Risk assessment

L.Brador has identified risks throughout internal routines, which includes documentations –both filled in by supplier, Asian office by visiting the supplier and by doing risk analysis of all new suppliers

L.Brador is involved in the Textile & Fashion 20302. Using a risk file which is based on risks in textile production for chemicals3 , social & ethical4, CO2 emissions5, water6 and Biodiversity & Habitat7 .

Through due diligence and focus on the social and ethical area - The Country Risk Classification in the risk file, relies on the Worldwide Governance Indicators. These determine the level of risks related to Governance in sourcing countries.

There are 6 dimensions of governance identified by the World Bank8:

1. Voice and Accountability (VA) – capturing perceptions of the extent to which a country's citizens are able to participate in selecting their government, as well as freedom of expression, freedom of association, and a free media.

2. Political Stability and Absence of Violence/Terrorism (PV) – capturing perceptions of the likelihood that the government will be destabilized or overthrown by unconstitutional or violent means, including politically‐motivated violence and terrorism.

3. Government Effectiveness (GE) – capturing perceptions of the quality of public services, the quality of the civil service and the degree of its independence from political pressures, the quality of policy formulation and implementation, and the credibility of the government's commitment to such policies.

2 The Swedish government has given the University of Borås the task to establish and lead Textile & Fashion 2030 – The National Platform for Sustainable Fashion and Textiles. The assignment is led by Smart Textiles, part of Science Park Borås at the University of Borås, in collaboration with the Swedish School of Textiles, the Swedish Fashion Council, the RISE Research Institutes of Sweden, the Swedish Trade Federation, and TEKO, the Swedish trade and employers’ association for companies working in the textile and fashion industry.

3 Environmental Performance Index (EPI) https://epi.yale.edu/

4 https://www.amfori.org/sites/default/files/amfori%20-%2026.11%20%20Country%20Risk%20Classification%202022_0.pdf The 2020 Worldwide Governance Indicators were published by the World Bank on the 21st September 2021 and extracted on the 23rd September 2021 for use in this Countries’ Risk Classification. This countries’ risk classification version 2022 enters into force on 1 January 2022. It overrules amfori BSCI list of Risk countries version 2021 and will remain valid until the next version.

5 Ref: Sachs, J., Schmidt-Traub, G., Kroll, C., Lafortune, G., Fuller, G., Woelm, F. 2020. The Sustainable Development Goals and COVID-19. Sustainable Development Report 2021. https://s3.amazonaws.com/sustainabledevelopment.report/2021/2021-sustainable-development-report.pdf Cambridge: Cambridge University Press, IEA (2019). CO2 Emissions From Fuel Combustion 2019. International Energy Agency, Paris. Available from: https://www.iea.org/reports/co2-emissions-from-fuel-combustion-2019

6 World Research Institute Aqueduct tool, Aqueduct’s tools map water risks such as floods, droughts, and stress, using open-source, peer reviewed data

7 https://epi.yale.edu/downloads/epi2020report20210112.pdf

8 www.govindicators.org

4. Regulatory Quality (RQ) – capturing perceptions of the ability of the government to formulate and implement sound policies and regulations that permit and promote private sector development.

5. Rule of Law (RL) – capturing perceptions of the extent to which agents have confidence in and abide by the rules of society, and in particular the quality of contract enforcement, property rights, the police, and the courts, as well as the likelihood of crime and violence.

6. Control of Corruption (CC) – capturing perceptions of the extent to which public power is exercised for private gain, including both petty and grand forms of corruption, as well as "capture" of the state by elites and private interests.

Based on above dimensions, the supply chain is affected, and it requires L.Brador to take responsibility in carried out actions

The most potential risk areas are in the production of the materials. The fabric and garment supply chains require risk assessment, training and both internal and third-party controls. For example, the amount of chemical used, which must be handled correctly, combined with handling different types of machines, makes the risk significant.

To secure, avoid and eliminate the potential risks, safety training of the workers is very important, both for knowledge and understanding of the risks. With the help of education, proper safety equipment will be used and safety rules that are implemented will be followed.

