MAIN RISKS

The regular management of its business and the development of its strategy expose the Moncler Group to various types of risks that could adversely affect the Group’s operating results and its financial position. These risks are integrated into the corporate enterprise risk management (ERM) process. The entity responsible for managing ERM promotes coordination between the internal functions involved, in order to ensure consistency and effectiveness in overseeing and monitoring the main risks within the corporate organisation.
The most important business risks are monitored by the Control, Risks and Sustainability Committee and periodically examined by the Board of Directors, which takes them into account in developing the strategy.

RISKS RELATED TO THE COVID-19 PANDEMIC
The Covid-19 pandemic, which has spread globally since January 2020 and is still ongoing, has led all countries in the world, including Italy, to face a complex health emergency, with social, geopolitical and economic implications. Although the spread of vaccines has reduced the danger of the virus and led to a relaxation of measures by governments at a global level, the uncertainty of the evolution of the pandemic situation, linked to the transmission of new variants of the virus, could again affect the results in the coming financial years, for example by restricting the international mobility of customers or by limiting the operation of stores in some periods. In this context, the Moncler Group continues to maintain business continuity plans aimed at safeguarding the health and safety of its employees, management flexibility and production processes ready for implementation.

RISKS RELATED TO THE RUSSIA-UKRAINE CONFLICT
The conflict between Russia and Ukraine, which began on 24 February 2022, is having major global consequences not only in terms of severe humanitarian crisis, but also in terms of economic effects on global markets, which have immediately been reflected not only in the increase in the costs of certain commodities such as natural gas and oil, and consequently in electricity, but also in sharp declines in share values on the world’s major markets.
The Moncler Group shut down its business shortly after the conflict broke out, closing both its Kiev and Moscow direct stores, halting online channel activity and shipping to the wholesale channel in Russia. The exposure to the Russian and Ukrainian markets, including tourists of Russian nationality buying in other markets, was less than 2% of the Group’s annual turnover in 2021 (before the start of the conflict).
The Group does not have suppliers of raw materials in Russia and Ukraine or any manufacturing sites located there. However, the escalation of the conflict could have unforeseeable repercussions on other neighbouring countries where the Group has production, with an impact on production capacity, for example as a result of the temporary disruption the power supply, and on procurement costs. The situation is constantly monitored to react promptly to any intensification of the conflict.

RISKS ASSOCIATED WITH THE MARKETS IN WHICH THE GROUP OPERATES AND GENERAL GEOPOLITICAL AND ECONOMIC CONDITIONS
The Group operates in the luxury goods sector, where there is a significant correlation between the demand for goods and the level of wealth, the level of economic growth and political stability in the countries where demand is generated. The Group’s ability to develop its business also depends on the political stability and economic situation of the various countries in which it operates.
Although Moncler operates in a significant number of countries around the world, reducing the risk of a high concentration of the business in limited geographical areas, any deterioration in economic, social or political conditions in one or more markets in which it operates could have negative consequences for sales and economic and financial results.
The possible reintroduction by national or supranational entities of constraints on the movement of individuals – as a result, for example, of international crises or pandemics – as well as the introduction of any export limitations as a result of trade or financial sanctions, could also affect sales, particularly in relation to specific geographical areas. In particular, in recent years the importance of Asian markets for the luxury goods sector has increased, reaching around half of turnover for the Moncler brand at the end of 2022, whereas Stone Island, having only recently begun its international expansion, particularly in Asia and America, remains more exposed to the European market (69% of revenues in fiscal year 2022).

CYBER RISKS AND PERSONAL DATA PROTECTION RISKS
Following a sophisticated malware attack in December 2021, which had no significant effects on the business but resulted in the exfiltration of personal information, the Group started a process of strengthening cybersecurity measures and technical expertise in this area, which during 2022 significantly increased the level of protection from this type of attack.
However, the Group’s rapid technological evolution and increasing organisational complexity, together with the increasing sophistication and frequency of cyber attacks, mean it is not possible to exclude the potential risk for the Group of cyber attacks using innovative attack techniques.
Moncler is investing significantly in its model for managing cyber risks with a view to business continuity, adopting the best technologies and methodologies for identifying and protecting the Group, along with procedures, staff training, and careful assessment and periodic review of risks, including with regard to third parties.

