Welcome

Values Report 2007

1 The Body Shop Values.............................................................................................

1.1 Welcome from The Body Shop Chairman and CEO.................................................................

2.Overview……………………………………………………………………………………………………

2.1 Comment from Jean Paul Agon, CEO , L'Oreal

2.2 Report commentary by The Body Shop Stakeholder Panel
2.3 Who we are
2.4 Governing Values
2.5 Our stakeholders
2.6 Our Values Strategy
2.7 Our community involvement
2.8 Stakeholder comment from The Body Shop Head Franchisee in Indonesia
2.9 Stakeholder comment from The Body Shop Regional Director for UK/ROI
3 Against Animal Testing............................................................................................
3.1 The Body Shop, our Against Animal Testing Policy and L’Oréal ..............................................
3.2 REACH and animal testing .......................................................................................................
3.3 Stakeholder comment from the British Union for the Abolition of Vivisection............................
3.4 100% Vegetarian ......................................................................................................................
4 Support Community Trade.......................................................................................
4.1 Celebrating Community Trade with old and new suppliers .......................................................
4.2 Principles and challenges of Community Trade........................................................................
4.3 Stakeholder comment from Divine Chocolate...........................................................................
5 Activate Self-Esteem ................................................................................................
5.1 Wise Woman™.........................................................................................................................
5.2 Stakeholder comment from a The Body Shop At Home Consultant .........................................
5.3 Employees................................................................................................................................
5.4 Stakeholder comment from an employee representative..........................................................
6 Defend Human Rights ..............................................................................................
6.1 What does Defending Human Rights mean for our suppliers? .................................................
6.2 Stakeholder comment from Oxfam ...........................................................................................
6.3 Spray to Change.......................................................................................................................
6.4 Campaign partner comment from MTV Networks International ................................................
6.5 Stop Violence in the Home .......................................................................................................
6.6 Campaign partner comment from UNICEF...............................................................................
7 Protect our Planet.....................................................................................................
7.1 Addressing Climate Change .....................................................................................................
 7.2 Stakeholder comment from Greenpeace ..................................................................................
7.3 Sustainable Ingredients – a campaign for forests, wildlife and decency ...................................
7.4 Chemicals.................................................................................................................................
7.5 Packaging – exploring routes to minimal waste........................................................................
8 . Glossary and definitions
9 Targets and commitments overview ...................................................................................
10. About this report
11. GRI Index

12.Archive
13. URS Technical briefing ....................................................................................................
Welcome to our Values Report 2007
 Welcome from The Body Shop Chairman and
CEO

The Body Shop was born challenging the status quo and creating
positive social change. It is what makes it as exciting today as it was
when it was founded 30 years ago.

Since our last Values Report two years ago, The Body Shop has
grown to include online shopping, moved into a number of new
markets and come under new ownership and our Values
commitments have grown with these changes. Our ‘Stop Violence in
the Home’ campaign is now running in 47 markets and has raised
over £2 million to help victims of domestic violence. We have also
strengthened the way our Values are embedded in our products and
ingredients by adding new suppliers to our Community Trade
programme, which ensures a fair deal for marginalised small-scale
producers, through a greater commitment to animal protection and by
taking a leading role in getting sustainable palm oil on the market,
which helps protect local communities, rain forests and wildlife. We
are also taking up the challenge of climate change. In the past, The
Body Shop has campaigned on renewable energy and invested in
wind farms, but we know that this is an area where we have some
catching up to do, if we are to really make a difference to global
warming. Every one of the initiatives in the report is a source of pride
and the result of the total commitment from every person that works
here to make the Company a different place to work than any other.

We want to lead by example, and the men and women on the

Executive are recruited both for their professional capability and for
their ability to develop cutting edge solutions to real social and
environmental problems. Everyone on the Executive is passionate
about delivering a commercially successful company that has Values
at its heart, and in this report we have asked each of them to say very
clearly what the Values mean to them and how they each play their
part in leading the Company to achieve even more. From our
economic success we can create more benefits for our local
communities and offer our customers products that are less harmful
to the environment than many alternatives.

Values are part of our everyday business, they are not a separate set
of rules that only apply when we choose, and we are always looking
for new ideas to take to our customers and employees to remind
them of what we stand for. Whether it is the success of our
Community Trade programme, new initiatives to save energy, or our
precautionary and proactive chemicals policy, we use our Values to
guide our decision making to make sure that the impact we have
today does not reduce the ability of future generations to act in the
best interest of their communities or the natural environment.

We know we do not have all the answers. We need the views of

others and we have to work in partnerships to really make a
difference. Throughout the past years, we have welcomed strong and
continued support from our stakeholders. In this report, we wanted to
give them an opportunity to express their views and to help us make
sure that we address the issues that really matter to people outside
as well as inside the Company. We are grateful that they are helping
us provide clear direction to ensure that we continue to be responsive
to the social and environmental concerns of our customers.

Our Values are not just things we do, but who we are. Being an
employee, a consultant or a franchisee here is to make a difference
every day. The achievements and aspirations in this report are a
result of our people’s passionate work and our customers’ dedicated
support. Whether we operate in new areas of the world, through new
channels or under new ownership, Values is in our DNA and we will
continue our efforts to make a difference.

Adrian Bellamy, Chairman

Peter Saunders, CEO

 Comment from Jean Paul Agon, CEO , L'Oreal

It is now more than a year since L'Oréal announced its acquisition - in

March 2006 - of The Body Shop International plc (The Body Shop).
That announcement was only possible because there existed, on
both sides, a deep rooted and shared belief in the strength and
importance of The Body Shop Values: Values that have stood the
test of time for more than thirty years.

The major shareholders and management team of The Body Shop

were, at that time, convinced of the sincerity of L'Oréal's commitment
to stakeholders: to ensure that The Body Shop Values would be
entirely upheld. Their belief in that commitment remains as strong
today as it was then. What is different, one year on, is that we are
now able to prove the depth of the commitment we made.

The Body Shop has not been folded into one of L'Oréal's four
business divisions. It is a separate business unit, with the excellent
management team remaining in place, reporting directly to myself.
Ensuring continuity of the management team was an important initial
step to ensuring continuity in upholding the Values.

As The Body Shop publishes its first Values Report since its
acquisition by L'Oréal, I would like to take the opportunity to reassure
all of its readers that it remains the intention of L'Oréal not only to
preserve the integrity of The Body Shop Values but to continue to
nurture them for the benefit of all. At L'Oréal we have tremendous
respect for the Values of The Body Shop and we have already
started to look at ways in which other L'Oréal group brands can
benefit from the long experience of The Body Shop. I also know how
important those Values are to you and I assure you that we have no
intention of changing them or of standing in the way of their
development and the important role they play.

I hope that, after one year, we have demonstrated the sincerity of our
actions and that we will continue to persuade all our stakeholders that
the promises we made on 17 March 2006 were for real.

L'Oréal has its own deep-rooted values that have evolved over
almost 100 years. The Values of L'Oréal and The Body Shop are not
identical; but certainly they are aligned in terms of their strength of
belief in and commitment to an ethical business model. Ours is a
partnership where each partner fully respects the other for its
similarities and differences; and therein lays its strength.

I am encouraged to see that through this report The Body Shop

continues to deepen its engagement with its stakeholders. This
engagement and the dialogue that often ensues is a vital part of the
identity of The Body Shop and will not be changed.

The Body Shop is now an important part of the L'Oréal family and it is
my goal that together we build a 'world-citizen' company that is a
benchmark in terms of sustainable development, as befits the world's
leading beauty company: a company that does not focus solely on its
own success, but one that cares for its environment, is concerned by
the great challenges of its time and is deeply respectful of difference.

Jean Paul Agon, CEO, L’Oréal

 Report commentary by The Body Shop
Stakeholder Panel

The stakeholder panel was invited by The Body Shop to comment on

the 2007 Values Report. As a group, we represent external and
internal views, commercial interest and campaigning agendas. With
so many different points of view involved, we found it a challenging
task, but in the end we found that we had more common ground than
expected. This was achieved because of the willingness of the panel
members, and The Body Shop representatives, to be open and frank.

We commend The Body Shop for taking this step of entering into an
honest dialogue about challenges and opportunities of truly living up
to its Values. It has been a valuable process for all of us, and we
would encourage other companies to follow this example.

Overall, the report is comprehensive and covers issues relevant to

The Body Shop. It underlines the importance of The Body Shop as an
example of a business that demonstrates that it is possible to have
strong ethical foundations and still be profitable. The five traditional
Values of The Body Shop contribute to the completeness of the
report, as serve as a safeguard to ensure that key ethical issues are
addressed, regardless of trends and fashion.

The panel recognises that The Body Shop has entered a key period
in its development. Firstly, the takeover by L'Oréal in 2006 brought
with it inevitable concerns about whether The Body Shop Values
would continue to be at the core of its practice. We requested that
L'Oréal specifically restated its commitments in the report and that
The Body Shop explain some of the mechanisms in place to ensure
its continued adherence to its Values. We feel that this report goes a
long way in addressing these questions and are pleased to see that
the report now includes a statement from L'Oréal’s CEO.

Secondly, where The Body Shop has led – on ethical trade with
communities, and environmental responsibility, amongst others –
many other businesses have followed. Some of those may be pulling
ahead of The Body Shop, and the next few years will be critical in
deciding whether The Body Shop retains the energy, imagination and
desire to maintain its leadership on all of its Values.

We had in-depth discussions on the details of each section, all of

which cannot be repeated here. However, general agreement was
reached on the following points and recommendations:

Against Animal Testing

We believe that this value is genuinely part of the DNA of the

Company. The Company is continuously safeguarding its systems
and remains the leader in this area, and welcomes discussion on key
challenges, such as upcoming chemicals legislation in the EU.
However, we would welcome a return to stronger campaigning on the
issue. While significant progress has been achieved in EU legislation
there are still huge challenges in many of the markets where The
Body Shop operates, and it is crucial that leading companies
continue to challenge the status quo.

Community Trade

The Body Shop Community Trade programme is a groundbreaking

initiative in the cosmetics industry, dealing directly with producers.
The programme is unique to The Body Shop, which meant that we
had a lot of detailed questions to understand how the producers
benefit, and how the Company ensures stability and predictability
which is crucial for small-scale producers. We also challenged the
Company to regain its leadership on ethical trade. Could purchasing
of Community Trade products be linked more directly to profit
growth? How can the Company drive demand for Community Trade
ingredients and accessories? With so many ethically traded products
now available, and so many companies focused on ethical trading,
what can The Body Shop learn from others, and what new alliances
can be formed? We would like to see more evidence of a personal
involvement of the leadership, for example by The Body Shop
directors visiting Community Trade producers.

Activate Self Esteem

Our discussions on this section focused on internal self-esteem

issues, such as employee development and diversity. We requested
that the Company include more information on its diversity policies,
and were pleased to see some data on gender included in the final
draft. However, it is not clear what the Company strategy is on
encouraging diversity at all levels and we would like to see this
expanded even further. On the other hand, we also feel that the
Company understates the importance of some of its activities. For
many women, working for The Body Shop At Home™ has provided
not only a decent living, but a new lease of life. Being a TBSAH
Consultant has built confidence and self esteem for many, an
opportunity to run their own business and campaign on real and
difficult issues.

Defend Human Rights

The true highlights are the Company’s campaigns on domestic

violence and on HIV and AIDS. These are impressive and effective
campaigns tackling global difficult issues and truly set the Company
apart.

Likewise, we are glad to see that the Company has an externally

verified system to safeguard workers in its supply chain based on
ongoing audits of suppliers and requirements for improvement plans
to address abuses.

However, this system covers only direct suppliers and does not take
into account abuses which might be taking place further down the
supply chain, and we would encourage the Company to address this.
Similarly, we would like to see the same standards diligently applied
to the Company’s own employees – an explicit guarantee that labour
rights are guaranteed for everyone working at The Body Shop. This
includes employees working for franchisees, as well as an
assessment of working conditions for independent The Body Shop At
Home™ consultants.

Protect our Planet

There are clear highlights to The Body Shop environmental

performance, such as its commitment to a responsible chemicals
policy, sustainable palm oil and FSC. However, the Company was
among the first to address climate change through campaigning for
renewable energy and even direct investment in a wind farm in
Wales. It is clear that the issue has slipped off the Company’s
agenda, and the Company is now playing catch-up with other
companies who are leaders in the area. We are glad to find that the
Company is again focusing on the area, but we are missing real
milestones and action points, based on an innovative analysis of
what can be achieved by the Company and its franchisees.

The Company has set itself a target of becoming carbon neutral by

2010, but we do not see enough detail on how the Company plans to
achieve significant reductions in CO2 emissions. The current
company strategy is focused on making retail operations carbon
neutral. We would encourage a stronger focus on CO2 emissions
from product manufacturing and transport and an explicit plan to
ensure that franchisees are included in the strategy. In addition, we
do not believe that “carbon neutral” is necessarily the right target. It is
too easy to achieve this, simply by buying offset. We think the
Company should focus all attention on reducing emissions and reach
out to its business partners, including suppliers, franchisees and even
Community Trade producers to bring about real change.

Conclusion

This report shows that the Company is still leading the way in a
number of areas, most prominently in its continued commitment to
prevent animal testing, and also on challenges such as sustainable
palm oil, Community Trade and campaigns on important social
issues.

However, in some areas where the Company used to be leading, we

find that the Company has fallen behind other ethical businesses,
most notably within the environmental area. We find that this report
could provide a more sober assessment of the Company’s current
performance in these areas and clearer action points to ensure that it
regains some of the lost ground.

The Body Shop could show leadership by being more open and
honest in documenting some of the real dilemmas it faced in
decision-making that allowed it to be both commercial and ethical.
There can be real conflicts between profitability and ethics and as
one of the early trendsetters in this area, the Company’s thoughts on
this could provide a valuable contribution by illustrating that sacrifices
and difficult decisions do sometimes have to be made in order to
operate responsibly and sustainably.

Finally, we would like to see the report have a wider scope, as the
report does not cover individual action undertaken at the market level
or by franchisees, only those actions that flow from the global policy
or direction. On the one hand, this focus does not do enough justice
to the leadership shown by some franchisees and markets, and on
the other, it does not provide clear evidence that the Company’s
policies are always adhered to on the ground.
Overall, the report provides a comprehensive catalogue of
achievements, addressing all material issues and a number of key
questions posed by us and the stakeholder groups that we represent.
We will look forward to seeing The Body Shop remain in the forefront
in its strongest areas and regain its leadership in other areas. To
drive change in businesses, we desperately need role models –
companies that can show what is possible. As representatives of
vastly different stakeholders we all want to see The Body Shop
succeed in being the model of ethics and sustainability.

Please click on a name to see the panel members’ individual

comments on The Body Shop

Cathie Cornish, The Body Shop at Home Consultant

Harry Hughes, Watersmead warehouse/Employee Representative,

UK CRC and European Works Council

Steve Jennings, Global Advisor Livelihoods, Oxfam GB

Alastair Kerr, Regional Director, The Body Shop UK/ROI

Suzy Santoso, Head Franchisee, The Body Shop Indonesia

John Sauven, Campaign Director, Greenpeace UK

Michelle Thew, Chief Executive, British Union for the Abolition of

Vivisection

Sophi Tranchell, MD, Divine Chocolate Limited

Gordon Roddick, Co-Founder of The Body Shop

Please click here to see URS technical briefing to the Stakeholder

panel
 Who we are

The Body Shop International plc is a global manufacturer and retailer

of naturally inspired, ethically produced cosmetics and toiletries
products, all cruelty free, and many with fairly traded natural
ingredients. Founded in the UK in 1976 by Dame Anita Roddick, at
the end of 2006 The Body Shop International had 2,265 stores in 56
countries, selling a range of more than 1,200 products. During 2006
we opened a total of 146 new stores, including our first stores in India
and Pakistan.

As well as selling our products through our stores we also have a

direct-selling channel called The Body Shop At Home, where
consultants sell products at parties in people’s homes. This operates
in four countries – the UK, the USA, Australia and, as of 2006,
Germany. Customers can also use our e-commerce websites for
online shopping in the UK, the USA, Canada, Australia, Korea and
Japan.

The Body Shop owns 100% of Soapworks, a soap factory based in

Glasgow, Scotland, which represents the only manufacturing facility
in the Company. All other product manufacture is outsourced.

Employees

By year-end 2006, The Body Shop directly employed 10,034 people

and a further 21,000 people are The Body Shop At Home
Consultants or employed by franchisees.

Part of the L’Oréal Group

2006 was a momentous year for The Body Shop, as the Company
became part of the L’Oréal Group. Now wholly owned by L’Oréal,
The Body Shop is no longer a public listed company. L’Oréal is listed
on the Paris Stock Exchange. The Body Shop operates as an
independent entity, with a separate Board and Executive Committee,
within the L'Oréal Group.

The Body Shop International’s sales figures were consolidated as

part of the L’Oréal Group from 1 July 2006 so sales figures given are
for the second half of 2006.

Regional structure

The Body Shop International global head quarters are split between
London and Littlehampton, West Sussex. These offices are home to
global corporate and support functions. The Body Shop International
is organised into four regions: the UK and Republic of Ireland; the
Americas; Europe, Middle East and South Africa (EMEA) and Asia
Pacific (AP). Many of The Body Shop International stores are
operated under franchise arrangements.

Number of stores

The number of stores increased by 89 in the second half of 2006. At

31 December, the total number of stores stood at 2,265 of which 886
are owned by The Body Shop International.

At 31 December At 31 December Store openings in

2005 2006 2006
Company-owned 794 886 92
stores
Franchisees 1,325 1,379 54
Total number of 2,119 2,265 146
stores

The number of stores at the end of 2006 showing company owned

and franchisee owned by region:

Region Total number of stores Company-owned stores Franchisees

Americas 464 400 64
Asia Pacific 662 72 590
EMEA 827 153 674
UK and RoI 312 261 51
Total 2,265 886 1,379

Sales

Consolidated since 1 July, The Body Shop recorded a second half-

year of solid growth, with an increase in sales at the end of the year.
Net consolidated sales grew by +9.7%.

Retail sales(1) increased by +6.5% (+2.7% with a comparable store

base)(2).

