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The Moncler Group, through the normal business management and the development of its strategy, is exposed to different types of risks that could adversely affect the Group’s operating results and financial position.
The most important business risks are monitored by the Control, Risks and Sustainability Committee and periodically reviewed by the Board of Directors, which is responsible for the development of the strategy.
RISKS RELATED TO THE COVID-19 PANDEMIC
The Covid-19 pandemic, which spread globally starting from January 2020 and continued throughout 2021, has led all the countries worldwide, including Italy, to face a complex health emergency, with social, political, economic and geopolitical implications. In this context, the Moncler Group continued to implement actions aimed at safeguarding the health and safety of its employees, while at the same time working to strengthen its managerial flexibility. However, it cannot be excluded that the uncertainly of the pandemic evolution, linked to the transmission of new variants may continue to influence the results of the next years, for example by limiting the international mobility of customers.
RISKS ASSOCIATED WITH THE CONFLICT BETWEEN RUSSIA AND UKRAINE
The conflict between Russia and Ukraine, which began on 24 February 2022, is causing significant consequences globally not only for the serious humanitarian crisis that originated, but also for the possible economic impacts on global markets, which were immediately reflected not only in increases in the costs of some raw materials such as gas and oil, but also in sharp reductions in the equity values of the major world markets.
The Moncler Group has currently suspended its commercial activities in Ukraine and Russia, closing both the direct store in Kiev and in Moscow, suspending the activity of the online channels and the shipments to the wholesale channel, for the part not yet sent, of Spring/Summer collections.
The exposure to the Russian and Ukrainian markets, including Russian tourists who buy in other markets, is less than 2% of the Group’s annual revenues.
The Group has no suppliers of raw materials in Russia and Ukraine or production sites located there. However, it cannot be excluded that a worsening of the conflict could have unpredictable impacts on other neighbouring countries where the Group produces, with an impact on production capacity and procurement costs. The situation is constantly monitored in order to be able to react promptly to any worsening of the conflict.
RISKS ASSOCIATED WITH THE MARKETS IN WHICH THE GROUP OPERATES AND WITH GENERAL GEOPOLITIC AND ECONOMIC CONDITIONS
Moncler Group operates in the luxury goods sector, which is characterised by a high correlation between the demand of goods and the trend in wealth, economic growth and political stability in the markets where the demand is generated. Thus, the Group’s ability to develop its business depends to a significant extent on the political stability and the economic situation of the various countries in which it operates.
Although Moncler operates in a significant number of countries around the world, thereby reducing the risk of high concentration of the business in specific geographical areas, the possible deterioration of economic, social and political conditions in one or more markets in which it operates may have a negative impact on sales and financial results.
The introduction by national or supranational bodies of restrictions on the movement of people – as a consequence, for example, of international crises or pandemics – as well as the introduction of any restrictions on exports following trade or financial sanctions could also have an impact on revenues, especially in relation to certain geographical areas in which the Group operates. In particular, the Asian region in recent years has further increased its importance both for the luxury goods sector and for the Group, representing for the Moncler brand at the end 2021 about half of its revenues; while Stone Island, having only recently begun its international expansion, particularly in Asia and America, remains more exposed to the European market (75% of the 12 months of FY 2021 revenues).
RISKS RELATED TO CYBER ATTACK AND THE PROTECTION OF PERSONAL DATA
On 22 December 2021, Moncler was victim of a sophisticated malware attack on its IT systems resulting in the temporary outage of its IT services, which were then gradually restored to maximum security and without significant impacts on the business. However, the malware attack caused the exfiltration, resulting in the loss of confidentiality, of personal information regarding employees, clients in the Company’s database and some suppliers, consultants and business partners. This data breach was promptly communicated both to the competent authorities, including the Italian and foreign Data Protection Authorities, and to those directly involved. In addition, a team of cybersecurity experts was immediately activated, who also contributed with elements to the strengthening of security measures on IT infrastructures.
The Company still collaborates with the locally competent personal data protection authorities in order to provide all the information periodically requested and, to date, there is no evidence of any sanctions against the Group referring to the attack. However, it cannot be excluded at present that the Company, on one side, might be subject to financial sanctions, even of a significant amount, and, on the other side, might receive claims for damages from individual or groups of customers.
In addition, despite the process of strengthening the cybersecurity measures and the internal and external expertise, the rapid technological evolution and the increasing organisational complexity of the Group along with the growing sophistication and frequency of cyber-attacks, expose the Group to the potential risk of new cyber-attacks. Thus, Moncler is further strengthening its cyber risk management model, which includes procedural aspects, training, risk evaluation and periodic review, including those related to third parties. The ultimate goal of this model is to ensure the implementation of strong protection and business continuity tools and processes, including the adoption of the best technologies and methodologies for identifying and protecting the Group from cyber threats.
RISKS RELATED TO COST AND AVAILABILITY OF HIGH-QUALITY RAW MATERIALS, TO CONTROL OF THE SUPPLY CHAIN AND TO RELATIONSHIPS WITH SUPPLIERS
Moncler and Stone Island’s products require raw materials of high quality, including, but not limited to down, nylon, cotton and wool. The price and availability of raw materials depend on a wide variety of factors largely beyond the control of the Group and difficult to predict.
Although in recent years the Group has always managed to guarantee an adequate and highly qualified sourcing of raw materials – as also demonstrated particularly during 2021, which was characterised by costs’ inflation of raw materials, transport and labour costs as well as by a greater sourcing difficulty – it cannot be excluded that there could be some tension on the supply side that could lead to a shortage of supply resulting in a significant increase in costs that could have negative impacts on the financial results of the Group. In order to minimise the risks related to a potential unavailability of raw materials in the time required by production, the Moncler brand adopts a multi-sourcing strategy of diversifying suppliers and purchase plans with a medium-term time horizon. Furthermore, these raw material suppliers are contractually required to abide by clear commitments to quality and compliance with current legislation on worker protection and on local labour law regulations, animal and environmental protection and usage of hazardous chemicals.
With reference to workers’ rights, the Moncler Group includes, among the suppliers’ qualification criteria, the passing of social audits carried out by qualified professionals.
With regards to animal welfare, the Moncler brand created a multi-stakeholder forum, which approved and constantly monitors and integrates the DIST (Down Integrity System and Traceability) Protocol, focused on the down. All suppliers have to scrupulously comply with it, in order to guarantee the traceability of raw materials, animal welfare and the highest quality throughout the supply chain. With regards to hazardous chemicals, the Group requires its suppliers to operate in full compliance with the most restrictive international legislation applicable to hazardous or potentially dangerous chemicals, including the European REACH14 regulation, the Chinese GB15 standards, the Japanese JIS16 standards and to abide to the Company’s Product Restricted Substance List (PRSL) and Manufacturing Restricted Substances List (MRSL), which include not only legal parameters but also several voluntary standards that are even more restrictive, in line with a precautionary approach.
RISKS ASSOCIATED WITH BRANDS IMAGE, PERCEPTION AND RECOGNITION
The luxury goods sector is influenced by changes in clients’ tastes and preferences, but also by different habits in the regions in which it operates. The Group’s success is significantly influenced by the image, perception and recognition of its brands. The Group constantly focuses on maintaining and enhancing the strength of the Moncler brand and the Stone Island brand, paying particular attention to the quality of the products, the design, the innovation, the communication and the development of its own distribution model, by looking for selectivity, quality and sustainability, also in the choice of the partners. The Group integrates sustainability assessments, also linked to local values (religious, cultural and social) in its communication and marketing strategies, believing that the continue creation of value for its stakeholders is an essential priority to strengthen its reputation.
If the Group will not be able in the future to maintain a high brands’ image, reputation and recognition, through its products and activities, revenues and financial results may be affected negatively.
RISKS ASSOCIATED WITH RELATIONSHIPS WITH THIRD PARTY MANUFACTURERS
The Moncler Group, both with the Moncler brand and the Stone Island brand, directly manages the development of the collections as well as the purchase or the choice of raw materials, while for the production of its garments it uses both independent third-party manufacturers (façon manufacturers), who operate under the close supervision of the Group, and, for the Moncler brand, internal production.
