THE ARMANI GROUP AND SUSTAINABILITY...Paolo Pacciani Luca Gaiani, Marco Terrenghi Directors....

THE ARMANI GROUP AND SUSTAINABILITY

2019

2019

THE ARMANI GROUP AND SUSTAINABILITY

4 | THE ARMANI GROUP

Undertaking self-examination about the sustainability of one's enterprise, measuring the progress made and setting new goals and objectives have become all the more important today, when events urgently call for changes and a new vision of and for the future.

The following pages document numerous initiatives that are oriented towards ever more ambitious goals and thus demonstrate our unflinching commitment to continuing on this path.

The Armani Group can rely on a system of solid values, complemented by the strong conviction that sustainability is evident above all in the company’s capacity to create products that stand the test of time This results from a model that is respectful of all the people involved and all the elements of which it is composed.

The Chairman

THE ARMANI GROUP

UNIQUE IN THE WORLD

FASHION, AS WE LIKE IT

A RESPONSIBLE SUPPLY CHAIN

THE PEOPLE OF THE GROUP

FOCUS ON THE CUSTOMER

THE COMMUNITIES WE SUPPORT

CONTENTS

9

27

75

37

97

51

107

119 METHODOLOGICAL NOTE - 120 CONTENT INDEX

Talking about Giorgio Armani means narrating a story that began more than 40 years ago.

An icon of elegance, a symbol of modernity and practicality, who is ever attentive to quality in every minute detail, Giorgio Armani embodies the essence of “Made in Italy”, effortlessly combining timeless style with a farsighted vision of the future. From its roots solidly planted in the Italian reality, the company has experienced steady growth across the globe, progressively expanding its offerings, from apparel and accessories to cosmetics and fragrances, as also eyewear, watches, jewellery, furniture and furnishing accessories.

The Armani Group’s distinctive sensitivity to societal and contextual changes in the environments in which it operates keeps the company increasingly and resolutely focused on sustainability.

THE ARMANI GROUP

2019 IN FIGURES

9,064

155

EMPLOYEES WORLDWIDE

7INDUSTRIAL

SITES

1,850MILLION EUROS IN ECONOMIC

VALUE DISTRIBUTED

CHEMICAL TESTS PERFORMED ON PRODUCTS

598COMPANY-OWNED

SALES OUTLETS

2,144MILLION EUROS IN ECONOMIC

VALUE GENERATED

100,000HOURS OF TRAINING-EDUCATION

PROVIDED DURING THE YEAR

AUDITS PERFORMED AT SUPPLIERS' FACTORIES

OVER

8,400OVER


THE ARMANI GROUP | 11

AND FACTS

The Armani Group has signed on to the Fashion Pact, one of the most important international initiatives launched to promote sustainability in fashion. The Pact brings together more than 250 leading brands and companies in the fashion and textile industries, all with the desire to promote a virtuous transformation of the sector.

In 2019, through the Armani Development Programme, the young talents in the Group contributed significantly to efforts to draw more attention to sustainability issues, by developing products with characteristics satisfying specific environmental, social and economic sustainability criteria.

Designed with particular attention to sustainability, the first two Armani Green Outlets were inaugurated in Sanremo and Hong Kong. This innovative concept is based on structures being made of recyclable materials with furnishings made from both natural and recycled materials, which will progressively be extended to the Group’s forthcoming outlets.

Currently in its tenth consecutive year, Acqua for Life is an initiative aimed at ensuring access to water in regions affected by water scarcity. To date, AFL has invested approximately € 9 million in water projects around the world, reaching over 200,000 people in 15 countries. All the projects are designed to be operational for at least three years and created in a manner such that upon conclusion of the initiative they can continue to serve the communities.

Research and experimentation remain ongoing with respect to innovative raw materials. Prominent among the materials adopted in 2019 are Ecodown® fibres — produced from plastic bottles and used in the padding of EA7 outerwear padded (puffer) jackets; recycled nylon used for an EA Underwear capsule collection of swimwear; regenerated leather fibres, used for some EA accessories; and finally recycled polyester, derived from PET bottles, which have been used to produce the Olimpia Milano team uniform.

SIGNATORY TO THE FASHION PACT

ARMANI TALENT

GREEN OUTLETS

ACQUA FOR LIFE

INNOVATIVE RAW MATERIALS


THE BRANDS OF THE GROUP

Launched in 2005, the Giorgio Armani Privé Haute Couture collection is the ultimate expression of the inventiveness, elegance and refinement of the Armani style.Traditional craftsmanship blends with stylistic genius in the creation of these garments of ultimate luxury and incomparable ‘Made in Italy’ quality.

Established in 1975, the Giorgio Armani collection is one that best expresses the eternal underlying values traditionally associated with the brand: high quality of materials, purity of lines, timeless elegance, excellence in production, extreme care and attention to detail.

2019 saw the launch of the first collection of Alta Gioielleria, Fine Jewellery, these valuable creations being the outcome of traditional know-how and precision craftsmanship.

Seen as an expression of the lifestyle vision of Giorgio Armani, Armani/Casa has since 2000 clearly established itself as an international leader in the high-end furniture and furnishings sector.

The production of furniture, furnishings and accessories has been integrated into the operations of the Interior Design Studio, addressing the needs of private individuals and property developers.


Created in 1981, Emporio Armani emphatically exudes the modern, dynamic spirit of the brand, while maintaining the distinctive Maison Armani elegance.The iconic logo has now become synonymous with a metropolitan style, enjoying wide appeal across diverse target customer segments including the very young, with broad cross-category messaging.

Founded in 2004, EA7 is the brand vehicle that offers sports enthusiasts technical apparel which delivers performance as well as the characteristic Armani style.

Launched in 1991, the A|X Armani Exchange collection has been inspired by the urban reality of the streets. Targeted at the younger generations and the young at heart, this line offers clothing and accessories that are in step with the fast paced street-smart reality from which it draws inspiration, while remaining faithful to the spontaneity and energy that are part of the Armani DNA.

From fragrances to make-up and skin care products, each creation by Armani Beauty unmistakably bears the designer's creative fingerprint and is noted for the excellence of the details. Just as nature is the highest form of perfection, Armani Beauty products are designed to unveil the natural beauty that lies within each one.


Launched in 2002 as an expression of the Armani lifestyle aesthetic migrated to the universe of taste, Armani/Dolci uses only the best Italian ingredients to create an exclusive selection of delectable products infused with refined and surprising flavours.

Since their inception starting in 2000 and onwards, the Armani/Fiori boutiques have been offering a comprehensive and personalised service to clients who receive assistance right from the selection of flowers to choose from, to recommendations for decorative objects, vases and cachepots or planters.

The Armani food and beverage universe debuted in 1998 with the inauguration of the restaurant in Paris, the first of over 20 locations opened worldwide by Giorgio Armani. From Milan to Tokyo, and from Monaco to Dubai, the Armani restaurants and clubs are constantly evolving and currently boast a presence on four continents.

FOOD & BEVERAGE

Giorgio Armani SpA concluded an agreement with Emaar Properties for the establishment, in 2005, of Armani Hotels & Resorts. The services offered have been conceived to satisfy the highest expectations in the luxury sector, without compromising on style and design. The chain includes the Armani Hotel Dubai and the Armani Hotel Milan.

