www.acnestudios.com

Social Report 2011

Member of FWF: 2008

Social report – Acne Studios AB – April 2012 1/ 8 Organizational chart Acne Studios Acne’s head office is located in , and is the workplace for approximately 100 people. The following departments are operated from the head office: Design and Production, Distribution (Wholesale and Retail), Logistics, Finance, IT and PR & Marketing. In addition to the headquarters in Stockholm we have country offices in France, Germany, Denmark, Norway and USA, as well as concept stores in Amsterdam, , Bergen, , , , Hamburg, , , New York, , , Stavanger, Stockholm and . The Design and Production Department is organized in one Men’s and one Woman’s team respectively and include functions for business controlling, CSR and quality and are working under the CEO and the Creative Director.

Design and Production Department

Production Manager

Business Controlling CSR and Quality Women’s Team Men’s Team

Design Design

Product Development & Product Development & Production Production Pattern Making Pattern Making

Social report – Acne Studios AB – April 2012 2/ 8 Contents

Organizational chart Acne Studios ...... 2

1. Summary ...... 4 2. Sourcing strategy ...... 5 2.1. Sourcing strategy and pricing ...... 5

2.2. Organisation of the sourcing department ...... 5

2.3. Production cycle ...... 5

2.4. Selection of new factories...... 6

2.5. Integrating monitoring activities and sourcing decisions ...... 6

3. Coherent system for monitoring and remediation ...... 7 3.1. China ...... 7

3.2. Turkey ...... 7

4. Transparency and communication ...... 8

Social report – Acne Studios AB – April 2012 3/ 8 1. Summary In 2011, we have strengthened our internal routines and communication regarding CSR. When it comes to social compliance, focus has been on China and Turkey, which are our main production countries from a risk perspective. A new CSR and Quality Manager was hired in April, and has been setting up new routines for our different CSR activities. During 2011 CSR has, as outlined in the work plan for 2011, been given increased importance in our on-going sourcing and supplier evaluations and CSR is continuously discussed at management meetings within the design & production department. In these meetings, it is decided on which suppliers to audit as well as on what actions that should be taken based on current audit findings. Audit results are normally communicated to everyone at the department at weekly meetings and a copy of every audit report is sent to the concerned buyer. Before a manager or buyer is going to visit a supplier, the CSR Manager is always consulted to give an update on the current CSR status and to inform of topics that need to be discussed during the visit. Our quality auditor is also kept updated on the social compliance situation at the factories and is helping the CSR Manager to follow up minor findings during his quality audits. The fact that we are such a small organization with around 25 people working with buying and product development gives us a great opportunity to work together like this. We have followed up on our goal for 2011 to communicate our CSR commitments to the rest of our organization. One example of this is a presentation that was held at an internal Retail Conference, where all regional and store managers participated. All managers were requested to pass this information on to their staff. This presentation was highly appreciated and many of our employees, throughout all different departments, show a big interest and concern in these issues. Information on our social compliance commitments and FWF membership is also described in our Retail Manual, which is distributed to all our stores. When it comes to social audits, we have started to make more audits together with FWF as opposed to before where we made most of our audits ourselves. During 2011, we made two full FWF audits at two new suppliers in China and made several shorter monitoring audits at new and existing suppliers in both Turkey and China together with a FWF audit supervisor. We see these different types of audits (full FWF audits and shorter monitoring audits with a FWF audit supervisor) as an efficient solution for monitoring the development and we will continue with this way of working during 2012. Unfortunately, we were not able to complete as many audits as planned in Turkey due to lack of FWF auditors there since September 2011. We are really hoping that FWF going forward will assure a reliable availability of auditors for their members so that we can fulfil our goals.

Social report – Acne Studios AB – April 2012 4/ 8 2. Sourcing strategy

2.1. Sourcing strategy and pricing Acne Studios designs, markets and distributes high-end and denim. Our product range includes men’s and women’s clothing, shoes and accessories. Below you can see the distribution of our production per country for 2011.

