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2023ESG Report2EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupContents2Editing Policy/Corporate Profile3Top Commitment:Chairman&CEO4Top Commitment:President&COO5Message from Chief Administrative Officer6Labor Practices101Human Resources Development 113Occupational Safety and Health Management 118Respect and Consideration for Human Rights 126Responsibilities to Customers 134Sustainability in the Value Chain145Social Contribution Activities163ESG Data(Society)165SocietyOur Sustainable History and Value Creation Model 8Policy&Basic Approach 11Governance 15Strategies 19Risks and Management 23Metrics and Targets 24Collaboration with Outside Initiatives 34SustainabilityattheITOCHUGroupCorporate Governance 170Risk Management 190Compliance 194GovernanceEnvironmental Policy 38Environmental Management 39Climate Change(Information Disclosure Based on TCFD Recommendations)41Prevention of Pollution and Resource Circulation 59Water Resources Conservation 69Conservation of Biodiversity 72Clean-tech Business 81ESG Data(Environment)93EnvironmentSDGs Bond(Sustainability Bond)201Evaluation by Society 202Independent Assurance Report 207ContentsEditingPolicyCorporateProfileCompany Name ITOCHU CorporationFounded 1858Incorporated December 1,1949HeadquartersTokyo5-1,Kita-Aoyama 2-chome,Minato-ku,Tokyo 107-8077,JapanOsaka1-3,Umeda 3-chome,Kita-ku,Osaka 530-8448,JapanChairman&CEO Masahiro OkafujiCommon Stock 253,448 Million YenNumber of Offices Domestic Offices 7 Overseas Offices 86Number of Employees*Consolidated 110,698 Non-consolidated 4,112 (As of March 31,2023)*The number of consolidated employees is based on actual working employees excluding temporary staff.ITOCHUs ESG Report is to provide various stakeholders including shareholders,investors,business partners,and others with a deep understanding of our companys sustainability policies,approaches,targets,systems,and specific initiatives.We recognizes that“Meeting the expectations of society through business activities will help maintain sustainability and lead to further growth.”With this in mind,ESG Report 2023 reports the details of our sustainable activities in the previous fiscal year together with ESG performance data and our contribution to the SDGs.DisclosureofSustainability-relatedInformationPublicationContentsPDFHTMLESG ReportITOCHU discloses information on a wide range of topics concerning its sustainability initiatives.The PDF is published as an annual report so as to provide continuous record of our ESG initiatives.In HTML,we provide information on activities carried out during the fiscal year in a timely manner.Annual ReportThis report is for a wide range of stakeholders including investors to provide particularly important information on our management performance and future growth strategies,as well as sustainability initiatives,in an integrated form,including financial and non-financial information,based on the characteristics of our business activities as a general trading company.Corporate Governance ReportThis report presents our companys approach to corporate governance and its corporate structure in accordance with the principles stated in the Corporate Governance Code.We provide more detailed information on governance such as institutional design,operational status,and effectiveness evaluation.Annual Security ReportThe financial statements have been prepared in accordance with Article 24,Paragraph 1 of the Financial Instruments and Exchange Act of Japan and submitted to the Kanto Local Finance Bureau.We provide more detailed information on our financial condition.(Japanese Only)ITOCHU Corporation Sustainability Management DivisionTEL: 81-3-3497-4060E-mail:tokcritochu.co.jpInquiriesThis report principally covers actual data for the fiscal year beginning on April 1,2022,and ended on March 31,2023(FYE 2023).However,some of the most recent information on our activities and initiatives are also included.ReportingPeriodPublication:September 2023Next publication(scheduled):September 2024Previous publication:September 2022PublicationInformationThis report covers ITOCHU Corporation(7 domestic offices and 86 overseas offices)and its major group companies.ReportingBoundaryThe environmental and social performance indicators marked with and in this report are independently assured by KPMG AZSA Sustainability CO.,Ltd.(P207)IndependentAssurance Basic Principles on the Use of Force and Firearms by Law Enforcement Officials OECD Guidelines for Multinational Enterprises The Environmental Reporting Guidelines issued by the Ministry of the Environment Keidanren:Charter of Corporate Behavior Japan Foreign Trade Council:Shoshas Corporate Environmental Code of Conduct,Supply Chain CSR Action Guidelines The Ten Principles of the United Nations Global Compact GRI Sustainability Reporting Standards(GRI Standards)International Integrated Reporting Framework(IIRC)ISO 26000(Social Responsibility)TCFD Recommendations Universal Declaration of Human Rights(UDHR)UN Guiding Principles on Business and Human Rights Sustainable Development Goals(SDGs)United Nations Declaration on the Rights of Indigenous Peoples(UNDRIP)ReferencedGuidelinesIn promoting sustainability,we refer to international guidelines and principles such as The Ten Principles of the United Nations Global Compact and Sustainable Development Goals(SDGs)adopted by the United Nations in September 2015.The guidelines and principles we refer to are listed below.Forward-LookingStatementsThis report contains not only past and present facts,but also forecasts,targets,and plans for the future.These forward-looking statements are based on information available at the time of publication of this report and are subject to a number of factors that may cause actual results to differ materially from those presented in the forward-looking statements.Please use this report at your own discretion.3EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupThe World Health Organization(WHO)has announced the end of the state of emergency for COVID-19 which spread worldwide since 2020.Japan has also finally downgraded the legal status of COVID-19 to that of a category 5 common infectious disease.In the spring of 2020,when the unprecedented catastrophe of COVID-19 struck around the world,we were forced to consider how we should respond to this crisis,how to protect our employees and how to continue our business.Because it was an unprecedented catastrophe which no one expected,rather than predicting when it would be over,I thought,as usual,about the area of prevention in our principles of“earn,cut,prevent”and what opportunities would arise from this crisis precisely because we were in such times.I believe prevention does not mean avoiding risks and halting business,but rather preparing in advance how to respond to the greatest risks which may arise and how to reliably proceed with business.Even if a risk emerges,we can ensure the damage from it will not be fatal by putting this prevention into practice on a daily basis.The origin of ITOCHUs continued development for more than 160 years is“Sampo-yoshi”(good for the buyer,good for the seller and good for society).However,“Sampo-yoshi”does not mean trying to please everyone;rather,it means analyzing the risks for all three parties and then taking measures suitable for each of them as soon as possible to achieve stable growth for all.That means it is extremely important to collect information about what is happening in society,what may happen and what the market wants.We then need to uncover opportunities and uncertaintiesthat is,risksbefore taking a thorough response to prevent them.The experience of being given a room with no toothbrush when I went on a business trip to Europe in 2018 made me strongly aware that the market is changing.We have shifted to a decarbonized society-conscious management and have been focusing increasingly on thermal coal divestment and environmentally-friendly businesses such as storage batteries,cellulose fiber and energy from waste.Changing our company in line with the changes in our customers and society is my concept of a market-orientated approach.We will continue to put“Sampo-yoshi”capitalism into practice,valuing all our stakeholders with the aim of achieving further sustainable growth in our corporate value.PreventativeManagementthatAnticipatestheFutureChairman&CEOMasahiroOkafujiMemberoftheBoardChairman&ChiefExecutiveOfficerJune20234EnvironmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupTop CommitmentRestrictions on activity due to COVID-19 have been lifted and there has been a shift to new lifestyles.Together with this,the flow of people is recovering and we are returning to a normal business environment.Moreover,we are starting to see resource prices gradually settling down,and personal consumption is also recovering in many countries.However,the global economy remains in a chaotic state due to various events such as fears of an economic slowdown arising from inflation reduction efforts mainly in Europe and the United States,and instability from concerns about losses on bonds held by financial institutions.Since being appointed President of ITOCHU,I have always kept in mind the importance of being a“trusted player”no matter the circumstances.To achieve this,I believe we need to thoroughly implement the bottom-up approach to management by visiting our customers and understanding with our own eyes and ears what society and our customers need.We need to communicate with all our stakeholders,taking a medium-to long-term perspective and being aware of changes in the environment and the market,as well as changes in the products and services sought by consumers.The global economic environment is changing dramatically,and the responsibilities sought from companies are also changing dynamically.In order to improve our corporate value,there is a need to expand and evolve in non-financial areas such as the environment,social issues and human capital in addition to having strong profit growth and a sound financial structure.We are incorporating non-financial areas into our management policies,such as our basic policies on“Realizing Business Transformation by Shifting to a Market-oriented Perspective”and“Enhancing Our Contribution to and Engagement with the SDGs through Business Activities,”as stated in our Brand-new Deal 2023 medium-term management plan.In doing so,we seek to be a trusted company that maintains a market-oriented approach amidst societal changes,undertaking business which is attuned to the new needs of our customers and society.HowtoBeaTrustedCompanyPresident&COOJune2023KeitaIshiiMemberoftheBoardPresident&ChiefOperatingOfficer5EnvironmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupTop CommitmentBased on the spirit of“Sampo-yoshi”(good for the buyer,good for the seller and good for society),the ITOCHU Group not only pursues profits for our company,we also help to solve social issues,in line with the expectations and trust placed on us by our business partners,shareholders,employees and various other stakeholders.We seek to create virtuous cycles in society and also to help achieve a sustainable society.To do so,we ask each employee to voluntarily fulfill their various roles based on our Corporate Guideline of Conduct of“I am One with Infinite Missions.”ITOCHU has developed a structure to promote sustainability based on changes in the external environment,such as by participating in the UN Global Compact since 2009.In particular,we recognize the importance of addressing climate change(contributing to a decarbonized society),which we have identified as a material issue.We are working toward the transition to a decarbonized society through a number of areas,including by declaring our support for the Task Force on Climate-related Financial Disclosures(TCFD),establishing an environmental policy,formulating greenhouse gas(GHG)emission reduction targets for 2030,2040 and 2050 as a core target of our Brand-new Deal 2023 medium-term management plan,and expanding our clean-tech business.In the area of supply chain management,we are aiming to build a sustainable value chain to respond the issues in each of our businesses by establishing individual procurement policies in our various business fields in addition to our Sustainability Action Guidelines for Supply Chains.For example,deforestation together with violations of the rights of small-scale farmers and poverty have become issues in the natural rubber business.Therefore,we have developed a traceability system that allows us to track the process of procuring natural rubber.This has made it possible for us to differentiate our products as those made with environmentally and socially conscious natural rubber.In this way,we are providing services that meet the needs of each industry to strengthen our value chain.We joined the Japan Center for Engagement and Remedy on Business and Human Rights(JaCER)as a regular member in 2022.JaCER provides an engagement and remedy platform in compliance with the United Nations Guiding Principles on Business and Human Rights.We intend to work on solving essential issues in human rights by establishing a structure to receive complaints from all our stakeholders in our supply chains.ITOCHU Corporations measures to promote sustainability are overseen by the Sustainability Management Division under the leadership of the Chief Administrative Officer(CAO).The CAO is responsible for sustainability management,including evaluating the impact our operations have on the environment and society,and also serves as chair of the Sustainability Committee.As one of our core internal committees,the Sustainability Committee deliberates and decides on important matters related to sustainability.In addition to serving as chair of the Sustainability Committee,the CAO also attends Board of Directors,HMC,and Investment Consultative Committee meetings to provide a perspective on sustainability to all investment proposals and provide reports as necessary to the Board of Directors.We designate an ESG officer within each division company and headquarters department to support the creation of internal systems that contribute to the realization of a sustainable society through our business activities.Additionally,we promote regular dialogue with internal and external stakeholders,including through initiatives the Sustainability Advisory Board.All of this enables us to understand the expectations and demands that society has for ITOCHU Corporation,which we reflect in our sustainability activities.ContributingtoaSustainableSocietyChiefAdministrativeOfficerFumihikoKobayashiMemberoftheBoardExecutiveVicePresidentChiefAdministrativeOfficerJune20236EnvironmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupTop CommitmentSustainabilitySustainabilityattheITOCHUGroup7EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupSustainabilityattheITOCHUGroup7The foundation of ITOCHU Corporation traces back to 1858,the year in which Chubei Itoh set out from Toyosato Village,in Shiga Prefecture,to Nagasaki as a traveling linen merchant.Chubei Itohs business was based on the spirit of“Sampo-yoshi”,the management philosophy of merchants in Ohmi,a province where he was born.The philosophy originated back to the shogunate era,when merchants in Ohmi were permitted to promote business activities in the region due to their contributions to the society.Since then,not only good for the seller and the buyer,but also for the society became the management philosophy.This can be said to be the roots of modern sustainability,which requires corporations to balance their business activities with the interests of multi-stakeholders.That spirit is evident in Chubei Itohs personal motto,“Trade is a compassionate business.It is noble when it accords with the spirit of Buddha by profiting those who sell and those who buy and supplying the needs of the society.”Our founder Chubei Itoh established a“store law”in 1872,and adopted a meeting system.The store law was a set of house rules covering what in modern parlance called management philosophy,code of ethical conduct,a human resources system and employment regulations,which subsequently became the foundation of ITOCHU Corporations management philosophy.Emphasizing communication with employees,Chubei Itoh chaired meetings himself.Moreover,he incorporated a series of what were at the time groundbreaking management systems,including the codification of“sharing of profit by three parties”*and western bookkeeping methods.Those initiatives built the foundations of mutual trust between the store owner and the employees.Since that era,we have based our corporate management on sustainability.Why were we able to keep developing for such a long period of time?We believe that it is because we have put into practice the spirit of“Sampo-yoshi”for over 160 years,which is the root of sustainability.At the same time,as the business environment has changed with the times,we have established a corporate culture that anticipates changes and turns it into opportunities.Since the foundation,ITOCHU Corporation has consistently thrived despite the turmoil it has faced in different eras,including two world wars and economic volatility.Starting as a trading company mainly handling textiles,we have fulfilled the role of a trading company that has responsively changed according to the demands of each generation.Furthermore,while significantly changing its products and business portfolios,we have expanded our sphere of influence from upstream raw materials to downstream consumer sales.ITOCHU Corporation has evolved into a general trading company,and from there into a globally integrated corporation.We are convinced that our history has continued for more than 160 years because we have surely upheld and passed on the spirit of“Sampo-yoshi”while remaining an essential component of society by responding to changes,in its expectations in different eras.OurFounderChubeiItohand“Sampo-yoshi”TheRootsofaManagementPhilosophyInheritedSincetheFoundation160YearsofHistoryandSustainabilityOurSustainableHistoryandValueCreationModelTheRootsofManagementPhilosophyOur founder Chubei Itoh(1842-1903)Ohmi merchants(Photo courtesy of Archival Museum for the Faculty of Economics at Shiga University)*Sharing of profit by three parties:In a predominately feudal era,this was an extremely progressive philosophy of sharing profits with employees.The stores net profit was divided among three parties:the store owner,the stores reserve fund,and store employees.A daifukucho ledger from the time of ITOCHUs foundingThe headquarters with modern amenities built in 19158EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupGovernanceStrategiesRisks and ManagementMetrics and TargetsCollaboration with Outside InitiativesPolicy&Basic ApproachOur Sustainable History and Value Creation ModelOurSustainableHistoryandValueCreationModelSteadilyImprovingEarningPower8DivisionCompaniesConsolidatedNetProfitGrowthProviding new values and impressions for everyday life in fields ranging from fashion to high-tech materials.TextileITOCHU has overcome numerous hardships by transforming itself by flexibly changing its management resource allocation and business structure in response to changes in the external environment.Since FYE 2011,ITOCHU has accelerated the speed of growth and steadily improved earning power step by step.500 Blnlevel400 Blnlevel300 Blnlevel161 Bln800 Blnlevel780 BlnConsolidated net profit(Bln Yen)Developing wide-ranging businesses,including plants,infrastructure,aircraft,ships,automobiles,construction/industrial machinery,and life care.MachineryContributing to economic development and environmental protection worldwide through the development and safe supply of mineral resources.Metals&MineralsWorking in tangible and intangible ways to help improve lives by using overall strength as a global trading company to offer solutions and services.Energy&ChemicalsExpanding globally while contributing to food safety and security from the supply of ingredients to manufacturing,distribution,and retail.FoodOperating on a global scale in fields ranging from general lifestyle products to the development and sale of homes and the goods that support them.General Products&RealtyCreating and expanding new markets by utilizing business development functions based on ICT and BPO along with customer networks.ICT&Financial BusinessDeveloping new businesses and customers based on a“market-oriented”perspective by fully leveraging our business platforms.The 8thCollapseofJapansbubbleeconomyanddisposalofnegativelegacyassets1990sFocuson“defense”andcommoditysupercycle2000sShiftto“offense”andexpandingfinancialbase2010sReturntogrowthtrajectoryafterCOVID-192020sFounding1858OilcrisisinJapanandattempttocultivatetheChinesemarket1970sGlobalizationanddiversification1950s 1960sExpansionintheICTSector1980sOurSustainableHistoryandValueCreationModel185819911996200120062011201622 2301003005007002004006008009EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupGovernanceStrategiesRisks and ManagementMetrics and TargetsCollaboration with Outside InitiativesPolicy&Basic ApproachOurSustainableHistoryandValueCreationModel24(Plan)(FYE)“Sampo-yoshi”CapitalismOurSustainableHistoryandValueCreationModelGovernanceSocietyEnvironment“Sampo-yoshi”BusinessExpansioninAccordancewithaDecarbonizedSocietyLeadingDevelopmentintheRecyclingBusinessesSustainedGrowththroughStrengtheningtheValueChainEnhancingourcontributiontoandengagementwiththeSDGsthroughbusinessactivitiesMedium-termManagementPlanMaintain Rigorous Governance StructuresAddress Climate Change(Contribute to a Decarbonized Society)10EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupGovernanceStrategiesRisks and ManagementMetrics and TargetsCollaboration with Outside InitiativesPolicy&Basic ApproachContribute to Healthier and More Affluent LifestylesEvolve Businesses through Technological InnovationEnsure Stable Procurement and SupplyRespect and Consider Human RightsDevelop a Rewarding Work EnvironmentOurSustainableHistoryandValueCreationModelTo realize a sustainable society,we embrace an approach to capitalism with greater emphasis on serving all stakeholders.Through our business activities,we will contribute to the achievement of SDGs in such ways as maintaining the foundations of everyday life and protecting the environment.Based on the spirit of ITOCHU Mission“Sampo-yoshi,”which is also the founding spirit,we have identified seven Material Issues that incorporate the perspectives of the environment,society and governance(ESG)as shown in the diagram below.We are steadily implementing initiatives through our core businesses to address these Material Issues.In the present medium-term management plan“Brand-new Deal 2023”,in particular,we will actively promote“Business expansion in accordance with a decarbonized society,”“Leading development in the recycling businesses,”and“Sustained growth through strengthening the value chain.”As a member of the international community,we will identify and assess material issues where we can create the most social and environmental value for that can enhance the sustainable growth of both society and our business.1.IdentificationofMaterialIssuesandPromotionofBusinessesthatAddresstheSocialIssuesWe will take necessary measures to ensure that we disclose accurate and clear information and expand the information we disclose,and maintain a communicative relationship with our stakeholders.In doing so,we aim to be receptive and responsive to the expectations and demands of society.2.EstablishmentofMutualTrustwithSocietyWe will promote sustainable business activities by preventing and continuing to give consideration to problems for the conservation of the global environment,climate change mitigation and adaption,pollution control,resource recycling,protection of biodiversity and ecosystems,and basic human and labor rights.We will endeavor to effectively use resources(such as air,water,land,food,minerals,fossil fuels,animals and plants),respect human rights and consider occupational health and safety in the businesses where we invest and in the supply chains of the products we handle.We request our business partners to understand and implement the concept of sustainability in the ITOCHU Group,and aim to build a sustainable value chain.We will respect the legal systems of each country and international norms.We will strive to understand the cultures,traditions and customs of countries and regions around the world.We will then engage in fair and sincere corporate activities.3.StrengtheningSustainableSupplyChainandBusinessInvestmentManagementWe believe that the promotion of sustainability starts with each and every employee.Therefore,we will take necessary measures to educate our employees on the material issues we have identified and nurture a sustainability mindset among the workforce.Every employee is expected to adhere to this policy by executing respective action plans drafted in alignment to this policy.4.EducationandAwarenessofEmployeestoPromoteSustainabilityFumihikoKobayashiMember of the Board Executive Vice President Chief Administrative OfficerEstablished in April 2006Revised in April 2022ITOCHU Group,conducting business globally under the spirit of“Sampo-yoshi,”the founding spirit and our Corporate Mission,considers that addressing global environmental and social issues is one of the top priorities in our management policy.We have formulated this policy based on The ITOCHU Group Corporate Guideline of Conduct,“I am One with Infinite Missions,”and The ITOCHU Group Code of Ethical Conduct for the realization of sustainable society.TheITOCHUGroupSustainabilityPolicyPolicy&BasicApproachSustainabilityPolicy11EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupGovernanceStrategiesRisks and ManagementMetrics and TargetsCollaboration with Outside InitiativesOur Sustainable History and Value Creation ModelPolicy&BasicApproachThe founder spirit and corporate philosophy of our group is“Sampo-yoshi”(good for the seller,good for the buyer and good for society).That is,we aim to contribute to solving social issues by meeting the expectations and trust of our various stakeholders including business partners,shareholders and employees in addition to earning profit.In April 2018,our company identified seven material issues that incorporate ESG aspects and two perspectives of the impact of social and business.Responding to critical issues(material issues)relating to sustainability also leads to opportunities for earnings in addition to reducing risks in our business.We recognize that our response to those material issues leads to a medium-to long-term improvement in our corporate value.We will work on these material issues through our core business from the following three perspectives taking into account the current business environment around us.This initiative will allow us to contribute to the realization of a sustainable society.The Ten Principles of the United Nations Global Compact GRI Standards International Integrated Reporting Framework(IIRC)ISO 26000(Social Responsibility)TCFD Recommendations Universal Declaration of Human Rights(UDHR)UN Guiding Principles on Business and Human Rights Sustainable Development Goals(SDGs)*United Nations Declaration on the Rights of Indigenous Peoples(UNDRIP)Basic Principles on the Use of Force and Firearms by Law Enforcement Officials OECD Guidelines for Multinational Enterprises The Environmental Reporting Guidelines issued by the Ministry of the Environment Keidanren:Charter of Corporate Behavior,Global Environment Charter Japan Foreign Trade Council:Shoshas Corporate Environmental Code of Conduct,Supply Chain CSR Action GuidelinesIn promoting sustainability,we refer to international guidelines and principles such as The Ten Principles of the United Nations Global Compact and Sustainable Development Goals(SDGs)adopted by the United Nations in September 2015.The guidelines and principles we refer to are listed below.*Sustainable Development Goals(SDGs):Following the 2015 deadline for the Millennium Development Goals(MDGs),the SDGs set goals for sustainable development by 2030.The 17 goals address issues such as poverty,starvation,energy,climate change and social equality.ReferenceGuidelinesandPrinciplesforPromotingSustainabilityITOCHUGroupsConceptofSustainabilityPolicy&BasicApproach12EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupGovernanceStrategiesRisks and ManagementMetrics and TargetsCollaboration with Outside InitiativesOur Sustainable History and Value Creation Model1.SustainableenhancementofcorporatevalueWe have anticipated change seeing it as an opportunity in the course of the development of our group for over 160 years.We have expanded from being a company at the upstream of the industry to one that is also at the downstream and from handling raw materials to also being involved in retail.We have increased the scope of our influence with that.At the same time,we have developed while changing the composition of the products we handle and our business areas together with the times.Therefore,we believe that constantly creating new value beyond the boundaries of our existing business is especially important in improving the corporate value of our group.Our group recognizes the importance of providing new value in our products and services with the“market-in”idea to capture the needs of sellers,buyers and society by utilizing our strength in the points of contact we have with consumers in the consumer sector.Together with this we understand the importance of conducting our business activities taking into account the environment and human rights including in our supply chain.2.ClimatechangeresponseClimate change is one of the most urgent global environmental problems.As a group involved in business worldwide,we are striving to adapt to changes in the business environment due to climate change.At the same time,taking this as an opportunity for further growth,we recognize that formulating and implementing greenhouse gas(GHG)emission reduction targets for 2030,2040 and 2050 and our specific response will lead to an improvement in our corporate value.3.HumancapitalmanagementanddiversityOur group has inherited the corporate philosophy of“Sampo-yoshi”(good for the seller,good for the buyer and good for society).We are striving to secure and develop human resources who embody the idea of“I am One with Infinite Missions”in our corporate action guidelines.To achieve that,it is essential to implement a human resource strategy which maximizes the abilities of each of our employees regardless of their gender,nationality or age.Accordingly,we have shared examples of our work style reforms such as morning-focused work and health management and personnel measures within our group.We are now rolling out a unique human resource strategy to suit the business of each of our group companies.In addition,the whole of our group will come together as one to expand our corporate value.For example,we will provide meticulous support for issues in recruitment,human resource development and labor management in our group companies.Policy&BasicApproachIn April 2018,ITOCHU put forth Material Issues that incorporate an ESG perspective when we formulated the previous medium-term management plan.Addressing these Material Issues through our core business,we will contribute to a sustainable society.ITOCHUs sustainability initiatives aim to fulfill our responsibilities for the society of today and the future.Also,these initiatives are contributing to the achievement of the Sustainable Development Goals(SDGs)*adopted by the United Nations in 2015.*Sustainable Development Goals(SDGs):Targets for sustainable development to achieve by 2030,adopted in September 2015 by member states of the United Nations Identification and Review Process for Material Issues(P14)Risks and Opportunities/Social Impacts of Each Material Issue(P20-21)Sustainability Action Plans(P24)MaterialIssuesPolicy&BasicApproach13EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupGovernanceStrategiesRisks and ManagementMetrics and TargetsCollaboration with Outside InitiativesOur Sustainable History and Value Creation ModelWe are striving to improve the quality of life for all people and are contributing to the creation of healthier and more affluent lifestyles.ContributetoHealthierandMoreAffluentLifestylesWe are ensuring appropriate and efficient execution of operations through independent,objective,and effective oversight of management by the Board of Directors and increased transparency in decision-making.MaintainRigorousGovernanceStructuresWe are contributing to the creation of a recycling-oriented society by giving consideration to biodiversity and other environmental issues while undertaking the effective utilization of resources as well as their stable procurement and supply,in line with demand in each country.EnsureStableProcurementandSupplyWe are striving to adapt to the impact of climate change on our business activities,while also promoting business activities that contribute to a decarbonized society and seeking to reduce greenhouse gas emissions.AddressClimateChange(ContributetoaDecarbonizedSociety)We are creating new value by proactively exploring new technologies as we adapt to changing industry structures by venturing beyond existing business frameworks.EvolveBusinessesthroughTechnologicalInnovationWe are promoting respect and consideration for human rights in our business operations and ensuring stability in our business,while also contributing to the development of local communities.RespectandConsiderHumanRightsWe are developing a work environment where all employees feel proud and motivated,and where they can leverage their diversity to demonstrate their abilities to the fullest.DevelopaRewardingWorkEnvironmentPolicy&BasicApproachSince ITOCHU Corporation first identified Material Issues in 2013,we have conducted regular reviews based on trends in the international community and the expectations of stakeholders.The Current Material Issues were identified in April 2018 in consideration of ITOCHUs sustainable growth and the social impact of its business,based on changes in social conditions and the business environment,such as the adoption of the SDGs and the effectuation of the Paris Agreement,as well as ITOCHUs corporate philosophy of“Sampo-yoshi.”While the original material issues focused on consideration for the environment and society(CSR),the revisions are based on“our efforts through core business,”“alignment with management strategy,”“medium-to long-term social change,”and“the addition of governance elements.”The material issues selection process is as illustrated.IdentificationandReviewProcessforMaterialIssuesPolicy&BasicApproach14EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupGovernanceStrategiesRisks and ManagementMetrics and TargetsCollaboration with Outside InitiativesOur Sustainable History and Value Creation ModelDiscussionandDecision-MakingAmongManagementThe Sustainability Committee chaired by the CAO holds deliberations and confirms the validity of Material Issues,after which decisions are made at company meetings and meetings of the Board of Directors chaired by the CEO.DeduceIssuesRefer to the international guidelines issued by the International Integrated Reporting Council(IIRC),items assessed by ESG evaluation bodies,etc.Use the SDGs covering social issues and create a strategic analysis sheet in consideration of the internal and external business environment and international trends,to deduce issues affecting sustainable growth.DivisionCompaniesDetermineImportanceandSetSuccessIndicatorsEach of ITOCHU Corporations division companies determines the risks,opportunities and success indicators for their business activities.Upon analyzing the business and social impacts of the risks and opportunities both within the company and those associated with outside stakeholders,they follow the Sampo Yoshi business philosophy and our corporate philosophy to identify priority issues to address for sustainable growth.ReviewsbytheSustainabilityAdvisoryBoardThe Sustainability Advisory Board conducts reviews and an exchange of ideas between outside experts.Social ImpactBusiness ImpactHighVery High Very High Discussion Processes with External Stakeholders(Experts):ITOCHU Sustainability Report 2018 P19(https:/www.itochu.co.jp/en/files/18fulle-all.pdf)PDFMaterialIssuesSelectionProcessConduct Reviews as Needed as Society and Business ChangeStakeholders Opinions and ExpectationsEvolve Businesses through Technological InnovationAddress Climate ChangeDevelop a Rewarding Work EnvironmentRespect and Consider Human RightsContribute to Healthier and More Affluent LifestylesEnsure Stable Procurementand SupplyMaintain Rigorous Governance StructuresImprove InfrastructuresSupply Safe and SecureProductsConsider BiodiversityConserve WaterPrevent Air PollutionStimulate Regional Economy through FinanceReduce Waste11223377445566998810101111121213131414Materiality MatrixImpact to the ManagementPolicy&BasicApproachThe Sustainability Management Division plans and formulates company-wide action to further sustainability at ITOCHU Corporation,which the Sustainability Chairperson served by the Chief Administrative Officer finalizes.Meanwhile,the ESG Officers and Managers in each unit carry out sustainability actions.The Sustainability Committee,one of the companys key committees,holds deliberations and reviews policy formulation and important matters.In addition to a role in heading the Sustainability Committee,the CAO joins meetings of the Board of Directors,the Headquarters Management Committee(HMC)and the Investment Consultative Committee.The chair also engages in decision-making based on the companys impact on the environment and society by reporting regularly to the Board of Directors to brief them on our promotion of sustainability.We furthermore engage in dialog with stakeholders within and outside the company.One example of this is our regularly convened advisory board.This dialog provides an understanding of what society expects of and desires from the company,which we can then apply to our initiatives at advancing sustainability.OrganizationandSystemsSustainability-relatedGovernanceStructuralChart(AsofJune23,2023)*CAO:Chief Administrative Officer HMC:Headquarters Management CommitteeGovernanceCAOCAOOversight functionsExecutive functionsPlanning,promotion and information collection/analysis functionsConsultationSelection and oversightInstruct on policy formulation and planningInstruct on policy formulation and planningConsultationCAOGovernance,Nomination and Remuneration CommitteeCAOWomens Advancement CommitteeCAOSustainability Committee Deliberates and reviews sustainability-related mattersInternal Control Committee Deliberates and reviews ERM-related matters including sustainability-related risksCAOCAOInvestment ConsultativeCommittee Deliberates sustainability-related risks in new and existing businesses and approves submissions to the HMCChairman&CEOTextileMachineryMetals&MineralsFoodGeneral Products&RealtyICT&FinancialEnergy&ChemicalsPresident&COOCAOBoard of Directors Approves sustainability-related group policies,strategies and related business promotion Supervise the appropriateness of sustainability disclosure informationCAOHeadquarters ManagementCommittee Determines sustainability-related group policies and strategies Determines and monitors ERM policies including sustainability-related risk management Promotes new business and makes divestment decisions based on sustainability-related risksCAO chairsCAO is a memberThe 8thSustainability Advisory BoardProposalsAdviceDialogue with external experts including proposals and advice relating to the latest trends in sustainability issuesAppoint management of each organization as Group ESG Officer Assign Group ESG Manager as assistant under the Officer Manage progress and monitor various measures and initiativesSustainability Management Division Plans,formulates measures and implements company-wide sustainability promotion,focusing on the response to critical issues for sustainability(material issues)Supports the formulation and implementation of measures in business activities Undertakes the general management of the implementation status of measures and reports to the Sustainability CommitteeHeadquarters Administrative DivisionsOverseas BlocsDomestic BranchesPlan proposalReport on activitiesPlan proposalReport on activitiesReport on deliberations and review findings15EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupStrategiesRisks and ManagementMetrics and TargetsCollaboration with Outside InitiativesPolicy&Basic ApproachOur Sustainable History and Value Creation ModelGovernanceOur group recognizes that responding to sustainability issues is an important management issue.The Board of Directors approves the Groups policies,strategies and related business promotion related to sustainability,and oversees the appropriateness of sustainability disclosure information.The Board of Directors oversees the appropriateness of material issues through a review important matters such as policies to respond to risks and opportunities for each material issue,the specific approach to responding to them,the indicators of the results of the response to them,and the degree of progress on them.The Board of Directors also oversees the execution of business and investment strategies to respond to sustainability-related risks and opportunities including environmental and social risks.