CONVERSE STATEMENT ON FORCED LABOR, HUMAN TRAFFICKING AND MODERN SLAVERY FOR FISCAL YEAR 2018


I. BACKGROUND

At Converse, we believe we have a responsibility to conduct our business in an ethical way. We expect the same from our suppliers, and, along with our parent company, NIKE, Inc., focus on working with long-term, strategic partners that demonstrate a commitment to engaging their workers, safe working conditions and environmental responsibility. This includes working to combat risks of forced labor, modern slavery and human trafficking.


The following information is to provide information required under the California Transparency in Supply Chains Act of 2010 as it relates to Converse’s business practices, and specifically how we address issues of forced labor.


II. CONVERSE OVERVIEW AND SUPPLY CHAIN STRUCTURE


Converse sells our products through Converse-owned retail stores and through digital platforms, to retail accounts and through other third parties. Converse’s commitment to ethical practices in our own operations and our supply chain begins at the highest level. We are focusing on quality, long-term supply agreements with fewer factories that are committed to our strict standards of sustainability and product excellence. Our sourcing strategy prioritizes and favors these suppliers that show demonstrable leadership in corporate responsibility and sustainability and who seek to move beyond minimum standards. As part of our growth strategy, we seek partners who are developing agile and resilient management systems which enable them to drive sustainable business growth through minimizing their environmental impacts, fostering a strong culture of safety and developing an engaged and valued workforce.


An interactive map of Converse’s current suppliers including information about the factory and its workers can be found here: http://manufacturingmap.nikeinc.com/. The map includes the supplier group, location of the facility, type of products produced, number of workers, and information on the workforce profile including percentage employment of women and migrant workers.


III. CONVERSE’S CODE OF CONDUCT AND STANDARDS TO ADDRESS FORCED LABOR


Converse takes seriously national and international efforts to end all kinds of forced labor – whether in the form of prison labor, indentured labor, bonded labor, human trafficking or otherwise.


Converse’s requirements for suppliers are contained in NIKE’s Code of Conduct and Code Leadership Standards. The Code of Conduct lays out the required minimum standards we expect each supplier factory or facility to meet in producing Converse products and includes strict requirements around forced and child labor, excessive overtime, compensation, and freedom of association amongst other requirements. NIKE’s Code Leadership Standards specify how the Code of Conduct must be implemented. The document also articulates how we measure factories’ compliance efforts and progress against our Code of Conduct including specific requirements on the management of key forced labor risks.


We have progressively raised expectations for our factory partners through evolving standards of our Code of Conduct and Code Leadership Standards. This includes adding specific requirements to address key risks of forced labor including prohibiting workers paying fees for employment, requiring worker freedom of movement, and prohibiting requirements to post bonds or make deposits as a condition of employment. The Code Leadership Standards also contain specific provisions related to management of workers with unique vulnerabilities to risks of forced labor such as foreign workers and interns.


In early FY18, we updated our Code of Conduct and Code Leadership Standards to elevate key expectations around the environment, building and machine safety, women’s rights, and chemical management, among others. The updates to our Code Leadership Standards also included changes to further clarify and tighten our requirements to address risks of forced labor. Examples include a more explicit prohibition of holding of personal documents by third parties such as labor agents, and a clear prohibition on posting bonds, deposits or requirements to participate in mandatory saving programs.


IV. DIRECT SUPPLIERS’ CERTIFICATION OF MATERIALS


Converse requires its finished goods suppliers to verify they are sourcing materials from vendors that are compliant with NIKE’s Restricted Substances List (RSL) and NIKE’s Code of Conduct. Converse’s Supply Agreements also explicitly require suppliers to comply with all local and country-specific labor laws and NIKE’s Code of Conduct and Code Leadership Standards.


