WAY S T H E H I G G I N D E X C R E AT ES B U S I N ES S VA LU E .10

Focus your sustainability strategy.Identify opportunities to cut waste and cost, and drive innovation.Avoid the time and cost of “do-it-yourself” approaches.Reduce data sharing time, cost and complexity.Drive improvement through industry benchmarking.Optimize sourcing.Reduce the time and costs of multiple assessments.Support stakeholder communications.Get out in front of regulation.Be a better company - demonstrate impact.

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FO C U S YO U R S U STA I N A B I L I T Y ST R AT EGY.

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4HIGG INDEX

The number of sustainability issues and initiatives can be overwhelming - it’s impossible to become an expert on everything. At the same time, many companies face static or shrinking budgets and must do more with less.

A Brand or Facility Module self-assessment can dramatically accelerate the process to prioritize and decide where to focus, and how best to utilize limited resources. Instead of paying $25,000 - $50,000 (or more) to hire a consultant to develop your

sustainability strategy, complete the Brand and/or Facility Module (free for members and non-member facilities), and save this money for pursuing opportunities identified by the assessment.

I. FOCUS YOUR SUSTAINABILITY STRATEGY.

Creates access to a network of industry and issue experts.

Prioritizes what to measure and how.

Provides best-practice, vetted guidance and resources.

Offers a ready-made agenda and materials to communicate and advocate for action within your organization and value chain.

The Higg Index provides a “one-stop-shop” point of entry for any apparel, footwear or home textiles company to organize its sustainability priorities - no matter the size or level of in-house sustainability expertise.

The Higg Index creates simplification:

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“SAC is our most valuable partnership for pursuing a focused sustainability strategy. We’ve been able to eliminate $46,000 in costs because the SAC and our collaboration on the Higg Index is a “one-stop-shop” for tools, expertise and other resources. With the release of the Product Modules, we expect to save even more.”

“The Higg Index Facility Module serves as TAL’s internal environmental roadmap. We completed a company-wide Facility Module self-assessment for every factory in about 2 weeks, and could easily identify key areas for improvement across our facilities, including waste and chemicals management.”

Christelle Esquirol, TAL Group.

“We use the Higg Index within the Lenzing Group to inform our strategy development and set targets. As a fiber supplier, participation in working groups to develop the Higg Index keeps us more closely connected to retail partners – creating more awareness of the needs of the entire supply chain – and helping us to better meet the needs of our customers.”

Peter Bartsch, Lenzing.

I. FOCUS YOUR SUSTAINABILITY STRATEGY.

Colleen Vien, Timberland.

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For Patagonia, already a recognized sustainability leader, the Higg Index suite of tools has become essential to developing, implementing and tracking strategic goals.

For example, in just three years, Patagonia set goals around packaging and transportation based on insights generated from the Higg Index; restructured its sustainability team to align with the Higg Index Brand, Facility and Product Modules (helping to better integrate Higg

Index measures into core business functions); and linked annual staff bonuses to goals derived from the Higg Index.

I. FOCUS YOUR SUSTAINABILITY STRATEGY.

I D E N T I F Y O P P O RT U N I T I ES TO C U T WA ST E , C O ST A N D D R I V E I N N OVAT I O N .

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The Higg Index is not a detailed energy or environmental management system audit, but it can help a company identify practices to save money. For example, by implementing just 5 of the energy conservation best practices included in the Higg Index Facility Module - Environment, an apparel textile mill could save between $100,000 - $400,000 every year, as well as

reduce fuel use between 11 – 19% and electricity use between 1 – 3.9%. These practices are not just good for the environment, they increase factory productivity and are good for the bottom line.

The Higg Index enables companies to identify brand, facility and in the future, product-related practices to optimize resources and reduce associated waste and cost. Identifying resource-hungry processes and evaluating product design choices can also lead to innovation opportunities.

