1. Kohl’s Department Stores, Inc.
Report To Shareholders On Social Responsibility
2007
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2. Table of Contents
3 Letter from the President
Social Responsibility
4 A. Product Manufacturing
4 Kohl’s Compliance Philosophy
4 Our Policy
5 Oversight of Our Policy
5 Compliance Program
6 Our Monitors
7 Factory Monitoring Process
8 Corrective Action and Remediation
8 Education and Training
9 Program Performance Statistics
9 B. Community Involvement
9 Charitable Programs
10 Volunteer Efforts
11 C. Environmental Responsibility
11 Energy Management Programs
12 Waste Stream Reduction Programs
13 Building Design: Kohl’s a “LEED”ing Green Retailer
14 Reduction of Climate Damaging Emissions
15 Encouraging Environmental Values
15 D. Health and Safety
15 Workplace Health and Safety
16 Product Integrity
16 Policy on Cosmetic Testing
17 Appendix
Terms of Engagement
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3. ___________________________________________________
Letter from the President:
Kohl’s is committed to the highest standards of integrity and performance relating to social responsibility.
Responsible corporate citizenship is a company core value, therefore social, economic and environmental
considerations are integrated into our purchasing and risk management processes. Incorporating socially
responsible principles into our daily business activities generates benefits not only in the present, but also for the
future.
We are involved in the communities in which we operate through charitable donations, volunteer efforts and
environmental partnerships. Through Kohl’s Cares for Kids ®, we have raised more than $102 million for
children’s health and educational initiatives since 2000. In 2007, more than 39,000 Kohl’s associates volunteered
over 136,000 hours and donated $3.2 million to youth-serving, nonprofit organizations. Our 2007 environmental
efforts included initiating delivery of rooftop solar energy to 113 Kohl’s locations in California, New Jersey,
Wisconsin and Connecticut which was the largest rooftop solar rollout in U.S. history. The objective of all of
these efforts is to promote positive change for the community, our customers, business partners, shareholders and
associates.
In support of our commitment to positive change, we maintain a dynamic social responsibility program. Program
components include established terms of engagement for our suppliers, clear communication of company
expectations and guidance in achieving compliance and monitoring efforts to track supplier performance. In
addition, we encourage our suppliers to develop and enhance their own social responsibility functions. Together
with our business partners, we strive to implement positive social, economic and environmental change.
We are pleased to issue this Report to Shareholders on Social Responsibility which includes company initiatives
and progress updates relating to social, economic and environmental responsibility. Our commitment to
enhancing the communities we serve remains strong and social responsibility will continue to be an essential
element of our growth and success.
Sincerely,
Kevin Mansell
President
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4. Social Responsibility
A. Product Manufacturing
Kohl’s is committed to high standards of behavior and performance on issues of social responsibility.
Through our Terms of Engagement (“our Policy”), we hold all of our Vendor Partners to these same
high standards. Our Policy is designed to protect the interests of workers engaged in the manufacture
of merchandise procured for Kohl’s. Our Policy focuses on compliance with local labor laws, working
conditions and spells out Kohl’s expectations to our Vendor Partners regarding wages, child labor,
health and safety issues, forced labor, respecting the rights of workers to free association and more.
Our Policy is posted on our Website at www.connection.kohls.com (“new vendors” tab).
We do not own or operate the manufacturing facilities in which merchandise we sell is produced, nor do
we control the production capacity of such facilities. We do not manufacture the merchandise we sell.
We purchase goods from independent suppliers. We contract with numerous Vendor Partners who in
turn contract with hundreds of manufacturing facilities in the United States and throughout the world to
procure the merchandise we sell in our stores. It is critically important to us that each Vendor Partner’s
manufacturing facility treats its workers fairly and in compliance with our Policy.
We have several ways to ensure that the merchandise we sell is produced in compliance with our
Policy: seeking Vendor Partners who share our commitment to the principles contained in our Policy,
monitoring our Vendor Partner’s compliance efforts and exercising our ability to take corrective action,
when necessary.
This report summarizes Kohl’s progress in further developing and implementing our compliance
program for our Vendor Partners. While the foundation of our efforts is our Policy; we believe
compliance is a process which requires working closely with our Vendor Partners to identify and
address challenges in a responsible manner, that considers the needs and expectations of the affected
Vendor Partner, its suppliers, employees, and our shareholders. This means that we will continually
challenge our Vendor Partners to protect the health, safety and human rights of workers.
Kohl’s Compliance Philosophy
We select Vendor Partners who we believe share our commitment as expressed in our Policy. If
deficiencies in adherence to our Policy are discovered, we exercise our ability to take corrective action.
Our compliance philosophy focuses on remediation and continuous improvement. We demand, as a
condition of doing business, that our Vendor Partners and suppliers adhere to our Policy and eliminate
unacceptable conditions in their facilities and that they respond appropriately and swiftly to correct
conditions that fall short of our expectations. From time to time, we review our Policy to determine
whether in light of new developments, Policy modifications would be appropriate. Our Board of
Directors is kept apprised of the development of our compliance program.
Our Policy
Kohl’s adopted a formal human rights policy in October 1996 entitled “Terms of Engagement for Kohl’s
Business Partners”, which emphasized our longstanding philosophy that no merchandise purchased by
us will be manufactured through use of labor conditions contrary to our Policy. Our Policy sets forth our
requirements with respect to working conditions, wages and benefits, working hours, nondiscrimination,
compliance with laws, and prohibitions against child and prison labor. Our Policy has been translated
into 46 languages. It is distributed to all of our Vendor Partners and suppliers each year. It is available
on Kohl’s Website, www.connection.kohls.com (“new vendors” tab). We also distribute our Policy to all
of our buying agents and all potential Vendor Partners from whom we are considering procurement of
overseas merchandise. We provide training to Vendor Partners on our Policy and our expectation of
compliance.
