California Transparency in Supply Chains Act Disclosure

The California Transparency in Supply Chains Act requires certain businesses to provide disclosures concerning their efforts to eradicate human trafficking and slavery from their direct supply chains. The disclosure is intended to provide consumers the ability to make more informed choices about the products and services they buy and companies they support. This is the Hey Dude Inc. (“HEYDUDE”) California Transparency in Supply Chains Act Disclosure ( ”Disclosure”).

HEYDUDE products are manufactured at contracted factories around the world. We strive to ensure all of our products are sourced, produced, and delivered to our customers in a manner that upholds international labor and human rights standards.

As such, HEYDUDE is committed to the global fight against forced, indentured, involuntary, trafficked, slave, compulsory, and child labor (collectively referred to here as “Coerced Labor”), and has implemented various measures to help ensure our product supply chain is free from such unlawful and unethical practices.

This Disclosure sets out the steps HEYDUDE takes, or has others take, to ensure that Coerced Labor does not taint our supply chain and serves as a reinforcement of our long-standing policy of conducting business with vendors who share our same values and high ethical standards.

VERIFICATION

HEYDUDE engages in a series of verification activities to identify, assess and manage the risk of Coerced Labor in our global supply chain. Specifically, we evaluate potential contracted factories against our rigorous standards and require them to agree to HEYDUDE’s terms of engagement prior to entering our supply chain. By agreeing to our terms of engagement, contracted factories are also bound by HEYDUDE’s Factory and Supplier Code of Conduct (the “Code of Conduct”). The Code of Conduct was created in line with the Fair Labor Association’s code of conduct and compliance benchmarks; it must be posted in a prominent location inside the factories in the local language(s) of the workers.

The Code of Conduct provides clear guidance on our expectations and addresses topics such as child labor, forced labor, work hours, wages, safety and health, non-discrimination and harassment. HEYDUDE intends to work with factories who understand that meeting the minimum standards contained in the Code of Conduct is a critical baseline from which manufacturing leadership, continuous improvement, and self-governance must evolve. Factories are expected to monitor their subcontractors and material suppliers and the work environment to ensure compliance with these laws and policies and obtain verification of compliance.

All of HEYDUDE’s factories and Tier 2 suppliers are also required to sign a Statement of Compliance, verifying that their operations are in compliance with all local laws and customs regarding hiring practices, wages and working conditions as well as the Code of Conduct. HEYDUDE uses the factory and supplier certifications as well as audits to verify and reduce the risk of Coerced Labor in its product supply chain.

HEYDUDE also takes steps to assess potential risks related to labor brokers and third-party recruiters in our supply chain. While the use of labor brokers and third-party recruiters in our supply chain is minimal, in each case HEYDUDE’s and our factories endeavor to require the labor broker or third-party recruiter to agree in writing to comply with all applicable laws and regulations covering their employees.

AUDITS

The issue of where Coerced Labor risks may lie in our supply chain, and how HEYDUDE assesses and manages those risks, are addressed through our audit processes. We will not knowingly work with factories or suppliers that use Coerced Labor, and utilize an internal monitoring team and accredited third-party auditors to conduct both scheduled and unannounced social compliance audits at our factories and our larger Tier 2 suppliers to evaluate and address risks pertaining to Coerced Labor in accordance with Worldwide Responsible Accredited Production (WRAP) principles.

Internal audits are performed twice per year and external audits are performed at least once per year at our contracted factories and larger 2 suppliers. We inspect for evidence of health and safety concerns, wage and social compliance, forced labor, child labor issues, harassment-free workplace policies, and environmental issues. Members of HEYDUDE’s supply chain monitoring team review the audits and assign the audited factory a color rating based on the severity of the findings from the audit. The audit rating is one tool used to determine whether the factory and/or its suppliers can remain active and produce for HEYDUDE.

The presence of Coerced Labor would mean the immediate failure of the audit and the right for HEYDUDE to require corrective action or terminate the contract with the factory or its supplier.

Beyond auditing, HEYDUDE engages in numerous activities with our factories to prevent Coerced Labor in our supply chain. This includes continuous improvement programs and capacity-building initiatives.

CERTIFICATION

HEYDUDE requires all of its contracted factories to sign a manufacturing agreement, which includes a statement that the factory conduct business in compliance with all applicable laws, rules and regulations and the Code of Conduct. Similarly, when the factory sub-contracts materials and/or labor, the Tier 2 suppliers are required to abide by these same compliance standards. Each factory and supplier certifies compliance with these terms and conditions prior to becoming an approved factory by signing a Statement of Compliance.

If HEYDUDE discovers that one of our contracted factories or its suppliers has violated any applicable laws, rules and regulations or the Code of Conduct, we may choose to cancel any outstanding orders, terminate the business relationship, and/or pursue legal action.

INTERNAL ACCOUNTABILITY

HEYDUDE maintains and enforces internal accountability standards for our employees which are set forth in our internal Worldwide Code of Ethics (“Code of Ethics”). The Code of Ethics outlines our broad commitment to “comply with all applicable laws, rules and regulations wherever we are located or do business, including applicable trade, tax, labor, employment, and consumer protection laws and regulations. This is the most fundamental policy underlying HEYDUDE’ commitment to ethical business behavior.”

We encourage any employee to seek guidance if they have questions or concerns. The Code of Ethics also requires that individuals report to their immediate supervisor or a member of HEYDUDE’s management team any violations of the Code of Ethics, the law, or other HEYDUDE policy. We will investigate all complaints promptly and thoroughly and expect all individuals to fully and candidly cooperate with such investigation. Non-compliance can result in corrective action, up to and including termination of employments. We may also exercise our right to notify the appropriate authorities of potential violations of applicable laws, rules or regulations.

Additionally, HEYDUDE has a whistleblower hotline (called the “Ethics Line”) for our employees and third parties with whom we partner to use if they find themselves in a situation which may lead to a violation of HEYDUDE policies or applicable laws or regulations. Our Ethics Line allows all who report to remain anonymous. We are committed to investigating and promptly responding to concerns, and we enforce a strict anti-retaliation policy for good faith reporting.

TRAINING

HEYDUDE employees complete online and facilitator-led training on our Code of Ethics as well as other compliance-related topics and sign an acknowledgment and agreement to abide by its principles. Employees are required to complete the training during their first 30 days of employment, and on a yearly basis thereafter. For our employees whose job functions involve overseeing production and/or the auditing of factories, HEYDUDE additionally provides internal and external training to ensure these individuals are knowledgeable and aware of the risks and most current issues and concerns regarding Coerced Labor.

We also regularly monitor reports and follow the developments of leadership in the industry such as the Footwear Distributors and Retailers of America and the American Apparel and Footwear Association.