Nisolo Accountable Audit

A SSESSMENT C R E AT R A S A C NISOLO T RUJ I L LO, P E RU AUGUST 2019

Introduction

ACCOUNTABLE is a reporting system that provides unprecedented transparency into the social impact of employment and manufacturing practices, particularly the impact on women.

Independent auditors are sent to assess a company, and this report is the outcome of the initial assessment.

A detailed report with scoring information will be published after the 90-day corrective action period.

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Executive Letter

Since day one, we’ve been in business to confront the social and environmental injustices the fashion industry is responsible for–only 2% of fashion’s estimated 75 Million factory workers around the world earn a living wage that meets their basic needs, and fashion is among one of the five most polluting industries in existence today.

Our vision at Nisolo is to push the fashion industry in a more sustainable direction–where success is based on more than just offering the cheapest price–a direction that not only values exceptional design, but the producer and the planet just as much as the end consumer.

So what does it look like practically to value the producer and the planet? On the environmental side of the coin, it means measuring our resource consumption and carbon footprint, and investing in conservation work to offset our emissions and combat climate change. With every Nisolo purchase, we are combatting deforestation and restoring the Peruvian Amazon through work with our partner, Ecosphere+, in the Cordillera Azul. Additionally, to ensure our products don’t end up in landfills, we’ve partnered with Soles4Souls to upcycle our used shoes, or recycle them responsibly. Valuing the producer means providing her with a safe and healthy working environment and a living wage, which is the amount required to meet her basic needs.

We’ve been focused on paying a living wage to the people in our supply chain all along. Since 2014, we’ve measured our producers’ expenses by way of internal impact assessments and utilizing expert research from WageIndicator to ensure we provide a wage that meets the needs of them and their children. While internal assessments are a good start for understanding workers’ needs and determining living wages, as a certified B Corporation firmly opposed to greenwashing, we believe intensely in the importance of 3rd party validation, which is why we hired ACCOUNTABLE to do an in-depth evaluation of our factory’s wages and working conditions.

ACCOUNTABLE’s in-factory assessment includes personal interviews, anonymous surveys, and double verification of company claims. It focuses on safety, equality, and wages. We are especially excited about this audit because of what it taught us. Even though our internal living wage methodology had a lot of similarities to ACCOUNTABLE’s, we learned that we were slightly off in our calculation. In fact, we discovered our lowest wages were 1.4% short of their calculation, a $4 per month differential, which led us to increase our lowest wages across our factory immediately, thereby ensuring all current and future producers receive a living wage.

We hope other brands will join this living wage movement and adopt ACCOUNTABLE because of its unique and affordable on-the-ground approach to wage and working conditions verification. 3rd party validation is critical in a world where the fashion industry is at a crossroads with one path leading toward honesty and progress over perfection, and the other toward a continuation of exaggeration, greenwashing, and dishonesty. Rather than continuing in a manner detrimental to progress, we envision the fashion industry serving as one of the most powerful conduits for social and environmental progress in existence today. And, we envision an industry where everyone receives a living wage. This audit and the work of ACCOUNTABLE is one more step in that direction.

Patrick Woodyard

Founder & CEO, Nisolo

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Overview of the Assessment Process

Included in this report, you will find: • A brief overview of the audited company • An executive summary giving a high-level overview of company findings • Overview of corrective actions • Living wage methodology and calculation

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NISOLO: Company Snapshot

MANUFACTURER PROFILE Location: TRUJILLO, PERU Products: SHOES Owner: NISOLO Established: 2011 Employees: 117 68% MALE, 32% FEMALE

Nisolo's vision is to push the fashion industry in a more sustainable direction – where success is based on more than just offering the cheapest price – a direction that not only values exceptional design, but the producer and the planet just as much as the end consumer.

INDEPENDENT AUDIT PERFORMED BY: Nubia Echevarria

ABOUT NISOLO: Nisolo is a B-Corp Certified, direct-to-consumer brand that produces ethically made shoes and accessories for men and women, the majority of which is produced in the factory they own and operate in Trujillo, Peru.

Every Nisolo purchase provides living wages in the factory Nisolo owns in Peru, enables Nisolo to pursue living wages within the rest of its supply chain, and combats climate change by protecting trees from deforestation in the Amazon Basin.

