S. Keane, NRDC, November Responsible Sourcing Initiative Susan Egan Keane Natural Resources Defense Council November 10, 2008

S. Keane, NRDC, November NRDC has been in China for 10 years

S. Keane, NRDC, November Our goal: dramatically improve environmental performance of factories in China

S. Keane, NRDC, November What are Major Incentives for Improvement?  Standards: not enforced  Liability: not there  Information disclosure: developing  Customer requirements  Cost savings: theoretically self- sustaining

S. Keane, NRDC, November What are Practical Barriers to Improvements?  Knowledge – do factories know how to improve performance?  Costs – is there a way to make improvements without major investments?

S. Keane, NRDC, November  Create a committed group of multi-national companies to focus on supply chain  Identify cost-saving and low-cost actions  Improve transparency  Improve Chinese government capacity NRDC’s Responsible Sourcing Initiative

S. Keane, NRDC, November Why Apparel?

S. Keane, NRDC, November 20088

9 Energy use is concentrated in a few big industries… But they don’t export much.

S. Keane, NRDC, November Our Work So Far  Initial fact finding at about a dozen fabric mills and dye houses  In-depth opportunity assessment at one fabric dye house  Work with multinational retailers and brands to identify key opportunities at supplier factories

S. Keane, NRDC, November Major Findings of Factory Tours  The bad news: production poorly operated, environmental performance suffers.  The good news: news: considerable considerable opportunities opportunities for low cost for low cost improvements. improvements.

S. Keane, NRDC, November In-depth Opportunity Assessment

S. Keane, NRDC, November Initial Improvements  Recycling the water at desizing process. Total water saving 4 tons/machine/hour x 4 machines = 16 tons water per hour.  Reusing energy by recycling hot water captured from steam from the drying section back to the desizing tank.  Reusing alkaline waste water from desizing process, to neutralize the acidic emissions from the boiler

S. Keane, NRDC, November Results  Less water, less waste water = reduced loading to water treatment plant reduced loading to water treatment plant compliance with environmental requirements compliance with environmental requirements  Savings achieved: 35% water consumption 35% water consumption 10% coal consumption 10% coal consumption 5% electricity consumption 5% electricity consumption

S. Keane, NRDC, November Other opportunities from In-depth Assessment  Line Cleaning  Dye Selection  Production Efficiency

16 Original order of 20 jobs Pink Orange Blue Orange Black Rice Khaki Rice Light Brown Dark Brown Dark Yellow Green Coffee Khaki Charcoal Khaki Light Brown Grey Army Green Khaki Pink Rescheduled into Groups of 5 Pink Orange Blue Black Dark Brown Light Brown Khaki Rice Khaki Dark Yellow Green Coffee Charcoal Light Brown Grey Army Green Khaki Pink

S. Keane, NRDC, November

S. Keane, NRDC, November Right First-time Dyeing

S. Keane, NRDC, November Collaboration with Retailers and Brands  Created collaborative group: The Gap The Gap H&M H&M Levi Strauss Inc Levi Strauss Inc Nike Nike Wal-Mart Wal-Mart  Identified common suppliers and screened for possible participation  Preparing to perform opportunity assessments

S. Keane, NRDC, November Next Steps  Identify priority actions  Disseminate and promote findings  Use to help develop supplier policies