SOCIALREPORT

2015Reporting period July 2015 – June 2016

CONTENTFOREWORD 3

TWO MINUTE VERSION 4

ABOUT DEUTER 5KEY EVENTS 2015/16 6PARTNERSHIP FOR SUSTAINABLE TEXTILES 6DEUTER ABOUT THE FWF 7 THE FWF ABOUT DEUTER 7SIMPLIFIED PRODUCTION CYCLE 8PRODUCTION VOLUMES PER COUNTRY 2015/16 12LIST OF SUPPLIERS 12DEUTER PRODUCTION IN NUMBERS 12

MILESTONES 17

1. VIETNAM 81.1. Implementation 2015/16 81.2. Monitoring 111.3. FWF Complaint System 111.4. Targets 2016/17 11

2. CHINA 12

3. MYANMAR 133.1. Monitoring 133.2. FWF Complaint System 163.3. Targets 2016/17 16

2

FOREWORD

Martin Riebel (Managing Director)

DEAR DEUTER FAMILY, CUSTOMERS, AND BUSINESS PARTNERS!

The world has become more unstable. That’s the predomi-

nant feeling I have when looking back on the past months.

The attacks in Munich and Paris, the attempted coup in

Turkey or the terrible suffering of the refugees – how do

you maintain your ideals in the face of events that repeat-

edly shake your positive core belief?

We at Deuter foster a brand philosophy, which has also

helped me these days to remember that it is worth to keep

up our beliefs and strive for improvement. We trust in our

policy of small steps – a policy, which builds a strong, solid

foundation for changes and which has again proven to be

the right path in the past months.

Our brand philosophy primarily focuses on people – peo-

ple worldwide, including the employees of our long-term

partners Duke in Vietnam and Bellmart in China and since

2015 also in Myanmar. In the past fiscal year all three fac-

tories in Vietnam (chapter 1) and the new production site

in Myanmar (chapter 2) have been monitored by independ-

ent FWF auditors. Further, so-called WEP trainings were

held by the FWF at all sites in Vietnam. In the end, changes

are most effective when they arise from cooperation rather

than being dictated and this means we have to strength-

en communication and the awareness for rights as well as

responsibilities.

Another big positive inspiration came from individual sto-

ries in the team at the headquarters in Germany. Such as

the vita of our new Area Manager Johannes Heinl, who

joined us as an intern in May 2015. We quickly realised

how much potential he has and when we were looking

for support for our international sales team, we knew he

was qualified for this responsible position. We always try

to promote talents and encourage them to show and de-

velop their strengths.

Those are very personal moments I experience in Asia as

well as in Europe and they assure me that not the whole

world is upside down. It is our duty, in the small as well as

in the big, to believe in and strive for the better, especially

in unsettled times.

Our annual Social Report has always been an occasion for

us to reflect our ambitions and efforts and to consciously

define new tasks. Now I hope you will enjoy the read.

Your Martin Riebel

Managing Director

3

TWO MINUTE VERSIONIn the fiscal year July 01, 2015 through June 30, 2016 four

factories of our production partners have been audited by

the Fair Wear Foundation (FWF).

All three factories of our long-term partner Duke in Viet-

nam were audited in September 2015. Prior, the FWF held

successful WEPs: these Workplace Education Programmes

focus on strengthening the communication between work-

ers and management (chapter 1). We also achieved a fur-

ther reduction of overtime at our supplier Duke. In 2015

we were awarded the FWF’s Best Practice Award for our

efforts in overtime reduction and we were able to jointly

further lower overtime in the past fiscal year.

To unburden the production in Xiamen and to meet the

cost rise in China, more and more sleeping bags are pro-

duced in the new factory of our long-term partner Bellmart

in Myanmar. Only the production of our down sleeping

bags as well as bluesign® certified products has remained

in China (chapter 2). At the first audit of the new factory in

May 2016 some deficits in regards to communication and

workplace safety were detected. We are working jointly

with Bellmart on a follow-up of the audit (chapter 3).

