Supply Chain Management, Labor Practices, and Human Rights

As an international business with locations around the globe, we are dedicated to upholding human rights, promoting equitable labor practices, and ensuring that our suppliers adhere to SGC’s standards. By actively pursuing these initiatives, we aim to be a positive influence on the communities where we operate and serve our customers.

Supply Chain Management

The success of our business is influenced by our suppliers and the reliability and quality of their systems, programs, and products. We work to ensure the health and resilience of our supply chain through regular supplier relationship assessments that identify and mitigate potential risks to the company and our customers. To promote and enforce our commitment to sustainability and corporate responsibility, our supplier policies and programs reflect consistent standards to which we hold each of SGC’s segments. We worked relentlessly throughout 2022 to increase the amount of sustainable products we source and to drive our suppliers to implement practices that reduce their carbon impact.

Supplier Accountability

SGC requires all of our suppliers to comply with our Code of Business and Ethical Conduct and support the company’s commitment to health, safety, human rights, environmental protections, and quality.

2022 Auditing

In 2022, all of the CID Resources division’s vendors had thirdparty audits performed by either SGS or Intertek. In addition, the compliance team at one of our major customer completed desktop reviews for four of CID Resource’s vendors in 2022. All four vendors successfully passed the reviews and have been certified as compliant.

The SGC Supplier and Vendor Compliance Manual defines the details of our audit programs and expectations for suppliers to communicate and uphold our requirements with their employees, supply chain partners, and subcontractors. We conduct regular supplier audits to ensure compliance with relevant policies and laws using Worldwide Responsible Accredited Production (WRAP), Business Social Compliance Initiative (BSCI), Sedex Members Ethical Trade Audit (SMETA), and other auditing protocols.

SGC or a third-party auditor conducts regular social compliance audits for our manufacturing partners to assess their performance in meeting our standards for labor and wages, health and safety, environmental responsibility, management systems, and ethics and business integrity. These audits evaluate metrics such as suppliers’ compliance with regulatory and testing requirements for adult and children’s apparel and electronics. In addition, we require manufacturers to undergo regular fire inspections by a local authority, perform mandatory fire drills, possess fire-fighting equipment, and have an evacuation plan in place.

Approach To Corrective Action

SGC’s suppliers, manufacturing partners, and their subcontractors are required to rectify any noncompliance issues. Furthermore, we monitor the progress of corrective actions taken to remedy noncompliance and require evidence of those measures within a designated timeframe as part of a formal corrective and preventive action plan. Our Supplier and Vendor Compliance Manual specifies the details of these requirements.

Responsible Sourcing and Conflict Minerals

SGC has a zero-tolerance policy for sourcing raw materials from suppliers whose products contain conflict minerals, and we collaborate closely with our supply chain partners to identify sources of raw materials that meet the standards outlined in our policies. We conduct our own due diligence to ensure that the products and materials we receive from our suppliers do not contain conflict minerals, including surveying targeted suppliers via the Electronic Industry Citizenship Coalition and Global e-Sustainability Initiative (EICC/GeSI) Conflict Minerals Reporting Template. SGC does not make purchases of raw ore or unrefined conflict minerals and makes no purchases in the countries that are the focus of conflict minerals regulations.

Many of our suppliers are dedicating resources toward the development of products that are more sustainable with improved recycling potential. To promote the adoption of sustainable practices, we educate our sales teams about these product offerings to enable them to showcase the benefits to our customers. By doing so, we aim to amplify the positive impacts associated with these sustainable products and materials. Our efforts yielded positive results. For example, the production of sustainable products from our Branded Products segment increased by 238% from 2021 to 2022 and our preferred suppliers continue to increase their sustainable product offerings and have altered many of their production practices to reduce their carbon footprints.

Mapping the Cotton Supply Chain

SGC has mapped our cotton supply chain for all our foreign-made nominated fabrics that contain cotton. By mapping this cotton supply chain, we can verify the sources of the cotton and determine how it was produced to promote our sustainability practices as well as be in compliance with US laws. Thanks to our partnership with Oritain in 2022, we have been able to verify the accuracy of the cotton supply chain map. Oritain is a global leader in applying forensic and data science to verify the origin of products and raw materials.

We also have begun to monitor the impact of our suppliers’ impact on the environment. In 2022, each of our product sourcing divisions tracked which suppliers maintain wastewater permits. We look forward to disclosing year-over-year results in this area in our 2023 corporate social responsibility report. Additionally, our Branded Products segment collaborates with several textile suppliers who have assessed their environmental performance using the Higg Facility Environmental Module (Higg FEM) assessment developed by the Sustainable Apparel Coalition. The Branded Products segment continues to assess suppliers based on sustainability and environmental impacts, with a preference for those who have higher environmental ratings.

HUMAN RIGHTS

Labor Practices And Human Rights

SGC complies with all applicable labor laws and strives to provide a safe, healthy work environment for all employees. We have established regulations and procedures that aim to promote the well-being of our workforce and prevent harm from occurring in the workplace. In addition, we have systems in place to report unsafe conditions or issues that arise in the workplace.

Expectations For Suppliers

We are committed to ensuring that our global manufacturing and supply chain partners uphold human rights and maintain fair working conditions. Our human rights due diligence process evaluates supplier social compliance certifications as well as compliance with our policies. As detailed in the Supply Chain Management section of this report, supply chain partners are required to adhere to our Code of Conduct and the policies outlined in the company’s Supplier and Vendor Compliance Manual. Supply chain partners must also comply with any human rights provisions contained within the policies and procedures of our various segments, as applicable.

Pursuant to our polices, suppliers are required to provide a safe, healthy work environment for their employees and follow appropriate labor practices in compliance with all applicable laws and regulations. These policies include protections against forced labor, human trafficking, child labor, harassment, violence, discrimination, and other unacceptable practices. Suppliers are also required to provide fair wages and benefits that meet or exceed the legally required wages and benefits for their locality, including legally required overtime wages. If no wage or benefits laws exist in the locations where our suppliers operate, we require them to engage with local contacts for guidance on the proper local pay standards for their employees.

We maintain a proactive approach to complying with fair labor and human rights policies by conducting regular trainings, audits, and monitoring activities to ensure continuous progress. If there are any instances of noncompliance within our supply chain, we work together with all relevant parties to find solutions and maintain productive relationships. Please refer to the Supply Chain Management section of this report for additional information.