€ millions 2nd half-year 2nd half-year Like-for-like

2005 2006 growth
Retail sales(1) 659.8 703.0 +6.5%
Retail sales with a comparable +2.7%
store base(2)
Consolidated sales 396.4 435.0 +9.7%

(1) Retail sales: Total sales to consumers through all channels.

(2) Retail sales with a comparable store base: total sales to consumers by stores that
operated continuously from 1 July to 31 December 2005, and over the same period in
2006.
Retail sales by geographic zone

2nd half-year 2nd half year % of 2006 retail like for like
2005 2006 sales growth
€ millions
Western 301.3 318.9 45.4% +5.8%
Europe
North 149.9 152.1 21.6% +1.5%
America
Rest of the 208.6 232.0 33.0% +11.2%
World
Total 659.8 703.0 100.0% +6.5%

(1) Retail sales: Total sales to consumers including tax through all channels.

(2) Retail sales with a comparable store base: total sales to consumers including tax by
stores that operated continuously from 1 July to 31 December 2005, and over the same
period in 2006.

These figures reflect particularly good results in Europe and Asia,

with very strong performances in the United Kingdom, Norway and
Japan. Growth was strengthened by the success of launches such as
the Aloe Vera Skin Care range and the Neroli Jasmin fragrance, and
by gift sets, which sold very well at the end of the year.

2007 outlook

Growing sales in recently entered markets, such as India and Russia,

a rapid succession of product introductions and the continued focus
on multi-channel retailing, mean that another year of growth can be
confidently expected in 2007.
 Governing Values

In July 2006, The Body Shop was officially de-listed from the London
Stock Exchange and joined the L’Oréal family. To highlight the
unique position of The Body Shop and our Values, from the start
L’Oréal has ensured that we continue to operate as a ring-fenced
division, maintaining a separate Board of Directors, Chairman, CEO
and Executive Committee. Peter Saunders, our CEO, reports directly
to Jean-Paul Agon the CEO of L’Oréal.

Within the Executive Committee, each Director has a distinct

responsibility for upholding Values relevant to their area:
Click on a name to learn what the Values mean to each member
of the Executive Committee

Our CEO, Peter Saunders, has ultimate responsibility for our Values,
but the Executive Committee discuss and agree Values strategies
and action plans approximately every two months.

While we may share best practice with L’Oréal on employee matters,

product development and sourcing, our fundamental policies and
practices remain unchanged and we will maintain our separate
strategies and action plans.

New Values Principles and a new Code of Conduct

Our five core Values still represent commitments that form the basis
for how we operate. In 2006, we reviewed all of our policies to ensure
that they reflect our current practice and strengthened commitments
in many areas. As a result, we developed five core Values Principles,
updated existing policies and introduced new policies in a number of
areas such as animal derived ingredients and marketing claims.
(These documents and a full policy hierarchy can be found on
www.thebodyshopinternational.com)

These Principles and Policies are used internally to help guide

decision making, and externally to help specify our commitment and
priorities. They were developed by a team of relevant representatives
from the business, and were endorsed by the directors responsible
for the respective functional areas and signed off by our CEO.

The more detailed policies and standards that sit under each
Principle are integrated into existing management documents. Our
product development guidelines, for example, specify which
chemicals our formulators cannot use, or whether certain natural
ingredients can only be used if sourced sustainably.

In 2006, we also launched a comprehensive Code of Conduct, which

sets out expected behaviour for all The Body Shop staff and
management. All employees must read and sign the Code of
Conduct. This document mandates that all employees act in
accordance with our Values.

Values Training

We recognise that Principles and Policies must be translated into

action to be effective. To support our staff, we have created a Values
training programme, which will reach all of our head office
employees, Company-owned markets and franchisees during 2007
and 2008. The training programme is designed to identify specific
challenges for each function or market, focusing on what the Values
Principles mean for different people within the business. The package
aims to bring the Values Principles to life and to encourage teams to
set concrete actions which support the Values.

Objectives and Values-related remuneration

While many people join The Body Shop because of our Values, we
also recognise that in a busy retail environment, everyone is focused
on reaching their personal and team objectives. It is therefore
important that Values objectives are officially included in the appraisal
process.

We have now strengthened the responsibilities and objectives of

many departments to ensure that caring for the environment,
safeguarding our animal testing policies or ensuring good working
conditions for employees and our supply chain do not get forgotten in
the pursuit of other objectives. All regional directors, for example,
have a specific objective to assist with the rollout of our Climate
Change Programme. Senior Sourcing and Product staff have as
much as 50% of their annual bonus dependent on their success in
different Values initiatives (such as increasing recyclate, reducing
certain chemicals or complying with our Ethical Trade Programme).
Monitoring, reporting and audit

The Body Shop is committed to continuous improvement in social,

environmental and animal welfare issues. The Executive Board
monitor performance against targets through an internal quarterly
Values Report. For special focus areas, such as Ethical Trade,
Community Trade and Climate Change, detailed reports are reviewed
monthly.

For certain areas, The Body Shop operates strict monitoring and
audit schemes. Our commitment Against Animal Testing, for
example, is certified via the Humane Cosmetics Standard, an
externally audited scheme operated by the BUAV (British Union for
the Abolition of Vivisection), widely recognised as the strictest
standard in the field. We also report to our external partners, such as
the Ethical Trading Initiative, the WWF Forest and Trade Network
and the Roundtable on Sustainable Palm Oil.

Links:

Policy

Code of Business Conduct

 Our stakeholders

The Body Shop has a long history of stakeholder engagement. Our

customers, NGO (non-governmental organisations) partners,
franchisees and other business partners expect us to listen and to
engage on issues of concern to them. Stakeholder engagement takes
place throughout the business, at market and regional level, and from
our Head Office functions.

Customers

We know from our customer surveys and focus groups that 80% of
our customers shop with us because of our Values, so we have a
great responsibility to understand their concerns and preferences.
We provide our staff with ongoing training to make sure they can
answer questions and respond to customers’ comments and
concerns. Some of our customers request in-depth information about
our Values, so we have launched a new user friendly website which
contains regularly updated information. We also track concerns by
collating customer emails from all of our regions on a quarterly basis.
The vast majority of questions in the past year have been about the
takeover of the Company by L'Oréal, animal testing and chemicals
use.

Employees and consultants

The Body Shop International plc directly employs 10,034 people, but
there are a total of 31,000 people globally working in our stores, in
offices, and warehouse operations and as The Body Shop At
Home™ consultants. They are our most important advocates and
always challenge us to do better. They face our customers every day
in stores or as consultants in people’s homes. Over the past year
they have had to answer many questions about the new ownership,
and they have had questions of their own. Everyone at The Body
Shop has a role to play in living up to our Values, and to ensure they
are supported in this, we provide training, direct communications,
informal dialogue at market level, a company intranet and a variety of
employee and consultant magazines. We also have regional Values
awards and a “Local Hero Award” to reward employees who have
made a real difference with their passion and commitment

NGOs (non-governmental organisations)

The Body Shop has traditionally worked closely with NGOs. Starting
with our first campaign, Save the Whale with Greenpeace in 1987,
NGOs have helped us to identify emerging issues, and to find new
solutions. While we continue to establish partnerships with NGOs on
our campaigns, we are also increasingly working with NGOs to
ensure that the way we run our business continues to be an example
to others. We have been in ongoing dialogue with WWF and Friends
of the Earth on sustainable ingredients, with Greenpeace on
chemicals and with BUAV on the impact on animal testing of new
chemicals legislation in the European Union. Some of these
organisations have been challenged by their members or other
NGOs, who have questioned the ongoing commitment of The Body
Shop to its Values after the L'Oréal acquisition. However, we have
been grateful to see these organisations recognise that our
commitments and efforts have not only continued and have even
increased.

In addition to the significant local engagement taking place through

our Stop Violence in the Home campaign, individual markets also
undertake extensive engagement to address regional and local
issues. In particular, our franchisees live the spirit of the Values in
this respect: West Malaysia and Australia work closely with local
NGOs to raise awareness on HIV and AIDS and every year markets
as far apart as Sweden, Norway and New Zealand collaborate with
local animal rights groups to campaign Against Animal Testing.

While engagement on particular issues forms the linchpin of our NGO

relationships, we also use engagement to assess the wider role of
The Body Shop. In 2006, we interviewed nine major NGOs about our
current performance, and more importantly, where we could make a
difference over the coming years. The consistent message was that
we should show continued leadership on the issues where we
already engage, as well as establishing a stronger focus on climate
change and sustainable livelihoods. The stakeholder panel reviewing
this report is also an example of such wider engagement.

Franchisees

Our franchisees are responsible for the largest part of our business,
and their contribution to building our brand and Values is significant.
In fact, they have often taken the lead in our campaigns and been an
example to other parts of the business through their commitment to
sustainable business practices. They understand their markets better
than anyone, and provide us with invaluable insights into local
concerns and issues. Our regional set-up ensures that there is an
ongoing dialogue between The Body Shop International plc and
franchisees, as well as between franchisees. Each region has a
dedicated Values representative who engages on an ongoing basis
with franchisees to ensure support and a feedback mechanism.
Every year, each region organises at least one Franchisee forum,
which the Director of Values attends, as well as Marketing and
Product forums.

Suppliers

Our engagement with suppliers takes a range of different forms,

some of which are described later in this report. We visit each of our
Community Trade suppliers at least every two years, and assess our
product suppliers annually. In addition, all suppliers receive annual
written communication on our animal testing policy. In areas where
we are trying to bring about greater change, we have more regular
dialogue. For example, we have been in close contact with our
packaging suppliers to increase the use of recyclate, and work with
other suppliers to use new natural ingredients or find alternatives to
chemicals of concern.

Other companies and multi-stakeholder networks

We want to share what we have learned with other companies, as

well as understand how others have made progress. We are
therefore a part of a number of formal networks, which include
progressive companies, both within and outside our sector.

Our preference is to engage in practical networks, aimed at

promoting responsible business practices. Our markets and regions
are very active in various local and national initiatives, while our Head
Office function engages in the following networks:

Accountability
CERES
IFAT
The Campaign for Safe Cosmetics
The Corporate Alliance against Domestic Violence
The Corporate Responsibility Group
The Ethical Trading Initiative
The Roundtable on Sustainable Palm Oil
WWF-Forest and Trade Network
 Our Values Strategy

‘Can I say at the end of the day that we are living up to our aim
that our Values are embodied in the products we have made, the
way we have made them and the way we have marketed and
sold them?’

Our strategy for Values is to make sure that we operate our business
so that the answer to that question is ‘yes’.

Our products are naturally inspired, free from animal testing and we
design our processes to have as minimal an impact on the
environment as we can. We aim to operate with care and respect for
all those we affect, and everyone in the business is charged with
ensuring that our business can be a force for social, as well as
economic, good.

We are committed to running a commercially successful, sustainable

business, and using resources responsibly with due regard for the
needs of future generations. We do not believe that there is any
conflict between commercial success and social or environmental
responsibility. The greater our economic performance the more
credible example we can set for other businesses, the wider ethical
choice we can offer to consumers and the stronger our voice for the
causes we champion.

Strategy and principles

The Values strategy identifies the areas where we make the greatest
social and environmental impact. It gives the direction, and identifies
actions that we need to prioritise such as the increased efforts we are
currently putting into addressing our impacts on climate change.

In 2006 a new set of Values Principles was published that clarify the
Company’s commitment to sustainable business. Workshops are
being held for all global employees during 2007 and 2008 that will
make sure all employees are fully conversant with the spirit as well as
the detail of these principles. Our four regions are actively embracing
this. For example, in the UK & ROI region stores are launching a
principle a month linked to product launches and events to make sure
that the Values come alive for all those who are talking to our
customers.

Choosing the issues to address

For a company with such a strong commitment and Values heritage,

our stakeholders have high expectations. It is therefore crucial that
we clearly communicate and prioritise the issues that we will address.
If we try to do everything we will fail, but if we focus, we believe that
we can make a real difference. We have therefore set a strategic
direction that ensures that we do what we say and we say what we
do, guided by the following criteria:

We use our global high street presence to champion causes

which can make a real difference to our employees, customers
and suppliers

We address issues where our operations have a direct negative

impacts or can have a positive impact on people, animals or the
environment

We look to our five Values to ensure we always live up to our

historical commitments, but work towards holistic solutions, for
example by balancing conflicting social benefits and
environmental impacts where necessary

We do not believe in double standards. Our initiatives are

therefore determined by global frameworks, but implemented at
the local level to ensure relevance and effectiveness

Our actions alone cannot bring as much change as we would like.

We therefore always try to send a positive and constructive
message to encourage others to change or take action

We are not experts on all issues. We therefore involve NGOs and

others who can help us address issues most effectively.

These criteria have led to a strong focus on issues such as animal

testing, sustainable ingredients, ethical and fair trade and the carbon
dioxide emissions related to our operations, but also highlighted key
areas where our campaigns can make a difference

The two current global campaigns are ‘Stop Violence in the Home’
and raising awareness about AIDS with a ‘Spray to Change’
campaign. Many other causes are supported by local employee
activities or by donations from The Body Shop Foundation, our
charitable trust.
 Our community involvement

The Body Shop Foundation

The Body Shop International plc does not in the main make
charitable donations, but a charity, The Body Foundation (registered
charity no. 802757), was set up in 1990. In 2006, The Body Shop
International plc gave the Foundation £671,000. The Foundation's
focus is to support innovative global projects working in the areas of
human and civil rights and environmental and animal protection. The
majority of the Board of Trustees are employees of The Body Shop
International plc.

The Foundation has its own terms of reference and its own Board of
Trustees, which include The Body Shop International’s Director of
Values and Business Development Director, among others. There
are common themes between the initiatives of the Company and
those of the Foundation. While The Body Shop International will
address the social and environmental impacts of running a business,
the Foundation will support pioneering, frontline organisations that
otherwise have little hope of conventional funding. For example, The
Body Shop International is sourcing sustainable palm oil from
Colombia, while the Foundation has provided funding for a
smallholder taskforce in South East Asia that is investigating how to
get small scale palm oil plantations certified as sustainable.

Charity shop

The Body Shop makes donations of end-of-line products that the

Foundation sells them on to raise funds. This is also a good way to
increase the visibility of the Foundation among The Body Shop
employees and the wider community, while avoiding sending non-
saleable products to landfill.

Regional grantmaking

The Foundation now has regional funding panels in the UK, EMEA,
Asia-Pacific and the Americas. These grants panels are made up of
regional representatives from the Company and franchisees, who
help the trustees to determine the areas that the regional grants of
the Foundation will focus on. For example, the Asia Pacific panel
focuses on child rights, poverty and environmental sustainability.
Already, the regional grants have meant that some very exciting new
projects and initiatives have been funded.

To find out more about projects supported by the Foundation and

how it operates visit thebodyshopfoundation.org
Engaging with local communities

The Body Shop markets and stores actively support both global
campaigns and local communities. The Body Shop staff around the
world are engaged in a huge variety of community activities from
organising beach clean-ups to supporting women’s shelters and
orphanages. There are hundreds of great examples of inspiring
initiatives all over The Body Shop world, but a few typical examples
are:

In Finland, several The Body Shop® stores organise special

‘pampering evenings’ in local homes for the elderly. The evenings
include socialising and hand and feet treatments. The events have
been very much appreciated, cheering up the elderly and providing
some variety to their everyday routines.

In New Zealand, each store and retail support centre selects its own
community project to complete every year, working for 12 hours a
month. The type of work completed varies from stream clean-ups, to
elderly care, child welfare, youth development, children’s hospitals
and supporting special needs children.

The Body Shop At Home Consultants often go the extra mile to make
a difference. In 2006, consultants raised GBP 34,000 for Children on
the Edge (a charity originally set up by The Body Shop to help
children at risk), and four consultants travelled to orphanages in
Romania to see that all the funds raised made a real difference.

Disaster relief

In general The Body Shop International does not fund charities.

However The Body Shop International does make donations to
disaster relief funds and these contributions are coordinated with the
regions. With stores in more than 50 countries around the world, it is
possible that The Body Shop employees may be affected by disaster,
as happened with the Indian Ocean tsunamis of Boxing Day, 2004
and Hurricane Katrina in New Orleans in October 2005.

These figures do not include contributions via campaign fund raising, reported separately
in this report or any other donations raised by individual markets, employees, franchisees
or via The Body Shop At Home™.

*Due to changes in accounting practices and in our financial year linked to the L'Oréal
acquisition, direct comparisons year-on-year are not possible, since pre-tax profits are not
reported. However, extrapolating the 10 month figure to 12 months would show an
approximately 14% increase - somewhat above company growth (9.5%).
 Stakeholder comment from The Body Shop
Head Franchisee in Indonesia

As a franchisee for the last 15 years, I continue to be immersed in

The Body Shop because of the mission and commitment the
Company has to Values, which is enshrined in its Articles of
Association. It is with great reassurance that we hear Jean Paul
Agon’s message that L'Oréal will encourage The Body Shop to forge
ahead as an ethical retailer and to observe the clear separation
between L'Oréal and The Body Shop. Gordon Roddick’s role as the
Chairperson of the stakeholder panel is especially significant in this
regard.

For the past 5 years, The Body Shop International has been focused
on improving its business strength and getting its house in order.
Values at The Body Shop have been concentrated on annual
campaigning on domestic violence and increasing Community Trade,
with success. Independently, a number of franchisees around the
world continue groundbreaking work in the five Values. With the
increasing numbers of franchisees and people employed across the
world, a systematic approach to keep the passion alive and to
implement the five Values in a consistent manner has been sadly
lacking.

BSI was a very early leader in the area of environmental

responsibility. With the exception of sustainable palm oil, not much
has been progressed in the past four years. It is a great delight to see
the renewed focus and commitment in this area. The franchise
community looks to the leadership of The Body Shop International in
driving towards delivering on one of the strongest reasons for our
being – to reduce the impact our business activities have on our
planet. The Body Shop must regain leadership in this critical area.

There has been much transparency with no holds barred (as is The
Body Shop style) in the discussions leading to this Values Report,
involving NGOs and employees as stakeholders. Frank and tough
discussions have been had on every section of the Values report.
Franchisees see this as The Body Shop International Management’s
commitment to strengthen what is already embedded by Anita
Roddick in The Body Shop organisations around the world.
Leadership can only come from the top and we look forward to
stronger leadership from the top management in this respect.