Also, the textile alliance Textilbündnis has further defined

and formalised its structures in the past fiscal year. By the

end of 2016 all members are to develop individual road-

maps (page 6).

4

ABOUT DEUTER Hans Deuter founded his company in 1898 in Augsburg/

Germany and was soon commissioned to supply the Royal

Bavarian Post Office with postage bags and mail sacks.

Today Deuter is one of the leading brands for backpacks,

sleeping bags and accessories worldwide. 101 employees

are working in the headquarters in Gersthofen near Augs-

burg and the brand is represented in 54 countries. In 2006

Deuter was acquired by the Schwan Stabilo Group – a fam-

ily owned company with a tradition of 160 years.

We believe that “from little things big things grow” and

are committed to efficiently reduce the negative impacts of

our actions on man and nature step by step.

5

KEY EVENTS2015/16

BEST GRADE: “LEADER STATUS” in FWF’s Brand Performance Check 2015

LECTURE AT THE 3. BAVARIAN CSR DAY Growth Engine CSR – why the economy’s future

depends on sustainability.

LECTURE AND INFORMATION DESK AT FOKUS N (sustainability exchange and network event

in Augsburg/Germany)

PRESENTATION BY MARTHA AND RICHARD ANKER ABOUT OUR NEW LIVING WAGE CALCULATION (ISPO 2016)

ATTENDANCE OF THE FWF INDUSTRY ROUNDTABLE 2016 (ISPO 2016) AND THE FWF MULTI-STAKEHOLDER MEETING

FWF ANNUAL CONFERENCE

EXCHANGE AT THE BSI SECTION OUTDOOR ABOUT CSR

„PARTNERSHIP FOR SUSTAINABLE TEXTILES GIVES US THE OPPORTUNITY TO IMPROVE THE SOCIAL AND ECO STANDARDS WITHIN THE TEXTILE INDUST-RY WITH POLITICAL SUPPORT AND THE COOPERATION WITH OTHER COM-PANIES. THE TEXTILE ALLIANCE IS CURRENTLY DEFINING ITS FRAME STRUCTURES AND WE ARE VERY MUCH LOOKING FORWARD TO FI-NALLY START PUTTING THE OBJECTIVES INTO PRACTICE IN 2016/17!”

PARTNERSHIP FOR SUSTAINABLE TEXTILESThe Partnership for Sustainable Textiles was founded in

October 2014. Representatives from business, government

and civil society aim at continuously improving the social,

ecological and economic conditions along the whole textile

supply chain in the textile and apparel industry. Deuter has

joined the Partnership for Sustainable Textiles in June 2015.

The Partnership for Sustainable Textiles has aligned its differ-

ent working groups and now works on the specification of its

implementation standards and indicators. To improve the co-

operation within this big multi-stakeholder alliance with 185

members (as at May 2015) a joint online platform has been

created. By the end of 2016 all members have to develop an

individual roadmap based on the specified implementation

standards. Although these roadmaps will not be published

yet, this will be obligatory for all members by early 2018.

Katrin Bauer (CR Managerin)

6

www.fairwear.org

7

2

1

3

4

5

6

8

DEUTER ABOUT THE FWFWe joined the Fair Wear Foundation (FWF) in 2011. The

FWF is an independent organisation cooperating with

companies and factories worldwide to improve the wor-

king conditions in the textile and garment industry, espe-

cially in low-wage countries. By becoming a member we

are committed to the FWF’s strict Code of Labour Practices.

We have found a strong partner in the FWF that greatly

supports our efforts in improving labour conditions with

independent auditors, important background information

and a global network. And with the FWF’s annual Brand

Performance Check our commitment stays transparent and

credible.

Deuter has a stable, long-term relationship with all its

suppliers as well as significant leverage, which allows

them to work effectively on improving working conditions.

While continuous efforts are still needed, the company

has strong systems in place to prevent and remediate ex-

cessive overtime. It has made considerable efforts to en-

sure subcontractors are part of its monitoring.

Deuter received one complaint in its last financial year,

which was handled according to FWF‘s complaint proce-

dure. Preventive steps were implemented.

Challenges remain to ensure independent worker repre-

sentation as well as continuous remediation at smaller

subcontractor locations.”

THE FWF ABOUT DEUTERTHIS IS WHAT THE FWF SAYS ABOUT DEUTER IN ITS LATEST BRAND PERFORMANCE CHECK –THE ANNUAL REVIEW OF OUR EFFORTS TO IMPROVE WORKING CONDITIONS:

„DEUTER MEETS MOST OF FWF’S MANAGEMENT SYSTEM REQUIREMENTS AND GOES BEYOND SEVERAL OF THEM. DEUTER HAS 97% OF ITS SUPPLY CHAIN UNDER MONITORING MEETING THE 90+% THRESHOLD REQUIRED FOR MEMBERS AFTER THEIR THIRD YEAR OF MEMBERSHIP.

THE 8 LABOUR STANDARDS

employment is freely chosen

freedom of association and the right to collective bargaining

no discrimination in employment

no exploitationof child labour

payment of a living wage

reasonable hours of work

safe and healthy working conditions

a legally bindingemployment relationship

7

Ho Chi Minh

China

Vietnam

Thailand

Laos

$ $ $? $

$ $

1. VIETNAM

SIMPLIFIED PRODUCTION CYCLE: (SAMPLE MAIN COLLECTION 2016)

Kick-Off Meeting

Product presentation

Approval First delivery to the shops

Strategy Development and Design Test case Production Production shipment sales samples from Asia

05 07 01 04 06 07 08 12 01 2014 2015 2016

Since 1994 Duke has produced our entire backpack, bags

and accessories collection and we are Duke’s exclusive cus-

tomer. Duke accounts for 90 % of our production volume.

At the three sites close to Ho Chi Minh today altogether

4.210 employees (thereof 3.230 women and 980 men as of

July 2016) assure the Deuter quality.

1.1. Implementation 2015/16 In the fiscal year 2015/16 we put a lot of time and effort in

the follow-up and clarification of a complaint that reached

us in November 2014. The Australian non-profit organisa-

tion Viet Labour reported non-compliances in regards to

working conditions in two factories of our producer Duke

(see Social Report 2014). We informed the FWF immedi-

ately and they initiated an independent investigation of

the allegations. Some could not be confirmed, however

some points requested improvement. All parties agreed to

strengthen the communication between workers, manage-

ment and supervisors in the factories. Therefore a WEP was

conducted in all three factories in August 2015.

Cambodia

8

WEP stands for Workplace Education Programme. The

training educates workers and management in regards

to the FWF’s Code of Conduct as well as communication.

Both sides learn effective communication tools for prob-

lem solving and worker-management dialogue.

We further initiated a FWF audit in September 2015 (see

1.2. Monitoring).

In December 2015 our Partner Duke took part in a FWF

subcontractor training.

Right: FWF subcontractor training

Below: FWF audit

Right: Workplace Education Programme 9

Minimum

Maximum

Mode12 12

100

80

60

40

20

2011 2012 2013 2014 2015 2016

73

59 60

52,5

92

5963

56,5

67

38

30,5

15,5

48

28

*random sample of workers from different departments (e.g. sewing, packing and cutting)

Maximum: The highest overtime number during that month.

Mode: The most frequent overtime number during that month.

Minimum: The lowest overtime number during that month.

The randomly selected employees worked a maximum of 92 excessive work hours

in January 2011, but a minimum of 67 overtime hours. Most of the randomly selected

employees worked 73 excessive hours in January 2011.

We – Duke and Deuter – were very proud to receive the

Best Practice Award 2015 for the significant overtime

reduction in the years 2011 to 2015 (see Social Report

2014). This was the result of a multi-level approach,

which included

• a balanced production capacity utilization over the

entire year by establishing the so called pre-produc-

tion of carry-over articles during low season

• building a third factory in Vietnam and

• increasing the storage capacities in the German head-

quarters.

