Vinamilk’s current state of ethics and corporate culture

L INTRODUCTION TO VINAMILK Vinamilk, formally the Vietnam Dairy Products Joint Stock Company is the largest dairy company in Vietnam and ® ® D headquartered in Ho Chi Minh Vinamilk City.

National Economics University

BRIEF CONTENTS

I INTRODUCTION TO VINAMILK

1 The History and Development

2 Business Philosophy, Vision, and Mission

Il VINAMILK’S CURRENT STATE OF ETHICS AND CORPORATE CULTURE

1 Corporate Culture

2 Corporate Social ResponsibilitfAY 23, 2024

3 Current State of Ethics

I VINAMILK’S ETHICAL ISSUES

1 Ethical Issues Involving the Quantity of Products

2 Ethical Issues Involving Honorable Scandal

IV GENERAL ASSESSMENT

1 Social Assessment of Vinamilk’s Activities

2 Economic Assessment of Vinamilk’s Activities

VI CONCLUSION

L INTRODUCTION TO VINAMILK

Vinamilk, formally the Vietnam Dairy Products Joint

Stock Company is the largest

dairy company in Vietnam and ® ® D headquartered in Ho Chi Minh Vinamilk City Vinamilk was established

operating with three factories:

Thong Nhat, Truong Tho, and

Dielac Under the leadership of

long-time CEO Mai Kieu Lien

who was instrumental in the

company's growth and innovation, particularly from the early 1990s onward, Vinamilk made a significant impact by launching infant formula and nutritional powder for the first time in Vietnam (White Revolution) and introducing UHT pasteurized milk and yogurt to the Vietnamese market

With over 46 years of establishment and more than 25 years of experience in the international market, Vinamilk proudly represents the national brand, bringing Vietnamese milk to the world The company is ranked among the Top 40 largest dairy enterprises globally in terms of revenue and is listed in the Top 10 most valuable milk brands worldwide With a current revenue of VND 60,075 billion, Vinamilk owns and manages more than 40 member units, including a comprehensive system of factories, farms, and branches both domestically and internationally

Vinamilk is committed to constant and robust development, aiming to provide sustainable value to all stakeholders The company not only envisions significant growth for its future but also strives to make a lasting mark on the global dairy industry, reflecting the pride in Vietnamese products and brands

1 The History and Development

Founding and Early Years (1976-1982)

e 1976: Vinamilk was established as the Southern Coffee-Dairy Company, a state- owned enterprise formed from three dairy factories in southern Vietnam

e 1982: The company was renamed United Enterprises of Milk Coffee Cookies and Candies, operating under the Ministry of Food Industry

Expansion and Diversification (1992-2010)

e 1992: The company adopted the Vinamilk brand name, focusing primarily on dairy products

e 2003: Vinamilk became a joint-stock company and was officially listed on the Ho Chi Minh Stock Exchange (HOSE) in 2006

e 2009-2010: Expansion into international markets began, with exports to over 30 countries by 2010

Technological and Product Innovations (2013-2014)

e 2013: Vinamilk launched its first high-tech dairy farm in Tuyen Quang Province, showcasing modern agricultural techniques

e 2014: Opened the largest dairy farm in Southeast Asia in Nghe An Province, with significant investment in sustainable and innovative farming practices

Strategic Investments and Acquisitions (2016-2017)

se 2016: Acquired a majority stake in Driftwood Dairy, a major dairy company in California, USA

e 2017: Continued expansion in international markets, acquiring stakes in dairy companies in Cambodia and New Zealand

Sustainability and Social Responsibility (2018-2020)

e 2018: Vinamilk was recognized for its commitment to sustainable development, implementing various eco-friendly initiatives in its production processes

e 2020: Launched Green Farm, an initiative focusing on environmentally sustainable farming practices

innovation and modernity (rebranding) while maintaining its core values and heritage

> Vinamilk has grown from a small state-owned enterprise into a major player in the global dairy industry, renowned for its high-quality products and sustainable

Prioritize Quality and Innovation: Vinamilk strives for continuous improvement in production, trade, and services, ensuring the highest quality and constantly developing new products

e Mrs Mai Kieu Lien Chief Executive Officer: "To manufacture one of the leading products in the market, we must always be innovative Innovation is a vital element!”

