July 13, Dear Michael,

Transcription

1 July 13, 2017 Dear Michael, Thank you for the additional thoughts and feedback in your June 22, 2017 letter. As mentioned in our reply dated June 21, 2017, KnowTheChain s findings are based on information companies make publically available. With the exception of one design oversight, our latest leather report did not contain factual errors, and what was included was obtained from public reports on your website. Because the accuracy of our reports is important to us, we included some of the clarifying changes you submitted where appropriate, and based on the understanding that those clarifications would be made in your public materials as well. To avoid future confusion, we encourage Kering to ensure all public information is consistent and accurate. As for our methodology, please keep in mind that the challenge of measuring performance on social issues is distinctly different from how environmental or sustainability issues are measured. KnowTheChain is committed to supporting efforts to mature the measurement of social indicators by coordinating closely with the Corporate Human Rights Benchmark and efforts being undertaken by the NYU Stern Center on Business and Human Rights. The latest NYU report, Putting the S in ESG, is illustrative of how unique the challenges of measuring social issues are compared to other sustainability challenges. We encourage any company that is concerned about social measurement to engage in constructive collaborations with stakeholders and efforts to improve social measurements. We look forward to Kering s input during our current methodology review period. Lastly, as mentioned in our pervious letter, in the spirit of transparency we will be publishing the contents of this exchange on the Business and Human Rights Resource Center s website as final supporting documentation of Kering s response. Thank you again for your thoughts. If would like to discuss this further, please call me at anytime. Kilian Moote KnowTheChain Project Director

2 KNOW THE CHAIN Randy Newcomb, President and CEO, Humanity United Phil Bloomer, Executive Director, Business & Human Rights Resource Centre 22 June 2017 Dear Know the Chain, As one of the first global companies to both trace and report on our impacts all the way back to the source of raw materials, and to implement responsible sourcing, product traceability, effective monitoring and the audit of the entire supply chain, Kering applauds all efforts to increase transparency within the apparel and luxury sectors. However, in the case of Know the Chain's report How footwear companies and luxury brands tackle forced labor risks in their leather supply chains, we do not agree with the unscientific basis of the methodology upon which its findings - related to Kering and its brands including Gucci, Bottega Veneta and Puma - are based. This is the second occasion that we have voiced concerns to Know the Chain regarding their methodology, having previously included untrue inferences with regards to Kering and forced labor in your report published last December. As a matter of principle, Kering believes that addressing human rights impacts and risks is a moral and business imperative. We have consequently established a framework of policies across the Group, including the Kering Code of Ethics and the Kering Suppliers Charter. Furthermore, the Kering brands referenced in the Know the Chain report fully adhere to the principles and certification of the internationally recognised standard SA8000, across the whole product supply chain. Our brands have been actively engaged with trade unions, universities and local governments to actively protect workers and preserve craftsmanship in our supply chains. 40, rue de Sèvres Paris kering.com RCS Paris Société anonyme (French corporation) with a share capital of VATFR

3 In the belief that even greater disclosure regarding human rights is imperative, by the end of 2017 Kering will conduct an analysis on how we can improve the linkages between our existing internal procedures and the United Nations Guiding Principles on Business and Human Rights. Having received an advance copy of your report on the June 14, 2017 after exchanges and phone discussions, upon your request, we formally submitted a request to correct several factual errors with specific public references and numerous methodological errors in your report. (See letter date June 16, 2017). We appreciate the fact that some of these corrections were taking into account but also feel that as sustainability is a field that is based on science and facts, we believe it is important to stay true to these principles of integrity and accuracy. This report does not fully meet that test from our perspective. We are concerned that the good work you are attempting to do on transparency and human rights is diluted by insufficient research and a distortion of fact. This approach does a disservice to a critical topic facing the industry today. Sincerely,