However, overtime continues to be an issue that we

have to and want to focus on. We further strive for an

optimization and we were able to reduce overtime also

in 2015 /16.

MONTHLY EXCESSIVE WORK HOURS AT VINA DUKE, OUR PRODUCTION PARTNER (FACTORY 1/2 AND FACTORY 3)*

10

1.2. MONITORING After the audit of a subcontractor of our partner Duke in

May 2015 (see Social Report 2015) we followed up the

results in this fiscal year. A task, however, that turned

out to be very difficult. One reason being that we our-

selves had no direct business relation with the subcon-

tractor, which impeded the communication. But the sub-

contractor also showed

no interest in improving

the points in discussion.

Despite repeated vis-

its and communication

Duke was forced to end

the business relation

with the subcontractor.

In September 2016 the

FWF team audited all

production sites of our

partner Duke. Since the management systems of the

three factories are identical or very much alike the re-

sults of the audits are very similar, too.

A selection of the improvement potential / audit results:

• The Vietnamese Labour Law has been revised and in

consequence the wage agreement has to be updated.

• There were various occupational safety points such

as defective emergency exit signs, missing fire extin-

guishers or the routine health check which for some

employees is due not once but twice a year.

• Workers have to approve individually planned over-

time and sign a declaration of consent, while to date

they agreed in teams.

• One worker has applied for her job with wrong pa-

pers (those of her older sister) stating she was born in

1991, when she was actually born in 1998. The pro-

cess of age verification, therefore, has to be improved.

All points have been addressed and solved during the

past fiscal year.

1.3. FWF COMPLAINT SYSTEMThere has been no complaint in the past fiscal year.

1.4. TARGETS 2016 /17 For the fiscal year 2016 /17 we will continue to focus on

living wages as well as the improvement of the subcon-

tractor management. Further, we established relations

to the Global Living Wage Coalition, an initiative by six

of the world‘s most influential sustainability standards

like Fairtrade International, UTZ Certified, and Social Ac-

countability International (SAI) to improve wage levels in

certified supply chains. And supported the calculation of

the Living Wage Benchmarks for HCMC in Vietnam. Un-

fortunately, the official benchmark has not yet been pub-

lished and therefore cannot be presented in detail here.

„ONE OF THE BIGGEST CHALLENGES IS THE PLANNING AND PLACING OF THE PRE-PRODUCTION. THERE IS A VERY HIGH COORDINATION RISK, AND IT IS CRUCIAL THAT OUR IMPORTERS UND OUR SUBSIDIARY IN THE US ARE ALSO STRONGLY COMMITTED TO THE PROJECT. IT IS NOT AN EASY TASK SINCE DEUTER IS A GLOBAL BRAND OPERATING IN 54 COUNTRIES AND EACH AND EVERY MARKET HAS ITS OWN RULES. ALL IN ALL MORE THAN 650.000 ARTICLES ARE ORDERED AT ONCE.“

Sebastian Schmidt (Supply Chain Manager)

11

2. CHINAXiamen

China

Vietnam

Thailand

Laos

China (4 %)

Vietnam (93 %)

Myanmar (< 3 %)

Cambodia

Country Supplier Production Site City

Vietnam Vina Duke Corp. Hoc Mon (Factory 3) Ho Chi Minh City

Vietnam Vina Duke Corp. Cu Chi (Factory 1/2) Ho Chi Minh City

Vietnam Vina Duke Corp. Count Vina (Factory 4) Tien Giang

China Bellmart Industrial Co., Ltd Kingtai Industrial (Xiamen) Co., Ltd. Xiamen

Myanmar Bellmart Industrial Co., Ltd Bellmart (Myanmar) Co., Ltd. Bago

LIST OF SUPPLIERS

Our partner Bellmart was able to significantly unburden

its production site in Xiamen by building a new factory

in Myanmar. Today, all our synthetic sleeping bags are

produced in Myanmar. 240 people are currently working

for Bellmart in Xiamen (as of December 2015) producing

all our down sleeping bags as well as our bluesign® cer-

tified products.

