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2018

THE ARMANI GROUP AND SUSTAINABILITY



2018

Today, across all fields of productive endeavour and beyond, sustainability is increasingly gaining prominence as a major theme of discourse and concern; this is certainly a positive sign given that securing the integrity of the environment and the availability of energy and natural resources, and upholding respect for work and communities are all indispensable elements for ensuring a positive future in terms of economic growth and development, and for our company. A sustainable strategic positioning and coherent corporate policy are key fundamentals for anybody seeking to plan and manage an enterprise that is forward-looking. I believe that a well thought out sustainability strategy today represents an enterprise's ability to not only create wealth, but also to endure over time, while being able to draw on renewable resources. And all this has to be effectively enabled through careful and responsible management. For me and my Group this entails a question of ethics, way before one of strategy. I can say that at its core the philosophy underlying the Armani brand has always been sustainable for two main reasons: firstly, with my work, I have constantly striven to offer quality apparel that stands the test of time both in terms of durability and wearability, and secondly, the Armani Group has always distinguished itself through adhering to a series of clear values that characterise its actions and products. While research and innovation naturally constitute important tools for finding solutions to the problems of environmental degradation, pollution, long-term availability of raw materials, and social inequalities, settling for occasional experimentation is hardly the optimal route. Indeed, it is necessary to completely rethink the way of doing business so as to make each link in the chain truly sustainable, i.e. we need to be capable of creating a model that replenishes what it consumes and can therefore sustain over time without damage accruing to future generations, and thus also pass along to them, in testimony thereof, the very same values upon which to continue building. This is, therefore, the veritable challenge: it is crucial, even during one’s daily work routine, to be ready to take it on.

The Chairman

6 | THE ARMANI GROUP

CONTENTS

THE ARMANI GROUP

09

27

37

41

67

85

95

WHAT WE DO

UNIQUE IN THE WORLD

HOW WE DO IT

THE COMMUNITIES THAT WE SUPPORT

WHO DOES IT

FOR WHOM WE DO IT


2018 IN NUMBERS

8,206

220

EMPLOYEES WORLDWIDE

7INDUSTRIAL

SITES

1,972MILLION EUROS IN ECONOMIC VALUE

DISTRIBUTED

CHEMICAL TESTS ON PRODUCTS

531COMPANY-OWNED

STORES

2,074MILLION EUROS IN ECONOMIC VALUE

GENERATED

5,000HOURS OF

TRAINING PROVIDED

AUDITS CARRIED OUT AT OUR SUPPLIERS' FACTORIES


OVER

10,000OVER

Talking about Giorgio Armani means narrating a story that began more than 40 years ago. An icon of elegance who also symbolises practicality and modernity, with perennial attention to quality in every minute detail, Giorgio Armani embodies the essence of “Made in Italy”, capable of combining timeless style with a farsighted vision trained on the future. Solidly connected to its Italian roots, the company has experienced steady growth across the world, progressively expanding its offerings, from apparel and accessories to cosmetics and fragrances, as also eyewear, watches, jewellery, furniture and furnishing accessories. The distinctive sensitivity to societal and contextual changes in the environments in which it operates keeps the Armani Group resolutely focused on sustainability with ever increasing attentiveness.

THE ARMANI GROUP

10 | IL GRUPPO ARMANI

THE BRANDS OF THE GROUP

2018 brought to completion the reorganisation of the Armani Group brands which began the previous year, culminating in focus being centred on the brands Giorgio Armani, Emporio Armani, and A|X Armani Exchange, with a view to better responding to the wants and needs of the various target customer segments. This structure also incorporates licensing agreements related to products such as eyewear, cosmetics and jewellery, and some active partnerships that have been so maintained.

THE ARMANI GROUP | 11


Launched in 2005 and sold on order throughout the world, the Giorgio Armani Privé Haute Couture collection is the highest expression of the inventiveness, elegance and refinement of the Armani style. Exclusive, rare and luxurious are indeed synonymous with Privé. The collection, which is the product of masterful artisanship and artisanal know-how, is aimed at a sophisticated and selective clientele. Each apparel item made entirely in Italy, is unique, crafted by hand with the passion and wisdom of skilful experience. Traditional craftsmanship blends with stylistic genius in the creation of these garments of ultimate luxury and incomparable ‘Made in Italy’ quality, dedicated to clients who take pride in showing off not simply an outfit, but a real and true work of art. The whole process from the creation to the production of the apparel items is entrusted to the personnel of the atelier, always with the direct involvement of Giorgio Armani. The atelier team now comprises of approximately 60 individuals, including seamstresses, professional couturières and designers, working out of the historic Milan headquarters of the Group (located at via Borgonuovo 11). Since 2005, up to the present time, the Giorgio Armani Privé collections have and continue to grace international catwalks, representing and promoting the Group's values all over the world and contributing to safeguarding both the established legacy of long-held traditional knowledge and the professionalism of sartorial artisanship.

Established in 1975, the Giorgio Armani collection is one that best expresses the eternal underlying values traditionally associated with the brand: the high quality of materials, the purity of lines and timeless elegance, excellence in production, extreme care and attention to detail. The Women’s collection offers apparel and accessories that seek to satisfy the needs of contemporary women no matter what the occasion, while the Giorgio Armani Men’s line strives to continuously redefine the classic style, with new materials, cuts and workmanship, complemented by the “Made to Measure” custom sartorial service which perfectly adapts each garment item to the client’s needs and requests.

Since 2000 Armani/Casa has established itself as an international leader in the high-end furniture and furnishings sector, expressing the lifestyle vision of Giorgio Armani, which combines refinement and style with the comfort and sense of intimacy essential to every home. The production of furniture and furnishings and accessories has been integrated into the operations of the Interior Design Studio, aimed at private individuals and property developers.


Since the launch of the first collection in 1981, Emporio Armani has emphatically exuded the modern and dynamic spirit of the brand, while maintaining the distinctive elegance of the Maison Armani. Over time, other brands of the Group have been integrated into Emporio Armani, which consequently encompasses the current wide selection of apparel and accessories for all occasions and functional uses, ranging from sportswear to formalwear, and even high-end elegant attire. Emporio Armani addresses diverse target customer segments, including the very young, with a broad cross-category messaging, thereby successfully offering items that are modern and innovative, which proactively anticipate and interpret style-fashion trends. The iconic logo has now become synonymous with a metropolitan style, which also extends to accessories, from footwear to bags and small leather goods.

Founded in 2004 as the brand vehicle to offer sports enthusiasts performance technical apparel that at the same time manages to express the characteristic Armani style, EA7 has over the years cultivated its own distinctive markedly individual identity. The logo evokes 7 different sports areas: training, tennis, basketball, diving, sea world, mountains, golf.

The A | X Armani Exchange collection was launched in 1991, drawing inspiration from the urban reality of the streets, and destined for new generations and for the young at heart. It is an “easy-going” line with affordable price points offering clothing and accessories that keep in step with the fast-paced street-smart reality serving as inspiration, while remaining faithful to the spontaneity and energy that are part of the Armani DNA.

Armani/Fiori represents the fulsome expression of the discerning taste and refinement of the Armani style entirely integrated with the sophisticated simplicity and essentiality of the lines in the floral décor and arrangements. Since their inception starting in 2000 and onwards, the Armani/Fiori boutiques have been offering a comprehensive and personalised service to clients who are assisted right from the selection of flowers available to them, to recommendations for decorative objects, vases and cachepots or planters.

PARTNERSHIPS AND LICENSING AGREEMENTS


From fragrances to make-up to skin care, each creation by Armani Beauty unmistakably bears the designer's creative fingerprint and is noted for the excellence of the details, making the brand one of the most appreciated worldwide by clients and make-up artists. Armani/Privé Haute Parfumerie uses the finest and most highly valued ingredients to create rich and refined fragrance compositions, packaged in beautiful bottles that reflect their value and exclusivity. Giorgio Armani fragrances are meant for those who choose to wear them as a form of self-expression through the style and elegance of the Armani world. Emporio Armani fragrances are a statement of urban style, at once dynamic, direct and refined.

Armani Hotels & Resorts were established in 2005 thanks to an agreement between Giorgio Armani SpA and Emaar Properties. The services offered are designed to satisfy the highest expectations in the luxury sector, while remaining uncompromising on style and design. The chain includes the Armani Hotel Dubai and the Armani Hotel Milan.

Launched in 2002 as an expression of the Armani lifestyle aesthetic migrated into the universe of taste, Armani/Dolci uses only the best Italian ingredients to create an exclusive selection of delectable products infused with refined and surprising flavours.

THE ARMANI GROUP | 15THE ARMANI GROUP | 15

FOOD & BEVERAGE

The Armani food and beverage universe debuted in 1998 with the inauguration of the restaurant in Paris, the first of over 20 locations opened worldwide by Giorgio Armani. From Milan to Tokyo, and from Monaco to Dubai, the Armani restaurants and clubs are constantly evolving and today boast a presence on four continents.

GIORGIO ARMANI, EMPORIO ARMANI AND A|X EYEWEAR

Giorgio Armani eyewear, since launching in 1998, has stood out for its high attention to detail and use of cutting-edge technologies, in order to procure a product capable of ensuring the brand's distinctive elegance and style, without sacrificing practicality and comfort. Emporio Armani eyewear is aimed at young and very young target audiences, and those having an individual, modern and dynamic style. Youthful and casual styling is also the distinguishing feature of A | X Armani Exchange eyewear.

EMPORIO ARMANI WATCHES AND JEWELLERY

The Emporio Armani Watch line, created in 1997, is characterised by casual, yet modern and sophisticated styling. To successfully achieve this, Emporio Armani watches deftly balance classic style with innovative forms and materials. The Emporio Armani Swiss Made line was introduced in 2014 combining elegance and design with the craftsmanship of Swiss watchmaking. Finally, the style dynamism of the brand meets wearable technology as is manifest in the line of Connected Smartwatches launched in 2016. The modern and versatile Emporio Armani Jewellery collection, launched in 2002, faithfully maintains the purity of lines.

A|X WATCHES

A | X Armani Exchange watches complement the lifestyle-centred offerings: they are aimed at young people favouring a dynamic and individual style, inspired by urban fashion trends.

