Levi Strauss & Co.

(LS&Co): Driving Adoption of Green Chemistry

1. What internal and external factors is LS&Co. responding to with the Screened
Chemistry program? How is this program different from other chemical management
strategies within the textile industry?

LS&Co was the first multinational apparel company to establish a code of conduct for all

of its global suppliers that covered labor, health, safety and environmental standards. It was one

of the first companies to initiate the modern corporate responsibility movement. LS&Co has

many one of the first examples. Such as being one of the first to establish guidelines for water

quality and a restricted substances list. It also was one of the first to provide incentives to

suppliers in developing countries if they upgraded their environmental, health, safety and labor

standards.

In order to maintain its strength and leadership as a socially and environmentally

responsible company in the apparel industry, LS&Co needs to be at the forefront of the green

chemistry movement. They need to be proactive regarding chemistry management and establish

a program that removes hazardous chemicals before they enter the supply chain and replace them

with better alternatives. By establishing the Screened Chemistry Program, LS&Co will be

leading the apparel green chemistry movement. They will be creating a unique scoring program

that is even more hazard-based than existing standards such as bluesign. Also, with this

Screened Chemistry Program, LS&Co will be staying ahead of government regulations and

pressures from organizations like Greenpeace and from savvier consumers.

LS&Cos Screened Chemistry Program supports their sustainability strategy,

Sustainability is sewn into the fabric of everything we dofrom how our clothing is made to

the work we do to help protect our planet. LS&Co moved from the traditional, risk-based

approach to hazard-based approach. The traditional approach for the industry was the use of a
Restricted Substance List (RSL) throughout their supply chain. These kept companies compliant

with international chemical regulations. The problem with this is that there was no real push to

use sustainable chemistries; it was also often hard to enforce with no incentives. The new

program was proactive, it allowed the screening of chemical formulations against human and

environmental health hazards. Issues were caught before they entered the supply chain,

previously this was done somewhere in the middle or at the end of the manufacturing process.

The framework of the Screened Chemistry program incorporates GreenScreen and the

U.S. EPAs Safer Choice Program to determine which chemical substances are best in class or

better alternatives. It identifies areas that require improvement and innovation. The program goes

further upstream in the supply chain to the design process than the previous established risk-

based programs. It provides a positive list of chemicals that are safer and better for consumers,

the environment and personnel within the supply chain. This program differs from the others by

making it hazard-base vs risk-based. Instead of managing the risk, this program reduces it.

LS & Cos Screened Chemistry Program (2013) supports their sustainability strategy,
Sustainability is sewn into the fabric of everything we dofrom how our clothing is made to
the work we do to help protect our planet. LS & Co moved from the traditional, risk-based
approach to hazard-based approach. The traditional approach for the industry was use of
Restricted Substance List (RSL) throughout their supply chain, these kept companies in
compliance with international chemical regulations. The problem with this is there was no real
push to use of sustainable chemistries and it is often hard to enforce with no incentives. The new
program was proactive, it allowed screening of chemical formulations (mix of ingredients)
against human and environmental health hazards. Issues were caught before they entered the
supply chain, previously this was done somewhere in the middle or at the end of the
manufacturing process. The Screened Chemistry program identifies better alternatives and areas
that require improvement and innovation.

LS&Co is a global company whose supply chain begins with a design team. Their collections
could include over 100 products. The next step in the chain is the prototyping process, they work
with a chemical company to finalize a prototype. Once the prototype is approved it is sourced
through the brands manufacturing process. A major problem, was the lack of enforcement of
green chemicals from brands when they were sourced. The Screened Chemistry program enabled
continued partnership of the chemical company past the
prototyping process and into manufacturing.

LS&Co.s goal is to have more sustainable chemistries in the textile supply chain. Ultimately,
they want to accomplish a zero discharge of hazardous chemicals by 2020. By implementing this
program they will keep out the hazardous chemicals out of their manufacturing processes. This
in turn will minimize the human health and environmental impact of its clothing manufacturing
processes. LS&Co. realizes that in order to bring change across the industry they need to bring
other companies and brands on board to drive a systemic change. It takes more than a company
to make a difference.

