More fit for the future

SUSTAINABILITY REPORT - 2017NILORN

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This is Nilorn’s statutory sustainability report for 2017, prepared in accordance with the requi-rements in Chapter 6 of the Swedish Annual Accounts Act. It covers all of the Nilorn operations, unless otherwise stated in relation to reporting of specific indicators from our sites. The report has been submitted by the Board of Directors, together with the Annual Report.

About this report

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Words from our CEO

About Nilorn

Sustainability at Nilorn

The Global Goals

Strategic direction

Combating modern slavery

Business conduct

Environmental Protection

Microplastics

Traceability for sustainability

Insight: Working at Nilorn

Production and logistics

Insight: Dhaka factory

Supply chain

Employees

Social engagement

Stakeholders and initiatives

Sustainability risks

Our way forward

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Together we can The world has set goals aiming to create a much better world for everyone, by 2030. These are the United Nations Global Goals. We see that many of our clients are early adapters in linking these challenges and opportunities, to their business and the life cycle of their products. We deliver small parts but we can make a large difference in what we do. By doing so we can be a part of the shifts required to reach those goals for the whole industry. An important part of achieving more sustainable value chains, both in terms of environmental and social aspects, is traceability. It’s here we can have an increasingly important role to play as our products often are a link between the brand and the consumer.

This is our second sustainability report, where we report on our work, our progress and the way forward. During 2017, I can proudly say that we have achieved a lot and really accelerated our sustainability work. To name a few, we have updated our Supplier Code of Conduct and our Code for Business Conduct and Ethics. Nilorn East Asia in Hong Kong is now also bluesign® certified.

We have a constant focus on finding the most sustainable materials for our customers and continue to learn and improve together with them. In this report we update you on our work with different materials and product certifications.

In April 2017, we opened a completely new production unit in Dhaka, Bangladesh, producing woven and printed labels and paper products.

At the centre of everything we do are our employees - and it is with ourselves we have to start. We need to offer a workplace where everyone can thrive in their respective roles, without compromising their health and wellbeing. But we also need to ensure that we have a common ground, in our company values - that sustainability and business ethics are an integrated part of our every day work and decisions.

Together with our clients, suppliers and other partners, we will become more fit for the future.

Claes af Wetterstedt

CEO Nilörngruppen AB

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2017HIGHLIGHTS• Our newly built production site in Dhaka started production

• The Nilorn production in Hong Kong became bluesign® certified

• We updated our Supplier Code of Conduct and handbook

• We implemented a new system for collecting non-financial information from all our sites

2017 FACTS AND FIGURES• Turnover from 680 (610) MSEK, i.e. an increase of 11 %

• Number of employees 444 (358)

• 49 % of employees work in production and warehouse

• Women/men ratio 47 % / 53 %

• Number of labels delivered more than 1.5 billion

Nilorn is an international company, founded in 1977, which adds value to brands through branding and design in the form of labels, packaging and accessories. Our clients are mostly found in the fashion and clothing industry, many of which have a presence in international markets. At Nilorn we strive to increase our clients’ competitiveness by providing services that cover all design aspects, plus a logistics system that guarantees reliable and short delivery times.

NILORN’S COMPETIVE ADVANTAGES IS PRIMARLY

DEMONSTRATED IN TWO SPECIFIC AREAS:

• Creative expertise in the branding and design of labels, packaging and accessories• Logistical solutions to ensure deadlines are met in the market where clients demand an increasingly high level of service.

OFFICES OFFICES/MANUFACTURING BASES

• Belgium • Bangladesh• China • England• Denmark • Germany• India • Hong Kong• Italy • Portugal• Pakistan • Turkey • Sweden • Switzerland • USA

About Nilorn

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For the past 30 years, we have been supplying our clients with customised high-quality designed labels and other brand-strengthening products and services. We like and want to stay ahead.

We acknowledge our clients’ challenge to secure a supply chain that minimises – and eventually eliminates – all negative impact on people and the environment. Therefore, working proactively on sustainability is an important value that we add to our clients’ brands.

Sustainability at Nilorn means working towards meeting the needs of people and society without compromising the needs of future generations – acting in the long-term interests of many people. All in line with the UN Sustainable Development Goals.

It means adapting to the limitations of the planet and protecting the environment. It means promoting a strong, healthy, inclusive and fair society where people can prosper and fulfil their potential.

Nilorn believes in taking a holistic approach - including the entire design, manufacturing and supply chain.

The Sustainability Manager is located at our Head Office and co-ordinates Nilorn’s sustainability work, together with local staff in our sourcing countries. In Nilorn East Asia we have our Supply, Sourcing and CSR Manager, which enables us to have a closer relationship to suppliers in that region.

Sustainability at Nilorn GovernanceENVIRONMENTAL POLICY

CODE OF CONDUCT

ANTI-CORRUPTION POLICY

HUMAN RESOURCE POLICY

Throughout the whole process, from design to

delivery, we strive to implement our Environmental

Policy. Read more about our environmental focus

and performance on page 17.

Our Supplier Code of Conduct serves as a common

foundation for us and our suppliers in terms of

acting in a responsible manner, including focusing

on environmental protection and good working

conditions. Read more about our work to implement

the Code of Conduct on page 30.

Our Anti-Corruption Policy contains the organisation’s

rules and restrictions regarding gifts and other forms

of appreciation. It also describes the procedures

for employees to raise any ethical questions or to

report any breaches or suspected breaches of the

company’s code of conduct. Read more about our

work to implement business ethics on page 15.

Our Human Resource Policy regulates what the

company expects of its employees and what

employees expect of the company. The HR policy

mainly regulates: management responsibility for

developing its staff, information supplied to all em-

ployees, annual performance reviews, payments and

IT usage. Read more about our work to implement

business ethics on page 15.

• Nilorn’s actions aim to have an overall positive impact on the planet and contribute to protecting biodiversity, animal welfare, sustainable use of re-sources and the development of a value chain with a low carbon impact.

• Nilorn is committed to having a positive influence on people’s lives impacted by its business, based on respect for human rights, meaningful community involvement and shared values.