Responsible Business Practices: They emphasize ethical business practices, fair competition, and compliance with regulations

2.2 Vision

To become a world-class brand in the food and beverage industry: Vinamilk aspires to be globally recognized for its high-quality, nutritious food and beverage products

A trusted provider of nutritional and healthy products: They aim to build trust among consumers by delivering products that promote health and well-being

Il VINAMILK’S CURRENT STATE OF ETHICS AND CORPORATE CULTURE

Vinamilk's current state of ethics and corporate culture show a company striving

to balance growth with responsibility While there have been challenges, such as past product recalls and the need for ongoing environmental improvements, Vinamilk's efforts in maintaining high ethical standards, fostering a positive work environment, and engaging in CSR initiatives demonstrate a commitment to ethical business practices and a positive corporate culture

1 Corporate Culture

Vinamilk has been reaching the strong position and gaining reputation in the market for many years and became a symbol of "Vietnam Trust" on nutritional and healthy products To achieve such success, Vinamilk has been building for itself a strong and sustainable corporate culture based on the following aspects

1.1 The Core Values

Straightforwardness: Integrity, honesty in behaviors and in all transactions Respect: Self-respect, respect for colleagues, respect for the Company, respect for partners, cooperation in respectable way

Fairness: Fairness to employees, clients, suppliers, and other related parties Compliance: Compliance with Laws; the Code of Conduct; and regulations, policies, and provisions of the Company

Ethics: Respect for standards established and acting ethically

1.2 Three Levels of Vinamilk's Organizational Culture

For managers: All managers of the company need to make efforts to bring benefits to shareholders, while effectively protecting the inherent resources of the whole enterprise

For employees: Employees must be treated with respect, and management must create the best conditions for employees to develop on equal footing, as well as build and maintain a friendly and open culture

For customers: Businesses need to be committed to providing a variety of products and services while maintaining high-quality standards Furthermore, price transparency of goods and products in all transactions

1.3 Six Principles in Vinamilk's Organizational Culture

Responsibility: If there is a problem or something happens, the first cause is entirely your fault; do not blame anyone

Outcome orientation: Use quantification to communicate and negotiate with colleagues

Creativity and innovation: Never say "no," but always consider at least two alternatives

Cooperation (Team Orientation): Adults do not require adult supervision, but they

do require someone to cooperate Therefore, employees should collaborate based on equality

Integrity: You must be accountable for all of your actions and words

Excellence: You must be a lifelong learner, highly specialized, and an international standard expert in your field

2 Corporate Social Responsibility (CSR)

2.1 For the State

Vinamilk commits: "We always comply with the laws of the state and the laws of any place where we operate."

In reality: According to the announcement of Vietnam Report Joint Stock Company about the ranking of the top 200 enterprises with the largest income tax payments in Vietnam in 2011, Vinamilk continued to rank in the top 5 and contributed more than 2,000 billion dong to the budget

2.2 For Consumers and Society

Vinamilk is known for its attentive and dedicated service, always listening to feedback from customers They are honest in advertising and strive to fulfill consumer needs with the motto: "High quality, reasonable prices, customer-centered,"

Vinamilk also aims for the motto: “Living and working for the community and having social responsibility.” Vinamilk is one of the brands with the most charitable activities:

® In 2005-2006, Vinamilk sponsored 1.5 billion VND for the “Nurturing Young Vietnamese Talents” fund and 3 billion VND in 2006-2007

® Granted numerous scholarships to excellent students nationwide, supported 18 heroic Vietnamese mothers for life, built houses of gratitude and charity worth 1.1 billion VND

¢ Donated 120 million VND to the Ho Chi Minh City Fatherland Front for building gratitude houses

¢ Invested 2 billion VND annually in the national malnutrition prevention program

® Donated 7 billion VND to poor and disabled children nationwide through the Vietnam Children’s Protection Fund

2.3 For Owners

Vinamilk respects and develops entrusted values and assets

It leads the trend of Investor Relations (IR)

e IR encompasses all corporate information disclosure activities with investors to meet both parties' information demand for mutual benefit

® In 2005, Ms Mai Kieu Lien, Vinamilk's CEO, established an IR department responsible for building relationships with investors This department includes staff knowledgeable about both financial and public relations activities

Vinamilk often updates financial reports in detail on its website monthly, quarterly, and annually, along with explanations of the company's business results through various periods

The FAQ system is always ready to address all inquiries and opinions, such as inquiries about the company's financial reports, information about stocks, etc

> Vinamilk consistently fulfills its economic obligations to investors, which is the evidence of the company's excellent business performance, receiving many awards and honors

2.4, For Employees

It is the best choice for career development when working at Vinamilk due to the professional environment, challenging work, and opportunities to work with experienced individuals Vinamilk is committed to creating the most favorable conditions to help employees achieve their career goals