3 Corporate Offices


THE ARMANI GROUPIN THE WORLD

AMERICAS

349 Company-Owned Stores

4 Corporate Offices


EUROPE


6 Production Sites (Italy) 1 Production Site

ASIA PACIFIC


11 Corporate Offices

1975

1981

19781984

197619

821979

19851977

198319

80

24 July 1975Giorgio Armani and Sergio Galeotti found Giorgio Armani S.p.A.

First boutique Giorgio Armani (Milan)

First licensing agreement with L’Oréal for the production

and distribution of Fragrances and Cosmetics

First store Emporio Armani (Milan)

Launch of the lines Armani Junior, Emporio Armani e Armani Jeans

First fragrance Armani Donna

First collectionGiorgio Armani Prêt-à-Porter

1986

198719

8819

891990

1991

19921993

19941995

1996

Launch of the line Giorgio Armani Eyewear

Launch of the lineEmporio Armani Watches

First store Emporio Armani Caffè

(London)

Launch of the line and first storeA|X Armani Exchange (Soho - New York)

First mono-brand store Armani Jeans (Rome)

First storeArmani Junior (Milan)

First Concept Store,Armani/Manzoni 31,

which includes the first Armani/Casa store and multiple

brands of the Group

1997

199819

99

E-commerce launch through the site

armaniexchange.com

20002006

20032001

20022007

20042005

Launch of the line Armani/Dolci

Launch of the line Emporio Armani Jewellery

Launch of the line EA7, active wear collection for sports

Inauguration of the new Armani/Teatro

(Milan)

Acquisition of the Nestlé factory at

via Bergognone 59/61 (Milan)

new corporate headquarters

Launch of the lines Giorgio Armani Cosmetics, Armani Collezioni and Armani/Fiori

20092010

20082011

20122013

20142015

20162017

2018

Launch of the haute couture line Giorgio Armani Privé

30 April,Giorgio Armani celebrates his company’s 40-year anniversary

Inauguration of the exhibition space Armani/Silos

Reorganisation of the portfolio of brands

Acquisition of the teamOlimpia Basket Milano

First Armani Hotel(Dubai)

20 September. Emporio Armani Boarding: at the

Linate airport hangar Giorgio Armani

presents the Men’s and Women’s

Spring-Summer 2019 collections

Establishment of the Fondazione Giorgio Armani

CORPORATE OFFICERS

BOARD OF DIRECTORS

BOARD OF STATUTORY AUDITORS

SUPERVISORY BOARD

Chair Paolo PaccianiMarco TerrenghiLuca Gaiani

Chairman and Chief Executive Officer

Directors

Giorgio Armani

Roberta ArmaniRosanna ArmaniSilvana ArmaniAndrea CameranaPantaleo Dell’Orco

Chair

Statutory Auditors

Substitute Auditors

Marco Terrenghi

Luca GaianiVieri Chimenti

Maria Cristina Pedroni Maurizio Morosi

The organisational and governance structure of the Armani Group has evolved over time, keeping pace with the Group’s expansion across the world. As at 31 December 2018, the Group is comprised of 13 business entities located throughout the world, 100% owned by Giorgio Armani SpA, which as the parent company ensures the execution of a variety of operational and staff functions on a global scale, through corporate head offices located in Milan at via Borgonuovo 11. Within the Group, oversight is provided by the corporate officers under the leadership of Giorgio Armani, who, in addition to presiding as chair over the Board of Directors, is the sole shareholder of the parent company. The Giorgio Armani Foundation was instituted in 2016 with the objective of ensuring that, over time, the Group's governance structures remain stable, while being consistent with and adhering to the core principles that have always inspired the founder's activities as entrepreneur and designer, while ensuring favourable employment levels and maintaining the Group's ability to create value. This decision to maintain continuity, reflects Giorgio Armani’s desire to provide for both a steady guiding hand in the future management of the company, as also the transmission and safeguarding of the values and principles that have always been part of the DNA of the Group.

GOVERNANCE AND ORGANISATION


as at 30 September 2019

as at 31 December 2018

100

100

100

100

100 100

100

100

99,99

100

100 100 100

STRUCTURE OF THE GIORGIO ARMANI GROUP

Giorgio Armani Spa

GA Canada

CaffèCroisette

GAAustralia

GACorporation

USA

GA Japan

Alia Srl

Olimpia Ssrl

GARetail

Srl

SpanishBranch

PortuguesBranch

FrenchBranch

BelgianBranch

HollandBranch

GermanBranch

AustrianBranch

GABrazil

GAOHongKong

GAHongKong

GAShanghai

UKBranch

IrishBranch

SwissBranch

GAOperations

Spa


UNIQUE IN THE WORLD

The Armani Group has over time been able to successfully elevate its reputation and credibility to the highest levels. For years it has been ranked among the top 30 companies in the world by reputation and among the top 10 in Italy in the Global RepTrack survey of the Reputation Institute. This result is highly significant in that it demonstrates how the company stands out not only for the exclusive quality of products, but also for its serious conviction in managing relations with stakeholders and the constancy demonstrated over the years in remaining unflinchingly faithful to its values and commitments.

THE VALUES OF THE ARMANI GROUP

28 | UNIQUE IN THE WORLD

The values of the Group as formalised in the Code of Ethics, and updated in 2018, reflects the way of doing business and guides the work of all those working in the name and on behalf of the Armani Group. In fact, the Code of Ethics is distributed to the Group’s directors, statutory auditors, employees, consultants, suppliers and business and commercial partners.

The norms and rules contained in the Code are not only in response to legal requirements, but are also dictated by a specific social and moral commitment that the Group assumes. The Code of Ethics is available to all Group employees on the homepage of the corporate intranet.

INTEGRITY, TRANSPARENCY AND SHARING

TEAM SPIRIT

PERSONNELPOLICIES

PROTECTION AND

ENHANCEMENTOF DIVERSITY

RESPONSIBILITY TO SOCIETY

ENVIRONMENTAL PROTECTION AND RESPECT

TRUST

TRANSPARENCY AND

COMPLETENESS OF INFORMATION

UNIQUE IN THE WORLD | 29

THE INTERNAL CONTROL SYSTEM

With a view to protecting and strengthening the reputation gained over the years, the Group has implemented an internal control system that ensures decision-making is consistent with corporate objectives and values. This control system is comprised of a set of tools, procedures and regulations, designed with the objective of ensuring appropriately structured information flows and effective processes are in place for identifying, measuring, monitoring and managing risks. The Group is thus able to successfully identify and manage risks, especially those pertaining to corruption related phenomena. In this regard, specific procedures have been established to monitor various aspects, such as payment authorisations, selection of suppliers, investments, management of relationships with public administration and gifts. The Group has also developed an Organisational, Management and Control Model (Model 231) for prevention of offences in line with the indications of Italian Legislative Decree 231/2001 and subsequent amendments and additions. Model 231 therefore includes a system of rules and principles that are designed to ensure compliance with the law in the performance of the Group's activities, thereby identifying and eliminating related potential risk situations. Thus the Code of Ethics is an integral part of Model 231 with acknowledgement of central importance attributed thereto, it being a fundamental part of the identity of the Armani maison and serving as assurance of solidity and growth in the future. The supervision and verification of the effective implementation of Model 231 is ensured by the Supervisory Board, which subjects the entire system to periodic inspections. During 2018, Model 231 was updated by the SB.

THE PATHWAY TO SUSTAINABILITY

Attention to environmental and social sustainability-related themes is constantly growing in every market sector, the fashion and luxury sector being no exception. Consumers, particularly the younger generations, are increasing being guided in their purchasing choices by values that are traceable back to the concept of sustainability. This is the trend strongly conditioning all the stakeholders upon whom the present and future success of the Group depends. The Armani Group's response to these influencing factors is to integrate sustainability criteria into the company's strategic decisions and choices, while expanding or enhancing its product offerings with innovative products yet without compromising the creative process undergirding their production. This provides the ability to ensure the company remains highly competitive thereby securing sustainable longevity. In order for this strategy to be successful, it is necessary to promote and spread the culture of sustainability along the entire value chain, seeking also to involve all of the actors participating therein. It’s for this very reason that the Armani Group has defined five priority action areas that constitute the pillars upon which the activities relating to sustainability are based. The oversight and coordination of the activities related to these aspects are entrusted to the Group's Corporate Social Responsibility (CSR) unit. Among its duties and obligations, the unit is responsible for: monitoring of compliance of products and processes with respect to international standards; interaction with national and international stakeholders, institutions and working groups in order to update Group policies and define objectives and projects with regard to social and environmental matters.


THE PRIORITIES OF THE ARMANI GROUP:

THE PILLARS OF SUSTAINABILITY

ENVIRONMENTAL PROTECTION AND EFFICIENT USE OF RESOURCES

EMPLOYEE WELLBEING AND TALENT DEVELOPMENT

ATTENTION TO THE CUSTOMER

SUPPORT AND INVOLVEMENT OF COMMUNITIES

RESPONSIBLE MANAGEMENT OF THE SUPPLY CHAIN

Initiated as of 2016, the Armani Group has deployed a priorities analysis process in alignment with the requirements provided for in international standards relating to sustainability reporting (Global Reporting Initiative). This process, defined as "materiality analysis", has enabled identification of the 13 most relevant issues (so-called "material" issues) for the Group and its stakeholders, as summarised in the Group's five pillars of sustainability, which serve as a guide for all present and future actions.

in order to ensure the service excellence, understood to be quality, authenticity, safety and traceability of the product.

in order to build stable business relationships and make the supply chain even more virtuous from the standpoint of environmental and social impacts, while prioritising greater involvement and dialogue with all suppliers.

in order to reduce environmental impacts along the entire value chain.

in order to ensure the health, safety and protection of the rights of workers, by investing in training and skills development of employees, considered to be the primary strategic asset of the Group.

in order to create value for the benefit of the territory and the people who live therein.


RELE

VAN

CE

FOR

STA

KEH

OLD

ERS

RELE

VAN

T

RELEVANT

HIG

HLY

REL

EVA

NT

Attention to environmental impacts

Data security and protection

Oversight of social and environmental impacts of the supply chain

Combatting counterfeitingCreation of value

for the national territory and the communities

Brand Reputation

Customer satisfaction and service excellence

Employer brandingDevelopment and management

of talent Protection of health and safety of workers

HIGHLY RELEVANT

RELEVANCE FOR THE ARMANI GROUP

Protection of workers and their rights

Building stable business relationships including

through supplier involvement and dialogue

Attention to product quality, safety and traceability

Training-Education

and skills development

Plotted area

THE MATERIALITY ANALYSIS PROCESS


The so-called “material” aspects have been selected upon analysis of documents and materials from various sources, as well as through comparison with the main competitors. Subsequently, the representatives of the internal functions of the Group were requested to analyse the individual issues attributing thereto appropriate levels of differing priority, while assessing them both from the corporate perspective and from the standpoint of the stakeholders with whom there is daily interaction. The evaluation was carried out on the basis of various criteria: economic and environmental impact, reputational risk, alignment and consistency with internal policies, commitments formally undertaken, and the Code of Ethics.


INVOLVEMENT OF STAKEHOLDERS

CLIENTS

PERSONNEL

RETAIL AND FRANCHISEES

PUBLIC ADMINISTRATION

SUPPLIERS, PARTNERS AND LABORATORIES

LOCAL COMMUNITIES, NGOS AND MEDIA

The Armani Group's value chain involves many stakeholders, both internal and external. With a view to increasing the value and sustainability of the business over time, the Armani Group operates collaboratively with all the players in the value chain, taking care to ensure that the changes required by the strategy are gradually integrated by each of them in their products and processes.Transparency and stakeholder engagement make it possible to create the climate of trust necessary to establish lasting relationships based on collaboration and participation in decision-making processes.

CREATING AND DISTRIBUTING VALUE

The Armani Group is a company deeply rooted in the contextual reality of Italy, yet having a cosmopolitan culture and vision. It is operationally present in all major countries across the various continents and relies on an appropriate distribution network with international scope, including flagship stores located in the most important and prestigious luxury-oriented streets worldwide. Through the "Retail" channel, managed by way of wholly controlled subsidiaries, the Armani Group distributes directly to end customers the product lines produced by the controlled entity GA Operations SpA. The direct stores ("DMS") are present in all the major markets in which the Group operates, in important positions both in terms of brand image and commercial relevance. The "Wholesale" distribution operation of the Group is aimed essentially at retail business operators, typically consisting of franchisees, department stores, specialised multi-brand retailers and operators from the Travel Retail and Duty Free channel.

