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© 2007 Monsanto Company

We Want to Hear From You

Tell us what you think. Please send your thoughts to the Monsanto Pledge team via e-mail: [email protected].

2007 Pledge Report

GroWtH For a better World

Contents1.1 Report contents. . . . . . . . . . . . . . . . . . . page 3 — Contents; page 4 — A Message from Hugh Grant1.2 Key Impacts . . . . . . . . . . . . . . . . . . . . . . Trends and impacts found throughout the report

Organizational Profile2.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . Cover2.2 Primary products/brands . . . . . . . . . . . page 49 and http://www.monsanto.com/products/default.asp 2.3 Operational structure . . . . . . . . . . . . . . http://www.monsanto.com/investors/corporate_profile.asp2.4 Headquarters location . . . . . . . . . . . . . http://www.monsanto.com/who_we_are/locations.asp2.5 Countries of operation . . . . . . . . . . . . . page 49, http://www.monsanto.com/who_we_are/locations.asp2.6 Nature of ownership . . . . . . . . . . . . . . . http://www.monsanto.com/responsibility/corp_gov/incorporation.asp 2.7 Markets served . . . . . . . . . . . . . . . . . . . http://www.monsanto.com/who_we_are/locations.asp 2.8 Employees, sales,

economic performance . . . . . . . . . . . . . page 492.9 Significant changes . . . . . . . . . . . . . . . Proxy: http://www.monsanto.com/pdf/pubs/2006/proxy.pdf2.10 Awards received . . . . . . . . . . . . . . . . . . http://www.monsanto.com/careers/culture/great_place.asp

Report Parameters3.1 Reporting period . . . . . . . . . . . . . . . . . . Fall 20073.2 Date of previous rept . . . . . . . . . . . . . . . Fall 20063.3 Reporting cycle . . . . . . . . . . . . . . . . . . . Annual3.4 Contact point . . . . . . . . . . . . . . . . . . . . Back Cover3.5 Rept. content. . . . . . . . . . . . . . . . . . . . . Iterative process involving many corporate sectors and regions3.12 GRI table . . . . . . . . . . . . . . . . . . . . . . . . This page

Governance, Commitments and Engagement . . . . . . . . . . . . . . . . . . . . Section: pages 50-55, See Monsanto.com, Corporate Governance site: http://www.

monsanto.com/responsibility/corporate_governance.asp4.8 Governance . . . . . . . . . . . . . . . . . . . . . Monsanto Pledge P3, Code of Business Conduct pages 52-55,

Health and Safety pages 17-20, Environment pages 23-37, Human Rights pages 15-17,

4.11 Product stewardship . . . . . . . . . . . . . . pages 53-55, http://www.monsanto.com/products/techandsafety/stewardship.asp4.14 External initiatives . . . . . . . . . . . . . . . . Examples of stakeholder engagement found throughout report

Economic . . . . . . . . . . . . . . . . . . . . . . . . . . . Section: pages 39-49EC 1 Economic value . . . . . . . . . . . . . . . . . . page 49 and pages 15-21EC 2 Implications due to Climate Change . . . pages 24-29EC 3 Benefit plan obligations . . . . . . . . . . . . page 49EC 6 Supplier Selection . . . . . . . . . . . . . . . . . pages 48-49EC 8 Investments in Public Infrastructure . . Examples throughout report

Environment . . . . . . . . . . . . . . . . . . . . . . . . Section: pages 23-37EN 1, EN 3, EN 4, EN 8, EN 9, EN 16, EN 20, EN 21, EN 22, EN 24, EN 26 . . . . . . . . . . . . . . . pages 30-34EN 18 Greenhouse Gas Reductions,

CCX membership . . . . . . . . . . . . . . . . . page 28

LaborLA 1 Workforce by region . . . . . . . . . . . . . . . . page 49LA 7 Health and safety performance . . . . . . pages 17-20LA 10 Training . . . . . . . . . . . . . . . . . . . . . . . . 28 hours of training/year/regular full time and hourly employee

Human RightsHR 2, HR 6, HR 7 . . . . . . . . . . . . . . . . . . . . . . . . pages 15-17

Society . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section: pages 4-21SO 1 Community impacts . . . . . . . . . . . . . . . pages 15-21SO 2, SO 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pages 52-53SO 6 Political contributions . . . . . . . . . . . . . . http://www.monsanto.com/responsibility/corp_gov/disclosures.asp

Product Responsibility . . . . . . . . . . . . . . pages 53-55 and http://www.monsanto.com/responsibility/stewardship.asp

This is our first report incorporating some of the Global Reporting Initiative G3 guidelines. We hope to build upon this base in future reports. For information about the GRI indicators, visit www.globalreporting.org.

We want to make the world a better place for

future generations. As an agricultural company, Monsanto can do this best by providing value through the products and systems we offer to farmers.

With the growth of modern agricultural practices and crops that generate ever-increasing

yields, we are helping farmers around the world to create a better future for human beings, the environment, and local economies.

Increased yields are the core of this agenda. As agricultural productivity increases, farmers are able to produce more food, feed, fuel, and fiber on the same amount of land, helping to ensure that agriculture can meet humanity’s needs in the future. Moreover, increased productivity allows farmers to produce more with the same – or fewer – inputs of energy and pesticide. This results in more responsible use of natural resources, better ecosystem health, increased soil fertility, increased farm income, and more opportunities for farmers and their communities.


Index (accordInG to GrI G3 IndIcators)

Letter to Stakeholders 2

The Monsanto Pledge 3

GROWTH FOR A STRONGER SOCIETY 4

GROWING WITH GOOD GOVERNANCE 50

Operating with Integrity 52

Integrity Guides Our Business Conduct 52

Commitment to Product Stewardship 53

Technology and Field Training 54

Seed Production and Distribution 55

Crop Sales and Marketing 55

Chemical Products 55

Biotech Advisory Council 55

Endnotes 56

Global Reporting Initiative Index IBC

Growing Hope in Africa 6

Growing Self-Suffi ciency Through Choice 7

Seed Donation, Malawi 9

Working with Partners To Accomplish More 9

Viewpoint: Public-Private Partnerships 10

Meeting Today’s Needs While Building for Tomorrow 13

Buhle Academy, South Africa 13

Respecting Communities and People 15

Progress in Human RightsImplementation 15

Issue Discussion: Child Labor 16

Child Labor, India 17

Work Site Safety 17

Seasonal Field Work, Mexico 18

Vehicle Safety 19

Community Development 20

Earthquake Recovery, Indonesia 21

Educational Outreach, Brazil 21

GROWTH FOR A HEALTHIER ENVIRONMENT 22

Agriculture Can Help Keep Carbon in Balance 24

Issue Discussion: Climate Change 26

Monsanto Products Promote Carbon Sequestration Systems 27

Viewpoint: Environmental and Financial Markets Converge 29

Meeting Humanity’s Needs While Reducing the Environmental Impact of Agriculture 30

Biotech Crops Permit Reduced Pesticide Use 30

Biotech Crops Raise Yield per Acre 31

Waterbirds and Farm Stewardship 33

Wildlife Protection, Guatemala 34

Environmental Effi ciency of Our Operations 35

Agricultural Innovations Make Farm Families More Prosperous 40

Biotech Crops Are Responsible for $27 Billion in Additional Farm Income 40

Study: India 42

Financial Independence, India 43

Study: United States 43

Roundup Ready Flex Cotton 44

Study: Brazil 45

Study: France 46

Sharing ESH Programs, Brazil 47

YieldGard Planting, Europe 47

Global Presence 48

Organizational Profi le 49

GROWTH FOR A PROSPEROUS ECONOMY 38

2 GROWTH FOR A BETTER WORLD

Ever-rising demands are being placed on agri-culture. The global population is increasing, people in developing economies are eating

better, and more countries are using biofuels as a cleaner burning, home-grown

source of energy. Land to bring under cultivation is declining as cities compete for land, water, and other resources. Farmers are stepping up to this challenge — and Monsanto is playing a

uniquely vital role in their efforts.

When I started with Monsanto’s prede-cessor in 1981, the average U.S. corn yield was 109 bushels per acre.1 In 2006, U.S. farmers produced an average of 150 bushels of corn per acre — a 37 percent increase. Molecular-based breeding and biotech traits contributed to these increases. Over the next decade, even more increases in yield are expected, as well as effi ciency improvements in the use of water and nitrogen.

Increased productivity adds to farmers’ incomes,

allowing them to reinvest in their farms, families

and communities. This is true for large commer-cial farmers as well as for those with only a few acres. Advances in productivity increase the quality of life for millions of farm families around the world.

Better productivity also means less environ-mental impact per bushel. Farmers make

fewer pesticide applications on their land. They make fewer tractor passes, so they reduce their greenhouse gas emissions. They till the soil less, thus sequestering more carbon. Increasing the productivity of existing farm-land makes it less likely that rain forests and other sensitive ecosystems will be converted to farmland. Drought-tolerant crops, now progressing through our research pipeline, are intended to allow crops to “sip” water instead of “gulping” it. That will be important in drought-prone regions and critical in places that depend on rain-fed agriculture.

Agriculture continues to be vital to the welfare

of many people. We are making progress, working with many partners, to improve agricultural performance, to reduce our carbon footprint, to improve biodiversity, and to demonstrate economic improvements to farmers around the world. Not only is this good for our planet and our customers; it is good for our business. There is still a long way to go. But I’m pleased with our progress and optimistic about the path ahead. I hope this report helps you to share our enthusiasm.

Hugh GrantMonsanto Chairman, President, and Chief Executive Offi cer

November 30, 2007

Letter to StakeholdersWe have seen signifi cant changes in global agriculture. In response to increasing social and environmental needs, farmers worldwide are working to maximize the yield from every acre of land.

MONSANTO 2007 PLEDGE REPORT 3

Integrity Integrity is the foundation for all that we do. Integrity includes honesty, decency,

consistency, and courage. Building on those values, we are committed to:

THE MONSANTO PLEDGE

DialogueWe will listen carefully

to diverse points of view

and engage in thoughtful

dialogue. We will broaden

our understanding of issues

in order to better address

the needs and concerns

of society and each other.

TransparencyWe will ensure that information

is available, accessible, and

understandable.

Sharing We will share knowledge

and technology to advance

scientifi c understanding,

to improve agriculture and

the environment, to improve

crops, and to help farmers

in developing countries.

Benefi tsWe will use sound and

innovative science and

thoughtful and effective

stewardship to deliver

high-quality products that are

benefi cial to our customers

and to the environment.

RespectWe will respect the religious,

cultural, and ethical concerns

of people throughout the world.

The safety of our employees,

the communities where

we operate, our customers,

consumers, and the environ-

ment will be our highest priority.

Act As Owners to Achieve ResultsWe will create clarity of direction,

roles, and accountability; build

strong relationships with our

customers and external

partners; make wise decisions;

steward our company resources;

and take responsibility for

achieving agreed-upon results.

Create a Great Place To WorkWe will ensure diversity of

people and thought; foster

innovation, creativity and

learning; practice inclusive

teamwork; and reward and

recognize our people.

The Monsanto Pledge is our commitment to how we do business. It is a declaration that compels us to listen more, to consider our actions and their impact broadly, and to lead responsibly. It helps us to convert our values into actions, and to make clear who we are and what we champion.

4 GROWTH FOR A STRONGER SOCIETY

GROWTH FOR A


Communities are the foundation of our business. Most of our customers, employees, and families live and work in rural communities where crops are grown. From smallholder maize farmers in Malawi to commercial cotton farmers in India, to the large corn and soybean farmers in the United States and Brazil, Monsanto is committed to strengthening

communities and doing what we can to help real people live

safer, healthier, and more productive lives.

STRONGER SOCIETY

Photo Left After collecting fi rewood and water, a family in Burkina Faso returns home for the evening.

5


Growing Hope in AfricaWe believe that agricultural technology can help increase the food security and income of smallholder farmers. Our products can help farmers meet challenges and manage risks so that they can achieve self-suffi ciency and even prosperity.

In our work in Africa, we emphasize the value of providing choice for smallholder farmers, working on tough problems through partner-ships, and urgently tackling the inherent risks of agriculture there. Following is the story of a farmer in Malawi, Mary Katsonya.

Mary Katsonya walks to work down an orange-colored rutted road near Malawi’s capital city of Lilongwe as the sun rises over the horizon on tidy fi elds of maize, as corn is known in Africa, peanuts, and tobacco. She is 62 years old, a widow, with fi ve

orphaned grandchildren to care for. To meet her entire family’s food and income needs, Katsonya has only a small, 2-hectare (4.9-acre) farm.

She wakes early every morning to check her fi eld, carrying a hoe to turn the earth between neat rows of tender maize plants to rid it of weeds. If the harvest is good this year, there will be enough maize to eat, and some to sell. Perhaps she can buy some vegetable seeds. She can make sure her grandchildren have schoolbooks.

If the harvest is not good, there will be hunger and a long wait until Katsonya can plant and tend the next season’s crop, hoping again for plenty. Or at least enough.

Katsonya is just one of millions of farmers in Africa

who face some of the most challenging conditions

in the world every day. On average, maize fi elds

During Malawi’s devastating drought, Katsonya harvested only 10 bags from her fi eld, equivalent to 500 kilograms. In 2007, she reaped 260 bags, or 13,000 kilograms.

Photo Left Mary Katsonya is one farmer among many in Malawi who benefi ted from high-quality hybrid maize seed.


like Katsonya’s produce only a tenth as much per acre as cornfi elds in North America and Europe.2 And those low yields may vary greatly from year to year. In 2005, during Malawi’s devastating drought, Katsonya harvested only 10 bags from her fi eld, equivalent to 500 kilo-grams. In 2007, she reaped 260 bags, or 13,000 kilograms. What made such a differ-ence in her yields over just two years?

Growing Self-Suffi ciency Through ChoiceIn 2005, Mary Katsonya watched her fi eld wither day by day, week by week, until she harvested only a few bags of maize from her small farm — not even enough to feed her family. They, and almost 5 million other Malawians, depended on emergency food aid that year to make it through the “hunger season.” 3 The cost to provide enough maize to sustain the Katsonya family for that year was about $400.

The drought had another consequence.Katsonya normally saves some grain from her harvest each year to plant the following year or to trade for new seed. Everything she grew in 2005, however, was used to meet her family’s needs, leaving her with no seed for the coming season.