We require all Vendor Partners to certify that each facility used to produce merchandise for Kohl’s will
operate in compliance with all applicable laws. To ensure that all Vendor Partners and all
manufacturing facilities understand our Policy and specifically the consequences which will result from
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5. noncompliance, Kohl’s requires Vendor Partners to notify and discuss our Policy with each
manufacturing facility used for the production of merchandise sold by us. Vendor Partners are also
required to post the Policy in each manufacturing facility that produces merchandise for Kohl’s in the
language of the workers and of management in the facility. During factory visits, our monitors validate
that our Policy is posted and, if needed, distribute copies of our Policy to ensure that factories are
aware of our requirements.
Our buying agents and all prospective and current Vendor Partners must fully comply with our Policy as
a condition of doing business with Kohl’s. Compliance with our Policy isn’t just mandatory at the outset
of production; it is an ongoing requirement for doing business with Kohl’s. Regardless of which factors
led to the selection of a particular Vendor Partner, manufacturing facilities must comply with our Policy
throughout the manufacturing process. Prospective manufacturing facilities which do not meet the
requirements of our Policy after being given reasonable opportunity to do so are not permitted to
manufacture merchandise for us. For those Vendor Partners producing merchandise for Kohl’s where
deficiencies are identified, our expectation that Vendor Partners move into full compliance is clearly
communicated to them.
Our Policy was written to help Vendor Partners understand and apply these standards to their day-to-
day operations and adopt them as “company policy”. Words like “shall” and “must” are included in our
Policy instead of words like “should” or “may”, because we want our Vendor Partners to take our Policy
seriously and to have no misunderstanding that keeping Kohl’s business depends on how their facilities
are run.
In addition, we require our suppliers of diamonds and jewelry to ensure that the merchandise they sell
to us meets the requirements of the Clean Diamonds Trade Act and the Kimberly Process Certification
and that this merchandise does not contain conflict diamonds.
Oversight of Our Policy
Implementation of our Policy is subject to the review and guidance of a group of senior executives who
are responsible for our corporate and business operations and personnel directly responsible for the
day-to-day efforts of our compliance program. Our compliance program includes an established set of
rules, requirements and expectations as set forth in our Policy, communication of our rules,
requirements and expectations, factory monitoring, corrective action and remediation, and education
and training. The senior executives are responsible for the overall direction of our compliance program
in addition to assessment of ongoing monitoring and remediation efforts of our Vendor Partners. These
executives are also responsible for strengthening our policies and procedures as they believe is in the
best interests of Kohl’s. The Audit Committee of our Board of Directors also reviews our efforts with
respect to our Policy and compliance program on an annual basis.
Kohl’s organizational structure supports the uniform and objective application of the compliance
program to all Vendor Partners. Corporate Governance department personnel are responsible for day-
to-day duties and administration of the compliance program and are independent of the Product
Development and Merchandising departments who are responsible for development, sourcing, and
merchandising. The Senior Vice President of Corporate Governance reports to the Audit Committee of
the Board of Directors. As a result, day-to-day decisions regarding the social compliance status of
potential factories, and those factories that are being used to produce merchandise for Kohl’s, are
made by personnel not involved in actual purchase negotiation. It is important to note that social,
economic and environmental considerations are also incorporated into our product development,
purchasing and risk management processes.
Compliance Program
We expect our Vendor Partners to take all steps necessary to ensure compliance with our Policy in their
manufacturing facilities that produce merchandise for us, whether the facility is operated by them or by
one of their subcontractors. We require our Vendor Partners who produce private label and exclusive
merchandise for us to identify all manufacturing facilities, domestic and foreign, that they plan to use to
produce such merchandise and to provide us with written certification that each facility will operate in
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6. compliance with our Policy. Subcontractors that a Vendor Partner desires to use in the manufacturing
process must be approved by us.
For private label and exclusive merchandise that is produced by Vendor Partners who are designated
the “importer of record”, we require participation in a manufacturing facility compliance survey. Under
this program, the facilities that the Vendor Partner intends to use must first conduct a self-survey of the
Policy requirements and then submit to inspection by third party monitors. If a deficiency is discovered,
the facility is given the same opportunity to correct deficiencies as are made available to those Vendor
Partners from whom Kohl’s acquires the merchandise, when Kohl’s is designated the “importer of
record”. We reserve the right to review all Vendor Partner facilities – including the use of unannounced,
on site inspections of manufacturing facilities. During fiscal 2006 and 2007, Kohl’s further developed its
risk based factory monitoring methodology. Factories that are deemed to have higher-than-average
risk receive ‘unannounced’ visits. The following methodology is used to asses risk and to determine if
monitoring visits are announced or unannounced.
Risk assessment is based upon the following factors:
- social conditions in the geographic location of the factory
- factory management attitude towards social compliance
- vendor historical performance across all factories used to produce goods for Kohl’s
- past monitoring visit results, if the factory was previously visited
- any reported potential issues
The risk ratings for each of the above factors are reviewed to establish an overall risk rating for each
factory.
We recognize that publication of a statement of principles is insufficient to achieve compliance with
those principles and that aggressive enforcement of our Policy is required. To achieve this goal, we
actively monitor factories in which our merchandise is produced. We support this effort with a Policy
Compliance team appointed to ensure consistency and quality in our monitoring efforts. To date, we
have performed in excess of 13,000 monitoring visits to over 3,000 manufacturing facilities in 75
countries around the world. Each audit involves close inspection of a factory to ensure compliance with
all aspects of the Policy.
To support our monitoring efforts, we have also developed an extensive database that permits us to
actively summarize and manage the information we receive through our monitoring efforts. It enables
us to identify emerging issues and particular regional problems so that we are able to focus our efforts
in areas with the greatest risks.
Monitoring of factories is performed by professional, independent third party monitors and is ongoing.
Factories are monitored by third party monitors as a condition of a business relationship with Kohl’s.
Once deemed compliant with our Policy, factories are monitored by third party monitors periodically,
based on established risk level.
Our Monitors
We have retained the services of two professional, independent third party monitors to monitor Vendor
Partner compliance with our Policy. These monitors were selected on the basis of their reputations as
experienced, independent, and world-renowned compliance and monitoring firms and to avoid even the
appearance of a conflict of interest. Our monitors have auditing professionals located in the territories
in which the manufacturing facilities are located, able to speak the language of the workers working in
the facilities monitored, and who each have extensive experience with monitoring for compliance for
social responsibility on behalf of numerous companies. We work closely with these monitors to develop
a monitoring program that enables us to consistently assess compliance with our Policy and to track our
compliance efforts. Out of this effort, we developed a lengthy, detailed and comprehensive set of
materials, which were designed to enable monitors to evaluate production facilities used to manufacture
Kohl’s private and exclusive brand merchandise.
