Description of Business

Corporate and Social Responsibility (CSR)

Cadbury Schweppes believes that corporate social responsibility is an integral part of being an effective, value-creating business. We seek to always manage the business in a way that is both profitable and responsible and adds value to shareowners and to the wider society. This commitment is explicitly stated as one of our businesses five goals; "nurture the trust of colleagues and communities".

To sustain our success in different and changing markets and diverse cultures, the Board of Cadbury Schweppes is committed to achieving superior levels of business integrity, ethics and professionalism, working to high international standards of corporate and social responsibility and corporate governance across all its activities. The Board has approved a Financial Code of Ethics that applies to the Chief Executive Officer and senior financial officers in the Group. All executive members of the Board, the CEC and the Global Leadership Team are expected to sign Cadbury Schweppes Business Principles. This expectation also extends to the whole management population of the business, with all managers being asked to confirm annually that they and their teams have seen the Business Principles and will abide by them. The roll-out of a confidential, all employee "Speaking Up" helpline in most languages was completed in 2005, which enables employees to report concerns of breaches of our business principles. Both the Code and Business Principles are available on the Group's website www.cadburyschweppes.com. The full corporate governance report and an outline of the Board of Directors' remit, composition and activities is given in the Directors' Report and the Corporate Governance Report.

Our CSR activities involve an active engagement programme with stakeholders to both inform policy and resource allocation, and to assess the effectiveness and appropriateness of activities undertaken. We are a signatory to the UN Global Compact and endorse its ideals. Our CSR strategy and policy is directed and assessed by a Board-level CSR Committee, established in 2001 and chaired by non-executive director Lady Judith Wilcox. The terms of reference for the Board-level CSR committee are available to view on the investor centre page of the Group's website, www.cadburyschweppes.com. Alternatively, they are available in hard copy format from the Group Secretary.

The CSR committee oversees an agenda covering five activity areas:

• Human rights and employment standards;
• Ethical sourcing and procurement;
• Marketing Food and Consumer issues;
• Environment, health and safety;
• Community.

In 2005, we put in place plans for independent auditing (verification and assurance) of three areas of CSR activity and we will continue to build on, and extend, the processes. These are environment, health and safety; ethical sourcing; and internal signed commitment to our business principles.

Our 2006, and third bi-annual, CSR report will outline our activities in all these areas and will be assured by our independent CSR auditors Deloitte and Touche LLP. This report, which includes a mapping to GRI (Global Reporting Initiative) guidelines, is to be published in early summer and will be accessible via our website www.cadburyschweppes.com.

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Human rights and employment standards, and Ethical sourcing and procurement;

Our Human Rights and Ethical Trading (HRET) policy has been developed taking into account international standards - such as the International Labour Organisation conventions, the UN Declaration of Human Rights, and OECD guidelines - as well as cultural and industry best practice from our local markets. Adopted by the Main Board in 2000, it covers core labour rights and dignity at work; health and safety in the workplace; fair remuneration; diversity and respect for differences and opportunity for development.

The HRET policy is there to guide to all Cadbury Schweppes' business units, as well as our suppliers and the business strategy in this area. The review of the effectiveness of policy is led by a group of senior managers who regularly assess progress.

Ethical sourcing and sustainability are two key drivers of our Global Supply Chain. Ethical Sourcing Standards for the Group based on the learning from pilot studies completed in five countries (China, Ghana, Indonesia, Mexico and Turkey), were put in place in 2002. These standards are being underpinned with a system for supplier evaluation, training for employees and a programme of engagement with our suppliers. In 2005, a new ethical sourcing director was recruited to manage the implementation of these standards.

In 2005, we continued to play a leading role in the multistakeholder alliance of the International Cocoa Initiative. We played a significant advocacy role with others in our sector to promote responsible labour practices and to stimulate more prosperous and sustainable cocoa farming, working with farmers. Having achieved a target for developing certification in 2005, this process is beginning to review farming activities in West Africa. There is strong support from Governments in Ghana and Cote D'Ivoire, although progress in the latter is hindered by the current civil and military unrest. Green and Black's, our organic "Fair-trade" business, set up new farmer cooperatives in Belize, with support from other parts of Cadbury Schweppes. With 1.5 million smallholder farmers in West Africa, only a fraction of whom are engaged in "Fair-trade" infrastructure, we focus on maximising ethical trade by working broadly on the root causes of poverty in these areas through education and technological development. Farmer field schools have helped over 25,000 farmer families, both increasing awareness of acceptable labour practices and generating increases in farmer family incomes.

Cadbury Schweppes is a member of the Roundtable for Sustainable Palm Oil.

In recent World Trade Organisation (WTO) trade talks, we added our voice to calls for freer access to European Union markets by developing world commodity suppliers.

Cadbury Schweppes has had an equal opportunity and diversity policy since 1993 and also has HIV/Aids global guidelines. A global employee climate survey was launched in 2004 and rolled-out to all employees in 2005 to help the business assess the commitment and engagement to the business of its employees, and in particular the opportunities to embrace CSR in their everyday work and as part of personal development. The most recent results show that whilst the considerable majority does feel that they get these opportunities, over 30% do not and that is an area for focus and improvement in 2006. Two programmes, "working better together" a cultural and organisational transformation programme, and "Passion for People" focused on the fundamental management skills needed to be successful at Cadbury Schweppes, will support this improvement.