The future can only point towards stronger and stronger responsibility
on the part of the retailer. The Body shop franchisee community is
ready to once again trail blaze in the area of Values. The next step is
for The Body Shop International plc to show the way and build the
systems by which the goals stated in this Values report will be
achieved not only at The Body Shop, but around the world.

Suzy Santoso, Head Franchisee,

Indonesia
 Stakeholder comment from The Body Shop
Regional Director for UK/ROI

The Body Shop enjoys a special place in many people’s hearts

because of our Values. Before I joined the business I admired as a
consumer how The Body Shop had led the way on environmental
issues and with the against animal testing campaigns. As a business
we were years ahead of other retailers and it was unique for a
leading high street brand to have such a commitment to campaigning
on these issues. It was such an amazing story, great products that
captured the public's imagination and a way of doing business that
was so different from anything that had gone before.

The core Values of the brand felt especially relevant to me; acting in
a fair and ethical way and treating people with respect were essential
elements of my upbringing and have always played a significant part
in my life. If I'm honest I joined The Body Shop because of our
Values, being presented with the opportunity to work with a company
that shared my own Values and wanted to make a positive difference
was too good a chance to miss.

Working in a way that supports small scale farmers though a positive

trade programme, working with marginalised groups in all areas of
Society and campaigning on issues which make a positive difference
to the World we live in make The Body Shop so much more than just
a retailer, or just a place to work. It is this sense of being able to
make a difference through our products and campaigns, which
makes The Body Shop such a rewarding place to work.

On a day to day basis our Values are important to us in the

workplace and we should strive to ensure we display these in the way
we work with each other. For example, we can try to ‘Activate Self
Esteem’ in our colleagues and we need to be aware of the positive
impact we can all have on the people we work with.

Increasingly the issues we promote and campaign on are becoming

more mainstream and integrated into other retailers' strategies. This
emphasises the difference we have made as a business to the way
other companies now think and act. Looking ahead there is an even
bigger opportunity for us to be famous to even more people for
delivering fantastic naturally inspired products, and leading the way
on environmental and social issues which are even more relevant
today than they were 30 years ago.

Alastair Kerr, Regional Director,

The Body Shop UK/ROI
 The Body Shop, our Against Animal Testing
Policy and L’Oréal

One of the principles that made The Body Shop unique and which is
still robustly adhered to today is our policy against animal testing of
cosmetics and their ingredients. Our Against Animal Testing Value
means that: we believe that no animals should be used in the testing
of toiletries and cosmetics. We do not ask others to test on our behalf
and suppliers must certify that they have not carried out animal tests
on ingredients to support their use for a cosmetics purpose.

When the L’Oréal offer was announced for The Body Shop, there
were criticisms from some NGOs particularly focused on animal
testing. Throughout this period, we have done our best to be open
and responsive to these critical stakeholders, offering to engage in
dialogue. These debates centred on the fact that The Body Shop and
L’Oréal had different policies on animal testing. In this article, we set
out how The Body Shop is continuing to rigorously apply its Against
Animal Testing policy as well as working with organisations to
champion the cause of animal protection. This approach reflects
L’Oréal’s clear stance that our Against Animal Testing policies are
protected and ring-fenced. For more information on L’Oréal’s policy
on this issue see loreal.com

The criticisms of the partnership with L’Oréal should be set against

the fact that the Coalition for Consumer Information on Cosmetics
and the European Coalition to End Animal Experiments expressed
optimism for the acquisition recognising the opportunity The Body
Shop has to positively influence its parent company on the issue of
animal testing in the cosmetics industry. We have also enjoyed
strong support from both the British Union for the Abolition of
Vivisection (BUAV) in the UK and the People for the Ethical
Treatment of Animals since the acquisition by L’Oréal. These
stakeholders are in regular dialogue with us concerning our policy
and lobbying on behalf of animals and naturally continue to challenge
us about the future opportunities.

Our current approach is clear. Firstly, we are continuously working

with NGOs like BUAV on critical issues like chemicals reform (see
next article). Secondly, we have made clear that our policy remains
unchanged with our continued commitment to the Humane
Cosmetics Standard, operated by BUAV. There has been clear ring-
fencing, including separate ingredient databases to avoid data
sharing and reliance on animal testing data. Thirdly, we continue to
demonstrate that we will not compromise our policy and to date have
not entered China as their product registration rules require animal
testing.

Although we are sorry that some NGOs have dropped their support
for us, we have continued to command the support of the vast
majority of our stakeholders in this area. The fact that we are the only
global retailer of cosmetics to meet the requirements of the Humane
Cosmetics Standard indicates we are still best in class in terms of our
approach to animal testing. The way we monitor our ingredients to
ensure that they have not been tested after our fixed cut off date is
highly thought of by leading animal protection groups. The Company
continues to be committed to the issue and has worked closely with
BUAV to lobby the EU to ensure that new chemical legislation does
not result in a growth in animal experimentation. Additionally The
Body Shop Foundation, our charity, continues to support a range of
organisations developing pioneering work on animal rights and
protection. These include causes that would not be funded by many
charitable trusts and companies.

Please visit our Animal Protection Principles and our Against Animal
Testing Policy

Please visit the statements on The Body Shop and L’Oréal from
PETA US and www.buav.org
 REACH and animal testing

Since the beginning The Body Shop has campaigned passionately to

end animal testing for cosmetics purposes. In the EU, we have been
successful in creating awareness of the issue and pride ourselves in
being part of the movement that saw the Cosmetics Directive
amended in 2003 to ban animal testing of finished cosmetic products
from 2004 and a timetable introduced for a ban on the testing of
ingredients used in cosmetic products. The ban on the testing of
ingredients will apply progressively as alternative methods are
validated and adopted and in any case by a deadline of March 2009.

A ban on the marketing of cosmetic products that contain ingredients

tested on animals for all human health effects with the exception of
repeated-dose toxicity, reproductive toxicity and toxicokinetics will
apply from March 2009 and for the specific health effects mentioned,
a deadline of March 2013 is foreseen by the Cosmetics Directive,
irrespective of the availability of alternative non-animal tests. Once
the marketing ban is in force, for all cosmetic products sold in the EU
and including those made outside of the EU, neither the product nor
the ingredients can have been tested on animals.

The Body Shop has not tested finished cosmetic products on animals
since its inception and does not use ingredients that have been
tested on animals for a cosmetics purpose after 31 December 1990.
A cut-off date recognises that it is not possible to guarantee that
ingredients have never been tested, but ensures that no further
animal tests will take place. This approach is in line with best practice
recognised by leading animal rights groups through their Humane
Cosmetics Standard, operated by the British Union for the Abolition of
Vivisection (BUAV). We have also never compromised on human
health or environmental protection: our products are assessed in
accordance with the requirements of the EU Cosmetics Directive. We
have also continuously urged the industry to collaborate in using,
developing and helping to validate alternative tests.

Protecting the environment at the expense of animals?

A new challenge to our commitment Against Animal Testing is the

reform of existing chemicals legislation into one new regulation
known as Regulation, Evaluation and Authorisation of Chemicals
(REACH). REACH will strengthen consumer and worker protection by
requiring registration and safety evaluation of all chemicals used in
the EU. The Body Shop has a strong commitment to the
precautionary principle, and addressing the impact of the chemicals
that we use on the environment and human health, and we therefore
support the objectives of REACH. The REACH regulation will come
into force in June 2007.

However REACH is likely to have wider impacts because for many of

these chemicals it could mean retesting on animals, potentially
invalidating previous victories in the Cosmetics Directive. The Body
Shop wants to ensure that every effort is made to prevent the need
for any new animal tests on chemicals used for cosmetic purposes.
We therefore worked with BUAV who campaigned to ensure that the
Cosmetics Directive ban on animal testing for cosmetic purposes is
protected. We signed up to a joint declaration with 20 other cosmetics
retailers in a nationwide advertising campaign run by BUAV to urge
consumers to fight for their right to keep cosmetics cruelty-free.

At the same time we also engaged with our key suppliers to

understand their plans, we spoke to scientific organisations such as
FRAME (the Fund for the Replacement of Animals in Medical
Experiments) on the availability of in vitro alternatives, and we have
discussed the situation with Greenpeace, who have campaigned to
strengthen REACH, to ensure that the right balance is struck
between environmental and animal protection.

In the future

The debate has identified a potential conflict between the

environment and animal testing and as a global advocate for
environmental and animal protection, we see this as a current and
future challenge. We are seeing similar moves on chemicals reform
in the USA and other parts of the world, and will remain vigilant –
sharing our experiences on REACH with global partners.

Links:

BUAV on REACH
 Stakeholder comment from the British Union for
the Abolition of Vivisection

Animal protection organizations and ethical consumers worldwide

reacted with surprise, and often dismay, at the news that L’Oreal was
to acquire The Body Shop International. Obvious and particular
concern was expressed over the future of The Body Shop’s firm and
consistent stance against animal testing.

Compassionate consumers are aware that The Body Shop was the
first international cosmetic company to be approved under the
Humane Cosmetics Standard in the EU and its sister Corporate
Standard of Compassion in the US. This international standard,
managed by leading animal groups worldwide, is the only true
guarantee for consumers who wish to avoid animal testing when they
purchase cosmetic and personal care products.

While many challenges lie ahead in the relationship between the

Body Shop and its new parent company, it is clear that the principle
for which The Body Shop was initially renowned, Against Animal
Testing, does indeed remain part of the company’s DNA. The
company’s commitment to ensure that there is no testing for its
products has survived the L’Oreal offer and clear arrangements look
to be in place for ring fencing of research, development and data
sharing to ensure that The Body Shop can continue to keep its value
in place.

L’Oreal have stated that The Body Shop’s current animal testing
policy will continue to be applied across the product range and that
L’Oreal will respect the identity and values of The Body Shop. We
hope that The Body Shop will encourage L’Oreal to go further,
however, and commit themselves to ending animal testing for its own
product ranges.

We recognize the multinational nature of the cosmetic industry and

the need for values-driven companies to expand and gain access to
global markets. Compassionate consumers send a strong message
to major corporations when they choose to buy cruelty free products.
We are pleased, therefore, that L’Oreal recognize, in its purchase of
The Body Shop, the importance of the growing ethical consumer
market and that the production of high quality cosmetic products
need not involve animal suffering. We now look to L’Oreal to learn
from The Body Shop and commit to meeting the requirements of the
international standard as a matter of priority.

The leadership provided by The Body Shop in efforts to drive animal

testing out of the cosmetic industry has been important in the
success of the campaign in the EU – where a testing and sales ban is
due to come into effect. Where The Body Shop has led, however,
others are now following, as major high street retailers commit to
going cruelty free. The time has come for the Body Shop to return to
higher profile and stronger campaigning on this issue, to reassert the
company’s core values and ensure that The Body Shop continues be
a leader in the global campaign to drive animal testing out of the
cosmetics industry.

Michelle Thew
Chief Executive,
British Union for the Abolition of Vivisection
 100% Vegetarian

The Body Shop has long been committed to animal protection. In

recent years we have enjoyed awards from both the Royal Society for
the Protection of Animal and People for the Ethical Treatment of
Animals for our best in class standards.

Suitable for vegetarians

Our commitment to animal protection extends beyond our Against

Animal Testing policy, as we believe that no animals need to be
harmed to produce cosmetics. This year we are delighted to
announce that all of The Body Shop products are now suitable for
vegetarians.
The term “suitable for vegetarians” means that our products are free
of any ingredients resulting from animal slaughter, such as gelatin or
animal hair. It may sound strange but many cosmetics do contain
these by-products. Customers with strong vegetarian principles seek
products that they can use without compromising their ethics, and we
are keen to meet their need.

Now 100% vegetarian

For many years, the vast majority of products sold by The Body Shop
could be classified as “suitable for vegetarians.” However, there were
two product lines that did not meet the criteria. This meant that we
could not communicate a clear message to our customers that The
Body Shop is a destination for vegetarian-friendly products.

Until 2007 our men’s shaving brush was made from hog’s hair and
our Bath Beads contained gelatin, a derivative of the meat industry. A
synthetic alternative has now been found for the shaving brush that
meets the high performance standard of the previous product and we
are proud to announce its introduction during 2007. The already-
proven and award-winning material is used in our current range of
make-up brushes. We have been working to find suitable alternative
ingredients for the popular Bath Beads, but were unable to source a
viable ethical alternative. Therefore this year the Company took the
decision to discontinue their sale altogether.
100% – globally

We have liaised with the UK Vegetarian Society to ensure that we

meet the standards required to claim vegetarian status. We have
chosen not to carry a mark to indicate our vegetarian status as The
Body Shop operates in more than 55 countries across the world and
there is no universally understood vegetarian mark – for example the
Vegetarian Society mark is recognised only in the UK.

Vegans

In all our channels – in-store, The Body Shop At HomeTM and online
– we are also happy to provide our vegan customers with information
on suitable product choices. Not all our products are suitable for
vegans, as shellac, beeswax, honey and lanolin are included in some
of our products, but we can help vegan customers identify products
suitable for them.

Communicating our commitment in 2007

During 2007 we are communicating our new Vegetarian commitment

to our stakeholders including customers, media and NGOs through
public relations activity and online communications.
 Celebrating Community Trade with old and new
suppliers

2007 is a proud year for The Body Shop as we celebrate 20 years of

our Community Trade programme. Created by our founder Dame
Anita Roddick in 1987, with a small group called Teddy Exports in
India as our first supplier, Community Trade now involves suppliers in
more than 20 countries across the world from Brazil to Zambia. More
than 15,000 people benefit from the Community Trade programme.

Twenty years on we continue to trade with Teddy who supply us with

our best-selling twin-ball massagers, and have been thrilled over the
years to watch their community grow and prosper with a school, and
HIV and AIDS awareness programmes. Teddy even offers maternity
pay for their female workers, an inspired and progressive move in a
developing country where even earning a decent wage can be
challenging.

Community Trade was the first fair trade programme of its kind in the
cosmetics industry and remains unrivalled by any other cosmetics
company. The fair price we pay offers communities the chance to
invest in their future as well as cover their wage and production costs.
It is our commitment to trading with a conscience. Community Trade
isn’t charity or aid, it is simply about empowering communities to
build their own successful futures.

Community Trade is fair because it meets the following criteria:

1) It offers a stable, predictable, fair wage

2) It’s about having an interest in the supplier’s community
3) Its goal is to help the community to have a future

Local engagement to address local issues

Our suppliers are highly diverse, and we address each Community

Trade supplier’s unique set of circumstances and challenges
individually. Apart from guiding principles, there is no “one size fits
all”. To understand and address local issues, we work extensively
with local grassroots groups and NGOs. This objective, local
knowledge and presence is often critical to the ongoing achievement
of the objectives of CT.

A new partnership – Aloe vera from Guatemala

In 2006, we launched Aloe – a full bath, body and skin care range –
using the world’s first fair trade aloe vera from our new Community
Trade supplier, the Guastatoya Farmers in Guatemala. Aloe vera,
often called the Miracle Plant, is also working wonders in Guatemala.

Our Community Trade programme with aloe farmers in the El

Progreso region of Guatemala delivers the opportunity for the farmers
to create a better life for themselves and their families. At the same
time, it is providing The Body Shop customers with the finest aloe, cut
by hand and processed in an innovative way that means it needs no
preservatives.

Part of the income from this trade is used to support children in 200
schools with a range of high quality visual materials. Schools in
Guatemala, particularly in rural areas, struggle to provide books and
visual aids. A “Friends of Schools” committee consisting of local
stakeholders such as church and education representatives chose
the visual aids as the most effective way to help primary age children.

Ruben Antonio Valdez, 43, an aloe farmer and a member of the

Friends of the School committee believes the Community Trade
scheme is not only improving his family life, but a whole generation of
young children in the local area: “The biggest difference is that I am
able to receive income and put my children through school. I am also
proud of the fact that profits are being reinvested in our children – our
children will benefit from this investment into the future.”

He also believes in spreading the word about the scheme: “Our hope
is that through these stories, we can involve more producers and
more people will benefit.”

Our new make-up range and marula oil

Last year we re-launched our make-up range and our revamped

products continued to feature Community Trade marula oil as a key
ingredient due to its strong moisturising properties. The Body Shop
pioneered the use of marula oil in its products in 2001, but the
women of Namibia have made and used marula oil for generations
and over the years it has become one of Africa's greatest skin care
oils.

Namibia is typical of many African countries where extremities of

wealth and poverty are evident. Around 6 per cent of the population
own 90 per cent of the land wealth. Half of its population depends on
subsistence farming for its living. Especially in the north it is a male-
dominated society where few women enjoy the opportunity for
financial independence. This is why the story of the Eudafano
Women's Co-operative is so inspiring.

For the 4,800 women of the Eudafano Co-operative, trading their

marula oil means that they can enjoy a level of financial
independence that their predecessors could only have dreamed of.
They can support their families, buy school books for their children
and basics like soap, new clothes and medicines. Every one of the
members of the co-operative earns the same fair, and above
average, price for her marula oil.

For more information on our Community Trade ingredients visit

www.thebodyshopinternational.com
 Principles and challenges of Community Trade

After 20 successful years, the Community Trade programme continues

to evolve. In the last two years, it has seen significant advances. We
have introduced new suppliers, products and ingredients as well as
new internal processes and procedures aimed at ensuring greater
sustainability of the trade with the communities over time.

The Community Trade programme today covers 28 suppliers across 21

countries. The current percentage of products containing CT
ingredients is just short of 60% – with Community Trade ingredients
representing an estimated 11% of our total raw material spend.
The current percentage of products containing CT ingredients is just
short of 60% – with Community Trade ingredients representing an
estimated 11% of our total raw material spend.

As the first, and arguably still the only programme of its kind in the
cosmetics industry, Community Trade is now bigger than ever. It
continues to deliver benefits to marginalised producers, our consumers
and our brand – a real three way win.

A strategy for Community Trade

2006 saw the culmination of a process that created the first Company-
wide strategy for Community Trade, ensuring that CT is driven to a new
level within the business. The essential elements of this strategy are a
vision, objectives and strategies for CT:

Vision:

To present, with Community Trade, a model to our industry that others

can follow

Objectives

1) To satisfy our demand for certain ingredients, gifts and accessories

in a fair way;
2) To bring benefits to as many people in marginalised communities as
possible, and
3) To support the brand by communicating the benefits of the
programme throughout our channels and regions.

