Responsible Sourcing Challenges Michael Kobori Vice-President, Supply Chain Social and Environmental Sustainability Levi Strauss & Co. April 1, 2009

2 Social and Environmental Sustainability Organization Scope of Responsibility – Labor, EHS standards in 850 supplier factories worldwide; – Environment, health and safety regulatory compliance and programs throughout global supply chain, distribution and retail operations; – Chemical product safety globally – Environmental sustainability vision and priorities for LS&CO. Reporting – VP reports to SVP, Global Sourcing Organization Staffing: 35 FTE – Global (3 FTE) – Americas (9 FTE) – Europe/Africa/Middle East (10 FTE) – Asia Pacific (13 FTE)

3 Responsible Sourcing Strategy Factory (314,000 workers in 850 factories) – Monitoring: Identify corrective actions for improvement – Collaboration: Improve impact, reduce duplication thru brand collaboration – Business Integration: Improve GTM disciplines, purchasing practices – Supplier Ownership: Shift from policing suppliers to building capability Community (340,000 workers in 14 countries) – Workers’ Rights Grants Program: $1.4 million supporting worker rights training, legal advocacy, health education, asset building. Public Policy – Trade-Labor linkage: Advocacy for labor rights in trade agreements – Multi-Stakeholder Initiatives: MFA Forum, UN Global Compact, ILO Better Factories Cambodia Transparency: Improve public reporting, awareness

4 Case Study: Freedom of Association in Haiti LS&CO. began production in Haiti, July Allegations of workers discharged for organizing, March 2004 Work with stakeholders to address issues, April 2004 – January 2005 Major activist campaign Union recognized by management, February 2005 CBA negotiated, December 2005

5 Case Study: Key Facts 2009 Worldwide economic downturn, LS&CO. customers reduce orders. LS&CO. in turn, makes volume reductions at suppliers worldwide, particularly those producing core product LS&CO. still primary customer at Haiti facility, which only makes core product. LS&CO. needs to balance volume reductions across all suppliers to maintain source base and reduce inventories. Will reduce volumes in Haiti. NGOs request LS&CO. to maintain production volumes to avoid worker layoffs. Question for Small Groups: What will you do to manage business requirements as well as protect LS&CO. reputation and integrity of responsible sourcing approach? Stakeholders to consider: LS&CO. shareholders, management; factory management; union; NGOs; workers.

6 What We Did Management requested LS&CO. to maintain production volumes for 3 months to enable it to bring other customers to facility to avoid layoffs. LS&CO. “brought forward” planned production to fill capacity for 3 months. Question: What impact does this course of action have on key stakeholders? What are the implications of taking this course of action?

7 7 Use Raw Materials Materials Manufacture Product Life Cycle Product Manufacture Transportation & DistributionRecyclingEnd Disposition

8 Data from LS&CO.’s Life Cycle Assessment on Levi’s® 501® Jean for U.S. Market, 2006 production year 32 kg of CO liters of water 400 MJ of Energy 78 miles driven by the average auto in the United States Is equivalent to the carbon sequestered by 6 trees per year (based on EPA representative sequestration rates of tons of carbon per acre per year) Running a garden hose for 106 minutes 53 showers (based on 7 minute showers) 575 flushes of a 3.78 liter/flush low flow toilet Watching TV on a Plasma Screen for 318 hours. Powering a computer for 556 hours. Which is equivalent to 70 work days (based on 8 hours of computer use/day) Lifecycle impact of Levi’s® 501® jean

9 Key Takeaway: Impacts out of our control are Greater than within our control: must address cotton and consumers Data from LS&CO.’s Facilities Environmental Impact Assessment (FEIA) and 2007 Life Cycle Assessment of Levi’s® 501® Jean. Lifecycle Insight

10 “We will build sustainability into everything we do so our profitable growth helps restore the environment.” Our vision on sustainability

11 Energy Efficiency and Climate Change: Achieve carbon neutrality by implementation of energy reduction initiatives and the use of 100% renewable energy first in our operations and then throughout the supply chain Water: Reduce water usage and improve water quality throughout the product life cycle while growing our business Resource Efficiency: Evolve into a zero-waste company offering consumers more sustainable products Chemicals: Minimize the environmental impact from chemicals used in production of LS&CO. product in all stages of the product life cycle Influence: Provide leadership to encourage other companies, consumers, governments and civil society organizations to address environmental sustainability Our priorities and aspirational goals

Vision Labor Standards Supplier performance improves (60% Green, 35% Yellow, 5% Red) Direct LS&CO. monitoring in <50% of suppliers LS&CO. recognized publicly as leader in innovative practices (collaboration, capacity building, purchasing practices) Health and Safety Chemical management program recognized publicly as leading, influences industry standards Environment Energy/GHG targets met, significant cost reduction achieved Materials and costs reduced through reduction in product developments, improvement in adoption rates Certified sustainable products developed for market and generating significant revenues, EBIT