Fortunately, in 2006 the government and other

donors stepped forward to provide Malawi’s farmers

with some tools — fertilizer and high-quality maize

seed — to help them get back on their feet.

Katsonya received 50 kilograms of hybrid seed and fertilizer, worth about $70. She tended her crop just as carefully as she had every other year. But she also received some extra help from local organizations that distributed the seed. That year the rains did come, and the corn grew taller and stronger as the months went on.

At the end of the season, Katsonya was delighted to count the 200 bags of grain as they were harvested. She saved 50 bags to feed her family through the year, and sold the rest to buy other things her family needed.

For the 2007 season, Katsonya had a choice to make: She could go back to saved seed, or purchase open pollinated varieties of seed, or seek hybrid seed again. She saw that her next-door neighbor, who in 2006 had chosen to plant seed saved from the previous year’s harvest, had produced only 10 bags from her farm, which was just a little larger than Katsonya’s. In the end, Katsonya chose hybrid seed again. Her 2007 harvest was even bigger — 260 bags.

Stories like Katsonya’s have been repeated across

Malawi, where 80 percent of the population is

dependent on rain-fed subsistence agriculture.2

Historically, about 90 percent or more of the maize in Malawi has been grown with little fertilizer and planted with seed saved from previous crops or open-pollinated varieties, which usually yield between one and two metric tons per hectare.2

MALAWI, AFRICA

Population: 13 million

Percent of population in rural areas: 85%

Life expectancy: 43 years

MALAWI

Source: CIA World Factbook


Good rains, greater use of high-yielding quality

hybrid seed, and wide availability of fertilizer all

contributed to conditions that gave farmers across

the country yields that were double the historic

average in 2006 and 2007.

With the support of international agencies and the private sector, the government of Malawi began giving farmers vouchers, worth about $3 each, to exchange at local seed distributors for their choice of seeds — open-pollinated varieties or hybrids. Almost a third of these vouchers were exchanged for Monsanto’s hybrid seed for the 2007 season. Local aid organizations that had handled the donated hybrid seed the previous year also began purchasing hybrids to use in their ongoing programs to increase self-suffi ciency on small farms.

As a result, maize production in Malawi in the 2006-2007 season jumped more than 33 percent over the previous year, to 3.44 million metric tons — almost double the last fi ve-year average maize production, according to the Famine Early Warning Systems Network.2 Once a major recipient of international food aid, Malawi is now a supplier. It sends maize to other countries

HUGH GRANT VISITS MALAWI

Monsanto has had a business in Malawi since 1998, when we purchased the Cargill (National Seed Company of Malawi) seed business, which had been operating there since 1989.1 Today, Monsanto has 22 employees in Malawi, which makes it one of our largest locations in Africa. Our modern seed production facility in Lilongwe has a capacity of 10,000 metric tons.

In January, Monsanto’s Chief Executive Offi cer Hugh Grant visited Malawi to meet with farmers and see recent yield improvements fi rsthand at one of the fi ve Millennium Villages where Monsanto seed had been donated.

“The striking thing from my visit to Africa was seeing just the extraordinary leverage that good, quality seed has had on their lives,” Grant said. “The leverage of decent germplasm and a little splash of fertilizer just makes an enormous difference.”

“It becomes more than subsistence — you move toward a surplus and get cash into the system that generates trade, and you build or drive education,” Grant said. “And by doing all those things, you get a village up off its knees and back on its feet.”

Why is Monsanto in Malawi? “I subscribe strongly to the view that you can do good business and do good,” says Grant. “Some of the people who are starting these programs will be our customers in the future. A piece of this will be philanthropic, but there’s a piece that’s the ground fl oor of a whole new generation of customers.”

2005 2006 2007

15,000

10,000

5,000

0

Mary Katsonya’s Harvest, 2005-2007(in kilograms maize)

■ Yield Need

Source: Monsanto

Since 2002, the people of Malawi have experienced chronic food shortages due to drought, poverty, and low crop yields. In 2006, 5 million people were in dire need of food aid. A Monsanto team saw an opportunity to address the food shortage and to increase local food self-suffi ciency through the donation of 700 metric tons of quality hybrid maize seed — enough to reach 140,000 resource-poor farmers. Working with Malawian government offi cials and local nongovernmental organizations (NGOs), the team ensured that Monsanto’s efforts could build on existing programs to increase self-suffi ciency at the local, family-farm level.

In less than 15 days, the team contacted all internal and external stakeholders. The team coordinated its work within the maize supply chain and with external suppliers to ensure that the seed and inputs would be available quickly. With the help of local NGOs, the team was able to ensure proper and prioritized distribution of the seeds. Because resource-poor farmers in Malawi were not used to planting quality hybrid maize, the team answered planting questions and explained benefi ts.

The quality hybrid seed delivered fi ve times the average yield of the open-pollinated maize varieties previously planted. The resulting output was enough grain to feed a million people for a year.

This project won Monsanto’s Judges’ Choice award, for best embodying the Monsanto Pledge and for its infl uence in combating hunger and poverty.

in need, such as Zimbabwe, Lesotho, and Swaziland.4 The Malawian government has also given surplus grain to the United Nations World Food Program for distribution to HIV/AIDs sufferers in Malawi.

A number of factors contributed to the increase in maize production in Malawi. The weather was favorable over the past two years, more people used better inputs (fertilizer and quality hybrid seed), and the area planted to maize grew slightly.

Monsanto is privileged to be a part of this evolving success story. In 2005, we donated cash for emergency food aid and seed for planting. We continue to donate seed for programs such as the Millennium Village

Project (MVP) in Malawi, and to participate in the government’s voucher program. We believe that the principles of self-suffi ciency

and choice are essential to improving food security

in Malawi and across Africa.

Working with Partners To Accomplish MoreThere are many different crops, farm sizes, and agronomic conditions across Africa. Monsanto has been working in agriculture in Africa for more than 50 years.1 We have a number of different commercial business models that effectively provide customers large and small with relevant products. These include maize seed and technology in South Africa, vegetable and maize seeds in East Africa, and crop chemicals in West Africa.


Pledge Award Winner — Judges’ Choice

SEED DONATION IN MALAWI REDUCES HUNGER, INCREASES SELF-SUFFICIENCY

Developments in agricultural science and technology hold the promise of major improve-

ments in food security and poverty

reduction in sub-Saharan Africa (SSA). Governments and regional organizations in Africa understand this and are committed to using science and technology to increase agricul-tural productivity.

Both the public and private sectors hold keys to accessing these technologies. But neither of them alone can utilize this potential on the African continent. Private-sector companies have signifi cant technological resources but no current commercial incentives to invest in specifi c technologies, varieties, and traits adapted to the agricultural conditions of the SSA market. Conversely, public-sector organizations have vast experience with regionally important crops but need improved access to proprietary technologies and assistance in adapting complex technologies to develop appropriate products for resource-poor farmers in SSA.

However, issues pertaining to the availability, technical chal-lenges, high transaction costs, licensing, testing, safety and liability of proprietary agricultural technologies may constitute barriers to the accession of these technologies by SSA researchers, development specialists, local private-sector businesses, and resource-poor farmers.

The African Agricultural Technology Foundation (AATF) was created four years ago with the encouragement of the Rockefeller Foundation, the United States Agency for International Development, the United Kingdom’s Department for International Development, Monsanto, and other public- and private-sector stakeholders to address the challenges associ-ated with accessing, developing, and deploying agricultural technologies to smallholder farmers in SSA. It strives to deliver proprietary technologies used outside Africa to African smallholder farmers, after adapta-tion by public research institutes, on-farm testing by nongovern-mental organizations, research institutes and extension services, and dissemination by private entrepreneurs, stockists and agro-dealers. The technologies that AATF accesses are those identifi ed by stakeholders in African agriculture as having the potential to solve some of the constraints affecting resource-poor smallholder farmers in SSA. They could be biological, chemical, mechanical or information technologies.

The facilitation role played by AATF is giving rise to the concept of the “agricultural innovation platform.” This entails fostering effective public and private sector partnerships along the agricultural technology value chain — from basic and applied research to fi eld testing and commercialization, including facilitating market access for farmers who produce surplus. It also calls for working with partners in providing stewardship

throughout the development, delivery, and use of productivity-enhancing products to farmers. This model constitutes the neces-sary means for bringing products from gene technologies to African farmers, because it makes it possible to comprehensively address issues such as intellectual property management, regulatory compliance, public awareness, and stewardship.

AATF has negotiated for the right to use technologies that could ease the constraints faced by smallholder farmers. The Bacillus thuringiensis (Bt) gene obtained under license from Monsanto has the potential to control the infestation of cowpea by the insect pest Maruca vitrata. The sweet pepper ferredoxin-like protein (pfl p) gene, licensed to AATF by Academia Sinica of Taiwan, is used to control banana bacterial wilt in the cooking bananas of the East African high-lands. AATF has also established and is managing other partner-ships designed to deliver products from these technologies to African smallholder farmers.

The licensing agreements negotiated for these technol ogies have been obtained under farmer-friendly conditions that allow royalty-free access and sharing on the African continent. The AATF facilitation is intended to guarantee access to all tech-nologies that it promotes, to ensure cost-effective deployment of new products grown with such technologies, and to provide stewardship to ensure the long-lasting effect of these technologies on smallholder farmers’ productivity.


Viewpoint

PUBLIC-PRIVATE PARTNERSHIPS CLOSE THE YIELD GAP IN AFRICA’S AGRICULTURE

Mpoko Bokanga, Ph.D., Executive Director, African Agricultural Technology Foundation


But many African farmers have needs that can’t be

met today by commercial channels. Subsistence farmers, as well as those who produce enough to provide for themselves and a little to sell in most years, remain vulnerable to poverty and hunger when crops fail. Achieving true food security and sustained prosperity in Africa’s diverse rural communities requires partnerships among private companies, public agencies, and nongovernment organizations (NGOs). Each group has unique strengths and expertise to contribute.

Siaya is one of the poorest districts in Kenya. The

district is 600 square miles, but has only 56 miles

of paved roads. Subsistence farmers in Siaya have plots ranging from 1/8-acre to 1-acre; grow corn, sorghum, beans, and other crops for household consumption. Most farmers who produce a surplus one year are unable to process or store it until they can get the best prices in the local market. Even if they were to generate additional income and wished to invest in high-yielding hybrid seeds, there are only a few dozen trading centers in the district with few supplies.

One partnership tackling the local challenges

in Siaya is the Business Alliance against Chronic

Hunger (BAACH). In December 2006, a group of international, regional, and national companies collaborated with the govern ment of Kenya and nongovernmental organizations. They agreed on a single focus: to apply all

available private-sector expertise to develop new

strategies to increase food production, nutrition,

and incomes.5

The participating companies wanted to leverage their expertise and capabilities to improve value chains — from production, processing and packaging to retailing and marketing — through business development and market linkages. Companies implement

these solutions in partnership with govern-ments, NGOs, international agencies, and local communities. In Kenya, the BAACH action

plan is to improve production of staple and high-

value crops and to strengthen entrepreneurship.

One action that has already had an effect is a pilot voucher program for agricultural inputs. It has provided more than 10,000 farmers in the Siaya district with access to their choice of maize seeds and fertilizer.5

A key feature is that smallholder farmers are issued vouchers that can be redeemed for discounted seed and fertilizer at their local input dealers (stockists). Stockists are often the most sustainable and effective distribu-tion channel to serve small holder farmers in rural areas, so this program reinforces food security and local businesses at the same time. A business model for packaging, storing, selling, and processing surplus maize has also been developed. It could benefi t up to 12 percent of the district population.5

Achieving true food security and sustained prosperity in Africa’s diverse rural communities requires partnerships.


Monsanto is an active partner in the BAACH program in Siaya, Kenya, as well as in other partnerships across Africa that are making a real difference for thousands of farmers, their families, and their communities. A few of these joint projects are described below.

MILLENNIUM VILLAGESThe Millennium Villages Project is an arm of the Millennium Promise organization. Monsanto has made a commitment to the program, through 2010, to donate 240 tons of high-quality hybrid maize seed each year to villages in Malawi, Tanzania and Kenya, enough to reach 24,000 small-holder farming families.6 The Millennium Villages Project ensures that the seed is coupled with effective development efforts, so that resource-poor farmers have access to all the tools they need for successful agriculture: quality seeds, fertil-izer, extension services, credit, markets, and knowledge of best management practices from their local environment. In the past year, Monsanto’s vegetable seed company, Seminis, also donated vegetable seed to the Millennium Village Project in Malawi to help diversify farm production and nutrition.

HUNGER PROJECT MALAWI The Hunger Project Malawi (THP-Malawi) works in fi ve sections of the country to improve food security, water supply and sanitation, microcredit, education, and health services for a population of 85,000. For the last several years, THP-Malawi has procured hybrid maize seed from Monsanto on behalf of farmers in the program because

they expressed satisfaction with the products. In addition, Monsanto fi eld representatives provide farmers in the program with training and advice about how to get the best yields from the seed.

CLINTON GLOBAL INITIATIVE Monsanto is a member of the Clinton Global Initiative (CGI). Monsanto’s commitment to support African agriculture is renewed annu-ally and put into action through the projects described in this section.

NETWORK FOR THE GENETIC IMPROVEMENT OF COWPEA FOR AFRICA (NGICA)The cowpea, also called the black-eyed pea, is a staple grown across western Africa. It is essential for the nutritional health in the region. Unfortunately, up to 90 percent of the crop can be lost to insects. Monsanto researchers are working with NGICA scientists, USAID, the Rockefeller Foundation, and the African Agricultural Technology Foundation to develop insect-resistance technology for the cowpea (see viewpoint, page 10). Early results are promising, and confi ned fi eld trials are planned for 2008.

MONSANTO FUND The Monsanto Fund is our company’s philanthropic foundation.7 One of its focus areas is to improve nutritional well-being through agriculture. The Monsanto Fund supports several projects in Africa. In 2006, the Fund announced a $15 million gift to the Donald Danforth Plant Science Center.

Biotechnology products, now grown by millions of farmers around the world, have brought signifi cant benefi ts to smallholders in Asia and South Africa.

Half of the gift will support work on high-yield crops for Africa, including cassava resistant to mosaic virus. More information on Monsanto Fund grant recipients is avail-able on page 20 of this report and online at www.MonsantoFund.org.

Meeting Today’s Needs While Building for TomorrowWe believe that technology can help reduce the risks of farming — by producing the best quality seed possible and then protecting it against weeds, insects, and even drought. Through public-private partnerships, we are making progress in Africa in three phases that complement and build upon one another.