Strategies:

a) Benefit Maximisation
b) Risk Management
c) Communication

Definitions, Principles and Guidelines

The Community Trade strategy is drawn from our definition of fair

trade, the result of 20 years’ experience of trading as a Values-driven
retailer:

1) Fair pay for work in fair conditions

2) An interest in the sustainable development of the community
3) A future that is predictable

From this definition, our Community Trade Principles dovetail into the
overall hierarchy of the Values Principles.

Beneath these principles lies a set of guidelines and commitments.

Constantly reviewed and developed, they are used to monitor
suppliers’ compliance with our standards – a process that takes place
on an ongoing basis in partnership with the suppliers themselves and
through visits at least every two years, as described in our The Values
Report 2005 The guidelines are also used to guide our internal
operations, to protect the benefits to our Community Trade suppliers
and to The Body Shop® brand. Alongside the guidelines sits a set of
commitments that we make to the CT supplier. These commitments
are, again, related directly to what we define to be “fair”.

Trading Levels and Sustainability

Our aggregate spend in the last financial year on CT gifts, accessories

and ingredients was the highest ever. Approximately half of this spend
is ingredients and half is accessories.

We monitor the current and forecast level of trade with all CT suppliers
closely. Through the close, frequent contact that we have with our CT
suppliers we understand their output capacity – in the short and long
term. We attach a target trading level to each supplier – called the
Sustainable Business Level. This annual level of trade produces
income and community benefits that are sufficient to comply with our
definition of fairness, without placing suppliers at risk.

Developments with existing suppliers

One significant move during 2006 concerned our CT supplier of cocoa

beans, Kuapa Kokoo in Ghana. Our purchases of cocoa are higher
than any other CT ingredient (by volume). Through the Community
Trade programme, we are one of the biggest customers of fair trade
cocoa bean from Ghana – all of which we buy from Kuapa Kokoo. The
Body Shop was key to the success of this farmers’ co-operative, and
we also assisted in the start-up of their UK based chocolate company,
called The Day Chocolate Company (now renamed Divine Chocolate
Limited). In 2006 The Body Shop was delighted to be able to hand
back our 14% stake in Divine to the cocoa farmers, giving them a
controlling 47% share in the Company. The statement “a farmer owned
fair trade company” is a rare one. That the farmers concerned are in
Ghana, and that the Company is in the UK is a matter of great pride to
all involved.

At the time of the handover Mr Ohemeng Tinyase, Managing Director,

Kuapa Kokoo Ltd commented: "Kuapa Kokoo was delighted and
honoured that The Body Shop has decided to transfer their holding in
the Day Chocolate Company to Kuapa Kokoo. We could not have
created Divine chocolate without the support of The Body Shop. The
funds generated by Divine chocolate have made a very great difference
to the lives of cocoa farmers in Ghana. Now that Divine chocolate is
progressing well, these benefits will be even greater. We in Kuapa
Kokoo have always treasured our relationship with The Body Shop who
use our cocoa butter in their products. We look forward to working with
them for many years.”

Demand challenges and their impact on suppliers

Through our forecasting system, and with an eye on product launches

and discontinuations, we aim to achieve sustainable business levels
through time – and to grow them as the suppliers grow.

Community Trade is a demand-led programme and we are dependent

on our customers buying products containing CT ingredients and
accessories. This is the nature of a programme based on trade not
charity. We cannot guarantee demand for life, but we monitor our
Community Trade suppliers’ financial dependency on orders from The
Body Shop, and provide forecasts to allow the suppliers to plan ahead.
We advise where we believe dependency to be an issue, and support
our Community Trade suppliers in identifying weaknesses, such as
limited skill sets or product ranges, which may be a barrier in gaining
access to other markets and other customers.

Number of active suppliers, new entrants and exits

2003/4 2004/5 2005/6 Year-end 2006

Number of active suppliers 30 30 30 28
New suppliers 0 0 0 1
Supplier exits 0 0 0 3

In cases where there is no longer a demand for a Community Trade

ingredient or accessory, we develop a discontinuation and exit plan.
Every exit requires a full briefing and sign-off from our CEO and
Executive Committee.

We will always strive for a “soft exit”, either by giving appropriate notice
or through sheltering the community from sudden financial hardship.
We will also point out where the sustainable business levels cannot be
achieved over time – despite the best efforts of our formulators and
product development team.

For example, at the end of the year it was decided that we had to
withdraw from two of our suppliers – in Kenya and in the Philippines –
and in each case, guided donations were made to assist in ensuring
the sustainability of their operations after our exit.
The year ahead

We want to be an example to others, showing that buying fairly traded

products provides benefits to all parties involved. We will work hard to
motivate and inspire our people through training and awareness events
and engage and delight consumers and build the market for
Community Trade ingredients, gifts and accessories in The Body
Shop® range. We look forward to the coming years and are excited
that L'Oréal is currently reviewing options for including Community
Trade ingredients in products, and we hope to be able to assist them.
 Stakeholder comment from Divine Chocolate

The Body Shop has supported Kuapa Kokoo and later Divine
Chocolate since 1994. They have been a fantastic partner, buying
Kuapa cocoa beans for inclusion in their cocoa butter range,
investing in Divine as a start up company and selling Divine in The
Body Shop during seasonal promotions. And more recently they have
donated the shares that they held in Divine Chocolate Limited to
Kuapa Kokoo, increasing the farmers’ ownership to 45% of the
company.

The Body Shop is certainly a company with a difference, a company

that is driven by its Values and one that has used its position to
support other producer businesses through its Community Trade
programme and other fledgling values driven businesses. A year
down the line their commitment to this is as strong as ever.

Sitting on this stakeholder panel has been a very interesting and

hopeful activity. It has been surprising to be part of such an open and
frank dialogue in a multinational company that is now owned by
L'Oréal. It has involved staff and associates at all levels of the
business as well as people representing organisations who offer
specialist expertise in the Values that The Body Shop holds dear. It
has been a reassuring and learning process for me personally,
seeing how to lock the Values into the Company once the founding
inspirational leader has moved on. Is impressive that they have
convened this panel and done this report and it is a great example to
other companies of how it might be done.

The way that The Body Shop works with producers in their
Community Trade programme has shown passion, commitment and
imagination and the review process has show that that has all
continued.

The internal processes seem to be thorough but would be even better

if there was some relevant independent scrutiny/verification. In future
Values reports it would be good to consult with and to include some
direct reports from a selection of the Community Trade suppliers.
The fact that the Community Trade programme is about a trading
relationship that works because consumers want to purchase the
products is great but it does mean that The Body Shop needs to
promote these products within the Company and to consumers in
order to grow the market for them. It would also be nice to see a
commitment to increase the spend on Community Trade ingredients
as a proportion of total spend to complement the commitment to
include Community Trade ingredients in 65% of products.

Sophi Tranchell
MD Divine Chocolate Limited
 Wise Woman™

In line with its commitment to Activate Self Esteem, The Body Shop
ensures that communications to customers are delivered in a
positive, honest and empowering tone of voice. This approach is
embedded in the Company’s mission to be a force for positive social
change. So, communicating the launch of a skin care range suitable
for mature skin for the 50+ age group could have been a challenge,
when ageing in our society is often positioned negatively.

Marketing communications in this area can imply that mature women

should want to turn back the clock rather than celebrate and embrace
the age they are. The Body Shop spent three years developing a skin
care range of seven products for mature skin, called Wise
WomanTM. It is a fact that mature skin has different needs to young
skin. Over time, skin becomes finer, drier and more delicate. As a
result it needs greater and more effective moisturisation. Our goal
was to provide a range to meet the specific skin care requirements of
the mature woman, not to make false promises of miracle cures.

The name Wise WomanTM was developed by The Body Shop

founder Dame Anita Roddick. In creating the marketing
communications to both customers and the media The Body Shop
wanted to ensure that the message it conveyed to customers was
honest, positive, engaging and celebratory.

The creative concept

The team developed a creative concept using Dame Anita Roddick

as the face of Wise WomanTM along with five women. Three are
customers, one is a consultant for The Body Shop At Home™ and
one is an employee of The Body Shop. By using ordinary women we
wanted to convey the message that these women, like many in their
age group, are also “wise women” and that with age comes
confidence, knowledge and greater self-esteem. None of the images
of the women used in the promotional material were retouched.

The language
Our goal in communicating the range was to be honest, positive and
celebratory. We clearly state that the range is for “mature skin”. We
have communicated the performance of the range through honest
language and the results of user trials, thereby demonstrating that
“real people” have tested the range. To celebrate the ageing process
we have incorporated the thoughts of Dame Anita Roddick, founder
of The Body Shop and a role model for generations of women across
the world, as well as the women who took part in the promotional
photography, highlighting their positive approach and philosophy on
life.

Providing a voice

In a youth-driven culture we are aware that women in their 50s can

be ignored or marginalised across some sectors of society and are
not readily given a voice. Social networking forums such as MySpace
are popular in the youth markets but there is little available for the
mature population. In response to this we have created a global
online community especially for women in their 50s. The website
invites women to share their thoughts and advice on health, beauty,
lifestyle, relationships, or any subject they would like to tackle.

The global site is in the English language and additional sites have so
far been developed in French, German and Dutch,

Through Wise Woman™ and the online community www.wise-

woman.net our goal is twofold. Firstly we want to offer mature women
a high performance skin care regime that satisfies the changing
needs of their skin. Secondly we are providing an opportunity for this
age group to voice their opinion on issues that are important to them.

Links:

To find out more about the Wise Woman range and philosophy visit
www.wise-woman.net
 Stakeholder comment from a The Body Shop at
Home Consultant

Inviting a The Body Shop At Home Consultant onto its Values panel
clearly demonstrates the commitment of The Body Shop to
transparency and openness. To be that panel member is both an
honour and a responsibility, representing, as I do, several thousand
feisty Consultants with Attitude!

Many of us joined The Body Shop At Home because of the

Company’s ethics, its campaigning and mischief-making. Good as
the products are, the Values are what makes the Company unique.

At parties, we meet customers face-to-face, and they are quick to

give their opinions. The L’Oréal takeover alarmed us all – particularly
with regard to animal testing. The Body Shop is a pioneer in cruelty-
free cosmetics, so joining L’Oréal was seen as tantamount to
“sleeping with the enemy”. However, in the past year, L’Oréal has
constantly reaffirmed that it respects our Values and has much to
learn from The Body Shop. Meanwhile, we have made a further
commitment to animal protection with our new “100% vegetarian”
product development. We welcome this…. Oh, and please bring back
our paper till bag with its “Against Animal Testing” message.

Telling the Community Trade stories about the people and

ingredients behind our products is integral to “At Home” parties.
Community Trade is mutually beneficial, we get great ingredients and
the suppliers get a fair price. For the women in Ghana who supply
our Cocoa Butter, for example, this is empowering in terms of
economic benefits, and increased self-esteem.

We would like to see The Body Shop meet its target of putting
Community Trade ingredients into more products, and we’d like to
see an increasing number of Community Trade suppliers, too.

Activate Self Esteem has a particular resonance. For us, too,

“Empowering Women”, like charity, begins “At Home”! This job has
brought increased economic independence and success to many
Consultants/Managers, and with it self-esteem and confidence. We
hear many of their moving testimonies every year at our The Body
Shop At Home seminar.

Every year we raise funds for the marginalised “Children on the

Edge”, who are very close to the heart of The Body Shop At Home.
Campaigns and fundraising are a big part of what we do under the
“Defend Human Rights” banner, the present Stop Violence in the
Home campaign has been a great success. This problem affects up
to 1 in 3 women and their children, so it naturally has personally
affected some of us and our customers.

The Value “Protect our Planet” includes so many issues – chemicals,

sustainable ingredients, climate change… and many more. As far as
pollution and waste are concerned, The Body Shop was ahead of its
time. “Do you need a bag?” was the groundbreaking question asked
of customers by The Body Shop counter staff right from the
Company’s inception. We have always been rewarded as a “green”
company and our mantra is Reduce, Reuse, Recycle. It’s impressive
that our make-up packaging contains 75% recycled material, but
what happens to our bottles/bags/boxes once emptied? As a
company we must surely take some responsibility for this, like we
used to.

It is understandable (at least in the UK) that refilling/returning

packaging is no longer viable for many reasons (contamination,
carbon emissions etc) but it is also regrettable. If the mantra of
Reduce, Reuse, Recycle is sincere, we must address this issue. Most
of our bags and packaging will probably end up in already overfull
landfill sites, as plastic recycling and doorstep collection is generally
poor in the UK at present. Maybe a campaign on this “hot issue” is
overdue?

On the plus side, we are seeing impressive sales of our “Bag of

Passion” – an inexpensive, strong and reusable bag with impeccable
credentials. It is made by our Community Trade supplier Teddy
Exports in India, an organisation dedicated to welfare and
development, and 40% of the bag’s proceeds go to Children on the
Edge, so it ticks all the boxes.

The Company’s commitments to developing a strategy on packaging

and waste in 2008 is a timely one, we want to stay at the forefront of
making a difference in everything we stand for.

Cathie Cornish,
Senior Consultant, The Body Shop at Home
 Employees

The Body Shop understands that our employees are critical to our
business success, and we know we need to use a range of
progressive people practices to earn a reputation as a good
employer. These fall into four areas:

• Leadership
• Training
• Work environment
• Ensuring a “Fair Deal” between employer and employee

Leadership

The Body Shop is currently designing a set of learning modules that

will equip our managers in the field with the practical leadership skills
they need to manage their people. These learning modules will build
on our existing programmes “Be Curious” and “Be Inspired”, which
are focused on building leadership capability in our up-and-coming
leaders. Our existing leaders also have the opportunity to build their
pan-organisation leadership skills through our “Global Leadership
Development Programme”, which is designed to help them to drive
results in our global, multi-channel business.

Training

Great leadership helps to provide the inspiration that an organisation

needs, but this soon fades if employees don’t get the training they
need to do their job well. The Body Shop supports our field
employees by providing extensive customer and product training.
“Inspiring the Customer”, for example, is our global customer service
programme and in 2006 we developed three global product training
programmes that tracked three major product launches: “Wise
Woman” skin care range, “Make Me Fabulous” make-up range and
“Aloe Vera”, also a skin care range.

Work environment

We are committed to making sure that all employees have the work
environment that will allow them to be successful in their jobs. For
example, we have flexible working arrangements where possible and
have implemented family friendly initiatives such as a childcare
voucher scheme for all our UK employees and an on-site nursery
based at our global office.

For the majority of our employees we offer an Employee Assistance

Programme, which is an entirely confidential service to help with any
problems or questions. We want to encourage diversity, particularly
ensuring that our management teams reflect our customer base that
is predominantly women. We have a range of policies, practices and
diversity training programmes that support equal opportunities and
aim to create a work environment free from harassment or bullying.

A fair deal

Our final focus as a reputable employer is to ensure that there is a

fair deal between The Body Shop and our employees. We are fully
committed to ensuring that basic labour standards such as non-
discrimination, freedom of association, freedom from harassment and
fair remuneration are adhered to. For example, in 2004, The Body
Shop in the UK discovered that its salaries were not as competitive
as they could be. We therefore designed a three-year reward strategy
that delivers a minimum 20% increase on base salary for our store
staff and moves our managers and assistant managers to above the
median pay rate for the role. The success of this reward strategy has
been a significant factor in a reduced employee turnover. On the
basis of our good results in the UK, we will benchmark our pay levels
globally in 2007 and 2008. There is no globally agreed living wage,
but we will look to current best practice to ensure that all of our
employees earn a fair living.

We also work closely with employee representative bodies to develop

agreed ways of working. For example, the Works Council for our
European business is an elected body and acts as a partner for us to
discuss, agree and deliver a healthy and motivational work
environment for our people across Europe.

The collective purpose of all these activities is not only to ensure that
The Body Shop is regarded as an “Employer of Choice” by new and
existing employees, but that we also have the practices in place,
which allow us to live up to The Body Shop Values. While we want to
continue to improve we can already see the results of our efforts. In
2005, we set targets to reduce employee turnover in the US by 10%
and in the UK by 15% by 2006. By year-end 2006, total US turnover
was 84% of 2005 levels and UK turnover 76%, exceeding our targets.
 Stakeholder comment from an employee
representative

Our core Values. Each and every one of paramount importance if we

are to work towards a better world.

Though all on the stakeholder panel subscribe to the combined

importance of these Values, each of us, I am sure, have those that
are closer to our hearts and minds and souls than others. We are,
after all, human, with all the preferences and attitudes that entails. I
too hold these very dear, and while they are listed separately within
our stated Values, I believe they greatly overlap.

My focus is a local one. A very local one. So local, in fact, that it is

here. Here in the workplace. Here in our warehouses, here in our
offices, here in our retail outlets and in the human resources (how I
hate that phrase, but sadly it is the phrase now recognised!) of our
suppliers, whether these suppliers be the suppliers of goods or
services or people.

Whilst this may seem parochial when compared with the global
aspect of this report, it is nonetheless important. In fact it is
fundamental. After all, if we can’t activate self-esteem, if we can’t
defend human rights in our own internal world, if we can’t activate the
self-esteem, the human rights, of our own employees, then to take
such Values, to fly the flag of such Values solely in the outside world,
would be nothing short of hypocrisy. And hypocrisy is not a value of
The Body Shop.

So how do we go about this?

Well, training is a good place to start.

Training in our values.
Training in their importance. These values are the very basis of our
business.
Training in how these values can effectively be introduced and
executed into and in our day-to-day working environment.
Training in people management for the people managers.
Leadership. Ensuring that the right person is in the right job at each
business level.
Ensuring that employees’ concerns are important to us as a business
and that these concerns are listened to.
Training in the most basic and obvious fact. A fact sadly and often
ignored in this age of the computer.

That fact is

PEOPLE

Despite our technological advance, despite our undoubted hi-tech

capabilities, we need people. Fact. Without people, without the
physical and mental input of people, people at every level of the
organisation, from the lowest level to the highest, without people
there would be no organisation. There would be no business. Full
Stop.