3 11

4

The Armani Group in the World

AMERICAS

ASIA PACIFIC

EUROPE

6 Italy

1

239 109

250COMPANY-OWNED SALES OUTLETS

REGISTERED/CORPORATE OFFICES

PRODUCTION SITES


1975 19

8119

7819

8419

7619

8219

7919

8519

7719

8319

80

24 July 1975Giorgio Armani and Sergio Galeotti found Giorgio Armani S.p.A.

First Giorgio Armani boutique (Milan)

First licence agreement with L'Oréal for the production

and distribution of Fragrances and Cosmetics

First Emporio Armani store (Milan)

Launch of the lines Armani Junior, Emporio Armani and Armani Jeans

First Fragrance Armani Donna

First collection Giorgio Armani Pret-à-Porter

1986

1986

1987

1988

1989

1990 19

9119

9219

9319

9419

9519

96

Launch of the line Giorgio Armani Eyewear

Launch of the lineEmporio Armani Watches

First store Emporio Armani Caffè

(London)

Launch of the line and first store A|X Armani Exchange (Soho - New York)

First single-brand store Armani Jeans (Rome)

First Armani Junior store (Milan)

1997

First concept storeArmani/Manzoni 31,

which includes the first Armani/Casa store and

multiple brands of the Group

Launch of e-commerce sales

through the website armaniexchange.com

Launch of Armani/Dolci

Launch of the line Emporio Armani Gioielli

Launch of the line EA7 Emporio Armani

Inauguration of the new Armani/Teatro

(Milan)

Acquisition of the Nestlé factory at Via

Bergognone 59/61 (Milan)

New Corporate Headquarters

Launch of Giorgio Armani Cosmetics, Armani Collezioni andArmani/Fiori

1998

1999

2000

2006

2003

2001

2002

2007

2004

2005

2008

Launch of the line Giorgio Armani High Jewelry

Launch of the haute couture line Giorgio Armani Privé

30 April,Giorgio Armani celebrates his company’s 40-year anniversary

Inauguration of the exhibition space Armani/Silos

Reorganisation of the portfolio of brands

Acquisition of the team Olimpia Basket Milano

First Armani Hotel(Dubai)

Establishment of the Fondazione Giorgio Armani

2009

2010 20

1120

1220

1320

1420

1520

1620

1720

1920

18


GOVERNANCE AND ORGANISATION

The organisational structure of the Armani Group has evolved over the years to keep pace with and support its international expansion. As at 31 December 2019, the Armani Group is comprised of 14 business entities located throughout the world, wholly owned and controlled by Giorgio Armani SpA, which as the parent company performs a variety of operational and staff functions on a global scale, through corporate head offices located in Milan at via Borgonuovo 11. Within the Group, oversight is provided by the corporate officers under the leadership of Giorgio Armani, who, in addition to presiding as chair over the Board of Directors, holds the position of Chief Executive Officer.

Instituted in 2016, the Fondazione Giorgio Armani, Giorgio Armani Foundation, is charged with securing the enduring stability of the Group's governance structures such that they remain consistent with and adhere to the core principles that have always inspired the founder's creative and entrepreneurial activities, while also ensuring favourable employment levels and maintaining the Group's ability to create value. This decision in favour of continuity supports Giorgio Armani’s desire to provide for both a steady guiding hand in the future management of the company, as well as the transmission and safeguarding of the values and principles that are an intrinsic part of the Group’s DNA.

Board of directors

Corporate officers

Supervisory board

Board of statutory auditors

Chief Executive Officer and Chairman of the Board

Chair

Statutory Auditors

Substitute Auditors

Chair

Members

Giorgio Armani

Roberta Armani, Rosanna Armani,Silvana Armani, Andrea Camerana,Pantaleo Dell’Orco

Marco Terrenghi

Luca Gaiani, Vieri Chimenti

Maria Cristina Pedroni, Maurizio Morosi

Paolo Pacciani

Luca Gaiani, Marco Terrenghi

Directors

Structure of theGiorgio Armani Group


as at 31 December 2019

100

100

100

100

99

99

100 100

100

100

99,99

100 99

100 100 100

Giorgio Armani SpA

GA Canada

CaffèCroisette

GAMexico

GAMexico

Importer

GAAustralia

GACorporation

GA Japan

Alia Srl

Olimpia Srl

GARetail

Srl

SpanishBranch

PortuguesBranch

FrenchBranch

BelgianBranch

HollandBranch

GermanBranch

AustrianBranch

GABrazil

GAOHongKong

GAHongKong

GAShanghai

Rainbow Fashion

Management (Macao)

UKBranch

IrishBranch

SwissBranch

UltimateSA

(Athens)

GAOperations

Spa

26 | UNIQUE IN THE WORLD

UNIQUE IN THE WORLD | 27

The Armani Group has over the years been able to successfully elevate its reputation and credibility to the highest levels.

For years, the company has been placed among the best companies in the world based on the Global RepTrak® 100 analysis, the ranking compiled by the Reputation Institute, a world leader in measurement and management of corporate reputation.

In 2019 the Group again entered the ranking, placing among the top five Italian companies and conquering the twenty-fourth position worldwide.

Achieving this significant result serves to distinguish the company not only for the exclusive product quality, but also for the serious approach shown in managing stakeholder relations and the unflinching constancy evident through the years in faithfully upholding its values and commitments.

UNIQUE IN THE WORLD


FROM IDEA TO POINT OF SALE

The union of creative genius with the pragmatic indications of the production and commercial/marketing areas bears fruit as the Armani product. This continuous collaboration between the various units of the Group leads to the development of the collection briefing, which is the initial phase that provides the fundamental indications for the subsequent creation of prototypes and sales samples, obtained by integrating technical and economic evaluations.

The samples sent to the showrooms of all markets and in all the distribution channels used by the Armani Group all over the world serve to initiate the sales campaign — a fundamental stage for the planning of volumes and production times.

The production orders collected through the sales campaign are transmitted to the various industrial entities of the Group, which are responsible for careful selection and management of suppliers. The monitoring and control system is key to ensuring that Armani Group managers remain constantly focused on product quality, and on the social and environmental sustainability of production.

The quality control checks on products continue even after delivery to the various regional warehouses, from where they are then distributed to the stores and eventually to the final recipient the customer, concluding a process whereby each product becomes the material testimony of the values affirmed by the Group.

PROTOTYPESFor each product line, style and manufacturing collaborate to transform briefing indications into prototypes, providing the means to deal with the first technical trials and address commercial/marketing feedback. In this preliminary phase, the initial estimates of final product costs are analysed in order to assess commercial sustainability.

SAMPLESUpon prototype approval according to the various commercial lines, the samples are produced with appropriate pricing for each market being defined, and thereafter sent to the showrooms in order to undertake the sales campaign.

COLLECTION BRIEFINGThe first phase of the process is aimed at preparing the collection briefing. This document, which will constitute the guideline for the appropriate positioning of products on the market, combines the emotion-oriented style indications with past and projected commercial/sales data.

FASHION SHOWSThis is the most dramatically staged and high-visibility occasion, during which the collection is officially presented to clients and especially to the national and international media.

PRODUCTION AND DELIVERY TO WAREHOUSESProduction planning is carried out and constantly updated thanks to regular monitoring of sales campaign performance and trends.Based on the geographical location, the volumes ordered are made available, subject to quality control, in the Group's warehouses within 4-6 months.

SALES CAMPAIGNSDuring predetermined periods of the year, by means of the product samples, sale of the products is undertaken via retail, wholesale, as well as online channels.

DELIVERY TO SALES OUTLETSThe logistics organisation located in various different regions of the world effectively enables delivery of products to the various commercial channels.



INTEGRITY AND SHARING

TEAMSPIRIT

POLICY RELATING TO

PERSONNEL

PROTECTING AND VALUING DIVERSITY

RESPONSIBILITY TOWARDS THE

COMMUNITY

PROTECTION AND RESPECT FOR THE ENVIRONMENT

TRANSPARENCY AND COMPLETENESS OF

INFORMATIONS

TRUST

THE VALUES OF THE ARMANI GROUP

The values of the Group as formalised in the Code of Ethics, guide the company’s mode of operation and conduct of business as reflected in the actions of all those working in their name and on their behalf.

In fact, the Code of Ethics is distributed to the Group’s directors, statutory auditors, employees, consultants, suppliers and business and commercial partners. The norms and rules contained in the Code, regardless of their legal value, are dictated by a specific social and moral commitment that the Group assumes. The Code of Ethics is available to all Group employees on the homepage of the corporate intranet. The Group attaches particular importance to protecting all forms of diversity, believing strongly that its presence is an added value and a critical success factor.

The Code of Ethics is available to all members of staff of the Group in an internal section of the company intranet and on the institutional website. Thanks to the series of measures undertaken, no episodes of discrimination were reported in 2019.


THE INTERNAL CONTROL SYSTEM

With a view to protecting and strengthening the long-standing reputation it has gained, the Group has implemented an internal control system that ensures decision-making is consistent with corporate objectives and values. This control system comprises a set of tools, procedures and regulations, designed to ensure appropriately structured information flows and effective processes are in place for identifying, measuring, monitoring and managing risks, especially risks pertaining to corruption related phenomena. In this regard, specific procedures have been established to monitor various aspects, such as payment authorisation, supplier selection, investments, management of relationships with public administration/governmental bodies, and gifts.

