Hermès - Registration Document 2016

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Corporate social responsability

Raw materials and suppliers

Raw materials and suppliers

2.4

The durability of Hermès’ business depends primarily on the future avai- lability of the high quality raw materials, which are at the heart of the products and are key to Hermès’ unique character. Hermès makes a conscious effort to respect, protect and work for the sustainability of the natural resources that it needs. The Group has used an approach that has remained constant for decades: getting to know our supply chain better, consolidating them to ensure the highest level of quality, and developing them to prepare for future growth. Keeping craftsmanship close to its heart, the Group works every day to focus on optimising the use of rare and precious materials. Growth also linked to the development of suppliers, whose superior expertise and future successes will contribute to those of the Group. The majority of production is integrated in-house, in line with Hermès’ strategy that focuses on preserving unique know-how and securing supplies. Most of our subcontractors and suppliers have been partners for many years, and these stable relationships mean that we can work closely and sustainably with our partners on a wide range of matters. For the Group, awareness of its corporate social responsibility also means turning to “socially supported organisation” in France for its direct and indirect purchases (see the chapter on handicap in section entitled “People, Social Responsibility”). Hermès is committed to supporting the sustainability of our partners, and maintaining balanced relationships characterised by goodwill and high standards: we ensure that they comply and share our social, envi- ronmental and ethical responsibilities.

Leather Goods Leather is an animal product, specially tanned and preserved, either using alum tanning (for lamb, sheep, and goatskin) or traditional tan- neries for skins from cattle or reptiles. Hides used in leather goods are by-products of animal husbandry. People sometimes refer to hides as the “5th quarter”, which means that tanning could be the most ancient recy- cling industry in the world. Hermès uses only full-grain leather, the top part of the skin, in an unadulterated condition. To maintain consistency in the finished product it also only uses entire hides. Leather reflects the animal’s life. It may bear traces of injuries, health issues (like para- sites), and other factors. You will only get a good hide from an animal that has been well-treated. Hence Group demand for high quality helps to improve the industry by encouraging animal husbandry that respects the animal’s welfare. All leathers used for Hermès manufacturing needs are directly pur- chased from tanneries, with no intermediaries. The vast majority of the needs are covered by in House tanneries, and by French, Italian, German and Spanish tanneries, all of whichmust adhere to European standards, which are some of the highest in the world for the industry. Hermès uses more than 30 different types of leather to make its goods, most of which come from calves raised in France (including our flagship “box” leather, made with an English tanning technique), but also natural cowhide (in our saddlery leather products line) and “exotic” leathers. These exotic leathers include crocodile, alligator, lizard, and ostrich (essentially raised for its meat and feathers). Unprocessed skins fromcattle andmembers of the sheep family, the raw materials for tanneries, come exclusively from animals that were raised for their meat. Calfskin comes from abattoirs within the European Union, which in practice means almost exclusively abattoirs in France. Hermès works together with its tannery partners, with a view to long-term cooperation, and has a dedicated annual budget to organise programs to improve the quality of the industry working together with farmers, their cooperatives and their professional associations. Exotic tanneries essentially use the skins of crocodilians. The vast majo- rity of the skins come from farms located in the United States, Africa, and Australia. All Hermès partner farms must scrupulously comply with the rules drawn up under the aegis of the UN for theWashington Convention, which defines protections for endangered species. Hermès requires that its partners meet the highest standards for the ethical treatment of alligators and crocodiles following recommendations by expert vete- rinarians and local authorities such as US Fish and Wildlife, the federal nature protection agency. These husbandry practices have also contri- buted to saving the species in the United States by repopulating alliga-

Knowing our supply chains, complying with regulations

2.4.1

Respect for raw materials obviously begins with respecting the regula- tions pertaining to them. This means legislative provisions: s s to combat the illegal exploitation of forest products, like the Lacey Act in the United States or the EU Timber Regulation (EUTR); s s The Washington Convention or the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES) is another such framework that can have an impact on the raw materials used in the leather business, tanneries, or some ingredients of perfumes.

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2016 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL