Odlo Sustainability Report 2013/2014 by Odlo

SUSTAINABILITY REPORT 2013/14

SUSTAINABILITY REPORT 2013/14 CONTENT

Foreword by Julio Paiva 5

ABOUT ODLO The Brand The Company Facts & Figures

SOURCINGâ&#x20AC;&#x2030;+ PRODUCTION Sourcing Strategy Production

CORPORATE ECOLOGICAL RESPONSIBILITY

8 8 8 11

CORPORATE SOCIAL RESPONSIBILITY

CSR Vision CSR Strategy Overview Odlo Climate Initiative The Odlo Code of Conduct CSR Overall Responsibility Goals & Achievements 2013/2014

12 12 13 16 17 20

MONITORING

23 23 24

Monitoring Instruments Monitoring by Country

27 28

Materials & Technologies 33 Transportation 34

Conclusions & Outlook 35

FORWORD by Julio Paiva Foreword by Julio Paiva Since Odlo’s founding, almost 70 years ago, sustainability and social responsibility have been at the heart of its corporate culture.

collections and to shifting market demands. This not only optimizes our production cycle in the short-, mid- and long-term, but also helps us to implement economic and environmental improvements.

In 1992, Odd Roar Lofterød and I founded Odlo Portugal. From the beginning, we focused on internal production and on finding partners, for whom issues such as social security, creativity, peaceful collaboration and an inspiring atmosphere are just as important as they are to us.

The past 20 years reflect Odlo’s steady growth. In Romania, we started with a production facility with an area of approximately 2,500 m2. This year we completed the final improvements, expanding the facility to 10,000 m2 and currently produce an average of 15,000 garments per day and employ approximately 400 people.

We are convinced that internal production is the most effective way to achieve a leading position in the fields of social and environmental responsibility. The creation of a better and fairer world in which to live and work—that is our goal. Today, sustainability is a priority. For us, sustainability means, above all, that we strive for long-term and lasting action. To pursue a path in line with our beliefs, we have developed strong internal organization within the company, while maintaining close contact with our headquarters in Switzerland. Our technology and innovation centre is located in Portugal. The centre’s specific projects provide an important foundation for Odlo’s efforts towards lasting sustainability. The company’s highly efficient production centre is located in Romania. Together with our external production partners, we are able to respond effectively to rapid changes in our

Equally important is the furtherance of partnerships with our suppliers and external partners, both in Europe and in Asia. We intensively encourage this dialogue between companies, and also at a personal level, because we know how important this exchange is for us—for our continued inspiration. We are very proud of these projects and developments, especially because they define Odlo as a company in which employees can feel comfortable and as a place where we all take steps together to build a more sustainable future. Julio Paiva Company Head Odlo Portugal and Odlo Romania

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About Odlo

ABOUT ODLO The Brand

The Company

Brand Philosophy Odlo invented functional sports underwear and the three-layer principle. As a technological leader with almost 70 years’ experience, Odlo has committed itself to producing the best functional sportswear for people who love to exercise – in any type of weather and at every level of intensity. The brand inspires people to go outside, to enjoy sports and to tackle new challenges. Odlo stands for uncompromisingly high demand in functionality, comfort and quality.

Always one step ahead The Odlo brand stands for high-performance sportswear. What began in 1946 with two knitting machines and a vision of high-quality sportswear continues today as a true success story. A Swiss company with Norwegian roots, Odlo focuses entirely on the layering principle and the implementation of newly developed fibres with the latest processing technologies.

With its sports underwear, Odlo is the European market leader in functional sportswear. Additional successful product lines are offered in Highline (Outdoor), Running, X-Country, Bike, Tec Shirts, Kids and Accessory sectors. Odlo has subsidiaries in Switzerland, Germany, France, Austria, Belgium/Holland, Norway, UK and China. The Odlo brand is distributed worldwide in approximately 25 countries.

Behind Odlo stands an organization, which has successfully combined a passion for sports with innovative strength and know-how. Our collections are continually optimized for better performance in close co-operation with athletes such as Olympic champion Dario Cologna (cross-country), the Swiss Nordic Team with Olympic champions Selina Gasparin (biathlon) and Simon Ammann (ski jumping) as well as mountain bike World Champion Nino Schurter and the ScottOdlo team. History In 1946, Odd Roar Lofterød sen., an enthusiastic sportsman, founded the Odlo Company in Norway. In addition to the underwear the company produced since its founding, Odd Lofterød developed special training tights for his son who was a member of the youth speed-skating team. These tights were made of “Helanca” fibres and provided further protection from the cold. In 1963, Odd Roar introduced the enhanced prototype to the market: the first functional stretch outfit for cross-country skiers and speed skaters made using the revolutionary “Helanca” fibre. By 1972, 25 national teams at the Olympic Games in Sapporo were wearing Odlo competition sportswear. In 1973, Odlo Termic, the first fully synthetic sports underwear, entered the market. In 1979, Odd Roar jun., raised in an atmosphere of creative, entrepreneurial spirit, took over the Odlo Company. In 1986, Odd Roar Lofterød jun., together with Swiss partners, established Odlo International AG in Hünenberg near Zug (Switzerland), the new headquarters of the Odlo brand. One year later, Odlo launched the revolutionary “Athletic Clothing