The Group has also developed an Organisational, Management and Control Model (Model 231) for prevention of offences, in line with the indications of Legislative Decree 231/2001 and subsequent amendments and additions. This Model therefore includes a system of rules and principles designed to ensure compliance with the law in the performance of the Group's activities, by identifying and eliminating potential risk situations. Representing an integral part of Model 231, the Code of Ethics is of central importance and acknowledged to be a fundamental part of the Maison Armani identity that serves as assurance of solidity and future growth. Supervision and oversight over the effective implementation of Model 231 is ensured by the Supervisory Board, which subjects the entire system to periodic inspections.

During 2019, the SB found no phenomena of corruption, whether ascertained or presumed, on the part of individuals working within or on behalf of the Armani Group. Likewise, there were no reported instances of non-compliance with the laws in force concerning social, environmental and economic matters.


CREATING AND DISTRIBUTING VALUE

The Armani Group has emerged from a long and intense process of commercial expansion to become a major international entity capable of creating and distributing wealth while contributing to the economic growth of the social and environmental context within which it operates, and also satisfying its own stakeholders’ economic interests.

Through ongoing research on style and diversification of product offerings, the Group is able to respond as rapidly as possible to market developments, and accordingly shape their attention and response towards a varied clientele with diverse purchasing options, also attributing appropriate and distinct positioning with respect to style and image for each of the brands in the portfolio. These are the key factors that continue to bring success to the Armani Group despite the difficulties of the international macroeconomic scenario, thereby further consolidating their leadership in the fashion and luxury sector.

Summary financial results (millions of €) 2019* 2018 2017

Consolidated Revenues 2,155.8 2,108.8 2,334.7

Gross Operating Profit before depreciation and amortisation (EBITDA)

494.1 314.3 437.7

Operating Profit (EBIT) 172.8 208.6 334.5

Economic and Financial Performance and Trends

In 2019, the Giorgio Armani Group continued to achieve positive results and continued the strategy of consolidating its international distribution network, characterised by a careful balancing of the direct Retail and Wholesale channels. In 2019, the Group expanded its scope of corporate reporting, with a view to ensuring greater control over the distribution network.The consolidated net revenues of the Group amounted to 2,155.8 million euros, representing an increase of 2.2% as compared to 2018. The Group achieved positive net profit amounting to 119.1 million euros. The Group's financial and balance sheet data remain solid thus allowing it to continue to self-finance its investment programmes: as at the end of 2019, net cash and cash equivalents (liquidity) amounted to 1,215 million euros (1,316 million euros in 2018), while net shareholders’ equity (net assets) was equal to 2,051 million euros (2,064 million euros in 2018).

* The 2019 Financial Results take into account the effects of International Financial Reporting Standard 16 (IFRS 16). For more information on economic performance, please refer to the 2019 Financial Statements of the Group.


The Armani Group Strategy — Key Guidelines

• Rationalisation and development of the distribution network, in alignment with its medium to long-term growth strategy.

• Strengthening of product research and innovation activities within structures of GA Operations Spa.

• Maintenance and creation of new licensing agreements with third parties for production and marketing of products and brands, with the aim of consolidating a leadership position in markets for non-core categories such as perfumes and cosmetics, eyewear, watches and jewellery.


* The 2019 Financial Results take into account the effects of International Financial Reporting Standard 16 (IFRS 16). For more information, please refer to the Appendix on p. 125.

** The Payments to Government Authorities also includes deferred taxes.

Generation and Distribution of Economic Value

Added value represents the Armani Group's capacity and ability to generate and distribute wealth, thus, on the one hand, contributing to economic growth in the social and environmental context in territories where it operates and, on the other hand, satisfying the economic interests of its own stakeholders. The added value indicates the difference between value and the intermediate costs of production; and determination thereof makes it possible for the Group to measure both the economic performance of management, as well as its ability to create appropriate conditions such that the economic value generated is distributed to the stakeholders. The economic value has been reported in three distinct levels: value generated, value distributed, and the value retained by the Group, which is necessary so as to increase financial and economic stability, thereby ensuring its viability over the long term.

Economic value generated and distributed (K €) 2019 2018 2017

Economic value generated by the Group 2,143,680 2,074,187 2,317,871

Revenues 2,155,806 2,108,772 2,334,717

Other income 3,848 4,879 4,845

Financial income 5,011 1,367 934

Value adjustments to financial assets - - -

Write-down of receivables (5,174) (7,884) (1,737)

Exchange rate differences (151) (9,663) (8,850)

Income / expenses from the sale of tangible and intangible assets - - -

Value adjustments to tangible and intangible assets (15,660 ) (23,284) (12,038)

Economic value distributed by the Group (1,850,244) (1,972,231) (2,101,182)

Operating costs (1,200,770) (1,359,834) (1,462,532)

Employee remuneration (455,456) (428,467) (433,779)

Payments to lenders * (18,718) (725) (1,229)

Payments to investors (134,995) (134,995) (120,080)

Payments to Government Authorities ** (39,767) (47,712) (82,946)

Gifts to third parties (538) (498) (616)

Economic value retained by the Group 293,436 101,956 216,689

Depreciation and amortisation (305,690) (82,392) (91,127)

Provisions (3,606) (2,688) (3,201)

Reserves (15,860) 16,876 122,361


Significant Events Occurring Following Close of the Financial Year

The global health emergency caused by the Covid-19 pandemic and the crisis prevailing during the initial months of 2020 have had severe repercussions on the world economy. European and non-European State governments issued exceptional, restrictive protective and public health countermeasures, which were implemented with ever greater determination, consequently exerting profound depressive effects on all economic sectors, especially sectors such as the Textile and Clothing, where tourist flows and the propensity to consume are highly relevant, and condition the production and distribution system thereof.

At the present time, sufficient approximation is not yet possible to accurately estimate the economic impacts of the Covid-19 pandemic; however the Group has sufficient resources complemented by appropriate and amply consolidated capital and financial structures to deal with these uncertainties.

36 | FASHION, AS WE LIKE IT

FASHION, AS WE LIKE IT | 37

The environmental, cultural and economic changes of recent years have clearly and unequivocally highlighted the need to promote a detachment from the conventional production and consumption paradigm. The purchasing decisions, especially of the new generations, are today more than ever inspired by ethical and social values and criteria.

And while companies are called upon to demonstrate their proactiveness, the contours of a change that has already occurred are emerging with ever greater clarity: no longer considered an accessory value or a source of pride for a few, sustainability is now deemed a necessary condition for responding to the evolving requirements of society.

This phenomenon affects all sectors, including the fashion and luxury industries.

The market is demanding transparency, commitment, innovation. The Armani Group is responding.

FASHION, AS WE LIKE IT


SUSTAINABILITY FOR THE ARMANI GROUP

Beginning in 2013, the Group has integrated sustainability into its strategic decisions and choices, including establishing the Corporate Social Responsibility - Sustainability Unit, set up to facilitate and manage this process. The unit fulfils its responsibility for drafting and updating the Group's policies and identifying appropriate objectives and projects with respect to socio-environmental matters, including by interacting with national and international stakeholders, institutions and working groups.

The Group has thus defined an action plan articulated into five priority areas that involve the entire value chain and the actors who participate in it.

In 2019 the Group decided to take another step forward by signing on to the Fashion Pact, an important international initiative that brings together more than 250 of the major companies in the world of fashion.


The Fashion Pact and International Commitments

The signing of the Fashion Pact represents a fundamental step in affirming the commitment of the fashion world towards sustainability. The initiative, presented for the first time on the eve of the G7 summit in Biarritz, France in August 2019, brings together 250 leading brands and companies in the fashion and textiles universe with a view to defining a common path leading to reduction of the sector’s environmental impact. The objectives pursued by the Fashion Pact are sub-divided into three areas of fundamental importance — viz climate, biodiversity, and oceans — and were defined to be consistent with the requirements articulated by the scientific community in respect of protection of natural habitats, combatting marine pollution, and effective reduction of global warming. Convergence around the same objectives enables individual groups to share knowledge and experience with other members of the Fashion Pact, to act in a coordinated manner in respect of the supply chain, and to interact effectively with other manufacturing sectors, thus accelerating the achievement of anticipated results.

