While all Performance Standards are applicable to this investment, IFC’s environmental and social due diligence indicates that the investment will have impacts which must be managed in a manner consistent with the following Performance Standards

PS1: Assessment and Management of Environmental and Social Risks and Impacts

PS2: Labor and Working Conditions

PS3: Resource Efficiency and Pollution Prevention

PS4: Community Health, Safety and Security

IFC’s appraisal considered the environmental and social management planning process and documentation for the Project and gaps, if any, between these and IFC’s requirements. Where necessary, corrective measures, intended to close these gaps within a reasonable period of time, are summarized in the paragraphs that follow and (if applicable) in an agreed Environmental and Social Action Plan (ESAP). Through implementation of these measures, the Project is expected to be designed and operated in accordance with Performance Standards objectives

Environmental and Social Assessment and Management System and Policy

UA has a comprehensive and functional supplier compliance framework that is based on the principle of continual improvement. There is a mandatory supplier Code of Conduct, which covers principles related to: non-discrimination, prevention of child and forced labor, protection of the environment, health and safety of workers, hours of work, compensation, harassment or abuse, freedom of association and collective bargaining, respect for human rights, among others. UA has committed formally to uphold the Fair Labor Association's Workplace Code of Conduct and compliance benchmarks (the FLA Code - https://www.fairlabor.org) and the FLA's Principle of Fair Labor and Responsible Sourcing and Production and to integrate them into business practices over time. FLA is a collaborative effort of universities, civil society organizations and socially responsible companies dedicated to protecting workers' rights around the world. As a FLA member, UA requires suppliers that manufacture its products to comply with the Under Armour Supplier Code of Conduct and the FLA’s Workplace Code of Conduct and meet its associated compliance benchmarks. The  above codes set requirements for supply chain partners, which are based on human rights, labor and local laws. It states that Suppliers shall collaborate with UA and their subcontractors to assess current practices vis-à-vis the code of conduct, identify opportunities for improvement, and implement improvement plans. Any violation of the law or the Codes may be viewed as a breach of the Manufacturing Agreement and could lead to the termination of the business relationship between Under Amour and the supplier.

UA's social compliance program was accredited by the FLA on February 2019, which demonstrate that it has the systems and procedures in place needed to successfully uphold fair labor standards throughout its supply chains. UA's VP of Sustainability and Chief Sustainability Officer is a member of the Board of Directors of the FLA, which highlights UA's commitment to, and active work in support of, the FLA's mission. Additionally, UA is member of the Sustainable Apparel Coalition (SAC), which is the apparel, footwear, and textile industry's leading alliance for sustainable production. The SAC is the developer of the Higg Index, which is a tool used to measure the social and environmental performance of brands and retailers, products and facilities.

IFC has reviewed UA's supplier compliance framework and found that it is largely aligned with IFC's Performance Standards. In particular, UA's system is aligned with IFC Performance Standard 2 (Labor and Working Conditions) as it has historically focused on labor issues, and there are significant efforts to address environmental aspects among its suppliers in alignment with PS3 (Resource Efficiency and Pollution Prevention) as described later in this document. The Code of Conduct has provisions consistent with internationally recognized labor standards. All documents establishing UA's supplier compliance framework can be found at https://about.underarmour.com/community/sustainability.

Identification of Risks and Impacts

In 2014, UA's Sustainability team adopted the Fair Labor Association's (FLA) Sustainable Compliance Initiative (SCI) methodology. This assessment approach allows UA to measure and track its business partners' employment practices, working conditions, and performance over time against the UA Supplier Code and the Fair Labor Association's Workplace Code and Compliance Benchmarks, the FLA's Fire Safety Initiative, and the Dhaka Principles for Migration with Dignity (the “Dhaka Principles”), as well as all applicable laws and regulations in the country of manufacture. The Dhaka Principles are a set of human rights-based principles to enhance respect for the rights of migrant workers from the moment of recruitment, during overseas employment, and through to further employment or safe return to home countries. They are intended for use by all industry sectors and in any country where workers migrate either inwards or outwards.

The SCI methodology is based on the “worker life cycle,” evaluating everything from how workers are hired to if, how, and when their employment with the supplier ends. By using it, UA is able to review how employers perform their core management and employment functions, including whether effective policies and procedures are in place, and whether training, implementation and process responsibilities and review/updates are assigned. Thanks to this methodology and UA's assessment tool, it better understands the trends, implementation challenges, and areas in which business partners may benefit from training or capacity-building opportunities vis-à-vis improving management systems. Additionally, it helps them develop insights into the best and most efficient ways to address compliance issues over time.

