ΕΥΘΥΝΗ ΓΙΑ ΤΟ ΜΕΛΛΟΝ responsibility for the future · responsibility for the...

ΚΟΙΝΩΝΙΚΟΣ ΑΠΟΛΟΓΙΣΜΟΣ 2010 - 2011S U S T A I N A B I L I T Y R E P O R T 2010 - 2011

ΕΥΘΥΝΗ ΓΙΑ ΤΟ ΜΕΛΛΟΝRESPONSIBILITY FOR THE FUTURE

ΠΑΠΑΕΛΛΗΝΑΣ ΟΜΙΛΟΣ ΕΤΑΙΡΕΙΩΝΛεωφ. Γ. Κρανιδιώτη 179, 2235 Λευκωσία, ΚύπροςT: +357 22741741, F: +357 22482155E: [email protected], www.papaellinas.com.cy

PAPAELLINAS GROUP179 Yiannos Kranidiotis Avenue 2235 Latsia, Nicosia CyprusT: +357 22741741, F: +357 22482155E: [email protected], www.papaellinas.com.cy

Το χαρτί της εκτύπωσης (Sappi Europe SA)προέρχεται από πιστοποιημένα αειφορικώςδιαχειριζόμενα δάση και ανταποκρίνεται στιςπροϋποθέσεις του PEFC (διεθνές πρόγραμμαπιστοποίησης των μεθόδων διαχείρισης των δασών).

Printing material (Sappi Europe SA) is produced byCertified Sustainably Managed Forests that meet all therequirements of PEFC (Program for the Endorsement of Forest Certification).

Responsibilityfor the future

PAPAELLINAS GROUP02

Corporate responsibility is slowly becoming an even more integral part of business operations, especially in times of crisis. Continual business environment changes make the existence of an unwavering corporate responsibility a key prerequisite for sustainable growth.

Papaellinas Group has recognised corporate responsibility as a business management tool and has designed its entire business strategy around the motto:

"Responsibility for the future"

Ever since it was established, the Group has had an anthropocentric approach which has also been integrated in its business philosophy.

Papaellinas Group has developed its strategy on the basis of the corporate responsibility principles, and its strategic plan has been designed on the four basic pillars of Corporate Social Responsibility:

This Corporate Social Responsibility Report of the Papaellinas Group describes all relevant actions and the corresponding results for 2010 & 2011. The Group's strategy is to present its work on social responsibility every two years, describing actions, performance and targets for future development in the main pillars of Corporate Social Responsibility. With the Corporate Social Responsibility Reports, the Group seeks to constantly improve operations and to enhance its commitments vis-a-vis all stakeholders.

TABLE OF CONTENTS 1. Introduction p. 03

2. Preambles p. 04

3. Papaellinas Group p. 06

4. Corporate Social Responsibility Commitments and Strategy p. 07

5. Human Resources p. 12

6. Market p. 22

7. Society p. 28

8. Environment p. 32

9. Future Objectives & Plans p. 36

10. Terms and Definitions p. 38

11. Corporate Responsibility Report Quality Assurance p. 39

12. GRI Table p. 40

Introduction1

Environment Society Employees Market

SUSTAINABILITY REPORT 2010 - 2011 03

Preambles2The unique investment for the future.

You hold in your hands, our Group's second Social Report, for 2010 and 2011. This report demonstrates two key facts:

Firstly, how seriously and consistently we have assumed our share of the responsibility towards society and the environment, towards our people with whom we share the same vision and principles, and towards our associates and the market. This Report is a presentation of the results, a statement of account that we offer to society in order to describe our actions and performance in Corporate Social Responsibility; apart from that, it is also a description of our commitment to all our stakeholders - staff, associates and suppliers, consumers, society as a whole - that we will continue to pursue the same objectives with the same dedication.

This dedication reveals the second fact mentioned earlier: That we continue to invest in Corporate Social Responsibility related issues - and indeed more than in the past - despite the recession in our economy and irrespective of any negative expectations that there may be regarding the end of the crisis and our economy's return to steady growth.

In the past months that were very difficult indeed on our economy, acting in a rational and responsible manner, we performed extensive cuts across all our expense lines, aiming solely at making our organisation viable even with a significantly reduced turnover while protecting as many jobs as possible. Nevertheless, we maintained a steady strategy in Corporate Social Responsibility. This is because we still view it as the unique investment in our organisation's future. So we consistently continue to recognise and assume our responsibility for the future, being our main motto, and we emphasize our deepest belief that for a business to remain viable, it must ensure its sustainability along with the development and advancement of its people, customers, society and the environment it operates in.

This approach and philosophy is not taken lightly by the Group. On the contrary, it is systematic and strategic, aimed at a viable growth which will also secure the development of our human resources, the market, society and the environment. These are the four main pillars of our program in which we incorporated a series of significant actions during the past two years.

We sincerely believe that businesses are entities inextricably linked to society as a whole. Therefore, apart from the strictly financial aspect of their operation, namely the pursuit of short-term profit, they must also be interested in the quality of life of various groups affected by their operation, and in the environment in which they operate. This creates their sole purpose for existence in perpetuity. The main purpose is to have corporate objectives in line with society's objectives. To the extent that this can be achieved through the Corporate Social Responsibility strategy, an organisation can be viable in the long run.

In this sense, we have placed our Social Responsibility at the centre of our operational strategy, and this remains so even during these hard times, confirming our confidence in our organization’s ability to survive the crisis, but also to shape the framework of a new dynamic expansion of activities, gazing at the future with belief, self-confidence and optimism.

Christos Papaellinas

Executive Director Papaellinas Group

04 PAPAELLINAS GROUP

Innovating in business...

In our previous Social Report, we had pointed out that we would follow it up with specific new actions within our entire Corporate Social Responsibility strategy. And indeed we have achieved a great deal since then, as you will find out in the following pages.

Our Group is an innovator and a pioneer. One example are the first climate neutral stores (BeautyLine) in Cyprus, following strict and multidimensional operational commitments for the protection of the climate. Another example is the parallel certification of our New Distribution Centre in Nissou area, as climate neutral, and the start of the certification procedure for a series of Group products, again as climate neutral. What is the meaning of all this? Where possible, we take measures to save energy, we measure the pollutants still emitted into the environment as a result of the operation of our stores and the Distribution Centre, and as a result of the production process, and we then offset these pollutants by financing projects to protect global climate via an international organisation.

In this context, we could also include the introduction and marketing of innovative products that respond to consumers' new needs, such as organic-natural products, and products guaranteeing a healthier lifestyle, marketed through our new chain of stores Holland & Barrett.

The milestone, however, in our strategy, especially with regards to our people, is our Group's certification with the globally unique quality standard Investors in People, which concerns human resources management and development. Our indisputably great and significant performance in this field has been rewarded with international recognitions, offering the Papaellinas Group of Companies a strong competitive edge, ensuring, among others, the excellence of our people in terms of know-how, skills, commitment, reward and advancement.

As a socially responsible Group, Papaellinas applies numerous practices on Corporate Social Responsibility-related issues. In 2009, the Group was presented the Social Excellence Award for large corporations, followed, in 2010, by the Best Work Place award (In Business Awards).

Without a doubt, our Group operates by innovating in the field of Social Corporate Responsibility. It invests in the industry despite the crisis, as it has a firm belief that this large investment in its people, the market, society and the environment, truly offers all the guarantees for a sustainable development.

Teamwork and Cooperation

The world of Corporate Social Responsibility is a world of numerous actions and practices, the implementation of which requires not only funds but also, coordination and methodical work. As regards the former, funds, Papaellinas Group, despite the economic crisis, continues to invest in a field that helps it stand out from the competition, as it deeply believes that an organisation, especially of that calibre, should be socially responsible. Significant staff benefits, equal opportunities and numerous training programs have made a strong contribution towards the development of the company's human resources, and by extension, the society's development. The same goes for Group’s contribution towards improving health and safety and the development of environmental awareness. Support of vulnerable population groups, sponsorships to various organisations and the encouragement and assistance of charity events, form yet another large Corporate Social responsibility chapter that our Group has been active in for several decades. All our actions lead to the improvement of quality of life and the progress of society as a whole, without aiming exclusively at higher profits. In order for an enterprise to prosper, society must prosper with it.

It takes knowledge and experience to institutionalise all these actions. While Corporate Social Responsibility programs evolve, we introduce new fields and set new targets while helping colleagues familiarise themselves with them. We do this through our training programs and with regular communications. Without our people’s participation, it would be impossible to achieve many of the targets set. Team work and cooperation are key requirements for achieving all of the above.

My wish in this second endeavour is that our experience and maturity are more evident when demonstrating our work and actions of the past two years. Hopefully, the picture of our Corporate Social Responsibility philosophy and strategy is now clearer and easier for our readers to understand.