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About Odlo

System” based the three-layer principle. Over the next 20 years, additional product lines were introduced on to the market. Odlo was ahead of the times in the mid-1990s when it launched a recycling program: customers could give back their used Odlo products in order to have them recycled. Just in time for the turn of the century, Odlo achieved a fabric breakthrough: the development of the “effect” fibre, thus introducing the first underwear containing odour-reducing silver ions on to the market. Further innovations followed with the universal, highly functional t-shirt Just One as well as the new, all-year-round quality underwear Cubic. Odlo constantly invests in the sustainability of its supply chain. Odlo Portugal, the company’s in-house factory, is constantly improving its technology. In 2003, an efficient distribution centre was built in Brüggen, Germany. In 2004, Odlo established an internal production facility in Romania. Following the expansion of the capacity in Romania in 2006, Odlo Portugal was re-structured as a competence and innovation centre. In 2006, Odlo joined the Fair Wear Foundation, an international non-profit organization founded to improve labour conditions in the textile industry. That same year, Odlo launched its functional, figure-hugging Evolution sports underwear and its new sports bra range. In 2011, a comprehensive CSR development project culminated in the launch of Evolution Greentec, an integral and sustainable concept. It is the first and only seamless underwear made from 100% recycled polyester that can be completely recycled. In 2012, Odlo’s Board of Directors nominated the Swede, Jonas Ottosson, as the new CEO of the Group. In 2014, the new logistics centre in Brüggen opened its doors. In Fall-Winter 2014/15, Odlo will present “the new Odlo”: a contemporary, modern and highly functional sports- and underwear collection for active people with high demands. New Organigram incl. CSR responsibility (2013/2014)

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FACTS & FIGURES

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About Odlo

Facts & Figures 2013 Headquarters

Odlo Sports Group AG, Switzerland, 6331 Hünenberg, Bösch 47

Brand established

1946 in Norway

Management

Jonas Ottosson (CEO), Thomas Spiess (Supply Chain), Claes Broqvist (Sales), Thomas Rast (CFO)

Sales 2013

141 million Swiss Francs

Employees 2013 Total 758 (FTE), 115 of which are at the Swiss operations in Hünenberg Markets

Odlo’s subsidiaries in Germany, Switzerland, France, Austria, Belgium/Holland, Norway, UK and China generate most of the sales. The Odlo brand is distributed worldwide in approximately 25 countries.

Core business With almost 70 years of experience, Odlo is a pioneer in functional sports underwear and the three-layer principle. Odlo offers a comprehensive all-year-round range of premium sportswear. Product segments

With its sports underwear, Odlo is the European market leader in functional sportswear. Other highly successful collections have been developed for the Highline (Outdoor), Running, X-Country, Bike, Tec Shirts, Kids and Accessories sectors. Market shares in the segment of functional underwear vary between 20% and 50%, depending on geographic location.

Point of Sales

Odlo products are offered worldwide at more than 4500 sales points, mainly in specialized sports’ trades. Approximately 1500 “shop-in-shop” systems provide Odlo’s consumers with worlds of experience. The Swiss company also runs its own Odlo stores.

Production

Odlo manufactures almost 73% of its products in Europe and the Middle East, primarily in its own factories. Odlo has modern manufacturing operations in Portugal and Romania. 27% of Odlo products are manufactured in Asia.

Odlo philosophy

As the market and technological leader, Odlo has committed itself to producing the best functional sportswear for people who love to exercise in every type weather and at every level of intensity. Odlo stands for uncompromisingly high-demand in function, comfort and quality.

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Corporate Social Responsibility

CORPORATE SOCIAL RESPONSIBILITY CSR Vision Sustainable action has been anchored in Odlo’s corporate vision from the beginning: “We act with social and ecological responsibility”. The company’s three core values are responsibility, action and transparency and reflect Odlo’s philosophy. We care As a high-quality Swiss company with a strong family tradition, sustainability is very important to us. We assume responsibility so that everyone can continue to enjoy sporting activities in nature well into the future. We act We take small, specific steps, because we are fully aware of the fact that we have limited resources and have to be economically successful. Therefore, we have developed a series of sensible measures that we can effectively realise. We share We stand by what we do. We inform our public about the measures we take, about our progress and also communicate any setbacks we encounter, if and when they arise.

CSR Strategy Overview The Odlo CSR strategy defines ambitious goals, responsibilities and milestones. The CSR strategy is an internal and confidential document, which is evaluated and approved by the Executive Board on an annual basis. The following extract provides an overview of its content. The CSR strategy for the upcoming years highlights the following areas of focus: Social responsibility > Be a fair and attractive partner to producers and ensure that they correctly apply the Odlo Code of Conduct. > Be a fair and attractive employer to employees (headquarters, subsidiary companies, internal production plants) > Realise the measures stipulated by the Fair Wear Foundation as an outcome of the management system audit > Follow up on corrective action plans (CAPs) as the out come of social audits at the production plants

Ecological responsibility > Assume ecological responsibility

> Ensure stakeholders’ health and safety within Odlo’s scope of capabilities > Implement the Odlo Climate Initiative with its 3 programmes: - awareness & responsibility - quality & innovation - resources > Participate in international working groups & initiatives

Transparency, communication, organisation > Increase transparency internally and externally

> Continuously develop and train management and employees

> Implement CSR in the management by objectives (MBO) process (annual goals, annual assessment, development of measures)

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Corporate Social Responsibility

Odlo Climate Initiative The Odlo Climate Initiative encompasses three areas of focus, each of which contains several measures. These have been implemented and communicated between 2011 and 2013.