Our principal buying agent’s personnel also visit manufacturing facilities at the inception of each
engagement and at least two times during the manufacturing. To ensure compliance with our Policy,
Kohl’s requires this principal buying agent, who is trained to recognize violations of our Policy, to notify
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7. us of such matters when they are observed. For certain high-volume merchandise purchased by us,
our principal buying agent’s personnel is onsite at the manufacturing facility each day for the duration of
the manufacturing process. Our principal buying agent also confirms that corrective action of previously
identified Policy violations has been undertaken.
Our internal product sourcing staff also watches for, and reports, issues of noncompliance with
appropriate parties if violations of our Policy are observed during factory visits made by them for follow
up and, when appropriate, corrective action.
Factory Monitoring Process
Our professional third party monitors monitor the manufacturing facilities in which Vendor Partners
produce merchandise for us. The purpose of each inspection is to determine whether each factory is
compliant with our Policy. The monitors spend one or two days in each manufacturing facility,
interviewing factory management and workers. During such visits, the monitors perform a facilities
walk-through where manufacturing facility conditions are observed, detailed testing of factory payroll is
conducted and other business records are reviewed. A manufacturing facility floor plan is also
reviewed to ensure that the entire facility is inspected.
Our full-compliance audit program includes fifteen different modules:
• Laws and Regulations
• Wages and Benefits
• Working Hours
• Child Labor
• Forced Labor
• Discrimination
• Free Association
• Disciplinary Practices
• Women Rights
• Health and Safety
• Health and Safety - Dormitories
• Environmental Requirements
• Communication and Record Keeping
• Subcontracting
• Monitoring and Compliance
Third party monitors conduct an opening meeting with manufacturing facility management during which
the monitor reviews our policy with management and the monitoring procedures are described in the
language understood by the manufacturing facility management. Our emphasis on remediation to
correct any deficiencies found is also stressed. Workers are selected to be interviewed at random and
all worker interviews are conducted in a private place and in the local language of the workers. The
content of these worker interviews is kept strictly confidential.
During the course of each monitoring visit, the monitoring representative documents all violations or
deficiencies related to our Policy and promptly reports findings to us. Upon completion of each
monitoring visit, the monitor summarizes and discusses each violation with the facility’s management
and the management team, once so notified, is asked to remedy all identified violations or deficiencies.
Our internal Policy compliance team carefully reviews the monitor’s report and promptly sends a letter
summarizing the monitoring results in detail to the manufacturing facility and our Vendor Partner,
notifying each of them in writing of any Policy violations and deficiencies that have been identified by
our third party monitor. Serious noncompliance issues require immediate submission of a corrective
action plan. In all communications, our Policy compliance team provides recommendations of
corrective action needed to bring the manufacturing facility into compliance with our Policy.
To further ensure that manufacturing facilities comply with our Policy, we require our principal buying
agent, who is trained to recognize deficiencies in Vendor Partner compliance, to notify us of such
matters when they are observed. Such personnel visit manufacturing facilities at the inception of the
relationship with Kohl’s and several times during the manufacturing process. For certain high-volume
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8. merchandise purchased by us, our principal buying agent is onsite at the manufacturing facility each
day for the duration of the manufacturing process. Our principal buying agent also confirms that
corrective action of previously observed Policy violations by our third party monitors has been
undertaken, as necessary. Our internal sourcing staff is also trained to raise issues of noncompliance
which are observed during manufacturing facility visits with appropriate individuals at Kohl’s.
Corrective Action and Remediation
Helping our Vendor Partners change to comply with our Policy helps everyone and we believe our
approach is balanced, fair, and effective. If noncompliance with Kohl’s Terms of Engagement is
brought to our attention, either through our monitoring efforts or otherwise, we take appropriate action,
which, depending on the severity of the deviation, ranges from working with our Vendor Partner to
ensure that adequate steps are taken to address the deficiencies discovered and to prevent
reoccurrence, to canceling affected orders, terminating our relationship with our Vendor Partner,
working with the authorities or other actions as warranted. We require our Vendor Partner to adopt a
corrective action plan whenever possible.
We prefer to work with Vendor Partners who address deficiencies that are reported to us. Timely
remediation must be undertaken as necessary. Follow-up evaluations are completed to verify
subsequent adherence to our Policy. If a deficiency is discovered and a decision is made to continue
the business relationship, follow-up inspections to verify compliance are undertaken. Our principal
buying agent provides direction and training to our Vendor Partners for implementation of needed
corrections identified through our monitoring process and follows up as necessary. Our response to
Vendor Partner noncompliance is dependent on the severity of the noncompliance, but we make every
effort to try to bring noncompliant facilities into compliance rather than terminate them.
Education and Training
We regularly communicate with our Vendor Partners on compliance issues. We encourage educational
programs and collaborative efforts by our Vendor Partners to enhance compliance with our Policy. In
2007, we conducted three group training sessions and numerous individual training sessions for Vendor
Partners to promote understanding and compliance with our requirements. These training sessions
brought together Vendor partners supplying Kohl’s with softlines, hardlines, home textiles and footwear.
In this way, we clearly communicated our expectations and, in turn, our Vendor Partners had the
opportunity to explain their practical challenges to us. We expect our Vendor Partners to cooperate in
such efforts and to take the steps necessary to ensure their contractors and manufacturing facilities are
also fully informed.
The following topics were reviewed during these training sessions:
• Expectations for suppliers
• Definition of each element of our Policy
• Best practices
• Review of site verification methods
• Reporting of findings and assessments
• Remediation methods
• Actions for compliance improvement
In addition, we strongly encourage our Vendor Partners to develop and/or enhance their own internal
social responsibility functions to raise awareness, improve and sustain performance. Kohl’s
emphasizes the importance of vendors maintaining open lines of communication with both factory
management and Kohl’s regarding issues of social responsibility. Kohl’s also partners with its agents
and Vendor Partners to identify opportunities to enhance processes that promote sustained socially
responsible performance.
