The most significant environmental- and human-related sustainability impacts in our industry arise from long and global value chains. We recognize the challenge of supply chain management, and one of the key developments in our sustainability work is to identify the environmental, human and economic impacts of our value chain and to work purposefully to minimize the adverse sustainability impacts and promote the positive ones in our supply chain.

Production chain management at Luhta

We seek to ensure and promote social and environmental responsibility in our supply chain through a range of policies and procedures, processes and measures. Our production team in Finland manages, coordinates and guides the overall production and sourcing process. In Suzhou, China, operations are implemented by Luhta’s own organization, which became operational in 2002. The organization is responsible for communicating with suppliers, providing guidance to suppliers, testing and monitoring the operational quality of suppliers, and monitoring sustainability. In addition to production quality, it is also responsible for ensuring that the reality in the factories corresponds to what is agreed in our Supplier and Partner Code of Conduct. Our own organization carefully selects the factories and visits them, both at the beginning of production and during the season.

Luhta’s procurements are made in compliance with responsible sourcing principles, and our suppliers must commit to Luhta’s Supplier Code of Conduct and the following policies Amfori BSCI Code of Conduct, Luhta Human Rights Commitment, Luhta Child Labour, Modern Slavery and Human Trafficking Statement, Luhta Labour Rights Policy, Restricted Substance List (RSL), Luhta Environmental Policy and Luhta Animal Welfare Policy.

Compliance with the principles is monitored by both Luhta’s internal and external auditors. Whenever we select new suppliers, we engage in dialogue with them to verify their certifications, practices, social and environmental responsibility, etc. We also require all our partners to provide information about all subcontractors and any audit reports that may be available. Where appropriate, we may prohibit a partner from using a particular subcontractor if, for example, there is a high risk of human rights violations.

We publish an annually updated list of our contract manufacturers to increase transparency about who manufactures our products and where.

North Star process and third-party audits to ensure supply chain responsibility

More than 95% of all our products are manufactured outside the EU – in China, where we have long and close working relationships with our contract manufacturers. Transparency throughout the supply chain and ensuring product quality is important to us. For this, we have North Star, our own internal supply chain management process. The North Star process is designed to increase supply chain transparency currently in China together with our amfori BSCI membership. Through our long and close partnerships and the North Star process, we aim to ensure product quality and good transparency in our value chain. Through these processes, we monitor our production in terms of both product quality and from the perspective of social and environmental responsibility of the production.

North Star helps us to regularly monitor suppliers and manufacturers and to carry out quality audits before and during production. In addition to quality control, audits are performed to ensure compliance with our requirements. In 2023, under our North Star process, we made 4,550 visits (including supplier visits during the product development phase) to our partners across all our product categories. Through the North Star process, we conducted a total of

231 factory audits in 2023. Some of the audit visits are unannounced, i.e. the supplier is not informed in advance of these audit visits. In addition to ensuring that conditions comply with the applicable requirements, these audits also ensure that our products are manufactured in the factories that have been reported to us. North Star also acts as a robust internal audit to verify processes and confirm the origin of the materials we use.

In addition to our North Star process, when assessing working conditions and the implementation of human rights at factories located in risk countries, we use international social responsibility auditing and certification systems, primarily amfori BSCI auditing. We examine the results of amfori BSCI audits as part of our supply chain sustainability management and development. We also accept other social responsibility assessment systems if their criteria are equivalent to those of amfori BSCI auditing and the auditing has been carried out by an independent party (e.g. SA8000).

Read more about our production chain-related sustainability work in our Sustainability Report.