We all matter.
We are all valuable.
We all need to feel that value.
We all need self-esteem.
We all have human rights.

Harry Hughes
Employee Representative,
UK CRC and European Works Council
 What does Defending Human Rights mean for
our suppliers?

Our Ethical Trade programme focuses on working in partnership with

our first tier suppliers to continually improve working conditions. This
approach has produced good results and brought about positive
change. We regularly assess suppliers against our Code of Conduct,
using questionnaires and site visits. We require that all of suppliers
ensure that:

• No-one should be forced to work

• Workers should be able to join and form trade unions
• Working conditions should be safe and healthy
• Child labour should not be used
• People do not work excessive hours
• Workers should earn enough to live on
• Workers should be treated equally, regardless of who they are and
what they believe
• Where possible, workers should be provided with regular
employment
• Workers should not be verbally, physically or sexually abused or
disciplined.

If issues are found, where our standards have not been met, we
agree corrective action plans, monitor the factory’s progress and
verify its completion through desktop analysis or further visits if
necessary.

Our Ethical Trading programme has been developed in collaboration

with the Ethical Trading Initiative (ETI), a group of commercial
companies, NGOs and trade unions that strive to progressively
improve working conditions in suppliers around the world. Over the
past year, we have contributed to a number of projects designed to
improve the effectiveness of ethical trade programmes. In particular,
we are reviewing whether purchasing practices and short lead times
in the cosmetics industry may undermine suppliers’ abilities to
provide decent working conditions. In addition, we are looking at how
to increase audit effectiveness in Chinese factories and ensure that
audit results will help bring about lasting improvements.
We are also members of the Supplier Ethical Data Exchange
(SEDEX), where we work collectively with other retailers to maintain
the quality of the assessments we use to evaluate working
conditions. By using SEDEX we also help to reduce the number of
supplier audits undertaken.

What have we achieved since 2005?

In 2006, our suppliers employed more than 30,000 workers in 22

countries. Our Ethical Trade programme seeks to ensure that
regardless of where our suppliers are based, working conditions meet
our Ethical Trade standards. Every supplier completed a SEDEX
based self-assessment questionnaire in 2006, with 78% of these
verified by a site visit. And we have improved our internal reporting so
that we know that we only trade with suppliers who commit to
improving working conditions.

All suppliers are physically inspected by either BSI or a third party.

Ethical audits are carried out on all high risk suppliers, for example
those based in China and Eastern Europe on an annual basis. All low
risk suppliers – those based in Western Europe and North America –
are ethically audited every two years. Follow-up visits to suppliers
take place to ensure that any non-compliance identified during an
audit is remediated. (To read more about our risk rating of suppliers,
please see our 2005 Values Report).

ETI Base Code Ethical Standard (based on Number of non-compliances

ILO conventions) against standard.
(% of factories with specified
non compliance)
High Risk Low & Medium
Country Risk
Country
No-one should be forced to work 1 (4%) 1 (3%)
Workers should be able to join and form trade 0 (0%) 4 (15%)
unions
Working conditions should be safe and healthy 6 (29%) 9 (33%)
Child labour should not be used 1 (4%) 1 (3%)
Workers should earn enough to live on 5 (24%) 2 (7%)
People do not work excessive hours 6 (29%) 3 (11%)
Workers should be treated equally, regardless 1 (4%) 3 (11%)
of who they are and what they believe
Where possible, workers are provided with 0 (0%) 1 (3%)
regular employment
Workers should not be verbally, physically or 1 (4%) 3 (11%)
sexually abused or disciplined

Through this integrated approach we have seen a great improvement

in the ethical performance of our suppliers. In 2006 we considerably
reduced the number of high risk non-compliances found and 86% of
our suppliers met all our Ethical Trade standards. While 14% of
suppliers have at least one non-compliance, they all have action
plans in place to meet our standards in a given timeframe.

Since 2005, we have provided technical support to suppliers on the

requirements of our ethical trade programme. This has renewed
suppliers’ commitment to our standards and as a result, we have
seen the number of disengagements reduce over the past years,
from five in 2004 and two in 2005 to only one in 2006.

Making a difference

During the last two years we have see a number of positive changes
to workers’ lives that have come about as a result of our Ethical
Trade programme. These include:

Improved communication between workers and management

When we first visited a Home Fragrance factory in France there was
no facility for employees to communicate collectively with
management. Workers were keen to set up regular meetings with
management to discuss their employment terms and conditions. As a
result of our visit regular meetings now take place and workers feel
more informed and valued in the workplace.

Improved health & safety conditions

During an assessment of a Gift factory in China, it was found that fire

safety standards were inadequate. Following discussions with
management and workers these were improved, smoke detectors
and fire extinguishers were installed and staff trained in fire safety.
Now employees are confident that they work in a safe environment.

Increased wages and benefits

In an accessory supplier’s factory in China workers were not being

paid appropriate overtime rates. During our ethical assessment we
informed management that we could only trade with them if they
resolved this issue. Now all 600 employees are paid appropriate
overtime premiums and their salaries have increased significantly.
The supplier has installed a time recording system in order to provide
ongoing, accurate records that will ensure workers are paid for the
hours they worked at the correct rate.

Improvements for the future

We will continue to ensure that we undertake regular assessments,

support suppliers in remediating non-compliances within a
demonstrated timeframe, and only source from suppliers who are
committed to continually improving the working conditions of their
employees.

Links:

The Body Shop Code of Conduct for Suppliers

The Ethical Trading Initiative
 Stakeholder comment from Oxfam

For a development NGO like Oxfam, the importance of The Body

Shop is that it demonstrates to all businesses that it is possible to be
profitable and ethical.

The Body Shop led the way in showing that corporate responsibility is
about what a company does every minute of every day, not
something that can be tacked on as an afterthought. The 2007
Values Report reaffirms that The Body Shop’s values are integral to
its work.

2007 may mark a turning point for The Body Shop. The world has
changed since The Body Shop was founded: ethically traded and
‘green’ products now fill the shelves of supermarkets and other
shops, and many companies are beginning to reduce their impact on
global climate change. This means that where The Body Shop was
once a trailblazer, other companies have caught up.

So, where might The Body Shop look to excel?

Firstly, The Body Shop’s adherence to the Ethical Trade Initiative’s

Base Code is a welcome guarantee that its immediate suppliers
provide their employees with decent terms and conditions of
employment. But what happens if those suppliers receive materials
from companies that do not treat their workers so well? The Body
Shop has an opportunity to ensure that decent waged work is the
norm throughout its entire supply chains. Doing so will not be easy,
will require time and innovative thinking, but provides The Body Shop
with an opportunity to change lives for the better. Closer to home, I
would like to see more evidence in future reports that the same
values that The Body Shop demands of it’s suppliers are fully
implemented amongst company’s own employees.

Secondly, The Body Shop’s Community Trade programme has

pioneered a business model that allows communities to trade their
way out of poverty. The Body Shop’s scale of commitment to trade
ethically in ingredients, gifts and accessories remains beyond that of
other cosmetics retailers. However, in other sectors, such as food
(and albeit only in certain markets such as the UK), responsible
trading has rocketed into the mainstream. What is not so clear is how
The Body Shop will respond to the newly ethical high street. How
much of The Body Shop’s ingredients should come from small-scale
community enterprises? Can product formulations be re-vamped to
allow more ingredients to come from cooperatives and community
associations? Would more visible alliances with other socially and
ecologically responsible trading schemes bring greater benefits to a
wider range of community enterprises?

Finally, The Body Shop is right in identifying global climate change as

a reality, and to commit to reducing its greenhouse gas emissions.
But it is also true that people living in poverty will be worst affected by
climate change. With its close relationship with community trade
partners, The Body Shop is in a unique position to work with them to
ensure that they become part of the solution to, rather than victims of,
climate change.

In short, The Body Shop, now owned by L’Oreal, must retain its
desire to bring about positive social change. The challenge is for the
company to continue to lead on the values that give the company its
identity.

Dr Steve Jennings,
Global Livelihoods Adviser,
Oxfam GB
 Spray to Change

As HIV and AIDS continues to spread, the generation most at threat

is the world’s youth. According to UNAIDS, young adults under the
age of 25 account for more than half of all new HIV infections each
year. In 2003, UNAIDS reported that approximately one third, or 12.1
million, of those estimated to be living with HIV/AIDS worldwide were
under the age of 25. There are almost 6,000 infections per day
among 15-24 year olds, one every 15 seconds. Youth are at the
greatest risk of contracting HIV and prevention is key to stemming the
spread.

The Body Shop has a long history of campaigning to raise awareness

and funds to support those affected by HIV and Aids. In 2007 The
Body Shop and MTV formed a partnership to launch a new global
campaign, which reached out to young people and provided strong
messages to increase their knowledge and awareness about HIV and
AIDS. In addition to the crucial aim of creating higher awareness
among the target groups, we developed the Rougeberry fragrance to
raise funds for the campaign.

Working together means we are stronger and that we maximise the

opportunity to use the power of our global brands to reach millions of
people through a unified call to action.

Awareness raising

Knowledge is the key weapon in stopping the spread of HIV and

AIDS. The campaign has achieved awareness-raising and open
discussion on a global scale. It was launched in 47 countries and ran
in 2,048 The Body Shop stores. Each store carried extensive in store
promotion including educational leaflets that provided basic facts
about HIV and AIDS, how to stay safe, and further sources of
information such as The Staying Alive Foundation website.

In every country the campaign was supported by multi-platform

marketing and PR promotion created and executed jointly by MTV
and The Body Shop. For example, in the UK R&B singer Jamelia was
the 'face' of the Rougeberry fragrance as she is a popular celebrity
with the target market. She was also able to talk freely about safe sex
and encourage young people to carry condoms. MTV and The Body
Shop conducted a poll on mtv.co.uk asking young women aged
between 16 and 30 about their attitudes towards sex. With 1,064
respondents, the poll revealed that 70% of young women don’t
believe that they are at risk of contracting HIV. The results were
widely covered in the press.

In Korea a localised microsite was created especially for the

campaign. In addition a Public Service Announcement was produced
using national celebrities. A television ad aired on MTV channels over
5,000 times promoting the campaign to a potential 1.4 billion people
and a global MySpace page (myspace.com/spraytochange) helped to
spread the word online, reaching more than 20,000 people. A
specially created global website www.spraytochangeattitudes.com
was created which is linked to by MTV and The Body Shop websites
around the world and itself links to the Staying Alive website.

Fundraising

Proceeds from the sale of every Rougeberry fragrance go to The

Staying Alive Foundation – a charity founded by MTV International
promoting and supporting young people who are protecting
themselves and their communities against the multiple threats posed
by HIV and AIDS. Studies show that young people are most receptive
to messages about HIV prevention from their peers, so the Staying
Alive Awards support prevention projects that young people create
for, and with, others.

The Foundation launched in January 2005 as a global grant making

and advocacy organisation and has been able to support some
amazing projects in communities around the world where HIV and
AIDS is hitting hardest.

For example, with help from generous partners, on World AIDS Day
2006 The Staying Alive Foundation provided grants to a total of 18
individuals and organisations. The China Youth Network was one of
these. The China Youth Network won a 2005 award for the life-skills
training that Hang Can, a young volunteer, conducted for ethnic
minorities. With their 2006 award, one of Hang's peers, Liu Chenghao
will expand the Youth Network's reach by developing a peer
education system in the hard-to-reach, ethnically diverse
communities of Guizhou and Qinhai that will include culturally
adapted HIV/AIDS education materials for at risk youth.

The Body Shop employees around the world have nominated local
groups of young people, in the developed and developing world, to
apply for the awards made possible by the Spray to Change
Campaign.
 Campaign partner comment from MTV Networks
International

MTV has been involved in promoting awareness of AIDS and

prevention of HIV infection for over 25 years. We have invested in
programming and on-the-ground projects which highlight HIV
prevention messages, address the stigma of safe sex and the
discrimination of people living with AIDS. We always look to empower
our audiences so that they can make their own choices for
themselves, their partners, and within their communities.

For MTV, producing a campaign with The Body Shop was an

opportunity that felt very natural: we have similar Values and aims,
especially with regard to HIV/AIDS, and working together with one
voice meant that we could reach both MTV’s audience and The Body
Shop customers at the same time, using MTV’s network of 56
channels, and the Company’s 2045 stores, allowing both businesses
to impact even larger numbers of people than by working alone.

It is never easy to partner on a project like this, and perhaps the most
challenging aspect was the timeline: retailers and broadcasters don’t
tend to work on the same timelines as each other! But from the start,
the two companies had set out a clear goal and vision of what we
wanted to achieve, and how we wanted to do it. We ensured that the
project leaders had very clear guidelines and strong communication
channels to make sure that where there were potential issues, we
could work our way around them in as short a period of time as
possible.

One of the smaller, but crucial aspects of the project was the
communication about Spray to Change to MTV & The Body Shop
staff: this meant that we had full buy-in from the very top of both
companies (MTVN vice-chairman Bill Roedy & Anita Roddick
launched the campaign) through to all employees around the world.
This conjoined communication meant that staff from both companies
had the opportunity to work on the project, whether through the initial
creation of the campaign, to the in-store marketing & press activities,
youth discussions, media pieces, celebrity endorsements, numerous
digital activities and of course, the selling of the perfume. There was
huge creativity and commitment from both sides, and this helped to
see the campaign successfully through from its creative inception
through to the launch.

Spray to Change was an inspiring project for all involved, and MTV
Networks is very proud to have partnered with The Body Shop on it.

Georgia Arnold,
MTV Networks International
 Stop Violence in the Home

Domestic violence is one of the greatest human rights violations of

our time affecting one in three women around the world at some point
in their life.

The Body Shop campaign

Stop Violence in the Home is the flagship global campaign of The

Body Shop. It is designed to raise funds to help those affected and to
increase awareness of an issue that remains hidden behind closed
doors.

In 2004 the campaign had been launched in three countries. By 2005

it had reached 40 countries. In 2006 the campaign ran in 47
countries.

Domestic violence and children

For the 2006 campaign we wanted to focus our attention on a specific

group of people who are affected by domestic violence – children.

From speaking to our NGO partners around the world we knew that
the impact on children was significant. However, we could find no
data to show how many children were affected and the impact the
issue had on their lives.

So, in May 2005, The Body Shop approached UNICEF and the
Secretariat for the United Nations Secretary-General’s Study on
Violence against Children who were producing a report for the UN on
the wider issue of violence and children. Together we agreed to
create a piece of work as part of this report to document the effects
on children of being exposed to domestic violence.

The result of our partnership is ‘Behind Closed Doors – The Impact of

Domestic Violence on Children’. The report, the first global study of
its kind, revealed the devastating and lasting impact on children of
living with domestic violence, conservatively estimating that up to 275
million children worldwide are exposed to domestic violence. Even if
children are not directly abused in the home, the experience of
witnessing abuse has profound effects on their wellbeing and
development.

The Body Shop campaign around the world

The report makes several recommendations on the steps to be taken

to ensure children have a home environment that is safe, secure and
free of violence. The national campaign activities from The Body
Shop markets were based around these recommendations.

Raising Awareness of the impact of domestic violence on

children

The report tells us “Much can be changed by bringing this problem

into the open”. The actions of The Body Shop markets across the
world raise public awareness of the problem in unique and innovative
ways.

In New Zealand for example, the campaign launched on 1 August

with an all-day concert attended by over 8,000 people, including
celebrities and sports personalities.

One of the successes of the 2006 campaign was the launch for the
first time in every Middle Eastern country that The Body Shop
operates in, with the support of their governments and UNICEF. The
Middle East is a challenging area for domestic violence campaigning
and by raising awareness and funds on this issue The Body Shop is
making unprecedented headway in these countries. All funds raised
will help UNICEF create a telephone helpline for children affected by
domestic violence – a first for this region of the world.

Enhance social services that address the impact of violence in

the home

The report tells us that many of the support services for women
escaping domestic violence offer little in the way of facilities or
services for children.

In Greece the funds raised went to THE SMILE OF CHILDE a

volunteer and not for profit organisation aiming to protect children’s
rights. The Smile of Childe will use the funds raised to build a
playground and study room for the children.

Raising funds

Raising awareness means more people ask for help from the not-for-
profit agencies providing services to those affected. Therefore a key
element of the campaign is for each market to link with a local or
national agency and raise funds to enable them to increase or
improve the services they provide.

Since August 2006, the campaign has raised over £580,000 through
the sale of the Mint lip care stick and Daisy soap, both products
specially created and designed for the campaign.
 Campaign partner comment from UNICEF

“No violence against children is justifiable” and “All violence

against children is preventable”.

This is the key message delivered from the report of the United
Nations (UN) Study on Violence against Children, launched at the UN
General Assembly in New York in October 2006. Over the past three
years a huge range of stakeholders worldwide worked with the
independent expert Paulo Pinheiro to create a groundswell of support
to stop violence against children. The report highlighted the full range
of violence against children across all settings, including at school, in
institutions, at work, in the community, and perhaps the most difficult
setting to address – the home and family.

The joint campaign of the UN Study with UNICEF and The Body
Shop International plc was able to contribute to putting a stop to all
forms of violence against children. While a great deal of progress has
been made on preventing and responding to violence against
women, and quite specifically in the home, children are still too often
forgotten. This joint campaign sought to break down some of the
barriers to positive action, and to consider a focus on putting the best
interests of the child at the centre.

This campaign reached across the globe to address a problem that is

truly global. There is no corner of the world that is not touched by
violence, and children (and women) tend to be the most affected and
least protected. Experience has shown that economic development
does not guarantee greater protection for children and their rights;
rather a specific focus on protecting children is necessary to ensure
their situation is recognised and addressed appropriately.

The report that was produced as a central tool for this campaign was
also a contribution to the larger United Nations Study on Violence
against Children. This UN report was considered at the UN General
Assembly in October 2006, and Governments recommended follow
up on the recommendations of the Study. This means that UN
agencies and their civil society partners will continue to work with
governments around the world to focus on reducing violence against
children, and would seek to continue to engage private sector
partners like The Body Shop in the process.