Chrystalla Michael

Training & Corporate Social

Responsibility Manager

Melanie Michaelidou

Human Resources &

Corporate Affairs Director


PAPAELLINAS GROUP06

Papaellinas Group3The Papaellinas Group of Companies has its registered offices in Nicosia, and is one of the largest and most influential business groups in Cyprus with prospects for further progress and growth. The Group's activities focus on the importation and distribution of pharmaceuticals, cosmetics and consumer goods, with internationally renowned products. In 1997 it penetrated the retail market with the BeautyLine cosmetics and perfumes stores, and in 2010, with the acquisition of the Holland & Barrett franchise in Cyprus, the Group went into health foods and natural remedy products.

The Group is committed to providing high quality and high reliability products and services, by creating and investing in strategic alliances, with a nexus of activities spread out all over Cyprus and by utilising state-of-the-art technologies so as to fully respond to market needs.

Its activities are divided into three areas: pharmaceuticals, cosmetics and consumer products. The products that the Group represents and distributes come under the following categories:

• cosmetics and perfumes• pharmaceuticals• personal and household care products• paper products• food and beverages• natural and healthy products

The activities of the Papaellinas Group are carried out by the parent company C.A. Papaellinas & Co Ltd and its subsidiaries BeautyLine, PharmacyLine, Demetriades & Papaellinas and HealthLine.

Background – Group’s Milestones

1929: Establishment of the Group's first company, C.A. Papaellinas & Co Limited, which at first operated as an importing and distribution company for pharmaceuticals in Cyprus.

The 1960's: The Group expands into consumer goods and cosmetics.

1997: Retail market penetration with the establishment of a new company, BeautyLine. Today, it has 15 stores throughout Cyprus.

1997: Creation of Demetriades & Papaellinas joint venture, importing and distributing pharmaceuticals of the internationally recognised pharmaceutical company Novartis.

2002: Establishment of PharmacyLine, as a separate distribution and repackaging centre for pharmaceuticals and cosmetics.

2002: Creation of a joint venture "Kapakiotis and Papaellinas" for pharmaceuticals distribution of the internationally recognised company GlaxoSmithkline (GSK). Papaellinas Group holds 50% of the company.

2010: After acquisition of the entire share capital, Demetriades & Papaellinas is integrated into the Group as a subsidiary.

2010: Establishment of HealthLine, the company created for management and operation of the Holland & Barrett franchise in Cyprus.

Sales Turnover in millionI

2010 2011

PharmacyLine 26,7 23,7

Demetriades & Papaellinas 17,9 15,2

HealthLine 0,1 1

BeautyLine 17,8 18,5

C.A. Papaellinas & Co Ltd

Consumer goods

47,7 44,5Cosmetics

Pharmaceuticals

Total 110,2 102,9

Apart from the generated financial value, the Group also makes a significant contribution to cypriot society and economy through its employees.

Group Social Value

2010 (in €) 2011 (in €)

Salaries 9.373.947,00 9.414.074,00

Social Insurance 938.299,00 939.532,00

Welfare Fund 399.744,00 440.056,00

Medical-Pharmaceutical Care

70.048,00 83.050,00

Additional benefits to employees

75.000,00 63.510,00

Total 10.857.038,00 10.940.222,00


4.2. Corporate Social Responsibility Strategy Papaellinas Group applies its Corporate Social Responsi-bility Strategy, under the main motto "Responsibility for the Future"

The Group has integrated its Corporate Social Responsibility principles, and respective criteria, within its corporate strategy aiming at sustainability. An integrated Corporate Social Responsibility strategy, will enable Papaellinas Group to evolve and implement targeted actions for sustainability and future growth.

Mapping out the Group's stakeholders and determining their needs, is the driving force in shaping the Group's Corporate Social Responsibility Strategy that reflects Papaellinas Group's values and philosophy.

Papaellinas Group has developed a comprehensive tool for measuring its performance with regards to the implementation of a Corporate Social Responsibility Strategy. This way, it can monitor the effectiveness of its actions, and the progress in meeting corporate targets.

Taking into account the extremely difficult financial conditions in which it has to work and meet its goals while remaining true to its mission, the Group has set key strategic priorities for its companies:

• Maintaining high liquidity by resetting investment priorities and through optimal working capital management, especially management of stocks combined with turning attention to products and services that have always been at the core of the Group's activities (distribution of pharmaceuticals, personal care and hygiene consumer goods, as well as branded cosmetics).

Corporate Social Responsibility Commitments and Strategy44.1. The four pillars of Corporate Social Responsibility for Papaellinas GroupPapaellinas Group sees Corporate Social Responsibility as part of its corporate philosophy which is intertwined with its ability to secure its business growth in a viable and sustainable manner, fully respecting the society and environment in which it operates. The Group is convinced that the progress of a business is proportional to the progress and prosperity of a society. With this in mind, the Group has assumed its share of the responsibility, and its business principles are based on corporate responsibility.

Papaellinas Group places a great deal of emphasis on Corporate Social Responsibility. The main principles that the Group operates by, constitute its competitive edge and make it stand out. Its anthropocentric approach places the Group's human capital in the heart of its success, as it is its most important asset. Envisaging a better lifestyle for people and for society as a whole, Papaellinas Group places social policy, health, safety, prosperity and the environment at the centre of its value system, making it an integral part of its corporate culture.

Vision

To be recognised as a model organisation of Dynamic Development, achieving and sustaining a Leading Position in all areas of our activities.

CSR Strategy

Creative Growth & Leading Position

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Innovation - Leadership

Responsibility - Integrity

Dynamic Adaptability

CORPORATE VALUES

PAPAELLINAS GROUP08

• Maximising productivity by making full use of human resources potential and of ultra-modern systems and infrastructure, placing emphasis on targeted training in areas with competitive edge potential (Sales, Logistics, IT, etc.)

• Reviewing processes and the organisation structure aspiring to achieve greater flexibility, faster decision-making, and, consequently, reducing costs across all Group activities, so as to offer more efficient and better quality services to customers.

4.3. Commitment for continuous dialogue with Stakeholders, Social and other Partners. Papaellinas Group places great emphasis on its stakeholders and their needs. The following graph shows the Group's main stakeholders that resulted after a self -evaluation and through defining the Corporate Social Responsibility Strategy process.

Stakeholder Mapping

Employees

The objective is to have an excellent working environment, promoting constant development and training for every individual employed in the Group. To meet this objective, Papaellinas Group focuses on encouraging dialogue with employees. In the Annual Employee Survey, all employees can offer their views both on the Group's benefits offered and on all Corporate Social Responsibility actions. The dialogue with employees is further enhanced through their meetings with their supervisors and during formal and informal evaluations, where they can raise all their issues of concern.

Customers Consumers

Customers Sales

Network

Media Employees

Owners Society

Associates

Papaellinas Group

Owners

Integrating Corporate Social Responsibility in the existing corporate strategy gives added value to the Group, through the commitment of its owners. The Group's owners are informed on Corporate Social Responsibility actions through the Corporate Social Responsibility Report, and through regular meetings discussing the progress of such actions.

Associates

The associates of Papaellinas Group are key stakeholders, and special emphasis is placed on preserving and improving the relations between them, setting criteria governed by the Group's principles and its corporate responsibility. The views presented by associates on Corporate Social responsibility actions, are of great use and decisive importance in the elaboration and redefinition of the Corporate Social Responsibility Strategy. Regular meetings provide the forum for ideas to be exchanged and improvement proposals to be made, all of which are evaluated by the Papaellinas Group.

Customers

Group customers are divided into two main categories: Sales Network and Consumers. The key objective is optimum service and immediate meeting of their needs, as well as ensuring the quality of products imported and distributed by the Group. Papaellinas Group invests heavily on maintaining a continuous dialogue with its customers in order to get a better grasp of their views through market research, and also keep them constantly informed through press releases and the Corporate Social Responsibility Report.

Society

Communication with society is the Group's utmost concern, in order to be in a position to immediately respond to any need. Members of the Group constitute a channel of communication with society, as well as their participation in various social bodies and associations. By participating in social actions, the Group comes closer to society and can better determine its needs.

Media

Public opinion on the actions carried out by the Group is a decisive factor that strengthens the Group's work for raising awareness in the Cypriot society on corporate social responsibility and sustainability issues.


