welcome} summary 1-185} 1 Corporate Responsibility at INDITEX. 3 Scope. 5 Who we are. 23 Corporate Governance. 57 Social Dimension. 91 Our people. 99 Environmental Dimension. 131 Economic Dimension. 163 Independent Validation. 165 SAM assessment. 169 Summary of GRI Indicators. 175 Glossary and indices. 181 Contacts. corporate responsibility at INDITEX Rc 1 IN THE COURSE OF THE LAST TWO YEARS INDITEX has given a deci- ded boost to its corporate responsibility policy, the results of which are reflected in this first Sustainability Report. This policy is not, however, a novelty in the style of management of our company, but rather has been part of its sensitivity since it began operating. The concept itself of sustainability reflects very precisely the way that INDITEX understands the development of its business model within the environment in which it operates. Sustainability, understood as the need for a company to generate not only financial benefits for its shareholders but also positive effects for any of its stakeholders. However, in the last few years, a series of social processes have been mate- rializing that have highlighted the need for a company’s efforts in this respect to be, on one hand, subject to a process of formalization which increases its efficiency and, on the other, transmitted in a clear and transparent manner not only to the shareholders of the company, but to society as a whole. This report has been prepared in accordance with the framework establis- hed in 2002 by the Global Reporting Initiative, and constitutes a balanced and reasonable presentation of the social, environmental and economic per- formance of our organisation. The content has been structured in three large sections, corresponding to the economic, social and environmental dimensions. In addition, information has been included in this Report rela- ting to Corporate Governance, which contains information regarding com- pliance with the recommendations both of the Olivencia Committee and of the “Report of the Special Commission for the Promotion of Transparency and Security in Financial Markets and Listed Companies”, known as the Aldama Report. The spirit that guides INDITEX’s communication policy as regards its sus- tainability strategy is that of suitably reflecting its degree of commitment to its basic principles that exists in our Group, providing information both on the general lines and on its materialization in specific actions in each of the areas. We want this first INDITEX Sustainability Report to be a useful instrument so c that each one of our stakeholders has at their disposal sufficient and preci- se elements so as to judge the adaptation of our efforts to the demands made by society of a group established worldwide. We are sure that the effort made in its preparation shall be suitably valued and that, in light of its contents, it will provide elements for discussion that shall not only improve R the quality of future editions but provide new approaches to INDITEX’s sus- tainability policy itself in the future. Amancio Ortega Gaona Chairman 2 scope sS 3 AMONG THE OBJECTIVES DEFINED IN 2001 for the development of a Corporate Responsibility Model was included, among other aspects, the pre- paration of the Sustainability Report. However, it has been in this corporate year that this goal has been achieved: to maintain transparent dialogue with each of its “stakeholders” through the publication of this commitment. The Report has been prepared taking into account the guidelines of the Sustainability Reporting Guidelines 2002 of the Global Reporting Initiative (www.globalreporting.org). The validation report drawn up by AENOR is avai- lable on page 163 of this Report. A detailed explanation of the scope of the data included in the Sustainability Report is given below: DIMENSION PERIOD COVERAGE Good Governance 2001 & 2002 Consolidated group Economic 2001 & 2002 Consolidated group Social Transmission of the 2001 & 2002 100% suppliers Code of Conduct Social audit of 2001 & 2002 80% suppliers and External Manufacturers external workshops and Workshops Social Action 2002 Spain and international Human Resources 2002 Spain and international Environmental 2002 Headquarters,factories and the Zara logistics S centre in Arteixo (A Coruña) In the future and as part of our commitment to tranparency, we will continue to be actively involved in those sector debates that the Sustainability Reports of the textile and distribution sectors develop. 4 who we are 5 7-22} 7 Road Map. 9 Who we are. 11 Formats. 15 International Presence. 17 The business model. 