REGULATORY COMPLIANCE IN PRACTICE: PRODUCT SAFETY Whatever the material, from fragrance and cosmetic ingredients to leather, textile, or jewelry components, CHANEL has dedicated teams of experts around the world to monitor all existing and incoming regulations in order to secure the safety of our products. While our finished products are fully compliant with the various toxicology regulations, we constantly urge our R&D and regulatory departments in all activities to try to further lower the required tolerance levels. Wherever possible, CHANEL FRAGRANCES & BEAUTY forbids the use of certain substances, based on a stricter interpretation of current regulations in this area. The FRAGRANCES & BEAUTY activity has internal criteria in place that define how these substances are identified. The criteria covers both environmental and ethical considerations, such as being on the IUCN Red List of Threatened Species, which identifies plants that are near-threatened, vulnerable, endangered, or critically endangered, as well as substances that involve potential consumer health concerns. Over the course of 2018, we will gather and consult a panel of experts and non-governmental organizations (NGOs) to conduct a critical review of our criteria for identifying restricted substances. We take a coherent approach to compliance issues, led by our legal and regulatory departments and implemented worldwide. It encompasses the following: • Clear governance and guidance from management on company ethics. • Helplines to raise concerns and whistleblowing protection. • Policies ensuring a supportive work environment and a zero-tolerance approach to any form of discrimination or harassment. • High employee protection in terms of labor practices and health and security. • Protection of our assets, including intellectual property and data privacy. • Anticorruption, money-laundering, and fair-competition issues. • Ensuring consumer health and safety through enforcement of strict regulatory compliance for all our products. As well as specific policies, compliance at CHANEL means constantly reevaluating and integrating new regulations, through awareness and specific-issues training, regular compliance reviews, audits, and remedial actions. We also expect third parties we conduct business with — including suppliers, contractors, agents, representatives, distributors, and consultants — to adhere to the spirit of these standards, comply with our ethical principles, and meet all of their contractual obligations. We strive to only do business with people who share our commitment to the highest standards of integrity and responsible business conduct. The new version of the Responsible Sourcing Policy referred to earlier in this report, which is being rolled out by all activities in 2018, is the materialization of this expectation, and CHANEL has committed to work with all suppliers to achieve these commitments. GOVERNANCE FOR RESPONSIBILITY AND SUSTAINABILITY