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Marketing Food and Consumer issues

Our strategy in this area is led by our Food Issues Strategy Group, which is chaired by Todd Stitzer, Chief Executive Officer, and has the Group's most senior leaders in commercial strategy, science and technology, corporate social responsibility, legal and human resources among its membership. This group drives the global strategy and plans to ensure that we are innovating, investing and managing our business to keep abreast of, understand and meet the needs of consumers with respect to the way we develop, produce and market our products.

In 2005 we rolled out a 12 Point Action Plan in response to consumer health concerns, embracing a global marketing code of advertising, including special reference to children, and an extensive series of policies on matters related to food and its content. With the aim of contributing to the development of sustainable solutions to obesity and poor lifestyles. In 2005 we undertook global consumer research studies into food, health, diet, nutrition and obesity, covering developing and developed countries, and have made these studies available to government. These studies build on work undertaken in 2004 and 2003. We are supporting (with untied and unbranded funds) primary scientific research in this area.

Building CSR into our brands is a top priority in 2006, covering areas such as labelling, consumer information, ethical sourcing, responsible advertising and cause related marketing, and an emphasis on innovation of affordable nutrition through treats for developing markets such as in Southern Africa.

We have an active engagement with the World Health Organisation and NGOs on matters of importance to consumers as it relates to our products and their lives, and have been commended for our productive approaches. More detail on our activities in this area can be found on our website: www.cadburyschweppes.com.

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Environment, health and safety

Our Environment, Health and Safety (EHS) Steering Group, chaired by Chris Orchard, Director of Business Risk Management and made up of senior managers in the business, oversees our integrated EHS policy and standards. The standards are based on both ISO 14001 and OHSAS 18001. Our EHS policy deals with environmental issues related to the manufacturing of our products, protecting bio-diversity and the eco-systems from which we source raw materials, the management of our supply chain and the distribution, sale and consumption of our products. Sustainable agriculture is an important opportunity for us, as well as for the farming communities we work with. For example, biodiversity is also a key farming concern. In 2005, we partnered with the Earthwatch organisation in an innovative programme in Ghana whereby Cadbury Schweppes colleagues worked with Ghanaian scientists and farmers on the nature and role of biodiversity within cocoa farming. Commercial sustainability of high quality cocoa beans demands both environmental and social sustainability. In support of the latter in 2005, our company and its local partners built the 300th well in rural Ghana - part of its on going programme of providing fresh water locally for farming communities, which has a direct impact on health and welfare, rural development and educational opportunities.

All of our manufacturing sites are audited on a rolling programme by the Group EHS Assurance Department and areas for improvement are identified. Some sites are also externally audited and certified to one or more of the internationally recognised standards, such as ISO 14001 or OHSAS 18001.

We continue to invest in systems, processes and facilities to improve our EHS performance, which is measured and tracked against publicly available targets in the key areas of energy use, water use and greenhouse gas emissions.

Local legislative requirements for health and safety reporting vary considerably across the world. To enable us to publish a consolidated set of Group health and safety data, key performance indicators (KPIs) have been defined which all sites must report against on a globally consistent basis. The one core KPI that we have selected is Lost Time Injury Frequency Rate (LTIFR) per 200,000 man-hours. In 2005, we introduced a new global EHS data reporting system to facilitate collation of all EHS KPIs.

Safety is a key area of focus for the Group and in 2006 we are launching a safety campaign to improve safety practices across our business. The critical aim of this programme is to ensure that we operate to the same global standards in all of our businesses.

Our EHS performance data and targets are published on our website and will be available in our CSR report.

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Community

We aim to create prosperous, educated, sustainable and healthy communities in the countries and cultures in which we operate. Our Growing Community Value around the World strategy guides our businesses in how they can contribute to and assist local communities. With a focus on education and enterprise, health and welfare and the environment, we develop targeted programmes for local communities, often involving commercial sponsorship, significant employee engagement through direct involvement or secondment, and help with facilities, as well as direct financial support. In 2005 the value of Cadbury Schweppes' contribution to non-profit causes totalled £9.8m, just over 1% of our pre-tax profit, paid in respect of the following charitable purposes: education and enterprise £2.74m, environment £0.72m, health and welfare £5.36m, and other £0.98m.

Our people are always a critical component of our community programmes. In recognition of the importance we place on their role in our community investment, our biannual Chairman's Award recognises outstanding examples of employee community involvement and rewards individuals or teams from any part of the business. 89 nominations were received for the 2005/6 award.

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External Ratings

Our CSR performance is rated on by various external organisation's indices. These include:

• Dow Jones Sustainability World Index. In 2005, we were scored at 73%, up from 71% in 2004.
• FTSE4Good and FTSE4Good Supply Chain Labour Standards Criteria. We are included in these indices, which measure performance of companies that meet globally recognised CSR and supply chain labour standards.
• The Carbon Disclosure project included Cadbury Schweppes in their Climate Leadership Index for the second year running.
• UK's Business in the Community Corporate Responsibility Index. In 2005, we were rated at 89%, up from 87% in 2004.