Hello,We’reFOND OF

CORPORATERESPONSIBILITY REPORT 2015 / 16

GERMAN SUSTAINABILITY AWARD

Germany's Most Sustainable SME 2016

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Contents

Foreword .......................................... 3

Our Company ................................... 4 CR – Mission Statement and Goals .. 6

Products & Sources .......................... 9

CR Project: Leather Sourcing .......... 14

CR Figures ....................................... 16

Contact & Imprint ........................... 20

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Corporate responsibility is one of the six core issues that we deal with together. A lot of hard work and a little spunk are gradually bringing us closer to our goal of being a sus-tainable company.Oliver Steinki, Sven-Oliver Pink, Florian Michajlezko Founders and CEOs, FOND OF BAGS

Hello, we’re FOND OF BAGS!

This means: We love what we do and put our heart and soul into doing it. It’s only natural that we take our corporate responsi-bility seriously.

This second CR Report is an important milestone, in which we make clear the progress we made in fiscal year 2015 / 2016. We first started working with concrete sustainability goals in 2015 and can now show where we currently stand. In the past year, this meant that our first step was to “look and understand”. Today, this experience is already a lived reality everyday. Nevertheless, every day we’re learning something new about what it means to act responsibly and to make this tangible in every area. We’re aware that we’re still far from the point of wanting to call ourselves a “sustainable” company. Yet at the same time, this awareness is an incentive to keep on getting a little closer to our vision of a sustainable company.

We hope you enjoy looking through our CR Report 2015 / 2016.

OUR COMPANY

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Facts & Figures

Brands

2010

€ 46 M

FOND OF BAGS is a medium-sized company with headquarters in Cologne. It was able to register a turnover of € 46 M in its sixth fiscal year, 2015/16.

F. O. BAGS GmbH was founded under the name ergobag GmbH in 2010 in Cologne.

3 managing directors

4 apprentices

5 interns

2016

46

34

21

13

510.3

2013

36 employees

17 women

19 men

2014

57 employees

23 women

34 men

2015

80 employees

36 women

44 men

2016

161 employees

83 women

78 men

22 work-study students

4 employees on parental leave

26% of women in managerial positions

95.7% of permanent employees

on an open-ended contract

4% over age 50

20102009 11 /12 12 /13 13 /14 14 /15 15 /16

CORPORATE RESPONSIBILITY MISSION STATEMENT AND GOALS

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CR Vision

Our vision at FOND OF BAGS is that, some day, we’ll get along without a CR department because everyone in the company will be promoting the issue in their own area of responsibility.

CR Mission

Our mission when it comes to CR is to raise awareness in every team member of the impacts of his /her professional actions and to demonstrate how he / she can minimize these impacts.

Where are we today?

11 CR goals were adopted in March 2016. We used the N-Kom-pass* to derive our goals. NWB Verlag’s web-based method helped us identify the most significant levers for sustainability and to reformulate them into goals. Based on the evaluation, we emphasized the supplier chain as a first step. We consid-ered in particular the areas of transparency and social and eco-logical aspects.

CR Goals

Social Responsibility

Ecological Responsibility

Transparency in the Supply Chain

Management signed the Code of Conduct.

3/15/2016

100% of the nominat-ed material suppliers signed the Code of Conduct.

7/31/2016

100% of the sewing rooms signed the Code of Conduct.

7/31/2016

100% of the sewing rooms were audited by an external inspection authority.

7/31/2018

PFC-free production

1/1/2019

100% of materials and 50% of components purchased from bluesign system partners.

12/31/2019

Two bluesign® products will be in production.

12/31/2019

Self-disclosure from 100% of the sewing rooms is available.

3/31/2016

Social and ecological conditions for collaboration are specified.

5/31/2016

Statements from 100% of the sewing rooms on the website.

5/31/2016

Supply chain of leather sourcing is transparent.

5/31/2017

*More information at www.n-kompass.de

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Status of the CR goals (July 2016)

2 of the 4 social goals have been met and the other two are actively in progress. The Code of Conduct, which specifies the rules of conduct for ourselves and our partners, has been cre-ated and signed by management and our sewing rooms. Not all of our nominated material suppliers have signed it. 3 of 7 of our sewing rooms were reviewed by our partner Sumations (status as of 7 / 2016).

We have already achieved 3 of 4 goals in the “Transparency in the Supply Chain” area. More detailed information about our sewing rooms is therefore available to us (number of workers, working hours, production capacities, etc.). Our customers and all interested parties can find out where we have our products manufactured (see website) and where the leather comes from (cf. “CR Project: Leather Sourcing,” p. 14).

