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For the Moncler Group, talking about quality also means talking about health and safety, respect for human rights, environmental protection and, in general, ethics in business conduct along the entire value chain. Being a socially responsible company involves taking a commitment that extends well beyond its boundaries, embracing the entire supply chain.

 

SUPPLY CHAIN DUE DILIGENCE
Suppliers are strategic partners, this is why the Group’s relationship with them goes beyond the economic and commercial sphere. For Moncler and Stone Island, excellence means quality, style, and innovation, but also a commitment to promote a supply chain that is attentive and respectful of workers’ rights, of animal welfare, and of the environment.
The focus on ethical, social and environmental aspects along the supply chain starts with the supplier selection phase and continues with systematic awareness-raising and monitoring activities. Knowledge, traceability, sharing of best practices and verification are in fact fundamental, not only to limit situations of risk, but also, and above all, to generate culture and promote the responsible, sustainable development of the business for the benefit of the entire supply chain.

To this end, the Group has developed a comprehensive, systematic due diligence process that is constantly strengthened and updated in view of emerging regulations.

 

THE GROUP’S POLICY SYSTEM
The Moncler Group has adopted specific internal policies to ensure and promote transparent, responsible management of its value chain. These policies include the Moncler and Stone Island Brand Codes of Ethics, the Human Rights Policy, the Environmental Policy, the Anti-Corruption Policy, the Health and Safety Management Policy and the Group Supplier Code of Conduct.

During the contracting phase, all suppliers4 must sign the Code of Ethics with the related policies, and the Supplier Code of Conduct outlining the principles and guidelines that inspire the Group’s business and guide the behaviour and actions of all those with whom Moncler and Stone Island interact. By signing the Code, suppliers commit to comply with these principles and ensure that their subcontractors comply with them as well. Violation of these principles constitutes a breach of contract, with the right, depending on the severity of the situation, to immediately terminate the relationship.

 

More specifically, the Supplier Code of Conduct. is inspired by the Universal Declaration of Human Rights and the ILO Conventions, and sets out the Group’s expectations for the main areas of responsible business. It consists of six sections (Labour and Human Rights, Health and Safety, the Environment, Animal Health and Welfare, Product and Service Safety and Quality and Business Ethics) and contains the mandatory requirements that suppliers must follow in order to begin or continue working with the Group.

The Group procedure that governs the selection of all new suppliers was updated in 2021. The evaluation of a new supplier involves an on-site visit by the quality team to assess the supplier’s alignment with the Group’s quality standards. After this technical analysis, the evaluation process for new façon manufactures and new finished products suppliers involves an ethical, social and environmental audit by a third party. For raw material suppliers, the process requires the completion of an environmental and social evaluation questionnaire supported by documentary evidence and then a third party on-site audit, that is carried out in line with the provisions of the audit plan. The Group thus commits to not include in its supply chain companies that do not comply with the Moncler and Stone Island quality standards and basic ethical, social and environmental principles.

In 2023, the teams that manage the selection of new suppliers were involved in training sessions during which the steps of the procedure to be followed for the various types of suppliers were reviewed. During these sessions, suggestions for improvement were collected in order to make the process increasingly effective.

 

RISK ASSESSMENT
The commitment to upholding the principles and guidelines that inspire the Group’s operations starts with the early, preventive identification of actual or potential risks of violations of these principles throughout the supply chain. The risk analysis is carried out using various tools at all the entities of the value chain: all Moncler Group offices, existing and potential business relationships (e.g., mergers or acquisitions), suppliers, sub-suppliers and their employees, including women, children, indigenous peoples and local communities, in any way connected to or affected by, directly or indirectly, the Group’s activities.

In particular, in 2023 the Group, with technical support from a specialised international partner, conducted a specific assessment of the risk of human rights violations throughout its supply chain. The analysis, carried out at country level, covered all stages of the production process. As a result of this project, the potential risk profile for each of the main human rights was mapped, including decent wages, health and safety at work, discrimination in the workplace, child labour, forced labour, trafficking in human beings, migrant workers, freedom of association and collective bargaining.

The theoretical risk assessment analysis confirmed that the services and production processes carried out by the Group in directly managed locations do not present a significant risk profile of potential human rights violations, while those managed by the Group’s direct suppliers are characterised by diversified levels of risk. In particular, the stages of the supply chain related to cotton cultivation and intermediate processing of finished products could potentially be characterised by higher risk profiles compared to other stages. For this reason, the Group has for years implemented structured monitoring and prevention processes aimed at mitigating these risks throughout the entire supply chain. Among the human rights analysed within the supply chain, ensuring decent wages has emerged as one potentially at risk. Indeed, for years the Group has been committed to monitoring this issue through specific analyses on the living wage. Lastly, country-level analysis has highlighted the presence of higher potential risks in Southeast Asian countries, where the Group’s supply chain has very limited presence.