Phase I: Improved Access to Quality Hybrid Corn and Vegetable Seeds. Conventional hybrid maize seed has been used in the United States for more than 70 years, yet it remains unknown or out of reach for most corn farmers in Africa. The experiences of farmers such as Mary Katsonya (see page 6) of Malawi show that subsistence and transitional farmers can double their yields by using high-quality seeds in combination with best management practices, such as appropriate fertilizer and water use.2 We are working with the partners described in this report and investing more in our own business in Africa to achieve this.

With the end of apartheid and the emergence of land reform in South Africa, the development of a viable black commercial farming sector has become important for the nation’s agriculture, economic growth, and food security.

During apartheid, blacks were left with the worst land in South Africa. Few of them were farmers, and those who did farm had little exposure to modern agriculture.

The Monsanto South Africa team knew that these farmers could become successful with the right training. The team established the Buhle Academy, an agricultural institute, on 171 hectares of land donated by the Monsanto Fund. The academy provides training in farming, agricultural methods, and relevant business and entrepre-neurial skills to the rising class of smallholder farmers in South Africa.

To date, more than 1,400 students have completed academy courses. They have come not only from eight of the nine South African provinces, but from other countries, such as Zambia and Malawi. Most students at the Buhle Academy are between 20 and 35 years old. “This is most encouraging, as agriculture has been considered the ‘career of last resort’ and despised by many young people,” said Shadrack Mabuza of Monsanto South Africa. “At Buhle, it has been exciting to see new, young aspiring farmers become excited about the science and business of farming.”


Pledge Award Finalist

BUHLE ACADEMY HELPS SOUTH AFRICANS BECOME SUCCESSFUL FARMERS

www.MonsantoFund.org


Phase II: Improved Access to Existing Biotechnology Traits. Biotechnology products such as insect-resistant maize and cotton have been grown by millions of farmers around the world for the past 10 years and have brought signifi cant benefi ts to smallholder farmers in Asia and South Africa.8 Like hybrid seeds, however, these yield-protecting traits are virtually unknown to farmers in sub-Saharan Africa. We are working with farmer groups and other stakeholders to encourage the governments of Africa to put in place sound regulations that would allow fi eld trials of these existing biotech traits so that scientists and the public can observe fi rsthand the safety and benefi ts of this technology for their farmers. (See Viewpoint, page 10, for information on the African Agriculture Technology Foundation, which works to apply existing technologies to the crops most important to African farmers.)

Phase III: New Biotechnology Products for Africa. It’s very likely that Malawi will again face drought as severe as the droughts of 2004-2005. Drought occurs regularly on the African continent, and it is a major factor limiting corn production. Global climate change is likely to intensify the effects of drought. Africa, which may be the continent most severely affected, has the fewest resources to adapt to these changes. Already the constant threat of drought discourages many farmers from investing in some of the more basic agriculture inputs and best management practices, because they simply do not know when a lack of rain will wipe out all of their gains.

We believe that drought-tolerance tech-nology should be developed in African seeds, specifi cally for use by farmers in these drought-prone areas.

Technology is being developed to protect temperate

climate maize crops from yield losses due to drought.

After several years of fi eld trials, the results are promising. But if the historical technology gap between the introduction of new agricul-tural technology remains, it could be 10 years or more after the U.S. introduction of drought-tolerant maize before African farmers have a similar product available to them.

To make drought-tolerant maize for Africa a reality on a timeline that is parallel with, rather than sequential to, the U.S. launch, Monsanto is establishing partnerships with international research institutes, NGOs, foundations, and national research organiza-tions in Africa.

The need is urgent. These public/private partnerships are essential to drive real change in Africa. They are collaborations that can grow hope.

Global climate change is likely to intensify the effects of drought, and Africa may be the continent most severely affected.


Respecting Communities and PeopleBuilding a better society requires commitment to the places where we operate, to our employees, and to our customers. This commitment is demonstrated both by Monsanto’s

approach to human rights and work safety practices, and by the company’s

relationship with its communities.

Progress in Human Rights Implementation As an agricultural technology company, Monsanto has a unique opportunity to protect and advance human rights. In April 2006, we took an important step to formalize our commitment to do that within the company and among our business partners. This commit ment, published as the Monsanto Human Rights Policy,9 was adopted after an 18-month dialogue with key business leaders and external stakeholders.

The United Nations’ Universal Declaration on Human Rights and the International Labor Organization’s Declaration on Fundamental Principles and Rights at Work guided the articulation of Monsanto’s human rights policy. The policy considers the unique nature of Monsanto’s business and the agri-cultural industry, and it is aligned with the values prescribed in the Monsanto Pledge.

Respect for human rights is essential to who we are at Monsanto. Some of our business partners face different circumstances and challenges, however. We are committed to helping them overcome these challenges.

Our business leaders and external stakeholders fi nd that a continuous-improvement approach to rectifying human rights violations is the most effective and honest model for the company. “Protecting human rights is a process,”

said Maureen Mazurek, Monsanto director of global safety and human rights. “It is ongoing, and its goal is to make continuous improve-ments by iden tifying populations who are at risk and then addressing those risks.”

Since adopting the policy, company leaders have named human rights champions for each

Photo Above Bollgard cotton seed producers in India receive training, audits,

and incentives to use adult labor.

The problem of child labor fi rst became apparent during the era of industrialization in Europe and North America. It is an element of the poverty trap. Child labor is part of the bargain that resource-poor people have been “forced to make in order to achieve a degree of immediate security,” according to the International Labor Offi ce of the United Nations.10

Although signifi cant progress has been made over the past century in combating child labor world-wide, it is still a problem in many developing countries. Almost 14 percent of children aged 5 to 14 — more than 165 million children — are laborers world-wide. Among these, 70 percent work in agriculture.10

Nowhere is this situation more evident than in India. Each year, millions of children under 14 years old are forced to work as laborers in India illegally.11 According to the Indian Embassy in Washington, D.C., 90 percent of these children work in rural family settings, and “nearly 85 percent are engaged in

traditional agricultural activities.”11

They work long hours with no food or rest, earn low wages, and are deprived of their right to an education and a future.

Solving the complex socioeconomic problem of child labor requires sustained commitments from employers, governments, and nongovern-mental organizations. Monsanto Company took a hard look at this challenging area and adopted a policy to protect human rights.9 Since the policy adoption in April 2006, we have been assessing areas where risks of policy violations may exist and addressing those risks as they arise. In India, we identifi ed risks due to the use of child labor by third-party contractors in hybrid cotton seed-production fi elds. Many of these contractors did not understand the negative effects of employing children as laborers.

Monsanto employees began a phased program to ensure compliance with the company’s human rights policy, to raise awareness about the negative effects of child labor, and to provide contractors with strate-gies that would allow them to continue to be productive without child labor.

Beginning in 2005, clauses prohibiting child labor were included in contracts with all of our fi rst-phase business partners (suppliers of direct goods) in the Indian hybrid cottonseed business. All hybrid cotton business partners and about 2,500 farmers received training and materials. In addition, through incentives,

cottonseed farmers benefi ted by $160 an acre for complying with the no-child-labor program. This permitted them to afford adult labor.

To ensure compliance with the new contracts, Monsanto introduced an audit program that includes both internal and external third-party auditors. By the end of the 2007 growing season, all business partners and farmers will have been audited.

This effort is ongoing and the results are encouraging. The percentage of children making up the work force among our direct-goods suppliers was reduced — from 20 percent in 2004 to 5 percent in 2006. Further progress is expected in 2007.

This program has the potential to contribute to the future economic welfare of communities throughout India. Increased education and practical strategies enable employers to be productive without using children as laborers. As children are removed from the fi elds and progress is made with educational programs through the efforts of the Monsanto Fund and other philanthropic organizations, children will be better protected from abuse. They will be allowed to play, learn, and enjoy their childhood, exercising their fundamental rights to an education and a future.

Percent of Child Labor Found in Monsanto Supplier Work Forces Producing Hybrid Cotton Seed in India

Source: Monsanto


Issue Discussion

CHILD LABOR IN AGRICULTURE

2004 2005 2006

20

15

10

5

0

When the Monsanto India Seed Manufacturing team realized that child labor was a concern in their local hybrid cotton seed-production fi elds, it implemented a program to address the issue. The team formed partnerships with multiple stakeholders, including the Child Care Programme. The team members incorpo-rated child labor clauses into agreements with farmers and coordinators, and they created labor attendance forms to track the age of workers. An incentive program was developed to reward hybrid cottonseed farmers who complied with child labor laws and regulations. In 2006, these awareness programs and campaigns reached more than 1,700 farmers, numerous government offi cials, and other stakeholders.

Results from the program indicate that the percentage of children in the work force went down from 20 percent in 2004 to less than 5 percent in 2006. “Farmers have learned that children’s rights to education and childhood must be protected,” said Jolanta Paull, regional Environmental, Safety, and Health lead. “They are proud that this initiative allows them to be part of the solution.”

of Monsanto’s geographic and functional areas. The champions have received training in the company’s human rights policy. They serve as educators and points of contact for other employees when a question regarding human rights arises. In 2007, the human rights leadership team wrote a guidebook that will be distributed to all employees in 2008.

Improvements in the workplaces of Monsanto’s business partners are also evolving. We seek to do business with partners who also aspire to the continuous improvement of their workplace conditions and to respect and protect human rights. Signifi cant early progress has been made regarding child labor among third-party contractors in India (see story on page 16). Additional areas where we believe we can substantially

infl uence the human rights practices of our business partners are being identifi ed.

Work Site SafetyAround the world, Monsanto is committed to establishing and maintaining work site safety for its employees, including its seasonal staff. In 2007, we achieved the best injury and illness performance in our history, a total recordable rate (TRR) of 0.77. The TRR is a standard safety measurement used by the U.S. Occupational Safety and Health Administration (OHSA).

After several years of steady improvements in safety, Monsanto did experience some challenges in 2006. That year our TRR increased from 0.93 to 1.13, because of vehicular and on-the-job injuries at rural


Pledge Award Winner

CHILD LABOR IS ADDRESSED IN HYBRID COTTON SEED-PRODUCTION FIELDS IN INDIA

Monsanto’s Latin America North team held a complete review of the temporary seasonal workers program in Mexico, focusing on how to reduce costs and improve conditions for seasonal workers.

A key factor in selecting new labor agencies was ensuring that they understood and supported Monsanto’s Pledge to create a great place to work and to respect its people. To inform their decision, the team spent several weeks in remote locations, conducting interviews with farmers, vendors, local authorities, and fi eld workers.

The team made medical evaluations available to workers and contracted with vendors to provide purifi ed water to the workers daily at the point of departure. This provided an immediate benefi t for the workers, who until then had no preventive medical care and typically brought water from home or drew unsanitary water from irrigated fi elds.

This project signifi cantly improved the working conditions for temporary workers. More than 480 medical checkups, 536 dental evaluations, and 1,200 vaccinations were provided to seasonal workers. Monthly seasonal worker absence fell from 22 percent to 15 percent. The number of common diseases found among workers fell from 45 to less than fi ve. These improvements also benefi t the community, as workers now return to their families in better health than they did before.

international sites. Because every injury and fatality affects Monsanto, its employees, and their families, the company’s Environment, Safety, and Health team quickly identifi ed areas where training could be improved. In 2007, these changes resulted in a better safety performance: The injury rate among employee groups targeted for improvement dropped by half. The companywide TRR of 0.77 for 2007 is well below the U.S. industry average of 4.4.12

Over the past several years, all Monsanto seed

production sites have undertaken the goal of

achieving the U.S. Occupational Safety and Health Administration’s Voluntary Protection Program (VPP) Star status or equivalent certifi cation for international sites. More than 70 percent of our seed sites have attained

this goal. The VPP Participants’ Association also recognized Monsanto’s Luling, Louisiana, manufacturing plant for outstanding safety performance in 2005. Luling received the highest regional VPP recognition, the Star of Excellence. The recog nition is for main-taining injury and illness rates lower than 90 percent of U.S. sites.

In addition to bolstering work site safety, we have also taken steps to improve conditions for seasonal workers. In many countries, the company transports seasonal workers to the work site in school buses. We prefer this safety-conscious step to the common industry practice of using cargo trucks to transport workers. Many sites also work diligently to provide

better housing and safe drinking water for their

seasonal workers.



CONDITIONS IMPROVE FOR SEASONAL FIELD WORKERS IN MEXICO


Vehicle SafetyMonsanto began its vehicle safety program for employees in 2002. Each year, every employee completes an online driver’s training module. Employees who spend extensive time driving are required to complete behind-the-wheel training. Before the program began, we recorded more than nine accidents for every million miles driven. Today, our record is less than four accidents for

every million miles driven.

In 2007, the Vehicle Safety team placed a renewed emphasis on seat belt use. “In 2006, we saw several off-the-job vehicle accidents,” says Maureen Mazurek, Monsanto director of Global Safety Programs. “In some cases, the consequences of these accidents might have been minimized if the drivers had been wearing seat belts.” The results of the check indicated that 85 percent of all employees were safely buckled up entering or exiting our sites, said Mazurek. “These are strong results, but we would like to see them higher,” she said.

We have a mandatory seat belt policy. The policy covers all employees in company vehicles and all employees in personal or

rental cars on company business. Seat belts are required for the driver and all passengers whether the driving is done on a public road, company site, or farm.

Monsanto also enacted a cellular phone use policy in 2007. When driving company vehicles or driving on company business or on company property, employees may not use handheld cellular phones.

An employee’s commute to and from work is considered off-the-job by the

Monsanto Companywide Injury/Illness Rate (TRR)*

2003 2004 2005 2006 2007

1.2

0.8

0.4

0

* TRR (total recordable rate) is calculated by multiplying the number of occupational injuries and illnesses by 200,000, then dividing the total by the number of employee hours worked.

Monsanto Star Sites

2003 2004 2005 2006 2007

120

80

40

0

“Our goal is to see all Monsanto employees safely buckled up every time they are in a vehicle, on and off the job.”


U.S. Occupational Safety and Health Administration’s (OSHA) defi nition, but many jurisdictions around the world require seat belt use and prohibit handheld phone use while driving. “We hope employees

take the practice of wearing seat belts home and

share it with their families,” said Mazurek.