In addition to the awareness raising and funding element which The

Body Shop has itself reported on thoroughly in the very useful
Special Issue of “EVERYBODY” in December 2006, the report has
also influenced other processes such as the Commission on the
Status of Women which has decided for the first time to focus on
violence against girls (rather than women) – including in the home –
over the next five years. This huge and formalised global network
stems from the international convention on the elimination of
discrimination against women and involves a range of UN agencies
as well as academics and civil society organisations all over the world
whose recommendations are brought to the General Assembly.

Amaya Gillespie,
UNICEF
 Addressing Climate Change

The planet is getting warmer and the weather as we know it is

changing. This is leading to rising sea levels, widespread flooding,
droughts, and the spread of tropical diseases. Scientists are
describing climate change as the most serious threat facing our
planet today.

Global warming, which leads to climate change, is caused by a build

up in the blanket of gases that surround our planet. The main gas
causing the problem is carbon dioxide (CO2). Virtually every human
activity produces CO2, from driving our cars to heating or air-
conditioning our homes. This is because CO2 is released when we
burn fuels such as oil, gas and coal to make electricity, or to power
our cars and planes.

The Body Shop took its first step in addressing climate change in
2001, when a joint campaign run in partnership with Greenpeace
International helped highlight the importance of renewable energy in
the fight against global warming. We also supported the development
of more renewables by investing in a wind farm in Wales. However,
over the past few years, our progress in this area has not been as
significant as we would have liked given the size of the challenge
ahead. In 2006, we therefore took our second step when we decided
to become a carbon neutral retailer by 2010.

Defining ‘carbon neutral retailer’

Carbon neutral to us does not simply mean buying offset. This claim
is only meaningful if we can make deep cuts in our energy use
through significant changes in behaviour and in the technology we
use to run our business. We have to look at how we transport our
goods, how we light our stores, how we cut our travel. We have to
influence our suppliers, help our franchisees or learn from them. We
have to discuss our plans with our stakeholders to understand if we
are on the right track and listen to other companies’ experiences in
how to make the biggest difference.

We believe that getting our own house in order first is crucial. We can
only ask others to join us, once we have examples to share. Our
initial target is therefore to ensure that carbon dioxide emissions from
our company-owned retail business worldwide are carbon neutral.
This includes emissions from running our offices and warehouse,
business travel and the emissions incurred in shipping goods to
company-owned stores or to our The Body Shop At Home™
consultants and our online customers.

Once we have made significant improvements in our direct emissions

that we can control, we will look at our indirect emissions where we
have some influence. For example, we learn from those franchisees
who are already tackling the issue and will support other franchisees
in managing their own carbon emissions as well as working with our
suppliers, particularly those who manufacture our products and
packaging. We will also help staff to make a difference at home.

Sources of our CO2 emissions

The following diagram is an estimated breakdown of our global CO2

emissions:

Hierarchy of action: reduce, replace, offset

Our strategy is simple: we will start by reducing energy use wherever

we can. Over the past year we have examined where we can save
energy in our stores, offices and warehouses, how we can transport
our products more efficiently, and how we can reduce our use of air
travel and shipping. We are now setting energy reduction targets for
all of our markets. We are also looking at improving the design of our
stores to increase their energy efficiency.

The next step is to ensure that wherever possible the energy we use
does not come from fossil fuels. In the markets where it is possible to
choose a renewable energy tariff we have switched our stores and
offices. In our company-operated markets, 60% of UK’s, 85% of the
Netherlands’ and 90% of France’s energy use now come from
guaranteed renewable sources, and we are looking at switching
additional markets in the course of 2007. Our Swiss franchisee has
gone even further by going 100% carbon neutral. We have also
changed our car policy to ensure that all new company vehicles are
hybrid models, saving up to 30% of our emissions.

The third step, and a last resort in our strategy, is offsetting

emissions. While we aim to ensure that offsetting will only form a
small part of our total strategy, we still screen our investments
carefully to ensure that the projects we support are aligned to our
Values and provide real environmental and social benefits. In 2006
we offset our business air travel (2,325 tonnes of CO2) by funding
non-tree planting projects through The CarbonNeutral Company
using a mixture of Clean Development Mechanism (CDM) and non-
CDM verified projects, all of which are externally verified by KPMG.

2005/6 offset projects:

1. Hydro power generation in Bulgaria

2. Providing solar panels to villages in Sri Lanka and India

3. E+Co, renewable energy projects in East Africa

While we will continue to demonstrate support for the CDM concept,

we also plan to consider high quality projects that are not part of this
mechanism. Often, the scale of many small but effective projects
mean that they are not CDM verified.

For a company operating in 55 markets at high street level, becoming

carbon neutral is a huge undertaking. We are also aware that new
challenges related to new technologies, offsets or renewables appear
continuously, and we need to address these. For example, recent
discussions highlight the potentially devastating effect of biofuels on
forests and food supply. To address such issues, we are constantly
reviewing our strategy to ensure we maintain credible investments in
line with the latest thinking and will publish at least annual updates on
our progress.

Links:

Climate Change position (To be published in early July)

IPPC
WWF Carbon Calculator
 Stakeholder comment from Greenpeace

The association between Greenpeace and The Body Shop goes back
a long way. We first worked together to help save the whale and
more recently to campaign for clean, renewable energy.

Anita and Gordon Roddick's deeply held Values on social and

environmental issues were integral to The Body Shop and gave The
Body Shop its 'green' brand. It inspired many activists and business
people alike. It was truly cutting edge and way ahead of its time as a
major high street brand. Where The Body Shop went others followed,
usually way behind. Whether it was animal testing or Community
Trade programmes, or human rights or investing in wind farms to
offset CO2 emissions, The Body Shop got there first.

It's a real tribute to the Company that it continues to strive for

improved performance of the Values that go to the heart of the
Company. But as it does so it faces many challenges not just from
competitors trying to copy it but also in dealing with a globalised
world where keeping down costs of production can clash with
environmental and social beliefs.

It means having to make tough decisions that will enable The Body
Shop to be a profitable business but at the same time socially and
ethically responsible. It will mean taking its customers with it on a
journey that will deepen its core Values and customer and staff
loyalty rather than look to short term profit.

And as climate change begins to impact on the communities it works

with in the developing countries it will need to find new ways of
sustaining those communities while at the same time massively
reducing the emissions of its own business operations.

Greenpeace welcomes the 2007 Values Report as a step in the right

direction and hopes that future progress will keep The Body Shop at
the cutting edge. .

John Sauven
Acting Executive Director, Greenpeace
 Sustainable Ingredients – a campaign for
forests, wildlife and decency

All of our products are inspired by nature. We draw on the natural

properties of ingredients, used for centuries in all parts of the world
as traditional remedies, to moisturise, cleanse or create wonderful
scents.

But in harvesting these natural ingredients, we know we must always

ensure that we do not upset nature’s delicate balance. We want to
contribute to sustainable development – “meeting the needs of our
generation without compromising needs of future generations“.

For our Community Trade ingredients such as honey, marula and soy
this means establishing close relationships with suppliers, and
knowing exactly where each ingredient originates. In other cases, we
have decided to work with companies and campaigners to bring
about changes in the wider industry to avoid large-scale
environmental degradation, human rights abuses and loss of wildlife.

Driving change – sustainable palm oil

Palm oil is the world’s second most used vegetable oil, with an
annual production of 400 million tonnes. Millions of people rely on
palm oil for their livelihood and for nutrition. However, palm oil has
recently been highlighted as a crop that is often grown on deforested
land, destroying fragile ecosystems and wildlife and linked to severe
human rights and worker abuses.

Over the past three years, we have taken a leading role in the
Roundtable on Sustainable Palm Oil (RSPO), working alongside
NGOs such as Oxfam and WWF, plantations and other actors in our
supply chain to change the way palm oil is grown and plantations are
managed. This has resulted in a groundbreaking standard for the
production of sustainable palm oil, taking into account all aspects of
biodiversity and human rights.

The roundtable has been successful in bringing together the business

sector and NGOs to tackle the problem and create a more
sustainable approach. More than 40% of the world’s palm oil
production is now represented in the initiative and some of the
world’s largest consumer brands and retailers have joined the RSPO,
sending a clear signal that there is a demand for sustainable palm oil.
In particular, we are delighted that L'Oréal joined the RSPO at the
beginning of 2007.

Through the roundtable we have helped develop high standards. We

have provided practical advice on human rights to plantations and
The Body Shop Foundation has co-funded important work to make
sure small-scale farmers are not disadvantaged by the RSPO
standard.

We expect fully certified RSPO palm oil to become available by the

end of 2007. However, we want to improve the situation as soon as
possible and are therefore moving ahead to lead the campaign for
sustainable palm oil. In June 2007 we became the first cosmetics
company to source traceable, sustainable palm oil. We have changed
our entire soap range to be manufactured using palm oil from one of
the leading sustainable plantations – Daabon in Colombia. We have
commissioned our own audit and visited the plantation to ensure that
the protection and welfare of communities, workers and the
surrounding jungle is preserved and promoted.

Daabon is committed to applying for RSPO certification as soon as

the standard is finalised, but in the meantime, we want to ensure that
we do not contribute to further deforestation but instead promote
sustainable palm oil. We hope this will encourage others to do
likewise.

Supporting sustainable forestry

The Body Shop is committed to promoting sustainable sources of

renewable raw materials. Over the past 35 years wood consumption
has doubled and we've lost half the world's forest land, causing loss
of endangered wildlife and depriving indigenous populations of land
and livelihood.

Although The Body Shop buys only small volumes of wood-based

products, for example for eye-pencils and massagers, we want to
make sure that our wood use does not contribute to deforestation and
that by promoting sustainable wood we encourage others to support
environmentally and socially responsible forestry. We support FSC
(Forest Stewardship Council) certified wood wherever we can. Our
target is to sell only wood products made from FSC wood by the end
of 2010. We are well on the way to achieving this, as the major part
of our non-Community Trade wood accessories are now FSC
certified. The exception is mainly eye pencils and these are due to be
made with FSC certified wood from 2007.

FSC certified forests are managed to ensure long term timber

supplies while protecting the environment and the lives of forest-
dependent peoples. So the FSC logo enables customers to buy wood
products with confidence they are not contributing to global forest
destruction.

We also look at wood use in our stores. Where wood is used in shop
fits, all new components must be FSC certified if commercially
available. Existing components are not replaced, as this would
contribute to unnecessary resource use.
 Responsible chemicals use

The Body Shop has always taken a strong position on the use of
chemicals in product formulations and the environmental impact of
our products and packaging. The Body Shop adopts a precautionary
approach to the use of chemicals and as early as 1993, we pledged
to ban PVC from our packaging and products. In 2005, we were the
first global retailer to commit to a firm timeline for phasing out
polycyclic musks and phthalates.

Over the past five years, The Body Shop has seen a significant
growth in consumer awareness and NGO activity around the use of
chemicals in consumer products. While this trend was originally
confined to Northern Europe and Scandinavia, we are seeing growth
in customer enquiries from other parts of Europe, the USA and
Canada.

Responsiveness and transparency

To understand customers’ concerns, The Body Shop has proactively

engaged with NGOs pursuing chemicals campaigns, including
Greenpeace in Europe, and the Campaign for Safe Cosmetics and
WWF in the USA.
To address the concerns raised, we committed to the phasing out of
phthalates by 2006, and polycyclic musks by 2010. We are well on
track to reach our target on polycyclic musks, which are now found in
only nine of our products. Despite our efforts, we did not quite reach
our phthalate target, as one formulation still contained phthalates at
the end of 2006, although this will be removed by the end of 2007.
This delay has occurred because it has taken slightly longer to match
the exact fragrance for one of our most popular products.

We also published a publicly available chemicals policy and strategy,

which include explicit positioning statements on chemicals of concern
to campaigners.

A best in class approach

We are proud to see that our approach has been recognised as

progressive and best in class by environmental and consumer
groups. In early 2007, Greenpeace in Europe published a
comprehensive report into their three-year campaign on Chemicals in
the House. The Body Shop was highlighted throughout the report for
our continued progress. Likewise, we received considerable praise
for our policies in a report from Innovest, an ethical investment
research agency, which places The Body Shop at the top of their
benchmark.

Offering consumer choice

As new chemicals come under scrutiny, we remain committed to

listening to stakeholders and working with them to find the best
solutions. One example is the discussion around parabens – a group
of chemicals long used as preservatives in the cosmetics industry. In
our view, the scientific evidence that parabens should be of concern
is weak or non-existent. However, to create a clear choice for our
customers, we have looked into alternative solutions, and in 2006 we
launched the Aloe range – of skin care and bath and body products
which are fragrance-, colour- and preservative-free. Over the coming
years, we will be launching more preservative-free products to ensure
that consumers are provided with an even greater choice.

We believe it is important to provide customers with the information

they need to make purchasing decisions and ingredients will always
be clearly labelled. As part of our commitment to the Campaign for
Safe Cosmetics we have recently signed up to add our products to
the Skin Deep database, a US based resource for consumers and
NGOs rating thousands of cosmetics products, run by the
Environmental Working Group. This will enable our customers to see
how their favourite The Body Shop® products fare against competing
brands.
 Packaging – exploring routes to minimal waste

The Body Shop has always been widely recognised for our unique
approach to packaging. We use only the packaging necessary to
keep the product fresh and intact, and in some cases to include
important legal or consumer information.

Over the years The Body Shop has piloted a number of the many
ways in which we can reduce the amount of resource use associated
with our packaging. In some cases we have found that the solution
for reducing our environmental impact has to take into account other
issues, such as mode of transport or how the customer will use or
dispose of the packaging.

Reduce

The first rule of packaging at The Body Shop is to use as little as

possible. For the vast majority of products we use simple bottles and
jars, with no secondary packaging. Less than 3% of our products
come in separate cartons, for example where legislation requires
secondary packaging (such as essential oils) or we need to include
consumer information. In these cases we will always use recyclable
cardboard made from recycled or sustainable forest materials.

Reuse

In the past, we offered customers the option of refilling products.

Unfortunately, we found that very few customers (less than 1%) were
using this option. In addition, refilling is potentially hazardous as
containers may inadvertently become contaminated with other
substances. We therefore stopped refilling in 2001.

However, we still encourage reuse of our packaging. Most of our gift

packaging, for example, can be used again – some of the beautiful
Community Trade boxes even as gifts in themselves. In addition we
launched a “Bag of Passion” or “Bag for Life” – a sturdy and attractive
shopping bag that can be reused indefinitely. It is made by Teddy
Exports, one of our Community Trade suppliers with proceeds going
to good causes.
Recycled packaging

This is a key area for our packaging policy. For a global business
operating in over 2,200 locations with varying local facilities, relying
on recycling to reduce the environmental impact of our packaging is
not always practical. Using recycled material, we can cut the overall
resource use significantly, without depending on customers to bring
back bottles.

At the end of 2006, all of our PET bottles contained 30% recycled
material and we will at least double this by the end of 2008. In 2006,
we also launched a full new make-up range and managed to include
recycled material in 73% of the packaging. Over the coming years,
our packaging team will aim to go even further by working closely
with our packaging suppliers.

Alternative materials

We are always on the lookout for new materials that reduce our
resource use and generate less waste. Since most of our products
are liquid and need to be stored in vastly different climates, our
options are limited. We are reviewing options such as cornstarch and
we have recently replaced our carrier bags with a new type of
degradable plastic.

Recycling

Most of our packaging can be recycled through standard household

and business recycling systems. We operate in a huge variety of
different markets, where recycling facilities vary greatly. Many of our
stores across the world continue to support recycling, by offering to
take back bottles. In New Zealand, stores make a huge effort by
offering recycling of types of plastic currently not supported by
household recycling schemes. In Taiwan, The Body Shop
encourages recycling through product discounts for returned
packaging, and in Australia and West Malaysia customers are
reminded to recycle through campaigns to “Bring ‘em back” and
encouraged by staff to recycle.

However, in some markets, we have had to reassess our priorities

and the net impact of our initiatives. In the vast majority of our
markets, recycling is not widely available, so we cannot offer this
service. In other markets, we found that few customers used the
service.

In 2006, we had the opportunity to reorganise our transport in the UK

to stores, increasing the mileage efficiency of our fleet and saving
230 tonnes of carbon emissions per year. An unfortunate side effect
of this is that we no longer have trucks coming back to our
warehouse with recycling waste. Driving a limited amount of PET
bottles across the country for recycling simply did not make
environmental sense. However, although we have instructed store
managers to ensure that packaging is recycled locally, doorstep
recycling is rarely available for small high street shops.

In the UK we have taken up the challenge and have contacted local

authorities to call for better recycling facilities to be set up for smaller
high street businesses so we can once more assist those customers
without access to recycling facilities.
 Assurance: URS Technical briefing

Introduction and approach

URS Corporation Limited (URS) has been commissioned by The

Body Shop International (The Body Shop) to provide internal
assurance services as part of the overall assurance of their
Values Report 2007. A stakeholder panel of independent experts
provides formal external assurance of the report. The
independence of the Stakeholder Panel (The Panel) is key to the
value of this approach to assurance methodology. This briefing
represents findings and observations in respect of URS work
during January through April 2007 as presented to The Panel by
URS on 3 May 2007. Further more detailed feedback including
recommendations has been provided to The Body Shop to
support this.

Methodology and Responsibilities

The overall assurance process has reflected the three principles

of the AA1000 assurance standard: Materiality, Responsiveness
and Completeness. The Panel’s focus is to provide a robust third
party opinion on materiality and responsiveness of the Values
Report 2007 including balance and overall style. URS has been
appointed to further strengthen the robustness of this opinion.
URS has reviewed the completeness and embeddedness of
systems and processes in place for implementing those Values
and associated key performance indicators (with a specific focus
on climate change data), and provided a technical and factual
briefing on our findings to The Panel to consider in the
development of its assurance opinion. As part of this process
URS was also requested to identify progress since the last review
of Values management conducted by URS in 2005. We also
reviewed and sought evidence to support performance and
factual claims made in the Values Report 2007 based on an early
version, and have provided detailed commentary to The Body
Shop on the report for consideration in preparation of subsequent
versions. The project team members at URS have not been
involved in the development of the report nor its associated
systems. This briefing provides only a record of observations and
findings presented to inform the opinion of The Panel and should
not be considered a standalone report or set of opinions to be
used as advice or as the sole basis for any decisions, including,
without limitation, financial or investment decisions. URS
conducted the work through a series of interviews with Group
level personnel (15) across a wide range of functions including
Human Resources, Product Development, Communications,
Values and Environmental Management. Documentation relating
to Values strategy and management was also reviewed in
preparation for, and subsequent to, these interviews and
meetings.