Vision & Strategy: Ensure ecological responsibility >

Awareness & Responsibility of Management and Employees

Quality & Innovations of Products

Meaningful Usage of Resources

(each decision)

(long life)

(reduce, reuse, recycle)

Awareness & responsibility The level of awareness of CSR is to be continuously raised among all employees. Ecological and social issues are to be addressed in every decision-making process. The know-how and sense of responsibility of each individual is to be increased by incorporating training, communication and the integration of CSR into the management by objectives (MBO) process. Odlo founded an “Eco Rep” group to more effectively increase the level of awareness of every individual in the company. The “Eco Rep” group is constantly developing activities to make daily life at work and at home more sustainable: • Systematic approach to an organisational set up to use leftover fabrics to generate products for our factory outlet stores • Collect paper waste to use it for notes • Create textile bags from leftover materials to avoid the use of plastic bags Quality & innovation of products Odlo develops products with a very long lifespan, an important aspect of sustainability. This will remain unchanged in the future. New, eco-friendly materials are continuously examined and – wherever it makes sense – integrated.

Reasonable use of resources Odlo strives to use resources responsibly and to re-use them, or continue to use them, whenever possible. Recycling options are carefully considered and implemented (i.e. recycled down). In addition, Odlo takes care of the environment and therefore has changed all DWR finishings from Fall Winter 14/15 to short-change technologies (C6) and continues to work towards developing FC free possibilities.

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Topic

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Corporate Social Responsibility

The Odlo Code of Conduct As early as the 90s, Odlo signed a code of conduct with its producers. At the beginning of 2009, Odlo revised its code of conduct according to the requirements of the Fair Wear Foundation and had it re-signed by each of the producers. This most restrictive code on the market is based on the conventions of the International Labour Organisation (ILO) and the Universal Declaration of Human Rights. Its major points are: Employment is freely chosen There shall be no use of forced, including bonded or prison, labour. (ILO Conventions 29 and 105) No discrimination in employment Recruitment, wage policy, admittance to training programmes, employee promotion policy, policies of employment termination, retirement, and any other aspect of the employment relationship shall be based on the principle of equal opportunities, regardless of race, colour, sex, religion, political affiliation, union membership, nationality, social origin, deficiencies, or handicaps (ILO Conventions 100 and 111). No exploitation of children There shall be no use of child labour. The age for admission to employment shall not be less than the age of completion of compulsory schooling and, in any case, no less than 15 years (ILO Convention 138). There shall be no forms of slavery or practices similar to slavery, such as the sale and trafficking of children, debt bondage and serfdom and forced or compulsory labour. Children (between the age of 15 and 18) shall not perform any work which, by its nature or the circumstances in which it is carried out, is likely to harm their health, safety or morals (ILO Convention 182). Freedom of association and the right to collective bargaining The right of all workers to form and join trade unions and bargain collectively shall be recognised (ILO Conventions 87 and 98). The company shall, in those situations in which the right to freedom of association and collective bargaining are restricted under law, facilitate parallel means of independent and free association and bargaining for all workers. Workersâ&#x20AC;&#x2122; representatives shall not be the subject of discrimination and shall have access to all workplaces necessary to carry out their representation functions (ILO Convention 135 and Recommendation 143).

Payment of a living wage Wages and benefits paid for a standard working week shall meet at least legal or industry minimum standards and always be sufficient to meet basic needs of workers and their families and to provide some discretionary income (ILO Conventions 26 and 131). Deductions from wages for disciplinary measures shall not be permitted nor shall any deductions from wages not provided for by national law be permitted. Deductions shall never constitute an amount that will lead the employee to receive less than the minimum wage. Employees shall be adequately and clearly informed about the specifications of their wages including wage rates and pay period. No excessive working hours Hours of work shall comply with applicable laws and industry standards. In any event, workers shall not on a regular basis be required to work in excess of 48 hours per week and shall be provided with at least one day off for every sevenday period. Overtime shall be voluntary, shall not exceed 12 hours per week, shall not be demanded on a regular basis and shall always be compensated at a premium rate (ILO Convention 1). Safe and healthy working conditions A safe and hygienic working environment shall be provided, and best occupational health and safety practice shall be promoted, bearing in mind the prevailing knowledge of the industry and of any specific hazards. Appropriate attention shall be paid to occupational hazards specific to this branch of the industry and assure that a safe and hygienic work environment is provided for. Effective regulations shall be implemented to prevent accidents and minimise health risks as much as possible (following ILO Convention 155). Physical abuse, threats of physical abuse, unusual punishments or discipline, sexual and other harassment, and intimidation by the employer are strictly prohibited. Legally-binding employment relationship Obligations to employees under labour or social security laws and regulations arising from the regular employment relationship shall not be avoided through the use of labouronly contracting arrangements, or through apprenticeship schemes where there is no real intent to impart skills or provide regular employment. Younger workers shall be given the opportunity to participate in education and training programmes. Odlo has committed itself to the correct implementation of this code of conduct.