“Our goal is to see all Monsanto employees safely buckled up every time they are in a vehicle, on or off the job.” To carry our commitment further, Monsanto hosted 30 multinational companies at our Creve Coeur, Missouri, campus to share best practices and work collaboratively in the area of vehicle safety.

Community Development Monsanto is committed to giving back to the

communities where our businesses operate and

our people live. Because each community is unique, we work in partnership with local Monsanto employees and community representatives to align our support with community needs. In 2006, the Monsanto Fund, the philanthropic foundation of Monsanto Company, awarded $11.9 million in grants for nutrition, education, environment, and community projects.7

MONSANTO FUND HIGHLIGHTS

The Monsanto Fund seeks to improve the earth’s ecosystem — to ensure clean water, productive land, and thriving biodiversity — and the well-being of its people.7 In 2006, the Monsanto Fund awarded $11.9 million in grants. This sum included $10.9 million distributed across four focus areas (Community, $2.4 million; Environment, $0.9 million; Nutritional Well-Being, $4.1 million; Science Education, $3.5 million) and $1 million to match employee gifts to other charitable organizations. Grants awarded in 2006 include:

Finca International (Malawi) Grant to improve nutritional well-being of the productive poor through services that include microfi nance capital and training, agricultural productivity education, agro-enterprise training, and nutrition education: $360,000.

Centro Educacional de Tecnologia (Brazil) Grant to support an environmental education program in nine schools, serving as many as 10,000 children in the communities of Camaçari and Dias D’Avila in Bahia state: $38,000.

International Rice Research Institute (Philippines) Grant to provide funds for critical equipment that can accelerate and expand the analytical activities of the Grain Quality and Nutrition Research and Training Center, in support of improving the micro-nutrient content of polished rice: $220,000.

Botanical Society of America (United States) Grant for “Planting Science”, a computer-based project to develop and test new inquiry-teaching and learning resources that integrate plant science content and processes: $81,730.

In 2006 the Monsanto Fund awarded $11.9 million in grants, including $2.4 million for local needs like fi refi ghting equipment.7



EDUCATIONAL OUTREACH SERVES YOUTH IN SÃO JOSÉ DOS CAMPOS, BRAZIL

More than 6,000 people died and 135,000 houses were damaged during a May 2006 earthquake near the city of Yogyakarta, Indonesia. This area is home to Monsanto’s Klaten seed production site, and many farmers in the area produce seed for Monsanto. The Klaten team quickly identifi ed the more than 900 farmers affected. In addition to loss of 50 percent of the seed crop, there were 63 deaths and 149 injuries among the farmers’ families. The team respected the emotional needs of these families during this challenging time, but knew that the farmers would suffer even further without a successful harvest.

The team developed a program to benefi t the farmers, coordinating the donation and distribution of food, equipment, and supplies. Farmers who had lost their homes were given tents for temporary housing. In addition, the team worked closely with the Monsanto Fund to arrange for the donation of $30,000 to rebuild schools.7 This project brought signifi cant economic relief to the affected farmers, who went on to produce a successful harvest. Their communities also benefi ted through the speed at which the farmers were able to return to productivity, which provided some stability during a challenging time.

Pledge Award Winner

SEED SITE HELPS INDONESIAN FARMERS RECOVER FROM EARTHQUAKE

Many public schools in Brazil have limited resources for instruction in noncore subjects. Employees at Monsanto’s São José dos Campos site, recognizing the educational challenges faced by families in their community, developed two new programs.

The fi rst program involved building strong relationships with local schools and government offi cials to develop two computer-training centers in schools that could address the needs of students and provide the greatest educational benefi ts. Monsanto team members volunteered to work as instructors, sharing technical knowledge to improve the students’ computing skills. Since 2001, more

than 1,000 children, teenagers, and young adults have trained at these computer centers. Their new skills increase the opportunities they have to pursue careers that require computer literacy.

The second program raised environmental awareness among young people through education. The team members shared information about environmental responsibility with students, who were then encouraged to share what they had learned with others and to carry environmental protection concepts to their homes, schools, and community common areas. Since 2005, the program has helped young people become agents of change in their communities. Participants identify conditions that are considered to trigger harmful environmental effects, and they propose corrective actions through awareness and persuasive campaigns.

22 GROWTH FOR A HEALTHIER ENVIRONMENT

GROWTH FOR A


A healthy, sustainable environment is important to our business. Our customers are farmers, and our goal is to help them meet the world’s needs for food, feed, fuel, and fi ber with the least environmental impact. Through increasing use of hybrid seeds and biotechnology, farmers are achieving increased yields with fewer tractor passes and pesticide applications. By reducing the footprint of agriculture, we can help

mitigate human impacts on the environment.

HEALTHIER ENVIRONMENT

Photo Left Herbicide-tolerant crops, including Roundup Ready corn, allow farmers to use conservation tillage, which sequesters carbon in the soil.

23


Agricultural soils can sequester more than 10 percent of man-made carbon emissions.16

Agriculture Can Help Keep Carbon in Balance Ecosystems must be in balance to be able to produce healthy, abundant crops consistently. Agriculture both affects and is affected by many environmental issues that concern environmental organizations, policy-makers, and stakeholders: climate change, biodiversity, and water availability and quality.

Farmers cannot afford to be short-sighted. They need to fi nd the best tools to achieve ever-increasing yields while protecting their topsoil, soil moisture, nutrient levels, and the environment around them.

Climate change is an area of intense discussion around the world. The Intergovernmental Panel on Climate Change, an authoritative body of scientifi c experts, released reports in 2007 that looked at important aspects of climate change: physical science, impacts, and mitigation.13 Agriculture is inextricably affected

by weather, temperature, and moisture changes

thought to be caused by climate change.

At the same time, agriculture is a contributor to greenhouse gas (GHG). Worldwide, agriculture as an industry is responsible for about 13.5 percent of all greenhouse gas emissions.14 Nitrous oxide, released when fertilizer in the soil degrades, is the largest agricultural contributor to greenhouse gas.15


According to the Food and Agriculture Organization (FAO) of the United Nations, “agricultural soils are among the planet’s largest reservoirs of carbon and hold potential for expanded carbon sequestration, and thus provide a prospective way of mitigating the increasing atmospheric concentration of carbon dioxide. Soils can sequester around 20 petagrams of carbon in 25 years, more than 10 percent of the anthropogenic (man-made) emissions.” 16

But soil cannot absorb more carbon indefi -nitely. According to the U.S. Environmental Protection Agency, soil carbon accumulation through conservation tillage systems occurs for periods of 15 to 20 years. At that point, the soil reaches a carbon steady state with no additional gains in carbon sequestration. Studies suggest that agricultural soils in the United States, on aggregate, have not reached a biophysical saturation point.

Rattan Lal, director of the Carbon Manage-ment and Sequestration Program at Ohio State University, believes that ultimately, carbon reductions are needed. But he says until alternative energy and more effi cient transportation and manufacturing systems can be developed, which may take 50 years, soil carbon sequestration can be a cost-effective “bridge to the future.” 17

Agriculture has a dramatic capacity to soak up global warming gases. Worldwide, farmers have the opportunity to offset their own emissions and those of other industries.

Photo Above Conservation Tillage recycles leaves, stubble, and other residue from past crops into nutrients. As a result, it conserves soil and water, reduces erosion, and reduces carbon dioxide released to the atmosphere.

Origin of Greenhouse Gas Emissions, 2006

■ 24.6% Electricity and heat■ 18.2% Land-use change■ 13.8% Industry■ 13.5% Farming■ 13.5% Transportation■ 8.9% Other fuel use■ 7.5% Waste and spills

Source: Oak Ridge National Laboratory

Climate change issues have occupied leading scientists around the world for many years. Monsanto’s scientists have recently taken a deeper look at the data, the trends, and the implications for agriculture. Monsanto created a panel of about 20 senior scientists to review studies and work with leading academics in this area. They spent the better part of a year researching existing studies and discussing the data. The panel’s consensus is that temperatures are rising and are expected to continue to rise, with related climatic consequences.

These consequences include changes in temperatures and weather patterns in agricultural regions. These changes have the potential to change crop productivity and cropping patterns. Other impacts could

include increases in the range and reproductive capabilities of weeds, increased geographic range of insect pests, increases in the incidence of mycotoxins (toxic fungi that form at the site of an insect intrusion into the plant), and increases in plant diseases.

The panel’s analysis also concluded that Monsanto’s operations have been continuously reducing their carbon impact per pound of product. Current and future products add value in two ways: by mitigating climate change impacts and by helping plants adapt to increased stresses of changing climate conditions.

Roundup Ready crops, which promote conservation tillage practices, are one agent of mitigation. Conservation tillage results in improved carbon sequestration and reduced fuel consumption. Con-till practices can sequester as much as a half ton of carbon per acre a year. Less tillage also means fewer passes by tilling equipment, and less fuel. The combined biotech crop-related carbon dioxide emission savings from reduced fuel use and additional soil carbon

sequestration in 2005 were equal to the removal from the roads of almost 4 million cars.8

The panel also found that Monsanto’s future technologies can help crops adapt to the climate and weather results of rising global temperatures. Through plant breeding, Monsanto is producing more resilient, better-adapted crops by continuous selection as local conditions change. The pace of change in temperature and climate in general is consistent with the pace at which Monsanto already adapts plants through its breeding programs.

Monsanto’s pipeline of biotech crops is focused on environmental-stress adaptation. Included in the pipeline are drought-tolerant crops and nitrogen-effi ciency genes. Drought-tolerant crops are designed to provide greater yield stability in years when crops would otherwise suffer due to drought conditions. This product will take some of the risk out of farming, in both developed and developing countries (see related story on page 13). Nitrogen-use effi ciency has the potential to contribute to a signifi cant reduction of agricultural GHG emissions while maintaining high grain yield at lower nitrogen levels.

Sustainability has long been a focus of Monsanto’s efforts. Adoption of biotech products has already led to more sustain-able and effi cient agriculture. Decisions on future biotech products will take into account climate change implications.


Issue Discussion

CLIMATE CHANGE: MONSANTO FELLOWS ASSESS CHALLENGES AND OPPORTUNITIES

Conclusions of Monsanto’s Climate Change Panel

Climate change is real

Monsanto is reducing its carbon impact

Our pipeline products focus on environmental stress


Monsanto Products Promote Carbon Sequestration Systems Monsanto products help farmers to meet

the challenges of climate change head on.

Monsanto’s Roundup Ready Crops: These products promote the use of conservation tillage systems by reducing the need to till the soil to achieve weed control. The Conservation Technology Information Center has credited biotech crops with increased con-till acreage since their intro-duction (see chart).18 A similar study by the American Soybean Association showed that reduced tillage practices with soybeans — triggered in large part by biotech crops — saved 247 million tons of irreplaceable topsoil in 2000. Conservation tillage reduced the number of times a farmer had to run equipment over the fi eld, saving 234 million gallons of fuel.19

Monsanto’s Insect-Resistant Crops: Biotech products such as YieldGard Corn Borer corn, YieldGard Rootworm corn, and Bollgard II reduce the need for pesticide applications, which also reduces diesel emissions from application machinery.

Biofuels: Monsanto supplies important tools to corn farmers who sell to the ethanol market. In addition to yield improvements that allow farmers to get more corn from each fi eld, we also offer our Processor Preferred High Fermentable Corn line of high-starch hybrids, which yield more ethanol. In addition, the company is collaborating with Perten Instruments on tools that will help make ethanol facilities more effi cient in producing both ethanol and dry distillers grains, a byproduct of the ethanol process that is used as livestock feed.

1996 2001 1996 2001 1996 2001

30

20

10

0

30

20

10

0

30

20

10

0

Tillage Practices and Roundup Ready Soybean Acres (million acres)

■ Roundup Ready ■ Non Roundup Ready

No-Till Reduced Till Conventional Till

Source: Conservation Technology Information Center


MONSANTO ANNOUNCES ITS COMMITMENT TO REDUCE CARBON DIOXIDE EMISSIONS, JOINS CHICAGO CLIMATE EXCHANGE

In 2007, Monsanto joined the Chicago Climate Exchange (CCX), North America’s only voluntary, legally binding green-house gas emissions reduction, registry, and trading program.

As part of its agreement, by 2010 Monsanto will reduce its own direct carbon emissions at major U.S. manufacturing sites by 6 percent from its 2000 levels or purchase carbon emission offsets as specifi ed in the CCX contract.

“Our job is to help farmers improve their productivity while using resources judiciously,” said Jerry Steiner, executive vice president at Monsanto. “Reducing our own carbon emissions

is a start. But we believe our bigger value is through products that help farmers practice conservation tillage and increase yields to meet growing food and fuel needs, while they maintain or even improve the environment.”

Depending on their farming practices, farmers can actually reduce carbon dioxide in the air. Plants take in carbon dioxide and use it to build roots, stalks, grain, and other parts. If farmers minimally till their fi elds before planting, much of that carbon remains in the soil. Farmers can sell this sequestered carbon as credits on the Chicago Climate Exchange. “This incentive encourages more farmers be an integral part of efforts to reduce greenhouse gas emissions,” Steiner said.

Future Products: In the pipeline are several products intended to address climate change and help farmers cope with other stressors.

Drought-tolerance genes would allow crops to

deliver strong yields with less water. In corn, the fi rst generation drought-tolerance trait is currently in its fi fth season of tests at multiple sites. Drought-tolerance genes are expected to protect and possibly increase crop yields in areas with moderate drought stress, while reducing irrigation costs. In 2007, Monsanto began to work with BASF to develop high-yielding crops and crops that are more tolerant to adverse conditions such as drought. The two companies expect to generate more viable research projects together than either could alone. The companies hope

to accelerate the introduction of new products, bringing a greater number of traits to the market at a faster speed.

Nitrogen-effi ciency genes would allow farmers to increase the effi ciency of fertilizer, so that more is used by the crop and less is left in the soil to form greenhouse gases or to run off into waterways.

More effi cient nitrogen use will also reduce fertilizer costs, which are typically about a fi fth of corn farm operating costs. Monsanto in October 2007 announced a collaboration with Evogene Ltd. to develop genes that will help corn, soy, canola, and cotton plants maintain yield with less nitrogen.

Market-based mechanisms such as emissions trading have become widely accepted as cost-effective methods for addressing environmental concerns, including air quality. Carbon markets to address climate change issues are the next frontier, and their potential is huge. The Chicago Climate Exchange (CCX) is well-positioned to develop this opportunity with traders and corporations. We gave the fi rst paper proposing the development of a market for carbon credit trading at the 1992 Earth Summit in Rio de Janeiro. The idea initially met with skepti-cism, but over the course of the decade, it gained force.