Overall findings: Values Programme

Overall we find there is demonstrated progress in the

formalisation of policies and the development of systems and
process to support the integration and implementation of Values
at a Group level since 2005. These developments vary across the
different Value areas; specifically: Activate Self Esteem A formal
policy has been developed and communicated covering aspects
of Activate Self Esteem both for internal Body Shop employees
as well as other parties the Body Shop is able to influence, such
as the wider community. Overall the Body Shop’s activities in this
area are recognised externally through high profile campaigns
such as Wise Woman and Stop Violence in the Home. With
respect to the welfare and self-esteem of BSI employees there
are various systems and processes for the implementation of
aspects of this Value. Currently these primarily cover The Body
Shop’s own employees in the UK and North America. Monitoring
of performance has started through the gathering of initial data for
most key issues. Against Animal Testing As in 2005, evidence
has been provided to demonstrate the full integration of systems
and processes for the management of this Value at a Group level.
A formal policy has now been developed and communicated and
been extended to incorporate animal protection (use of
vegetarian products).

Community Trade

A formal policy has been developed and communicated. From

discussions and documentation reviewed, the identification and
selection of potential Community Trade partners is increasingly
demand led. New tools have been developed by The Body Shop
to enable demand, supply and performance of suppliers to be
tracked and monitored on a regular basis. Where exit is still
unavoidable the process for this has also been more clearly
defined. Community Trade partners are excluded from The Body
Shop’s formal Ethical Trade audit programme. However, there
are regular documented visits to partners, during which
performance in key areas of ethical business management is
assessed. From our discussions we understand that the
relationships between The Body Shop and Community Trade
partners are based on personal interactions and seek to be trust
based. As the Community Trade programme has been expanded,
there has been recruitment of additional Community Trade Team
staff to support the programme and continue building and
maintaining these relationships.

Defend Human Rights

A formal policy has been developed and communicated to define

Human Rights for The Body Shop. The policy considers
employees, suppliers and the wider community. With respect to
suppliers, the Ethical Trade audit process continues to be
maintained and new tools have been developed to enable The
Body Shop to track and document supplier performance more
systematically, as well as close out corrective actions in audits.
We have found that the systems and controls for this Value
internally relating to employees, to be less well developed than
those for Ethical Trade.

Protect Our Planet

An overall policy has been developed and communicated as well

as a number of specific policies, for example for chemicals in
products and climate change. The systems and controls for the
implementation of this Value includes programmes for packaging,
chemicals, sustainable raw materials and climate change which
are at varying stages of development and integration into the
business. Actions on programmes for sourcing sustainable
timber, chemicals in products and packaging continue, and more
recently the development of internal tracking mechanisms has
aided the ongoing management of performance in these areas.
We also noted that significant progress has been made in
proactively sourcing sustainable palm oil in the last 12 months.
Initiatives focused on reducing climate change impacts remain in
their infancy.

Overall findings: Values Report 2007

Our scope was to seek evidence to verify factual elements of the
2007 Values Report, which relate to measurable and or
documented activities and performance in the implementation of
the Body Shops Values. Where evidence has been sought,
appropriate information has been provided to verify the claims
made. We have not sought to provide comment on or to
substantiate more qualitative report claims concerning Values
policy developments and aspirations. Based on our discussions
and the documents reviewed we consider that the content of the
report reflects the overall Values programmes in place at The
Body Shop. With respect to data accuracy, as the data collection
processes for climate change are still in their infancy we
conducted a specific review in this area. Calculation errors were
identified in the climate change data, which have since been
recalculated and corrected.
 GRI Index

This index references the content of the 2007 Values Report, and
reflects the extent to which The Body Shop publicly reported on its
performance for the financial year 2006.

GRI Indicator Adherence to Where this

guidelines? year?
This year
Vision and Strategy
1.1 Statement on the organisations vision and Full Welcome
strategy regarding its contribution to sustainable
development
1.2 Statement from the CEO (or equivalent senior Full Welcome
manager) describing key elements of the report
(impacts, risks and opportunities)

2.1 Name of reporting organisation Full Who we are

2.2 Primary brands, products and/or services – Full Who we are
Should also indicate the nature of its role in
providing these products and services, and the
degree to which the organisation relies on
outsourcing
2.3 Operational structure of the organization Full Who we are
including description of major divisions, operating
companies, subsidiaries and joint ventures
2.4 Location of organisation’s headquarters Full Who we are
2.5 Number of countries where the organization Full Who we are
operates, and names of countries with either
major operations or that are specifically relevant
to the sustainability issues covered in the report.
2.6 Nature of ownership; legal form Full Who we are
2.7 Markets served (including geographic Partial Who we are
breakdown, sectors served, and types of
customers/ beneficiaries).
2.8 Scale of the reporting organization: Partial Who we are
-Number of employees
-Net sales
-Total capitalization broken down in terms of debt
and equity
-Quantity of products or services provided.
2.9 Significant changes during the reporting Full Welcome, Who we are,
period regarding size, structure, or ownership Governance
including:
-The location of, or changes in operations,
including facility openings, closings, and
expansions; and
-Changes in the share capital structure and other
capital formation, maintenance, and alteration
operations.
2.10 Awards received in the reporting period Full What does human rights
mean to our suppliers,
REACH and Animal
Testing

Report Profile
3.1 Reporting period Full About this report
3.2 Date of most recent previous report Full About this report
3.3 Reporting cycle (annual, biennial, etc.) No
3.4 Contact point for questions regarding the report Full Contact us
or its contents.
Report scope and boundary
3.5 Process for defining report content, including: Full About this report
-Determining materiality;
-Prioritizing topics within the report; and
-Identifying stakeholders the organization expects
to use the report.
3.6 Boundary of the report (e.g., countries, Full About this report
divisions, subsidiaries, leased facilities, joint
ventures, suppliers).
3.7 State any specific limitations on the scope or Full About this report.
boundary of the reports. Notes to specific
data
3.8 Basis for reporting on joint ventures, Full About this report.
subsidiaries, leased facilities, outsourced Notes to specific
operations, and other data
entities that can significantly affect comparability
from period to period and/or between
organizations.
3.9 Data measurement techniques and the bases Partial About this report
of calculations, including assumptions and
techniques
underlying estimations applied to the compilation of
the Indicators and other information in the report.
3.10 Explanation of the effect of any re-statements Partial About this report.
of information provided in earlier reports, and the Notes to specific
reasons for such re-statement (e.g., mergers/ data
acquisitions, change of base years/periods, nature
of business, measurement methods).
3.11 Significant changes from previous reporting Partial About this report.
periods in the scope, boundary, or measurement Notes to specific
methods applied in the report. data
3.12 Table identifying the location of the Standard Not
Disclosures in the report. covered
Identify the page numbers or web links where the
following can be found:
• Strategy and Analysis
• Organizational Profile
• Report Parameters
• Governance, Commitments, and Engagement
• Disclosure of Management Approach, per
category
• Core Performance Indicators
• Any GRI Additional Indicators that were included;
and
• Any GRI Sector Supplement Indicators
Assurance
3.13 Policy and current practice with regard to Full Combined
seeking external assurance for the report. If not assurance provided
included in the assurance report accompanying the by a stakeholder
sustainability report, explain the scope and basis of panel and URS,
any external assurance provided. Also explain the About this report
relationship between the reporting organization
and the assurance provider(s).

Governance
4.1 Governance structure of the organization Full Governance
4.2 Indicate whether the Chair of the highest governance Full Governance
body is also an executive officer
4.3 For organizations that have a unitary board Partial Governance
structure, state the number of members of the highest
governance body that are independent and/or non-
executive members.
4.4 Mechanisms for shareholders and employees to No
provide recommendations or direction to the highest
governance body
4.5 Linkage between compensation for members of the Partial Governance
highest governance body, senior managers, and
executives and the organization’s performance
(including social and environmental performance).
4.6 Processes in place for the highest governance body No
to ensure conflicts of interest are avoided.
4.7 Process for determining the qualifications and No
expertise of the members of the highest governance
body for guiding the organization’s strategy on
economic, environmental, and social topics.
4.8 Internally developed statements of mission or Full Governance
values, codes of conduct, and principles relevant to
economic, environmental, and social performance and
the status of their implementation. Explain the degree to
which these:
• Are applied across the organization in different
regions and department/units; and
• Relate to internationally agreed standards.
4.9 Procedures of the highest governance body for Full Governance
overseeing the organization’s identification and
management of economic, environmental, and social
performance, including relevant risks and
opportunities, and adherence or compliance with
internationally agreed standards, codes of
conduct, and principles.
4.10 Processes for evaluating the highest governance No
body’s own performance, particularly with respect to
economic, environmental, and social performance.
Commitments to external initiatives
4.11 Explanation of whether and how the precautionary Full Chemicals
approach or principle is addressed by the organization.
Article 15 of the Rio Principles introduced the
precautionary approach. A response to 4.11 could
address the organization’s approach to risk
management in operational planning or the development
and introduction of new products.
4.12 Externally developed economic, environmental, and Full Described in
social charters, principles, or other initiatives to which each article
the organization subscribes or endorses.
4.13 Memberships in associations (such as industry Full Described in
associations) and/or national/ international advocacy each article
organizations in which the organization:
• Has positions in governance bodies;
• Participates in projects or committees;
• Provides substantive funding beyond routine
membership dues; or
• Views membership as strategic.
Stakeholder engagement
4.14 List of stakeholder groups engaged by the Full Our
organization. stakeholders’
4.15 Basis for identification and selection of Full About this Report
stakeholders with whom to engage Our Stakeholders
4.16 Approaches to stakeholder engagement, including Full About this
frequency of engagement by type and by stakeholder Report,
group. Our Stakeholders
4.17 Key topics and concerns that have been raised Full Described in
through stakeholder engagement, and how the each article and
organization has responded to those key topics and in Our
concerns, including through its reporting. stakeholders

Provide a concise disclosure on the Management Partial Who we are,

Approach items outlined below with reference to the Governance
following Economic Aspects:
• Economic Performance;
• Market Presence; and
• Indirect Economic Impacts.
Goals and performance Partial Who we are,
Governance
Policy Partial Who we are,
Governance
Additional contextual information Partial Who we are,
Governance
Economic Performance Indicators
Aspect: economic performance
EC1 Direct economic value generated and distributed, Partial Who we are;
including revenues, operating costs, employee Community
compensation, donations and other community Involvement
investments, retained earnings, and payments to
capital providers and governments.
EC2 Financial implications and other risks and No
opportunities for the organization’s activities due to
climate change.
EC3 Coverage of the organization’s defined benefit No
plan obligations.
EC4 Significant financial assistance received from No No significant
government. assistance received
in the reporting year
Aspect: market presence
EC5 Range of ratios of standard entry level wage Partial Our employees
compared to local minimum wage at significant
locations of operation.
EC6 Policy, practices, and proportion of spending on No
locally-based suppliers at significant locations of
operation.
EC7 Procedures for local hiring and proportion of No
senior management hired from the local community at
locations of significant operation.
Aspect: indirect economic impacts core
EC8 Development and impact of infrastructure Full Community Trade
investments and services provided primarily for public section, Spray to
benefit through commercial, in kind, or pro bono Change and SVITH
engagement.
EC9 Understanding and describing significant indirect Partial Community Trade
economic impacts, including the extent of impacts. Principles and
Challenges

Disclosure on Management Approach Partial Protect our Planet

Provide a concise disclosure on the Section
Management Approach items outlined below
with reference to the following Environmental
Aspects:
• Materials;
• Energy;
• Water;
• Biodiversity;
• Emissions, Effluents, and Waste;
• Products and Services;
• Compliance;
• Transport; and
• Overall
Goals and performance Full Protect our Planet
Section
Policy Full Protect our Planet
Section
Organizational responsibility Full Governance
Training and awareness Partial Values strategy
Monitoring and follow up Full Protect our Planet
Section
Additional contextual information Full Protect our Planet
Section
Environmental Performance Indicators
Aspect: materials
EN1 Materials used by weight or volume. No
EN2 Percentage of materials used that are Partial Packaging
recycled input materials.
Aspect: energy
EN3 Direct energy consumption by primary Partial Climate Change
energy source.
EN4 Indirect energy consumption by primary No
source.
EN5 Energy saved due to conservation and Partial Climate Change
efficiency improvements.
EN6 Initiatives to provide energy-efficient No
or renewable energy based products
and services, and reductions in energy
requirements as a result of these initiatives.
EN7 Initiatives to reduce indirect energy No
consumption and reductions achieved.
Aspect: water
EN8 Total water withdrawal by source. Not Not deemed relevant
deemed or material
material or
relevant
EN9 Water sources significantly affected by Not Not deemed relevant
withdrawal of water. deemed or material
material or
 relevant
EN10 Percentage and total volume of water Not Not deemed relevant
recycled and reused. deemed or material
material or
relevant
Aspect: biodiversity
EN11 Location and size of land owned, Not Not deemed relevant
leased, managed in, or adjacent to, protected deemed or material
areas and areas of high biodiversity value material or
outside relevant
protected areas.
EN12 Description of significant impacts of Partial ‘Sustainable
activities, products, and services on Ingredients – a
biodiversity in protected areas and areas of campaign for forests,
high biodiversity value outside protected wildlife and decency’
areas. article
EN13 Habitats protected or restored. Partial ‘Sustainable
Ingredients – a
campaign for forests,
wildlife and decency’
article
EN14 Strategies, current actions, and future Partial ‘Sustainable
plans for managing impacts on biodiversity. Ingredients – a
campaign for forests,
wildlife and decency’
article
EN15 Number of IUCN Red List species and Not Not deemed relevant
national conservation list species with deemed or material
habitats in areas affected by operations, by material or
level of extinction relevant
risk.
Aspect: emissions, effluents, and waste
EN16 Total direct and indirect greenhouse Partial Climate change article
gas emissions by weight and data section
EN17 Other relevant indirect greenhouse gas No
emissions by weight.
EN18 Initiatives to reduce greenhouse gas Partial Climate change article
emissions and reductions achieved. and data section
EN19 Emissions of ozone-depleting Not No use of ozone
substances by weight. deemed depleting substances
material or
relevant
EN20 NO, SO, and other significant air No
emissions by type and weight.
EN21 Total water discharge by quality and Not Not deemed relevant
destination. deemed or material as BSI
material or does not manufacture
relevant products
EN22 Total weight of waste by type and No
disposal method.
EN23 Total number and volume of significant Not Not deemed relevant
spills. deemed
material or
relevant
EN24 Weight of transported, imported, Not Not deemed relevant
exported, or treated waste deemed deemed
hazardous under the terms of the Basel material or
Convention Annex I, II, III, and VIII, and relevant
percentage of transported waste shipped
internationally.
EN25 Identity, size, protected status, and Not Not deemed relevant
biodiversity value of water bodies and related deemed
habitats significantly affected by the reporting material or
organization’s discharges of water and runoff relevant
Aspect: products and services
EN26 Initiatives to mitigate environmental Full ‘Sustainable
impacts of products and services, and extent Ingredients – a
of impact campaign for forests,
mitigation. wildlife and decency’,
Packaging
EN27 Percentage of products sold and their No
packaging materials that are reclaimed by
category.
Aspect: compliance
EN28 Monetary value of significant fines and Not There were no
total number of non-monetary sanctions for deemed incidents or fines
noncompliance with environmental laws and material or recorded for the
regulations. relevant reporting year
Aspect: transport
EN29 Significant environmental impacts of Partial Climate Change
transporting products and other goods
and materials used for the organization’s
operations, and transporting members of the
workforce.
Aspect: overall
EN30 Total environmental protection No
expenditures and investments by type.