Starting in 2013, ANN INC. asked its key strategic suppliers to complete the Facility Environment Module. As part of helping them complete the Higg Index, ANN INC. provided support for the facilities to conduct energy audits. During the audits, one facility found over $200,000 in potential energy savings. “This helped our supplier run a better, more efficient business and strengthened our partnership with them.” Katherine O’Hare ANN INC.

II. IDENTIFY OPPORTUNITIES TO CUT WASTE, COST AND DRIVE INNOVATION.

SOURCE: NRDC, NRDC’s 10 Best Practices for Textile Mills to Save Money and Reduce Pollution Version 2.0. Practices referenced include: Preventative Maintenance, Optimize Compressed Air System, Boiler Renovation/Optimization, Maintain Steam Traps, Insulate Pipes and Hot Vessels and Tanks

in potential energy savings.

9HIGG INDEX

Lighting 30% annual cost savings through upgrades, including T8T5, individual switches, removal of excess light tubes, occupancy sensors

Utilities 30% annual cost savings through variable frequency drive motor installation.

Energy audits are one example of a Higg Index practice that can help a factory identify a range of opportunities to cut resource use (and cost).

Examples of possible savings include:

Cooling 80% annual cost savings through water curtain installation.

Water Replacement of traditional dyeing and finishing machinery with more environmentally friendly equipment can reduce water use up to 40%

SOURCE: Savings examples provided by Sustainable Fashion Business Consortium members and based on actual implementation of energy and water-saving best practices

II. IDENTIFY OPPORTUNITIES TO CUT WASTE, COST AND DRIVE INNOVATION.

China’s 12th Five-Year Plan: The Chinese central government has prioritized the textile sector as one of the growing industries that need to reduce their energy and resource intensity and has developed reduction goals for the industry in a specific Five-Year Plan. In response to requirements for energy reduction in the 12th Five-Year Plan, running from 2011 through 2015, the textile industry is expected to upgrade process and monitoring technology

to international standards; to set national standards on energy conservation; and to double production efficiency relative to a 2010 benchmark. Specifically, the current Five-Year Plan challenges the textile sector to decrease its energy consumption per unit GDP by 16 percent.

SOURCE: NRDC, NRDC’s 10 Best Practices for Textile Mills to Save Money and Reduce Pollution Version 2.0

AVO I D T H E T I M E A N D C O ST O F D O - I T-YO U R S E L F A P P R OAC H ES .

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Companies who already have years of experience implementing sophisticated product and supply chain measurement tools know that it costs hundreds of thousands of dollars annually to develop and maintain these systems. The Higg Index offers a credible, fast, low-cost solution, enabling companies to divert time, human resources and money that would be spent on creating content and software toward Index implementation

and pursuing improvement opportunities. Higg Index modules have been developed under a consensus-based, multi-stakeholder process, building on best practice approaches, and indicator content and methodology will be regularly updated to ensure rigor and relevance. The assessment is easily and immediately accessible through a web-based interface (free with SAC membership).

III. AVOID THE TIME AND COST OF DO-IT-YOURSELF APPROACHES.

Designing, developing and maintaining internal assessment tools from the ground up can take years and cost a lot.

Higg Index 2.0 Web Tool

“Simply having immediate access to the Facility Environmental Module and web tool has already created a return on our investment in SAC membership.”

David KempSustainability ManagerBrooks Sports, Inc.

12HIGG INDEX III. AVOID THE TIME AND COST OF DO-IT-YOURSELF APPROACHES.

The Higg Index came along at the right time for Gap Inc., a global retailer that set out in 2011 to assess the environmental impacts of its supply chain.  SAC’s launch of the first version of the Higg Index enabled the retailer to use a suite of sustainability assessment tools that were created by and for the retail industry, creating an immediate return on its investment in SAC membership.

