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Traditional Medicinals

Sustainability and Benefit Corporation Annual Report

FY 2014 (October 1, 2013 – September 30, 2014)

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Contents Authors of the Report and Data Collection Process............................................................................................................................................................ iii

Company Background Information ........................................................................................................................................................................................... iii

Our Approach to Public Reporting .......................................................................................................................................................................................... viii

SFTA Annual Reporting Commitment ...................................................................................................................................................................................... ix

California Benefit Corporation Reporting Commitment .................................................................................................................................................. ix

B-Lab Third Party Certification .................................................................................................................................................................................................... x

1. ORGANIC AND FAIR (SUSTAINABLE) LAND USE & ETHICAL SOURCING PRACTICES ............................................................................ 1

1.1. Biodiversity Conservation, Forests and Native Ecosystems ...................................................................................................................... 1

1.2. Ethical and Fair Trade Sourcing ............................................................................................................................................................................. 4

1.3. Geo-Authentic Botanicals .......................................................................................................................................................................................... 7

1.4. Non-GMO Verification ................................................................................................................................................................................................. 8

1.5. Organic Sourcing and Handling ........................................................................................................................................................................... 10

2. DISTRIBUTION & SOURCING ........................................................................................................................................................................................... 14

3. ENERGY USE ............................................................................................................................................................................................................................ 18

4. CLIMATE CHANGE AND AIR EMISSIONS .................................................................................................................................................................... 23

5. WATER USE AND QUALITY .............................................................................................................................................................................................. 30

6. SOLID WASTE REDUCTION .............................................................................................................................................................................................. 33

7. PACKAGING, MARKETING AND OTHER MATERIALS ........................................................................................................................................... 37

7.1. Packaging Materials .................................................................................................................................................................................................. 37

7.2. Marketing Materials .................................................................................................................................................................................................. 39

7.3. Other Materials ............................................................................................................................................................................................................ 39

8. LABOR ........................................................................................................................................................................................................................................ 42

9. ANIMAL CARE ......................................................................................................................................................................................................................... 46

10. SUSTAINABILITY EDUCATION (Internal and External) ................................................................................................................................. 48

11. GOVERNANCE AND COMMUNITY ENGAGEMENT ............................................................................................................................................ 52

11.1. Sustainability Governance ................................................................................................................................................................................ 53

11.2. Transparency & Stakeholder Engagement .......................................................................................................................................................... 54

11.3. Membership and Volunteerism in Associations and Advocacy Organizations.................................................................................... 55

11.4. Community Engagement .............................................................................................................................................................................................. 56

11.5. Third Party Certifications and Recognitions ....................................................................................................................................................... 58

Certified California Green Business ................................................................................................................................................................................. 58

Certified B Corporation ........................................................................................................................................................................................................ 59

Green America® Gold Tier Certified Business ............................................................................................................................................................ 59

2014 Bay Area Green Business Award ........................................................................................................................................................................... 60

U.S. EPA Green Power Partner .......................................................................................................................................................................................... 61

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Authors of the Report and Data Collection Process

Contact information: Josef Brinckmann, VP of Sustainability

(707) 824-6759 / [email protected]

Ben Couch, Supply Chain and Sustainability Project Manager

(707) 824-6784 / [email protected]

Information for this SFTA report was collected from the responsible persons of various departments of the

company in particular the Senior Accounting Manager, Chief Financial Officer, Human Resources Manager,

Procurement Manager, Site Development Manager, Supply Chain and Sustainability Project Manager, VP of

Human Resources, and VP of Sustainability. The stated goals for Fiscal Year (FY) 2015 were developed

collaboratively by Traditional Medicinals’ Executive Leadership Team (ELT) during two half-day workshops

carried out in summer of 2014 facilitated by the VP of Sustainability. Members of the ELT are identified here

below.

Company Background Information

Founded in 1974, Traditional Medicinals® is a family owned business, producing certified organic and non-

GMO verified herbal medicinal teas in its solar powered facility with Fair Trade and FairWild® certified herbs.

The company is a California Benefit Corporation, a Certified B Corporation, a California Certified Green

Business, Green America® GOLD certified Green Business, and a long-standing member of the California

Certified Organic Famers. The company’s products are distributed mainly in the United States of America and

Canada through health and natural foods stores, cooperative grocers, independent grocers, major grocery chains,

mass market retailers, and drug stores.

Mission Statement:

Traditional Medicinals® makes affordable and effective herbal medicines for family healthcare. We honor

traditional herbal knowledge and modern phytotherapy. We balance our commitment to sustainability with our

commitment to the highest quality ingredients, and promote social justice and environmental activism.

Vision Statement:

Traditional Medicinals® inspires people to embrace plant medicine and empowers them to care for themselves

and others. We aspire to transform the commerce of herbs by promoting wellbeing at every point and striving to

create value for all stakeholders, from collection and cultivation to consumption.

Board of Directors:

Drake Sadler, Chairman Blair Kellison

John Elstrott Mark Retzloff

Susan Shields Michael Funk

Executive Leadership Team (ELT):

Blair Kellison: Chief Executive Officer Jane Catelani Howard: Chief Financial Officer

Janine Levijarvi: VP of Human Resources Katie Huggins: VP of Technical Services

Scott Nakashian: VP of Operations Matt Crum: VP of Marketing

Gary Gatton: VP of Sales

mailto:[email protected]

mailto:[email protected]

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Traditional Medicinals® Inc. Headquarters, Sebastopol, California. Photo courtesy: ©2014 Julie Hughes

Locations and Facilities:

Headquarters and Manufacturing Facility: 4515 Ross Road, Sebastopol, California 95472

Marketing and Sales Services Offices: 621 Second Street, Suite A, Petaluma, California 94952

Storage Warehouse: 975 Corporate Center Parkway, Suite 140 B, Santa Rosa, California 95407

Web Sites:

Traditional Medicinals (USA): http://www.traditionalmedicinals.com/

Traditional Medicinals (CANADA): http://ca.traditionalmedicinals.com/

Facebook: https://www.facebook.com/TraditionalMedicinals

Instagram: https://instagram.com/TradMedicinals/

Pinterest: http://www.pinterest.com/tradmedtea/

Twitter: https://twitter.com/tradmedicinals

Memberships and Sponsorships:

Traditional Medicinals is a corporate member of the United Plant Savers (UpS), an emerald sponsor member of

the American Botanical Council (ABC), a founding member of the American Herbal Products Association

(AHPA), a friend of the Fair Wild Foundation (FWF), a gold leaf sponsor of the American Herbalists Guild

(AHG), a member of the California Certified Organic Farmers (CCOF), a member of Green America® Green

Business Network™, a member of the Organic Trade Association (OTA), a platinum member of the American

Herbal Pharmacopoeia (AHP), and sponsor member of the Sustainable Food Trade Association (SFTA).

Primary Regions for Sales:

Our organic herbal products are sold mainly the United States of America and Canada but there is also some

distribution in Japan, Hong Kong Special Administrative Region of the People’s Republic of China, Republic of

China (Taiwan), Republic of Singapore, and the Republic of the Philippines.

http://www.traditionalmedicinals.com/

http://ca.traditionalmedicinals.com/

https://www.facebook.com/TraditionalMedicinals

https://instagram.com/TradMedicinals/

http://www.pinterest.com/tradmedtea/

https://twitter.com/tradmedicinals

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Primary Regions for Sourcing:

For our approximately 60 herbal products we use over 100 different botanical ingredients that are sourced from

over 35 countries. Most of our formulations stem from European herbal traditions. Therefore we mainly use

European and Mediterranean as well as some Western Asian plant species in our herbal products. Important

partners for the supply of the botanical ingredients that we use in our herbal products include wild collection

firms, family farms and processing companies situated in European countries, especially Bosnia &

Herzegovina, Federal Republic of Germany, Hungary, Italian Republic, Republic of Albania, Republic of

Austria, Republic of Bulgaria, and Republic of Poland.

However in terms of the annual volume of botanical raw materials sourced, about 80% originate from ten

countries (of five continents) in the following order,

(1) Republic of India (Asia)

(2) Arab Republic of Egypt (Africa)

(3) United States of America (North America)

(4) Republic of Bulgaria (Europe)

(5) Republic of Kazakhstan (Asia)

(6) Republic of Poland (Europe)

(7) Hungary (Europe)

(8) Democratic Socialist Republic of Sri Lanka (Asia)

(9) Bosnia & Herzegovina (Europe)

(10) Republic of Paraguay (South America).

Furthermore, over 50% of the total volume of botanicals used by the company originates from the top four

listed countries (India, Egypt, USA, and Bulgaria).

Main source countries for botanical raw materials used by Traditional Medicinals in terms of volume.

The legend in above map shows quantitative ranges of pounds purchased from lightest color (none purchased)

to darkest color (highest volume).

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A letter from our CEO, Blair Kellison

Together, our 150 employees are the stewards of Traditional Medicinals. Since our inception in 1974 we have

spent 40 years infusing environmental and social sustainability into our operations. It is an honor for me to

represent our employees in this opening address of our 2014 Annual Sustainability Report.

For 40 years we’ve been a company that has strived to do the right thing. In all our actions we have considered

their effects on all stakeholders, not just our shareholders, and we’ve always tried to make our actions

transparent to others. Thankfully, the California Benefit Corporation regulation has established clear guidelines

for public reporting of just what doing the right thing means each year for each company.

We initiated this annual report to enhance our company’s transparency with our stakeholders and in particular

our consumers. From our early beginnings we have been deeply committed to environmental and social

sustainability so we welcomed the opportunity to illustrate this commitment in our annual sustainability report.

We hope that the readers of this, our third annual sustainability report, will find the information as beneficial as

we have internally. The rigor of preparing this report each year brings to light areas where we can do a better

job of “doing the right thing”. This report renews annually, across all departments, our commitment to look

deeper inside ourselves to find ways to improve. We never find ourselves celebrating the improvement of our

‘B Score’ or comparing ourselves to others but instead focusing on the areas we can improve upon. The SFTA

and California Benefit Corporation reporting processes identify specific areas where we can still make

improvements and make public our intentions to do so.

At Traditional Medicinals we believe the actions we take today around sustainability will one day simply be the

norm or the law and that we are just a little ahead of our time.

We thank the readers of this report for taking the time to take a look at how we are doing. We welcome your

feedback on how we can improve.

Blair Kellison

CEO

Photo courtesy: ©2014 Julie Hughes

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A letter from our Co-founder, Drake Sadler

Nearly four decades ago when we began blending teas in a small herb shop in Northern California, the young

idealistic hippie co-founders shared the common belief that through their work together they could change the

world. Certainly a lot of change has occurred, and we have matured into a large successful business. One thing

however has not changed, and that is the mission of the company. It may appear that we are in the herb

business, but really we are in the business of change. We are changing the standards of quality for herbal

products, changing the practice of alternative medicine, changing the health of the people who consume our

products and changing the lives of the rural native people who farm and collect our herbs in the wild.

Many medicinal plant species are collected in the wild mainly by local and indigenous people that are

sometimes impoverished and struggle to preserve their culture and communities. We work closely with

organizations like Fair Trade USA and Fair Wild Foundation—organizations that assist communities in

economic development and social empowerment, investing in change from poverty to prosperity. With the

support of our health conscious consumers, we believe we share an opportunity to end poverty, end hunger,

rebuild families, restore self-sufficiency and economic stability in these rural and indigenous communities.

We stand on the threshold of something new, something important, and something we can pass on to our

children and the next generation. To expand upon this common purpose we must recognize and encourage spirit

leadership within business, in our own communities, and in our families. Thank you so very much for your

support of Traditional Medicinals.

Drake Sadler

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Our Approach to Public Reporting

Traditional Medicinals is committed to annual public reporting of its sustainability and social responsibility

performance. Sustainability is built on three interrelated pillars: environmental protection, social equity and

economic viability. Performance indicators for measuring sustainability in our operation and value chains

therefore involve economic, environmental and social criteria.

Traditional Medicinals integrates the implementation of sustainability standards within its overall quality

assurance system in light of mission-driven priorities for sourcing the highest quality ingredients while

promoting social justice and environmental activism.

Our emphasis on the value of independent third-party auditing and certification of sustainability practices

(organic and fair) in our supply chain requires transparency from the field level to our production facility in

Sebastopol, California. An organic and fair certified botanical supply chain is integrally linked to the company’s

overall sustainability performance.

Our approach to public reporting is informed by the company’s voluntary participation in a number of

initiatives that require periodic reporting using various assessment tools. This includes requirements of being a

California Benefit Corporation, Certified B Corporation, California Certified Green Business, Green America®

Certified Green Business, EPA Green Power Partner and as a member of the Sustainable Food Trade

Association (SFTA).

We had initially chosen the SFTA report format because its reporting categories (focused on organic food

supply chain and production) overlap with the scope of our function as a manufacturer of sustainable (organic +

fair) herbal products. Our first annual report (FY2012) closely followed the SFTA framework. Our second

annual report (FY2013) was expanded to include additional information gleaned from our experience with the

Certified B Corporation and California Green Business assessment processes. While this third annual report

(FY2014) continues to follow the SFTA format it is expanded by the inclusion of information that is required

for California Benefit Corporation public reporting. Our aim is to produce one annual report that satisfies the

reporting requirements for each of the voluntary initiatives, while communicating our efforts and performance

toward our sustainability mission.

In its website, Traditional Medicinals published highlights from the FY2012 and FY2013 annual reports and

aims to publish this FY2014 report publicly before end of FY2015. Prior to public reporting, all shareholders

received a copy of this report. Our publicly reported highlights for FY2012 and FY2013 included:

Biodiversity Conservation

Sustainable Botanical Supply Chain (Organic + Fair)

Sustainable and Responsible Packaging

Non-GMO Verification

Renewable Energy

Community Engagement

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SFTA Annual Reporting Commitment

On March 30, 2012, Traditional Medicinals became a member of the Sustainable Food Trade Association

(SFTA). This organization provides businesses in the organic food trade with guidelines and recommendations

for how to embody sustainability in their own operations. The SFTA spent two years compiling input from

organic growers, distributors, processors, retailers and certifiers to create an 11-point action plan titled

“Declaration of Sustainability in the Organic Food Trade.” Companies that sign the pledge commit to

continuous improvement and transparency around practices in key areas.

On that date, Traditional Medicinals signed on to the Declaration committing to reporting annually our

performance in the 11-action categories that include organic & land use, distribution & sourcing, energy,

climate change & emissions, water use & quality, solid waste reduction, packaging & marketing materials,

labor, animal care, sustainability education, and governance & community engagement.

Each year, we will strive for continuous progressive improvement and to practice transparency in annually

auditing our performance and selecting reporting metrics that are relevant to our business. This report is a

compilation of information we have collected and intend to submit to the SFTA to qualify for ongoing

membership in the association.

California Benefit Corporation Reporting Commitment

As a California Benefit Corporation, Traditional Medicinals must deliver to each shareholder an annual benefit

report including a narrative describing the process and rationale for selecting the third-party standards used to

prepare the report, for example the B Impact Assessment and SFTA standards, and the ways in which the

company pursued a general public benefit during the report year and the extent to which that general public

benefit was created. Additionally, a narrative is to be included for any circumstances that have hindered the

creation of a general public benefit by the company.

Furthermore, the report is to include an assessment of the overall social and environmental performance of the

company, prepared in accordance with a third-party standard applied consistently with any application of that

standard in prior benefit reports, for example each annual report provides the company’s most recently issued B

Impact Report (a biennial score card).

Shareholders receive an annual report that includes the name of each person that owns 5 percent or more of the

outstanding shares of the company. The publicly published report includes a statement by the board of directors

(see next section). A statement is also required as to whether any of the company’s directors, officers, or

material owners have any connection with the third-party standard. Traditional Medicinals has no connection

with the entity that developed the third-party standard.

http://www.sustainablefoodtrade.org/declaration-of-sustainability/

http://bimpactassessment.net/

http://www.sustainablefoodtrade.org/metrics-report/

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Finally, as a California Benefit Corporation, Traditional Medicinals is required to post all of its Benefit Reports

on the public portion of its Internet website. The publicly posted Benefit Report may omit any proprietary or

financial information.

Board Statement on Benefit Purposes in Our Bylaws

STATEMENT OF THE BOARD OF DIRECTORS OF

TRADITIONAL MEDICINALS, INC.,

a California benefit corporation

REGARDING THE FISCAL YEAR 2014 ANNUAL BENEFIT REPORT

March 12, 2015

The Board of Directors (the “Board”) has reviewed Traditional Medicinals, Inc.’s (the “Benefit

Corporation”) fiscal year 2014 annual benefit report.

Traditional Medicinals is committed to sourcing and producing the highest quality herbal medicine,

social justice, environmental activism, and prioritizing sustainability for all stakeholders. A few examples of

Traditional Medicinals’ benefit impacts in FY2014 include:

Increasing the total volume and percentage of pounds purchased of certified organic, FairTrade,

FairWild, and combined Organic + Fair botanicals.

Increasing total number of products with Organic + Fair labeling.

Supporting Washington State Proposition 522’s effort to Label Genetically Engineered Foods, both

financially and through social media.

Reaching 100% Renewable Energy in FY2014 through on-site solar power generation, purchased

renewable energy, renewable energy certificates and carbon offsets.

Increasing landfill diversion from the previous year to a rate of 76.8%.

Continuing to measure and report corporate and targeted supply chain carbon footprint.

After careful review and analysis, it is the Board’s opinion that the benefit corporation pursued its

general purpose during the period covered by the report.

In accordance with California Corporations Code §14621, the undersigned directors of the benefit

corporation have executed this statement as of the date first set forth above.

B-Lab Third Party Certification

As part of our benefit corporation status we are a certified B Corporation, which means that our company’s

overall environmental and social performance is measured and independently verified by a third party, B Lab.

B Corps are certified by the nonprofit B Lab to meet rigorous standards of social and environmental

performance, accountability, and transparency. Today, there is a growing community of over 1,200 Certified B

Corps from 38 countries and 121 industries working together toward 1 unifying goal: to redefine success in

business, i.e. not just to be the best in the world, but to be the best for the world.