4.4. Corporate Social Responsibility Committee Defining a comprehensive Corporate Social Responsibility Strategy has generated the need to set up a team that will control and coordinate all the group's actions. The committee holds monthly meetings to monitor how actions are progressing, to review the needs of the Group's stakeholders and to set new Corporate Social Responsibility actions responding to those needs. The committee is made up of members of different departments of the Group, in order to present all the different needs of each department. The Corporate Social responsibility committee is made up of three (3) persons from key departments:

They are:

• Executive Director

• Human Resources and Corporate Affairs Director

• Training & Corporate Social Responsibility Manager

4.5. Internal CommunicationIn Papaellinas Group, internal communication is one of the secrets of its success, a valuable means for the implementation of Corporate Social Responsibility actions. The Group uses internal communication to provide regular information to employees, enhance the cohesion of its human resources, and strengthen team-work and cooperation.

Means of internal communication in the Papaellinas Group:

• Group Meetings

• During training programs, Group employees are informed about the actions implemented.

• Communication with employees via the "Blue Envelope" sent to all staff by post.

• Providing information and raising awareness on Corporate Social Responsibility via email.

• The company's magazine "Between Us" published twice a year and distributed by post to all employees and associates.

• Briefings on the environmental practices as part of the Group's Corporate Social responsibility actions.

• Training seminars to all departments on Corporate Social Responsibility issues by the Group’s Corporate Social Responsibility Manager.

• Messages and signs posted at the workplace

• Social Report

4.6. Code of ConductIn all actions of its strategy, Papaellinas Group of Companies is guided by the four key categories of the UN Global Compact, described below. In that context, the Group develops its activities, respecting the principles and values of this UN Compact.

Specifically:

Human Rights

Recognising that with its activities, it may, positively or negatively affect Human Rights, the Group commits to always factor in human rights in the decision-making and implementing process. The group respects its people and their rights, during their employement and in their advancement process, excluding criteria such as gender, religion and age.

Labour Rights

The Group recognises and accepts employees' rights as these have been set globally. In particular:

• it prohibits forced and compulsory labour and rejects the drafting of contracts with predefined employment terms, non- negotiable by the other parties.

• prohibits child labour and

• eliminates gender and religious discrimination when offering employment


Environment

The Group recognises that with its activities, it unavoidably contri-butes to environmental pollution, and for this reason:

• it constantly strives to reduce pollutants emitted into the atmosphere by taking specific actions

• it offsets emitted pollutants through international organisations investing in renewable energy sources projects in developing countries

• it trains staff and associates with a view to increasing their environmental awareness.

Corruption

Papaellinas Group, wishing to eliminate the possibility of actions leading to corruption of any form appearing in any if its companies, makes sure, considering all legal and moral criteria, that all proper control procedures are implemented, in order to safeguard legality and the interests, of its companies and their employees.

4.7. Corporate Governance For Papaellinas group, Corporate Governance is a prevailing concept referring to the relations between the company's management, board of directors and all stakeholders, in order to set business targets. Such targets are not only governed by financial criteria but also by moral and social values, included in the Papaellinas Group Corporate Social Responsibility.

4.7.1. Organisation StructureIn Papaellinas Group, Corporate Social Responsibility applies to all levels, and originates in its management. The Board of Directors consists of five (5) members:

Andreas Papaellinas Executive President

Christos Papaellinas Executive Director

Maria Dimadi Member

Katia Theodotou Member

Naso Papaellina Member

4.7.2. Internal AuditAn Internal Audit, carried out in the context of the principles of good governance of an organisation, is seeking to strengthen the internal procedure system and improve the organisation's risk management and governance procedures.

At Papaellinas Group, the internal auditing procedure comes under the responsibility of the Operations department, responsible for recording and monitoring proper operation of corporate procedures for all Group departments. The audit is carried out in cooperation with department heads who are responsible for monitoring the proper implementation of corporate procedures.

4.8. Memberships Papaellinas Group is an active member of several business associations for exchanging opinions and good practices with other members of the business community.

• Cyprus Employers and Industrialists Federation

• Cyprus Chamber of Commerce and Industry

• Cyprus-French Association

• Hygiene Paper Products Manufacturers Association

• Cyprus Duty Free Items Suppliers Association

• The Cyprus Association of Directors

• Cyprus Commercial Agents Association

• Cyprus Association of Pharmaceutical Companies

• Cyprus Business Growth and Management Association

• Nicosia Chamber of Commerce and Industry

• Cyprus-Greek Business Association

• Cyprus-English Business Association

• Cyprus-Israeli Business Association

• Cyprus Advertisers Association

• Cyprus Human Resources Management Association

11SUSTAINABILITY REPORT 2010 - 2011

Investors In People Certification

Papaellinas Group has been certified by the globally unique quality standard in human resources management and development "Investors in People". With this certification the Group, with an indisputably very high performance in the management and development of its people in all companies, ensures that it will go even deeper into the implementation of best practices in this field. The certification offers Papaellinas Group a competitive edge, as it confirms that it meets all requirements for people excellence in terms of know-how, skills, commitment, reward and development.

One of the great benefits for the Group from its participation in Investors In People, was that its established values (Responsibility, Dynamic Adaptability, Innovation) and its vision were clarified and disseminated throughout the Group.

4.9. Awards For Papaellinas Group, awards are viewed as a recognition for all the efforts made and actions taken to improve performance. After receiving, in 2009, the first Social Excellence Award regarding the practices that the company follows in balancing professional with family life, other awards followed in the human resources field.

Best Work Place 2010 Award for the best workplace/ Best company to be employed in

In 2010, Papaellinas Group was awarded the Best Work Place Award, following a public vote. This award came as recognition of the progress achieved in the workplace in recent years, establishing Papellinas Group as one of the safest and most modern places of employment.

The Group's unique management practices, with various staff benefits, are consistent with its anthropocentric character. Incentives, advancement opportunities and emphasis on training, greatly contributed to this award.

The Group ensures this good working environment through special practices, such as the implementation of measures for balancing professional with family life.

Investors in People (IIP) is an International Quality

Standard focusing on Human Resources. It assists

businesses stand out and get a competitive edge,

through their Human Resources. It was created in

1990 as an initiative of the British Government, is active

in 50 countries worldwide and has been adopted

PAPAELLINAS GROUP12

BalancingEfficiencyWith QualityOf Life


Δι

5 HumanResources

5.1. Policy & ObjectivesA key priority of the Group's Corporate Social Responsibility Strategy is the creation of a work environment which promotes constant development and training for every individual, with a view to achieve personal improvement and to upgrade their skills and knowledge. The purpose of this policy is to attract and retain high calibre executives and employees on all levels, by improving their abilities, skills and knowledge with the maximum training and guidance possible.

To correctly implement this policy, the Group has set focused human resources development targets:

• Development of human resources abilities to increase efficiency

• Retention of human resources and benefits

• Top level training for all staff

• Optimisation of the hiring system and new recruits program

• Excellent organisation and correct staffing of all departments

• Information and awareness-raising of all group employees on Corporate Social Responsibility

5.2. Group EmployeesIn year 2011, Papaellinas Group was employing four hundred and seven (407) full time employees in total. As part of the HR management policy, the Group aims to offer equal opportunities for advancement, with no discrimination.

The Group pursues an equal opportunities policy for all employees, fully respecting human rights. There is no gender discrimination in the organisation, either with regards to remuneration of any nature or with regards to the unimpeded advancement of employees. The employees' basic salary is calculated on the basis of the job requirements, their work experience and their education.

5.2.1. Gender distribution per level of hierarchy

The Group’s equality policy at the workplace is evident in the results presented in the graph above which shows the employment of women in all departments and in every hierarchy level.

0

10

20

30

40

50

60

70

36% 33% 32%

67% 68%64%

Top Middle

MenWomen

Staff


5.2.2. Distribution by business unit

Cosmetics Beauty LineLtd

Pharmacyline Ltd Consumer Goods Healthline Demetriades &

Papaellinas

Pharmacy Pharmaceuticals Administrative Staff

2010 14% 17% 10% 35% 2% 3% 2% 17%

2011 14% 17% 11% 30% 5% 2% 3% 3% 15%

The above diagram shows the composition of Papaellinas Group employees per business unit. The majority of the Group's employees work in the consumer products business unit.

0%5%

10%15%20%25%30%35%


2011

2010

0

50

100

150

200

0

50

100

150

200

C.A. Papaellinas Beauty Line Pharmacyline Healthline D & P

Men 105 4 18 5 4

Women 186 67 23 4 2

2010

<30 years 30-40 years 40-50 years 50-60 years 60-70 years

37%

22%11%

2%

28%

2011

<30 years 30-40 years 40-50 years 50-60 years 60-70 years

35%

29%

22%12%

2%

Papaellinas Group places great emphasis on the younger generation and the young people working in it. The majority of the staff is in the most productive 30 to 50 years age group.

Because of the Papaellinas Group activities and the products and services offered, there is a high presence of women in all business units.