21 The management team. 6 1 2 1963 1975 Confecciones First Zara store GOA in A Coruña 6 7 1991 1992-1994 Pull and Bear Mexico (1992), and acquisition Greece (1993), of 65% of Belgium and Massimo Dutti Sweden (1994) 11 12 1999 2000 Stradivarius. Holland, Austria, Denmark, Germany, Poland, Saudi Qatar and Andorra. Arabia, Bahrain, INDITEX headquarters Canada, Brazil, Chile in Arteixo, A Coruña and Uruguay road map 3 4 5 1988 1985 First international 1989-1990 Inditex S.A. as the opening of Zara: New York (1989) head of the group Oporto (Portugal) and Paris (1990) 8 9 10 1995 1998 1997 100 % Massimo Bershka. Argentina, Norway and Israel Dutti. Malta (1995) Japan, UK, Venezuela, and Cyprus (1996) Lebanon, UAE, Kuwait and Turkey 13 2001 14 May 2001: IPO. Oysho. Puerto Rico, Jordan, Ireland, Iceland, Luxembourg, the Czech 2002 Republic and Italy El Salvador, Finland, the Dominican Republic, Singapore and Switzerland 8 who we are Ww 9 INDITEX, ONE OF THE LARGEST FASHION DISTRIBUTION GROUPS IN THE WORLD, had 1558 stores in 44 countries at the end of corporate 2002. In addi- tion to its seven store formats –Zara, Kiddy’s Class, Pull and Bear, Massimo Dutti, Bershka, Stradivarius and Oysho– it brings together around one hundred com- panies linked with the various, different activities that make up the design, manufacture and textile distribution business. The first Zara store opened to the public in 1975 in A Coruña, where it began its activity. Nowadays INDITEX stores can be found in the main cities around the world and always in the most important shopping areas. INDITEX has been listed on the Stock Exchange since 23 May 2001, after an IPO which aroused great interest on the behalf of investors around the world, its sha- res being oversubscribed more than 26 times over. Its shares are included in the main stock indexes in Spain and Europe. INDITEX has undergone significant growth in the last few years, achieving con- solidated net sales in 2002 of 3,974 million euros and net income of 438 million euros. At 31 January 2003 INDITEX had 32,535 employees. Table 1.- The following table shows the evolution of the most significant figu- W res of the group over the last few fiscal years *: 2002 2001 2000 1999 1998 1997 1996 Net sales** 3,974 3,250 2,615 2,035 1,615 1,217 1,002 Net income** 438 340 259 205 153 117 73 w No of Stores 1,558 1,284 1,080 922 748 622 564 No of Countries 44 39 33 30 21 14 10 International Sales 54% 54% 52% 48% 46% 36% 32% Employees 32,535 26,724 24,004 18,200 15,576 10,891 8,412 * from 1 February to 31 January of the following calendar year ** in millions of euros 10 formats Ff 11 WITH THE OBJECTIVE OF SEGMENTING ITS APPROACH to the mar- ket, INDITEX has seven fashion distribution formats. All these share the same commercial and management focus: to be the leaders in their seg- ment through a flexible business model, as well as a vocation for interna- tional presence. However, each of the formats has great autonomy in the management of its business. Their management teams are independent in the taking of commercial decisions and in the way that they adminis- trate their resources. Nonetheless, the fact of belonging to a group spread over more than forty countries brings them a great number of organizational and knowledge- management synergies. Thus, each management team can concentrate on the roll-out of its business knowing that certain of the supporting ele- ments are covered by INDITEX’s accumulated experience. INDITEX, as the parent company, is responsible for the central corporate services, i.e. those that are shared by the seven formats and which make easier international growth: administration, the use of logistics technology, Ff the general HR policy, legal aspects and financial capacity, amongst others. 12 Table 2.- The performance of each format in the whole INDITEX group is shown in the following chart: SALES PER FORMAT (millions of euros) Var% FORMAT 2002 2001 02/01 Zara 2,913.4 2,435.1 20% Kiddy´s Class 60.4 47.6 27% Pull and Bear 266.2 225.7 18% Massimo Dutti 287.3 241.4 19% Bershka 299.3 202.0 48% Stradivarius 124.1 93.5 33% Oysho 23.4 4,5 n/a Total sales 3,974.0 3,249.8 22% Graph 1.- Specific weight of the Graph 2.- Specific weight of the formats of INDITEX in 2002 (%): formats of INDITEX in 2001 (%): Stradivarius: 3,1% Stradivarius: 2,9% 0ysho: 0,6% 0ysho: 0,1% Bershka: 7,5% Bershka: 6,2% Massimo Dutti: 7,2% Massimo Dutti: 7,4% Pull and Bear: 6,7% Pull and Bear: 6,9% Kiddy´s Class: 1,5% Kiddy´s Class: 1,5% Zara: 73,3% Zara: 74,9% 13 ZARA (www.zara.com) BERSHKA (www.bershka.com) Zara, whose first store opened in 1975 in A Coruña Bershka was born in April 1998 as a new store and fas- (Spain), is present in 40 countries with a network of more hion concept, focussing on the younger female public than 500 stores located at prime sites in principal cities.