There are now more than 360 CCX members. They repre-sent a range of organizations: U.S. and European corporations, including Ford, Motorola, Bayer, Rolls-Royce, and Monsanto; universities in Iowa and Minnesota; and cities such as Chicago, Illinois, and Portland, Oregon. International members come from Australia, Brazil, China, and India. Baseline emis-sions by CCX members currently account for almost 15 percent of U.S. stationary source emissions, an amount greater than Germany’s annual allocation under the EU trading system. That makes CCX the largest market outside of the EU Emissions Trading Scheme.

The CCX program recognizes many greenhouse gas mitigation options, including on-site emis-sion reductions, allowance trading, and use of a limited range of verifi ed and tradable offset proj-ects. Chicago Climate Exchange members who cannot reduce their own emissions can purchase credits from those who make extra emission cuts, or they can buy offsets from individual mitigation projects, including no-till or low-till farming plans. Studies suggest that agricultural lands have the potential to sequester approximately 275 to 763 million metric tons of carbon dioxide each year, roughly 3.75 percent to 10 percent of total U.S. emissions. Farmers who practice minimum tillage have the potential to sequester up to half a ton of carbon per acre on their farms each year.

By trading credits on the Exchange, farmers can earn more from their operations while improving the climate picture and building organic matter to enrich their soil. It’s a winning proposition all around.

Our members are building the monitoring, verifi cation, legal, banking and trading infrastructure that will be needed to make this market function. We continue to attract the attention of other markets in the United States and around the world that are interested in addressing the issue. Many are interfacing with our program.

We are building a bridge to the European Union through the European Climate Exchange, which started trading in April 2005. The contours of a truly global marketplace for emissions are emerging. CCX’s role is to inform the public debate on the real cost of climate change mitigation so that policy-makers and the public will be better informed for future decisions. If we can accomplish that, we will have succeeded.

The author is chairman and CEO of the Chicago Climate Exchange (CCX) and a research professor at the Kellogg Graduate School of Business at Northwestern University.


Viewpoint

ENVIRONMENTAL AND FINANCIAL MARKETS CONVERGE

Dr. Richard L. Sandor, Chairman and CEO, Chicago Climate Exchange


Meeting Humanity’s Needs While Reducing the Environmental Impact of AgricultureAs population increases and people demand higher-quality food, farmers need tools that will allow them to meet the world’s needs for more food, fuel, and fi ber while reducing agriculture’s impact on the land and helping to preserve natural habitats. Recent studies have shown that farmers who plant biotech crops make fewer pesticide

applications and that biotech crops are better for biodiversity than conventional

crops.20 Over the next decade, biotechnology will deliver even

more products that address land and resource limitations.

Biotech Crops Permit Reduced Pesticide UseBiotech crops have helped farmers reduce their use of pesticides in crop production. Since 1996, farmers have cut their pesticide use by almost half a billion pounds (224 m kg) with genetically modifi ed (GM) crops, about 7 percent.21 This represents about 40 percent of the annual volume of pesticides used in the European Union.21 In the United States, in 2005

alone farmers used almost 70 million pounds less

pesticide by planting biotechnology-derived crops.22

U.K. economists Graham Brookes and Peter Barfoot have quantifi ed changes in the “environmental footprint” of agriculture with GM crops with an environmental index quotient (EIQ).21 The EIQ is an indicator that

Photo Above Bollgard cotton has allowed farmers to use 94.5 million kilograms less insecticide through 2005.


draws on key toxicity and environmental exposure data related to individual products and allows for pesticide comparisons. Brookes and Barfoot found that the overall environ-mental impact (EIQ) of pesticide use on GM crops was 15 percent less than pesticide use on non-GM crops, a signifi cant difference.21

Although pesticide impacts vary by country, year,

and pesticide use programs, the global trend of

reduced pesticide use has been remarkably

consistent for a decade.

Biotech Crops Raise Yield per AcreSince its introduction in 1996, biotechnology has enabled farmers to improve yield and reduce inputs through traits that allow improved weed and insect management.

Farmers need to produce more food than ever before.

Each year, global population grows by more than

73 million.23 This is only slightly less than adding a population the size of Germany’s each year. As a result, world population is expected to reach 7 billion by 2013 and 8 billion by 2028. And, as people in developing countries attain higher levels of education and income, the demand for higher-quality food increases. The combined effect of population gains and income gains around the world is projected to increase the demand for food 55 percent by 2030.24

Much of the land best suited to agriculture is already under cultivation. To avoid converting marginal or fragile lands, technology is needed to increase yield per acre on land that is already

Since 1996, farmers have cut their pesticide use by almost half a billion pounds with genetically modifi ed crops.20, 21

Global Impact of Changes in Applications of Pesticides with GM Crops: 1996-2005

Change In

Pesticide Application Environmental mass (m kg) percent Impact

HT Soy -51.4 -4.1% -20.0%

HT Maize -36.5 -3.4% -4.0%

HT Cotton -28.6 -15.1% -22.7%

HT Canola -6.3 -11.1% -22.6%

IR Maize -7.0 -4.1% -4.6%

IR Cotton -94.5 -19.4% -24.3%

Total Change -224.3 -6.9% -15.3%

HT: herbicide-tolerant; IR: insect-resistant

Photo Above Brothers Craig and Gene Stehly grow Asgrow brand Roundup Ready soybeans to protect yield on their family farm in South Dakota.


cultivated, through improved pest resistance, stress tolerance, and nutrient utilization.25

Biotechnology and advances in breeding are helping

agriculture achieve higher yields and meet the needs

of an expanding population with limited land and

water resources. Production of primary food and feed crops — corn, wheat, rice and oilseeds — has increased by 21 percent since

1995, while the total cropland devoted to these crops has increased by only 2 percent.26 The productivity gains that accounted for most of the increased production of these crops are also important for global food security and land conservation.

Monsanto predictions are for average soybean yields in the United States to increase from 43 bushels an acre in 2006 to 80 bushels an acre in 2030 — nearly doubling. Of this increase, about 50 percent will be due to biotechnology and 25 percent to molecular breeding improvements.

In corn, yields are expected to increase from 149 bushels an acre in 2006 to 300 bushels an acre in 2030. Of this, about 33 percent will to be due to biotech nology and 33 percent to molecular breeding improvements.

In both corn and soybeans, continued innova-tion in agricultural practices may contribute to yield gain, as well.

Over the next decade, biotechnology has the

potential to deliver several benefi cial products.

These products may include plants that can

Soybean Yield Potential to 2030 in the United States(yield in bushels per acre)

• Historical Yield • Trend Based on Historical Yield Data• Molecular Breeding • Biotech Yield

300

200

100

01970 1990 2010 2030

Corn Yield Potential to 2030 in the United States(yield in bushels per acre)

• Historical Yield • Trend Based on Historical Yield Data• Molecular Breeding • Biotech Yield

90

60

30

01970 1990 2010 2030

AGRICULTURAL PRODUCTIVITY GAINS HELP ADDRESS LAND LIMITATIONS

MONGOLIA

CHINA

KAZAKHSTAN

RUSSIA

AGRICULTURAL PRODUCTIVITY GAINS HELP ADDRESS LAND LIMITATIONS

If there had been no productivity gains since 1995, more than 400 million acres (160 million hectares) of new cropland would have been required to produce the actual 2004 total of 2.34 million tons of primary crops. That is an area larger than the cropland areas of the United States or China, or the entire country of Mongolia.26


tolerate stress from harsh conditions — such as arid or saline soils, cold environments, or low nutrient availability — and continue to produce food. Applied to areas that are not under stress conditions, these products have the potential to boost yield per acre with no changes to inputs.

Waterbirds and Farm Stewardship Waterbirds are sensitive indicators of ecosystem health. To study the impact of row-crop agriculture on U.S. waterbird populations, the National Audubon Society, Monsanto, and the Monsanto Fund launched a three-year collaboration called “Waterbirds on Working Lands.” 27

The project recognized that since most farmers are

already conscientious stewards of their farmland,

results could be further enhanced by identifying

and sharing best practices. Audubon provided the project staff and conducted the research and literature reviews. A grower advisory board provided valuable insight to the project. The Monsanto Fund provided the $2.1 million funding, and Monsanto helped with agricultural expertise.7

The Audubon Society drew up an inventory of 137 species of waterbirds at potential risk in seven bird conservation regions that include much of the Mississippi River watershed. An analysis of data revealed that 72 percent of the species studied had either stable or increasing continentwide popula-tions over the past 20 years. The rest of the species were decreasing.

The report found that waterbirds tended to do

better in the areas with the highest proportion

of land devoted to row crops. Birds there increased by 3.78 percent a year compared with 1.54 percent a year for the same species overall on the continent.27

The Audubon Society attributes these improvements to several factors: less use of harmful pesticides, more activity by wetland and farm conservation programs, and more farmers who left excess grain in their fi elds for waterbirds — often because of conservation tillage practices. All of these practices can accompany proper row-crop management.

72 percent of the 137 waterbird species studied had either stable or increasing continentwide populations over the past 20 years.

Efforts are now focused on encouraging further farmland stewardship. Recommen-dations to enhance farmlands included optimized nutrient management plans, greater use of minimum tillage systems, and use of integrated pest management practices. These practices may involve the use of low-toxicity agrichemicals and pest-resistant cultivars, harvest management to allow early nesting, and fi eld border and edge management practices to protect waterbird habitats.

The joint project not only produced a robust work product; it also gave all of the organiza-tions involved a better understanding about how to work together. According to Tess Present, Audubon vice president of conserva-tion planning support and Waterbirds Project

lead, “The Waterbirds on Working Lands Project enabled Audubon to better understand the concerns and issues of the farmer commu-nity, and how we could better work together to conserve wildlife habitat and biodiversity.”

John Anderson, a Monsanto Technology Development Manager, concurred. “Audubon and Monsanto have similar goals in helping farmers to maintain their economic viability and to meet growing food demands while creating the least envi-ronmental impact. Strong partnerships like this one, which included farmers and focused upon results, achieve goals constructively and collaboratively.”

Several years ago, the Seminis research team in Salamá, Guatemala, recognized that local wildlife species were perishing because of increased human activity. The team decided to create a protected wildlife area to raise awareness of biodiversity among workers and local residents.

The team built a new water reservoir for the research center and designated 20 percent of the site for wildlife. Hunting, a popular local activity, was banned at this site. Team Members then created habitats for the animals, including specially designed sandbanks for iguana nesting. Since the creation of the wildlife area, many species have made their homes there — iguanas, rabbits, squirrels, armadillos, raccoons, wildcats, opossums,

and serpents. Many birds also nest in the reserve, including grackles, pigeons, quails, sparrow hawks, and 3,000 white and gray migratory herons.

The team demonstrated to workers and community members the value of conservation and the benefi ts of wildlife protection. “We wanted to show our employees and the community that there is a need to protect areas like this,” said Joel Calderón, Salamá site manager. “We are setting the example on this environmental issue in the Salamá Valley, and we want the community to learn from this project.”



WILDLIFE PROTECTION PROJECT EDUCATES COMMUNITY IN GUATEMALA


Environmental Efficiency of Our OperationsIn addition to making products that help reduce the impact of agriculture on the environment, we are also committed to reducing the direct impacts of our operations.

Three Monsanto facilities (in Augusta, Georgia, in Luling, Louisiana, and in Muscatine, Iowa) have been recognized as top-performing facilities by the U.S. Environmental Protection Agency (EPA) Performance Track program. This program recognizes facilities that demonstrate sustained environmental compliance, commit themselves to continued measurable environmental improvements, and actively participate in community outreach.

We measure the effects of our chemical operations

through recognized reporting procedures. The eco-

effi ciency reporting method used on the following

pages was developed in cooperation with the World

Business Council for Sustainable Development. The system permits year-to-year comparisons of new data to baseline data from calendar

year 1990. Product data (for example, energy use and material consumption) are recorded by total amounts and by environmental infl uence per unit of output. For purposes of comparison with prior years, a constant product mix based on Monsanto’s technical-grade chemical production in calendar year 2006 is used. That adjusts previous-year data so that changes in product mixes do not infl uence the comparability of the year-to-year eco-effi ciency indicators. Ozone depleting substances are not graphed, because the total is too small to be statistically signifi cant.

At our headquarters in Creve Coeur, Missouri, we are purchasing 10 percent of our total energy consumption from renewable sources through the Ameren Pure Power initiative.28


Waste OffsiteWaste (metric tons)/ Product Output (metric tons)

0.024

0.026

0.090

9,700/404,000

10,600/412,000

15,600/173,000

2006

2005

1990

MORE EFFICIENT LESS EFFICIENT

Energy ConsumptionEnergy (gigajoules)/ Product Output (metric tons)

2006

2005

1990


48.5

48.1

91.3

19,600,000/404,000

19,800,000/412,000

15,800,000/173,000

Water ConsumptionWater (cubic meters)/ Product Output (metric tons)

2006

2005

1990

37.1

36.4

74.6

15,000,000/404,000

15,000,000/412,000

12,900,000/173,000


Chemical Oxygen Demand (COD)COD to surface water (metric tons O2 eq.)/ Product Output (metric tons)

2006

2005

1990

0.0072

0.0073

0.0120

2,900/404,000

3,000/412,000

2,080/173,000


Direct Greenhouse Gas EmissionsGHG (metric tons CO2 eq.)/ Product Output (metric tons)

2006

2005

1990


3.23

3.39

4.96

1,305,000/404,000

1,397,000/412,000

858,000/173,000

Acidifi cation EmissionsEmissions (metric tons SO2 eq.)/ Product Output (metric tons)

2006

2005

1990

0.015

0.030

0.088

5,950/404,000

12,310/412,000

15,250/173,000


Indirect Greenhouse Gas EmissionsGHG (metric tons CO2 eq.)/ Product Output (metric tons)

2006

2005

1990


1.45

1.44

2.53

585,000/404,000

595,000/412,000

438,000/173,000

Photochemical Oxidant CreationVOCs (metric tons)/ Product Output (metric tons)

2006

2005

1990

0.00025

0.00024

0.00057

102/404,000

97/412,000

99/173,000



This year, we have included additional performance indicators developed by the Global Reporting Initiative, a stakeholder network that developed principles and indicators that organizations can use to measure and report economic, environmental, and social performance. The following environmental indicators are for our 2006 global chemical operations.