RISKS RELATED TO THE COST AND AVAILABILITY OF HIGH QUALITY RAW MATERIALS, SUPPLY CHAIN CONTROL AND SUPPLIER RELATIONS
Moncler and Stone Island brand products require high-quality raw materials, including, but not limited to, down, nylon, cotton and wool. The price and availability of raw materials depend on a wide variety of factors, which are largely beyond the Group’s control and difficult to predict.
Although the Group has always managed to ensure a supply of raw materials adequate to its production requirements in terms of quantity and quality, hypothetical further tensions on the supply side could lead to difficulties in supply and a further increase in costs, with negative consequences for the Group’s economic results. In order to minimise the risks associated with the potential unavailability of raw materials in the timescales required for production, Moncler adopts a multi- sourcing strategy for supplier diversification and plans purchases with a medium-term time horizon. In addition, suppliers of raw materials must meet precise contractual quality, composition and performance requirements and comply with applicable laws on worker protection, working conditions, local labour laws, respect for animal welfare, the environment and the use of hazardous chemicals.
In the area of workers’ rights, the Moncler Group includes, among its supplier qualification criteria, company audits carried out by qualified professionals.
With regard to respect for animals, the Moncler brand formed a multi-stakeholder forum that approved and continuously monitors and integrates the DIST (Down Integrity System & Traceability) protocol, to which suppliers must adhere strictly, ensuring the traceability of the raw material, respect for animals and the finest quality throughout the supply chain. With regards to hazardous chemicals, the Group requires its suppliers to operate in absolute compliance with the most restrictive international laws applicable to hazardous or potentially hazardous chemicals, including the European REACH regulation, Chinese GB standards, Japanese JIS standards, as well as with the Product Restricted Substance List (PRSL) and the corporate Manufacturing Restricted Substances List (MRSL), which include not only legal parameters, but also many more restrictive voluntary requirements, in line with a precautionary approach.

RISKS RELATED TO BRAND IMAGE, REPUTATION AND RECOGNITION
The luxury goods sector is influenced by changing consumer tastes, preferences and lifestyles in the various regions in which it operates. The Moncler Group’s success is significantly influenced by the image, reputation and recognition of its brands. If in the future the Group is not able, through its products and initiatives, to maintain the image, reputation and recognition of its brands, sales and economic results may be affected.
The Group therefore constantly strives to maintain and increase the strength of the Moncler and Stone Island brands, with a focus on product quality, innovation, communication and the development of its distribution model according to criteria of selectivity, quality and sustainability, including when it comes to the selection of counterparties with which to operate. The Group integrates sustainability assessments, including those related to compliance with local values (religious, cultural and social) into its communication and marketing strategies, out of a belief that the continuous creation of value for all its stakeholders is a fundamental priority in strengthening its reputation.

RISKS RELATED TO RELATIONS WITH THIRD-PARTY PRODUCERS
The Moncler Group directly manages the development of its collections as well as the purchase or selection of raw materials, whereas for the garment packaging phase it relies on both own factories and independent third parties that operate under the Group’s close supervision (façon manufacturers).
Although the Group does not depend to a significant extent on any façon manufacturer, the suspension or termination of a relationship with some of the most significant façon manufacturers could adversely affect the Group’s business, with consequences for its sales and earnings.
The Moncler Group constantly monitors the supply chain of third-party manufacturers in order to ensure, in addition to requirements of high quality and financial reliability, full compliance with labour laws, worker safety and the environment and the principles of its Supplier Code of Ethics and Conduct through audits at third party contractors and their sub-suppliers. However, there is still a risk that a counterparty will not fully comply with the contracts entered into with Moncler in terms of quality, timeliness of deliveries and compliance with the applicable regulations.

RISKS ASSOCIATED WITH THE RETAIL DISTRIBUTION NETWORK
With the Moncler brand, the Moncler Group generates most of its revenues through the retail channel, consisting of directly operated single-brand stores (DOSs) and the online store, whereas the Stone Island brand is more exposed to the wholesale channel (63% of 2022 revenues). Over the years, the Group has demonstrated its ability to open new stores in the most prestigious locations in major world cities and in top-tier department stores, despite the competition between operators in the luxury goods sector to secure such positions, which is very strong. The Group thus may encounter difficulties in opening new stores in the future, with negative consequences for its business growth prospects.
In addition, by its nature, the retail business has a higher incidence of fixed costs, mainly relating to lease agreements. Although management has demonstrated its ability to develop profitable retail business over the years, a potential slowdown in sales in specific geographical areas could reduce the Group’s ability to turn a profit.