(That includes a review of strategies and divestment decisions).We use the ESG Checklist for Investment as an advance ESG risk assessment on all our new investment projects.The checklist helps us to understand and analyze the status of sustainability-related risk policies,systems and initiatives.HMC,which deliberates on important projects,verifies sustainability-related risks.Moreover,after investing in projects,we conduct multifaceted monitoring and reviews of group companies to avoid sustainability-related risks as well as on-site visits and surveys to prevent environmental pollution and other issues.The CAO periodically reports on its sustainability-related deliberations and initiatives to the Board of Directors which then oversees them.The Sustainability Committee deliberates on the formulation and implementation of various measures to respond to sustainability-related matters.The committee identifies,assesses and manages the setting of sustainability-related targets,the state of progress on those targets,and current sustainability-related risks and opportunities.The Board of Directors oversees the promotion of business and investment strategies to respond to sustainability-related risks and opportunities.(That includes a review of strategies and divestment decisions.)In addition,at the executive level,the managers of each company concurrently serving as those in charge of ESG and the managers of headquarters administrative division participate in the Sustainability Committee as core members.The committee receives reports on sustainability-related matters from the Sustainability Management Division and those in charge of promoting ESG in each company and headquarters administrative division.It then manages and monitors the progress on the various measures and initiatives.BoardofDirectorsSustainabilityCommitteeOur CAO has specialized experience and knowledge in the field of the SDGs and ESG.The CAO receives periodic reports about twice a month from the Sustainability Management Division in charge of planning and implementing various sustainability-related measures.Furthermore,we invite external experts to give talks and exchange opinions at meetings of the Sustainability Advisory Board held every year.Through those opportunities,we deepen our knowledge about sustainability-related trends in the world,the expectations in our company and the issues we should tackle.The CAO,our representative director,is a member of the HMC which discusses our general management policy and important management-related matters.At the same time,the CAO concurrently serves as the chair of the Sustainability Committee.The CAO decides matters deliberated upon in meetings of the Sustainability Committee as the person with overall responsibility for sustainability.The HMC then approves important matters after they have been decided upon by the CAO.The CAO reports those decisions to the Board of Directors about three times a year together with the status of the main activities to promote sustainability.We believe this structure gives the Board of Directors the competency when overseeing sustainability.SkillsandCompetenciesoftheBoardofDirectorsFYE2023Sustainability-relatedDeliberationsandReportsSustainability-related MeetingsMembersNumber of Meetings HeldMain Approval,Deliberation and Report ContentsBoard of DirectorsDirectors and Audit&Supervisory Board members3 Deliberations by the Sustainability Committee and decisions by the CAO Social contribution activity reportsSustainability CommitteeChair:CAOMembers:General Managers of the Corporate Planning&Administration Division,Corporate Communications Division,General Accounting Control Division,Human Resources&General Affairs Division and IR Division;General Managers of the Planning&Administration Departments in each Division Company;full-time Audit&Supervisory Board member3 Establishment and revision of sustainability-related policies Revision of the ESG Checklist for Investment Climate change response Sustainability action plan reviews Human rights due diligence and sustainability-related research reviews Securities report and sustainability-related disclosures ISO14001 environmental management reviews ESG assessments Environmental and social risks monitoring and review results Confirmation of the material issues TNFD disclosure preparationGovernance16EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupStrategiesRisks and ManagementMetrics and TargetsCollaboration with Outside InitiativesPolicy&Basic ApproachOur Sustainable History and Value Creation ModelGovernanceThe Sustainability Advisory Board was established to engage outside stakeholders in dialog with our executive management to determine whether the direction we are taking with regards to sustainability is aligned with the needs of society as ITOCHU Corporations business grows more diverse and widespread,and then to apply the insights to promoting sustainability.In FYE 2023,we welcomed three experts from industry,academia and the government to discuss the theme of supply chains and human rights in a meeting of the Sustainability Advisory Board we held in January 2023.The experts gave talks on the latest trends from their differing perspectives.After that,ITOCHU introduced the status of our follow-up on human due diligence in the food field,local contribution initiatives and initiatives to secure traceability by utilizing blockchain technology in the general products&realty field.There was then a frank exchange of opinions in the question-and-answer session.The participants shared with us their expectations in ITOCHU and advice for us:“Realizing human rights-related initiatives in your core business is best practice.Striking a balance between the stable procurement of essential goods and the promotion of sustainability is an extremely difficult challenge.”“It will be very important to focus on dialogue with various stakeholders in your initiatives to respect human rights.You will need to work together with your business partners and industry groups to prioritize and then promote those initiatives.In addition,information disclosure is essential.You should disclose information without fear of criticism and collaborate with various stakeholders on what you cannot do alone.We will reflect the opinions received in our future Group sustainability efforts.Third Party OpinionViewing Climate Change as an OpportunityYukari Takamura(Annual Report 2022 P85)(https:/www.itochu.co.jp/en/csr/pdf/ar2022E_08.pdf?230320)PDFSustainabilityAdvisoryBoardSummaryofPastActivitiesFYE 2023Supply Chains and Human RightsExternal Lecturer Mr.Ken Toyoda Director for Business and Human Rights Policy,Ministry of Economy,Trade and IndustrySustainability Advisory Board Members Ms.Tomoyo Matsui Professor of Graduate Schools for Law&Politics,The University of Tokyo Mr.Hideki Wakabayashi Director,Japan NGO Center for International CorporationTHINK Lobby Board MemberDirector,Global Compact Network JapanITOCHU Members Fumihiko Kobayashi Member of the Board,Executive Vice President,Chief Administrative Officer Ryoma Omuro General Manager,Planning&Administration Department,Textile Company Toshio Okudera General Manager,Planning&Administration Department,Machinery Company Osamu Tano General Manager,Planning&Administration Department,Metals&Minerals Company Haruo Maeda General Manager,Planning&Administration Department,Energy&Chemicals Company Daiju Hashimoto Manager,Food Safety and Compliance Management Office Yasuhiro Takahashi General Manager,Planning&Administration Department,General Products&Realty Company Atsushi Hashimoto General Manager,Planning&Administration Department,ICT&Financial Business Company Tetsuya Mukohata Manager,Planning&Administration Section,The 8th Company Yoshiko Matoba General Manager,Human Resources&General Affairs Division Masahiro Sogabe General Manager,Legal Division Yoshihito Tabe General Manager,Sustainability Management Division(served as Moderator)FYE 2022Carbon CreditsSustainability Advisory Board Members Mr.Fumihiro Kajikawa Director,Environmental Economy Office,Ministry of Economy,Trade and Industry Ms.Yukari Takamura Professor of Institute for Future Initiatives,The University of Tokyo Mr.Hidemi Tomita Managing Director,LRQA Sustainability K.K.FYE 2021Response to Climate ChangeSustainability Advisory Board Members Ms.Yukari Takamura Professor of Institute for Future Initiatives,The University of Tokyo Ms.Fuyumi Naito Director of Decarbonized Business Promotion Office,Climate Change Policy Division,Global Environment Bureau/Chief Sustainability Officer,Ministry of the Environment Mr.Hidemi Tomita Director,Lloyds Register Japan K.K.FYE 2020Sustainable Business Direction in a Circular EconomySustainability Advisory Board Members Mr.Eiji Hosoda Professor of Business Administration and Information Science,Chubu University,Professor Emeritus,Keio University Ms.Mami Fukuchi Associate Professor of Graduate School of Interdisciplinary Information Studies,The University of Tokyo Mr.Hidemi Tomita Director,Lloyds Register Japan K.K.FYE 2019Climate ChangeSustainability Advisory Board Members Mr.Kenichi Suganuma Ambassador Plenipotentiary and Extraordinary(in charge of climate negotiations),Ministry of Foreign Affairs Mr.Tsuyoshi Mizuguchi Professor of Economics,Takasaki City University of Economics Mr.Hidemi Tomita Director,Lloyds Register Japan K.K.Meeting of the Sustainability Advisory BoardOverviewoftheSustainabilityAdvisoryBoard2022Governance17EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupStrategiesRisks and ManagementMetrics and TargetsCollaboration with Outside InitiativesPolicy&Basic ApproachOur Sustainable History and Value Creation ModelGovernance(Job Titles at the Time)ThemeParticipationFYE 2023SDGs and Sustainability(Examples:Latest trends,Sustainability Action Plans,GHG emission reduction and climate change measures,business and human rights,supply chain management,etc.)100.0%FYE 2022SDGs and Sustainability(Examples:Latest trends,risks and opportunities of the ITOCHU Group,GHG emission reduction and climate change measures,business and human rights,supply chain management,etc.)100.0%FYE 2021Sustainability Trends(ITOCHU Group Material Issues,Risks,and Opportunities)100.0%FYE 2020Global Sustainability Trends(ESG,SDGs,Climate Change,Supply Chains)100.0%FYE 2019“ESG Climate Change Response,Business&Human Rights”99.9%GovernanceWhile pursuing sustainable activities,ITOCHU engages in various activities to raise awareness within the Company so as to further ITOCHU Group employees understanding and to work through business on solutions to social issues in a manner that conforms to the latest global trends.SustainabilityAwarenessActivitiesatITOCHUITOCHU conducts general sustainability education for all directors and employees every year,with the aim of promoting sustainability throughout the company and conducting awareness surveys.This training is intended to promote understanding of trends in the environment,business,and human rights,as well as ITOCHUs initiatives,policies,and measures in response to these trends.In addition,the opinions and level of understanding received from the Employee Questionnaire conducted at the end of the course are utilized in the next years training.RecentSustainabilityAwarenessActivitiesWe have been holding in-house sustainability seminars on a continuous basis since 2007 to bring in outside insights and ideas on various sustainability issues.We engage in various sustainability trainings for ITOCHU personnel so as to promote sustainability awareness within our Group.We strive to raise awareness of the environment,human rights,and other aspects of sustainability that must be understood according to each business domain and responsibility.SustainabilitySeminarsSustainabilityTrainingsTraining TitleApplicable EmployeesTraining DetailsParticipants in FYE 2023Group ESG Managers ConferenceGroup ESG managersBasic knowledge and explanation of work duties for ITOCHU Group ESG promotion supervisors94Training New RecruitsNew employeesITOCHU Group sustainability promotion110Training in Preparation for Overseas AssignmentsEmployees designated for overseas assignmentPoints of caution related to ITOCHU Group sustainability and promoting sustainability overseas212Training for Group Executive OfficersGroup executive officersITOCHU Group sustainability and importance of Group alliances124Training for Newly Appointed Section ManagersNew Section ManagersExamples of businesses which promote the ITOCHU Group sustainability and which balance social issues and business feasibility55Sustainability Survey WorkshopEmployees conducting sustainability surveysImportant items in the Sustainability Action Guidelines for Supply Chains and sustainability surveys90FYE 2022When and Where Does CO2 Occur?Life Cycle Assessment(LCA)Study SessionMethod of Calculating Scope 3 Emissions in the ITOCHU GroupFYE 2021Are the SDGs Profitable?FYE 2019Business and Human Rights(in the Supply Chain)FYE 2018Business and Human Rights(Development)FYE 2017What Companies and Consumers Can Do to Create a Sustainable SocietyIn October 2021,we invited Yasushi Furushima of the Environment and Energy Policy Team in Mizuho Research&Technologies for a sustainability seminar titled,“When and Where Does CO2 Occur?”In the introductory and practical versions,we learned a wide range of practical examples,analysis methods,and initiatives for life cycle assessment in various industries and products,and it was a good opportunity for each individual to think about how to apply them to their main business.Moreover,in February 2022,we held a practical seminar titled“Method of Calculating Scope 3 Emissions in the ITOCHU Group.”We are working to improve our abilities so that all related employees can calculate Scope 3 for themselves.RecentSeminarsSustainability Seminar18EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupStrategiesRisks and ManagementMetrics and TargetsCollaboration with Outside InitiativesPolicy&Basic ApproachOur Sustainable History and Value Creation ModelGovernanceOur group has established the ITOCHU Group Sustainability Policy based on our corporate philosophy and changes in the external environment.We are now promoting initiatives to contribute to sustainability on an organizational and systematic basis.Specifically,we have incorporated our groups material issues into the Sustainability Action Plan linked to our business activities.We want to help solve issues through trading and business investment based on the policies in our medium-term management plans.We review and disclose the issues we should address,the applicable business fields,our specific approaches,performance indicators and state of progress every year in our Sustainability Action Plan.Please refer to the“ITOCHU Group Sustainability Policy(P11)”for details.FlowofSustainabilityPromotionPolicyCode of Ethical ConductThe ITOCHU GroupSustainability PolicyEnvironmental PolicyHuman Rights PolicyBasic Activity Guidelines on Social ContributionSustainability Action Guidelines for Supply ChainsMaterial IssuesEvolve Businesses through Technological InnovationAddress Climate Change(Contribute to a Decarbonized Society)Develop a Rewarding Work EnvironmentRespect and Consider Human RightsContribute to Healthier and More Affluent LifestylesEnsure Stable Procurement and SupplyMaintain Rigorous Governance StructuresCorporate Mission&Guideline of Conduct“Sampo-yoshi”CorporateMissionGuideline of ConductI am One with Infinite Missions SocietyBuyerSellerBusiness ActivitiesMid-term Management PlanSustainability Action PlanPlanCheckActDoManagement Resources-Financial Capital-Human and Organizational Capital-Business Portfolio-Business Know-how-Trust and Creditworthiness-Client and Partner Assets-Natural Resources-Relationship with SocietySolving Sustainability Issues Through Business ActivitiesTextileFoodMachineryMetals&MineralsEnergy&ChemicalsThe 8thHeadquartersGeneral Products&RealtyICT&Financial BusinessFlowofSustainabilityPromotionStrategies19EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupGovernanceRisks and ManagementMetrics and TargetsCollaboration with Outside InitiativesPolicy&Basic ApproachOur Sustainable History and Value Creation ModelStrategiesStrategiesRisksandOpportunitiesforEachMaterialIssue20EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupGovernanceRisks and ManagementMetrics and TargetsCollaboration with Outside InitiativesPolicy&Basic ApproachOur Sustainable History and Value Creation ModelMaterial IssuesRisksOpportunitiesEvolve Businesses through Technological Innovation Obsolescence of existing business models resulting from the emergence of new technologies,such as IoT and AI.Labor shortage in developed countries,loss of excellent human resources in businesses in which efficiency improvement is delayed.Creation of new markets and provision of innovative services.Utilizing new technologies for optimizing human resources and logistics,increasing competitiveness by promoting work style reform.Address Climate Change(Contribute to a Decarbonized Society)Transition Risk Reduction in demand for fossil fuels due to business restrictions on greenhouse gas emissions.Physical Risk Damage to business due to the increase in abnormal weather(e.g.,droughts,flooding,typhoons and hurricanes).Increase in renewable energy and other business opportunities which will contribute to alleviating climate change.Retention and acquisition of customers by strengthening supply structures that can adapt to abnormal weather.Develop a Rewarding Work Environment Decline in labor productivity,loss of excellent human resources,missed business opportunities,increase in health-related expenses,and other events that would result from failure to take appropriate measures.Improvement of labor productivity,health and motivation,securing of excellent human resources,enhanced capability of responding to changes and business opportunities,and other events that will result from providing a motivating workplace environment.Respect and Consider Human Rights Business delay or business continuity risk resulting from the occurrence of a human rights problem in business activities that expands(geographically).Decline in credibility that may result from defects in the social infrastructure services we provide.Stabilization of business or securing of excellent human resources resulting from harmonious coexistence with local communities.Establishment of safe,stable supply system for product enabled by the consideration of human rights and improvement of work environment in the supply chain.Contribute to Healthier and More Affluent Lifestyles Decline in credibility that would result from the occurrence of consumers and service users safety or health issues.Impact on business of destabilization of the market or social security system based on policy change.Increase in demand for food safety,security and health improvement.Expansion of information,financial and logistics services resulting from an increase in consumer spending or penetration of the internet.Ensure Stable Procurement and Supply Impact of opposition movement resulting from the occurrence of an environmental problem and worsening relationship with local communities.Structural exhaustion of the overall industry caused by the occurrence of price competition,mainly in the consumer-related sector.Increase in resource demand attributed to an increase in population and improvement of living standard in emerging countries.Winning customer trust or creating new businesses with a stable supply of environmentally friendly resources and materials.Maintain Rigorous Governance Structures Occurrence of business continuity risk or unexpected loss resulting from the malfunction of corporate governance or internal control.Improvement of transparency in decision-making,appropriate response to changes and establishment of a stable basis of growth enabled by the establishment of a firm governance system.StrategiesSocialImpactsofEachMaterialIssueMaterial IssusImpact ClassificationImpact DescriptionEvolve Businesses through Technological InnovationInnovation Promote DX,and improve productivity and operational efficiency of the entire industry.Leverage new technologies(such as Fintech,IoT,AI,and remote technology,etc.)and business models,and promote the creation of new businesses and the provision of innovative services utilizing consumer contact points.Address Climate Change(Contribute to a Decarbonized Society)GHG Emissions Comply with the Japanese governments target,achieve“virtually zero”GHG emissions by 2050.Furthermore,aim for“zero offset”by 2040 through the active promotion of businesses that reduce emissions,and contribute to reducing the impact of climate change.Climate Change Opportunities Promote integrated projects including the development,operation,and fuel supply of ammonia-fueled vessels,and contribute to net zero emissions of GHGs in the marine and shipping sectors.Develop,own,and operate renewable energy power plants so as to realize a stable supply of renewable energy,and contribute to mitigating the effect of climate change.Provide a stable supply of AI storage batteries that help optimize the balance of power supply in household regions and contribute to mitigating the effect of climate change.Promote sales of electric vehicles(EVs)and hybrid vehicles(HVs),and contribute to global warming countermeasures in the transportation sector.Promote environmentally friendly energy use in regional heat supply,and contribute to mitigating the effect of climate change.Climate Change Adaptation Diversify origin and development of local industries so as to hedge weather risks,and reduce the impact of extreme weather and global warming in food,forestry sectors.Transition Risk Promote efforts to completely withdraw from fuel coal mine interests,and contribute to mitigating the effect of climate change.Work with specialized companies on resource development projects that take into account GHG reduction(Transition Fuel),and contribute to mitigating the effect of climate change.Capital Introduction Continue to invest in the development of technologies that contribute to the reduction of greenhouse gas emissions,such as CCS(CO2 storage)and CCU(CO2 utilization),and contribute to mitigating the effect of climate change.Promote businesses related to the stable supply of materials necessary for the production and supply of fuels such as hydrogen and ammonia,raw materials such as nickel and PGM,and storage batteries,and contribute to mitigating the effects of climate change.Expand the use of sustainable by-products as an alternative to cement,which is indispensable for civil engineering and construction,and contribute to mitigating the effect of climate change.Pollution Prevention and Resource Recycling Work with local specialized companies in Europe and the Middle East,promote waste disposal and waste power generation projects,and contribute to mitigating the effect of climate change.Water Resources Work with local specialized companies mainly in Europe and the Middle East,promote water treatment business,and promote effective use of water resources and contribute to reducing the environmental impact.Develop a Rewarding Work EnvironmentLabor Practices Prohibit all forms of discrimination,create an environment in which employees with childcare,nursing care,or illness can also play an active role,and support the activities of diverse human resources.Enhance occupational health services and health&safety management system,and promote employees health and safety.Penetrate labor standards,work style reform,enhancing employee benefits,and promote improvement of labor productivity and employee engagement.Develop training programs for all levels from a global perspective,develop and utilize personnel systems based on management by objectives,and promote the development of excellent human resources.Respect and Consider Human RightsLabor Practices Establish and conduct fair recruitment,harassment prevention,human rights training,and grievance hotlines,and reduce the negative impact on human rights.Mining Give due consideration to the environment,health and occupational safety(EHS)and coexistence with local residents,and promote sustainable mining operations.Contribute to medical care and education for local communities in the areas where we operate our mines.Forest Improve supply chain transparency in the procurement of raw materials for wood,palm oil,natural rubber,food,etc.,and prevent negative impacts on forests,the environment and local residents.Supply Chain Continuously conduct surveys on human rights,society,and the environment of new businesses,business investments and major suppliers,and reduce negative impacts of human rights,society and the environment throughout the value chain.Conduct human rights due diligence,and reduce negative human rights,society and environment throughout the value chain.Community Contribution Promote social contribution activities for local communities,and realize a symbiotic community where sports and cultural exchange are possible.Strategies21EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupGovernanceRisks and ManagementMetrics and TargetsCollaboration with Outside InitiativesPolicy&Basic ApproachOur Sustainable History and Value Creation ModelStrategiesSocialImpactsofEachMaterialIssueMaterial IssusImpact ClassificationImpact DescriptionContribute to Healthier and More Affluent LifestylesFood Safety Select and concentrate on suppliers to ensure stable procurement of safe and secure food products,and provide safe products to our customers.Work with suppliers,provide products with food information and nutritional balance,and contribute to the promotion of peoples health.Medical Health Provide advanced medical equipment and advanced medical services,develop safe pharmaceuticals and other product,and contribute to the improvement of peoples health.Retail Finance Expand financial services that support people who need financing for their daily lives and business continuity(low-income people,etc.),and contribute to a healthy and prosperous life.Ensure Stable Procurement and SupplyForest Increase supply chain transparency in the procurement of raw materials for wood,palm oil,natural rubber,food,fiber,etc.,and prevent negative impacts on forests,the environment and local residents.Plastic Work with brand owners,supply environmental-friendly materials such as bioplastics,establish recycling and reuse programs,and contribute to solving social problems such as marine plastics and waste plastics.Electric Power,Mining,Oil and Gas Fields Reduce impacts on biodiversity through ESG risk assessment focusing on biodiversity in investment projects(electric power,mines,oil and gas fields,etc.).Stable Supply of Resources Diversify production areas to hedge weather risks,cultivate new production areas through the development of local industries,and contribute to the stable supply of agricultural products.Work with key partners,maintain a value chain of mining resources and next-generation fuels(hydrogen and ammonia)that reinforces existing achievements,and contribute to the stable supply of resources.Supply Chain Strengthen communication on the respect for human rights and environmental management with major suppliers of natural resources,and prevent negative impacts of suppliers on the economy,environment,and people.Further expand and increase the handling of sustainable materials,and contribute to the stable supply of textile products.Pollution Prevention and Resource Recycling Contribute to the promotion of the effective use of resources and the reduction of adverse environmental impact in our own offices and business activities such as waste disposal and food.Comply with relevant chemicals laws and regulations,and minimize the adverse effects on human health,the environment and the stable supply of chemicals.Water Resources Promote the efficient use of water in our own offices and business activities,promote water treatment projects in water-stressed areas,and contribute to the promotion of effective use of water resources and reduction of environmental impact.Maintain Rigorous Governance StructuresGovernance Provide highly effective supervision of management,increase the transparency of decision-making,ensure appropriate and efficient business execution,and meet the expectations of our stakeholders through sustainable growth.Establish a group risk management system,maintain continuous performance,and meet the expectations of our stakeholders.Further foster awareness among employees that compliance at all times constitutes a contribution to the company and society,and mitigate adverse impacts on the economy(competition practices,procurement practices,etc.Strategies22EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupGovernanceRisks and ManagementMetrics and TargetsCollaboration with Outside InitiativesPolicy&Basic ApproachOur Sustainable History and Value Creation ModelStrategiesAs a group which operates business globally,we constantly monitor risks to our business from changes in the social situation and business environment in each country such as measures and legislation relating to the environment and society.The Division Company Management Committees(DMC)are advisory bodies to our company presidents who have overall responsibility for the management and business activities in each of our companies.The DMC review business risks and opportunities including those relating to sustainability in terms of the environment and society every year.They then formulate an annual plan after prioritizing various measures and businesses.Each company presents its annual financial plan to the Headquarters Management Committee(HMC)as the executive body and the Board of Directors as the supervisory body.Finally,the Board of Directors approves these plans upon comprehensively analyzing and deliberating them from a sustainability perspective.Our group recognizes that risk management is a critical management issue.With reference to the COSO-ERM framework concept,the ITOCHU Group has established a basic policy for risk management.We have set up the necessary risk management structures and methods.We periodically collect information on trends focused on existing and new regulations relating to climate change,supply chains,human rights and other areas of sustainability as well as information on sustainability-related risks and opportunities which impact our businesses around the world.We then identify the importance of that risks and opportunities.Our group delegates discretionary powers to each of our companies to achieve prompt decision-making.We manage sustainability-related risks and opportunities associated with business operations at the division company level.The DMC of each company deliberates on management policies,and investments,financing,guarantees and business which affects our management.The division company president then decides on those matters.These decisions are incorporated into businesses,products,group companies,supply chains,strategies and portfolio assessment methods depending on the situation at each stage of business.Identification,AssessmentandManagementofSustainability-relatedRisksandOpportunitiesRisksandManagementOur group has established a variety of in-house committees and responsible departments to deal with various risks and opportunities including sustainability-related risks and opportunities.At the same time,we have set up the necessary risks management structures and management methods.For example,we have set up various management rules,investment criteria,risk limits and transaction limits,and reporting and monitoring structures.We then manage risks and opportunities all-inclusively and individually.Each of our companies reports the risks and opportunities it manages to our in-house committees.The HMC and/or the Board of Directors then approves those risks and opportunities after they have been deliberated on by the committees according to their level of importance.The Internal Control Committee reviews the effectiveness of the management structure every year and makes a report to the Board of Directors.Please refer to the”Governance Risk Management(P190)”for details.IntegrationintotheEnterpriseRiskManagementSystem23EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupGovernanceStrategiesMetrics and TargetsCollaboration with Outside InitiativesPolicy&Basic ApproachOur Sustainable History and Value Creation ModelRisksandManagementDivision CompanySDGs TargetsImpact ClassificationIssues to AddressBusiness AreaCommitmentSpecific ApproachPerformance IndicatorsDegree of ProgressTextile CompanyInnovationImproving and increasing the efficiency of business processesTextile products in generalWe will strive to sustain and improve the textile industry by promoting the digital transformation of our entire group.Contribute to an increase in the efficiency of business processes,the optimization of inventory and the strengthening of customer relationship management in group companies by building a system to utilize IT and data.Promote the digital transformation of group companies and then aim to increase profits,improve the efficiency of business,cut costs and reduce inventory/disposal losses by utilizing IT and data.Sales increase was confirmed at JOIX CORPORATION by consolidating the inventories into“EC inventory”which used to be in stock at several warehouses.We will continue to verify the effects together with other measures.In June 2022,DESCENTE implemented the production DX system“SUPPLYZ fashion”.This will lead DESCENTE,which has the largest product procurement in Textile Company group,to streamline the labour-intensive operations to be more cost-effective.Metals&Minerals CompanyInnovationNext-generation business development Mining business Resource-related business Logistics businessWe will contribute to improving business efficiency and eliminating concerns about skilled worker availability while fully considering the health and safety of on-site employees.Promote an increase in efficiency of mine operations and facility management utilizing digital transformation.Promote conversion to the automatic operation of mining equipments such as underground mining equipments and dump trucks.Promote initiatives that contribute to an improvement in the health and safety of employees at operation sites and in the overall business efficiency.We signed a memorandum to collaborate in decarbonization and digital transformation with CSN and started demonstration experiment with the aim of contributing to increased safety,operational efficiency and decarbonization at the iron ore mine(Casa de Pedra CdP Mine)that we invest and CSN steel work.In FYE 2023,it began the full-scale operation of GE Digitals operation and asset management software at the CdP Mine.We also agreed to collaborate on decarbonization of the CSN Group mainly at the CdP Mine with Shell,a major resource company.Food CompanyInnovationNext-generation business developmentOverall food-related businesses We will aim to improve productivity and increase business efficiency in the overall food-related field by promoting systemization of RPA and AI.We will aim to create innovative services and new business by integrating resources and new technologies of the ITOCHU Group.We will aim to improve productivity and increase business efficiency by introducing and utilizing new systems and new technologies focused on the food distribution field.We will create unique new value by combining the wide ranging product lineup,functions and expertise of our group based on retail customer needs.Status of promoting business reform in the food-related field with the introduction of AI,RPA and other systems.Status of promoting the development of new products and services through the food wholesale business developed by the ITOCHU Group.We continue to promote electronic invoicing through data exchange between ITOCHU and its group companies.We have formed a business alliance with sinops Inc.,which has demand forecasting capabilities for retailers.We are collaborating with partners(retailers,wholesalers,and manufacturers)to improve logistics efficiency by optimizing the value chain.Our group companies have implemented functions such as automatic ordering and delivery route optimization using AI technologies to promote logistics efficiency and labor-saving operations.We have launched“FOODATA”,the service that supports the effective use of data in the product planning and development processes of food manufacturers.ICT&Financial Business CompanyInnovationMaintenance of industrial,logistics,and transportation infrastructureICT infrastructure development businessWe will contribute to realize safe secure,and highly convenient social infrastructure through providing various ICT solutions.Maximize the added value of our ICT solutions by continuously sourcing new products and services.Increase the number of partnerships.We have partnered with five new vendors to provide stable ICT solutions.We provided comprehensive support to our clients in their digitalization and helped them to continue to grow their businesses.The 8th CompanyInnovationNext-generation business developmentConsumer related businessWe will aim to create innovative services and new business by integrating assets and new technologies of the ITOCHU Group.Increase contact with consumers by promoting the retail business in our initiatives to understand consumer behaviors,and combine the wide range of products,functions,and expertise of the Group to create unique new value that will be profitable for consumers and communal society.Aim to develop new businesses and cultivate new customers by taking full advantage of the business foundations possessed by the ITOCHU Group.We have entered into a capital and business alliance agreement with Couger Inc.