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NILORN

BRANDING & DESIGN

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NILORN

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BRANDING & DESIGN

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NILORN

BRANDING & DESIGN

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NILORN

BRANDING & DESIGN

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BRANDING & DESIGN

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BRANDING & DESIGN

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Discussing choice of materials and its implications on sustai-nability with our client.

Making more detailed decisions on choice of materials, to which factories to place orders etc. We have an important role in giving our clients options to choose more sustainable solutions.

Ensuring that the ambitions of the client and our own knowledge, result in products that have an as low environmental impact as possible.

The conditions under which the products are produced, in terms of environmental performance of the factory and occupational health and safety and otherlabour conditions for the workers.

By working close to our customers production sites, we can minimise distances, and therefore transport emissions.

Our products are a part of other products, so our key role in this part of the chain is to deliver promptly, in order not to cause delays, which in turn could have negative conse-quences both from an environmental and worker perspective.

We can help our customers reach out to the consumer with messages concerning labelling of products and, in general, help increase the transparency and traceability of products.

THE VALUE CHAIN - FROM A SUSTAINABILITY PERSPECTIVE

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We deliver our products to fashion brands across the globe. Throughout 2017, we looked into the challenges and opportunities the fashion industry is facing in relation to the sustainable development goals and their targets. We have researched how brands have investigated and communicated their most material challenges and opportunities. Based on that and following a mapping of the issues of utmost priority for our own business, we have found that a number of the goals and targets are of particular relevance. We take a closer look at these goals at page 10 and 11.

The Global Goals

We are signatories to the UN Global Compact and this commitment defines the foundation on which our business should stand. At the initiative of the UN, the international community has formulated and adopted 17 global goals in 2015, aiming to eradicate poverty and malnutrition as well as to ensure a truly sustainable development across the social, environmental and economic dimensions. These are ambitious goals. Nilorn, as a supplier to leading global fashion brands, stands behind the goals and is committed to do its share to contribute to reach the goals.

ADDR E SS I NG TH E G LOBAL S USTAI NAB LE DEVE LOPM E NT GOALS

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In September 2015, all 193 Member States of the United Nations

adopted a plan for achieving a better future for all — laying out a path

over the next 15 years to end extreme poverty, fight inequality and

injustice, and protect our planet. At the heart of Agenda 2030 are the 17

Sustainable Development Goals (SDGs) which clearly define the world

we want — applying to all nations and leaving no one behind. Read more

about the goals here: https://www.un.org/sustainabledevelopment/

sustainable-development-goals/

With the launch of the SDGs, business is explicitly called upon to make

a contribution to the global sustainability agenda.

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Nearly 2.2 billion people live below the US$2 a day poverty line. Sustainable economic growth will require societies to create the conditions that allow people to have quality jobs that stimulate the economy while not har-ming the environment.

One important target for this development goal is to take immediate and effective measures to eradicate forced labour, end modern slavery and human trafficking and secure the prohibition and elimination of child labour.

We commit ourselves to implement social standards, such as living wages and decent working conditions in our supply chain. There is a screening of new suppliers and we encourage our suppliers to adopt quality, environmental and occupational health and safety management systems certifications and include certification schemes used by suppliers in our criteria for choice of suppliers. Four of our production units are part of Sedex and have a SMETA audit report.

We work with social projects, such as for cotton growers in Africa (Cotton made in Africa), where studies of the social impact of the projects show clear improvements in social conditions thanks to the training received through the programs.

Decent work andeconomic growth

PROMOTE SUSTAINED, INCLUSIVE AND

SUSTAINABLE ECONOMIC GROWTH,

FULL AND PRODUCTIVE EMPLOYMENT

AND DECENT WORK FOR ALL

Clean water andsanitation

ENSURE AVAILABILITY AND

SUSTAINABLE MANAGEMENT OF WATER

AND SANITATION FOR ALL

Water scarcity and poor water quality is a daily challenge for many people around the world. The fresh water supply chain is already stressed in many countries and less than 1% of total water supply is accessible and fit for human consumption.

For many types of apparel and accessories, water is used all along the life-cycle of the product. From the production of raw materials, such as cotton, to the washing of a garment in the household of the consumer.

One target under this development goal is to improve water quality by reducing pollution, eliminating dumping and minimising release of hazardous chemicals and materials. In our supply chain we can work with water issues directly by being more efficient in the processes that require water and ensuring proper waste water treatment. We also engage indirectly in projects aiming at improving the conditions further upstream, such as through our engagement with Cotton made in Africa.

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Climate change is one of the most pressing environmental issues of our time and climate change is a global challenge that does not respect national borders. Here the issues are clearly linked to more circular use of materials, as that would decrease the impacts all along the value chain.

In the case of our industry as a whole - and to our own business - climate change poses risks. The supply of materials is dependent on the ability to grow resources. The infrastructure of the supply chains along with our own factories is, of course, vulnerable to extreme weather events and other potential consequences of climate change.

In 2017, Nilorn began to take action and set out plans to decrease the greenhouse gas emissions caused by our activities, raising awareness at our sites and preparing to be involved in adaptation.

We measure the impact of business travel and energy consumption and will increase our use of energy from renewable sources. We also must be aware of the risk of climate change affecting our supply chain located in areas likely to be affected and see how we can be involved in adaptation.

Climate actionTAKE URGENT ACTION TO COMBAT

CLIMATE CHANGE AND ITS IMPACTS

Responsible consumption and production

ENSURE SUSTAINABLE CONSUMPTION

AND PRODUCTION PATTERNS

Partnerships forthe goals

STRENGTHEN THE MEANS OF IMPLEMENTATION

AND REVITALISE THE GLOBAL PARTNERSHIP

FOR SUSTAINABLE DEVELOPMENT

Sustainable consumption and production aims at “doing more and better with less,” increasing net welfare gains from economic activities by reducing resource use, degradation and pollution along the whole lifecycle, while increasing quality of life. One target for this development goal is to substantially reduce waste generation through prevention, reduction, recycling and reuse.

At Nilorn we have already done work in this direction by adopting policies to choose more environmentally friendly materials, increasing the use of recycled materials, and taking action for a sound management of chemicals. A lot of work remains to be done for our industry to fully align with responsible consumption and production targets, in particular with regard to addressing our impacts throughout the life-cycle of the products. Nilorn has joined the bluesign® system to put the whole production chain in focus and strive to protect health and the environment across the entire chain of production.

