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Learn what brands and retailers are thinking about their supply chain and what is important to them Get ahead of the curve and differentiate yourself, What can you do to make yourself more valuable? Learn about how they are selecting their future suppliers http://www.flickr.com/photos/mr_marmot/1407779603/ http://www.flickr.com/photos/biagkensiak/4146751081/sizes/l/in/photostream/ http://www.flickr.com/photos/psd/2393140192/sizes/l/in/photostream/ Scaling Heights: March to Sustainability 2011 Taking Off: March to Sustainabiity 2011

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Brandix Casual Clothing located in Sri Lanka has reduced carbon emissions by 75% and energy use by 40% and water use by nearly 60% and is the first factory in the world to receive LEED platinum status.

MAS Intimates Thurulie located near Colombo in Sri Lanka is green from the very ground up, from its construction of compressed earth bricks which require no kiln burning, to its rooftop of grass and medicinal plants, which cut down on the amount of heat entering the building. These ‘green’ factories use around half the energy and less than half the water required by traditional factories

‘Impahla Clothing’, in Capetown became the first carbon-neutral garment supplier on the African continent in 2009. Impalah's 2009 Sustainability Reports revealed a 40% increase in production, a doubling of its permanent staff, and a 10% drop in absenteeism while the company's bottom line improved through the cost savings gained.

A supplier in Czech Republic has started the installation of a solar power plant to cover up to 50 percent of the factory’s electricity need, while a Slovenian supplier has installed biomass boilers that halved CO2 emissions compared to the old oil-fuelled system.

Report produced by cKinetics is a sustainability accelerator providing strategy and operational consulting services. This report has been produced by the Supply Chain consulting team at cKinetics which has a presence in the US and in India. Supported by Sustainability Outlook creates online and offline interactions to drive conversations around the topic of resource management in the business operations of the firms and their extended value chains. With a focus on emerging markets, Sustainability Outlook brings together business, policy, consumer advocates and other stakeholders.

For inquiries, please write to MTS2011@cKinetics.com

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Pietra Rivoli in her book ‘The travels of a t-shirt in the Global Economy’ took up the task of tracing the life of a t-shirt in order to examine the economics and politics of the apparel industry. The protagonist of the book, a US$6 T-shirt, was used as a vehicle for telling the story about its entire life cycle right from the cotton fields of Texas to its proud buyer and ultimately to the used market in Africa. The theme of the book was triggered by an anti-globalization protest questioning the origins of university tshirts: "Who made your t-shirt? Was it a child in Vietnam, chained to a sewing machine without food or water? Or a young girl from India earning 18 cents an hour and allowed to visit the bathroom only twice a day?" Modern consumers in Europe and North America are increasingly asking such questions. They are expecting a lot out of the suppliers and retailers of the clothing and apparels that they buy. In addition to fit and fashion aspects of their purchases,, consumers also expect that the employees involved in the production of their clothing are provided with a higher standard of environ in their workplace. A recent survey commissioned by M&S demonstrated that nearly a third of shoppers placed clothes back on the rails owing to their concerns about their origins. The survey also highlighted that 78% of shoppers wanted more information as to how the clothes had been manufactured, the extent of use of chemicals, as well as the conditions in the factories producing the goods. This evolution in consumer outlook is influencing brands and retailers to think about their product supply chain (including activities outside their organizations) and ways to better manage the same. In this report we discuss in detail about this recent phenomenon that is shaping the future of the textile industry: Sustainability across the supply chain. Sustainability by its definition is about doing ‘more with less’, which means finding savings and creating business value in addition to having a positive impact on the environment. Furthermore, sustainability is about producing goods which are safe for humans and the environment in all stages of its life cycle. March to Sustainability 2011 looks at aspects of sustainability that concerns the textile supply chain from raw material all the way to the point that it is converted to finished product. The focus of the report is on the sustainability initiatives and targets set by progressive brands and retailers with regards to materials usage, energy efficiency, GHG and carbon emissions, water and chemicals footprint, restricted chemicals usage, labor practices and logistics and supply chain enhancements. This year’s report builds upon the 20101 Report and reflects on the progress achieved by the various initiatives since the last year as also provides a preview into the newer initiatives expected to be rolled out over the next 12-24 months.