4 Dear Michael, We received your letter dated June 16, I appreciate you reaching out to provide clarifications and express your thoughts and concerns. As you know, our research is based on public disclosure from companies. In addition, to further strengthen our research, we invite companies to provide any additional information they deem relevant. It is our desire to avoid publishing inaccurate information, even when based on company reporting. On this occasion, we are making an exception and considering the additional information you provided as outlined below after our disclosure deadline. The findings outlined in our case study, which you reference in your letter, were based on your recent public disclosure. For this reason, we would strongly encourage you to ensure your public disclosure contains information that you deem accurate, consistent, and relevant at all times. Regarding to the specific points of your letter: 1) Size of leather business KTC source: Page 21 of your 2016 reference document refers to the revenues of Kering s leather goods: Leather goods, with estimated revenue of 44 billion in Change in case study: We will take out the reference of the estimated revenue from leather goods. 2) Kering brands that sell leather products KTC source: Page 21 of your 2016 Reference document states: Kering operates in leather goods mainly through the Gucci and Bottega Veneta brands, as well as the Saint Laurent, Balenciaga, Alexander McQueen and Stella McCartney brands. Change in case study: We will take out any reference to Stella McCartney. 3) Leather supply chains in Brazil and China KTC source regarding Brazil (tier 3): Your latest EP&L report says: South America are key sources of wool and leather. However impacts in Brazil are much lower than in prior years, as sourcing is focused in Europe. Change in case study regarding Brazil: Will we take out the reference in the graphic called Companies Exposure to Countries with Leather-related Forced Labor Risks KTC source regarding China (tier1): Page 3 of your 2016 reference document, under geographic locations of Kering s suppliers for Luxury outlines Italy 92%, Western Europe (excl. Italy), Eastern Europe 2%, Asia 2%. Change in case study: n/a. We feel our current wording clarifies that any

5 sourcing from China would be limited ( unclear (max. 2%) ). Additionally, simply stating that you are not sourcing from certain countries in the first tier of your supply chain is not sufficient. Best practices dictate disclosure of all countries where your tier 1 suppliers are located. Lastly, you included a suggestion that Kering should have large bubbles across all tiers in the graphics indicating supply chain transparency and due diligence. We made two changes here to reflect the information you provided as well as one design error on our part. KnowTheChain methodology A) Description of supply chain due diligence approach and footprint KTC source: As pointed out above, the 2016 reference document was taken into consideration. Change in case study: n/a. The information cited in the report was reviewed as part of our first assessment. The additional information provided by you is focused on the management of chemicals in tanneries, which while important, is not the subject of our case study. Furthermore, there is no clear indication that supplier engagement at tier 1 addresses forced labor beyond a broad discussion of sustainability. B) Gucci and Bottega Veneta SA 8000 audits are undertaken in tiers 1 and 2 and social compliance requirements are included in contracts for suppliers in tier 1 and 2. KTC source: Kering response to the Resource Centre questionnaire on leather states: Gucci and Bottega Veneta, respectively embarked in 2007 and 2009 on the process of obtaining SA 8000 (Social Accountability 8000) certification. This global standard takes into account not only the Company itself, but also the companies in its production chain. There was no specification that this included indirect suppliers or those below tier 1. In addition, the sources listed in Kering s letter are not from the company s website, so they would not have been taken into account unless Kering provided the information in its additional disclosure. Change in case study regarding supply chain transparency: There was no additional information provided. However, the graphic in the report we sent previously had a design error, so we are adding a small bubble for tier 3 transparency. Change in case study regarding supply chain due diligence: We have increased the bubble size for tier 2 due diligence to account for tier 2 supplier audits, in addition to cascading standards, and also reflected this change in the text of the case study. It is important to keep in mind that social compliance requirements for suppliers have already been incorporated into our evaluation. As stated previously, KnowTheChain does not consider audits the only

6 component in supply chain due diligence. For good practice examples, please read the case study or some of our previous reports. The case study explains that analysis on whether companies disclose at least some information on supply chain labor due diligence. Specifically, the analysis looked at purchasing practices, worker voice, and monitoring for tier one; monitoring, cascading standards and grievance mechanism for tier two; and monitoring, sub-supplier engagement and grievance mechanisms for tier three. We will add a note to make it more explicit that this analysis looked at which diligence processes were in place, but only evaluated to a limited degree the robustness of such due diligence processes. C) Traceability of the leather supply chain KTC source: Company website and Kering response to the Resource Centre states: for example, the high volume iconic products in Bottega Veneta s Cabat range made entirely from nappa leather are traceable and certified by ICEC (Institute of Quality Certification for the Leather Sector). KTC source: n/a. The case study did not look at the degree of traceability of leather, but instead the transparency of souring across tiers. It is commendable that Kering has taken steps to trace its supply chain, however, the indicators looked at what information is being made publicly available specifically regarding suppliers. Change in case study: n/a. D) Kering s statement on leather sourcing and GHG emissions KTC source: n/a. We do not focus on environmental issues. We would welcome further disclosure on sourcing, such as a full list of where tier 1 suppliers for luxury brands are located. Change in briefing: n/a. Please note that in order to take your additional disclosure into account, we will need to publish the information you provided as additional clarification on the Business & Human Rights Resource Centre website. We trust that this communication and the changes we have made reasonably address your concerns, however do not hesitate to contact me if you have any additional questions. Thank you, Kilian Moote KnowTheChain Project Director

7

8

9

10