The achievement of the global sustainable development goals depends upon the collaboration of many different actors, including businesses. A stronger commitment to partnership and cooperation is needed to achieve the goals.

Nilorn is a small global organisation and in our sustainability work we must cooperate and also rely on the effort of many other organisations, including labels and certifications. Example of co-operations are FSC (read more on page 23), Sedex membership and the Swerea Chemical group.

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GOAL

To exceed our clients expectations in all aspects of our global operations.

STRATEGY

Nilorn provides services to clients that help them to grow their brand presence in international markets. Fundamentally, our success is tied to the success of our clients.

Nilorn’s strategy is based on achieving growth through innovative design, products and services that add value and attract consumers to our clients’ brands and products.

Strategic directionVISION

To be the best label and branding company worldwide.

BUSINESS CONCEPT

Nilorn’s mission is to design, manufacture and sell labels and label programmes in order to assist clients in the fashion and textile industry to strengthen their brand presence in international markets. Nilorn offers a complete line of branding services, from design to manufacturing, sales, logistics and service. The process includes branding identity and differentiation through design, product development, integrated logistics and other services within the supply chain. Nilorn’s mission can be summarised as ”Adding value to your brand”.

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VISION:

To be the best labeland branding

companyworldwide

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COMBATINGMODERNSLAVERY

Modern slavery is a growing concern: an

estimated 45 million people were in some

form of modern slavery across 167 countries in

2016. The International Labour Organisation

estimates that 1 in 4 victims of modern slavery

are children, while women and girls account

for over 70% of victims. Modern slavery is a

term that captures a range of human rights

issues, including forced labour, bonded

labour, human trafficking and child slavery.

The complexity of supply chains increase the

likelihood of modern slavery in the global

industry.

In 2017, Nilorn published its first statement

in line with the UK Modern Slavery Act 2015,

detailing the steps we are taking to mitigate the

risk of modern slavery occurring in the supply

chain and business operations. Nilorn has a

zero tolerance approach to modern slavery in

any form and the different forms of modern

slavery are covered by the focus areas of our

supply chain audits.

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Business conduct

NILORN CORE VALUES

• Passion • Innovation• Respect • Common Sense• Responsibility• Execute• Teamwork

NILORN SUPPLIER CODE OF CONDUCT

• Freedom of association • Working conditions • Wages and working hours• Child labour• Forced labour• Non discrimination

NILORN CODE OF ETHICS AND BUSINESS CONDUCT

• Compliance with laws and regulations • Respect in the workplace • Protection of company property• Professionalism

BUSINESS ETHICS

Nilorn’s anti-corruption policy includes not accepting gifts or other benefits from our partners. If ever gifts are accepted, it should take place with full transparency and in a manner that follows the organisation’s policy. Employees sign the anti-corruption policy, incorporated in the induction of new employees.

CODE OF CONDUCT

Nilorn’s Supplier Code of Conduct lays out the overall ethical approach for us and our suppliers. It is part of the contract that we have with suppliers. However, it is a challenge to ensure that the values and requirements of the Code of Conduct are implemented. We, and our suppliers, operate in countries with different traditions and legal requirements. In 2017 we did not terminate any business relationship suppliers due to non-compliances.

GLOBAL COMPACT

Since January 2017, Nilorn is signatory to the UN Global Compact corporate responsibility initiative and its 10 principles in the areas of human rights, labour, the environment and anti-corruption.

In 2017 we updated our Supplier Code of Conduct and the Code of Ethics and Business conduct applicable for all Nilorn employees, to ensure that they are aligned with the UN Global Compact. We will also continue our focus on communication of these updated policies and roll-out training, at all locations of Nilorn.

The core values are the practices a Nilorn employee should be guided by daily, in all work situations. They form a common platform and strengthen our teamwork. Together with our Code of Conduct and other ethical guidelines, they guide how we conduct our business.

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REACH is a regulation of the European Union, adopted

to improve the protection of human health and the

environment from the risks that can be posed by

chemicals, while enhancing the competitiveness of the EU

chemicals industry. It also promotes alternative methods for

the hazard assessment of substances in order to reduce

the number of tests on animals.

The REACH regulation specifies a list of restricted

chemicals and REACH affects all EU-actors that

professionally manufacture, import, sell, buy, distribute or

use chemicals as such and in articles. If goods contain

restricted chemicals it is mandatory that the manufacturers

and importers are informed.

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understanding and improving the situation in Hong Kong with regard to plastic waste. The project was motivated by a sense that all of us as residents and business people in Hong Kong can do more to keep our city greener. Simple statistics, such as the 5.2 million plastic bottles discarded every day by Hong Kongers (that is almost 2 billion bottles per year), illustrate the seriousness of the situation. Nilorn East Asia has signed on to this “No Plastic Waste Challenge” and also signed a new agreement for waste handling.

During 2016 we took a first step in collecting information and measuring our emissions. It gave us an initial baseline in our work to reduce our environmental impact. We implemented a new system for collecting non-financial information from internal and external sources in 2017, with the aim to get relevant, consistent and transparent reporting.

Nilorn’s operations are located in several different countries and as there are differences in emissions between countries,

Environmental protection

We are committed to reducing the environmental impact of everything we do - designing a product, choosing production processes, choosing a supplier, planning the logistics etc. Our aim is to be a genuinely environmentally-friendly company, not just selling eco-friendlier products when we are asked for them. Both materials and mode of transportation are almost always decided by the client. Our role in guiding the client in finding better alternatives is becoming more and more important and we see an increased interest from our clients to use either certified materials such as FSC paper or made of recycled polyester, for example.

In our updated Supplier Handbook there are explicit environmental requirements, including, for example, chemical handling, environmental management system, energy and waste handling.

In 2017, the Sustainability Committee of the Swedish Chamber of Commerce started a project aimed at

The client, and end consumer, should feel secure in the use of Nilorn’s whole product range. Sustainable products, for us, im-plies finding better materials. Once chosen and used, those materials should be kept in a recycling loop for as long as possible. For us it is important to work to be genuinely better all round, not only from the product perspective.