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Traditional Medicinals 2014 B Impact Report

Company Score

Median Score*

Overall B Score 134 80

Environment 39 9

Environmental Products & Services (e.g. Renewable energy, recycling) 16 4

Environmental Practices 23 6

Land, Office, Plant 7 4

Energy, Water, Materials 11 2

Emissions, Water, Waste 3 1

Suppliers & Transportation 3 N/A

Workers 24 22

Compensation, Benefits & Training 16 15

Worker Ownership 4 2

Work Environment 4 4

Community 36 32

Community Products & Services 17 15

Community Practices 36 15

Suppliers & Distributors 7 4

Local 2 5

Diversity 3 2

Job Creation 2 2

xii

Traditional Medicinals 2014 B Impact Report

Company Score

Median Score*

Civic Engagement & Giving 4 4

Governance 17 10

Accountability 14 6

Transparency 4 3

Overall 134 80

80 out of 200 is eligible for certification *Of all businesses that have completed the B Impact Assessment *Median scores will not add up to overall

http://www.bcorporation.net/benchmarks

1. ORGANIC AND FAIR (SUSTAINABLE) LAND USE & ETHICAL SOURCING PRACTICES

1.1. Biodiversity Conservation, Forests and Native Ecosystems

Photo: Białowieża Forest © Evergreen - UNESCO World Heritage Centre

Image source: http://whc.unesco.org/en/list/33/gallery/

The Białowieża Forest, a UNESCO World Heritage Site situated on the watershed of the Baltic Sea and the Black Sea, is

one of the last and largest remaining primeval forest areas in Europe. The border between Belarus and Poland runs

through the center of this remnant of the original forests of Europe. Only 20 km from the Belarussian border, the nearest

town to the forest in Poland is Hajnówka. This is where, since 2009, Traditional Medicinals® has been sourcing Certified

Organic and FairWild® European wild dandelion root from our producer partner “Runo Spólka z.o.o.”, a small

company that works with about 60 families for the sustainable wild collection and resource management of medicinal

plants growing in the wet meadows, edges of the forest and within forest where permitted. Biodiversity conservation is

fundamental to the FairWild Standard.

Policies & Guidelines

Traditional Medicinals is committed to sourcing botanical ingredients that are produced according to

independently verifiable and certifiable sustainability standards (comprising ecological, economic, and social

sustainability criteria). Traditional Medicinals is committed to not only sustainable agricultural methods as

evidenced by third-party certification of medicinal plant farms (whether certified biodynamic or certified

organic or both) but also to sustainable harvesting and resource management of wild medicinal plants

under fair trade conditions.

Source: Traditional Medicinals Policy CP00027.00: Sustainable Purchasing Policy for Botanicals. 2013.

http://whc.unesco.org/en/list/33/gallery/

http://www.runo.pl/

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Practices

The following table quantifies the number of botanical components used by Traditional Medicinals, whether

herbal raw materials (e.g. wild dandelion root) or agriculturally-derived packaging components (e.g. cotton for

teabag string). The company’s active participation in Voluntary Sustainability Standards (VSS) such as the

FairWild Standard is an example of taking responsibility for biodiversity conservation in our value chain.

Cultivated or Wild-harvested FY2014 Count FY2014 Percent

Cultivated plants 68 58.1%

Primarily cultivated plants with some wild-harvesting 6 5.1%

Wild-harvested plants 40 34.2%

Primarily wild-harvested plants with some cultivation 3 2.6%

Total number of botanical components: 117 100%

Total wild-harvested botanical components: 49 41.9%

Over 40% of the botanical species that we use are wild-collected products of biodiversity. For these, our

Supply Chain Group collaborates with our producer and supplier partners along with nature conservation non-

governmental organizations (NGOs) in the implementation of suitable sustainability standards (using

ecological, economic and social criteria and indicators) which include risk assessment, resource assessment,

resource management and monitoring systems, independent inspection and certification.

For “organic wild” certification, the United States Department of Agriculture (USDA) National Organic

Program (NOP) Wild Crop Harvesting Practice Standard requires that wild plants must be harvested in a

manner that ensures that such harvesting or gathering will not be destructive to the environment and will sustain

the growth and production of the wild crop. To comply with this standard, a wild-crop harvesting Organic

System Plan is required which includes mapping, documentation, assessment of plants and animals occurring in

the mapped harvest area, ecosystem management and harvesting practice plan, monitoring system, and training.

Beyond the minimum requirements of USDA NOP organic wild crop certification, Traditional Medicinals

supports more rigorous whole ecosystem sustainable management

approaches that take care of the people, plants and animals living in the

biodiversity areas where many of our medicinal plants are sustainably

managed; for example the FairWild Standard. Established in 2006, the

purpose of the FairWild Standard is to support efforts to ensure that

wild-collected botanicals are managed, harvested and traded in a way

that maintains populations in the wild and benefits rural producers.

Traditional Medicinals is also a contributing “Friend of FairWild”

The FairWild Foundation (FWF) mission statement:

“We aim to provide a worldwide framework for implementing a sustainable, fair and value-added

management and trading system for wild-collected natural ingredients and products thereof.”

Traditional Medicinals’ commitment to the Fairtrade system also supports biodiversity conservation in

developing countries. The Fairtrade International (FLO) Fairtrade Standard for Small Producer

Organizations includes specific biodiversity conservation requirements that are applicable to and must be

implemented at farms where any Fairtrade certified herbs are grown. FLO’s intent and scope of biodiversity

requirements:

http://www.fairwild.org/friends-of-fairwild/

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“Biodiversity supports natural ecosystems. The loss of natural ecosystems is a threat to the sustainability of

the production system because the benefits they provide can be lost. These benefits include enhanced water

conservation, soil fertility, potential alternative crops, hosting of natural enemies, and a reserve of products

important to local communities. Natural ecosystems also provide a buffer to mitigate and adapt to the effects

of climate change.”

To support biodiversity conservation efforts of non-profit organizations in North America, Traditional

Medicinals is a corporate member of the United Plant Savers (UpS) whose mission is:

“To protect native medicinal plants of the United States and Canada and their native habitat while ensuring

an abundant renewable supply of medicinal plants for generations to come.”

In 2013, Traditional Medicinals made a five-year commitment to support the UpS Adopt an Herb Program. We

chose to adopt the Native American tree slippery elm (Ulmus rubra MUHLENBERG; Family: Ulmaceae), from

which we use the inner bark in our Herba Tussin® and Throat Coat® herbal tea products.

Sources:

Fairtrade International (FLO) Fairtrade Standard for Small Producer Organizations, Current version: 01.05.2011_v1.2.

Bonn, Germany: FLO. 2011.

Fair Wild Foundation (FWF). FairWild Standard: Version 2.0. Weinfelden, Switzerland: FWF. 2010.

United Plant Savers (UpS). Corporate Members and Adopt-a-Plant Sponsors 2013-2014.

United States Department of Agriculture (USDA) National Organic Program (NOP). Guidance: Wild Crop Harvesting.

Washington, DC: USDA. 22 July 2011.

United States Department of Agriculture (USDA) National Organic Program (NOP). Draft Guidance Natural Resources

and Biodiversity Conservation for Certified Organic Operations. Washington, DC: USDA. 2014.

http://www.unitedplantsavers.org/content.php/161-species-at-risk_1

http://www.fairtrade.net/fileadmin/user_upload/content/2009/standards/documents/generic-standards/2014-01-15_SPO_EN.pdf

http://www.fairwild.org/documents/

http://www.unitedplantsavers.org/content.php/145-Corporate-Members

http://www.ams.usda.gov/AMSv1.0/getfile?dDocName=STELPRDC5090757



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1.2. Ethical and Fair Trade Sourcing

“Traditional Medicinals has increased the eco + social program

percentage of its botanical raw materials to 39.3 per cent.”

Ambootia Estate (Darjeeling, India), a biodynamic and organic farm since 1992,

has been Traditional Medicinals’ qualified producer of organic and fairtrade certified tea leaf since late 1990’s.

Photo: Bimla Giri, a farmer on the Ambootia Tea Estate. Her children attend a school funded by Fairtrade Premium.

Image source: Fairtrade America Facebook






organic or both) but also to sustainable harvesting and resource management of wild medicinal plants under

fair trade conditions.


Practices

We define ethically and sustainably sourced botanicals as those that are certified organic and either Fair

Trade or FairWild certified and/or are sourced from selected community and social development project sites

such as REVIVE! Project (Rajasthan, India) or ROSHNI Project (Pakistan). Information about the REVIVE!

Project is provided as part of the “Community Engagement” section in Chapter 11 of this report.

https://www.facebook.com/pages/Ambootia/173923189310971

https://www.facebook.com/FairtradeMarkUS/photos/a.198244586975093.50920.196808500452035/613009578831923/?type=1&theater

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Traditional Medicinals considers botanical ingredients that are certified to have been produced in compliance

with any of the below listed standards as meeting our minimum requirements for evidence of economic and

social sustainability for production and ethical trade:

Control Union (CU) Fair Choice Social and Fair Trade Standard

EcoCert Equitable, Solidaire, Responsible (ESR) Standard.

Fairtrade International (FLO) Fairtrade Standard for Herbs and Herbal Teas for Hired Labour

Fairtrade International (FLO) Fairtrade Standard for Tea for Hired Labour

Fairtrade International (FLO) Fairtrade Standard for Tea for Small Producer Organizations

Fairtrade International (FLO) Fairtrade Standard for Herbs, Herbal Teas & Spices for Small Producer

Organisations

Fair Trade Sustainability Alliance (FairTSA) Consolidated standards for the production of agricultural

products, processed foods, wild collected plants, handicrafts and personal care products

Fair Trade USA (FTUSA) Farm Workers Standard (FWS)

Fair Trade USA (FTUSA) Independent Smallholder (ISS) Standard

FairWild Foundation (FWF) FairWild Standard (FWS)

Institute for Marketecology (IMO) Fair For Life Social & Fairtrade Standard

Instituto Biodinâmico de Desenvolvimento Rural (IBD) EcoSocial Standard

The below table shows that the purchased quantity (pounds) of “Organic + FAIR or REVIVE or ROSHNI”

botanicals in FY2014 increased significantly (by 39.8%) compared to previous year. The percentage (%) of

total botanical purchases that were designated as “Organic” and “Fair” and/or obtained from the REVIVE or

ROSHNI Projects grew from 34.6% to 39.3%.

Botanical Ingredients Purchased, Organic + Fair Pounds, % of Total, FY2013 vs FY2014, % Change

Ethically and Sustainably Source Botanicals FY2012

Pounds

FY2012

(% of

Total)

FY2013

Pounds

FY2013

(% of

Total)

FY2014

Pounds

FY2014

(% of

Total)

%

Change

Pounds

Total Botanicals Purchased 1,047,332 100% 1,298,313 100% 1,594,926 100.00% 22.85%

Total Organic Botanicals Purchased 1,020,888 97.475% 1,268,429 97.7% 1,577,607 98.91% 24.37%

Total Organic + FairTrade Certified Botanicals 116,074 11.1% 148,248 11.4% 247,251 15.50% 66.78%

Total Organic + FairWild Certified Botanicals Purchased 110,954 10.6% 143,617 11.1% 180,788 11.34% 25.88%

Total Organic + REVIVE! Project Botanicals Purchased 129,891 12.4% 131,169 10.1% 163,365 10.24% 24.55%

Total Organic + ROSHNI Project Botanicals Purchased - - 25,893 01.9% 36,049 2.26% 39.22%

Total Organic + FAIR or REVIVE or ROSHNI 356,919 34.1% 448,927 34.6% 627,454 39.34% 39.77%

The below table shows that although the number of herbal products with Fairtrade labeling increased from 21 to

24 (14.3%) in FY2014 compared to FY2013, the total number of herbal products with Fair + Organic

certification labeling increased only from 28 to 30 (7.1%). This is explained by the fact that 4 herbal products

carried both Fairtrade and FairWild certification marks, e.g. Healthy Cycle™, Pregnancy® Tea, Just for Kids

Cold Care and Just for Kids Nighty Night® have dual certification labeling. Furthermore, there are examples of

organic + fair certified ingredients purchased (paying the fairtrade price and premium) that were not yet labelled

as such in FY2014, for example certain products containing FairWild® certified dandelion root which the

company has been procuring since 2009 from the aforementioned producer in Poland.

Number of Herbal Products with Fair + Organic Labeling FY2009-FY2014

Finished Products with Fair + Organic Labeling FY

2009

FY

2010

FY

2011

FY

2012

FY

2013

FY

2014

%

Change

Total Number of Herbal Products with Fairtrade Labeling 10 13 17 18 21 24 14.3%

Total Number of Herbal Products with FairWild Labeling 2 5 7 9 10 10 0.0%

Total Number of Products with Fair + Organic Labeling 12 18 24 27 28 30 7.1%

Total Number of Herbal Products 52 53 61 15.1%

Percentage of Total with Fair + Organic Labeling 51.9% 52.8% 49.2% -6.9%

6

Commentary on FY2014 decrease in % of products with Fair + Organic labeling: The above table shows that while

the number of products with both Fair + Organic labeling indeed increased by 7.1%, the percentage of total products with

Fair + Organic labeling decreased by a comparable 6.9% in FY2014 compared to previous year. The primary reason for

the decrease is the fact that while there was a 15% increase in products, only about half of the new products introduced

during FY2014 carried both Fair + Organic labeling. Furthermore, one of the new products contained less than 70%

certified organic ingredients, which placed it below the minimum percentage required for labeling.

The following table quantifies Traditional Medicinals total case equivalent (6 retail units per case) sales for

FY2012-FY2014 and the share of products with organic labeling (>70% organic ingredients).

Summary of Total Organic Products Sold FY2012-FY2014

Organic Product Sales FY2012 FY2013 FY2014 % Change

Total Case Equivalent (CE) Sold 2,443,293 2,864,811 3,481,895 21.5%

Total Organic (>70% organic ingredients) CE Sold 2,432,789 2,853,374 3,461,509 21.3%

Organic CE % 99.6 99.6 99.4 -0.2%

The following table provides a summary of attributes for Traditional Medicinals finished products in the United

States market during FY2014, such as those with Fair Trade, Fair Wild, Kosher, Non-GMO, and/or Organic

labeling, as well as products with ingredients obtained from the REVIVE! and/or ROSHNI Projects.

Summary of Finished Herbal Product Attributes FY2013 and FY2014

FY2013 FY2014 % of Total

Total Number of Herbal Products in U.S. Market 53 61 100%

Fair Trade Labeling

Number of Products labeled with > 20% Fair Trade Ingredients 21 24 39.3%

Number of Products labeled with > 50% Fair Trade Ingredients 8 11 18.0%

Number of Products labeled with 100% Fair Trade Ingredients 5 6 9.8%

Labeling Initiative Fair Trade USA

Fair Wild Labeling

Number of Products labeled with > 20% Fair Wild Ingredients 10 10 16.4%

Number of Products labeled with > 50% Fair Wild Ingredients 5 5 8.2%

Number of Products labeled with 100% Fair Wild Ingredients 2 2 3.3%

Labeling Initiative FairWild Foundation

Kosher Labeling

Number of Products labeled with 100% Kosher Ingredients 50 59 96.7%

Certification Body OK Kosher

Non-GMO Labeling

Number of Products with Non-GMO Project Verification 52 60 98.4%1

Labeling Initiative Non-GMO Project

Organic Labeling

Number of Products with >70% Organic Ingredients 52 59 96.7%





Number of Products with <70% Organic Ingredients 1 22 3.3%

Certification Body California Certified Organic Farmers

REVIVE! Project

Number of Products with REVIVE! Project Senna 5 5 8.2%

ROSHNI Project

Number of Products with ROSHI Project Licorice 1 1 1.6%

1 100% of herbal tea products carried Non-GMO Project Verification Seal. One product in capsule format was not yet verified.

2 The company decided to launch one new product with <70% organic ingredients but with a plan for the Procurement Department to

prioritize transitioning that ingredient to organic production as quickly as possible.

7

1.3. Geo-Authentic Botanicals

“Nearly three-quarters of the botanical ingredients used in Traditional

Medicinals products are geo-authentic”


It is the policy of Traditional Medicinals to source botanical ingredients from their native habitats and

distribution range whenever reasonably possible, processed according to the traditional methods with respect

given to practices based on the Traditional Ecological Knowledge (TEK) and Traditional Medical Knowledge

(TMK) of the local, rural and indigenous people who harvest our herbs while implementing sustainable natural

resource management plans.

Geo-authentic botanicals refer to those with specific germplasm, cultivated or collected in their traditional

production regions, of a specified biological age at maturity, with specific traditional production techniques and

processing methods.

Traditional Ecological Knowledge (TEK) has been defined as "a cumulative body of knowledge, practice and

belief evolving by adaptive processes and handed down through generations by cultural transmission, about the

relationship of living beings (including humans) with one another and with their environment.

Traditional Medical Knowledge (TMK) includes ethnobotanical knowledge on plant and genetic resources as

well as folkloristic oral traditions that deal with medicinal applications of these resources.

Source: Traditional Medicinals Policy CP00030.00: Environmentally Preferable Purchasing Policy for Geo-authentic Botanicals.

2013.

Practices

The following table quantifies the number of geo-authentic components used in Traditional Medicinals

products, whether herbal raw materials (e.g. wild schisandra berries) or agriculturally-derived packaging

materials (e.g. forest-grown abacá leaf for making teabag filter paper).

Geo-authentic status Count Percent

Primarily from geo-authentic origins 86 73.5%

Primarily from non-geo-authentic origins 29 24.8%

Not Applicable (e.g. hybrids no longer occurring in the wild) 2 1.7%

Total number of botanical components: 117 100%

8

Nearly three-quarters of the botanical components used in Traditional Medicinals products are geo-authentic.

Some of our botanicals that are not geo-authentic are however regional traditional specialties, for example while

hops originate from Asia, our hops are from Germany where hops cultivation was introduced sometime during

the 11th

century in Bavaria.

Our herbal products are largely dependent on access to ever-increasing quantities of specified qualities of wild-

harvested and/or traditionally grown botanicals. Therefore we have a significant stake in the preservation of

TEK and TMK that is practiced by local, rural and indigenous communities that serve as the stewards of

sensitive ecosystems and biodiversity areas where the highest quality medicinal plants occur in the wild. Many

or most of these plant species will never be brought into controlled cultivation for agronomic, economic and

quality reasons. Biodiversity conservation is supported by this purchasing policy to prefer geo-authentic

botanicals.

