DISCLOSURE INDEX
Carter’s Climate Risks and Opportunities
Carter’s Climate Risks and Opportunities
Carter’s took a deeper look at its climate-related risks and opportunities in 2022 to better inform our approach toward meeting our climate goals. Guided by the Task Force on Climate-Related Financial Disclosures (TCFD), we identified mitigation strategies for the risks identified during the third-party risk assessment include operational initiatives, tech enhancements, and monitoring and reporting.
Physical Risks
Potential Financial/Operational Impact
Time Horizon
Management Strategies
Acute Physical
- Includes extreme weather events, e.g., severe flooding, droughts.
- May disrupt production along the value chain (upstream, direct operations, and downstream).
- May negatively impact consumer discretionary spending and negatively impact our sales and results of operations.
- Flooding of high importance for retail stores due to potential merchandise damage and inability for customers/employees to travel to affected locations.
- Could result in higher distribution expenses, revenue loss, and lower profit margins.
Short (before 2025)
Medium (2025-2027)
- Continue to monitor and evaluate corporate climate risk, complete our annual GHG inventory, and develop and manage an ambitious climate strategy.
- Retail, Real Estate, and Sourcing teams to incorporate climate risks into criteria for opening new stores and onboarding new vendors, based on location.
Chronic Physical
- Includes increased temperatures, extreme rainfall, sea level rise, water scarcity, etc.
- May disrupt distribution activities in the southwest and southeast U.S., including retail and distribution centers.
- Could result in higher operating costs, supply disruption, and property damages.
Long (2028 & beyond)
Transition Risks
Potential Financial/Operational Impact
Time Horizon
Management Strategies
Policy/Legal
- There is potential for a significant cost burden to Carter’s if global suppliers decide to pass the additional costs from current and emerging regulation related to emissions reductions, utility/energy usage, etc., to their buyers.
- China’s ETS is set to expand and could have a waterfall effect on costs for suppliers, and thereby increased raw materials costs for Carter’s.
- Potential carbon taxes around the globe could affect upstream operations, including the import of materials and finished goods.
Short
Medium
Long
- Carter’s continuously monitors emerging legislation on a global scale to determine its impact on our business.
Technology
- Improvements in technology may influence the viability of the use of alternative materials.
Medium
Long
- Carter’s continuously evaluates alternative material options, using the principles of life cycle assessment to inform decision making.
Market
- Increasing consumer awareness of environmental issues has sparked a trend in the industry of offering carbon-neutral and related products, allowing customers to make more conscious decisions. Companies that do not recognize this trend may be perceived to be behind market expectations.
Short
Medium
Long
- Carter’s is currently exploring carbon-neutral product offerings that are supported by ISO compliant life cycle assessments and carbon credit purchase that align with best practices in environmental commodity procurement.
- Carter’s has also set ambitious climate and environmental goals.
Reputation
- There is potentially a significant positive or negative financial impact associated with reputational impacts based on climate inaction or industry-leading climate action.
- Public expectations for reductions in greenhouse gas emissions could also result in increased energy, transportation, and raw material costs.
- If Carter’s is not proactive in setting and achieving its climate targets, there could be a negative impact on customer perception and a decreased ability to participate in the expanding low-carbon market.
Medium
Long
- Carter’s evaluated industry peers’ climate change commitments and reporting to better inform our own climate strategy.
- We are taking steps to mitigate this risk through pledging to become net zero in our own operations by 2040.
Opportunities
Potential Financial/Operational Impact
Time Horizon
Management Strategies
Resiliency
- Strong climate action and target setting can signal to market expectations and create resilience.
- Could lead to indirect operating costs.
Short (before 2025)
- Carter’s set a science-based target to reduce 50% of Scope 1 and 2 emissions by 2030 and has also committed to becoming net zero in its own operations by 2040.
Products & Services
- Expanding supplier engagement through their GHG emissions and climate targets would help develop more accurate accounting and transparency of our own products and supply chain.
- Offering carbon-reduced or carbon-neutral products can help meet customer demand and trends.
Short (before 2025)
Medium (2025-2027)
Long (2028 & beyond)
- Carter’s set a goal to ensure 77% of our suppliers by spend covering purchased goods and services will have set their own science-based targets by 2027.
- Little Planet products are made with GOTS-certified organic cotton and are set to be made from 100% sustainable cotton and poly by 2030.
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