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Preface Sustainability and the textile industry Sustainability initiatives led by industry coalitions Snapshot of key brands with Sustainability initiatives in the supply chain Supply chain Sustainability initiatives by leading textile and apparel brands adidas Group C&A Group Gap Inc H&M: Hennes & Mauritz Inditex Group John Lewis Partnership Levi Strauss & Company Lindex Mountain Equipment Co-op New Balance Nike Group The Otto Group Patagonia Group Phillips-Van Heusen Puma Recreational Equipment Inc Timberland VF Corp Textile supply chain Sustainability initiatives by leading retailers Carrefour Group IKEA Group Marks & Spencer Tesco Group Wal-Mart Group Specialized Sustainability firms Continental Clothing Company Specialized Sustainability brands Textile specific ecolabels and certifications Other ecolabels and certifications relevant to the textile and apparel sector Forecast and road ahead Index Endnotes i 1 6 8 11 12 16 20 23 26 28 30 34 36 38 40 44 46 48 50 54 56 58 61 62 64 68 70 72 75 76 77 80 83 86 88 89


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Sustainability and the textile industry
The global textile and apparel industry 2 is predicted to grow to US$800 billion by 2015 3 as compared to roughly $700 billion today. As a sector, it not only has a large environmental footprint but is also the single largest contributor to industrial waste water and the largest user of pesticides. Some specific processes, like yarn production and dyeing, use large volumes of water and are copious consumers of energy. In a global market with increasing regulation and consumer preferences for ‘sustainable products’, sustainable production is gaining increasing importance. Sustainability has typically meant looking at both environmental and social aspects. The environmental facets like sustainable sources of raw material, optimal use of energy, minimal use of toxic chemicals, waste reduction and preservation of land have been receiving greater focus in recent times. This report delves in detail on these aspects. The social aspects have been under scrutiny for a couple of decades, since the early 1990s. The industry has a huge requirement of cheap and skilled workforce but there continues to be a dearth of both. Workers are not available for the garment industry owing to poor pay and poor working conditions and the workforce lacks the adequate skill set. Hence while the industry holds a promise of creating an additional 12 million jobs by 2012, pressure is high to create better paying jobs with respectable work conditions. The drivers for the increased focus on Sustainability are (a) Brand reputation protection and risk management (b) Increasing resource (water, energy, land) scarcity in the regions of production (c) Compliance requirements both at a product level (which is driven mainly by the importing market like REACH in the EU) or compliance requirements at a process level (which are driven by the production region laws) (d) Consumer pull i.e. increasing consumer preference in the EU and in North America (which are the largest markets) for sustainable labels.
Compliance is inter-twined with risk mitigation. As future legislation continues to develop in Europe and some of it is being planned in US/Canada, brands and retailers are looking to get an idea of their supplychain risk and proactively managing it. In addition, emerging countries themselves are working on looking at legislation on carbon emission and water usage. This impacts manufacturers (which are mainly based in emerging countries) as well as brands and retailers.

The basic drivers for the textile industry to move towards ecoefficiency and sustainability exist. Energy prices are high and rising, water is getting scarce, and compliance requirements across the globe on social and environmental issues are increasing.

On account of the above factors, Sustainability is now being looked at by the apparel and textile brands not as a mere CSR activity but more as a market differentiator and business enabler. The major brands and retailers across the globe have entered into a healthy competition in order to outdo the other and entice the consumer towards them. Some of the path-breaking initiatives taken by the major brands recently are: • As part of its Plan ‘A’ commitment to become the world’s most sustainable major retailer by 2015, Marks & Spencer (M&S) signed a deal with supply chain traceability specialist Historic Futures 4 to develop a full ‘raw material to store’ traceability on every single clothing item 5. This would allow M&S to become the first major retailer to collect information from the extended supply-chain, describing where and how every product is made, including the source of the raw materials such as cotton and wool. The full traceability will enable an even greater ability for M&S to differentiate its products. As an example, for its t-shirts, it will give information on where: cotton is grown; yarn is spun; fabric is produced; fabric is dyed; etc. Related to this, M&S has launched the ‘Look-Behind-the-Label’ campaign in a few of its stores, which informs shoppers as to the way the group sources its products. • In 2010, Sportswear giant Puma became the first company to release an Environmental Profit and Loss (EP&L) statement, which measures the full economic impact of the brand on