We also conduct regular internal training sessions on the requirements of our Policy. In 2007, training
on Kohl’s policies and procedures related to our Policy was provided to associates responsible for the
development of private and exclusive brand product and our merchants who are responsible for
procurement of the merchandise we sell. Ongoing training sessions occur on a quarterly basis to
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9. reinforce previous training and to orient new associates with regard to our Policy.
In addition, Kohl’s executives are required to attend annual, internally presented business ethics
meetings and sign a form acknowledging their attendance, understanding and compliance with Kohl’s
business ethics standards. This training reinforces business ethics best practices and supports the
company’s on-going commitment to high standards of behavior on issues of social responsibility.
Program Performance Statistics
Social Compliance Program Monitoring Statistics
Item Description 2007 2006
Manufacturing Facility Visits 3,008 3,017
Percentage of Visits Performed Unannounced 30% 3%
Number of Facilities Visited 1,615 1,520
Percentage of Facilities in Compliance with our Policy at
Year End 62% 57%
Percentage of Facilities that Failed to Meet Our Standards
and were Made Not Authorized Due to Noncompliance 13% 11%
Percentage of Facilities Vendor Partners Withdrew from
Consideration since More Appropriate Facilities were
Available 9% 13%
Percentage of Facilities Still in Monitoring Process at Year
End 16% 19%
Kohl’s is a member of Business for Social Responsibility (BSR) and a participant in the Ethical Sourcing
Working Group sponsored by BSR to allow members to share ideas and experiences regarding their
social responsibility compliance efforts and to identify “best practices” relating to such issues. In
addition, members of our Policy Compliance team have attended national conferences on corporate
social responsibility.
We believe our policy, and our efforts to achieve compliance with it, is a sound approach to promoting
responsible working conditions in those factories that produce our private and exclusive brand
merchandise. We have made progress during the course of the past year in further developing and
implementing our compliance program for Vendor Partners.
B. Community Involvement
Kohl’s is involved in the communities in which we operate through charitable financial contributions and
volunteer efforts. The objective of these efforts is to promote positive change for the community we
serve, our customers, business partners, shareholders and associates.
Charitable Programs
Kohl’s Cares for Kids
Kohl’s Cares for Kids is not just a program, it’s a promise of hope for a brighter, healthier future for
children in communities that we serve. As a family-oriented company, Kohl’s dedicates its charity
efforts to improving health and educational opportunities for children in our store communities. Every
day across the country, from injury prevention to immunization programs, Kohl’s is putting time, effort
and funding toward keeping children healthy.
Throughout the year, Kohl’s sells special Kohl’s Cares for Kids merchandise with 100% of the net
profits from the sale of this merchandise benefiting children’s health and educational initiatives
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10. nationwide. Kohl’s Cares for Kids is Kohl’s way of supporting its customers, communities and improving
the lives of children. Through Kohl’s Cares for Kids ®, we have raised more than $102 million for
children’s health and educational initiatives since 2000.
Kohl’s Cares for Kids Hospital Program
Kohl’s supports children’s health initiatives through partnerships with designated hospitals in each
community it serves. Kohl’s partners with hospitals in the communities we serve to support community
outreach initiatives that improve children’s health.
Kohl’s Kids Who Care Scholarship Program
The Kohl’s Kids Who Care recognition program is a signature program under the Kohl’s Cares for Kids
umbrella which provides Kohl’s an annual opportunity to recognize and reward young volunteers who
transform their communities for the better. This grassroots program demonstrates Kohl’s commitment
to the community and kids at the local level. Through the Kohl’s Kids Who Care Scholarship program,
parents, educators and community members nominate children ages 6 through 18 who volunteer in
their community to be recognized by Kohl’s for their efforts.
Kohl’s Cares for Kids Fundraising Card Program
Kohl’s has created a simple, effective way to help raise much needed funds for schools and youth-
focused nonprofit organizations, while eliminating many of the challenges characteristically associated
with fundraising. The Kohl’s Cares for Kids Fundraising Card Program provides discounted fundraising
gift cards to youth-serving, non-profit organizations. These groups then sell the purchased cards at
face value and keep the remaining profits.
US Youth Soccer
For the past six years, Kohl’s has served as the Official Department Store sponsor of US Youth Soccer
and is pleased to announce a three year partnership extension with US Youth Soccer through 2010. In
addition, Kohl’s will maintain title sponsorship of the only national recreational property executed by US
Youth Soccer called the American Cup – a premier recreational youth soccer tournament hosted
through US Youth Soccer State Soccer Associations throughout the country.
It is Kohl’s American Cup philosophy that all players should receive equal opportunities and benefits
within their level of play. All players have the right to participate in competitions where they can
develop and exhibit their skills while enjoying themselves. The Kohl’s American Cup provides
recreational players this opportunity and places emphasis on participation, as opposed to competition.
Volunteer Efforts
Kohl’s A-Team
The Kohl’s A-Team is an associate volunteer program under the Kohl’s Cares for Kids umbrella that
supports youth. Its mission is to enhance the lives of youth in the communities we serve to enrich the
lives of our associates by leveraging our collective talents through volunteer efforts. In 2007, more than
39,000 Kohl’s associates volunteered over 136,000 hours and Kohl’s donated $3.2 million on behalf of
those volunteer efforts to youth-serving, nonprofit organizations.
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11. C. Environmental Responsibility
Kohl’s Environmental Mission:
To be a leading environmentally responsible retailer through focused resource stewardship by our
associates, vendors and business partners.
Kohl’s Resource Stewardship Strategies:
• Maximize Energy Efficiency
• Minimize Waste
• Improve New Building Design
• Reduce Climate Damaging Emissions
• Encourage Environmental Values
Energy Management Programs
Central Energy Management System
Implementation: 2005
98% of Stores
Through careful monitoring, this system controls most interior and exterior lighting as well as heating
and cooling systems at our stores. As a result of this program, Kohl’s has one of the lowest energy
usages per square foot in the retail industry.
High Efficiency Lighting
Implementation: 2003
This has resulted in 12.3% lower energy use for all new locations constructed after rollout in 2003.
