reached an agreement for a partnership with Bologna FC 1909 for the 2016-2017 season. Granarolo - a historical sponsor for the team for four championships, from 1997 to 2001 - accompanied Bologna in the dual role of Top Partner of the first team, and Official Partner of the youth team. In fact, Granarolo will be present on the match shirts (arm patch) of all the kids in the Allievi, Giovanissimi and Esordienti categories, and will accompany them throughout the championship.The interest for youth teams is linked with the fact that the kids are the true recipients of the future image of sports, bringing a positive message of loyalty and sportsmanship. Bologna FC 1909 has built, around youths, a new, beautiful value-based project, which also considers a significant commitment to bringing families back to the stadiums.

1

34

5

6 2

The following are the distinctive characteristics of the Milk Bank in Bologna, hosted by Granarolo:

• "Allattami is the only milk bank, out of the 27 in Italy, created outside the hospital areas and totally financed by a private company, namely Granarolo.

• The hygienic and safety criteria are at the highest levels.• The traceability system makes it possible to control the entire process. For example,

continuous wireless control of temperatures is carried out on the freezers and the pasteuriser, which the system automatically records and associates with the bottle's label.

• The bottle is sealed on arrival at the Milk Bank. It is never opened by the operators until the day it is administered, in order to make the process even safer and to exclude any contamination.

• The same day the milk is administered to the newborn, the tracking system automatically sends a text message to the donor mother to notify her: a small gesture in exchange for a gesture of great love.

The project has passed the boundaries of the province. In fact, in addition to the hospital in Ferrara, which was included in the project in 2013, at the end of 2016 the hospitals of Parma and Imola also joined the project, thanks to an agreement with the Italian Red Cross. This model has become a point of reference for efficient collaboration between the public and private sectors, and is often mentioned in the media. The project is very engaging even for the Group's human resources: many people, in fact, take turns coordinating the project, and ask to participate actively, acknowledging its important significance.

For further information: www.allattami.it

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OPENING THE PLANTSGranarolo is aware of how much being able to know how a large company in the milk and cheese industry operates is a great opportunity for all, and particularly for students. Throughout 2016, the Group continued to host visitors of all ages and school levels - free of charge - at our largest productive plants (crèches, elementary schools, junior and senior high schools, right up to university courses and post-graduate courses), including educational tours of the productive process, with classroom lessons to explore interesting topics and even specific workshops, continuing a profitable relationship with schools and universities. During the year, following in the footsteps of the factories of Pasturago, Bologna, and Gioia del Colle, the Soliera factory also officially opened to school visits. In 2016, the Group's facilities welcomed almost 6,500 visitors.After the significant increase owing to Expo 2015, visits from delegations also continued - more than 20 institutional, international, and academic delegations, including those for the Ambassador of the United States in Italy, the delegation for Maurizio Martina - the Minister of Agricultural, Food and Forestry Policies, the University of Edinburgh, the International Food Marketing Research Symposium 2016, the National Order of Biologists, and the Association of Professional Italian Chefs.For Granarolo, this represented an important opportunity to promote the Made in Italy label and the culture of quality.

HOSTED INDIVIDUALS PASTURAGO BOLOGNA GIOIA DEL COLLE SOLIERA

Crèches 60

Primary School 100 991 25 34

Middle School 803 348 136 88

High School 494 1,753 567 97

Universities/Masters/Training Courses 142 118

Institutional, foreign, academic/association delegations

645

Total 1,3973,939

(4,249 with summer camps)

846 (882 with summer

camps)219

Granarolo also promotes several cultural initiatives, including:

• Teatro Arena del Sole and Teatro Testoni Ragazzi in Bologna• The Museum of Peasant Farming Culture in Bologna• The Musica Insieme Foundation in Bologna• The Leonardo da Vinci Museum of Science and Technology in Milan• The journalism championships for kids promoted by QN (Quotidiano Nazionale) in various

Italian regions.

In 2016, support for the Lercaro Foundation - which is home to artworks from various periods - continued. In particular, Granarolo supported recovery and appreciation of food-related ceramics from Puglia dating back to the Fourth century BC.