Although the Group does not depend to a significant extent on any given façon manufacturer, there is the possibility that any interruption or termination for any reason of the relationships with these manufacturers may materially affect the Group’s business with a negative impact on sales and earnings.
The Moncler Group maintains constant and continual control over its third-party manufacturers in order to ensure there is full compliance, in addition to the highest quality requirements, with labour laws, workers safety, environmental laws and with the principles of Moncler’s Code of Ethics and Suppliers Code of Conduct. Moncler performs audits at these third-party manufacturers and at their sub-suppliers verifying also the compliance with dedicated health measures within the plants related to the Covid-19 pandemic. The risk cannot be excluded, however, that any one of these might not fully comply with the agreements entered into with Moncler in terms of quality, timely delivery and compliance with applicable regulations.
RISKS ASSOCIATED WITH THE RETAIL DISTRIBUTION NETWORK
The Moncler Group generates with the Moncler brand the majority of its revenues through the retail channel, consisting of directly operated mono-brand stores (DOS) and the online channel. While the Stone Island brand is more exposed to the wholesale channel (75% of FY 2021 revenues). Over the years, the Group has demonstrated the ability to open new stores in the most prestigious locations in the most important cities in the world and within high profile department stores, despite competition among key players in the luxury goods sector to secure a strong position in that sector. This is the reason why it should not be excluded that the Group might face difficulties in opening new stores, which could have a negative impact on the growth of the business.
In addition, by its nature, the retail business is characterised by a great incidence of fixed costs, mainly related to rental agreements. Although management showed the ability in the years to develop a profitable retail business, it cannot be excluded that a potential revenues slowdown could reduce the Group’s capability to generate profits.
In carrying out its activities, the Group has always paid particular attention to the environment and its related risks. In this sense, in 2020, it signed the Science Based Targets (SBTi) Initiative, defining targets for the reduction of greenhouse gas emissions consistent with the commitment of the United Nations; and, starting from 2021, the Group voluntarily reports corporate risks related to climate change according to the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) of the Financial Stability Board. The potential risks analysed relate to increased severity of extreme and chronic weather events, increased cost of raw materials, the introduction of regulations aimed at containing climate change, possible regulations on the labelling of textile products and any changes in customer behaviour.
With regard to its logistics hub in Piacenza (Italy) and the peripheral hubs in America, China, Japan and Korea, where Moncler checks, stores and handles raw materials and finished products, the Company has adopted the prevention and risk mitigation measures, in the event of a temporary disruption of operations due to external or natural events, including insurance policies covering the loss of integrity of business assets and business interruption damages and has developed related contingency plans.
RISK ASSOCIATED WITH KEY MANAGEMENT PERSONNEL
The Moncler Group’s results depend also on the ability of its management team, who has had a decisive role in the development of the Group and which has a significant experience in the luxury goods sector. If the existing relationships with some of these individuals were to be interrupted without proper and timely replacement, the competitive ability of the Group and its growth prospects may be affected.
The Group believes that it has an operational and managerial structure capable of ensuring the continuity of the business, also through the definition of a succession plan and the adoption of retention plans for key professional figures, as well as talent management programs aimed at developing skills and talent retention.
RISKS RELATED TO BRANDS AND PRODUCTS COUNTERFEITING AND THE PROTECTION OF INTELLECTUAL PROPERTY RIGHTS
The luxury goods market is known to be characterised by brands and products’ counterfeiting.
The Moncler Group has made considerable investments for the adoption of innovative technologies, which allow products to be tracked along the value chain, to prevent and mitigate the effects of counterfeiting of its brands and products and to protect its intellectual property rights in the territories in which it operates. However, it cannot be excluded that the presence on the market of significant quantities of counterfeited products may adversely affect the image of the brands, with a negative impact on revenues and operating results.
