HERMES_REGISTRATION_DOCUMENT_2017

2

CORPORATE SOCIAL RESPONSIBILITY

SUPPLIERS AND PARTNERS

Alert Mechanism The close relationships between Hermès and its suppliers are key to identifying suspicious conduct. On-site visits by purchasers and regular first- and second-level assessments are important aspects that make it possible to detect any violations and to alert the Group. Each métier is responsible for challenges identified and monitoring the implementation of corrective actions with suppliers. Similarly, the legal framework of relations with our subcontractors is regularly updated in light of actual experience. In particular, the conclusions of the audits, which bring together the auditors, the métiers, the buyers and the Industrial Department, offer deep insights solidly rooted in the real cir- cumstances of our subcontractors. In accordance with the code of business conduct, any employee iden- tifying suspicious conduct is encouraged to report it internally. System for monitoring major issues In addition tomonitoringmétiers and subsidiaries, the audit department provides a summary of major risks to Group management, and monitors major issues, including by way of audits. In 2017 it continued to audit purchasing functions. These audits enable the correct implementation of the system described above to be verified. First introduced in 2005, self-assessment of internal control by the subsidiaries contributes to the dissemination of an internal control culture in the Group. This system makes itpossibletoassessthe levelof internalcontrolandtounderstand to what extent operational and functional risks are properly addressed, as described in section1.8.1 Internal control system in response to risks. In order to fulfil the requirements of Law 2017-399 of 27 March 2017, Hermès Group established a Compliance Committee during the year. It comprisesrepresentativesoftheSustainableDevelopmentDepartment, the Audit and Risk Management Department, the Industrial Affairs Department, theHumanResourcesDepartment, theSalesDepartment, the Finance Department and the Legal Department. A Chief Compliance Officer was appointed during 2017. Finally, with the application of the Sapin 2 law, we have increased our monitoring of French suppliers, particularly regarding monitoring of their regulatory compliance with respect to corruption prevention. 2.6.1.2 Operational exemples of risk management and mitigation procedures Leather Goods The Leather Goods division maintains very close relations with its sup- plier partners. The teams visit them frequently to initiate and then follow improvement measures possibly concerning the development of new products, or the quality or optimisation of raw materials.

Tanneries The Tanneries division regularly develops new partnerships and 70% of its subcontractors have been audited over the last four years. Regular inspections are also carried out on livestock sites. In addition to these inspections, an audit programme was set up for all crocodile skin providers. These verifications primarily concern CITES regulations, good animal welfare practices, environmental management, social conditions of employees, and safe infrastructure and working conditions. These topics are grouped together in a charter of best livestock raising prac- tices established in relation with veterinary experts. All of the breeding sites with which the divisionmaintains commercial relations have signed this charter and have been audited over the past two years. Progress plans that have been established with suppliers are regularly monitored. As mentioned in the “rawmaterials” chapter 2.4.1, a specific audit inclu- ding all these topics, was conducted in 2017 for the ostrich division. The “Lizard” (Varanus salvator) sector in Malaysia was also inspected during the year by expert veterinarians in collaboration with our partner. These inspection conducted by our partner, the purchasing department and scientists are designed to ensure compliance with current regula- tions, traceability of the supply chain and that good practices are in place in the facilities. Textiles The textiles division follows a general purchasing approach to improve traceability of the raw materials used in our products. All processing stages are covered by this approach right from the origin of the mate- rial. We also apply a sourcing policy, taking into account the origin and the production conditions of the products (also see chapter on “Raw Materials”). Tableware CATE requires its suppliers to sign a guidebook on undertakings with res- pect to non-disclosure, fair trading and corporate social, environmental and ethical policy. For our French suppliers, it has also implemented obligations pursuant to the 2014 Savary law aimed at combating unfair business competition. In addition, we conduct extensive inspections to ensure that suppliers’ and/or customs declarations indicating that the components are “Made in France” are accurate. At Puiforcat these same undertaking guidebooks are also signed with strategic and/or sensitive suppliers. Annual meetings have been held to share results and strategic elements with our main partners.

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2017 REGISTRATION DOCUMENT HERMÈS INTERNATIONAL