DEUTER PRODUCTION IN NUMBERS

2 Suppliers

Employees in Vietnam4300

Deuter Mitarbeiter 101Production sites 5

240 Employees in China

Employees in Myanmar 387PRODUCTION VOLUMES PER COUNTRY 2015/16

12

China

Vietnam

Thailand

Laos

Myanmar

Bago

3. MYANMAR

Cambodia

Thus the audit of the sleeping bag factory was followed

by the audit of the garment production. Although the re-

sults were very similar, Deuter handled the follow-up for

the sleeping bag site, while another member oversaw the

follow-up of the garment production. All of the brands are

in close communication to keep the processes as effective

and efficient as possible.

The audit team consisted of two auditors from Thailand

and one from Burma, who was responsible for the inter-

views with the employees. The FWF is currently just about

to establish a local audit team.

We as Deuter have not made the decision to move pro-

duction to Myanmar ourselves. We rather trusted in the

cooperation with our long-term partner Bellmart, who has

built an additional factory in Myanmar.

Currently 387 employees work in the new factory (thereof

298 women and 89 men as at May 2016).

We were able to further expand the production in Myan-

mar and today already 44% of our sleeping bags are ma-

nufactured at the new site. These are synthetic sleeping

bags only. The production of our down sleeping bags and

all our bluesign® certified products remains in the factory

in Xiamen, China.

Just like in the fiscal year before, several Deuter employees

from the headquarters (management as well as product

and quality managers) have visited the factory. Further a

FWF audit was conducted in May 2016, accompanied by

our CR Manager on site.

3.1. MONITORINGThe AuditIn May 2016 we initiated an audit at our partner Bellmart.

It was a so-called shared audit in cooperation with two

further FWF members. Apart from the sleeping bag pro-

duction the site also accommodates a sewing factory for

garments operated by the same management.

13

> THE WORKERS INDICATED THAT THE MANAGEMENT TREATS WORKERS QUITE WELL AND ARE ABLE TO COMMUNICATE WITH MANAGEMENT THROUGH THEIR SUPERVISOR.

The ResultsThere were no irregularities regarding forced labour, child

labour, payment of legal living wage or legally binding em-

ployment.

Communication and Complaint SystemDeficits were found, however, regarding factory internal

communication. The workers are not sufficiently informed

about the FWF’s Code of Labour, the Burmese Labour Law

and their rights. A complaint system exists, yet the emplo-

yees are not used to the procedures and the workers’ re-

presentative is not much involved in the complaint process.

Freedom of AssociationThere is no wage agreement and the trade union is not

involved in disciplinary proceedings. There are further no

regular meetings between trade union and management or

they are not recorded.

> EVEN THOUGH THEY ARE NOT AWARE OF THE COMPLAINT POLICY AND PROCEDURES, THEY FEEL FREE TO RAISE COM-PLAINTS TO SUPERVISORS OR MANAGERS DIRECTLY.

FROM THE WORKERS‘ INTERVIEWS OF THE FWF AUDIT:

14

Minimum: 132250 MMK

Maximum: 165750 MMK

Mode: 155450 MMK

200 MMK

175 MMK

150 MMK

125 MMK

100 MMK

75 MMK

50 MMK

25 MMK

WAGE LADDER BELLMART (MYANMAR) FOR SEWING MACHINE OPERATORSMONTHLY WAGES INCLUDING BENEFITS (NO OVERTIME)

1) Legal monthly minimum wage Myanmar from September 2015 on.

2) Legal minimum wage for workers in probation period from September 2015 on.

3) Poverty line, World Bank international norm, 2014.