We are also intensively working on, researching, and developing the ecological aspects in order to reach our ambitious goals.

We are further along the path of pursuing our goal of re-placing the standard PFC and its water-repellent function with a more environmentally friendly substance by 1/1/2019. To this end, we are now setting out on two paths. On the one hand, we are working directly with our material manufacturer on a new PFC-free coating.

Parallel to this, we have had our materials treated directly by German chemical suppliers and are carrying out physical tests

for water repellency, etc. It’s important for us that our custom-ers don’t have to experience any “wet surprises” if the new coating doesn’t offer the usual protection against moisture and /or dirt. At the same time, however, the goal of freedom from PFCs should be achieved.

Two of our brands are currently pursuing the goal of bringing two bluesign® products to market. We currently sourcing ap-proximately 70% of our materials and 17% of our components from bluesign® system partners and thus from suppliers that are continuing to reduce their emissions into the air and water and have an environmental management system.

PRODUCTS & SOURCES

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86 M86,000,000 0.5 l (20g) PET bottles have been recycled for our products since 2010.

... 1,151,258 bathtubs of water (161,176 m3) and ...

… 594 hot air balloons of CO₂ (3,503 metric tons) have been saved.

As a result, 5,632 barrels of oil (895,430 l) ... = 1,000 barrels of oil

= 100 metric tons of CO₂

Where does our leather come from?

With OFFERMANN, the oldest German leather brand, we could take a decisive step in the direction of assuming responsibility. The leather for the Spring / Summer 2017 collection will no lon-ger be sourced from a local market in India and tanned there, but will originate from the German company “Leder Heinen”. This means that we will know that the leather hides will come from north German beef cattle and the highest environmental standards will apply during processing. The hides will still be sewn in India, where we have real professionals in the craft of sewing leather by hand in our partner “Trident”.

Where do our materials come from?

An important pillar of our sustainability strategy is minimizing our environmental impact during product manufacture. For this purpose, we use fabrics with a recycled PET bottle content of up to 100 % (our AEVOR and Affenzahn brands use fabrics with a recycled content of 50%). PET recycling has double the ben-efits: Less waste is produced and fewer natural resources are needed to produce a finished backpack. The manufacturing process saves natural resources: Water consumption and CO2 emissions are reduced. In this way, unnecessary environmental impacts are reduced in the manufacturing process. Compared to conventional production methods, waste water is reduced by 20%, energy consumption by 50%, and emissions of harmful pollutants by 60%.

Savings made by recycling PET plastic (2010-2016)

1.15 M

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1. PET bottles are collected & sortedThe empty PET plastic bottles are collected and taken to a recycling plant. Once there, the clear bottles are selected to undergo recycling.

2. The bottles are crushed The bottles are crushed into PET �akes.

4. Pellets are madeThe PET �akes are melted down and mixed thoroughly. The hot mass is then formed into thick �bers that are cut into 3 mm pellets.

5. The thread is spunThe pellets are melted again, drawn into long �bers and spun into thread. The �nished thread is wound onto spools and transported to the weaving mill.

6. WeavingThe thread is placed in sophisticated weaving machines and woven into white lengths of fabric.

7. PrintingPatterns are then printed onto the lengths of fabric and both sides are coated to make the fabric water-repellent.

8. SewingThe fabric pieces cut from the patterns are then used to sew our wonderful product.

3. The bottles are washedThe bottles are then washed in a water bath.

The manufacturing process “from bottle to bag”

The PET plastic bottles are crumpled up, crushed, and broken up into little shreds of plastic. Specially-designed machines are used to thoroughly clean the shreds of any orange juice or soft drink residue, resulting in a fine powder. The powder is melted and then blown through extremely thin nozzles to produce wa-fer-thin polyester fibers that are then twisted together and spun into long strands. A weaving machine is then used to weave the strands into fabric. The still plain looking white fabric is now processed into brightly colored materials by using salt water and pigments – the salt very slightly roughens the surface of the fibers so that the tiny color particles can bind well. The fi-bers are then dried and coated with an adhesive paste, known as polyurethane paste, to protect them. The paste used on all our textiles is water-based and solvent-free. Harmful emissions are therefore avoided, and the waste water is not polluted with poisonous chemicals.

As a final step, the fabrics are cut and completely sewn to-gether by hand. Manual sewing of the bags is one of the most important steps in the development process of our products. That’s why when selecting partners for the sewing of our prod-ucts, we value good social / ecological conditions and a high standard of quality.