ECONOMIC-FINANCIAL PERFORMANCE AND TRENDS

In 2018, the Giorgio Armani Group continued to achieve positive results and to consolidate the international distribution network, characterised by a careful balancing of the Direct Retail and Wholesale channels. The Group's consolidated net revenues amounted to 2,108.8 million euros, representing a drop of 9.7% as compared to the previous financial year. With effect from Spring-Summer 2018, the Armani Group initiated an operation to simplify and consolidate its brand portfolio: with the medium-term goal of strengthening the individual brands so as to thereby enhance each brand’s potential in respect of the various reference target segments, the Group decided to focus on the Giorgio Armani, Emporio Armani and A|X Armani Exchange lines. The Group achieved positive net profit amounting to 151.9 million euros (242.4 million euros in 2017), equal to 7.2% of revenues. Further improvement in financial and balance sheet data: as at the end of 2018 liquidity increased by 30.5% while net assets reached 2,064 million euros (2,028 million euros in 2017), yet again confirming the Armani Group's capacity to generate cash flow and self-finance its investment programmes.


SUMMARY FINANCIAL RESULTS (Mln di €)

2017 2018

Consolidated Revenues 2,334.7 2,108.8

Gross Operating Profit before depreciation and amortisation (EBITDA)

437.7 314.3

Operating Profit (EBIT) 334.5 208.6


ECONOMIC VALUE GENERATED AND DISTRIBUTED

Added value represents the Armani Group's capacity and ability to create and distribute wealth, thus, on the one hand, contributing to economic growth in the social and environmental context in territories where it operates and, on the other hand, satisfying the economic interests of its own stakeholders. The added value indicates the difference between value and the intermediate costs of production, and makes it possible to measure both the economic performance of management, as well as its ability to create appropriate conditions such that the economic value generated is distributed to the stakeholders. The economic value is reported in three distinguishing levels: value generated, value distributed, and value retained by the Group, as is necessary for increasing financial and economic stability, ensuring persistence thereof over time.

ECONOMIC VALUE GENERATED AND DISTRIBUTED (K €)

2017 2018

Economic value generated by the Group 2,317,871 2,074,187

Revenues 2,334,717 2,108,772

Other income 4,845 4,879

Financial income 934 1,367

Value adjustments to financial assets - -

Write-down of receivables (1,737) (7,884)

Exchange rate differences (8,850) (9,663)

Income/expenses from the sale of tangible and intangible assets - -

Value adjustments to tangible and intangible assets (12,038) (23.284)

Economic value distributed by the Group 2,101,182 1,972,231

Operating costs 1,462,532 1,359,834

Employee remuneration 433,779 428,467

Payments to lenders 1,229 725

Payments to investors 120 080 134 995

Payments to Government Authorities * 82,946 47,712

Gifts to third parties 616 498

Economic value retained by the Group 216,689 101,956

Depreciation and amortisation 91,127 82,392

Provisions 3,201 2,688

Reserves 122,361 16,876

* Payments to Government Authorities include differed taxes.

WHAT WE DO

38 | WHAT WE DO

FROM IDEA TO POINT-OF-SALE

An Armani product embarks on a journey comprised of several fundamental phases: design, sale, production and distribution on the market. The initial activities, which concern design, are those that combine the emotion-oriented indications originating from the style and merchandising offices, with the more pragmatic ones coming from the production and commercial areas.

Continuous collaboration between the various units of the Group leads to the development of the collection briefing from which the prototypes are made. Upon completion of the technical and economic evaluations the sale sample is produced. The latter is essential to initiating the sales process in showrooms across all markets and all distribution channels used by the Armani Group worldwide.

The sales phase is absolutely key to the planning of production: based on the information obtained during this phase, programming commences, with volumes and lead times organised therefrom. With the progression of the sales campaign, production orders are issued to the various industrial entities of the Group, who will manage the relationship with suppliers, devoting ample resources first to the selection and then to the control thereof; Armani Group managers remain constantly focused on product quality, and on the social and environmental sustainability of production.

The production phase ends with the delivery of the products to the Group's warehouses located in the various areas that carry out quality control before final delivery to the points of sale. The last phase of the chain is the relationship with the customers who will eventually find in the various distribution channels the products designed for them several months earlier.

COLLECTION BRIEFINGThe first phase of the process is aimed at preparing the collection briefing. This document, which will constitute the guide for the appropriate positioning of products on the market, combines the emotion-oriented indications of style with past and projected sales data.

PROTOTYPEFor each product line, the collaboration between style and manufacturing transforms the briefing indications into a prototype that provides the means to deal with the first technical trials and address commercial feedback. In this preliminary phase, the initial estimates of the final costs of the product are analysed in order to assess their commercial sustainability.

SAMPLESUpon approval of the prototype, the samples are produced with the correct pricing being defined for each market, and then sent to the showrooms in order to undertake the sales campaign.

DELIVERY TO POINTS OF SALEThe logistics organisation located in various different regions of the world effectively enables delivery of the products to the various commercial channels.

FASHION SHOWIt is the most dramatically staged and high-visibility occasion, during which the collection is officially presented to clients and especially to the national and international media.

SALE CAMPAIGNSDuring predetermined periods of the year, by means of the product samples, available in various showrooms, sale of the products is undertaken both via the retail, wholesale, and online channels.

PRODUCTION AND DELIVERY TO WAREHOUSESProduction planning is carried out and constantly updated thanks to regular monitoring of sales campaign performance and trends. Based on the geographical location, the volumes ordered are made available, subject to quality control, in the Group's warehouses within 4-6 months.

WHAT WE DO | 39

HOW WE DO ITGenerating value and growth in harmony with the territory of operation and surrounding communities is a fundamental objective for the Armani Group, who has always endeavoured to promote and ensure the excellence and uniqueness of its value chain. Over the years the Group has successfully launched, thanks moreover to the involvement of and critical collaboration with its suppliers, a series of initiatives aimed at promoting continuous improvement of the supply chain, on the one hand, and of all the offices, stores, and self-owned operational premises, on the other.

The activities undertaken are numerous and pertain to various areas which, being interconnected with each other, constitute the underpinnings of sustainability for the Group:

• Sharing with stakeholders, and in particular with suppliers, in order to make the value chain even more virtuous;

• The quality and safety of the product and its components;• The selection of suitable raw materials for products and packaging that meet

specific environmental and social sustainability criteria;• Efficient management of resources, such as water and energy;• Optimisation of the logistics system.

These are the underlying principles that originated the "Armani Sustainability Project" (ASP) logo, which will be applied to all those products that satisfy specific sustainability criteria.

42 | COME LO FACCIAMO

In 2018 a pilot project was launched for the development of a protocol containing the necessary sustainability criteria to be satisfied by the products in order to be declared "sustainable" and deserving of the Armani Sustainability Project (ASP) logo. The protocol, which reflects the principles summarised in the five pillars of sustainability for the Armani Group, is currently undergoing the validation and will be released by the end of 2019.

During the pilot project the logo has already been used as the mark of endorsement on the new packaging for all lines of the Group, which having been produced with an increasing percentage of recycled paper, without plastic coating, and with water-based inks, are therefore completely recyclable.

The logo adopts the design belonging to an aesthetic sensibility that is very dear to Giorgio Armani, the stylised bamboo leaf of the Eastern tradition, which revolves around the text evoking the concept of circular economy.

HOW WE DO IT | 43

44 | HOW WE DO IT

RESPONSIBLE MANAGEMENT OF THE SUPPLY CHAIN

The Group is aware of the strategic importance of the effective management of supplier relationships in order to be able to offer its clients the best in terms of quality and style, the very values underpinning the brand philosophy. In this regard, it has developed a series of documents that the suppliers are required to sign on to in the contract signing phase, with the aim of extending their own respective sustainability policies. These documents set forth the rules of environmental-, social-, and product safety conduct, in particular:

• The Code of Environmental Conduct;• The Code of Social Conduct;• The Restricted Substances List (RSL).

The Code of Environmental Conduct aims to minimise the negative impacts on the environment deriving from the Group's supply chain activities, through control and management of emissions and polluting substances, waste management, efficient use of resources and personnel training.

The Code of Social Conduct instead aims to ensure decent and safe working conditions for all workers involved in the Group's value chain. The principles contained therein include prohibitions against child labour or forced labour and discriminatory practices of any kind, as well as a series of measures aimed at protecting workers' rights.

The Restricted Substances List (RSL) is the reference document for management of product safety that guides suppliers and the supply chain towards the reduction and progressive elimination of potentially hazardous chemical substances, in a manner consistent with regulatory updates and the best available technologies.

These documents are prepared by the CSR unit of the Group and are updated annually. The dissemination of these policies is an integral part of the awareness-raising and training programmes for suppliers in various regions of the world.

HOW WE DO IT | 45HOW WE DO IT | 45

THE ARMANI GROUP SUPPLY CHAIN

The Group's suppliers can be divided into the following categories:

• Suppliers of Marketed Items, who, by autonomously procuring raw materials, produce the finished apparel item according to a technical design of the product or sample;

• Suppliers of Subcontract Manufacturing Services, to whom the Group entrusts the production of the finished product, supplying the necessary raw materials and technical information for the work planned;

• Suppliers of raw materials;• Providers of services, such as analytical laboratories, consulting companies

and general services procurement agencies.

Breakdown of purchasing categories*

Breakdown of purchasing categories by geographical area*

*Services providers excluded

64%

43%

SUBCONTRACT MANUFACTURING (FAÇON)

AFRICA AMERICAS

RAW MATERIALS

ASIA PACIFICMARKETED ITEMS

EUROPE

18%9% 1%

18%

47%

46 | HOW WE DO IT

OVERSIGHT OF THE SUPPLY CHAIN

In order to monitor compliance with the codes of environmental and social conduct and with all the documents signed by suppliers during the contract formalisation phase, the Group has implemented a process for monitoring the supply chain, by means of social and environmental auditing programmes.The audits are aimed at identifying any potential critical aspects and at guiding the suppliers towards any eventual corrective actions necessary to be able to continue being a qualified supplier.

On the basis of the non-conformities reported, the suppliers are subsequently ranked on a rating scale from A to E, so as to enable the CSR unit to effectively monitor their progress on the path to complete compliance with the standards. The suppliers whose overall rating is initially below B, are guided towards achieving improvement in the global assessment through a corrective action plan, with achievement timelines established according to the importance of the respective issues being addressed. However, suppliers whose overall

A-B

E

C-D

ACTION

AUDITRating Corrective

Action Plan (CAP)

Immediate corrective

actions

Compliant with

standards

HOW WE DO IT | 47

rating is not in line with the Group’s expectations are immediately called upon with a request to take corrective action within very brief timeframes and, where there appears to be no possibility of adherence to the standards, an exit plan is defined. This process of supplier evaluation and engagement has served not only to ensure compliance with the requirements defined by the Group, but above all fosters the sharing of good environmental and social practices among suppliers, thus enhancing the level of awareness within the sector.

Alongside the audit plan, the Group activated the "Suppliers Sustainability Engagement Tool" platform in 2014, in order to intensify direct dialogue with suppliers. By means of a self-assessment questionnaire, suppliers are invited to report data and information on their respective production sites relative to the social, environmental and safety at work aspects and to update the same at the beginning of each new production season.

This allows the Armani Group to perform an initial screening of suppliers, while assessing the eventual need for obtaining further in-depth information with targeted audits.

Documentation-based

verification of the CAP

CAP Complete =

Upgrade

CAP Incomplete =

Re-Audit

CAP Complete =

Upgrade

CAP incomplete =

Exit plan

COVERAGE OF SOCIAL AND ENVIRONMENTAL AUDITS

During 2018, totally 220 social and environmental audits were carried out (approximately 50% more compared to the data for 2017). The 220 inspections cover 50% of the Armani Group's suppliers, in terms of 2018 turnover. Suppliers of marketed items accounted for 95% of the suppliers audited.