LS & Co. need for adoption of a Screened Chemistry program is to mitigate the risk associated
with chemical formulation used in garment production before they enter the supply chain. Efforts
to reduce hazardous chemicals and environmental pollution in the supply chain has already been
established; however, they only identified chemicals that were not permitted to use. They did
little to push toward the use of more sustainable chemistries in the textile supply chain. LS & Co
believed that the Screened Chemistry program could manage chemicals in the supply chain to
protect people and the environment. The program takes a shared approach by working with other
brands, governments, NGOs, and suppliers to create a system designed to achieve the goal of
zero discharge of hazardous chemicals.

2. How can LS&Co. advance its screened chemistry approach? Who are the key partners?
What are the largest barriers to adoption of LS&Co.s Screened Chemistry approach? Is
there a role for business, NGOs and governments outside of the apparel industry?

In order to advance its screened chemistry approach, LS&Co needs to convince and

incentivize the chemical companies to focus on green chemistry. LS&Co needs to get the

chemical companies on board. In order to do this they need cover or the initial chemical

screening costs with the chemical companies. They need to convince the chemical companies

that the expenses of going green will be worth it. Provide them with a green certificate that

will give them an advantage over competitors and get them more business. They also need to

incentivize chemical companies to create green chemical formulations; if their profits dont

cover the expenses for these formulations then they would pay them the difference. This

incentive agreement approach has worked; as per Bart Sights, the VP of LS&Co Technical
Innovation: We signed that agreement with a few chemical companies and no one has sent us a

bill - early adopters are actually gaining business.

LS&Co also needs to use the green chemical company not only for prototyping, but

also during the manufacturing process. They need to enforce their choice of a green chemical

company to the manufacturer instead of leaving the choice to them. LS&Co needs to maintain a

vertical supply chain with most of the vendors and manufacturing processes within a facility.

This will help to have a more rationalized supply chain where they can have more control of the

manufacturing processes.

Key partners to making this a successful program include not only the chemical

companies, but also the mills, vendors and the ZDHC group. In order to reach ZDHCs goal of

zero discharge of hazardous chemicals by 2020, pilot programs need to be developed with other

brands that are willing to partner. Also, LS&Co should map out their supply chain in order to

look for shared vendors with other brands to made them aware of their green processes.

LS&Co encountered some challenges and barriers during the adoption of their screened

chemistry program. Some of these challenges include the resistance from chemicals suppliers.

Chemical suppliers are hesitant to phase out their biggest selling chemicals.

The chemical suppliers also want to make sure that the chemical screenings maintains their

intellectual property safe and confidential. The lack of cross-industry standard is also a barrier;

having to meet multiple, different standards for different brands costs a lot of money. Another

one of the challenges relate to the third party assessments. Having a third party making the

chemical screenings made for bottlenecks in the process; these were small companies without an

established network of assessors, at least not yet. Another challenge is the size of some of the
chemical companies and suppliers, some of them were larger and less flexible companies which

tend to move slow when adopting newer processes and innovations.

Yes, there is a role for business, NGO and governments. The apparel industry is not the

only industry that uses harmful hazardous substances. Requirements are needed within all

industries to build standardized and transparent practices and requirements. Government should

be in charge of creating policy that will drive the systemic change that can aid in helping all of

mankind.

Chemical suppliers need to do R&D to find better alternatives to harmful chemicals. LS&Co.
needs to be the industry leader with this initiative and provide a financial incentive to the
chemical suppliers so that new green chemicals are produced and used in the supply chains.
LS&Co also needs to leverage their big company name and be an agent of change and signal that
they are moving towards stronger protections and regulations around chemical use. They need to
educate the consumer on the potential health and environmental issues that the chemicals used in
the industry can cause. This will in turn make the consumers demand safer chemicals from the
textile industry. Eventually the regulations and protections will become industry standard and
practice.

Some barriers that the screened chemistry will face will be the adoption from the chemical
suppliers. It will be hard for chemical suppliers to phase out chemicals of concern because some
of these chemicals are some of their biggest selling products.

