Modern Slavery Statement

Paladone Modern Slavery & Human Trafficking Statement Financial Year 1st July 2019 – 30th June 2020

Introduction

This statement sets out Paladone Holdings Ltd actions to understand and identify all potential modern slavery risks related to its business and to put in place steps that are aimed at ensuring there is no slavery or human trafficking within Paladone’s own business or its supply chains. It also explains the relevant policies Paladone has adopted and highlights future objectives, targets, training and actions taken by Paladone to mitigate the risks of Modern Slavery.

The statement has been produced in accordance with the Modern Slavery Act 2015 and takes into consideration the guidance provided by the UN Guiding Principles on Business and Human Rights as endorsed by the UN Human Rights Council and the Ethical Trade Initiative (ETI) Base Code, supporting good international labour practice and the principles and guidance in the Act. It also takes into account all customer requirements including customer specific codes of conduct.

This is Paladone’s third Modern Slavery statement and relates to actions and activities during the financial year 1 July 2019 to June 2020. In previous years, Paladone has published its statement no later than Dec. We recognise that we are publishing this statement later than expected. This is because of reduced staff capacity and increased difficulty in gathering the required data during the coronavirus pandemic.

We recognise that we have a responsibility to take a robust approach to slavery and human trafficking and Paladone is absolutely committed to preventing slavery and human trafficking in its corporate activities.

This statement has been approved by the Board of Paladone Holdings Ltd.

Organisation Structure & Supply Chains

Paladone designs unique gift products for its retail customers which are sold wholesale to 80 countries around the world with an annual turnover in excess of £50 million. In addition to our UK and USA offices we have an office in Hong Kong with dedicated ethical and quality compliance staff. We work with a number of factories across a large spectrum of product which are predominantly based in China.

Distribution

As well as our own distribution centre in Shoreham, we work with a further 2 third party logistics facilities in the UK, and 1 in the US.

At the outset of the financial year Paladone had a global staff head count of 151 people across 3 International offices. The headquarters based in Shoreham by Sea in the UK are accountable for 116 staff with a further 24 people in HK and China and the remaining 11 in California U.S.A. We also have sales and sales support contractors working in France and Australia to support our global operations. Paladone continues to see growth in the global wholesale gifting sector. Whilst every effort is made to drive ethical practice in its supply chains, Paladone looks to go beyond audit and to work with its supply chain to do the same and raise its awareness to issues like Modern Slavery that touches every corner of the globe.

Responsibilities and Governance

Responsibility for our anti-slavery initiatives is as follows:

• Policies: The Procurement and Compliance Director in conjunction with the HR director are accountable for putting in place and reviewing policies and the process by which they were developed.
• Risk assessments: Our Procurement and compliance teams in conjunction with our HR team are responsible for assessing the company risks and analysis of where slavery has the potential to be present.
• Investigations/due diligence: The Procurement and compliance Director and HR director have overall accountability for investigations and due diligence. The responsibility of carrying out investigations may be delegated to compliance and HR teams in relation to known or suspected instances of slavery and human trafficking.
• Training: The HR Director has overall accountability for training direct employees and agency workers within the UK. The Learning and Development Manager develops and delivers internal training including inductions for new starters. L&D also sources specific external training and manages e-learning in relation to modern slavery. The compliance executive monitors training of suppliers to ensure awareness of our supplier code of conduct, and modern slavery.

Policies and controls

The term Modern Slavery is used to encapsulate slavery, child labour (as defined by the International Labour Organisation) and forced or compulsory labour, as well as human trafficking. Paladone prohibits the use of forced, debt bonded, involuntary prison labour, slavery or human trafficking in its business or supply chain which is enforced through our Supplier Code of Conduct (COC).