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Corporate Social Responsibility

CSR MANAGEMENT SYSTEM CSR Overall Responsibility Odlo International Executive Board bears overall responsibility for CSR. It defines the CSR strategy. Significant strategic decisions are made by the entire Executive Board. Within the Executive Board, the Director of Supply Chain Management, as the CSR delegate, is entrusted with implementation of the CSR strategy. He is supported by the CSR team. Odlo CSR Team 2013/14 Odlo assigns a CSR team to ensure the implementation of its vision and strategy. By the end of the 2013/2014 reporting period, the team was composed of the following members: Team members and their CSR roles CSR Delegate/Manager: Administrator Sourcing & Production: Fabric Development Manager: Production Representative:

Thomas Spiess Ramon Kälin Regina Goller Joana Araujo

Communication, Training and Development The following platforms have been implemented and are used by the CSR team: Members

Internal Platforms Timing

CSR team

CSR team meeting

Executive Board

CSR strategy meeting

yearly

project-specific

Executive Board meeting

project-specific

Odlo headquarters staff

Informational meeting

up to 6 times per year

Odlo international staff

International Marketing & Sales meeting

twice a year

Intranet

several times a year

Target Group Internal management of production plants (Odlo Portugal & Odlo Romania)

Every Odlo employee is obliged to act with social and ecological responsibility in his or her field of work. All managers at Odlo are responsible for implementing the CSR strategy in their own fields of activity, placing necessary emphasis on the topic and providing incentives for the continuous development of CSR at Odlo. Management Tools 2013/14 Odlo internally

Odlo externally

CSR vision and strategy

Code of conduct

CSR budget

CSR questionnaire for producers

Monthly meeting of CSR team

Social audits, Fair Wear Foundation

Report to Executive Board

CSR report

CSR work plan (annual planning)

Corrective action plans (CAPs)

CSR contributions to “Odlo Inside” newsletter International CSR presentations

monthly

Platforms for Timing informing producers Direct contact (phone, e-mail)

on-going

Management meeting

continuously, if required up to 4 times a year

International Marketing & Sales meeting

twice a year

several times a year

Employees of inhouse/ internal production plants (Odlo Portugal & Odlo Romania)

Intranet Information board

on-going

Management of manufacturers

Direct contact (on-site visits, video-conference, phone, e-mail)

on-going

Corrective action plan (CAP)

quarterly update

WEP Program Workers of production plants

Information board

information by producer

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Corporate Social Responsibility

AQUAM HARUPTA TUSCIIS Fair Wear Foundation Membership Odlo is a member of the Fair Wear Foundation (FWF), which strives to improve labour conditions in the textile industry worldwide. The FWF verifies that producers abide by its code of conduct and that they achieve adequate progress. Governed by trade unions, NGOs and business associations, the FWF’s independence is guaranteed. Transparency and accountability are key principles (www.fairwear.org).

Goals & Achievements 2013/2014

FWF members work towards improving the labour conditions in factories that produce sewn textiles all over the world. The basis for collaboration between the FWF and its members is its code of labour practices. Eight labour standards form the core of its code of conduct. FWF members undertake to comply with the outlined labour practices.

• Fulfilment of the Odlo CSR strategy for the years 2012 – 2015 • Brand performance check at the Odlo International headquarters by the Fair Wear Foundation in March 2013 • Increase in transparency within the entire value chain

The FWF verifies whether companies comply with the code of labour practices through factory audits and a complaints procedure, through management system audits of its members and through extensive stakeholder consultation in the production countries. The FWF shares its knowledge and (local) contacts with its member companies, providing them with access to information on local legislation, labour standards and culture. Members are required to set up a coherent monitoring system that includes factory audits, factory training and factory visits. The FWF has a complaints procedure that enables factory workers to anonymously bring to light any abuses related to labour conditions.

Social and ecological responsibility have been part of Odlo’s core values and thinking since the company’s founding. In 2009, the standardised Odlo CSR Management System was implemented. In 2013, primary measures taken to further develop the system include:

Social Audits Odlo cultivates long-term partnerships with its producers. In 2013, 14 producers were active for Odlo, not including our 2 factories in Portugal and Romania (16 producers in total). Extract from the “Brand Performance Check 2013” of the FWF: “During the Brand Performance Check, FWF staff speak to various employees at the affiliate who have important roles to play in the management of supply chains. FWF verifies the actions of affiliates based on several sources including documentation of activities, financial records, the affiliate’s supplier register and staff interviews. Following the Brand Performance Check, FWF summarizes findings in this report, which is made public via www.fairwear.org. The FWF Performance Benchmarking Guide provides more information about the indicators and is available for download”. Management summary of the “Brand Performance Check 13” Odlo is in the process of implementing the FWF’s requirements. As a FWF member for more than 5 years, Odlo has yet to reach the monitoring threshold of 90%. Odlo is expected to improve its monitoring practice in 2013 in order to be able to monitor at least 90% of its total turnover. Odlo has participated in a FWF project, together with other outdoor companies, in order to assess the impact of hypothetical increases towards living wage benchmarks. Odlo has an efficient system in place to implement CAPs at the factory level. Odlo actively engages with other FWF affiliates when sourcing at the same production site. Odlo will continue to enhance activities with regard to training and capacity building. Factory Audits

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Corporate Social Responsibility

AQUAM HARUPTA TUSCIIS To date, all audits have resulted in corrective action plans (CAPs). The findings detailed in these CAPs are now being addressed by the audited producers under the supervision of Odlo and the FWF. All producers committed themselves to continuous improvement in 2013. Therefore, we were able to close all pending findings according to the CAP’s. Under the chapter “Monitoring by Countries,” the results are illustrated and commented on in detail. Special monitoring was required for Odlo’s producer in India over the past few years. Here, an audit carried out in 2010 brought to light significant shortcomings. Despite the fact that operations were being managed satisfactorily, considering local circumstances and the fact that new jobs were being generated, the situation did not live up to Odlo’s expectations. Together with the producer and the FWF, a tight, binding roadmap was defined over the course of several meetings. An independent consultant is supporting the producer in implementing the measures on site.