This risk-based approach is essential for the prevention and mitigation of negative impacts on human rights. This includes prioritizing audits based on criteria that take into account the potential risk level of human rights violations, as well as selecting new suppliers considering the risk of human rights violations as one of the evaluation criteria.

The Supply Chain and Procurement departments are regularly involved in training activities where the results of the assessments of the risk of human rights violations along their supply chain are shared.

In addition to the periodic analysis of the risk of human rights violations throughout the value chain, various analyses are carried out annually to identify the main risks and impacts, including environmental aspects, with particular attention to issues such as climate change, biodiversity and water consumption.

 

PREVENTION AND MITIGATION OF IMPACTS

The integration of the analyses carried out during the risk assessment allows the Group to obtain a complete, in-depth risk map and is the basis for defining the actions to prevent and mitigate adverse impacts throughout the supply chain.

The main tool implemented by the Group to prevent and mitigate impacts throughout the supply chain is the periodic and systematic ethical, social and environmental auditing of suppliers with which the Group already has a working relationship, in order to verify compliance with applicable laws and the principles contained in the Group’s Codes.

In order to ensure maximum impartiality, audits are regularly conducted by qualified, experienced third parties. The audits focus on verifying respect for fundamental human and worker rights, with particular attention to issues of forced labour, child labour, freedom of association, working hours, guaranteed minimum wage and health and safety. The Group’s proprietary checklist, used to perform audits, is regularly updated to take account of changes in reference standards and local and international regulations. In 2023, an updated and revised version was used with the technical support of the International Labour Organisation (ILO), including even stricter requirements than in previous versions.
The Group has a three-year audit plan that ensures all façon manufacturers and finished product are audited at least once every three years.

In 2021-2023, Moncler conducted 564 ethical, social and environmental audits (on both suppliers and subcontractors), accounting for approximately 100% of the volumes assigned to outerwear façon manufacturers, 81% of the volumes assigned to suppliers of other outerwear processes (dye houses, printing works, embroideries, etc.), 99% of footwear and bag suppliers, 39% of tanneries, 97% and 94% of the volumes assigned respectively to knitwear suppliers and soft accessories suppliers, and 96% of the 2022 turnover of pattern making and prototyping suppliers.

Stone Island, which has a three-year ethical, social and environmental audit plan aimed at ensuring the highest coverage of suppliers in its supply chain, also carried out 2815 ethical, social and environmental audits during the same three-year period (on both suppliers and subcontractors), equal to around 99% of the value of orders assigned to finished products

suppliers and 98% of the value of orders assigned to façon manufacturers.

Moreover, during 2023 both Brands also conducted ethical, social and environmental audits on major raw materials suppliers representing 79% of total material purchases for Moncler and 93% for Stone Island. In particular, with regard to the down supply chain, 100% of Moncler’s suppliers were also found to comply with the new human rights and environmental compliance modules officially included in the DIST Protocol. Those environmental and social modules were also applied to Stone Island’s down supplier verification processes.

Lastly, ethical, social and environmental audits also continued to be carried out on strategic service suppliers: logistic platforms, external quality control platforms, providers of services at Group offices and stores for which no significant non-compliances were identified.

In addition to the standard environmental module included in ethical, social and environmental audits, in 2023 Stone Island conducted 18 specific environmental audits on a selection of fabric, finishing and dyeing suppliers, while Moncler examined the analyses of the waste water of 32 companies with wet processes on a sample of fabric, down, dyeing, weaving and tannery suppliers to identify impacts related to potential spills or cases of water contamination. No critical non-compliances have emerged from the conducted activities. It is the Group’s objective to continue monitoring these activities in the coming years.

These audit activities were complemented by audits on animal welfare and on down traceability as per the DIST (Down Integrity System & Traceability) Protocol across the entire supply chain for Moncler and according to the Responsible Down Standard (RDS) for Stone Island.

The increase in the number of ethical, social and environmental audits during the last year is due to the verification activity for new human rights and environmental compliance modules within the DIST Protocol.

 

CORRECTIVE MEASURES ADOPTION
In case violations of applicable laws or principles contained in the Group’s Codes and Policies are identified during audit activities, the Group commits to implementing appropriate actions to remedy the situation.