Implementing this policy will help us secure continued access to the wild-collected botanicals that we need for

our products while enabling us to deepen long-term relationships with the harvesting communities who can earn

fair trade prices and premiums for effectively caretaking the biodiversity areas that provide the correct quality

of ingredients, necessary for our products to be effective for their intended uses.

1.4. Non-GMO Verification

“Traditional Medicinals has maintained the Non-GMO Project Verified

percentage of its herbal tea products at 100 per cent.”


It is the policy of Traditional Medicinals to purchase and use non-GMO botanical ingredients and packaging

components. Traditional Medicinals does not use ingredients or components that were produced using

biotechnology in products or at any stage of production, processing or handling.

Source: Traditional Medicinals Policy CP00022.00: Environmentally Preferable Purchasing Policy Non-GMO Botanicals and

Packaging Components. 2013.

Practices

It is a long-standing practice of Traditional Medicinals to purchase and use non-GMO (genetically modified

organism) botanical ingredients and packaging components. We remain opposed to the practice of genetic

engineering, an experimental technology which merges DNA (deoxyribonucleic acid) from different species,

creating unstable combinations of plant, animal, bacterial and viral genes that cannot occur in nature or in

traditional crossbreeding.

9

We are strongly committed to the work of the Non-GMO Project, a non-profit organization that offers third

party verification and labeling for non-GMO products. The Non-GMO Project began enrolling qualifying

products in the fall of 2008. 100% of our herbal tea products are Non-GMO Project Verified in compliance with

the requirements of the Non-GMO Project Standard.

The complete list of our non-GMO verified products is publicly available online here.

In addition to non-GMO botanical ingredients, agriculturally-derived packaging materials that are immersed in

water for preparation of the products (e.g. tea bags) were added to the scope of the Non-GMO Project Standard

starting with Version 11.0 in May of 2014. For Traditional Medicinals, this meant that verification would now

be required for our tea bag filter paper which is a product of the abacá (Musa textilis) plant and the attached tea

bag string (which is also immersed in the water), a product of the cotton (Gossypium spp.) plant.

Traditional Medicinals® supported Washington State Proposition 522 financially and also promoted it through social media.

Our commitment to source botanical ingredients through the Fairtrade system where possible also supports our

non-GMO policies and practices. The Fairtrade International (FLO) Fairtrade Standard for Small

Producer Organizations includes specific GMO requirements that are applicable to all crops that a Fairtrade

producer organization is certified for and also to other crops grown in the same fields. FLO’s intent and scope

for their non-GMO requirements are:

“Genetically Modified (GM) crops do not contribute to sustainability in the long run. GM crops increase

dependencies on external inputs and discourage an integrated approach in the production system thus

inhibiting resiliency. GM crops may also have potential negative impacts on human health and to the

environment.”

Sources:

Fairtrade International (FLO) Fairtrade Standard for Small Producer Organizations, Current version: 01.05.2011_v1.2. Bonn,

Germany: FLO. 2011.

Non-GMO Project. Non-GMO-Project Standard v11. Bellingham, WA: Non-GMO Project. May 2014.

http://www.nongmoproject.org/

http://www.nongmoproject.org/find-non-gmo/search-participating-products/search/?brandId=77




http://www.nongmoproject.org/wp-content/uploads/2014/06/Non-GMO-Project-Standard-v11.pdf

10

1.5. Organic Sourcing and Handling

“Traditional Medicinals has increased the organic percentage of its

botanical raw materials to 98.9 per cent.”

Trout Lake Farm (Trout Lake, WA), founded in 1973, has been one of Traditional Medicinals’

qualified suppliers of organically grown botanical raw materials since the mid-1970’s

Photo: © 2015 Trout Lake Farm


Sustainable Botanical Sourcing





organic or both) but also to sustainable harvesting and resource management of wild medicinal plants under

fair trade conditions.


Integrated Pest Management (IPM) at Traditional Medicinals’ Facility

It is the policy of Traditional Medicinals to use pest control operators that are qualified to manage certified

organic facilities, apply Integrated Pest Management (IPM) techniques (including non-chemical pest prevention

with no perimeter spraying), and are certified in IPM (e.g. EcoWise Certified or GreenPro Certified).

Source: Traditional Medicinals Policy CP00016.00: Pollution Prevention Policy for Integrated Pest Management at Facilities. 2013.

http://www.troutlakefarm.com/who-we-are/farming-communities

11

Practices

Traditional Medicinals is a long-standing member of the California Certified Organic Farmers (CCOF). CCOF's

mission is to certify, educate, advocate, and promote organic. Founded in 1973, CCOF was among the first

organic certification agencies, playing a part in the back-to-the-land, environmental, and organic farming

movements of the 1970’s, movements that also played a role in the founding of Traditional Medicinals in 1974

and of our first organic herb supplier, Trout Lake Farm, founded in 1973. In 1980, we launched our first range

of herbal teas made with domestically and organically grown herbs.

Our own practices and guidelines are closely aligned with CCOF’s Organic Principles:

“Organic standards promote and enhance biodiversity, biological cycles, and soil fertility, and restore,

maintain, and enhance ecological harmony. The legacy of organic will be the catalyzation of healthy,

sustainable, and humane production systems. CCOF believes that organic standards should continually

evolve to address a broadening range of issues, including Animal Welfare, Carbon Sequestration, Ecosystem

Protection, Genetically Modified Organisms, Processing Standards, and Social Justice.”

In FY2014, nearly 100% of Traditional Medicinals’ botanical raw materials were certified organic; produced in

compliance with the one or more of the following national organic regimes: the USDA National Organic

Program (NOP) regulations; the European Union organic regulations [(EC) No 834/2007, 889/2008 and

1235/2008)]; Canadian Food Inspection Agency (CFIA) Canada Organic Regime (COR) regulations and/or the

Japanese Agricultural Standard (JAS) organic regulations.

ORGANIC PRODUCTION AND PURCHASING

In FY2014, Traditional Medicinals purchased 1,594,926 pounds of botanical ingredients, of which 1,577,607

pounds (98.91%) were certified organic and just 17,319 pounds (1.09%) were non-certified ingredients.

Certified Organic Botanicals Purchased

(cultivated and wild harvested)

FY2012

Pounds

FY2012

(% of

Total)

FY2013

Pounds

FY2013

(% of

Total)

FY2014

Pounds

FY2014

(% of

Total)

%

Change

Pounds

Total Botanicals Purchased 1,047,332 100% 1,298,313 100% 1,594,926 100% 22.9%

Total Certified Organic Botanicals Purchased 1,020,888 97.5% 1,268,429 97.7% 1,577,607 98.9% 24.4%

FINISHED PRODUCT

Finished Products with Organic Labeling FY2013 FY2014 % of Total

Total Number of Herbal Products in U.S. Market (excluding sampler packs) 53 61 100%






Number of Products with <70% Organic Ingredients 1 23 3.3%

Organic Certifier CCOF CCOF

3 The company decided to launch one new product with <70% organic ingredients but with a plan for the Procurement Department to prioritize

transitioning that ingredient to organic production as quickly as possible.

http://ccof.org/ccof/mission

12

ORGANIC - OTHER AGRICULTURALLY DERIVED MATERIALS

Some components of our product packaging are agriculturally derived materials, in particular our unbleached

tea bag filter paper which is a product of abacá (Musa textilis), a plant native to the Philippines also known as

Manila hemp.

Another example is our food-grade tea bag string, a product of the cotton (Gossypium spp.) plant. The natural

cotton strings are attached with aluminum staple wire to the abacá filter tea bags. In FY2014, our cotton strings

were prioritized for transition to organic certification and we believe that this will be implemented during

FY2015.

Also in FY2014, our tea bag filter paper was prioritized for transition to dual certification of Forest Stewardship

Council (FSC) and Rainforest Alliance (RA). While FSC and RA certifications are not equivalent to NOP

organic certification we believe that this dual certification is appropriate and suitable in this case and satisfies

our policy to specify the use of non-GMO and sustainably produced packaging materials.

Goals

Previous Goals Current Status

By Q2 of FY2014 (Jan-Mar 2014) a Sustainable

Purchasing Tracker will be implemented to detail

availability of botanical ingredients with fair + organic

sustainability certifications.

Accomplished. Managed by the Supply Chain and

Sustainability Project Manager who prepares periodic

reports for the Purchasing Department.

By Q4 of FY2014 (Jul-Sept 2014), the Purchasing

Department will expand the Supplier Relationship

Tracker to include Supplier Codes of Conduct and

Sustainability Survey (fair + organic) elements.

Accomplished.

Starting in FY2013 we will require our suppliers to

prepare once annual Fair Trade Impact Reports for

each producer group supplying fair + organic botanical

ingredients. The purpose of this annual internal report

is for our herb supplier partners to provide us with key

information that outlines the impact of any social

premium fund monies and/or other support contributed

to certain producer groups.

Low compliance thus far after two years. Therefore we

plan to collaborate with our suppliers to restructure our

fairtrade impact information requests into our overall

supplier relationship tracker process. Furthermore

some of our significant suppliers have joined

voluntary schemes that require public reporting which

will enable us to access some of this information from

those sources.

Transition our last remaining 100% non-organic

product, Pau d’arco herbal tea, to organic certification

by qualifying a new producer group that is capable of

implementing the Organic Wild Crop Harvesting

Practice Standard.

This was not accomplished. A producer group in the

Peruvian Amazon is in process of qualification and we

still expect to accomplish this goal during FY2015.

The one remaining product (Smooth Move® Senna

capsules) without Non-GMO Project verification will

be verified during FY2014.

This was not accomplished.

Traditional Medicinals will work with its suppliers of

agriculturally-derived packaging components to

achieve Non-GMO Project verification.

Sources of non-GMO agriculturally-derived packaging

components were identified and plans were developed

for the transition to occur during FY2015.

Increase the percentage of geo-authentic ingredients

by transitioning, where possible, the sourcing of

presently non-geo-authentic ingredients to sources in

traditional growing regions within each species native

origin.

The percentage of geo-authentic components remained

roughly the same. No specific actions were taken to

increase the percentage.

13

New Goals for FY2015

Carried over from FY2013 goals: The one remaining product (Smooth Move® Senna capsules) without Non-

GMO Project verification will be verified during FY2014.

Procurement Department and Technical Services with assist of Supply Chain Group will develop written

implementable plans for the transition of remaining non-organic botanical ingredients.

Procurement Department and Technical Services with assist of Supply Chain Group will develop written

implementable plans for the transition of remaining non-certified agriculturally-derived packaging components

(e.g. cotton, hemp fiber, paper) to achieve verifiable sustainability, including non-GMO status.

Supply Chain and Sustainability Project Manager will begin to monitor % of species TM uses that are

sustainably wild collected (certified) from biodiverse areas and show year-over-year improvements.

Procurement and Sustainability departments will develop a new plan with TM suppliers and producers for

social impact reporting and work with them on how to measure the impacts and operationalize data collection.

The Supply Chain Group will add geo-authentic origin as a weighted factor in its risk assessment process for

long-term planning, whereas our geo-authentic purchasing policy was not previously represented in the risk

assessment model.

Long Term Goals

Achieve full ingredient sustainability by our 50th anniversary in 2024, if not sooner. That includes the goal of

100 percent fair + organic certified and Non-GMO Project verified ingredients, as well as biodegradable,

compostable, recyclable and non-GMO packaging.

Traditional Medicinals uses geo-authentic southern schisandra, a climber vine that naturally occurs in southwestern China. Mr. Gao

Ping You, of Daping Village, a member of the Pingwu Shuijing Traditional Chinese Medicinal Materials Cooperative, is shown

climbing a tree to collect clusters of ripe schisandra berries. Photo by Josef Brinckmann 2013.

14

2. DISTRIBUTION & SOURCING

“In FY2014, miles driven in company cars decreased by 24.4 per cent

compared to previous year.”

Image: One of Traditional Medicinals hybrid company cars


Company Vehicles:

It is the policy of Traditional Medicinals to only buy or lease the most environmentally friendly vehicles such as

battery electric vehicles, hybrid electric vehicles and/or alternative fuel vehicles such as those that run on

biofuels. If such vehicles are not commercially available in a model suitable to the intended use of the vehicle,

then at a minimum the vehicle must be a U.S. Environmental Protection Agency (EPA) SmartWay® Certified

Vehicle with a better than average rating, i.e. with a Fuel Economy and Greenhouse Gas Rating of 6 to 10 and a

Smog Rating of 6 to 10 (on a scale of 1 to 10).

Source: Traditional Medicinals Policy CP 00008.00: Environmentally Preferable Purchasing Policy for Company Vehicles. 2013.

Distribution:

It is the policy of Traditional Medicinals to minimize environmental footprint from our shipment of finished

products by implementing best practices for transportation efficiency for shipments that are under TM’s control.

Source: Traditional Medicinals Policy CP00024.00: Minimizing Environmental Footprint Policy for Distribution of Finished

Products. 2013.

Sourcing:

It is the policy of Traditional Medicinals to minimize environmental footprint from our purchasing of

ingredients and components by implementing best practices for transportation efficiency.

Source: Traditional Medicinals Policy CP00025.00: Minimizing Environmental Footprint Policy for Purchase of Ingredients and

Components. 2013.

15

Practices

COMPANY VEHICLES

Plate number/car

identification

Type of car [small

(s), medium (m),

truck (t)]**

Type of fuel

(e.g. diesel or

petrol)

Unit

(km or

miles)

Distance

travelled

FY2012

Distance

travelled

FY2013

Distance

travelled

FY2014

6BOZ651* S Petrol - Hybrid Miles 26,000 30,816 6,433

N188251 S Petrol - Hybrid Miles 20,000 17,400 16,675

6LPE112 S Petrol - Hybrid Miles 11,592 14,847 7,953

7J27462 M Diesel Miles 415 3,621 4,350

AJDR66* S Petrol - Hybrid Miles 14,868 15,495 14,729

6KYB647 M Diesel Miles 13,212 13,212 9,252

493ZAW* S Petrol - Hybrid Miles 30,888 25,302 6,731

7DZX452 S Petrol Miles - - 9,002

7ETK292 S Petrol Miles - - 5,350

C34885A S Diesel Miles - - 10,826

TOTAL MILES 116,975 120,693 91,301

Case Equivalents (CE)4 Sold 2,443,293 2,864,811 3,485,429

Miles driven per CE 0.048 mi/CE 0.042 mi/CE 0.026 mi/CE

Commentary on reason for decreased driving miles in FY2014: With the opening of the newly established

Sales and Marketing Services office in Petaluma during FY2014, some employees with company cars were able

to work at a location closer to their residence which explains, in part, the significantly decreased driving miles

by about 24.4% compared to previous year FY2013. Furthermore, some of the company cars listed in FY2012

and FY2013 were replaced during FY2014 which also explains, in part, some lower per car miles driven.

*Cars replaced during FY2014.

**Changed the classification of car types to match IIHS (Insurance Institute for Highway Safety) classification.

DISTRIBUTION AND SOURCING

Image: United Natural Foods Inc. (UNFI) picking up order at Traditional Medicinals Sebastopol facility

4 Case Equivalent (CE) based on 6 retail units per case.

16

Traditional Medicinals does not own its own trucks for distribution and does not operate its own distribution

system. There are two trucks (one biodiesel and the other diesel) used for hauling materials between storage

warehousing and production buildings. Customer orders are picked up by customer’s own trucks or by

designated common carriers. The company owns 7 medium sized hybrid cars which are used by regional sales

managers and executive management. In FY2014, 10 company vehicles were in use; 3 were replaced by new

vehicles as noted in the table below.

We carry out our policy for minimizing environmental footprint for sourcing by:

Allowing sufficient lead time for sea freight and to minimize or eliminate all air freight;

Avoiding less-than-container load shipments;

Receiving purchased materials by truck in full-container-load quantities whenever possible.

We carry out our policy for minimizing environment footprint for distribution by:

Combining purchase orders and ship dates in order to reduce multiple pick-ups from those customers who

provide their own freight carrier;

Combining the shipments that we schedule with same carriers and pick-up dates whenever possible;

Using a case-packer that produces a smaller shipper case, resulting in the use of less corrugated and the

ability to add more cases per pallet.

In FY2014, we increased our raw material safety stock allowances and reviewed our lead time requirements to

account for projected growth and to reduce risk of having to air freight orders. Procurement continued to

transition key suppliers to consignment delivery to Traditional Medicinals’ Santa Rosa warehouse, improving

the cube and container utilization of sourced materials. Additionally, we consolidated our outbound freight

distribution, reducing the number of carriers to facilitate bundling shipments.

We created and hired a new position, Director of Logistics and Warehousing, to improve our management of

sourcing and distribution. This Director began a third-party logistics project to be implemented in FY2015 that

should significantly increase the amount of full truckload outbound freight from TM’s facility.

MODES OF TRANSPORT

Distribution:

Finished Product Shipped FY2012 FY2013 FY2014

100% (3,002,448 lbs.) 100% (3,570,747 lbs.)

% of total product sold (by weight) shipped by truck 99% (2,387,435 lbs.) 99% (2,972,424 lbs.) 99% (3,535,040 lbs.)

% of total product sold (by weight) shipped by air 1% (18,005 lbs.) 1% (30,024 lbs.) 1% (35,707 lbs.)

% of total product sold (by weight) shipped by boat 0% 0% 0%

% of total product sold (by weight) shipped by rail 0% 0% 0%

Explanation: Total lbs. for FY2014 based on Sales report of total cases sold (3,400,711) at 1.05 lbs. (average) per case.

Sourcing:

Product Ingredients and Packaging Components FY2012 FY2013 FY2014

% of total purchases (by net weight) shipped by truck 100% 100% 100% (4,084,433 lbs.)

% of total purchases (by net weight) shipped by air 0.5% (then by truck) 0.5% (then by truck) 1.1% (44,815 lbs.)

% of total purchases (by net weight) shipped by boat 18% (then by truck) 20% (then by truck) 30.7% (1,252,953 lbs.)