The Armani Group has joined the initiative since the first phase of drafting of the Pact in order to contribute towards ensuring the Fashion Pact becomes an effective tool capable of achieving concrete and ambitious sustainability goals and objectives.

The signing of the document has resulted in sustainability taking on an even more significant role in the corporate culture. The Group's sustainability action plan, having already launched initiatives in the same priority areas identified by the Fashion Pact, was thereby strengthened and integrated, thus making the Armani Group one of the key protagonists in the transformation of fashion within a sector that is capable of combining creativity, growth and sustainable development.

The Group's Pillars of Sustainability The Group’s concept of sustainability in fashion has been articulated in five priority areas, i.e. the “Pillars of Sustainability”, which serve as guide for all present and future actions.

FOCUS ON THE CUSTOMERin order to ensure excellence in service, understood to comprise quality, authenticity, safety and traceability of the product.

SUPPORT AND INVOLVEMENT OF COMMUNITIESin order to create value for the benefit of the territory and the people who live therein.

ENVIRONMENTAL PROTECTION AND EFFICIENT USE OF RESOURCESin order to reduce environmental impacts along the entire value chain.

EMPLOYEE WELLBEING AND TALENT DEVELOPMENTin order to ensure the personal and professional growth of all employees, considered to be the primary strategic asset of the Group.

RESPONSIBLE MANAGEMENT OF THE SUPPLY CHAINin order to build stable business relationships and make the supply chain even more virtuous from the standpoint of environmental and social impacts, based on greater involvement and dialogue with all suppliers.



THE SUSTAINABILITY PLAN

Over the course of 2019, the Armani Group drew up a sustainability plan intended to guide corporate commitments and activities in the medium term.

Starting from the pillars of sustainability, specific improvement programmes have been identified that involve the different phases of the value chain and the entities comprised therein.

Finally, with a view to aligning the Group's commitments with the international sustainability reporting framework, the pillars and the resultant improvement programmes have been linked to the United Nations Sustainable Development Goals (SDGs).

The Sustainable Development Goals are 17 macro-objectives defined by the United Nations to ensure sustainable development of the world population by 2030, established for safeguarding the wellbeing of and protecting the planet.

These goals touch on various interconnected and interdependent issues (from the fight against poverty and inequality, to education, and the protection of ecosystems) with universal significance: in order to achieve them, it will require concerted coordinated action on the part of institutions, enterprises and civil society across the world.

In 2019, the Armani Group contributed either directly or through the organisations it supports, to 9 SDGs.


ARMANI GROUP SUSTAINABILITY PLAN

PILLAR SDGs SUPPORTED OBJECTIVE ACTIVITIES

Responsible management of the supply chain

Introduction and adoption of animal welfare standards

by 2025

Mapping of existing animal welfare standards on the market.

Drafting of a protocol for the purposes of application of the Armani Sustainable Project (ASP) logo.

Use of 25% of raw materials that meet specific

sustainability criteria by 2025Drafting of a protocol for the purposes of application of the Armani Sustainable Project (ASP) logo.

Raising the quality standards for suppliers of the

Group by 2030Review of the check list and review of the rating following the updating of the check list. Creation of the supplier evaluation committee and decisions making subsequent to audits.

Environmental protection and efficient use of resources

Reduction by 30% of emissions under direct

control by 2030

Mapping of the Group's direct CO2 emissions (stores, operations, and registered offices around the world).

Setting up the CO2 emission reduction plan based on the results of the mapping.

Use of 25% of raw materials that satisfy specific

sustainability criteria by 2025


Sharing of the Group's sustainability protocols with licensees.

Use of electricity produced 100% from renewable

sources for the Group's Italian offices and stores by

2023

Mapping of electricity supply contracts and evaluation of costs.

Purchase of certificates of origin (GO Certificates) or possible implementation of new photovoltaic systems.

Commitment to purchase 100% FSC certified

paper by 2025

Mapping of purchases of non-certified paper.

Replacement of purchases of non-certified paper.

Commitment to eliminate single-use plastic from B2C

packaging by 2025, and from B2B packaging by 2030.

Mapping of the different packaging used.

Elimination of plastic components from product packaging (also in compliance with the "Single Use Plastic" directive).

Commitment to purchase 50% of recycled plastic in

packaging by 2030

Mapping of plastic materials used.

Development of a plan to replace purchases of virgin plastic with recycled plastic.

Support for innovations that reduce water pollution by

chemical substances

Participation at international working groups (CNMI, Fashion Pact).

Dissemination of Armani Group Manufacturing Restricted Substances List (MRSL).

Acquisition of new methodologies for the reduction of

water and land pollutionFinancing of a research programme on purification using microorganisms.

Employee wellbeing and talent development

Involvement of all corporate areas in the sustainability

plan of the Group

Creation and dissemination of content for the company intranet and the website.

Development of workshops (on sustainability in general, and on specific topics).

Development of talents Promotion of Armani Retail Development Programme.

Focus on the customerImprovement of the relationship with the customer and

raising awareness of sustainability issues

Expansion of product-related content released to the customer via the Certilogo QR code.

Enhancing involvement and raising awareness of customers with respect to sustainability issues relevant to the Group,

also through the adoption of the Green Outlet concept in the design of new retail spaces.

Support and involvement of communities

Launch of social responsibility projects aimed at the

community

Providing support to address the needs of the most vulnerable and for social emergencies.

Continuation of the Acqua For Life project.

Launch of stable collaborations in the field of training-

educationFinancing of medical-scientific research projects.


ARMANI GROUP SUSTAINABILITY PLAN

PILLAR SDGs SUPPORTED OBJECTIVE ACTIVITIES


Introduction and adoption of animal welfare standards

by 2025

Mapping of existing animal welfare standards on the market.


Use of 25% of raw materials that meet specific

sustainability criteria by 2025Drafting of a protocol for the purposes of application of the Armani Sustainable Project (ASP) logo.

Raising the quality standards for suppliers of the

Group by 2030Review of the check list and review of the rating following the updating of the check list. Creation of the supplier evaluation committee and decisions making subsequent to audits.


Reduction by 30% of emissions under direct

control by 2030

Mapping of the Group's direct CO2 emissions (stores, operations, and registered offices around the world).

Setting up the CO2 emission reduction plan based on the results of the mapping.

Use of 25% of raw materials that satisfy specific

sustainability criteria by 2025


Sharing of the Group's sustainability protocols with licensees.

Use of electricity produced 100% from renewable

sources for the Group's Italian offices and stores by

2023

Mapping of electricity supply contracts and evaluation of costs.

Purchase of certificates of origin (GO Certificates) or possible implementation of new photovoltaic systems.

Commitment to purchase 100% FSC certified

paper by 2025

Mapping of purchases of non-certified paper.

Replacement of purchases of non-certified paper.

Commitment to eliminate single-use plastic from B2C

packaging by 2025, and from B2B packaging by 2030.

Mapping of the different packaging used.

Elimination of plastic components from product packaging (also in compliance with the "Single Use Plastic" directive).

Commitment to purchase 50% of recycled plastic in

packaging by 2030

Mapping of plastic materials used.

Development of a plan to replace purchases of virgin plastic with recycled plastic.

Support for innovations that reduce water pollution by

chemical substances

Participation at international working groups (CNMI, Fashion Pact).

Dissemination of Armani Group Manufacturing Restricted Substances List (MRSL).

Acquisition of new methodologies for the reduction of

water and land pollutionFinancing of a research programme on purification using microorganisms.


Involvement of all corporate areas in the sustainability

plan of the Group

Creation and dissemination of content for the company intranet and the website.

Development of workshops (on sustainability in general, and on specific topics).

Development of talents Promotion of Armani Retail Development Programme.

Focus on the customerImprovement of the relationship with the customer and

raising awareness of sustainability issues

Expansion of product-related content released to the customer via the Certilogo QR code.

Enhancing involvement and raising awareness of customers with respect to sustainability issues relevant to the Group,

also through the adoption of the Green Outlet concept in the design of new retail spaces.


Launch of social responsibility projects aimed at the

community

Providing support to address the needs of the most vulnerable and for social emergencies.

Continuation of the Acqua For Life project.

Launch of stable collaborations in the field of training-

educationFinancing of medical-scientific research projects.