-a company which independently develops virtual human agents with advanced recognition technology.We are utilizing the technology of Couger Inc.to develop an AI model to support store manager operations at FamilyMart stores.We plans to introduce the AI model to approximately 5,000 stores to support store manager operations and provide optimal data tailored to each stores situation and store manager,leading to labor savings and improved store management.ITOCHU,FamilyMart,NTT Docomo and CyberAgent established Data One,an advertising distribution company,in October 2020.Data One sell new targeted advertising products based on actual purchase data in real stores.It is characterized by its provision of a streamlined service including purchase effect verification.It has 29 million ad IDs(as of March 2023)and aims to improve the consumer purchasing experience and digital marketing efficiency.ITOCHU and FamilyMart established Gate One,a media business company using digital signage,in September 2021.We have been installing large signage inside FamilyMart stores,turning stores into a form of media.We have installed signage in 3,000 stores by June 2022.By Feb 2024,we aim to install signage in 10,000 stores.By distributing unique contents that customers enjoy,we will raise our media value and aim to become the third form of media,after TV and the internet.EvolveBusinessesthroughTechnologicalInnovation:ActionPlansMetricsandTargetsAs a concrete initiative to address the Material Issues we have identified,we embed these issues into the Sustainability Action Plan for each business sector.Each company deduces the risks and opportunities associated with critical sustainability issues in each business sector,formulates a Sustainability Action Plan that stipulates the approach and success indicators to achieve their medium-and long-term commitments,and holds semi-annual review meetings for each unit affected by the plan.This implementation of the PDCA cycle advances sustainability.In addition,each unitheadquarters administrative divisions,domestic branches and offices,overseas locations,etc.formulates a Sustainability Action Plan according to its business and function,the goal being to further entrench the foundations supporting business activities.After the Materiality is identified,we reflect it in sustainability action plans in each business area as specific measures for contributing to the solution of social issues.We promote sustainability by defining the Commitment,which shows how we achieve medium-and long-term growth and provide value to society,and specific approach and performance indicators for achieving the Commitment.SustainabilityActionPlans24EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupGovernanceStrategiesRisks and ManagementCollaboration with Outside InitiativesPolicy&Basic ApproachOur Sustainable History and Value Creation ModelMetricsandTargetsDivision CompanySDGs TargetsImpact ClassificationIssues to AddressBusiness AreaCommitmentSpecific ApproachPerformance IndicatorsDegree of ProgressMachinery CompanyClimate Change OpportunitiesTaking ountermeasures against climate changeOverall power generation businessWe will develop power plants with a good balance between renewable energy power generation and conventional power generation,thereby contributing to the development of countries and regions in a sustainable manner that is optimized for each.Pursue opportunities to invest aggressively in renewable energy power generation through analyses of countries and regions.energy power generation through analyses of countries and regions.FYE 2031:Target to achieve a renewable energy ratio more than 20%(equity interest basis)and reflect this to the future strategy.We continue to operate wind power projects.(Butendiek and Cotton Plains).We invested in wind farms consisting of Kimball Power Plant(Nebraska,U.S.)and South Fork Power Plant(Minnesota,U.S.)in March 2020.We acquired all equity interests in Bay4 Energy Services,LLC in December 2020.Bay4 Energy Services,LLC operates,maintains and provides asset management services for to approximately 1,500 solar power plants with a total capacity of 2.3 GW in the U.S.We established Tyr Energy Development Renewables,LLC(“TED”)to accelerate the development of renewable energy in the U.S.TED is currently developing approximately 2 million kW of renewable energy assets,primarily solar power plants.Negotiations are also underway to conclude a long-term renewable energy power purchase agreement(PPA).In December 2022,we signed an agreement to invest in the Prairie Switch wind farm(Texas,USA).The project is currently under construction and is expected to be completed by the end of 2023.The renewable energy ratio based on the generation project equity capacity is 16.1%(as of March 2023).Machinery CompanyClimate Change OpportunitiesTaking ountermeasures against climate changeZero emission vesselsWe will contribute to decarbonization in the shipping and maritime sectors through the promotion of an“integrated project”encompassing the development,ownership and operation of ammonia-fueled ships,the development of fuel supply chains,and fuel procurement.In addition to the joint development of ammonia-fueled vessels with the Japanese consortium and the ownership and operation of these vessels,ITOCHU will take the lead in the development of supply chain of an ammonia bunkering and fuel procurement,aiming for early materialization of the pilot project.Establish a value chain centered on ammonia as an alternative marine fuel by promoting the development,ownership,and operation of ammonia-fueled vessels,the development of fuel supply chains,and the procurement of ammonia fuel in an integrated manner.After 2026,promote the spread of ammonia-fueled vessels and the establishment of a supply chains to contribute to the decarbonization of the maritime industry.Aiming to contribute to the decarbonization of international shipping and build a new business,we are promoting an“integrated project”for ammonia-fueled vessels.The project is developing(1)development of ammonia-fueled vessels,(2)ownership and operation,(3)development of fuel supply chains,and(4)procurement of fuel ammonia in a comprehensive and concurrent manner.In April 2022,we concluded a memorandum of understanding with the Maritime and Port Authority of Singapore to promote the development of ammonia bunkering facilities in Singapore,together with partner companies that are developing bunkering facilities in the country.ITOCHU and partners are promoting the establishment of a safe fuel supply system and the development of ammonia bunkering vessels.In November 2022,together with partner companies jointly selected for the Green Innovation Fund project,we obtained Approval in Principle from Nippon Kaiji Kyokai for the basic design of a large ammonia-fired bulk carrier.The development of ammonia-fired large bulk carriers is underway with safety in mind.As part of the project,ITOCHU is facilitating“Joint Study”as a framework for organizing and discussing common issues related to the introduction of ammonia as an alternative marine fuel,with 34 domestic and foreign companies and organizations,including major resource companies,energy companies,steel manufacturers,shipping companies,and shipbuilders.In April 2022,the“Joint Study for Ammonia Bunkering Safety”was newly launched as a framework for exchanging opinions on ammonia bunkering safety standards with major port authorities and related industry players,and its activities will be expanded in cooperation with the existing“Joint Study”.More than 50 presentations were made by concerned parties and experts.Machinery CompanyClimate Change OpportunitiesTaking countermeasures against climate changeSales of passenger cars and commercial vehiclesWe will achieve the eco-friendly mobility society by strengtheningbusinesses of electric vehicles(EVs),hybrid vehicles(HVs),vehicles with a reduced environmental impact,and those related.Contribute to spread of eco-friendly vehicles by increasing business of eco-friendly and high-efficiency products,such as EVs,HVs,vehicles with a reduced environmental impact,and related parts.Expand sales of eco-friendly products in response to the expanded lineup of EVs,HVs,vehicles with a reduced environmental impact,and similar vehicles from automakers as our business partners.We have invested in a ride sharing service company called Via(2019).We have been providing efficient transport system to mainly rural areas.We have been participating in a small electric truck demonstration experiment since January 2019 and in developing features around EVs,and have started to provide various solutions as a partner of ISUZU“EVision”,total solution program for ISUZU EVs in Japan market.We aim to reduce environmental load through shifting to EVs and also shifting to renewable energy with EVs.In Sep 2021,“Combination of developing battery-exchangeable EVs and utilizing renewable energy Sector coupling demonstration project”was adopted as the Ministry of the Environment-commissioned project.We aims to commercialize battery-exchangeable EVs and as the owner of this project.In November 2022,the demonstration and operation started with a prototype(Two battery-exchangeable EV trucks,six battery packs,and one battery-exchange station)developed and manufactured under the project.We have invested in 2018 in China called Dishangtie Car Rental,an electric commercial vehicle rental and maintenance service.We have engaged a MOU to study about expanding such EV maintenance rental and leasing to abroad countries.Machinery Company Water Resources Pollution Prevention and Resource RecyclingImproving water and sanitation infrastructuresWater and environmental projectsWe will contribute to improve the sanitary conditions,the development of economic activities,and the protection of the global environment through the appropriate treatment and effective use of water and waste.Expand water and environment projects to promote the appropriate use and treatment of water and the effective utilization of resources,and reduce the burden on the environment.Expand and diversify the investment portfolio in the water and environment field.(Plan to work on decarbonization project development utilizing JCM etc.)WaterFieldWe have developed a water supply service business in the U.K.and seawater desalination business in Australia and Oman.We aim to continue contributing to stable water supply in regions through seawater desalination,and water supply/and sewerage businesses.At the same time,we are looking to be involved in solutions-based business for water issues in each industrial sector across a range of industries.EnvironmentalField We operate four municipal solid waste incineration and power generation plants(waste to energy plant)in the U.K,which treat 1.3 million tons of waste annually,accounting for 15%of the UKs waste incineration market,and generate enough electricity to power 160,000 British households.In November 2020,we acquired a 20%stake in Environment Development Company Ltd.(current SSES),which provides integrated hazardous waste management services in Jubail Industrial City in Saudi Arabia.In August 2021,we started to provide the government of Serbia with partial service of energy-from-waste project.Appropriate treatment of municipal solid waste in City of Belgrade and reduction of environmental pollution and greenhouse gas emissions has begun without environmental loads.Recycling of construction waste has also begun.We are currently constructing a municipal solid waste incineration and power generation plant(waste to energy plant).7 SDGs certified,with an expected reduction of approximately 210,000 tons of greenhouse gas emissions,and,in 2022,the project obtained Certification of Carbon Credit by Gold Standard.In December 2020,we entered a concession agreement for the development and operation of an Energy-from-Waste(EfW)plant with Dubai Municipality.This is the first EfW project in Dubai and will be one of the largest EfW plants in the world,processing half of municipal solid waste from the emirate per year(1.9 million tons),which is currently under construction.We are aiming to enhance the functions of our initiatives that to capture strong demand for waste management services in light of intensifying environmental regulations in each the industrial sector and the growing awareness of ESG and SDGs more generally in the same way as in the water field.AddressClimateChange(ContributetoaDecarbonizedSociety):ActionPlansMetricsandTargets25EnvironmentTop CommitmentGovernanceSocietySDGs Bond(Sustainability Bond)Evaluation by SocietyIndependent Assurance ReportSustainability at the ITOCHU GroupGovernanceStrategiesRisks and ManagementCollaboration with Outside InitiativesPolicy&Basic ApproachOur Sustainable History and Value Creation ModelMetricsandTargetsDivision CompanySDGs TargetsImpact ClassificationIssues to AddressBusiness AreaCommitmentSpecific ApproachPerformance IndicatorsDegree of ProgressMetals&Minerals Company Climate Change Opportu-nities Capital Intro-ductionTaking countermeasures against climate change Resource recycling business Mining business Environmental business Materials-related business We will realize stable resource supply as our social mission and responsibility while fully considering its environmental impact.We will contribute to climate change issues through businesses that help to reduce greenhouse gases(e.g.,lighter-weight vehicles and electric vehicles(EVs)and the stable supply of essential materials.Take the lead in developing recycling-orientated business.Promote initiatives for the social implementation of hydrogen and ammonia as next-generation resources and raw materials in client industries(e.g.steel and power).Promote businesses to contribute to the stable supply of nickel,PGM and other materials necessary in the manufacture and supply of hydrogen,green materials and energy,and storage batteries.Continue to be involved in the development of technologies that contribute to the reduction of greenhouse gas emissions,including technologies for carbon dioxide capture and storage(CCS)and carbon dioxide capture and utilization(CCU).Promote initiatives to completely withdraw from thermal coal mine interests while continuing to realize stable resource supply as our social mission and responsibility through trading in regards to our coal business.Implementation and expansion of businesses that contribute to developing lighter-weight vehicles and shifting to EVs(e.g.,aluminum and copper).Promote recycling-orientated business.Promote initiatives for the social implementation of hydrogen and ammonia as next-generation resources and raw materials in client industries(e.g.,steel and power).Promote examination toward technological development and commercialization to contribute to a reduction in greenhouse gas emissions,including hydrogen,green material and energy production,and carbon dioxide capture and storage(CCS)and carbon dioxide capture and utilization(CCU).Strive to withdraw from thermal coal mine interests.Realize initiatives in businesses that contribute to developing lighter-weight vehicles and shifting to EVs(e.g.,aluminum and copper).We are contributing to the effective utilization of limited resources and the supply of environmental materials by promoting 3R W(reduce/reuse/recycle waste management)through our supply chains toward the realization of a sustainable society.Specifically,we are steadily promoting initiatives in venous industries.This includes the reuse and recycling of store facilities and fixtures,the expansion and increase in sophistication of metal scrap and waste treatment,and strengthening of cooperation with the REVER HOLDINGS CORPORATION(current TRE HOLDINGS CORPORATION)general recycling company we invested into last year.We agreed with Nel ASA(Norway),who is the worlds largest manufacturer of electrolysers that are essential for green hydrogen production,to create a strategic partnership in the hydrogen industry.We and Nel are jointly exploring hydrogen business opportunities.We are promoting to realize the Platreef project and others in the PGM/nickel business where demand is expected to grow significantly due to the worldwide spread of electric vehicles and fuel cell vehicles,and also expanding trade activities of such materials.We continue to conduct a commercialization survey of a by-product hydrogen project in northern Kyushu with partners for the social implementation of hydrogen.We have an investment into Australia-based MCi,who possesses mineral carbonation technologies.We are promoting this technology for the Japanese market.In July 2022,we signed an MOU with TAISEI CORPORATION to begin verification of the use of this calcium carbonate as raw materials for concrete.We are promoting the examination of other carbon dioxide capture,utilization and storage(CCUS)technologies and various initiatives that will lead to a reduction in CO2 emissions.As per the Medium-Term Management Plan,we decided to withdraw from thermal coal mine interests with a perspective of strengthening contribution and initiatives to SDGs.We already divested our Drummond mine interests in Colombia that had accounted for the majority of the ITOCHUs thermal coal interests and also divested Ravensworth North coal mine interests in Australia producing both thermal and coking coal.We are currently promoting business in North America with Nikkeikin Aluminum Core Technology Company,Ltd.which we invested into in FYE 2020 for the manufacturing of aluminum parts for automobiles.It started commercial production in the beginning of 2023.In addition,we will continue to promote aluminum raw material and product trading to contribute to the development of lighter-weight vehicles.Energy&Chemicals Company Transition Risk Stable Supply of ResourcesStably supplying energy taking into account climate change and the environmentOil/gas interests and liquefied natural gas(LNG)projectsWe will pro
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SUSTAINABILITYREPORT2023EnvironmentSocialGovernanceAs of March 1,2024Please refer to the Sustainability Website for the latest information.Top Commitment 5Message from Executive Vice President 5Philosophy and Approach Related to Sustainability 6Philosophy and Approach 6The Three Corporate Principles 6Corporate Standards of Conduct 7Mitsubishi Corporation Code of Conduct 7Mitsubishi Corporation Environmental Charter 8Mitsubishi Corporation Social Charter 8Human Rights Policy 8Value Creation Process 9MCs Sustainability Promotion Framework 10MCs Sustainability Promotion Framework 10Sustainability Initiatives 10Companywide Sustainability Framework 11Promoting Sustainability Through Business 12Cycle for Integrating Sustainability into Business Strategy 12Sustainability Promotion Framework in Each Business Group 12Incorporating Sustainability into Individual Projects 13Disclosure(about the Sustainability Website)14Collecting Sustainability Information on a Consolidated Basis 14Dialogue with Stakeholders(Incorporating External Perspectives)15Dialogue with Stakeholders in FY2022 15Sustainability Advisory Committee 16Materiality 18Overview of Materiality 19Integrating Materiality into Management 20Relevance of MCs Materiality to the SDGs 20Materiality Identification Process 21Materiality Details 22Contributing to Decarbonized Societies 22Related SDGs Themes 22Action Plan Regarding this Material Issue 22Conserving and Effectively Utilizing Natural Capital 26Related SDGs Themes 26Action Plan Regarding this Material Issue 26Promoting Stable,Sustainable Societies and Lifestyles 30Related SDGs Themes 30Action Plan Regarding this Material Issue 30Utilizing Innovation to Address Societal Needs 34Related SDGs Themes 34Action Plan Regarding this Material Issue 34Addressing Regional Issues and Growing Together withLocal Communities 39Related SDGs Themes 39Action Plan Regarding this Material Issue 39Respecting Human Rights in Our Business Operations 45Related SDGs Themes 45Action Plan Regarding this Material Issue 45Fostering Vibrant Workplaces That Maximize the Potential of a Diverse Workforce 47Related SDGs Themes 47Action Plan Regarding this Material Issue 47Realizing a Highly Transparent and Flexible Organization 52Related SDGs Themes 52Action Plan Regarding this Material Issue 52Participation in Initiatives 56Support for the UN Global Compact 56WBCSD 56Task Force on Climate-related Financial Disclosures（TCFD）57Climate Change 59Our Approach 59Introduction and Mission 59Creating MC Shared Value 60Partnerships with Stakeholders 61Governance 63New Activities Based on the Roadmap to a Carbon Neutral Society and Midterm Corporate Strategy 2024-Creating MC Shared Value 65Roadmap to a Carbon Neutral Society 65Sustainability as a Growth Lever 651.5C Scenario Analysis 67Approach to Scenario Analysis 67The 1.5C Scenario Used in FY2022 67Influences and Considerations for the FY2022 1.5C Scenario 69Results of the 1.5C Scenario Analysis and Relevant Implications 70Identification of Businesses Subject to Analysis 70Climate Risks 70Climate Opportunity 75Summary 77Physical Risks 78Physical Risk Assesment Process 78Physical Risk Assessment Results 79Key GHG Metrics and Disclosure Highlights 80Targets 80Scope 1&2 81Scope 3 Category 11 82Avoided Emission 83Policy on Coal-fired Power Generation Businesses(IPP and EPC)87Mitigation and Adaption Initiatives 88Renewable Energy 88EV/Batteries 91Ammonia Fuel/Hydrogen Energy/SAF 92CCUS 95Carbon Credit 99Other Low-Carbon/Decarbonized Businesses(Green Logistics,Green Buildings,etc.)100Other Data and Report 107Other Reference Data 107Climate reports 108TCFD reporting 108Natural Gas and LNG-related Data 109Equity Share of Oil and Gas Upstream Production 109Involvement in LNG Projects 110Renewable Energy Related Data 112List of Renewable Energy Businesses 112List of Offshore Power Transmission Businesses 113Environmental Management 114Policy 114MCs Environmental Policy 114Green Procurement Policy 115Structure 116Environmental Management Systems(EMS)Promotion Framework 116Status of ISO 14001 Acquisition 117Environmental Audits 118Environmental Communications 118Initiatives 119Procurement of CO2-Free Electricity for the Head Office Building 119Relevant Data 120Number of Environmental Reports and Corrective Measures 120EnvironmentEnvironmentSustainability Report 2023Mitsubishi CorporationContents1Environmental Data 154Climate Change Data 155Water Resources Data 158Prevention of Pollution Data 159Efficient Use of Resources Data 160Water Resources 121Policy121Targets122Structure123Risk Management123Initiatives125Initiatives to Maximize Water Efficiency 125Initiatives to Reduce Water Consumption 125Initiatives in Water-Stressed Regions 126Providing Solutions through our Business Activities 127External Collaboration128Responding to CDP 128Participation in the Water Project of the Ministry of the Environment of Japan 128Collaboration with NGOs 128Biodiversity 129Policy129Targets130Structure131Risk Management131Identifying and Responding to Dependencies and Impacts on Nature Using the TNFD Beta Framework131Initiatives135Examples of Protection/Conservation Activities through Business Operations135External Collaboration137Status of Participation in the Round Table on Responsible Soy Association(RTRS)137Compliance with the Soy Moratorium(Moratria da Soja)137Participation in CDP 137Cermaq Initiatives138Examples of Collaboration with Government Bodies 138Examples of Collaboration with International Organizations and NGOs 139Foundation and Fund Activities140Examples of Collaboration with Other Companies140Performance141Results of Social Contribution Activities141Prevention of Pollution 142Policy142Targets143Structure144Risk Management144Initiatives145Initiative to Reduce Waste Production(Non-Consolidated Basis)145MC Fashions“THE ME”Business 146Initiatives with Lawson,Inc.to Reduce Waste Losses 146Initiatives to Reduce Waste Production(Mitsubishi Shokuhin Co.,Ltd.)147Application of Life Cycle Analysis in our Salmon Farming Business 147Initiatives to Prevent Oil Spills147External Collaboration148Japan Foreign Trade Council148Efficient Use of Resources 149Policy149Structure150Risk Management150Targets151Initiatives152Recycling and Closed-Loop Business Initiatives(Livestock Feed Production Business)152Recycling and Closed-Loop Business Initiatives(Livestock Business)153Participation in the PET Chemical Recycling Business 153Climate Change 59Our Approach 59Introduction and Mission 59Creating MC Shared Value 60Partnerships with Stakeholders 61Governance 63New Activities Based on the Roadmap to a Carbon Neutral Society and Midterm Corporate Strategy 2024-Creating MC Shared Value65Roadmap to a Carbon Neutral Society 65Sustainability as a Growth Lever 651.5C Scenario Analysis67Approach to Scenario Analysis 67The 1.5C Scenario Used in FY2022 67Influences and Considerations for the FY2022 1.5C Scenario 69Results of the 1.5C Scenario Analysis and Relevant Implications70Identification of Businesses Subject to Analysis 70Climate Risks 70Climate Opportunity 75Summary 77Physical Risks78Physical Risk Assesment Process 78Physical Risk Assessment Results 79Key GHG Metrics and Disclosure Highlights 80Targets 80Scope 1&2 81Scope 3 Category 11 82Avoided Emission 83Policy on Coal-fired Power Generation Businesses(IPP and EPC)87Mitigation and Adaption Initiatives 88Renewable Energy 88EV/Batteries 91Ammonia Fuel/Hydrogen Energy/SAF 92CCUS 95Carbon Credit 99Other Low-Carbon/Decarbonized Businesses(Green Logistics,Green Buildings,etc.)100Other Data and Report 107Other Reference Data 107Climate reports 108TCFD reporting 108Natural Gas and LNG-related Data109Equity Share of Oil and Gas Upstream Production 109Involvement in LNG Projects 110Renewable Energy Related Data112List of Renewable Energy Businesses 112List of Offshore Power Transmission Businesses 113Environmental Management 114Policy 114MCs Environmental Policy 114Green Procurement Policy 115Structure116Environmental Management Systems(EMS)Promotion Framework 116Status of ISO 14001 Acquisition 117Environmental Audits 118Environmental Communications118Initiatives119Procurement of CO2-Free Electricity for the Head Office Building119Relevant Data120Number of Environmental Reports and Corrective Measures120Human Rights 162Policy162Basic Approach on Respect for Human Rights 162Policies and Measures for Specific Matters 165Structure166Consultation Desk Framework166Dialogue with Stakeholders167Human Rights and Environmental Due Diligence168Human Rights and Environmental Risks 168Initiatives170Employee Training 170Educational Support for Indigenous Youths in Australia through the Clontarf Foundation 171Friendship Camp for Mothers and Children 171Examples of External Collaboration172Examples of Collaboration with International Organizations 172Participation in Initiatives 172Grievance Mechanism 173Policy173Processing Inquiries through the Grievance Mechanism 174Eligible Users 174Eligible Topics 174Eligible Product Categories 174Eligible Companies 174Handling of Non-Eligible Inquiries 174Submitting Inquiries175Process After Receiving an Inquiry176Labor Practices 1771.Labor Standards,Labor Environment and Related Matters 177Policy177Basic Approach to Human Resources 177Policy on Labor Practices177Structure179Risk Management179Initiatives180(1)Conducting Fair Recruitment Activities and Providing JobOpportunities 180(2)New Work Styles Befitting MC180(3)Respect for Human Rights181Relevant Data1822.Employee Relations183Policy(Freedom of Association and Collective Bargaining)183Basic Approach183Policy on Freedom of Association and Collective Bargaining183Collective Bargaining183Structure184Risk Management184SocialSocialSustainability Report 2023Mitsubishi CorporationContents2Human Rights162Policy 162Basic Approach on Respect for Human Rights 162Policies and Measures for Specific Matters 165Structure 166Consultation Desk Framework 166Dialogue with Stakeholders 167Human Rights and Environmental Due Diligence 168Human Rights and Environmental Risks 168Initiatives 170Employee Training 170Educational Support for Indigenous Youths in Australia through the Clontarf Foundation 171Friendship Camp for Mothers and Children 171Examples of External Collaboration 172Examples of Collaboration with International Organizations 172Participation in Initiatives 172Grievance Mechanism173Policy 173Processing Inquiries through the Grievance Mechanism 174Eligible Users 174Eligible Topics 174Eligible Product Categories 174Eligible Companies 174Handling of Non-Eligible Inquiries 174Submitting Inquiries 175Process After Receiving an Inquiry 176Labor Practices1771.Labor Standards,Labor Environment and Related Matters177Policy177Basic Approach to Human Resources 177Policy on Labor Practices 177Structure 179Risk Management 179Initiatives 180(1)Conducting Fair Recruitment Activities and Providing Job Opportunities 180(2)New Work Styles Befitting MC180(3)Respect for Human Rights 181Relevant Data1822.Employee Relations 183Policy(Freedom of Association and Collective Bargaining)183Basic Approach 183Policy on Freedom of Association and Collective Bargaining 183Collective Bargaining 183Structure184Risk Management 184Initiatives185Performance186Agreement on Collective Bargaining186Diversity Management 187Policy187A Flexible and Powerful Organization Capable of Adapting to Changing Business Environments187Structure189Initiatives190Supporting Employees with Family Responsibilities190Supporting Womens Careers at MC192Engaging the Senior Workforce194Diverse Employment Opportunities for Persons with Impairments194Engaging a Global Workforce195Relevant Data196Data on Employees Using MCs Various Systems(As of March 31 Each Year)196Percentage of Women in Management-Level Positions and Gender Composition of Board Members197MC Women Overseas(As of April 2023)198Employment Rate of Persons with Impairments199Independent Practitioners Assurance199Evaluation by Society200Key Certifications200Well-being(Health&Productivity Management,Occupational Safety and Health)201Policy201Management Message201MC Group Occupational Safety and Health(OSH)Policy 201Fostering Vibrant Workplaces That Maximize the Potential of a Diverse Workforce and Reducing Health Risks202Supply Chain Initiatives 202Policy to Proactively Address Global Health Issues(HIV/AIDS,Tuberculosis,Malaria)202Targets203MC Group 203MC 203Structure204Employee Participation 205Loan and Investment Screening 206Risk Management(Risk Assessment)206Reporting of Workplace Accidents 206Initiatives207Initiatives on a Non-Consolidated Basis 207Employee Health Management207Initiatives on a Consolidated Basis 212Performance Data214Occupational Safety and Health Data(Consolidated and Non-Consolidated Basis)214Other Data 217Independent Practitioners Assurance 218Human Resource Development 219Policy219Principles of Human Resource Development 219Targets220Priority Targets and Current Status 220Structure221MC Group HRD Program Structure221Initiatives222Promoting Career Autonomy222Introduction of Human Resource Development Programs223Performance227Human Resource Development and Training Data227Customer Responsibility 228228228229229232233233233234237238239239239PolicyResponsible Advertising and MarketingPolicy and Approach Related to Food Products Businesses Access to Better Nutrition and Medical CareTargetsInitiativesInitiatives on a Non-Consolidated BasisInitiatives in the Food Science BusinessResponse to Issues Related to the Food Products Business Nutritious Product InitiativesInitiatives for Better Access to Medical CareParticipation in External InitiativesSalmon Aquaculture Industry-Global Salmon Initiative(GSI)Seafood Industry-SeaBOS UN Global Compact-Ocean Stewardship Coalition239Community 240Policy240Basic Approach240Policy on Community Investment240Policy on Local Employment and Procurement240Policy on Mine/Site Decommissioning240Structure241Risk Management241Corporate Philanthropy Activities242Employee Volunteer Activities242Examples of Initiatives246Urban Development Projects to Enhance Urban Value in Indonesia 246HEREs DX Business247Local Procurement in the MDP Business247Mine Closure Initiatives248Community Investment248Other Reference Data251Donation Amounts 251Supply Chain Management 252Policy252Basic Policy252Individual Guidelines254Animal Welfare Policy for Suppliers255Bluefin Tuna Sustainable Sourcing Policy 255Structure256Risk Management256Initiatives263Employee Training263External Collaboration264Participation in Supply Chain Initiatives 264Cermaq Initiatives265Mitsubishi Corporation Packaging Ltd.Initiatives265Lawson,Inc.265Princes266Olam267Related data268Data on RSPO-Certified Palm Oil268Data on ASC-Certified Products268Data on FSC CoC-Certified Products268Procurement Data for Organic Cotton268Sustainability Report 2023Mitsubishi CorporationContents3Directors and Audit&Supervisory Board Members Remuneration:Total Amounts and Number of Eligible Persons in the Fiscal 305Names,Titles,Total Amounts of Consolidated Remuneration and Amount by Type of Remuneration for Each Director and Audit&Supervisory Board Member 306Significant Employee Salaries of Directors and Audit&Supervisory Board Members Serving Concurrently as Employees 306Employee Salaries 306Compliance 307Policy307Structure308Investigations of Compliance Violations and Response Systems 308Monitoring System311Initiatives312Initiatives for Preventing Corruption312Initiatives in Selecting and Managing Agencies,Intermediaries,etc.313Mitsubishi Corporation Groups Anti-Corruption Guideline313Cases of Corruption313Internal Whistleblowing System314Supervision by the Board of Directors316Performance317Results of Compliance Training317Number of Compliance Violations317Provisions Concerning Legal Violations and Litigation 317Tax Transparency318Risk Management 319Policy319Risk Management System320Overview320Responding to Business Investment Risk 321Crisis Management on a Consolidated Basis/Business Continuity Management(BCM)322Structure and Concept 322Status of Initiatives in Normal Conditions 323Business Continuity Management(BCM)323Implementation Status Monitoring324Information Security and Cyber Security Measures325Independent Auditors325MCs Primary Stakeholders 326Customers and Partners326Examples of Engagement 326Employees327Examples of Engagement 327Shareholders,Investors and Creditors327Examples of Engagement 327Local Communities328Examples of Engagement 328NGOs328Examples of Engagement 328Governments and Local Authorities328Examples of Engagement 328External Evaluations 329Independent Practitioners Assurance Report 331Corporate GovernanceBoard of Directors and Shares,etc.270MCs Basic Policy on Corporate Governance270Board of Directors271Composition and Size of the Board of Directors and the Policy and Process for Appointing Nominated Directors271Skills Matrix of Directors and Audit&Supervisory Board Members272Composition of the Board of Directors274Matters Deliberated by the Board of Directors276Board of Directors Advisory Bodies277Governance,Nomination and Compensation Committee277International Advisory Committee277Independent Directors and IndependentAudit&Supervisory Board Members279Independent Directors279Independent Audit&Supervisory Board Members 280Selection Criteria for Independent Directors and Independent Audit&Supervisory Board Members280Initiatives to Enhance the Effectiveness of the Board ofDirectors282Briefing Sessions Before Board of Directors Meetings282Meetings of Independent Directors and Independent Audit&Supervisory Board Members282Discussion between Independent Members of the Board and Officers and Employees282Dialogues with and Site Visits to Business Subsidiaries and Affiliates 283Orientation upon Assumption of Office284The Evolution of MCs Corporate Governance284Evaluation of the Effectiveness of the Board of Directors 285Initiatives on Japans Corporate Governance Code286MCs Stance on Acquisition,Holding,and Reduction in Listed Shares 286MCs Pension Management Structure287Policy and Procedures for Appointment and Dismissal of Management Executive and Appointment of Nominated Directors and Audit&Supervisory Board Members287Details of Retired Executives Currently Serving in Advisory Positions 288Policy of Dialogue with Shareholders288Corporate GovernanceAudit&Supervisory Board and Audit 290Audit&Supervisory Board Members/Audit&Supervisory Board290Audit Plans291Audits of Management Performance292Enhancing the Effectiveness and Auditing Activities of the Audit&Supervisory Board(Members)293Enhancement of Tripartite Audits294Audit295Audit&Supervisory Board Member Audits 295Internal Audits295Accounting Audits 296Mutual Cooperation among Audit&Supervisory Board Member Audits,Internal Audits and Accounting Audits,and their Relationship with Internal Control Departments296Corporate GovernanceDirectors and Audit&Supervisory Board Members Remuneration,etc.297Directors and Audit&Supervisory Board MembersRemuneration297Basic Approach to the Package 297The Process for Setting Remuneration for Directors and Audit&Supervisory Board Members 298Calculation Method for Performance-Linked Remuneration 300Conceptual Image of Payment Mix for Remuneration of Executive Directors 303Guideline for Share Ownership(Standard)303Deliberation Process Regarding the Revision of Remuneration Package for Executive Directors 303GovernanceGovernanceSustainability Report 2023Mitsubishi CorporationContents4SocialEnvironmentGovernanceSustainability ManagementTop commitmentMessage from Senior Vice PresidentMitsubishi Corporation(MC),since its establishment,has held the ThreeCorporate Principles as its core philosophy,and aims to contribute to thesustainable development of society by conducting its global business activitieswith integrity and fairness in line with these principles.The need to find solutions to the challenges facing the global environment andsociety is becoming more urgent,and expectations upon the private sector tobe part of those solutions to societal issues such as climate change,humanrights,and biodiversity are increasing year by year.In Oct 2021,MC formulated its“Roadmap to a Carbon Neutral Society”in which we declared our goal of achieving a carbon neutralsociety,fulfilling our responsibility as an active player in industries including resources and energy by maintaining stable energy supplywhile providing decarbonization solutions.In this Roadmap,in addition to committing to halve GHG emissions by FY2030(FY2020 baseline)and to achieve Net Zero by 2050,wehave also established“Integrated EX(Energy Transformation)/DX(Digital Transformation)initiatives to Create a New Future”as acommon theme for company-wide business promotion.Furthermore,in Midterm Corporate Strategy 2024,we defined and announced our goal of creating MC Shared Value(MCSV)as thecontinuous creation of significant shared value by enhancing the MC Groups collective capabilities in order to address societalchallenges.In addition,we also announced the redefinition of our Materiality as the eight crucial societal issues that the MC Group will prioritizethrough our business activities.We intend to continuously create MCSV by addressing the societal issues laid out in our Materiality,including Contributing to Decarbonized Societies,while pressing ahead with our growth strategies such as utilizing integrated EX/DXinitiatives.Lastly,as a company that has continued to grow alongside the society by developing business in response to the needs of the changingtimes,it is vital for MC to collaborate and grow together with its diverse stakeholders.With this in mind,we have established the positionof Chief Stakeholder Engagement Officer(CSEO)in April 2023,and I have been appointed.By engaging with our increasingly diverse stakeholders interactively and continuingly,we aim to grow sustainably through the creation ofMCSV by incorporating third-party perspectives into our growth strategies.Kenji KobayashiSenior Vice PresidentCorporate Functional Officer,CSEO5SocialEnvironmentGovernanceSustainability ManagementPhilosophy and Approach Related toSustainabilityPhilosophy and ApproachThe Three Corporate PrinciplesContributing to Society through Business Firmly Rooted in Principles of Integrity and FairnessThe Three Corporate Principles Corporate Responsibility to Society,Integrity and Fairness,and Global Understanding Through Businesshave served as MCs core philosophy since MCs inception,inspiring us to conduct fair and sound business activities at all times.We haveconstantly endeavored to enhance our compliance initiatives.Measures have included establishing the Corporate Standards of Conduct toset forth our expectations with regard to how business should be conducted,in conjunction with developing various compliance-relatedinternal rules,introducing a compliance officer system,and expanding and upgrading risk management frameworks.The MitsubishiCorporation Code of Conduct requires employees to conduct business in compliance with laws and regulations as well as global standardssuch as the Universal Declaration of Human Rights established by the United Nations(UN)and the core labor standards of theInternational Labor Organization(ILO).It also requires officers and employees(including full-time and part-time employees,secondeesand temporary staff;hereinafter only referred to as officers and employees)to act in a socially responsible manner by complying with thehighest ethical standards,and to acknowledge commitment to the Mitsubishi Corporation Code of Conduct.MC adopted theEnvironmental Charter Social Charter,and Human Rights Policy in accordance with the Three Corporate Principles,and we commit toincrease our corporate value as well as to contribute to the sustainable development of society,as a globally integrated businessenterprise.MC Group companies share a common history and philosophy*as they continue to grow together and learn from one another.MC will fulfill our mission of simultaneously generating economic value,societal value,and environmental value through our businessactivities.