RISKS RELATED TO THE EVOLUTION OF THE REGULATORY FRAMEWORK
The Moncler Group operates in a complex international environment and is subject, in the various jurisdictions in which it operates, to rules and regulations which are constantly monitored, especially for all matters relating to the health and safety of workers, environmental protection, rules around manufacturing of products and their composition, consumer protection, personal data protection, protection of intellectual and industrial property rights, competition rules, fiscal and customs rules, and, in general, all relevant regulatory provisions.
The Group operates following the legal provisions in force and has established processes that guarantee knowledge of the specific local regulations where it operates and of the regulatory amendments that gradually take place. Nevertheless, since the legislation on some matters, especially on tax issues, is characterised by a high degree of complexity and subjectivity, it cannot be excluded that a different interpretation to that of the Group could have a significant impact on the results. In this regard, the Moncler Group is engaged in a program for the definition of preventive agreements (Advance Pricing Agreements) – partly finalised – with the Tax Authorities of the main countries in which the Group operates.
In addition, the enactment of new legislation or amendments to existing laws, which may require the adoption of more stringent production standards, for example in the field of product compliance, could lead, by way of example, to compliance costs linked to the production processes or to the features of the products, or could even limit the Group’s operations with a negative impact on the financial results.
EXCHANGE RATE RISKS
The Moncler Group operates in international markets using currencies other than the Euro, of which mainly Renminbi, Yen, U.S. Dollar, Korean Yuan and British pound. Therefore, it is exposed to the risk associated with fluctuations in exchange rates, equal to the transaction amount (mainly income) which are not covered by a matching transaction of the same currency. The Group has implemented a strategy to gradually hedge the risks related to exchange rate fluctuations, limiting its actions to the so called “transactional risk”, and has adopted a stringent policy on currency risk that sets the minimum limit of coverage per currency at the beginning of each sales campaign at 75%, and the minimum limit of coverage per currency at the end of the sales campaign at 90%.
However, also due to the so called “translational risk”, arising from the translation in Euro of financial statements of foreign companies denominated in local currency, it cannot be excluded that significant changes in exchange rates could have a positive or negative impact on the Group’s results and financial position.
INTEREST RATE RISKS
The Moncler Group has no significant financial agreements active by third parties as it is fully capable of self-financing. Furthermore, the Group may make use of loans from third parties, specifically bank loans; in case it should choose to resort to such loans, it would be subject to the risk of interest rate risk revision. The Group, in order to partially hedge the risk of increased interest rate, could potentially enter into some hedging transactions. However, any significant fluctuations in interest rates could lead to an increase in borrowing costs, with a negative impact on the Group’s financial results.
The Moncler Group operates in accordance with the credit control policies aimed at reducing the risks resulting from insolvency of its wholesale customers. These policies are based on preliminary in-depth analysis of the reliability of the customers and based on eventual insurance coverage and/or guaranteed forms of payment. In addition, the Group has no significant concentrations of credit.
However, it cannot be excluded that a rise in the difficulty of some clients may result in losses on receivables, with a negative impact on the Group’s financial results. The Moncler Group monitors and manages with particular attention its exposure to wholesale customers with significant orders, also by requesting and obtaining bank guarantees and money deposits in advance of shipments.
The Group has implemented financial planning process aimed at reducing the liquidity risk, also taking into consideration the seasonality of the business, in particular for the Moncler brand. Based upon the financial requirements, where the need arises, credit lines required to meet those needs are planned with the financial institutions and are classified between short-term and long-term.
Moreover, given the risk of losing the capital, the Group follows strict rules to balance its deposits and cash liquidity in an appropriate number of highly rated bank institutions, avoiding the concentration and using only risk-free financial products.
RISKS RELATED TO DEVELOPMENT AND INTEGRATION WITH STONE ISLAND (SPORTSWEAR COMPANY S.P.A.)
On 31 March 2021, the acquisition of Sportswear Company S.p.A. by Moncler S.p.A. was finalised. Subsequently, with effect from December 2021, the Stone Island brand was conferred to Moncler S.p.A. through the partial demerger of Sportswear Company S.p.A.