THE MATERIALITY ANALYSIS PROCESS

The Armani Group has decided to account for and report its results in terms of sustainability in accordance with the principle of materiality and therefore by highlighting the issues and themes considered to be important ("material") both by the Group and its stakeholders, thus making the Sustainability Report a veritable tool for undertaking active dialogue.

The selection of these issues and themes occurred over four successive phases:

1. Identification of the sustainability issues relevant to the Group;

2. Assigning of priorities by the Group to the issues identified;

3. Involvement of stakeholders;

4. Identification of the "material" topics to be described in the Sustainability Report.

The sustainability issues relevant for the Armani Group have been summarised in the five pillars of sustainability described above.

During the first phase, in order to facilitate the reporting of the Group's annual progress and to align the Sustainability Report with the international framework, the pillars were associated with one or more aspects of sustainability proposed by the International Standards of the Global Reporting Initiative. This made it possible to identify the indicators that are appropriate for reporting the Group's performance trends over time.

During the second phase, the Armani Group assigned action priorities to the previously identified issues by means of a scored assessment system.

Each issue after being assessed on the basis of five criteria, was assigned a score that is variable from 1 (low relevance for the business) to 3 (high relevance for the business).

The final score for each issue was obtained as the average of the scores attributed to the individual criteria. This made it possible to define the list of action priorities of the issues for the Group, thus contributing to drawing up the vertical axis of the materiality matrix.


Criteria adopted by the Group for the assessment of the relevant aspects

CRITERION DESCRIPTION

Strategic relevance for the Group

Aspect that could have a significant economic impact (positive or negative) on the Group's activities in the medium term (2-5 years or more)

Presence of the aspect in the Group's policies

Aspect is appropriately addressed in the documents relating to the Group's policies

Existence of certifications or voluntary initiatives relating to the topic under consideration

Presence of certifications or activities already implemented or planned relating to the aspect under consideration

Aspect that is liable to generate risks

Aspect which, if not properly managed, could entail tangible or intangible risks for the Group

Aspect that generates positive or negative impacts

Aspect in relation to which the Group's activities generate a positive or negative impact on the environment, the territory and/or the surrounding communities


The third phase saw the involvement of the Group's stakeholders to whom dedicated questionnaires were sent. In this manner, the interlocutors were able to provide an assessment in respect of the sustainability aspects on which they wished to receive more information from the Armani Group.

For each aspect of sustainability, they were asked to express a rating of interest scored from 1 (not at all interested) to 3 (very interested). For each theme, the average of the ratings of all stakeholders was taken, thus contributing to drawing up the horizontal axis of the materiality matrix.

During 2019, 43 stakeholders were contacted, obtaining an overall response rate of 65%.

EMPLOYEES

NGO

LICENSEES

MEDIA

CLIENTS

SUPPLIERSTRADE ASSOCIATIONS

STAKEHOLDERS OF THE GROUP


The fourth phase constitutes the synthesis of the first three, which made it possible to construct the Armani Group's sustainability related materiality matrix, which identifies the “material” aspects that are simultaneously relevant to the Group and its stakeholders.

All aspects with a relevance score equal to or greater than 2 were considered to be material; in this way, the process enabled identification of 23 relevant issues: 4 linked to economic aspects, 5 to environmental aspects, and 14 to social aspects.

The materiality process is periodically reviewed with respect both to the assignment of priorities to the issues identified and to the review of the panel of stakeholders, in a manner so as to ensure that it is always aligned with the company's policies and mission. For this reason, all aspects that were found to be non-material (with a score of less than 2 in the matrix) will be subject to periodic review and could be reported in subsequent editions of the Sustainability Report.

The Armani Group Matrix of Material Aspects

The materiality matrix is presented below along with the connection between the pillars of sustainability and the material issues.

The four economic aspects that emerged (economic performance, anti-competitive behaviour, anti-corruption, compliance with socio-economic norms and regulations) cannot be associated with any specific pillar given that they are relevant across the board and necessary for the activities of the Armani Group.

rele

vant

relevant

hig

hly

rele

vant

highly relevantSTAKEHOLDER

AR

MA

NI

GR

OU

P

4

23

1617

18

22

12

1311

9

147

8

21

6

2 20 3

5

11019


15

Connection between the Group's Pillars of Sustainability and the material issues/themes

PILLARS OF SUSTAINABILITY MATERIAL ISSUES/THEMES


1. Child labour2. Forced labour3. Protection of human rights4. Social/labour-related assessment of suppliers5. Environmental assessment of suppliers


6. Raw materials7. Energy consumption8. Water consumption9. Emissions into the air10. Compliance with environmental standards and

regulations


11. Employment policies12. Health and safety in the workplace13. Promotion of diversity and equal opportunities14. Non-discrimination15. Employee training and education

Focus on customer

16. Customer health and safety17. Customer privacy/data protection18. Labelling and communication related to the

product


19. Local communities

Relevant across the board

20. Economic performance21. Anti-competitive behaviour 22. Anti-corruption23. Compliance with socio-economic norms and

regulations


50 | A RESPONSIBLE SUPPLY CHAIN

A RESPONSIBLE SUPPLY CHAIN | 51

To obtain an excellent product, both in terms of quality and sustainability, it is essential to ensure the close collaboration of all the actors operating in the value chain. Over the years, indeed thanks to greater involvement from and in close collaboration with suppliers, the Group has launched a series of initiatives aimed at promoting greater sustainability both within the supply chain, as well as across all offices, stores and company-owned operational sites.

The numerous activities undertaken concern various key areas:

• active collaboration with stakeholders, in particular with suppliers, in order to make the supply chain even more virtuous;

• ensuring the quality and safety of the product and its components;

• selection of raw materials for products and packaging that meet specific environmental and social sustainability criteria;

• efficient management of resources, such as water and energy.

A RESPONSIBLE SUPPLY CHAIN


RESPONSIBLE MANAGEMENT OF THE SUPPLY CHAIN

The Group is cognisant of the strategic importance of supplier relationship management in order to be able to offer customers the best in terms of quality and style — the very values underpinning the brand philosophy.

With the objective of disseminating and promoting their sustainability policies across the supply chain, the Group has developed a series of relevant documents that suppliers are required to sign on to in the contract signing phase.

Specifically:

• The Environmental Code of Conduct, which aims to minimise the negative impacts on the environment deriving from the Group's supply chain activities, through control and management of emissions, management of waste, and efficient use of resources.

• The Code of Social Conduct, which aims to ensure dignified, decent and safe working conditions for all personnel involved in the entire value chain of the Group, through a series of measures that serve to protect the rights and safety of workers — these include prohibition against the use of child labour and forced labour, and against implementing discriminatory practices of any kind.

• The Restricted Substances List (RSL), is the reference document for management of product safety that serves to guide the entire supply chain towards the reduction and progressive elimination of potentially hazardous chemical substances, in a manner consistent with updated regulations and norms, and the best available technologies.

These documents are prepared by the Group's CSR office, are updated periodically and available in a dedicated section of the Group's official website1. The dissemination of these policies is an integral part of the awareness-raising and training/education programmes for suppliers in various regions of the world.

1https://www.armani.com/experience/us/corporate/social-responsibility/supply-chain/

The Armani Group’s Supply Chain

The Group's suppliers may be divided into four main categories:

• Suppliers of finished products and apparel items, who, by autonomously procuring raw materials, produce the finished apparel item according to a technical design or sample of the product

• Suppliers of Subcontract Manufacturing Services, to whom the Group entrusts the production of the finished product, supplying the necessary raw materials and technical information for the work planned

• Suppliers of raw materials

• Providers of services, such as analysis laboratories, consulting and general services procurement companies

Breakdown of purchasing by category and geographic distribution

(excluding providers of services)

65%

41%

SUBCONTRACT MANUFACTURING SERVICES

AFRICA AMERICAS

RAW MATERIALS

ASIA PACIFIC

FINISHED PRODUCTS / APPAREL ITEMS

EUROPE

19%

8% 2%

16%

49%



OVERSIGHT OF THE SUPPLY CHAIN

In order to monitor compliance with the codes of environmental and social conduct and with all the documents signed by suppliers during the contract formalisation phase, the Group has implemented a process for monitoring the supply chain, by means of social and environmental auditing programmes. The audits are aimed at identifying any potential critical aspects and consequently, at guiding the suppliers towards any eventual corrective actions necessary to be able to continue maintaining the qualification of supplier to the Group. On the basis of any non-compliance reported, the suppliers are subsequently ranked on a rating scale from A to E, so as to enable the CSR unit to effectively monitor their progress on the path to complete compliance with the standards.