Occupancy Based Sensor Lighting
Most locations in our stores, distribution centers and corporate offices have occupancy based sensor
lighting in bathrooms, stockrooms, fitting rooms and office areas to further conserve energy.
Environmental Protection Agency (EPA ) Green Power Partnership
Membership Since: 2006
Kohl’s partnered with the EPA in purchasing 201,396,000 kWh in renewable energy credits for use in
2007. This purchase of biomass energy from Clear Sky, and other municipal providers ‘greens’ 20% of
Kohl’s total energy consumption. These commitments placed Kohl’s at # 2 on the EPA Top Ten Retail
Green Power Purchasers and rank # 8 overall in 2007. On October 22, 2007 Kohl’s was recognized by
the EPA with a Green Power Leadership Award for its commitment to renewable energy.
Demand Response Controls
Implementation: 2007
Kohl’s partnered with RTP Controls to install “automated demand response” controls in 33 stores in
California. Using these controls, Kohl’s has voluntarily agreed to reduce power usage in its stores
during the peak times Monday through Friday in the months May to October. The utility alerts RTP
when the demand will likely exceed the supply and RTP sends a message to the control unit at our
stores that automatically shuts down the store’s cornice and spotlights to support energy reduction at
these times. The store customers and associates are alerted by a message that is broadcast at
regular intervals on the store public address system.
Solar Power Installations
Kohl’s entered into a “power purchase agreement” with SunEdison for a twenty year term in 2007. This
allows installation of solar power on Kohl’s rooftops without any capitol outlay to Kohl’s. This use of a
silent, clean power is cost saving and great for the environment. As of January 2008, Kohl’s has 21
solar power systems activated in California and another 21 systems in various stages of construction.
As the largest single host of solar electricity production in North America, the Kohl’s
implementation will generate 25 megawatts of electricity in California alone when completed. This is
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12. greater than that of the five largest photovoltaic systems in the US combined, and equivalent to the
electricity used by 3,087 California homes. It will offset more than 28 million pounds of carbon dioxide in
the first year, similar to taking approximately 2,500 cars off the road.
The systems will provide about 40% of each store’s power. An average system on the California stores
will have 2,340 solar panels that will nearly cover the roof of the typical 88,000 square foot building.
Kohl’s largest system is on the San Bernardino, California Distribution Center and has 6,208 panels and
will generate 1 megawatt of power.
Green Power Purchases
Kohl’s has partnered with the EPA Green Power Partnership to support the use and development of
renewable energy. Kohl’s demonstrates its support of green power by purchasing renewable energy
credits. Kohl’s made two substantial purchases in the past year. Kohl’s commitment is to have 20% of
its energy use come from renewable energy sources. To accomplish this goal, a purchase of
201,396,000 kWh of renewable energy credits was made in 2007. Kohl’s ranked # 2 on the Retail Top
Ten list and # 6 on the Fortune 500 List for purchase of green power in 2007.
Waste Stream Reduction Programs
Paper Purchasing Programs
Kohl’s considers a variety of factors when choosing mill partners who provide paper for the printing of
our weekly advertisements. They include pricing, sustainable and certified forestry, environmentally
friendly processes and the use of recycled content. Kohl’s also looks at each mill’s internal operations
for production and distribution efficiencies. Selection of mill partners who share our environmental
commitment will help us to improve the environmental aspects of this program and the paper we
purchase.
Through mill partnerships, Kohl’s supports and encourages the following certifications:
• Program for the Endorsement of Forest Certification (PEFC)
• Forest Stewardship Council (FSC)
• Sustainable Forestry Initiative (SFI)
• Canada Standards Association (CSA)
• Master Logger Certification Program (MLC)
• American Tree Farm Systems (ATFS)
Kohl’s challenges all suppliers to provide only certified sources of wood and fiber. Kohl’s does not
knowingly purchase forest products that are illegally harvested or protected from harvesting by law.
Kohl’s requires each mill partner to operate under a third-party certified chain of custody (COC). We
work with all mills to improve paper purchasing certifications. Kohl’s also prefers mills who meet all
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13. government regulations for clean air and water, and who manufacture paper without the use of chlorine
or chlorine compounds.
Kohl’s paper purchasing team purchased from 100% certified sources in 2007. They will continue to
conduct annual sustainability meetings with all suppliers who provide forest products.
Recycling Programs
Kohl’s has a longstanding commitment to recycling as part of our business practice.
Recycling Results - 2007
Cardboard and Paper 92,200 tons
Hangers 5,721 tons
Merchandise 1,550 tons
Plastic 1,005 tons
Misc* 2,522 tons
*Bottles, Cans, Gift Cards, Fluorescent Light bulbs
Plastic Recycling:
Kohl’s implemented a new plastic recycling program in 2007 that is supporting 70% of our stores. Our
stores strip all plastic that is shipped with our merchandise and return it through our distribution network
for recycling. This plastic is recycled into plastic pellets that will be used for molding new products.
Use of Products with Recycled Content
When cost effective, it is Kohl’s goal to use products with recycled content. The following is a list of
items Kohl’s purchases for its business operations.
Item % of Recycled Content
Gift Boxes 100%
Restroom Papers 100%
Merchandise Bags 10-30%
E-Commerce Shipping Cartons 30%
Advertising Paper 20.5%
Office Supplies 12%
Waste Prevention
Kohl’s waste stream management program does not stop with just recycling and using recycled
products. Looking for ways to reduce what arrives at, or is used at Kohl’s is also an important aspect of
this strategy. One example is the decision to cut the number of advertisements sent to the stores on a
weekly basis. It was reported that distribution was too high and therefore wasteful. After researching
the issue, the advertising team reduced its printing order by 5.5 million copies in 2007. This suggestion
alone saved 313 tons of paper, expense and trees.
Building Design: Kohl’s a “LEED”ing Green Retailer
LEED for Retail Portfolio Program Prototype
Kohl’s Store Planning team is partnering with the United States Green Building Council (USGBC) to
modify all new store prototype plans to meet the USGBC “Leadership in Energy and Environmental
Design” (LEED) criteria. There will be a variety of improvements using the Retail Portfolio Program in
Kohl’s prototype store design particularly in energy and water efficiency, construction innovation and
operational improvements. By participating in this program, Kohl’s will have its prototype certified by
LEED, streamlining the future certification process. This means that all new stores that Kohl’s
constructs starting in Fall 2008 will constructed as LEED certified locations.
