HERMÈS - 2018 Registration document

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Corporate social responsibility

Business model

Practically all of our production takes place in France, where we have 42 production sites in 8 of France’s 13 regions, and grouped to create regional clusters. All of these production sites are human-size. For exa- mple, our leather workshops employ a little over 250 people. A simula- tion-based recruitment method, developed with the Job Centre (National Employment Agency) enables us to recruit people locally on the basis of their aptitudes rather than formal qualifications, irrespective of age or experience. We invest significant amounts in in-house training (65 trai- ners and some 200 tutors in our Leather Goods division). This production approach is consistent with the craftsmen’s need to manage resources parsimoniously, whilemanaging the teams in a bene- volent and conscientious way. This craftsmanship model holds part of the solution to the challenges of sustainable development in social and environmental matters. Limited subcontracting The Group’s use of suppliers and partners is limited. It establishes long- term relationships with them, in a spirit of cooperation and excellence. With our top 50 tier one industrial suppliers, the average length of our trading relationship is 21 years. Some of them even date back to the 1950s. This outsourcing has limited risks (70% of our objects are pro- duced in-house). In absolute value terms, outsourcing only represents a fraction of our cost of sales, but with the same high standards and level of control as for in-house production. An analysis of the top 50 tier one leading industrial suppliers shows that 56% of purchases come from France, 30% fromelsewhere in Europe, and only 14% from the rest of the world (where they mainly consist of rawmaterials, for which our operatio- nal involvement and vigilance are extremely high, given the implications). Centralised logistics Since its production is based in France, Hermès’ logistics is centralised in the Paris region, thus rationalising its distribution (85% of which is outside France). Its main logistics centre in Bobigny covers almost 30,000 m 2 . A limited number of intermediary logistics centres optimise flows across the Group’s main markets (Japan, China, United States). This centralisation reduces the supply chain’s environmental footprint. “Multi-local” distribution Present worldwide, Hermès is committed to the principle of giving pur- chasing freedom to its distribution subsidiaries and stores. Market managers and store managers thus meet several times a year in France to select a local product assortment specifically suited to their clientele, thereby reducing waste. This purchasing freedom is a strong value at Hermès. This model ensures variety in the offering, makes every player accountable and allows specific targeting, thus reducing the Group’s ecological footprint. Out of our 310 exclusive points of sale, 219 are operated as branches in rented premises (except for certain stores in Paris, Tokyo-Ginza, Seoul, Beverly Hills and Geneva). Hermès stores are designed as showcases for our products. During their construction, reno-

Other materials Hermès essentially uses renewable natural rawmaterials, often in small quantities. It seeks the best characteristics and high-quality supply sources that meet its environmental and social standards. The Group thus uses only small quantities of cotton, wood, precious metals and gemstones (for which we have a certification from the Responsible Jewellery Council – RJC). There is a dedicated annual budget to develop the knowledge, tech- niques and sustainability of our partners’ supply chains. Programmes to improve the quality of their products are also carried out andwemaintain high levels of discussion and sharing. Since 2016, with the backing of an international NGO (WWF France), Hermès has been auditing supply chains (alligator in the United States, cashmere in China, and wood in Asia and Africa) in order to assess their environmental and social footprints. In addition, in 2017, the House conducted a full review of the ostrich farming industry. The review, which was led by a specialised veterinarian, placed emphasis on the ethical treatment of the animals, like in other audits. MAIN ACTIVITIES Hermès’ distinctive feature is a highly integrated form of production, which is based in France. Indeed, most of our products (80%) are made in France, essentially in our own production units (over 70%). By nature, the House’s craftsmanship model implies operational sobriety: control of supplies of noble and expensive materials, optimisation of the use of these resources by craftsmen who are aware of the value of objects, opting for decentralised target-specific distribution where store mana- gers buy according to their respective markets. A company focused on creation AHermèsobjectexpressestheHouse’screativity.Workingwithinanartis- tic department headed by Mr Pierre-Alexis Dumas – a sixth-generation member of the Hermès family – our creative talents are either Hermès employees or engaged in a long-term commitment with the Company. They feed on Hermès’ values, its rich past, its present, and the diverse artistic trends that inspire the style, in order to uphold shared aesthetic values. Their mission is to create, innovate, put forward new concepts and collections whose forms, materials and colours will astound our cus- tomers and be enhanced by our craftsmen. Creative freedom of produc- tion, is asserted while respecting the harmony and consistency of the collections, evinced by an annual theme. It is counterbalanced by the stores’ free choice of purchases. Hand-crafted in France In all our métiers, Hermès’ craftsmanship model is based on the excep- tional savoir-faire of men and women established in France. To ensure their growth and development in our production units and territories, we provide them with in-house training aimed at passing on skills. 2.1.5

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2018 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL