Validated Audit Process (VAP) Introduction

1 Validated Audit Process (VAP) IntroductionVAP Operations TeamOctober 2017 The Validated AuditProcess VAP ProcessOverview GlossaryContentAn industry solution for improving business practicesThe Validated Audit Process (VAP) Is your business effectively managing social, ethical, and environmental risks in your supplychain?Poor social and ethical performance in the supply chain can be damaging to your brand and shareholder valueValue of the VAPV alidatedAuditProcessMember CompaniesSuppliersStakeholdersThe Validated Audit Process (VAP) providescompanies assurance in identifying risksand driving improvements and robustmanagement systems for labor,ethics,health, safety, and environmentalconditions in the is the key to a successfulaudit.

2 The Validated Audit model iscontingent upon the supplier s willingnessto being open and honest about their socialand environmental Process and helps tobuild long lasting relationships withcustomers Validated Audit is a key step of a capability development model that assesses conformance to the RBA Code of Conduct, local laws, and regulations through a management systems approach to drive sustainable VAP provides a comprehensive social and environmentalassessmentLaborHealth &SafetyEnvironmentalEthicsManagementSyst ems1)Freely ChosenEmployment2)Child LaborAvoidance3)WorkingHours4)Wages andBenefits5)HumaneTreatment6)Non- Discrimination7)Freedom ofAssociation1)Occupational Safety2)Emergency Preparedness3)Occupational Injury & Illness4)IndustrialHygiene5)Physically Demanding Work6)Machine Safeguarding7)

3 Sanitation, Food, andHousing8)Training1)CompanyCommitment2 )Management AccountabilityandResponsibility3)Legal and CustomerRequirements4)Risk Assessment and Risk Management5)Improvement Objectives6)Training 7)Communication8)Worker FeedbackandParticipation9)Audits andAssessments10)Corrective Action Process11)Documentation andRecords12)SupplierResponsibility1)Env ironmental Permits &Reporting2)Pollution Prevention &ResourceReduction3)HazardousSubstances4 )Wastewater & SolidWaste5)AirEmissions6)Product ContentRestrictions7)Storm Water Management8)Energy Consumption and Greenhouse Gas Emissions1)BusinessIntegrity2)No ImproperAdvantage3)Disclosure ofInformation4)IntellectualProperty5)Fai rCompetition6)Protection ofIdentity and Non Retaliation7)Responsible Sourcing ofMinerals8)PrivacyTreat employees with dignity & respectEvaluate & control exposure to hazardsManagement SystemsProtect the environmentUphold the highest standardsRBA Code of Conduct.

4 VAP Audit provides a unique combination of depth and quality assurance in an independent, sharable qualified third party end-to-end Audit service focused on improving business the Validated Audit Process1 to 3 day Checklist Audit Closed (Y/N) questions Lack auditor checks on systems, policy and/or data triangulation Limited coverage and time on site, resulting in limited depth and # issues found Challenging to share a common Audit reportRBA VAPA udit Systems based evaluation, ensuring adequate depth (days on-site based on size and complexity)

5 , worker interviews and data triangulation Management of the end to end Process approved Audit firms and auditor certification Rigorous Quality Assurance ProcessFinancial or Legal Due Diligence Audit Evaluates legal compliance & operational risks to inform investment and risk management Significant auditor day ratesBenefits of using the Validated AuditProcessACTIONABLERESULTSSTANDARDIZE D APPROACHDEMONSTRATE YOUR COMPANY S LEADERSHIPT oolsValidated Audit tools weredeveloped using the highest standards across industries.

6 All VAP lead auditors are approved by the RBA Audit Program Manager (APM) and are required to use common tools, templates,and Audit ManagementAll Validated Audits are independently managed by a trusted third party Audit Quality Manager to ensure report consistency andquality. Auditor performance is evaluated oneach Audit as well as aggregated data on an Audit Reports identify improvement opportunities in social and environmental practices, performance, and management systems. The Process provides good practices to help your company understand next steps to reduce risk and audits provide a streamlined approach for responding to multiple customer Audit requests.

7 Factorieswill have one Audit report to share with all their customers, reducing supplier Audit fatigue and duplication of effort. This enables your company to focus on root cause and continuous customers are assured of Auditeeconformance totheRBA Code of Conduct, local laws, and regulations. Proactive engagement in addressing risks through the VAP Process demonstrates supplier accountability and commitment to improving working conditions in the proactively managing risksand by providing support to address improvements where needed, Validated Audits help suppliers build trust through open dialogue Audit BenefitsNon- Validated Audit VA offers full management and oversight by an Audit quality manager.

8 Which provides independent double quality check on each report prior to release and a consistent interpretation of the RBA Code of Conduct (See next slide) All audits are conducted by RBA approved Audit firms with auditors who are either RBA IRCA certified or RBA VAPapproved All auditors are approved and auditor performance is monitored Audit assignment is based on Audit firm performance Consistent methodology and tools are used Audit reports can be shared with multiple customers VA provides a full facility evaluation to the RBA code of conduct Authenticated VA serial number or watermark tracking Audits are managed and stored in EICC ON Lack of

9 Centralized auditmanagement Audits lack third party oversight and qualityassurance Auditors may or may not be RBA approved orIRCA certified Inconsistent interpretation of RBA Code ofConduct Audit coverage may or may not include entire facility, which limits sharing across multiplecustomers Lack of VA serial number or watermarktracking Audit management and Audit report availability inEICC-ONMerits of VAPNon-ValidatedValidatedBenefitsAMACMAV AP4thParty Oversight by APMXTwo Independent Quality Checks for consistency across approved Audit firmsXTwo auditor minimum (EHS lead and Labor/Ethics lead)

10 XIndependent billing, no money changes hands between Audit firm& auditeeXEligiblefor the VAP Recognition ProgramXAudit ReportAvailable in EICC-OnXSecureaudit sharing among RBA membersXAggregated Audit data included in industry Audit trends (across all Audit firms)XAuditor/ Audit Firm ReportCard after each auditXAudit scope includes entire facility and all customers (some exceptions allowed)XTriangulatedevidence required for proof of every compliance and non-complianceXShadow AuditsXRequirement to close Priority findings XPost Audit Survey 1)Auditee Survey 2)Auditor SurveyXAPM ManagedCAP Options (fee based)XFollows the full RBACode of Conduct?