Production countries 2011

30,00% 20,00% 10,00% 0,00%

The above graph shows the percentage of production per country based on purchase costs. Our production is made on CMT, CM or full price terms. Price negotiations are undertaken both at an early development stage but also with the order figures in hand. We are always looking for good value for money; that said, we are never willing to compromise on our designs or product quality and we always see that prices should be reasonable in both parties’ perspective.

In general, we have direct business relationships with our suppliers but in case of working through agents, we always strive to have direct contact with the factories. The reasoning behind this is to keep control of everything from development and production to CSR conditions. Our goal is to have a supplier base that can meet all our different requirements. We are always open to find new suppliers to work with, but we never do so before we feel secure that it is a supplier we can trust and strive for long-term relationship with. We continuously evaluate our suppliers based on different parameters such as communication, prices, deliveries, CSR etc.

2.2. Organisation of the sourcing department The Design and Production department is headed by a production manager and consist of around 30 employees. The department is divided into a men’s and a women’s team which both have a team leader and consist of around 30 peoples including designers, product developers/buyers and pattern designers. In addition, the department include two production controllers and the CSR and quality manager. One responsibility of the team leaders is to coordinate the sourcing of fabric and garment suppliers together with the concerned buyer. We also have fabric sourcing manager who are responsible for coordination of our fabric suppliers.

Social report – Acne Studios AB – April 2012 5/ 8 2.3. Production cycle Each year we produce two Main collections for men’s and women’s wear respectively, as well as two Pre- collections for women’s wear. In addition to these collections, we also make two smaller Capsule collections per year. The production orders are placed based on external and internal (our own stores) orders of the collections and only include a small element of stock ordering for in-season orders. In addition to the large seasonal orders that are placed at the end of each selling period, we are also working with reorders within the store seasons. The production lead-times vary between just a few weeks up to half a year and are highly dependent on internal planning, the capacity of our suppliers and fabric lead times.

2.4. Selection of new factories Every season usually brings about some new supplier. This process starts with a meeting where our product idea is presented to the supplier. Following this meeting, the supplier is usually asked to produce prototype samples that are sent to us. If we approve these samples, the next step is the production of sales samples. Parallel to this product sampling, the supplier is informed about our FWF membership and given a questionnaire, our Code of Labour Practices, our Restricted Chemical List and a business contract. All contracts and forms are to be signed where both parties keep one original copy. We always ask new suppliers for reports from previous CSR audits made at the factory, to get an initial idea of their CSR status.

2.5. Integrating monitoring activities and sourcing decisions All employees at the Design and Production department have great interest in producing our garments in factories with working conditions that are in line with our Code of Labour Practices. The outcome of our audits, together with other aspects such as prices, lead-times and communication skills of suppliers are always considered when deciding which suppliers we want to continue working with and to what extent. If we for some reason would like, to quit working with a supplier, we always explain the underlying motive to the supplier. We never leave a supplier that we have been working with for a long time right away if problems occur; instead, we decrease our orders gradually if the problems persist and keep a dialogue with the supplier on our reason for doing so. We do not automatically terminate a business relationship based on audit findings that are in conflict with our Code of Labour practices but always give our suppliers chances to improve in order to meet our standards. However, if we realize that they after repeated requests are not willing to make improvements, we will eventually terminate the business relationship. On the other hand, suppliers that show willingness to make improvements and live up to all our requirements are likely to stay as suppliers to us for a long time. The very few supplier relationships that we have terminated during and after 2011 were all ended based on inadequate communication or due to quality and delivery problems. For the suppliers that had findings during audits in 2011, we will carefully follow up their improvements during 2012. In 2012, we will also focus on suppliers that we think might use un-approved subcontractors - something that is risky and in the end could lead to termination of a business relationship. Another focus area for 2012 is to ensure that all productions going through agents are placed with the same factories season after season whenever possible. This is to ensure consistency in quality and communication, but also to help developing a mutual understanding of our Code of Labour practices with these factories.