C.A. Papaellinas Beauty Line Pharmacyline Healthline D & P

Men 95 4 18 10 4

Women 172 66 25 10 3

5.2.4. Distribution by age group

5.2.3. Gender distribution per business unit


5.2.5. Persons with disabilitiesIn the context of offering equal opportunities, according to the relevant policy, Papaellinas Group employs 7 individuals with some form of disability for simple day to day work.

5.2.6. Absence from Work

Days of absence 2011


BeautyLine PharmacyLine D & P Healthline Group

Due to illness 698 300 156 29 6 1189

Due to pregnancy / maternity

1089 348 0 0 0 1437

5.2.7. Total Number of Hirings / Exits Regarding the hiring procedure, the HR Division determines the staffing needs of the Group, jointly with the Management, depending on the prevailing business conditions and the organisation's expectations. In 2010, the organisation hired 90 persons, and in 2011, 48 new employees joined the Group.


BeautyLine PharmacyLine D & P Healthline Group

2010 Exits 32 15 9 1 0 57

Hirings 52 14 14 2 8 90

2011 Exits 17 4 9 0 2 32

Hirings 17 2 11 17 1 48

Despite the fact that we are going through a time of crisis, Papaellinas Group not only ensures that existing positions are secured it also creates new ones, thus supporting employment in the Cypriot market.

Hiring is a transparent and objective procedure. Below one can find a graphic presentation of this procedure.

Vacancy

Member of the Group

Interviews/ Psychometric Tests

Decision, Job Offer Induction Hiring Announcement, Day one

Review of CVs Job Announcement

Hiring Method

Briefing/Induction Program

Request Approval

Performance Evaluation


5.2.8. «Friend Support» Model Papaellinas Group has developed a new model called the "Friend Support", intended to help with the smooth integration of new recruits in the work and corporate environment, and to assist them in efficiently taking up their duties. The program aims at integrating new members and getting them familiarised with the organisation's culture, systems and procedures, as efficiently as possible.

The model has a duration of one to two months and is coordinated by the Human Resources department. Every new employee is assigned to an older member of the department for guidance, who will offer the necessary knowledge and experience regarding the specific position, and how the Group operates.

5.3. Development & TrainingAt Papaellinas Group, staff development and training is a key priority, as it considers itself a "Learning Organisation". The Group's objective is for employees to improve the way they work and to enhance their abilities and skills, through educational and other training programs and through horizontal communication with supervisors, so that it can effectively address increasing challenges and new realities.

In 2010, the total time spent on Group employees' training was 1690 hours, while in 2011 this number increased to 2320 hours. The average training time per employee in 2010 was 4.5 days, and in 2011, 5.8 days. Note also that the Group invested 120,000 euros in 2010 and 166,530 euros in 2011 for staff training in Cyprus and abroad. The following table offers a breakdown of total training hours per department.


Total training time (hours)

2010 2011

Cosmetics 120 170

PharmacyLine 110 127

Demetriades & Papaellinas 30 72

Pharmacy 120 199

FMCG 130 176

Holland & Barrett 180 276

BeautyLine 410 529

Pharmaceuticals 30 58

Administrative Staff 560 713

Total 1690 2320

Training programs cover the following themes:

• Business Development

• Service Customer

• Technological Infrastructure/Upgrades

• Human Resources

• Efficiency

• Corporate Social Responsibility

• Technical Skills

• Health & Safety at Work

Note also that Papaellinas Group sponsors its employees to obtain vocational and university degrees (MBA, CAT, Bachelor in Business Administration).

The educational programs offered to employees can either take place at the Group's Training Centre, in the centre of Nicosia, or in the training room at the Group headquarters, or at the Mass Market Distribution Centre.

5.3.1. Human Resources EvaluationAll new Group employees undergo a six-month evaluation period, based on which, a decision will be made on whether they will be offered a permanent position. All permanent employees are evaluated once a year.

The evaluation process places emphasis on determining and evaluating the objectives of each position, but also on the personal development of each employee.

The system is based on measurable data and aims at:

• Objectively evaluating the employee's performance on the basis of predefined criteria

• Constantly improving his/her performance

• Reviewing his/her targets - what was achieved, what was not and what are the new targets

• Identifying new needs for education and training


5.3.2. Papaellinas Group Employee SurveyThe employee survey conducted in February 2011 on Corporate Social Responsibility and the practices implemented by the Group, showed that the concept of Corporate Social Responsibility is very widespread, and so is its impact on improving the company's image and operation. Moreover it seems that employees rate the various Corporate Social Responsibility practices implemented by the Group very highly.

As to the extent to which they believe that Corporate Social Responsibility practices can contribute to the company's success, all practices marked very high rates, with the highest one being that 95% of employees greatly believe that Corporate Social Responsibility helps create a positive outward image for the company, and the lowest that 70% of employees greatly believe that it helps reduce the exit rate from the company.

In the category of questions for the entire set of Corporate Social Responsibility practices, and in the question of how important do they think they are, 39 out of 40 practices implemented by the Group scored as very important with rates ranging from 84% to 99%.In all questions on whether the Group successfully handles Corporate Social Responsibility issues, 70 to 89% responded that they are being handled very successfully, in all 11 categories. Papaellinas Group conducts the Employee Survey every 2 years, to depict the employees' views and expectations regarding their work, their work environment, as well as their view on the overall image that the Group presents as an organisation in terms of Corporate Social Responsibility issues.

Employees’ level of satisfaction

Work Environment Effectiveness Management Performance

Training & Development

Reward Practices0

20

40

60

80

100

80% 87% 84% 85% 80% 81% 79% 87% 70% 74%


Based on the Employee Survey, there has been an obvious increase in job satisfaction during the past 3 years in all areas identified by the Group. After targeted actions, the Group managed to increase the already high satisfaction level of its employees, and aims at maintaining and/or further increasing it.

5.4. Additional Benefits

Papaellinas Group offers a series of benefits to its permanent staff:

• Welfare Fund

• Life Insurance

• Medical-Pharmaceutical Care Scheme

• Maternity leave extension

• Flexible work hours

• Sponsorships for obtaining vocational/university degrees

• Cover of expenses for fertility medicines

• Continuous and cost free training on work-related issues

• Monthly baby-coupons for 2,5 years to buy baby products

• Cash Prizes to employees' children excelling at school (junior high school and high school)

• Staff Support Fund (Special fund to offer financial support to employees and/or their dependants facing medical and/or other problems)

• Baby car seat

• Road safety seminars

• Discounts on company products to company employees

5.4.1. Work Flexibility - Balancing Professional & Family Life

Papaellinas Group pays a great deal of attention on helping employees balance their professional and family life, and carries out a series of actions to that end.

• Flexible work hours: Employees have flexible work hours regarding arrival and departure times.

• Extension of the maternity leave to six months, instead of 18 weeks stipulated by the law, in order to further support the family as an institution.

5.5. Health & Safety

The Papaellinas Group policy on the health and safety of employees comes down to the following motto: ‘’safety starts with me’’

The objective of this policy is to protect life & limb, and the health of Group employees, while at work.

With a view to constantly and consistently improving work conditions and health and safety levels, the Group has set specific priorities and actions for implementation:

• Immediately and fully inform all staff on ways of preventing labour - traffic accidents and occupational diseases.

• Create an environment for a two way communication within the group, in order to foster the Health & Safety at Work culture.

• Integrate health and safety issues in other policy areas of the Group.

• Close cooperation of the Group with social partners and other involved bodies, on health and safety issues.


The Group's objective is for all employees, without exceptions, to be in a position to timely identify any potential risk, immediately inform the person in charge of any incident related to health and safety at work, and take the necessary protective measures for themselves and their co-workers. The ultimate purpose of this is to change the employees' culture on health and safety at work.

In the context of this effort to raise awareness and increase knowledge regarding possible sources of risk, and to create a model and safe work environment, a team has been put together at the new distribution centre which is in constant contact with all employees for exchange of views/messages. This team is made up of the Health & Safety Supervisor, the Distribution Centre Manager, the Distribution Centre Supervisor and the Centre's Maintenance Manager. This team meets every week, or sooner, and exchanges views-remarks, analyses incidents - near misses and any severe accidents, as well as proposals that would improve the safety level at the distribution centre.

The Group also took additional actions to ensure the health and safety of its employees:

• Health and Safety Campaign with signs and information boards throughout the Group’s premises and the corporate fleet of vehicles.

• Annual Road Safety Campaign

• Reachtruck operation training for all operators.

• Health and Safety Seminars (First Aid, Fire Safety, Automatic Defibrillator, Risk Assessment at the workplace, etc)

• Intensive briefings by the Health and Safety Supervisor, via email and group meetings.

• Risk Assessment study in all Group buildings

As to road safety, the Group wants to build awareness and to do so, it organises road safety seminars for all staff members, and even their families.