Throughout 2021, coordination activities were carried out between the two companies. In that integration process, Moncler and Stone Island bring together their entrepreneurial and managerial cultures while fully respecting each Brand’s identity and autonomy. The process is taking place under the guidance of a Strategic Committee and an Integration Committee, made up of the two Companies’ senior management.
Although both parties are sensitive to the other’s culture and their focus is on mutual priorities, because of the complexity and delicacy of the integration process, it cannot be excluded that delays will occur, or predetermined strategies will be adjusted along the way.
ENVIRONMENTAL, SOCIAL AND COMPLIANCE RISKS
With operations in various countries around the world, the Moncler Group believes that respect for people and human rights, protection of the environment and compliance with laws, should be considered a prerequisite for responsible business management. It thus commits to implement the necessary policies, perform due diligence and appropriate checks and provide training and information in order to minimise any risks related to these issues. These risks are reported within the company’s Enterprise Risk Management model along with their probability of occurrence and level of impact.
Concerning our people, among the main risks relating to human resources management, the Group has identified the potential risks of reliance on key people and of difficulty in retaining and developing talent. To address these risks, a performance assessment system has been implemented, covering the entire corporate population and taking into account both soft skills and hard (technical) skills. This system allows to enhance and develop individual skills in the medium and long term, to define succession plans and nurture the best talent. In addition, the Group has developed an incentive plan specifically aimed at managers and key personnel in order to promote their retention.
The risk of human rights violations against the employees of Group companies is considered at the theoretical risk level, owing to the protections provided by the various laws and/or collective labour agreements, the working standards set out in the Moncler and Stone Island Codes of Ethics, and, above all, the oversight activities in place at the corporate offices. In addition, the Group is updating its Personnel Recruitment Policy in order to ensure a robust selection and recruitment process in accordance with the principle of equal opportunities, to promote diversity and ensure the development of an inclusive environment starting with the candidate experience phase.
The Group’s business model entails the manufacture of the products through the production site owned by Moncler in Romania, as well as through façon manufacturers and finished products suppliers in Italy and abroad. In addition, both Moncler and Stone Island purchase raw materials and services from a large number of suppliers worldwide. The variety of partners and the geographical scope of the Group’s operations have led to significant investments in preventing and monitoring the existence of any risks related to human rights violations along the supply chain, with a particular focus on façon manufacturers, specialised workshops and main logistics operators. With the help of certified specialised firms, Moncler and Stone Island regularly verify that their supply chain complies with applicable laws and the principles set forth in the Code of Ethics and in the Supplier Code of Conduct. These latter, in particular, lay down the standards of conduct with which suppliers must comply, failing which, the collaboration may be terminated. The Group is also committed to raising awareness of the importance of responsible procurement principles among its partners, through training activities. Following the audits concluded in 2021, some limited situations of non-compliance with specific regulatory elements were identified, including certain aspects of remuneration, such as overtime pay for all overtime hours worked, and health and safety, such as certification of fire prevention, inadequate management of delegated powers and training at plants, safety exits and extinguishers that do not meet regulatory requirements. The resolution of these aspects is the subject of follow-up activities on the basis of predefined timescales according to the severity of the irregularities detected. Serious non-conformities compromise the continuing relationship with suppliers.
The Group also pays particular attention to environmental aspects and the related risks throughout its activities and the ones of its partners due to the fact that the most significant impacts are indirect. These risks are integrated into the corporate Enterprise Risk Management (ERM) process. One of the strategic drivers of the Sustainability Plan is the fight against climate change, demonstrating the Group’s priority commitment to preventing and mitigating such risks. In this regard, Moncler joined the Science-Based Targets initiative in 2020, setting greenhouse gas emissions reduction targets that are consistent with the United Nations’ commitment to limit the maximum increase in global temperatures compared to pre-industrial levels. Following the Stone Island acquisition, in 2021, the Group began an update process to review its CO2 emissions reduction targets as recommended by the SBTi guidelines, to include all Moncler and Stone Island CO2 emission sources and reflect the size and scale of the business.
