1. Responsible Trade in a Global Economy Context: Consumer expectations, legal and regulatory requirements, evolving corporate culture, and NGO action, have led retailers to develop comprehensive social responsibility policies covering a growing range of subjects throughout their entire business operations, including the following “responsible trade” issues impacting sourcing/supply chain:  Labor & Human Rights  Environment & Sustainability  Animal Welfare  Product Health & Safety Source: http://www.ustr.gov/sites/default/files/uploads/factsheets/2007/asset_upload_f ile585_13067.pdf. http://ec.europa.eu/enterprise/sectors/chemicals/reach/index_en.htm. http://www.ustr.gov/sites/default/files/uploads/factsheets/2007/asset_upload_f ile585_13067.pdf http://ec.europa.eu/enterprise/sectors/chemicals/reach/index_en.htm Implication: Responsible trade is an issue for retailers large and small. In a global industry, Canadian retailers are impacted by other countries’ laws and regulations (e.g., US & EU), international organizations, and trade agreements, which necessitate broader engagement than at just the provincial and federal level to advance and protect their interests.

2. Responsible Trade: Raw Materials Context: As part of their responsible trade policies, retailers are scrutinizing inputs that go into their products to reduce energy use, waste water, promote stainable and legal raw materials, and eliminate toxic substances. Patagonia and other apparel retailers are requiring sustainable inputs, including organic cotton, wool, and recycled synthetics, and proper treatment of waste water. IKEA is an industry leader in developing traceability and certification programs to combat Illegal logging and use of sustainable substitutes for tropical hardwoods. Signet Jewelers has developed a comprehensive program to eliminate from their supply chain metals (gold, tantalum, tin, and tungsten) smelted from conflict minerals mined in the Democratic Republic of Congo. Implication: These programs are often in response to legal mandates – such as the U.S. Lacey Act and Conflict Minerals law – and require an unprecedented degree of supply chain visibility back to the raw materials. Traceability and ensuring compliance through certification programs can be very difficult and expensive. Full cooperation throughout the supply chain is essential as retailers often have to rely on information from suppliers. Source: http://www.patagonia.com/us/patagonia.go?assetid=68400. http://www.ikea.com/ms/en_US/about_ikea/our_responsibility/ikea_forest_pro jects/index.html. http://www.signetjewelers.com/sj/pages/responsibilities/engagement/gold- supply-chain.http://www.patagonia.com/us/patagonia.go?assetid=68400 http://www.ikea.com/ms/en_US/about_ikea/our_responsibility/ikea_forest_pro jects/index.html http://www.signetjewelers.com/sj/pages/responsibilities/engagement/gold- supply-chain

3. Responsible Trade: Child Labour Context: Child labour in factories has become less of a concern over the past decade with incomes rising and more effective monitoring and enforcement. However, there is a growing concern in agriculture and mining - two important sectors to food, apparel and electronics retailing - that have a negative impact on brand reputation and confidence in supply. About 60 million under-17-year-olds are involved in global agriculture, possibly rising to 190 million in eight-years according to UN estimates. Heavy criticism has fallen on business, and due to the complexity of child labour, very few large-scale commitments have been made. However, some effective partnerships have been developed, such as in the cocoa industry. Implication: To ensure confidence and viability of inputs for private label products, retailers must consider a suite of solutions including audits and complementary assurance mechanisms, certifications, and collaboration with supply chain partners, government, NGOs, and international organizations like the ILO. Source: http://www.guardian.co.uk/world/2012/oct/29/un-eliminate-child- labour-2020http://www.guardian.co.uk/world/2012/oct/29/un-eliminate-child- labour-2020

4. Responsible Trade: Animal Welfare Context: The Business Benchmark for Farm Animal Welfare (BBFAW) was created in partnership with investors and Compassion in World Farming and the World Society for the Protection of Animals. The report creates a framework and assesses policies, management practices and activities across several international food and grocery peers, and includes debated practices such as CAFOs, farrowing crates, tethering, veal crates, sow stalls, etc. Implication: Although PETA and other animal rights groups have been difficult to engage, the Australian wool issue shows that it is possible while protecting retail interests and brand reputation. Moreover, the BBFAW report represents a measured approach in activist groups engaging investors. Similar investor engagement initiatives such as the Access to Medicines Index and the Access to Nutrition Index have led to the mainstream adoption of previously contentious sustainability practices among large companies. The industry will need to be ready with a response, and in some cases a commitment, on some of the mentioned practices in the report. Source: http://www.bbfaw.com/. http://newmerino.com.au/wp/news-and- opinions/mulesing/mulesing-retail-position-paper/.http://www.bbfaw.com/http://newmerino.com.au/wp/news-and- opinions/mulesing/mulesing-retail-position-paper/

5. Responsible Trade: Transportation Context: There has been growing concern in port communities (e.g., LA/Long Beach) about air pollution generated by ships, drayage trucks, locomotives, and cargo-handling equipment at the ports. Local politicians (with union and NGO support) have proposed stringent solutions, including container fees on retailers and other shippers for pollution mitigation. A retail group (Best Buy, Home Depot, JC Penney, Lowe’s, Nike Target, Wal-Mart) organized the Coalition for Responsible Transportation (CRT) in 2007. Many others participate in the U.S. EPA’s Smartway program. To reduce carbon footprint and reduce fuel costs, retailers are shifting cargo from less efficient transportation modes (e.g., air cargo and truck) to rail; shortening their supply chains; and adding environmental standards in transportation contracts. Implication: With global supply chains, how retailers transport their goods is a key aspect of sustainability and reducing carbon footprint. Industry engagement with transportation partners, government, and NGOs is necessary to find reasonable ways to mitigate pollution, protect brands, and avoid political backlash. One potential benefit is a more efficient and cost-effective supply chain. Source: http://www.guardian.co.uk/environment/2009/apr/09/shipping- pollution. http://www.iata.org/publications/airlines-international/august- 2012/pages/cargo-emissions.aspx. http://www.responsibletrans.org/. http://epa.gov/smartway/. http://www.portmod.org/.http://www.guardian.co.uk/environment/2009/apr/09/shipping- pollutionhttp://www.iata.org/publications/airlines-international/august- 2012/pages/cargo-emissions.aspxhttp://www.responsibletrans.org/ http://epa.gov/smartway/http://www.portmod.org/

6. Responsible Trade: Product Life Cycle Context: Retailers are assuming increased responsibility for the entire life cycle (creation to disposal) of products they sell due to internal CSR policies and legal mandates. Electronics – Many retailers have in-store collection programs to recycle and dispose of old electronics. Apparel – With textiles accounting for over 5% of municipal solid waste, Patagonia organized the Common Threads Partnership to make quality products to reduce unnecessary consumption, and repair, reuse, and recycle garments. Implication: The product life cycle is long and complicated, covering resource extraction, design, manufacture, assembly, marketing distribution, sale, use, and disposal; involves many parties, including retailers to improve environmental performance along each step ; and requires a high degree of corporate commitment. Sources: http://www.patagonia.com/us/patagonia.go?assetid=68400. http://ec.europa.eu/environment/ipp/intragratedpp.htm.http://www.patagonia.com/us/patagonia.go?assetid=68400 http://ec.europa.eu/environment/ipp/intragratedpp.htm