% of total purchases (by net weight) shipped by rail 0% 0% 0%

Explanation: Percentage shipped by air increased in FY2014 due primarily to issues related to an unforeseen spike in demand for a

main ingredient and also due to quality control rejection of certain lots of material that necessitated alternative sourcing.

17

PRODUCT SOURCING: LOCALITIES

Localities of Product Ingredients and Packaging Components Purchased FY2012 FY2013 FY2014

% of total purchases (by net weight) that were produced regionally (within 500 miles) 65% 54.8% 53.1%

% of total purchases (by net weight) that were produced domestically (USA and Canada) 28% 9.3% 9.3%

% of total purchases (by net weight) that were produced internationally (outside USA & Canada) 7% 35.8% 37.8%

Explanation: For FY2013, the Purchasing Department resolved their reporting error for FY2012 which explains what appeared to be

a significant year-on-year change. The table shows no significant change from FY2013 to FY2014. Note: Within this data, about 85%

of our botanical ingredients (in terms of weight) are produced internationally and about 86.2% of our packaging materials (in terms of

weight) are produced regionally.

Goals


It is the goal of Traditional Medicinals to receive purchased

materials as 100% full container loads delivered to our facility

by truck and 0% air freight.

This was not achieved. 1.1% of our total

purchases were air freighted. See table and

explanation above.

By Q3 of FY2014 (Apr-Jun 2014), the Purchasing Department

will execute outbound freight RFP for cost savings and freight

optimization, including EPA SmartWay® ratings.

Accomplished in Q4.

New Goals

Procurement Department will track how many miles of air, land and/or sea freight transport are eliminated

through implementation of our “Minimizing Environmental Footprint Policy for Purchase of Ingredients and

Components”

Operations and Procurement Departments will create a plan for mapping inbound freight networks for high

priority components from Significant Suppliers to minimize unnecessary transport steps, measure and compare

year-on-year changes in miles and cube efficiency, and increase use of drop-shipping and consolidation

wherever feasible.

Operations Department will optimize our outbound freight network through the implementation of third party

logistics (3PL) services to consolidate our shipments in FY2015, and measure sustainability performance

impact of the program year-on-year, in the form of percentage of qualifying shipments shipping in full pallet

layer or full pallet stacks.

The Innovation Team will aim to prioritize the formulation of products with ingredients that can be produced

and sourced “closer to home”, i.e. the Americas, wherever feasible.

The Sales Department will incent our top customers to order in more efficient increments, e.g. in complete

layers and/or full pallet quantities, which will enable maximum loading efficiency for trucks.

18

3. ENERGY USE

“Traditional Medicinals reached 100% Renewable Energy in FY2014”

\

Image: Rooftop at Traditional Medicinals facility in Sebastopol showing some of the 1,450 solar panels


It is the policy of Traditional Medicinals to implement energy conservation and efficiency practices (e.g.

energy-efficient lighting fixtures, motion or occupancy sensors, task lighting, programmable thermostats,

Energy Star® A/C units), to generate the majority of the company’s energy requirement from own solar panels,

and to offset 100% of total energy use that is not generated from our own solar panels through an annual

purchase of Renewable Energy Certificates which support renewable energy from wind projects.

Source: Traditional Medicinals Policy CP 00006.00: Energy Policy. 2013.

It is the policy of Traditional Medicinals that new purchases of appliances and facility

equipment are Energy Star® qualified products as per the energy efficiency guidelines set by

the U.S. Environmental Protection Agency.

Source: Traditional Medicinals Policy CP 00007.00: Environmentally Preferable Purchasing Policy for Appliances, Lighting and

Facility Equipment. 2013.

19

Practices

In FY2014, Traditional Medicinals made several significant changes in the way it manages and monitors

electricity use.

1. We joined the new locally controlled renewable energy initiative ‘Sonoma Clean Power’ (SCP) CleanStart

program, which provided us with a much-improved renewable power mix for the electricity that we still

need to purchase (33% Renewable Power);

2. We purchased enough Green-e-Energy® certified Renewable Energy Certificates (RECs) from the

Bonneville Environmental Foundation (BEF) to offset 100% of electricity not produced by our own solar

panels;

3. We decided that in FY2015 we would transition from the SCP CleanStart program (33% Renewable Power)

to the new SCP EverGreen program (100% Local Renewable Power);

4. Traditional Medicinals qualified to become recognized by the U.S. Environmental Protection Agency (EPA)

in their Green Power Partnership (GPP) program.

About the EPA Green Power Partnership: The United States Environmental Protection Agency (EPA) Green

Power Partnership (GPP) is a voluntary program that encourages organizations to use green power as a way to

reduce the environmental impacts associated with conventional electricity use. The Partnership currently has

more than 1,300 Partner organizations voluntarily using billions of kilowatt-hours of green power annually.

Partners include a wide variety of leading organizations such as Fortune 500® companies, small and medium

sized businesses, local, state, and federal governments, and colleges and universities. For more information,

visit: http://www.epa.gov/greenpower/

We track and measure the energy consumption and use electricity generated by our solar panels, as well as

purchased electricity and natural gas.

http://www.epa.gov/greenpower/

20

SCP works with two energy suppliers for electrical energy generation, Constellation and

Calpine. Already, seventy percent of the electricity that SCP buys is carbon-free — from

sources not tied to fossil fuels.

Here’s a breakdown of SCP’s current mix:

Qualifying renewable sources (wind, solar, geothermal, biomass, etc.): 33%

Large hydropower (also carbon free): 37%

General systems power (primarily natural gas): 30%

Local renewable power (starting with geothermal + adding solar over time):100%

In 2008, we installed 1,450 solar panels at our manufacturing facility in Sebastopol. In the first six years since

going live, from October 2008 through September 2014, our solar panels have generated an average of 441,589

kWh of electricity annually.

In FY2014 solar panels at our Sebastopol facility provided about 46.8% of our total annual electricity use

(including all three locations). However we offset all of the additional electricity that we purchased.

Referring to the above listed point #1, during the previous FY2013 we purchased the additional electricity from

Pacific Gas & Electric (PG&E) whose power mix included only 19% eligible renewable resources such as

wind, geothermal, biomass, solar and small hydro. By joining the locally controlled renewable energy initiative

‘Sonoma Clean Power’ (SCP) midway through FY2014, we were initially able to improve the renewable energy

power mix (of purchased electricity) from 19% to 33%. By end of FY2014, Traditional Medicinals decided to

transition into the EverGreen program during FY2015, a 100% locally produced renewable energy option.

ENERGY USE

The table below reports Traditional Medicinals total energy use in British Thermal Units (BTUs). The kilowatt-

hours of electricity (renewable produced from our solar panels and partially non-renewable purchased from

PG&E (Oct-May) and Sonoma Clean Power (May-Sept.)) and therms of natural gas are also shown, the totals

of each used as the BTU conversion factors.

Energy Use (annual) FY2011 FY2012 FY2013 FY2014

Total annual energy use (BTUs);

renewable and non-renewable (all facilities) 4,240,608,607 3,702,512,720 4,530,054,512 4,386,315,733

kWh produced from own solar panels (Sebastopol) 474,696 420,225 483,936 460,883*

kWh of electricity purchased (Petaluma) - - 14,708 19,323

kWh of electricity purchased (Santa Rosa) - - 12,180 17,949

kWh of electricity purchased (Sebastopol) 251,660 344,800 422,594 486,717

Total kWh of electricity used (all facilities) 726,356 765,025 933,418 947,600

Therms of natural gas purchased (Petaluma) - - 236 188

Therms of natural gas purchased (Sebastopol) 17,626 10,924 13,206 11,343

Total therms of natural gas used (all facilities) - 10,924 13,442 11,531

21

The table below shows normalized annual facility energy per square foot and per metric ton of finished product

shipped annually, which amounted to 49,269 BTU’s per sq. ft. and 2,572,657 BTUs per MT (or 1,258 BTUs per

case equivalent). Our Sebastopol production facility in FY2014 was 56,649.5 sq. ft. and offices at same location

comprised 16,299.5 sq. ft. for a total of 72,949 sq. ft. Square footage at our Santa Rosa storage facility was

12,600 sq. ft. and at our Petaluma Marketing and Sales Services Offices was 3,479 sq. ft. The total for all three

sites was 89,028 aq. ft. We shipped approximately 1,705 metric tons of finished products in FY2014.

* For solar generation data in the above FY2014 column, May 2014 through and including July figures were

estimated (based on same months of previous year 2013) because during those months in 2014 our monitoring

system wasn’t storing solar generation data, but the solar array was producing kWh.

Normalized Energy (annual) FY2011 FY2012 FY2013 FY2014

Annual energy use (BTUs); renewable and non-renewable 4,240,608,607 3,702,512,720 4,530,054,512 4,386,315,733

Metric tons of product sold 1091 1,501 1705

Energy (BTUs) per ton of product sold 3,393,687 3,017,574 2,572,657

Facility square footage (Sebastopol) 72,949 72,949 72,949 72,949

Facility square footage (Santa Rosa) - - 12,600 12,600

Facility square footage (Petaluma) - - 3,479 3,479

Total square footage (all three sites) 72,949 72,949 89,028 89,028

Facility energy (BTUs) per sq. ft. 58,131 50,755 50,883 49,269

Commentary on decreased energy per metric ton (MT) of product sold and decreased facility energy per

sq. ft.: While the above table shows a 3.2% decrease in annual energy use, and therefore decreased facility

energy per sq. ft. and per ton of product sold, it also shows significant (25.5%) increase in the quantity of

finished product sold compared to previous year FY2013.

The table below summarizes annual electricity generated by our own solar panels and the amount of Renewable

Energy Certificates (RECs) purchased from Bonneville Environmental Foundation (BEF), both shown in kWh

and converted to BTUs. The table also shows that the quantity of RECs purchased provided a 100% offset for

all purchased electricity as well as the quantity of carbon offsets purchased provided a 100% offset for all

purchased therms of natural gas. Our annual electricity and natural gas use (converted to BTUs) decreased by

3.2% and our total renewable energy use increased by 210.8% in FY2014 compared to previous year.

Renewable Energy (annual) FY2011 FY2012 FY2013 FY2014

Annual energy use (BTUs); renewable and non-renewable 4,240,608,607 3,702,512,720 4,530,054,512 4,386,315,733

kWh produced from own solar panels 474,696 420,225 483,936 460,883

kWh purchased from local renewable sources5 0 0 0 0

kWh of renewable energy certificates purchased from BEF 144,000 144,000 144,000 525,000

Annual renewable energy, generated and purchased (kWh) 618,696 564,225 627,936 985,883

Total kWh of electricity used (all facilities) 726,356 765,025 933,418 947,600

Percentage of total electricity produced from own solar panels 65.35% 54.93% 51.85% 48.64%

Percentage of total electricity offset through purchase of RECs 19.82% 18.83% 15.43% 55.40%

Total therms of natural gas used (all facilities) - 10,924 13,442 11,531

Total therms of natural gas offset by purchase of 62 carbon offsets - - - 11,531

Total percentage of renewable energy 85.17% 73.76% 67.28% 102.97%6

Annual renewable energy, generated + purchased (BTUs) 2,111,078,285 1,925,215, 527 2,142,606,574 4,516,797,174

Explanation: Starting in FY2013 calculations began to include the energy used at the (then) newly leased Marketing and Sales

Services Offices in Petaluma, California and leased storage warehouse in Santa Rosa, California, thereby lowering the percentage of

annual energy generated from own solar panels. In FY2014, for the first time, we reached 100% renewable energy as shown in the

table with 48.64% of total electricity offset through purchase of RECs

5 Beginning in FY2015 purchases of locally-produced renewable geothermal will become part of the energy mix. 6 In FY2014 we purchased somewhat more RECs than needed which explains the greater than 100% total of renewable energy.

22

Using the EPA Green Power Equivalency Calculator, our FY2014 generation of 460,883 kWh from our own

solar panels combined with the purchase of RECs in the amount of 525,000 kWh for a total of 985,883 kWh

avoided an estimated 537 metric tons of carbon dioxide emissions which is the equivalent of any one of the

following:

- the CO2 emissions from the electricity use of 73.9 average U.S. homes for one year;

- the CO2 emissions from 576,843 pounds of coal burned;

- the CO2 emissions from 60,425 gallons of gasoline consumed;

- the greenhouse gas emissions from 113 passenger vehicles each year;

Goals


To track and measure energy consumption at all leased

office, production and storage locations and to

purchase enough Renewable Energy Certificates

(RECs) to offset 100% of total energy use that is not

generated from our solar panels.

Tracking and measuring at all leased sights began

during FY2013. Purchasing enough RECs to offset

100% occurred in FY2014.

To achieve LEED (Leadership in Energy and

Environmental Design) certifications for its building

projects at Sebastopol, California facility.

No LEED certifications for building projects were

issued during FY2014.

To achieve California Green Business Program

certification for its facility in Sebastopol, California.

Certification was issued during first quarter of

FY2014.

New Goals for FY 2015

The Supply Chain and Sustainability Project Manager will determine and track amount of energy produced by

Traditional Medicinals solar panels, not used by TM, but sent back into the grid.

The Supply Chain and Sustainability Project Manager will determine method for tracking and measuring energy

use at any contract manufacturing facilities proportionate to the total hours of production associated only with

Traditional Medicinals products.

It remains a goal for Traditional Medicinals to produce and/or source 100% of our electricity from renewable

energy sources (e.g. produced from own solar panels and purchased from locally produced renewable energy

provider).

Operations Department will perform a GAP analysis and evaluate current facilities for LEED certification.

Future building projects will be carried out in compliance with Traditional Medicinals Policy CP 00011.00:

Environmentally Preferable Purchasing Policy for LEED Green Building Materials.

http://www.epa.gov/greenpower/pubs/calculator.htm

23

4. CLIMATE CHANGE AND AIR EMISSIONS

“In FY2014 our purchase of Renewable Energy Certificates supported

the Noble Great Plains Windpark, Gruver, Texas”

Image: Noble Great Plains Windpark

A core principle embodied in TM’s mission statement is our commitment to promote environmental activism.

Implementing policies that minimize greenhouse gas (GHG) emissions by our support for renewable energy

projects that increase the quantity of clean energy being delivered into the power grid is an expression of our

activism.


Commuting:

It is the policy of Traditional Medicinals to encourage employees to reduce their carbon foot print and to

provide incentives for regular employees who carpool, ride their bicycle, walk or use public transportation to

come to work. To implement this policy Traditional Medicinals has developed a voluntary Transportation

(Commuting) Benefits Program.

Source: Traditional Medicinals Human Resources Department Policy: Transportation (Commuting) Benefits Program. 2013.

Offsetting:

It is the policy of Traditional Medicinals that all Scope 1 (fuels burned on site) and Scope 2 (purchased

electricity for all leased or owned facilities) emissions should be offset through the purchase of Green-e Energy

Certified Renewable Energy Certificates (RECs) and that the REC resource mix will be selected each year from

the available choices including biogas, geothermal, landfill gas, low impact hydro, solar, and/or wind.

Source: Traditional Medicinals Policy CP00026.00: Minimizing Greenhouse Gas (GHG) Emission Policy for Purchase of Renewable

Energy Certificates (RECs). 2013.

Spare the Air:

It is the policy of Traditional Medicinals to participate in the Spare the Air Employer Program, to notify

employees of Spare the Air days and to encourage employees to use alternatives to solo driving.

Source: Traditional Medicinals Policy CP 00017.00: Pollution Prevention Policy for Spare the Air Days. 2013.

http://www.noblepower.com/photos/great_plains-windpark.html

24

Practices

RENEWABLE ENERGY CERTIFICATE (REC) PROVIDER AND PROGRAM

Our REC provider is the Bonneville Environmental Foundation (BEF), a 501(c)(3) non-profit foundation.

Annually, we purchase Green-e® Energy Certified Renewable Energy Certificates (RECs) from BEF that

directly support the development of renewable energy projects. BEF’s RECs represent renewable energy

sources such as wind, solar or biogas projects where clean energy has been delivered to the North American

power grid to reduce carbon emissions from fossil fuel-based electricity. One REC represents the non-power

environmental attributes of 1,000 kilowatt-hours (1 megawatt hour) of renewable energy.

In FY2014, our REC resource mix was 100% wind, supporting, in particular, Noble Great Plains Windpark,

located in Hansford County, Texas, which consists of 76 1.5 MW turbines from General Electric, and has a total

capacity of 114 megawatts. The Noble Great Plains Windpark creates enough clean energy to provide the

annual electricity needs of approximately 38,000 homes.

http://www.b-e-f.org/

http://www.noblepower.com/our-windparks/texas/noble-great-plains-windpark/

25

Our FY2014 purchase of RECs in the amount of 525,000 kWh is the equivalent of the electricity used to

power 48.45 average U.S. homes for one year.

Using the EPA Green Power Equivalency Calculator, this green power purchase also avoided an estimated

342 metric tons of carbon dioxide emissions, which is the equivalent to one of the following:

the greenhouse gas emissions from 72 passenger vehicles each year;

38,487 the CO2 emissions from gallons of gasoline consumed.

CARBON OFFSET CERTIFICATE PROVIDERS AND PROGRAM

One of our carbon offset providers is the Bonneville Environmental Foundation (BEF), from whom we

purchased 62 carbon offsets corresponding to our purchase of 11,531 therms of natural gas used at our

Sebastopol and Petaluma locations in FY2014. These carbon offsets support the Big River Salmon Creek

Forest Project

http://www.epa.gov/greenpower/pubs/calculator.htm

http://www.b-e-f.org/

http://www.b-e-f.org/project-portfolio/big-river-salmon-creek-forest/

http://www.b-e-f.org/project-portfolio/big-river-salmon-creek-forest/

26

Our FY2014 purchase of 62 carbon offsets from BEF is equivalent to:

the reduction of 136,687 pounds of carbon dioxide equivalent (CO2e); or

the emissions associated with 164,346.52 vehicle miles travelled.