The suppliers whose overall rating is initially below B, are guided towards achieving improvement in the global assessment through a corrective action plan, with achievement timelines established according to the importance of the respective issues being addressed. However, where suppliers receive an overall rating that is not in line with the Group’s expectations, a meeting with them is immediately convened and they are requested to take corrective action within very brief timeframes and, where there appears to be no possibility of adherence to the standards, an exit plan is defined.

This process of supplier evaluation and engagement has served not only to ensure compliance with the requirements defined by the Group, but above all fosters the sharing of good environmental and social practices amongst suppliers, thus increasing and enhancing the level of awareness within the sector.

Rating


Supplier Audits and Assessment

A-B EC-D

Compliant with

standards

Corrective action plan

(CAP)

Immediate corrective

actions

Documentary verification

of CAP

CAP complete

= Upgrade

CAP incomplete

= Exit plan

CAP complete

= Upgrade

CAP incomplete

= Re-audit

Coverage of Social and Environmental Audits

Given the large number of the Group’s suppliers, a priority list is defined annually for the audits to be carried out in the field.The priorities are defined on the basis of the risks that could be generated by suppliers who:

• enjoy autonomy of action in procurement and supply management, such as suppliers of marketed items;

• have production facilities in countries considered to be at risk of employing improper practices towards workers and the environment, such as in the Asia region.

In addition, each year the Group tries to cover the largest number of production sites managed by each supplier while avoiding repeating the controls at the facilities already audited.

This explains the variability of the number of audits over the years.

201720182019

220

155147

200

150

50

100

0

Number of social and environmental audits


During 2019, 155 social and environmental audits were carried out, covering 37% of the Armani Group’s suppliers, in terms of 2019 turnover.

SUPPLIERS OF RAW MATERIALS


PRODUCT SAFETY

Guaranteeing the safety of its products is a fundamental requirement for any company operating on the market. This is even more so in the fashion world, where attention to the safety of chemical substances used for the production of apparel items has been further accentuated by the environmental campaigns of recent years.

Since 2013, the Group has defined the initiative "Zero Discharge 2020" as a pathway for eliminating or minimising potentially hazardous substances from its production processes and products by 2020.

This is an objective that can be achieved only by strengthening the dialogue with suppliers in order to ensure on the one hand that use is made exclusively of non-hazardous chemical formulations and, on the other hand that the quest and research continues for suitable alternatives that ensure the highest quality standards, taking into consideration the environmental, economic and social impacts thereof.

The Armani Group’s path towards the Zero Discharge goal consists of three phases that are interconnected with each other:

• Defining and periodic updating of the list of restricted substances (Restricted Substances List - RSL)

• Execution of appropriate testing on significant samples from the collections• Preparation of a report on the results of testing conducted by the Group

The Group has also actively contributed to the drafting of the documents "Linee guida sui requisiti eco-tossicologici per gli articoli di abbigliamento, pelletteria, calzature e accessori" (Guidelines on the eco-toxicological requirements for articles of clothing, leather goods, footwear and accessories) and "Linee guida sui requisiti eco-tossicologici per le miscele chimiche e gli scarichi industriali” (Guidelines on the eco-toxicological requirements for chemical mixtures and industrial waste) by the Sustainability Committee of Italy’s Camera Nazionale della Moda Italiana (National Chamber for Italian Fashion).

The first document is aimed at encouraging the responsible use of chemical substances in the production chain through the dissemination and promotion of virtuous practices.

The second, on the other hand, establishes ambitious limits both for the use of chemical mixtures in production and for the detection of waste in water, providing useful information and indications for monitoring and control of the entire production cycle. Thanks to the commitment in place and the systematic control of the supply chain, in 2019 the Group did not find any instance of non-compliance with the regulations currently in force with respect to health and product safety.


The Restricted Substances List (RSL)

The Restricted Substances List (RSL) is the result of collaboration with all the actors involved in the production process, in particular suppliers and chemical laboratories. The document lists: the substances subjected to restrictions, the maximum permissible limits, the acceptability ranges, and prescribed methods of analysis for each substance.

The Group has both a basic RSL, that is valid for any type of product, as well as specific RSLs for the various merchandise categories, applicable to materials and packaging used for the products of the various brands: clothing and accessories, furniture and furnishing products, and costume jewellery. Children's items are subject to a more restrictive RSL than that for articles and products intended for adult consumers.


The Real Time Management of Testing

Given that the Group operates in the global market, the procedures to be implemented and the protocols to be adhered to are thus manifold and may vary according to the different markets. For this reason, the Group has equipped itself with an IT system for the management of chemical testing that allows for real-time monitoring of the progress of the process and facilitating the management thereof in the various industrial sites, through simplification and harmonisation of procedures. In particular, the programme has made it possible to establish a uniform language with a standardised single test request form for all operational locations of the Group, as well as to track test outcomes and results in an easily searchable, shared centralised system that also allows saving and storing marketing authorisations for placing the products on the market in various intended target countries.

Over the course of 2019, more than 8,400 chemical tests were performed on the products.

Laboratory Tests

Laboratory testing on products, carried out by means of sampling, are essential to monitoring progress towards the Zero Discharge objective and ensuring that the products placed on the market are in line with the relevant reference RSLs. The Armani Group relies on the collaboration of the most highly accredited, ISO 170252 certified chemical laboratories in the sector, so as to ensure not only the most reliable analytical techniques but also effective ongoing updating of the specifications. The selection of the laboratory and of the samples to be subjected to testing, the management of testing related flows and appropriate reporting thereof are entrusted to the respective offices responsible therefor at each industrial site of the Group.

The products whose laboratory tests yield positive results are sent onward for sale, whereas those for which critical issues are identified are assessed with the supplier in order for them to be appropriately adapted to the required parameters.

Drafting of Reports on the Results of Tests

The results of the tests carried out during each season are analysed in order to assess the presence of chemical substances in the products that could be the subject of specific further testing. The results of the tests and in-depth analyses then contribute to the defining and updating of the parameters of the RSLs.

2ISO 17025 is an international standard that sets forth the "General Requirements for the Competence of Testing and Calibration Laboratories".


THE SELECTION OF RAW MATERIALS

The selection of raw materials takes place in compliance with precise economic, ethical and environmental criteria that ensure consistency, on the one hand, with the Group’s sustainability-related values and principles, and with client wants and needs, on the other.

The Armani Group intends to expand the range of product offerings that reflect a series of sustainability requirements by implementing a process of continuous improvement of its performance in terms of environmental and social factors.

This process necessarily entails the engagement of its own supply chain, by way of encouraging the quest for more sustainable solutions in the management of production processes, which also reduce the company's environmental impact and promote appropriate working conditions that are fully compliant with human rights regulations.

For this reason, the “Armani Sustainability Project” (ASP) logo was created, serving as the distinguishing mark of endorsement to be applied to all the products of the Group that meet specific sustainability criteria.

In order to respond to the growing focus on social and environmental issues, during 2019 (specifically in the Spring-Summer 2019 and Autumn-Winter 2019 collections), apparel items with innovative raw materials were introduced.

Armani Sustainability Project (ASP)

The logo incorporates the design that belongs to an aesthetic sense that is very dear to Giorgio Armani, the stylised bamboo leaf of the Eastern tradition, which revolves around the text evoking the concept of the circular economy.


Cotton made in Africa

After first introducing it in 2018 in the Emporio Armani line, for the Spring-Summer 2019 collection, the Armani Group decided to extend the use of denim from the Cotton made in Africa (CmiA) initiative also to the Armani Exchange line.

The CmiA initiative of the Aid by Trade Foundation serves the objective of improving the lives and living conditions of cotton farmers in sub-Saharan Africa through targeted training programmes.

The Foundation teaches farmers modern and efficient cultivation methods, thereby helping them to improve both the quality of cotton and their economic and social conditions. Furthermore, the Foundation has defined appropriate cultivation standards to ensure the maintenance of soil fertility and the protection of water courses, through the responsible use of pesticides and fertilisers.