THE COMMITMENT TO SUSTAINABILITYGranarolo is a partner in the promotion and active support of "Cooperare con Libera Terra”, the national agency for the promotion of cooperation and legality, established on 27 May 2006 and including the participation of cooperatives, associations, and public entities. The association's objective is to support the development and entrepreneurial consolidation of new cooperatives established on property confiscated from organised crime, by asking associated companies to provide competence and professional abilities. In 2012, Granarolo committed directly to supporting the development of the first Libera Terra cooperative, established in Castel Volturno, in Campania, and called "Le Terre di Don Peppe Diana", which produces buffalo mozzarella. The cheese factory was also established thanks to the skills provided by Granarolo, and is located on land confiscated from the camorra, representing a stronghold for legality. Granarolo continues to promote the cheese factory's growth, also by reporting the attacks that the cooperative receives periodically.

Granarolo is also among the founding partners of Impronta Etica, a non-profit organisation to promote and develop corporate social responsibility, established in 2001 by will of certain companies from the Emilia-Romagna region, already committed to sustainable development. Granarolo is already a part of the Steering Committee of Impronta Etica and was Chairman until 2007. We currently cover the role of Vice Presidency.

For 2016, the Group supported the CSR Fair, promoted by Impronta Etica and SCS Consulting under the patronage of Alma Mater Studiorum University of Bologna in the part that takes place in Bologna. In a moment of great changes in society, in nutritional habits at a global level, in attention to sustainability, Granarolo's objective was to share how social and economic traits of a territory in which it insists the most may represent the foundations for entrepreneurial and social paths that combine innovation and sustainability, through the support and direct involvement of Universities and in synergy with the many excellent companies in the territory. The Group will continue this commitment, supporting the initiative in 2017 as well.

The Group also participated in the second edition of the World Food research and innovation forum, promoted by the Emilia-Romagna Region, with the contribution of Aster, a consortium for innovation and industrial research. The initiative took place, in May 2016, in Parma, the heart of the Food Valley, and concerned issues of strategic importance for the future of the planet, including safe access to food, and in sufficient quantities for all. The objective of the forum was to favour sharing research, experiences and knowledge, in addition to launching the challenge of rethinking the organisation of agricultural production, and striving for innovation and technology.

The Group financed a two-year research grant, intended to develop a model for assessing the maturity of sustainability practises. In collaboration with a network of businesses in Emilia Romagna (CAMST, COOP Alleanze 3.0, Manutencoop, and Unipol Group), and with the University of Bologna. The final objective is to carry out research on the sustainability practises, breaking up sectors and dimensions.

Granarolo finally participated in Pact for Youth, a European initiative, promoted by CSR Europe and by the CE Employment & Social Affairs Department, to promote employability and the social inclusion of young people by developing partnerships between businesses and the educational system.

196 197

MINIMISING RETURNS AND REUSING PROCESS SCRAPSAt the end of 2016, we developed procedures governed by an algorithm to systematically clean up the assortment of items that have high return rates.A procedure was also activated to recover process scraps. In fact, the cheese making process generates a significant quantity of waste: from processing 10 Kg of milk in the dairy factory, an average of 1-2 Kg of cheese are obtained, compared to 8-10 Kg of waste. Dairy waste water is entirely free of toxic agents or inhibitors of bacterial activity. However, owing to their high organic content, they cannot be discharged directly into bodies of water, and they are not always easy to process with purification systems. In the specific case of cheese, the waste liquid is called whey. Granarolo uses it to make ricotta, and as an additive in other food and patisserie products. After separation of the ricotta - which is the last phase in the dairy processes and leads to removal of most of the protein still present in the solution - the whey is called "scotta". To find a further use even for this "scotta", a project was created to directly use it to produce bio-plastics.

7.2 GRANAROLO'S CONTRIBUTION TO MAJOR ISSUES AT NATIONAL AND INTERNATIONAL LEVELSGranarolo is fully aware of the international challenges concerning agricultural production and productive models, the improvement of international trade, commercial trade and consumption, and access to nutrition, and intends to make a contribution - in terms of skills and sensitivity - to researching and identifying paths to improvement on these issues. Granarolo plays an active role in many contexts.

7.2.1 THE COMMITMENT TO FOOD INNOVATIONStarting in 2015, Granarolo planned and participated in many initiatives concerning food innovation - the meeting point between nutrition and technology. Before EXPO 2015, we participated in the first edition of Seeds and Chips, based on the idea of putting large companies in contact with young people and start-ups from all over the world. This was followed by the numerous initiatives after the six months of the exposition, and the contribution made by the birth of Think4Food, a round table of "thinking heads" in cooperation, to define the need for innovation in companies and to create the tender application to involve start-ups and university spin-offs. Think4food worked to select start-ups that will be awarded in the summer of 2017. Among the projects selected, it is worth mentioning My-Grants, a vertical Web-App, created by Christian Richmond Nzi and dedicated to informing, training, and supporting all immigrants landing on Italian coastlines and located in (first and second) hospitality centres. Using three themes (rights & exile, social challenges, entrepreneurship), provided in progressive quiz forms, the user's prior skills are monitored, in addition to the ability to acquire new notions, dedication, perseverance, interests, shortcomings, and ambitions.

In 2016 we renewed our commitment to promoting this way of thinking in all contexts, activating new collaborations even with Universities and representative organisations. We have confirmed our active participation in the second edition of Seeds and Chips, in addition to our collaboration with a very important university masters course with an international twist, the International Food & Beverage Management course, organised by ESCP Europe Business School, the oldest business school in the world. Granarolo's involvement in the Masters course was twofold: on one hand we will act as a vehicle for food culture through lessons to company managers, on the other we will be able to choose from a network of young and brilliant students from Italy and abroad.

THE "BUON CASALE" FACTORY SHOPS: SAVING AND FIGHTING FOOD WASTAGE

In 2015, Granarolo Group opened the first "Buon Casale" retail points. These are company factory stores, with "last minute" offers, at the Granarolo plants in Gioia del Colle and Bologna. It is a kind of self-service "fresh market" where private consumers, Ho.Re.Ca. operators, farmer shareholders and Granarolo employees have the chance to find special prices on a vast assortment of products from the Granarolo portfolio (milk, yoghurt, fresh and seasoned cheeses - even DOP, cold cuts, packaged egg and semolina pastas and much more, under the Granarolo, Yomo, Pettinicchio, Podda, Amalattea, Pinzani, Croce di Magara, Gennari, and Pastificio Granarolo labels), in addition to a selection of other cold cuts, oven products (bread, pizza, piadine and desserts), ready-made dishes, salads, and drinks and fruit juices - all of which vary according to the seasons.

COMPANY FACTORY SHOPS BOLOGNA GIOIA DEL COLLE TOTAL

Net turnover € 372,526 € 125,101 € 497,627

No. receipts 29,853 12,501 42,354

Total volumes of products sold at the outlets in 2016 1,295 (quintals) 675 (quintals) 1970 (quintals)

Of which total volumes of products with short-term expiry sold 31.1 (quintals) 18.7 (quintals) 49.8 (quintals)

Companies that signed agreements in 2016 38

No. of items available More than 500

The Buon Casale retail points were designed with sustainability in mind, and to avoid wasting products with a short shelf life and to allow consumers to save on the retail price, in addition to avoiding normal overstocking phenomena that usually transform into wasted food.In 2017, a new factory shop is expected to open in Modena.

GRANAROLO AND THE FIGHT AGAINST FOOD WASTAGE

Through recovery of unsold goods in the company factory outlets, Granarolo makes donations of food products to 8 local associations, who use them for distribution to people who are in need, or to make meals for these people.

In detail, the object of the donations are products that are still intact in their functions in terms of use, nutrition and hygiene, but have been withdrawn from sale as they no longer comply with quality and service standards. Owing to Granarolo's specific situation, these are mainly products like yoghurt, fresh milk and cream, fresh and hard cheeses, butter, gastronomic products and vegetable products, for a total of 57 different product families and 528 items.

In 2016, Granarolo donated 566.9 tonnes of products. Out of the total quantity of donated products, it is possible to estimate a theoretical number of equivalent meals which, over the past year, is equal to about 1,135 meals (1 equivalent meal corresponds to about 500 g of food according to the estimate applied by the Fédération Européenne des Banques Alimentaires).

Since 2017, other products, like pasta and eggs, are also available for donation.

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7.2.3 ACTIVE PARTICIPATION In the national context, Granarolo participates in CLAN (Cluster Agroalimentari Nazionali) with the purpose of creating a national network in collaboration with the University of Bologna and Federalimentare. Granarolo also takes part in thematic round tables for Europe 2020 and Horizon 2020, the framework program launched by the European Union for Research and Innovation.In 2016, the "Cucinare la salute con Gusto" project continued. This project is dedicated to promoting tasty and healthy cuisine: chefs, dieticians and experts in sustainability interacted in multiple occasions with the public, in order to give advice and to combine tasty, nutritious and environmentally sustainable cuisine. The objective of the initiative was to increase awareness - as much as possible - among interlocutors of the possibility of eating well, while protecting one’s own health and the health of our planet. "Cucina la Salute con Gusto" is a project that involved - in addition to Granarolo - the Association of Professional Italian Cooks (APCI), the National Dieticians' Association (ANDID), LifeGate, and a few other large companies. Between 2016 and 2017, it also entered the great Italian Hotelier Institutes, with an Apprenticeship programme which will reach its conclusive phase at the Host trade fair in Milan.