The company also provides health and accident insurance packages for employees outside the legally required insurance program to provide better health care for Vinamilk's employees

® In 2013, all Vinamilk employees were vaccinated against influenza

- Vinamilk believes that training and developing human resources are investment strategies for the company's future success Therefore, Vinamilk employees have the opportunity to be trained to improve the skills and knowledge required for their jobs Training courses on expertise and skills, as well as practical training sessions, are regularly organized by Vinamilk, both domestically and internationally

In 2013, Vinamilk spent 6.5 billion dong on internal and external training programs The salary and welfare system is also appropriate: health insurance, transportation support, etc

In 2013, the average salary increase rate was 22.7%, surpassing previous years' rates (2012: 18.5%; 2011: 10%)

> Vinamilk's commitment to Pp providine 6 high-quality hign-q Pp products and services, respectin ?P 6 customers, and partners, upholding ethical standards, engaging in CSR initiatives, and fostering continuous improvement and innovation is at the core of its corporate philosophy These commitments reflect the company's dedication to excellence, integrity, and social responsibility, guiding its actions and decisions as it continues

to grow and succeed in the dairy industry

3 Current State of Ethics

3.1 Environmental Concern

- Vinamilk’s environmental protection project:

Vinamilk has been installing solar panels at its dairy farms and factories to reduce reliance on non-renewable energy sources With a capacity of 3,39 MWp and 7,542 high-efficiency solar panels, the solar power system at Vietnam Dairy Factory is one of the most recent solar power systems installed in the beverage processing plant chain and Vinamilk’s dairy foods

The company has implemented biogas systems that convert waste from dairy farms into energy This not only helps in waste management but also in generating clean energy for farm operations

To address water usage concerns, Vinamilk has adopted advanced irrigation techniques and water recycling systems This helps in conserving water and ensuring sustainable usage

Moreover, Vinamilk has earned many awards for sustainable development due to methodical investment and implementation such as “Leading enterprises in CSR and ESG” and “Excellent/typical CSR enterprises of Vietnam.” in 2022

Vinamilk also has committed to achieving “Net Zero” emissions by 2050 This target aligns with global efforts to combat climate change and reflects Vinamilk's commitment to sustainability and environmental responsibility

- Vinamilk’s green farm project:

Reports show that livestock and agriculture are sectors that have a direct impact on the environment and lead in reducing greenhouse gases Therefore, Vinamilk has invested in organic dairy farms that use environmentally friendly practices, avoiding synthetic pesticides and fertilizers This helps in maintaining soil health and reducing environmental pollution

As the leading dairy enterprise in Vietnam, with a system of high-tech factories and farms and millions of products supplied every day, Vinamilk has built an action program focusing on 4 key areas:

3.2 Animal Welfare

- Vinamilk has successfully deployed the 4.0 revolution in livestock farming, achieving the goal of modern science and technology application in association with sustainable development for building the best environment for cows

Vinamilk is managing 14 farms, 01 Center for Dairy Technology and Embryo Transplantation certified to Global G.A.P across the country and 1 dairy farm in Laos, of which 04 farms certified to Organic EU, 03 farms follow Vinamilk Green Farm model

e Vinamilk has perfectly built the ideal living space for cows, heightened the sense

of responsibility for animal health, standardized the care process, aiming towards

“humane farm animal care.” In these farms, dairy cows are happy and healthy and perfectly cared for in all five aspects including nutrition, physical health, environment, mental state, and behavior

3.3 Product Quality and Safety

The company is committed to producing and supplying high-quality products that meet customer needs Vinamilk always prioritizes quality in every aspect of its operations

e "We will provide a diverse range of products and services with the highest quality standards, competitive prices, and honesty in all transactions” Vinamilk’s CEO said

® Building nearly 20 international standard systems applicable to the operation chain, Vinamilk is proud to be one of the pioneers in standardizing the operation procedure in various aspects: quality, food safety and hygiene to energy, environment and social responsibility

® In the year 2000, Vinamilk successfully established the ISO 9001:2000 quality management standard at its factory and achieved the international HACCP certificate for food safety and hygiene in 2004

em et

Factories certified ISO 9001:2015; FSSC 22000 100%

Local factories with ISO 17025 certified laboratory 100%

GlobolG.A.P Certified Farms 100%

Number of violations on food safety 0 Number of product recal! to poor quality 0 Total number of incidents of non-compliance with regulations and standards (voluntary participation) related to the health and 0 safety impacts of products and services over the lifecycle