America’s favorite forests include the redwoods along California’s north coast. The redwood region is known

for its raw beauty and rich wildlife but decades of aggressive harvesting, changing timber owners and

encroaching development have left this fragile ecosystem diminished. And these towering stands of trees are not

just housing wildlife and ecosystems - they are also trapping carbon dioxide (CO2), a greenhouse gas linked to

climate change. In fact, redwood forests store more carbon per acre than any other forest type. To help protect

and restore these lands, The Conservation Fund acquired 16,000 acres of redwood and Douglas fir forest

surrounding Big River and Salmon Creek. The Fund implemented sustainable forestry practices across both

properties to restore water quality and protect habitat for Coho salmon, steelhead trout and spotted owl. They

also generated carbon offsets from the project that are verified to the Climate Action Reserve standard in

addition to being Forest Stewardship Council (FSC) and Sustainable Forestry Initiative (SFI) Certified.

Improved forest management carbon offset project, Big River Salmon Creek Forest, Mendocino County, California.

Photo: John Birchard

Additionally, we purchased 5 carbon offsets from Soil & More International (SMI), corresponding to the sales

of two new products launched near end of FY2014. The new products are offered in a single cup format. While

the outer carton is composed of 100% recycled cardboard, the individual single-serve cups are not

biodegradable, recyclable or compostable. Therefore, we calculated the weight of the single serve cups (along

with the production scrap rate) for an overall assumption of 100% landfill waste. Going forward we will

purchase carbon offsets at start of fiscal year based on estimated sales projections with a true up at end of fiscal

year for a 100% offset of landfill waste created by this new product.

SMI carbon credits are linked to compost and soil management and directly contribute to sustainable farming

practices through increased soil fertility, water holding capacity and microbial biodiversity. SMI uses locally

http://www.soilandmore.com/index.php/Buy-Carbon-Credits

27

available biomass for the production of high quality and cost effective compost, which is applied as an

alternative to synthetic fertilizers - another emission reduction potential.

GREENHOUSE GAS (GHG) EMISSIONS

A company’s Carbon Footprint is the amount of greenhouse gases (GHG) and specifically carbon dioxide

(CO2) that has been emitted through all activities of the company in the manufacture and transport of their

products. This even includes emissions at the farm level for the herbs as well as commuting and business travel

of employees. A Carbon Footprint enables companies to assess the impact that their activities have on climate

change.

By assessing our impact we can identify specific areas where improvements can be made through changing

practices. Starting in FY2013 and repeated in FY2014 we assessed “product carbon footprints” as well as an

overall “corporate carbon footprint”. At the herbal ingredient level, we have found that the company’s share of

total emissions (from the manufacture of herbal tea products in Sebastopol) varies, for example 10.96% for

licorice, 15.4% for chamomile, and 17.7% for senna. The reason for these variations is due to differences at

herb production sites (whether cultivated or wild), processing facilities and transport before reaching our dock.

The biggest part of our own emissions actually comes from commuting and business travel of our employees.

We work with Soil & More International (SMI) to help us calculate our corporate carbon footprint. Founded

in 2007, SMI developed a Carbon Footprint Calculation model that has been certified by TÜV NORD CERT

GmbH, an independent third party organization that is accredited for Carbon Footprint Verification according

to the ISO 14064 standard (an international environmental management standard against which greenhouse gas

(GHG) emissions reports are voluntarily verified).

SMI’s study concluded that due to our significant efforts in green energy and energy efficiency, the share of

energy-related emissions is still low by comparison to other comparable-sized companies in same industry. We

have taken measurable actions to reduce and green our energy related emissions through our installation of solar

panels and the purchase of green energy certificates that support wind power. Nonetheless, the second annual

corporate carbon footprint study carried out by SMI showed a result of 679,107.28 kg of carbon dioxide

equivalents (CO2e) emissions compared to 517,731.68 kg, an increase in 31% compared to previous year.

Being an internationally active company, SMI expected that our travel would likely contribute the most to our

carbon footprint. That proved to be true with about 60% of our CO2e coming from commuting and business

travel of employees. While an increase in CO2e emissions in FY2014 compared to previous year was not

unexpected due to significant growth of the company in that time frame, two years data is insufficient to clearly

identify drivers or trends that would inform a carbon footprint reduction plan. We believe that with 3 to 5 of

data it will be possible to more accurately identify categories of emissions within our control to better manage

and improve. The following Table shows comparison of corporate carbon footprint FY2013 vs. FY2014

http://www.soilandmore.com/

28

Traditional Medicinals Carbon Footprint Tables FY2013-2014 – from Soil & More International

1. Energy Emissions FY2013 FY2014 Annual Change Emissions Share

Emissions

Amount

% of

Category

Emissions

Amount

% of

Category

Emissions

Change

FY

Change

% Grand

Total

Scope 1 Gas (PG&E) 64,526 48% 92,731 49% 28,205 44% 13.65%

Scope 2 Electricity (PG&E) 40,210 30% 61,173 33% 20,963 52% 9.01%

Scope 2 Electricity (own solar panels) 29,599 22% 34,087 18% 4,488 15% 5.02%

Scope 2 Green-e Energy 0 0% 0 0% 0 N/A 0.00%

Total Energy Emissions 134,336 100% 187,991 100% 53,655 40% 27.68%

2. Travel Emissions FY2013 FY2014 Annual Change Emissions Share

Emissions

Amount

% of

Category

Emissions

Amount

% of

Category

Emissions

Change

FY

Change

% Grand

Total

Scope 3 Commuting - Cars 96,572 29% 207,496 46% 110,924 115% 30.55%

Scope 3 Business Flights 196,424 58% 199,265 44% 2,841 1% 29.34%

Scope 3 Business Taxi 198 0% 296 0% 98 49% 0.04%

Scope 3 Business Metro 53 0% 6 0% -48 -90% 0.00%

Scope 3 Business Shuttle Bus 9 0% 39 0% 31 360% 0.01%

Scope 3 Business Car Rental 1,452 0% 6,377 1% 4,925 339% 0.94%

Scope 1 Company Vehicle - Hybrid 40,994 12% 33,015 7% -7,980 -19% 4.86%

Scope 1 Company Vehicle - Diesel 126 0% 6,016 1% 5,890 4656% 0.89%

Scope 1 Company Vehicle - Biodiesel 2,631 1% 0 0% -2,631 -100% 0.00%

Total Travel Emissions 338,460 100% 452,509 100% 114,049 34% 66.63%

3. Waste and Materials FY2013 FY2014 Annual Change Emissions Share

Emissions

Amount

% of

Category

Emissions

Amount

% of

Category

Emissions

Change

FY

Change

% Grand

Total

Scope 3 Waste Transport 4,329 10% 4,212 11% -117 -3% 0.62%

Scope 3 Waste Treatment 36,861 82% 31,506 82% -5,355 -15% 4.64%

Scope 3 Paper 2,891 6% 2,889 7% -1.5 0% 0.43%

Scope 3 Water 855 2% 0 0% -855 -100% 0.00%

Total Waste & Materials Emissions 44,936 100% 38,608 100% -6,328 -14% 5.69%

4. Summary FY2013 FY2014 Annual Change Emissions Share

Category

Total

% Grand

Total

Category

Total

% Grand

Total

Emissions

Change

FY

Change

% Grand

Total

Total Energy Emissions 134,336 26% 187,991 28% 53,655 40% 27.68%

Total Travel Emissions 338,460 65% 452,509 67% 114,049 34% 66.63%

Total Waste & Materials Emissions 44,936 9% 38,608 6% -6,328 -14% 5.69%

Total Emissions 517,732 100% 679,107 100% 161,376 31% 100.00%

5. Emissions and Scope FY2013 FY2014 Annual Change Emissions Share

FY Scope

Total

% Grand

Total

FY Scope

Total

% Grand

Total

Emissions

Change

FY

Change

% of

Total

Total Emissions Scope 1 (TM Controlled) 108,278 21% 131,762 19% 23,484 22% 19.40%

Total Emissions Scope 2 (Emissions from Indirect

Generation) 69,809 13% 95,260 14% 25,450 36% 14.03%

Total Emissions Scope 3 (Activity Related to TM) 339,644 66% 452,086 67% 112,442 33% 66.57%

Total Emissions 517,732 679,107 161,376 31%

29

Normalization Data Normalization Factor Result Normalization Factor Result FY Change FY Change Pct.

Total Emissions per Sq. Ft 72,949 5.815 89,028 7.628 1.81 31%

Total Emissions per Pound Sold 3002448 0.172 3,758,821 0.181 0.01 5%

Total Emissions per Case Equivalent 2,864,811 0.181 3,485,429 0.195 0.01 8%

Total Emissions per Worker 144 3,595 153 4,439 843 23%

Note: Total amounts and change amounts are rounded to units.

SPARE THE AIR EMPLOYER PROGRAM

The Spare the Air Program was established by the Bay Area Air Quality Management District

in 1991 to reduce air pollution and provide advance notice when a "Spare the Air Alert" is in

effect. The Air District declares Spare the Air Alerts on days when air quality is forecast to be

unhealthy. The Spare the Air Employer Network consists of employer coordinators informing

their workforce of impending Spare the Air days, educating employees about the ways

individuals can improve air quality, and motivating them to take action.

TRANSPORTATION (COMMUTING) BENEFITS PROGRAM (TBP)

We keep track of employees who participate in the TBP and maintain quantitative data on employees who

carpool, bicycle or use public transportation. The TBP provides the following incentives for regular employees

who carpool, ride their bicycle, walk or use public transportation to come to work:

$ 5 per day for each employee that carpools (driver and passenger(s)); when an employee rides his/her

bicycle to work; when an employee walks to work; or when an employee uses public transportation.

OTHER EMISSION- AND POLLUTION- REDUCING PRACTICES

We also encourage employees to bike and/or use public transit by posting bicycle maps and transit info;

We set aside car/van pool/ride share parking spaces in our parking lot;

We have converted all company vehicles to low emission vehicles (hybrids and alternative fuel vehicles);

We provide secure bicycle storage for staff and visitors;

Bicycles and helmets are available for use by Traditional Medicinals regular employees during office hours.

There are 4 bicycles available; all are cruisers, 2 for women and 2 for men.

Goals


It is the goal of Traditional Medicinals that all Scope 1 (fuels burned on site) and

Scope 2 (purchased electricity for all facilities) emissions will be offset through

Bonneville Environmental Foundation (BEF) with Green-e Energy Certified RECs.

Accomplished.

Work with Soil & More International to assess the carbon footprint of our highest

volume botanical ingredient sourced from two locations, Tinnevelly senna leaf from

Republic of India and Alexandrian senna leaf from Republic of the Sudan.

Accomplished.


The Supply Chain and Sustainability Project Manager will identify the major drivers in our Scope 1, 2 & 3

emissions and the Executive Leadership Team will set new goals that can help to reduce GHG emissions.

The Supply Chain and Sustainability Project Manager will track GHG trend data and report on impact of the

company’s GHG reduction efforts year-to-year.

Traditional Medicinals will purchase carbon credits for 100% offset of production facility waste going to

landfill, new product packaging that is neither compostable nor recyclable, and therms of natural gas used.

Traditional Medicinals managers will prioritize use of video conferencing instead of travel for meetings outside

of necessary face-to-face meetings.

The Executive Leadership Team will develop justification criteria for necessity of travel that managers will

need to follow in the annual budget planning process.

http://www.sparetheair.org/Get-Involved/For-Employers.aspx

30

5. WATER USE AND QUALITY

“In FY2014 we decreased our well water usage by 13 per cent”

Image: Traditional Medicinals well pump house


Facilities:

It is the policy of Traditional Medicinals to conserve water in our facilities. We do this by:

Using low-flow aerators in lavatory sinks with a flow rate not exceeding 0.5 gpm (gallons per minute) and

in kitchen sinks not exceeding 1.5 gpm.

Using toilets with a flow rate not exceeding 1.4 gpf (gallon per flush).

Posting signs in restrooms and kitchen to encourage water conservation and to report leaks.

Using only dry methods to clean outdoor hard surfaces.

Using dry floor cleaning methods, followed by damp mopping, rather than spraying or hosing with water.

Using a water-efficient dishwasher rather than hand washing.

Source: Traditional Medicinals Policy CP 00003.00: Conserving Water Policy for Facilities. 2013.

Garden:

It is the policy of Traditional Medicinals to conserve water for our garden irrigation. We do this by:

Using drip irrigation under constant surveillance to ensure proper operation, coverage and repair.

Reporting leaks.

Watering our herb garden with drip irrigation starting early in the day and only during about ½ of the year

(May to October) and by adjusting the irrigation schedule monthly during irrigation season, or as needed.

Programming the irrigation system to use shorter, repeated cycles of watering.

31

Applying mulch or compost in non-turf areas to improve the water holding capacity of the soil.

Using a septic system and drip leach field in a portion of the herb garden.

Source: Traditional Medicinals Policy CP 00004.00: Conserving Water Policy for Garden Irrigation. 2013.

Toilets, Urinals, Faucets:

It is the policy of Traditional Medicinals to purchase and use only the most water-efficient toilets, urinals and

faucet aerators (e.g. EPA WaterSense® Certified), for example:

High efficiency toilets (HETs) performing at below the federal standard of maximum 1.6 gpf

(gallons per flush) (NOTE: Our internal standard is maximum 1.4 gpf);

Low-flow aerators in lavatory sinks with a flow rate not exceeding 0.5 gpm (gallons per

minute) and in kitchen sinks not exceeding 1.5 gpm;

Waterless urinals.

Source: Traditional Medicinals Policy CP 00014.00: Environmentally Preferable Purchasing Policy Toilets, Urinals, and Faucet

Aerators. 2013.

Practices

We use well water at our main location in Sebastopol but municipal water at our Marketing and Sales Services

Offices in Petaluma. Our main location is also a dry process facility in both production and cleaning procedures.

Motion sensor faucets and low flow toilets are in place. The water usage is tracked on a daily usage basis,

consistently below a target of 7 gallons per employee per work day.7 Our septic system is designed to keep

within the water usage goal.

WATER USAGE

The table below shows the total amount of well water used at our Sebastopol facility during FY2014. Also

shown are the amounts normalized per square foot (72,949 sq. ft.) per employee at the Sebastopol facility (134

employees) and employee per work day (Sebastopol only). In FY2014 there were a total of 153 employees,

some of whom have office spaces at both Sebastopol and Petaluma facilities and some who work primarily at

home offices.

We are only able to track well water usage at our primary Sebastopol facility. The municipal water used at our

Petaluma office is not presently measurable because the leased unit is part of a larger complex whereby the total

water bill is managed and paid for by the property owner. Similarly, use of water at Traditional Medicinals

leased storage warehouse in Santa Rosa is not measurable for same reason although a relatively low amount is

used, i.e. two persons wash hands each day in the handling of Traditional Medicinals’ raw materials as per

requirements of Good Manufacturing Practices for hygiene.

We think that the reason for significantly less well water used at our Sebastopol facility is the result of water

saving technologies installed during FY2013 but not fully utilized until FY2014. Company growth led to the

opening of a new office location during FY2014 yet the number of employees working at the Sebastopol facility

remained unchanged compared to previous year.

7 In the United States there are 251 work days per year allowing for 9 national holidays. Traditional Medicinals provides 11 paid

holidays making for 249 work days per year.

32

Well Water Consumption FY2012 FY2013 FY2014 %

Change

Total annual well water consumed at Traditional Medicinals (gallons) Sebastopol 215,120 255,216 221,420 -13.2%

-13.3% Normalized annual water usage per square foot (gallons) - Sebastopol 2.949 3.499 3.035

Normalized annual water usage per employee (gallons) – Sebastopol - FY2012

(120 employees); FY2013 (134 employees); FY 2014 (134 employees)

1,792.7 1,890.5 1,652.4 -12.6%

Normalized water usage per employee (gallons) per day (249 work days per year) 7.19 7.59 6.64 -14.3%

Goals


For our FY2013 water usage calculations we will begin to include

the municipal water used at our newly leased Marketing and Sales

Services Offices in Petaluma, California (began operation during

second quarter of FY2013).

Not accomplished. Municipal water bills

at leased facilities are managed by

building owners.


The Operations Department will evaluate whether Traditional Medicinals should install a rainwater collection

system that could be used for irrigation.

The Operations Department will begin to measure FTE well water use per person per day at Sebastopol facility.

The Operations Department will measure impact of black water purification system.

The Operations Department will track % of water used for irrigation vs. inside the facility and the Supply Chain

and Sustainability Project Manager will track changes in each over time.

The Supply Chain and Sustainability Project Manager will measure Traditional Medicinals water use compared

against an appropriate benchmark.

33

6. SOLID WASTE REDUCTION

“In FY2014 our landfill diversion rate was 76.8%, a 40% increase over

FY2013”

Image: Traditional Medicinals uses a baler to bundle cardboard and plastic destined for recycling

Policies and Guidelines

Audits:

It is the policy of Traditional Medicinals to reduce waste by implementing a Zero Waste Plan that is based on a

goal to eventually send nothing to landfill or incineration. Progress towards the goal is to be monitored and

measured through a comprehensive waste stream audit to be carried out at least once annually.

Source: Traditional Medicinals Policy CP00028.00: Waste Reduction Policy for Waste Audits. 2013.

Composting:

It is the policy of Traditional Medicinals to strive towards Zero Waste by composting all food and plant

discards. We do this by:

Placing food waste and kitchen scraps (e.g. fruits, vegetables, dairy products, grains, bread, unbleached

paper napkins, coffee grounds, coffee filters, eggshells, tea bags) into our compost system.

Placing past-expiry and/or production waste herbs, blends, and collected herb dust into our compost system.

Placing plant debris and waste from pruning into our compost system.

34

Covered compost pots are located in lunch rooms, other kitchen areas in conference rooms, and near sinks

situated in office areas.

Source: Traditional Medicinals Policy CP 00018.00: Waste Reduction Policy for Composting Food and Plant Discards. 2013.

Eliminating Disposable Products:

It is the policy of Traditional Medicinals to reduce waste by eliminating disposable products such as paper or

plastic dishes, utensils, and single serve water bottles, etc. We do this by:

Replacing disposables with permanent ware (dishes, cups, utensils, etc.).

Using refillable containers for sugar, salt & pepper.

Avoiding use of single-serve individual packets.

Source: Traditional Medicinals Policy CP 00019.00: Waste Reduction Policy for Eliminating use of Disposable Products. 2013.