ENVIRONMENTAL RISKS
Environmental issues and the related risks are also subject to assessment and formulation of mitigation plans.
With reference to the environmental risks linked to climate change, in 2021 the Group began voluntarily reporting company risks related to climate change in both its Non-Financial Statement and the CDP Climate Change Questionnaire, as required by the European Securities and Market Authority (ESMA) and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) of the Financial Stability Board: Governance, Strategy, Risk Management, Metrics and Targets.
The potential and actual risks analysed concern the intensification of extreme climatic phenomena, the increase in the cost of certain types of raw materials, the introduction of regulations aimed at containing climate change and possible changes in customer purchasing habits.
In addition to the risks associated with climate change, the Group also identifies among environmental risks the failure to comply or incomplete compliance with relevant rules and laws which could result in possible criminal penalties and/or financial outlays; environmental pollution phenomena related, for example, to uncontrolled emissions, inadequate disposal of waste and wastewater or spills of dangerous substances into the ground.
The Group is committed to preventing and mitigating any environmental risks through various initiatives and projects.
In 2020 Moncler joined the Science-Based Targets initiative (SBTi), setting targets for reducing greenhouse gas emissions in line with the United Nations’ commitment to limiting the maximum increase in global temperatures from pre-industrial levels.
The Group formulated rules, processes and control activities to prevent and manage any environmental risks from its processing and raw materials suppliers, through the adoption of the Code of Ethics, the Supplier Code of Conduct and the Environmental Policy, updated in July 2022, containing binding rules observance of which is verified through environmental compliance audits carried out by specialised third-party entities.
The Group also manages risks arising from the temporary disruption of operations arising from external events or natural events through various initiatives, including business continuity plans, as well as insurance policies covering the loss of the integrity of company assets and damage arising from the disruption of business.
Please refer to the 2022 Non-Financial Statement for more information.

RISKS ASSOCIATED WITH DEPENDENCE ON KEY PERSONNEL
The Moncler Group’s results also depend on the ability of its management, which plays a crucial role in the Group’s development and which has significant experience in the luxury goods sector. If the relationship with some of these professionals is terminated without a timely, appropriate replacement, the Group’s ability to compete and its growth prospects may be affected.
The Moncler Group has an operational and management structure capable of ensuring business continuity, including through the definition of succession plans and the adoption of retention plans for key professionals, as well as talent management aimed at developing skills and retaining talent.

RISKS RELATED TO THE COUNTERFEITING OF BRANDS AND PRODUCTS AND THE PROTECTION OF INTELLECTUAL PROPERTY RIGHTS
The luxury goods market is characterised by the counterfeiting of brands and products.
The Moncler Group has made significant investments in the adoption of innovative technologies that enable tracking of products throughout 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 where it operates. However, the presence on the market of significant quantities of counterfeit products could still adversely affect the brand image, with a negative impact on sales and financial performance.

RISKS RELATED TO THE EVOLUTION OF THE REGULATORY FRAMEWORK
The Moncler Group operates in a complex international context and is subject, in the various jurisdictions in which it operates, to laws and regulations that are constantly monitored, especially with regard to the health and safety of workers, environmental protection, rules on the manufacture and composition of products, consumer protection, personal data protection, industrial and intellectual property rights protection, competition rules, tax and customs rules, and in general all the relevant regulatory provisions.
The Group operates in accordance with applicable provisions of law and has established processes that ensure knowledge of the specific local regulations in the contexts in which it operates and of the regulatory changes that are gradually made. However, since legislation on certain matters, for example taxation, is characterised by a high degree of complexity, an interpretation other than that applied by the Group may still have a significant impact on economic results. In this regard, the Moncler Group is involved in a programme to negotiate advance pricing agreements with the tax authorities of the main countries in which the Group operates, some finalised and some still in progress.
In addition, the enactment of new legislation or amendments to existing legislation that impose more stringent standards – for example with regard to product compliance – may entail, by way of example, costs of adapting the production methods or characteristics of the products or may limit the Group’s operations, with negative consequences for its financial performance.

