CALIFORNIA TRANSPARENCY IN SUPPLY CHAINS ACT

California Transparency in Supply Chains Act (SB 657)

The California Transparency in Supply Chains Act of 2010 (SB 657) (the “Act”) will go into effect in the State of California on January 1, 2012. The Act seeks the eradication of slavery and human trafficking from product supply chains and transparency by manufacturers and retailers regarding their efforts to ensure that their supply chains are free from slavery and human trafficking. We, at Anvil, believe strongly in ensuring human rights are respected in our supply chain and our management approach to human rights is disclosed under the Human Rights section of our CSR report available here. We hold both ourselves and our business partners to certain published Anvil Responsible Production and Ethical Sourcing Principles (“Production Principles”) that reflect the value we place on human rights, including those outlined by the Act.

Definitions

To address the regulations of the Act, we have revised our Production Principles to specifically include a definition of “slavery” as someone who is “forced to work – through mental or physical threat; owned or controlled by an ‘employer’, usually through mental or physical abuse or threatened abuse; dehumanized, treated as a commodity or bought and sold as ‘property’; physically constrained or has restrictions placed on his/her freedom of movement.” This definition is based on the definition used by Anti-Slavery International.

Additionally, we have added a definition for trafficking in persons as follows:

“Trafficking in persons” shall mean the recruitment, transportation, transfer, harbouring or receipt of persons, by means of the threat or use of force or other forms or coercion, of abduction, of fraud, of deception, of the abuse of power or of a position of vulnerability, or of the giving or receiving of payments or benefits to achieve the consent of a person having control over another person, for the purpose of exploitation. Exploitation shall include, at a minimum, the exploitation of the prostitution of others or other forms of sexual exploitation, forced labour or services, slavery or practices similar to slavery, servitude or the removal of organs. The consent of a victim of trafficking in persons to the intended exploitation shall be irrelevant where any of the means set forth above have been used.”

This definition is based on the definition contained in the United Nations’ Protocol to Prevent, Suppress, and Punish Trafficking in Persons, Especially Women and Children, Supplementing the United Nations Convention Against Transnational Organized Crime. View our revised Production Principles here.

Risk Assessment

Anvil regularly assesses the risks related to its supply chain. We do this not only by assessing risks that are prevalent in particular countries in which we source materials or manufacture goods, but also by assessing the strengths and capabilities of the companies with which we associate. These continuing assessments are performed by internal personnel and help shape our sourcing strategies. With respect to fiber sourcing, Anvil primarily relies on U.S. grown cotton, but as our fiber diversification program expands to other countries, Anvil is developing a fiber scorecard to include labor and other compliance criteria.

Standards for Anvil Factories and our Suppliers

The principles contained in the Production Principles outline minimum standards for any Anvil-owned or subcontract production facility. Contract manufacturers may not subcontract work without Anvil’s express written consent and then only to approved subcontractors that abide by these Production Principles.

Our Production Principles reflect those norms that are already recognized in the international business context, being based on the principles outlined in the United Nations Global Compact and internationally agreed-upon rules, including, but not limited to, the U.N. Universal Declaration of Human Rights, the International Labor Organization (“ILO”)’s Declaration on Fundamental Principles and Rights at Work, the U.N. Convention on the Rights of the Child, ILO Convention 29 and 105 (Forced & Bonded Labour), ILO Convention 87 (Freedom of Association), ILO Convention 98 (Right to Collective Bargaining) and ILO Convention 182 (Worst Forms of Child Labour). These Production Principles have historically required, among other things, all contract manufacturers to maintain compliance with relevant laws and regulations in all locations where they conduct business and prohibit the use or support of involuntary or forced labor – indentured, bonded or otherwise. Our auditing procedures to support this requirement include a review of the company’s policies on freedom of movement, retention of documents, curfews, etc., review of personnel and payroll files, including signed employment contracts and age verification, review of country laws related to minimum age for employment and conducting random employee interviews. Effective December 2011, the Production Principles have been modified to specifically include a definition of “slavery” and “human trafficking” within our No Forced or Child Labor Principles.

Although from time-to-time we utilize subcontract factories to manufacture products, Anvil manufactures the vast majority of its products in wholly-owned subsidiary factories in order to maintain the greatest control over our supply chain and production process. These factories are located in Honduras and Nicaragua which are designated as Tier 2 countries under the U.S. Department of State 2011 Trafficking in Persons Report (the “Report”). In addition, all three of our offshore owned factories are audited and certified by Worldwide Responsible Accredited Production (“WRAP”), an internationally recognized social accreditation. A number of our private label customers and other Anvil-brand customers also visit and audit our facilities to ensure that they comply with their individual social, environmental and other compliance standards, all of which include comparable prohibitions against forced and child labor and similar restrictions.

Audits

Currently, our compliance team includes a team of internal auditors certified to audit under several internationally recognized social compliance methodologies. Each year our internal auditors conduct multiple audits of our three owned Central American manufacturing facilities and have also audited key raw material suppliers. In addition, while Anvil’s offshore factories are not located in countries designated as Tier 2 Watch List countries or Tier 3 countries on the Report, Anvil does, from time to time, source a small percentage of finished goods from third party factories located in such countries. As part of our sourcing process, we conduct due diligence to confirm, to the best of our knowledge, that the cotton used to produce our finished goods is not sourced from countries known to be at high risk for forced, child or similar labor. Our sourcing and compliance teams evaluate proposed subcontracting and sourcing facilities individually to ensure their compatibility with our Production Principles. Due to foreign travel restrictions and the fact that our finished goods sourcing often represents a small portion of any subcontract factory’s overall production, the majority of our examinations are announced in advance and performed by Anvil employees with extensive training and audit certifications. Anvil’s program to ensure compliance with our Production Principles, including onsite audits, is disclosed in our CSR Progress Report available here.

Accountability

Anvil maintains and enforces internal accountability procedures for employees and contractors regarding company standards in our Production Principles, including on forced labor and child labor, which standards specifically have been modified to include a definition of slavery and human trafficking. We also routinely work with our contractors and suppliers to help prevent social compliance issues from arising, including through onsite training. We have actively encouraged our sub-contractors to become WRAP certified and have had some success helping contractors become WRAP certified. However, if a facility is found to be in violation of the Production Principles, the partner will be requested to take corrective action. While we prefer to support and encourage continuous improvement toward compliance, should a partner be unwilling or unable to meet our requirements in a timely manner, we will be forced to cease doing business with that company. In these ways, Anvil pledges to stay true to the values underpinning our ethical sourcing standards, including our prohibition against the use or support of involuntary or forced labor, slavery and human trafficking.

Training

Anvil conducts internal training on Anvil’s Code of Conduct and the Production Principles to ensure the necessary participants in the supply chain management are knowledgeable and aware of the issues and concerns surrounding the supply chain, including human trafficking and slavery, with a particular focus on mitigating risks. Anvil also encourages employees involved in Anvil’s supply chain to participate in external training programs and seminars on social compliance issues. The total number of employees trained on policies and procedures concerning aspects of human rights that are relevant to our operations are disclosed in our CSR Progress Report here.