In early 2013, Williams-Sonoma wanted to create an environmental assessment for its vendors, but lacked the resources and time to embark on a DIY project of this kind. By September 2013 the retailer began sending the Higg Index Facility Module - Environment to its suppliers to complete, and by the end of the year 125 vendors representing 175 factories returned a completed module. By using the Facility Module – Environment the company avoided the need to spend time and money on content development for an in-house assessment tool.

In the future (estimated 2017), the Higg Index Product Footprinting Module will dramatically reduce the time and cost to assess the life cycle impact of products.

Cost range to hire external consultants to perform life cycle assessment on a single product

Through a shared data platform, the Higg Index Product Footprinting Tools (estimated 2017) aim to make conducting product life cycle assessment faster and more cost-effective for SAC members. These tools will include built-in analytical capabilities and design direction for ease of use with your own in-house resources, enabling member companies to assess hundreds - even thousands - of products in a fraction of the time.

R E D U C E DATA S H A R I N G T I M E , C O ST A N D C O M P L E X I T Y.

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The Higg Index web tool allows partners to easily connect with each other and share and receive modules through the click of a button, avoiding the burden of managing hundreds of separate emails and spreadsheets.

With a small team of two focused on environmental sustainability at Brooks Running, the Higg Index Facility Module is enabling the brand to do more with less. Brooks was able to quickly adopt the Facility Module. After joining the SAC in March 2014, the team connected with and requested a number of key suppliers to complete the

environmental self-assessment and received responses within a month. These completed assessments helped to guide discussion about performance during in-person visits to those facilities in the following month.

IV. REDUCE DATA SHARING TIME, COST AND COMPLEXITY.

Brooks Sports Logo

“The Higg.org platform developed by Schneider Electric has reduced the amount of time required by VF to manage Facility Module data by an estimated 40%, and has saved the company more than $20,000 by eliminating the need for our own online survey platform.”

Pete Higgins, VF Corp.

The standardization of questions and online access has made it easier to collect responses from global vendors in a commonly accessible web platform. Now in its third year of working with key vendors on the Higg Index Facility Module, Gap Inc. is experiencing a roughly 50% response rate – a more than 30 percent increase from previous years.

Manufacturers post modules once annually, for all customers. Response

rates

Time tomanage

“If we had to manage all of this with emails and spreadsheets, the process would’ve been a lot more time consuming and we’d have missed the opportunity to begin this important dialogue with our suppliers.”

David Kemp, Sustainability ManagerBrooks Sports, Inc.

D R I V E I M P R OV E M E N T T H R O U G H I N D U ST RY B E N C H M A R K I N G .

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The Higg Index is enabling the apparel and footwear industry to aggregate data on industry-wide sustainability practices for the first time ever. Manufacturers and brands can benchmark their Higg Index performance against peers and develop action plans to close the gap between high and low-performing areas that may be a source of hidden waste and cost, or opportunity for innovation. Facilities can be compared based on issues that matter most to their company or customers.

The benchmarking universe is vast – and expanding. As of October, 2014:

• >60 Brand Modules posted• >1,500 Facility Modules (a growth rate of 200% since January 2014)

The Higg Index vision: Peer-to-peer benchmarking is proven to drive action. Metrics verified by benchmarking data can lead to some significant improvements for those involved. There is positive evidence of this within the Leather Working Group where on average leather manufacturers have seen energy and water consumption per unit area reduce by 18% and 42% respectively since the start of the program.

Big data = big opportunities. Scaled up use of the Index will identify common improvement priorities at the industry-level, creating opportunities for brands, retailers and manufacturers to potentially pool resources to drive action – saving time and resources and maximizing impact.

V. DRIVE IMPROVEMENT THROUGH INDUSTRY BENCHMARKING.

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In 2014 the company began working with a targeted group of seven vendors (representing approximately 50 facilities) in India to benchmark water use performance using the Facility Module. The results quickly highlighted those facilities using best water management practices, which Gap Inc. then shared anonymously with other participating facilities. With this information, vendors and their facilities are able to more clearly understand their performance relative to competitors and peers, and learn what measures other facilities are taking or investing in to reduce their environmental impact. These best practices show real ROI to vendors, and help them to see both the true cost and environmental impact reduction through these efforts. Gap Inc. plans to continue to work with vendors to help set water reduction goals, and develop strategies to help them achieve the goals.