7.2.4 PROMOTING SUSTAINABLE DAIRY PRODUCTION CHAINS IN DEVELOPING COUNTRIES

Africa Milk Project is an international cooperation project for self-development promoted by CEFA Onlus, in collaboration with the Granarolo Group. Established more than 10 years ago, the project had the objective of developing - around the Njombe Milk Factory (a social dairy located in one of the poorest districts of Tanzania) - a micro milk production chain, a small but self-sufficient agricultural and livestock-farming system capable of producing milk and distributing it to families and schools, while simultaneously ensuring food and work.

Today, the Milk Factory in Njombe takes the raw material from 800 local farmers, provides work to 800 people, and supplies milk, for free, to 26,000 children in order to educate families on the consumption of milk. From the start, Granarolo supported the development of the dairy in Njombe by means of financial contributions and training for farmers - even with courses held at our factories - in addition to other forms of support.

Since 2009, the Group has intended to give a stronger impulse for growth to this experience, also by involving our consumers, also in coherence with the principles of cooperation for self-development, creating the africamilkproject.org website and Facebook page. In 2015 New.Co. was founded, directly controlled by the local authorities and farmers in Tanzania, reaching the project’s target: self-development and autonomous management. With the "Africa Milk Project: love your land, fight poverty, drink your milk”, CEFA the seed of solidarity, Granarolo, the Italian Ministry for Foreign Affairs and the Njombe Livestock Association in Tanzania won first prize for Best Practice in the category: "Sustainable development of small rural communities in marginal areas”, at Expo 2015

In 2016, AfricHand Project was established, an initiative to create a milk/cheese factory in Beira, Mozambique. Around it, under the initiative of CEFA Onlus and Granarolo, institutions and territorial authorities united, and investments were made to train families and farmers. 2017 will be dedicated to training and accompanying farmers, with the purpose of improving the characteristics of the raw milk, with food safety in mind. The regions involved: Gaza and Sofala.

7.2.2 THE PERMANENT MILK OBSERVATORYIn 2014, Granarolo sponsored - in collaboration with the Ministry of Agricultural, Food and Forestry Policies - the birth of the permanent milk Observatory called "Mangiar Sano, Filiera Italiana" [Eating Healthy, Italian Production]. The observatory was established on the initiative of group of consumer associations (ADOC, Federconsumatori Nazionale, Cittadinanzattiva, Movimento Consumatori) with a dual purpose:

1. to promote awareness of nutrition aspects also linked to food safety, necessary for providing consumers with information of general interest about the Italian production chain;

2. to guarantee supervision of guarantee and protection of quality and of the Made in Italy label.

In particular, the Observatory deals with promoting interdisciplinary and inter-sector studies and research, in Italy and abroad, in collaboration with public institutions (national, regional, local) and with associations, study centres and research centres that deal with milk and its production chain. It also deals with facilitating the fight against counterfeiting and adulterating Italian milk and cheese products through campaigns to increase awareness and information at national and local levels, in addition to favouring specific initiatives concerning legality in the production chain and reinforcement of protection for territorial quality.On 20 October 2015, during Expo 2015 the first results of the survey entitled "Food labelling, protection, safety, and education" were presented. The survey was carried out by the Observatory through a questionnaire distributed by local associations to citizens, with the purpose of understanding knowledge among consumers of product labels, food safety and the Italian production chain. This information formed the foundation to set up a communication campaign in 2016 aimed at increasing awareness among public and professionals of the culture of quality in a more authoritative, fair, and transparent manner.

In April 2019, the commitment provided by Granarolo beside consumer associations, even at a ministerial level, produced the Italian decree on milk origins, an essential act of transparency towards consumers.Inter-ministerial decree 09/12/2016 containing "Indication in labels of the origin of raw materials for milk and dairy products, in actuation of (EU) regulation n° 1169/2011, concerning the provision of food information to consumers" will come into force within 90 days of publication in the Official Gazette, and will remain in force "experimentally, until 31 March 2019". The new rules apply only to pre-packaged food products made in Italy and intended for the internal market, not including dairy products with DOP, IGP, and STG markings or organic products.