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Nilorn is participating in the Chemicals Group at Swerea IVF. The Chemicals Group exists to disseminate the latest findings related to chemicals and their potential impacts on the environment and human health, to its member companies. The chemical guidance developed by the initiative helps the members to avoid importing products containing unwanted substances. Nilorn RSL is based on the Chemicals Guidance provi-ded by The Textile Importers’ Association in Sweden and Swerea IVF. Bureau Veritas Certification Hong Kong is our nominated partner for physical and chemical testing.

REACH

All Nilorn partners are required to sign an agreement stating that the REACH regulation and Restricted Substances List are complied with. This is a non-negotiable requirement.

especially diverse and wide-ranging for electricity consump-tion and travel, we have used local emission factors where possibly (Defra/DECC).

• Staff travelling 540 tonne CO2e• Energy consumption 1220 tonne CO2e

Today almost 80% of waste generated by Nilorn operations goes to landfill - this is an important area for us to improve.

In our Swedish office and the new European Distribution Center in Germany we are using energy from hydropower.

RESPONSIBLE USE OF CHEMICALS

Nilorn produces a variety of products in many different materials, at our six production sites. We conduct internal audits which include checking the handling and storage of chemicals used in production. This is also a prioritised issue in the audits conducted at our suppliers’ sites.

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MICROPLASTICS In recent years there has been large focus

on the micro-sized particles of plastics, so

called microplastics and the number of

negative consequences for humans and the

natural environment they have. Protecting

the marine environment from the potential

impact of microplastics is an important issue.

In marine protection, plastic particles with a

diameter of less than 5 mm are referred to as

microplastics. These can be fragments created

by the breaking up of larger pieces of plastic

such as packaging or as fibres that are washed

out of textiles. Up to 12 million tonnes of

plastic, often single-use items including

packaging, end up in the sea every year.

Improved waste management and recycling

schemes are two areas that can help reduce

pollution, alongside increased reuse of

materials.

Because our products are often made of

synthetic fibres such as polyester and

polypropylene, we are contributing to

pollution by plastics as well. There has to be

a reduction of the leakage of plastics into our

natural systems and at Nilorn we will look at:

• Design for sustainability

• Reuse of materials

• Waste reduction and secure good handling of waste

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bluesign®

As of 2013, the Nilorn group is a bluesign® system partner. Our production facility in Portugal has been certified since 2012 and, in 2017, Nilorn East Asia in Hong Kong started the screening process and received the bluesign® certificate for textile accessories and the article range printed care labels.

At Nilorn, we find the increasing focus on bluesign® to be a very positive trend and we welcome more of our clients to join this initiative and choose bluesign® approved products.

The assessment of a factory entails the following steps: • An evaluation of the production site, focusing on the use

The bluesign® system puts the whole production chain in focus. It has focus both on the product itself, in terms of sound materials, but also the chain of production, from raw materials to finished products. The certification covers: resource pro-ductivity, consumer safety, water emissions, air emissions and occupational health and safety.

of chemicals, the working conditions, environmental impact, and water and energy consumption.

• Based on the detailed assessment, a report on the findings and an action plan with necessary measures are drawn up.

• Once all necessary measures have been implemented, the products can be approved according to the bluesign® system. These measures could include: eliminating the use of hazardous chemicals, changes in operation, installation of air and water cleaning systems, improvement of personnel safety and an overall improvement in house-keeping.

Eco-labels and other certification schemes are a way in which our clients can communicate their focus on responsibility along the production chain, making the consumer more aware about their purchases. It may sound confusing, but

Traceability for sustainability With our creative labels we help our clients strengthen their brands and products. They are also an important part in ena-bling brands and consumers to trace their products back in the supply chain.

our labels are also labelled. At Nilorn we can certify our products, such as labels, buttons, accessories and other product groups. Here we provide you with the latest insights into some of these certifications.

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The OEKO-TEX® tests for harmful substances are fundamentally based on the respective purpose of the textiles and materials and they cover: legally banned and controlled substances, chemicals known to be harmful to health (but not yet legally controlled) and other parameters for health protection. Testing is geared towards how the textile will actually be used, the more closely the product is in contact with the skin, the stricter the requirements. Class 1 is the highest level.

The OEKO-TEX® Association conducts annual control testing of certified products, at a rate of at least 25% of all certificates issued. It tests articles bearing the OEKO-TEX® label that are available in retail shops and also samples of materials from factories. In addition, independent auditors

The STANDARD 100 by OEKO-TEX® is an independent test and certification system for textile raw, intermediate and end products at all stages of processing. Examples of products that can be certified are yarns, woven and knitted fabrics, accessories (such as buttons and labels) and readymade articles.

carry out random checks of companies holding OEKO-TEX® certificates, in the form of unannounced inspections.

Nilorn holds an OEKO-TEX® certificate for textile production and accessories, produced both in our factories and suppliers’ factories. We hold certification for product class 1, the highest level. Further to the Nilorn OEKO-TEX® Standard 100 Class 1 in appendix 4 we and some suppliers have upgraded to appendix 6 standard for certain products. The difference between the two appendices is limit values and inclusion of chemicals. The appendix 6 catalogue was created for those who are either participating in the detox campaign or working with customers who have this demand on their products and supply chain. Nilorn is continually working to improve our environmental impact and appendix 6 is one of those ways.

OEKO-TEX® 100 (class 1)

“Labels that help the consumer make better choices”

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At Nilorn we have decided to have recycled materials third party certified, in accordance with the recycled content standard. The standardisation is made by SCS Global Services. The purpose with the certification is to make claims of recycled content trustworthy. The SCS Recycled Content Certification evaluates products made from pre-consumer or post-consumer material, coming from waste streams. It declares the percentage of recycled content for the purpose of making an accurate claim in the marketplace. We see an increasing interest from our clients to use such materials and this is an important part in our aim to work with transparency.

Examples of recycled content in Nilorn products are polyester, paper and plastics.

Recycled Content Standard We are always scouting for new, more sustainable materials for our products. Recycled materials is an important part of our more sustainable offerings. Third party certification of claims of recycled content increases the credibility in the market.