Even for Patagonia, a recognized leader of social and environmental stewardship, the Higg Index identified opportunities for improvement. “The Brand Module benchmarking exercise ignited several departments within our organization who saw they needed to do more,” said Cara Chacon, Patagonia’s Director of Social and Environmental Responsibility. The Higg Index has prompted Patagonia to document daily practices that improve environmental performance and embed them into policies that can be shared around the company, rather than passed as tribal knowledge. For example, Higg tools confirmed there was room for improvement in packaging – leading Patagonia to create its first formal packaging policy. For a growing company, even one the size of Patagonia, capturing and formalizing environmentally beneficial operating procedures is a critical precursor to continued scalability and expansion of responsible business practices.

V. DRIVE IMPROVEMENT THROUGH INDUSTRY BENCHMARKING.

As a vertically integrated manufacturer, Esquel has been able to use the environmental Facility Module of the Higg Index at both the garment and fabric mill levels of the supply chain. Working through the Higg Index assessments has helped raise further awareness around sustainability throughout Esquel’s operations, and comparing the scores across facilities has created a race to the top among factory management teams. This company-wide benchmarking exercise revealed areas where some facilities shined – and others fell behind. Related discussions led to the formation of a Higg Index “improvement team” made up of production site management from the highest scoring facilities and corporate sustainability staff. The improvement team is tasked with helping the lower-performing facilities improve their systems further and report back to the Esquel Sustainability Council, which is chaired by one of Esquel’s independent board members. “As a result of the Higg Index scores gaining visibility throughout our organization, we’ve been quite pleased with ongoing improvements. We sincerely hope the index will soon become THE globally accepted industry standard.” Tammy Rodriguez, Esquel Group.

O P T I M I Z E S O U R C I N G .

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Brands and manufacturers can share scores with customers to demonstrate stand-out performance, or convey improvement plans and progress. Buyers can utilize benchmarking results to compare potential business partners in order to inform purchasing decisions and other business relationships.

Higg Index scores are already being used as a factor to award business, with many more companies planning to integrate Higg Index results into purchase decisions in the future.

The Higg Index can enable a company to source from business partners with the lowest possible environmental and social risk and highest possible environmental and social performance.

VI. OPTIMIZE SOURCING.

Target is in its third year of using the Higg Index to perform self-assessments of more than 3,000 facilities that produce Target-sourced owned brand product, with a response rate of

“ The Higg Index is a best-in-class, industry accepted resource that helps us efficiently and effectively measure environmental performance in our supply chain. The assessment results have been incorporated into our vendor scorecard and are used to inform business decisions.”

Scott Lercel Director Social Responsibility and SustainabilityTarget Sourcing Services.

With broader industry-wide implementation of the entire suite of tools and verification of results, the Higg Index has the potential to generate exponential value.

INCREASED ADOPTION = INCREASED VALUE.

R E D U C E T H E T I M E A N D C O STS O F M U LT I P L E A S S ES S M E N TS .

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The goal of the Higg Index is to serve as the single standard for environmental and social assessment in the apparel, footwear and home textiles industry.

VII. REDUCE THE TIME AND COSTS OF MULTIPLE ASSESSMENTS.

A common assessment will drive time and cost savings for manufacturers by dramatically reducing the number of assessments (and ultimately, audits) required, and by reducing or eliminating duplication and/or inconsistencies. Brands and retailers will also benefit by coordinating and collaborating on outreach and requests to partners - providing one clear request with zero inconsistencies, ultimately leading to better quality data, higher response rates, and less time spent. Once stricter verification mechanisms are in place, the costs of assessment are expected to be reduced even further as

one set of 3rd party verified results could be accessed by multiple partners.When the staff time to manage a social compliance audit is taken into account, the true price of an audit could be 10 times the price paid to the auditing firm. This is time that could be spent on improving factory environmental and social /labor management practices as well as productivity.