5.5.1. Number of AccidentsLabour accidents concerning the Group refer to traffic accidents occurring during working hours. 8 traffic accidents were reported in 2010, and 10 in 2011. Note that in all the above traffic accidents, there was only material damage and no threat to the employees' life or limb.

Aiming For TrustworthyRelationships

PAPAELLINAS GROUP22

© A. Lorenzetto


Market Products - Retail - Suppliers6

During the last 82 years, Papaellinas Group has been one of the leading organisations in Cyprus, and today its products can be found in 2295 different points of sale. The Group's objective is to provide top quality products and excellent service to its customers, and to always be the first choice for consumers, suppliers and associates. The vision of Papaellinas Group is to consolidate its presence in the industry as a pioneering organisation in Cyprus, and to achieve its objectives through consistency and through professional, effective and quality service.

6.1. Papaellinas Group Products and ServicesPapaellinas Group represents internationally recognised products, since its strategy is one of selecting excellent quality products that respond to the highest expectations of consumers and associates. The Group's associates all hold a leading position in their respective industries, both at home in Cyprus and abroad.

Papaellinas Group operates in the following sectors:

• Import and Distribution of Pharmaceuticals

• Import and Distribution of Cosmetics

• Import and Distribution of Consumer Products

• Cosmetics Retail – Beautyline

• Health foods and natural remedies retail - Holland & Barrett

Within the framework of developing, creating and marketing new products, Papaellinas Group has created a policy for the importation and distribution of organic products in the Cyprus market, and also for the creation of green products and services.

6.1.1. New Group Products

Organix baby food

Placing special emphasis on new products, Papaellinas Group has incorporated a range of organic baby foods in its portfolio, with the acquisition of the Organix brand.

• Organic baby foods that set the benchmark for better nutritional practices

• They contain 100% organic ingredients

• What appears on the label is absolutely true and sincere

• The products offer information to parents for the best possible choices regarding children's nutrition

• They do not contain added aromas, flavour enhancers, artificial colours or preservatives

• They do not contain processed sugar and hydrogenated fats

• They are not genetically modified products


Climate Neutral Stores

BeautyLine stores are the first climate neutral stores in Cyprus. Two of the Group's BeautyLine stores have calculated their carbon footprint. This action is a part of the Papaellinas Group Corporate Social Responsibility, and aims at giving the Group's contributing to the overall effort to protect the environment, and at constituting a model in the business world of recognising its own responsibility for environmental protection.

The calculation showed that the large store on Arhiepiskopou Makariou 3rd Avenue in Nicosia, emits 62,93 tons of carbon dioxide, while measurements in the second climate neutral store, this time in Limassol (Arhiepiskopou Makariou 3rd Avenue) revealed a carbon footprint of 48,77 tons.

The philosophy behind a climate neutral store is based on the calculation of its carbon footprint, namely the quantity of greenhouse gases emitted during its operation, such as through power consumption, transportation of products and employees, as well as waste. Where possible, measures are taken to reduce emissions and any remaining emissions are offset through the financing of climate protection projects on our planet.

6.1.2. Green Products & ServicesClimate Neutral "Nannys"

Papaellinas Group makes a breakthrough on a product level and creates the first climate neutral product in Cyprus. The Group carried out a life-cycle analysis for Nannys baby diapers, by calculating the greenhouse gasses emitted during the entire production process of the product and the transportation required from raw material to end product.

The Group decided to offset these emissions through the non-profit organisation myclimate, by investing in renewable energy sources projects in developing countries, thus offsetting the product's carbon footprint.

Calculation of greenhouse gas emissions for the life-cycle of Nannys Flexicare

Product Kgr CO2 / pack Pack

ΜΙΝΙ 4,312 44 items

MINI PLUS 4,755 44 items

MIDI 4,024 32 items

7,04 56 items

MAXI 3,83 26 items

6,76 46 items

MAXI PLUS 3,93 26 items

6,96 46 items

JUMBO 4,33 24 items

JUMBO PLUS 8.68 24 items

Calculation of greenhouse gas emissions for the life-cycle of Nannys Baby love

Product Kgr CO2 / pack Pack

ΜΙΝΙ 2,13 36 items

MIDI 2 29 items

4 58 items

MAXI 2,19 24 items

4,39 48 items

MAXI PLUS 2,06 22 items

4,12 44 items

JUNIOR 1,6 24 items

2,66 40 items

JUNIOR PLUS 2,83 25 items

Raw Materials

Transporta- tion of Raw Materials

Production Process Packaging


A climate neutral store saves energy and water consumption, recycles packaging material, uses recycled bags, sells organic/green products, and informs customers about the actions implemented. At the same time, it uses printed material and other means suggesting ways for daily customer habits to become more environmentally friendly.

The following table offers a breakdown of the carbon footprint (CO2 emissions) for each store.

CO2 emissions of Beautyline stores

Emission Sources CO2 Emissions (in tons)

Nicosia store Limassol store

Energy consumption 59 46,4

Transportation of employees 1,71 0,47

Waste 2,22 1,9

TOTAL 62,93 48,77

The study for the calculation of the BeautyLine stores' carbon footprint, was based on the internationally recognised Greenhouse Gas Protocol Corporate Standard and on standards PAS2060 and ISO 14064, and concerns both direct and indirect emissions released during operation.

6.1.3. Products & Services Quality and SafetyPapaellinas group has developed specific procedures in order to ensure the quality of its products and services offered in the Cypriot market.

• For consumer products, the Group has developed a returns Policy to safeguard the quality of offered products and services.

• For pharmaceuticals, the medicines quality assurance procedures are being followed, with specifications both for storing and for transportation.

• ISO 22000: 2005 Certification for the Food Safety Management System

• Creation of a new Mass Market Distribution Centre, ensuring the best possible storage conditions for the Group's products.

• 20% renewal of the Distribution Centre fleet of vehicles.


6.2. Papaellinas Group activities - Subsidiary companies Papaellinas Group and the parent company C.A. Papaellinas & Co Ltd have four subsidiary companies, BeautyLine, PharmacyLine, Demetriades & Papaellinas and HealthLine.

BeautyLine

BeautyLine is a retail cosmetics chain that holds a leading position in Cyprus with 15 stores. It boasts a huge variety of branded cosmetics and perfumes, complete ranges of face and body care products, as well as modern make-up lines.

BeautyLine's success comes from its customer-centred approach combined with its high calliber employees, most of who are graduates of beauty schools and can offer services exceeding the expectations of even the most demanding customer.

PharmacyLine

The PharmacyLine specialised distribution and repackaging centre is the largest of its kind in Cyprus, serving 400 pharmacies and cosmetics and perfumes stores. It is a modern distribution centre, fully meeting the needs of the market with a vast range of products, such as pharmaceuticals, parapharmaceutical products and cosmetics, sold exclusively to pharmacies and cosmetics and perfumes stores.

The key purpose of PharmacyLine is to provide top quality products to associated pharmacies, and at the same time provide warehousing and distribution services, at highly competitive prices, to the importing companies it is in business with. Moreover, with the repackaging department, the company serves both its own needs and those of its customers.

Demetriades & Papaellinas

The company was founded in 1997 and was acquired by the Papaellinas Group in 2010. It operates as the main Cyprus distributor of Novartis products; one of the largest pharmaceutical companies in the world.

HealthLine - Holland & Barrett

In 2010 Papaellinas Group established HealthLine, securing the exclusive rights to represent the Holland & Barrett franchise in Cyprus, which is the largest chain of health foods and natural remedies stores, with a leading position in the health food industry in Europe. Products are sold through six Holland & Barrett stores in Cyprus.

6.3. Papaellinas Group associatesPapaellinas Group has a broad network of 328 associates. In the context of corporate responsibility, the Group places great emphasis on having local associates so as to support Cypriot entrepreneurship.

Specifically, in 2010, 76% of the Group's total associates were local, while in 2011 the respective percentage was 78%.

Number of suppliers

The following figures show how much of Papaellinas Group’s investments go towards its associates and suppliers. In 2010 the overall amount was 4.75 million euro, while in 2011 the respective amount rose to 5,12 million euro. Although the number of suppliers abroad is smaller than local suppliers, amounts invested in suppliers abroad are higher. This is because of the nature of Papaellinas Group's activities and the imports made for the distribution of consumer, cosmetics and pharmaceutical products in the Cyprus market.

Amounts invested by the Group in suppliers (in euro)

0

50

100

150

200

250

300

LocalAbroad

230 255

72 73

2010 2011

LocalAbroad0

500.000

1.000.000

1.500.000

2.000.000

2.500.000

3.000.000

3.500.000


6.4. Responsible Marketing & Communication with customersPapaellinas Group develops its entire corporate communication and marketing plan, following responsible marketing and advertising principles. These principles ensure that consumers are correctly informed, and more specifically, that all information used is legal, fair, honest, and presents the truth, respecting diversity.