We operate the following policies that describe our approach to the identification of modern slavery risks and steps to be taken to prevent slavery and human trafficking in our operations

• Whistleblowing policy We encourage all our workers, customers and other business partners to report any concerns related to the direct activities, or the supply chains of, our organisation. This includes any circumstances that may give rise to an enhanced risk of slavery or human trafficking. Our whistleblowing procedure is designed to make it easy for workers to make disclosures, without fear of retaliation. Any actions that may need to take place are recorded and will be managed by the HR Director.
• Employee code of conduct (house rules) Our code makes clear to employees the actions and behaviour expected of them when representing our organisation. We strive to maintain the highest standards of employee conduct and ethical behaviour when operating abroad and managing its supply chain.
• Supplier/Procurement code of conduct We are committed to ensuring that our suppliers adhere to the highest standards of ethics. We work with our suppliers to meet the Ethical Trade Initiative (ETI) Base Code, which forms the foundation of our Supplier COC. Suppliers are required to demonstrate that they provide safe working conditions where necessary, treat workers with dignity and respect, and act ethically and within the law in their use of labour. We work with suppliers to ensure that they meet the standards of the code and improve their worker's working conditions. However, serious violations of our supplier code of conduct will lead to the termination of the business relationship. Adhering to the Supplier COC is a mandatory requirement for all our suppliers and is subject to an audit both by our Asia-based Compliance team and via nominated third parties. We are members of SEDEX and therefore expect a transparent and cooperative attitude from our suppliers to work together towards improving conditions for the people that make our products. For detailed information on our code, please visit our website (https://paladone.com/supplier-code-of-conduct/)
• Responsible Recruitment / Agency workers policy We use only specified, reputable employment agencies to source labour and always verifies the practices of any new agency it is using before accepting workers from that agency.

Risk Assessment and Due Diligence

We undertake risk assessment and due diligence when considering taking on new suppliers, and regularly review our existing suppliers. Our due diligence and reviews include conducting supplier audits or assessments through our own and third party auditors, which have a greater degree of focus on slavery and human trafficking where general risks are identified.

Risk Assessment - High Risk Areas Identified

Paladone’s Compliance and HR teams have conducted a risk assessment to identify high risk areas of the business and have identified the factories we work with in China and temporary warehouse workers in the UK and USA as the highest risk of modern slavery.

China Factories

We have identified that recruitment of temporary and migrant workers at peak times (June-September) are exposed to the highest risk of exploitation. With the impact of Coronavirus, factories in China may struggle with slow return from migrant workers and therefore it is critical for those suppliers to take further checks and measurements in their recruitment practice and mitigate the potential risk of any type of modern slavery.

We have also mapped the locations of the factories we work with against the number and nature of non-compliances found on audits to identify the factories and areas to focus on as a priority. Through training we are aware that non-compliances such as the below can all be potential red flags of risks of modern slavery:

• lack of worker representation
• improper recruitment practices
• unfair fees or deductions from wages
• poor dormitory conditions
• retaining of ID documents
• unfair contracts
• excessive working hours

We track the factories we work with through a database of detailed information from third party and Paladone audits. We have developed a grading system which enables us to rate factories based on their audit standard and work closely with them to rectify any issues found and drive continuous improvement. Our preferred audit standard is the SEDEX Members Ethical Trade Audit (SMETA) as the audit framework is built around the ETI Base Code and is widely recognised by the industry as the most thorough standard. It is the only audit format to include Modern Slavery and Human Trafficking dedicated sections in its latest audit format SMETA 6.1 which includes:

• Human Rights based on the UN Guiding Principles
• Transparency in recruitment practices
• The movement of migrant labour across the globe
• Details on the Modern Slavery Act 2015
• An Expanded Business Ethics Module
• Updated definition of migrant worker and options to record worker nationalities

SMETA audits can be announced or semi-announced and we build relationships to encourage factories to work towards semi-announced & unannounced audits as it demonstrates a higher level of compliance.

Temporary Warehouse Workers

In our main UK warehouse Paladone employs agency workers at busy periods which we are aware of as another high-risk area as we have less control over how agencies have recruited the staff, whether they have taken illegal deductions or deposits and whether they have carried out checks to ensure workers are not victims of human trafficking or forced labour. To minimise this risk Paladone’s HR department conducts interviews with any new agency and uses only specified, reputable employment companies to source labour, always verifying their practices before accepting workers. An audit is carried out annually to ensure that standards are being maintained and worker interviews are carried out to ensure they understand their rights and to check they are being treated in accordance with the ethical standards agreed.

