DUE DILIGENCE AND RISK ASSESSMENT

PUMA conducts regular due diligence on human rights & labor, environmental and integrity risks (listed in T.03) for its own activities and across its supply chain as per the recommendations of the UN Guiding Principles for Business and Human Rights as well as the OECD Due Diligence Guidance for Responsible Supply Chains in the Garment and Footwear Sector, and other relevant responsible business conduct standards. We embed responsible business conduct in our own policies, training and management systems and identify actual and potential harms in our own operations and supply chain.

Due diligence is an ongoing process, in which we can identify, mitigate, prevent risks and address their existing and potential adverse impacts (e.g. child labor, discrimination, hazardous chemicals, etc.).

As stated in the "Corporate Governance Statement", PUMA has a functioning Compliance Management System (CMS) to systematically prevent, detect and sanction violations in the areas of corruption, money laundering, conflicts of interest, antitrust law and fraud/embezzlement.

In response to the COVID-19 pandemic, the possibility of future crises and/or upcoming regulations, our vendors are recommended to conduct their due diligence. Our risk assessment process of potential harm to people (human rights & labor and environmental risks) includes:

• External sources: NGO reports, media, country indices and country regulation, PUMA partnerships with FLA, Better Work, Fashion Charter, ZDHC, AFIRM, etc. and stakeholder dialog
• Internal sources: PUMA social, chemical and environmental audit findings/data analysis, grievances received per country, supply chain risk mapping, number of factories in countries with high risk, per commodity, also including non-core factories, material processing and raw material extraction

We prioritize risks based on:

• Severity: Scale (how serious the impact is), scope (how many people are or will be affected) and irremediability
• The likelihood of risk occurring based on operating environment: conflict zone, weak governance; mismatch between local practices and international standards

Our mitigation measures include the factory monitoring program, grievance mechanism, supplier scorecard, business integration, goal-setting and internal and external reporting. The effectiveness of our measures is evaluated based on progress and compliance with our policies.

PUMA policies are published on our website, as well as our factory monitoring programs and standards defined in our Social, Environmental, Occupational Health and Safety and Chemical handbooks.

PUMA also adopted ELEVATE intelligence, or EiQ, a comprehensive suite of supply chain analytics, to:

• Assess our supply chain risks by geography, commodity and issue
• Complete a risk assessment for suppliers, factories and sites
• Manage risks that are material for each supplier, factory or site.

The 10FOR25 targets are linked directly to the four main sustainability-related risks identified in our due diligence process:

• Potential human rights violations or incidents in our supply chain (Tier 1 and Tier 2^*)
• Potential incidents of environmental pollution in our supply chain (Tier 1 or Tier 2)
• Potential non-compliance with chemical regulations during production (Tier 1 or Tier 2)
• Negative effects of climate change (transition risks and physical risks)

The four main sustainability-related risks are reflected in the Risk Management System that PUMA has established to identify and manage material risks or risks that could pose a threat to the company’s objectives at an early stage. The Risk Management function conducts formal interviews with selected risk owners (key function management responsible to identify and address the risks) on a semi-annual basis set to identify, evaluate and report risks. The risk owners of PUMA’s sustainability department review risks within their area of responsibility and report the evaluation and the evolution of countermeasures implemented to mitigate or reduce the potential impact of sustainability-related risks to the Risk Management function.

To mitigate and prevent sustainability risks, PUMA has set the 10FOR25 targets and implemented a due diligence process. PUMA reports internally and publicly (through annual sustainability reports) on the following activities and progress toward our goals 10FOR25:

• Conduct regular complete and follow-up social audits based on International Labour Organization standards (including reaudits and capacity building projects) for all Tier 1^* and Core Tier 2^* suppliers.
• Monitor performance with factory environmental management system via Higg Index Facility Environmental Module (FEM), regular RSL testing (Restricted Substances List) of materials and products, input chemistry control via Manufacturing Restricted Substances List (MRSL) by ZDHC, output control via wastewater tests by independent and accredited laboratories.
• Follow the status of new regulation via industry associations such as Federation of the European Sporting Goods Industry (FESI), and key partners, a matrix listing PUMA's key partnership initiatives is maintained to track all relevant international and national sustainability organizations, and follow up on legal requirements (e.g. UK Modern Slavery Act, new German due diligence law) in a timely manner. Implementation of approval procedure for sustainable product claims.
• Actively conduct stakeholder dialog with NGOs and other expert organizations. Regular updates of PUMA policies and sustainability standards (e.g. Code of Conduct, handbooks). Set up functioning workers’ hotline (included in Code of Conduct) and employees’ hotline (included in Code of Ethics), enhance industry collaboration with competitors in terms of human rights and environmental performance measurement tools, standards, certifications (e.g. Facility Environmental Module, Social Labour Convergence Program, Material Restricted Substance List, Leather Working Group, Forest Stewardship Council). Regular Internal training (for example e-learning accessible via Workday).

^*Tier 1 manufacturers of PUMA products; Tier 2 manufacturers of materials and components

Net risks as outlined in the CSR Directive Implementation Act (§315c in relation to §289c, section 3, number 3 German Commercial Code (HGB), were not identified in 2021.

Further details on PUMA’s overall risk management can be found in the Risk Management section.

PERFORMANCE IN BRAND AND PUMA’S RETAIL MODULE

As part of our risk assessment and industry benchmarking, we use the Brand and Retailer Module (BRM) of the Sustainable Apparel Coalition. The Higg Brand & Retail Module (Higg BRM) guides brands and retailers on their sustainability journeys and identifies hotspots and opportunities for improvement along their global value chain. From more sustainable materials sourcing to a product’s end of use, the Higg BRM assesses the life cycle stages for their sustainability coverage. Our Higg BRM scores are externally verified.

Our overall BRM environmental score increased from 74.3% in 2020 to 76.8% in 2021. The social score increased from 76.4% in 2020 to 85.4% in 2021. We significantly improved our social score for logistics and retail operations as well as our end of use score, although this score is still at a low level. Improvements include the payment of a living wage to all PUMA employees globally (including retail and logistics) as well as the introduction of several circularity initiatives, such as our RE:SUEDE and RE:JERSEY programs, swap shops at major offices as well as takeback boxes in selected stores across three continents.