Material ConsumptionMaterials (metric tons)/ Product Output (metric tons)

2006

2005

1990

6.4

6.8

8.3

2,599,000/404,000

2,792,000/412,000

1,440,000/173,000


EutrophicationPhosphates to surface water (metric tons PO4 eq.)/ Product Output (metric tons)

2006

2005

1990


0.0064

0.0090

0.0095

2,600/404,000

3,690/412,000

1,650/173,000

Direct Energy Consumption

Source (gigajoules)

Natural Gas 6,271,368

Oil 70,058

Coal 6,760,417

Waste Fuel 68,787

Total 13,170,630

Indirect Energy Consumption

Source (gigajoules)

Electricity 6,432,506

Raw Materials Consumed

Source (metric tons)

Direct Materials 403,701

Nonrenewable Materials 2,195,238

Total Water Discharge by Quantity and Destination

Water Discharge (million gallons)

Surface Water Fresh 4,101

Surface Water Saline 263

Total 4,364

Total Water Withdrawn by Source

Water Source (million gallons)

Public Water Supply 487

Ground Water 2,913

Surface Water — Fresh 1,121

Total 4,521

Not included is water contained in incoming raw materials (e.g. NaOH)

Surface Water Quality After Treatment

Water Discharge (kilograms)

BOD (biochemical oxygen demand) 59,256

COD (chemical oxygen demand) 2,899,860

PO4 Equivalents 2,596,119

Other Signifi cant Air Emissions by Type and Weight

Emission (kilograms)

PM (particulate matters) 781,501

SO2 3,780,678

NOX 3,103,507

CO 11,579,010

VOC (volatile organic compounds) 106,926

HAP (hazardous air pollutents) 101,085

GROWTH FOR A

Increases in agricultural productivity help farmers become more profi table. Around the world, farmers select Monsanto products because they reduce the labor and inputs required while delivering superior yield. We are committed to delivering products that increase

yield and address the needs of farmers, processors,

and consumers.

Photo Left Pascal Metge grows DeKalb brand YieldGard Corn Borer corn on his farm in France to protect yield against impact from the European corn borer.

PROSPEROUS ECONOMY

39

40 GROWTH FOR A PROSPEROUS ECONOMY

Agricultural Innovations MakeFarm Families More Prosperous Around the world, agricultural innovations are improving the economic well-being of farmers. A better yield means greater output per acre, hour, and dollar. In addition, biotech crop-protection strategies allow farmers to use their inputs more effi ciently. Monsanto’s technologies are helping farmers realize these economic benefi ts. We will continue to introduce new products with benefi ts for farmers and consumers.

Biotech Crops Are Responsible for $27 Billion in Additional Farm IncomeBecause of the economic and environmental benefi ts that biotech crops deliver, farmers have planted more acres with biotech products each year since their introduction. According to Clive James, chair and founder of the International Service for the Acquisition of Agri-Biotech Applications, 10.3 million farmers planted biotech crops in 22 countries in 2006, up from 8.5 million farmers in 21 countries in 2005.29 The land planted to biotech crops in 2006 increased by 13 percent from 2005. This is the 11th consecutive year that biotech crop acreage has grown by more than 10 percent. Since 1996, the global area of biotech has increased about 60-fold, from 4.2 million acres (1.7 million hectares) planted in 1996 to 250 million acres (102 million hect-ares) planted in 2006. The cumulative area planted to biotech crops during that period was 1.43 billion acres (577 million hectares).29

Photo Above Tom and Charm Arnott grow Bollgard II and Roundup Ready cotton on their family farm in Queensland, Australia.


“This unprecedented high adoption rate is testimony to the trust and confi dence of millions of small and large farmers in crop biotechnology in both industrial and developing countries,” said James.29

A study by U.K. economists Graham Brookes and Peter Barfoot quantifi ed the cumulative economic and environmental effects of biotech crops grown from 1996 through 2005.8 They concluded that farmers who planted biotech crops realized signifi cant economic gains over farmers who planted nonbiotech crops. Moreover, in every country where biotech crops are grown, farmers benefi ted from higher economic returns. Farm income increased by $5 billion from biotech crops in 2005. The cumulative increase in farm income from biotech crops since 1996 was $27 billion.8

Increased planting of biotech crops in developing

countries is providing increased yields and income

to resource-poor farmers. Ninety percent of the farmers who benefi ted from biotech crops were resource-poor farmers in developing countries, whose increased income contrib-uted to the alleviation of poverty there.29 Farmers in developing countries earned most (55 percent) of the additional $27 billion in cumulative farm income, largely from insect-protected cotton and herbicide-tolerant soybeans.8

In addition to the 22 countries that planted biotech crops in 2006, 29 countries have approved the importation of biotech crops,

Because of the economic and environmental benefi ts that biotech crops deliver, farmers have planted more acres with biotech products every year since their introduction.

Photo Above Harald Nitschke grows YieldGard Corn Borer corn on his farm in Germany. He is one of several thousand European farmers who have chosen this technology.

Global Farm Income Benefi ts from Genetically Modifi ed Crops

2005 1996-2005(million dollars) cumulative

Herbicide-Tolerant Soy 2,842 14,417

Herbicide-Tolerant Maize 212 795

Herbicide-Tolerant Cotton 166 927

Herbicide-Tolerant Canola 195 893

Insect-Protected Maize 416 2,367

Insect-Protected Cotton 1,732 7,510

Others 25 66

Total Income 5,588 26,975

Source: Brookes & Barfoot


bringing the total number of importing countries to 51. Six European Union (EU) countries planted biotech crops in 2006, with Slovakia being the most recent country to adopt them.29 The specifi c economic benefi ts of biotech crops were studied in four countries: India, the United States, Brazil, and France.

India A study by IMRB International compared key economic indicators among Indian farmers growing biotech insect-resistant cotton with those growing nonbiotech cotton.30 The study concluded that biotech insect-resistant cotton farmers in India earned higher profi ts than nonbiotech farmers, as a result of the higher yields and lower production costs of biotech cotton.

Farmers who planted Bollgard and Bollgard II cotton in 2006 earned on average an additional 7,757 rupees ($196) an acre. This increase was attributed to a more than 50 percent higher average yield for insect-resistant cotton than for conventional cotton. Bollgard II farmers reported the highest yield, 1,138 kilo-grams an acre; Bollgard farmers reported 1,033 kilograms an acre.

In addition, farmers’ expenses for inputs were reduced with biotech cotton. Bollgard farmers spent an average of $18 an acre for insecticide to control bollworm, the major pest in cotton. Farmers of conventional cotton spent an average of $40 an acre.

Sitaram Madhavrao Solate is one farmer who has

benefi ted by planting Bollgard cotton. He has grown cotton on his farm in the Aurangabad district of Maharashtra state for many years. He began growing Bollgard in 2004. Before planting Bollgard, 2003 yield on his four acres of cotton was 900 kilograms per acre, with a net profi t of 28,000 rupees ($715), or 7,000 rupees per acre ($178). Since he switched to Bollgard, his yield and net profi t have risen signifi cantly. He has been able to purchase farm equipment, a color television, and additional land for cotton production.

Studies have reported that biotech insect-resistant cotton farmers in India earned higher profi ts than nonbiotech farmers.

Yield and Cost Benefi ts of Biotech Cotton in India

(dollars/acre) Nonbiotech Bollgard Bollgard II

Farmer Price $ 10.50 26.16 33.28

Pesticide Cost on Bollworms 39.80 17.53 10.15

Pesticide Coston Other Pests 34.78 33.31 23.13

Yield (kg/acre) 689 1,033 1,138

Value of Yield* $315.60 473.10 521.20

Source: IMRB International*Calculated at $45.80/100kg

Comparison of Solate’s Profi ts, Before and After Adopting Biotech Cotton

2003 Nonbiotech 2006 Bollgard

Cost per Acre $211 $214

Yield per Acre 900 kg 1,400 kg

Profi t per Acre $178 $499

He now plants cotton on 20 acres. In 2006, he produced 1,400 kilograms per acre. He had a profi t of 392,000 rupees ($9,974), or 19,600 rupees an acre ($499).

United States The National Center for Food and Agricultural Policy (NCFAP) reports that biotech crops continue to be planted on more acres in the United States because they deliver signifi cant economic and environmental benefi ts for U.S. farmers. Farmers who planted biotech varieties of soybeans, canola, cotton, and corn in 2005 benefi ted from higher productivity and higher net returns and made signifi cantly fewer pesticide applications for weed and insect control.22

In 2005, U.S. farmers planted eight biotechnology-derived crops on 123 million acres, an increase of 4 percent from 2004.22

This produced several advantages: higher productivity of 8.3 billion pounds, increased net returns to farmers of $2 billion, and a reduction of almost 70 million pounds in pesticide applications.22 These results are consistent with the trends reported in previous NCFAP studies.

All of the states producing biotech crops reaped considerable benefi ts. Large increases in biotech corn and soy plantings in the Midwest in 2005 resulted in a large increase in benefi ts in this region over previous years.22

In the Umerkote area of Orissa, India, predatory lenders sometimes exploit resource-poor farmers by charging high interest rates — more than 20 percent a year. Often, farmers are unable to pay back these loans because they have access only to poor-quality seed. Monsanto Sales representative Dibyendu Padhan realized that Umerkote’s agronomic conditions were ideal for maize cultivation and that Monsanto hybrid varieties would

do well there — if only farmers had access to the technology and reliable agricultural credit.

Padhan set up meetings between local leaders and banks supported by the National Bank for Agriculture and Rural Development (NABARD). As a result, NABARD-supported

banks offered the farmers low-cost credit to purchase DeKalb maize seed and other inputs. Padhan also explained the differences between open-pollinated and hybrid

seed to the farmers. He introduced best agronomic practices by constructing 100 demonstration plots of DeKalb hybrids.

Through his efforts, a transparent, reliable credit and distribution system was created. By adopting hybrids and improved agronomic practices, the farmers increased their yields by 1.8 to 2 metric tons a hectare. “With access to low-cost credit, high-yielding DeKalb corn hybrids, farm inputs, and crop agronomy knowledge, they have almost doubled their income,” said Ajai Rana,

Monsanto India corn business lead.



TRIBAL FARMERS IN INDIA GAIN FINANCIAL INDEPENDENCE

Biotech crops were able to reduce overall crop production costs by more than $100 million in four states in 2005.22

In 2005, corn and canola showed the greatest

increase in percentage of land planted to biotech

varieties. Increasingly popular varieties and reduced trade issues were both factors in this increase.22

Although planted acreage, productivity, and pesticide reduction all increased from 2004, net income did not. This was probably a function of increased production costs and lower corn and cotton crop prices, which reduced the overall value of the 2005 crop so much as to make direct comparisons with 2004 impractical. Nonetheless, the incremental net farm income of $2 billion was a signifi cant contributor to the agricultural economy.22

In 2005, biotech crops resulted in an additional 8.3 billion pounds of yield for U.S. farmers.

Anticipating high farmer demand for Roundup Ready Flex cotton, many seed companies planned a rapid conversion from Roundup Ready cotton varieties to the new product in 2006. The launch was jeopardized in 2004, however, when signifi cant leaf necrosis was observed in treated plants in a few of the fi eld research trials.

A Monsanto team was called in to examine the causes of injury. The team duplicated the necrosis in environmentally controlled growth chambers and quickly identifi ed the problem. A new glyphosate formulation, Cropshield, was developed, and the team worked with selected competing glyphosate manufacturers to test their products’ performance on Roundup Ready Flex cotton. The team announced that Monsanto would not charge more for its new formulation. In addition, Monsanto shared its data with cotton farmers, the chemistry retail channel, the U.S. Environmental Protection Agency, and the National Cotton Council. The team then validated its quality and analytical procedures for the new glyphosate formulations. Facilities were modifi ed and plans were made to segregate Flex-appropriate from non-Flex-appropriate glyphosate production materials.

By ensuring that Roundup Ready Flex launched on time, the team provided value to seed producers and dealers who had committed to the new product, and it allowed farmers to realize the benefi ts of this new technology.


Pledge Award Winner

MULTIFUNCTIONAL TEAM ENSURES SUCCESSFUL LAUNCH OF ROUNDUP READY FLEX COTTON


BrazilWith a cultivated area of 21 million hectares, Brazil is the second largest producer of soybeans in the world. Farmers in the country produced 55 million tons of soybeans for the harvest of 2006-2007.31

A recent study explored the economic benefi ts of genetically modifi ed (GM) soybeans in Brazil.31 The authors found that the cumulative economic benefi t of GM soybean crops in Brazil was $2.3 billion since the harvest of 2003-2004, the fi rst in which cultivation of genetically modifi ed soybean seeds was approved in Brazil.

Farmers realized economic gains in two ways: reduced production costs and increased yield

per hectare. Production costs were down because, by growing Roundup Ready soybeans farmers were able to use conservation tillage, which can reduce labor in the fi eld. The authors observed that producers had saved $1.3 billion cumu-latively since the 2003-2004 harvest.

Since 2003, farmers in Brazil saved $1.3 billion and earned another $951 million by growing GM soybeans.

Impact of Transgenic Crops: U.S. Agriculture 2001-2005

2005 2004 2003

Planted Acreage (million acres) 123 118 106

Yield Increase(billion pounds) 8.3 6.6 5.3

Net Income(billion dollars) 2.0 2.3 1.9

U.S. Transgenic Crop Impacts: 2006

Planted Yield Net Acreage Impact Income(in millions) (acres) (pounds) (dollars)

RR Soy 64.6 Equal +1,169

RR Canola 1.1 Equal +14

RR Corn 27.9 Equal +269

RR Cotton 11.1 Equal +39

YG Corn Borer 27.9 +6,123 +197

YG Root Worm 3.5 +1,470 +55

BG Cotton 8.1 +671 +251

Total * 144.2 +8,341 +2,017

RR: Roundup Ready ; YG: YieldGard; BG: Bollgard*Totals include VR papaya and squash not shown in table


Farmers also realized an increased yield per hectare. According to report, GM soybeans resulted in a 9 percent increase in yield per hectare in Brazil’s Southern region and a 5 percent increase in yield per hectare in its Midwestern region. This created an addi-tional $951 million in cumulative income for the producers since 2003-2004. The authors attributed this yield gain directly to the reduction in weeds that usually compete with the crop for nutrients and water.