M&S aims to become the first major retailer to collect information from the extended supply-chain, describing where and how every product is made, including the source of the raw materials such as cotton and wool


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ecological systems including water and air. The EP&L project is part of a larger environmental initiative by Puma’s parent company PPR Group 6- to move beyond conventional CSR and promote a new business paradigm: Sustainability as a driver of creativity and innovation; which in-turn would deliver financial, social and environmental returns. In the latter part of 2011 H&M plans to launch its first product line using ‘Better Cotton’, which would give H&M the early mover advantage amongst the pioneers in using Better Cotton. H&M also started selling the ‘Conscious Collection’ line of clothing which is not just organic cotton but showcases the creation of a fashion statement using eco-smarter materials like Tencel and recycled polyester. Levi Strauss & Co launched the ‘Water<Less’ denim collection which reduces water consumption by an average of 28% and saved 16 million liters of water in its spring collection. Recently Patagonia announced its web-initiative ‘The Footprint Chronicles’ which allows consumers to track social and environmental impact of specific garments. The Footprint Chronicles would help Patagonia in a big way to have all its clothes being fully recyclable. This initiative by Patagonia is in line with its reputation as being at the vanguard of sustainable clothing. Anvil Knitwear joined the Cotton made in Africa (CmiA) initiative, becoming the first U.S.based apparel manufacturer to do so. Anvil knitwear also created a website called ‘Track My T’, which takes consumers through the journey that their t-shirt has taken (each tee has a tracking number). From just a cotton seed on the farm, through the cotton gin, yarn spinner, textile mill, cut and sew facility, distribution center and then onto the consumer, one can get an inside look across the process.

These are just few of the initiatives, being taken by brands and retailers to create a competitive edge using sustainability and in this report we have covered actions undertaken by 24 brands and retailers.

Advances in tracking Sustainability
In our last report March to Sustainability 2010, we had outlined how sustainability was at the cusp of being rolled out within the supply chain. In the time since the last report, we see that not only are a number of initiatives in ‘execution mode’, but significant investments in systems are being made to track Sustainability. Illustrative list of systems and efforts to coordinate sustainable sourcing
Levi Strauss & Co In 2009 LS&Co started to collect water use data directly from the suppliers, as well as their own operations and to support this data collection exercise Levi’s started the new ‘Social and Environmental Sustainability Information Management System’ (SESIMS), which allows them to monitor detailed environmental performance at the supplier level. Nike launched the Environmental Apparel Design Tool (EADT), which would help designers make real time decisions in reducing waste leading to an increased use of Environmentally Preferred Materials (EPM). Nike has kept the tool as an open source and encourages designers and other users to build upon the tool. Puma in cooperation with the Global Reporting Initiative announced its intention to expand environmental considerations and improve working conditions throughout their strategic supplier network. The suppliers who are responsible for more than twothirds of all Puma products will receive GRI certified training on transparent measurement and reporting on their Sustainability performance using the GRI G3 Guidelines – the world’s most widely-used framework for Sustainability reporting. This program is known as Global Action Network for Transparency in the Supply Chain (GANTSCh) and is conducted by GRI certified training partners and during the reporting process; the suppliers are scheduled to release their own Sustainability reports. Gap introduced the ‘Environmental Footprint Assessment’ (EFA) to provide a detailed accounting of how their business affects the environment. The first phase of the EFA focused on regions and facilities where Gap controls the operations. The second phase of the EFA is will focus on the supply chain.





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Sustainable Apparel Coalition Index The industry is quite cognizant of the fact that the proliferation of multiple standards and systems to track sustainability will be inefficient and expensive. To address that challenge a number of leading brands and retailers teamed up to form the Sustainable Apparel Coalition that will develop a Sustainable Apparel Index. The Index will enable companies to evaluate material types, products, facilities and processes based on a range of environmental and social practices and product design choices. The aim is to develop an industry-wide supply-chain index that measures water and energy use, greenhouse gas emissions, waste, and social labor practices, to name a few. The companies have committed to collect supply-chain information, work toward a standard level of best practices, and share information that may be helpful in improving supply chain sustainability.

