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Responding department: Corporate Social Responsibility (also with input from Legal, Supply Chain)

Stock exchange symbol: (HSYFB:US)

Does your company have a publicly available commitment to respect human rights?

Our commitments are publically available in both our Code of Ethical Business Conduct (page 30): [link] and also in our Sourcing Code of Conduct (pages 3, 4, 5): [link]

How are human rights governed in your company?

The lead responsibility is located in our Global Supply Chain Group, headed by our SVP of Global Supply Chain. Because we are primarily a commodities based business, our supply chain presents the most relevant issues on this spectrum, particularly in Cocoa. Within this group, we operate a Responsible Sourcing Department, which is responsible for environmental and social practices within our vast global supply chain. Governance within our company resides within the confines of our Code of Ethical Business Conduct and our Sourcing Code of Conduct, which are authored by input from various functions including supply chain, legal, and CSR to name a few. Ultimately, the Audit Committee of our Board of Directors presides over both these documents, and is charged with reviewing our Codes annually. This is defined on page 6, section 3L of our Audit Committee Charter, found here: [link] These considerations are quite relevant to our company's business model and strategy, and we've invested millions of dollars (USD) towards cocoa sustainability, primarily in West Africa, over the last several years along. We have a West Africa Leadership Council, comprised of the SVP of Supply Chain, the SVP General Counsel, and the SVP Chief Growth and Marketing Officer, as well as other staff members, which oversees our investments in West Africa, much of which is focused on improving social practices within our supply chain. A very recent example of how these issues align with our strategy can be found in our partnership with Project Peanut Butter, where we built a factory in Ghana to manufacture RUTF to malnourished children, and the soon to be announced project where we are producing a school-feeding supplement for Ghana, intended to help incent children to stay in school and also improve their nutrition. Ultimately, we view West Africa as a potential future commercial market, and are investing heavily in the region to improve livelihoods and social practices, through education and gender empowerment. You can read a bit more about these and our other related efforts on pages 25-29 of our most recent CSR report, found here: [link]

How are human rights managed within your company?

As mentioned in question #2 above, our Responsible Sourcing Department is charged with overseeing and managing the various social (and environmental) aspects of our global supply chain. The way in which we identify actual and potential issues is two-fold: First, we've been members of AIM-Progress and the International Labor Organization (ILO) since 2011, learning and sharing best practices. AIM Progress is a forum of leading Fast Moving Consumer Goods (FMCG) manufacturers, assembled to enable and promote responsible sourcing practices and sustainable supply chains. It is a global initiative supported and sponsored by AIM in Europe and GMA in North America. Secondly, we utilize third parties to conduct SEDEX audits on our supplier(s) facilities. We've given each of our suppliers a risk profile, based on commodity, geographic location, spend, etc. and we commission these third party audits to assess the social (and environmental) practices of our suppliers. We then work with suppliers to remediate any specific issues found during the course of the audits, and have terminated relationships with suppliers if egregious issues are found. The importance of this is signaled through our Sourcing Code of Conduct, adherence to which is a contract term for all purchase orders. Annually, all employees much successfully complete training on the Code of Ethical Business Conduct, which covers these issues and many others. Internally, we track effectiveness through our SEDEX audit process, and analyze the findings over time to ensure that our efforts to both communicate and work with our suppliers is effective. We verify that remediation actions are permanent through this process, and share our audit findings opening through the SEDEX database.

What is the company’s approach to the engagement of stakeholders (including workers, and local communities impacted by the company’s activities), on human rights issues?

Annually, we perform a formal stakeholder engagement process with our seven stakeholder groups: employees, investors, business partners, consumers, NGO's, local communities where we have operations, and government/regulatory agencies. We evaluate 17 different criteria that are related to our business, ranging from ethical sourcing to talent management, and including human rights. We prioritize our efforts, investments and focus based on the overall importance of each of the 17 issues we assess as identified by our external stakeholders and as they align with our business priorities. This process is also integrated with our overall Enterprise Risk Management process. Our aim is to focus on the most impactful, meaningful priority issues, and for Hershey, three of the highest priority issues are Ethical Sourcing, Ethics and Compliance and Child Labor - each of which as links to human rights both internally and externally. You can view additional details on our stakeholder engagement and priority issues analysis on pages 10, 11, 12 and 72 of our 2013 CSR Report, found here: [link] Our full priority issues matrix is detailed on page 72, an also worthy of note is our discussion on our value chain and impacts on page 12.

Priority human rights issues: What are some of the priority human rights issues for your company?