Papaellinas Group places special emphasis on handling customer complaints. With this process, the Group wants to be able to immediately respond to, but primarily, improve the quality of its products and services by utilising its experience.

A complaint recording and response system has been developed for each and every activity of the Papaellinas Group.

Distribution Centre: approximately one complaint is recorded every month and is addressed within one week.

Consumer Products: approximately 5 order mistakes per

day, addressed within 48 hours according to policy.

PharmacyLine: there is a 24 hr problem resolution policy.On average, two complaints are recorded per day.

BeautyLine: on average one complaint is recorded per month.

Problems are addressed within 48 hours according to policy.

6.5. Associates Opinion SurveyPapaellinas Group places a great deal of emphasis on the views of its associates so as to improve its own performance, enrich Corporate Social Responsibility actions and fulfil its vision. In 2011, Papaellinas Group, in partnership with the MBA Program of the University of Cyprus, conducted an overall opinion survey of associated pharmacists (random sample), regarding their perspective and their opinions on the implementation of the Group's corporate responsibility. We should note that the survey results are of particular importance to the Group, since they will become the point of reference in the planning and implementation of actions intended to strengthen the relationship with the pharmacists in Cyprus, and to satisfy them in terms of the cooperation conditions.

PAPAELLINAS GROUP28

Contributing Responsibly


7 Society

The prosperity of Cypriot society is a priority both for Papaellinas Group and for all its individual corporate entities. 82 years of business presence in the Cypriot market go hand in hand with the Group's business principles and the enhancement of social solidarity. The Group's commitment for the constant support of the entire Cyprus society and social groups in need of protection has been transformed into a corporate policy intended to upgrade and improve Cyprus society.

In this context, Papaellinas Group has placed great emphasis on supporting vulnerable groups, promoting young entrepreneurship, and raising society's awareness on safe driving. According to these priorities, it plans and implements actions that are beneficial to the society. The Group does considerable social work, with sponsorships, donations and financing of charity, medical, cultural and other activities, and at the same time, assists low-income families. In 2010 & 2011, Papaellinas Group offered I90,300 towards social actions.

Regarding vulnerable social groups, emphasis is placed on the support of the following socially vulnerable groups support associations:

• Alcyonides

• Cyprus Kidney Association

• “Love Wagon”

• Cyprus Association. of Cancer Patients and Friends

• Red Cross

• "Hand in Hand" Foundation

• Poor families in the form of contributions in kind

7.1. Road SafetyPapaellinas Group believes that road safety is a way of achieving social prosperity, and has signed the European Road Safety Charter, intended to reduce the number of fatal accidents.

Road safety is yet another area supported through the Group's corporate social responsibility. It plans and implements actions aimed at reducing traffic accidents, by raising awareness. The Group organises regular seminars, both for its staff and their families, with presenters specialised in road safety.

In May 2011, it organised a Biking Day for children, in order to raise road safety awareness from a young age.

The Group's objective is zero lives lost in traffic accidents. These actions will continue and will intensify until society is mature enough on matters of road safety.

7.2. Strengthening the Academic System

Cooperation with the University of Cyprus

Papaellinas Group has a long-standing cooperation with the University of Cyprus, strengthening education in Cyprus. The aim of this cooperation is to train students and graduates, upgrade and promote entrepreneurship, and inform young people on the developments in the business arena.


Within the framework of this cooperation, Papaellinas Group offers a scholarship (worth I10,600) each year to one top student at the University of Cyprus, in order to follow the University's MBA program.

Moreover, as part of this cooperation, Papaellinas Group takes part in the Career Day, as well as in jointly organised open seminars and lectures on promoting entrepreneurship and informing young people, with distinguished guest speakers from abroad.

7.3. VolunteerismVolunteerism is an integral part of the Group's philosophy. To this end, Papaellinas Group constantly supports activities and initiatives creatively contributing to making the best use of the employees' time, with a range of actions.

• Staff Support Fund: 75% of employees subscribe to this fund with regular contributions. Each year, all employees participate in events organised to financially support the Fund, and monies are used to help employees and/or their dependants with mostly medical problems. Moreover, once a year employees participate in an internal event - Bazaar - and contribute to the support of the staff Fund

• Staff voluntary actions: Blood donations are organised twice a year at the company's offices. Blood donation is also open to other donors, outside the company.

• Within the context of its voluntary actions, Papaellinas Group supports the Europa Donna Cyprus organisation, and organises Health and Beauty Days. The Group's professional make-up artists volunteer their services and offer facials and make-up to Europa Donna Cyprus members.

• In Papaellinas Group volunteerism is also expressed through the conveyance of business and professional knowledge from its executives to students. Final year Medical Representatives students of the European University were given the opportunity to learn the particularities and difficulties of the Medical Representative’s work, thanks to the General Manager of Demetriades & Papaellinas who shared his professional experience in a lecture he gave.


7.4. The Scourge of DrugsPapaellinas Group, jointly with the Agia Skepi Rehabilitation Unit, organised an event presenting the harsh reality of drugs. The issue of drugs is one of the most serious issues in Cypriot society.

This briefing event was addressed to all Group members, their families and friends. During the event, there were speeches from people daily living this nightmare and from some who have managed to combat it. The keynote speaker was Ms Tina Pavlou, the Psychologist at the Agia Skepi Rehabilitation Unit. The purpose of the event was to increase the awareness regarding this scourge of society, and present ways and means to prevent and combat it.

7.6. Supporting the Hand-in-Hand Charity OrganisationThe Group actively supports the Hand-in-Hand Charity Foundation, by donating various group products. The foundation was established by a group of people who felt the need to offer and help poor children, especially children with serious health problems.

The purpose of this organisation is to offer financial support and love through various events organised under its auspices.

7.7. Supporting Sports in CyprusPapaellinas Group actively supports sports in Cyprus, by promoting a balanced way of life and by sponsoring local sports clubs. Specifically, the Group is a major sponsor of two clubs, the women's volleyball team of Olympia Neapolis and the football team of Ethnikos Latsion.

7.5. Health Support "Little Volunteers" organisationWithin this context of social contribution, BeautyLine stores supported a charity event of the "Little Volunteers" organisation, and all proceeds were given to the "PUTTING SOME COLOUR IN LIFE" project for the Makario Hospital.

Taking CareOf All ThatSurrounds Us

PAPAELLINAS GROUP32


Environment

Papaellinas Group has invested in the growth and the implementation of actions, that pivot around the concept "taking care for all that surround us". Like every entity, Papaellinas Group consumes natural resources and exerts pressure on the natural environment through its activities. Being, therefore, fully aware of the critical environmental problems globally, it plans and implements actions for mitigating its toll on the environment and improving environmental conditions.

Within the framework of the clear Corporate Environmental Policy it has established, the Group strives for business growth whilst always respecting the natural environment and its resources. All Group companies have set specific environmental targets intended to reduce their impact on the natural environment. Through integrated actions and with the active participation of all stakeholders, the Group seeks to raise the environmental awareness among both its staff and associates.

8.1. Natural resources, Energy and Climate ChangeThe use of natural resources and climate change are the main environmental issues of concern, both globally and in Cyprus. Papaellinas Group has recognised the importance of these issues and has committed to the constant improvement of efficiency in power and water usage, aiming at minimising its impact on the atmosphere and use of natural resources.

Specifically for energy consumption, two main sources have been identified, namely fuel consumption for the Papaellinas Group fleet of vehicles, and power consumption through the EAC (Electrical Authority of Cyprus).

8.1.1. Measuring Energy ConsumptionIn order to plan and implement successful efficiency-improving actions, the Group measures consumptions so as to focus on the sources of greater consumption.

Power & Water Consumption

Emission Sources 2010 2011

Power Consumption (KW) 1.853.579 1.978.264

Water Consumption (cubic meters) 6.589 6.913

Power and water consumption concerns all the premises of the Papaellinas Group, both the head and regional offices in other cities, the Beautyline and Holland & Barrett stores, as well as the distribution centres (PharmacyLine and Mass Market Distribution Centre). The increase in power and water consumption is due to the expansion of the Group's activities and the opening of Holland & Barrett stores.

8.2. BeautyLine – Energy Audits & Action PlansWithin the framework of recording its impact on the environment, Papaellinas Group completed energy inspections in four BeautyLine stores, at a pilot level, so as to calculate energy consumption and implement targeted actions to reduce it. This is a strategic priority for the Group which commits to implement it in other BeautyLine stores as well.

8


The energy inspections demonstrated in detail the energy consumption in the stores and identified the main consumption sources. In all four stores, lighting is the primary consumption source. The inspection results led to the elaboration of specific action plans in order to optimise the energy performance of BeautyLine stores.