Polyester is the most common synthetic fibre in textile manufacturing and the one we use most for Nilorn’s products. The disadvantage of polyester is that it is an oil-based material, not from a renewable source. At the same time, the advantage of the oil-based materials is that it is relatively easy to recycle them and today there is an increased focus on recycled materials to reduce both landfill and littering of oceans.

Polyester has an advantage in that it can be recycled many times. Most of recycled polyester comes from PET bottles, bottles are a clean, easy product to recycle. Using recycled materials can be a part of a product liability, but it is of course not only the choice of materials that affect it. Design, production, waste and transport are all important aspects to consider. Providing recycled materials requires traceability and origin.

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”Addingvalue

to your brand”

FSC stands for ’Forest Stewardship Council’, an

international non-profit organisation dedicated to

promoting responsible forestry.

FSC

FSC certifies forests all over the world to ensure they meet the highest environmental and social standards. Products carrying the FSC label are independently certified to assure consumers that they come from forests that are managed to meet social, economic and ecological needs.

A properly labelled product shall both carry the FSC symbol and the certificate number.

Nilorn products that can carry this label are products produced with the use of paper or forest based textile fibres. Nilorn aims to continuously increase the content of FSC certified paper in our products and we are now able to provide it in all sales markets.

Security andanti-counterfeit Naturally, all the companies we work with are proud of their brands and products and they want to protect them. So we prioritise the security of our clients. We have developed and are now producing a number of successful secure techniques. UV-yarn, UV-printed holographic yarn, holograms, sequential numbering, watermarks, Nilorn secure and radio frequencies are some examples of methods that can be applied to protect the clients’ products.

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“I’m a mother. A wife. An Art Director. A daughter. A friend. And my interest for a more sustainable way of life comes into all those roles. And in all of them it is about finding the right balance and about learning as you go along”, says Marie Huber.

It all started with a school visit to Nilorn while studying textile purchasing and management. “I felt that their design department would suit me perfectly” says Marie. She started as an intern at Nilorn in 2001 and now holds the position as one of our Art Directors.

I NS IG HT: WOR KI NG AT N I LOR N DESIG N DE PARTM E NT

“I find inspiration everywhere. It can be a film, a personality or a piece of music that puts me in a special mood. Talking to people is also highly inspiring as it makes ideas grow” says Christina Walter.

Christina has worked as a designer for Nilorn in Germany since 2014 and works on our collections and concepts. “I have high hopes for the future. I believe in a circular economy based on the cradle to cradle concept where safe materials - natural or synthetic - are intelligently cycled and

manufactured in ways that positively impact people and planet”.

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A GROWING INTEREST FROM OUR CUSTOMERS

“Over the years the interest from customers for more sustainable materials has had its ups and downs. But this time round I really feel that it is different. The customers are more knowledgeable about their alternatives and are prepared to choose a sometimes more costly, but more sustainable alternative” Marie explains. “We see an increasing interest in FSC certified paper products, in recycled polyesters and also other alternatives to traditional plastic materials. We also see customers that are making a complete turnaround, setting targets to have all their labels and trims in sustainable materials within just a few years”.

Sustainable materials are definitely a growing market for Nilorn. In Germany there has been a strong focus on this from Outdoor brands, but we now see that an increasing number of fashion companies are asking for these products. “It has gone from “nice to have” to being a better choice in the minds of our clients” says Christina. “I just learned that our recycled polybag is one of our bestselling products” she continues.

The range of materials that we can work with is increasing. Recycled materials like polyester, cotton and leathers, just to mention a few, and natural fabrics like bamboo and hemp. There are also high-tech fibres made from vegetable fibres or oils. “We have to keep an open mind to future technologies and materials” says Christina.

We aim to always discuss the implications on sustainability that a choice of materials has, in the dialogue we have with our clients. It is here, in the idea and design phase, that Nilorn can play an important role, that has effects along the whole life cycle of our products. We want to be in the forefront, scouting for new interesting materials and solutions, because we see this as a really important part of our long term success as a supplier. So the knowledge and innovative skills of our design team is of course a very important success factor for Nilorn. Read some more here about how we work with more sustainable materials at Nilorn and get some direct insights from some of our design team members.

“Even if the customer makes another final choice, we aim to give them a more sustainable option to start with. In that way we hope the client keeps the sustainable offer in mind. And next time they see it as an option for them to change” Christina explains.

THE WHOLE CHAIN NEEDS TO LIVE UP TO OUR STANDARDS

Of course there are also challenges when it comes to choosing new materials. It often means changes in our supply chain, which in turn requires of us to update risk assessments and audit these new suppliers. Transparency is a key issue for us and therefore we need to ensure that we have those things in order before we sell the product to our clients.

“It is also easier for us to find alternative materials and new concepts and the suppliers are getting better at delivering on time, with quality and trustworthiness. It is still sometimes challenging and of course you wish that it would go even faster. But this is not just a trend, it is the future and we will continue to be in the forefront and propose new solutions for our clients”, Marie concludes.

It’s not just a trend, it is the future

I NS IG HT: WOR KI NG AT N I LOR N DESIG N DE PARTM E NT

“Our sustainable design collections

have been seen very positively by our clients”

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PRODUCTION

Of our total purchasing value in 2017, 80% was sourced in Asia and 20% in Europe. Sourcing in Asia mainly comes from Hong Kong, China and India. Most of our European sourcing is from Turkey and Italy. As a complement to the sourcing activity, Nilorn’s own production facilities represented approx. 10-15% of the group turnover in 2017.

NILORN HAS ITS OWN PRODUCTION SITES IN:

• Bangladesh • Germany• Hong Kong • Portugal • Turkey • England

LOGISTICS

The development of the fashion industry requires that Nilorn is represented in many parts of the world, through their own companies and a network of strategic partners. The Nilorn Auto Order System provides control and aims

Our production and logistics Nilorn is strategically located in major manufacturing countries around the world, enabling shorter delivery times, lower freight costs and reduced environmental impact. The majority of our production is through external suppliers as it allows us to be flexible and adapt to our clients’ locations. Our own production is an important complement. With this combined approach, we can ensure timely deliveries and high quality.

to save time for our clients. When a production order is sent to the manufacturer, Nilorn simultaneously receives a request from the client’s system in a fully automated process and, depending on location and stock levels, most orders are handled within 48 hours.