The company's supplier onboarding process begins with the completion of a first audit. After assessor's complete supplier assessments, they give Initial Management Action Plans (IMAP) to factory management. After UA receives the assessment reports, the Sustainability team subsequently prepares Management Action Plans (MAP) to fine-tune and, in some cases, to broaden the steps that need to be taken to address issues raised on the assessments. UA has a list of egregious findings, which are the more severe instances of deviation from the Supplier Code of conduct. The suppliers have 14-30 days to remedy these findings before establishing a relationship and beginning to receive orders from UA. Once onboarded, companies undergo periodic monitoring, to ensure corrective actions plans are being implemented. Tier 1 factories are generally audited at least once a year (more than 250 factories were audited in 2019). UA works mostly with FLA-accredited third-party service providers to undertake such audits and provides all auditors periodic training on the UA audit tool and UA standards and methodology, to ensure auditor consistency.

UA's Human Rights Due Diligence (HRDD) model aims to identify conditions within countries that may expose UA to greater risk of violating human rights. It is part of the impact assessment portion of the Human Rights Due Diligence process, as outlined in the United Nations Guiding Principles on Business and Human Rights (UNGPs). The UNGPs identify the International Bill of Human Rights and the eight core conventions of the International Labour Organization's (ILO) Declaration on Fundamental Principles and Rights at Work as the baseline set of human rights that business enterprises must respect and protect.

In an attempt to cover the topics contained in these documents, UA's HRDD model organizes data into three broad thematic categories: (i) General governance capacity, which aims to gauge the state's capacity for good governance; (ii) Protect, which aims to measure the degree to which the rights contained in the International Bill of Human Rights are protected in a given country; and (iii) Respect, which aims to examine the degree to which the ILO's eight core conventions are respected in a given country. Based on this assessment, UA engages with suppliers, civil society organizations, and other third-party stakeholders to focus on specific issues and risks to ensure FLA and UA Codes are met and embody core labor standards, and related conventions, of the ILO. Only after these requirements are met, UA approves suppliers to start production in that specific country.

Management programs

Key sustainability policies and programs supplementing the code of conduct are: Responsible Sourcing Policy, FLA Code and Benchmarks, FLA's Fire Safety Initiative, and the Dhaka Principles for Migration with Dignity, and the Higg Facility Environmental Module (Higg FEM), among others.

Organizational Capacity

At the leadership level, UA has a Sustainability Council that meets regularly. This cross-functional committee comprises senior and operationally responsible leaders, and The Council's responsibilities include striving to incorporate the results of UA's Sustainability program and related due diligence efforts into business processes and helping to drive operational improvements.

UA's corporate sustainability team is led by its Vice President, Chief Sustainability Officer and Managing Counsel, who reports to UA's Chief Operating Officer. The sustainability team serves the regions on which their supply chain operates, with teammates in Central America and Southeast Asia, as well as the United States. The company's sustainability team at its headquarters in Baltimore, USA, is strategically located on the same floor as Sourcing, Supply Chain, Planning, and Manufacturing Excellence.

Monitoring and Review

Working with their global sourcing teams, UA has embedded sustainability into the vendor scorecard which is prepared based on the supplier audit program described above. This integrated approach provides an opportunity for improved tracking of supplier performance on key E&S indicators. It also promotes greater cross-functional communication and alignment on sourcing decisions. The sustainability component is fed by an assessment tool that features more than 810 questions that takes into consideration non-compliances’ severity, frequency and pervasiveness. UA tracks these key performance indicators (KPIs) closely, updating them every quarter taking into consideration progress on corrective action plans.

The Sustainability Council undertakes periodic reviews of issues, risks, findings, and trends related to assessments of suppliers for compliance with laws and labor-related codes and benchmarks. Instances of underperforming vendors are timely escalated and addressed, as they directly impact the commercial relationship between UA and the vendor. If vendors are not committed to remediate E&S related non-compliances under reasonable timeline, UA has a procedure in place to stop orders and end the commercial relationship. As part of its transparency initiatives, UA publishes a supplier list on its website. This list includes Tier 1 (assembly locations) suppliers that are estimated to account for over 90% of its business, and the company is committed to evaluating and is considering expanding, this disclosure over time.

