Why are some issues greyed out? Environment
- GHG Emissions
- Air Quality
- Energy Management
- Water & Wastewater Management
- Waste & Hazardous Materials Management
- Ecological Impacts
Social Capital
- Human Rights & Community Relations
- Customer Privacy
- Data Security
- Access & Affordability
- Product Quality & Safety
The category addresses issues involving unintended characteristics of products sold or services provided that may create health or safety risks to end-users. It addresses a company’s ability to offer manufactured products and/or services that meet customer expectations with respect to their health and safety characteristics. It includes, but is not limited to, issues involving liability, management of recalls and market withdrawals, product testing, and chemicals/content/ingredient management in products.
- Customer Welfare
- Selling Practices & Product Labeling
Human Capital
- Labor Practices
- Employee Health & Safety
- Employee Engagement, Diversity & Inclusion
Business Model & Innovation
- Product Design & Lifecycle Management
- Business Model Resilience
- Supply Chain Management
The category addresses management of environmental, social, and governance (ESG) risks within a company’s supply chain. It addresses issues associated with environmental and social externalities created by suppliers through their operational activities. Such issues include, but are not limited to, environmental responsibility, human rights, labor practices, and ethics and corruption. Management may involve screening, selection, monitoring, and engagement with suppliers on their environmental and social impacts. The category does not address the impacts of external factors – such as climate change and other environmental and social factors – on suppliers’ operations and/or on the availability and pricing of key resources, which is covered in a separate category.
- Materials Sourcing & Efficiency
The category addresses issues related to the resilience of materials supply chains to impacts of climate change and other external environmental and social factors. It captures the impacts of such external factors on operational activity of suppliers, which can further affect availability and pricing of key resources. It addresses a company’s ability to manage these risks through product design, manufacturing, and end-of-life management, such as by using of recycled and renewable materials, reducing the use of key materials (dematerialization), maximizing resource efficiency in manufacturing, and making R&D investments in substitute materials. Additionally, companies can manage these issues by screening, selection, monitoring, and engagement with suppliers to ensure their resilience to external risks. It does not address issues associated with environmental and social externalities created by operational activity of individual suppliers, which is covered in a separate category.
- Physical Impacts of Climate Change
Leadership & Governance
- Business Ethics
- Competitive Behavior
- Management of the Legal & Regulatory Environment
- Critical Incident Risk Management
- Systemic Risk Management
(Industry agnostic)
Disclosure Topics (Industry specific) for:
Apparel, Accessories & Footwear
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Product Quality & Safety
Management of Chemicals in Products
The introduction of the Consumer Product Safety Improvement Act in the U.S. and the Registration, Evaluation, Authorization, and Restriction of Chemicals legislation in the EU demonstrates increasing regulatory and stakeholder concern surrounding the use of harmful or potentially harmful substances in consumer products, including apparel, accessories, and footwear. Finished apparel and footwear products have been found to contain traces of chemicals that have been banned or regulated. Depending on the chemical, the amount present in a product, and the type of exposure that consumers face, specific substances can be carcinogenic, and can disrupt hormone activity in humans and other organisms. Failure to manage this issue may generate additional regulatory oversight and impact a company’s social license to operate. In addition, the presence of harmful chemicals in products can lead to recalls, litigation, and reputational damage. Companies in this industry can work in both the design and manufacturing phases to manage the use of chemicals of concern, develop safe alternatives, and eliminate those that have been banned. Given the industry’s reliance on outsourced manufacturing, this involves proactive partnerships with suppliers. In managing this issue, companies must balance the hazard posed to consumers presented by certain chemicals with the quality of a product and its costs of production.
Supply Chain Management
Environmental Impacts in the Supply Chain
The Apparel, Accessories & Footwear industry’s global supply chain contributes significantly to environmental externalities through water consumption and pollution, as well as air pollution. Water pollution results from the discharge of chemicals during water-intensive dyeing and tanning processes, while air pollution stems from the industry’s energy use. These impacts have the potential to damage a company’s reputation and to affect cost structures over time. The scale of this issue has historically been intensified by the fact that the industry relies on manufacturing partners in emerging markets where environmental regulations and oversight are limited. However, enhanced scrutiny on the part of stakeholders and consumers, coupled with the development of more stringent regulation in certain regions, has led companies throughout the industry to work with suppliers to reduce their environmental impact. Apparel, accessories, and footwear companies that leverage their market power to work with suppliers to improve operational efficiencies and resource consumption and limit pollution will be able to mitigate costs associated with increased resource scarcity and regulation. Further, those that engage with suppliers through monitoring, auditing, and strict standards will likely be better positioned to protect shareholder value over the long term.
Labor Conditions in the Supply Chain
The treatment of workers and the protection of worker rights in the Apparel, Accessories, & Footwear industry’s supply chain is of growing concern among consumers, regulators, and leading companies. Critical aspects of this issue include employee health and safety, fair pay, child labor, and forced labor. Although companies continue to improve performance on this issue, the industry’s reliance on a multitiered system of suppliers, subcontractors, labor recruitment firms, and part-time workers makes it difficult to manage. Because companies in the industry typically contract with suppliers in countries with the lowest direct costs, the industry’s products are often manufactured in countries that have limited regulations or enforcement protecting workers. This dynamic can heighten a company’s exposure to reputational risks and impacts on short- and long-term costs and sales. Such effects can arise from increasing regulation and its enforcement in response to high-profile safety or labor incidents, production disruptions due to strikes and other labor-related work stoppages, or through a shift in demand away from companies associated with such incidents. Companies with strong supply chain standards, monitoring, and engagement with suppliers to address labor concerns may therefore be better positioned to protect shareholder value over the long term.
Materials Sourcing & Efficiency
Raw Materials Sourcing
Companies in this industry rely on numerous raw materials as key inputs for finished goods. Traditionally, these have consisted of materials such as cotton, leather, wool, rubber, and precious minerals and metals. Environmental and social factors such as climate change, land use, resource scarcity, and conflict in regions where the industry's supply chain operates are increasingly shaping the industry's ability to reliably source materials. In turn, these factors can impact business risks such as material shortages, supply disruptions, price volatility, and reputational risks. Companies can manage these risks through engaging with suppliers, enhancing visibility into the supply chain, using certification standards, and/or sourcing innovative alternative materials such as reclaimed secondary feedstocks. Companies that proactively manage this topic are likely to reduce their exposure to price volatility and potential supply disruptions while improving their brand reputation and developing new market opportunities. Failure to do so can lead to reduced margins, constrained revenue growth, and/or a higher cost of capital.
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