Puffer Jacket made from Recycled PET

The Fall-Winter 2019 season saw the

launch in the EA7 line of puffer jackets

filled with Ecodown® fibres, produced by

Thermore from PET bottles. At the same

time, this made it possible to avoid the

use of animal feathers, giving new life to

disposable plastic bottles.

The filling for a single puffer jacket

corresponds to the recycling of about 10

bottles.

Eagle Arcade Swimwear made from Recycled Nylon

Emporio Armani Underwear has

launched a capsule collection dedicated

to beachwear that includes swimwear

for women and men, made with 100%

recycled nylon fibre. The use of recycled

nylon gives new life to still useful materials

while eliminating the need for producing

virgin synthetic fibres. Even the shopping

bag is made from 80% recycled plastic

that is recyclable at the end of its life.

The capsule was sold online as of July

2019 and exclusively within the dedicated

temporary stores, operated on some

Italian beaches on the occasion of the

itinerant initiative Eagle Arcade Beach

Tour, which was designed for the purpose

of raising public awareness with regard to

issues related to environmental protection.


Olimpia Team Uniform Outfit made from Recycled Polyester

For official championship and Euroleague

matches, the Olimpia Milano players have

definitively adopted the team uniform

made from recycled plastic (PET)

bottles. The team wishes to continue

being spokespersons for environmental

issues, underlining how improvements

can be achieved with even small attentive

gestures and personal and commitment

at the level of the individual person.

To give greater prominence to the

initiative, on the occasion of the 2018/2019

playoffs, the ASP logo was inserted on

the uniforms.

Accessories made from Regenerated Leather Fibre

During the Spring-Summer 2019

season, a series of accessories made

from regenerated leather fibre was

introduced in the Emporio Armani line.

The production of leather fibre is similar

to that of paper: the processing waste

of natural leather is ground and mixed

with synthetic aggregates, pressed

and processed into sheets of various

thickness; these may then be subjected

to finishing processes to enhance their

characteristics so as to increase the

similarity to natural leather. The entire

process occurs without involving water

use, thus avoiding the production of

wastewater, whose high environmental

toxicity represents a significant problem

in the tanning industry.


Fur Free policy

The Group has abandoned the use of animal fur in its collections starting with the Autumn-Winter 2016-2017 season.

The Group's Fur Free Policy is aligned with the standards of the Fur Free Alliance and reflects the Group's desire to help stem the loss of biodiversity on planet Earth.

In particular, the Group has undertaken to not use products deriving from animals that are hunted or bred specifically for use of their fur, including minks, foxes, beavers, otters, and raccoon dogs; the use of rabbit fur has also been eliminated. This category does not include synthetic furs, the skin or hair of skins typically used to make leather, and fibres obtained from shearing or combing.


INNOVATIVE AND SUSTAINABLE PACKAGING

The quest for ever better results in terms of sustainability explains the Armani Group's approach of not excluding any aspect that may offer the possibility for action thereupon.

For this reason, since a number of years, packaging has also been the subject of research and study, always inspired by the concept of incremental innovation, which facilitates making quality improvements without sacrificing style.

The selection of packaging used in stores is guided by the following principles:

1. Preference for recycled raw materials and reduction in purchase of virgin raw materials;

2. Reduction in plastics use, transported volumes, and waste;

3. Sourcing and supply of paper and cardboard from forests managed according to the standards of the Forest Stewardship Council (FSC)3;

4. Selection of recyclable and/or reusable solutions.

These principles represent the basis for ongoing dialogue and consultation with packaging suppliers, the latter being in fact required to comply with precise standards of chemical safety, resistance, and quality in all phases of production. Compliance with the required standards is ensured with the support of external laboratories, who are entrusted with the responsibility for performing testing on materials.

During 2019, the Group carried forward a process of improving institutional packaging, focusing in particular on the recyclability of packaging. Indeed the solutions that have been studied enable simplifying as far as possible the process of recovering individual materials, making it easier for customers to appropriately dispose of the packages.

These interventions have been adopted across all the lines: Giorgio Armani, Emporio Armani and Armani Exchange. In addition, umbrella carrier bags made from compostable plastic have been adopted in the Giorgio Armani and Emporio Armani boutiques, in the Emporio Armani Caffè and in the Nobu restaurant.

3Independent forest certification system that certifies forest management according to rigorous environmental, social and economic standards.


Institutional Packaging

Revamp of the institutional packaging for the Emporio Armani line saw the creation of:

• Single-material shopping bags produced for the EA7 line, made entirely of paper, with central flat belt handles;

• Boxes for the underwear line made from 50% recycled plastic;

• Single-material sock hangers, by replacing the recycled polyester hook with cardboard hook.

The institutional packaging for the Giorgio Armani line was extensively revamped between 2017 and 2018.

In 2019 the main innovation was the introduction of shopping bags made entirely out of FSC paper and with handles made of tubular woven paper cords.

For the Armani Exchange line the main innovations were:

• Progressive adoption of hang tags made of Soporset paper, derived from forests managed responsibly using the most advanced techniques;

• Boxes for the underwear line made from 50% recycled plastic.


RESPONSIBLE MANAGEMENT OF OUR OPERATIONAL OFFICES

Protection of environmental resources being part of the Group's pillars of sustainability, it therefore represents one of the main areas wherein the company has reaffirmed deep commitment to improving its performance.The Armani Group pays particular attention to monitoring its environmental impacts, without which it would not be possible to plan effective initiatives for reduction thereof. The activities launched for this purpose may be categorised into three macro domains:

• adoption of adequate organisational methods and the best available techniques so as to optimise energy and water consumption and minimise waste;

• attention to waste sorting and disposal;• ensuring awareness and involvement of personnel on issues related to

environmental protection.

The 2019 scope of reporting has been extended to all of the consolidated companies of the Armani Group also with regard to consumption (energy and water), production of waste and greenhouse gas emissions.Given that the scope of reporting in respect of the 2018 data included only the Italian companies of the Group, the comparison between the two years is inconsistent, for this reason, reported in the following tables are the data for the year 2019, pertaining both to the new scope and to the previous scope of reporting.


Water withdrawals by source4 (m3) 2019 2019 2018 2017

New scope of reporting Scope of reporting, 2017-2018 Data

Withdrawal from aqueduct 241,603 124,584 124,705 89,045

42017 Scope of reporting: GA Operations SpA and Giorgio Armani SpA2018 Scope of reporting: GA Operations SpA, Giorgio Armani Retail Srl, Giorgio Armani SpA, Alia Srl2019 Scope of reporting: GA Operations SpA, Giorgio Armani Retail Srl, Giorgio Armani SpA, Alia Srl2019 Scope of reporting - World: all global operational locations of the Group

Water

The Armani Group's water consumption is mainly linked to food service activities, sanitary services, fire testing and air conditioning, with the withdrawal sourced primarily from the aqueduct.The Group continues to make investments intended to augment efficiency in the use of water resources, while avoiding all forms of waste. This takes the concrete form of implementing both structural interventions and training and awareness-raising actions aimed at all personnel, relating to saving water through daily actions so as to reduce wasteful use of this resource.

The results have rewarded these efforts: in 2019, despite the activation of some buildings and the opening of the company gym Armani/Fitness, water consumption dropped slightly as compared to the previous year.

Waste

The reduction of waste production represents another fundamental area for committed engagement and action by the Group, through activities ranging from employee training on issues such as wastage and differentiated waste collection, to installation of drinking water fountains in the company’s operational locations, with the aim of reducing the use of water packaged in plastic bottles and the replacement of disposable plastic items with products made from compostable material.This type of intervention shows the extent to which the Group also pays attention to the daily practices and habits of its employees, mindful of the not insignificant impact they generate.

Waste produced by type4 (t) 2019 2019 2018 2017


Total waste 16,850 1,080 1,141 1,157


Energy

The Armani Group attributes great importance to saving energy, demonstrated in the company constantly monitoring its consumption so as to better direct efforts towards achieving the objectives defined in the sustainability plan.