FranceA study conducted by the Association Générale des Producteurs de Mais compared crop yields between farmers of genetically modifi ed (GM) and conventional crops in France.32 The study found that farmers are realizing signifi -

cant benefi ts from insect-protected crops such

as YieldGard Corn Borer corn.

For several years, France has seen an increase in the aerial pests attacking corn, including webworm and Mediterranean corn borer. Pest attacks can hinder circulation of nutrients to the developing cob and create an increased risk of crop lodging, with losses of up to 30 percent of the harvest.

The authors report that, under such condi-tions, GM insect-protected corn yields 1,150 kilograms per hectare more than untreated conventional varieties, worth

an additional $140 (98€) per hectare. Gains can exceed 3,000 kilograms per hectare in areas of high infestation.

The authors also point out that because of its high effectiveness against boring insects, YieldGard Corn Borer corn removes the gateways for opportunistic fungi to attack, improving the sanitary quality of the grain. Insect-protected corn showed a 58 percent reduction of mycotoxins in plots most at risk, and a 45 percent reduction in plots with the fewest insect attacks.

The increase in average yield for genetically modifi ed corn in France reaches 1,150 kilograms per hectare above the yield attained with conventional varieties.

Economic Benefi ts of Genetically Modifi ed Soybeans in Brazil, 2003-2007

(in thousands) 2003-2004 2004-2005 2005-2006 2006-2007 Accumulated Period

Cultivated area with GM Soybean (hectare) 4.620 5.580 9.400 11.767 31.367

Cost Reduction $195,588 $236,229 $397,949 $498,165 $ 1,327,931

Productivity Gain $140,090 $169,200 $285,032 $356,812 $ 951,134

Increase in Net Revenue1 $335,678 $405,429 $682,981 $854,977 $2,279,064

Source: Pereira et. al., 20071. Considering the sack price as constant.


Pledge Award Winner

INDUSTRY-LEADING ESH PROGRAMS WIN CUSTOMERS IN BRAZIL

Pledge Award Winner

DIALOGUE AND INNOVATIVE CHANNELING RAISE YIELDGARD PLANTING IN EUROPE

Realizing that responsible stewardship of environmental, safety, and health (ESH) is an area where Monsanto outperforms its rivals in Brazil, a cross-functional team developed programs to maintain this ESH lead, to spread good practices among employees, and to communicate these safety practices to customers and the public.

The team standardized the safety information provided to fi eld sales representatives and customers. It also made understanding and compliance with handling, toxicity, package disposal, and emergency procedures part of the qualifi cation program for distributors. In

addition, the team hosts semi-annual gatherings of large companies at the São José dos Campos manufacturing site. At these meetings, participants learn about environmental protection equipment and about safe methods for Roundup agricultural herbicide preparation and product application. Attendees also learn about toxicity and proper package disposal. All empty packages are sent to the National Institute for Empty Package Processing.

More than 170,000 customers and distributors were trained in good stewardship practices in 2006. ESH training was provided to 780 distribution and warehouse workers. Overall, more than 200 client companies participated in the forums. The team’s efforts have also increased the rate of package recycling — from 35 percent in 1997 to 82 percent in 2006.

Despite a challenging public climate, Monsanto teams in France and Germany achieved additional planting of YieldGard maize in 2006, allowing more farmers to realize the economic and environmental benefi ts of agricultural biotechnology. The increased French plantings were achieved as the result of building trust through dialogue with farmers, grain handlers, other downstream stakeholders, seed associations, and government representatives. YieldGard plantings increased in France from 500 hectares in 2005 to 5,000 hectares in 2006 — demonstrating the safety and benefi ts of biotechnology to farmers, policy-makers, and consumers. Nonetheless, Monsanto continues to face challenges to biotechnology adoption in France and will continue to apply its Pledge principles in its work to bring the benefi ts of biotechnology to the region.

The German team addressed a public perception that biotech and conventional crops could not coexist. The team designed — as the fi rst essential step toward a successful commercialization process — a unique product stewardship and grain channeling program that respected the businesses of neighboring farmers. “We developed a tool to prove that real coexistence with equal rights for each planting system can be achieved,”noted Ursula Lüttmer-Ouazane, Monsanto’s area lead for Northern Europe. The program raised awareness among stakeholders in the agricultural community and among political decision-makers that good science combined with industry commitment can manage coexistence, thus providing farmers of both biotech and conventional crops with market opportunities.


As a global agricultural company, we do business wherever crops are grown. We have full- and part-time employees in almost every agricultural market. We grow seed for sale, and we manufacture products as close to our markets as possible. We also hire people from within each market and purchase goods locally whenever possible. We buy raw materials and supplies and services in most world regions.

Supporting Local SuppliersIt is common practice across all Monsanto facilities in the United States to provide opportunities for locally based or diversity

suppliers to do business with us. In 2007, 19 percent of purchases by our U.S. manu-facturing sites were placed with local suppliers. We consider transactions to be local when the supplier is in the same state as the Monsanto facility it serves.

We focus on inclusion in the procurement process. Typically, suppliers are evaluated on “total cost of ownership” of the goods or services they provide. Factors that make up total cost of ownership are costs, quality, delivery, service, and technology. If a local supplier meets the criteria, it may be given preference over a nonlocal supplier who also meets the criteria. Suppliers who are not awarded business are often provided with coaching and feedback on why they were not selected and what steps they can take to improve their chances of winning future business.

The procurement team holds workshops in St. Louis to help diverse suppliers and local suppliers learn to do business with Monsanto. The workshops cover such topics as business conduct, ethics, and how to respond competitively to a request for a proposal.

In 2008, Monsanto’s procurement organization will establish a team to focus on sustainability. Goals for this team will

Global PresenceAround the world, Monsanto products and technologies that farmers like to use are delivering economic value to

many other stakeholder sectors.

Photo Above Senior Breeder Bill McCarthy inspects bell peppers at a Seminis research farm. Seminis has research and development

stations in 17 countries and production farms in 23 countries.


include setting criteria for evaluating the environmental performance of suppliers’ goods and services.

Competitive Benefi ts and CompensationWe believe that employee compensation, recognition, and benefi ts are integral to our business success. We provide competitive rewards to attract and retain the best talent, and to foster a greater sense of ownership in the company.

Our rewards package globally provides our regular employees competitive base pay and the opportunity to earn an annual incentive award based on performance. In addition, we provide benefi ts programs in each country that complement locally provided govern-ment programs to ensure that our people have a competitive total compensation and benefi ts package. Our goal is to provide fl exi-bility in our benefi t offerings to meet the varied needs of our people and their families.

Regional Distribution of Leadership

Asia/ Europe/ Latin America United Pacifi c Brazil Canada Africa North South States Total

Executives 10 4 1 13 3 2 145 178

Senior Managers 37 33 15 52 14 25 554 730

Managers 127 100 35 151 39 43 780 1,275

Sales 115 231 57 328 75 63 827 1,696

Workers 1,556 1,345 145 2,437 912 733 6,652 13,780

Total 1,845 1,713 253 2,981 1,043 866 8,958 17,659

Locations: in 56 countries

Key Crops: Corn, Cotton, Oilseeds (soy and canola), and Vegetables

Leading Brands: DeKalb, Asgrow, Deltapine, Seminis, Posilac, Roundup

Number of Employees: 17,659 regular and 5,000 temporary workers

Composition of Work Force by Gender, 2006:5,173 females, 12,486 males, 17,659 total

Economic Performance (in millions)

Net Sales $ 7,294

Costs of Goods Sold $ 3,775

Operating Expenses $2,348

Interest Expense $ 134

Interest Income $ 55

Cash paid for dividends $ 207

Income tax provision $ 337

2006 ORGANIZATIONAL PROFILE

Monsanto is a leading provider of agricultural solutions to farmers worldwide. Monsanto’s employees provide top-quality, cost-effective, integrated solutions to help farmers improve their productivity and produce better quality foods. For more information about Monsanto — its products, leadership, and Pledge commitments — visit www.monsanto.com.

http://www.monsanto.com

GROWING WITH

Corporate governance is an important part of who we are and how we conduct ourselves every day. Our business decisions are guided by the core tenets described in the Monsanto Pledge, our Code of Business Conduct, our Product Stewardship guidelines, and the charters of our board and its committees. The people of Monsanto are committed

to living up to the principles of sound corporate governance

outlined in these documents.

GOOD GOVERNANCEPhoto Left Monsanto Soybean Breeder Craig Moots inspects soybean plants with Roundup RReady2Yield technology, currently in our product development pipeline, at a Monsanto research facility.

51

Integrity Guides Our Business ConductOur integrity and our expertise in agricultural solutions help us build relationships of trust with customers and with all our stakeholders, from regulators to suppliers and consumers. These relationships develop and expand our business.

To create a baseline of our values, we wrote the

Monsanto Code of Business Conduct.33 By presenting

guidelines for appropriate business behavior, the

code helps employees deal responsibly with the

range of complex business practices that affect

the company’s reputation. Our code makes this plain: “Challenges that arise in the course of our business can be resolved consistent with all applicable laws and regulations, and with our high ethical standards, and still allow us to meet our business objectives if issues are identifi ed early, addressed cooperatively, and solved thoughtfully.” Our Business Conduct Web site offers handbooks that provide greater detail on subjects such as antitrust, confl icts of interest, and the giving and receiving of gifts.

Every employee is expected to be fully aware of the code and its business conduct program components, and to adhere to its principles. In an annual certifi cation process that includes training about the code, employees certify to adherence to the code. We have a robust training program that presents two or three topics in depth each year to large segments of our employee population. New hires receive training on the code, as well as anti-harassment instruction. Recently, the Monsanto Business Conduct Offi ce released an Ethical Moments video series. These brief videos present

Operating with IntegrityMonsanto takes pride in its commitment to integrity in all business operations. From our corporate vision of “abundant food and a healthy environment” to our daily efforts to deliver agricultural solutions to farmers around the world, to our Monsanto Pledge, integrity is the foundation of our corporate identity.

52 GROWING WITH GOOD GOVERNANCE

Photo Above Seed Stock Shipping Manager Mark Armstrong and Technology Solutions Manager David Stoltzfus examine corn being grown for

Monsanto’s seed production and technology site in Williamsburg, Iowa.


common ethical dilemmas that could arise in the workplace.

Monsanto’s Business Conduct (BC) offi ce looks into every matter or concern that it receives. Throughout each year, the BC offi ce receives hundreds of questions through its Voice Your Concern online system, its Guidance Line telephone program, and through e-mails and visits from employees. Most issues brought to the BC offi ce’s attention are simple requests for guidance about policy or compliance requirements. These questions are researched and the answers provided to the employees who submit the questions.

If an employee believes that the code may have been violated, a team made up of Internal Audit, Human Resources, Global Security, Legal, Commercial, IT Security, and BC offi ce representatives manages the resolution of the issue.

Integrity and the Business Conduct program are

taken seriously throughout Monsanto, from the

lowest to the highest levels. Our board of direc-tors receives updates from our director of Business Conduct regularly. Monsanto Today, our publication for employees, has run a series of interviews with Monsanto leaders about what integrity means to them. And members of the Business Conduct team have been invited to conduct case studies and presentations at departmental town hall meetings. We expect our managers to create an open environment, so that

employees feel comfortable raising questions within their work group as well as with Business Conduct.

Commitment to Product Stewardship We are committed to the responsible manage-ment of technologies and products across our seeds, traits, and chemical businesses, from concept to discontinuation. We apply the

principles of the Monsanto Pledge to our products,

actions, and business. This commitment aligns our product offerings with the commitments Monsanto employees make to follow our Code of Business Conduct.

In 2007, Monsanto collaborated with other Biotechnology Industry Organization (BIO) member companies to create a program called Excellence through Stewardship. This industry

Photo Above Monsanto India cotton researchers Mahant Shivayogayya, N. Uday Lakshmi, and Siddhartha Choudhary discuss breeding advances in cotton with Derenda Stanley, greenhouse coor-dinator for breeding technology at Monsanto’s Leland Agronomy Center in Mississippi.

Every employee is expected to be fully aware of our Code of Business Conduct, which presents guidelines for appropriate business behavior.

program is designed to promote responsible management of all plant products around the world during each phase of a product’s life cycle. It includes common objectives, princi-ples and management practices; a Guide to Understanding and Implementing Quality Management Program, which includes BIO’s previously adopted Containment Analysis and Critical Control Point for plant-made pharmaceuticals and plant-made industrial products; and a Stewardship Third-Party Audit Program, a checks-and-balances system of third-party audits.

BIO also adopted a Product Launch Stewardship Policy in 2007. It provides market assessments, dialogue with stakeholders, appropriate approvals, and market management plans. This policy is

specifi cally designed to address issues that could arise if different trading partners approve products at different times.

Monsanto supports industry and trade group stewardship efforts. But it is deeply committed to maintaining its own leadership in responsible management of products and technologies. Our product stewardship programs

are designed to assure the integrity of our products

and the processes used to develop, produce and

manage them. These programs cover the entire life cycle of our products, from gene discovery and plant development through seed production, marketing, and distribu-tion. They extend to crop production and crop utilization in the marketplace and even to the responsible disposal of discontinued products.

54 GROWING WITH GOOD GOVERNANCE

Monsanto’s Global Product Stewardship operations ensure the safety of the company’s products and facilitate the launch of new technologies globally, ultimately providing value to consumers and communities. Without these processes, the complexities of delays in regulatory approvals could delay or prevent successful launch of new agricultural biotechnology products. In the face of these challenges, the Monsanto Global Product Stewardship team has developed and implemented proactive, activity-based product stewardship plans, processes, and operations.

The Global Product Stewardship Team’s efforts have allowed farmers in countries around the world to gain access to the benefi ts of Monsanto technologies they otherwise would not have enjoyed. The anticipation and resolution of signifi cant issues demonstrates the positive impact of effective stewardship on the acceptance and use of Monsanto’s products, the reliability of the science supporting product safety and use, and the validity of the team’s conviction that coexistence of all agricultural systems is achievable with cooperation, fl exibility, and mutual respect.


GLOBAL PRODUCT STEWARDSHIP SECURES FARMER ACCESS TO NEW BENEFICIAL TECHNOLOGY


Technology and Field Testing Starting at the earliest stages of a product’s life, Monsanto ensures that products will be safe for people and the environment, as well as useful for our customers. This overarching policy, often called “premarket stewardship,” includes comprehensive project and technology program reviews and quality reviews.