More than $1 billion USD is estimated to be spent on social compliance audits annually in China alone – not including indirect costs (e.g. staff time). Reducing the number of audits to only 1 per year from 5 could save an estimated $800,000,000 – enough to install energy and water sub-meters in 16,000 – 26,000 apparel and footwear factories throughout China, or retrofit over 3,700 factories with LED tubes.

SOURCE: Estimates provided by GAFTI and RESET Carbon, Ltd.

spent on compliance audits

23HIGG INDEX VII. REDUCE THE TIME AND COSTS OF MULTIPLE ASSESSMENTS.

“At Patagonia, we aim to develop and implement an industry-wide assessment tool – the Higg Index – to measure environmental and social performance in a single module. Once fully developed, the Higg Index toolset will perform both its current function, providing a high-level social and environmental indicator to assess a supplier’s sustainability “journey,” and it will act as a detailed audit instrument to assess supplier compliance comprehensively. Accessibility is a critical aspect of this approach, as companies will give up their own tools only when an audit tool incorporates the highest common denominator standards across our industry – allowing for the reduction of audit redundancy, a win-win for brands and suppliers alike. We free up time and resources for everyone to reduce social and environmental impacts on a deeper scale.”Cara ChaconPatagonia’s Director of Social and Environmental Responsibility.

“The time, and consequently the cost, associated with multiple redundant audits on factories is huge. The Higg Index offers a tremendous opportunity to significantly reduce the number of duplicative social and environmental audits conducted at factories today. With the addition of a robust verification mechanism comes the invitation to brands and retailers to converge on a single approach – this will be win-win for us, our suppliers and our customers. Christelle Esquirol, TAL Group.

S U P P O RT STA K E H O L D E R C O M M U N I CAT I O N S .

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“The Higg Index currently in development provides a unique opportunity to measure the sustainability impact throughout the value chain and to communicate that impact to our customers and stakeholders in a robust, comparable and credible approach.”

Erik Karlsson,H&M.

“Our collaborative participation in the EU Product Environmental Footprint pilot (footwear) will allow us to gather insights for future Higg Index development, as well as to determine the best and most accurate way to publicly communicate sustainable product data.”

Alexis Haass, Director Sustainability, adidas.

The Higg Index will provide a credible, comprehensive, industry-relevant, and verifiable approach for companies who want to communicate results and demonstrate progress to key stakeholders, including customers.

Companies can also use Higg Index results to attract potential funders (e.g. grant-making organizations, lenders, investors) as well as inform corporate acquisition decisions by providing insight into a business’s sustainability performance and potential level of risk. More and more, savvy investors are using companies’ environmental, social and governance (ESG) data to identify sustainability leaders – with winning results. “In a resource

constrained world, markets recognize and reward resource efficient behavior.” – Osmosis Investment Management’s “Investment Thesis.” By picking the most efficient sectors, investment management firm Osmosis has been outperforming for the past nine years.

SOURCE: Greenbiz.com

VIII. SUPPORT STAKEHOLDER COMMUNICATIONS.

The Higg Index was created under the guiding principle of improving sustainability performance “beyond compliance.” Smart companies already have robust systems and protocols for tracking and ensuring compliance with existing policy and regulation. However, state, local and national regulation will require increased transparency and compliance on a

growing number of environmental and social issues, many of which are already measured in the Higg Index. Insights generated through broad adoption of the Higg Index, and through participation in efforts such as the EU Product Environmental Footprint pilot (footwear), will also enable our industry to potentially influence emerging policy and legislation.

G E T O U T I N F R O N T O F R EG U L AT I O N .