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Countries, production facilities, locations*

* Fiscal year 2015 / 16 ** See page 13 for a detailed review of the social standards

Name Country Partner since Brands Social audit**

ASG Global Co., Ltd. Vietnam 2015 ergobag, satch April 2016

ASG VINA Co., Ltd. Vietnam 2010 ergobag, satch, A E P, pinqponq March 2015

INS VINA Ltd. Vietnam 2013 Affenzahn planned by July 2018

VIVA Saigon Vietnam 2011 satch September 2016

Sing Bao Sewn Products Co., Ltd China 2014 ergobag, satch, AEVOR planned by July 2018

Guanxi Starry Ltd. China 2014 ergobag, satch planned by July 2018

Trident Exports India 2015 OFFERMANN planned by July 2018

We are taking a close look!

We want to have visited all our sewing rooms and conducted a social audit by mid-2018. An audit is an inspection of the social standards. Since audits can have a different quality and value, we would like to describe our process here.

We have our audits carried out by professionals from the Su-mations agency. They have many years of experience and have already gotten around a lot in Asia. What makes the audit team special is that it’s always a team of colleagues from Germany and includes at least one local team member. This means that the services of an interpretor aren't needed during the inter-views and attention can also be paid to local non-verbal meth-ods of communication.

Each audit takes place according to a fixed structure. First, the date for the visit is officially coordinated with our partners and the process for the audit is made clear. We think this is all a matter of fairness. 1-2 days before the actual visit to the factory, the audit team is already on site to talk to local residents, fruit and vegetable vendors, and the workers outside the factory gates during a pre-check. This is how we ensure that the answers are honest and beyond the sphere of influence of the factory management. Sumations therefore already knows before entering the gates what issues they need to pay special atten-tion to (e.g., overtime, payment of wages, trade union freedom).

China

2Longhua

Shipai

AEVORAffenzahnergobag

Vietnam

4Ho-Chi-

Minh-City

pinqponqA E Psatch

ergobagAffenzahn

India

1Kolkata

OFFERMANN

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Sequence of the social audit

Day 1 of the actual audit is dedicated primarily to the tour of the factory. Emergency escape routes, floor markings, first aid kits, junction boxes, fire alarm and extinguishing systems, toilets, sewing machines, the factory canteen, storage spaces, and waste disposal are checked. If there is time left over, the official interviews can also begin. The team also talks with union repre-sentatives and management in addition to workers.

Day 2 is dedicated to an inspection of documents. Does the information about working hours agree with invoices from the canteen? Do the security guards who are hired by a service provider have social security insurance? Here, once again, it really pays off to have on board a local colleague who speaks the local language.

The conclusion is the creation of what is called a Corrective Action Plan (CAP in short). All of the identified improvement options (findings) are noted in this document, provided with a date and responsibility, and arrangements made for how the findings will be tackled.

Now the ball is in our court. The CAP will be gone over with the partner during regular telephone calls and on-site visits and the findings resolved.These audits will be repeated every three years. In the case of critical issues that we cannot personally review, audits can, however, also be repeated earlier by professionals.

CR PROJECT: LEATHER SOURCING

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Leather Sourcing

With the acquisition of OFFERMANN, a leather supply chain became relevant for us, one which includes special challenges. We responded quickly and boldly here and now source the fin-ished tanned hides, starting with the Spring / Summer 2017 col-lection, from the long-established company “Leder Heinen” in Mönchengladbach* instead of from a local but non-transparent market in India. The hides come from northern German beef cattle, and the tanning process takes place under the best eco-logical considerations. We are very proud that we were able to implement this step so quickly. The products from the previous collection will continue to be made with the leather from India.

Leather is also partly used for the brands A E P, pinqponq, satch, and ergobag. Here we work together with Saigon TanTec (STL), Vietnam**. The tannery was commissioned in 2010 according to the highest environmental standards and with the help of aid money from Germany. STL boasts wind turbines, which cover 100% of its electricity demand, solar thermal energy, bamboo walls for temperature regulation, and a “green treatment” plant. The proof of origin for the leather also persuaded us. All the hides that STL uses come from North American beef cattle. TanTec, however, receives the hides already tanned. Upstream are 4 other tanneries, two in the U.S. and two in Brazil. We will also look closely at these tanneries and check whether they comply with the environmental standards that are so important to us.

* Website: www.heinen-leather.de ** Website: www.liteleather.com

CR FIGURES

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Packaging waste

More turnover means more packaging waste, even in fiscal year 2015 / 16. Around 424 . 7 metric tons of waste accumulate due to the transport of the goods to Germany from our produc-tion countries of Vietnam, China, and India, as well from our warehouse to dealers and final customers. We could, nevertheless, also record some progress here: After initial problems such as boxes that were too large for small shipments, we optimized the box size with our new logistics provider in the second quarter of 2016. Shipment from Asia also is being made in customized boxes.