More specifically, the categories involved are:

• milk (cow, buffalo, sheep, goat, donkey "and of other animal origin", both fresh and long-life)• cheese, dairy products and curds• milk creams (concentrated and not concentrated, with or without the addition of sugar and/or

sweeteners).• buttermilk, milk, and coagulated milk, kefir and other types of milk and fermented or acidified

milk, both concentrated and with the addition of sugar or aromatic sweeteners, or with the addition of fruit or cocoa

• whey, even concentrated or with the addition of sugar or other sweetener• products made of natural milk components, even with the addition of sugar or other

sweeteners, not mentioned or included in the rest of the list• butter and other fatty materials obtained from milk. Spreadable milk creams

The origin will need to be indicated on the label, indicating the country in which it was milked, as well as the country of "conditioning" (for UHT milk) or of transformation (for other products). Alternatively, it is possible to indicate only the "origin of the milk", when both the aforementioned phases took place in the same national territory.

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TABLE OF CORRELATIONS WITH GRI-G4 INDICATORS

8

The following is the GRI table in reference to the In Accordance-core option, as indicated in the GRI-G4 Guidelines. In addition, we have inserted indicators belonging to the "Food processing sector supplement", a document that integrates the General GRI-G4 Guidelines with specific issues and KPI for the food production sector. For the 2016 Sustainability Report, Granarolo has not made plans for external assurance.

INDICATOR DESCRIPTIONCHAPTER/PARAGRAPH REFERENCE

PAGE REFERENCE

NOTES/AMENDMENTS

Strategy and analysis

G4-1

Declaration of the relevance of sustainability for the Organisation, in addition to the Organisation's strategy for managing sustainability issues

The Chairman’s Letter; The road to sustainability and reporting at Granarolo

5-713

G4-2Description of the main impacts, risks and opportunities

The road to sustainability and reporting at Granarolo

13

Organisational profile

G4-3 Name of the organisation About us 30

G4-4 Main brands, products and/or services

Positioning in Italy and Abroad. Balanced nutrition and the answer to evolving consumption

62-68112-116

G4-5 Head Office About us 30

G4-6 Countries in which the company operates About us 30-31

G4-7 Ownership system and legal form About us 32-33

G4-8 Markets servedAbout us. Positioning in Italy and abroad

30-3164-68

G4-9 Size of the organisation

About us.A competitive and sustainable business modelAppreciating People

30-3148-75126-133

G4-10 Characteristics of employees Appreciating People 131-133

G4-11Employees covered by collective contract agreements

Employment dynamics 134

G4-12 Description of the supply chain

Our competitive leverage 76-95

INDICATOR DESCRIPTIONCHAPTER/PARAGRAPH REFERENCE

PAGE REFERENCE

NOTES/AMENDMENTS

G4-13

Significant changes concerning size, structure, ownership or the chain of supply in the organisation

The organisational model. Positioning in Italy and abroad

4362-68

G4-14 Precautionary approach to risk management

Risk analysis and prevention 45-47

G4-15

List of initiatives, principles, documents on financial, social and environmental aspects signed by the organisation

Granarolo and Sustainable Development Goals (SDG).Granarolo's contribution to major issues at national and international levels.

22-23200, 201

G4-16

List of national/international advocacy associations and organisations

The commitment to sustainability. The permanent milk observatory

196200

Identification of material and peripheral aspects

G4-17

List of entities consolidated in the consolidated financial statements and of those not included in the sustainability report

The road to sustainability and reporting at Granarolo 13

G4-18

Explanation of the process to define the contents of the report and the way the organisation implemented the corresponding reporting principles

The road to sustainability and reporting at Granarolo

13-23

G4-19 List of material aspects identified

The road to sustainability and reporting at Granarolo

19-20

G4-20 Material aspects outside of the organisation

The matrix of materiality 21

G4-21 Material aspects inside of the organisation

The matrix of materiality 21

G4-22

Explanation of the effects of any changes to information inserted in the previous reports, and the reasons for doing so

The road to sustainability and reporting at Granarolo

13

GENERAL STANDARD DISCLOSURE

204 205

INDICATOR DESCRIPTIONCHAPTER/PARAGRAPH REFERENCE

PAGE REFERENCE

NOTES/AMENDMENTS

G4-31

Useful contacts and addresses to request information on the sustainability report and its contents

The road to sustainability and reporting at Granarolo

13

For information and clarifications on what is reported, please write to csr@granarolo.it

G4-32 GRI table of contents

The road to sustainability and reporting at Granarolo.Table of correlations with indicatorsGRI-G4