Total energy consumption4 (TOE) 2019 2019 2018 2017


Direct energy consumption (methane, diesel fuel)

1,450 1,433 1,322 1,386

Indirect energy consumption (electricity) 9,639 4,309 4,400 4,430

Total consumption 11,089 5,742 5,722 5,816

5 The emission factors for electricity were obtained, where possible, using the specific residual energy mix for each country, i.e. the energy mix net of the shares of energy produced from renewable sources with appropriate certifications of origin. Where this information was not available, the data provided by IEA was used. The reference year of the emission factors for all countries is 2018.As regards methane gas and diesel, on the other hand, the emission factor used is the same for all countries and obtained from the Ecoinvent3 database.

Greenhouse Gas Emissions

Greenhouse gas emissions are calculated by converting energy consumption into tonnes of carbon dioxide equivalent (tCO2eq), by applying specific emission factors for the different energy sources (diesel, methane and electricity) and for the relevant country5. The greenhouse gas emissions, being linked to energy consumption, reflect their own trend over time.

Greenhouse gas emissions4 (tCO2eq) 2019 2019 2018 2017


Direct emissions (from fuels) 5,090 5,031 4,647 4,876

Indirect emissions (from electricity) 35,630 16,141 16,482 16,595

Total emissions 40,720 21,172 21,129 21,471


The Energy Saving Programme

• Implementation of energy diagnostics and audits across all Production Sites and offices in Italy, as well as across a series of stores, in order to obtain a global and comprehensive snapshot of its energy consumption levels and identify some savings trajectories

• Implementation of remotely operated systems for monitoring of company-wide consumption levels subdividing them, for example, by specific work areas, such that possible actions for improvement may be made more evident

• Centralisation of temperature regulation in the work environments, in order to ensure proper management

• Use of an innovative digital signage platform to manage the turning on and off of all monitors

• Progressive replacement of interior lighting with LED technology

• • Installation of sensors that regulate the turning on and turning off of lighting in all spaces

• Attention to the use of low-emissivity structures and materials in the design-planning of the renovation and restructuring of the Group's buildings

74 | THE PEOPLE OF THE GROUP

THE PEOPLE OF THE GROUP | 75

On a daily basis, Armani Group employees proudly carry forward its traditions and uphold the company’s values and founding principles, thus ensuring its leadership in the world of fashion.

Attention to the growth and wellbeing of employees is of fundamental importance for the Group and in fact constitutes one of the pillars of its sustainability plan.

In addition to paying particular attention to contractual stability and protection of safety in the workplace, the Group offers ongoing opportunities for both professional and personal training and development, and various measures aimed at promoting health, quality of leisure time, and the proper balance between professional and family life.

THE PEOPLE OF THE GROUP

The People of the Armani Group


AS OF 31 DECEMBER 2019,THE ARMANI GROUP EMPLOYED

9,064PEOPLE

WOMEN

MEN

5,651

3,413

AMERICAS

2,4931,309

1,184


ITALY

3,055

EUROPE

1,022

ASIA - PACIFIC

2,494

2,048

1,661

633

1,007

833

389


The Armani Group comprises 9,064 people globally. The presence of women is consistent across all corporate levels and represents more than half of the Group's overall workforce. This result has been achieved thanks to various accommodations and arrangements in terms of flexibility in working hours, such as the possibility to avail of a part-time work schedule upon returning from maternity/parental leave up to the child's third year, the latter being granted in a much more generous and extensive manner than stipulated as per the provisions of the CCNL (Contratto Collettivo Nazionale del Lavoro, National Collective Bargaining Labour Agreement).

The breakdown by contractual functional classification remains substantially stable as compared to previous years, indeed just like the distribution of employees by age group and years of service within the Group.

Women by functional classification (%)

2019 2018 2017

Senior Executives/Top Management 47% 44% 45%

Supervisory-Managerial 51% 50% 50%

Employees 71% 69% 69%

Salesforce 62% 60% 61%

Workers 60% 62% 67%

Employees by contractual functional classification and gender (no)

2019 2018 2017

Men Women Total Men Women Total Men Women Total

Senior Execs/Top Mgt

166 149 315 185 146 331 177 147 324

Supervisory-Managerial

585 616 1,201 561 559 1,120 570 575 1,145

Employees 688 1,677 2,365 713 1,610 2,323 694 1,577 2,271

Salesforce 1,555 2,585 4,140 1,389 2,083 3,472 1,318 2,042 3,360

Workers 419 624 1,043 369 591 960 314 641 955

Total 3,413 5,651 9,064 3,217 4,989 8,206 3,073 4,982 8,055


Employees by age group and gender (no)

2019 2018 2017


50 434 834 1,268 457 783 1,240 446 835 1,281

Total 3,413 5,651 9,064 3,217 4,989 8,206 3,073 4,982 8,055


The company’s decisions concerning employment contracts, oriented towards maintaining stability, clearly demonstrate the importance the Group places on fostering a solid sense of belonging, which facilitates and nurtures employee motivation. Open-Ended Permanent contracts exceed 90% of the total.

The adoption of part-time contracts, granted to mothers until the child completes 3 years of age, represents a valid tool for ensuring the Group's employees can maintain greater balance between private and professional lives (work-life balance). In 2019, about 20% of employees availed of this type of contract, enjoying the same company provided employee benefits and welfare services as full-time workers.

Employees by employment contract type (no)

2019 2018 2017


Open-Ended Permanent

3,110 5,144 8,254 2,876 4,579 7,455 2.830 4,521 7,351

Fixed Term Temporary

303 507 810 341 410 751 243 461 704

Total 3,413 5,651 9,064 3,217 4,989 8,206 3,073 4,982 8,055

WomenMen

2000

3000

4000

5000

1000

more than 30 years

between 20 and 30 years




less than 2 years

Employees by length of service and gender (no) in 2019

179

1,287 1,1761,514

4,366

44365 849 908

1,707

438 441

735

606135

177

542

2,659


ATTENTION TO THE WELLBEING OF ALL PERSONNEL

For the Armani Group, it is essential to ensure that each and all employees are offered a stimulating place in their respective work environments, which is respectful of their individual needs and where they can calmly and peacefully perform their duties and activities.

Diversity and Equal Opportunities

Defending the dignity of the person is a prerequisite for creating a motivating and stimulating workplace, founded on trust and loyalty. For this reason, the investments made over time with respect to management of diversity and protection of equal opportunities are among the Group's key priorities. In 2019, the Armani Group actively participated in the HR & Education round table of the Camera Nazionale della Moda Italiana, National Chamber of Italian Fashion, which among other initiatives undertaken, led to the drafting of the manifesto Including Diversity. Starting from the concepts of ethnicity, gender, sexual and religious orientation, age, mental and physical abilities, as well as socio-economic conditions, the manifesto sets forth a pathway for transformation of company policies such as to make them inclusive.

Welfare Measures

By way of a significant contribution to employee wellbeing a host of welfare services and initiatives are in place that allow for substantial enhancement in the living and working conditions for all personnel; these include, for example, the set of special agreements entered into with commercial establishments or companies that provide health and related services. This category includes the Armani People Care welfare plan, launched at the end of 2018. Intended for employees hired on open-ended permanent contracts by the companies Giorgio Armani SpA, Giorgio Armani Retail and Alia, the Plan extends support to employees and their families, with a budget to be spent on activities dedicated to leisure and sport, travel/holiday packages or on home care services or medical and school expenses. Starting as of January 2019, a dedicated portal has been made available through which employees have the possibility to select some services or request reimbursements for themselves and their families. Employees of Giorgio Armani Operations were able to choose to receive the performance bonus in cash or to convert it into Welfare or supplementary social security and retirement benefits.In addition to this there are initiatives to support and aid parenting, such as the Armani Junior Summer Camp, which during the school closing period allows employees' children to participate – at discounted pricing – in a summer camp dedicated to basketball, that is led and managed by qualified instructors and special guests from the A|X Olimpia Milano team. Finally, a social security consulting and assistance service was made available to employees.


Safeguarding Employee Health

As of 2005, the Armani Group has decided to supplement the insurance coverage for occupational and non-occupational accidents by also adding free health coverage for all employees, with the possibility of extending it, at a reduced rate, to the nuclear family unit. In addition, a free Check Up programme offering the possibility of an annual health check has also been established.

At the end of the year, the inclusion of Life insurance coverage effective as of 2020, was also communicated to employees. This policy, intended for all employees (non-managers), provides for the payment of a compensatory amount to employees’ heirs in the event of death due to illness.


Leisure Time

One of the most successful initiatives implemented by the Group is the opening

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