Tota! number of incidents of non-compliance with regulations and voluntary rules with respect to product, service and labeling 0 formation

Sale of prohibited and disputed products 0

Total number of cases of noncompliance with voluntary laws and requlations on communications and marketing, including

advertisement, promotion and sponsorship based on outcome type 0 Monetary value of substantial fines for non-compliance with laws and regulations on provision and use of products and services 0

Monetary value of substantial fines for non-compliance with laws and requlations on provision and use of products and services 0

Table of criteria related to product responsibilities in 2022

III VINAMILWB’S ETHICAL ISSUES

Vinamilk is a leading company in the dairy industry, known for its vision to

"Become the foremost trusted symbol in Vietnam for nutritional products and health serving human life" and famous for its commitment to "Providing the community with top-quality nutrition and service with utmost respect, love, and responsibility towards human life and society." Despite its status as the most famous dairy company in Vietnam, it has faced scrutiny over several unethical issues Here are some notable concerns

1 Ethical Issues Involving the Quantity of Products

LJ "The 'Pure Fresh Milk' Incident” in 2006

a Summary Story

- In early September 2006, public opinion was stirred by the revelation that Vinamilk -

a leading company in the dairy industry in Vietnam - had provided inaccurate information on the packaging of its products labeled as "pure fresh milk" On Vinamilk's fresh milk products, information about the ingredient ratios was ambiguous, and some products did not meet standards This incident shocked consumers, leading them to lose trust in Vinamilk as well as other Vietnamese dairy brands Most consumers switched to foreign milk brands, causing a rapid decline in sales for many Vietnamese dairy companies Consumers were deeply discontented with Vinamilk's "fresh milk" issue They might have felt outraged, worried, and possibly frightened after realizing the direct impact on their health The milk they had been consuming lacked complete information about ingredient ratios, and some products didn't meet standards, evidenced by pouches of milk spoiling before their expiration date, swelling, bursting, and emitting a distinct odor In response to the intense consumer backlash, investigative authorities stepped in

- According to investigations, among the 9 dairy companies producing fresh milk consumed in Vietnam, only 3 units use pure fresh cow's milk So what are many products labeled as "sterilized fresh milk" actually? This indicates that many Vietnamese dairy companies inaccurately promoted their products, with Vinamilk being the most prominent

- In early 2006, Vinamilk introduced a product called “pure sterilized fresh milk without sugar" to the market, with phrases on the packaging like “nutrients from nature every day,” leading consumers to believe it was genuine fresh milk However, all the printed phrases on the packaging were vague and unclear When the product was launched, Mai Kieu Lien, the general director of Vinamilk, stated that "the company's fresh milk is 99% pure sterilized fresh milk." However, investigations revealed that in early 2006, Vinamilk purchased 68 million liters of fresh milk and produced 79 million liters Based on these figures, approximately 11 million liters of

"pure fresh milk" were not included in the purchased milk

- According to Nguyen Dang Vang, the head of the Livestock Department, "Vinamilk has a system of sourcing raw materials domestically, so the percentage of pure fresh cow's milk in the product may be higher, but it does not exceed 30% So, what is the remaining 70% of the "milk" made of? Meanwhile, Vietnamese standards require that sterilized fresh milk must contain 99% fresh milk This seriously affects consumers' health

- After the media exposed the vague labeling of domestic dairy companies' products, on the afternoon of October 18, 2006, Vietnam Dairy Products Joint Stock Company (Vinamilk) held a press conference chaired by Mai Kieu Lien, Vinamilk's General Director

- Vinamilk announced product standards 1/2006/CBTC dated February 17, 2006, named "sterilized fresh milk without sugar." Since it is produced with a proportion of fresh milk accounting for up to 99%, the label includes the term "pure." The public opinion has recently pointed out that this has caused misunderstanding among consumers and is not in line with labeling regulations The inspection agency also concluded that the labeling was incorrect

- "If we are wrong, we will correct it." On October 10, 2006, Vinamilk sent a letter to the competent authority requesting to adjust the label as announced, removing the term "pure" and replacing it with "sterilized fresh milk without sugar.” For other products not related to fresh milk, we also revised the name: "Sterilized milk" with basic ingredients being fresh cow's milk

b Point of View

- Exaggerated Health Claims:

Nutritional Benefits: Vinamilk’s advertisements might claim that their milk can significantly boost a child's height, intelligence, or immune system without substantial scientific backing Such claims exploit consumer concerns about child’s development and well-being, potentially misleading parents into purchasing products based on unverified