Rewiring the cotton supply chain
Another significant development with regards to Sustainability and the textile industry has been the focus on sustainably sourced cotton. Cotton, the ‘white gold’ is the principal raw material for the textile industry and provides livelihood to millions of people both from the farming sector and the industry. adidas has provided a massive boost to sustainable cotton farming by announcing that all adidas apparel would use ‘better cotton’ sourced through the Better Cotton Initiative (BCI) by 2018. Similarly, IKEA wants all cotton used for its product range to come from Better Cotton Initiative (BCI) by 2015. In addition to players like Levi’s, H&M, M&S and Nike have come up with equally bold commitments in going for ‘better cotton’ and called all their cotton suppliers in Pakistan, Bangladesh, India and Turkey to apprise them of what is coming with Better Cotton Initiative (BCI). To strengthen the implementation and success of Better Cotton Initiative (BCI), leading brands like adidas, H&M, M&S, IKEA, and Levi Strauss & Co along with funders like ICCO, IDH, and Rabobank have founded the ‘Better Cotton Fast Track’ (BCFT) program. Under this program the group along with several implementation partners like Solidaridad and WWF will work together until 2015 to accelerate the implementation of BCI by building a demand for Better Cotton. The program has set a target of producing 1 million tons of better cotton by 2015 and will invest in farmer projects around the world and initiate procurement of the Better Cotton that is produced.

adidas has committed to have all its apparel be ‘better cotton’ by 2018; and Ikea wants all cotton used for its products to be ‘better cotton’ by 2015.

Cotton is produced in more than 110 countries around the world, many of which are already feeling the impact of climate change and as the temperatures rise and water supplies fall, cotton faces a risk of crop failure. Cotton production uses 3.5% of world wide water use for crop production and consumes 11,000 liters to make 1 kg of cotton textile which implies that 2,700 liters of water is used to make 1 T-shirt.

Outside of brands engaged with the BCI, brands like C&A have formed the Cotton Connect initiative along with the Shell Foundation. The Cotton Connect initiative is working on various community investment programs for C&A such as value chain coordination, mapping and supplier engagement and measuring various social and environmental impacts. Such initiatives by these major global brands is changing the way sustainable cotton is being looked at and gives a huge fillip to the farmers who are otherwise reluctant to adopt better cotton farming.

Sustainability and labor
Labor practices in the textile industry have been under scrutiny for a couple of decades now. Consequently the policies and systems in this area are the most mature. However, a few process and system innovations continue to happen in this space. Some of the most notable ones in the past couple of years are as follows: • Nike has been working on a program called the ‘Lean and Human Resource Management’, through which Nike seeks to align factory Human Resource Management (HRM) with lean manufacturing concepts. The lean manufacturing alignment requires the factories to employ


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“We are designing for the sustainable economy of tomorrow, and for us that means using fewer resources, more sustainable materials and renewable energy to produce new products.” - Mark Parker, President & CEO, Nike

higher- skilled and higher- paid workforce as the workers would be trained to perform multiple tasks. Consequently, gains in productivity, quality and profitability are expected, which would create a win-win scenario. With Nike’s goal of having 90% of its footwear coming from the lean sites by 2011, the Lean and HRM practice would result in reduced cost of production and better wages for the workers. Till now 8 factories in Vietnam and 8 factories in China have taken part in this measure. adidas continues to advocate for a better employer-employee relationships and has been working on its Human Resources Management System (HRMS). As a part of the HRMS, adidas started the confidential reporting channels called ‘hotlines’ and through these hotlines it would educate the workers about their rights and the way to protect themselves from the risks in the workplace. By end of 2010 workers from more than 400 suppliers had access to these hotlines. 2010 also saw global brands like Levi Strauss & Co. and H&M work together with the International Textile, Garment & Leather Workers’ Federation (ITGLWF) to impose a global ban on sandblasting- a process using crystalline silica to wear down denim 7. The process of sandblasting leads to silicosis, a fatal lung disease that caused the death of 40 garment workers in Turkey since 2005. Levi Strauss and H&M have been working to remove sandblasted products from their lines and along with ITGLWF aim towards placing government-mandated bans in countries throughout the world. This step would compel the developing countries where most of the supplier units are based, to impose a blanket-ban on sandblasted products and also discourage consumers across the globe from buying such products which are detrimental to the health of the workers.