Photo Studio
The new Kohl’s Photo Studio located in Milwaukee, Wisconsin which opened early in 2008, has been
designed using LEED criteria. Kohl’s will be applying for certification of this photo studio in 2008 with
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14. an expectation of achieving a “Gold” rating from the USGBC. This location will be Kohl’s first certified
LEED building.
Sustainable Attributes:
• Use of Rapidly Renewable Materials - The building features bamboo and cork flooring in
some areas.
• Use of Certified Wood - A large portion of the lumber used came from certified forests.
• Construction Waste Management - Construction waste was separated for recycling
rather than going to landfills.
• Storm Water Design - Ponds located on the property will help control water flow during
storms and will be used to water the landscaping.
• Water Efficient Landscaping - Native plantings will be watered using a new WeatherTrak
control system that monitors local weather conditions.
• Light Pollution Reduction - The building has no exterior ‘up’ lights and the sign at this
location uses LED technology.
• On Site Renewable Energy and Green Power - This location will have an on-site solar
power installation which begins construction in April, 2008 as well as using 35% renewable
energy through renewable energy credits.
• Green Housekeeping and Recycling - Use of green cleaning methods and chemicals
along with a robust recycling program will help to keep the building an environmentally
friendly operation.
Existing Stores
Prior to 2007, Kohl’s tested a number of construction methods that are friendly to our environment.
They include:
• Daylight Harvesting
• Low Emitting Adhesives, Paint and Sealants
• Bioswales: Bioswales are landscape elements designed to remove silt and pollution from
surface runoff water. They consist of drainage with gently sloping sides and filled with
vegetation, compost and/or riprap.
• Stormceptors: A stormceptor is a prefabricated, underground unit that separates oil, grease,
and sediment from storm water runoff.
• LED Signage and Lighting
• Irrigation Control Systems
• Landscape Plantings related to planting zones
• Green Rooftops
All stores have been constructed with “Energy Star” rated roofs that help with heating and cooling
efficiencies. Over 115 existing locations have been “recycled” since 2000 saving structural steel and
concrete.
Reduction of Climate Damaging Emissions
Transportation Programs
In 2007, Kohl’s executed 18,794 backhaul trips to our Distribution Centers from our vendors on the
return trips to the stores, eliminating 3,608,448 empty trailer miles. These once empty trailers now
carry merchandise from our vendors ultimately reducing the overall number of inbound transportation
trips. In addition, Kohl’s uses rail transportation for 31% of all inbound transportation. Rail uses less
fuel and creates fewer emissions than truck service.
Our transportation carriers are doing their part with regard to fuel efficiency. In 2006, our top seven
carriers had the highest rating of 1.25 in the EPA Smartway program that stresses fuel efficiency and
carbon reduction strategies. In total, 84% of all miles traveled in 2006 were through EPA Smartway
rated carriers. Kohl’s joined the EPA Smartway Shipper program in 2007 and has established goals as
part of this program.
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15. Climate Leaders:
Kohl’s joined the EPA Climate Leaders in 2007 and is committed to measuring its carbon footprint by
looking at energy use, transportation miles, and business travel. As a retail company, Kohl’s only has
indirect impacts on emissions as a result of our operations. By enlisting the help of the EPA, Kohl’s will
be developing a corporate-wide inventory of its greenhouse gas emissions. Once completed, work will
begin on setting goals to reduce Kohl’s impact on the global environment.
Encouraging Environmental Values
Associate Engagement and Communication
In 2007, Kohl’s created the “Green Scene” as a way to organize business practices that are good for
both Kohl’s and the environment. Through creation of our own environmental brand with the mission of
“Transforming our Future”, encouragement of environmental values began.
The Green Scene program publishes updates on a monthly basis on Kohl’s internal website as well as
in a quarterly magazine distributed to our associates.
Vendor Engagement
Kohl’s introduced its environmental mission in 2007 at its annual Vendor and Carrier Summit
Conferences. Vendors have been challenged to help reduce packaging in determining the right number
of units per carton as well as developing their own environmental sustainability programs. Carriers
have been encouraged to participate in the EPA Smartway carrier program. The Store Planning team
is engaging its vendors through the LEED portfolio program for retail and all general contractors will be
required to build to our LEED criteria as well as recycling construction waste.
D. Health and Safety
Kohl’s Commitment:
We are committed to protecting our associates and customers through dedicated workplace safety
initiatives.
Workplace Health and Safety
Kohl’s concern for the welfare of our associates and customers is demonstrated through our risk
management programs. Since 2002, we have reduced our associate injury rate per store and
distribution center. While encouraged by these reductions, we continue to expand our safety initiatives
in all of our facilities.
In 2007, a new safety communication platform named C.A.R.L. was rolled out to every associate in the
company. C.A.R.L.’s four fundamental principles include: Cleanliness, Awareness, Responsibility and
Leading by Example. Associate support of these key principles has continued the trend of reduced
customer and associate incident rates. Safety programs are highlighted in daily huddles, monthly
training materials, associate contests and an Annual Safety week to clearly and consistently reinforce
C.A.R.L. principles to maintain a safe environment.
Retail Stores
Associate understanding of Kohl’s safety commitment is just the beginning. In addition, our Risk
Management department partners with other corporate departments and store associates to improve
the in-store shopping experience for our customers by identifying and mitigating potential safety
concerns. From fixtures to facilities, Kohl’s balances its uncompromising safety philosophy with
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16. business initiatives. Key safety initiatives are rolled out and monitored to ensure that our associates are
safety conscious on an ‘every day’ basis.
Distribution Centers
We maintain comprehensive safety programs in our distribution centers which provide a safe working
environment to our associates and reduce workplace injuries. Such programs involve safety training
and awareness initiatives which provide a safe and productive work environment.