*The Three Corporate Principles,Corporate Standards of Conduct,Code of Conduct,Environmental Charter,Social Charter,and Human Rights Policy areshared with all MC Group employees globally via a portal site for MC Group companies as well as through various internal training programs.The Three Corporate PrinciplesCorporate Standards of ConductMitsubishi Corporation Code of ConductMitsubishi Corporation Environmental CharterMitsubishi Corporation Social CharterHuman Rights PolicyValue Creation Process6SocialEnvironmentGovernanceCorporate Standards of Conduct1.Aim of Corporate Business ActivitiesThrough its business activities,Mitsubishi Corporation will endeavor to increase its value.At the same time,MC will strive to enrichsociety in all ways,developing and offering its customers the best services and products,with the highest regard for safety.2.Fairness and Integrity in Corporate Business ActivitiesMitsubishi Corporation will continue to develop its business activities in compliance with all relevant laws,international regulationsand internal rules.MC will act responsibly and will respect the highest social standards.3.Respect for Human Rights and EmployeesMitsubishi Corporation will respect human rights and will not engage in any discrimination.MC will preserve and improve itscorporate strengths through the development of its employees,all the while respecting the character and individuality of eachemployee.4.Information Security and DisclosureWhile Mitsubishi Corporation will continue to develop,implement and improve the effectiveness of its information securitymanagement system,at the same time MC will disclose information accurately and in a timely fashion,so as to maintaintransparency and be correctly understood by both its stakeholders and the general public.5.Consideration for Environmental IssuesMitsubishi Corporation understands that an enterprise cannot continue to prosper without consideration for its environmentalperformance,and will strive to protect and improve the global environment and pursue sustainable development through all aspectsof its business activities.6.Contribution to SocietyAs a responsible member of society,Mitsubishi Corporation will actively carry out philanthropic programs in an effort to promote theenrichment of society.Moreover,MC will support efforts of its employees to contribute to society.Mitsubishi Corporation Code of ConductBasic PolicyAll officers and employees of Mitsubishi Corporation(the“Company”)must comply with all applicable laws,rules and regulations wherethey operate,international standards and rules,and all internal corporate rules and policies.In addition,all officers and employees ofMC must act in a socially responsible manner by complying with the highest ethical standards in the conduct of their business.Basic Principles1.Respect human rights,and do not discriminate on any basis or engage in any form of harassment.2.Maintain a high regard for environmental considerations in conducting our business operations,and ensure that our business isconducted in an environmentally sustainable manner,and comply with treaties,laws and regulations concerning the environment.3.Promote fair business practices and comply with trade rules,regulations,and internal corporate rules and policies.4.Comply with the rules and regulations of international trade.5.Protect and properly use confidential and proprietary information,protect the rights of MC and respect the rights of others.6.Do not engage in insider trading.7.Avoid conflicts of interest with MC;maintain a distinction between corporate and private business.8.Record and report accounting and financial information timely and accurately.9.Maintain proper legal and ethical standards with respect to gifts and entertainment.10.Resolutely oppose any organization,group or individual engaged in unlawful activities and do not provide money or other types ofeconomic benefits to them.11.Promptly report to or consult the superiors,the Group Compliance Officers,the relevant departments,the Secretariat for theCompliance Committee,or the outside counsel in charge of Compliance upon discovering or committing any violations of this“Codeof Conduct.”7SocialEnvironmentGovernanceMitsubishi Corporation Environmental CharterAt Mitsubishi Corporation we consider the Earth itself to be our most important stakeholder and are continually working towards therealization of a sustainable society through our business activities.We will strive to reduce greenhouse gas emissions by continually implementing new efficiency measures and embracing newtechnologies.We will promote the sustainable use of natural resources including energy,minerals,food stocks and water throughout our globalbusiness operations.We recognize the critical importance of what ecosystems can provide and are committed to protecting ecosystems and mitigating anypotential impacts on biodiversity.We will strive to create and enhance environmental value through environmental conservation and environmental impact reductionmeasures including pollution prevention.We will continue to actively engage and work with our various stakeholders openly and transparently and disclose information on theenvironmental impacts of our business operations in an appropriate and timely manner.We will conduct all of our activities in compliance with environmental laws while adhering to international rules and social standards.Mitsubishi Corporation Social CharterMitsubishi Corporation strives to achieve sustainable societal value though our business operations by contributing towards lastingsolutions to the wide spectrum of sustainability challenges facing todays global society.We will work to address local societal challenges in the regions and communities in which we operate,contributing towards lastingand sustainable development through our business activities.We will continue our wide-ranging philanthropic commitments while regularly adapting our approach in line with ever-evolving societalneeds and challenges.We will fully respect human rights and indigenous peoples rights.We will fully respect fundamental labor rights and endeavor to ensure the provision of proper working environments with considerationfor safety,health,and other aspects.We will not engage in corruption of any kind and will take appropriate preventative measures to safeguard against such practices.We will continue to actively engage and work with our various stakeholders openly and transparently and disclose information on thesocial impacts of our business operations in an appropriate and timely manner.Human Rights PolicyMC has formulated a Human Rights Policy to organize and clarify its approach to human rights and to promote efforts to respect them.8SocialEnvironmentGovernanceValue Creation ProcessMCs businesses are underpinned by financial and other capitals which exist both internally and externally.We invest the capitals into businesses to address social challenges through our businesses and continuously create significant sharedvalue.The created shared value strengthens the capitals and becomes a source of further value creation.By repeating this cycle,weaim to achieve sustainable growth.For more details of Value Creation Process,please refer to our Integrated Report(Integrated Report/Annual Report|MitsubishiCorporation).9SocialEnvironmentGovernanceSustainability ManagementMCs Sustainability PromotionFrameworkMCs Sustainability Promotion FrameworkSustainability InitiativesMCs Three Corporate Principles call upon us to strive to enrich society,both materially and spiritually,while contributing towards thepreservation on the global environment.In recent years,expectations and demands for companies to address various societal challenges have been increasing.Guided by ourMateriality,a set of crucial societal issues that we will prioritize through our business activities,we aim to continue to grow together withsociety by continuously creating MC Shared Value,as set forth in Midterm Corporate Strategy 2024.Furthermore,in order to increase our corporate value in line with the ever-changing demands of society,we have established aneffective promotion framework that recognizes the importance of dialogue with our stakeholders and a cycle of business strategyexecution based on this dialogue.Cycle of Dialogue and Business Strategy ExecutionDetermination of policyExecution led by each Business GroupDisclosureDialogue with stakeholdersCompanywide Sustainability FrameworkDisclosure(about the Sustainability Website)Dialogue with Stakeholders(Incorporating External Perspectives)MCs Sustainability Promotion FrameworkPromoting Sustainability Through Business10SocialEnvironmentGovernanceCompanywide Sustainability FrameworkIn MCs management framework,sustainability initiatives are overseen by the Corporate Functional Officer in charge of Sustainability.The Sustainability Department plans and drafts related policies and measures.Following deliberations by the Sustainability&CSRCommittee,which convenes approximately twice a year,items are put forward or reported to the Executive Committee and the Board ofDirectors.Reference:Sustainability Advisory CommitteeMain Discussion Themes for the Sustainability&CSR Committee in FY2023Climate changeMaterialityBiodiversityHuman rights/Supply chain managementEnvironmental conservation projectsCorporate philanthropy activities11SocialEnvironmentGovernancePromoting Sustainability Through BusinessIn order to continuously create societal and environmental value through our business activities,we have established a frameworkthrough which both Corporate StaffDepartments as well as Business Groups proactively promote sustainability.Cycle for Integrating Sustainability into Business StrategyFollowing deliberations by the Sustainability&CSR Committee,the President and CEO as well as each Group CEO hold furtherBusiness Strategy Committee Meetings to discuss future strategy.In these meetings,policies for businesses that are deemed to be most affected by climate change are checked against the results ofour 1.5 scenario analysis.Sustainability Promotion Framework in Each Business GroupTo build-in and promote sustainability within the Business Group initiatives further,management personnel responsible for promotingbusiness strategy in each Business Group have been appointed as Group Chief Sustainability Officers.To promote collaboration for sustainability within MC,MC holds meetings with Group Sustainability Managers as needed in order toshare information and explain measures related to sustainability.12SocialEnvironmentGovernanceIncorporating Sustainability into Individual ProjectsFramework for putting forward proposal applicationsMC confirms the significance of each business against our Materiality when screening proposals of investment and financingproposals.Identification of environmental and social risks and opportunities(including scenario analysis and carbon pricing impactanalysis)is mandatory.System for Screening ProposalsWithin Sustainability Department,dedicated staff are appointed for each Business Group and are tasked with providing support andchecks on both environmental and social risks and opportunities for individual proposals based on the latest external trends,stakeholder demands,and international standards.In addition,by having the General Manager of Sustainability Department serve asa member of the Investment Committee,MC has put a screening system in place to facilitate decision-making that takes into accountspecialized insight on environmental and social impacts.13SocialEnvironmentGovernanceDisclosure(about the Sustainability Website)We believe that the cycle of disclosing our sustainability initiatives in a timely and appropriate manner based on the requests of ourstakeholders,gaining their understanding,and reflecting their feedback on our initiatives is crucial.We will continue to proactivelydisclose sustainability-related information based on the recognition that this cycle contributes to enhancing our corporate value over themedium to long term.Disclosures are made through the Sustainability Website after approval by the Corporate Functional Officer in charge of Sustainabilityand after reporting to the Disclosure Committee,a subcommittee of the Executive Committee.The website was established with the aim of centralizing ESG-related information disclosed separately through such channels as theIntegrated Report and the ESG Data Book,and of responding in a timely manner to the increasingly complex requirements of ESGevaluation bodies and disclosure standards.The website is primarily aimed at stakeholders who have a strong interest in ESGinvestment.Referring to multiple ESG reporting guidelines,it has been organized according to ESG topic for easier reference.Disclosures can also be downloaded in a conventional report format as a PDF.Looking ahead,we will continue striving to ensure that our ESG disclosure serves as an effective communication tool that contributes toconstructive stakeholder dialogue by improving the clarity of our reporting based on the valued feedback we receive from ourstakeholders.Collecting Sustainability Information on a Consolidated BasisTo fully grasp qualitative and quantitative information around sustainability,MC annually conducts environmental and occupational healthand safety surveys targeting all consolidated companies.The aggregated results are reported to management and used as basicinformation for planningsustainability initiatives and other measures.Target companies are determined by the Sustainability Department and the relevantSection/Business Groups.In principle,the survey covers all consolidated companies,including subsidiaries affiliates,joint operations and joint venture.Survey items include greenhouse gas(GHG)emissions,water,waste,occupational healthand safety data,expenditures for philanthropic activities,environmental managementmeasures and other management policies.The survey results are reported to the Sustainability&CSR Committee,the ExecutiveCommittee and the Board of Directors.A portion of the data has received independent practitioners assurance from DeloitteTohmatsu Sustainability Co.,Ltd.to improve data reliability,and is disclosed on theSustainability Website,in our Sustainability Report and our annual response to CDP.Selection of target companies for thesurvey(March)Start of survey(March)Completion of survey/Reporting(June)Disclosure(from July)14SocialEnvironmentGovernanceDialogue with Stakeholders(Incorporating External Perspectives)MC places great importance on its ability to identify and appropriately address the ever-changing demands of society.We engage indirect dialogue with investors including shareholders and NGOs,and hold discussions with local communities on individual projects.Inaddition,MC carries out supply chain surveys as part of its supply chain management.We see constructive dialogue with all of ourstakeholders and the reflection of input from that dialogue in our policies and actions as being vital to the achievement of sustainablemedium-to long-term improvement in our corporate value.Moreover,to better understand global environmental and societal trends,MC has established sustainability departments in Europe,theAmericas,Southeast Asia and other regions to share and coordinate information.MC is also a signatory of the UN Global Compact anda member of organizations such as the World Business Council for Sustainable Development(WBCSD).In addition,the SustainabilityAdvisory Committee,which MC established in 2008,is working to incorporate external perspectives into its sustainability activities.Thecommittee meets twice a year to provide advice and recommendations.Dialogue with Stakeholders in FY2022In FY2022,MC held approximately 40 direct dialogues with shareholders on the topic of sustainability.MC also conducted 85 directdialogues with NGOs,including 9 in Japan,32 in Europe and 44 in the Americas.These meetings provided valuable insights intostakeholders perspectives,including expectations in relation to our strategies toward the transition to a low-carbon/decarbonizedsociety,as well as policies around individual fossil fuel projects.MC will consider the suggestions received and will strive to providetimely and appropriate disclosure of the response measures and policies it formulates.15SocialEnvironmentGovernanceSustainability Advisory CommitteeMC established the Sustainability Advisory Committee in 2008,consists of six external experts representing the perspectives of MCsdiverse stakeholders including international agencies and the ESG investment sector.The Committee acts as an advisory body to theCorporate Functional Officer(CSEO)and meets twice a year.MC conveys its thinking on sustainability policies to Committee membersand,with the aim of improving stakeholder engagement,receives advice and recommendations from them.Moreover,MC conductstours of business sites for Committee members in order to deepen their understanding of MCs businesses.At the SustainabilityAdvisory Committee meeting held inJune 2023,MC received feedback on the following topics:Main TopicsMaterialityInitiatives toward a low-carbon/decarbonized societyNatural capital/BiodiversityHuman rights/Supply chain managementStakeholder engagement16SocialEnvironmentGovernanceSustainability Advisory Committee MembersEiichiro Adachi:Senior CounselorDirector of the Institute for Societal Values in FutureGenerationsThe Japan Research Institute,LimitedPeter D.Pedersen:ProfessorGraduate School of Leadership and Innovation,Shizenkan UniversityMasaru Arai:ChairNPO Japan Sustainable Investment ForumMiwa Yamada:Director-GeneralInter-disciplinary Studies CenterInstitute of Developing EconomiesJapan External Trade Organization(IDE-JETRO)Tokutaro Nakai:Executive AdvisorNippon Steel CorporationSoichi Noguchi:CEOMirai Space Co.,LtdAstronautOn-Site Observation TourIn the fall of 2023,MCs Sustainability Advisory Committee members visited the Tomakomai CCS Demonstration Project,inwhich we participate as an investor,and Hokkaido Airports Co.,Ltd.(Hokkaido Airports),the operator of New Chitose Airport,established by a consortium of which MC is a member.The Tomakomai CCS Demonstration Project is the first large-scale CCS demonstration test in Japan aimed at commercial scaleCCS.Through the tour,we deepened our understanding of the effectiveness and safety of CCS and exchanged opinions onissues to be addressed to make CCS commercially viable.Hokkaido Airports Co.,Ltd.,the operating company of New Chitose Airport and other airports in Hokkaido,informed us aboutthe latest issues for the industry and local communities.In addition,we heard about the feasibility studies conducted by the NewEnergy and Industrial Technology Development Organization(NEDO)on the production and use of hydrogen at New ChitoseAirport and surrounding areas.We were also able to exchange opinions on the future possibilities of utilizing renewable energywith consideration for the airport as a starting point for this.Group photoMeeting17SocialEnvironmentGovernanceSustainability ManagementMaterialityBased on the Three Corporate Principles,which have served as MCs core philosophy since its inception,MC identified a set of KeySustainability Issues in 2016 as mileposts for proactively realizing“triple-value growth”through the simultaneous generation economic,societal and environmental value.While responding to the requests of all stakeholders,MC has worked to address various societalissues through its business activities and has contributed towards the sustainable development of society as well as value creation.After reaching the six-year point since the establishment of the Key Sustainability Issues,stakeholder expectations of companiesregarding issues such as climate change had grown even higher,and the issues that companies must address had evolved.Against thisbackdrop,in order to further raise our corporate value over the medium to long term,we conducted a review of our Key SustainabilityIssues from the perspective of their importance to our business activities.The revised Materiality was announced in Midterm CorporateStrategy 2024 as a set of crucial societal issues that we will prioritize through our business activities,towards the strategys goal ofcontinuous creation of MC Shared Value.Out of the eight redefined material issues,the six that we will pursue through our business activities are categorized as“Realizing aCarbon Neutral Society and Striving to Enrich Society Both Materially and Spiritually”,while the two that we will pursue throughorganizational management are grouped as“Striving to Serve as a Platform for Generating Triple-Value Growth”.Guided by ourMateriality,we will continue to strengthen our efforts toward sustainable corporate growth.18SocialEnvironmentGovernanceOverview of MaterialityIssuesOverviewRealizing a Carbon Neutral Society and Striving to Enrich Society Both Materially and SpirituallyStriving to Serve as a Platform for Generating Triple-Value GrowthContributing toDecarbonized SocietiesContribute to the realization of decarbonized societies by striving to reducegreenhouse gas(GHG)emissions,while providing products and services thatsupport decarbonization during the transition period.moreConserving and EffectivelyUtilizing Natural CapitalRecognizing the Earth itself to be our most important stakeholder,strive tomaintain biodiversity and conserve natural capital,and work to create circulareconomies while reducing our environmental footprint.morePromoting Stable,Sustainable Societies andLifestylesPromote sustainable societies and lifestyles of the future through businessesin a diverse range of countries and industries,while fulfilling our responsibilityto provide a stable supply of resources,raw materials,products,services,etc.,in line with the needs of countries and customers.moreUtilizing Innovation toAddress Societal NeedsCreate businesses that help to address societal needs while working to spurmajor industry reforms that are supported by business innovation.moreAddressing RegionalIssues and GrowingTogether with LocalCommunitiesStrive to contribute to the development of economies and societies byaddressing issues facing countries and regions,while seeking to growtogether and collaborate with diverse stakeholders,regions and communities.moreRespecting Human Rightsin Our BusinessOperationsRespect the human rights of all stakeholders involved in promoting ourdiverse operations worldwide,and pursue solutions for value chain-relatedissues,while considering the local conditions in each country.moreFostering VibrantWorkplaces That Maximizethe Potential of a DiverseWorkforceRecognizing that our human resources are the great assets of our businesses,foster a diverse and versatile talent pool that drives efforts to generate triple-value growth throughout our organization,and also seek to develop anorganization where diverse human resources share common values and growtogether while furthering their connections and inspiring one another to excel.moreRealizing a HighlyTransparent and FlexibleOrganizationWhile swiftly responding to changes in the business environment,strive torealize effective governance on a global,consolidated basis andmaintain/strengthen a sound organization that is transparent and flexible.more19SocialEnvironmentGovernanceIntegrating Materiality into ManagementMC regards its Materiality as a guideline for the continuous creation of significant MC Shared Value,as we aim to create this value bystrengthening the MC Groups collective capabilities to address societal challenges.To effectively achieve this target,each Division andBusiness Group establishes“Action Plans”,which serve as mid-term plans related to the relevant material issues for each business orinitiative,and tracks their progress through annual reviews.MC has thereby established a mechanism to confirm how our Materialityserves our business strategies,initiatives and organizational management that lead to the creation of MCSV.Here is a typical example of such an Action Plan.Relevance of MCs Materiality to the SDGsBy leveraging its collective capabilities and engaging in a variety of businesses,our company will contribute to addressing a wide rangeof societal challenges and ensure sustainable growth.We believe that promoting businesses based on our material issues will also helpto achieve the Sustainable Development Goals(SDGs)related to each key issue.IssuesOverviewRealizing a Carbon Neutral Society and Striving to Enrich Society Both Materially and SpirituallyStriving to Serve as a Platform for Generating Triple-Value GrowthContributing toDecarbonized SocietiesmoreConserving and EffectivelyUtilizing Natural CapitalmorePromoting Stable,Sustainable Societies andLifestylesmoreUtilizing Innovation toAddress Societal NeedsmoreAddressing RegionalIssues and GrowingTogether with LocalCommunitiesmoreRespecting Human Rightsin Our BusinessOperationsmoreFostering VibrantWorkplaces That Maximizethe Potential of a DiverseWorkforcemoreRealizing a HighlyTransparent and FlexibleOrganizationmore2 0SocialEnvironmentGovernanceMateriality Identification Process2 1SocialEnvironmentGovernanceSustainability ManagementMateriality DetailsRelated SDGs ThemesAction Plan Regarding this Material IssueWe regard achieving a decarbonized society as one of our important corporate issues that should be challenged,and we are promotingcarbon reduction and decarbonization through our business activities with“Contributing to Decarbonized Societies as one of ourmaterialties.By leading this transformation and connecting it to our own business growth,we will create MC Shared Value.In additionto promoting our own decarbonization(Halve by FY2030(compared to FY2020)and net zero by 2050),we will contribute to thedecarbonization of society by creating avoided emissions through EX-related investments on a scale of 1.2 trillion yen over the three-year period of Midterm Corporate Strategy 2024.Contributing to Decarbonized SocietiesContribute to the realization of decarbonized societies by striving to reduce greenhouse gas(GHG)emissions,whileproviding products and services that support decarbonization during the transition period.Contributing to Decarbonized SocietiesConserving and Effectively Utilizing Natural CapitalPromoting Stable,Sustainable Societies and LifestylesUtilizing Innovation to Address Societal NeedsAddressing Regional Issues and Growing Together with Local CommunitiesRespecting Human Rights in Our Business OperationsFostering Vibrant Workplaces That Maximize the Potential of a Diverse WorkforceRealizing a Highly Transparent and Flexible Organization2 2SocialEnvironmentGovernanceMC is expanding its renewable energy business in Japan and abroad to achieve a decarbonized society.In connection with thisinitiative,MC is moving ahead with the goal of doubling its renewable energy equity generation capacity from 3.3 GW in FY2019 to 6.6GW in FY2030.Current generation capacity(net equity basis),including assets under construction,is 3.9 GW(as of the end of September 2023).Major ProgressMC Signs Loan Agreement for Monsoon Cross-border Wind Project in LaosDoubling Renewable Energy Power Generation Capacity2 3SocialEnvironmentGovernanceMC is focusing on the practical implementation of hydrogen in society and the commercialization of ammonia,an excellent means oftransporting and storing hydrogen.MC is proceeding with joint testing with our partners at each stage of the value chain,“production,”“transportation”and“usage.”We are also promoting the societal implementation of Sustainable Aviation Fuel(SAF)in the area ofaviation fuel,where electrification and hydrogenation are difficult.Major ProgressesMitsubishi Corporation and Amogy with SK Innovation join forces to unlock the potential of Amogys ammonia crackingtechnology in Japan and South Korea New Company for Green Hydrogen Business Eneco Diamond Hydrogen Established in EuropeParticipation of Sempra Infrastructure to the Detailed Study regarding the Introduction of e-methane to Japan UtilizingCameron LNG TerminalEstablishment of a“Council for utilizing Namikata Terminal as a Hub for introducing Fuel Ammonia”RWE,LOTTE CHEMICAL Corporation and Mitsubishi Corporation enter into a Joint Study Agreement to develop a cleanammonia project in Port of Corpus Christi in Texas,USAJoint Feasibility Study on the Commercialization of Sustainable Aviation FuelMineral resources such as copper are essential products which are used for renewable energy and electrification and are vital toachieving a decarbonized society.MC aims to expand our copper business through organic growth opportunities in existing assets,which boast some of the worlds largest copper reserves,increasing our interest in existing assets,acquiring new assets and utilizingnew technologies to improve resource recovery.Major ProgressNew Participation in the Marimaca Copper Project in ChileImplementation of Next Generation Energy Supply ChainsSupply of Mineral Resources to Promote an Electrified Society2 4SocialEnvironmentGovernanceMC,as a company aiming to contribute towards achieving the goals of the Paris Agreement,recognizes that CCUS will play a major rolein achieving those goals.The International Energy Agency(IEA)has stated that CCUS must be used to reduce roughly 1.5 billion tons ofCO2 emitted in 2050 in order to achieve the 1.5C target(the remaining amount to be reduced through renewable energy and energy-saving technology),and the Intergovernmental Panel on Climate Change(IPCC)has also emphasized the role that technology shouldplay.CCUS is a field that spans multiple industries,from those that are the source of CO2 emissions,to those that produce end-productssuch as fuel and chemical materials.Therefore,MC recognizes CCUS as a business opportunity to demonstrate its collectivecapabilities as a company that interacts with many industries.To take advantage of this business opportunity,MC will promote thecommercialization of CCUS by establishing a task force spanning multiple business groups as well as a liaison committee.Here are our representative low-carbon and decarbonization related projects that contribute to the realization of this Action Plan.Further details regarding MCs initiatives on climate change are available here.CCUS Initiatives2 5SocialEnvironmentGovernanceRelated SDGs Themes Action Plan Regarding this Material IssueEvery business in our company is built on the foundation of the natural capital benefits that the ecosystem provides.Therefore,werecognize that the conservation and effective utilization of this natural capital are indispensable to achieving sustainable growth togetherwith society.MC is committed to realizing a circular economy by taking advantage of business opportunities while trying to diminish ournegative impact on the global environment.Conserving and Effectively Utilizing Natural CapitalRecognizing the Earth itself to be our most important stakeholder,strive to maintain biodiversity and conserve naturalcapital,and work to create circular economies while reducing our environmental footprint.2 6SocialEnvironmentGovernanceMC considers the realization of a circular economy to be a pillar of our EX initiatives.To achieve this,it is essential to make effective useof limited resources and ensure they are able to circulate as efficiently as possible.MC is committed to the environmentally friendlymaterials manufacturing business through the recycling of materials by utilizing new technologies,bio-carbon recycling,new businessesrelated to product recycling,and materials and products that support a low-carbon,decarbonized society.PET Chemical Recycling Business with Thai ShinkongMC entered the PET chemical recycling business through an investment in Thai Shinkong Industry Corporation Ltd.,which producesPET resins for beverage bottles with a new production line having started operation in June 2023.PET is highly recyclable mono-material with a wide range of applications,including in food and beverage containers as well as in textiles,thanks to its excellenttransparency,barrier properties,and well-established collection and recycling systems.As the transition to a circular economyprogresses worldwide,we will expand our capacity for producing PET resins,for which demand is expected to grow in line with the shifttowards mono-materials,and by introducing chemical recycling technologies through our participation in the PET chemical recyclingbusiness with the aim of“Conserving and Effectively Utilizing Natural Capital”.Promotion of a Circular Economy2 7SocialEnvironmentGovernancePartnership with HondaMC and Honda Motor Co.,Ltd.(Honda)have signed a memorandum of understanding to begin discussions toward the creation of newbusinesses with an aim of leveraging the strengths of both companies to build sustainable business models,with a focus on expandingEV adoption in a decarbonized society.Moving forward,the two companies will strive to increase the value offered to customers throughtheir EV and EV battery businesses.Details about the commercialization of these businesses are explained below.Battery Lifetime Management BusinessThis new business aims to maximize the value of batteries installed in Honda electric light motor vehicle models,that are scheduled togo on sale in Japan in 2024.By employing sophisticated battery-monitoring functions,the new business would manage and maximizethe value of batteries throughout their lifetime by repurposing them from powering EVs(in-vehicle use)to then using them as stationaryenergy storage(stationary use).2.Smart-charging*1 and V2G*2 Energy Management BusinessThis new business helps EV users optimize their electricity costs by offering access to smart-charging,V2G services,and green(renewable)power through advanced control technologies.*1 Smart-charging systems automatically adjust the timing of EV charging to avoid peak load periods and optimize energy consumption.*2 Vehicle to Grid:In a V2G system,EVs will not only be charged with electricity from the grid but will also supply electricity to the grid itself to help meetlocal electricity needs.Major ProgressBuilding a sustainable PET bottle supply chain2 8SocialEnvironmentGovernanceAlmost all MC businesses interact with the environment and depend upon the benefits ecosystems can provide.In order to ensure thefuture continuity of our business activities,MC needs to understand the extent of our environmental dependencies and impacts,analyzerisks and opportunities,minimize excessive reliance and negative impact on the natural environment,and pursue initiatives thatcontribute to environmental recovery.Trial Analysis Using the TNFD FrameworkFrom this perspective,MC conducted a trial analysis based on the TNFD framework recommendations from FY2022 to FY2023.In thefuture,we will utilize the knowledge obtained from the trial analysis in the management of individual businesses and continue to identifyand respond to nature-related issues using the TNFD framework,thereby improving the MC Groups sustainability and corporate value.More details regarding MCs initiatives on biodiversity are available here.Identifying and Responding to Nature-related Issues2 9SocialEnvironmentGovernanceRelated SDGs Themes Action Plan Regarding this Material IssueEnsuring the stable lives of people is one of our companys greatest mandates,and we believe it is important to fulfill this in asustainable manner through our business.While continuing to provide the goods and services necessary for maintaining the operation ofthe current societal system,we will promote businesses which move society forward towards a more sustainable future.Promoting Stable,Sustainable Societies and LifestylesPromote sustainable societies and lifestyles of the future through businesses in a diverse range of countries and industries,while fulfilling our responsibility to provide a stable supply of resources,raw materials,products,services,etc.,in line withthe needs of countries and customers.30SocialEnvironmentGovernanceGlobal energy demand is expected to increase mainly due to population growth and economic development.While the switch torenewable energy is expected to progress in the power sector in the future,dramatic technological innovation is essential to supplementrenewable energy sources in terms of intermittency,location and other factors.Therefore,to meet the worlds growing energy demandand at the same time realize a carbon-neutral society,it is essential to decarbonize fossil fuels.MC is committed to fulfilling its responsibility to provide a stable supply of natural gas and LNG,which will support the transition periodwith its relatively low environmental impact among fossil fuels,as well as reduce GHG emissions throughout the value chain viaimprovements in operational efficiency,CCUS and other methods.Tangguh LNG Project InitiativesTangguh is the largest gas-producing project in Papua Barat Province of Indonesia,accounting for around 20%of the countrys gasoutput.MC is participating in the project as a joint venture with bp,the project operator.Tangguh LNG Project began operations in 2009and has safely delivered more than 1,500 cargoes to global markets including Indonesia and Japan.In October 2023,the expansion of athird LNG train added 3.8 million tons per year of LNG production capacity to the existing 2 trains(production capacity:7.6 million tonsper year),increasing the total LNG production capacity of the Tangguh LNG Project to 11.4 million tons per year.In addition,we are planning the next phase of development including CCUS project,which is based on a Plan of Development approvedby SKK Migas(Special Task Force for Upstream Oil and Gas Business Activities Republic of Indonesia)in 2021.Once the CCUS projectis implemented,which is subject to a final investment decision by Tangguh Partners,it will remove up to 90%of the reservoir-associatedCO2 which represents nearly half of Tangguhs LNG emissions,making Tangguh one of the lowest GHG intensity LNG plants in theworld.Fulfilling Our Responsibility for Ensuring a Stable Energy Supply to Support the Transition Period31SocialEnvironmentGovernanceSince steel is a basic material that is difficult to replace,its demand is expected to remain strong over the long term in line with globaleconomic growth.In the steel industry,the ironmaking process(blast furnace method),which uses primarily iron ore as raw materials,emits a high amount of GHG emissions.Therefore,it is expected that the use of electric furnaces,which mainly use steel scrap,and theuse of hydrogen in the ironmaking process will expand in the future.However,it will take considerable time to realize the necessarytechnological innovations and switching of production facilities.Therefore,decarbonization of the blast furnace ironmaking process,which is currently the mainstream process,will be an important issue for the time being.MC will continue to contribute to thedecarbonization of the steel industry by fulfilling our responsibility to provide customers with a stable supply of high-quality metallurgicalcoal as one of raw materials for the blast furnace ironmaking process,one of MCs major commodities,and contribute to thedecarbonization of the existing blast furnace method.MDP InitiativesMitsubishi Development Pty Ltd.