Seed Production and DistributionProduct stewardship is critical to ensure that Monsanto’s seeds deliver the product identity, integrity, and trait purity (quality) that farmers expect. We pursue responsible management in seed production and distribu-tion by following guidelines to ensure seed quality and trait purity, by maintaining compliance with labeling regulations, and by ensuring that seed licensees comply with contract requirements.

Crop Sales and Marketing As the main points of contact between Monsanto and its customers, our sales and marketing people play a major role in product stewardship. This includes ensuring that customers and licensees use biotech crops properly, clearly establishing steward-ship expectations with the farmers who are our customers, and educating farmers about the importance of following best practices and Monsanto recommendations for chemical products and weed- and insect-resistance management.

Chemical ProductsChemistry stewardship ensures that chemical ingredients are selected to meet Monsanto criteria for human health and environmental safety. Stewardship requires that product marketing be accurate, set reasonable expec-tations, and comply with the laws and regulations that govern marketing claims.

Stewardship also conveys good practices for chemical product use, including appropriate use rates and application times, conditions, and equipment. Monsanto is introducing a labeling initiative that, where it can be implemented, will include a 24-hour emergency number and a backup number. This will help provide timely technical support, including advice on the disposal of pesticides and used containers.

2007 BIOTECH ADVISORY COUNCIL

(as of November 2007)

Tom Ewing, United States. Former Congressman from Illinois, serves as chair of the Monsanto Grower Council

Vasant Gandhi, India. Chair of the Centre for Management in Agriculture, Indian Institute of Management, Ahmedabad

Mphome Sabina Khoza, South Africa. Director of Fair Deal Agricultural Training Center, Suurbekom

Carlo Lovatelli, Brazil. Director, corporate affairs, Bunge Group

Richard Mott, United States. Biodiversity grants, Wallace Global Fund

Robert Paarlberg, United States. Professor of political science at Wellesley College, associate and visiting professor of government at Harvard University

Carole Piwnica, Belgium. Attorney, food regulations, mergers and acquisitions, EU and U.S.

1. Monsanto was incorporated in 2000 as a subsidiary of Pharmacia Corporation and includes the operations, assets, and liabilities that were previously the agricultural business of Pharmacia. With respect to the time period prior to September 1, 2000, references to Monsanto in this annual report also refer to the agricultural business of Pharmacia.

2. Famine Early Warning Systems Network. (2007, September 5). Malawi food security update. Retrieved from http://www.fews.net/centers/innerSections.aspx?f=mw&m=1002543&pageID=monthliesDoc

3. World Food Programme. (2005, September 30). Early lean season in Malawi leaves 5 million hungry [News release].

4. Apps, P. (2007, September 7). Malawi donates food to WFP for its own people. London: Reuters.

5. World Economic Forum. (n.d.). Business Alliance Against Chronic Hunger. Retrieved November 30, 2007 from http://www.weforum.org/en/initiatives/hunger/index.htm

6. Melcer, R. (2005, December 21). Monsanto’s seed gift is boon to Malawi. St. Louis Post-Dispatch.

7. The Monsanto Fund is a tax-exempt, private foundation which serves as the philanthropic arm of Monsanto Company. Though it is a separate legal entity from the Company, the Fund receives substantial contributions from the Company which are reported annually on its tax return.

8. Brookes, G., and Barfoot, P. (2006). GM Crops: The fi rst ten years: Global socio-impact and environmental impacts. ISAAA Brief No. 36. Ithaca, NY: ISAAA.

9. The Monsanto Company Human Rights Policy can be retrieved from http://www.monsanto.com/responsibility/our_pledge/human_rights.asp

10. International Labour Offi ce. (2006). The end of child labour: Within reach. Geneva: Author.

11. Embassy of India, Washington, DC. (n.d.). Child labor and India. Retrieved November 30, 2007 from http://www.indianembassy.org/policy/Child_Labor/childlabor.htm

12. United States Department of Labor, Bureau of Labor Statistics. Injuries, illnesses, and fatalities. Retrieved November 30, 2007 from http://www.bls.gov/iif/

13. Intergovernmental Panel on Climate Change. (2007). IPCC fourth assessment report: Climate change 2007. New York: Cambridge University Press.

14. National Geographic Society. (2007, October). Greenhouse Earth. National Geographic Magazine, 212 (4), supplement.

15. United States Environmental Protection Agency, Offi ce of Atmospheric Programs. (2005, November). Greenhouse gas mitigation potential in U.S. forestry and agriculture. Washington: Author.

16. Food and Agriculture Organization of the United Nations, Land and Water Development Division. (n.d.). Soil Carbon Sequestration. Retrieved November 30, 2007 from http://www.fao.org/ag/agl/agll/carbonsequestration/background.stm

17. Lal, R. (2001, May 2). Soil carbon sequestration to reduce net gaseous emissions. Proceedings of the Committee on Environment and Public Works. Washington: United States Senate.

18. Conservation Technology Information Center. (n.d.). Conservation tillage and plant biotechnology. Retrieved November 30, 2007 from http://www.conservationinformation.org/?action=learningcenter_publications_contillbiotechnology

19. American Soybean Association. (2001, November 12). ASA study confi rms environmental benefi ts of biotech soybeans [News release].

20. Pesticides registered by the U.S. Environmental Protection Agency will not cause unreasonable adverse effects to man or the environment when used in accordance with label directions.

21. Brookes, G., and Barfoot, P. (2006). Global impact of biotech crops: Socio-economic and environmental effects in the fi rst ten years of commercial use. AgBioForum 9 (3), 139-151.

22. Sankula, S. (2006). Quantifi cation of the impacts on US agriculture of biotechnology-derived crops. Washington: National Center for Food and Agricultural Policy.

23. United States Census Bureau, Population Division. (n.d.). World population information. Retrieved November 30, 2007 from http://www.census.gov/ipc/www/idb/worldpopinfo.html

24. Food and Agriculture Organization of the United Nations. (2002). World agriculture: Towards 2015/2030. Rome: Author.

25. Borlaug, N. (2007, July 18). Continuing the green revolution. The Wall Street Journal.

26. United States Department of Agriculture, Economic Research Service. (n.d.). Data sets. Retrieved November 30, 2007 from http://www.ers.usda.gov/Data/

27. The Audubon Society. (n.d.). Status and trends of North American waterbirds. Retrieved November 30, 2007 from http://www.audubon.org/bird/waterbirds/status_and_trends.html

28. Information about Ameren and the Ameren Pure Power program can be retrieved from http://www.ameren.com/purepower

29. James, C. (2006). Global status of commercialized biotech/GM crops: 2006. ISAAA Brief 35. Ithaca, NY: ISAAA.

30. IMRB International. (2007). Economic benefi ts of BT cotton cultivation in India. Mumbai, India: Author.

31. Pereira, E., Leal, J., and Hussne, R. (in press). Economic impacts of genetically modifi ed crops in Brazil. International Journal of Product Development.

32. Association Générale des Producteurs de Mais. (2007, February 27). GMO corn in 2006: Clear results [News release].

33. The Monsanto Company Code of Business Conduct can be retrieved from http://www.monsanto.com/responsibility/business_conduct/code_languages.asp

ENDNOTES

56

Trademarks and service marks owned or licensed by Monsanto and its subsidiaries are indicated by special type throughout this publication.

Unless otherwise indicated by the context, references to Roundup products in this report mean Roundup branded herbicides and other glyphosate-based herbicides; all such references exclude lawn-and-garden products.

This report is printed with soy-based inks on recycled paper that contains at least 10 percent postconsumer waste.

http://www.fews.net/centers/innerSections.aspx?f=mw&m=1002543&pageID=monthliesDoc

http://www.fao.org/ag/agl/agll/carbonsequestration/background.stm

http://www.weforum.org/en/initiatives/hunger/index.htm

http://www.monsanto.com/responsibility/our_pledge/human_rights.asp

http://www.indianembassy.org/policy/Child_Labor/childlabor.htm

http://www.bls.gov/iif/

www.monsanto.com/responsibility/business_conduct/code_languages.asp

http://www.census.gov/ipc/www/idb/worldpopinfo.html

http://www.ers.usda.gov/Data/

http://www.audubon.org/bird/waterbirds/status_and_trends.html

http://www.ameren.com/purepower

http://www.conservationinformation.org/?action=learningcenter_publications_contillbiotechnology

Contents1.1 Report contents. . . . . . . . . . . . . . . . . . . page 3 — Contents; page 4 — A Message from Hugh Grant1.2 Key Impacts . . . . . . . . . . . . . . . . . . . . . . Trends and impacts found throughout the report

Organizational Profile2.1 Name . . . . . . . . . . . . . . . . . . . . . . . . . . Cover2.2 Primary products/brands . . . . . . . . . . . page 49 and http://www.monsanto.com/products/default.asp 2.3 Operational structure . . . . . . . . . . . . . . http://www.monsanto.com/investors/corporate_profile.asp2.4 Headquarters location . . . . . . . . . . . . . http://www.monsanto.com/who_we_are/locations.asp2.5 Countries of operation . . . . . . . . . . . . . page 49, http://www.monsanto.com/who_we_are/locations.asp2.6 Nature of ownership . . . . . . . . . . . . . . . http://www.monsanto.com/responsibility/corp_gov/incorporation.asp 2.7 Markets served . . . . . . . . . . . . . . . . . . . http://www.monsanto.com/who_we_are/locations.asp 2.8 Employees, sales,

economic performance . . . . . . . . . . . . . page 492.9 Significant changes . . . . . . . . . . . . . . . Proxy: http://www.monsanto.com/pdf/pubs/2006/proxy.pdf2.10 Awards received . . . . . . . . . . . . . . . . . . http://www.monsanto.com/careers/culture/great_place.asp

Report Parameters3.1 Reporting period . . . . . . . . . . . . . . . . . . Fall 20073.2 Date of previous rept . . . . . . . . . . . . . . . Fall 20063.3 Reporting cycle . . . . . . . . . . . . . . . . . . . Annual3.4 Contact point . . . . . . . . . . . . . . . . . . . . Back Cover3.5 Rept. content. . . . . . . . . . . . . . . . . . . . . Iterative process involving many corporate sectors and regions3.12 GRI table . . . . . . . . . . . . . . . . . . . . . . . . This page

Governance, Commitments and Engagement . . . . . . . . . . . . . . . . . . . . Section: pages 50-55, See Monsanto.com, Corporate Governance site: http://www.

monsanto.com/responsibility/corporate_governance.asp4.8 Governance . . . . . . . . . . . . . . . . . . . . . Monsanto Pledge P3, Code of Business Conduct pages 52-55,

Health and Safety pages 17-20, Environment pages 23-37, Human Rights pages 15-17,

4.11 Product stewardship . . . . . . . . . . . . . . pages 53-55, http://www.monsanto.com/products/techandsafety/stewardship.asp4.14 External initiatives . . . . . . . . . . . . . . . . Examples of stakeholder engagement found throughout report

Economic . . . . . . . . . . . . . . . . . . . . . . . . . . . Section: pages 39-49EC 1 Economic value . . . . . . . . . . . . . . . . . . page 49 and pages 15-21EC 2 Implications due to Climate Change . . . pages 24-29EC 3 Benefit plan obligations . . . . . . . . . . . . page 49EC 6 Supplier Selection . . . . . . . . . . . . . . . . . pages 48-49EC 8 Investments in Public Infrastructure . . Examples throughout report

Environment . . . . . . . . . . . . . . . . . . . . . . . . Section: pages 23-37EN 1, EN 3, EN 4, EN 8, EN 9, EN 16, EN 20, EN 21, EN 22, EN 24, EN 26 . . . . . . . . . . . . . . . pages 30-34EN 18 Greenhouse Gas Reductions,

CCX membership . . . . . . . . . . . . . . . . . page 28

LaborLA 1 Workforce by region . . . . . . . . . . . . . . . . page 49LA 7 Health and safety performance . . . . . . pages 17-20LA 10 Training . . . . . . . . . . . . . . . . . . . . . . . . 28 hours of training/year/regular full time and hourly employee

Human RightsHR 2, HR 6, HR 7 . . . . . . . . . . . . . . . . . . . . . . . . pages 15-17

Society . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section: pages 4-21SO 1 Community impacts . . . . . . . . . . . . . . . pages 15-21SO 2, SO 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . pages 52-53SO 6 Political contributions . . . . . . . . . . . . . . http://www.monsanto.com/responsibility/corp_gov/disclosures.asp

Product Responsibility . . . . . . . . . . . . . . pages 53-55 and http://www.monsanto.com/responsibility/stewardship.asp

This is our first report incorporating some of the Global Reporting Initiative G3 guidelines. We hope to build upon this base in future reports. For information about the GRI indicators, visit www.globalreporting.org.

We want to make the world a better place for

future generations. As an agricultural company, Monsanto can do this best by providing value through the products and systems we offer to farmers.

With the growth of modern agricultural practices and crops that generate ever-increasing

yields, we are helping farmers around the world to create a better future for human beings, the environment, and local economies.

Increased yields are the core of this agenda. As agricultural productivity increases, farmers are able to produce more food, feed, fuel, and fiber on the same amount of land, helping to ensure that agriculture can meet humanity’s needs in the future. Moreover, increased productivity allows farmers to produce more with the same – or fewer – inputs of energy and pesticide. This results in more responsible use of natural resources, better ecosystem health, increased soil fertility, increased farm income, and more opportunities for farmers and their communities.


Index (accordInG to GrI G3 IndIcators)

www.globalreporting.org

http://www.monsanto.com/products/default.asp

http://www.monsanto.com/investors/corporate_profile.asp

http://www.monsanto.com/who_we_are/locations.asp


http://www.monsanto.com/responsibility/corp_gov/incorporation.asp


http://www.monsanto.com/pdf/pubs/2006/proxy.pdf

http://www.monsanto.com/careers/culture/great_place.asp

http://www.monsanto.com/responsibility/corporate_governance.asp

http://www.monsanto.com/products/techandsafety/stewardship.asp

http://www.monsanto.com/responsibility/corp_gov/disclosures.asp

http://www.monsanto.com/responsibility/stewardship.asp

http://www.monsanto.com/responsibility/corporate_governance.asp

Monsanto Company 800 North Lindbergh Boulevard St. Louis, Missouri 63167, U.S.A.

www.monsanto.com MAG07012

© 2007 Monsanto Company

We Want to Hear From You

Tell us what you think. Please send your thoughts to the Monsanto Pledge team via e-mail: [email protected].

2007 Pledge Report


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