Product Integrity
At Kohl’s, delivering a quality product is our business. In order to ensure that we are living-up to our
deliverables, product integrity considerations are built into the product development process. During
every phase of the product development process, we are continually checking to ensure that what is
developed is a safe product and that it meets the applicable Federal and state mandates.
Product compliance and safety are the driving force of the Product Integrity department at Kohl’s. The
department works with manufacturers, vendors and agents to ensure that all private and exclusive
brand products are subjected to rigorous testing prior to shipment. Testing is conducted at independent
third party laboratories approved by Kohl’s. Depending on the end product, testing can range from
checking for mechanical hazards, choking hazards or chemical hazards to flammability of fabrics. Only
when the product that is being tested has passed Kohl’s quality standards, can it be shipped to our
stores.
Our Product Integrity department is continually working with government agencies and trade
associations to keep itself abreast of any changes in consumer product regulations. During the past
year, this department has been very closely monitoring product compliance and safety developments at
the federal, state and local levels. The department is responsible to ensure that such changes are
incorporated into our product development culture. Additionally, Kohl’s has taken proactive steps in
voluntarily adopting product safety programs, keeping in mind the best interests of our customers.
The goal of our Product Integrity department is to ensure that the Product Development team adopts
and embraces changes made to Kohl’s Corporate Testing Program. The Product Integrity department
understands the importance of training, awareness and communication and is responsible for training
our internal staff, agents and vendors on topics ranging from Product Safety and Children’s Sleepwear
to Footwear Testing. The end goal is to deliver a safe, quality product.
Policy on Cosmetic Testing
The primary cosmetic manufacturers used by Kohl’s do not perform any testing on animals.
April, 2008
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17. APPENDIX
TERMS OF ENGAGEMENT
FOR KOHL'S BUSINESS PARTNERS
These Terms of Engagement apply to all of Kohl’s Business Partners. Kohl’s strongly encourages Business
Partners to exceed these Terms of Engagement and promote best practices and compliance by Business
Partners with the Terms of Engagement in all factories in which they manufacture merchandise. For
questions or for information pertaining to Kohl’s Terms of Engagement, e-mail: kohlslaw@kohls.com.
While Kohl’s recognizes that there are different legal and cultural environments in which Business Partners
operate throughout the world, these Terms of Engagement set forth the basic minimum requirements
Business Partners must meet in order to do business with Kohl’s. The Terms of Engagement also provide
the foundation for Kohl’s ongoing evaluation of compliance by Business Partners with the Terms of
Engagement.
Business Partners are defined as vendors, manufacturers, contractors, subcontractors and other suppliers,
sources and agents who provide Kohl's with goods or services ordered pursuant to any purchase order,
contract or agreement issued directly by Kohl's or ordered on Kohl’s behalf.
LAWS &
REGULATIONS All Kohl’s Business Partners must operate in full compliance with all applicable
local and national laws, rules and regulations pertaining to all aspects of factory
operations in the jurisdiction of which they conduct business.
EMPLOYMENT
PRACTICES Kohl's will only do business with Business Partners whose workers are treated
fairly and who in all cases are present voluntarily, not put at risk of physical harm,
fairly compensated, and allowed the right of free association and not exploited in
any way. Business Partners shall ensure procedures are in place by which
workers, alleging violations of these Terms of Engagement, may do so without fear
of negative repercussions.
In addition, Kohl’s Business Partners must adhere to the following:
• Wages
and Benefits: Kohl's Business Partners must pay workers wages and legally
mandated benefits that comply with the higher of (a) any
applicable law, or (b) to match the prevailing local manufacturing
or industry practices. In addition to their compensation for
regular hours of work, workers shall be compensated for
overtime hours at such premium rates as are legally required, or
in those countries where such laws do not exist, at least equal to
their regular hourly wage rate. Kohl’s recognizes that wages are
essential to meet workers’ basic needs. Kohl’s will seek and
favor Business Partners who are committed to the betterment of
wages and benefits within their facilities.
• Working
Hours: Kohl's expects its Business Partners to operate based on
prevailing local work hours. Except in extraordinary
circumstances, Business Partners shall limit the number of hours
that workers may work on a regularly scheduled basis to the
legal limit on regular and overtime hours established by local
laws and regulations in the jurisdiction in which they
manufacture. Subject to the requirements of local law, a
regularly scheduled workweek of no more than sixty (60) hours
and one day off in every seven (7) day period are encouraged.
Partners will comply with applicable laws that entitle workers to
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18. vacation time, leave periods and holidays. Business Partners
must regularly provide reasonable rest periods and one day off
within a seven-day period. Any time worked over the norm for
the area should be compensated as prescribed by the local labor
laws. Working hours must be recorded by an automated
timekeeping system. Whenever a worker is present in a facility,
the worker’s time must be recorded and the worker properly
compensated. This applies to both regular and overtime working
hours and any time used for work preparations or repairs.
• Child Labor: Use of child labor is strictly prohibited. Business Partners must
observe all legal requirements for the work of authorized minors,
particularly those relating to hours of work, wages, minimum
education and working conditions. Kohl’s supports the
development of legitimate, workplace apprenticeship programs
and Business Partners will be expected to comply with all laws
and regulations applicable to such apprenticeship programs.
“Child” is defined as a person who is younger than 15 (or 14
where the law of that country permits) or younger than the age
for completing compulsory education in the country where such
age is higher than 15. Kohl’s will not utilize Business Partners
who use or permit the use of child labor in any of their facilities.
• Prison Labor/
Forced Labor: Business Partners will not use or permit the use of bonded labor,
indentured labor, prison labor or Forced Labor in the
manufacture or finishing of products ordered by Kohl’s. Nor will
Kohl’s knowingly purchase materials from a Business Partner
utilizing bonded labor, indentured labor, prison labor or Forced
Labor. “Forced Labor” is defined as any work or service which is
extracted from any person under the threat of penalty for its non-
performance and for which the worker does not offer himself
voluntarily. An employer involuntarily keeping workers
identification documents is prohibited.
• Discrimination: While Kohl's recognizes and respects cultural differences,
employment (hiring, wages, benefits, advancement, termination,
and retirement) shall be based on the worker’s ability and not on
personal characteristics. Kohl’s believes that workers should be
employed on the basis of their ability to do the job, rather than on
the basis of gender, age, disability, sexual orientation, racial
characteristics, cultural or religious beliefs or similar factors.
