'RISK ASSESSMENT & DUE DILIGENCE

Key Activities This year

Unauthorised subcontracting We have identified 25 cases of unauthorised subcontracting (subcontractors who have been engaged without our approval and therefore without us carrying out an audit) in our product supply chain through our auditing work. Where such cases are identified, we work with the supplier and factory to highlight the risks of subcontracting to unauthorised sites. We have seen an increase of over 100% in unauthorised subcontracting cases during the year which could be due to the reduction in in-person visits over the last 2 years, in turn causing complacency or risk-taking in the supply chain. As our COP teams start to increase the physical audits, they are better

able to identify unauthorised subcontracting cases and work with suppliers to remediate.

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Due Diligence & Action Taken

During these audits we identified 19 factory sites with modern slavery related risks. Of these 19 factories, 11 have been successfully remediated or have an agreed plan to remediate and 8 have been disengaged. Our priority is to support factories to resolve issues, but we will not continue to work with them indefinitely if there is no willingness to improve.

Focus on child labour

During the year we identified 3 cases of child labour (4 children in total) and 2 of these cases were remediated.

In one resolved case, a 15 year old was working in a factory during the school holidays and when our COP team highlighted the issue, the factory was positively engaged in remediation. The child stopped working immediately and the factory paid all owed wages up to the date when he was due to return to school. The child and his parents were contacted to confirm he had returned to school and his school certificate was provided for review. In order to prevent a future occurrence of this issue, the factory established internal procedures to scan workers’ age documentation during the recruiting process to verify that all workers meet legal working age. The management team committed to carrying out regular checks as well. The factory was audited again by our COP team and achieved an acceptable rating.

The unresolved case was at a factory proposed for NEXT in China and was identified during the preliminary checks that are required before business is placed. Two children were identified on site during a COP team audit. We appointed an in-country independent third party to maintain contact with the children and their families to understand their needs and perspective. Without existing business leverage it was challenging to gain collaboration and despite repeated attempts to engage, we were unable to successfully conclude the case. The factory management did not want to participate and the families ceased communication with our appointed representatives. This was a disappointing outcome for us and highlights the complexity of cases where engagement from all involved parties is vital in order to achieve a positive result. As a result, NEXT did not place any business at this factory.' - 6-8