The Nilorn Web Solution provides a complete overview of orders, warehousing and distribution, allowing both the client and manufacturer to order labels and check/control the delivery. The web order system is available in several languages and offers a comprehensive set of follow-up and report generating options. We have warehouses in Dhaka, Hilden, Hong Kong, Istanbul, Karachi, Keighley, New Delhi, Recarei and Shanghai.

In December 2017, the new Nilorn Distribution Centre started its

operation in Hilden, Germany. The DC will start to serve the Belgian,

German, Swedish and Swiss market. Total area is 1700m2 and 10

employees. The energy used is 100 % from hydropower.

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At our production site in Hong Kong we produce printed textile and paper labels. The factory is bluesign® and OEKO-TEX® certified. There are 111 employees.

LOGISTIC FOCUS• Reliability

• Efficiency

• Cost effectiveness

• Worldwide distribution

• Short delivery times

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I NS IG HT: DHAKA FACTORY

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It is a sound investment for Nilorn to have a factory and be present in Bangladesh. We can more easily influence the work and the development of production in this region. The factory is a state-of-the-art facility when it comes to machinery and conditions for the workers - something that will have a positive effect for all of Nilorn’s stakeholders.

Since starting up production in 2017, internal policies, pro-cedures and responsible practices, including sustainability and compliance, have been in focus. Nilorn is committed to creating a healthy and productive working environment,and for this, further training will an important part. Energy consumption and minimum wastage in the manufacturing of products are other areas in focus. There is a small solar

Dhaka factory For a long time, the garment and textile industry in Bangladesh has been of high importance for the supply of apparel all around the world. Considering this, it is natural that Nilorn now has an office and factory in this area. Many of Nilorn’s clients produce their goods in Bangladesh and it is much easier for all parties concerned if the production of labels, hangtags and such are just a hop and a skip away from the garment making - instead of on the other side of the world. With Nilorn’s own production in Bangladesh, time will be saved and we will have a smoother and more efficient operation.

panel installed and all lighting is low energy. The factory has an Effluent Treatment Plant (ETP) for production waste water and there is water meter installed. Waste handling is a challenge in Dhaka, the factory is sorting waste and it’s taken care of by a waste handler. During 2018, we will work on reducing waste and also search for end-of-life alternatives The environmental work is an on-going process to better the situation for both employees, products and environment.

NILORN BANGLADESH DHAKA FACTORY

• STANDARD 100 by OEKO-TEX®, class 1

• FSC Chain of Custody Certification

• Sedex Members Ethical Trade Audit (SMETA)

I NS IG HT: OU R FACTORY I N BANG LADESH

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We do our own inspections in combination with relying on third party audits, through BSCI, SEDEX and other initiatives. ISO 9001, ISO 14001 and OHSAS 18001 are also certification schemes used among suppliers, which we take into consideration when choosing a supplier.

Most importantly we focus on having a very close dialogue and frequent meetings with all prioritised suppliers.

Reduce to increase has been one focus for supply chain management in 2017. An analysis was done after the result of the supplier evaluation in 2016 and in total we reduced our supplier base by around 50. The reason for this reduction was to increase our efficiency in the management of suppliers and part of our strategy of working closer with the chosen suppliers. We are pleased to see that in 2017 the production with those suppliers has moved to others in the approved list.

For 2017, we conducted the same review, this time extending to group companies outside China. The results were again collected and the list reviewed. In 2018, we will reduce our

Working with our supply chainNew suppliers to Nilorn are to be reviewed by the CSR department. The first assessment includes looking at social audits that the factory may have been subjected to previously, as well as other areas such as their production capacity and quality of products. A supplier is preferably visited prior to production.

supply base by a further 30 suppliers. It is important for us to continue reducing our supply chain for greater control, visibility, improved communication and buying power. We seek to continue working with reliable, reputable, environmentally and socially conscious suppliers. Whilst reducing our supply chain we also build on the relationships we hold with suppliers, some of which have been over 20 years. A stronger relationship equals a better partner. SEDEX

Sedex, the Supplier Ethical Data Exchange, is a not-for-profit membership organisation dedicated to driving improvements in responsible and ethical business practices in global supply chains. Sedex is an online database, used by more than 50,000 members in over 150 countries, which allows companies to store and view data on ethical and responsible business practices. Sedex does not set any standards or determine the policy of its members.

Sedex provides a place to store any and all ethical audit reports, with a summary of non-compliances held in a common format. However, Sedex has created the Sedex Members Ethical Trade Audit (SMETA) – a common audit methodology and report format aiming to drive consistency of data from the auditing process. The audit checks specifically against the ETI base code and how it is spread to employees and the supply chain, relevant local laws, environmental performance, subcontractors/home workers, eligbility to work and understanding of the ETI base code.

WHAT HAPPENS DURING A SMETA AUDIT?

The normal process for a SMETA audit would follow these steps:

1. Self-Assessment Questionnaire (SAQ) and Pre-Audit Site Profile

2. Audit preparation and quotation to the site

3. Actual site visit and audit

a. Opening meeting with senior management

b. Site tour

c. Document review

d. Worker interviews

e. Closing meeting with senior management

4. Issuing of the the SMETA report and CAPR (Corrective Action Plan Report)

5. Loading up the SMETA / CAPR reports to the SEDEX data base

6. Follow up audits if required within 3-6 months time frames

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AT NILORN, WE ARE AUDITED AGAINST SEDEX/SMETA IN OUR FACTORIES IN

BANGLADESH, HONG KONG, PORTUGAL AND TURKEY - MAKING THE RESULTS

AVAILABLE FOR ALL SEDEX MEMBERS TO ACCESS.

is an online database which allows members to store, share and report information in four key areas:

LABOUR STANDARDS

ENVIRONMENT

HEALTH & SAFETY

BUSINESS ETHICS

THE SEDEX GLOBAL PLATFORM

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Capacity building and training is arranged locally in each country, for example First Aid and Occupational Health and Safety training. We see a benefit in setting a structure for capacity building across our locations. One area in which we will train and further inform employees is concerning sustainable materials. It is important that our employees feel that they can develop as individuals and in their roles. All employees are offered annual performance reviews.