The new Screened Chemistry Program goes further upstream in the supply chain to the design
process than the previous established. The program provides a positive list of chemicals that are
safer and better for the environment so that at the start of the design and product development
process with regards to chemicals used to achieve the designs. This program differs from the
others by making it hazard base vs risk bas program. Instead of managing the risk, this program
reduce them. Key partners to making this a successful program include collaboration with
governments, NGOs, suppliers, competitors, and ZDHC.

Some challenges included resistance from chemicals suppliers, multiple industry standards,
different brand standards, scaling of third party assessments, and a slow moving industry,
Chemical suppliers will not want to phase out chemicals voluntarily as this is one of their biggest
selling products. Consumers will need to be educated and made more aware of the hazard and
concern of using these chemicals in order to demand safer practices. Also, a bandwagon
approach with other industry leaders is need to influence the market.
Yes, there is a role for business, NGO and governments. The apparel industry is not the only
industry that uses harmful hazardous substances. Requirements are needed within all industries
to build standardized practices and requirements that overall can aid in helping all of mankind.

3. Who should bear the responsibility and cost for screening chemistries? Who stands for
having chemicals screened for safety? Are there ways to share this cost?
To create that buy in LS&Co paid for several chemical screens when the initial plan was to have
chemical suppliers pay for the chemical screens. The challenge the company had was to find
better alternatives and still match the current cost criteria. However, development is costly in
terms of certification, R&D resources and opportunity costs. An example provided was
Garmon, they invested $1 million to be green friendly.

LS&Co found ways to share the responsibility they signed agreements with their chemical
suppliers that split the risk of investing to have their formulations screened they would provide
the difference if profits didnt cover the initial investment. Chemical suppliers didnt think the
screening money was an issue as long as the entire company followed the same green chemistry.

The responsibility should be bared by both parties as LS & CO is facilitating. Initially the
company paid for numerous chemical screens to get chemical companies on board. They
believed as more companies started to implement the program, the less it would cost. In addition
to paying for a few initial screens, LS & Co would pay the chemical companies difference the
second year of their investment into the program if their progrits did not cover the initial screen
investment.

4. What leverage does ZDHC have on the apparel industry? Is ZDHC the best avenue for
LS&Co. to advance its Screened Chemistry Program?

The ZDHC is the best avenue for LS&Co to advance its Screened Chemistry Program.

The ZDHC group includes a collaboration of 23 signature brands, 33 value chain affiliates, and

14 associates which include several recognized test laboratories and industry related associations.

Together they are working to support implementation of safer chemical management practices.

The ZDHC foundation has great influence in the global textile, leather and footwear

industries. It has created a comprehensive program that has as main objective the elimination of
hazardous chemicals in the apparel manufacturing processes. The ZDHC program created the

apparel industrys Manufacturing Restricted Substance List (MRSL). This was developed and

published with inputs from brands such as LS&Co and key stakeholders including chemical

companies. The program also specifies wastewater guidelines and expectations for the entire

industry. It also created, in conjunction with other industry coalitions and associations, an audit

protocol to provide brands with a consistent set of chemical management assessment tools to be

used across their supply chain. In addition to the aforementioned programs, the ZDHC has also

developed research, data & disclosure and training programs.

5. Traditional approaches to corporate strategy emphasize the competitive nature of

business with the objective to achieve a competitive advantage. Porters 5 forces model
depicts companies within an industry in a series of competitive battles with their industry
peers and their suppliers. How might these traditionally competitive based views of
business hinder the adoption of LS&Co.s Screened Chemistry approach across the
apparel industry? What might be done to overcome this?

Porters 5 Forces that shape the company's future, understanding them will determine the
company's success. Determines how the economic value it creates is apportioned.
1. Consumers
2. Suppliers
3. Substitutes
4. New Entrants
5. Existing Rivals

Presentation Outline
Introduction
LS & CO supply chain
ZDHC
Chemical Management System
Screen Chemistry
who , what, when, why
How are they pushing
Challenges/Barriers
Whos pays for it?