In general, within the framework of environmental risks, the Group defines rules, processes and control activities to manage any environmental risks associated with its suppliers by adopting the Code of Ethics and the Supplier Code of Conduct. Compliance with the binding provisions contained in these documents is verified by environmental audits carried out by specialised third parties. In terms of direct environmental impacts, the Group is implementing numerous initiatives aimed at minimising such impacts by adopting an Environmental Policy, implementing an environmental management system, defining public commitments and targets for reducing energy consumption, while also involving and raising awareness of its employees in reducing paper, toner and energy consumption and promoting waste sorting. Moncler is ISO 14001 certified at its corporate offices, the logistics hub in Castel San Giovanni (Piacenza) and at the production site in Romania; with regards to Stone Island, the process of obtaining this certification began in 2021 with the goal of certifying the corporate offices in Milan and Ravarino (Modena) by 2022.
Lastly, the focus on animal welfare is an area of particular commitment for the Moncler Group. Both Brands thus require their suppliers to comply with the animal welfare requirements set forth in the Supplier Code of Conduct. In particular, Moncler demands and verifies that all its down suppliers comply with stringent requirements set out in its proprietary Down Integrity System & Traceability (DIST) Protocol. The Group continuously carries out audits, with the support of a specialised third party, to ensure adequate treatment of animals.
Moncler will phase out fur from all its collections. The Company will stop sourcing fur in 2022 and the last collection to feature fur will be the Fall/Winter 2023. This decision is consistent with Moncler’s ongoing commitment to responsible business practices and the constructive long-term dialogue established with the Italian animal welfare association LAV as a representative of the Fur Free Alliance. Stone Island has not used fur since 2018 and has also joined the Fur Free Retailer Policy.
Compliance and other types of risks
In terms of non-compliance risks, a Group-wide Compliance Procedure has also been adopted in order to: disseminate the definition of compliance; determine the scope of application; set the general compliance principles adopted; define employee roles and responsibilities; provide guidelines based on the pillars of the Group Compliance Programme, which is regularly updated.
The activities carried out by the Group Compliance function aim to strengthen the system for monitoring and managing non-compliance risks, starting from the areas considered most sensitive, such as health and safety, privacy, anti-corruption and product compliance.
The Group also regards the protection and promotion of employees health, safety and wellbeing as a key value and a priority principle of its way of operating. For this reason, an effective management system has been implemented in compliance with the international ISO 45001 standard, at a global level, in all offices, stores (excluding shop-in-shops), and at Moncler’s logistics and production sites. During the year, Stone Island also implemented a series of activities and improvement projects to obtain ISO 45001 certification, which it achieved for all offices and stores in Italy, and with the aim of having all offices and stores in the world certified by 2022. In addition, in order to ensure the protection and promotion of health and safety at company workplaces uniform management rules are applied, as detailed in the Health and Safety Management Policy adopted at Group level, and periodic audits are carried out at all sites where Moncler and Stone Island personnel work. The management system, supported by important training and awareness-raising activities, both for Group personnel and suppliers, plays a fundamental role in reducing the risk of workplace accidents.
Both Moncler and Stone Island monitor privacy issues. In their Codes, both Brands highlight their commitment to implementing appropriate measures of an organisational and technological nature to adequately meet to the privacy protection needs of their employees, collaborators, clients and suppliers, in compliance with all applicable laws and regulations and in accordance with the best and most recent applicable practices. All the necessary steps were also adopted to promptly ensure compliance with all the measures required by Regulation (EU) 2016/679, the General Data Protection Regulation (GDPR).
Regarding corruption prevention measures, Moncler adopts an Anti-Corruption Model, which includes a regulatory review of corruption offences in the countries in which the Company operates, identifying the areas and corporate processes at greatest risk of corruption. An Anti-Corruption Policy is therefore in force and has been adopted by each company of the Moncler Group. It defines the responsibilities for monitoring changes in legislation, risk controls, training, audit activities, management and reporting of cases of non-compliance.
The main social risks identified by the Group include, as a priority, those for clients, related to product safety and counterfeiting. To protect the health and safety of its clients, the Group requires its suppliers to operate in accordance with the most restrictive international laws applicable to hazardous or potentially hazardous chemicals and constantly verifies the chemical composition and the physical and mechanical characteristics of its products. Suppliers are contractually bound to comply with the guidelines contained in the Group’s Product Restricted Substances List (PRSL) and Manufacturing Restricted Substances List (MRSL) published in February 2022 on the corporate website, which lay down the most restrictive requirements for the use of certain substances. The proper implementation of these guidelines is verified through tests on the chemical composition of the raw materials at specialised third-party laboratories by the supplier and/or by Moncler and Stone Island. Both brands have established a completely dedicated internal function (Operations Compliance Department) to fully monitor this risk.
With a view to better protect its clients and the Brand, the Group has long been committed to fight counterfeiting. Both Brands have therefore put in place a series of management and prevention tools managed by the Brand Protection and Intellectual Property department at Moncler and by the Legal Department at Stone Island: from the formulation of detailed procedures to collaboration with law enforcement, customs and other luxury brands, training and audits of suppliers and to the use of anti-counterfeiting labels applied on all products.
Moncler Group has made an analysis of the emerging external risks that are expecting to significantly increase in importance in the long term with a potential impact on the textile sector.
Name: Food Crisis
Food insecurity might become a global threat. Economic models projected a shortage of cereals and an increase in cereal price in 2050 due to drivers ranging from increasing geopolitical conflicts and related export bans, to pandemics, uncontrolled demographic growth, economic shocks and climate change.
These contributing causes would impact consumers globally through higher food prices and less availability. Also the World Economic Forum estimates that over 500 Million people could face acute hunger in the next years. In several arable areas of the world this situation might create conditions for a global food shortage that could increase in the future.
Farmers that grow staple crops and natural fibers in the future might be encouraged to grow food crops instead of natural fibers such as cotton, linen and hemp because of potential higher incomes due to higher prices and possible government incentives. This could potentially result in a shortage of natural fibers for the apparel industry, in particular cotton. Cotton is a key raw material for the Group and a shortage of cotton could mean either higher cost inputs or potentially unavailability of supply for production.
The Group is increasing its investments in research and development in recycled cotton and alternative raw materials and is also committed to have 50% of its cotton from organic or regenerative agriculture that are more resilient to climate change and can therefore come from areas less suitable for food production.
Name: Extreme weather events
Extreme weather events are recognized by International Organizations, such as the World Economic Forum (WEF) and the Organisation for Economic Co-operation and Development (OECD), as one of the climate change related risks which will become more frequent and severe in the long term.
Several analyses, such as those conducted by the Intergovernmental Panel on Climate Change, showed that global warming will potentially lead to a growing increase of the frequency and intensity of extreme weather events, such as prolonged heatwaves and flooding. Selected areas of Moncler Group’s value chain could be located where global warming may have effects in the long term according to those studies.
For Moncler Group’s business, extreme weather events could represent an issue considering impacts on conventional raw material production. As an example, cotton yields can be reduced by drought and scarcity of water for irrigation as well as by the increase of temperatures, leading to an increase of cotton cost and scarcity.
In addition, concerning wool production, it must be considered that growth and quality of pasture and fodder crops may be negatively affected by changes in rainfall amounts and variability as well as by higher GHG concentrations in the atmosphere and high temperatures.
The combination of these aspects could have an impact on both wool production and quality leading to a cost increase also for this raw material.
An example of mitigating measures is represented by the investments Moncler puts in place to explore and develop with suppliers R&D departments lower impact materials, like recycled raw material and raw material coming from organic/regenerative agriculture (more resilient to climate change), promote raw materials diversification and decrease dependency from vulnerable geographies.
The Moncler Group has also set in its Sustainability Plan 2020-2025 public specific commitments to increasingly use organic cotton or cotton coming from regenerative agriculture as well as wool traced under Responsible Wool Standard (RWS) (70% of wool used will certified under RWS by 2025) as this kind of cotton and wool are grown in agriculture systems that are more resilient to climate change.
14 Registration, Evaluation, Authorisation and restriction of Chemicals.
15 National Standard of the People’s Republic of China.
16 Japanese Industrial Standards.