RISKS ASSOCIATED WITH EXCHANGE RATE PERFORMANCE
The Moncler Group also operates on international markets in currencies other than the euro, mainly the renminbi, yen, US dollar, Korean yuan and pound sterling. It is therefore exposed to risk arising from the fluctuation of exchange rates, to an extent equal to the amount of transactions (mainly revenues) not covered by transactions of the opposite sign expressed in the same currency. The Group has a strategy in place aimed at gradually hedging the risks associated with exchange rate trends, limited to “transaction” risks, and has adopted a strict policy on currency risk that sets the minimum hedging limit per currency at the beginning of each sales campaign at 75%, and the minimum hedging limit per currency at the end of the sales campaign at 90%.
However, due in part to “translation” risk – deriving from the conversion into euro of the financial statements of foreign companies expressed in local currency – significant changes in exchange rates may entail changes (positive or negative) in the Group’s results and financial position.

RISKS ASSOCIATED WITH INTEREST RATE PERFORMANCE
The Group does not avail itself of significant lines of credit as it is fully able to finance its own operations. In addition, the Group has the option of using loans from third parties, specifically banks. If it chose to use such loans, it would be subject to the risk of interest rate changes. In order to hedge part of the risk relating to an increase in rates, the Group may carry out certain hedging activities. However, any significant fluctuations in interest rates could lead to an increase in financial expenses, with negative consequences for the Group’s results.

CREDIT RISKS
The Moncler Group operates in accordance with credit monitoring policies aimed at reducing the risks arising from the insolvency of its wholesale customers. These policies are based on preliminary analysis of the reliability of customers and on guaranteed forms of insurance cover and/or payment methods. In addition, the Group does not have significant credit concentrations.
However, the emergence of significant delinquency by certain customers could still result in losses on receivables, with negative consequences for the Group’s results. The Moncler Group monitors and manages its exposure to wholesale customers with significant positions with particular care, including by applying for and obtaining bank guarantees and cash deposits in advance of shipments.

LIQUIDITY RISKS
The Group implements financial planning activities aimed at reducing liquidity risk, including in view of the seasonal nature of the business, particularly for the Moncler brand. Based on evolving financial needs, where necessary, lines of credit are planned with the banking system to meet these needs, according to a corresponding distinction between short-term and long-term lines of credit.
In addition, to face the risk of loss of available capital, the Group follows strict rules to spread its deposits and cash and cash equivalents in a balanced manner over an adequate number of highly rated banks, while avoiding concentration and using only risk-free financial products.
ENVIRONMENTAL, SOCIAL AND COMPLIANCE RISKS

Social risks
Concerning people, among the main risks relating to human resources management the Group has identified the potential risks of reliance on key people and the difficulty in retaining and developing talent. To address these risks, a performance evaluation system has been implemented, covering the entire corporate population and taking into account both soft skills and technical skills. This system allows to enhance and develop individual skills in the medium-to-long term, to define succession plans and nurture the best talents. In addition, the Group has developed a medium-to-long-term incentive plan specifically aimed at managers and key roles in order to promote their retention.

The risk of human rights violation against employees of Group companies is considered at the theoretical risk level, due 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, the Human Rights Policy issued in early 2023 as an integral part of the Code of Ethics and of the Supplier Code of Conduct and, above all, the oversight activities carried out at corporate sites. In 2022, to continue to ensure equal opportunities in the personnel selection and recruitment and to promote diversity and an environment that is increasingly inclusive right from the candidate experience phase, the Group updated the Personnel search and selection Policy. In addition, the Group has always been encouraging to report on witnessed or suffered misconduct to their superiors or Human Resources team. The Group has thus implemented a system of rules and a whistleblowing process for reporting irregularities, also in anonymous form, offences and violations of the Code of Ethics and internal regulations, including alleged human rights violations.

The Group’s business model entails for its products to be manufactured at the production site owned by Moncler in Romania, the “smart factory” in Trebaseleghe (Padua) as well as through façon manufacturers and finished-products suppliers operating in Italy and abroad. Moncler and Stone Island also purchase raw materials and services from a large number of suppliers worldwide. The diversity of partners and the geographical location 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 major logistics operators. With the help of certified specialist 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 Suppliers Code of Conduct. The latter, in particular, lays down the standards of conduct with which suppliers must comply with, failing which the collaboration relationship may be terminated. The Group is also committed to raising awareness among its partners, through training, on the importance of responsible sourcing principles. Following the verifications concluded in 2022, some limited situations of non-compliance with specific regulatory elements were identified, including certain aspects of remuneration, such as overtime pay for overtime hours worked, and of health and safety, such as on certification on fire prevention, inadequate management of 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.