BeautyLine Store Power Consumption

(KWh)

14, Makarios ave, Nicosia store 100.708

193, Makarios ave, Limassol store 91.156

58, Stavrou ave., Nicosia, cat. 5, store 69.456

25, Kolonakiou ave., Limassol, cat. 9, store 132.092

The carbon footprint was also calculated in two of the four stores. After implementing reduction measures, the Group then offset the emissions, through the non-profit organisation myclimate, and created the first Climate Neutral Stores in Cyprus.

8.3. The new Mass Market Distribution Centre of the Papaellinas GroupIn mid-2010, the new Mass Market Distribution Centre of the Papaellinas Group was put in operation; it is the largest and most modern distribution centre in Cyprus. The new distribution centre was created to address the Group's ever increasing requirements and to reduce its environmental impact.

It has been designed and operates under conditions meeting the highest productivity, quality, health and safety standards.

With this investment, Papaellinas Group aims at constant growth in consumer products and at establishing itself as the best company to do business with for the thousands of the Group's associates.

8.3.1. Climate Neutral Distribution CentreAs the new distribution centre has been created on the basis of the best possible environmental criteria, Papaellinas Group calculated its carbon footprint. Measurements included energy consumption for operation, transportation of employees to and from the workplace, company transports (not including company fleet vehicles) and waste.

Then, Papaellinas Group offset the greenhouse gas emissions of the Distribution Centre through myclimate, a Swiss non-profit organisation, by investing in renewable energy sources projects in developing countries.

The following table offers a breakdown of the total emitted tons of greenhouse gases (CO2-eq), resulting from the measurements made.

Emission Sources CO2-eq(tons)

Power Consumption 193,06

Transportation of employees 93,61

Company transports 39,7

Waste 7,22

TOTAL 333.59

8.4. Corporate Fleet The Papaellinas Group activities are heavily based on its company fleet of vehicles, used for product distribution throughout Cyprus. The Group's company fleet consists of 123 commercial vans, 22 lorries and 12 company cars.

Since the company fleet is responsible for CO2 emissions and for contributing to atmospheric pollution, the Papaellinas Group has started to gradually replace its vans with newer vehicles with lower carbon emissions. The replacement program started in 2010 and during these past two years, 53 vehicles have been replaced with new technology and low emissions vehicles. These criteria apply to the purchase of every new vehicle used by the Group, aiming at a low CO2 emissions fleet, and at an overall reduction of the carbon footprint from its activities.

The calculations below refer to the Papaellinas Group company fleet of 22 lorries serving the Mass Market Distribution Centre and the 12 PharmacyLine company cars.


Company fleet mileage and CO2 emissions

2010 2011

Km CO2 emissions Km CO2 emissions

Mass Market Distribution Centre 479.804 222,15 688.517 318,78

PharmacyLine Distribution Centre 347.070 99,26 402.475 115,11

TOTAL 826.874 321,41 1.090.992 433.89

8.5. Raw Materials and RecyclingPapaellinas Group places special emphasis on the effective use of raw materials with the environment in mind, and on recycling all solid waste from the activities of its companies.

Within the framework of this policy, the Group has replaced all bags used for internal distribution for PharmacyLine and BeautyLine with biodegradable ones, which decompose in the natural environment significantly faster than plastic ones.

The Group's recycling actions cover a very broad spectrum, as there is a packaging, plastic, paper, glass and battery recycling program in place. The recycling process is implemented in all Group facilities. The following table shows the quantities of materials recycled in 2010 and 2011. Note that the process has been made more systematic and has generated impressive results, since in 2011 there was an impressive increase in volumes recycled.

Packaging quantities recycled by Papaellinas Group

Materials Recycled (kg)

2009 2010 2011

Paper 3.065 5.035 15.300

Plastic 4.578 2.046 2.500

TOTAL 7.643 7.081 17.800

The Group systematically collects and recycles ink cartridges used by its companies. In 2010 and 2011, 200 ink cartridges were recycled. The objective of the Group is to recycle any material that is recyclable.


Future Objectives& Plans9The Papaellinas Group Corporate Social Responsibility is described in its Corporate Social Responsibility Corporate Strategy which is used as a base in setting targets and commitments for each of its four pillars.

Focus Area Actions implemented in 2010-2011 Future targets and Commitments

CSR Strategy • Defined and Implemented the Corporate Social Responsibility Strategy

• Issued the first Corporate Social Responsibility Report

• Set-up the Corporate Social Responsibility Committee

• with monthly meetings, to implement the Corporate Social Responsibility Strategy

• Membership of the UN Global Compact

• Issue the Corporate Social Responsibility Report every two years

Employees • Employee survey to evaluate Corporate Social Responsibility Practices

• Staff briefings on Corporate Social Responsibility and the actions that the Group implements now and in the future

• Actions for balancing professional and family life

• Road safety seminars for all staff

• Staff Support Fund:

• financial assistance to colleagues and dependants with medical & other problems

• Training

• Payment of tuition for MBA and other degrees

• Counting accidents for prevention purposes

• Continue actions implemented for the prosperity of the staff at a professional and a personal level.

Market • Created climate neutral products: Nannys – Flexicare and Baby Love diapers

• Import of organic products

• Created two Climate Neutral Beautyline Stores

• Group associates' opinion survey

• Create a third Climate Neutral Beautyline Store

• Create a Climate Neutral product (calculate carbon footprint & offset) for a new shaving foam line.

• Systematically record complaints

• Brief associates & suppliers on the Group's Corporate Social Responsibility principles

• Conduct an associates' awareness survey


Focus Area Actions implemented in 2010-2011 Future targets and Commitments

Society • Supported associations (social & sports) and vulnerable groups

• Offered an MBA scholarship to one top student of the University of Cyprus per year

• Supported people with financial problems

• Continued and intensified road safety programs

• Continuous cooperation with the University of Cyprus

• Open lectures / social

• Continue all actions already implemented by the Group to support vulnerable groups and/or persons

Environment • Calculated the energy and water consumed by the Group's operation.

• Gradually replaced the Group's commercial and passenger vehicles with new, low emission ones

• Recycling

• Created a Climate Neutral Mass Market Distribution Centre: High environmental specifications & emissions offsetting through myclimate

• Energy Audits and actions in four BeautyLine stores

• Used biodegradable bags

• Systematically record energy & water consumption in the Group

• Implement action plans to reduce energy consumption in Beautyline stores

• Install an energy saving system at the Mass Market Distribution Centre

• Install photovoltaic panels at the Group's head office

• Record all materials recycled.


Offsetting: Carbon offset is done by a person, company or organization, through the funding of climate protection projects by an amount equal to the emissions produced by the said person, company or organization. These projects usually comprise of renewable energy sources (such as wind parks, photovoltaics, etc.) and/or the adoption of energy-efficient technology, which replaces or reduces the pollution produced with the burning of fossil fuels (e.g. petroleum, hard coal, lignite, etc.). Carbon offset services are usually provided by a commercial emissions offset provider, such as myclimate.

Carbon Footprint: The amount of CO2 created by all activities within a given sphere: a person’s daily life, a city, a

manufacturing process and so on.

Carbon Dioxide (CO2): A colorless and odorless gas produced by animal respiration, animal and dung decomposition

and the burning of fossil fuels. CO2 is produced the most by human activity compared to any of the other six types of

greenhouse gases.

Emissions: The release of substances, such as greenhouse gases, into the atmosphere.

Energy Audit: An inspection, survey and analysis of energy flows for energy conservation in a building, process, or

system to reduce the amount of energy input into the system without negatively affecting the output(s). An energy

audit includes the recording of energy consumption and characteristics, processing of measurement results and the

identification of specific energy saving measures.

Corporate Social Responsibility (CSR): The voluntary commitment on the part of businesses to include in their

business practices those economic, social and environmental criteria / initiatives that go over and beyond legislative

requirements, and which regard all those impacted by and who have an impact on their activities (stakeholders).

Climate Neutral: A product with a net zero carbon footprint. The carbon footprint of a product represents the amount

of gases released during product lifecycle. For carbon neutrality certification, gases need to be offset once the carbon

footprint has been measured.

Stakeholders: Groups that directly or indirectly influence the current and future sustainability of the company, and which

are also, directly or indirectly, affected by the activities of the company.

Global Reporting Initiative (GRI): The mission of the Global Reporting Initiative (GRI) is to establish a global and

reliable system with a common language and measurement system for sustainability reporting (ecological footprint

reporting), which can be used by organizations across the globe, regardless of their size or sector.