Employee headcount increased 24%. This growth is due prin-cipally to recruitment in Bangladesh, China and Hong Kong.

Our employees

Nilorn aims to be an employer of choice by offering a more sustainable, caring and safe working environment. During 2017 several Nilorn offices invested in better ergonomics by providing foot rests in the desk areas. Some other examples from Nilorn:

• Belgium - focus on energy efficient IT-equipment, all TCO certified, allowing sales staff to work remotely

• Hong Kong – improved health insurance and increased dental costs provided

• Portugal – renewed cooling system, new floor and sound-proofing doors installed all in order to improve working conditions in the production area

• Sweden – with a close cooperation with the local gym employees are encouraged to work out, new adjustable sit-stand desks

• UK - recognition of attendance with one extra day holi-day for 100% attendance. Access to a telephone helpline for health issues is provided

The success of Nilorn is directly linked to the ability to empower and invest in our employees to be ambassadors for our brand.

DATA

• Sick leave: 3,7%* • Number of work related injuries: 4

* Absenteeism is tracked locally in accordance with regulations applicable in the different countries where Nilorn operates. The Company does not have a harmonised system for managing absenteeism throughout its subsidiaries.

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Employees - per country

ALL EMPLOYEES MANAGEMENT BOARD

Number of employees: 444

MEN 50% WOMEN 50%

MENWOMEN

MEN 86% WOMEN 14% MEN 53% WOMEN 47%

GENDER DISTRIBUTION

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MR SIMON LEPPICH:

”It was a fantasticexperience to meet and learn from the farmers what sustainable cotton growing means”

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CmiA is an Aid by Trade Foundation initiative that was established in 2005. Its objective is to help smallholder farmers help themselves through trade and to improve the social, ecological and economic living conditions of smallholder cotton producers and their families in Sub-Saharan Africa.

To put this aim into practice, an alliance of international textile companies built up by CmiA buys the sustainably grown cotton, integrates it into its textile value chains and pays a license fee to the foundation. Today there are more than 30 brands and retailers participating in CmiA. More than one million smallholder farmers (of which 17% are female farmers) and some 11,000 factory workers in the so-called cotton ginneries are currently part of the CmiA program. CmiA is active in Cameroon, Burkina Faso, Ethiopia, Ghana, Ivory Coast, Mozambique, Zambia, Tanzania and Uganda.

In October 2017, a group of CmiA retailers, brands and part-ners traveled to Uganda to meet cotton farmers in the CmiA growing regions of Uganda. The group met African cotton farmers, learned from them how to grow sustainable cotton, listened to a female farmers group who presented projects they initiated as a group and observed how the cotton is ginned and processed to textiles. One of the participants was Nilorn Germany’s Managing Director Mr Simon Leppich.

Simon says: ”It was a fantastic experience to meet and learn from the farmers what sustainable cotton growing means and that we, during our visit to Uganda, could follow the

There is a focus on a more sustainable production of materials for the garment industry. Cotton is one of the resources where there are many challenges to overcome. To ensure supply, we must work together to train and help cotton producers make the transition from traditional cultivation methods to more sustainable practices. This is precisely what the “Cotton made in Africa” (CmiA) initiative does.

textile value chain from cultivation of cotton to textiles made in Africa.”

The cotton farmers involved in CmiA work exclusively in smallholder structures. Education is one of the most important requirements for improving the living condi-tions of African cotton farmers and combating causes of migration. Therefore, CmiA puts a focus on training the participating cotton farmers in business and agriculture. The farmer trainings established by CmiA support the farmers in implementing the CmiA sustainability criteria. In the so-called farmer business schools participants learn a great deal about efficient and sustainable farming methods. As a consequence, it enables them to increase yields and thereby income. The CmiA-trainings not only convey knowledge about how to manage a cotton farm more economically and more environmentally friendly, but also raise awareness among the rural population for topics such as child labour. The participating smallholder farmers gain an understan-ding about why their children should go to school instead of doing demanding work on the farm that is harmful for them. They learn that good schooling helps the en-tire family in the long run.

Nilorn is a partner of CmiA and we provide all standard CmiA hangtags and woven labels.

Read more at:www.cottonmadeinafrica.org

Social engagement

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We know that our daily operations have effects on others in our surroundings. We aim to prioritise dialogue with different stakeholders as this is an instructive for us, to listen and to learn from others and it is necessary to allow all groups to cooperate for a more sustainable industry.

Stakeholders

PRIORITISED AREAS

IT-solutions, Code of Conduct,sustainable materials

Sustainable materials, eco-labelling

Business ethics, reporting

Business relationship, buying process

Raw material, labour, wages

Chemicals, trade, social compliance

STAKEHOLDER GROUP

CUSTOMERS

EMPLOYEES

INVESTORS

SUPPLIERS

NGOs

INDUSTRY

MEANS TO COMMUNICATEABOUT SUSTAINABILITY

Dialogue, meetings, magazine

Meetings, training, Intranet

Reporting, meetings

Meetings, fairs, events

Initiatives, conferences

Memberships, working groups

The Swedish Textile Importers association is a valuable resource for us at Nilorn. Through them, we monitor the latest developments in trade policy issues. They provide importers of textiles with industry-specific service, helping us to keep track of everything that may be important to the business, such as customs duties, rules of origin, free trade agreements and CSR. Nilorn has been a member since 2004 and our Sustainability Manager has been a board member since 2017.

TEKO is the Swedish trade and employers’ association for companies working in the textile and fashion industry. They represent the sector, both nationally and internationally, in all questions of common interest and inform clients, suppliers, media, the public and the government about the Swedish textile and clothing industry, its companies and its products. An important task is to supply information and service to the member companies. TEKO is also the national member for Sweden to GINETEX – the International Association for Care Labelling. Nilorn has been a member since 2017.

The Swedish Textile Importers Association

Teko

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Sustainability risksNilorn’s risk management approach follows our decentralised structure and the same applies to our sustainability risks. All managers at Nilorn with operational responsibilities are expected to ensure that risks associated with their operations are appropriately identified, evaluated and managed.

COMPLIANCE

Risk of suppliers not complying with the Supplier Code of Conduct and not following national laws and regulations.

