1. “Strengthening incentives for compliance through certification and other tools- pros and cons"? A presentation by Sanal Kumar, Chairman & MD Classic Fashion Apparel Industry Ltd Co 1

2. About Classic Fashion.. Since 2003, we have strived to be an Innovative, Responsible & World Class Apparel manufacturer Today we are a multi-National Team of 9500 and growing… CFAI is proud to be on the Ministry’s “Golden-List” & also be an active participant in the BWJ program We are committed to give back to the society that we live and work in 2

3. Apparels - the paradigm shift…. 1900 -1910 ConsumerSupported by - Dressmaker / Tailor 1920-1950 ConsumerSupported by - Traveling Salesman, Dressmaker 1960-1970 ConsumerSupported by - Traveling Salesman, Dressmaker, Store Salesman 1980 – Current ConsumerSupported by Buyers, Merchandisers, Distributers, Stylists, Pattern Makers, Markers & Cutters, Production Managers, Quality Controllers, Forwarding Agents, Shipping agents, Transporters…. More Stakeholders More Expectations 3

4. “Compliance” – simplified Meeting the minimum requirements pertaining to working conditions at the workplace – using local Laws & Client’s Codes of Conduct as guidelines 4

5. Industry reaction to Compliance… Companies that refuse to acknowledge non-compliance Companies that acknowledge the problem but plan to deal with it when it becomes sufficiently acute Companies that are taking steps to mitigate risks (from compliance) to their operations Companies that are actively engaged in shaping policy, investing in change management and working with stakeholders 5

6. The Terrain - Global Fashion industry valued at USD 03 trillion ~ 92,13,000 people directly employed in fashion industry globally Name of Certification * Factories Certified globally No. of Countries SA8000 313769 WRAP190060 SEDEX23,000150 BSCI520010 * Commonly found certifications 6

7. Comparison between Rule based & Incentive based regulation Rule based regulation (no incentives) “Hands-on” Regulation Results in under-utilization of Managerial expertise in factories Organizations react to risks identified by regulatory bodies Trade-offs because of ineffectiveness are not visible Does not guarantee Systemic Stability Incentive based regulation Redemptive power of rewards is high “Hands-off” regulation May not drive sustainable change Uses insights of Managers & is proactive Allows proactive risk identification system Trade-offs are visible & can be measured Processes with no incentives could be neglected Successful only when combined with Penalties Guarantees systemic stability 7

8. Key initiatives that could facilitate further incentivisation 8 Ministry’s Golden List Strengthens Ministry’s partnership with Industry Encourages & supports Industrial growth Validates commitment of Businesses to International Standards Provides “assurance” to Clients Better Work Jordan Provides “back stopping” support to Industry initiatives Reinforces Industry – Client relationships Supplements Factory’s capacity building measures on human resources Creates platform for meaningful dialogue among stakeholders Acts as a mirror – reflecting the developments taking place in the Industry and providing guidance Organizations like JGATE could support the implementation of any new initiatives

9. In conclusion….. Regulatory Controls Motivation thru incentivisation Monitoring (3 rd Party Audits) 9

10. Needless to say the onus of being a responsible business is now with the Manufacturer / the Manufacturing Community Moving from “Push” to “Pull” 10

11. .. it is all about People Planet Principles + Profit 11

12. Thank You 12