The company selected the following from a check list:

  • Freedom of association and trade union rights
  • Conflict minerals
  • Transparency in payments to governments / responsible tax practices
  • Women
  • Racial and ethnic minorities
  • Children (including child labour)
  • Migrant workers

Actions on workplace diversity / non-discrimination

Workplace Diversity: Hershey's Manufacturing Apprenticeship Program: As part of our commitment to actively embrace a diverse and inclusive workforce, our innovative Manufacturing Apprenticeship Program was launched to provide opportunities for individuals with intellectual and physical disabilities. Participants perform the same work for the same pay—each subject to the same expectations as fellow employees. Started in 2012 , the program has been tremendously successful. Our five apprenticeship employees have been fully embraced and integrated into the workforce, and the experience has inspired some of them to take additional steps toward independence. In 2013 and 2014, after studying the best practices that made the program so successful, we expanded the program to 3 additional plants in the United States, and to one plant in Mexico. We continue to advocate for the employment of people with disabilities and are planning to hire additional employees through this program in 2015.

Actions on children (including child labour)

Child Labour: Hershey Ahead of Schedule on Certified Sustainable Cocoa Goals: A cornerstone of Hershey’s 21st Century Cocoa Strategy is its commitment to source 100 percent third-party-certified cocoa for all of its chocolate products worldwide by 2020. The company has committed to three milestones as it scales its certified cocoa purchases: As of the end of 2013, we had achieved 18 percent certified cocoa,nearly double our first-year goal. By 2014, we achieved 30% certified cocoa, and committed to 50% by the end of 2015, a full year ahead of our original commitment.Qualifying cocoa is verified by independent auditors who assess suppliers on established standards of labor and environmental and sustainable farming practices. These steps help mitigate the conditions that contribute to the presence of child and forced labor in cocoa growing regions in West Africa and other parts of the world. With 10 percent to 12 percent of the world’s cocoa supply certified as of the end of 2013, and the need for more certified cocoa growing, Hershey is seeing indications that its 2020 commitment—announced in October—is already influencing suppliers to expand the global supply of certified cocoa. To date, Hershey has committed to source cocoa through three of the world’s most recognized cocoa certifying organizations: UTZ Certified, Fair Trade USA and Rainforest Alliance.

Actions on 'other' issues

All of the business related issues have been checked. Those not checked are not directly applicable to our business.

How are human rights commitments and information about how the company addresses its human rights impacts communicated, internally and externally?

We utilize various mechanisms to communicate on these topics. Our Annual Report includes the details on governance from the Board and Executive level on these topics - how/when policies and or issues are reviewed, grievance mechanisms, etc. These topics are discussed primarily on pages 13-22, but also are touched on in a few other places, found here: [link]

Additionally, we go into more depth on these topics in our annual sustainability/CSR report, found here: [link] Specific pages of interest include: 10,11,12, 25-29 and 72, as well as the GRI index included at the end of the report.

We also use other means of communication internally to report progress both internally and externally, including internal intranet posts, videos and live town hall meetings where senior leaders or relevant employees discuss our position and progress on these topics, ranging from cocoa sustainability to sourcing practices. We also communicate externally via press releases and other ways, such as live meetings with activist groups and NGO's. Here are a few examples of recent external communications on these topics: [link] [link]

What provisions does your company have in place to ensure that grievances from workers and affected communities or individuals are heard, and can you provide examples of remedies provided?

Posted on our external website is our full process for grievance procedures, which applies both internally and externally. Here is our PROCEDURE FOR SUBMISSION AND HANDLING OF COMPLAINTS REGARDING COMPLIANCE MATTERS: [link] Additionally, on page 46 of our CSR report, we detail the grievance mechanisms in place: [link]

As an example of a remediation, Hershey was criticized for conditions related to the J-1 visa program sponsored by one of its suppliers at a packaging plant near Hershey, Pennsylvania (The J-1 visa program is a visitor exchange program run by the U.S. Department of State). While the facility was neither owned nor operated by The Hershey Company and the employees enrolled in the J-1 program were not employees of The Hershey Company, the fact that the issue involved a supplier facility in which Hershey products were packaged nevertheless reflected on The Hershey Company itself. When we learned of the issue, we worked with the supplier to remediate the issue, and we offered the students local tours and a stipend amounting to a week’s pay in an effort to provide some of the cultural experience that the students had been seeking through the program. This incident led us to review and strengthen our supplier code of conduct, first released in 2009. We released the revised code in December 2011, then again revised and strengthened it in 2014. This example of a remediation appears on page 19 of our 2011 CSR Report, found here: [link]  

Finally, the Audit Committee of our Board oversees all grievance mechanisms, and is publically available here: The Audit Committee may be contacted as follows: Mail: Audit Committee c/o Corporate Secretary The Hershey Company 100 Crystal A Drive P.O. Box 810 Hershey, PA 17033 Email: [email protected] The Independent Directors may be contacted as follows: Mail: Independent Directors c/o Corporate Secretary The Hershey Company 100 Crystal A Drive P.O. Box 810 Hershey, PA 17033 Email: [email protected]

In addition, the Hershey Concern Line may be used by calling 1-800-362-8321 and by accessing the website www.HersheysConcern.com.