32370 MMKNational poverty line3)

81000 MMKLegal minimum wagefor workers in probation2)

108000 MMKLegal minimum wage1)

Wages Before 1st September 2015 Myanmar had no national mi-

nimum wage. Since then the minimum wage is in effect

and is set at:

• Trainees for 3 months are paid 50% of the minimum

wage (1.800 Kyats per day). Workers who are under pro-

bation for 3 months are paid 75 % of the minimum wage

(2.700 Kyats per day). After working for six months, the

workers are regarded as permanent workers who are ful-

ly paid (3.600 Kyats per day)

• The legal minimum wage per month is calculated with

30 days per month x daily wage (54.000 MMK, 81.000

MMK, 108.000 MMK)

• Currently we have no independent or multi-stakeholder

minimum wage evaluation for Myanmar.

Working HoursMaximum weekly working hours allowed in Myanmar

amount to 60 hours/week (44 hours/ regular working +

overtime 16 per week).

• Regular working time at Bellmart in Myanmar is from

Monday to Friday 7:30 am to 4:30 pm. Lunch time is

from 12:00 pm to 13:00 pm (1 hour), Saturdays are only

½ -workdays 7:30 am to 11:30 am. Overtime starts from

4:30 pm to 5:30 pm or 6:30 pm.

The factory has to submit the overtime request with the

agreement of a worker representative to get the approval

from Labor Department every week before providing the

overtime to workers.

The audit has shown that the employees work 8-16 hours

overtime per week, which complies with the legal require-

ments. However, the audit uncovered very few irregularities

regarding the documentation of Sunday work.

Currency: Myanmar Kyat (MMK)

Maximum: The highest wage paid in the sewing department.

Mode: The wage that most workers receive in the sewing department.

Minimum: The lowest wage paid in the sewing department.

15

Workplace SafetyThe building housing the stitchery had not the same safe-

ty precautions as the main building. Fire alarm, emergency

exit signs and evacuation plans were missing.

Follow-upAn orienteering program for new employees is being set up

and complemented by regular trainings. Thus all workers

will be informed about the processes within the factory,

the communication channels and the FWF. The workers’

representative is involved in the grievance process. Additi-

onally, every worker receives a handbook with all the im-

portant information.

Non-compliances regarding workplace safety have already

been addressed and are planned to be remediated until

October 2016. Monitoring overtime and wages will be do-

ne in the future.

Our partner Bellmart has agreed to manage the FWF’s

WEP in Myanmar. However, there is not yet a date set for

the pilot.

3.2. Complaint SystemThere have been no complaints in the past fiscal year.

3.3. Targets 2016/17 In the fiscal year 2016/17 we will finalise all open points

of the Corrective Action Plan and further support Bellmart

with trainings and expertise. Also, the wage policy will re-

main an issue, which we will follow closely. Handbook for workers, Bellmart, Myanmar

Workplace safety, Bellmart Myanmar16

DEUTER SPORT GMBH Daimlerstraße 23, 86368 Gersthofen, Germany

Tel. + 49 (0) 821 / 49 87 -0

www.deuter.com

2006 Founding member of the European Outdoor Conservation Association (EOCA)

2008 bluesign® system partner

2011 FWF membership New CR manager position 1. FWF audit at Duke Duke becomes bluesign® system partner

2012 FWF audit at Duke (Hoc Mon, Count Vina) Bellmart becomes bluesign® system partner

2013 WEP training at Bellmart

2014 FWF audit at Bellmart OHS training and audit at Duke (Hoc Mon)

2014 FWF verification audit at Bellmart „Leader Status” in the FWF’s Brand Performance Check

2015 FWF Best Practice Award

2015 Member of the „Partnership for Sustainable Textiles”,

2015 WEP and audit at Duke

2015 Audit at Bellmart in Myanmar

MILESTONES AND, OF COURSE, PLEASE DO NOT HESITATE TO CONTACT US IF YOU HAVE ANY QUESTIONS OR QUERIES:

KATRIN BAUER – KATRIN.BAUER@DEUTER.COM