ABOUT CREATRA: Creatra SAC is a shoe manufacturer, officially owned by Nisolo, LLC. This audit was conducted on the manufacturing organization, Creatra SAC. Creatra is a formal medium size company with a current staff of 117 employees. They operate out of a mid-size factory located in an industrialized area of Trujillo, Peru. Production Infrastructure is well-established. They produce high quality leather shoes for their retail brand Nisolo in the US. They are currently manufacturing smaller orders for a few other brands in hopes of building that arm in the near future. They currently source their leather in Leon, Mexico.

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NISOLO: Overall Findings

STRENGTHS: • Their lowest wage meets the living wage standard.

• They provide training and continued education for all employees who have a desire to grow and progress in their career. Employee evaluations take place every 6 months.

• They are socially conscious and integrate their beliefs into their work environment. They have incorporated an Asian Methodology called the 5S’s (Selection, Order, Cleanliness, Standardization, and Discipline), which is displayed largely in the factory area to encourage their factory workers to follow this ethos while they work.

• They have an in-house Social Impact Team who measure their social impact on the livelihoods of their factory workers and craft programs to improve their quality of life. They have also implemented environmentallyconscious programs like their partnerships with Ecosphere+ and Soles4Souls to help with Amazon conservation and fashion waste.

• Factory workers take a 5 minute movement break in the afternoon to encourage blood flow to their extremities and help with their mental state. This activity elevates their mood significantly.

• Workers have an eating area with a microwave and small refrigerator. An independent cook provides affordable daily lunches (6 soles/$2) for their staff.

• Fire safety was up to code and all extinguishers were checked and approved.

• They offer complimentary safety gear for their factory workers: ear plugs, face masks, and gloves.

• Complimentary drinking water is offered to all workers. They have several water stations throughout the factory.

• They focus on eliminating waste by donating excess raw materials that aren’t up to quality standards to a supplier who recycles and reuses the materials.

• Work stations have implemented the removal of single-use plastic bags and are using reusable crates and cotton bags for excess materials and waste.

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NISOLO: Overall Findings

WE AKNESSES /CORRECTIVE ACTION PRIORITIES: •

Nisolo’s lowest wage prior to the audit was 930 soles/month, but the estimated Livable Wage calculation for Trujillo, Peru, is 943 soles/month. ACCOUNTABLE encourages Creatra to have a starting pay for all incoming employees at 943 soles/month.

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68% of staff were male and 32% were female. ACCOUNTABLE would encourage to hire and train more women in factory and management positions.

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The current average length of employment for Creatra is 19 months among employees. Moving forward, ACCOUNTABLE believes this average will increase if corrective action recommendations are implemented.

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ACCOUNTABLE recommends implementing an official policy offering women a car service (or other safe transport) to return to their homes safely if they work past 8pm.

CORRECTIVE ACTIONS TAKEN: •

Within 30 days of finalizing the audit, Nisolo raised their lowest wages to meet the living wage standard.

CORRECTIVE ACTIONS PERIOD: •

Nisolo is currently implementing ACCOUNTABLE’s recommended corrective actions. A detailed report with scoring information will be published after the 90-day corrective action period.

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NISOLO: Living Wage Methodology and Calculation

LIVING WAGES Livable Wages are critical to providing a basic and decent lifestyle for a worker and his /her family.

Short term impact: Greater self-sufficiency and education, access to health care, decreased crime, fewer vulnerabilities for exploitation.

Long term impact: Permanent upward mobility out of poverty, less child labor and exploitation, better health.

Below Minimum Wage

Minimum Wage

Progressive Wage

Livable Wage

LIVING WAGE C ALCUL ATION Living wage is determined by an evaluation of leading resources—Trading Economics and WageIndicator—as well as local data and ACCOUNTABLE survey data.

Methodology: The Living Wage is based on local cost of living for housing, transportation, food, healthcare, education, other necessary expenses, and savings. It also takes into account local taxes and mandatory bonuses required by the Peruvian government.

Cost of Living in Trujillo, Peru (Currency: Peruvian Nuevo Sol | 1 USD = 3.37 PEN) Food

230

Housing

230

Transport

75

Health

40

Education

85

Other

150

Mobile

30

Savings (5%)

40

Expenditure

880

Living Wage (Accounting for taxes + mandatory bonus)

943

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