Hazardous Waste:

It is the policy of Traditional Medicinals to dispose of hazardous materials such as CFL/fluorescent light bulbs,

batteries, paint, chemical waste, and electronic waste in a responsible manner. Traditional Medicinals also

submits its facilities information, site maps, and hazardous materials inventory to the California Environmental

Reporting System (CERS) through the Sonoma County Fire & Emergency Services Department.

Source: Traditional Medicinals Policy CP 00034.00: Pollution Prevention Policy for Responsible Disposal of Hazardous Materials.

2013.

Recycling:

It is the policy of Traditional Medicinals to reduce waste by recycling all resources such as paper, plastics,

cardboard, glass, and aluminum.

Source: Traditional Medicinals Policy CP 00020.00: Waste Reduction Policy for Recycling at Manufacturing Plant and Offices. 2013.

Reuse:

It is the policy of Traditional Medicinals to reduce waste by:

Reusing equipment such as desks, lamps, furniture; or

Donating usable items to charities; or

Giving usable items to employees.

Source: Traditional Medicinals Policy CP 00021.00: Waste Reduction Policy for Reuse or Donation of Desks, Lamps and Furniture.

2013.

Practices

Our sources of waste include dry herbal materials, damaged or defective packaged tea bags, folding cartons,

corrugated boxes and other packaging materials. Waste herbs, herb dust and blends are used in our compost

35

system. All recyclable materials, including ‘big bags’8 for herbal shipments, tea cartons, and corrugated boxes,

are recycled through a local company. Operation practices include tracking waste throughout the entire

production process, which includes blending and packaging.

The main drivers responsible for the significant year-on-year improvement shown in the below table include:

Operations Department continued implementation of the newly upgraded recycling program, wherein

recycling trainings were provided to employees, which, for example,

o introduced new containers and signage for separating different types of materials;

o helped our sanitation crew with a more efficient way to compact cardboard and plastic for credit back;

o kept only landfill items going into the trash compactor and reduced those loads to the landfill site;

o led to important diversions of unpainted wood, used wire and scrap metal by the Site Department.9

While these waste streams went to landfill in FY2013, they were not yet measured in FY2014 (new goal

for FY2015) but contributed to the significant reduction in landfill pounds in FY2014 as shown in the

below table.

The following table quantifies year-on-year changes in waste FY2012 through FY2014. Total waste diverted

from landfill increased by 40% compared to previous year for the following two main reasons:

Total landfill output decreased by 48.14%

Total annual recycling output increased by 60.77% compared to previous year. Reasons for this include an

increase in cardboard and plastic recycling materials from 58.8 tons in FY2013 to 72.7 tons in FY2014;

Waste & Byproducts

FY2012 FY2013 FY2014 %

Change

Total Annual Waste and Byproducts (Tons) 301.75 229.15 229.715 0.25%

Total Landfill Output (Tons) 120 102 52.9 -48.14%

Total Annual Hazardous Waste (Tons); laboratory and

production wastes10

0.75 1.15 0.415 -63.91%

Total Annual Recycling Output (Tons) 11

65 78 125.4 60.77%

Total Annual Composting Output (Tons); composted onsite 116 48 51 6.25%

Proportional breakdown of byproducts stream

(% landfill, compost, recycling, reuse etc.)

by weight in pounds

39.77% landfill

38.44% compost

21.54%

recycling

0.25% hazardous

44.51% landfill

20.94% compost

34.04%

recycling

0.50% hazardous

23.03% landfill

22.20% compost

54.59%

recycling

0.18% hazardous

-48.26%

6.02%

60.37%

-64.00%

Normalized Annual Waste per sq. ft. (Tons); 72,949 sq. ft. 0.0041 0.00314 0.00315 0.25%

Total waste diverted from landfill (Tons) 181 126 176.4 40%

Total waste diverted from landfill (Percentage) 59.98% 54.99% 76.79% 39.64%

8 Big bags, or flexible intermediate bulk containers (FIBCs), are composed of low-density polyethylene (LDPE) and polypropylene

(PP) and are both reusable and recyclable. 9 Starting in FY2014, used pallets, wire and scrap metal was picked up by Perez Pallet Inc., a service provider that recycles and/or

repurposes materials. 10

Hazardous wastes such as oil and old filters are picked up by Evergreen Environmental Services. The oil is remanufactured into

useable oil. 11

Recycling output includes cardboard, plastic and mixed recyclable materials from office and production. For FY2014 mixed (office

and production) recycling data, Operations Department used an estimated weight of 225 lbs. per cubic foot provided by our recycling

collection provider.

36

Goals


It is the goal of Traditional Medicinals to achieve

California Green Business Program certification for its

facility in Sebastopol, California.

Accomplished during the first quarter of FY2014.

Certification valid for three years. Reassessment

We plan to continuously reduce the percentage of landfill

waste.

This previous goal is now embodied in our ‘Waste

Reduction Policy for Waste Audits’

Track the landfill pickup invoices and recycling credits

from FY2014 and compare against previous years.

Accomplished.


Operations Department will identify drivers of increases or decreases in overall waste production and take

appropriate actions in support of Traditional Medicinals Policy CP00028.00: ‘Waste Reduction Policy for

Waste Audits’

Operations Department will measure the % of compostable materials found in dumpsters in annual waste audit

and take appropriate actions in support of Traditional Medicinals Policy CP 00018.00: ‘Waste Reduction Policy

for Composting Food and Plant Discards’

Operations Department and Sustainability Department will co-develop and deliver composting training for

employees.

Operations Department with Sustainability Department will analyze and determine whether significant changes

in composition of waste stream are result of policy implementation or learnings from minimum once-annual

waste audits.

Traditional Medicinals will become a member of a suitable zero waste organization (e.g. Zero Waste

International Alliance (ZWIA) or U.S. Zero Waste Business Council (USZWBC)). The Operations Department

with the Sustainability Department will study the various zero waste standards, attend events, and begin to take

the steps towards independent certification and/or recognition.

Operations Department (Janitorial) will work to make it easier for employees and guests to compost and recycle

by installing color differentiated containers with photographs.

37

7. PACKAGING, MARKETING AND OTHER MATERIALS

“While weight of product sold increased by 25% in FY2014, weight of

packaging materials purchased increased by only 10.7% compared to

previous year”

Image: New smaller and lighter case box

7.1. Packaging Materials


Sustainable and Responsible Packaging:

It is the policy of Traditional Medicinals to purchase and use sustainable and responsible packaging materials

when commercially available in the required specified qualities. Sustainable and responsible packaging:

Is manufactured using clean non-toxic production technologies;

Includes agriculturally derived materials that are sustainably produced, for example:

Certified organic and non-GMO cotton (Gossypium hirsutum) string;

Rainforest Alliance Certified™ and non-GMO abacá (Musa textilis) teabag filter paper;

Biodegradable vegetable-based printing inks made from non-GMO soybean (Glycine max) oil with

natural pigments and resins;

Optimizes use of renewable / recycled source materials like paperboard (for boxes, cartons):

with highest % recycled and post-consumer waste content without compromising required strength and

quality; and/or

with virgin wood fibers certified to Forest Stewardship Council (FSC) standards, which include strong

environmental, social and community protection elements; AND

Is biodegradable, compostable and/or recyclable at the end of the product’s life.

Source: Traditional Medicinals Policy CP 00023.00: Environmentally Preferable Purchasing Policy for Sustainable and Responsible

Packaging Materials. 2013.

38

Non-GMO Packaging:

It is the policy of Traditional Medicinals to purchase and use non-GMO botanical ingredients and packaging

components. Traditional Medicinals does not use ingredients or components that were produced using

biotechnology in products or at any stage of production, processing or handling.

Source: Traditional Medicinals Policy CP00022.00: Environmentally Preferable Purchasing Policy Non-GMO Botanicals and

Packaging Components. 2013.

Practices

The following table shows that in FY2014 we purchased about 2.71 million pounds of packaging, shipping and

marketing materials, up 10.7% over previous year’s 2.45 million pounds. We use a variety of different

packaging materials for our herbal tea products, including filter paper, paper tags, cotton string, aluminum wire,

sealable envelopes, folding cartons, corrugated boxes, and paper case labels.

Our folding cartons are produced from 100% recycled paperboard, of which at least 55% is from post-consumer

waste. The cardboard case packing boxes are composed of 52.5% recycled fiber on average.* For our herbal tea

products, the herbal mixtures are filled into abacá (Manila hemp) filter paper tea bags which are packed into

heat-sealed envelopes that have a non-recyclable inner lining.

Material FY2012

Pounds

FY2013

Pounds

FY2014

Pounds % change

Recycled

Content

(%)

Post-

Consumer

(%)

Pre-

Consumer

(%)

Recyclability

(%)

MARKETING MATERIALS

Marketing materials: paper 4,300 6,940 4,678 -32.6% 100 8012 20 100

Marketing materials: board 1,050 1,910 1,109 -41.9% 100 35 65 100

Marketing materials: plastic 675 125 0 -100.0% 0 0 0 0

PRODUCT PACKAGING MATERIALS

Filter tea bag paper 111,003 152,286 162,320 6.6% N/A N/A N/A 100

Aluminum staple wire 7,824 6,785 11,643 71.6% N/A N/A N/A 100

Cotton string 23,285 29,145 24,300 7.0% N/A N/A N/A 100

Paper tags 58,590 77,842 89,969 15.6% 0 0 0 100

Lined paper envelopes 476,068 537,544 651,724 21.2% 0 0 0 0

Folding cartons 618,880 729,207 853,849 17.1% 100 55 45 100

Corrugated case boxes 589,848 678,807 637,179 -6.1% 9213 Not known Not known 100

Display board 66,279 42,211 49,424 17.1% 70 0 0 100

Case labels 144,539 166,119 202,404 21.8% 0 0 0 100

Glass bottles (syrups) 2,004 3,107 2,007 -35.4% 0 0 0 100

Plastic bottles (capsules) Not known 2,217 2,183 -1.5% 0 0 0 100

Bottle labels 73 156 112 -28.2% 0 0 0 0

Bottle caps Not known 43 28 -35.4% 0 0 0 0

Bottle neck bands/seals Not known Not known - 0 0 0 0

SHIPPING MATERIALS14

Corrugated shipping boxes Not known 1,010 1,231 21.8% >30 Not known Not known 100

Shrink wrap Not known 5,631 6,861 21.8% 0 0 0 0

Pallet corners Not known 11,262 13,722 21.8% 100% 80% 20% 100

Total Marketing Materials 6,025 8,975 5,787 -35.52%

Total Packaging Materials 2,098,393 2,425,469 2,687,142 10.79%

Total Shipping Materials Not known 17,903 21,814 21.85%

TOTAL 2,104,418 2,452,347 2,714,743 10.7%

12

This is an average value based on some materials being 100% and others being 60%. 13

92% is an average based on purchase of different box materials with different composition specifications, one is 100% recycled

content and the other is FSC Mix, for a total of 8% weighted average 3rd

party certified virgin material in this item. 14

While most data in this table was obtained from purchase records the shipping materials weights was made available based on sales

records. In FY2015 we will revise data collection method to extract weights of all line items from purchase records.

39

Packaging and Marketing Materials Metrics FY2012 FY2013 FY2014

Year-

to-Year

Change

Total Annual Packaging and Marketing Materials (pounds) 2,104,418 2,452,347 2,714,743 10.7%

Pounds of Product Sold 2,405,440 3,002,448 3,758,821 25.19%

Total Case Equivalent of Product Sold 2,443,293 2,864,811 3,485,429 21.66%

Pounds of Packaging & Marketing Materials Purchased Per Pound of Product Sold 0.875 0.817 0.722 -11.58%

Pounds of Packaging & Marketing Materials Per Case Equivalent Sold 0.861 0.856 0.779 -9.01

Explanatory notes about significant changes in FY2014 data compared to previous year:

In FY2013, Traditional Medicinals began buying an unfolded cardboard case box in addition to its previous

pre-folded case box. The unfolded box, which is machine-folded in the case packing process, uses less

cardboard than the previous box. In FY2014, TM transitioned primarily to the unfolded box, which yielded

the 6.1% decrease in case box pounds year to year.

FY2014 saw a significant increase in pounds of aluminum staple wire usage purchased. The reason for this

is explained by shipments received at the very start and also at the very end of the fiscal year.

For FY2014, we updated our cotton string unit pounds definition to a slightly reduced number, which

explains the relatively low pounds purchase increase compared to the overall case sales growth.

Decreases in Marketing Materials (paper and board) came primarily from the choice to end a coupon

insertion program that accounted for approximately one third of their material purchase weight in FY2013.

TM’s marketing strategy reflects an increased focus on social media for marketing and sustainability

communication.

Decreases for certain Packaging Materials corresponding to products discontinued during FY2014.

Other increases are consistent with growth rate plus a reasonable allowance for purchase schedule variance.

7.2. Marketing Materials

Corporate Gifts and Professional Products

It is the policy of Traditional Medicinals® to prefer to purchase and gift environmentally friendly and socially

responsible corporate gifts and promotional products.

We do this by preferring to purchase:

Gifts and products that are made by our own herb producers;

Organic and/or fairtrade clothing and apparel products;

Organic and/or fairtrade food and beverages products;

Items made by fair trade artisans; or

Items that are otherwise considered environmentally and/or socially responsible.

Source: Traditional Medicinals Policy CP00033.00 Environmentally Socially Preferable Purchasing Policy- Corporate Gifts and

Promotional Products. 2014.

7.3. Other Materials

Policies

Computing and Office Equipment

It is the policy of Traditional Medicinals® that new purchases of computing and office equipment are EPEAT®

registered, ENERGY STAR certified products, or carry an equivalent certification. Purchase and use of EPEAT

and/or ENERGY STAR certified products are preferred for:

40

audio/visual equipment;

battery chargers;

computing equipment (computers, laptops, monitors);

office equipment; and

telecom equipment.

Alternatively, equivalent certifications may be appropriate for the above equipment, provided equivalence is

verified by the Sustainability department.

Source: Traditional Medicinals Policy CP00009.00 Environmentally Preferable Purchasing Policy for Computing and Office

Equipment. 2013.

Kitchen and Break Room Supplies

It is the policy of Traditional Medicinals® to purchase only the most eco-friendly and sustainably produced

kitchen and break room supplies including paper-based kitchen and break room supplies for use by employees

and guests such as coffee and tea, honey and sugar, coffee filters, napkins and paper towels.

We do this by providing:

Bulk (not single-serve) coffee, honey and sugar that are certified organic and certified fair trade.

Coffee filters composed of Forest Stewardship Council (FSC) certified, unbleached, totally chlorine-free

(TCF) paper or made from alternative materials like sustainably grown hemp.

Napkins and paper towels composed of 100% recycled content with the highest % of PCW but not-less-than

35% PCW.

Permanent dishware (e.g. cups, dishes, mugs, utensils, etc..) as opposed to disposables with the exception of

Non-GMO plant-based biodegradable and compostable materials;

Refillable containers for sugar, salt & pepper, etc. as opposed to individual disposable condiment packets.

Teas that are packaged in our own facility.

Source: Traditional Medicinals Policy CP00010.00 Environmentally Preferable Purchasing Policy for Kitchen and Break Room

Supplies. 2013.

LEED Green Building Materials

It is the policy of Traditional Medicinals® to purchase only green building and construction materials that will

contribute towards LEED certification of our buildings.

Source: Traditional Medicinals Policy CP00011.00 Environmentally Preferable Purchasing Policy for LEED Green Building

Materials. 2013.

Low-toxicity Janitorial Cleaning Products

It is the policy of Traditional Medicinals® to only purchase janitorial cleaning products accepted on the SF

approved List, are Green Seal Certified and/or have an 8.1 rating or above on Good Guide, and are suitable for

use in a certified organic facility.

Source: Traditional Medicinals Policy CP00012.00 Environmentally Preferable Purchasing Policy for Low Toxicity Janitorial

Cleaning Products. 2013.

Paper-based Products

It is the policy of Traditional Medicinals® to only purchase the most environmentally friendly paper-based

materials including paper-based supplies such as office paper, copy/printer paper, business cards, business

forms, envelopes, file folders, notebooks and writing pads, coffee filters, napkins, paper towels and toilet paper.

We purchase and use:

41

Office paper (copy/printer/letterhead) composed of 100% recycled content of which 100% is post-consumer

waste (PCW).

Business forms, business cards, envelopes, notebooks and writing pads composed of 100% recycled content

and with the highest % PCW available.

Facial tissues, napkins, paper towels and toilet paper composed of 100% recycled content with the highest

% of PCW but not-less-than 35% PCW.

File folders with the highest % recycled content and PCW available.

If not commercially feasible for a particular project, exceptions to the above may be granted allowing use of

virgin fiber provided such fiber is certified by the Forest Stewardship Council (FSC).

Source: Traditional Medicinals Policy CP00013.00 Environmentally Preferable Purchasing Policy for Paper-based Products. 2013.

Goals

Long Term Goal Current Status

To collaborate within a consortium of like-minded companies to cause

sufficient demand and scale-up for the production of recyclable and/or

compostable sealable-lined paper envelope materials with effective moisture,

oxygen and vapor barrier properties for shelf-life stability.

No active collaboration with

other companies took place

during FY2014.


By Q2 of FY2014 (Jan-Mar 2014) a Sustainable Purchasing Tracker will be

implemented to detail availability of agriculturally-derived packaging

components with fair + organic sustainability certifications.

Accomplished.

By Q4 of FY2014 (Jul-Sept 2014), the Purchasing Department will expand

the Supplier Relationship Tracker to include Supplier Codes of Conduct and

Sustainability Survey elements.

Accomplished.


The Procurement Department will make use of third party environmentally-friendly purchasing resources to

create ‘green lists’ of all non-botanical and non-packaging items that can be purchased by authorized persons in

other departments in compliance with the rules for certified organic facilities and certified California green

businesses, and also in compliance with various Traditional Medicinals policies, e.g. Policy Number

CP00012.00: Environmentally Preferable Policy for Low-Toxicity Janitorial Cleaning Products.

The ‘Supply Chain and Sustainability Project Manager’ will track correlation between % change in packaging

materials purchased (by weight) and % change in sales (by weight) and normalize % change in packaging

materials purchased (weight) per case equivalent unit sold.