13-23202-213

G4-33 Assurance policies and practices

The road to sustainability and reporting at Granarolo.Table of correlations with indicatorsGRI-G4

13202

Governance

G4-34

Governing structure, including committees that depend on the leading body

Corporate Governance Structure 40-42

G4-38Composition of the highest governing body and committees

Corporate Governance Structure 41-42

G4-39

Specifies whether the Chairman of the highest governing body also has an executive role

Corporate Governance Structure 41

G4-42

Role of the highest governing body and directors in defining, approving, and updating: the organisation's purpose, values and mission, strategies, policies and objectives linked with financial, social and environmental impacts

Mission, vision and values.The Governance System

36-3940-42

G4-45

Role of the highest governing body in the process to manage risks linked with sustainability issues

Risk analysis and prevention 45-47

INDICATOR DESCRIPTIONCHAPTER/PARAGRAPH REFERENCE

PAGE REFERENCE

NOTES/AMENDMENTS

G4-23

Significant changes in terms of objectives and perimeters in relation to the previous report

The road to sustainability and reporting at Granarolo

13, 22-23

Stakeholder involvement

G4-24List of stakeholders involved by the organisation

Relations with stakeholders 16-17

G4-25Principles to identify and select the main stakeholders to be involved

Relations with stakeholders 14

G4-26 Approach to involving the stakeholders

Relations with stakeholders. Involving and listening to farmer shareholders. Communicating with increasingly careful consumers. Company culture and communication

1894125138-139

G4-27

Issues that emerged from engagement, procedures for management, also through reporting

The road to sustainability and reporting at GranaroloRelations with stakeholders.Communicating with increasingly careful consumers. Company culture and communication

1314-20125138-139

Report profile

G4-28 Reporting period The road to sustainability and reporting at Granarolo

13

G4-29 Date of publication of the previous report

The road to sustainability and reporting at Granarolo

July 2016

G4-30 Reporting periodThe road to sustainability and reporting at Granarolo

13

206 207

INDICATOR DESCRIPTIONCHAPTER/PARAGRAPH REFERENCE

PAGE REFERENCE

NOTES/AMENDMENTS

G4-EN3 Energy consumption within the organisation

Reducing the impact of the productive process.Environmental trends in the Group's

166-171183-184

G4-EN5 Energy intensity

Reducing the impact of the productive process.Environmental trends in the Group's companies

170-171184

G4-EN6Reducing energy consumption as a result of energy efficiency initiatives

Reducing the impact of the productive process 167-171

Water

G4-DMA General information on management procedures

Reducing the impact of the productive process 171

G4-EN8 Total volume of water taken, divided by source

Reducing the impact of the productive process 172

G4-EN10Percentage and total volume of recycled and reused water

Reducing the impact of the productive process 172

Emissions

G4-DMA General information on management procedures

Reducing the impact of the productive process.Environmental trends in the Group's companies

176185

G4-EN15 Direct greenhouse gas emissions

Reducing the impact of the productive process.Environmental trends in the Group's companies

177185

G4-EN16 Indirect greenhouse gas emissions

Reducing the impact of the productive process.Environmental trends in the Group's companies

178185

G4-EN17 Other indirect greenhouse gas emissions

Reducing the impact of the productive process 179

G4-EN18 Intensity of greenhouse gas emissions

Reducing the impact of the productive process 176-179

G4-EN19 Reducing greenhouse gas emissions

Reducing the impact of the productive process 176-179

INDICATOR DESCRIPTIONCHAPTER/PARAGRAPH REFERENCE

PAGE REFERENCE

NOTES/AMENDMENTS

G4-46

Role of the highest governing body in reviewing the effectiveness of the process to manage risks linked with sustainability issues

Risk analysis and prevention 45-47

Ethics and values

G4-56

Values, principles, standards and rules for behaviour within the organisation

Mission, vision and valuesThe integrity of company conduct

36-3941

SPECIFIC STANDARD DISCLOSURE

Financial performance

Generated and distributed economic value

G4-DMA General information on management procedures

Granarolo: development strategies and results

60-61

G4-EC1 Direct generated and distributed economic value

Generated and distributed economic value

73-74

Indirect economic impact

G4-DMA General information on management procedures

Corporate citizenship at local and global levels

188, 192

G4-EC7

Development and impact of investments in infrastructures and supported services

Projects in favour of communities.Granarolo's contribution to major issues at national and international levels