We converted the plastic outer packaging in fiscal year 2014 / 15 to a low thickness and thus saved around 33% plastic. For quality assurance reasons, it is unfortunately not possible to completely dispense with packaging the products. The main reason is that the dust that accumulates in our German ware-house would get on the products and lead to an increased num-ber of complaints. Up to now, we have also decided against using bio-based plastics, since no supplier could unequivo-cally prove that the originating products, e.g., corn, fulfilled our requirements: no genetic technology, no land grab, no large-scale use of pesticides, no clearing of primeval forests. The sewing room of our A E P brand already uses recycled plastic for the outer packaging of A E P bags. Our aim is to also switch to recycled outer packaging for our other brands.

Comparison of packaging waste

Plastic outer packaging: 17.4 t

Cardboard packaging: 178 t

Plastic outer packaging: 31.6 t

Cardboard packaging: 424.7 t

195.4t

456.3t

2014 / 2015 2015 / 2016

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Total greenhouse gas emissions

The total greenhouse gas emissions in fiscal year 2015 / 16 were 1925.61 t CO2.

In the interests of simplicity, the following were not included in the calculation: the CO2 footprint for materials, production, shipping to customers, material disposal, and water and elec-tricity consumption at our sites.

Direct greenhouse gas emissions (Scope 1 emissions)

Since we don’t have either our own production facilities or di-rect greenhouse gas emissions in our offices, the GHG emis-sions in Scope 1 are solely from CO2 emissions that are emitted from our company-owned vehicles. These emissions totaled 93.1 t CO2 in the past fiscal year.

1925.6t CO2

CO2Total greenhouse gas emissions 2015 / 2016*

* All figures are rounded to one decimal point. The term "t CO2" refers to metric tons of CO2 equivalents.

Direct greenhouse gas emissions 2015 / 2016*

93.1t CO225 vehiclesCO2 emitted by our 25 company vehicles during 2015 / 2016

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Indirect greenhouse gas emissions (Scope 2 emissions)

The greenhouse gas emissions incurred using electricity and gas by FOND OF BAGS at our manufacturers in the past fiscal year totaled 79.2 t CO2 for district heating and 47.99 t CO2 for electricity. The figure for electricity was calculated based on the electricity mix of the 2014 electricity supplier. In sum, the Scope 2 emissions were 127.19 t CO2.

Indirect greenhouse gas emissions (Scope 3 emissions)

Combined under Scope 3 are all those greenhouse gas emis-sions that resulted from the transport of the goods as well as the total emissions from business trips. Due to reasons of com-plexity, the sample shipment could not be taken into consid-eration for transport of goods. In fiscal year 2015 / 16, Scope 3 emissions amounted to a total of 1705.32 t CO2. Of this amount, 859.3 t CO2 could be attributed to transport of goods, 845 t CO2 to plane trips, and 1.02 t CO2 to train trips.

Of the plane trips, 326.6 t CO2 is attributed to the account of our team trip to Vietnam.

The total electricity consumption at our company headquarters in Cologne for the fiscal year 2015 / 16 totaled 106,883.77 kWh. Electricity consumption per worker thereby declined signifi-cantly.

1705.3t CO2

845.0t CO2

859.3t CO2

1.0t CO2

Indirect greenhouse emissions 2015 / 2016*

Energy consumption

106,884 kWh

77,496 kWh

~664kWh

~1000 kWh

a total of

a total of

2015 / 2016 at our Cologne headquarters

2014 / 2015 at our Cologne headquarters

per employee

per employee

+38 % -33 %

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Imprint

* World map: designed by Freepik

The vision of the CR department? That we become superfluousat FOND OF BAGS!Michael DammFOND OF CORPORATE RESPONSIBILITY

Contact for matters relating to Corporate Responsibility

Michael Dammmichael.damm@fondofbags.com

Hannes Weberhannes.weber@fondofbags.com

Created with and thanks to the fantastic support of:Corinne Behm, Miriam Bongers, Alexandra Buchkremer, Johannes Decker, Martin Steinbach, Thomas Waaden, and Rebecca Weyers.

FOND OF BAGSF. O. BAGS GmbHVogelsanger Straße 7850823 CologneT. +49 (0) 221 / 539 705-100F. +49 (0) 221 / 539 705-40info@fondofbags.com

PhotographyAthenea Diapoulis / Simon Hariman

Creative Direction, Design, & Infographics*FOND OF BAGS | CREATION, www.make-studio.net