DWR finish in all wind-resistant and waterproof materials.

Thanks to the support of the local consultant, major steps could be taken and all of the open issues in the CAP have been resolved. In 2013, on June 27th there was a subsequent audit in India to track the progress.

• The “Bike to work” initiative, June 2014 For the 8 th consecutive year Odlo International has taken part in the “bike to work” initiative organised by the umbrella association “Velo Schweiz”. For an entire month employees rode to and from work by bicycle, thus making an ecological as well as a fitness-related contribution. (biketowork.com)

Implementation of Odlo Climate Initiative 2011-2013 In 2010, Odlo conceived and launched the Odlo Climate Initiative 2011-2013, a programme for comprehensively improving the company’s ecological footprint. The following results were achieved as of 31.12.2013: • Product life cycle analysis of the sportswear core merchandise Odlo EVOLUTION in comparison to EVOLUTION GREENTEC in co-operation with “my climate” in autumn, 2011 • Investigation of new, ecological materials and technologies, e.g. dope dyeing (currently the most environmentally friendly dyeing technique), CO2 dyeing 2012 • Co-operation with suppliers of environmentally-friendly materials, such as Polartec, the market leader for ecological materials, continued in 2013 and in the future • Change of padding material to “Primaloft Eco” version (80% recycled PES) • Change from long-chained (C8) to short-chained (C6) based

• Continued with EVOLUTION GREENTEC WARM in winter, 2013 and developed EVOLUTION GREENTEC LIGHT for summer, 2014 (integrated recycling concept) • General reduction of materials and colours used per season, which helps to avoid minimums • Around 65% of the entire fabric source comes from Europe • Work with materials made in Switzerland (Schoeller®), Germany, Austria, Italy and Portugal Internal CSR Initiatives and International Activities Internal CSR initiatives are initiated by individual members of staff, managers, teams or the HR department. These initiatives include:

• Sports events Odlo supports a variety of internal and external sports events, thus promoting both popular sports, employee- health and the development of young athletes. • “feel fit!” health package for Odlo employees The Swiss headquarters in Hünenberg offers its employees access to a variety of activities that are good for their health. The Odlo health package includes a sports facility, nutritional consulting, lectures on health-related topics and workplace ergonomics. • During 2013/14, Odlo Portugal participated in different social activities such as working in a food bank and raising money for the institution “In the middle of nowhere” to support the local community and associations. The company created a workplace gymnastics day for all employees. Every year, Odlo Portugal devotes an entire day to help the local community. The purpose of this

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Corporate Social Responsibility

AQUAM HARUPTA TUSCIIS day is to instil in people the spirit of helping others and to promote the practice of voluntary actions in a society that increasingly needs this type of support. • Aid supplies for victims in Syria and Bosnia. Human Plus E.V. has organised several aid shipments. Human Plus, Germany stands for fast, non-bureaucratic aid for victims of war and/ or natural catastrophes. Odlo contributed textiles to the relief shipment. • We donated leftover fabric from our supplier Tayeh for the “Wat Suankaew” foundation. • Also in 2013/14, the initiative “Lunch with Friends of Odlo” attracted some interesting personalities to Hünenberg. Alexandra Engen gave her personal insights into the GHOST Racing Team, answering employees’ questions in a casual and charming way. Transparency and External Communications In 2013/14, Odlo used the following tools for external communications: • Odlo website/CSR website (www.odlo.com) • Odlo Internet Newsletter / Intranet Platform • CSR Report 2012 • Press releases/Press conferences and product launch For ecological reasons, Odlo refrains from publishing a CSR flyer, but makes all information available, using paperless technology on its website.

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Sourcing and Production

SOURCING AND PRODUCTION Sourcing Strategy The Odlo Sourcing Strategy is based on the following principles: Priority 1: In-house/ Internal production To the extent that it is possible, in terms of capacity and knowhow, new garments and/ or additional production volumes are manufactured in our internal/ in-house factories in Portugal or Romania. Priority 2: Long-term partnerships While many other brands make use of hundreds of producers, encouraging them compete against each other or exchanging them every season, Odlo, in keeping with the motto “less is more,” aims for long-term partnerships with a small number of producers. The growth in sales, targeted by Odlo, should, to the extent that it is possible, be achieved with these selected partners. New partners are selected according to a strict evaluation procedure. This policy enables the producers to plan for the long term, thus increasing stability and job security. Co-operation period with producers as at 30.6.2014: Co-operation period

Number of producers

More than 15 years:

2 producers

More than 10 years:

4 producers

7 - 10 years

5 producers

4 – 7 years:

2 producers

Less than 4 years:

3 producers

Pricing Policy Odlo calculates its prices using the “open costing principle”. This means that, for every product, the sales price is calculated individually, taking into consideration the material and work costs, overhead (headquarters, marketing, etc.) and the profit margin. Price is negotiated directly with the producer. Odlo does not work on the basis of tenders, i.e. no additional competition is created among the producers.