193-194, 198199-201

Environmental performance

Materials

G4-DMA General information on management procedures

Reducing the impact of the productive process 165-166

G4-EN1 Materials used, by weight or volume

Reducing the impact of the productive process 165

Energy

G4-DMA General information on management procedures

Reducing the impact of the productive process.Environmental trends in the Group's companies

166183

208 209

INDICATOR DESCRIPTIONCHAPTER/PARAGRAPH REFERENCE

PAGE REFERENCE

NOTES/AMENDMENTS

Expenses for environmental protection

G4-DMA General information on management procedures

Expenses, complaints, and environmental 182

G4-EN31

Total expenses and investments for environmental protection, by type

Expenses, complaints, and environmental fines

182

Supplier environmental assessment

G4-DMA General information on management procedures

Reducing the impact of the production chain 164

G4-EN33

Present or potential negative environmental impact in the supply chain, and actions taken

Reducing the impact of the production chain 164

The frame of reference currently refers to raw material suppliers, who are part of the Granlatte production chain.

Formal complaint mechanisms

G4-DMA General information on management procedures

Expenses, complaints, and environmental fines

182

G4-EN34

Number of complaints on environmental impact filed and solved through a formal complaint mechanism

Expenses, complaints, and environmental fines

182

Social performance

Employment practices and adequate work conditions

Employment

G4-DMA General information on management procedures

Appreciating people.In defence of employment

130131

G4- LA1

Total number and percentage of new employments and turnover, by age, gender and geographical area

Employment dynamics 131-132

G4- FP3

Percentage of work time lost owing to industrial controversies, strikes and/or shut-downs, divided by country

Employment dynamics 134

Occupational Health and Safety

G4-DMA General information on management procedures

Health and safety in the workplace 140-141

INDICATOR DESCRIPTIONCHAPTER/PARAGRAPH REFERENCE

PAGE REFERENCE

NOTES/AMENDMENTS

Sewage and waste

G4-DMA General information on management procedures

Reducing the impact of the productive process.Environmental trends in the Group's companies

173-174186

G4-EN22 Total discharged water by quality and destination

Reducing the impact of the productive process.Environmental trends in the Group's companies

173186

G4-EN23 Total weight of waste by type and disposal method

Reducing the impact of the productive process 174-175

G4-EN24Total number and volume of significant accidental spills

Reducing the impact of the productive process 176

Products and services

G4-DMA General information on management procedures

Reducing the impact of packaging 180-181

G4-EN27Mitigating the environmental impact of products and services

Reducing the impact of packaging 180-181

Compliance with laws on environmental issues

G4-DMA General information on management procedures

Expenses, complaints, and environmental fines

182

G4-EN29

Monetary value of significant fines, and the total numberof non-monetary fines owing to failure to complywith environmental laws and regulations

Expenses, complaints, and environmental fines

182

In 2016, Granarolo paid a 3,000 Euro fine for exceeding the sewage limits in the Pasturago factory in 2012

Transport

G4-DMA General information on management procedures

Reducing the impact of the productive process 179

G4-EN30

Significant environmental impact of transportation of products and other goods, materials for the activities of the organisation and for staff transportation

Reducing the impact of the productive process 179

210 211

INDICATOR DESCRIPTIONCHAPTER/PARAGRAPH REFERENCE

PAGE REFERENCE

NOTES/AMENDMENTS

G4-SO1

Percentage of the activities for which the local community was involved, impact was assessed, and development programs were implemented

Projects in favour of communities 193-199

Product responsibility

Client health and safety

G4-DMA General information on management procedures

Promoting health and well-being 112-118

G4-PR2

Total number of episodes of non-compliance with regulations and codes on product and service impact on health and safety throughout their life cycle, by type and results

Guaranteeing food safety 118

G4-FP4

Nature, objective and effectiveness of any program or practice to promote access to healthy lifestyles and the prevention of chronic illnesses, access to healthy, nutritious, and affordable food, and improvement of well-being in disadvantaged

Attention to responsible consumption and to dialogue.Granarolo in the territories: the commitment to inclusion

124195-196

Labelling products and services

G4-DMA General information on management procedures

Promoting health and well-being 112-115

G4-PR3

Type of product and service information required by the organisation's information and labelling procedure, and percentage of significant categories of products and services subject to these requisites

Guaranteeing food safety. The permanent milk observatory

117-118200

Information to consumers comply with legal requirements

G4-PR4

Total number of episodes of non-conformity with regulations and codes on information and labelling of products and services