Notwithstanding the zero-tolerance approach for major breaches, for which the Group reserves the right to terminate immediately the existing contractual relationship with the supplier, both Brands are committed to support their supply chain raising awareness and driving continuous improvement, requiring the implementation of corrective actions where needed. Following each audit, an improvement plan is issued and its implementation is then verified.

The Group undertakes to proactively support all suppliers in implementing the agreed corrective actions.

In order to verify that corrective measures are effectively implemented by the agreed deadline, the Group carries out both on-site and documentary follow-up audits.

With regard to the 389 suppliers audited in 2023, at year-end more than 89% of them were in line with the Group’s social and environmental standards (91% of critical suppliers). Relationship was terminated with around 4% of them (14 suppliers), and the remaining 7% turned out to have open non-compliances at the end of 2023, as the audit activity took place just before the last months of the year and not all the actions aimed at remediating the non-compliances had been closed.

In 2023, with particular reference to social aspects, 190 of the 389 sites audited were found to have non-compliances and the relative improvement plan was issued. The main areas of non-compliance were related to occupational health and safety (73%) and, in 25% of cases, aspects relating to management of employment relationships, including non-compliance relating to salaries and remuneration (12%), working hours (8%), employment contract management (5%), and, in only 2% of cases, human rights issues. For the least critical non-compliances, it was agreed with the suppliers to implement a resolution plan promptly, while in the most critical cases, collaboration with the supplier was always ended.

Aware of the fact that promoting principles of responsibility among its suppliers is beneficial to mutual sustainable growth, in addition to constantly raising awareness of ethical, social, environmental and animal welfare topics, the Moncler Group supports its supply chain in several ways. In particular, Moncler supports some strategic suppliers, making health and safety experts available to give advice and develop knowledge of best practices and providing operational support for investments in technologically advanced machinery for particular processes (21 suppliers in 2023). The programme was also extended to Stone Island suppliers in 2022.

SUPPLY CHAIN AUDITS: ETHICAL, SOCIAL, ENVIRONMENTAL AND ANIMAL WELFARE
FAIR WAGE PRACTICES ALONG THE VALUE CHAIN

In its Supplier Code of Conduct and Human Rights Policy, the Group recognises the importance of ensuring wages that are compliant with the law or binding collective agreements and, in any case, adequate to the cost of living, the employee’s basic needs, discretionary profit, market benchmarks and the type of professional performances.

Suppliers must provide a fair level of compensation and career development that reflects knowledge, skills, abilities, professional experience, benefits, salary and non-salary incentives.

Like the Group, suppliers are expected to provide all the benefits required by the law, including, but not limited to, social security, parental leave, annual holidays and calendar holidays, in addition to engage in regular social dialogue on compensation issues. Moreover, all suppliers are required to bear the responsibility for taxes and other costs of recruiting and hiring workers, including migrant workers, temporary workers and fixed-term contracts.

In 2021 the Group, with the support of a third party, began carrying out specific assessments on the living wage on both its corporate sites and suppliers, with the aim of covering 100% of the Group’s critical suppliers by 2025. As of December 2023, the percentage of critical suppliers assessed and involved in a living wage analysis was 65%.

In particular, Moncler partners with the Fair Wage Network, an independent organisation dedicated to progressing fair wage practices across global supply chains. The methodology adopted by Fair Wage Network focuses on the collaboration of companies and suppliers and assesses wage practices through workers and managers questionnaires, identifying potential issues and suggesting improvement activities.

The Fair Wage Network assessment methodology is structured around 12 dimensions, covering the entire spectrum of wage indicators: the living wage is therefore only one of the dimensions analysed while other variables of the wages practices and pay systems are evaluated such as wage

negotiation with workers’ representatives through collective bargaining, the presence of grievance mechanisms for complaints on remuneration issues, etc.. Another area of the analysis involves comparing the results of the assessment with sector and country parameters.

The implementation of this analysis and the gradual extension to other Moncler suppliers have been assessed and prioritised on the basis of the risk profile associated with the geographical location of the supplier and other factors, such as the presence of collective labour agreements, which ensure dialogue and respect for social and environmental aspects. To this regard, approximately 70% of the Moncler Group’s suppliers is located in Italy and is covered by collective bargaining agreements.

In general, the Group is committed to work with all players in its supply chain, specialised associations and other strategic partners to increase awareness and understanding of the issue of fair wages.

NOTES

Approximately 85% of significant contracts include compliance with the Brands’ Code of Ethics (95% for Moncler).

The figure includes 37 ethical, social and environmental audits carried out by Stone Island prior to the closing of the acquisition by Moncler S.p.A. of the entire share capital of Sportswear Company S.p.A., the company that owns the Stone Island brand.