V. DUE DILIGENCE, RISK ASSESSMENT AND MONITORING


RISK EVALUATION


Converse continually evaluates and updates its systems to identify and address risks in its supply chain, including those related to slavery and human trafficking. This process includes information from external sources such as risk assessments for key human rights risks, supplier specific risk profiling based on location including the employment of vulnerable worker groups and areas of improvement identified in audits, as well as information on key and emerging risk areas identified through our engagement with external stakeholders. Converse is also working towards mapping and understanding impacts further up the supply chain and to expand its engagement with upstream suppliers of contracted manufacturers where additional risks of forced labor may occur.


AUDITING


We regularly audit contract factories, which are monitored on a schedule based on their performance. These assessments take the form of audit visits, both announced and unannounced to measure against the NIKE Code of Conduct, Code Leadership Standards and local law.


Converse uses both internal and external third-party audits to assess compliance with our requirements and local law. We also monitor conditions at contract factories through audits and assessments by independent organizations, including the Fair Labor Association and the Better Work Programme, a joint project of the International Labour Organization (ILO) and International Finance Corporation (IFC).


Converse audits include detailed criteria to look at risks for forced labor or human trafficking including the employment of vulnerable worker groups such as foreign migrants, interns and temporary workers and high risk practices such as payment of recruitment fees or restrictions on freedom of movement.


In FY18, following the update to our Code of Conduct and Code Leadership Standards, we also made improvements to our audit tool. This included adding new questions and updating existing questions to expand the depth of coverage of key forced labor risks.


VI. REMEDIATION AND EFFECTIVENESS


Converse works with internal, external, and independent monitors to carry out audits and help in remediation and capability-building efforts. If we are alerted to an issue of non-compliance within one of our contract factories, we investigate it immediately. Where improvements are required, we seek to drive ownership by factory management to identify and correct issues, and also improve systems to address root causes in order to prevent future reoccurrences.


Converse also continuously seeks to improve our approach to evaluating working conditions in our supply chain and working with our suppliers to enhance their capabilities. In recent years we have made significant changes to improve monitoring of supplier compliance with our Code of Conduct and Code Leadership Standards. This included a significant overhaul of our audit program, tools and processes which included increased auditor rotation, broader use of third party auditors, and more unannounced audits.


In FY18, through our enhanced audit program, we found a few isolated instances of foreign migrant worker employment practices that were in violation of the Code of Conduct and Code Leadership Standards. The issues involved workers paying fees related to their recruitment and employment and one instance where the facility had penalties for early contract termination. In each case we worked with the supplier to remediate the identified issues and to strengthen their systems to prevent future reoccurrence. For the situations where it was found workers had paid fees for their employment we required suppliers to repay workers for such fees. In all instances full re-audits are conducted to verify corrective actions have been completed.


If a factory fails to make progress against required remediation, it is subject to review and sanctions, including potential termination.


VII. TRAINING AND ACCOUNTABILITY


Converse believes suppliers that successfully address the well-being of their workers, by engaging with them directly to understand their needs, will improve factory performance. However, we know that our ability to influence our supply chain is dependent in part on how we build the right incentives and sanctions into our business relationships. Our Manufacturing Index (MI), introduced in 2012, scores factories on sustainability – including labor practices – on a par with traditional metrics of cost, quality and on-time delivery.


To more fully integrate our sustainability criteria into sourcing decisions and to help employees and management who have direct responsibility for supply chain management, Converse provides training to enhance understanding and compliance with our sustainability policies and requirements including our Code of Conduct. That training is required annually for individuals who manage production relationships with suppliers.


VIII. COLLABORATIVE SOLUTIONS


Converse believes addressing critical human rights risks, such as forced labor, often requires a collective approach. Converse has long partnered with multi-stakeholder and external organizations such as the Fair Labor Association, Sustainable Apparel Coalition, the International Labour Organization’s Better Work Programme, and the Better Cotton Initiative to address labor risks in our supply chain. Through our partnerships with these and other organizations we work on a wide range of human rights risks, including those related to forced labor and human trafficking.


We will continue to expand our collaboration with other peers, NGO, organizations to increase respect for human rights and to accelerate positive impact in the countries where we and our suppliers operate.