Which external and collaborative human rights initiatives does your company participate in, and what is the nature of your involvement?

The most relevant and significant collaborative effort is our participation in CocoaAction (found here: [link]) CocoaAction is a strategy that brings the world’s leading cocoa and chocolate companies together to sustain the cocoa industry and improve the livelihoods of cocoa farmers. CocoaAction will develop meaningful partnerships between governments, cocoa farmers, and the cocoa industry to boost productivity and strengthen community development in Côte d’Ivoire and Ghana – the largest cocoa producing countries in the world. By 2020, CocoaAction intends to train and deliver improved planting material and fertilizer to 300,000 cocoa farmers and empower communities through education, child labor monitoring &

environmental protections. Cocoa Action will be measured through adherence to key performance indicators, and progress will be publically reported on a regular basis. We have also been involved in the UN Global Compact, through various meetings and workstreams, and are conducting internal discussions related to a more formal engagement this year.

Which are the key one, two or three elements of your approach to human rights that been developed or amended since June 2011? Please indicate if these actions were in response to the UN Guiding Principles.

As it is most relevant to our business, our most significant progress has been related to Cocoa Sustainability, in the forms of ethical sourcing and labour practices. The Hershey Company announced that 30 percent of its globally sourced cocoa was independently certified and verified in 2014—this reflects an accelerated pace for achieving its goal of sourcing 100 percent of its cocoa supply from certified and sustainable cocoa farms by 2020. The announcement follows the company’s 2013 achievement of sourcing 18 percent certified cocoa globally, nearly double its original goal of 10 percent for the first year of its 2020 commitment. Following this accelerated progress, Hershey also announced a new target to source at least 50 percent certified cocoa by the end of 2015, reaching its 2016 goal of 40 and 50 percent one year ahead of schedule. Hershey is currently sourcing certified cocoa through three of the world’s largest and best-known cocoa certifications: UTZ Certified, Fair Trade USA and Rainforest Alliance Certified™.

During the past year, Hershey has been expanding its work with industry partners to build sustainable farm training through the Hershey Learn to Grow program in Ghana, Nigeria and Cote d’Ivoire. In 2014, the company announced that more than 19,000 cocoa farmers in Cote d’Ivoire will be enrolled in Learn to Grow agricultural and community training programs. In September, Hershey announced a new three-year program expanding its cocoa farmer training and community initiatives in Ivory Coast, the world’s largest cocoa producing country. These efforts have led to an increase in certified farms and verified sustainable cocoa, which will contribute to Hershey’ sourcing 100 percent cocoa that is certified and originates from sources that have been independently audited and verified for appropriate farming, labor and environmental practices. Hershey’s 100 percent certified and sustainable cocoa commitment is one part of Hershey’s ongoing commitment to support sustainable cocoa farming through its 21st Century Cocoa Sustainability Strategy. Hershey’s cocoa strategy is part of the broader cocoa-industry efforts through CocoaAction to improve product, family livelihoods and communities across the cocoa-growing sector in Ghana and Cote d’Ivoire. We did consider the UN Guiding Principles as we developed our 21st Century Cocoa Sustainability Strategy, but the catalyst for these accelerated efforts has really been the prioritization of these issues internally (as part of our overall business strategy) and the clear and consistent indication from our external stakeholders that these issues were also a priority for them.

What are some of the obstacles and challenges that your company encounters in implementing its human rights commitments?

For Hershey, the main challenges we faced were due to the complexity and scope of our supply chain. The cocoa growing regions of West Africa offer challenges in the form of human rights and labour practices, and cocoa farms are small and remote, with more than 2 million cocoa farms in West Africa alone. We don't own farms and don't buy cocoa directly from cocoa farmers, we purchase cocoa from intermediary cocoa processors. Driving significant, meaningful change posed some obstacles, however the tipping point for us was when our CEO, JP Bilbrey, called for the world's largest chocolate companies to work collaboratively on the issues we all face - both the branded companies and the cocoa processors. His challenge led to the formation of CocoaAction (discussed above) where the cocoa industry is working together, drawing upon the individual strengths and expertise of the various companies, to drive unprecedented progress on these issues.

Another huge benefit for our efforts in overcoming these supply chain challenges has been technology - specifically mobile technology and GPS mapping. Hershey's Cocoalink program uses cell phones to provide actionable agricultural and social information to these remote cocoa farmers. This program, now with more than 50,000 registered farmers, received the 2014 P3 Impact Award from the US State Department for the most impact public-private partnership. Part of our farmer training program, known as Learn to Grow, uses GPS mapping of farms - so that farmers know the exact size of their farm and can optimize their inputs, freeing up capital to invest in hiring labour rather than resulting to child labour. Collaboration and technology have truly helped us begin to overcome these significant challenges in the most critical aspect of our supply chain.