California Transparency in Supply Chains Act of 2010 (SB 657)
Specialized Disclosure

"Human trafficking affects us all, whether we live in countries of origin, transit or destination. Preventing and combating it requires a comprehensive international approach. We must act together to stop a crime in our midst that deprives countless victims of their liberty, dignity and human rights."
-Ms. Asha-Rose Migiro Deputy Secretary-General of the United Nations

Specialized is committed to upholding human and labor rights, ensuring that every worker has safe and fair working conditions and that there is 'zero tolerance' for human trafficking and slavery in our supply chain.

The policies, procedures and operations outlined in our Sustainable Innovation Program incorporates explicit prohibition of human trafficking and slavery and addresses issues of human trafficking and slavery required under the California Transparency in Supply Chains Act, as well as addressing other issues of social and environmental sustainability. Standards for workplace conditions for our supply chain partners are outlined in our Code of Conduct and the code element Forced Labor specifically calls out our commitment to prohibiting human trafficking and slavery anywhere in our direct and indirect supply chain. Compliance is integral to our sourcing strategy and will inform business relationships once we complete the analysis of our suppliers in 2012.

Below is our disclosure statement pursuant to the California Transparency in Supply Chains Act (SB 657).

The disclosure described in subdivision (a) shall, at a minimum, disclose to what extent, if any, the retail seller or manufacturer does each of the following:

1. Verification of supply chains to evaluate and address risks of human trafficking and slavery; Specialized will be conducting a risk analysis of its direct supply chain based on our code of conduct in 2012. Specific attention will be placed on human trafficking and slavery.

2. Audits of suppliers to evaluate supplier compliance with Specialized's standards for trafficking and slavery in supply chains; Auditing suppliers with regards to sustainable manufacturing, specifically slavery and human trafficking, is not a system that Specialized currently has in place but aims to implement by the end of 2012. We feel that the first step is to train and build knowledge and awareness internally at Specialized and with supply chain partners, including how we can partner together for solutions. It is necessary for us to assess our supply chain in greater detail to gather a better understanding on the areas of risk in order to inform our work going forward. All future monitoring will be done against Specialized's Code of Conduct.

3. Certification by suppliers that materials comply with slavery and human trafficking laws of the country where they are doing business; Supplier understanding of the risks of non-compliance to a code of conduct, especially human trafficking and slavery is the key focus to our communication strategy with suppliers in 2012. The aim is to build capacity with our suppliers so that they can certify their own supply chains to eradicate human trafficking and slavery.

4. Procedures for failures to meet Specialized's standards regarding slavery and human trafficking; Development of internal policies & procedures will incorporate disciplinary actions appropriate to the operation at hand, for instance, if found in evaluating new suppliers compared with existing suppliers. The focus will be on remediation and executing swift solutions for the protection of human rights.

5. Training on human trafficking and slavery, including mitigating risks within the supply chain. Specialized has begun the development of an internal training program for employees to understand the issues relating to social and environmental responsibility with a focus on human trafficking and slavery in manufacturing. This training will also be extended through communication to suppliers with a long-term partnership approach to remediating issues against our code of conduct in the supply chain.

We understand that building accountability at Specialized is key to an authentic commitment to sustainable manufacturing. Specialized's corporate policy for sustainable manufacturing has been communicated throughout the company and informs the work being carried out through our Sustainable Innovation Program.