Such measures by the leading brands have gone a long way in setting standards for the implementation of better working conditions for the workers at the supplier sites. But the worry lies in the fact that despite steps taken by the global brands, the worker compensation remains abysmally low in countries like China, India, Bangladesh, Cambodia and Vietnam and since the government regulation on minimum wages differs from one country to another, it remains difficult for the brands to impose any floor value on compensation.

Sustainability: from CSR to core business
The big shift that is happening today is that Sustainability is moving from being a ‘nice-to-have’ to be a ‘must-have’. Most brands and retailers started testing the waters on Sustainability through their CSR initiatives. For some of these brands, Sustainability efforts are now moving out of CSR and becoming core to business operations. Nike’s President and CEO, Mark Parker sums it up well: “We are designing for the sustainable economy of tomorrow, and for us that means using fewer resources, more sustainable materials and renewable energy to produce new products.” Simultaneously, serious investments of capital and time are being made to make Sustainability core. Nike spent US$6 million in developing its Environmental Apparel Design Tool (EADT) tool which is now becoming a key component of the Sustainable Apparel Index (being rolled out by the Sustainable Apparel Coalition). Similarly, PPR, the parent company of Puma, has allocated an annual budget of €10 million for the PPR HOME initiative, which sets a new standard in sustainability and business practice in the Luxury, Sport & Lifestyle and Retail sectors. Marks & Spencer which committed £200 million in 2007 for its 5 year Plan ‘A’ program which focuses on Sustainability (although not on textiles alone) generated returns of over £70 million in 2010-11 (up from £50 million the prior year) 8.


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Snapshot of key brands with Sustainability initiatives in the supply chain
The following is a snapshot of the nature of actions being undertaken by key brands profiled in this report. Major Sustainability policies and initiatives in place for the supply chain
Materials adidas C&A Gap Inc H&M Inditex John Lewis Levis Strauss & Co (LS&Co) Lindex MEC New Balance Nike The Otto Group Patagonia Phillips-Van Heusen Puma REI VF Corp Timberland Carrefour IKEA M&S Tesco Wal-Mart Energy GHG/ Carbon Water Waste Chemicals Labor Logistics

Supply chain initiatives in place for introducing Sustainability in materials, manufacturing and processes Supply chain initiatives in place for increasing energy efficiency at supplier facilities Supply chain initiatives in place for monitoring and reducing Greenhouse Gas Emissions at factories Supply chain initiatives in place for reducing water consumption in manufacturing and treatment of waste water Supply chain initiatives in place for waste management and land use Supply chain initiatives in place for increasing Sustainability in reducing chemical usage and restricting use of harmful chemicals Supply chain initiatives in place for tracking and improving labor practices. Supply chain initiatives in place for improving Sustainability in logistics.


