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Climate Risks and Opportunities

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Climate Risk Assessment
In 2022, we conducted our second annual climate change risk assessment to better understand physical and transition risks and impacts for our stores, distribution centers, suppliers, and cotton sourcing. The assessment was aligned to the TCFD framework and identified both best-case (Representative Concentration Pathways [RCP] 2.6) and worst-case (RCP 8.6) climate scenarios across our owned operations, as well as for key aspects of our supply chain. From this assessment, we understand that the effects of climate change could have a long-term adverse impact on our business and operations and could present business and strategic opportunities.
Transition Risks
Risks related to policy, legal, technology, market, and reputation can impact our business in the short-, medium-, and long-term. For example, if global suppliers decide to pass additional costs from current and emerging regulation related to emissions reductions or global carbon tax schemes, Carter’s could be impacted by those additional costs. Additionally, increasing consumer awareness of environmental issues has sparked a trend in the industry of offering more sustainable products, allowing customers to make conscious decisions.
The failure to meet or properly report progress on our climate targets, public expectations or regulatory requirements may result in reputational damage or other adverse effects. Public expectations for reductions in greenhouse gas emissions could also result in increased energy, transportation, and raw material costs, and may require us to make additional investments in facilities and equipment.
Physical Risks
Our business is susceptible to unseasonable weather conditions, which could influence customer demand, consumer traffic, and shopping habits, as well as disrupt production along the supply chain. For example, severe weather events and other acute and chronic climate-related risks could affect timing and demand for our products, and thereby have an adverse effect on our operational results, financial position, and cash flows.
Frequent or unusually heavy or intense snowfall, flooding, hurricanes, heat stress and sea level rise, or other extreme weather conditions over an extended period could cause our stores or distribution centers to close for a period of time or permanently, and could make it difficult for our customers and employees to travel to our stores or to receive products shipped to them, which in turn could negatively impact our operating results. In addition, changes in weather patterns could result in decreased agricultural productivity in certain regions, which may limit availability and/or increase the cost of certain key materials, such as cotton. For a full list of our climate-related risks, please see the Disclosure Index.