2017 2018

220

147

200

150

50

100

0

48 | HOW WE DO IT

80%95%

1%

5%13%

AFRICA

ASIA PACIFICSUPPLIERS OF MARKETED ITEMS

6%

AMERICASSUPPLIERS OF SUBCONTRACT MANUFACTURING

EUROPE

Suppliers audited by category and geographical distribution

Number of Social and Environmental Audits

HOW WE DO IT | 49

PRODUCT SAFETY

The Armani Group has a heightened awareness of the present-day importance of the issue of safety of chemical substances used in the manufacture of products and in production processes. This theme is particularly relevant in the fashion world, where attention to product safety has been further accentuated by environmental campaigns in recent years.

Since 2013, on the basis of studies and protocols proposed at the international level, the Group has defined the "Zero Discharge 2020" initiative for eliminating or minimising potentially hazardous substances from its production processes and products by 2020. This goal is reachable only by strengthening the dialogue with suppliers in order to ensure there is constant commitment to exclusively using non-hazardous chemical formulations, and to assessing sustainable alternatives that ensure the highest quality standards, taking into consideration the environmental, economic and social impacts thereof.

The path towards the Zero Discharge goal of the Armani Group consists of three interconnected phases:

• Regular updating of the list of restricted substances (Restricted Substances List - RSL);

• Conducting appropriate testing on significant samples from the collections;• Preparation of a report on the results of testing conducted by the Group.

The Group has also actively contributed to the drafting of the "Guidelines on the eco-toxicological requirements for articles of clothing, leather goods, footwear and accessories" by the Sustainability Committee of the National Chamber for Italian Fashion, bringing to bear their own experience. These guidelines seek to encourage the development of good practices, through effective management of the use of chemical substances in the production value chain.

By way of confirming the commitment to a radical transformation of the fashion sector supply chain, in 2018, yet again together with the National Chamber for Italian Fashion, the document "Guidelines on the eco-toxicological requirements for chemical mixtures and industrial waste" was released. This document establishes challenging though attainable limits, both for the use of mixtures in production and for wastewater while providing useful information for monitoring and control of the entire production cycle.

50 | HOW WE DO IT

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THE RESTRICTED SUBSTANCES LIST (RSL)

The Restricted Substances List (RSL) is the result of collaboration with all the actors involved in the production process, in particular suppliers and chemical laboratories. The document lists: the substances subjected to restrictions, the maximum permissible limits, the acceptance ranges, and prescribed methods of analysis for each substance. The Group has established specific RSLs for various merchandise categories, applicable to materials and packaging used for products of the various brands: clothing and accessories, furniture home furnishing and costume jewellery. Children's items are subject to a more restrictive RSL than that for articles and products intended for adult consumers.

LABORATORY TESTS

Laboratory testing on products, carried out by means of sampling, are essential to monitoring progress towards the Zero Discharge objective and ensuring that the products placed on the market are in line with the relevant reference RSLs. The Armani Group relies on the collaboration of the most highly accredited, ISO 17025 certified chemical laboratories in the sector, so as to ensure not only the most reliable analytical techniques but also effective ongoing updating of the specifications. The selection of the laboratory and of the samples to be subjected to testing, the management of testing related flows and appropriate reporting thereof are entrusted to the respective offices responsible therefor at each industrial site of the Group. The products whose laboratory tests yield positive results are sent onward for sale, whereas those for which critical issues are identified are assessed with the supplier in order for them to be appropriately adapted to the required parameters.

REPORTING ON TEST RESULTS

The results of the tests carried out during each season are analysed in order to assess the presence of chemical substances in the products that could be the subject of specific further analysis. The results of the tests and in-depth analyses then contribute to the defining and updating of the parameters of the RSLs.

REAL-TIME MANAGEMENT OF TESTING

Given that the Group operates in the global market, the procedures to be implemented and the protocols to be adhered to are thus manifold and may vary according to the different markets. For this reason, the Group has equipped itself with an IT system for the management of chemical testing that allows for real-time monitoring of the progress of the process and facilitating the management thereof in the various industrial sites, through simplification and harmonisation of procedures. In particular, the programme has made it possible to establish a uniform language with a standardised single test request form for all operational locations of the Group, as well as to track test outcomes and results in an easily searchable, shared centralised system that also allows saving and storing marketing authorisations for placing the products on the market in various intended target countries. Over the course of 2018, more than 10,000 chemical tests were performed on products.

52 | HOW WE DO IT

HOW WE DO IT | 53

THE SELECTION OF RAW MATERIALS

The selection of raw materials is considered by weighing specific economic, ethical and environmental criteria that ensure consistency, on the one hand, with the Group’s sustainability-related values and principles, and with client wants and needs, on the other. The Group has therefore since a number of years initiated projects relating to traceability of raw materials in collaboration with suppliers.

Having optimal information and knowledge about each phase of the life cycle of products, right from the obtaining of raw materials, allows the Group to direct its efforts in a targeted manner towards the productive phases which present far more opportunities for improvement; it represents a guarantee of quality and transparency for consumers and helps to spread greater awareness along the entire value chain.

In 2018, the Group’s collections introduced a variety of products that use innovative materials, in response to the growing global attention on environmental issues.

54 | HOW WE DO IT

COTTON MADE IN AFRICA

The Armani Group continued its support to the initiative Cotton made in Africa (CmiA), including 47 denim items linked to the programme in the Spring-Summer 2018 collection, and 38 for the Fall Winter 2018/19 Emporio Armani line. A project of the Aid by Trade Foundation, CmiA’s goal is to improve the lives and living conditions of cotton farmers in sub-Saharan Africa through targeted training programmes. Strict cultivation standards have been established with respect to the environment to ensure the maintenance of soil fertility and protection of water courses, through responsible pesticide and fertiliser use. The Foundation teaches farmers modern and efficient cultivation methods, thereby helping to improve both the quality of cotton and their economic and social conditions.

DENIM MADE WITH CHITOSAN

In the Spring-Summer 2018 season, 5 models of Emporio Armani denim were produced using a polymer of organic and renewable origin, obtained from the processing of shellfish food waste. The polymer was patented by the Centro Ricerche Canepa Evolution* and is commonly used in agriculture and medicine. In fact, use of an innovative technology has made it possible to replace PVA (polyvinyl alcohol) in the colour fixing process with chitosan, a natural non-toxic and biodegradable polysaccharide derived from chitin, which is found in the exoskeleton of crustaceans. The use of this alternative material serves to reduce water and energy consumption during denim production, while helping to improve the final product quality.

CASHMERE FLAKES

The Giorgio Armani 2018 offering was enriched by a small selection of outerwear jackets padded with "Cashmere Flakes"; these items, which are very light, warm and made of natural fibre, use a special and exclusive filling of cashmere material which constitutes a valid alternative to goose down.

*www.canepa.it/it/sostenibilita/savethewater

OLYMPIA UNIFORM IN RECYCLED POLYESTER

From the 2018/2019 sports season, for official championship competition and Euroleague games, the Olimpia Milano players have decisively adopted the special uniform created for Earth Day 2018, made with a fabric of recycled material, obtained from polyester recovered from bottles (Re-PET). This initiative reflects the team’s desire to be viewed as active spokespersons for the theme of environmental protection, which concerns everyone, and to underline how improvements can be achieved with even small gestures and personal attention and commitment at the level of the individual.

HOW WE DO IT | 55

THE GROUP’S FUR FREE POLICY

Since Fall Winter 2016/17, the Group has abandoned the use of animal fur in its collections. The Group's Fur Free Policy is fully aligned with the standards of the Fur Free Alliance.

FUR FREE ALLIANCE DEFINITION OF FUR

Fur: means animal skin with fur or hair fibre, regardless of the degree of processing thereof obtained from any animals either hunted or bred and killed for use of their fur. By way of example this category includes, but is not limited to minks, foxes, beavers, otters, sables, lynxes, rabbits, karakul and astrakhan lambs, raccoon dogs.

The definition of "fur" is not applicable to the following:1) used coats repurposed for reconversion into leather;2) fibres obtained from shearing or combing, sheepskin and shearling skin;3) skin or hair of skins typically used to make leather (bovine);4) synthetic fur.

NOTE: the abolition of fur includes the abolition of rabbit fur.

One may continue to find materials deriving from animals commonly used in the food chain or whose hair constitutes waste in a different industry.

However, such use will be avoided wherever possible where it becomes evident that these animals are mainly killed for their hair. These animals include :

• Sheep, Shearling, Mongolia Lamb (however there’s a ban against use of furs of newborn or unborn animals such as "broadtail", "karakul", "swakara", "astrakhan", etc.);

• Cow (cowhide);• Pony;• Goat;• Alpaca.

56 | COME LO FACCIAMO

HOW WE DO IT | 57

58 | HOW WE DO IT

INNOVATIVE AND SUSTAINABLE PACKAGING

The search for ever better results in terms of sustainability explains the Armani Group’s approach of not excluding any aspect that may offer the possibility to act thereupon. For this reason, since a number of years, packaging has also been the subject of study and innovation, to improve quality without sacrificing style.

The selection of packaging used in stores is guided by the following principles:

• Strong preference for recycled raw materials and reduction in the purchase of virgin raw materials;

• Reduction in plastics use, transported volumes, and waste;

• Sourcing and supply of paper and paperboard from forests managed according to the standards of the Forest Stewardship Council (FSC), an independent forest certification system that certifies forest management according to strict environmental, social and economic standards;

• Selection of 100% recyclable solutions;

• Selection of reusable packaging.

Achieving these goals requires not only constant effort in design and planning, but also ongoing dialogue and consultation with suppliers. The latter are in fact required to comply with precise standards of chemical safety, resistance, and quality in all phases of production.

The requisite monitoring and control are undertaken also with the support of external laboratories, which are responsible for carrying out testing on materials with a view to ensuring, for example, the absence (or compliance with particular limits) of elements that are harmful to the consumer and the environment. During 2018, further advances were made in the consistent process of institutional packaging innovation by increasing the use of recycled raw materials, adopting mono-material solutions that allow for 100% recycling and reducing plastics use.

HOW WE DO IT | 59HOW WE DO IT | 59

Giorgo Armani corporate packaging

Paper with 40% post-consumer waste

100% FSC-certified paper

Handles in 100% recyclable woven paper

Emporio Armani corporate packaging

100% recycled paper

Circular mesh handles entirely made of paper

100% recyclable

Made of 100% recycled PET

• Hangers in 100% recycled ABS• Shoes boxes with collapsable construction that takes up 80% less space

during transportation• Boxes for the underwear line in 30-40% recycled plastic

Take-away packaging for Emporio Armani Caffè is 99% compostable. Only mug cups are in recyclable plastic.

New handles made of 100% recycled polyester

FSC - certified paper with minimum of 50% post-consumer waste 100%

recyclable

Made of 100% recycled PET

• Stickers made of paper and free of plastic coating• Ribbon in 100% recycled polyester

Paper used for the Giorgio Armani Privè line is produced with 80% less water consumption.

Armani Exchange corporate packaging

60 | HOW WE DO IT

RESPONSIBLE MANAGEMENT OF OUR SITES

The Group pays particular attention to the environmental impacts generated directly in the production sites, in the offices and in the stores owned by the company or under its direct control. In this context, the activities may be attributed to three macro-realms:

• adoption of adequate organisational methods and the best techniques available so as to optimise energy and water consumption and minimise waste;

• attention to waste sorting;• ensuring awareness and involvement of personnel on issues related to

environmental protection.