Environmental risks
Environmental issues and the related risks are also subject to assessment and formulation of mitigation plans.
With reference to the environmental risks linked to climate change, since 2021 the Group voluntarily reports company risks related to climate change in both its 2022 Non-Financial Statement and the CDP Climate Change Questionnaire, as required by the European Securities and Market Authority (ESMA) and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) of the Financial Stability Board: Governance, Strategy, Risk Management, Metrics and Targets.
The potential and actual risks analysed concern the intensification of extreme climatic events, the increase in the cost of certain types of raw materials, the introduction of regulations aimed at containing climate change and possible changes in clients purchasing dynamics.
In addition to the risks associated with climate change, the Group also identifies among potential environmental risks the failure to comply or incomplete compliance with relevant laws and regulations which could result in possible criminal penalties and/or financial outlays; environmental pollution phenomena related, for example, to uncontrolled emissions, inadequate disposal of waste and wastewater or spills of dangerous substances into the ground.
The Group is committed to preventing and mitigating any environmental risks through various initiatives and projects.
In 2020 Moncler joined the Science-Based Targets initiative (SBTi), setting targets for reducing greenhouse gas emissions in line with the United Nations’ commitment to limiting the maximum increase in global temperatures from pre-industrial levels.
The Group defined rules, processes and control activities to prevent and manage any environmental risks from its processing and raw materials suppliers, through the adoption of the Code of Ethics, the Supplier Code of Conduct and the Environmental Policy, updated in July 2022. Compliance with the binding provisions contained in these documents is verified through environmental audits carried out by specialised third-parties.
The Group also manages risks arising from the temporary disruption of operations deriving from external events or natural events through various initiatives, including business continuity plans, as well as insurance policies covering the loss of the integrity of company assets and damages arising from the disruption of business.
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 requires and verifies that its down supply chains 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. Stone Island only purchases down certified according to the RDS (Responsible Down Standard).
Moncler will phase out fur from all its collections. The Company stopped sourcing fur in 2022 and the last collection featuring fur will be Fall/Winter 2023. This decision reflects Moncler’s ongoing commitment to increasingly responsible business practices and is consistent with the constructive dialogue that has long been 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: circulate the definition of compliance, determine the scope of its applicability, set general compliance principles, identify employee roles and responsibilities and provide guidelines based on the pillars of the Group Compliance Programme, 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 regards the protection and promotion of employees health, safety and wellbeing as a key value and a priority principle of its way of doing business. For this reason, an effective management system has been implemented at the global level in compliance with the international ISO 45001 standard in all offices, direct stores and logistics and production sites. In addition, in order to ensure the protection and promotion of health and safety at corporate sites, 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 employees work. The management system, supported by important training and awareness-raising activities for both 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 indicate their commitment to implementing appropriate measures of an organisational and technological nature to respond appropriately 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. Accordingly, 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 provides, inter alia, for 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 monitoring controls, training, audit activities, management and reporting of cases of non-compliance.
The main compliance 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. In particular, the PRSL applies to materials, treatments and products, and includes not only the requirements of the most restrictive regulations of the countries where production and sale take place, but also other, more stringent voluntary requirements, according to a precautionary approach. The proper implementation of these guidelines is verified through tests on the chemical composition of the raw materials carried out at specialised third-party laboratories by the supplier and/or Moncler and Stone Island. Both brands have established a completely dedicated internal function (Operations Compliance Department) to fully monitor this risk.
With the aim of protecting the clients and the Brand the Group has been committed to fight counterfeiting. Both Brands have therefore put in place a series of management and prevention tools managed by the Group’s Brand Protection and Intellectual Property department: from the formulation of detailed procedures to collaboration with law enforcement, customs and other luxury brands, training and audits of suppliers and 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

Category: Geopolitical

Description:
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.

Impact:
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.

Mitigation actions:
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 (acute physical climate risks)

Category: Environmental

Descriotion:
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, droughts 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.

Impact:
For Moncler Group’s business, extreme weather events could represent an issue considering impacts on conventional raw material production.
For example, although cotton is naturally heat stress tolerant and requires little to no extra water other than natural rainfall in most regions of the world thanks to its ability to thrive in variable temperature climate, events such as intense droughts and flooding could cause cotton scarcity and consequently increase of its price. Looking at global cotton price historical data, these extreme weather events have most negatively impacted global cotton production and led to a price increase. On the other hand, cotton has a fast adaptable and displaceable production.
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 and 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.

Mitigation actions:
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 compared to Group’s conventional options, 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.