New teabag packaging machines purchased by Traditional Medicinals will enable gradual elimination of 2

aluminum staples per teabag. Furthermore, the Operation Department will research technical feasibility of

eventual transition to teabags that do not use cotton string and/or paper tags. The elimination of staple wire,

string and tags would reduce packaging materials use per year significantly and these materials are not

necessary for preparation of a medicinal herbal tea infusion.

42

8. LABOR

“In FY2014 25% of employees participated in the Transportation

Benefit Program up from 15% in FY2013”

Car pool parking sign at Traditional Medicinals


Traditional Medicinals is an Equal Opportunity Employer. The Traditional Medicinals, Inc. Employee

Handbook, which contains the policies and practices that are in place to ensure fair working conditions in the

workplace, is given to each employee. Employees are required to sign and return the signature page of the

Handbook to the Human Resources Department attesting that they have fully read and understood the contents.

Our Employee Handbook includes policies on: accommodating disabilities, employee benefits (paid time off

and paid holidays), lactation accommodation, leaves of absence (family leave, medical leave and non-medical

leaves), insurance benefits, non-harassment policy, problem solving process, religious accommodation, and

workplace violence prevention.

Equal Opportunity Employer

It is the policy of the Company to provide equal employment opportunity for all applicants and employees. The

Company does not unlawfully discriminate on the basis of race, color, religion, sex, national origin, ancestry,

age, medical condition, disability, genetic characteristics or information, marital status, sexual orientation,

gender identity or expression or any other legally protected criteria. This policy applies to all areas of

employment including hiring, training, compensation, promotion, and discipline.

No retaliation of any kind will occur because an employee has in good faith reported an incident. The Company

will take effective remedial action commensurate with the circumstances.

Source: Traditional Medicinals, Inc. Employee Handbook. Effective Date: June 2012.

Foods served to Employees at Traditional Medicinals Facilities

43

It is the policy of Traditional Medicinals® that foods delivered to and offered at the company for employees

and guests should ideally be non-GMO, organic and/or made with natural ingredients whenever reasonably

possible. We pursue this ideal by:

Preferring and recommending caterers, restaurants, and retailers listed as participating in the Non-GMO

Project or in other comparable Non-GMO initiatives;

Requesting that food vendors provide us with information on the organic and non-GMO components of

meal and snack choices;

Selecting a Vending Service Provider that can stock some certified organic and/or natural healthy snack and

beverage options in our vending machines; and

Creating tools and offering training to employees pursuant of this policy.

Source: Traditional Medicinals, Inc. Environmentally Preferable Purchasing Policy- organic, non-GMO foods delivered and offered at

company. 2014.

Core benefits package

Traditional Medicinals provides a group medical benefit plan, dental, vision, life insurance, short and long term

disability plan, 401(k) retirement plan, profit-sharing program, employee assistance program (EAP), flexible

spending account (Section 125 Cafeteria Plan and Dependent Care Plan), transportation (commuting) benefits

program, 12 paid holidays per year, and paid time off (PTO) days for full time (FT) employees.

How the benefits programs work:

The Company pays for the cost of employee coverage. Medical coverage includes $20 co-pay for Preferred

Provider Physician and Chiropractic care. Outpatient prescriptions are covered through the US Script Pharmacy

Program with $10 co-pay for generic drugs, $15 co-pay for Formulary Brand-Name Drugs, and $25 co-pay for

Non-Formulary Brand Name Drugs. Non-panel provider services, x-rays, surgery, and lab work are paid at 80%

of covered charges after a calendar year deductible of $200.00. Emergency room visits are covered with $75 co-

pay.

Dental coverage currently extends to any licensed dentist. The maximum benefit for the first 12 months of

coverage per individual is $750, thereafter is $1,200 per calendar year, per individual.

Vision benefits are covered in a similar manner as the dental benefits. Each insured has a maximum of $300 per

year.

In addition the Company offers 401k, FSA and 12 paid holidays per year.

The Company provides paid time off (PTO) to eligible employees. Upon completion of the introductory period,

FT employees accrue PTO as follows:

1st yr. of employment =80 hrs. /yr.

2nd

- 5th yr. = 120 hrs. /yr.

6th

- 15th yr. = 160 hrs. /yr.

16th

- 20th yr. = 200 hrs. /yr.

21st yr. and beyond = 240 hrs./yr.

Practices & Metrics Labor Metrics FY2012 FY2013 FY2014

Workforce

Composition &

Diversity

Total employees 120 = 118 FT / 2 PT /

Approx. 20 Temporary

144 (+20%) = 140 FT / 4

PT / Approx. 24 Temp.

153 (+6.25%) = 150 FT /

3 PT / Approx. 16 Temp.

Gender 65 Female (54.2%) /

55 Male (45.8%)

69 Female (48%) /

75 Male (52%)

67 Female (44%) /

86 Male (56%)

44

Labor Metrics FY2012 FY2013 FY2014

Number of women in

management

10 out of 24 managers

(41.7%)


(36.0%)


(42%)

Age

21-30 yrs. old =11 (9.2%)

31-40 = 31 (25.8%)

41-50 =35 (29.2%)

51-60 =30 (25.0%)

61-70 =13 (10.8%)

21-30 yrs. old = 30

(20.8%)

31-40 = 36 (25%)

41-50 = 29 (20.1%)

51-60 = 34 (23.6%)

61-70 = 15 (10.4%)

16-20 yrs. old = 6 (3.9%)

21-30 = 24 (15.7%)

31-40 = 41 (26.8%)

41-50 = 28 (18.3%)

51-60 = 37 (24.2%)

61-70 = 17 (11.1%)

Ethnic/Racial

70 Caucasian (58.3%)

44 Hispanic (36.7%)

5 Asian American (4.2%)

1 African American

(0.8%)


55 Hispanic (38.2%)


2 African American

(1.4%)


55 Hispanic (35.9%)


2 African American

(1.3%)

Number of ethnic

minorities 50 (41.7%) 64 (44.4%) 64 (42.8%)

Employees with

disabilities 1 (0.8%) 1 (0.7%) 1 (0.7%)

Employee

Engagement &

Retention

Annual total and rate of

employee turnover 12 (10%) 15 (10.4%) 14 (9.2%)

Employee satisfaction No survey taken in

FY2012

A “Culture Scan” was

administered. Employees

were asked to grade

culture elements (e.g.

understanding, living and

support for our vision and

values, clarity of roles and

decision making,

responsiveness to

opportunity, innovation

and creativity, learning

and listening, teamwork

and collaboration,

recognition and

motivation, personal

accountability, talent

development, etc.) with a

score card of 1-6, with 6

being the highest possible

score. The average score

was 3.5.

HR with an independent

consultancy engaged the

7-member Executive

Leadership Team (ELT)

and an interdepartmental

group of 20 employees for

the formation of an

Operational Values Team

(OVT) to collaborate on

the establishment of a set

of agreed-upon

operational values.

Number of promotions

from within – positions

above entry level filled

with internal candidates

13 out of 26 job openings

(50.0%)


(40.0%)


(38.2%)

Compensation

Employee health care

benefits: % of health

care costs (health,

vision, and dental)

covered for employees

100% of premium for FT employees

% of total, FT and PT

employees eligible for

employer health care

benefits

100% of FT / 0% for PT

Employee 401(k) or

other retirement plan

contribution: % of total,

FT and PT employees

eligible for employer

98% 97.22% (all FT

employees)

98.04% (all FT

employees)

45

Labor Metrics FY2012 FY2013 FY2014

401k plans

Ratio between lowest

and highest paid

employee

10.25 times 10.25 times 15 times15

% of employees

receiving living wage for

local economy

100% 100% 98%

Health and

Safety

Number of recordable

injuries and illnesses

under OSHA

20 recordable claims;

Accidents, lost days &

restriction days are

recorded and a total posted

in lunchroom from Feb 1 -

April 30.




recorded and a total

posted in lunchroom from

Feb 1 - April 30.




recorded and a total

posted in lunchroom from

Feb 1 - April 30.

Accident frequency ratio

for company vehicles None in FY2012 None in FY2013 None in FY2014

Injury frequency ratio;

injuries per 100,000

hours worked

16.03 5.42 9.23

Office ergonomics Ergonomic training, equipment and/or assessment are offered when requested by

employees.

Wellness programs

In FY2012 we hosted a

health fair, offered skin

cancer screening, allergy

screening and healthy

lunches.

In FY2013 we hosted a

seminar: How to prevent

and deal with Diabetes.

In FY2014, offered a ten-

week wellness challenge;

included two BMI and

blood pressure screenings

and walk groups; skin

cancer screening; Zumba

and stretching exercises;

Lunch-n-learn “Reading

Food Labels” class.

Local

Sustainability

Transportation Benefit

Program (TBP): Subsidy

for employees who

carpooled to work or

used alternative

transportation (bus, bike,

walk)

The TBP started in June

2012. Total payout was

$8,133.00.

Total employees who

participated=26 (21.7% of

employees).

The TBP payout in 2013

was $12,540.50.

Total employees who

participated=22 (15% of

employees).

The TBP payout in 2014

was $16,836.

Total employees who

participated=39 (25% of

employees).

Goals


The Executive Leadership Team (ELT) will identify and track the drivers for any significant year-on-year

changes in employee labor metrics, e.g. whether or if a decrease or increase in recordable accidents were the

result of specific policies or practices that are being implemented.

The ELT will set goals for employee retention and employee engagement, e.g. administer a biennial employee

satisfaction survey.

The ELT will set quantified worker safety goals, e.g. reduce number of missed work days due to work-related

injuries or accidents.

The ELT will develop and implement a mentoring program for employees that supports hiring from within and

employee retention metrics.

Human Resources will encourage increased participation in the company’s ‘English as Second Language’

(ESL) and measure number of enrollee’s year on year.

Human Resources will explore the offering of a ‘Spanish as Second Language’ (SSL) program to interested

employees.

15

CEO was given a raise in FY2014.

46

9. ANIMAL CARE

Pandas on lunch break at Chengdu Research Base of Giant Panda Breeding, Chengdu, Sichuan

Photo by Josef Brinckmann 2009

Policies:

Traditional Medicinals does not use animal parts or animal products as ingredients. However, the company is an

organic and fair trade handler and processor with some producers having animals in their care and in some cases

playing a role in the production of the crop (e.g. in the case of producers following the rules of biodynamic

agriculture).

Practices:

The rules of animal care that are articulated in the respective standards that our herb producers implement in

order to become certified organic, certified biodynamic and/or certified Fair Trade or FairWild are relevant in

our value chain. Furthermore some of our producers are engaged in ‘people, plants and animals’ whole

ecosystem management initiatives, for example with the implementation of WWF’s Giant Panda Friendly

Products Standard in Sichuan Province for the company’s supply of schisandra berries. Producers operating

according to the FairWild Standard’s principles and criteria must also take a whole ecosystem approach in order

to sustainably manage the wild-collection area to maintain a balanced and healthy ecosystem including the wild

animals living in the herb collection area.

Here are some examples of how animal care is part of the Traditional Medicinals botanical ingredients value

chain, the first from the FairWild system and the second example from the Demeter Biodynamic system.

Animal care for FairWild certified producers:

47

In the FairWild Standard Resource Assessment Guidance,16

relevant for successful implementation of the

FairWild Standard, when assessing wild harvest impacts, the following observations, among others, should be

made during the first resource inventory process:

‘What protected plant or animal species occur in or around the sampling / observation point?

Any problems observed (e.g. erosion, habitat destruction by animals etc.)?’

Furthermore, when carrying out periodic monitoring of the wild collection areas in order to determine any

potential adjustments which should be made to the harvesting method, the following step, among others, is

suggested for implementation and documentation:

‘Are there any changes which seem to have negative impacts on the target plant or the collection area, or

any other plant or animal species within the collection area?’

It is recommended to write regular monitoring reports about the findings. If there are negative impacts on the

target plant, the collection area or any other plant or animal species within the area, adequate measures should

be identified and implemented to mitigate the effects. All necessary steps should be taken, such as for example:

Change collection instructions

Distribute the instructions to collectors

Train collectors about new instructions

Intensify monitoring of the identified factors (repeated observations when? By whom? How documented?)

Animal care for Biodynamic certified producers:

Some of Traditional Medicinals’ producers of farmed herbs are Demeter Biodynamic® operations. Sections of

the Demeter Biodynamic Farm Standard include necessary elements of the farm organism, soil fertility

management, crop protection, greenhouse management, animal welfare, and the use of the preparations (made

from herbs, mineral substances and animal manures). According to the Biodynamic Farm Standard:

“Animals are a crucial element of a Biodynamic farm, and in addition to their obvious contribution to a farm’s

fertility, their care and welfare are given extensive consideration. Housing must allow animals to move freely

and protect them from heat, dust, excess humidity, and harmful gasses such as ammonia. Poultry cages are

prohibited, every animal must be given a dry, soft and insulated spot where it can lie down and rest, and access

to free range forage and the outdoors is required. Dehorning, de‐beaking, and wing clipping of poultry are

prohibited, as is tail cutting of piglets and docking of lambs. Homeopathic remedies in place of vaccines are

strongly recommended, and the use of antibiotics is prohibited. If an animal is being raised for the sale of meat,

eggs or milk, a minimum of one‐ half of its feed must come from the farm, and the remainder must be Demeter

certified (minimum of 80% of the total ration) or NOP certified organic (no more than 20% of the ration).”

Goals


The Supply Chain Group with the Quality Control Unit will amend the producer site-visit audit criteria in order

to elicit additional information about animal use and care in the Traditional Medicinals sustainable botanical

value chain.

16 FairWild Foundation. 2014. FairWild Resource Assessment: FairWild Guidance Manual for Establishing Species and Area Management Plans for

Low Risk Plant Species. (Version 1.0 - December 2014). FairWild Foundation, Weinfelden, Switzerland. Available at:

http://www.fairwild.org/publication-downloads/other-documents/FairWild-Species-Area-Management-Plan-Low-Risk-Plants-Dec2014.pdf

http://www.fairwild.org/publication-downloads/other-documents/FairWild-Species-Area-Management-Plan-Low-Risk-Plants-Dec2014.pdf

48

10. SUSTAINABILITY EDUCATION (Internal and External)

“In FY2014 we increased the reach of Sustainability Education focused

Facebook post by 171%”

Image: Example of Traditional Medicinals Sustainability Focused Facebook Post

Policies and Practices

Internal communications and education

It is the policy of Traditional Medicinals to educate employees on resource conservation and pollution

prevention. We do this by providing employee education on our sustainability policies and practices including

the environmental, economic and social criteria and indicators that are applied for assessment of our overall

performance as an organization.

Source: Traditional Medicinals Policy CP 00005.00: Employee Education Policy on Resource Conservation and Pollution Prevention.

2013.

External communications and education

The main avenues for external communications and education regarding Traditional Medicinals’ efforts around

organic and sustainable supply chain and responsible business practices are mainly our labeling, website, social

media platforms, and some PR outreach and surveys.

49

Labeling:

Relevant sustainability certifications and verifications are displayed prominently on our product labeling, such

those shown here below on the information panel of our Organic Pregnancy® Tea:

United States Department of Agriculture (USDA) Organic

certification mark;

Fair Trade USA (FTUSA) Fair Trade certification mark;

FairWild Foundation (FWF) FairWild certification mark;

Non-GMO Project Verification seal; and

B Lab - Certified B Corporation logo.

Other relevant sustainability statements displayed prominently on our labels include:

Reduce, reuse, recycle statements, e.g. 100% recycled carton (at least 55% verified post-consumer waste);

Solar & wind power statements; and

Compostable tea bags statements, e.g. tea bags are made from compostable manila fiber paper.

Website:

Our website provides sustainability information including highlights of our annual sustainability reports at:

http://www.traditionalmedicinals.com/steep-sustainably/

http://www.traditionalmedicinals.com/steep-sustainably/

50

Social media:

In FY2014, we averaged about 1.5 posts a month on Facebook that primarily focused on a sustainability-related

issue compared with about 1 post per month in previous year. Additionally, a larger number of other posts make

secondary references to sustainability-related issues. Over the course of the year, we estimate that sustainability-

centric posts were viewed approximately 676,888 times compared to 250,000 times in previous year.

Examples of Sustainability Education Posts through Traditional Medicinals Facebook Platform

51

Goals


The Marketing Department will finalize and

implement phase 1 of our training program with

sustainability module targeting employee participation

of 100%.

The core curriculum, along with test questions, was

developed by the Sustainability Department during

FY2013 but the employee training program was not

prioritized or implemented during FY2013 or FY2014.

The Human Resources will track and report on annual

average workplace sustainability training hours per

employee.

This did not occur during FY2013 or FY2014. See

above.

The Marketing Department will implement the

sustainability training program for employees.

This did not occur during FY2013 or FY2014.


The Marketing Department with the Sustainability Department will perform before-and-after employee

knowledge assessment (based on comprehension test results) to determine areas of sustainability knowledge

that have improved as a result of the education program.

The Marketing Department will engage customers / stakeholders through website platform to determine level of

understanding about Traditional Medicinals’ sustainability initiatives.

The Marketing Department will develop a web page designed to educate customers on what to do with

packaging components when finished, with illustrations, narrative, animation and/or pictures.

The Sales Department with the Marketing Department will identify at least one suitable retailer to jointly

develop a sustainability consumer education project / program that may also involve certain products that can

help to illustrate a sustainable botanical supply chain and the sourcing and use of sustainable and responsible

packaging materials.

52

11. GOVERNANCE AND COMMUNITY ENGAGEMENT

“In FY2014 Traditional Medicinals elected to become a California

Benefit Corporation”

Girls from organic senna farming villages in Thar Desert, Rajasthan have increased access to education

through bicycle scholarships provided through Traditional Medicinals-funded Revive! Project

Photo: © 2014 by Nirav Solanki


Traditional Medicinals Vision, Mission, Beliefs, Commitments, and Attributes Statements:

Vision: Traditional Medicinals inspires people to embrace plant medicine and empowers them to care for

themselves and others. We aspire to transform the commerce of herbs by promoting wellbeing at every point

and striving to create value for all stakeholders, from collection and cultivation to consumption.