Stakeholder Engagement

UA strives to listen and engage with all its key stakeholders and has a number of mechanisms in place to help identify and respond to potential incidents in their supply chain including the process noted in the Reporting Potential Misconduct provision in its Supplier Code of Conduct and its participation, as a Fair Labor Association affiliate, in the FLA's Safeguard Mechanism. When action is required, UA seeks to develop plans that consider local circumstances and to consider the safety of those potentially impacted, engaging third parties for support and expertise as needed. UA aims to engage effectively with civil society organizations and trade unions representatives in key sourcing regions. For additional information, please see “civil society overview” related to FLA Principle 9 in UA's February 2019 FLA Accreditation Report available on the company website.

Emergency Response

To address the impacts of COVID-19 pandemic on factory partners and workers, UA has endorsed the COVID-19: Action in the Global Garment Industry (Call to Action).  This international Call to Action brings together the ILO, International Organization of Employers (IOE), International Trade Union Confederation (ITUC), IndustriALL (http://www.industriall-union.org/), Global Union (http://www.global-unions.org/) , UNIGlobal Union (https://www.uniglobalunion.org/), brands, manufacturers and workers' rights organizations to mobilize action for the protection of workers' health, safety and livelihoods. Under Armour works to support the Call to Action, including serving on its Working Group and International Financial Institution Task Force.

UA has communicated to its manufacturers that in light of COVID-19, they must take all required and advisable steps to protect their employees' health and safety. Additionally, manufacturers must meet their legal obligations as employers to their employees including those related to COVID-19 arising under local governmental directives and recommendations during times when their facilities are closed as well as when they are legally permitted to resume operations. Amid the COVID-19 pandemic, UA continues to pay to its suppliers the full negotiated price for all goods, both completed and in process. Moreover, UA developed a worker protection and infection control self-assessment tool, with detailed guidance based on health experts’ opinions and WHO recommendations to facilitate implementation of measure to reduce COVID-19 risks impacts on its workforce on all Tier 1 factories. 

UA's supplier compliance framework considers core elements of IFC's Performance Standard 2. The Supplier Code of Conduct has adequate provisions related to terms of employment, including compensation. Suppliers are required to provide benefits required by law and fully compensate for overtime according to local law and to inform workers of overtime policies. UA's Supplier code of conduct framework forbids any type of child or forced labor, as well as any type of discrimination. It promotes the overall respect of universal human rights and ethical behavior, respect the right of employees to freedom of association and collective bargaining. Other provisions covered by the framework include requirements for a workplace to be safe and healthy; and the work environment protecting and preserving environment. Full details on specific requirements are available on UA's website.

In regard to Freedom of Association and Collective Bargaining, The Supplier Code of Conduct has provisions that requires UA suppliers and their subcontractors shall recognize and respect the right of employees to Freedom of Association and Collective Bargaining. Additionally, employers are required to develop and implement effective industrial relations systems and mechanisms to resolve industrial disputes, including employee grievances and ensure effective communication with employees.

As described earlier, UA's Sustainable Compliance Initiative (SCI) methodology which relies on third-party auditors, allows the company to monitor labor and working conditions at its supplier factories. The methodology questions are grouped as follows: health & safety, recruiting, hiring and personal development, migratory workers, wages and benefits, hours of work, workplace conduct and discipline, industrial relations, environmental protection, termination and retrenchment, and grievance system. In addition, it takes into consideration the severity of non-compliances, frequency and pervasiveness. Audit results are translated into a scorecard and UA tracks this performance closely, updating scores every quarter taking into consideration progress of closing corrective action plans. The company also assess at a country and regional levels the frequency and types of non-compliances, which then informs the on-boarding process of prospective factories so that contextual risks identified are addressed early on.

Grievance Mechanism

UA undertakes regular trainings for its suppliers on workplace standards, transparency, root cause analysis, and health & safety for strategic suppliers. Grievance procedures ensure workers have access to and are aware of the multiple grievance channels they can access. UA has also implemented confidential reporting channels for workers to contact UA directly. The UA Supplier Code of Conduct includes an email address and hotline, and auditors are instructed to provide information on these reporting channels during worker interviews. Through the email address and hotline, UA has received grievances from workers and unions. These grievances have led to intensive and productive engagements with local CSOs and unions, and UA has worked with the unions and the factories to reinstate workers where appropriate.

The Supplier Code of Conduct states that no employee shall be subject to physical, sexual, psychological or verbal harassment or abuse. The FLA Code of Conduct and Compliance benchmark, which sets the basis for compliance audits has a section on sexual harassment is where it is defined with examples and sets the expectations of employees on this issue. Any concern by employees on this issue can be reported through the established grievance mechanism described above. Employers are checked during compliance audits that employees are aware of grievance procedures and its applicable rules.