Social report – Acne Studios AB – April 2012 6/ 8 3. Coherent system for monitoring and remediation The monitoring of our Code of Labour practices has, as described in our work plan, focused on China and Turkey during 2011. In 2012 we will conduct audits of our Albanian and Rumanian suppliers.

3.1. China

China is one of our three main production countries. We are working with thirteen Chinese factories; four of which we are working directly, and the rest are handled through agents. Most factories have been audited by either us or by other clients. In addition, we have also previously audited some of the main suppliers’ washing houses ourselves. Four factories have been audited in a full FWF audit, whereof two full audits were made in 2011. In addition to this, five factories were audited in a shorter monitoring audit in 2011 together with an audit supervisor from FWF and the CSR Manager at Acne. This means that social compliance was followed up and discussed with around 50% of our Chinese suppliers during 2011. All audits result in a corrective action plan of things that need to be improved. Our experience is that no factory is perfect and all have at least some findings in conflict with our Code of Labour practices. Most common findings in China are too long working hours and wages that are below estimated living wages. We are going to follow this up during 2012 and 2013 to see how Acne can help suppliers to reduce working hours that exceeds the limit in our Code of Labour practices and how we can make sure the payments are in line with regulations of overtime payment and estimated living wages. Most suppliers have been audited several times, either by us or by other clients, and we see few findings of violations of health and safety issues. As we are particularly concerned of health and safety conditions at the dying- and washing facilities that some suppliers use, we will audit some of these going forward, even though this is not required by FWF. The background to do so comes from our membership in Sweden Textile Water Initiative, where we in 2012 will have guidelines on water use that we want to start to implement. We have one supplier that is also producing for another FWF member and we will look into performing a joint follow-up audit in 2012. One supplier took part in a training seminar held by FWF in 2011. Several other suppliers also showed their interest but could not attend since the training was held in another part of China than they are situated in. Since the start of our membership in FWF in 2008, we have had no complaints trough the FWF complaints mechanism from China.

3.2. Turkey During 2011, we were working with six suppliers in Turkey. We are dealing directly with all suppliers but one, which is dealt with through an agent. In 2011, we made two audits on our own and two monitoring audits, accompanied by an audit supervisor from FWF. One supplier has previously (2010) been audited in a full FWF audit. In addition, we also visited two small subcontractors to our main suppliers to discuss our Code of Labour Practices. We had planned to do more audits in Turkey during 2011 but as there was a lack of FWF auditors (two audit supervisor quit within short notice) since September 2011 these audits had to be postponed to 2012. One of our main concerns in Turkey is the possible use of non-approved subcontractors. Subcontractors might be used when there is shortage of capacity or a tight production schedule. In 2012, we are going to follow this up closely with our suppliers to make sure production is only made at factories that we have approved. Other findings in Turkey are excessive working hours during peak season and ambiguity in the salary systems, e.g. double bookkeeping. This makes it hard for us to estimate the actual wages given to workers. In late 2010, we had a complaint on one of our suppliers through the FWF complaints mechanism. This complaint was followed up during 2011 and the concerned supplier has taken actions to prevent the problems from occurring again. We will continue to monitoring their progress with respect to this matter during 2012.

Social report – Acne Studios AB – April 2012 7/ 8 FWF held a social compliance training seminar in September for suppliers in Istanbul, in which four of our suppliers participated. It is worth mentioning is that in total it was 15 factories from different FWF member companies that took part of this seminar which means that 25 % of the participating companies came from Acne.

4. Transparency and communication Acne Studios aim to be as transparent as possible regarding our CSR activities. Our annual social report is given to FWF and uploaded on their webpage for everyone to read. We also have information on our webpage regarding our membership in FWF, together with our Code of Labour Practices. From time to time we receive emails from customers or students with questions on our CSR work and we always reply as quickly and accurate as we can. Our CSR commitments were presented to all store and regional managers during a Retail Conference in 2011. In addition our CSR work is described in our Retail Manual that is distributed to all our stores.

Social report – Acne Studios AB – April 2012 8/ 8