Training on Modern Slavery

We require compliance teams who deal with due diligence, quality management and compliance within our supply chain as well as HR teams and key warehouse personnel within our company to complete training on modern slavery. In addition to this, all new starters to our business are made aware of modern slavery within their induction, which includes what it is, how to spot the signs and how to report a suspected incident.

Our modern slavery training covers:

• how to identify the signs of slavery and human trafficking;
• what initial steps should be taken if slavery or human trafficking is suspected;
• how to escalate potential slavery or human trafficking issues to the relevant parties within our organisation;
• what external help is available, for example through the Modern Slavery Helpline, Gangmasters and Labour Abuse Authority and "Stronger together" initiative;
• what messages, business incentives or guidance can be given to suppliers and other business partners and contractors to implement anti-slavery policies; and
• what steps our company should take if suppliers or contractors do not implement anti-slavery policies in high-risk scenarios, including their removal from our supply chains.

Awareness-raising programme

As well as training staff, we have raised awareness of modern slavery issues by putting up posters across our premises.

The posters explain to staff:

• the basic principles of the Modern Slavery Act 2015;
• what employees can do to flag up potential slavery or human trafficking issues to the relevant parties within our organisation; and
• what external help is available, for example through the Modern Slavery Helpline

Activities and management of modern slavery in 2019/2020

AREA	KEY ACTIVITIES
Policy	A Supplier Handbook was updated to include our Code of Conduct which suppliers must sign to show their commitment to uphold the best practice prior to commencement of business.
Procedure	The modern slavery and human trafficking sections have been incorporated into our factory audit procedure.
Training	A number of employees have completed Online Modern Slavery training courses, which helped raise awareness, better spot the signs and increase confidence in reporting modern slavery when potential cases are encountered. Our factory compliance team have completed a webinar provided by Stronger Together with views of lessons learnt from high risk sectors
Action	In 2019, our Compliance Team based in the Far East have completed 86 factory visits in addition to 3rd party audits, to conduct more informal workers interviews for better understanding on the working conditions, and provide more awareness to factory management on moderns slavery. We have taken further actions to consolidate our supply base, the number of factories we work with has reduced from 120 in 2015 to 75 in 2019.
Investigations	Continuously investigate the root causes of Non-Compliances discovered from factories’ social audits, closely work with factory management for improvement.
Investment	Invested into better reporting tool to enable us to track Non-compliances from audits, conduct further analysis by sections and close off them more efficiently and effectively.

Future plans to tackle modern slavery for 2020/2021

• To develop further the training provided around modern slavery to include the role and responsibilities of supervisors and team managers in spotting the signs of exploitation and how to handle and report suspected cases
• To develop a “Workforce Incident Reporting Procedure” for supervisors, workers, and recruiters to report suspected cases of exploitation and unfair treatment. This includes issues such as worker violence, abusive behaviour, bullying, bribery, corruption, discrimination, harassment, victimisation, modern slavery, and hidden labour exploitation.
• To clearly identify and define the individual roles and responsibilities of HR, functional Heads, Investigating Managers, compliance teams who support operational due diligence steps addressing exploitation risks and ensure their roles and responsibilities are communicated to relevant colleagues.
• To develop further our anti bribery and corruption policies, ensuring that we can demonstrate compliance and tracking of any incidents.
• To introduce a “Modern Slavery Champion(s)” to maintain peer engagement and raise awareness of modern slavery and hidden labour exploitation within the general workforce.
• To develop and implement a “Responsible Recruitment Policy” using the toolkits from Stronger Together.
• To Continue to screen any new suppliers by desktop audits & on-site visit with fully completed reports to assess the labour condition before a partnership is confirmed.
• Encourage more suppliers to join the SEDEX membership, conduct annual audit & make improvements as per Corrective Action Plan set up by the auditors. Closely monitor our suppliers Non-Compliances closure performance, for those who are not cooperative to make improvement, Paladone will terminate the business.
• Collaboratively work with our customers and suppliers by understanding the challenges that have emerged following Covid-19 outbreak, and key actions to take in order to ensure modern slavery is kept high on the agenda.
• Continuously develop the best way to implement a Whistleblowing policy into China factories.
• Develop our supply chain mapping to increase our understanding of risk within our supply chain.