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B E A B E T T E R C O M PA N Y-D E M O N ST R AT E I M PACT.

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Demonstrating impact creates value for customers, employees and communities. The Higg Index provides a simple mechanism to measure, guide and track progress on impact reduction, all under one umbrella.

“The Higg Index enables us to put all of Pratibha’s sustainable initiatives on a single platform. Top-management buy-in and perceived benefits through Higg Index usage have created a buzz across the organization.”

Dhawal Mane, Prathiba Syntex Ltd.

“We anticipate that 2014 will show further reductions as we have made the Higg Index part of our continuous improvement efforts – in other words – it has become part of our daily processes.”

Rich Ringeisen, Charming Trim.

Response rates

X. BE A BETTER COMPANY-DEMONSTRATE IMPACT.

Impact reductions at Charming Trim 2013 vs. 2012 baseline

Electricity Consumption – reduced by 6%

CO2 Emissions – reduced by 6%

Water Consumption – reduced by 2.8%

Solid Waste – reduced by 23%; all solid waste is 100% recycled by a 3rd party

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40

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80 2013 Higg scores

2014 Higg scores

Show improvement over time.

Aggregate Higg facility module scores have increased significantly from 2013 to 2014

A R E YO U D O I N G A L L YO U C A N TO :

SAVE MONEY. SAVE TIME. RUN A BETTER BUSINESS.MAKE AN IMPACT?HIGG.ORG

H I G G I N D E X BY T H E N U M B E R S

200% Growth rate in Higg Index Facility Modules posted between January and September 2014.

More than $1 billion USD: Estimated amount spent on social compliance audits annually in China alone – not including indirect (e.g. staff time) costs.

$800,000,000: Amount that could be saved by reducing the average annual number of social compliance audits per factory from 5 to 1.

16,000 – 26,000: Number of apparel and footwear factories in China that could be fully equipped with networked energy and water sub-metering solutions with $800,000,000. Sub-metering is a critical first step to accurately measure and improve resource consumption in a factory.

97%: Percent of Target’s 3,000+ owned-brand facilities that completed the Higg Index Environment Facility Module in 2014.

40% and $20,000: The amount of time and money the Higg.org platform developed by Schneider Electric has saved SAC member VF to manage Facility Module data.

$10,000 - $40,000: Cost range to hire external consultants to perform life cycle assessment on a single product.

Through a shared data platform, the Higg Index Product Footprinting Tools (estimated 2017) aim to make conducting product life cycle assessment faster and more cost-effective for SAC members. These tools will include built-in analytical capabilities and design direction for ease of use with your own in-house resources, enabling member companies to assess hundreds - even thousands - of products in a fraction of the time.

Impact reductions achieved after Higg Index implementation by SAC member Charming Trim (2013 vs. 2012 baseline):

Electricity Consumption – reduced by 6%

CO2 Emissions – reduced by 6%

Water Consumption – reduced by 2.8%

Paper Consumption – reduced by 6%

Solid Waste – reduced by 23%; all solid waste is 100% recycled by a 3rd party.

$200,000: Amount of potential energy savings identified during an energy audit for one of ANN, INC’s suppliers. As part of helping the company’s key strategic suppliers complete the Higg Index, ANN, INC. provided support for the facilities to conduct energy audits.

$375,000: Estimated reduction in annual energy costs that would typically be identified during an energy audit of a mid-sized Chinese dye mill with a $2.5 million annual energy bill .

$100,000 - $400,000: Estimated amount an apparel mill could save every year by implementing just 5 of the energy conservation best practices included in the Higg Index Facility Module - Environment.

$46,000: Amount SAC member Timberland has eliminated in costs because the SAC and collaboration on the Higg Index is a “one-stop-shop” for tools, expertise and other resources.

$25,000 - $50,000: Average amount spent on a consultant to develop a sustainability strategy.

$0: Cost to SAC members to use the Brand and/or Facility Module to develop your own strategy.