WATER

Water consumption is linked to food service activities, health services, fire tests and air conditioning. The provision comes primarily from the aqueduct.

The 2018 scope of reporting considered was extended to include water consumption of company owned stores, cafes, restaurants and Italian clubs; this explains the difference as compared to water consumption in 2017, which included exclusively the Production Sites and the Italian offices.

A comparison carried out maintaining the scope of reporting considered same as in 2017, i.e. GA Operations SpA and Giorgio Armani SpA, shows a consistent reduction in water consumption in 2018.

WATER CONSUMPTION BY SOURCE* (m3)

2017 2018

Total consumption from the aqueduct 89,045 130,999

WATER CONSUMPTION BY SOURCE (m3)

2017 2018

Total consumption from the aqueduct 89,045 78,159

*Scope of Reporting Considered 2017: GA Operations SpA and Giorgio Armani SpAScope of Reporting Considered 2018: GA Operations SpA, Giorgio Armani SpA, Giorgio Armani Retail Srl, Alia Srl

HOW WE DO IT | 61

ENERGY

Given that energy consumption figures alongside water consumption, among the Group's priority action areas, the commitment to increase energy efficiency is constant. This commitment has taken the concrete form of an energy saving programme implemented by the Group that is leading to a gradual decrease in consumption over time. In fact, 2018 saw a reduction of about 2% as compared to 2017. A photovoltaic system installed at the Via Bergognone site in Milan, now produces more than 130,000 kWh of energy each year, partially covering the energy needs of the offices.

TOTAL ENERGY CONSUMPTION (TOE)

2017 2018

Direct Methane, Diesel fuel 1,386 1,322

Indirect Electricity 4,430 4,400

Total consumption 5,816 5,722

THE ENERGY SAVING PROGRAMME

• Performance of energy diagnostics and audits across all Production Sites and offices in Italy, as well as across a series of stores, in order to obtain a global and comprehensive snapshot of its energy consumption levels and identify some savings trajectories;

• Implementation of remotely operated systems for monitoring of company-wide consumption levels subdividing them, for example, by specific work areas, such that possible actions for improvement may be made more evident;

• Centralisation of temperature regulation in the work environments, in order to ensure proper management;

• Use of an innovative digital signage platform to manage the turning on and off of all monitors;

• Progressive replacement of interior lighting with LED technology;

• Installation of sensors that regulate the turning on and turning off of lighting in all spaces;

• Attention to the use of low-emission materials and structures in the design-planning of the renovation of the Group's buildings.

62 | HOW WE DO IT

HOW WE DO IT | 63

GREENHOUSE GAS EMISSIONS

The energy saving programme implemented by the Armani Group contributes to reducing greenhouse gas emissions, calculated by converting direct energy consumption (attributable to fuel use) and indirect energy consumption (attributable to electricity use) into carbon dioxide equivalents (t CO2 eq) by using conversion factors that respect the intrinsic characteristics of the various different energy sources. With respect to energy consumption, in 2018 a reduction in greenhouse gas emissions of about 2% was recorded as compared to 2017.

SUSTAINABLE MOBILITY

In Milan, in order to promote reduction in the environmental impact and rationalisation of employee travel between the Via Borgonuovo and Via Bergognone locations, some years ago the Group introduced a shuttle service operating on alternating schedules. With a view to optimisation, this service is also used for dispatching internal mail. Given the Group's international presence, the preferred option regularly promoted among employees is the use of video-conferencing for meetings among global teams dispersed across different locations.

GREENHOUSE GAS EMISSIONS (t CO2 eq)

2017 2018

Direct Methane, Diesel Fuel 4,876 4,647

Indirect Energy power 16,595 16,482

Total Consumption 21,471 21,129

WASTE

The Group has maintained an ongoing commitment to awareness-building and training-education of employees on the topic of waste management and need to ensure sorted collection of waste. Drinking water fountains have been installed in all the industrial sites and operational locations, with the aim of reducing the consumption of water packaged in plastic bottles. To encourage the use of these fountains, a personal water bottle has been distributed to most employees. Thanks to the awareness programme, waste generation in 2018 decreased by about 1.5% as compared to the 2017 data, notwithstanding the extension of the scope of reporting considered relative to data to the company Alia Srl (Italian cafes, restaurants and clubs) in addition to Giorgio Armani SpA (Italian offices), GA Retail (Italian stores) and GAO (Production sites in Italy).

WASTE PRODUCED BY TYPE (t)

2017 2018

Hazardous 8 11

Non-hazardous 1,149 1,130

Total waste 1,157 1,141

64 | HOW WE DO IT

11%

14%

THE LOGISTICS SYSTEM

As part of a complex organisation, where the design-style offering must be subsequently supported by highly meticulous and precise services, having an efficient logistics system is a high priority competitive factor. The logistics network within the Armani Group includes material handling systems (warehouses) and transportation systems for physical flows of products. The management of warehouses is mainly entrusted to certain selected external providers, with the exception of the Modena site which has its own warehouse.Since 2016, the Group has deployed a rationalisation process that culminated in 2018 in the effective consolidation of the storage function, previously divided into five storage facilities managed by external providers, into one single site. This operation serves to effectively reduce transport fragmentation, thereby enabling more efficient use of resources (packaging material, fuel, etc.) and consequently improving the level of service provided to the end customer. With regard to the transportation of products, the Armani Group aims to establish relationships with qualified carriers and shipping-forwarding agencies (representing approximately 75% in terms of resources used for transport) who are able to ensure high standards of service and reliability, also considering the need to serve the global market: from Japan to Brazil, from China to the USA and Canada, and to Australia.

75%Italy / Overseas

Italy / Overseas

Italy / Overseas

SHIPPING-FORWARDING

AGENCIES

COURIERS

SMALL INDEPENDENT CARRIERS

Distribution of the Group’s external providers

HOW WE DO IT | 65

FULL TRACEABILITY

With a view to ensuring accurate planning of the shipping-forwarding phase, 2018 saw to completion the adoption by the Production Sites of the Net Mover software system designed to track all the phases of transportation, under the framework of a broader Transport Management System project.

The introduction of the software is aimed at fostering collaboration among all the actors involved in the operational process (including external actors), tracking the status of each shipment, providing a reporting tool dedicated to management and automatically integrating invoices from shippers and carriers into the accounting system.Full traceability will provide the ability to act on further rationalisation of the routing sections and on increasing the level of vehicle saturation: factors that play a fundamental role in ensuring sustainability of transport.

LOGISTICS AND SUSTAINABILITY

As part of its commitment to sustainability, the Group has redefined its logistics function in accordance with the criteria of protection and respect for the environment. This commitment is concretely reflected in the adoption of a series of packaging technologies, intermodal solutions, procedures and initiatives aimed at reducing the environmental impact of the various stages of the logistics chain without compromising service quality and productivity.

The activities implemented and the Group's ability to positively influence logistics performance vary depending on the transport system used. In particular, road transport with dedicated shipping is the only case upon which the Group can act directly, by requiring suppliers to meet specific requirements, for example the use of alternatively fuelled vehicles. In the context of material handling, a study currently in progress is focused on reducing the plastic components of packaging, such as via the elimination of strapping bands for each carton and the introduction of recycled paper to replace plastic bubble wraps in under filled packages. Furthermore, a study was initiated on the use of reusable containers (metal baskets) for transfers between the GAO operations sites and the central warehouse. Once fully operational, the amount of packing cartons used for internal transfers will be significantly reduced.

66 | WHO DOES IT

WHO DOES ITIn the fashion world, the Armani Group is represented by 8,206 people who stand ready to uphold the tradition and carry forward the brand's leadership all over the world. Attention to employee and talent development is one of the 5 pillars of the Group's sustainability strategy, recognising that staff growth, through ongoing opportunities for both professional and personal training, is essential for the Group’s growth. This is complemented by the attention paid to the well-being of each person, which is reflected in measures that aim to promote good health, quality leisure time, and the proper balance between professional and family life. Also the corporate decisions concerning employment contracts, oriented towards maintaining stability, clearly demonstrate the importance the Group places on building up a solid sense of belonging, which facilitates and enables nurturing employee motivation.

68 | WHO DOES IT

EMPLOYEES BY CONTRACTUAL FUNCTIONAL CLASSIFICATION AND GENDER (n°)

2017 2018

Male Female Total Male Female Total

Senior Executives 177 147 324 185 146 331

Manager 570 575 1,145 561 559 1,120

Employees 694 1,577 2,271 713 1,610 2,323

Sales force 1,318 2,042 3.360 1,389 2,083 3,472

Workers 314 641 955 369 591 960

Total 3,073 4,982 8,055 3,217 4,989 8,206

EMPLOYEES BY EMPLOYMENT CONTRACT TYPE (n°)

2017 2018


Permanent 2,830 4,521 7,351 2,876 4,579 7,455

Fixed Term 243 461 704 341 410 751

Total 3,073 4,982 8,055 3,217 4,989 8,206

WHO DOES IT | 69

EMPLOYEES BY AGE GROUP AND GENDER (No)

2017 2018


<30 967 1,416 2,383 1,125 1,494 2,619

30-50 1,660 2,731 4,391 1,635 2,712 4,347

>50 446 835 1,281 457 783 1,240

Total 3,073 4,982 8,055 3,217 4,989 8,206

Female Male

1000

1500

2000

500

0

over 30 years

between 20 and 30 years




less than 2 years

Employees by length of service and gender (No)

611 672

1465

1036

1818

2604

266

427

949

1089

1088

1516

516373

663

729345

245

AMERICAS

2,326AS AT 31 DECEMBER 2018,THE ARMANI GROUP EMPLOYED

8,206

PERSONS

WOMEN

MEN

4,989

1,203 1,123

3,217

70 | WHO DOES IT

THE ARMANI GROUP’S PEOPLE

ITALY

3,060

EUROPE

950

FAR EAST

1,706REST OF THE WORLD

164

2,022

1,078

108

578

1,038

628

56

372

WHO DOES IT | 71

72 | WHO DOES IT

ATTENTION TO THE WELL-BEING OF ALL EMPLOYEES

For the Armani Group, it is essential to ensure that all employees are offered a stimulating place in their respective work environments, where they can calmly and peacefully perform their duties and activities and have their specific needs addressed attentively. The various elements that are key enablers to achieving this outcome include: above all, respecting diversity, while constantly valuing and making the most of the contribution that each one brings to the company's growth.

PROTECTING DIVERSITY AND ENSURING EQUAL OPPORTUNITIES

Defending the dignity of the person is a prerequisite for creating a motivating and stimulating workplace, founded on trust and loyalty. For this reason, the investments made over time with respect to management of diversity and protection of equal opportunities are among the Group's key priorities. Within the Armani Group, women represent more than half the workforce and consistently fill important roles at every level of the organisational structure. This result has been achieved thanks to various accommodations and arrangements in terms of flexibility, such as the possibility to avail of a part-time work schedule upon returning from maternity leave, which is granted in a much more generous and extensive manner than required by law.

PERCENTAGE OF WOMEN BY FUNCTIONAL CLASSIFICATION (%)

2017 2018

Senior Executives 45% 44%

Manager 50% 50%

Employees 69% 69%

Sales force 61% 60%

Workers 67% 62%

WHO DOES IT | 73

EMPLOYEE WELLBEING INITIATIVES

By way of a significant contribution to employee well-being a host of services and initiatives are in place that allow for a substantial enhancement in living and working conditions. These include, for example, provision of workplaces that are safe and comfortable, and the set of special agreements entered into with commercial establishments or companies that provide health and related services. The company reaffirmed its interest in providing for the personal well-being of employees with the launch announced at the end of 2018, of the Armani People Care Welfare Plan.