Continue to build strong supplier relationships. Increase awareness of Code of Conduct, environmental requirements and other policies. Own and 3rd party audits of suppliers.

Negative reputation and risk that we do not live up to the require-ments of our clients. Delays in delivery and increased costs.

RISK CATEGORY RISK DESCRIPTION RISK MITIGATIONRISK CONSEQUENCES

Risks that legal and regulatoryrequirements are not met.

Nilorn has a group governance framework and compliance, including anti-bribery and corruption policy. Increase training. Establish appropriate procedures, monitoring and reporting to prevent violation of laws, corruption or handling of personal data. 3rd party social audit at own production units.

Negative reputational and/or financial impact.

Injuries or work related sickness at Nilorn own production sites or at supplier sites.

3rd party social audit at Nilorn production units. Own and 3rd party audits of suppliers. Con-tinue to build a common H&S culture and effective manage-ment systems.

Fatal accidents, serious injuries or long-term absenteeism at production sites. Risk of legal and financial conseqences if OHS has been managed poorly. Risk that employees find the work environ-ment unsatisfactory, resulting in difficulties to retain and recruit. Reputational risk if poor safety conditions exist in the company, resulting in damage to our brand.

Managing increased demand of more environmentally con-scious products by our clients. Increased demand to understand climate change effect on both internal and external operations.

Focus on improved efficiency to minimise environmental impact in our own operations and in supply chain, bluesign certification being one method. Keep high awareness of new regulations and market demands.

Risk of losing clients. Not being able to meet clients’ expecta-tions in our operations and/or products with regards to envi-ronmental performance and new materials. Risk of problems with supply due to climate related incidents.

HEALTH & SAFETY

ENVIRONMENT

SUPPLY CHAIN

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“2018 will be the year when we, in a much clearer way, will link our sustainability work and ambitions to the UN Sustainable Development Goals – not only in our own work with our values, policies, procedures and measurements, but most importantly also in the ongoing dialogue with our clients, where we will continue to help them make even better choices”.

Anna-Karin Wårfors, Sustainability Manager.

IN 2018 WE WILL FOCUS ON:

• Group FSC certificate

• More recycled materials and RCS (Recycled Content Standard) certificates

• Implementing updated Code of Conduct and Supplier Handbook in supply chain

• Aligning chemical and physical testing routines in Nilorn companies

• Improving reporting of sustainability data

Our way forward

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PRODUCTS IN MORE SUSTAINABLE MATERIALSRespekt is a highlight of our work to develop products with lower

environmental impact. It shows the ongoing process to a more sustai-

nable offer, from design to delivery. The RESPEKT concept features,

environmental finishings and various materials such as bamboo, vegetable

tanned leather and FSC paper, along with recycled materials. All articles

comply with REACH regulations or meet higher environmental standards.

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NILÖRN ABWieslanders väg 3Box 499501 13 BoråsSWEDENTel: +46 33 700 88 00Fax:+46 33 700 88 48info@nilorn.com

BALLY LABELS AGSchachenstrasse 24 CH-5012 SchönenwerdSWITZERLANDTel: +41 62 855 27 50Fax: +41 62 855 27 59info@bally.nilorn.com

NILORN BANGLADESH LTD.Millennium Castle, 12th fl .House 47, Road 27 Block A, BananiDhaka -1213BANGLADESHTel: +88 02 8835912 Fax: +88 02 8835913 info@bd.nilorn.com

NILORN BELGIUM NVBrusselsesteenweg 5259090 MelleBELGIUMTel: +32 9 210 40 90 info@be.nilorn.com

NILORN DENMARK A/S Kongensgade 31B 5000 Odense C DENMARKTel: +45 70 23 16 23info@dk.nilorn.com

NILORN EAST ASIA LTDUnit 1701, 17/F, Westley Square48 Hoi Yuen Road, Kwun TongKowloonHONG KONGTel: +852 2 371 2218Fax: +852 2 371 2629info@hk.nilorn.com

NILORN GERMANY GMBHItterpark 740724 HildenGERMANYTel: . +49 2103 908 16 0Fax: +49 2103 908 16 99info@de.nilorn.com

NILORN INDIA PVT. LTD6233, 3rd Floor,Block no. 6, Dev Nagar,Karol Bagh,New Delhi - 110005INDIATel. +91 11 2575 2675Fax +91 11 2576 0230info@in.nilorn.com

NILORN ITALYVia del Bramante 3441012 Carpi (MO)ITALYTel: +39 3381611351info@it.nilorn.com

NILORN PAKISTAN (PVT) LTD2nd Floor, Yasir ChambersGulshan –E-Iqbal, Block 13AMain University RoadP.O. Box 75300KarachiPAKISTANTel: +92 21 349 92151Fax:+92 21 349 92153info@pk.nilorn.com

NILORN PORTUGAL – INDÚSTRIA DE ETIQUETAS, LDARua Central de Barrosas, 3044585 - 902 Recarei – ParedesPORTUGALTel: +351 22 411 95 80Fax: +351 22 411 95 99info@pt.nilorn.com

NILORN SHANGHAI LIMITEDRm 701, 288,Chengjiaqiao Road.Minhang District,Shanghai,CHINAPoastal Code 201103Tel: +86 21 345 512 90info@sh.nilorn.com

NILORN TURKEY Bağlar Mahallesi 49Sokak No: 50K:3BağcılarIstanbulTURKEYTel: +90 212 657 76 76 (pbx). Fax: +90 212 657 75 10info@tr.nilorn.com

NILORN UK LTD1A Acre ParkDalton Lane KeighleyWest YorkshireBD21 4JHUNITED KINGDOMTel: +44 1535 673 500info@uk.nilorn.com

NILORN USA LLC3499 Meier StreetLos Angeles, CA 90066UNITED STATESTel: +1 888 315 1875info@us.nilorn.com

NILÖRNGRUPPEN ABWieslanders väg 3Box 499501 13 BoråsSWEDENTel. +46 33 700 88 88Fax +46 33 700 88 19info@nilorn.comwww.nilorn.com

Subsidiaries & partners

Headquarters

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Cover photo: By Annie Spratt on Unsplash

Production: Nilorn in cooperation with TomorrowToday

Paper: Edixion

Printing: Responstryck

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