Organisation of the sourcing team Odlo has reorganised its sourcing and product development department. Beginning 1.7.2013, sourcing and product development was integrated into the Supply Chain Management Organisation. With this change the sourcing, development and supply planning processes are even more well-coordinated and communication between internal and external production facilities is simplified. These teams work closely together with our Product Management team. They all work in the same building at our Swiss headquarters, which promotes flexible, informational exchange and more efficient decision-making routes. Our producers are involved in the order planning process as early as during the development phase (which occurs eleven months prior to the final order placement). Both sides agree on lead times. Lead times (the time between order placement and delivery) are dependent upon both the material and the complexity of the product (between 3 – 5 months). Throughout the entire production cycle, producers remain in close contact with Odlo management. Production Cycle

2012

First Planning with supplier

Design & Development A

2013

Final order

Production over 3-5 months

Order& Production PlacementA

2014

Transport by ship, land or air

Delivery to the shops

Picture: Odlo production cycle. Odlo produces 2 collections per year.

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Sourcing and Production

AQUAM HARUPTA TUSCIIS Selection Process for New Producers Odlo applies a 4-step plan in selecting new producers: Step 1

Producer meeting (source allocation meeting) to discuss new collections: Product Management, Sourcing/Product Development, Supply Chain Management)

Step 2

Search for a new producer, if no existing partner can deliver the requested technology, additional quantities or new items

Step 3

Visit the new producer on site, examination of “Odlo Must Criteria”, completion of a producer assessment (checklist) (Head of Sourcing & Product Development)

Step 4

Final decision about co-operation with new producer by Executive Board

The new producer must fulfil at least the following “Odlo Must Criteria”: • A professionally managed company; state-of-the-art production • Willingness to sign and comply with the Odlo Code of Conduct

Production For decades, Odlo manufactured its products predominantly at its internally-owned factory in Portugal. With the growth of the company and the expansion of its product range, Odlo eventually required additional production capacity and know-how. After careful research, management decided in favour of a small number of producers, with whom Odlo would enter into long-term partnerships. In 2004, Odlo built a modern factory in Romania. The capacity of this facility was doubled in 2012. In Romania, large volumes of Odlo sports underwear are manufactured, whilst Odlo Portugal is managed as a technology and competence centre. In 2013, 58% of Odlo’s products were manufactured in Odlo’s internally-owned factories—a unique situation in the textile industry. A total of 72% of garments were produced in Europe including the Middle East. In first half of 2014, 69.5% of Odlo’s products were manufactured in Odlo’s internally-owned factories. A total of 82.4% of garments were produced in Europe including the Middle East.

• Compliance with Odlo quality standards • Successful completion of the producer assessment

Production table by country for 2013 Country of Production

Number of producers

Value%

Volume%

Odlo Romania

38.70

50.2

Odlo Portugal

6.20

7.8

Total own production Europe

44.90

58.0

Germany

6.00

3.5

Israel

9.90

9.7

Romania

1.40

0.6

Total Europe and Middle East

62.20

71.9

China

28.70

19.6

Thailand

7.60

7.2

India

1.50

1.3

Total Asia

37.80

28.1

Total

100.00

100.0

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Sourcing and Production

AQUAM HARUPTA TUSCIIS Production table by country for the first half of 2014 Country of Production Odlo Romania

Number of producers 1

Value%

Volume%

44.30

55.1

Odlo Portugal

14.1

14.4

Total own production Europe

58.40

69.5

Germany

4.4

2.4

Israel

8.7

8.5

Romania

4.0

2.0

Total Europe and Middle East

75.5

82.4

China

16.7

9.8

Thailand

6.0

6.4

1.8

1.4

Total Asia

24.50

17.6

Total

100.00

100.0

India

Agents & Subcontractors Agents, as opposed to producers, do not have their own manufacturing facilities but commission third-party companies. Odlo has been working with an agent in China for some years. This agent is listed in the above chart as a producer. According to the agent, 3 third-party companies were commissioned in 2011, with one third-party company accounting for the majority of volume. All third-party companies working with our agent have been included in our supplier register and are now being continuously integrated in the Odlo monitoring system. Some Odlo producers outsource certain processes (e.g. the sewing in of parts) to subcontractors. Others place commissions with subcontractors in case of capacity constraints. In any case, the main contractor vouches for its subcontractors. Odlo has expanded its supplier register to include the subcontractors involved in the manufacturing process as well. All these subcontractors are now included in the Odlo monitoring system.

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MONITORING

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Monitoring

MONITORING 3 3

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Complaints A producer’s employees can file complaints concerning their working conditions with an independent authority designated by the FWF. The authority forwards the complaint anonymously to the FWF which, in turn, informs Odlo.

During their visits, Odlo employees fill out a checklist and report their findings to the CSR Team.

R-

Inspections by Odlo Staff Odlo employees visit producers on a regular basis and inspect the working conditions on site, e.g.: • Quality Assurance Team Asia and Europe • Head of Sourcing & Production Development (3 – 4 times a year) • Director Supply Chain Management • Supply Manager • Members of the Product Management Team • Executive Board Members • Other Odlo employees

Inspections

Corrective Action Plans (CAPs) To follow up on these audits, Odlo maintains a corrective action plan (CAP) with all participating producers that lists all of the shortcomings that are found. At regular intervals, producers are required to report any progress made to Odlo by means of these CAPs. Producers have to show evidence of the completion of corrective actions by furnishing photos and through on site visits.