(MDP)which conducts exploration,development,production,and sales of mineral resources,jointlyoperates its metallurgical coal business,BMA,together with its partner.BMA operates one of the worlds largest metallurgical coaloperations,with an annual production volume of approx.60 million tons and a share of approx.30%of seaborne trade volume.BMA isfulfilling its responsibility to provide a stable supply of high-quality metallurgical coal that contributes to the decarbonization of the blastfurnace method of steelmaking.In October 2023,MDP and BHP agreed to sell some of its coal mines and promoted furtherconsolidation of its high-grade/quality mines.Also,while staying aware of changes in the business environment,MDP will strive to reduce GHG emissions from BMAs productionprocesses.Furthermore,together with its metallurgical coal business partner BHP,MDP is working to support research that contributesto reducing emissions throughout the entire metallurgical coal value chain.In October 2022,MDP entered into a collaborationagreement with ArcelorMittal,Mitsubishi Heavy Industries,Ltd.and BHP regarding the application of CO2 capture technology in the fieldof steel making and will jointly conduct demonstration tests for the application of CO2 capture technology at ArcelorMittals steel works.Ensuring a Stable Supply of High-quality Metallurgical Coal32SocialEnvironmentGovernanceWith demand for food rising in line with global population growth,and an increased interest in sustainability,the establishment of asustainable production and supply system is becoming increasingly important.MC is working to develop sustainable production,processing and sales business model,as well as increasing products that have international fishing/farming certifications such asMSC/ASC,and promoting transactions with suppliers that comply with our Policy for Sustainable Supply Chain Management.Cermaq InitiativesCermaq is one of the major salmon(including coho)farming,processing and sales companies in the world which became a subsidiary ofMC in 2014.Cermaq produces salmon in Norway,Chile and Canada for a total production quantity of around 200 thousand metric tonsper year and supplies sustainable,safe and secure farmed salmon to consumers around the world.Cermaq,has identified biodiversity protection as a key part of its license to operate in all the countries where it has operations.Cermaqworks actively in cooperation with local stakeholders to protect wild salmonids in all areas where they are present,removes marine litterand tracks bird and marine mammal mortalities at its sites in compliance with all laws the countries where they operate and regulationsof requirements set by the ASC standard.In its feed supplier Code of Conduct,Cermaq mandates that no fish meal or fish oil used in thefeed for its fish shall originate from IUU(Illegal,unreported,unregulated)fisheries.Major ProgressMC and Maruha Nichiro Agree to Establish New Joint Venture in Salmon(land-based)Sustainable Food Supply33SocialEnvironmentGovernanceRelated SDGs Themes Action Plan Regarding this Material IssueWe recognize that innovation has great potential to enable us to solve societal and industrial issues and to considerably enrich peoplesdaily lives.MC will achieve sustainable growth by dynamically transforming our current businesses,whilst approaching businessopportunities that are generated by innovation.Utilizing Innovation to Address Societal NeedsCreate businesses that help to address societal needs while working to spur major industry reforms that are supported bybusiness innovation.34SocialEnvironmentGovernanceMC has many physically based businesses that require DX-driven solutions.By providing DX functions to these businesses,we willoptimize logistics and improve productivity,increase business value,and contribute to the development of the industry as a whole andthe realization of vibrant local communities.By developing cross-industry DX functions that leverage our broad business knowledge and then providing them as services,MC willhelp to improve the value of industries themselves.Toward this end,we aim to improve the productivity of industry and society as awhole and create sustainable value by building a“cross-industry digital ecosystem”in which industries,companies,local communitiesand others can organically connect and coexist.In FY2023,to accelerate the development and realization of further projects,MC narrowed down the focus of its DX projects from alonglist which included over 100 candidate projects.Activity at MC DigitalMC develops business in a wide range of industries,but there are areas where further value can be added by utilizing cutting-edge IT.MC Digitals mission is to update business models by leveraging technology,and the company will utilize the latest technology,such asAI,to generate innovative solutions to issues in all the industries that MC conducts business in.MC Digital will also collaborate withoverseas innovation ecosystems,as well as academic and administrative institutions,while striving to develop new businesses andprovide solutions for various fields.Major ProgressMC and ENEOS launch a Joint Venture for Last One Mile Delivery Business based at Gas StationsBuilding a Cross-industry Digital Ecosystem35SocialEnvironmentGovernanceFood waste in Japan has been calculated to be 5,700,000 tons(2019),and the scale of this food waste is equivalent to 1.4 times theamount of the WFPs(World Food Programme)world food aid(2020).Additionally,around 54%of Japans total food waste is comprisedof commercial food waste that is disposed of during the distribution and production process.This is recognized as a key issue to besolved for the food distribution industry.MC is proceeding with initiatives to reduce food waste using digital technology,including AI.Some of MCs subsidiaries and affiliateshave set a goal of reducing food loss by 50%by 2030 through initiatives such as improving distribution efficiency.DX Business in Food DistributionSpecifically,MC has begun developing solutions to enable the prediction of demand and automation of ordering at food wholesalers.Through the utilization of AI to calculate appropriate order quantities,in order to not cause shortages,while reducing the stock amount atfood wholesalers and then connecting this to actual orders,the“purchasing of the necessary amounts of necessary items”will becomepossible.Therefore,MC can contribute to the reduction of food waste at food wholesalers.In the demonstration experiment,comparedto current manual ordering processes,it was possible to reduce stock volume while also reducing the probability of stock shortages.Thissolution is anticipated to display sufficient efficacy.Going forward,by popularizing this solution that MC is currently developing throughout the entire food wholesale industry,MC willcontribute to the reduction of food loss in the food wholesale industry.MC will also aim for distribution optimization and reduction of foodwaste across the entire foodstuff distribution value chain by providing solutions for food manufacturers and food retailers.Mitsubishi Shokuhin,which operates a core function in the food distribution business,has completed the introduction of an inventoryoptimization solution that utilizes AI demand forecasting into all Lawson centers and is aiming to reduce food waste by 50%in 2030compared to FY2016 levels.DX Business in Food DistributionReduction of Food Waste36SocialEnvironmentGovernanceSupply chains connecting producers and consumers are made possible through effective combinations of storage and transportation-based logistics capabilities.Japans domestic warehousing market is central to those supply chains and worth approximately seventrillion yen.Various negative pressures including labor shortages,dependencies on specific individuals for certain jobs and leaseagreements have resulted in inflexible inventory capacities,which has in turn contributed to wasteful,inconsistent and burdensomefulfillment practices throughout numerous industries.Other countries,such as the US and China,are facing similar challenges,whichhas prompted innovators to develop new business models such as self-driving warehouse robots and schemes that allow users to sharevacant warehouse spaces.Gaussys Warehouse DX ServicesConsidering that the“Roboware”subscription service allows anyone,regardless of their background or skills,to use robots to easilymanage their warehouse facilities,it presents a viable solution to the labor-shortage and overreliance problems mentioned above.“WareX”is a similarly straightforward system that anyone can use to share available warehouse space,thus addressing the problems oflimited or excess capacities.Gaussy will offer customers both of these services,the former(Roboware)of which employs six types of warehouse robots and hasalready been rolled out in more than 25 facilities across Japan,and the latter(WareX)of which has more than 1,400 facilities(as ofDecember 2023)registered on its nationwide system.Large,medium and small enterprises alike have been taking advantage of“WareX,”as it provides them with an efficient way to lease vacant warehouse spaces on a pay-as-you-go basis.Driven by its vision to create new opportunities in logistics,Gaussy is committed to developing flexible mechanisms that will adapt toevolving warehousing needs and cargo volumes.All of its partners look forward to offering fulfillment customers with new andunprecedented options for their businesses.Solution to Wasteful,Inconsistent and Burdensome Practices by Optimizing the Entire Supply Chain throughDigital Technology37SocialEnvironmentGovernanceDecarbonization is an urgent issue that requires fast-paced initiatives on a global scale.To this end,MC believes it is important not onlyto develop completely new decarbonization technologies,but also to innovate at the scale-up stage,moving technologies that havealready completed R&D to implementation as quickly as possible.In order to realize a carbon neutral society,MC is already promoting the development of EX-related businesses such as next-generationenergy.In order to complement and further accelerate these initiatives,MC will work to scale-up innovative decarbonization technologiesthrough public-private partnerships.Participation in Breakthrough Energy Catalyst Program to Accelerate the Application of Decarbonization Technologies in SocietyMC is the first company in Asia to participate in Breakthrough Energy Catalyst(BEC),a program dedicated to accelerating theapplication of innovative decarbonization technologies in society.BEC is a brand new model that was launched as part of Breakthrough Energy,a network of initiatives founded in 2015 by globalphilanthropist Bill Gates.The BEC program provides investment and other support for individual projects based on new decarbonizationtechnologies for which research and development have already been completed.MC is active in the renewable energy field and has begun to explore the introduction of next-generation energy sources,such ashydrogen,ammonia,and methanation.We recognize the need to use new technologies and innovations to meet the global challenge oftransitioning to a carbon-neutral society.In addition,BEC acts as a Catalyst,organically linking funds from private sector partners and philanthropic organizations,product off-take support for consumers of green products,and assistance from government agencies.Through these activities,BEC is establishinga framework to support the scaling up of projects based on innovative decarbonization technologies that are nearing commercialization,contributing to the realization of a carbon-neutral society.The current five focus areas for BEC are(1)clean hydrogen production(and related infrastructure),(2)long-duration energy storage(LDES),(3)sustainable aviation fuels(SAF),(4)direct air capture(DAC),and(5)green manufacturing industries(steel,cement,plastics,etc.).In the future,BEC may expand its focus to include other technologies that are also important for decarbonization.MC alsoconsiders these technologies vital to its own EX Strategy and its Roadmap to a Carbon-Neutral Society.Our participation in BEC will allow us to support the adoption of innovative technologies that will accelerate the transition to a carbon-neutral world and contribute to further reductions in environmental impact without compromising peoples well-being.MC will contribute to the transition to a carbon-neutral society by making full use of the expertise and networks that it has cultivated inJapan and throughout Asia to collaborate with other BEC partner companies who represent a broad range of industries,including steel,aviation,and finance.Major ProgressesLaunch of Marunouchi Climate Tech Growth Fund L.P.MC invests in KyotoFusioneering,a spin-off from Kyoto UniversityNextGen a South Pole/Mitsubishi Corporation joint venture establishes worlds largest diversified portfolio of permanentcarbon dioxide removals to scale the marketToyobo and MC Launch Operations at New Joint Venture Company Toyobo MC Corporation to Specialize in FunctionalMaterials-Contributing to the Realization of a Carbon-Neutral Society through Technological Innovation38SocialEnvironmentGovernanceRelated SDGs Themes Action Plan Regarding this Material IssueWe believe that MC can create significant value by leveraging our companys unique collective capabilities and connections with variousindustries,and by interconnecting with diverse stakeholders and local communities.We will pursue sustainable growth together withlocal communities by resolving issues that communities are facing and also by approaching peripheral business opportunities.Addressing Regional Issues and Growing Together withLocal CommunitiesStrive to contribute to the development of economies and societies by addressing issues facing countries and regions,while seeking to grow together and collaborate with diverse stakeholders,regions and communities.39SocialEnvironmentGovernanceIn May 2022,MC announced its new management plan,entitled“Midterm Corporate Strategy 2024 Creating MC Shared Value.”Theplan details MCs growth strategy to promote regional revitalization through utilizing integrated EX and DX initiatives.MC has embarkedon initiatives to promote specific measures for regional revitalization throughout the company,including the creation of new carbon-neutral industries,supporting smooth transitions to decarbonized societies and developing vibrant communities.Establishment of New Branches in Akita and ChoshiIn November 2022,MC opened new domestic branches in Japan for the first time in 35 years in both Akita and Choshi.MC wasappointed as one of the operators of Japans first,general-sea-area fixed-foundation wind farms which are being developed off thecoasts.With the themes of utilizing local energy resources such as renewable energy,creating new carbon neutral industries,andcreating vibrant communities by addressing regional issues,MC aims to create a new future through the fostering of new industries andregional revitalization,such as by addressing challenges facing society and industry through collaboration with various stakeholdersincluding partners and local government authorities,while taking advantage of our unique,wide-ranging industrial network.The Akitaand Choshi regions are a precedent for this,and MC will continue to work closely with our electric power subsidiaries and offshore windproject companies that will develop the offshore wind power business for more than 30 years to come,with the aim of developing notonly offshore wind power,but also of realizing MCs goal of promoting regional revitalization through the integrated EX and DX initiatives.Akita BranchChoshi BranchCreating self-sustained decentralized communities40SocialEnvironmentGovernanceRegional Development Agreement with Local GovernmentsMC signed partnership agreements with the five cities by 2023:Yatsushiro in Kumamoto Prefecture,Kurashiki in Okayama Prefecture,Nasushiobara in Tochigi Prefecture,Choshi in Chiba prefecture and Chitose in Hokkaido prefecture,to resolve regional issues andpromote initiatives for regional development and revitalization.Specific cooperation items cover a wide range of areas,including therevitalization of local and regional communities using digital technology and improvement of civic services such as energy,mobility,andhealth.As a first step with the agreement with Nasushiobara City,we have started two services.Community portal apps:This app.digitally consolidates communication from all local communities(such as schools andneighborhood associations)and public announcements from local governments in order to provide residents with essential daily lifeinformation.Currently,we are in the process of building a public relations creation system using generative AI to streamline theinformation distribution tasks of the local government and to ensure that residents can receive the information they desire.Regional Data Platform:To provide a data platform for Nasushiobara City,ensuring secure data integration with high extensibility.Moreover,the IDs of the services are integrated into a shared ID,which is connected with My Number,a digital ID assigned to eachresident by the Japanese government.Major ProgressesChoshi City and MC Sign Regional Development AgreementAgreement Signed to Promote Urban Development towards Carbon Neutral City of ChitoseYatsushiro City,Kyushu Electric Power Co.,Inc.,NTT Anode Energy Co.,Ltd.,and Mitsubishi Corporation Conclude aPartnership Agreement to Expedite Carbon Neutrality in Yatsushiro City41SocialEnvironmentGovernanceThe explosive expansion of the middle class and rapid urbanization,particularly in emerging economies,has increased the need fordevelopment and management of social infrastructure projects that take into account social and environmental values.In the midst of such changes in the external environment,MC aims to contribute to the economic growth of the countries in which itoperates,while also helping to reduce environmental impacts,by promoting the development and management of large-scale,high-value-added urban development projects to sustainably create high-quality living,working,medical,educational,logistics,andtransportation environments.Urban Management and Urban Development Projects to Enhance Urban Value in IndonesiaMC is exploring an urban management project and promoting a large-scale urban development project in collaboration with Sinar MasLand(SML),one of the largest real estate developers in Indonesia.MC signed an MOU with SML in March 2020,initiating a joint execution of urban management as well as the implementation of smartand digital solutions(urban services)in BSD City(6,000 hectares).This partnership between MC and SML aims to implement urbanservices throughout BSD City,including an AI/IoT data platform,city portal,mobility,and energy-related content,in collaboration withvarious MC Group companies and partners across different business sectors.After the signing of the MOU,we initiated the first trial operation of autonomous electric vehicles(AEVs)in Indonesia,followed by thesharing service experiment designed to promote a shift in behaviour from“owning”to”renting”.Furthermore,we have recently embarkedon another experiment involving a mobile convenience store operated by electric vehicle.Through these initiatives,we have beenactively exploring different city service experiments and implementations aimed at addressing social issues while promoting citysustainability.At the same time,in the same city,MC is working with SML on a large-scale developmentThis project is the first transit-orienteddevelopmentUrban development based on public transit,aiming for a society that is not dependent on automobiles.in Indonesia,and it will develop a smart city that combines urban functions such as residential units,commercial properties,schools,hospitals,parks,and public transportation nodes on a new development site of over 100 hectares.By encouraging a modal shift towards expanding and promoting the use of public transport,we aim to contribute not only to theeconomy,but also to society and the environment by helping to address issues such as traffic congestion and air pollution.Another goalis to create convenient,safe,and secure urban developments through the implementation of urban services such as AI/IoT dataplatform,city portal,mobility,and energy-related content.Project imageDevelopment and Management of Smart Cities42SocialEnvironmentGovernanceMajor ProgressesPoC Launched in Portland,Oregon to Develop Smart Multifamily ApartmentPilot Project for Lifelog-based Health Services in Muraoka-Fukasawa District43SocialEnvironmentGovernanceIn regional communities facing depopulation,there is a growing need for on-demand transportation services that allow for thestreamlining of transportation,and more services utilizing digital technology.MC will work to address societal challenges through ourmobility services business and aim for further expansion by further strengthening our business foundation,which includes functions wehave developed over many years and our ability to build community-based networks.Trials of“KnowRoute”in Shiojiri CityMC is part of a consortium that has commenced trial operations of a mobility-as-a-service(MaaS)project in Shiojiri City,NaganoPrefecture.The“Shiojiri Project”is being undertaken as part of an initiative launched by Japans Ministry of Economy,Trade andIndustry(METI)to promote new,regional MaaS applications.MCs partners in the consortium include Next Mobility Co.,Ltd.,a jointventure between MC and Nishi-Nippon Railroad Co.,Ltd.,and the municipal government of Shiojiri City.Based on the successful results of the demonstration project,we are now shifting to full-scale operation and expanding certain serviceareas.Other than rail,the only means of public transportation in Shiojiri City is a community bus service,but it has been hampered byproblems such as a lack of drivers,and a limited fleet.The city is also aging.About 28%of its roughly 67,000 residents are at least 65years old,which has led to an even greater need for public transportation.To address both of these needs,the consortium that MC isparticipating in will work to solve the problems facing public transportation in Shiojiri City through promotion of the“Shirojiri Project”.Solutions for Regional Transportation Challenges through On-demand Mobility Services44SocialEnvironmentGovernanceRelated SDGs Themes Action Plan Regarding this Material IssueIt is impossible to conduct sustainable business or to increase corporate value without respecting the human rights of the people weinvolve in our business activities.MC will not only respect human rights when promoting its businesses but will also pursue businessopportunities which create added value by tackling human rights issues.Respecting Human Rights in Our Business OperationsRespect the human rights of all stakeholders involved in promoting our diverse operations worldwide,and pursue solutionsfor value chain-related issues,while considering the local conditions in each country.45SocialEnvironmentGovernanceMCs current activities have expanded far beyond its traditional trading business to include project development,production andmanufacturing operations,working in collaboration with our trusted partners around the globe.Furthermore,since MC handles a widerange of products and services around the world,we believe in the importance of identifying and analyzing the negative impacts of ourbusiness on human rights and the environment in order to ensure that such impacts are avoided/mitigated.MC is conducting humanrights and environmental due diligence with this in mind.Further details of MCs initiatives on human rights are available here.Procurement based on MCs Policy for Sustainable Supply Chain ManagementIn order to monitor suppliers compliance with our Policy for Sustainable Supply Chain Management,we have identified products withhigh environmental and social risk in 2016 and 2020 with advice from consultants and external advisors.MC conducts annual surveys ofsuppliers(via our Sustainable Supply Chain Survey),with a focus on those industries where social risks including human rights andlabor conditions,as well as environmental risks,are considered higher.In addition,MC has formulated individual procurement guidelinesfor each product as needed.Most recently,in January 2024,we formulated our Soybean Procurement Guidelines.Mitsubishi Corporation Fashion Co.,Ltd.,a wholly-owned subsidiary of MC,is working to enhance sustainable procurement of apparelproducts,strengthen communication and dialogue with suppliers through our Sustainable Supply Chain Survey,and promote thedevelopment of a sustainable supply chain.The MC Group has a global workforce of approximately 86,000 professionals,who we recognize as some of our most importantstakeholders.In order for the MC Group to continue generating corporate value sustainably,it is necessary for diverse human resources,regardless of gender,nationality,etc.to be able to fully demonstrate their respective capabilities in response to the further diversificationand globalization of business.We believe that the fundamental premise for this is the development of a working environment based onrespect for human rights,starting with ensuring workplace safety.For further details of initiatives and progress,please also visit here.Implementing Human Rights Due Diligence for Business ActivitiesEnsuring the Safety of Employees46SocialEnvironmentGovernanceRelated SDGs Themes Action Plan Regarding this Material IssueOur human capital is most powerful and vital asset and the source of all value creation at MC.To continue creating MC Shared Value(MCSV)in a rapidly changing business environment,we recognize that the most important factor is remaining a dynamic,spirited andvibrant organization in which human capital,which is the source of all value creation,can work to overcome challenges with a sense ofmotivation and pride and to bring out our collective capabilities while interconnecting with members of our diverse and versatile talentpool.Based on this belief,we have been developing initiatives that are designed to maximize the value of human capital.Fostering Vibrant Workplaces That Maximize the Potential ofa Diverse WorkforceRecognizing that our human resources are the great assets of our businesses,foster a diverse and versatile talent poolthat drives efforts to generate triple-value growth throughout our organization,and also seek to develop an organizationwhere diverse human resources share common values and grow together while furthering their connections and inspiringone another to excel.47SocialEnvironmentGovernanceEmployee Engagement KPIs Relating to the Success of a Diverse WorkforceWe see employee engagement as the most important factor in our efforts to develop a dynamic spirited,and vibrant talent pool andorganization through HR policies linked to our management strategies.We have therefore increased the frequency of EmployeeAwareness Surveys from once every three years to annually and also established quantitative KPIs.Employees receive feedback aboutthe survey results so that they can use this information to make improvements in their own organizations.At the management level,weanalyze and discuss these survey results,identify issues that need to be addressed on a companywide level,and reflect our findings inpolicies.Initiatives to Strengthen EngagementWe are working to foster a corporate culture that capitalizes on diversity by encouraging communication across organizational,occupational,and generational lines.We are also creating an environment in which people in our diverse and versatile talent pool canrealize their full potential and develop their own careers.Through these efforts,we aim to enhance employee engagement andcontribute to MCs sustainable growth.Strengthen Engagement48SocialEnvironmentGovernanceDE&I InitiativesMC is working to maintain and increase diversity by appointing employees based on their abilities and performance,ensuring to assignthe right person in the right position,regardless of age,gender or nationality or any other irrelevant factors.In particular,in order toincrease the number of women in managerial positions(target of 15%or more by FY2025)and to accelerate their appointment to keypositions,we are promoting career support tailored to women such as a mentorship programs for women in managerial positions.MC isalso focusing on initiatives aimed at 100%utilization of childcare-related systems by men.Establish a company-wide working groupdirectly under MCs President and promote the development of an environment and organizations where all employees can flourish byfully demonstrating their individual strengths.Proceed to study/implement initiatives that empower employees to succeed byrespecting/accepting their individuality and leveraging our versatility.Percentage of Women in Management-Level Positions(Non-Consolidated)*1 The number of employees who began taking the type of leave during each fiscal year.*2 Percentage of men working at the Head Office or MC domestic offices as of the end of the fiscal yearwhose spouse gave birth in the relevant fiscal year and who used childcare-related systems including childcare leave and spousal childbirth leave.Occupational Health and Safety InitiativesIn creating safe working environments for employees and contractors(safety,health,labor management,risk management,etc.),MCaims to build and operate management systems that go beyond simply meeting the legal requirements in the countries where weoperate to provide support that is more substantial.Within the MC Group,there are companies with OSH management systems thathave acquired ISO45000 and OHSAS18001,the international standards for occupational health and safety management systems.Furthermore,in order to promote OSH management throughout the entire MC Group,we will are working to develop an organizationalframework,clarify responsibilities and continuously monitor progress in order to refine,maintain and further improve our activities.In addition,MC aims to steadily reduce the number of workplace accidents and maintain and promote health through continuousmonitoring of KPIs such as reducing the frequency rate of workplace accidents compared to the previous year and ensuring a 100%health check-up rate for domestic(Japan-based)employees.Lost Time Injuries Frequency Rate*(This data includes Subsidiaries and joint operations,any other group companies like Affiliates,which contains production business sites)*Lost time injury frequency rate is the number of lost time injuries per 1,000,000 actual working hours and refers to the frequency of workplace accidents.Lost time injuries refers to occupational accidents that involve one or more days of lost work.Lost time injury frequency rate is employed in MCs KPIs.49SocialEnvironmentGovernanceMCs Basic Policy on HR DevelopmentThe individuals that make up our diverse and versatile talent pool consistently use their foresight,their aspirations,and their ability toanticipate future needs to tackle the challenge of finding solutions to societal challenges.We believe that this talent pool is our greatestasset and the very source of value creation at MC.We continue to produce human resources with a management mindset and a commitment to increasing the value of the business byproviding employees with opportunities to accumulate a variety of experience in stages through both on-the-job training(OJT)and off-the-job training(Off-JT)according to their career stage.Specifically,we ensure that employees can steadily gain experience according to their career stage and gain the qualities that they willneed to support the future success of MC,including leadership development and global experience.We also take steps to strengthenadaptability to changes in the business environment,including reskilling.Contributing to Value Enhancement through Business Management Backed by High AspirationsApproximately 700 people with a wide-range of experiences made possible by MC hold key positions and perform vital roles*on aconsolidated basis.Through those roles,which include business management activities in various regions and at sites and GroupCompanies in Japan and overseas,these people contribute to the realization of management strategies,such as the Value-AddedCyclical Growth Model and the integration of EX and DX initiatives.We have prioritized the visualization of these extremely importantand challenging duties and the talent needed to perform them as the basis for a matching process designed to promote the placement ofthe right people to the right positions.*Including Officers,Division COOs and General Managers of MC,heads of business sites in Japan and overseas,as well as management executives ofMC Group companies for which our employees are responsible.Strategic Development through Diverse ExperiencesMatching Talent to Business Strategies through Talent Visualization50SocialEnvironmentGovernanceOptimizing Human Resource Placement through Talent VisualizationWe have equipped an HR subsidiary with the capacity to visualize the talent required for key positions and created a team of seven full-time assessors with backgrounds at MC to drive the visualization process.These assessors carry out individual interviews and provideinterviewees with personalized feedback and dialogue based on various data,such as aptitude test results.To date,approximately 350interviews have been completed.We will continue to pursue this process with the aim of matching people with tasks based on theirabilities and motivation,regardless of age or gender.The resulting data resources will also be analyzed and used to develop the next-generation of leaders as well.Disclosure of HR DataMC discloses data including regarding diversity and human resource development.Initiatives and data regarding diversity management are available here.Initiatives and data regarding human resource development are available here.Initiatives and data regarding wellbeing(occupational health and safety,health and productivity management)are available here.51SocialEnvironmentGovernanceRelated SDGs Themes Action Plan Regarding this Material IssueIn this era of rapid transformation,it is essential to have the mobility to promptly adapt to the changes in the world while having a broadperspective in order to realize sustainable growth.In addition,we recognize strengthening corporate governance on an ongoing basis asan important management issue,as it is the foundation for ensuring sound,transparent and efficient management,all of which areintegral for sustainable growth.From this perspective,our chief initiatives are as follows.Realizing a Highly Transparent and Flexible OrganizationWhile swiftly responding to changes in the business environment,strive to realize effective governance on a global,consolidated basis and maintain/strengthen a sound organization that is transparent and flexible.52SocialEnvironmentGovernanceAs MC engages in a global network of business operations across all regions and industries,MC has accumulated intangible assets inthe form of intelligence and industry expertise.Through the efficient and effective division of functions among our Head Office,globaloffices and subsidiaries,as well as group companies,we are constantly collaborating to enhance our ability to respond to change andgenerate the next source of significant growth.Establishment of the Global Intelligence(GI)CommitteThrough our global network developed over many years,MC possesses multifaceted intelligence and know-how in macroeconomics,industry and geopolitics.In order to connect this diverse intelligence and further strengthen our ability to respond to changes in theexternal environment,MC has newly established the Global Intelligence(GI)Committee in 2022.By incorporating the analysis of the GICommittee into companywide strategies,we will strengthen the driving force of our Business Groups and collaboration across allindustries.Incorporating Global Intelligence into Management53SocialEnvironmentGovernanceMC has always been flexible in adapting its businesses and systems to match the changing times.The need for such flexibility is greaterthan ever in these turbulent times,requiring companies to be even more agile.We will continue to flexibly reshape our organizationalstructure and human resources in order to respond rapidly to chang