L.Brador choose to have nominated suppliers with a close and long-term collaborations. It allows a deeper knowledge about the supplier and gives a wider insight on which parts of improvements that are needed. Based on the knowledge, actions can be carried out together with the supplier to achieve sustainable and long-term solutions. The Asian office helps with translations and internal physical visits to minimize and mitigate the risks and cease adverse impacts of the working environment.

L.Brador are using the third-party controls to ensure the safety of all the employees working environment and fulfillment of contracts. Due to that third-party is an external part, L.Brador has the possibility to get a more transparent and truthful perspective of the supplier facilities and set up, at any time. The controls carried out by third-party inspectors helps to prevent and minimize the risks and significant impacts

Reports

L.Brador focus on fabric and garment suppliers, based on the risk tools and measurements (Textile & Fashion 20309) where the significant risks are in the supply chain of textile production. Due to the risks, L.Brador demands audits by third-party This to ensure that the required working conditions is fulfilled by our suppliers The audits include both physical factory and social compliance

9 The Swedish government has given the University of Borås the task to establish and lead Textile & Fashion 2030

The National Platform for Sustainable Fashion and Textiles. The assignment is led by Smart Textiles, part of Science Park Borås at the University of Borås, in collaboration with the Swedish School of Textiles, the Swedish Fashion Council, the RISE Research Institutes of Sweden, the Swedish Trade Federation, and TEKO, the Swedish trade and employers’ association for companies working in the textile and fashion industry.

Expected results of the audits are awareness of and legal compliance, regulations and the requirements of working environment in the country of operations.

All parts of the conducted audits are evaluated with established corrective action plans if needed. L.Brador’s strategies forward are based on measured effects and areas of development. This is to guarantee the employees’ health and security and take actions, making working environment develop and sustainable throughout the whole supply chain. L.Brador will annually revise the action plan for sustainability and set priorities with implementation of executions.

Factory audit

The factory audit Includes areas of environmental working conditions, training and knowledge, documentations of management and production processes. Below Grading table 1, is referring to the levels of achievement of the factory audit.

Grading table 1 - Factory Audit

A: ≧90% - <100%

B: ≧80% - <90%

C: ≧60% - <80%

D: >0% - <60%

Every part is evaluated with approximately 5-15 different questions scored by the auditor. For example, Part 3. Packing, handling & storage, there are 8 check points, the maximum score for each point is 5 (=A), the total maximum score of part 3 is 8x5=40. The actual score given by auditor is 4 (=B) for 7 check points and 3 (=C) for 1 check point, so the actual total score for part 3 is 31, so the percentage of part 3 is 31/40=78%.

According to the grading table, C: ≧60% - <80%, the grade for part 3 is C.

The overall conclusion is same as the lowest score of all parts, A, B, C or D. For example, if the lowest score of some part is C, the overall conclusion will be C Generally, because of the scoring rules, most of the suppliers within textile production meet a B-C-D level, where C is the most common.

Audit Result Summary

Overall Conclusion (Grade): C

Table 3. Example of Audit results summary, overall conclusion grade.

L.Brador will not accept any lower levels than C in overall conclusion. In specific questions in a separate part a D is allowed, but with a full explanation and immediately implemented action plans with the supplier and third party. The ambition L.Brador always strives to is to collaborate with suppliers achieving level C or higher, in every part of the audit.

The L.Brador factory audits results indicates that the suppliers are aware of the working environment and the requirements. Specific results of the L.Brador factory audit, with information about areas to be improved (where a few of the suppliers achieved level C-D in separate questions), are specified for each part below. None of the points are being seen as serious deviations.

Part 1 - Infrastructure & production machines

Upcoming points in the reports are that in a few cases the maintenance of the machines/equipment needs to be improved. They also see a need of improvement to maintain the production/workshop lines cleaned and tidy.

Part 2 - Production process control

Upcoming point in the reports are that some suppliers need to improve marking of raw materials.

Part 3 - Packing, handling & storage

Upcoming point in the reports see a need of improving of handling processes of working areas. To ensure consistency in that structure a few needed further actions to be implemented.

Part 4 - Training, knowledge, skill & experience

Upcoming point in the reports see a need of that training records should be provided, and some suppliers need to improve the continuously training, not focusing only on new employees.