Promoting health and well-being 118

In 2016, there were no cases of non-conformity, and the product labels were found to comply with sector laws and codes

INDICATOR DESCRIPTIONCHAPTER/PARAGRAPH REFERENCE

PAGE REFERENCE

NOTES/AMENDMENTS

G4-LA5

Percentage of total workers represented in formal company-worker committees for health and safety, which make it possible to check and inform of health and safety programs in the workplace

Health and safety in the workplace 145-146

G4-LA6

Type of injury and rate of occupational injuries, occupational illnesses, lost days of work, absenteeism and total number of deaths, divided by geographical area and gender

Health and safety in the workplace.Trends in Granarolo S.p.A. Trends in subsidiaries

141142-145146-148

G4-LA8

Health and safety issues included in formal agreements with the trade unions

Health and safety in the workplace.Trends in Granarolo S.p.A.

140-141145-146

Training and education

G4-DMA General information on management procedures Professional growth 135

G4-LA9

Average number of training hours per employee, divided by gender and worker category

Training and careers 136

G4-LA10

Programs to manage skills and for professional updating, to support the ongoing employability of employees, and to support management at the end of their career

Development and retribution policies 137-138

G4-LA11

The percentage of employees that regularly receive assessments on performance and the development of the career, by gender and worker category

Development and retribution policies 138

Society

Local communities

G4-DMA General information on management procedures

Granarolo in the territories: the commitment to inclusion

192

212 213

SUSTAINABILITY REPORT 2016

Editorial Staff

This Sustainability Report was written by the Communication department of Granarolo S.p.A. with the involvement of numerous people for data collection, descriptions and comments/notes.

The reporting process was supervised by the Chairman, the General Manager, the Communication, External Relations and CSR Manager, the Quality, Innovation, Safety, and the Environment Director, the Human Resources and Organisation Director, the Italy and Non-European Countries BU Director, the European Countries BU Director, the Chief Financial Officer, the Marketing Director, the Operations Director, the Governance - Risk Management and Compliance Supervisor and the Traditional Channel Business Diversification and Supply Chain Director.

The following people contributed to writing the Sustainability Report: Angela Bacak, Matteo Bricchi, Andrea Bruini, Annalisa Chelli, Giuseppina Cioffo, Giulia Deleonardi, Maria Teresa Di Gioia, Mirella Di Stefano, Fabio Fanetti, Luca Ferrarini, Graziella Lasi, Roberta Merighi, Alessia Moretti, Maddalena Nardi, Alex Quetti, Luca Rimondini, Emanuele Rizzoli, Andrea Romani, Marina Perelli, Carlotta Dallara, Antonella Petruccelli, Rossella Stifani, Lorenzo Innocenti, Raffaele Bombardieri, Diego Taddia, Claudia Silvagni, Tommaso Simili, Roberto Spoletti, Giulio Tavoni, Rosa Maria Tilli, Roberto Vaccari, Simonetta Venturi, Alessia Vianello, Rita Viola, Giampaolo Zanirato.

The Sustainability Report also improves thanks to the contribution of readers, who may request clarifications or send suggestions to crs@granarolo.it

Director of the editorial project: Myriam Finocchiaro

Technical and methodological assistance: SCS Consulting

Visual concept and design: Marco Dignani

Photos: Francesca Cesari, Gabriele Fiolo, Stefano Pesarelli, Francesco Villari, Diego Zanetti, and archive images.

Granarolo has chosen to use, for this publication, FSC® certified paper and a printing service - Casma - that has obtained FSC® chain of custody certification in December 2008, with code SA-COC-002076.

FSC® (Forest Stewardship Council®) is an international non-governmental and non-profit organisation. It was founded in 1993 to promote responsible management of forests and plantations around the world. "Responsible management" means: protecting the natural environment, bringing real advantages to the population, local communities, and workers, and ensuring efficiency in financial terms. FSC® members are: environmentalist and social groups (WWF, Greenpeace, Legambiente, Amnesty International, etc.), indigenous communities, forest owners, industries that work and trade wood, Mass Retail Channel companies, researchers and technicians, etc. In order to succeed, FSC® is equipped with a voluntary and third party (independent) certification system, specific for the forestry sector and for products that are derived from forests, and operative at an international level. There are currently 130 million certified hectares around the world, and more than 16,000 companies have already chosen to become certified, following the FSC chain of custody - a mechanism that makes it possible to maintain traceability of the raw material (paper or wood) from the forest to the finished product.

Finished printing in the month of July 2016.

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