Myclimate: myclimate is an internationally-recognized, non-profit foundation based in Switzerland, that offers high quality

carbon offsetting services through investments in renewable energy and energy-efficient programs. The services offered

by myclimate fulfill the highest standards (Gold Standards) and not only reduce greenhouse gas emissions, but also

clearly contribute to sustainable development. ENDS (Environmental Data Services) has classified myclimate as one of

the top three carbon offset companies in the world (out of 30 companies), both for the services offered and the brand

awareness of the foundation.

UN Global Compact: The United Nations Global Compact is an international framework in which corporate entities align

their operations and strategies with ten universally accepted principles in the areas of human rights, labor, environment

and anti-corruption. The businesses that are members are committed to upholding these principles.

Terms andDefinitions10


Corporate Responsibility Report Quality Assurance11Introduction

Papaellinas Group requested that the Centre for Sustainability and Excellence (CSE) provide an independent assurance and comment on the Corporate Responsibility Report of the Company for the period January 2010-December 2011. CSE is part of an international network of experts and one of the top companies in the world specialized in finding solutions for Corporate Social Responsibility and Sustainable Development.

Assurance Statement

We were commissioned to review the Corporate Responsibility Report of Papaellinas Group for the period between January 2010 and December 2011, as well as the policies, practices and performance data provided therein.

Our approach was based on the best practices adopted for the Assessment and Submission of Sustainability Reports, including the G3 guidelines of the GRI and EFQM for CSR. The data provided in the Corporate Responsibility Report was reviewed through interviews, sampling test and verification of the qualitative performance data related to Corporate Social Responsibility for the aforementioned time period.

We believe our work is a sound basis from which the following conclusions may be drawn:

• The Corporate Responsibility Report has achieved its objective of providing a balanced presentation of CSR management and performance information for Papaellinas Group concerning the strategic CSR objectives.

• Papaellinas Group has organized its structures and procedures to identify, understand and respond to key issues of CSR, including stakeholder engagement and CSR programs with significant impact.

• The mapping of CSR indicators has been incorporated in the Corporate Responsibility Report, thus having the possibility of a wider coverage and better quantitative targeting.

Nicosia, June 2012

Nikos Avlonas

Managing Director of CSE

www.cse-net.org


GRI Table12

GRI Indicator Section Coverage

1. Strategy And Analysis

1.1 2.0 •1.2 4.2, 4.3, 4, 7 •2. Organisational Profile

2.1 3.0 •2.2 3.0, 6.1 •2.3 3.0, 6.2 •2.4 6.2 •2.5 3.0 •2.6 3.0 •2.7 3.0, 6.2 •2.8 3.0, 5.2 •2.9 3.0, 6.1 •2.10 4.9 •3. Report Parameters

3.1 1.0 •3.2 1.0 •3.3 1.0 •3.4 Evaluation Form •3.5 1.0, 4.2, 4.3 •3.6 3.0, 6.2 •3.7 1.0, 11.0 •3.8 1.0, 6.2 •3.9 1.0, 12.0 •3.10 12.0 •3.11 6.2, 12.0 •3.12 11.0, 12.0 •3.13 11.0 •4. Governance, Commitments And Engagement

4.1 4.1, 4.4, 4.6, 4.7 •4.2 4.4, 4.7 •4.3 4.7 •

This report is the second attempt to capture the effects of the Papaellinas Group CSR activities and covers all its activities, based on the overall CSR strategy and targets. The Report covers the period January 2010 - December 2011.

The Corporate Responsibility Report of Papaellinas Group describes its policy, strategy, procedures, targets and performance in the social, financial and environmental sectors, which have a direct impact on its activities and sustainability. The Report was compiled according to the principles for report submission of the Global Reporting Initiative, the G3 Guidelines.

Papaellinas Group has evaluated the Corporate Responsibility Report and finds that the report has been compiled in line with the G3 Guidelines B+ application level.

The CSE has evaluated the Corporate Responsibility Report of Papaellinas Group according to the GRI G3 Guidelines B+ application level.

Coverage:

•Full Index Coverage in the Report

•Partial Index Coverage in the Report

•No reference in the Report

Coverage not possible


4.4 4.3, 4.5 •4.5 4.4, 5.3 •4.6 4.7 •4.7 4.4, 4.8, 5.3 •4.8 4.1, 4.2, 4.6 •4.9 4.1, 4.2, 4.3, 4.6 •4.10 4.1, 4.2 •4.11 4.2 •4.12 4.6, 4.8, 7.1 •4.13 4.8 •4.14 4.3 •4.15 4.3 •4.16 4.3 •4.17 4.3 •Economic Performance

EC1 3.0 •EC2 •EC3 3.0 •EC4 - -

EC5 5.1 •EC6 6.3 •EC7 5.2 •EC8 3.0, 7.0 •Environmental Performance

EN1 8.5 •EN2 - -

EN3 8.1 •EN4 8.1 •EN5 8.1, 8.2, 8.3 •EN6 6.1.2, 8.2, 8.3 •EN7 8.1, 8.2, 8.3 •EN8 8.1 •



EN9 - -

EN10 - -

EN11 - -

EN12 - -

EN13 - -

EN14 - -

EN15 - -

EN16 6.1.2, 8.2, 8.3 •EN17 6.1.2, 8.2, 8.3, 8.4 •EN18 6.1.2, 8.2, 8.3, 8.4 •EN19 - -

EN20 - -

EN21 •EN22 8.5 •EN23 •EN24 - -

EN25 - -

EN26 6.1.2, 8.2, 8.3, 8.4 •EN27 •EN28 •EN29 8.3, 8.4 •EN30 •Labour Practices And Decent Work Performance

LA1 5.2 •LA2 5.2 •LA3 5.4 •LA4 •LA5 •LA6 - -

LA7 5.2, 5.5 •LA8 5.3, 5.4 •LA9 5.5 •


LA10 5.3 •LA11 5.3, 5.4 •LA12 5.3 •LA13 5.2 •LA14 5.2 •Human Rights Performance

HR1 •HR2 •HR3 5.3 •HR4 4.6, 5.2 •HR5 •HR6 - -

HR7 - -

Social Performance

SO1 4.1, 4.2 •SO2 4.7 •SO3 4.6, 5.3 •SO4 4.7 •SO5 4.8, 7.1, 7.4 •SO6 - -

SO7 •SO8 - -

Product Responsibility Performance

PR1 5.5, 6.1 •PR2 6.1 •PR3 6.1, 6.4 •PR4 •PR5 6.4, 6.5 •PR6 6.4 •PR7 •PR8 6.4 •PR9 •

GRI application level table

Management Approach Disclosersfor each Indicator Category

Same as requirement for Level B

Management Approach Disclosersfor each Indicator Category

Report on all criteria listedfor Level C plus:1.23.9, 3.134.5 - 4.13, 4016 - 4.17

Not Required

Report on:1.12.1 - 2.103.1 - 3.8, 3.10 - 3.124.1 - 4.4, 4.14 - 4.15

G3 ManagementApproach Disclosures

G3 ManagementApproach Disclosures

Sta

ndar

d D

iscl

osur

es

Report Application Level

OUTP

UTOU

TPUT

C C+ B B+ A A+

Repo

rt Ex

tern

ally

Ass

ured

Repo

rt Ex

tern

ally

Ass

ured

Repo

rt Ex

tern

ally

Ass

ured

Report on each core G3 and SectorSupplement* Indicator with due regard tothe Materiality Principle be either: a) reporting on the Indicator or b) explaining the reasonfor its omission

Report on the minimum of 20 Performance Indicators, at least one from each of Economic, Environmental, Human rights, Labor, Society, Product Responsibility

Report on the minimum of 10 Performance Indicators, includingat least one from each of: Economic, Social and Environmental

G3 PerformanceIndicators & Sector

SupplementPerformance Indicators

OUTP

UT

* Sector supplement in final version

8


Evaluation Form

By filling out the form below, you are helping us improve our CSR Strategy and Initiatives.

All information to be obtained in the evaluation form will be used only for internal evaluation by our competent CSR management team.

Which “Papaellinas Group” stakeholder group do you belong to?

What do you think about the Contents of the CR Report?

Employee NGO

Member of Society Customer

Partner / Supplier

Μedia

Excellent Good Average Poor

Corporate Social Responsibility Commitments

and Strategy

Human Resources

Marketplace

Society

Environment

Future Objectives & Plans

Other

Personal Data

(Optional)

Name: Company/Organization:

Tel.: Email:

Send the completed evaluation form via email to [email protected] or by post to:179 Yiannos Kradiniotis Avenue, Latsia, 2235, Nicosia,

Cyprus, Postal Code 1700 Nicosia, to the attention of the HR Department.

What is your opinion on the methodology used for the development of our Report?

Other comments

Are there any key areas or matters which you would like us to mention or elaborate on further in our next CR Report?

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