Conducting environmental audits - DECATHLON's audit system

To protect the health & safety of people living around or working in factories/manufacturing sites and preserve the local environment (from waterways to air quality). The aim is to reduce the manufacturing impact of Decathlon products on the environment.

Decathlon has selected the manufacturing sites concerned by choosing an indicator based on the volume of waste water generated per day by a site. The teams consider that sites that generate more than 50 cubic meters of industrial waste water pose a environmental pollution risk. Heavy water use in actual fact goes hand in hand with high consumption of chemicals, leading to a risk of direct pollution and endangering the health of local populations. This use also requires higher energy resources with potential emissions of pollutants.

The countries currently most affected by environmental management are China, Bangladesh, India and Vietnam.

Nevertheless, this indicator is set to evolve from 2022 onwards with two objectives in mind:
1️⃣ expand the scope of sites covered by an environmental audit to include new industrial processes with low water consumption but with a high environmental risk;
2️⃣ allow for better control of environmental risks.

In each of its production countries, Decathlon relies on OPM-SD (Sustainable Development Operational Process Manager) specialists responsible for coordinating sustainable development projects within the plants. Some of them are dedicated to environmental management and trained to carry out environmental audits.

Some of these audits are carried out by them in-house, and some externally, by an auditing firm with identical level of high standards. During each audit, the external auditing firm also performs air and water quality tests, which they analyse.

Production sites are assessed against a single environmental audit checklist based on five levels: A, B, C, D and E.

Decathlon requires its suppliers that they achieve at least a grade of C. In the event of a D grade, the supplier has between six months and a year to implement actions and improve. In the event of an E grade linked to an immediate risk of pollution to the environment, measures are expected to be taken at once, going so far as the immediate suspension of production until the problem detected is resolved.

The scores are then published within the company to get an overall Decathlon United view, then by country, and lastly by process.

To achieve its environmental objectives, Decathlon has raised its requirements for existing sections and integrated two new themes into its audit checklist in 2021:environmental risk governance and energy management.

As a result, Decathlon now focuses on checking five main themes:
1️⃣ - Environmental risk governance: suppliers must have a robust governance system in place to manage environmental risks effectively. The following is assessed: managerial organisation, environmental policy, continuous improvement strategies, along with the suppliers ability to detect and mitigate their potential risks and put in place corrective action plans;

2️⃣ - On-site industrial water treatment: industrial water waster must comply with Decathlon requirements and local regulations. If there is a discrepancy between local standards and our specifications, we apply the most stringent rule. With the update of the audit checklist, the requirements on the volumes of recycled water were raised, and detailed monitoring of the amounts used requested;

3️⃣ - Management of hazardous materials (chemical, biochemical, electronic or even from production): hazardous waste must be stored in specific areas, protected from weather events (rain, sun) and without there being a risk of contaminating groundwater, the principal source of drinking water. In 2021, Decathlon reinforced its expectations regarding chemical products by requesting accurate tracking of the volumes of hazardous waste entering the factory and generated by the supplier.

4️⃣ - Air pollution: emissions of fine particles, harmful gases (NOx and SOx) and other types of gaseous pollutants into the atmosphere must be limited, and suitable filtering systems must be installed in the plants. To clarify its requirements, Decathlon has published guidelines in 2021 indicating the maximum recommended emissions level according to the energy sources used (coal, biomass, refined oil, gas);

5️⃣ - Energy management: CO2 emissions have to be measured for scopes 1 and 2, and long-term strategies have to be in place to ensure the emissions reduction trajectories are aligned with the science and the objective to limit global warming to 1.5°C.

Over the course of the year, several webinars have been organised for teammates so they could better assist suppliers in understanding the new checklist.

Following this update, a new version of the Code of conduct (available here alongside other legal documents) was published, now integrating the company's decarbonisation expectations; it presents, for each topic, the minimum D score requirement (corresponding to a score of C in the checklist) as well as its goals for the production sites of its suppliers (B score).

In 2022, 83.4% of relevant sites for Rank 1 and Rank 2 suppliers were rated A, B or C on Decathlon’s audit grid (compared with 77% in 2021).

The mechanism for assessing environmental responsibility in production has been severely impacted since the start of the COVID-19 pandemic63. After seeing a decline in performance in 2021, Decathlon is now back in line with its commitment to ensure that 90% of relevant sites for Rank 1 and Rank 2 suppliers are rated
A, B or C by 2026.

This progress can be explained by:
✅ strong motivation from production teammates to maintain ties with suppliers and guide them towards production practices that have less of an impact on the environment;
✅ a growing number of internal auditors (24 vs 16 in 2021) and more teammates trained in auditor validation to achieve greater autonomy, 142 audits in 2022 (compared with 129 in 2021) and the ability to take corrective action more quickly;
✅ updated training dedicated to the basics of environmental compliance provided to auditors, production leaders and production managers in several countries (Morocco, Pakistan, Portugal, Brazil and Sri Lanka), so they can inform more teammates (55) and be able to sound the alarm in the event of a problem identified outside audit periods.