RESPONDING TO EVERYONE'S NEEDS

Another aspect of fundamental importance is the issue of properly balancing private and professional life, which the Armani Group promotes and provides for, through the flexible entry-exit times offered to employees and the stipulation of diverse types of contracts. In addition to this, there are initiatives to support and aid parents, such as the Armani Junior Summer Camp, which during the school closing period allows employees' children to participate in a summer camp dedicated to basketball, led and managed by qualified instructors and special guests from the team A | X Olimpia Milan.

SAFEGUARDING HEALTH

As of 2005 the Armani Group has decided to supplement the insurance coverage for occupational and non-occupational accidents by also adding free health coverage for all employees, with the possibility of extending it, at a reduced rate, to the nuclear family unit. At the end of the year, the inclusion of Life insurance coverage was also communicated to employees. This policy, intended for all employees (non-managers), provides for the payment of a compensatory amount to the employee's heirs in the event of death due to illness. Additionally, a free Check Up programme offering the possibility of an annual health check has also been established.

74 | WHO DOES IT

WHO DOES IT | 75

LEISURE TIME

The many benefits that employees can enjoy also include the offer of two free tickets to watch the matches of Olimpia basket Milano team, and the opportunity to avail of an instalment payment scheme through payroll for purchase of public transport passes. Last but not least, staff can expect to enjoy discounted employee pricing at Group-owned stores on apparel and accessories, moreover with access throughout the year, also extended to family members, to extraordinary sales of clothing and accessories from previous seasons.

FOSTERING INVOLVEMENT IN THE COMPANY

Efficient internal communication is a key element for ensuring the proper functioning of every organisation, in that it serves to facilitate and encourage the involvement of all employees and keep them updated as to the Group's objectives to be achieved, and the results obtained. Within the Armani Group the main tools deployed for this purpose are the Armani Intranet and Internal Communications, through which employees are kept informed about the main organisational level changes, the issues and themes about which the company wishes to increase awareness, and projects and initiatives established for the benefit of the local communities or the employees themselves that have the Group’s support.

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GROWTH WITHIN THE GROUP

Within the Armani Group a range of opportunities for skills development and professional growth are available and aimed at all categories of employees.

The training related initiatives are founded on four main aspects, designed to promote the development of cross-functional and soft skills useful for both company and personal growth:

• Meritocracy for enhancing and valuing excellence;• Leadership and passion for effectively managing change and people;• Ambition as an attitude to be sought continuously;• Performance excellence as a goal.

The activities are promoted by the Training & Development (T&D) office and cover various areas, ranging from technical aspects (for example IT) to linguistic and managerial training. In order to ensure the development of suitable offerings that also meet high quality standards, in addition to the T&D office, qualified professionals in the sector, specialised consulting firms and schools are also involved.

WHO DOES IT | 77

TRAINING PER EMPLOYEE, BY GENDER AND PROFESSIONAL CATEGORY (hours)

2017 2018


Senior Executives

1,739 1,881 3,620 1,922 1,780 3,701

Manager 6,822 9,114 15,936 3,538 4,121 7,659

Employees 6,350 13,509 19,859 3,042 7,638 10,680

Sales force 66,759 76,797 143,556 11,711 13,619 25,330

Workers 4,175 8,679 12,854 2.300 2,280 4,581

Total 85,845 109,979 195,824 22,512 29,438 51,951

EMPLOYEES INVOLVED IN TRAINING ACTIVITIES (No)

2017 2018


Senior Executives

47 49 96 100 119 219

Manager 290 301 591 374 405 779

Employees 285 657 942 246 467 713

Sales force 1,226 1,678 2,904 1,165 1,507 2,672

Workers 94 427 521 107 180 287

Total 1,942 3,112 5,054 1,992 2,678 4,670

TRAINING BY TRAINING AREA (hours)

2017 2018

Training to Executives 16,155 9,559

Professional Training 18,790 14,826

Language Training 6,976 3,435

Code of Ethics (Organisational Model 231, etc.) 140,476 17,245

Health and Safety 10,626 4,973

Other 2,802 1,913

Total 195,824 51,951

78 | WHO DOES IT

WHO DOES IT | 79

THE TRAINING OFFERING FOR ALL EMPLOYEES

The Group’s training offering is very wide and diversified in accordance with the company functions. The goal is to provide for employee growth and development in line with company objectives, creating team spirit that generates strong synergies. This also explains the company’s ability to attract and retain the best human capital, to which its growth is directly linked. As further evidence of this aspect, the Armani Group has for years been placed among the top positions in the rankings drawn up by the Universum Award: an assessment of the best employers based on the opinions of tens of thousands of students in Italy.

The training offering plans are centred on developing:

• cross-functional and soft skills such as public speaking, negotiation, conflict management and communication. The training courses on these aspects are aimed at various functional positions within the company and include team building initiatives, especially in support of corporate reorganisation processes.

• technical and professional skills and competencies for the growth of employees at all employment contract levels (such as language courses and IT courses), with courses managed by external experts or internal trainers, and conducted both in groups and individually.

In addition, the Group offers special programmes for new hires, young talent, sales personnel and managers.

80 | WHO DOES IT

WHO DOES IT | 81

INDUCTION OF NEW EMPLOYEES

The programme, which supports newly hired employees during the period of initial integration in the company, is delivered on a bi-monthly basis and structured over a few days oriented to augmenting knowledge about the Armani Group.

ARMANI DEVELOPMENT PROGRAMME

The Group has an internal development programme dedicated to young talents under 35 present in the company, who are selected by the managers and by the Human Resources Department. During 2018 the programme included an assessment oriented activity aimed at mapping the potential of the participants so as to then develop ad hoc training plans.

SALES PERSONNEL

Special training programmes are dedicated to the personnel of company-owned stores focusing on product knowledge and on quality of customer service, so as to ensure alignment of service level with company standards. Each season various training courses on the products are provided, with the aim of illustrating all the characteristic features: stylistic, technical and functional, in order to be able to respond with competence to the questions and needs of clients. The delivery of these courses occurs both directly and indirectly, through video tutorials distributed to the stores. In order to extend availability and enhance organisational efficiency of these courses, an e-learning project is currently under development. The new platform will be presented at the end of 2019 and once fully operational, will cover all of the Group's stores worldwide. The product oriented courses are complemented by others that enrich the training offering, with a view to facilitating the exchange of sales experiences and know-how, as well as in-store programmes organised on site at stores located across the most important city-centres.

LEADERSHIP DEVELOPMENT AND PERSONNEL MANAGEMENT

Cyclically delivered programmes support managers and other functions responsible for management of resources and teams, in the development of personal skills. The goal is to enhance and develop the talents within their own respective teams so as to improve team performance.

INDIVIDUAL AND TEAM COACHING

Individual coaching programmes meant for the Group's managers are designed to enhance their potential and professional growth, thus enabling them to achieve corporate objectives. These represent opportunities, appropriately supported and guided by professional coaches, for achieving improvement both in terms of performance and management of the resources available to them, once individual objectives have been defined in alignment with the Group’s objectives. Unlike individual coaching, the purpose of Team Coaching instead shifts focus on the development and growth of a group of individuals. Yet again, external professionals are enlisted to help the groups, the aim being to improve communication methods and processes among team members, strengthen motivation and the propensity to collaborate towards achieving common goals.

82 | WHO DOES IT

HEALTH AND SAFETY OF OUR PEOPLE

One of the primary constituents of the pillar linked to employee well-being is ensuring health and safety at work. This therefore represents a key Group priority, which is managed through constant prevention activities.

PREVENTION: IDENTIFYING RISKS AND INVESTING IN TRAINING

Safety in the workplace is ensured through a series of activities designed to prevent occupational illnesses and accidents, including first and foremost analysis of the risks characterising the company’s various operational locations, from production sites to points of sale.

Once the risks have been identified, appropriate measures for control thereof are put in place, such as periodic health surveillance of the personnel exposed to such risks along with work done on improving the work environment. The latter mainly concern the production sites that have higher potential exposure to risk of accidents, and which over the years have seen the deployment of various initiatives related to renovation and improvement of structures and machinery. For example, the installation of ventilation and dust extraction systems, and modern systems for checking electrical installations.

Another fundamental element of prevention is enhancing awareness among employees, cultivated through training and update courses targeted especially at new hires, but also at longer-serving employees, with the objective of clearly indicating the possible risk factors and relative prevention measures provided for by the company.

The various courses differ in accordance with the respective roles, tools and equipment with which the employees come into contact and the relative degree of risk exposure. Special courses are also provided for those directly involved in the Occupational Health and Safety Management System, such as First Aid Officers

TRAINING ON HEALTH AND SAFETY ISSUES (hours)

2017 2018

Prevention of risks related to the activity carried out 8,111 3,172

Emergency Mgt Personnel 2,154 906

Workers’ Safety Reps WSR 352 832

Prevention and Protection Service PPS 228 32

Total 10,845 4,942

WHO DOES IT | 83

MONITORING AND CONTROL

An internal control system instituted in 2014, is based on audits carried out by the Supervisory Body (SB). Health and safety inspections are performed annually both in companies with Milan-based operational locations and in the sites of GA Operations SpA. The scope of the audits is to verify the management of workplace health and safety related issues (register of periodic inspections, analysis of the functions subjected to health surveillance for specific risks), management of tenders in accordance with Italian Legislative Decree 81/08, monitoring and verifying the consistency of the risk analysis and compliance with mandatory regulatory requirements. While not currently having a validated management system, the company has implemented a documentation-based system designed to ensure not only compliance with regulations and norms, but also pursuit of continuous improvement. The commitment to ensure the safety of employees is also required of all the third-party companies with whom the Group collaborates; the latter are required to sign on to the document established for assessment of interference risks and ensure prevention in the main activities characterised by high risk (for example, safety in work activities such as driving, ironing services, etc.).

INDICATORS ON HEALTH AND SAFETY

Within the health and safety performance monitoring plan, accident indicators play a fundamental role in assessing the outcomes and results of the preventive measures adopted.

HEALTH AND SAFETY INDICATORS

2017 2018

Accidents at work number 14 23

Accidents in transit number 19 22

Fatal accidents at work number - -

Fatal accidents in transit number - -

Cases of occupational illnesses number 6 1

Absence due to accident (in transit) days 627 632

Absence due to accident (at work) days 682 446

Hours worked hours 5.080,629 4.449,901

Employees number 3,066 3,122

Accident Indicators

Incidence rate 4.57 7.37

Severity rate 0.15 0.09

Rate of work-related illnesses 0.24 0.04

Accident frequency 2.76 5.17

84 | FOR WHOM DO WE DO IT

FOR WHOM WE DO IT

Augmenting customer satisfaction and loyalty is a delicate and complex operation, which is dependent on the one hand, on style, and product quality and safety, while on the other hand, being secured by ensuring the brand's ability to create for the customer an overall experience that is exclusive, distinctive and wholly satisfying. The latter is based on two fundamental factors: adequate training of the sales personnel, the first point of contact between the customer and the Group, and careful planning and management of the overall customer experience. In addition to taking care of these aspects, the Group is increasingly involved in the fight against counterfeiting, which is necessary to protect brand values particularly vis-a-vis the customers who believe in them.


FOR WHOM DO WE DO IT | 87

THE SALES PERSONNEL

The competent and passionate salesperson is capable of interacting positively with the client, satisfying their needs and gaining their trust, while enriching the shopping experience and strengthening brand loyalty. The sales personnel therefore fulfil an essential role for the Group and are adequately trained in order to develop deep product knowledge, the willingness to interact, complemented by a solid ability to support the customer in making the purchase. The Group is committed to sharing with its sales staff the general principles to be adhered to while interacting and managing relations with clients. In order to continuously improve the service offered, the Group has defined some cross-disciplinary activities, so-called "non-selling duties", which contribute to ensuring organisational efficiency, presenting an impeccable image and providing sales service characterised by high quality and professionalism. In order to measure and improve the quality of service offered in stores, the Group uses two tools: the mystery shopping initiative that enables monitoring of the customer experience during moments of contact with the store and the sales personnel, and a precise personnel performance evaluation scheme, i.e. “Human Capital Development”, which takes into account both quantitative and qualitative data.


THE CUSTOMER EXPERIENCE

Ensuring a unique and sophisticated shopping experience requires careful planning and optimal management of all aspects that, directly or indirectly, could influence the consumer's ability to choose and their perception of the brand. The first step is the accurate mapping of the customer journey, i.e. analysing the customer’s itinerary undertaken in completing their purchasing experience, from the first contact with the Group to the conclusion of the process, both online and offline. For each stage of this journey the customer's expectations are identified along with the behaviours to be demonstrated by staff so as to ensure client satisfaction during the entire purchasing process. Every single moment of contact is examined such as to ensure that the interaction with the client is always characterised by care and attention to the finest detail.

Thus, in addition to interactions involving products and services that are part of the offering, the customer experience serves the purpose of strengthening and fine-tuning: contacts with staff, the image, layout and design of point of sales outlets, customer service, advertising, the web site and various social media interfaces. Given the strategic importance of this process, in 2017 a new professional position was introduced in the retail sphere, specifically tasked with promoting the training of sales personnel and the evolution of the customer journey. Starting in 2018, a team dedicated to the Customer Experience was established, with responsibility for defining the fundamental elements necessary to ensure the customer enjoys an unforgettable experience while in the Armani world and on the occasions related to purchasing the related products, and for training the sales personnel on these issues.

The Customer Experience model pursued by the Group is formalised in the Customer Interaction Plan, which ensures a high level of service and organisational coherence in management activities across the various stores. The Plan has made it possible to identify opportunities for making the relationship with the clientele increasingly exclusive, direct and personalised, even through various communication activities, such as distribution of online catalogues, news flashes about new collections, ad hoc messages on shopping related occasions or special events, and newsletters for promotion of a product or a particular period (sales and presales).

March 2017 saw the launch of the Clienteling project: a software application deployed in-store facilitates and enables more efficient management by sales personnel of the periods of contact with the clients.



ENSURING CLIENT DATA PROTECTION & PRIVACY

Ensuring the security of buyers’ personal data is not only required by law, but also one of the priorities identified by the Armani Group. As of 2015, the e-mail address: [email protected] has been activated to facilitate and ensure greater effectiveness in the management of compliance with regard to the processing of personal data pursuant to Italian Legislative Decree n.196/03 and subsequent amendments, which requires all Group companies to ensure that the processing of personal data will itself be respectful of the fundamental rights and freedoms, and dignity of the concerned person, particularly with respect to confidentiality, personal identity and the right to protection of personal data. In the same way, a compliance monitoring and verification process for all privacy requirements was initiated, involving the various departments of the Group and the relevant personal data processing areas in relation to the privacy requirements provided for by European Regulation 679/2016 (in force as of 25 May 2018).

PROTECTING THE BRAND

Being fundamentally committed to securing the authenticity and value of its products, the Armani Group has always been active in protecting its intangible assets and in the fight against counterfeiting, dedicating ample resources to the protection of Intellectual Property (IP) rights and collaborating with leading national and international associations in the sector. Protection of intangible assets and anti-counterfeiting measures are implemented on the one hand, through the registration of Intellectual Property rights such as trademarks, patents, industrial designs, and on the other by ensuring protection thereof under the jurisdictions of the respective administrative and judicial offices worldwide. Achieving these objectives is also possible thanks to the activation of customs surveillance services in most industrialised countries. As well in 2018, the commitment to protection and anti-counterfeiting operations was substantial and conspicuous to the extent that the Group's anti-counterfeiting team and the Intellectual Property Department, underwent significant expansion doubling the number of professionals registered in the Italian Register of Industrial Property Consultants and Authorised Representatives before the Office for Harmonisation in the Internal market (OHIM). The introduction of new technologies and expansion of the dedicated teams have greatly enhanced the Group’s efficiency and effectiveness in terms of direct administrative management of Intellectual Property, control of costs, and increase in enforcement actions aimed at countering any type of abuse and/or violation of IP rights. Anti-counterfeiting activities focus on the one hand, on promoting awareness, education and training in respect of customs authorities in countries where an active surveillance system exists, and on the internet domain on the other hand, via efficient brand protection tools designed to strike at thousands of websites that may be traced to actual criminal organisations. Moreover, these interventions are further complemented by initiatives such as the QR Code project which, by directly involving the consumer, enables them to make a valuable contribution to the Group's efforts in this area.

THE QR CODE PROJECTThe project, carried out in partnership with CERTILOGO® and AVERY DENNISON®, is based on a technological solution that allows the final consumer, in full compliance with data protection regulations, to participate in the process of authentication of Group products with a simple scan of the QR Code present on the composition labels of apparel items, through a common smartphone or any other device connected to the internet. This action allows consumers to access an information section entitled "Authenticity" on the websites attributable to the Group, from where the relevant item information may be obtained.

The data generated by the scans may be used not only for the fight against counterfeiting, but also for identifying possible fraud cases, any possible problems in the supply chain, theft, controlling the parallel market and, last but not least, for improving the product offering to the final consumer.

The first EA7 Emporio Armani branded products incorporating this technology arrived in stores starting from the Spring-Summer 2018 season. From the Fall/Winter 2018-2019 season, the QR Code has been officially affixed to all the apparel and accessories of the EA7 Emporio Armani, Emporio Armani and A|X Armani Exchange collections. The progressive extension to cover all types of products, including those of the Giorgio Armani line, is planned to occur shortly.

The project collected more than 100,000 authentications in 2018.


92 | PER CHI LO FACCIAMO

FIGHT AGAINST COUNTERFEITING

In 2018 the customs surveillance service and the on-the-ground raids produced the following outcomes:

• more than 3,000 seizures worldwide, in particular in China, Italy, Spain, Germany, Russian Federation, Belgium and France;

• more than 5,500 websites dedicated to the marketing of counterfeit products shut down;

• more than 42,000 ads for the marketing of counterfeit products on digital platforms (marketplaces) removed, achieving a 99% compliance rate;

• more than 4,500 pages on social media have been contested, achieving over 97% compliance (shut down).

Also, given that China proved to be the country with the highest proliferation of counterfeiting activities in 2018, one of the main objectives identified by the Group for 2019 is promoting education and awareness of the issues among the customs authorities of this country.


THE COMMUNITIES WE SUPPORT

The Armani Group has always considered itself to be an integral part of the territory and the communities within which it operates and has built relationships with the world of culture, institutions, and humanitarian associations, extending support to projects — even long term projects — that are consistent with its own core values and with its Code of Ethics.

96 | THE COMMUNITIES THAT WE SUPPORT

SUPPORTING CULTUREAND CREATIVE TRAINING FOR YOUNG PEOPLE

A lot of attention is naturally dedicated to the civic-socio-economic reality of the city of Milan, where the Group maintains its headquarters and with whose institutions it has always enjoyed long-standing relationships of great collaboration, both in the cultural and social sphere.

Armani/Silos the Group's exhibition venue, has since its opening been working in synergy and in close collaboration with the Department of Culture, sharing projects and participating in many of the city's initiatives.

In addition to making available to the public, students and young designers, the wealth of experience and materials representing the fruits of over forty years of work, in 2018 Armani/Silos also offered temporary exhibitions, film festivals, workshops for schools, and a second cinema workshop, led by director Luca Guadagnino, for students of cinema who were selected through an international competitive call for applications.

Armani/Silos deems it important to be connected with diverse institutions in the city, for example BASE, with whom through a synergistic collaboration, the participation in the Vogue Photo Festival Milan Photo Week was defined, and the Design school of the Politecnico di Milano University, which relies on Silos for access to research materials and spaces for training activities aimed at Italian and foreign students.

The Armani Group also supports other important Milanese cultural entities, such as the Pier Lombardo Foundation, which in addition to the Franco Parenti Theatre manages and organises cultural events and meetings, as well as national and international institutions such as the MAXXI Foundation in Rome, dedicated to contemporary creativity, or the Byrd Hoffman Watermill Foundation of New York, a hothouse for nurturing young artists of all disciplines under the guidance of the great theatre director Robert Wilson.

Ongoing relationships are also maintained with the Brera gallery, with whom a project for restoration of part of the historic site is currently being studied; and with the FAI, National Trust of Italy in whose case, the Armani Group has since the beginning been part of the group of major donors, "I 200 del FAI".

THE COMMUNITIES WE SUPPORT | 97

AID TO THE NEEDY AND DISENFRANCHISED

Since a number of years, the Group has been attentive to the social environment, and in particular it is close to the Opera San Francesco per i Poveri, the foundation that since the post-world war era has been assisting and supporting the disadvantaged population segments in Milan with a series of essential basic services. For years the Armani Group has provided donations, both in cash and merchandise, thus contributing to funding the basic services offered by OSF: the free community kitchen, the clothing exchange wardrobe, the pharmacy, the medical assistance programme. The Group also supports the city’s main hospital foundations, such as the Fondazione IEO (European Institute of Oncology Foundation), the De Marchi Foundation and the Paolo Pini Association. In 2018 support was also extended by way of donations of objects, accessories and toys, to ABIO, Association for the Hospitalised Children, which is active in many paediatric departments of the main hospitals in the area, through a network of volunteers, who are trained for this specific type of activity, and support both the young patients with entertainment activities, and their families with welcome and information services. In addition to the foregoing, worthy of mention is the contribution of Nobu, which in 2018 was one of the primary protagonists of the Action against Hunger activities, to the extent of earning the titles of "Golden Restaurant against Hunger 2018" and "Best Restaurant against Hunger 2018".

INITIATIVES FOR MEDICAL AND SCIENTIFIC RESEARCH

The Group on an ongoing basis, supports some of the most important Italian entities involved in research, such as the Veronesi Foundation, among the most advanced in the field of prevention and treatment of oncological diseases. Furthermore, through its points of sales in Italy and abroad, it regularly participates in fundraising initiatives for breast cancer research launched by the “Pink Ribbon” international campaigns, which are promoted in Italy by AIRC, the Italian Association for Cancer Research, and overseas by the main associations striving to find a cure for this type of disease. The Group is also one of the main participants in "Convivio", the biennially held trade show-and-market through which ANLAIDS Lombardia finances important research programmes on AIDS prevention and treatment.

In addition to the activities rooted within the Italian territory, the Armani Group, in collaboration with its partner L'Oréal, has for almost a decade been making progress with its own project, inspired by a 2010 UN resolution that recognises access to drinking water and sanitation services as basic human rights.Water is the most basic necessity of life and is therefore one of the most precious natural elements. Unfortunately, even today, for one in ten people, access to clean safe water is difficult and far from guaranteed. Acqua for Life addresses the problem of access to water in a global manner: in nine years of activity it has succeeded in reaching more than 195,000 people in 238 communities spread over three continents.

With an investment of around 7.7 million euros made in impoverished areas or areas without safe potable water, the programme has made possible the installation of water access points, sanitation facilities, rainwater collection tanks, filtering and purification systems. In this way the communities have water for their own needs and basic agricultural uses. Today, thanks to Acqua for Life, tens of thousands of women and children, who would normally be tasked with finding and transporting water, are able to have a more regular life, devote themselves to family, and attend school.

The programme, which has a three year duration, also provides for initiatives oriented on educating the communities on the proper use of water, so as to promote wide adoption of sanitary norms and practices capable of maximising the beneficial effects of its responsible use, thus helping communities to become capable of managing and maintaining the water sources beyond the effective period of support for the project. In 2019, Acqua for Life will initiate new projects in Kenya, India, China and Argentina, while those already underway in Madagascar, Nepal, Haiti and Papua New Guinea will continue. Acqua for Life collaborates with two international partners: Green Cross International and Water Aid, associations that have made it possible to efficiently and competently reach the most diverse parts of the world.



NON-PROFIT ACTIVITIES OF OLIMPIA MILANO BASKETBALL

The Pallacanestro Olimpia Milano professional basketball team was founded in 1936 as Dopolavoro Borletti. Its long history is characterised by peaks of success interspersed with phases of difficulty and challenges that have helped shape it into one of the leading teams in Italian and European basketball today. Initially becoming a sponsor in 2004, Giorgio Armani eventually bought the team in 2008, deploying a plan of strategic investment and targeted choices in terms of players and coaches and technical staff that effectively spurred its relaunch. Today the team also known as "scarpette rosse (red shoes)", plays an increasingly prominent role as evidenced by the constant growth in spectators.

Over the years, Olimpia Milano has shown itself to be an enterprise always attentive to ensuring respect of those ethical principles which, above all, in sport, support and facilitate the achievement of a healthy and enduring growth path. Testimony of this, and of the principles contained in the Internal Regulations, the team has obtained the Ethics in Sport Certification "Esicert" issued by Bureau Veritas. Cognisant of being role models for many young people and fans, the athletes are committed to ensuring that collaboration and responsibility do not remain only theoretical concepts.

The company devotes numerous initiatives targeted at the youth sector with the scope of promoting the culture and healthy principles of sports. The activities centred around sports training for children and young people are in addition to actions related to fund raising and support for local sports undertakings, as indicated below.


102 | LE COMUNITÀ CHE SUPPORTIAMO

SPECIAL OLYMPICS

For the past four seasons, Olimpia Milano has been committed to supporting Special Olympics Italia, through fundraising and collection of discontinued sports gear and equipment, and with sponsorship of events. These are all undertaken with the strong involvement of the Armani Junior Programme and affiliated companies.

ONE TEAM

One Team is an ambitious project, supported by Olimpia Milan one of its Founding Partners, and is promoted by Euroleague as a "container of social projects" of the major European teams. There are mainly four social themes that are sought to be addressed through One Team, as follows:

• Social inclusion;• Disabilities;• Gender diversity;• Substance abuse.

Within the context of the One Team initiative, Olimpia Milano together with the Laureus Foundation has embarked on a social project involving the children of the Baroni primary school in Gratosoglio, a district of Milan characterised by situations of social, cultural and economic hardship with a consequent high risk of delinquency. With the multi-scope objective of promoting acquisition of skills covering the spectrum of emotional, psychological and motor skills, the children were given the opportunity to watch a match and receive coaching from the Olympia youth sector coaches, supported by a sports psychologist.

In addition to this initiative, worthy of mention is the project developed in collaboration with the Don Gnocchi Foundation in Milan, aimed at the rehabilitation of a group of children with borderline intellectual functioning: the specific rehabilitative activities offered by the Don Gnocchi foundation

LE COMUNITÀ CHE SUPPORTIAMO | 103

were accompanied by a basketball course with the Olimpia Milano youth sector coaches, with the dual aim of helping the children improve their motor planning skills while also serving to incentivise motivational and relational aspects.

Olimpia Milano also directs its contributions through the initiatives included in the Armani Junior Programme, which each season develops a project involving 10 institutions, including elementary and middle schools, selected from among disadvantaged neighbourhoods. In this manner, support is provided to schools and communities in activities developed to counter and prevent the phenomena of bullying and social exclusion, and moreover imparting to young people the importance of sports and its three fundamental elements: collaboration, competition, and respect for rules.

"FIERI GUERRIERI" CHEERING SCHOOL AND "IO TIFO POSITIVO"

The "Fieri Guerrieri" (Proud Warriors) project serves the objectives of contributing to reducing the phenomena of school bullying, improving integration and transmitting and sharing the positive values of sports, such as respect for others and adhering to externally imposed directives.

The teams compete in a cheering contest, to create the best chorus and flag and in another contest to design the logo for the Curva Dei Fieri Guerrieri. Always with a view to pursuing the same important social objectives and offering young people a positive model for showing team support, Olimpia collaborates on the "Io Tifo Positivo" project, which enjoys the valuable support of the Municipality of Milan, the Province of Milan and the Lombardy Region.

In demonstrating support for the red and white team colours during the championship home matches, the Fieri Guerrieri cheering school is led by the educators and facilitators of the Comunità Nuova Association.

104

NOTE ON METHODOLOGYThis is the fourth edition of the Armani Group Sustainability Report, whose drafting was inspired by the sustainability reporting standards published by the Global Reporting Initiative (GRI Standard 2016 version). To facilitate better understanding of the document, the "Content Index" is provided in the appendix and includes a list of the selected indicators (standard disclosures).The process of preparing this Sustainability Report entailed the involvement of the managers responsible for various corporate functions in order to determine the contents, the projects carried out and the related performance indicators. The drafting of the Report was inspired by principles including: materiality, stakeholder inclusiveness, and completeness. The relevance of the information and details included was defined taking into consideration the impacts and responsibilities of the Group in the economic, social and environmental spheres, the regulatory contextual environment and the specificities of the sector in which it operates, as well as the needs and expectations of the stakeholders as referred to in the analysis of materiality.The data and information included relate to the financial reporting period corresponding to the year 2018, with some advances for projects launched during 2019. To facilitate the comparability of data over time, where possible, the Report also provides trends related to the preceding financial year (2017). The scope of reporting considered corresponds to that of the Consolidated Financial Statements as regards the data relating to the number of employees and the hours of training provided. With regard to data and information pertaining to environmental footprint (energy and water consumption, greenhouse gas emissions, waste production) and health and safety at work, the scope of reporting considered includes the following companies:

• Giorgio Armani SpA (Italian offices);• Giorgio Armani Retail Srl (company-owned stores in Italy);• Giorgio Armani Operation SpA (production sites in Italy);• Alia Srl (Restaurant, cafe and club).

Any eventual exceptions with respect to this scope of reporting have been appropriately pointed out.

The current document has not been subjected to third party verification. For more information contact the CSR unit: [email protected]

105

106

CONTENT INDEX

GRI Standard Disclosure Page Omissions

GENERAL DISCLOSURES

GRI 102

102-1 Name of the organization 24 -

102-2 Activities, brands, products, and services 11-15; 38-39 -

102-3 Location of headquarters 24 -

102-4 Location of operations 16,17 -

102-5 Ownership and legal form 24,25 -

102-6 Markets served 16,17 -

102-7 Scale of the organization 8,16,17 -

102-8 Information on employees and other workers 68-71 -

102-9 Supply chain 44-48 -

102-10 Significant changes to the organization and its supply chain 44-48 -

102-11 Precautionary Principle or approach 29 -

102-12 External initiatives 96-103 -

102-13 Membership of associations 96-103 -

102-14 Statement from senior decision-maker 5 -

102-16 Values, principles, standards, and norms of behavior 28,29 -

102-18 Governance structure 24,25 -

102-40 List of stakeholder groups 33 -

102-41 Collective bargaining agreements - cofidentiality constraints

102-42 Identifying and selecting stakeholders 33 -

102-43 Approach to stakeholder engagement 32-33 -

102-44 Key topics and concerns raised 32-33 -

102-45 Entities included in the consolidated financial statements 25 -

102-46 Defining report content and topic Boundaries 105 -

102-47 List of material topics 31,32 -

102-48 Restatements of information 105 -

102-49 Changes in reporting 105 -

102-50 Reporting period 105 -

102-51 Date of most recent report 105 -

102-52 Reporting cycle 105 -

102-53 Contact point for questions regarding the report 105 -

102-54 Claims of reporting in accordance with the GRI Standards 105 -

102-55 GRI content index 106-109 -

102-56 External assurance 105 -

107107

GRI Standard Disclosure Page Omissions

MATERIAL TOPICS

Diversity and Equal Opportunities (protection of workers and their rights)

GRI 103 Management Approach

103-1, 103-2, 103-3 72 -

GRI 405 diversity and equal opportunities

405-1 Diversity of governance bodies and employees 68-69

Supplier Environmental Assessment (Oversight of social and environmental impacts of the supply chain)


103-1 Explanation of the material topic and its Boundary 44-48 -

GRI 308 Supplier Environmental Assessment

308-1 New suppliers that were screened using environmental criteria 44-48 -

Supplier Social Assessment (Presidio degli impatti sociali e ambientali della catena di fornitura, Costruzione di relazioni commerciali stabili anche attraverso il coivolgimento e il dialogo con i fornitori)


103-1, 103-2, 103-3 44-48 -

GRI 414 Supplier Social Assessment

414-1 New suppliers that were screened using social criteria 44-48 -

Economic Performance (Creation of value for the national territory and the communities)

GRI 103Management Approach

103-1, 103-2, 103-3 34 -

GRI 201 Economic Performance

201-1 Direct economic value generated and distributed 34-35 -

108

Training and Education (Employer branding, Development and management of talent, Training and skills development)


103-1, 103-2, 103-3 92-95 -

GRI 404 Training and Education

404-1 - Average hours of training per year per employee 93 -

Occupational Health and Safety (Protection of health and safety of workers)


103-1, 103-2, 103-3 98-102 -

GRI 403 Occupational Health and Safety

403-2 Types of injury and rates of injury, occupational diseases, lost days, and absenteeism, and number of work-related fatalities

100-102 -

Energy (Attention to environmental impacts)


103-1, 103-2, 103-3 72-73 -

GRI 302Energy 302-1 Energy consumption within the organization 72 -

109

Water (Attention to environmental impacts)


103-1, 103-2, 103-3 71 -

GRI 303 Water 303-1 Water withdrawal by source 60 -

Emissions (Attention to environmental impacts)


1103-1, 103-2, 103-3 63 -

GRI 305 Emission

305 – 1 Direct (Scope 1) GHG emissions 63 -

305 – 2 Energy indirect (Scope 2) GHG emissions 63 -

Effluents and waste (Attention to environmental impacts)


103-1, 103-2, 103-3 63 -

GRI 306 Effluents and waste

306-1 Waste by type and disposal method 63 -

Biodegradable and recyclable paper sourced from responsibly managed forests, consisting of pure cellulose with at least 25% recovered fibres and produced in adherence with sustainability criteria during its processing.

2019

www.armani.com

Documents

THE ARMANI GROUP AND SUSTAINABILITY › cloud › armanif31wp › uploads › ...the Giorgio Armani Privé collections have and continue to grace international catwalks, representing