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UNDERSTANDING THE REPORT

Scope and publication frequency

GRI 2.9 | 3.1 | 3.2 | 3.3 | 3.4 | 3.6 | 3.7 | 3.8 | 3.9 | 3.10 | 3.11 | 3.13

This third edition of the KPMG in Brazil Sustainability Report has been prepared in accordance with the international guidelines of the Global Reporting Initiative (GRI), version G3, with the self-declared application level of B+ and independent assurance of BSD Consulting.

Published annually since 2010, the Sustainability Report shows the performance of the 26 offices comprising the network of independent firms that operate under the KPMG name, in Brazil (referred to throughout this report as KPMG in Brazil).

It covers the period from October 01, 2011 to September 30, 2012, which coincides with the financial year of KPMG in Brazil, which will be referred to as 2012.

The information in this Report was provided by the various departments managing activities relating to the performance indicators presented. As in the previous edition of our Sustainability Report, the accounting data complies with the practices adopted in Brazil. It is important to mention that in 2012 we can evaluate the first complete period of activities of our Organization since the incorporation of professionals coming from the operations acquired in 2011.

Nevertheless the scope, limit and measurement methods have not changed, therefore, there are no reformulations of the information provided in the previous year.

For a better understanding and to put the data reported into context, in certain cases information of KPMG International is presented, as well as the methodologies, the bases used or the specific periods for certain data.

Please send us your comments, doubts, suggestions or feedback so we can enhance our Sustainability Report every year.

Maria Cristina Bonini
Director of People, Performance and Culture

Eliane Momesso
Manager of Corporate Citizenship

comunidade@kpmg.com.br
Tel: +55 (11) 3736-1228

Structure

The structure of our Sustainability Report is based on the KPMG International's Global Strategy for the period 2011-2015. These fundamentals are Global Consistency, Growing with Quality, Professionalism and Integrity, and People. The Global Strategy seeks to integrate and leverage the member firm's actions via the following objectives, which are undertaken by the entire KPMG network throughout the world as priorities:

• Investment in emerging markets.
• Focus on key sectors such as financial services, health, government, infrastructure and energy.
• Strategic acquisitions and investments to extend our skills in highly complex services, including management and tax consulting.
• Maintain an extensive source of professionals that are specialized in these segments.

Integrating sustainability into our strategic view means we have a broader sense of purpose, geared toward serving public confidence and helping resolve some of the world’s most complex problems. To be part of the essence of our strategy, sustainability is being incorporated into the way we handle opportunities and challenges in our business segment.

Throughout this Report we will demonstrate that the pillars of our Global Strategy are completely connected to the material issues identified with our stakeholders - as shown in the next figure and detailed below, which reinforces our belief that we are on the right track.

Strategy Fundamentals at KPMG

OUR STRATEGIC STAKEHOLDERS

GRI 3.5 | 4.14 | 4.15 | 4.16

In 2009, KPMG in Brazil prepared its first mapping, prioritization and engagement of stakeholders. Representatives from all of the group’s areas and all of the offices were invited to participate in the initiative, which we called Workshop – Sustainability Committee. Based on the understanding of the context in which our business is inserted and its role in society and the markets, the participants mapped out 14 groups of stakeholders.

During stage two, the KPMG in Brazil Executive Committee and the director from the Corporate Citizenship department classified the groups according to their level of influence on business performance: those that most impact KPMG, and those that are most impacted by our activities. Subsequently, four stakeholder groups were prioritized for our business: partners and partner-directors; internal public; clients and the market; regulatory bodies and the Government.

Following our participation in the Stakeholder Engagement Research, a pilot program of KPMG International, contributed to by UK independent consultants Good Business, in 2011 we included three more important groups: sector specialists, civil society and the media.

The selection of these seven priority stakeholders is crucial for an increasingly efficient management, as it has enabled us to invest in a progressively qualified dialogue tailored to each stakeholder. However, we are clearly investing in our relationship with all the stakeholders mapped out in stage one, as they are also contributing to consolidating our repute.

DEFINITION OF MATERIAL THEMES

GRI 3.5 | 4.14

After KPMG in Brazil had defined its priority stakeholders, the next step was to consult them so as to understand what these stakeholders believed to be the main responsibilities of a professional service company.

Based on the understanding of the three core services we provide - Audit, Tax and Advisory – Good Business identified nine themes entailing a wide range of impacts deriving from the duties and responsibilities of the services in relation to the business world and the public in general.

Via individual interviews (personally or by telephone) stakeholders were invited to evaluate the importance of each theme raised and to add others which they believed were important to our business.

This contact was important for KPMG to not only further engagement with our stakeholders but to provide valuable feedback for the enhancement of our practices.

The consultation did not produce additional themes to those suggested, which were considered sufficient to cover the relevant issues for KPMG in Brazil.

GRI 3.5 | 4.16

The findings of the interviews conducted revealed four themes of major importance. The priority themes are strongly connected to the foundations of our global strategy and throughout this report we seek to demonstrate their interdependence with our management, policies and corporate actions.

Four material or relevant themes

• Ethical business Conduct
• Responsible and transparent governance systems
• Conduct high quality and independent audits (services*)
• Good treatment of employees

*KPMG in Brazil understands that all of its services have to be provided with high quality and independence, consequently, we extended the scope of this material theme

Prioritization results

Ethical business conduct
Responsible, transparent governance systems
High quality independent audits
Good treatment of employees
Supply chain impacts
Positive social and community contribuitions
Environmental impacts
Environmental and social client services
Responsible tax advice

OUR PATH TOWARDS SUSTAINABLE DEVELOPMENT

GRI 1.2 | EC9

What is the sustainability role of a service sector business like KPMG?

Our contribution is being built via two convergent paths: what we follow as an Organization and what we help our clients to follow.

Our path

The first path concerns our internal journey to understand our contribution to sustainability, to earn the conviction of our professionals in respect of this and to encourage responsible actions by all in the conduct of our business and our personal lives. It’s our homework assignment, to develop each day for the long term, and which is shaping the way we relate with our stakeholders.

• Our principles - The path we walk is underpinned by policies, principles and values that are related to human and labor rights, ethics, governance and anticorruption, responsible management of natural resources and the impacts of our activities. These principles are championed by KPMG in Brazil and elsewhere throughout our chain of values, and are materialized through the various services that we provide to our clients, in the relationships with our suppliers and with our communities.


• Our management - We have been increasingly committed and collaborative. Through a more reflective attitude and a more integrated vision, we are understanding the connection of sustainability with our business and learning how to identify the positive and negative impacts arising from our operations.


• Our indicators - A major challenge of this process is to identify the environmental, economic and social impacts resulting from our activities. Although our environmental impacts are negligible in our segment and have not been identified as material by our stakeholders, we take our corporate responsibility seriously. Two indicators we used to map them out are the local environmental targets and the carbon footprint targets, with the global per capita figure having fallen by 29% from 2007 to 2011. Social impacts involve the hiring and training of personnel, the ethical conduct of our business, in addition to the provision of pro Bono services to social organizations. Lastly, the economic impacts include the payment of salaries and taxes and the value generated for clients by our services. We are aware that we need to deepen our analysis, both by seeking to improve the results of each indicator, as well as the incorporation of complementary indicators. This report helps us in that way, because it gives economic, environmental, social and governance indicators that are aligned to the fundamentals of our strategy and to the themes our stakeholders consider priority in our segment.

The path we are helping to pioneer

The second way in which we are making a contribution to sustainability is by putting our know-how at the service of our clients, voluntary organizations, the press and industry bodies.

Our practices offer an insight into the complexity, identify opportunities and challenges, and anticipate the potential impact of the changes that are continually taking place in the field in which we operate. Using that information, we can help our stakeholders to find the best solutions. That contribution involves:

• Professionalizing our clients - We help our clients in their expansion process, by offering them training and know-how so that they can navigate their way more safely around the complexities. In so doing, we help them generate revenue and jobs in the communities where they are based. We also create value by helping them to make the appropriate contribution under the current tax system, and to introduce quality, transparency and credibility into their financial statements. In this way, we encourage best practice in the markets we operate in.


• Sharing know-how - The active participation of our staff in debates and discussions about the regulatory environment and the markets in which our practices are involved helps to form a critical mass on important themes, through research, representations, talks, events and publications.


• Restoring market confidence - When we look at the serious crisis of confidence that has gripped the world, it is clear that responsible auditing, tax and advisory practices have an important role to play in creating a more transparent, responsible and effective business environment. We are committed to making our own contribution to that process.


• Training professionals for the market - Our intensive investment in the training and development of our staff not only impacts on the performance excellence of KPMG in Brazil and our clients, but also equips the market with qualified professionals. Those who do not pursue their careers in our Organization take our expertise with them to major Brazilian and multinational companies, which creates value for KPMG in Brazil, our clients and society as a whole.


• Spearheading positive change - We are committed to the values of the communities we operate in and to the events that affect them. That commitment is one of the most lasting qualities of our staff and brand. We are committed to bringing about positive change, leading by way of example and inspiring our stakeholders to do the same.

External and internal parameters

To help us draw up the policies and actions that comprise these two pathways (to be explored in more detail in the next chapter), we have also signed up voluntarily to a series of international initiatives already consolidated by the UN and the World Economic Forum, as described in the chapter People/Corporate Citizenship.

As we advance along these pathways, we contribute to the transition to responsible capitalism and to the generation of collective value.