Kohl’s will not utilize Business Partners who discriminate against
workers on the basis of gender, age, disability, sexual
orientation, racial characteristics, cultural or religious beliefs or
similar factors.
• Free
Association: Workers must be free to join organizations of their own choice.
Business Partners shall recognize and respect the rights of
workers to freedom of association and collective bargaining.
Workers shall not be subject to intimidation or harassment in the
peaceful exercise of their legal right to join or to refrain from
joining an Organization.
• Disciplinary
Practices: All Business Partners must treat all workers with respect and
dignity. Kohl’s will not utilize Business Partners who use, or
permit the use of corporal punishment, physical, sexual,
psychological or verbal harassment or other forms of mental or
physical coercion, abuse or intimidation. Business Partners shall
not use, or permit the use of fines as a disciplinary practice.
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19. • Women’s
Rights: All Business Partners will ensure that workers who are women
receive equal treatment in all aspects of employment.
Pregnancy tests will not be a condition of employment or
continuation thereof and pregnancy testing, to the extent it is
provided, will be voluntary and at the option of the worker.
Workers will not be exposed to hazards that may endanger their
reproductive health and Business Partners will not force workers
to use contraception.
• Health &
Safety: Kohl's will only utilize Business Partners who provide workers
with a clean, safe and healthful work environment designated to
prevent accidents and injuries arising out of or occurring while in
the course of work or as a result of the operation of a Business
Partner’s facility. All Business Partners must comply with all
applicable, legally mandated standards for workplace health and
safety. Where applicable, Business Partners who provide
residential facilities for their workers must provide safe and
healthy facilities, separate from production facilities, that comply
with legally mandated standards for health and safety.
ETHICAL STANDARDS Kohl's will seek to identify and work with Business Partners who aspire as
individuals and in the conduct of their business to a set of ethical
standards which are compatible with Kohl's standards. Bribes, kickbacks
or other similar unlawful or improper payments are strictly prohibited to be
given to any person or entity to obtain or retain business.
ENVIRONMENTAL
REQUIREMENTS Kohl's will only do business with Business Partners who comply with all
applicable government laws and regulations, international standards, U.S.
regulations prohibiting the use of ozone depleting chemicals
(hydrochlorofluourocarbons) and the International Trade in Endangered
Species of Wild Fauna and Flora, as listed in the United States
Endangered Species Act of 1973.
LEGAL
REQUIREMENTS Kohl's policy is to obey the laws of each country in which merchandise is
manufactured for Kohl’s. Business Partners will comply with all applicable
local and national laws, rules and regulations pertaining to all aspects of
factory operations. This includes compliance with these Terms of
Engagement and the terms and conditions of purchase orders issued by
Kohl's or on Kohl's behalf and also requires attention to U.S. country of
origin regulations which govern quota classification and the marking of
products. Business Partners manufacturing facilities will comply with US
Customs-Trade Partnership Against Terrorism (C-TPAT) requirements.
COMMUNICATION All Business Partners must post the Terms of Engagement in places in
their factories readily accessible to workers, translated into the language of
the workers and supervisors and communicate these provisions to all
workers. Business Partners shall take appropriate steps to ensure the
provisions of these Terms of Engagement are communicated to all
workers. Upon employment, as part of worker orientation, the Terms of
Engagement shall be presented to workers and explained to them. From
time to time Business Partners shall periodically review these Terms of
Engagement with workers.
MONITORING/
COMPLIANCE Kohl's takes affirmative measures to monitor compliance with Kohl’s
Terms of Engagement and Kohl’s Purchase Order Terms and Conditions.
Such measures may include prescreening Business Partners, scheduled
or random, announced and unannounced on-site inspections of factories
by Kohl's representatives, or certification by Kohl's Business Partners that
Kohl's Terms of Engagement have been complied with.
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20. Kohl’s associates and representatives have been asked to be watchful for
violations of Kohl’s Terms of Engagement on visits to factories or
manufacturing facilities and to report questionable conduct to management
for follow up and when appropriate, for corrective action.
RECORD
KEEPING All Business Partners must maintain in the factories producing
merchandise for Kohl’s all documentation necessary to demonstrate
compliance with Kohl’s Terms of Engagement. Business Partners must
furnish Kohl’s representatives reasonable access to production facilities,
employment records and workers for confidential interviews in connection
with monitoring factory or inspection visits. Business Partners must
promptly respond to reasonable inquiries by Kohl’s representatives
concerning the operations of factories with respect to Kohl’s Terms of
Engagement.
SUBCONTRACTING Business Partners shall not utilize subcontractors for the production of
Kohl’s merchandise, or components thereof, without Kohl’s prior written
approval and only after the subcontractor has agreed to comply with Kohl’s
Terms of Engagement. Business Partners shall require each Kohl’s
approved subcontractor to abide by the Terms of Engagement. Business
Partners shall be held accountable for a subcontractor’s failure to abide by
Kohl’s Terms of Engagement.
CORRECTIVE
ACTION If a Business Partner is in violation of Kohl's Terms of Engagement, Kohl's
will work with the Business Partner to remediate the violation if at all
possible. If this effort is unsuccessful or not possible, Kohl’s shall
reevaluate its business relationship with the Business Partner and shall
take appropriate corrective action. Corrective action may include
cancellation of the affected order, prohibition of subsequent use of a
factory or termination of Kohl's business relationship with any Business
Partner found to be in violation of these Terms of Engagement, or
exercising any other rights and remedies to which Kohl's may be entitled
under Purchase Orders issued by Kohl's or on behalf of Kohl's, at law or
otherwise.
COUNTRY
EXCEPTIONS Business Partners will not produce merchandise for Kohl’s in countries
which are considered by Kohl’s to deny basic human rights. Kohl’s will not
initiate or continue its business relationship with Business Partners that
produce merchandise for Kohl’s where there are gross and systematic
violations of human rights and when there is a recognized movement from
within the country calling for withdrawal.
For questions or for information pertaining to Kohl’s Terms of Engagement e-mail:
factory.compliance@kohls.com
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