Responsible Sourcing ChallengesResponsible Sourcing Challenges

Michael KoboriMichael KoboriVice-President, Supply ChainVice-President, Supply Chain

Social and Environmental SustainabilitySocial and Environmental SustainabilityLevi Strauss & Co.Levi Strauss & Co.

April 1, 2009

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Social and Environmental Sustainability Social and Environmental Sustainability OrganizationOrganization

Scope of Responsibility– Labor, EHS standards in 850 supplier factories worldwide; – Environment, health and safety regulatory compliance and

programs throughout global supply chain, distribution and retail operations;

– Chemical product safety globally– Environmental sustainability vision and priorities for LS&CO.

Reporting– VP reports to SVP, Global Sourcing Organization

Staffing: 35 FTE– Global (3 FTE)– Americas (9 FTE) – Europe/Africa/Middle East (10 FTE) – Asia Pacific (13 FTE)

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Responsible Sourcing StrategyResponsible Sourcing Strategy

Factory (314,000 workers in 850 factories)– Monitoring: Identify corrective actions for improvement– Collaboration: Improve impact, reduce duplication thru brand

collaboration– Business Integration: Improve GTM disciplines, purchasing practices– Supplier Ownership: Shift from policing suppliers to building capability

Community (340,000 workers in 14 countries)

– Workers’ Rights Grants Program: $1.4 million supporting worker rights training, legal advocacy, health education, asset building.

Public Policy

– Trade-Labor linkage: Advocacy for labor rights in trade agreements– Multi-Stakeholder Initiatives: MFA Forum, UN Global Compact, ILO

Better Factories Cambodia

Transparency: Improve public reporting, awareness

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Case Study: Freedom of Association in HaitiCase Study: Freedom of Association in Haiti

LS&CO. began production in Haiti, July 2003.

Allegations of workers discharged for organizing, March 2004

Work with stakeholders to address issues, April 2004 – January 2005

Major activist campaign

Union recognized by management, February 2005

CBA negotiated, December 2005

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Case Study: Key Facts 2009Case Study: Key Facts 2009

Worldwide economic downturn, LS&CO. customers reduce orders. LS&CO. in turn, makes volume reductions at suppliers worldwide, particularly those producing core product

LS&CO. still primary customer at Haiti facility, which only makes core product. LS&CO. needs to balance volume reductions across all suppliers to maintain source base and reduce inventories. Will reduce volumes in Haiti.

NGOs request LS&CO. to maintain production volumes to avoid worker layoffs.

Question for Small Groups: What will you do to manage business requirements as well as protect LS&CO. reputation and integrity of responsible sourcing approach?

Stakeholders to consider: LS&CO. shareholders, management; factory management; union; NGOs; workers.

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What We DidWhat We Did

Management requested LS&CO. to maintain production volumes for 3 months to enable it to bring other customers to facility to avoid layoffs.

LS&CO. “brought forward” planned production to fill capacity for 3 months.

Question: What impact does this course of action have on key stakeholders? What are the implications of taking this course of action?

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Use

Raw Materials

MaterialsManufacture

Product Life CycleProduct Life Cycle

ProductManufacture

Transportation & DistributionRecyclingEnd Disposition

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Data from LS&CO.’s Life Cycle Assessment on Levi’s® 501® Jean for U.S. Market, 2006 production year

32 kg of CO2

3480 liters of water

400 MJ of Energy

•78 miles driven by the average auto in the United States

•Is equivalent to the carbon sequestered by 6 trees per year (based on EPA representative sequestration rates of tons of carbon per acre per year)

•Running a garden hose for 106 minutes

•53 showers (based on 7 minute showers)

•575 flushes of a 3.78 liter/flush low flow toilet

•Watching TV on a Plasma Screen for 318 hours.

•Powering a computer for 556 hours. Which is equivalent to 70 work days (based on 8 hours of computer use/day)

Lifecycle impact of Levi’s® 501® jeanLifecycle impact of Levi’s® 501® jean

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Key Takeaway: Impacts out of our control are

Greater than within our control: must address cotton

and consumers

Data from LS&CO.’s Facilities Environmental Impact Assessment (FEIA) and 2007 Life Cycle Assessment of Levi’s® 501® Jean.

Lifecycle Insight

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“We will build sustainability into everything we doso our profitable growth helps restore the environment.”

Our vision on sustainability

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• Energy Efficiency and Climate Change: Achieve carbon neutrality by implementation of energy reduction initiatives and the use of 100% renewable energy first in our operations and then throughout the supply chain

• Water: Reduce water usage and improve water quality throughout the product life cycle while growing our business

• Resource Efficiency: Evolve into a zero-waste company offering consumers more sustainable products

• Chemicals: Minimize the environmental impact from chemicals used in production of LS&CO. product in all stages of the product life cycle

• Influence: Provide leadership to encourage other companies, consumers, governments and civil society organizations to address environmental sustainability

Our priorities and aspirational goals

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2011 Vision2011 Vision

Labor Standards Supplier performance improves (60% Green, 35% Yellow, 5% Red) Direct LS&CO. monitoring in <50% of suppliers LS&CO. recognized publicly as leader in innovative practices (collaboration,

capacity building, purchasing practices)

Health and Safety Chemical management program recognized publicly as leading, influences

industry standards

Environment Energy/GHG targets met, significant cost reduction achieved Materials and costs reduced through reduction in product developments,

improvement in adoption rates Certified sustainable products developed for market and generating

significant revenues, EBIT