Mission: Traditional Medicinals makes affordable and effective herbal medicines for family healthcare. We

honor traditional herbal knowledge and modern phytotherapy. We balance our commitment to sustainability

with our commitment to the highest quality ingredients, and promote social justice and environmental activism.

Beliefs: We believe in the sacred healing power of plants. We believe in the wisdom contained within the

world’s systems of Traditional Herbal Medicine. We believe that in order for plant medicine to be truly healing,

it must be crafted with attention and care for all stakeholders, creating a harmonious system that promotes

wellbeing at every point.

Commitments: include, among others: - Protect the integrity of this harmonious system through devotion to

principles of traditional plant medicine, a commitment to quality, social and environmental stewardship,

responsible growth and business practice, and protection of biodiversity, ecosystems and traditional knowledge.

- Scale our business responsibly by holding ourselves accountable to all of our stakeholders—implementing a

system of growth that maintains balance and creates value for all stakeholders.

Attributes: Who we are is defined by the following attributes: Partnership, Wisdom, and Leadership.

Source: Traditional Medicinals Council. Vision, Mission, Beliefs, Commitments, Attributes. 2011.

53

Traditional Medicinals Statement of Ethical Practice:

All employees, directors, advisors and shareholders contribute to and have a stake in the success of Traditional

Medicinals. Additionally these stakeholders have a shared commitment to ethical practices that express the

company’s founding principles and standards which guide our conduct.

Principles: Traditional Medicinals’ ethical principles include: Honesty, Fairness, Objectivity, and

Responsibility. Stake holders are empowered to act in accordance with these principles and encourage others

within the organization to do the same.

Standards: Traditional Medicinals’ ethical standards include: Competence, Confidentiality, Integrity, and

Credibility.

Source: Traditional Medicinals Human Resources Department Policy: Traditional Medicinals Statement of Ethical Practice. 2006.

Community Engagement:

Traditional Medicinals, Inc. is committed to investing in the communities we operate in, from the villages

where our herbs are harvested to the cities where our employees live and work.

We commit to donate a certain percentage of operating income annually to approved non-profit registered

501(c)3 organizations or to equivalent registered organizations outside of the United States, as well as to some

non-registered organizations.

The percentage to be donated annually and the organizations selected to be recipients of Traditional Medicinals’

corporate investing will be determined transparently through the annual budgeting process with involvement of

all department heads who request such contributions to be made.

The criteria to be used for community investment are to be consistent with the principles embodied in our

mission and vision statements, respectively, and also consistent with the “Civic Engagement and Giving”

practices expected of Certified B Corporations.

Source: Traditional Medicinals Policy CP00031.00: Civic Engagement Policy for Global Community Investment. 2013.

Practices

11.1. Sustainability Governance

Traditional Medicinals is a C Corporation and also became a California Benefit Corporation in 2014. The

majority owner is the Sadler Trust (The Company’s co-founder). During FY2014, the Company had six board

members, one of whom was departing during FY2014 and another joining, thus closing FY2014 with five board

members. Drake Sadler (co-founder) and Blair Kellison (CEO) are board members along with three

independent board members. The board meets three times per year with formal board meetings and corporate

minutes and records. The Company undergoes an annual independent audit with an internationally recognized

accounting firm and the Company undergoes an annual independent valuation for determining the annual price

of shares.

54

Source: Blair Kellison, CEO. 2014.

11.2. Transparency & Stakeholder Engagement

Traditional Medicinals has always worked to promote transparency throughout its organization and network of

producers and suppliers. The Company is always focused on its stakeholders, which range from herb collectors

in far off lands, to processors that cut the herbs to Traditional Medicinals’ office and manufacturing personnel,

to its distributors and retailers to the shoppers who purchase its herbal tea in stores.

As a Certified B Corporation since 2010, Traditional Medicinals is audited biennially for compliance with

rigorous standards of social and environmental performance, accountability, and transparency. A publicly

posted impact report (scorecard) is accessible to all stakeholders (See page ix for our 2014 B Impact Report

summary).

As an SFTA member since 2012, Traditional Medicinals has pledged its commitment to continuous

improvement and transparency around practices in key areas, including governance & community engagement.

As such, each year, we strive for continuous progressive improvement and to practice transparency in annually

auditing our performance and selecting reporting metrics that are relevant to our business.

In FY2014, Traditional Medicinals became a California Benefit Corporation and, in doing so, has new

transparency obligations including the requirement to post all of its Benefit Reports on the public portion of its

website.

All employees receive on a quarterly basis a report containing all of the Company’s pertinent financial reporting

data, authored collectively by the Executive Leadership Team (ELT). This is the same data received by the

Company’s board of directors. Employees are asked for feedback and questions are welcomed concerning any

part of the ELT’s quarterly report. Furthermore all managers attend a quarterly half-day presentation made by

the ELT on the Company’s previous quarter performance.

Traditional Medicinals products contain ingredients carrying multiple independent third-party ecological and

social sustainability certifications which ensure traceability and transparency as well as stakeholder engagement

throughout the value chain, including, for example USDA Organic, Fair Trade, FairWild, and Non-GMO

Project.

Source: Blair Kellison, CEO. 2014.

55

11.3. Membership and Volunteerism in Associations and Advocacy Organizations

Traditional Medicinals provides both material and financial support to several non-profit organizations ranging

from biodiversity and nature conservation organizations to standards setting organizations for herbal quality,

safety and sustainability, tax exempt 501c3 herbal education organizations and herbal trade organizations. The

membership and sponsorship payments made to these non-profit organizations is calculated separately from the

donations that Traditional Medicinals makes to other types of non-profit organizations, for example those

included in a category that sustainability standards-setting organizations generally refer to as “Civic

Engagement and Giving” (a category that generally excludes membership and sponsorship payments but

includes charitable donations). See section 11.4 (Community Engagement) of this report for information on

financial contributions made to non-profit organizations. In addition to financial contributions, Traditional

Medicinals supports employee volunteerism as described in the following table.

Non-profit organizations supported by Traditional Medicinals in form of Annual Donations and/or Volunteer Labor Hours

Name of Organization Affiliation or Membership Level Roles served by TM employees

American Botanical Council (ABC) Emerald Sponsor Member

2 employees serve on the ABC Advisory

Board, 1 of whom also serves as a

Contributing Editor to HerbalGram, the

Journal of the ABC.

American Herbal Pharmacopoeia (AHP) Platinum Member

1 employee serves as a member of the

AHP Advisory Committee and as a

contributing writer for monographs of the

AHP.

American Herbal Products Association

(AHPA) Founding Member

1 employee serves as an elected member

of the AHPA Board of Trustees. Several

employees serve as members of the AHPA Analytical Laboratories, Botanical Raw

Materials, and Standards Committees.

American Herbalists Guild (AHG) Gold Leaf Sponsor None presently. 1 employee was a

founding Herbalist of the AHG.

California Certified Organic Farmers (CCOF) Member None.

56

Name of Organization Affiliation or Membership Level Roles served by TM employees

Canadian Health Food Association (CHFA) Member None.

Fair Wild Foundation (FWF) Friend (Corporate Sponsor)

1 employee serves on the FWF Board of

Trustees and as Chair of the Market Share

Task Team.

Green America® Green Business Network™ Member and Green Business Network

Leadership Forum Member None.

International Union for Conservation of

Nature (IUCN) Medicinal Plant Specialist

Group (MPSG), Species Survival Commission

(SSC)

1 employee serves as a member.

Organic Trade Association (OTA) Member None.

Santa Rosa Chamber of Commerce 1 employee is a Board Member and an

Executive Committee Member

Sonoma County Building Economic Success

Together (BEST)

1 employee serves as Board Chair as well

as Co-Chair of the BEST Sonoma County

Food Industry Group (FIG)

Sustainable Food Trade Association (SFTA) Full Member and Sponsor.

1 employee served on Manufacturing

Working Group and volunteers in the

Mentoring Group

United Plant Savers (UpS) Corporate Member 1 employee serves on the Advisory Board.

United States Pharmacopeia (USP)

1 employee serves as an elected member

of the USP Dietary Supplements & Herbal

Medicines Monographs Expert Committee

and as Vice Chair of the USP Dietary

Supplements & Herbal Medicines

Nomenclature Sub-Committee of the USP

Nomenclature, Safety and Labeling (NSL)

Expert Committee.

11.4. Community Engagement

The following table shows financial contributions made to qualifiable non-profit organizations based on

definitions used in assessment metrics. For example, B Lab defines ‘Charitable Giving’ as charitable donations

including financial contributions and in-kind goods and services to non-profits.

Type of contribution FY2013 FY2014

Contributions made to non-profit registered 501(c)3 charities or organizations (e.g.

American College of Traditional Chinese Medicine, Bastyr University) or to

equivalent registered charities outside of the United States (e.g. FairWild

Foundation, GRAVIS), and to a small number of non-registered organizations.

$284,077 $266,097

Contributions made to non-profit registered 501(c)3 organizations in the form of

membership or sponsorship fees (e.g. American Botanical Council, Sustainable

Food Trade Association).

$85,000 $79,537

$369,077.00 $345,634.00

The total FY2014 contribution amount of $345,634 represents 28.8% of the annual amount that the company

allocates in its internal social business investment budget, which amounted to $1,200,022 for FY2014. Outside

of contributions made to non-profit organizations, the remaining 71.2% includes the following expenses:

Traditional Medicinals Sustainability Department Budget (including salaries, benefits, travel and hotel);

Consulting and Professional Services (including agricultural study costs and carbon footprint analysis

costs);

57

Inspection, Certification and Licensing Fees of third-party organizations (including annual fees for audits as

well as license fees for use of certification marks on labels, such as B Corp, Fair Trade, FairWild, Kosher,

Organic);

Purchase of Renewable Energy Certificates and Carbon Offsets;

Estimated fairtrade price markups and fairtrade social premium fund amounts corresponding to FY2014

purchases of Fairtrade certified and FairWild certified ingredients. These are estimates because in most

cases the price mark ups and social premium fund amounts are not broken out of invoiced price.

Furthermore, many producers with multiple certifications (e.g. fair, kosher, quality system, organic) will

calculate a price mark-up that takes into consideration the costs of implementing all standards that have

annual inspection and certification fees.

As was the case in FY2013, the largest recipient of contributions in FY2014 was GRAVIS (Gramin Vikas

Vigyan Samiti; Centre of People's Science for Rural Development) - a voluntary organization that takes a

Gandhian approach to rural development by working with the poor of the Thar Desert and enabling them to help

themselves: http://www.gravis.org.in/

The funds contributed to GRAVIS are directed to support The Revive! Project™, a social business partnership

focused on reducing poverty and empowering women through organic agriculture.

The Revive! Project was started in 2009 in six villages in the Jodhpur District of Rajasthan, India. These

villages depend on the cultivation of Tinnevelly senna (Cassia angustifolia VAHL; Family: Fabaceae), used in

our Smooth Move® herbal tea, for their livelihood. To date, Traditional Medicinals has invested over

$1,000,000 into the Revive! Project. Yet, unlike charity, we view these investments in supplier communities as

part of our social business model.

To accomplish this goal, the Revive! Project partnered with a Rajasthan-based NGO, Gravis, and a Sonoma

County-based NGO, Womenserve, to implement many initiatives, including: community organization &

development, medical support, water & food security, education for children, economic development, and

women’s empowerment.

Starting in FY2013 and carrying on into FY2014, Traditional Medicinals launched a participatory evaluation of

the Revive! Project with GRAVIS, administered by HEDCON, an independent Indian development NGO. The

goal of the evaluation was to understand the implementation and outcomes of Revive! programs like self-help

groups, water infrastructure development, village health worker trainings, community self-reliance trainings,

and senna farming practice development, among others. Based on initial findings from the evaluation,

Traditional Medicinals Foundation is working with GRAVIS around capacity development and improved

monitoring & evaluation practices to define, plan and implement program activities towards increased resiliency

in Revive! communities. For more information on the Revive! Project, please visit:

http://traditionalmedicinals.com/revive-project/

Scholarships

For the past several years, Traditional Medicinals awarded annual scholarships to students who demonstrate

strong herbal knowledge at two different schools of medicine, American College of Traditional Chinese

Medicine (San Francisco, CA) and Bastyr University (Kenmore, WA):

(1) The annual “Traditional Medicinals Scholarship in Herbal Sciences” awarded to a Bastyr University

student. Bastyr University is an accredited, globally respected institution of natural health arts and sciences.

http://www.gravis.org.in/

http://traditionalmedicinals.com/revive-project/

http://www.bastyr.edu/

58

(2) The annual “Dr. Jason Su Scholarship for Chinese Medicine” for an American College of Traditional

Chinese Medicine (ACTCM) student. ACTCM has been at the forefront of Traditional Chinese Medicine

(TCM) education since its inception in 1980 with two degree programs—the Master of Science in

Traditional Chinese Medicine (MSTCM) and the Doctorate of Acupuncture and Oriental Medicine

(DAOM).

11.5. Third Party Certifications and Recognitions

Certifications

The sustainability and social responsibility performance of Traditional Medicinals is measured, reported and

evaluated through the following metrics:

California Green Business Program Environmental Metrics

Certified B Corporation Impact Assessment

Green America – Green Business Certification Assessment

Soil and More Carbon Footprinting Metrics

Sustainable Food Trade Association Metrics

Certified California Green Business

http://www.actcm.edu/tuition/typesofaid/

http://www.actcm.edu/tuition/typesofaid/

59

The California Green Business Program is a government program working with local agencies to recognize

and assist businesses that operate in an environmentally friendly manner.

Traditional Medicinals® became California Green Business Certified on 02 December 2013. To become

certified, a business must have written policies and implemented practices that focus on environmental efforts

such as waste reduction, water conservation, energy conservation, and pollution prevention. In 2013, we

showed that we had taken actions to conserve resources and prevent pollution in both our facility (green

building and renewable energy) and our operations (environmentally-preferable purchasing and other practices).

Credit worthy action items were verified through onsite assessments by an auditor from the local agency, the

Sonoma County Green Business Program. Audit and recertification is carried out every three years. Our initial

certification was limited in scope to our Sebastopol facility. Our 2016 inspection will include all sites

(Petaluma, Santa Rosa, and Sebastopol).

Certified B Corporation

In August 2014, Traditional Medicinals had its environmental and social sustainability

performance measured and independently verified by the third party, non-profit organization B

Lab. Traditional Medicinals first became a Certified B Corporation in 2010 and to maintain

our annual certification, assessments by B Lab must be carried out every two years. This was

our third biennial assessment and we achieved our highest score yet, 134 points. To view

Traditional Medicinals 2014 B Impact Report, click here.

A company can become a “B Corp” through implementation of rigorous standards of social and environmental

performance, accountability, and transparency. A minimum score of 80 out of 200 points must be earned.

Certification criteria focus on four key areas: governance (corporate accountability, transparency); workers

(benefits, compensation, and worker ownership); community business model (fair trade, civic engagement,

giving); and environmental business model (organic, non-GMO).

Although we have been a Certified B Corporation since 2010, in order to meet the legal standards for B Corp

certification and to maintain certification, a company must elect Benefit Corporation status within 4 years of the

effective date of B legislation in their state.

California Governor, Jerry Brown, signed the California Benefit Corporation legislation into law in October

2011, which meant that we had until 2015 to officially elect Benefit Corporation status necessary to maintain

our B Corp certification. In FY2014, Traditional Medicinals elected to become a California Benefit

Corporation.

Green America® Gold Tier Certified Business

In 1992, Traditional Medicinals joined Green America’s Green Business Network™ of socially and

environmentally responsible businesses.

http://www.greenbusinessca.org/

https://www.bcorporation.net/what-are-b-corps/the-non-profit-behind-b-corps

https://www.bcorporation.net/what-are-b-corps/the-non-profit-behind-b-corps

http://www.bcorporation.net/community/traditional-medicinals/impact-report/2014-08-28-000000

60

“Traditional Medicinals has been certified by the Green America’s Green Business

Network as an environmentally and socially responsible business. This business has

reached the Gold tier by adopting principles and practices that demonstrate a strong

commitment to conserving the environment and supporting social justice.

The Green America’s Green Business Network is proud to recognize their

contribution to creating and growing a green economy by supporting the needs of

their customers, workers, the environment, and the community. We appreciate your

continued support of Traditional Medicinals and thank you for your commitment to

sustainability.”

Green America®, a not-for-profit membership organization founded in 1982, is dedicated to harnessing the

economic power of consumers, investors and businesses to promote social justice and environmental

sustainability. Green America certifies businesses that are:

Actively using their business as a tool for positive social change;

Operating a “values-driven” enterprise according to principles of social justice AND environmental

sustainability;

Environmentally responsible in the way they source, manufacture, and market their products and run their

operations and facilities;

Socially equitable and committed to extraordinary practices that benefit workers, customers, communities,

and the environment; and

Accountable for their work by continually improving and tracking their progress, and operating with radical

transparency in every facet of their business.

Recognitions

2014 Bay Area Green Business Award

On 10 April 2014, Traditional Medicinals was honored to receive a “Green Business Award” from the Bay Area

Green Business Program.

Blair Kellison and Mary Goff receiving an award on behalf of Traditional Medicinals at the 2014 Green Business Awards Reception

held at the Laguna de Santa Rosa Foundation.

61

U.S. EPA Green Power Partner

In August 2014, Traditional Medicinals was recognized by the United States Environmental Protection

Agency (EPA) in their Green Power Partnership program. The EPA Green Power Partnership is a voluntary

program that encourages organizations to use green power as a way to reduce the environmental impacts

associated with conventional electricity use. To view Traditional Medicinals 2014 EPA Green Power Partner

Profile, click here.

Goals


The Accounting Department will track % of charitable

giving as a % of net profits as well as the % of TM-

defined social investment. The Sustainability

Department will include results in annual report.

The Sustainability Department will track and report %

charitable giving that is donated locally.

The Legal & Regulatory Affairs, Sustainability and

Marketing Departments will collaborate in order to

expand the level of transparency and public reporting

through the website now required of Traditional

Medicinals as a California Benefit Corporation.

http://www.epa.gov/greenpower/

http://epa.gov/greenpower/partners/partners/traditionalmedicinals.htm

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