Labor Practices and Decent Work

Disclosure on Management Approach Partial Ethical Trade,
Provide a concise disclosure on the following Our Employees
Management Approach items with reference to the
Labor Aspects listed below. The ILO Tripartite
Declaration Concerning Multinational Enterprises and
Social Policy (in particular the eight core conventions
of the ILO) and the Organisation for Economic Co-
operation and Development Guidelines for
Multinational Enterprises, should be the primary
reference points.
• Employment;
• Labor/Management Relations;
• Occupational Health and Safety;
• Training and Education; and
• Diversity and Equal Opportunity.
Goals and performance Partial Ethical Trade,
Our Employees
Policy Partial Ethical Trade,
Our Employees
Organizational responsibility Partial Ethical Trade,
Our Employees
Training and awareness Partial Ethical Trade,
Our Employees
Monitoring and follow up Partial Ethical Trade,
Our Employees
Additional contextual information Partial Ethical Trade,
Our Employees
Labor Practices and Decent Work
Performance Indicators
Aspect: employment
LA1 Total workforce by employment type, Partial Who we are
employment contract, and region.
LA2 Total number and rate of employee turnover by Partial Our employees
age group, gender, and region.
LA3 Benefits provided to full-time employees that are No
not provided to temporary or part-time employees, by
major operations.
Aspect: labor/management relations
LA4 Percentage of employees covered by collective No
bargaining agreements.
LA5 Minimum notice period(s) regarding operational No
changes, including whether it is specified in collective
agreements.
Aspect: occupational health and safety
LA6 Percentage of total workforce represented in No
formal joint management–worker health and safety
committees that help monitor and advise on
occupational health and safety programs
LA7 Rates of injury, occupational diseases, lost No
days, and absenteeism, and number of work elated
fatalities by region.
LA8 Education, training, counseling, prevention, and No
risk-control programs in place to assist workforce
members, their families, or community members
regarding serious diseases.
LA9 Health and safety topics covered in formal No
agreements with trade unions.
Aspect: training and education
LA10 Average hours of training per year per No
employee by employee category.
LA11 Programs for skills management and lifelong Partial Our employees
learning that support the continued employability of
employees and assist them in managing career
endings.
LA12 Percentage of employees receiving regular Partial Our employees
performance and career development reviews.
Aspect: diversity and equal opportunity
LA13 Composition of governance bodies and Partial
breakdown of employees per category according to
gender, age group, minority group membership, and
other indicators of diversity.
LA14 Ratio of basic salary of men to women by No
employee category.
Human Rights
Disclosure on Management Approach Partial Ethical Trade
Provide a concise disclosure on the following and Our
Management Approach items with reference to the employees
Human Rights Aspects listed below. The ILO
Tripartite Declaration Concerning Multinational
Enterprises and Social Policy (in particular the eight
core conventions of the ILO which consist of
Conventions 100, 111, 87, 98, 138, 182, 20 and
1059), and the Organisation for Economic
Cooperation and Development Guidelines for
Multinational Enterprises should be the primary
reference points.
• Investment and Procurement Practices;
• Non-discrimination;
• Freedom of Association and Collective Bargaining;
• Abolition of Child Labor;
• Prevention of Forced and Compulsory Labor;
• Complaints and Grievance Practices;
• Security Practices; and
• Indigenous Rights.
Goals and performance Partial Ethical Trade,
Our employees
Policy Partial Ethical Trade,
Our employees
Organizational responsibility Partial Ethical Trade,
Our employees
Training and awareness Partial Ethical Trade,
Our employees
Monitoring and follow up Partial Ethical Trade,
Our employees
Additional contextual information Partial Ethical Trade,
Our employees
Human Rights Performance Indicators
Aspect: investment and procurement practices
HR1 Percentage and total number of significant No
investment agreements that include human rights
clauses or that have undergone human rights
screening.
HR2 Percentage of significant suppliers and Full Ethical Trade
contractors that have undergone screening on
human rights and actions taken.
HR3 Total hours of employee training on policies and Partial Ethical Trade
procedures concerning aspects of human rights that
are relevant to operations, including the percentage
of employees trained.
Aspect: non discrimination
HR4 Total number of incidents of discrimination and Partial Ethical trade
actions taken. data on non-
compliances
Aspect: freedom of association and collective
bargaining
HR5 Operations identified in which the right to Partial Ethical trade
exercise freedom of association and collective data
bargaining may be at significant risk, and actions
taken to support these rights
Aspect: child labor
HR6 Operations identified as having significant risk Partial Ethical Trade
for incidents of child labor, and measures taken to article and Data
contribute to the elimination of child labor.
Aspect: forced and compulsory labour
HR7 Operations identified as having significant risk Partial Ethical Trade
for incidents of forced or compulsory labor, and article and Data
measures to contribute to the elimination of forced or
compulsory labor.
Aspect: security practices
HR8 Percentage of security personnel trained in the Not
organisation’s policies or procedures concerning deemed
aspects of human rights that are relevant to material
operations. or
relevant
Aspect: indigenous rights
HR9 Total number of incidents of violations involving No
rights of indigenous people and actions taken.
Society
Disclosure on Management Approach Partial Community
Provide a concise disclosure on the following Trade, Stop
Management Approach items with reference to the Violence in the
Society Aspects: Home, Spray to
• Community; Change
• Corruption;
• Public Policy;
• Anti-Competitive Behavior; and
• Compliance
Goals and performance Partial Community
Trade, Stop
Violence in the
Home, Spray to
Change
Policy Partial Community
Trade, Stop
Violence in the
Home, Spray to
Change
Organizational responsibility Partial Community
Trade, Stop
Violence in the
Home, Spray to
Change
Training and awareness Partial Community
Trade, Stop
Violence in the
Home, Spray to
Change
Monitoring and follow-up Partial Community
Trade, Stop
Violence in the
Home, Spray to
Change
Additional contextual information Partial Community
Trade, Stop
Violence in the
Home, Spray to
Change
Society Performance Indicators
Aspect: Community
SO1 Nature, scope, and effectiveness of any Partial Community
programs and practices that assess and manage the Trade section
impacts of operations on communities, including
entering, operating, and exiting.
Aspect: corruption
SO2 Percentage and total number of business units No
analyzed for risks related to corruption.
SO3 Percentage of employees trained in No
organisation’s anti-corruption policies and
procedures.
SO4 Actions taken in response to incidents of No
corruption.
Aspect: public policy
SO5 Public policy positions and participation in public No
policy development and lobbying.
SO6 Total value of financial and in-kind contributions No
to political parties, politicians, and related institutions
by country.
Aspect: anti -competitive behavior
SO7 Total number of legal actions for anticompetitive No
behavior, anti-trust, and monopoly practices and their
outcomes.
Aspect: compliance
SO8 Monetary value of significant fines and total No
number of non-monetary sanctions for
noncompliance with laws and regulations.
Product Responsibility
Disclosure on Management Approach Partial Chemicals, Our
Provide a concise disclosure on the following Stakeholders,
Management Approach items with reference to the Wise Woman
Product Responsibility Aspects:
• Customer Health and Safety;
• Product and Service Labeling;
• Marketing Communications;
• Customer Privacy; and
• Compliance.
Goals and performance Partial Chemicals, Our
Stakeholders,
Wise Woman
articles
Policy Partial Chemicals, Our
Stakeholders,
Wise Woman
articles
Organizational responsibility Partial Chemicals, Our
Stakeholders,
Wise Woman
articles
Training and awareness Partial Chemicals, Our
Stakeholders,
Wise Woman
articles
Monitoring and follow up Partial Chemicals, Our
Stakeholders,
Wise Woman
articles
Additional contextual information Partial Chemicals, Our
Stakeholders,
Wise Woman
articles
Product Responsibility Performance Indicators
Aspect: customer health and safety
PR1 Life cycle stages in which health and safety Partial Chemicals
impacts of products and services are assessed for
improvement, and percentage of significant products
and services categories subject to such procedures.
PR2 Total number of incidents of non-compliance Not No non
with regulations and voluntary codes concerning deemed compliances
health and safety impacts of products and services material were recorded
during their life cycle, by type of outcomes. or last year
relevant
Aspect: product and service labeling
PR3 Type of product and service information Full Sustainable
required by procedures, and percentage of significant Ingredients and
products and services subject to such information Chemicals
requirements
PR4 Total number of incidents of non-compliance Not No non
with regulations and voluntary codes concerning deemed compliances
product and service information and labeling, by type material recorded
of outcomes. or
relevant
PR5 Practices related to customer satisfaction, Partial Our
including results of surveys measuring customer Stakeholders
satisfaction.
Aspect: marketing communications
PR6 Programs for adherence to laws, standards, and Partial Wise Woman
voluntary codes related to marketing
communications, including advertising, promotion,
and sponsorship.
PR7 Total number of incidents of non-compliance Not No breaches
with regulations and voluntary codes concerning deemed were recorded
marketing communications, including advertising, material last year
promotion, and sponsorship by type of outcomes. or
relevant
Aspect: customer privacy
PR8 Total number of substantiated complaints Not No breaches
regarding breaches of customer privacy and losses deemed were recorded
of customer data. material last year
or
relevant
Aspect: compliance
PR9 Monetary value of significant fines for Not No non-
noncompliance with laws and regulations concerning deemed compliances
the provision and use of products and services. material were recorded
or last year
relevant
 About this report

The Body Shop 2007 Values Report covers the period since the
2005 Values Report was published up to the end of 2006 (unless
otherwise stated).

The 2005 Values Report primarily focused on the financial year

up to 29 February 2005. Our financial year has been changed
and now run in according with the calendar year, whereas we
previously reported from March-February.

Assurance approach

Our assurance programme is inspired by the three principles of

the AA1000 standard, materiality, responsiveness and
completeness. We strongly believe that these principles should
be assessed by third parties to ensure continuous improvement.

In this report, we have split responsibility for this assessment in

two, giving responsibility for assessing Materiality and
Responsiveness to a panel of stakeholders and an assessment of
completeness to URS Corp.

The Stakeholder Panel

The stakeholder panel comprises of organisations and individuals

who are either affected by, or may affect the way we develop and
implement our Values. They represent groups directly affected by
our actions, for example employees, TBSAH consultants and
franchisees, as well as interest groups with a considerable
involvement and knowledge around social, environmental and
animal protection.

The stakeholders invited to join the panel have different levels of

existing relationships with The Body Shop. Some have formalised
links, while others were invited on the basis that they are
specialists in areas where The Body Shop is committed to
improving performance and have established themselves and/or
the organisations they represent as critical but constructive. None
of the stakeholders or their affiliate organisations has received
any remuneration for their involvement.

URS Corp

URS was engaged on a consultancy basis to verify claims made

in the report and test data completeness and robustness. URS
was given access to interviews with senior management as well
as all management documents relating to the subjects covered in
the report. URS presented and discussed their findings with the
stakeholder panel.

Definitions and reporting boundaries

Within this report “Products” relate to cosmetics and toiletries only

and does not include accessories unless specifically stated.

Unless otherwise stated, the term “our people” include everyone

working for The Body Shop brand, including employees,
franchisees and their employees as well as The Body Shop At
Home consultants
Unless otherwise stated, the data in the report covers data as at
31 December 2006. In some cases, extrapolations have been
made to adjust figures to our new financial year.

The report cover policies and performance relating to The Body

Shop International (BSI). Franchisees and The Body Shop At
Home Consultants™ are obliged to adhere to BSI policies and
sell only products and accessories approved by The Body Shop.
All data on products relate to products approved by BSI, while
data relating to business operations cover only BSI-owned
operations.

Contact details:

If you are a customer and have question regarding the report

please contact customer enquiry centre in your market or region

For media enquiries, please contact

bsi.pressoffice@thebodyshop.com

For NGO enquiries, please contact

values@thebodyshop.com
Targets and commitments overview

Targets from Status/Progress New target

2005 Report
Against Continue to be Achieved Continue to be certified
Animal certified against against the Humane
Testing the Humane Cosmetics Standard
Cosmetics
Standard
Community No target set - Visit every CT supplier at
Trade least every two years
No target set - 65% of products will contain
CT ingredients or be
produced by CT suppliers
by year-end 2008
Employees Employee Achieved
turnover reduced
by 15% in the UK
and 10% in the
US
Ethical 100% of first tier Achieved We will only trade with
Trade product suppliers suppliers that commit to and
ethically reviewed make demonstrable
and approved improvement to meeting
requirements in The Body
Shop Code of Conduct for
Suppliers.
We will ensure that all first
tier product suppliers are
assessed on a regular
basis: low risk suppliers
every two years and
medium and high risk
suppliers every year.
100% of relevant Achieved
members of
sourcing team
trained in ethical
audits
Climate 5% reduction of Data not available 30% reduction in store
Change energy use in carbon emissions by year-
stores and offices end 2008
by year-end 2007
90% of car fleet On track – 90% of car fleet to be hybrid
to be hybrid currently 24% vehicles by year-end 2008
vehicles by year-
end 2008
No target set Carbon Neutral retailer by
2010
All air travel offset Achieved All air travel offset
2325 tonnes for
2005/6
2063 tonnes for
2006 (March-Dec)
Sustainable 100% of wood On track 100% of wood products
Ingredients products from 2004: 49% from FSC sources
FSC sources 2005: 65%
2006: 68%
Palm oil – report On track: All soaps made from RSPO
annually on Reports on certified palm oil by year-
progress www.rspo.org end 2008
Chemicals Polycyclic musks On track – 9 Phase out polycyclic musks
phased out PCMs remaining from product formulations
from product formulations by year-end 2010
formulations by
2010
Phthalates Not achieved – 1 Phase out phthalates in
phased out from formation product formulations by
product remaining year-end 2007
formulations by
2006
Packaging No targets set - 65% of our packaging
assortment will contain
recycled content by year-
end 2008
No targets set - We will double the recycled
content of all of our PET
bottles by year-end 2008
(currently 30%)
No targets set - We will develop and
communicate a company-
wide strategy on waste and
packaging by year-end
2008
 Glossary and definitions

Animal derived ingredients

Ingredients that come from animal sources such as gelatine (a
gelling agent derived from animal ligaments, skins, tendons,
bones etc).

Biodiversity
The diversity, or variety, of plants, animals and other living things
in a particular area or region. This can mean habitat diversity,
species diversity and genetic diversity.

Biofuels
Any fuel that derives from biomass – recently living organisms or
their metabolic byproducts, such as manure from cows. It is a
renewable energy, unlike other natural resources such as
petroleum, coal and nuclear fuels. Biofuels include ethanol,
biodiesel, and methanol.

Blanket of gases
The atmosphere is a blanket of gases about 600 miles (1,000 km)
deep around the Earth. It can be divided into five layers:
troposphere, stratosphere, mesosphere, thermosphere, and
exosphere.

British Union for the Abolition of Vivisection (BUAV)

One of the world’s leading organisations campaigning globally to
end animal experiments. Their vision is to create a world in which
no one wants or believes we need to experiment on animals.

Coalition for Consumer Information on Cosmetics (CCIC)

An organisation which promotes the ‘Humane Cosmetics
Standard’, a single comprehensive standard for ‘cruelty free’
cosmetics, and an internationally recognized "leaping bunny"
logo.

Community Trade programme

A targeted purchasing programme of natural ingredients and
accessories from socially or economically marginalised
communities around the world. CT gives producers in
marginalized societies access to a market that would otherwise
be out of reach, and it does this in a fair way.

Cut-off date
The Body Shop operates a fixed cut-off date of 31 December
1990, which means that we will not buy any ingredient that has
been tested on animals for cosmetic purposes after this date. It is
impossible to change the fact that virtually every ingredient, even
water, has been tested on animals in the past. Operating a fixed
cut-off date is widely accepted as the gold standard in against
animal testing policy.

Degradable
Capable of being chemically reduced or broken down, as
apposed to ‘biodegradable’ which means capable of
decomposing under natural conditions.

Ecosystems
A complex set of relationships amongst the living resources,
habitats and residents of an area. It can include plants, trees,
animals, fish, birds, micro- organisms, water, soil and people.

Ethical Trade Programme

Our way of ensuring that workers in our supply chain do not have
their human rights violated. We have a Code of Conduct which
stipulates the minimum standards that we require, and we work to
ensure that suppliers abide by this code. The Ethical Trade
programme cover first tier product suppliers, except Community
Trade suppliers, who are covered by our Community Trade
standards.

Ethical Trading Initiative (ETI)

An alliance of companies, non-governmental organisations

(NGOs) and trade union organisations, promoting and improving
the implementation of corporate codes of practice which cover
supply

European Coalition to end Animal Experiments

Europe's leading alliance peacefully campaigning on behalf of
laboratory animals. Formed in 1990 by animal organisations
across Europe to successfully campaign to ban cosmetics testing
on animals, the European Coalition draws together organisations
with a range of legislative, scientific and political expertise.

Hybrid cars
A hybrid vehicle or gas-electric hybrid powered vehicle uses a
mixture of technologies such as internal combustion engines
(ICEs), electric motors, gasoline, and batteries. Today's hybrid
cars are driven by electric motors powered by both batteries and
an ICE.

In vitro alternatives
Literally means ‘in glass’. In this context we mean laboratory
alternatives to animal testing.

Living wage
The term "living wage" is used by advocates to refer to the
minimum hourly wage necessary for a person to achieve some
specific standard of living. There is some discussion about how a
living wage should be determined because it varies greatly from
location to location.

NGOs
Non-governmental Organisation, a not-for-profit agency not
affiliated with any government or private sector entity, devoted to
managing resources and implementing projects with the goal of
addressing social problems.

Non-compliances
Suppliers who do meet the standards in our ‘Code of Conduct’
are deemed to be ‘non-compliant’. These non-compliances do not
necessarily mean that business is terminated with the supplier –
rather we work with them to remedy the problems.

Offsetting
The process of reducing the net carbon emissions of an individual
or organisation through arrangements with a carbon-offset
provider. A carbon offset service achieves net reduction of
greenhouse gas emissions through a wide variety of offsets – tree
planting is currently the most common. Renewable energy and
energy conservation offsets have also become increasingly
popular.

Parabens
A group of chemicals widely used as preservatives in the
cosmetic and pharmaceutical industries. They can be found in
shampoos, shaving gels, cleansing gels, deodorants, personal
lubricants, and topical pharmaceuticals.

PET Bottles
Polyethylene terephthalate is a thermoplastic polymer resin of the
polyester family that is produced by the chemical industry and is
used in synthetic fibres, beverage, food and other liquid
containers.

Phthalates
A family of chemicals, produced from phthalic anhydride and
alcohols. There are two groups of phthalates – higher and lower.
Lower phthalates are commonly used in personal care products,
especially in nail polish, hair spray and perfumes. In perfumes, it
is used as a carrier or a solvent for artificial musks. The most
common types of phthalates found in personal care products are
Diethyl Phthalate (DEP) and Dibutyl (DBP). Higher phthalates, for
example DEHP are used as softeners in plastics, such as PVC.
Under EU legislation these are been banned from use in personal
care products.

Polycyclic musks
A type of chemical fragrance used to replace natural animal-
derived musk fragrances.

Recyclate
Post consumer recycled material.

Renewable energy
Energy obtained from sources that are essentially inexhaustible,
unlike, for example, fossil fuels, of which there is a finite supply.
Renewable sources of energy include wood, waste, geothermal,
wind, and solar thermal energy.

Roundtable on Sustainable Palm Oil

A global multi-stakeholder initiative “to promote the growth and
use of sustainable palm oil through co-operation within the supply
chain and open dialogue between its stakeholders”. The not-for-
profit association has members from the oil palm growers, palm
oil processors and traders, consumer goods manufacturers,
retailers, banks and investors, environmental/nature conservation
NGOs and social/development NGOs.

Sustainable business levels

Levels of business set with Community Trade suppliers, so that
we neither overstretch them nor over-promise what trade they will
have with The Body Shop. Using forecast data we closely monitor
the effect that sales trends, new product development and
product discontinuation/cannibalisation will have on the
sustainable business level. We maintain a “league table” of those
ingredients whose trend is in decline, and those where we predict
future capacity issues. This table is used by our product
developers, who play a vital role in the sustainability of the
Community Trade programme by working with us to look for
additional uses for ingredients in decline.

Vivisection
The dissection or, more generally, any cutting or surgery upon a
living animal, typically for the purpose of scientific investigation.

WWF Forest and Trade Network

The WWF-UK FTN was founded as the WWF 1995 Group, with
20 member companies, in 1991. Its members' vision was to
ensure that their timber and paper supplies came from well-
managed forests, and did not contribute to forest destruction and
illegal logging practices.