Corrective Action Plans

Social Audits by the FWF Odlo commissions an external, independent organisation to perform social audits. The majority of the audit teams are trained by the FWF to carry out factory audits.

Code of Conduct

7 7 7

Code of Conduct & FWF Questionnaire All producers have to sign the Odlo Code of Conduct (see chapter “Code of Conduct”), confirming that they have filled out the required FWF questionnaire truly and correctly and that they are prepared to work towards full implementation of the necessary measures within the company.

7 7 7

Monitoring Instruments Odlo’s current monitoring system is comprised of the following:

Brand Performance Check At regular intervals, the FWF also audits Odlo to support the FWF processes. The results are published on the FWF website and are integrated into the CSR work plan and the CSR report. CSR work plan Odlo draws up a work plan once a year (annual planning), which is then submitted to the FWF. This confidential document details the activities planned for the following year. The work plan for 2013/1-6 2014 was submitted to the FWF on time at the end of 2012. CSR Report The present report functions as a controlling device and is publicly available. As Odlo International is changing its financial year from the calendar year to a mid-year to mid-year period (1.7.2014 – 30.6.2015), this report summarizes 2013 and the short year 1-6/2014 as an 18 month long period.

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Monitoring

AQUAM HARUPTA TUSCIIS Monitoring by Country Since Odlo’s affiliation with the Fair Wear Foundation in 2008, the following audits of our producers have been conducted: Independent audits carried out by the FWF by country (as per 30.06.2014) COMPLETED PLANNED accomplished planned Country ProductID ID 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014/15 2014/15 2015/16 Country Product 2009 2015/16

Thailand Thailand

3039 • • 3039 • • •* •*

China China 4926 • • 4926 • •

3817 • •* 3817 • •* 4591 • • 4591 • • 3811 • • 3811 • • 3803 •* 3803 •

Indien Indien 4833 • •* 4833 • •* 4835 • •* 4835 • •* Vietnam Vietnam 5620 •* 5620 •* Rumänien Rumänien 145 • •* 145 • •* 2143 •*

2143 • • 3804 3804 •

Israel Israel 3785 •** •** •** •**

3785 •** •** •** •** Jordanien Jordanien

5141 •** •** •** •**

5141

•**

Germany

Germany 3795 3795 *-In planning **-Meta Certificate *-In planning **-Meta Certificate

•**

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Monitoring

Corrective Action Plans (CAPs) by category and country 2013/14 The table below groups these findings according to the core elements of the CoC: New findings emerged during the FWF social audit in 2013/14 Area of Reporting

Country

Producer number

No.of findings

Management

Romania

3804

Forced labour

Romania

3804

Discrimination

Romania

3804

Child labour

Romania

3804

Freedom of association

Romania

3804

Payment of living wages

Romania

3804

Overtime

Romania

3804

Health and safety

Romania

3804

Total

CAP Progress Report as at 30.6.2014 (summary): Area of Reporting

Closed Finding

during g 2013/14 /

Open findings 30.06.14

Management

Forced labour

Discrimination

Child labour

Freedom of association

Payment of living wages

Health and safety

Total

Overtime

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Corporate Ecological Responsibility

CORPORATE ECOLOGICAL RESPONSIBILITY With Evolution Greentec, Odlo has developed a unique and innovative type of underwear that meets the highest standards of functionality and is specifically designed and produced using a green thread. The green thread stands for an outstanding level of sustainability and environmental compatibility. After years of development, a recycling concept has emerged that combines function, high-tech material and sustainability.

Kontakt: Name Name, ODLO International AG Telefon: +00 00 000 00 00 forename.surname@odlo.com Forename Surname, ODLO International AG Telefon: +00 00 000 00 00 forename.surname@odlo.com Fotos: http://weblink User: Xxx Password: Xxx

As the raw material for Evolution Greentec seamless underwear, Odlo exclusively uses off-grade granulate which is produced as a side-product in the manufacture of polyester yarn. This â&#x20AC;&#x153;wasteâ&#x20AC;? yarn produces a consistently pure-quality, hardwearing end product. Evolution Greentec goes through two recycling cycles. In the first one, waste (off-grade granulate) from thread production for the regular Evolution products is brought into the textile cycle, producing new high-quality Evolution Greentec products. In the second cycle, worn Evolution Greentec garments are fed into a non-textile recycling process, for example to produce clothes hangers. The Evolution Greentec packaging consists entirely of 100% recycled and recyclable cardboard. The Evolution Greentec collection consists of four garments, each in two colours, for women and men. In the summer of 2013, the Evolution Greentec collection was also launched in light quality, consisting of four garments in three colours for women and three garments in three colours for men. Taking ecological and economic considerations into account, the range and colours will be maintained for at least three years. With the high premium collection Odlo Zeromiles, Odlo developed a new ecologically friendly, outstanding collection of exclusive garments. Odlo Zeromiles means the least possible amount of miles between manufacturing and selling. Material sources as well as garment making facilities are mainly located in Europe. Materials from Switzerland, Austria and Germany provide high and REACH confirmed qualities. Recycled downs from Spain complete the ecological idea.