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adidas, 3, 4, 6, 7, 8, 9, 12, 13, 14, 15, 52, 80, 86 Apparel and Footwear International RSL Management Working Group (AFIRM), 7, 15, 18, 19, 22, 25, 33, 39, 42, 53, 59 Better Cotton, 2, 6, 9, 13, 23, 69, 86 Better Cotton Fast Track, 3, 6, 13, 15, 25, 33, 64, 67, 69 Better Cotton Initiative, 3, 6, 15, 23, 25, 30, 33, 35, 64, 67, 69 Better Factories Cambodia, 24, 25, 48, 49 Better Work, 7, 14, 15, 22, 25, 27, 33, 39, 41, 42, 53, 69, 74 BICEP, 20, 22, 30, 33, 57, 59 BSR, 22, 23, 25, 57, 66, 67 Business Social Compliance Initiative, 45, 89 C&A, 3, 5, 6, 7, 8, 9, 11, 16, 17, 18, 19, 80, 89 Carbon Disclosure Project, 62, 63, 74 Carbon Label, 84 Carrefour, 5, 6, 8, 10, 61, 62, 63, 80 CEO Water Mandate, 7, 25, 27, 30, 31, 33, 42 Continental Clothing, 7, 76, 80, 81 Cotton Connect, 3, 18, 19 Cotton made in Africa, 2, 44, 45, 52, 84 DEFRA, 70, 84, 89 EarthPositive, 76 ecolabels, 80 Environmental Apparel Design Tool, 2, 4, 40, 42 Environmental P&L, 50, 51, 53 Environmentally Preferred Materials, 2, 38, 39, 40, 41 Ethical Trading Initiative, 6, 21, 27, 70, 71 Fair Factories Clearinghouse, 14, 55, 57, 74 Fair Labor Association, 7, 15, 24, 25, 37, 39, 42, 47, 48, 49, 53, 59 Fairtrade, 69, 70 GANTSCh, 2, 51, 53 Gap Inc, 5, 6, 7, 8, 9, 11, 20, 21, 22 GHG Protocol, 27, 51, 62, 64 Global Compliance Principles, 57, 58, 59 GOTS, 52, 76, 80, 81 GRI, 2, 27, 28, 36, 51 GSCP, 6, 10, 15, 19, 22, 49, 63, 66, 67, 69, 71, 73, 74, 89 H&M, 2, 3, 4, 5, 6, 7, 8, 9, 11, 23, 24, 25, 80, 86, 87, 89 Historic Futures, 1, 9, 30, 82, 89 IKEA, 3, 6, 8, 10, 64, 65, 66, 67, 86 Inditex, 5, 6, 7, 8, 9, 11, 26, 27, 80 International Finance Corporation, 7 International Labor Organization, 7, 21, 23, 48 International Textile, Garment & Leather Workers’ Federation, 4, 27 Intertek, 66, 67 John Lewis, 5, 6, 7, 8, 11, 28, 29 Lindex, 5, 7, 8, 9, 11, 34, 35, 80 LS&Co, 2, 5, 6, 7, 8, 9, 11, 30, 31, 32, 33, 80 M&S, iii, 1, 3, 6, 7, 8, 10, 68, 69, 89 MADE-BY, 80, 82 MEC, 6, 7, 8, 9, 36, 37, 39, 80 New Balance, 5, 6, 7, 8, 11, 38, 39, 80 Nike, 2, 3, 4, 5, 6, 7, 8, 9, 11, 40, 41, 42, 52, 73, 80 NRDC, 20, 73 Oeko-Tex, 62, 76, 80 Organic Cotton, 18, 34, 53, 69, 81 Otto, 5, 6, 7, 8, 11, 44, 45, 80, 84 Outdoor Industry Association, 6, 37, 47, 54, 55, 57 PAS 2050, 84 Patagonia, 2, 5, 6, 7, 8, 9, 11, 46, 47, 80 Plan ‘A’, 1, 4, 68, 69, 89 Puma, 1, 2, 4, 5, 6, 7, 8, 9, 11, 50, 51, 52, 53, 80, 81 PVH, 48, 49 REI, 6, 8, 9, 54, 55, 87 SA8000, 45, 59 Sedex, 7, 28, 29, 71, 87 SEEP, 24, 25, 74 Source4Style, 77 Suppliers Energy Efficiency Program, 74 Sustainable Apparel Coalition, 3, 4, 6, 12, 14, 15, 19, 22, 25, 33, 37, 39, 42, 45, 47, 53, 54, 55, 57, 59, 69, 73, 74, 86, 87 Sustainable Apparel Index, 3, 4 Tesco, 5, 6, 7, 8, 10, 61, 70, 71 Textile Exchange, 7, 15, 18, 19, 22, 25, 27, 33, 34, 35, 37, 39, 42, 45, 47, 53, 55, 59, 69, 71, 74, 76, 80, 81 Timberland, 6, 8, 10, 56, 57, 58 UN Global Compact, 7, 30 Verite, 6, 47 VF, 5, 6, 7, 8, 10, 11, 57, 58, 59 Wal-Mart, 5, 6, 7, 8, 61, 72, 73, 74, 80, 87 Worldwide Responsible Accredited Program, 7, 58, 59


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