Hermès // 2021 Universal Registration Document

RISK FACTORS AND MANAGEMENT RISK FACTORS

INDUSTRIAL RISKS

4.1.2

SUPPLY MANAGEMENT ●

4.1.2.1

DESCRIPTION OF THE RISK s

POTENTIAL IMPACTS ON THE GROUP s

Most of Hermès’ production is integrated, in line with its strategy of preserving unique savoir-faire and securing supplies. However, the ability of the Hermès Group to grow is also linked to the development of its suppliers, whose exceptional savoir-faire and future successes will contribute to those of the Group.

A supply shortage, in terms of volume or quality, of certain exceptional materials for the Group could lead to disruptions in production and eventually a loss of business.

IMPACT PROBABILITY

RISK MANAGEMENT s The Hermès Group makes most of its products in-house, primarily in France. It is not therefore seeking suppliers established in countries at risk. Hermès has long been committed to a responsible long-term partnership approach with its suppliers. It enters into special partnerships with its suppliers and producers, based on ethics and trust, by fostering long-term relationships with them. This stable relationship allows for close collaboration on many subjects over time. The Group’s approach is based on in-depth knowledge of all its supply chains. A total of 75 supply chains have been analysed since the beginning of 2020, resulting in the creation of a supply chain brief for each of them, which formalises the Group’s short and medium-term ambitions to ensure ethical and responsible supply chains. The Group Purchasing Manager handles supplier risk transversally. Its role is in particular to manage the community of buyers by supporting them on a daily basis in managing supplier risk, as described in chapter 2 "Corporate social responsibility", § 2.6. Hermès has developed long-term relationships with its partners and suppliers, thereby better protecting its supplies and critical savoir-faire . Drawing up supplier risk mapping enables action plans to be determined, assessed and prepared in response to the risks identified, wherever necessary, in particular in relation to the duty of care (human rights, environment, health and safety). Significant work has also been carried out to optimise and secure the supply chain. Committed to providing long-term support for all its partners and maintaining balanced relationships characterised by goodwill and high standards, Hermès ensures that its partners respect its social, environmental and ethics ambitions. A CSR handbook was formalised in January 2021 to set out the House’s expectations on this subject. Supplier audits, conducted using internal resources as well as independent external firms, serve notably to check that their operations meet the Group’s expectations. The Group is strengthening supply protection, implementing a policy of diversification and limitation of supplier dependence, and building up security inventories. One of the challenges of the “know your supplier” system is ensuring that suppliers have identified the risk areas related to their activity that could lead to a total or partial stoppage of their production (critical raw materials, equipment, processes, sources of energy or key people, etc.). The formalisation of backup solutions and their regular testing are recommended. Where appropriate, equity investments may help to secure these relationships. In line with the current health crisis, the Group has set up close monitoring of its suppliers in order to best support them and anticipate any difficulties, in a constant spirit of partnership.

4

2021 UNIVERSAL REGISTRATION DOCUMENT HERMÈS INTERNATIONAL

335