Danone // 2020 Universal Registration Document

Overview of activities, risk factors 2.6 Risk factors DANONE UNIVERSAL REGISTRATION DOCUMENT 2020 30 DESCRIPTION MANAGEMENT MEASURES medium Impact of climate change on value chain The climate risk is present in several of Danone’s risks described above: two strategic risks (Packaging and Fast changes in consu- mer preferences), and two external environment risks (Regulatory changes and Rawmaterial price volatility & availability). In addition, on the operational side, as Danone’s businesses are directly related to nature and agriculture, its value chain can be impacted by climate change and its consequences on soil, biodiversity and ecosystems and on the consequences of shifts or disruptions in availability, quality and prices of raw materials and ingredients used. Climate change also affects water availability which can impact Danone’s operations as well as subsidiaries’ relationships with local stakeholders. The transition towards regenerative agricultural practices and in- gredients availability as well as the climate efficiency of operations are key to adapt Danone’s business model to this environmental change building resilience, efficiency and consumer preference. Overall, Danone considers this risk as low in the short term but high in the long term. Danone is monitoring its full scope carbon footprint as a foundation for its 3-pillars strategy based on: (i) reduction of carbon emissions, (ii) fostering soil carbon sequestration and (iii) compensation of the remaining emissions through carbon positive actions. Danone is a Science-Based Target 1.5° company and is committed to achieving carbon neutrality across its entire value chain by 2050. Danone has also taken commitments to eliminate deforestation from its value chain. Danone’s strategy translates into an accelerated investment plan of around €2 billion on brands, climate and agriculture, packaging and digitalization announced in February 2020 (see section 2.2 Strategic priorities ). For more information on water stewardship and sustainable agri- culture, particularly regenerative (including organic) agriculture, as well as on Danone’s commitments towards carbon neutrality and elimination of deforestation, see section 5.3 Preserve and renew the planet’s resources . medium Currency volatility Most of Danone’s subsidiaries operate locally and therefore in the currency of their country. However, the location of certain production units or central, regional or transactional services may result in inter-company billings in foreign currencies. In addition, some of Danone’s raw materials are billed or indexed in foreign currencies. Lastly, Danone also develops export activities. Fluctuations in foreign exchange rates against the functional cur- rency of some subsidiaries may impact their sales and operating margin. A significant or prolonged drop in their currency, lower availability of hedges for the currency or an increase in their cost can also negatively impact the competitiveness, profitability and results of some subsidiaries. As of December 31, 2020, the main currencies exposed to tran- sactional currency risk were the British pound, the Chinese yuan, the Australian dollar, the Hong Kong dollar, the U.S. dollar and the Russian Ruble. Information regarding operational currency risk is presented in Note 13.3 of the Notes to the consolidated financial statements. Danone’s policy consists of (i) minimizing and managing the impact of exposure to transactional risk on its results, (ii) monitoring and managing it centrally, (iii) whenever the regulatory and monetary frameworks so allow, executing financial transactions locally or centrally, and (iv) using derivative instruments only for the purpose of economic hedging. Danone hedges its highly probable commercial transactions so that, as of December 31, its residual exposure of the following fiscal year is significantly reduced.