beyond factory walls 2009 timberland report

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Responsibility Beyond Factory Walls:

Engaging Factory Workers & Strengthening Communities

2009 REPORT

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Table of Contents

EXECUTIVE SUMMARY 1

CEO LETTER 3

I. TIMBERLANDS CODE OF CONDUCT & FACTORY MONITORING PROGRAM 4

Why We Focus on Factory Conditions 4

Management & Oversight of Code of Conduct Program 4

Timberlands Sphere of Influence on Social and Human Rights Issues 5

Radical Shift in Practice 5

Challenges We Face 6

II. BEYOND MONITORING 6

Engaging Workers 7

Establishing Trust and Two-Way Dialogue 7

Worker Code of Conduct Committees 8

Engagement Outside of Assessments 10

Strengthening Communities 10

Worker-Engaged Community Service 11

III. SUSTAINABLE LIVING ENVIRONMENTS 13

Living Wage Overview 13

Alternative Approach: Sustainable Living Environments 14

Scaling the Sustainable Living Environment Approach 15

Case Study: Improving Health Services & Providing Access to Microfinance in Bangladesh 17

Case Study: Improving Womens Health in China and Vietnam 20

IV. CONCLUSION 21

The Timberland Company has permission of all factories and workers mentioned in this paper to publish the information herein.

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Timberland is committed to ensuring that the workers who produce our products are provided with fair, safe and non-

discriminatory workplaces. Our products are produced in factories across the globein 38 countries by roughly 300

factories and approximately 247,000 workers.1One of these factories, located in the Dominican Republic, is owned and

operated by Timberland. Our Code of Conduct team is made up of 11 Assessors and two contractors who each have

different numbers of factories they must assess. In countries where we dont have a local assessor, we employ an external

monitoring firm to assess factories producing Timberlandproduct.

Whether we are focusing on our own factory or on our third-party contract

manufacturers, we work to ensure that all factories comply with our Code

of Conduct. But we also seek to do more. We define Earthkeeping as our

mission to put commerce and justice at the center of our business platform.

In the spirit of Earthkeeping, we believe it is important to go beyondfactory walls by protecting the environment in which we operate and the

individual workers who produce our products.

By engaging workers directly in our factory assessment process,

we believe it is possible to establish trust and a two-way dialogue that

ensures factory workers voices are heard. Weve helped train workers and

cultivated support from factory management so workers can establish their

own Code of Conduct Committees. This enables them to participate in the

process of identifying improvement areas and to take part in initiatives to

achieve positive change. Weve also encouraged factory owners and workers

to establish and promote home-grown training programs that encourage

workers to share ideas and implement improvements. And weve learnedthat seeking input from community members, local NGOs, government,

industry organizations, other area factories, and other brands that source

from the same factories is integral to ensuring sustainable improvements.

We seek to engage workers in the communities where they live

and work so that they too may create better quality-of-life conditions for

themselves and their communities. We aim to ensure that workers live

EXECUTIVE SUMMARY

FACTORY LOCATIONS (YEAR END 2008)1

1. Timberlands factory list is updated quarterly at www.earthkeeper.com/csr.

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WORKPLACE KEY PERFORMANCE METRICS

RESULTS

WORKPLACES INDICATOR 2007 2008

Purchasing Practices Percentage of Footwear Production in High Risk Factories 34% 1%

Percentage of High Priority Factories 38% 38%

Scoring Average Assessment Score 61.9 62.0

Average Environmental Score (not including tanneries) 1.88 2.1

Average Environmental Score (including tanneries) 2.53 3.17

Improvement Percentage of Continued Factory Partners with Improved Score 51% 69%

and work in Sustainable Living Environments, an approach that considers

the fact that paying higher wages may not always help workers realize

improved access to basic needs or opportunities for betterment. We believe

that while minimum wages in many places may not be sufficient, wages

alone will not guarantee that every worker has food that meets universal

nutritional standards, affordable and accessible health care, or educational

opportunities. As a result, we have increased the focus of our work beyond

assessments to finding practical solutions that aim to improve available

infrastructure so that Timberlands presence creates fair, safe, and non-

discriminatory conditions inside and outside of work.

CURRENT PROGRESS & NEXT STEPS

Over the course of 2007 and 2008, we have worked toward measurable

factory improvements to scale the lessons learned through various pilot

programs instituted during those years. The results from our remediation

efforts also support our belief that going beyond monitoring and beyond

factory walls is critical to addressing workers needs. For example, we

have nearly eliminated high risk issues from our footwear sourcing

channels, and weve seen our continued business partners achieve higher

scores on our Code of Conduct assessments, demonstrating that improved

working conditions is a long-term journey that requires both time and

resources to see measurable results. Weve also continued to include

environmental aspects as a priority in focus our Code of Conduct program

and have seen measurable improvements based on factories implementing

Environmental Management Systems. Our commitment to improve

environmental conditions in tanneries is also on track, whereby we seek

to have all tanneries achieve a Silver rating according to the standards of

the Leather Working Group by 2010; weve already seen this program have

significant impacts, reducing tanneries overall environmental footprints.

While weve partnered with factories to improve their assessment

scores, their status within our Code of Conduct assessment process, andthe conditions in which workers perform their jobs, weve also experienced

challenges. We did not meet our 2008 target for improving our average Code

of Conduct Assessment Score, as this metric incorporates the scores of new

suppliers who are often unaccustomed to the rigor and high standards

that Timberland demands. Nonetheless, we have increased our 2010 target

assessment score because we expect that increased remediation assistance

at our lowest-scoring factories and continued improvement of assessment

scores for our long-term business partners will drive year-over-year

improvements. Increasing direct remediation assistance, engaging workers,

and strengthening communities are objectives that support the tangible

performance improvements we seek.

One voice can and must make a difference. We believe that speaking up

for a courageous idea or voicing a grievance strengthens and builds a

community. This premise is the foundation for our approach of placing

workers at the center of our monitoring process, empowering them

with the knowledge and skills to better their lives inside and outside

the factory walls. We present this paper as a stand-alone report that

explains our commitment to improving the lives of workers. We believe

that the accomplishments and challenges we face are not unique to our

brand and that collaboration and engaging stakeholders are necessary

to scale our efforts. This document discusses our current programs

and complements our 20072008 printed CSR reportas an in-depth

look at our Workplace pillar. While we have included key performance

metrics here, you can also learn more about our performance by

reading the printed CSR report. Finally, we hope this paper presents

ideas for future innovationfor Timberland, for our industry, and

for other stakeholdersthat can help us build more sustainable

working environments that allow all of us to participate in a universal

Earthkeeping agenda.

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As a third-generation CEO, Im reminded often of my grandfather, who was a craftsman and role

modelsomeone I looked up to while growing up in Timberlands original New Hampshire factory.

In 1994, we published our Code of Conduct to officially formalize the pursuit of human dignity

in the manufacturing process. We have never questioned whether or not to invest in the lives of

workers making our shoes, apparel, and accessories. Instead, the question is how best to serve our

various stakeholdersfrom a demanding shareholder or discerning customer to an employee who

wants to make a living with purpose.

Timberland is only successful if we maintain our license to operatethat is, our contract

with various vendors, suppliers, custom