Z EZ ER RO O M MI LI LE ES S PREMIUM PREMIUMCOLLECTION COLLECTION Inspired by by Norwegian roots Inspired Norwegian roots carried outout in Swiss quality carried in Swiss quality

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Corporate Ecological Responsibility

Harum lacest, sustiate et repre ped ut aborit aborentur rae sae nam ex eume enditat emporem facessi ntotat harci con. Soluptatatur? Leste ressunt aut aut laccum earia que volupisciis reiunt ulpa poritiiscit, si nias autatur aborerc hictia num est et ium que dolupic tem. Quiamustem et inis ea cus et et maio voluptas autempe rspero officatem aut labore consecae mod que nossimincia venimi, quisin et hil in pratati onseque et faccume latur, qui comnihillaut labo. Itaquid eumquo dent lit, omnis sumquun tionsectur? Ipiet que rerum quam nam, quamendandit quam quissero iunt est moluptation nonseditium ad utecto dolor alitecte ilique consed minverf erianti asimus. Picture: Prepared cutted pieces ready for sewing.

Materials & Technologies Odlo uses only highly functional fibres. Approximately 70% of our fabrics are developed exclusively for Odlo. The fabrics we use offer optimal moisture transport and high breathability. A Fabric Development Team, based at the Odlo headquarters in Switzerland, endeavours to provide athletes only with the best fabrics. The Swiss company is in the process of forging close relationships with research institutes.

Odlo continuously strives to reduce material consumption, e.g. by using laser cutting technology or by using lighter fabrics. Odlo uses pure synthetic fibers as well as mixed yarns to gain the best possible function for the required usage. Oeko-Tex 100 Odlo functional sportswear has been awarded the Oeko-Tex label, “Confidence in Textiles”, which certifies textiles that are free from harmful substances according to Oeko-Tex Standard 100. Odlo sportswear complies with current standards regarding human ecology: it contains no carcinogenic substances, no formaldehyde, is free from allergenic dyes and has a skin-friendly pH value. Green Dot All Odlo underwear packaging features the “Green Dot”, being entirely recyclable.

Picture: Back to the roots. Also the Zeromiles line Odlo invests into the development of clothes with natural fibres.

bluesign® system partners Most Odlo fabric suppliers are bluesign® system partners, such as Polartec, the inventor of modern synthetic fleece. Bluesign promotes an independent industry textile standard. The bluesign® standard is an input stream management system that covers all environmental, health and safety (EHS) aspects within the textile manufacturing chain. (www.bluesign.com). REACH Odlo’s entire European production is subject to the strict requirements of REACH. REACH stands for Registration, Evaluation and Authorisation of Chemicals. REACH, first implemented on June 1st, 2007, is the new regulation concerning the safe production and the use of chemical substances within the European Union (EU) .

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Corporate Ecological Responsibilty

Transportation Odlo strives to arrange long distance transportation by sea whenever possible.

Sea transportation represents the best alternative from both an ecological and economic point of view. The rising trend of air transportation over the past few years has fortunately started to decline. Odlo is happy to be able to communicate that its share of transportation by air or sea/ air is again down to 3-4%. There are two major reasons for this development. The first reason is the Asian market is much less tight than it has been during the past two years. The second reason is Odlo’s investment in a sophisticated order tracking System (OSCA by Setlog), which provides the possibility to align production and demand in an optimal way, generating a positive impact on the share of goods to be transported by air.

Transport mode in 2013 (number of cartons in %)

Truck: 46’965 cartons_70%

Air: 2’543 cartons_4% LCL: 2’113 cartons_3% FCL 40’: 8’929 cartons_13%

FCL 20’: 6’542 cartons._10%

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Conclusions and Outlook

AQUAM HARUPTA TUSCIIS Conclusions and Outlook We are convinced that our consistent purchasing and manufacturing strategies were not only effective in the past, but also will continue to work well into the future. During the course of our company’s history, we have not merely followed every relocation trend. Instead, for decades, we chose to maintain our manufacturing base near the primary market in Central Europe. Through steady technological advancement and capacity expansion, we have continued to improve our internally-owned production facilities in Portugal and Romania. We are convinced that, in the future, it will become increasingly important to keep production as close to the market as possible. This not only allows for a high level of service to be guaranteed, but also significantly improves sustainability. As a member of the Fair Wear Foundation, we have made major improvements in our operations over the last seven years. These changes have had an immediate and positive impact on the sustainability of our actions. We realise that, in the future, we will still have to address many issues that we currently have not solved to our satisfaction. We know the next steps will not necessarily be easy and are fully aware of the challenges that lie ahead. As a company, we can proudly look back on almost 70 years of socially responsible and sustainable action. As we move towards the future, we will not give up our goal of creating a better and fairer world in which to live and work. In 2013, we focused our attention on customer responsibility. A large-scale survey provided us with answers to questions addressing the personal opinions and values of our customers as well as the influences on their decisions to purchase socially responsible, brand name products. The survey revealed that the number of “ socially conscious consumers “ could be increased. It also showed that, we, as a company, need to be much more proactive in informing our clientele about our products. Here, new media can be used effectively as easily accessible information platforms. We gladly invite our readers to further inform themselves about our company and to follow our developments at www.odlo.com, under the heading Corporate Social Responsibility.

Editorial Information Publisher Odlo Sports Group, Bösch 47, CH-6331 Hünenberg, Switzerland www.odlo.com Editors CSR Team, Odlo International: Thomas Spiess, CSR delegate of the Executive Management Ramon Kälin, Regina Goller, Joana Araujo, Stephanie Seibert, Stefanie Waltenspül Visual Communication Barbara Mattern, Odlo International For further information about Odlo’s corporate social responsibility, please contact thomas.spiess@odlo.com

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