Occupational Health & Safety/Ergonomics

One of the 16 principles stated on the UA Supplier Code of Conduct is Health and Safety. UA and their subcontractors must provide their employees with a safe and healthy working environment to prevent accidents and injury to health arising out of, linked with, or occurring in the course of work or as a result of the operation of employer facilities. They are required to comply with all applicable workplace conditions, safety and environmental laws rules, regulations and standards. Implementation of Health and Safety management systems are monitored during compliance audits. Instances of non-compliances are addressed through MAPs and are part of the supplier's scorecard assessment.

COVID-19 impacts on the apparel industry as well as disruption on the supply chain due to reduced demand had affected many UA suppliers. Factories had been advised to follow government's guidance on closures and reopening. Some UA suppliers have taken measures to protect its workforce to ease the burden of temporary closures and reduced production. When retrenchment has been the last option, suppliers are required to follow applicable local requirements.

Structural and Fire Safety

Before each annual assessment, UA asks factories to complete a FSCAP module (Fire Safety Competency Corrective Action Plan), which is built on guidelines developed by the FLA and international fire safety experts. Factories are required to be in possession of all legally required and valid permits and certificates related to fire safety inspections and an adequate number of employees shall be trained in first aid and firefighting techniques. UA provides support to facilities that have fire safety and emergency violations and participates in the FLA Fire Safety Initiative (https://www.fairlabor.org/firesafety), which empowers workers to advocate for strong awareness of the importance of fire prevention and protection, and to focus on changing behaviors across all levels of a factory.  The FLA's program combines bottom-up and top-down solutions, training workers on the factory floor (including on-site fire safety facilitators), factory management and higher-level fire safety trainers.

Safe Transportation

On instances where factories provide transportation to its workers, UA factory assessments address compliance with applicable regulations. Nevertheless, UA will work with relevant stakeholders and factories so that transportation risks to employees are assessed and mitigated, as part of the factory assessment process; which will include, and not limited to: road hazard risks, adequacy of vehicles, driver training and monitoring, among others. UA will accordingly update its applicable requirements for the factories and the monitoring checklists, as needed.

 UA is a member of the Sustainable Apparel Coalition (SAC), helping lead the way toward an apparel, footwear, and textiles industry that results in no unnecessary harm to the environment and has a positive impact on the people and communities associated with its activities. UA relies on the Higg Facility Environmental Module (Higg FEM) to manage its environmental performance which standardizes how facilities measure and evaluate their environmental performance, year over year. The Higg FEM measures energy use and greenhouse gas emissions, water use, wastewater, emissions to air (if applicable), waste management, chemical use and management. These modules measure impacts at individual factories, not the supplier company as a whole. Users conduct the assessments at least once a year, and these assessments are then verified by SAC-approved, on-site assessors. Benchmarking by facility type allows facility managers to compare their performance against that of their peers.

As part of our UA focus on collaboration and scaling change across the industry, in 2018 it launched a partnership with the Apparel Impact Institute's Clean by Design program for mills, which have the most significant sustainability impacts (energy and water consumption, and chemicals use).UA has 7 partner mills in Asia working to improve energy and water efficiency through this program. The company has a climate action strategy and it plans to finalize GHG emission baseline and inventory, launch a company-wide climate action task force.

UA factory operations may pose risks to community health and safety, primarily through its security service arrangements (especially if armed) and through traffic risks arising from transportation of its employees when factories provide transportation.

The use security services at factories is part of the scope assessment of legal compliance of its factories, as well of applicable Code of Conduct and benchmarks. Nevertheless, UA will work with relevant stakeholders and provide guidance to factories so that its security arrangements are in line with the Voluntary Principles on Security and Human Rights. Additionally, will support factories to conduct security risk assessments as to ascertain the risks posed by its security arrangements to those within and outside its facilities and to determine whether security personnel are being hired, equipped, and trained adequately, including on: human rights issues, proper use of force, and appropriate conduct toward workers, and other stakeholders. For this, UA will accordingly update its applicable requirements for the factories and the monitoring checklists, as needed.

To mitigate risks to nearby communities arising from transportation arrangements provided by factories to its workers, UA will work with factories to enhance its factory assessment process so that traffic risks are identified and adequately managed.

Under Armour, Inc.

1020 Hull Street

Baltimore, MD 21230-2080

Phone: (1.888.727.6687)