Due Diligence and Risk Analysis
Benetton Group pays the utmost attention to risk management and deems the assessment in advance and on an ongoing basis of the nature and level of the risks associated with the strategic objectives of fundamental importance for the creation of sustainable value. Benetton Group annually updates the due diligence process of its value chain, in order to identify, prevent and mitigate the risks for the business and the current and potential impacts of the activities carried out. The analysis gives maximum priority to the environmental and social dimension and is aligned with the OEDC Guidelines on Due Diligence in the Garment and Footwear Sector. In particular, Benetton Group:
- has carried out a mapping of its value chain and considered the sector in which it operates, the type of product, the geography of its operations, the business model and supply practices as risk factors;
- has identified the main environmental and social risks to which the Group is exposed, assessing their probability and impact;
- has prioritized the mapped risks and identified appropriate mitigation actions.
The social and environmental due diligence process is carried out with the contribution of the company managers, and through consultation with the relevant stakeholders (employees, suppliers, associations); specifically, the Benetton Group periodically liaises with the working groups promoted by the industry, in which there is a confrontation on the interests of the categories represented (NGOs committed to guaranteeing respect for human rights and environmental protection, representatives of suppliers and workers, other brands and retailers). In the case of critical issues, Benetton Group reserves the opportunity to deepen the discussion through a dedicated dialogue with the categories of interested stakeholders (e.g. trade union representatives).
The risk analysis was conducted internally, with the contribution of company managers, whereas it does not provide for direct involvement of external stakeholders.
Risk analysis is an integral part of the corporate system and is a dynamic process, subject to continuous updating.
In order to identify the environmental risk factors, the IPE’s environmental compliance database, Environmental Performance index and Material Sustainability Index (MSI) of Sustanable Apparel Coalition were considered.
In order to identify social risk factors, we referred to the ILO conventions, the principles of SA8000, UN Guiding Principles on Business and Human Rights, United Nations Sustainable Development Goals, the WBCSD database – The Human Rights Opportunities and World Economic Forum – The Global Risks Report.
Climate-related risks and opportunities
Benetton Group has a process for identifying, assessing, and responding to climate-related risks and opportunities over the short (0-3 years), medium (3-6 years) and long term (>6 years). Benetton Group is structuring an ERM model aimed at supporting senior management in identifying and assessing the main business corporate risks and opportunities, including ESG topics, and how to manage them as well as organizing the relevant system control. The Group identifies potential climate-related risks and opportunities through analysis of sectoral literature, benchmark analysis, assessment of trends applicable to the business model and corporate governance, with the aim of exhaustively mapping, and subsequently evaluating, all climate - related issues that could have a substantive impact on the Group’s strategy. The following parameters are always considered when assessing potential climate – related risks and opportunities:
- Magnitude of impact
- Perimeter of impact
- Ability to mitigate the impact
- Likelihood
- Group's contribution to the impact
The evaluation of the climate-related issues and opportunities is based on a dual perspective:
- inside-out perspective, considering the impact of these issues can generate on the environment and society;
- outside-in perspective, considering the ESG risks and opportunities associated with these issues that could impact the Group’s business.
The process for identifying, assessing, and responding to climate-related risks and opportunities is carried out by the Sustainability and Internal Audit departments and it is approved by the Control, Risk and Sustainability Committee.
Benetton Group applies a holistic approach in responding to climate-related risks, that are at least annually. Overall climate goals and strategies are updated when necessary. Based on this, the Sustainability function with the support of all the interested teams has the responsibility to co-develop both long-term strategies and short-term action plans in order to manage their climate risks including reducing their own climate impact.
The main climate-related risks and opportunities with a significant impact on business development or financial stability of the Group are:
Changes in customer attitudes and purchasing patterns
It is noted that the demand for greater sustainable products from consumers is constantly growing in the fashion industry: the alignment with consumers expectation for products with low environmental impacts is key to be recognized as sustainability leaders and to preserve the market share.
Transition to lower-carbon footprint production and/or low-emission technologies
Benetton Group is committed to partner to its supplier to implement a gradual and just transition to green energy. Due to the increase in the energy costs, all production costs could consequently rise.
Current and emerging regulation with the introduction of global or regional carbon taxes
This risk is related to non-compliance with laws and regulations, both internal and external, that may depend on exposure in terms of penalties and business interruption, on GHG emissions taxes or import duties on garments produced.
Increased green energy costs
Considering the uncertain macroeconomic context and the increasing demand about green energy, the transition to lower carbon energy sources may lead to increased energy costs due to potential gaps between demand and supply. This may impact Benetton Group’s direct operations (campus and stores) as well as the value chain.
Raw material availability and price
Benetton Group primarily depends on natural fibers, such as cotton and linen. Higher temperatures and water shortages will affect raw materials production in many regions, with potential impacts on availability and price. Price increases for other raw materials are also expected.
Extreme weather events that influence production and logistics
Extreme weather events, such as heat waves, droughts, and floods, may cause disruption to production and distribution in some countries.
Policy
Please, download here below the main policies for Benetton Group:
Animal Welfare and Materials Policy
Non-discrimination and Non-harassment Policy
Labour Relations Principles Policy
Compensation and Benefits Policy
Benetton Group is committed to prevent the generation of textile waste and not to waste the value of end-of-life garments. For this reason, it adopts a “make-to-order” production system, aimed at minimizing overstock. This is however reallocated in the secondary sales channels, as is the case for defective stock and production samples.
As of 12.31.2022 there are 261,000 items of obsolete goods in the warehouse, which will be managed through the appropriate channels. During 2022, no items were scrapped.