9. CODE OF CONDUCT AND RESPONSIBLE PRACTICES AND THE COMMITTEE OF ETHICS

For the purposes of reaffirming the core values and principles which drive Inditex’s activity and adapting the risk management and control system to the social and regulatory environment, the Code of Conduct and Responsible Practices of the Inditex Groups (which replaces both the Internal Guidelines for Responsible Practices of the Inditex Group’s Personnel and the Code of Conduct) was approved by the Board of Directors in 2012, which also adapted the “Code of Conduct for Manufacturers and Suppliers” (previously named “Code of Conduct for Manufacturers and External Workshops”). Additionally, the Board of Directors approved the Manual of Criminal Risks Prevention and the Procedure of the Whistle Blowing Channel.

All employees of Inditex, manufacturers, suppliers or third parties with any direct relationship and a lawful business or professional interest, regardless of their tier or geographic or functional location may report to the Committee of Ethics through this Whistle Blowing Channel any breach of Inditex’s conduct and regulatory compliance policies which affect the Group, and which arise from any employees, manufacturers, suppliers or third parties with whom the Inditex Group has any direct employment, business or professional relationship, by means of a report made in good faith.

Throughout financial year 2016, the Committee of Ethics processed 111 dossiers, 98 of them after receipt of a notice or report and the other 13 ex-officio.

The main reasons underlying the notices received were the report of conducts which might be in breach of the commitments or ethical values addressed in the Code of Conduct and Responsible Practices or the Code of Conduct for Manufacturers and Suppliers, and clearing up doubts on certain issues regarding the enforcement of the Code of Conduct for Manufacturers and Suppliers. All reports received were handled by the Committee of Ethics in a timely manner.

THE CODE OF CONDUCT AND RESPONSIBLE PRACTICES

The Code of Conduct and Responsible Practices provide the action lines which must be followed by the Inditex Group in the performance of its professional duties. Its goal consists of exacting an ethical and responsible professional conduct from Inditex and its entire workforce in the conduct of their business anywhere in the world, as a reflection of its corporate culture upon which the training and the personal and professional career of its employees is based. For such purposes, the principles and values which shall govern the relationship between the Group and its stakeholders (employees, clients, shareholders, business partners, suppliers and the societies where its business model is implemented) are defined.

The Code of Conduct and Responsible Practices of the Inditex Group is based upon a number of general principles, inter alia, that the operations of the Inditex Group shall be developed in an ethical and responsible manner; all persons, whether natural or legal, who maintain, directly or indirectly, any kind of professional, economic, social or industrial relationship with the Inditex Group shall be treated in a fair and honourable manner and that, all the activities of the Group shall be carried out in the manner that most respects the environment, promoting biodiversity and the sustainable management of natural resources.

Additionally, the Code includes a number of conduct commitments and commitments towards responsible practices, including: compliance with applicable laws and regulations, internal regulations, conventions to which Inditex has acceded; enforcement of human and labour rights, and of the regulations and best practices in the area of employment, health and safety at work; the obligation to act in accordance with the following principles: respect, dignity and justice, taking into account the different cultural sensitivities of employees and/or customers, their diversity, multiculturalism, not allowing any form of violence, harassment or abuse, or discrimination; compliance with the health and safety of the product standards which ensure that Inditex’s goods do not entail any health and/or security hazard; the creation of fair, ethical and respectful relations with suppliers and public authorities, in line with the international provisions on corruption and bribery prevention; the obligation to prevent and monitor any conflict of interest situations; the duty to use Inditex’s assets and services in an effective manner, to protect the information of the Company, and to enforce the regulations on personal data protection; the obligation to protect industrial and intellectual property, both of the Group and of third parties; the duty to clearly and accurately record any transaction of significant financial weight in the appropriate accounting records, and the conduct of Inditex’s business promoting social and environmental sustainability, as a way to build value for the stakeholders.

THE COMMITTEE OF ETHICS

For the purposes of ensuring compliance with the Code of Conduct and Responsible Practices and with the Code of Conduct for Manufacturers and Suppliers, Inditex relies on a Committee of Ethics, whose composition has been provided above.

The Committee of Ethics reports to the Board of Directors through the Audit and Control Committee and has the following duties:

• To oversee compliance with the Code and the internal circulation thereof to the Group’s s personnel.
• To receive any manner of written instruments with regard to the enforcement of the Code and to send them, where appropriate, to the relevant body or Department which may be responsible for dealing with and settling such instrument.
• To monitor and supervise the management and settlement of any file.
• To solve any doubts which may arise, regarding the enforcement of the Code.
• To propose to the Board of Directors, after report from the Audit and Control Committee, any explanation or implementation rule which the enforcement of the Code may require, and an annual report to review its enforcement.
• To oversee the Whistle Blowing Channel and compliance with the Procedure.

In the performance of its duties, the Committee of Ethics shall ensure:

• The confidentiality of all the information and background and of the acts and deeds performed, unless the disclosure of information is required by law or judicial order.
• The thorough review of any information or document that originated its action.
• The commencement of such proceedings required by the circumstances, acting always with independence and full respect of the right of the affected person to be heard as well as of the presumption of innocence.
• The indemnity of any employee as a result of bringing complaints in good faith to the Committee.

The Committee of Ethics submits a report twice a year to the Audit and Control Committee, reviewing its proceedings and the enforcement of the Code of Conduct and Responsible Practices and of the Code of Conduct for Manufacturers and Suppliers.

Additionally, the Audit and Control Committee reports to the Board of Directors, on an annual basis (twice during FY2016) as well as whenever this latter so requires, on the enforcement of the Code of Conduct and Responsible Practices and of the additional documents which comprise the Corporate Compliance policy of the Group from time to time in force.

The Committee of Ethics may act of its own motion or at the behest of any of Inditex employees, manufacturer, supplier or any third party involved in a direct relationship and with a lawful business or professional interest, further to a report made in good faith.

Decisions of the Committee of Ethics are binding for the company and for the employees.

SOCIAL ADVISORY BOARD

Inditex’s Social Advisory Board, the advisory body in the area of Sustainability, met twice during FY2016. Members of the Social Advisory Board do not receive any type of remuneration for their participation in this advisory body.

Meetings held by the Social Advisory Board in 2016:

Regulations of the Social Advisory Board:

The Social Board is the advisory body of Inditex in the field of sustainability. In December 2002, the Board of Directors authorized its creation and approved its Regulations, which determine the principles of action, the basic rules governing its organization and proceedings and the rules of conduct of its members.

The Regulations of the Social Advisory Board were amended by the Board of Directors in 2015 for the purposes of driving the Group’s strategy in the following areas: (i) the Social Responsibility Policy; (ii) the Code of Conduct for Manufacturers and Suppliers of the Group; (iii) the Environmental Sustainability Policy; and, (iv) the Code of Conduct and Responsible Practices of the Group.