Gildan won Environmental Finance's Sustainability-linked loan of the year, Americas award by embedding ESG targets into its $1 billion revolving credit facility. Peter Iliopoulos explains how sustainability is at the heart of the apparel giant's business model
Environmental Finance: Can you introduce Gildan and your approach to ESG?
Peter Iliopoulos: We are a leading apparel manufacturer, listed in Toronto and New York, with manufacturing operations in the Americas and Asia. We are unique in that we are vertically integrated, owning almost the entire value chain except for growing cotton.
ESG is a core part of our business strategy. Going back to 2001, when we were setting up operations in Central America, we did so keeping in mind our environmental and social impacts while looking to achieve wins from a cost and sustainability perspective. We realised early on that this would be a key differentiator for our customers. Because we own our factories, we can implement leading working conditions, monitor our environmental impacts and roll out innovative practices.
Our governance structure is also unique; we have an ESG Steering Committee, co-chaired by our CEO and our chief financial and administrative officer, with representatives across the entire organisation, which guides our strategy. So, ESG isn't siloed – instead, we take a holistic approach.
EF: Last year, you launched your Next Generation ESG strategy. What does that strategy involve?
PI: This is the third generation of ESG target-setting we've gone through, dating back to 2010. It's based on an exhaustive materiality assessment that we carry out every three years, involving a range of stakeholders to understand how we can align their needs and what they value with our strategy.
The new strategy is based on five pillars: climate, energy and water, including committing to a science-based emissions target; circularity, including sourcing sustainable materials and recycled fibres/yarns; human capital management, ensuring human rights are respected and improving health and safety; long-term value creation, involving investing 1% of pre-tax earnings in our communities; and disclosure, further enhancing our reporting, including publishing a stand-alone report structured in accordance with the recommendations of the Task Force on Climate-related Financial Disclosures.
EF: On the back of that strategy, last year you structured a $1 billion sustainability-linked loan (SLL) offering. What prompted that?
PI: In 2022, we amended and restated our $1 billion revolving credit facility. We felt the time was right to integrate ESG into our financial strategy further and reinforce our commitment by linking them and sending a strong message to our stakeholders.
This also adds rigour to our process, encouraging us to enhance and tighten how we track our progress towards our ESG commitments and how we tie that to our financial costs.
EF: What did the SLL target-setting process involve?
PI: It started with a conversation with our Treasury department, who approached us about the idea. The timing was right; we had just announced our new strategy with 10 targets across five pillars. Together, we initiated discussions internally and with the banks to decide on three of our KPIs to include in our SLL.
First, it was important to show our commitment to climate change, so we linked our goal of reducing Scope 1 and 2 emissions by 30% by 2030 (against a 2018 baseline). Circularity also came up as a high priority and a challenging one, so we linked our target of ensuring we use 75% recycled or sustainable packaging and trim materials by 2027.
Lastly, on the social side, we wanted to send a strong message to our employees of our commitment to diversity: we’re already at gender parity below the director level, so we included our target to reach gender parity at the collective group representing director level and above by 2027.
Our choices were all supported by the lead banks accompanying us in this process.
EF: How are you planning to meet those targets?
PI: We have clear roadmaps to ensure progress on each target. All of the work is measured, monitored, and reported on so we can understand how we are advancing. We present this to senior leadership and our board quarterly, illustrating the strong governance we have in place.
Overall, we are being mindful across our operations, and implementing and optimising different programmes to progress meaningfully on our targets.
EF: What's next for ESG at Gildan?
PI: It's a more than 20-year journey that will continue to be a deeply rooted in how we do business but will also grow as ESG evolves. We are committed to push forward and stay ahead of the curve to be an ESG leader for our stakeholders, because we truly believe that sustainability is the right thing to do and good for our business.
Peter Iliopoulos is senior vice-president of taxation, sustainability and government affairs at Gildan, in Montreal, Canada.
For more information, see: gildancorp.com/en/responsibility/