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More Energy,Less EmissionsSustainability&Climate 2024 Progress Report1 Sustainability&Climate 2024 Progress Report1 Sustainability&Climate 2024 Progress ReportOur Approach to Sustainable DevelopmentEnergy is at the heart of the most daunting chal-lenges of the 21st century,defined in the U.N.s 2030 Agenda in the form of its 17Sustainable Development Goals(SDGs).As part of its transition strategy to achieve its 2050 Net Zero Ambition,together with society,the Company affirms its purpose:to provide as many people as possible with energy that is more reliable,more affordable and more sustainable,and has placed Sustainability at the heart of its strategy,its projects and its operations.Our commitment is based on the values defined in our Code of Conduct and our approach to sustainability is structured around 4axes:climate and sustainable energy,caring for the environment,acting for the well-being of employees,having a positive impact for stakeholders.To help our collective corporate culture evolve in favour of sustainable development,we have mobilized our 100,000employees through the progress plans defined at each of our sites as part of the SustainabALL program,in which the Company sets out its material contribution to sustainability.OUR APPROACHOUR APPROACHOURPURPOSETo provide as many people as possible with energy that is more reliable,more afordable,and more sustainableOUR AMBITIONTo be a major player in the energy transition,on the road to Net Zero by 2050,together with society10 KPIS COVERING THE PERIOD 2023-2025 IN SUPPORT OF OUR TRANSITION10 KPIS COVERING THE PERIOD 2023-2025 IN SUPPORT OF OUR TRANSITIONCLIMATE AND SUSTAINABLEENERGY CARING FOR THE ENVIRONMENTACTING FOR THE WELL-BEING OF EMPLOYEESPOSITIVE IMPACT FOR STAKEHOLDERSEnergy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress2 Sustainability&Climate 2024 Progress ReportSummaryIntroductionMessage from Patrick Pouyann,Chairman and CEO 3Message from Jacques Aschenbroich,Lead Independent Director 6Governance 7Our Climate-Related Risks 9Our Ambition and Progress 10Global Challenges:More Energy,Less Emissions 11Global Issues:COP28 and Actions to be Taken 12A Two-pillar Multi-energy Strategy 13A Net Zero Company by 2050,Together with Society 14 2030:Our Objectives for More Energy and Less Emissions 15How TotalEnergies 2030 Objectives Compare to the IEA Scenarios 16Focus:Supporting Iraq Toward its Energy Independence 17A Strategy to Reduce Our Clients Emissions 18Supporting Our Customers in their Decarbonization Journey 19Focus:Texas,USA:Multi-energy Integration 20Disciplined and Sustainable Investments to Support our Strategy 21A Resilient Portfolio 232023 Taxonomy:a Company in Transition 25Evaluation of our Transition by Third-Parties 26ENERGY&CLIMATE:OUR ORDERLY ENERGY TRANSITION 27Climate Impact of Our Strategy:Our 2023 Progress and 2025-2030 Objectives 28 Oil:Todays Energy 29Producing Oil Differently:Focus on Low-cost and Low-emission Oil Assets 29Relentlessly reducing Our Scope 1 2 Emissions,Oil&Gas 30Scope 1 2 Emissions Reduction by 2030 31Our Energy Efficiency plan:$1 Billion over 2 years 32Focus.Refining-Chemicals:a Practical and Ambitious Decarbonization Pathway 33Gas:a Transition Fuel 34Liquefied Natural Gas:a Key Fuel for the Energy Transition 34Aiming for Zero Methane Emissions 36Expanding Geological Carbon Storage to Reduce Our Emissions and Those of Our Customers 38Offsetting Residual Emissions with Natural Carbon Sinks 39Actively working With Our Partners on Non-Operated Assets 40Focus:What are the Relevant Indicators for Reducing GHG Emissions Worldwide?41Helping our Customers Reduce their Own Emissions 42Anticipating Changes in Demand by Adapting our Sales of Petroleum Products 43Reduction of Emissions Enabled by Our Sales of Gas 44Electricity:the Energy of Decarbonation 46Our Major Development in Electricity:an Integrated Approach 46Our Renewable Electricity Capacity Build-up 47Developing Electric Mobility 48New Low-carbon Energy and Innovations to Achieve Net Zero by 2050 49New Low-carbon Energy 49Focus:Sustainable Aviation Fuel(SAF)51Innovating to Accelerate the Energy Transition 52OUR ACTIONS FOR A JUST TRANSITION 54Our Just Transition Plan 55Advocacy and Sector Initiatives in Support of the Energy Transition 58Acting for the Well-Being of Employees 60Ensuring Peoples Safety 61Our Employees at the Heart of the Transition 64Engaging Every Employee 65Attracting,Developing and Retaining Talents 66Building a Good Place to Work 67Promoting Diversity and Inclusion 69SustainabALL Program 70 Stories.SustainabALL 71Caring for the Environment 72Caring for the Environment 73Environmental Protection 74Taking Action to Preserve Water Resources 75Developing Circular Management of Our Products 77Stories.SustainabALL:Developing Circularity 79Acting for Biodiversity 80 Stories.SustainabALL:Acting for Biodiversity 82Having a Positive Impact for Stakeholders 83Upholding Human Rights 84Promoting Fiscal Transparency and Fighting Corruption 86Engaging with Our Stakeholders 87Supporting Our Host Communities 89Focus:Mozambique 90Making a Commitment to Young People 91Accessible and Affordable Energy for All 92Focus:Clean Cooking 93Working Alongside Our Suppliers 94Sharing the Economic Value We Create 95Performance Indicators 96Performance IndicatorsHaving a Positive Impact for StakeholdersCaring for the EnvironmentActing for the Well-Being of EmployeesEnergy&Climate:our Orderly Energy TransitionOur Ambitionand Progress3 Sustainability&Climate 2024 Progress Report3 Sustainability&Climate 2024 Progress ReportMore Energy,Less Emissions Message from Patrick Pouyann,Chairman and CEOThrough this Sustainability&Climate report,I am pleased to present you the concrete progress of our transition strategy,to which we have been resolutely committed since 2020.In 2023,TotalEnergies posted solid results,in line with its objectives while executing its strategy of balanced transition towards an integrated energy company and being the major that invests most in tomorrows energy system.TotalEnergies stays the course of its balanced multi-energy strategy.Anchored on two pillars hydrocarbons,especially LNG on the one hand,and Integrated Power,the energy at the heart of the energy transition,on the other hand,the Company is building a strong position to support the energy transition of its customers.Indeed,thanks to refocusing its Oil&Gas portfolio on assets and projects with low breakeven and low greenhouse gas emissions,and by diversifying into electricity,notably renewable,through an integrated strategy from production to customer,the Company is implementing its transition strategy supporting its customers and stakeholders in their decarbonization while offering an attractive return to shareholders.responsibly producing low-cost,low-emission hydro-carbonsIn 2023,we have reduced our emissions by 24ross all our operated sites compared with 2015,with a 34%reduction for our operated Oil&Gas production,refining and liquefac-tion sites.These results support our objectives for 2030(40%net reduction).The Scope 1 2 emission intensity of Upstream Oil&Gas activities on equity basis,decreased to 18kgCO2e/boe in 2023.Methane emissions from our operated sites,already among the lowest in the sector,have fallen by more than 47%compared with 2020.We are on track to reach our-50%target a year ahead of our 2025 target,aiming for zero methane emissions by 2030(-80%target).For this reason,we have decided to extend to all our Upstream Oil&Gas operations the target of methane intensity emissions below 0.1%(and not only to Upstream gas operations).We are a leader in LNG,a transitional energy that addresses the intermittent nature of renewable power generation and helps reduce emissions in countries using coal for power generation.As in 2022,the Company evaluated that its LNG sales contributed to avoiding around 70 Mt of CO2e emissions worldwide in 2023.Anchored on two pillars,the Company is building a strong position to support the energy transition of its customers.Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress4 Sustainability&Climate 2024 Progress Report4 Sustainability&Climate 2024 Progress ReportOur growth in power,with a renewable electricity generation portfolio representing more than 80GW(including 22GW of gross capacity already installed),positions us as one of the worlds leading solar and wind developers in 2023,and we have the ambition to be among the worlds top 5 by 2030(excluding China).These developments in electricity contribute to reducing our customers emissions generated by the use of the energy we sell them.As a result,the carbon content of the energy sold to our customers fell by 13%in 2023 compared with 2015,and we are well on track to achieving our-25%target in 2030.in a collaborative approach essential to the success of a just,orderly and equitable transition.TotalEnergies welcomes the agreement reached in Dubai at COP28,which calls for“transitioning away from fossil fuels in energy systems,in a just,orderly and equitable manner”and which highlights the need for transitional fuels such as gas.As an energy producer and supplier,we need to have the courage to say that the energy transition will mean a higher energy price,because it means building a decarbonized power system using intermittent energy sources,which will have to be supplemented by flexible resources,while investing massively in infrastructure and and by developing a profitable and differentiated Inte-grated Power business model to create a future cash-flow engine of the CompanyTotalEnergies invested$16.8billion in 2023 of which 35%in low-carbon energies,mainly in power.These massive invest-ments have made it possible to increase our capacities in renewable electricity production(by 6GW in 2023),storage,flexible production,and distribution(60,000charging points for electromobility at the end of 2023 including more than 1,000high-power charging points).The Company is building a world class cost-competitive portfolio combining renewable(solar,onshore wind,offshore wind)and flexible assets(flexible gas power plants,storage)to deliver clean firm power to its customers 24/7.In particular,TotalEnergies is leveraging its purchasing power to optimize its investment costs and industrialize its renewable assets through digital to lower operating costs.In 2023,our net electricity production amounted to 33TWh,including 19 TWh of renewable power.The Company aims to grow its power generation to more than 100TWh by 2030,investing on average$4billion per year;we are aiming for cash flow generation from this segment of more than$4billion in 2028,with the Integrated Power segment becoming net cash positive by this time.the electrification of uses,particularly in industry and trans-port.In order to make this transition acceptable,we are pursuing the development of new hydrocarbon projects,as the pace of transition will not be the same everywhere in the world.We believe that we cannot ask countries of the Global South to not develop their resources,when OECD countries have been developing them for more than a century to ensure their development.This is also what the Dubai agreement is about.This agreement reinforces TotalEnergies transition strategy,which is anchored on two pillars,the responsible production and sales of Oil&Gas,and electricity,notably renewables.TotalEnergies supports the objectives of tripling renewable energies(and aims to do more at its own level)and doubling energy efficiency by 2030,as well as slashing methane emissions within that time frame(“aiming for zero methane”).TotalEnergies welcomes the agreement reached in Dubai at COP28.This agreement reinforces TotalEnergies transition strategy.Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress5 Sustainability&Climate 2024 Progress Report5 Sustainability&Climate 2024 Progress Reportemissions together,as in the air transport sector,illustrated by the strategic partnership with Airbus to supply 50%of their sustainable fuel needs in Europe and to conduct a research and innovation program aimed at developing 100%sustainable fuels.We owe our ambition and our results to our teams,whom I would like to thank for their commitment.As part of its transition strategy aimed at achieving Ambition Net Zero in 2050,together with society,the Company has placed sustainable development at the heart of its strategy,projects and operations.Together,with the SustainabALL program,we are making our collective culture evolve step by step.2024 is our centenary year.Energy represents the history and the future of TotalEnergies.Rising to the dual challenge of meeting the energy needs of an ever-growing world population while reducing global warming,reinventing energy production and consumption in order to get to Net Zero by 2050,together with society,those tasks underlie the raison dtre of TotalEnergies which is to supply to as many people as possible a more affordable,more available and more sustainable energy.These objectives are an integral part of TotalEnergies roadmap for 2030.We share this approach with our stakeholders.We play an active role in disseminating responsible produc-tion objectives in our industry:at COP28,more than 50compa-nies from the Oil&Gas sector signed the OGDC(Oil&Gas Decarbonization Charter),committing themselves to reducing emissions from their operations and,in particular aiming for zero methane emissions by 2030.TotalEnergies has actively supported the success of OGDC.And I myself have the honor of having been designated among the 3“champions”to lead the OGDC with the CEOs of ADNOC and Aramco.When it comes to detection,measurement and reduction of methane emissions,we are sharing our drone detection and measure-ment technology(AUSEA)with several national companies from producing countries:Petrobras(Brazil),Sonangol(Angola),NNPCL(Nigeria),SOCAR(Azerbajan),ONGC(India).Every day,TotalEnergies supplies electricity and gas to 8million homes in Europe,and every day 8million people visit our 15,000service stations in 56countries around the world and 60,000electric charging points.Our Company works with its industrial customers,particularly those in hard to abate sectors to find solutions to reduce these We are proud of 100years of pioneering spirit in the service of energy and its challenges.We are resolutely committed to this new path of collective challenges for sustainable development,Net Zero,together with society.We owe our ambition and our results to our teams,whom I would like to thank for their commitment.Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress6 Sustainability&Climate 2024 Progress Report6 Sustainability&Climate 2024 Progress ReportSince the last General Meeting of Shareholders,held in May 2023,I have held the position of Lead Inde-pendent Director,which was entrusted to me by the Board of Directors,and in this capacity I chair the Gover-nance and Ethics Committee.In this context,I oversaw the work that led to the unanimous decision by the Board of Directors to propose to the General Meeting of Shareholders in May 2024 the renewal of Patrick Pouyanns term of office as part of the balanced governance implemented since 2015,which led the Board to propose the renewal of my own term of office as Lead Director.In reaffirming its support for the quality and relevance of the transition strategy implemented since 2020,the Board of Directors considered it appropriate to ensure the continuity of the Companys governance and leadership.Over the past 10years,Patrick Pouyann has done an excellent job at steering TotalEnergies in a complex environment,delivering extremely solid financial results and committing the Company to the energy transition more quickly and decisively than its peers.The Board of Directors is unanimously counting on his leadership and strategic vision to pursue TotalEnergies transition with determination and consistency,based on 2 pillars:Oil&Gas on the one hand,and Power and Renewables on the other.This vision,which creates value in the medium and long term,and this strategic stability are an asset and a differentiating factor for TotalEnergies compared with its peers.The renewal of Patrick Pouyanns responsibilities takes place in the continuing policy of combining functions of Chairman and Chief Executive Officer,this management form being considered to be the most appropriate for dealing with the challenges and specificities of the energy sector,which is facing major transformations.Indeed,more than ever,this context requires agility of movement,which the unity of command reinforces,by giving the Chairman and Chief Executive Officer the power to act and increased representation of the Corporation in its strategic negotiations with States and partners of the Company.The unity of the power to manage and represent the Company is also well regulated by the Companys corporate governance,with a lead independant director who has extensive powers and whom the Board of Directors has judged to be fully fulfilling his role.I also led the evaluation of the Board of Directors perfor-mance,which was based on a written questionnaire and individual interviews with each director,as well as on the discussions we had at the annual meeting of directors who do not hold an executive or salaried position(“Executive Session”),which I chaired.The implementation of the tran-sition strategy decided by the Board of Directors makes TotalEnergies the Company most committed to the energy transition among the majors,by developing,in a resolved and structured way,an“Integrated power”business.As a result,TotalEnergies is one of the major players in renewable energies,and the“Integrated Power”business is achieving encouraging levels of profitability.In this context,commu-nication efforts need to be further developed to improve the perception of the fundamental work undertaken by the Company and to ensure that this energy transition is fully recognized by stakeholders.With regard to stakeholders,my role as Lead Director leads me to engage in dialogue with various shareholders,in particular on the Companys transition strategy,its progress in this area and the updating of its ambition described in this report.For the 4th consecutive year,the Companys ambition in terms of sustainable development and energy transition will be submitted to shareholders for their opinion.The Annual General Meeting in May 2024 will therefore be asked to give an advisory opinion on this report,which is a concrete demonstration of the shareholder dialogue,open to all stakeholders,that we wish to have,in complete trans-parency,to achieve together a“just,orderly and equitable”energy transition,in line with the Paris Agreement and the Duba consensus.Achieving Our Transition TogetherJacques Aschenbroich Lead Independant Director,Chairman of the Governance and Ethics CommitteeEnergy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress7 Sustainability&Climate 2024 Progress Report7 Sustainability&Climate 2024 Progress Reportchange and environmental risks,financial risks and oppor-tunities.Site visits make a very practical contribution to their training,enabling them to deepen their knowledge of the Companys specific features,its sustainability challenges in particular,its businesses including new ones and its teams.They are often the occasion for thematic presenta-tions.In addition,the climate-related training modules iden-tified among those available to TotalEnergies employees are accessible to Directors.Strategy&CSR CommitteeAt the 2023 Annual Strategy Seminar,the Directors discussed the energy transition in the US and in the world with Dan Yergin,Vice President of S&P Global.The Strategy Seminar also provided an opportunity to examine Integrated Powers profitability drivers,as well as the state of hydrogen technol-ogies and cost assessments.The Audit CommitteeThe Audit Committee,which is already reviewing the extra-fi-nancial performance declaration,has taken steps to take on the new tasks arising from the regulations on the reporting of sustainability information.In particular,it will monitor the process of drawing up the sustainability report that will succeed the extra-financial performance declaration,and which will be published for the first time in 2025 in relation to the 2024 financial year.It also monitors the certification of sustainability information.To define its strategy and take into account the challenges posed by climate change,TotalEnergies relies on a clearly defined organizational structure and governance.Climate and sustainability issues are addressed at the highest level of the organization,by both the Board of Directors and the Executive Committee.Board of DirectorsTotalEnergies Board of Directors is dedicated to promoting long-term value creation by the Company.It defines the Companys strategic orientations and annually reviews oppor-tunities and risks,such as financial,legal,operational,social and environmental risks,and the measures taken in response.It ensures that both the Companys strategy and the invest-ment projects submitted for its consideration take account of climate and sustainability concerns.To aid the Board in carrying out its duties,a continuous training program on climate was approved for the Directors in 2021.It includes a variety of modules on the following topics:energy,climate BOARD OF DIRECTORSCHIEF EXECUTIVE OFFICERAudit CommitteeGas,Renewables&PowerExploration&ProductionRefining&ChemicalsMarketing&ServicesStrategy&SustainabilityFinanceAsia StrategyGovernance and Ethics CommitteeCompensation CommitteeStrategy and CRS CommitteeChairman andLead Independant DirectorExecutive CommitteeOneTech9 meetings of the Board of Directors97.6%attendance rate7 meetings of the Audit Committee100%attendance rate3 meetings of the Compensation Committee100%attendance rate1 executive session chaired by the Lead Independent Director5 meetings of the Governance&Ethics Committee96%attendance rate3 meetings of the Strategy&CSR Committee100%attendance rateSPECIALIZED COMMITTEES FOR ADDRESSING OUR STRATEGIC PRIORITIES GovernanceEnergy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress8 Sustainability&Climate 2024 Progress Report8 Sustainability&Climate 2024 Progress ReportVARIABLE COMPENSATION ALIGNED WITH THE COMPANYS STRATEGIC OBJECTIVES Safety performance1 GHG reduction1 Supervision of the transformation strategy1 Profitability of renewables1 CSR performance1 Financial performance1(Integrated Power included for 10%)Safety GHG reduction Diversity New in 2022 Individual performance2 Financial performance Financial performance GHG reductionChairman&CEO extra-financialcriteria account for 39%,financial criteria for 61%,including 10%for Integrated PowerFrom the Chairman and CEO to all beneficiary employees3:extra-financial criteria account for 30%Senior Executives:extra-financial criteria account for 30p0%ANNUAL VARIABLE COMPENSATIONPERFORMANCE SHARE PLAN35%55%1.Maximum percentage.2.According to the role.3.More than 12,000 employees.Compensation CommitteeFor many years the Compensation Committee has included sustainability issues including climate ones in the compen-sation structures of the Chairman&Chief Executive Officer,as well as in the criteria related to the performance share plans(see opposite).Executive Committee(Comex)The Chairman&Chief Executive Officer of TotalEnergies,assisted by the Executive Committee,ensures that climate issues are taken into account and built into operational road-maps.The Executive Committee is responsible for identifying and analyzing risks that could prevent TotalEnergies from reaching its objectives.The TotalEnergies Risk Management Committee(TRMC)assists the Executive Committee.The TRMCs primary duties are to ensure that the Companys risk mapping is updated on a regular basis and that its existing risk management processes,procedures and systems are effective.The Strategy&Sustainability Division coordinates the Companys activities through the entities in charge of strategy and markets analysis,sustainability and climate,and also safety,health and environment,legal affairs,relations with public authorities and internal audit.Its President also chairs the Risk Committee(CoRisk)which is in charge of the Companys investments.The Finance Division ensures an ongoing dialogue with investors,analysts and extra-financial rating agencies on climate challenges and on extra-financial issues more broadly.In all,more than 450meetings were held in France and worldwide in 2023.6190a%6%6%8%8%Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress9 Sustainability&Climate 2024 Progress Report9 Sustainability&Climate 2024 Progress ReportOur Climate-Related RisksThe risks posed by climate change are included among the risks analyzed by the TotalEnergies Risk Management Committee(TRMC).TotalEnergies ranks its risks by type and gravity.In 2022,the TRMC updated its risk mapping and submitted the results to the Board of Directors in early 2023.In the table above,TotalEnergies risks are positioned in relation to identified generic risks,in accordance with the recommendation of the Taskforce on Climate-related Finan-cial Disclosure(TCFD).The TRMC also verifies the use of appropriate risk management systems.Additional action plans can be defined when necessary.Audits are conducted to ensure that existing risk reduction and control measures are effective.Personnel from multiple disciplines,segments and businesses may collaborate in carrying out these action plans and audits.The Audit Committee of the Board of Directors monitors the effec-tiveness of the internal control and risk management systems established by senior management,in light of identified risks and with a view to fulfilling TotalEnergies objectives.Adaptation to physical risksWe take climate risk into account in the design of our facil-ities and in the evaluation of our sites in operation.Climate change potentially has multiple consequences,including rising sea levels and increased extreme weather events,that can negatively impact our operations.We have issued recommendations for addressing the antic-ipated changes in the climate system and its components in our facility design bases(metocean criteria).Similarly,we evaluate the vulnerability of our sites in oper-ation to weather events so that their consequences do not affect the installations integrity or peoples safety.Internal studies have not identified any existing facilities that are vulnerable to the consequences of climate change known to date.1.International Association of Oil&Gas Producers.EXTRACT FROM TOTALENERGIES RISK MAPPINGPolicy andlegal risks Technology riskMarket riskReputation risk Acute riskChronic riskPace of the energy transition deployment,evolution of the demand333Financing of Oil&Gas reserves33Operational risks related to the effects of climate change and extreme events3333Risk of legal action3Reputation risk3Risks related to skills management and changes in jobs33Transition risksPhysical risksFollowing the recommendation of the task force on Climate-related Financial DisclosuresEnergy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress10 Sustainability&Climate 2024 Progress Report10 Sustainability&Climate 2024 Progress ReportOur Ambition and Progress 11 Global challenges:More energy,Less Emissions 12 Global Issues:COP28 and Actions to be Taken 13 A Two-pillar Multi-energy Strategy 14 A Net Zero Company by 2050,Together with Society 15 2030:Our Objectives for more Energy and less Emissions 16 How TotalEnergies 2030 Objectives Compare to the IEA Scenarios 17 Focus.Supporting Iraq Toward its Energy Independence 18 A Strategy to Reduce our Clients Emissions 19 Helping Our Industrial and Commercial Customers Decarbonize their Operations 20 Focus.Texas,USA:Multi-energy Integration 21 Disciplined and Sustainable Investments to Support our Strategy 23 A Resilient Portfolio 25 2023 Taxonomy:a Company in Transition 26 Evaluation of our Transition by Extra-financial Rating Agencies Grandpuits solar power plant and battery energy storage system.Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress11 Sustainability&Climate 2024 Progress Report11 Sustainability&Climate 2024 Progress ReportGlobal Challenges:More Energy,Less EmissionsEnergy is an essential resource,everywhere indis-pensable for living:for food,lighting,heating and cooling,transport,healthcare,construction and trade.Historically,energy demand has grown in line with demo-graphic growth and rising living standards,as illustrated on the left since 2000.The worlds population is set to grow by almost 2billion additional inhabitants by 2050.This prospect will have significant implications for achieving the UNs Sustainable Development Goals(SDGs)to improve prosperity and social well-being while protecting the environment and biodiversity.In the countries of the Global South,where access to energy is already one of the limiting factors in human development(see graph below),populations aspire to improve their quality of life.In OECD countries,energy has enabled socio-economic development that no country is prepared to forego.The IPCC reiterated in 20211 that global warming is the consequence of GHG emissions linked to human activities,and warned of the environmental and socio-economic impacts of this already tangible climate change.“TotalEnergies supports the Paris Agreement.”Since the Paris Agreement in 2015,States have jointly pledged“to strengthen the global response to the threat of climate change,in the context of sustainable development and the fight to eradicate poverty,in particular by holding the increase in global average temperature to well below 2C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 C above pre-industrial levels”.The energy system must therefore be transformed,because energy is at the heart of this global climate challenge:green-house gas(GHG)emissions linked to the production or use of energy account for over 60%of global emissions in 2021(ref.IPCC&IEA),as the global energy system is still 80%relying on fossil fuels.There is an urgent need to accelerate the development of a decarbonized energy system,while maintaining the current energy system at a level sufficient to meet global demand and organize a just,orderly and equitable transition of energy systems.EVOLUTION OF TOTAL PRIMARY ENERGY DEMAND(TPED)AND WORLD POPULATION GROWTHBase:2000=100Sources.Population:Oxford Economics,TPEDEnerdata.Graph:adapted from Smil,Vaclav.Energy and Civilization:A History.The MIT Press,2018;data from World Bank,Energy Institute,EIA databases.1.Human Development Index(HDI)combines life expectancy at birth,adult literacy,combined educational enrollment,and per capita GDP.2.Climate Change 2021:The Physical Science Basis and other assessment reports 6.200090 100 2005201020152021120 140 Total primary energy demandPopulation1.8%1.2%Compound Annual Growth Rate(*CAGR)2000/2021TOTAL PRIMARY ENERGY DEMAND(TPED)PER CAPITA VS THE HUMAN DEVELOPMENT INDEX(HDI)0.50.60.70.80.91.0HDI(1)TPED per capita(MWh/Capita)InsufcientSufcientOverabundant 012014010080604020IndiaBrazilSouth AfricaArgentinaFranceIsraelUKSwitzerlandJapanGermanyAustraliaUnited StatesSaudi ArabiaOmanKoweitCanadaUnited Arab EmiratesNorwaySouth KoreaAsia non-OECDAsia OECDNorth AmericaMiddle EastLatin AmericaChinaEuropeCentral AsiaAfricaAzerbaijan KazakhstanRussian FederationEnergy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress12 Sustainability&Climate 2024 Progress Report12 Sustainability&Climate 2024 Progress ReportTotalEnergies welcomes the agreement reached in Dubai that calls for“transitioning away from fossil fuels”in a“just,orderly and equitable manner.”Within this framework,TotalEnergies notes with interest the agreements reference to transitional fuels such as gas.TotalEnergies supports the objectives of tripling the amount of renewable energy and doubling energy efficiency by 2030,as well as slashing methane emissions within that time frame.These objectives are at the heart of TotalEnergies roadmap for 2030.This agreement reinforces TotalEnergies transition strategy,which aims,on the one hand,to contribute to the development of a new decarbonized energy system based on electricity and renewables,in which gas plays a useful role as a flexible transitional energy;and,on the other hand,to support a just,orderly and equitable transition away from fossil fuels,notably in emerging countries that legitimately aspire to economic and social development for their populations.Given the energy-related emissions as shown in the chart on the left,reducing the associated emissions implies in the short term:minimising the share of coal in the electricity mix,starting from OECD countries;decarbonizing the road transport sector(currently 90%powered by petroleum products);aiming for the elimination of methane emissions from fossil fuel production processes.To achieve this,massive investments are needed,not only in renewable energy,but also in electricity networks and systems enabling to ensure the availability of the new elec-tricity system.Another challenge is to reduce fossil fuel consumption at the right pace.In the Global South,fossil fuels remain an affordable solution for providing growing populations with access to energy,and therefore greater prosperity.In OECD countries,an accelerated transition means retiring existing assets at country,industry and household levels,and investing in new low-carbon assets.The transition will not take place without social acceptability(both between North and South and within OECD countries)and without genuine efforts in terms of climate justice.Accelerating the pace of investment in low-carbon energies requires strong cooperation between the private and public sectors.In OECD countries,simplify and speed up the permitting process to accelerate the deployment of grids and renew-able energies.Actively support the transition of the Global South through(I)the development of multilateral financial guarantees essential to project financing and(II)the deployment of training programs to support the local implementation of new technological solutions.Global Issues:COP28 and Actions to be TakenGLOBAL GHG EMISSIONS FROM FOSSIL FUEL COMBUSTION IN 2021-37Gt CO2eResidential&CommercialOther uses of energyEnergy-related methane334 0 5 10 15 Coal Oil Gas Methane164V5(1%Electricity1474%4%Transport898%2%0%Industry5520%Sources:CO2 Emissions in 2022,IEA,rapport et database:https:/www.iea.org/reports/CO2-emissions-in-2022 Emissions in 2022 Analysis-IEA.Greenhouse Gas Emissions from Energy Data Explorer(update 2023):https:/www.iea.org/data-and-statistics/data-tools/greenhouse-gas-emissions-from-energy-data-explorer Greenhouse Gas Emissions from Energy Data Explorer Data Tools-IEA.Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress13 Sustainability&Climate 2024 Progress Report13 Sustainability&Climate 2024 Progress ReportA Two-pillar Multi-energy StrategyTotalEnergies stays the course of its balanced inte-grated multi-energy strategyTotalEnergies reaffirms the relevance of its balanced inte-grated multi-energy strategy considering the developments in the oil,gas and electricity markets.Anchored on two pillars,Oil&Gas,notably LNG,and electricity,the energy at the heart of the energy transition,the Company is in a very favorable position to take advantage of energy prices evolu-tion.Thanks to the refocusing of the Oil&Gas portfolio on assets and projects with low breakeven and low greenhouse gas emissions,and to the diversification into electricity,notably renewable,through an integrated strategy from production to customer,the Company is implementing its transition strategy while ensuring an attractive shareholder return policy.responsibly producing low cost,low emission Oil&Gas.While drastically lowering the emissions from its operations,TotalEnergies plans to grow Oil&Gas production by 2-3%per year over the next five years,predominantly from LNG,thanks to its rich low cost,low emission Upstream portfolio.The Company plans notably to develop a top-tier pipeline of LNG projects(Qatar North Field Expansion,Papua LNG,Energia Costa Azul LNG and Rio Grande in the US,Mozambique LNG)while leveraging its leading position in Europe in regas-ification and its leading LNG exporter position in the United States.TotalEnergies plans to launch the production of its portfolio of high-return oil projects(Brazil,Gulf of Mexico,Iraq,Uganda)recently enriched with exploration successes in Suriname and Namibia.The key indicator of our progress on this pillar is the reduc-tion in Scope1 2 emissions because our first duty as a producer of hydrocarbons is to reduce the greenhouse gas emissions linked to their production.and developing a profitable and differentiated Integrated Power model to create a future cash engine of the Company.TotalEnergies is replicating its integrated Oil&Gas business model into the electricity value chain to achieve a profitability(ROACE)of 12%for the Integrated Power segment,equiv-alent to Upstream Oil&Gas ROACE at 60$/b,above the returns of the traditional Utilities model.The Company is building a world class cost-competitive portfolio combining renewable(solar,onshore wind,offshore wind)and flexible assets(CCGT,storage)to deliver low-carbon electricity available 24/7.In particular,TotalEnergies is leveraging its scale effect in equipment purchase to opti-mise its investment costs and industrialize its renewable assets through digital to lower operating costs.TotalEnergies also uses the strength of its balance sheet to keep market exposure,allowing it to capture additional margins in a market exposure.The Company aims to grow its power generation to more than 100TWh by 2030,investing around$4billion per year;the generated cash flow of this segment was$2.2billion in 2023 and will be more than$4billion in 2028,becoming net cash-flow positive at that time.Additionally,TotalEnergies invests in low-carbon molecules(biofuels and biogas,as well as hydrogen and its derivatives:e-fuels and SAF).The key indicator of our progress to measure our transition towards low-carbon energy products is the lifecycle carbon intensity1 of the products used by the Companys customers.It divides the lifecycle emissions(from production to final use)of our energy products sold(Scope1 2 3)by the quan-tity of energy supplied(g CO2 e/MJ).The reduction in carbon intensity1 reflects the lower carbon content of the energy sold to our customers and the Companys progress in imple-menting its transition strategy.1.Lifecycle carbon intensity of energy products sold.See reports glossary for further details.Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress14 Sustainability&Climate 2024 Progress Report14 Sustainability&Climate 2024 Progress ReportA Net Zero Company by 2050,Together with SocietyGLOBAL ENERGY SYSTEM ACCORDING TO THE IEA IN 2050Total primary energy demand mix WorlwideTotalEnergies sales mixElectricity&Renewables Electricity1500 TWh/yLNG&Gas OilCoal Natural gasOil25-30 Mt/y LNG0.2-0.3 Mb/d Oil10 Mt/y polymersLow-carbon molecules2Bioenergy50Mt/y11102330434782262023202320502050ambition1000%0%0P187252459683TOTALENERGIES NET ZERO VISION 2050TotalEnergies reaffirms its ambition to be a major player in the energy transition and shares a vision of what its activities could be to achieve carbon neutrality by 2050,together with society.By 2050,TotalEnergies would produce:about 50%of its energy in the form of electricity,including the corresponding storage capacity,totaling around 500TWh/year,on the premise that TotalEnergies would develop about 400GW of gross renewable capacity;about 25%of its energy,equivalent to 50Mt/year of low-carbon energy molecules in the form of biogas,hydrogen,or synthetic liquid fuels from the circular reaction:H2 CO2 e-fuels;around 1Mboe/day of Oil&Gas(about a quarter of the production in 2030,consistent with the decline envisaged by the IEAs Net Zero scenario),primarily liquefied natural gas(about 0.7Mboe/d,or 25-30Mt/year)with very low-cost oil accounting for the rest.Most of that oil would be used in the petrochemicals industry to produce about 10Mt/year of polymers,of which two thirds would come from the circular economy.That Oil&Gas would represent:about 10MtCO2e/year of Scope1 residual emissions,with methane emissions aiming towards zero(below 0.1MtCO2e/year);those emissions would be offset in full by projects using nature-based solutions(natural carbon sinks).Scope 34 emissions totaling about 100MtCO2e/year.To get to net zero together with society,TotalEnergies would*Sources:2023 Enerdata-2050 IEA 2023(NZE Scenario).1.Hydro,solar,wind and nuclear.2.Biofuels,biogas,hydrogen and e-fuels/e-gas.3.From operated facilities.4.GHG Protocol Cate-gory 11.See reports glossary for further details.5.Lifecycle carbon intensity of energy products sold.See reports glossary for further details.Mt CO2econtribute to“eliminate”the equivalent of 100Mt/year of CO2 generated by its customers by developing carbon utilization(CCU)and carbon capture and storage(CCS)solutions of approximately 100MtCO2e/year.In 2050,our trading portfolio would be aligned with our productions and sales portfolio.2050 IEA NZE energy mixVISION OF TOTALENERGIES SALES IN 2050Scope 1 23Scope 34205010NBS:10 Mt CO2CCU/CCS100 Mt CO201002050-100%Lifecycle carbon intensity5Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress15 Sustainability&Climate 2024 Progress Report15 Sustainability&Climate 2024 Progress Report2030:Our Objectives for More Energy and Less Emissions ENERGY PRODUCTION AND SALESEnergy productionIn PJ/dEnergy salesIn PJ/dOver the decade 2020-2030,the TotalEnergies energy transition strategy based on two pillars is reflected in the production and sales targets shown on the left hand side:ProductionWe plan to increase our energy production(oil,gas and elec-tricity),by 4%per year between 2023 and 2030,while reducing emissions(Scope1 2 and methane)from our operated facilities(see table p.31).Sales We are aiming to reduce the carbon intensity1 of our sales by 25%by 2030,compared to 2015.Taking these factors into account,we are developing our sales mix to reach 20%electricity by 2030,with a higher proportion of gas sales than oil sales.Low-carbon moleculesLow-carbon moleculesElectricityElectricityGasGasOilOil 4%/yearof energy production between 2023 and 2030-25%lifecycle carbon intensity of energy products sold1202025251010001.Lifecycle carbon intensity of energy products sold.See reports glossary for further details.201820232030202320182030 4%/year40 0P %Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress16 Sustainability&Climate 2024 Progress Report16 Sustainability&Climate 2024 Progress ReportHow TotalEnergies 2030 Objectives Compare to the IEA ScenariosReducing GHG emissions at our operated facilities(Scope 1 2)is key to our ambition to supply more energy while curbing GHG emissions.Our objective of cutting net Scope 1 2 emissions from our operated activities by 40%is consistent with the reduction targets of the European Unions“Fit-for-55”program(a 37crease between 2015 and 2030)and the IEAs 2023 Net Zero Emissions(NZE)scenario(a 31crease between 2015 and 2030).Our targets for lowering the lifecycle carbon intensity2 of energy products sold(a 15%reduction by 2025 and a 25%reduction by 2030)put the Company on a trajectory close to the Announced Pledges Scenario(APS)in the IEAs World Energy Outlook 2023,which assumes that the States parties to the Paris Agreement fulfill all their net zero objectives.An independent third party(Wood Mackenzie)3 has audited the calculations made and the trajectories presented.Global CO2 emissions-IEA scenarios(WEO 20231)In%vs 2015-60-60-30-30-40-40-50-50-20-20-10-10 10002015201520202020202520252030203020352035 IEA CO2 emissions(Energy)Scope1 2 emissions:TotalEnergies TotalEnergies-Objectives 2025(exc.NBS)-2030(inc.NBS)TotalEnergies-2030(exc.NBS)1.Based on the IEAs World Energy Outlook 2023 https:/www.iea.org/reports/world-energy-outlook-2023.Licence CC by 4.0.Global CO2 emissions from energy combustion and industrial processes.Excluding Covid-19 impact in 2020 and 2021 for TotalEnergies GHG emissions.2.TotalEnergies lifecycle carbon intensity of energy products sold(see re-ports glossary for further details)and the change in carbon intensity of the worlds energy,calculated as the ratio of the worlds CO2 emissions from fossil fuels(in Mt CO2)to the total primary energy supply(in EJ)of the IEAs World Energy Outlook 2023.A replacement factor of 2.63(38%)is used to obtain a fossil fuel equivalent for renewable power generation(wind,solar and hydroelectricity)modeled in those scenarios for purposes of comparison with TotalEnergies lifecycle carbon intensity.3.Link to the assurance letter of Wood Mackenzie.SCOPE 1 2 EMISSIONS FROM OPERATED FACILITIESLIFECYCLE CARBON INTENSITY OF ENERGY PRODUCTS SOLD2In%vs 2015STEPS(2.4C)STEPS(2.4C)APS(1.7C)APS(1.7C)NZE(1.5C)NZE(1.5C)AIE(WEO 2023)Lifecycle carbon intensity of energy products sold:TotalEnergies TotalEnergies-Objectifs 2025-2030https:/ Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress17 Sustainability&Climate 2024 Progress Report17 Sustainability&Climate 2024 Progress Report the construction of a large-scale seawater treatment unit to increase water injection capacities in southern Iraq fields without increasing water withdrawals as the country is currently facing a water-stress situation.This water injec-tion is required to maintain pressure in several fields and as such will help optimizing the production of the natural resources in the Basra region;the construction and operation of a photovoltaic power plant with a capacity of 1GWp to supply electricity to the grid in the Basra region powering 350,000homes.These projects represent a total investment of approximately$10billion(100%share).The project also illustrates how the footprint of our projects can be minimized.A preliminary review of the projects land footprint was carried out during the design phase.The proj-ects technical experts worked in coordination with the team in charge of societal performance and our partners to revise the layout of the gas pipelines in order to avoid the projects impact on populations.IRAQRATAWIBASRAW.QURNAMAJNOONKuweitRatawi Redevelopment PlantGas Gathering PipelineCondensate Export Pipeline Condensate Export Terminal Ratawi Development AreaExisting FacilityRatawi Pipeline Pump Station Connected toIraqi Export PipelineSolar PlantElectric GridSea Water Treatment PlantPower Generation viaSeveral Power PlantsEuphratesTigrisShati al-ArabIRAQSaudi Arabia IranKuweitSyria100 years after the start of its oil activities in Iraq,Total-Energies continues to be a pioneer in the country by devel-oping several projects in the Basra region,designed to enhance the development of Iraqs natural resources to improve the countrys electricity supply.TotalEnergies,with the support of the Iraqi authorities,on the one hand will invest in installations to recover gas that is being flared on three oil fields and as such supply gas to 1.5GW of power generation capacity in a first phase growing to 3GW in a second phase,and,on the other hand,will also develop 1GWac of solar electricity generation capacity to supply the Basra regional grid.In April 2023,TotalEnergies confirmed with the Iraqi author-ities the terms of the GGIP(Gas Growth Integrated Project)agreements announced in September 2021.These agreements include:the construction of a new gas gathering network and treat-ment units to supply the local power stations,with Total-Energies also bringing its expertise to optimize the Oil&Gas production of the Ratawi field,by building and operating new capacities;FOCUS SUPPORTING IRAQ TOWARD ITS ENERGY INDEPENDENCEEnergy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress18 Sustainability&Climate 2024 Progress Report18 Sustainability&Climate 2024 Progress ReportA Strategy to Reduce Our Clients EmissionsLIFECYCLE CARBON INTENSITY1 OF ENERGY PRODUCTS SOLDBy 2030,we intend to reduce the emissions linked to the energy we supply to our customers by 25%compared to 2015.In other words,we intend to decrease by 25%the carbon intensity1 of energy products sold,which accounts for the lifecycle emissions(Scope 1 2 3)of our energy products per unit of energy sold(gCO2e/MJ).Indeed,by offering our clients an increasingly decarbonized portfolio,we contribute to the energy transition and help our clients reduce their emissions.In 2023 we maintained our progress thanks to sales growth of renewable energy by notching a 13%reduction in the lifecycle carbon intensity1 of our products compared to 2015.Growth in electricity will drive more than half the reduction in our lifecycle carbon intensity1 between 2015 and 2030.The other factors will be the reduction in sales of petroleum products coupled with an increase in gas production(partic-ularly LNG)and sales of products derived from biomass.Lastly,lower emissions from our facilities will contribute to 10%of the intensity1 reduction.Base 100 in 2015LEVERS TO THE REDUCTION OF THE LIFECYCLE CARBON INTENSITY1 OF ENERGY PRODUCTS SOLD(2015-2030)1.Lifecycle carbon intensity of energy products sold.See reports glossary for further details.2.Biofuels,biogas,hydrogen and e-fuels/e-gas.100752015BaselineReduce portfolios Scope1 2 emissionsShift to gasProduce and sell electricityLow-carbon molecules2CCS as a service2030Objective025507510020152023202220252030-25%-15%-13%-12%Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress19 Sustainability&Climate 2024 Progress Report19 Sustainability&Climate 2024 Progress ReportSupporting Our Customers in their Decarbonization JourneyAs a producer of renewable power,biogas and biofuels,a supplier of natural gas and electricity and a leader in electric mobility,we are also helping our customers reduce their emissions with our customized solutions and developing CO2 storage solutions for industrial customers.Solarization of the LOral factory in Vichy(France).1.International Sustainability Carbon Certification.2.EU Emissions Trading System(EU ETS).Established in 2022,TotalEnergies OneB2B Solutions has more than thirty experts who assist our largest customers across nearly a dozen industries in fulfilling their ambitions for the energy transition,thanks to solutions tailored to their needs.Over the past 2 years,we engaged 334large B2B clients on their Scope1 2.Delivery of Battery Energy Storage System(BESS)replacement for diesel-powered backup at Microsoft data centerSaft,a subsidiary of TotalEnergies,has delivered a battery energy storage system(BESS)to replace diesel backup power generators at Microsofts sustainable data center.The new large-scale BESS formed by 4groups of 4MWh each will provide 80minutes sustainable supply in case of grid failure.Partnership with Saint-Gobain for a Power and Biomethane Purchase AgreementTotalEnergies has signed in 2023 a new 15-year renewable Power Purchase Agreement(PPA)with Saint-Gobain.This is the second long-term solar power supply agreement designed to help decarbonize the power consumption of the building materials companys 125 industrial sites in North America.Under the 300MW PPAs in North America,TotalEnergies will supply clean energy from its Danish Fields Solar farm(Texas),helping offset Saint-Gobains North American Scope2CO2 emissions from electricity by 90,000 metric tons per year.A 100GWh Biomethane Purchase Agreement for a three-year period starting in 2024 has also been signed in 2023.The biomethane will be produced by TotalEnergies at its BioBarn biomethane plant,which came on stream at the beginning of the year and whose production is certified sustainable by ISCC1 under the highest sustainability criteria of the European Union REDII Directive.By acquiring the Guarantees of Origin,and thanks to their sustainable certification,Saint-Gobain will be able to attest,within the framework of the EU Emissions Trading Scheme2,to the decarbonization of its energy consumption in France.Semiconductor market -Semi Climate Consortium membershipIn 2023,TotalEnergies joined the Semiconductor Climate Consortium Energy Collaborative.The fast-growing semiconductor industry has an important role to play in the energy transition.The Company is joining the leaders in this value chain to accelerate their use of renewable energies and the reduction of the carbon intensity of networks in the countries where they produce,particularly in the Asia-Pacific region.HIGHLIGHTS Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress20 Sustainability&Climate 2024 Progress Report20 Sustainability&Climate 2024 Progress ReportTexas is the 2ndlargest state in the United States in terms of surface area and population(30 million),and the 2ndlargest in terms of electricity consumption(nearly 445TWh in 2023).TotalEnergies set up operations there in 1957 and has built up a strong position with nearly 2,000employees.The Company deploys there its strategy based on 2 key pillars:Oil&Gas,mainly LNG,and Integrated Power.Focus on gas-Upstream LNG integrationAfter our historical roots with the Port-Arthur refining and petrochemicals platform and our Upstream assets in Barnett,TotalEnergies is expanding in the LNG segment through the Rio Grande LNG liquefaction terminal project in South Texas,which has all the necessary permits and for which the investment decision for the 1st phase(17.5 Mtpa)was made in July 2023.Start-up is scheduled for 2027.TotalEnergies shall offtake 5.4 Mtpa of LNG for 20 years,which brings the Companys US LNG export capacity to more than 15Mtpa by 2030.MAIN ASSETSELECTRICITY GENERATIONCompany share,TWh2642023CustomersCustomersTradingRegasStorageTrading&ShippingFlexible generationLNG Plant equity&offtakeRenewablesUpstream4GW installedbenefiting from strong IRA uplift.Access to low-cost supply thanks to its Barnett assets.1.5GW installed gas-fire capacityacquisition.16,67%equity stake in Rio Grande LNG phase1. 5,4 Mtpa offtake.300MW installed BESS.Strong trading teamsin Houston.Competitive LNG fleet.30%merchant on ERCOT grid.Access to more than 20 Mt/y of regasification capacity in Europe.Secure Long-Term Brent-indexed sales in Asia.2024Flexible generationRenewelablesHoustonFOCUS TEXAS,UNITED STATES:MULTI-ENERGY INTEGRATION Solar Onshore wind Storage BESS Flexible generation LNG/Upstream gas Trading HubThe electrical value chainThe gas value chain Focus Integrated PowerThe Texas electricity market is the 2nd largest in the United States and is expected to grow at a rate of 2%/year.It is mainly managed by the Electric Reliability Council of Texas(ERCOT),which oversees the electrical grid.With such a congested network,prices are set at its 4,500 nodes.Liquidity and volatility are among the highest in the country,with spark spread levels particularly high in summer(in contrast to our European electricity portfolio,which is more stressed in winter).This market offers numerous opportunities for renew-able energy and flexible production.TotalEnergies has built up a 4GW portfolio of renewable assets in this market,supplemented with gas-fired power plants.Indeed TotalEn-ergies acquired the US company TexGen holdings three gas-fired power units representing 1.5GW of electricity generation capacity in Texas.The mix of renewable and flexible assets,including batteries(300MW installed),will enable us to meet our customers expectations for electricity that is less and less carbon intensive and available 24/7.700 MWac of CPPA with merchant upside sharing mecanismEnergy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress21 Sustainability&Climate 2024 Progress Report21 Sustainability&Climate 2024 Progress ReportDisciplined and Sustainable Investments to Support our StrategyINVESTMENT STRATEGYWe are maintaining an annual capital expenditure target of$14-18 billion over the next 5years.Spending on low-carbon energy will represent 1/3 of our investments,more than new Oil&Gas projects(30%).TotalEnergies invested$16.8billion in 2023,including 35%for low-carbon energy mainly in power.In 2024,we plan to invest between$17 and$18billion,including a further$5billion for Integrated Power.Consistent with our commitment to build a multi-energy Company,we have begun publishing financial indicators for the Integrated Power segment from April 2023.Continuing to invest with disciplineIn a global economic context marked by inflation,it is essen-tial to maintain our investment criteria to ensure the profit-ability and resilience of our portfolio.Each material invest-ment project is assessed taking into consideration the aims of the Paris Agreement on the basis of the following criteria:project profitability is analyzed in a hydrocarbon price scenario compatible with the Paris Agreement objectives of limiting temperature rise to“well below 2C”and with a carbon price of$100 per ton(or the prevailing price if higher in a given country);for new Oil&Gas projects(greenfield projects and acqui-sitions),the intensity of Scope1 2 greenhouse gas emis-sions is compared,depending on their nature,to the inten-sity of the average greenhouse gas emissions of Upstream production assets or that of various Downstream units(LNG plants,refineries)of the Company;as of 2024,the threshold has been lowered to 18kgCO2e/boe,versus 19kgCO2e/boe previously evidence of the effec-tiveness of our criteria.For additional investments in existing assets(brownfield projects),the investment will have to lower the Scope1 2 emissions intensity of the asset in question.The goal is for each new investment to contribute to lowering the average intensity of the Compa-nys Scope1 2 greenhouse gas emissions in its category.For projects involving other energy and technologies(biofuels,biogas),GHG emission reductions are assessed based on the amount by which they will reduce the carbon content of our sales.MaintenanceGasMaintenanceOilIntegrated PowerOilLNG and GasLow-carbon molecules33%in low-carbon energies30%in new projects14-18 B$/year through cyclesEnergy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress22 Sustainability&Climate 2024 Progress Report22 Sustainability&Climate 2024 Progress ReportAPPROVED OIL&GAS PROJECTSGHG emission intensity%vs.portfolio averageTechnical costs0100 %Technical costs include operating costs and investment costs.0500%$20/boe12345671234567In 2023,after evaluation according to these criteria,43investments have been validated.The most significant by category are:Upstream Oil&Gas DivisionDevelopment of Phase1 of the AGUP project in Iraq,as part of our GGIP project(see focus p.17),launch of the Mabruk restart project in Libya,extension of the Dalia and Kaombo fields in Angola.Liquefied natural gasIn June 2023,TotalEnergies signed a framework agreement with U.S.-based NextDecade to participate in the development of the Rio Grande LNG(RGLNG)project,a liquefaction plant,whose construction has started in July 2023 in southern Texas.Integrated PowerVarious renewable electricity projects(PV,wind,hydro and BESS)resulting from the acquisition of stakes in Casa dos Ventos(Brazil)and Rnesans Enerji(Turkey and TotalEren);3GW marine concession in Germany and 2.7GW in the USA(New York and New Jersey),BESS installations in Feluy&Antwerp(Belgium)and CottonWood(USA),PV power plants in Clinton(Ohio),Brazoria(Texas),and Guillena in Spain.Low-carbon moleculesHydrogen:acquisition contracts for the needs of the Normandy platform and the Leuna refinery;Biogas:final investment decision taken for the BioNorrois unit 153GWh/year;SAF:doubling to 285kt of production capacityat Grandpuits,France(Galaxie extension).CCSPermit application in Norway for the Luna project.DisposalsIn Canada,TotalEnergies no longer holds any oil sands interests as of November 2023 following the saleto ConocoPhillips of its 50%interest in Surmont,as well as the sale to Suncor of all of the shares of its subsidiary TotalEnergies EP Canada,includingits interest in the FortHills oil sands asset.In Germany and the Netherlands,sale to Alimentation Couche-Tard of all our 1,580service stations.In Belgium and Luxembourg,a joint venture(TotalEnergies 40%and Alimentation Couche-Tard 60%)to operate more than 600service stations.HIGHLIGHTS Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress23 Sustainability&Climate 2024 Progress Report23 Sustainability&Climate 2024 Progress ReportA Resilient PortfolioMERIT CURVE OF GLOBAL OIL PRODUCTION COST1 Technical cost,$/bTotalEnergies has strengthened the resilience of its portfolio through very active portfolio management in recent years:the Upstream portfolio has seen a 50%portfolio change since 2015,ensuring an oil reserves replacement ratio above 100%over 2015-2023.Our portfolio has a low breakeven point,in line with the Companys objective of keeping it below$30/b(the Companys organic cash breakeven point before dividends is$22.2/b in 2023),which ensures the competitiveness of its resources.For its Upstream Oil&Gas activities in 2023,TotalEnergies has the lowest production cost per barrel of around$5.5/boe among its peers 2 and its GHG emissions intensity(Scope1 2)is falling to 18kgCO2e/boe in 2023(compared with 19 in 2022)3.The average life of the Companys proved and probable Oil&Gas reserves is 18 years,and the discounted value of its Upstream Oil&Gas assets over 20 years old represents less than 15%of their total value.Risks of stranded assetsIn June 2020,TotalEnergies determined that among its Upstream assets,only the Fort Hills and Surmont oil sands projects in Canada could be classified as stranded assets,meaning assets with reserves beyond 20 years and high production costs,whose overall reserves might therefore not be produced by 2050.TotalEnergies has sold these assets in 2023.This portfolio management approach allows TotalEnergies to mitigate the risk of stranded assets in the future if the risks of a structural decline in demand for 1.Source:Rystad,IEA WEO 2023 scenarios.2.Peers:BP,Chevron,ExxonMobil,Shell.3.Equity Oil&Gas Upstream intensity is calculated excluding integrated LNG assets.20400601201008040200 10 20304050STEPSAPSNZEMb/dOil&Gas materialize faster than estimated as a result of stricter global environmental regulations and constraints and the resulting changes in consumer preferences.As shown on the left hand side cost merit order curve of production costs for 2040,compared to the demand expected under various IEA scenarios,TotalEnergies port-folio of Upstream Oil&Gas projects has an average technical cost that places it among the 50Mb/d lowest-cost for these horizons,thanks in particular to long plateau oil assets with low production costs.Sensitivity to CO2,Oil&Gas pricesTotalEnergies assesses the robustness of its portfolio,including new material investments,based on relevant scenarios and sensitivity tests.Each material investment,including in the exploration,acqui-sition or development of Oil&Gas resources,as well as in other energies and technologies,is reviewed in relation to the objectives set out in the Paris Agreement,so that every new investment enhances the resilience of the Compagnys portfolio.Even though CO2 pricing does not currently apply in all the countries where the Company operates,TotalEnergies includes,as a base case,a minimum CO2 price of$100/ton in its investment criteria(or the prevailing price in a given country,if higher);beyond 2029,the CO2 price is increased by 2%/year.Global oil demand,according to IEA scenarios TotalEnergies-Long-plateau oil assets TotalEnergies-Oil portfolio average Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress24 Sustainability&Climate 2024 Progress Report24 Sustainability&Climate 2024 Progress Report Assuming a CO2 price of$200/ton from 2024 and an annual increase of 2yond 2029,i.e.an increase of$100/ton compared to the base case scenario from that date onwards,TotalEnergies estimates a negative impact of around 15%on the discounted present value of all its assets(Upstream and Downstream).Compared with the reference scenario used to evaluate investments(Brent at$50/b),the use of the IEAs3 NZE price scenario would lead to a present value of all the Companys assets(Upstream and Downstream)that is around 10%lower.Impairment of Upstream assets In addition,to ensure robust accounting of its assets in the balance sheet,the Company calculates the impairment of its Upstream assets on the basis of an oil price trajectory that stabilises until 2030,then decreases linearly to reach 50$2023/b in 2040,and then decreases from 2040 onwards to the price adopted in 2050 by the IEAs NZE scenario,i.e.25.5$2023/b.Gas prices in Europe and Asia decline and stabilise from 2027 until 2040 at levels lower than current prices,with the Henry Hub remaining at$3$2023/MMBtu over this period.They then all converge towards the prices in the IEAs NZE scenario in 2050.3.World Energy Outlook 2023,Table 2.2 Fossil fuel prices by scenario(p.96).4.See definition by the Energy Information Administration,a federal agency within the U.S.Department of Energy.5.See United Nations Framework Classification for Resources to Petroleum,“Supplementary Specifications for the application of the United Nations Framework Classification for Resources to Petroleum”pages 8 and 22,points 9,102,103,104.UNCONVENTIONAL OIL&GASUnconventional Oil&Gas are defined by the EIA4 as hydrocarbons that are“produced by means that do not meet the criteria for conventional production”ie“by a well drilled into a geologic formation in which the reservoir and fluid characteristics permit the oil and natural gas to readily flow to the wellbore.”According to UNFC5,“examples include CBM,low permeability deposits such as tight gas(including shale gas)and tight oil(including shale oil),gas hydrates and natural bitumen”.In 2023,these non-conventional hydrocarbons accounted for 9.7%of our production and less than 5%of our consolidated turnover.In addition,TotalEnergies no longer produces oil from tar sands since the divestment of its Surmont and Fort Hills Canadian assets at the end of 2023.The Company also exited its extra-heavy oil development projects in Venezuelas Orinoco Belt in 2021.Ultra-deep offshore,defined as water depths in excess of 1,500 m,which in the 2000s represented the technical limit for drilling and production facilities(since then largely exceeded),does not fall into the category of non-conventional hydrocarbons:in fact,reservoirs located in these areas are developed using facilities that employ a continuum of conventional technologies.It is the combination of very high-pressure reservoirs and very deep-water depths that can present increased risks.TotalEnergies does not intend to develop this type of asset.Similarly,the mere fact that an oil or a gas field is located in an Arctic zone is not sufficient to qualifyit as unconventional,if it is operated using conventional technologies.However,the Company recognizes the particular environmental sensitivity of certain Arctic zones.For this reason,in 2012 we undertook not to explore any oil fields in Arctic sea ice;a list of our licenses in Arctic zones is available on the Companys website.Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress25 Sustainability&Climate 2024 Progress Report25 Sustainability&Climate 2024 Progress Report2023 Taxonomy:a Company in TransitionPursuant to European Union regulations,Total-Energies publishes the proportion of eligible activities and aligned activities in the turnover and CapEx1 indicators,across the scope of the entities controlled by TotalEnergies,as well as a proportional view,proposed by the delegated regulation of July 6,2021.This proportional view includes the contribution of joint ventures and companies in which TotalEnergies has significant influence,accounted for by the equity method.Controlled scope Proportional view Given the size of the Company and its partnership-based development model across the integrated electricity value chain,the proportional view is more relevant than the controlled scope.Eligible or aligned capex represented more than 30%of the Companys investment in 2023 in the proportional view confirmation of the growth dynamic underway since 2020.1.CapEx refers to the taxonomy standard.A reconciliation table is provided in the 2023 Uni-versal Registration Document,Section 5.4.6.1.Proportional view,as per EU delegated act 2021/2178.CAPEX1 ELIGIBILITY&ALIGNMENTOur main eligible activities at TotalEnergiesIn electricity and renewables:activities related to renewable energy(wind,solar,bio-energy and hydropower),as well as battery production;activities related to new energy infrastructure for low-carbon mobility(charge points for electric vehicles,hydrogen filling stations);electricity generation from natural gas(combined-cycle gas turbine power plants).In biofuels and chemicals:activities related to the manufacture of biofuels for use in transportation and certain petrochemical activities,including biopolymers production and mechanical or chemical recycling of plastics.The Companys other main eligible activities are the manu-facture of biogas via anaerobic digestion of biowaste and activities related to carbon sinks(carbon capture and storage of CO2,natural carbon sinks).Detailed tables are presented in the Performance Indica-tors section.202027 21344 222023 CapEx Eligibility CapEx Alignment17%Proportional view2Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress26 Sustainability&Climate 2024 Progress Report26 Sustainability&Climate 2024 Progress ReportEvaluation of our Transition by Third-PartiesToday,TotalEnergies is recognized in the rankings of the main extra-financial rating agencies as a benchmark in its sector for the quality of its consid-eration of environmental issues,social responsibility require-ments and good governance.TotalEnergies is also praised for its transparency in these areas.In 2023,we have improved the majority of our extra-financial ratings.We also maintain our presence in a number of extra-finan-cial indices made up of the best-performing companies in terms of sustainable development.In 2023,TotalEnergies is in particular included in the FTSE4Good index,the DJSI World and DJSI Europe indexes,the MSCI Europe ESG Leaders,the MSCI World ESG Screened and the MSCI Europe ESG Screened.MSCI In their enhanced Implied Temperature Rise(ITR)model seeking to align with thebest practice guidance from the Glasgow Financial Alliance for Net Zero(GFANZ),MSCI have estimated in February 2024 that TotalEnergies,with a 1.8C ITR score(the lowest among its peers),is in line with the Paris agreements goal of limiting global mean temperature to well below 2C.Several benchmark rankings in 2023 and early 2024 also confirmed the progress made by the Company in the field of energy transition and sustainable development,in particular:1.Carbon Tracker Absolute Impact 2023:in 2023,Total-Energies climbed to 2nd place out of 25(up 1 place on 2022)in this report,which evaluates the emissions targets of the 25 biggest Oil&Gas companies.2.Mercom Capital Group ranking:TotalEnergies is the 1rstsolar developer in the world.3.Ecovadis:in 2023,TotalEnergies obtained a score of 83/100 for its subsidiary SAFT(which obtained Platinum status in 2023 and is positioned in the 99th percentile),78/100 for its Refining-Chemicals branch,and 79/100 for its Marketing&Services branch.4.Workforce Disclosure Initiative(WDI):score of 87%in 2023( 1%versus 2022),above the industry average(66%).The WDI assesses the transparency of companies human resources management.5.Tax transparency VBDO ranking: 1point versus 2022,top 10 ranking maintained.Ranking vs our peers11.Peers:BP,Shell,Exxon,Chevron,Eni,Equinor.2.CDP:1st for CDP Water and improvement in our rating;1st tie for CDP Climate,same rating than 2023.OUR EXTRA-FINANCIAL RATINGSAA28Medium riskB-Prime65Advanced74A-2nd(tie)1st1st(tie)n/a1st1st (tie)December 2023Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress27 Sustainability&Climate 2024 Progress Report27 Sustainability&Climate 2024 Progress Report 28 Climate Impact of Our Strategy:Our 2023 Progress and 2025-2030 Objectives 29 Oil:Todays Energy 34 Gas:a Transition Fuel 46 Electricity:Energy of Decarbonation 49 New Low-carbon Energies and Innovations to Achieve Net Zero by 2050 Part of the solar farm at the TotalEnergies platform in La Mde,France.Energy&Climate:Our Orderly Energy TransitionEnergy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress28 Sustainability&Climate 2024 Progress Report28 Sustainability&Climate 2024 Progress Report1.Net emissions,including nature-based carbon sinks from 2030.2.Lifecycle carbon intensity of energy products sold.See reports glossary for further details.3.Excluding Covid impact for first half 2022.4.GHG Protocol Category 11.See reports glossary for further details.Climate Impact of Our Strategy:Our 2023 Progress and 2025-2030 ObjectivesScope 1 2 Emissionson Operated ActivitiesNet Zero in 2050Scope 1 2 emissionsMt CO2e4035-40%1Methaneemissionskt CH44234-50%-80%vs 64 kt in 2020-34%-47%Indirect EmissionsNet Zero in 2050,together with societyLifecycle Carbon intensity of energy products sold2Scope 1 2 3100 in 2015-12%-13%-15%-25%Scope3 Worldwide4Mt CO2e 410 Mt in 20153893355400400out of which Scope3 Oil350Mt in 20152543-277-34%-40 30202320222025ObjectivesEnergy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress29 Sustainability&Climate 2024 Progress Report29 Sustainability&Climate 2024 Progress ReportProducing Oil Differently:Focus on Low-cost and Low-emission Oil AssetsIn addition,it will evolve in a differentiated way according to the specific energy transition roadmaps of the various countries.Thus,demand for oil could start to decline around 2030,but at a slower rate than the current natural decline rate of existing fields(around 4%per year).TotalEnergies therefore believes that new oil projects are still needed to meet this demand and to keep prices at an acceptable level in order to create the conditions for a just transition that allows people time to adapt their energy use.In 2023,TotalEnergies produced 1.4 Mb/d of oil,equivalent to its 2019 level,representing around 1.5%of world produc-tion.The first responsibility of TotalEnergies as an oil producer is to produce differently,meaning while minimizing emissions.To that end,we approve hydrocarbon projects on the basis of performance criteria,notably technical costs and carbon intensity(Scope1 2)-(see p.21-22).We operate our fields in accordance with strict requirements concerning safety,emissions reduction and environmental impact.The cash flow generated by these Oil&Gas activities contributes to accelerating our investments in renewable energy.In 2023,global demand for petroleum products reached 101.8 Mb/d,i.e. 2.3Mb/d compared to 2022,and should continue to grow over the decade according to the IEA(105.7Mb/d by 2028).These demand forecasts remain dependent in particular on population and economic growth,market penetration pace of low-carbon technology innovations such as electric vehicles and changes in behavior.En Mb/dGLOBAL OIL DEMAND19080100702028202720262025202420232022202120202019 2 11.Source IEA Oil 2023(June 2023).In Brazil,we are pursuing our strategy of investing in low-cost,low-carbon assets,with the Mero field.A first floating production storage and offloading vessel(FPSO)started up in May 2022,followed by a second at the end of December 2023.These will be followed by two more staggered until 2025.We are also present in the offshore Atapu and Sepia fields,corresponding to low-cost,low-emission reserves,where a decision on the production start-up of two new FPSO is currently being studied.In Iraq,the GGIP(Gas Growth Integrated Project)is a major multi-energy project(see Focus on Iraq).TotalEnergies is focusing its exploration investments on oil prospects with low technical costs,low GHG emissions and short lead times.In particular,in 2023 we continued to evaluate and assess the discoveries made in Suriname in 2020,enabling the launch of development studies for a major 200kb/d oil project on Block 58,offshore Suriname.In 2023,TotalEnergies also continued to evaluate and appraise the discovery made in Namibia in 2022.In Canada,TotalEnergies sold its oil sands interests in November 2023 in order to focus its capital allocation on assets with a low breakeven point and low-carbon intensity.HIGHLIGHTS Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress30 Sustainability&Climate 2024 Progress Report30 Sustainability&Climate 2024 Progress ReportRelentlessly Reducing Our Scope 1 2 Emissions,Oil&GasOur primary responsibility as a producer of fossil fuels is to substantially reduce emissions on our facilities.We are resolutely continuing to reduce emissions from our operated sites.Across the 2015 scope of our Oil&Gas activities,emissions from our operated assets fell by more than 34%from 2015 levels,dropping from 46 to 30MtCO2e in 2023(a decrease by 36%for Oil&Gas operated upstream and a decrease by 32%in Refining&Chemical).In 2023,with more than 140 GHG emissions reduction proj-ects coming to fruition,we reduced our emissions by 1.5million tons of CO2e across our operated assets.These ongoing reduction efforts have made it possible to reduce the Scope1 2 equity intensity of our Upstream Oil&Gas assets,from 20kgCO2e/boe in 2020 to 18kgCO2e/boe in 20231.These results put us among the players with the best intensities in the industry.Mt CO2eSCOPE 1 2 FROM OPERATED OIL&GAS FACILITIESSCOPE 1 2 UPSTREAM INTENSITY,EQUITY BASIS-34%vs 20151.Equity Oil&Gas Upstream intensity is calculated excluding integrated LNG assets.20152023300204046 99%;the remaining 1ing certi-CUMULATED CREDITS GENERATED FROM THE 11SANCTIONED PROJECTS BY THE END OF 2023Million credits010203040502022registered2023registered2030expectedInvest in a fundIn 2023,the Company has made the decision to invest$100million over 15years in the projects of the Nature Based Carbon fund managed by Climate Asset Management,which focuses on preserving or restoring three types of ecosystems:degraded natural forests,grasslands impacted by human activity and wetlands.HIGHLIGHTS Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress40 Sustainability&Climate 2024 Progress Report40 Sustainability&Climate 2024 Progress ReportActively working With Our Partners on Non-Operated AssetsOur Scope 1 2 emissions based on equity share amounted to 49MtCO2e in 2023.Half of those emissions are attributable to our interests in sites we operate;the remaining being from our interests in sites operated by our partners.We are actively mobilizing our partners to reduce emissions from assets they operate.At Exploration&Production,a dedicated team is tasked with sharing best practices with our partners at non-operated assets,such as deploying a decarbonization roadmap that includes an energy assessment,reduction of methane venting and routine flaring,and improving energy efficiency,particularly for gas turbines and compressors.We use the projects conducted at our operated sites to illustrate ways our partners can reduce their Scope 1 2 emissions and encourage uptake.Upstream emissions can also be reduced by reinjecting the CO2 extracted with the gas produced.This reinjected volume currently represents almost 2Mt per year in Companys equity share,particularly in Brazil,and is set to grow signifi-cantly as associated gas production increases.SCOPE 1 2 BASED ON EQUITY SHARE-20231.FPSO:Floating,Production,Storage and Offloading.Operated sites 26 Mt CO2eNon-operated sites23 Mt CO2e49 Mt CO2e2023 Operated sitesSites operated by others:Upstream Oil&Gas activities Refining&Chemicals Others(Marketing&Services/iPower/iLNG)Our collaboration with PetrobrasThe FPSOs1 P-68 and P-70,operated by Petrobras,have been producing in“closed flare”mode since 2023.We also participate in joint technical forums with our partners to promote TotalEnergies retrofit expertise.Moreover TotalEnergies venting free oil tank design has been incorporated on Sepia2 and Atapu2 and FIDhas been taken in 2024 for an innovative subsea technology called HiSep to reinject CO2 rich gas into the Mero field.COP28:signing of the Oil&Gas Decarbonization CharterAt COP28,a major initiative between national and international oil companies was launched to reduce the industrys GHG emissions:the Oil&Gas Decarbonization Charter(OGDC).This initiative brings together more than 50companies,two-thirds of which we are partner with,representing over 40%of the worlds oil production.This is an historic step forward,as it brings together for the first time international oil companies(IOCs)&national oil companies(NOCs)from this sector around concrete objectives not only to act on their emissions(net-zero operations by 2050 or earlier,elimination of routine flaring by 2030 and aiming for near zero Upstream methane by 2030)but also to report on their actions.TotalEnergies was one of the first companies to sign the Charter,and its CEOPatrick Pouyann was chosen to represent the IOCs on the OGDCs three-person co-chairmanship,formed by the CEOs of ADNOC,Aramco and TotalEnergies.HIGHLIGHTS Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress41 Sustainability&Climate 2024 Progress Report41 Sustainability&Climate 2024 Progress ReportFOCUS WHAT ARE THE RELEVANT INDICATORS FOR REDUCING GHG EMISSIONS WORLDWIDE?We are ambitious in our targets for direct emissions(Scope1 2),which we control in our operated facilities.We have defined medium and long-term targets and action plans aimed at Net Zero by 2050(see p.14/30-31).We are also ambitious in helping our customers reduce their emissions through our multi-energy strategy,which makes a wider range of energies available to our customers,including low-carbon energies.We track progress through the decarbonization index of our sales(life cycle carbon intensity of energy producs sold)1.We have been leading among our peers in terms of actually achieving decarbon-ization of the energy products sales mix since 2015.As part of our contribution to the energy transition of our clients,we are thus developing activities in the production and sales of low-carbon electricity.We also produce and sell liquified natural gas,which is a necessary transition fuel for building a reliable,low-carbon power system,comple-menting renewable energies that are intermittent by nature.Moreover,gas helps to decarbonize power generation in many countries,since burning gas rather than coal to produce electricity emits half as much CO2 for the same amount of energy produced(see p.44-45).In this respect,setting objectives to drastically reduce TotalEnergies global indirect emissions(Scope3)2 in abso-lute value,without an evolution of the overall structure of energy demand,is in reality not relevant to reduce global GHG emissions.Most of the emissions reported under Scope3 by Total-Energies correspond to the direct emissions(Scope1)of the consumers of these products:the use of these products depends on their decisions and needs.In this context,an absolute reduction target for Scope3 for a company like TotalEnergies,without any change in energy systems and therefore without the reduction of the corre-sponding Scope1 of energy users,would lead to a shift of this demand towards other suppliers,notably the national oil companies of producing countries which account for more than 70%of the world market(compared with around 1.5%for TotalEnergies).This strategy would have no effect on lowering global green-house gas emissions,and therefore no positive impact on climate,and would be contrary to the interests of our Company and its shareholders.This strategy could be counter-productive for TotalEnergies customers,as the Company has set as a goal to ensure their energy supply security while supporting them in their own decarbonization journey.Reminder:under Scope3,since 2016 TotalEnergies has reported Category 11 emissions related to the end use by its customers of products sold i.e.,linked to their combus-tion to obtain energy.Since 2023,TotalEnergies has published an estimate of indi-rect emissions related to the other Scope3 categories,in accordance with the classification used by the GHG Protocol and Ipieca.We are also implementing action plans to reduce the emissions of the other categories(see p.101).1.Lifecycle carbon intensity of energy products sold.See reports glossary for further details.2.GHG Protocol-Category 11.See reports glossary for further details.Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress42 Sustainability&Climate 2024 Progress Report42 Sustainability&Climate 2024 Progress ReportHelping our Customers Reduce their Own EmissionsBy 2030,the Companys two-pillar balanced transi-tion strategy aims to result in a sales mix of energy products with the view to final use whose lifecyle carbon intensity of energy products sold4 would be reduced by 25%,which means:for an equivalent quantity of energy,the carbon content of energy products would be reduced by 25%(“less emis-sions for same energy”);for an equivalent quantity of emissions(Scope 1 2 3),the Company would supply 33%more energy to its customers(“more energy for same emissions”).Furthermore,by 2030,energy products sold such as LNG and low-carbon electricity might contribute to enabled emis-sions reductions(“Scope4”)3 of around 150MtCO2e(around 100MtCO2 coming from Gas&LNG sales and around 50MtCO2 coming from Renewables),to be compared with a Scope32 kept below 400MtCO2e.These reductions,which will result from our customers decisions to substitute more carbon-intensive energy products with less carbon-intensive ones,and therefore reduce their own Scope1 2(use of gas or renewables to generate electricity instead of fossil fuels),will definitely contribute to lower global GHG emissions.1.Biofuels,biogas,hydrogen and e-fuels/e-gas.2.GHG Protocol-Category 11.See reports glossary for further details.3.Calculation methodology described in TotalEnergies Sustainability and Climate 2024 Progress Report Glossary and in p.44-45.4.Lifecycle carbon intensity of energy products sold.See reports glossary for further details.20P 30Energy sales2030EstimatedScope32100 TWh15 TWh20 TWh Flexible generation Renewables202320302025CustomersTradingStorageFlexible GenerationRenewables20406080100Germany In October 2023,TotalEnergies signed agreements to acquire the renewable energy aggregator Quadra Energy,which has a 9GW“virtual power plant”.United StatesTotalEnergies will supply solar power to LyondellBasell,a world leader in petrochemicals,through two long-term sales contracts to supply 275MWac(358MW)of green electricity from the Cottonwood Bayou and Brazoria Solar farms in Texas.Xlinks:taking part in a pioneer projectTotalEnergies acquired a minority stake in the Xlinks project,the ambition of which is to develop a giant renewable project in Morocco(combining solar and wind),to supply green electricity to the United Kingdom through the installation of high-voltage direct current(HVDC)subsea cables,coupled with a large battery energy storage.HIGHLIGHTS Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress47 Sustainability&Climate 2024 Progress Report47 Sustainability&Climate 2024 Progress ReportOur Renewable Electricity Capacity Build-upWe are executing our roadmap in renewables elec-tricity.At year end 2023,TotalEnergies reached a gross installed production capacity of 22 GW of renewable electricity and intends to continue developing these activities to reach 35GW by 2025 and 100GW by 2030,a level that would bring us among the worlds top five producers of renewable elec-tricity(wind and solar)excluding China.GWGROSS INSTALLED CAPACITY OF RENEWABLE ELECTRICITY GENERATIONIn GWonshoreoffshoreFrance0.90.6-0.11.6Rest of Europe0.21.11.10.22.6Africa0.10.0-0.00.2Middle East1.2-1.2North America4.92.1-0.57.5South America0.41.2-1.6India5.40.5-5.9Asia/Pacific1.50.00,30.01.8TOTAL14.65.51.40.822.4WindWindOthersTOTALSolar 6GW IN 2023Of gross capacity in 2023,including:United States-Myrtle,Danish,Clearway( 2 GW)United Kingdom-Seagreen( 0.9 GW)Brazil-Casa dos Ventos( 0.7 GW)India( 0.7 GW)France( 0.6 GW)20212022Deliveredin 20232023202510 GW17 GW35 GW22 GW 6 GWIntegration of Total ErenTotalEnergies acquires 100%of Total Eren after five yearsof a successful strategic partnership,raising its stake from nearly 30%to 100%of a global player with 3.5GW of renewable generation and a portfolio of 10GW.Offshore windGermany.TotalEnergies has been awarded two marine concessions in Germany to develop two offshore wind farms with a total capacity of 3GW.From 2030,these projects will supply electricity equivalent to the consumption of more than 3million households.United States.TotalEnergies joins force with Corio Generation and Rise Light&Power for its 3GW offshore wind project of New York and New Jersey.TotalEnergies was awarded a 25-year contract to supply 1.4GW of renewable electricity in New York and a 20-year contract to supply 1.3GW of renewable electricity in New Jersey.Scotland.TotalEnergies and its partner SSE Renewables have commissioned the worlds largest offshore wind farm:Seagreen is now fully operational at its design capacity of 1075MW.HIGHLIGHTS Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress48 Sustainability&Climate 2024 Progress Report48 Sustainability&Climate 2024 Progress ReportDeveloping Electric Mobility contract or on the road with subscription offers allowing access to a very large network of charging stations.From the production of renewable electricity to the operation of recharging services,the Company is present across the entire electric mobility value chain.TotalEnergies will invest more than$1billion in electric mobility between 2024 and 2028,devel-oping a network of high-power electric charging stations along motorways,major roads and in urban hubs in Europe.By 2028,the Companys ambition is to have 1,000high power charging sites in Europe.In addition to this network adapted to road roaming,TotalEnergies supports its B2B customers in their transition to electric mobility by offering services for the deployment and supervision of charging stations at the workplace as well as at employees homes.For heavy duty trucks in particular,the Company is developing a tailor-made offer for road haulers,with smart charging and green electricity supply solutions in addition to in-depot charging.To meet their charging needs outside their depots,TotalEnergies plans to install high power charging points suited to this type of vehicules along European corridor from 2024 onwards.The Company is also developing its recharging network in a number of cities around the world,with a portfolio of over 30,000recharging points in operation or under deployment in Paris,London,Brussels and Singapore.Finally,TotalEnergies supports individual customers at home,with home charging solutions that include an energy supply BREAKDOWN OF THE 55,000 CHARGE POINTS OPERATED BY TOTALENERGIES IN EUROPE BY THE END OF 2023FranceMore than 21,000 operated charge points,including more than 3,600 in B2G 1GermanyMore than 5,000 operated charge pointsUnited Kingdom2,500 operated charge points on the public charging network source LondonThe Netherlands16,000 operated charge points including more than 15,000 in B2G 1BelgiumMore than 9,000operated charge points,including more than 2,500 in B2G 11.B2G:Business to Government,commercial relationship between a company and a public or local authority,or government.In France,in 2023,the Company passed the milestone of 1,000high-power charging stations installed at 200sites.In addition to these stations,we operate nearly 20,000charge points(local authorities,corporate fleets,public charging points on roads,parking lots).In Germany,TotalEnergies was selected in the Deutschlandnetz tender to install and operate 1,100high-power charge points at 134 sites.In Spain,TotalEnergies acquires 200 fast and ultra-fast charging sites from the Wenea network.TotalEnergies and Wenea sign an agreement to build a leader in electric mobility.HIGHLIGHTS Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress49 Sustainability&Climate 2024 Progress Report49 Sustainability&Climate 2024 Progress ReportThe energy transition also requires the development of low-carbon energy based on the conversion of biomass and waste or the production of e-fuels combining hydrogen with CO2 used as a raw material.TotalEnergies is thus developing these new energy:biofuels,biogas,hydrogen and e-fuels.BiofuelsToday,biofuels emit 50%less CO2 than their fossil fuel equiv-alents1,making them a decarbonization pathway for liquid fuels.Because demand is strong,this is a high-margin market,but access to feedstocks(plants,residues,sugar,etc.)remains a barrier to growth.Among these biofuels,TotalEnergies favors the production of Sustainable Aviation Fuel(SAF)to decarbonize the aviation industry.To avoid land use conflicts,TotalEnergies is developing solu-tions based on primarily food industry waste and residues (used oils,animal fats).Our aim is to increase the share of circular feedstocks to more than 75%as from 2024 in our production of biofuels(see p.77).BiogasBiogas,produced from the decomposition of organic waste,is a renewable gas.Injected into gas networks in the form of biomethane,it contributes to the decarbonization of natural gas uses.TotalEnergies gross production capacity of 1.1TWh/year eq.biomethane has almost doubled compared with 2022.The TRANSFORMING OUR INDUSTRIAL SITES TO PRODUCE LOW-CARBON ENERGYNew Low-carbon Energy2019End20222022NormandyStart of SAF production(coprocessing)GrandpuitsBiorefinery commissioning scheduled Capacity:210kt/y of SAFCircularityPriority given to waste and residues 75%SustainabilityNo more sourcing of palm oil and derivatives at La MdeLa MdeBiorefinery commissionedSAFProduction target of 1.5Mt/y(around 10%of the global market)Low-carbon hydrogen/e-fuelsPriority to decarbonizing our European refining assets2030202520241.According to the European Directive 2018/2001 named RED II.Energy&Climate:our Orderly Energy TransitionActing for the Well-Being of EmployeesCaring for the EnvironmentHaving a Positive Impact for StakeholdersPerformance IndicatorsOur Ambitionand Progress50 Sustainability&Climate 2024 Progress Report50 Sustainability&Climate 2024 Progress ReportCALL FOR TENDERS FOR GREEN HYDROGEN500 kt/yearGREEN HYDROGEN PRODUCTION TO MAKE SUSTAINABLE AVIATION FUELE-fuel(Electrolysis)Carbon captureH2OH2CO2Company now intends to pursue its development through growth,mainly in Europe and the United States,with a 2030 target of 10TWh of net production.Hydrogen and e-fuelsHydrogen.The production of green hydrogen will require the massive deployment of renewable electricity production capacities,to which TotalEnergies is contributing through its investments and the development of the Integrated Power segment(see p.46).For our operations,our priority is to Biogas Start-up of the BioBarn plant in France in 2023,with a capacity of 160GWh/year,equivalent to the average annual consumption of 32,000 inhabitants.It is one of the first plants in France to be awarded ISCC EU certification,guaranteeing the highest level of environmental performance in Europe.Since January 2024,100%of our biomethane sites in Fr
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Shell plc#PoweringProgressSustainability Report 2023ContentsRead the Shell Sustainability Report onlineat download our app:DigitalThe Sustainability Report is published in anonline version at online versionincludes additional information,such as aninteractive GRI index to enhance usability forthe reader.In the event of any discrepancybetween the online and hardcopy versions,the information contained in the online reportprevails.This hardcopy version is provided forthe readers convenience only.Design and production:Friend Implementation:nexxar Sustainability at Shell02Letter from the CEO04Powering Progress05Our approach to sustainability08About this reportOur values11Business ethics and transparency14SafetyAchieving net-zero emissions22Energy transition27Managing greenhouse gas emissions34Providing lower-carbon electricity37Fuelling mobility39Driving innovationRespecting nature41Our approach to respecting nature42Environmental collaborations43Biodiversity and ecosystems44Resource use and circular economy45Conserving water resources48Air qualityPowering lives50Our approach to powering lives50Providing access to energy51Working with our suppliers53Contributing to communities56Diversity,equity and inclusion57Worker welfare58Respecting human rights60Managing our impact on people62A just transitionSustainability in our oil and gas activities65Our business activities66Producing oil and natural gas67Embedding sustainability into our activities68Non-operated ventures68Acquisitions and divestmentsOur performance data70About our data71Our standards and policies72Our Powering Progress targets73Safety data76Greenhouse gas and energy data83Other environmental data87Social data92Reconciliation of non-GAAP financial measuresSustainabilityat ShellWelcome to the Shell SustainabilityReport,which covers our social,safetyand environmental performance in2023.02Letter from the CEO04Powering Progress05Our approach to sustainability08About this reportSustainability atShellOur valuesAchieving net-zeroemissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 01Shell Sustainability Report 2023Letter from the CEOWael SawanChief ExecutiveOfficerIn 2023,we made good progress in our goal of creating more value with less emissions.We achieved our second-best financial results ever,while reducing our carbon emissions on the path towards becoming a net-zero emissionsenergy business by 2050.By years end,we had achieved more than 60%of our target of halving carbon emissions in our own operations by2030,compared with 2016.We also met our short-term target to reduce the net carbon intensity of the energy products we sell,with a 6.3%reduction against our target of 68%compared with 2016.We work hard to minimise risk throughout our operations.I am deeply saddened that four of our contractor colleagues in Shell-operatedventures died in 2023:one in Malaysia,one in the Philippines and two in an attack on a convoy in Nigeria.Four government security agentsalso lost their lives in the attack.A fifth contractor colleague,who was injured in a fire in Nigeria in 2023,passed away in February 2024.Weare determined to learn from these incidents and take steps to prevent something similar from happening again.Delivering oil and gas with less emissionsAs we continue to deliver the oil and gas that the global energy system relies on,we are reducing the carbon emitted in its production.We expect liquefied natural gas(LNG)will play a critical role in the energy transition.LNG produces fewer greenhouse gas emissions than coalwhen used to generate electricity and fewer emissions than petrol or diesel when used as transport fuel.It also offers flexibility to electricity gridsas wind and solar power grow.In 2023,we helped two additional countries reduce their reliance on coal-fired power generation by delivering the first cargoes of LNG to newimport terminals in the Philippines and Vietnam.We are also working to reduce the emissions intensity of our LNG projects.LNG Canada(Shell interest 40%,non-operated),which is expectedto start production later this decade,is designed to have the lowest carbon intensity of any large liquefaction facility currently operatinganywhere in the world about 60%lower than the average facility today and 35%lower than the best-performing facility.Reducing emissions of methane is one of the most effective near-term actions to keep the goal of the Paris Agreement within reach.We aim tokeep methane emissions below 0.2%at Shell-operated oil and gas assets each year,and I am pleased to say we achieved this again in 2023.Our target is to achieve near-zero methane emissions by the end of this decade.Despite the progress we have made,there is much work still to be done and lessons to be learned,whether from safety incidents or in how todevelop new projects that minimise our impact on the environment.Our latest offshore oil and gas facility in the US Gulf of Mexico,Vito(Shell interest 63.1%),is a compelling example of how we work to embedsustainability and emissions reduction into the life cycle of our projects,from design to decommissioning.Vito,which started production in 2023,is one-third of the size of its original design.It is expected to reduce CO2emissions by about 80%over its operating life.We are now repeatingthe same concept in other new offshore projects.Investing in the energy transitionWe are also investing in low-carbon and non-energy products that reduce emissions for our customers.In 2023,we invested$5.6 billion in low-carbon energy solutions,including biofuels,hydrogen,charging for electric vehicles and renewablepower generation;and$2.3 billion on non-energy products such as chemicals,lubricants and convenience retail,which do not produceemissions when our customers use them.This amounted to around one-third of our total capital spending in 2023.Sustainability atShellOur valuesAchieving net-zeroemissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 02Shell Sustainability Report 2023We also invested 49%of our research and development budget in 2023 on decarbonisation projects.These include testing a new solid sorbenttechnology to remove CO2emissions from the air,and an electrolyser to produce hydrogen from renewable energy at higher efficiency andlower cost than is currently possible.Respecting natureAlong with generating shareholder value and achieving net-zero emissions,our Powering Progress strategy is about powering lives andrespecting nature.We have already achieved some of the commitments made under our respecting nature goal,which we set in 2021.These include reducing fresh-water consumption by 15%compared with 2018 in areas where water supplies are stressed,which we reached ahead of the target date of2025.We are working hard to help develop a viable circular economy for plastics,despite a global lack of feedstock made from plastic waste,slowtechnology development and regulatory uncertainty.In 2023,we signed several strategic co-operation agreements with partners to increasesupplies of feedstock and enable its long-term storage.We also continued to remove single-use plastics like cups and cutlery from our Shell-owned service stations and to find new ways to reduce,recycle or reuse plastics in our packaging for lubricants and car-care products.Powering livesEnergy is essential to human life.Yet too many people in the world have no or,at best,unreliable access to electricity.Even more lack cleancooking facilities.For many years,we have worked to bring reliable and affordable electricity and improved cooking conditions to those who donot have them.We invest in businesses that supply energy access in emerging markets and we provide funds and expertise to social investmentprogrammes.Shell has pledged$200 million as part of a broader initiative to help people in sub-Saharan Africa,India and South-east Asia get access toenergy in the near and medium term.We are making progress in our ambition to become one of the most diverse and inclusive organisations in the world.For instance,in 2023,32%of our senior leadership positions were held by women,which is close to our target of 35%by 2025.As of January 1,2024,for the first time inour history we have more women than men on our Executive Committee.We continue to support the UN Global Compacts corporate governance principles on human rights,environmental protection,anti-corruptionand better labour practices.We respect human rights in our business and work hard to ensure that our joint-venture partners and supply chainsdo the same.We recognise the importance of a just transition to a net-zero emissions energy system in which the costs and benefits are distributed fairly.In theUK,for example,we are supporting three Energy Transition Skills Hubs that plan to help 15,000 people into jobs with a focus on the energytransition by 2035.This is our 27th Shell Sustainability Report,a voluntary publication we have issued each year since 1997.As of 2024,our sustainabilityreporting will be integrated with the Shell Annual Report and Accounts.I welcome this step,which brings all our reporting into one document.We will continue to be transparent in our reporting and demonstrate that sustainability is embedded in our way of doing business.Wael SawanChief Executive OfficerMore in this reportSustainability at Shell|Our journey to net zero|Our approach to respecting nature|Providing access to energyMore on Shell websitesOur approach|Shell at a glanceSustainability atShellOur valuesAchieving net-zeroemissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 03Shell Sustainability Report 2023Powering ProgressMore in this reportLetter from the CEO|Sustainability at Shell|Sustainability governance|Performance overviewMore on Shell websitesOur approach|Shell at a glanceOur PurposeTo power progress together by providingmore and cleaner energy solutionsPowering ProgressGenerating Shareholder ValueGrowing value through a dynamic portfolioand disciplined capital allocationRespecting NatureProtecting the environment,reducing waste and makinga positive contributionto biodiversityPowering LivesPowering lives through ourproducts and activities,andsupporting an inclusive societyAchieving Net-Zero EmissionsWorking with our customers and sectorsto accelerate the energy transitionto net-zero emissionsUnderpinned by ourof honesty,integrity,respect for people,and our focus oncore valuessafetySustainability atShellOur valuesAchieving net-zeroemissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 04Shell Sustainability Report 2023Our approach to sustainabilitySustainability at ShellPowering Progress sets out our strategy to become a net-zero emissions energy business by 2050,generating value for our shareholders,ourcustomers and wider society.As we move forward on this journey,we will power lives and respect nature while holding fast to our core values ofhonesty,integrity and respect for people.It is a strategy that integrates sustainability with creating more value with less emissions through performance,discipline and simplification.Our commitment to contribute to sustainable development has been part of the Shell General Business Principles since 1997.These principles,together with the Shell Code of Conduct,apply to the way we do business and to our conduct with the communities where we operate.We haveworked to embed this sustainability commitment into our strategy,our business processes and our decision-making.Read more about what sustainability means at Shell at more about our strategy Sustainable Development GoalsWe strive to play our part in helping governments and societies achieve the UNs 17 Sustainable Development Goals(SDGs).The goals wereone of the considerations in the development of our Powering Progress strategy.We believe the actions we take as part of our strategy can helpdirectly contribute to 13 of the SDGs,while indirectly contributing to others.Information on how we are contributing to these SDGs can be found throughout this report and at in this reportOur journey to net zero|Our Powering Progress targets|Sustainability governance|Performance overview|Respecting human rightsMore on Shell websitesOur approach|Commitments,policies and standards|UN Sustainable Development Goals|Shells approach to human rights(pdf)Sustainability governanceWe have comprehensive governance structures throughout Shell,along with performance standards and other controls.These include the ShellGeneral Business Principles,our Code of Conduct and our Health,Safety,Security,Environment and Social Performance(HSSE&SP)ControlFramework A.They influence the decisions made and actions taken across Shell.A We are transitioning from the HSSE&SP Control Framework to our new Safety,Environment and Asset Management(SEAM)Standards as part of the Shell Performance Framework.The SEAM Standards will come into effect in mid-2024.The Sustainability Committee(SUSCO),previously known as the Safety,Environment and Sustainability Committee,is one of the four standingcommittees of the Board of Directors of Shell plc.SUSCO assists the Board of Directors in fulfilling its responsibilities by reviewing the progress ofShell with respect to sustainability and the non-financial elements of Shells Powering Progress strategy.The Committee meets regularly to review and discuss a wide range of topics,including progress on Shells Powering Progress goals of net-zeroemissions,respecting nature,and powering lives.The Committee also reviews wider matters of public concern such as biodiversity,plastic wasteand methane emissions.In 2023,the Committee visited Shells Energy and Chemicals Park Rheinland in Germany to review energy transition projects and safety and tomeet staff and a senior government representative.Two Committee members also visited the Olympus offshore platform in the US Gulf of Mexicoto review safety and sustainability performance.The Board of Directors has primary oversight of the delivery of Shells energy transition strategy and is supported by SUSCO,the Audit and RiskCommittee(ARC)and the Remuneration Committee(REMCO).Read more about SUSCO and how Shell manages sustainability at and in our 2023Annual Report and Accounts(Annual Report).More in this reportOur journey to net zero|Our approach to safety|Energy transition|Our approach to respecting natureMore on Shell websitesOur approach|Board of Directors|Sustainability governanceSustainability atShellOur valuesAchieving net-zeroemissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 05Shell Sustainability Report 2023Performance overviewPerformance in 20232.62022:2.0serious injuries andfatalities per 100 millionworking hours.SeeOurapproach to safety74 gCO2e/MJ2022:76 gCO2e/MJnet carbon intensity,whichmeasures the life-cycleemissions intensity of theportfolio of energyproducts sold.SeeDelivering our climatetargets31 22:30%reduction in our totalcombined Scope 1 and 2absolute greenhouse gasemissions compared with2016,the base year A.SeeDelivering our climatetargets632022:66operational process safetyTier 1 and 2 events.SeeProcess safety9.7 billion2022:9.5 billionlitres of biofuels went intoShells petrol and dieselworldwide B.SeeBiofuels54,0002022:27,000public electric vehiclecharge points operated byShell.SeeElectric vehiclecharging2,1342022:1,790reports to the Shell GlobalHelpline,where peoplecan report potentialbreaches of the Code ofConduct.SeeEthicalleadership702022:55operational spills of morethan 100 kilograms.SeeSpills0.1 million2022:0.1 milliontonnes routine flaring fromupstream operations.SeeFlaring25,0002022:24,000suppliers around theworld.SeeSupply chain32 22:30.4%women in seniorleadership positions.SeeDiversity,equity andinclusion$128 million2022:$182 millionspent on voluntary socialinvestment.SeeSocialinvestment83 22:83%spent on goods andservices from suppliersbased in the same countryof operation.SeeLocalcontent295,0002022:266,000formal training days foremployees and joint-venture partners.SeeDiversity,equity andinclusion120,0002022:78,300students participated inNXplorers,our flagshipSTEM programme.SeeSTEM educationMore in this reportOur journey to net zero|Letter from the CEO|Our Powering Progress targetsMore on Shell websitesOur approach|Our approach to sustainability|Results and reportingFrom assets and activities under our operational control.AIncluding around 3.4 billion litres through our Razen joint venture.BSustainability atShellOur valuesAchieving net-zeroemissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 06Shell Sustainability Report 2023RemunerationOur remuneration is designed to support us in achieving our net-zero emissions target.Our Long-term Incentive Plan(LTIP),Performance SharePlan(PSP)and annual bonus scorecard all include performance indicators that help us to assess our success in delivering our energy transitionstrategy.In 2023,Shells journey in the energy transition continued to be part of the annual bonus scorecard(15%weighting),which applied to all Groupemployees.We assessed our performance using three metrics:The annual bonus scorecard continued to include a customer excellence measure(10%weighting),highlighting the importance of buildingstronger customer relationships in the energy transition.The scorecard also continued to include safety performance(15%weighting).For acomplete breakdown of the scorecard see the graphic below.In 2023,a proportion of the Long-term Incentive Plan,applicable to Executive Directors and around 150 other senior executives,was linked toShells journey in the energy transition(25%weighting),including a target to reduce the net carbon intensity of our energy products by 913%(compared with a 2016 baseline)by 2025.The same energy transition performance condition was also part of the 2023 Performance SharePlan awards(12.5%weighting),applicable to around 16,500 employees.Read more about remuneration in our 2023 Annual Report.More in this reportOur journey to net zero|Energy transition|Delivering our climate targetsMore on Shell websitesOur approach|Leadership|Corporate governanceselling lower-carbon products:the proportion of adjusted earnings in our Marketing segment coming from lower-carbon energy products(on alife-cycle basis),as well as non-energy products and convenience retail;reducing our operational emissions:greenhouse gas abatement projects that reduce our Scope 1 and 2 operational emissions;andpartnering to decarbonise:progress in rolling out electric vehicle charge points.Annual bonus scorecard architecture 2023Percentage355cdOperational excellence(Asset management excellence 15%,project delivery excellence 10%,customer excellence 10%)Cash flow from operations(weighted 35%)abShells journey in the energy transition(Selling lower-carbon products 5%,reducing operational emissions 5%,partnering to decarbonise 5%)cSafety(Serious injury and fatality frequency 7.5%,Tier 1 and 2 process safety 7.5%)dLong-term Incentive Plan performance conditions 2023Percentage25%cdRelative cash generation(cash flow from operations/average capital employed)(weighted 25%)aRelative total shareholder returns(25%)bAbsolute organic free cash flow(25%)cShells journey in the energy transition(25%)Performance against the relative performance conditions is assessed against other energy majors(bp,Chevron,ExxonMobil and TotalEnergies).dSustainability atShellOur valuesAchieving net-zeroemissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 07Shell Sustainability Report 2023About this reportSelecting the topicsThe 2023 Sustainability Report,published on March 19,2024,is our 27th such report.It details our social,safety and environmentalperformance in 2023.As of 2024,our sustainability reporting will be integrated with the Shell Annual Report and Accounts.Each year we use a structured process to select the reports content.We engage with various groups and individuals to understand specificconcerns about our business and its impact,particularly relating to the environment and society.We consider the views of others such as non-governmental organisations,customers,the media,academics,investors and employees.Input from our Report Review Panel of independent experts helps to ensure that coverage is relevant,balanced,fair and complete.Read more about our topic selection process at guidelinesOur reporting is informed by several voluntary reporting standards and guidelines including those developed by Ipieca,the global oil and gasindustry association for advancing environmental and social performance across the energy transition,and the Global Reporting Initiative(GRI)(see the GRI content index and for full details).As a member of the World Business Council for Sustainable Development,we support the organisations updated criteria for membership,whichinclude requirements for corporate transparency.We are also a founding member and a signatory of the United Nations Global Compact.We continue to support its corporate governanceprinciples on human rights,environmental protection,anti-corruption and better labour practices.The recommendations of the Task Force on Climate-related Financial Disclosures(TCFD)guide our reporting in our Annual Report.Our climate-related financial disclosures are consistent with all of the TCFD recommendations and recommended disclosures.We recognise the value that therecommendations bring.As a third-country issuer with securities listed on an EU-regulated market,Shell plc expects to come within the scope of the EU CorporateSustainability Reporting Directive in 2024,subject to relevant legislative processes.We also continue to monitor the development of emergingframeworks such as the Taskforce on Nature-related Financial Disclosures.More detailed information about how we report is available at in this reportSustainability at Shell|About our data|Our standards and policies|GRI content indexMore on Shell websitesOur approach|Voluntary reporting standards and ESG ratings|External voluntary codesReport Review PanelWe use an external review panel to strengthen our sustainability reporting.The panel helps evaluate and improve the quality and credibility ofour Sustainability Report.The 2023 Report Review Panel comprised five sustainability and corporate reporting experts:The panel provided input into our 2023 topic selection process.Panel members reviewed the report,discussed Shells reporting and spoke torelevant Shell employees before preparing their statement.The panels mandate focused on the quality of Shells reporting,including credibility,completeness and responsiveness.The panel is not accountable for reviewing the data in the report or material on S outside the boundsof this report.Panel members are offered an honorarium for their input.Find out more about the panel at Parsons,UK,formerly Head of Creating Shared Value Engagement,Nestl(Chair of the Report Review Panel);Vanessa Zimmerman,Australia,Chief Executive Officer,Pillar Two;Renard Siew,Malaysia,Adviser on Climate Change,Centre for Governance and Political Studies;Elizabeth White,USA,Principal Strategist and Global Head Sustainability and Development Impact,Sector Economics and ImpactMeasurement,International Finance Corporation,part of the World Bank Group;andMaria Pontes,UK,Director of Programmes and Partnerships,Earthwatch Europe.Sustainability atShellOur valuesAchieving net-zeroemissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 08Shell Sustainability Report 2023Report Review Panel recommendationsAs in previous years,Shell has given the panel the opportunity to review two drafts of the 2023 Sustainability Report and to providewritten and verbal feedback which has been considered by Shell when producing the final version of the report.In 2021,Shell altered itsapproach to sustainability reporting in order to highlight significant data with further explanations and background provided through linksto S.It should be noted that the panel has no remit in connection with the website and has not reviewed any of the informationprovided therein.Overall,the panel has welcomed the conciseness of the Sustainability Report and has been keen to ensure that sufficient explanation ofthe context of the data is included in order to help readers better understand the information without having to resort immediately toclicking on website links.The panel has therefore stressed the importance of including transparent,qualitative information along with thefigures,and we are pleased that this has been recognised by Shell who has continued to make progress in this area although moreremains to be done.The use of graphics to get across progress on strategic priorities is a useful tool in this respect and we welcome thatShell continues to adopt this approach.Highlighting key differences between the current report and that of the previous year is also useful such as changes to the most importanttopics,reasons for achieving or not achieving key targets or significant external actions such as the signing of the Oil and GasDecarbonization Charter launched at COP28.However,there is also an opportunity to better demonstrate the connections between thedifferent topics.For example,making further links between the human rights section and other sustainability topics could aid readers tounderstand Shells overall approach and to highlight that this approach is also guided by respecting people.We were also pleased to see additional detail on the actions taken in relation to contributing to a just transition.The respecting naturesection has also been more elaborated than previously,although more transparency about the challenges involved would be useful.Wewere also pleased to see additional detail on salient human rights issues and Shells broader approach to managing human rights risks.To further improve transparency,the panel recommends that Shell provides additional information and data on the following:More in this reportSustainability at Shell|About our data|Our standards and policies|GRI content indexMore on Shell websitesOur approach|Voluntary reporting standards and ESG ratings|External voluntary codesEnsuring that key terms and concepts used throughout the report are clearly defined.The human rights risks associated with the transition to renewable solutions(including solar)and in connection with biodiversity,andactions taken to manage these risks.How Shell has used its salient human rights issues assessment to prioritise its human rights risk management actions,including moredetail on how these issues guide work under its four focus areas.How Shell tracks the effectiveness of its sustainability performance,including comparisons with other sectors.Clearer information on the key challenges faced by Shell in achieving its respecting nature targets.The environmental challenges associated with wind and solar activities.More detail on the nature of stakeholder engagements.Sustainability atShellOur valuesAchieving net-zeroemissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 09Shell Sustainability Report 2023Living byour valuesPowering Progress is underpinned byour core values of honesty,integrityand respect for people,and our focuson safety and sustainability.11Business ethics and transparency14SafetySustainability atShellOur valuesAchieving net-zeroemissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 10Shell Sustainability Report 2023Business ethics and transparencyEthical leadershipPowering Progress is underpinned by our core values of honesty,integrity and respect for people,and our focus on safety.This includesour commitment to doing business in an ethical and transparent way.Our core values of honesty,integrity and respect for people underpin our work with employees,customers,investors,contractors,suppliers,non-governmental organisations,the communities where we operate and others.Shell General Business PrinciplesThe Shell General Business Principles set out our responsibilities to shareholders,customers,employees,business partners and society.They setthe standards for how we conduct business with integrity,care and respect for people.As part of these principles,we commit to contribute tosustainable development,balancing short-and long-term interests and integrating economic,environmental and social considerations into ourdecision-making.All Shell employees and contractors,and those at joint ventures we operate,are expected to behave in line with these businessprinciples.Code of ConductThe Shell Code of Conduct explains how employees,contractors and anyone else acting on behalf of Shell must behave to live up to ourbusiness principles.The Code of Conduct covers safety,anti-bribery and corruption,fair competition,human rights and other important areas.Shell employees,contractors and third parties can report any potential breaches of the Code of Conduct confidentially through several channels,including anonymously through the Shell Global Helpline,which is operated by an independent provider.We maintain a stringent no retaliationpolicy to protect any person making an allegation in good faith.Anti-bribery and corruptionShell has rules on anti-bribery and corruption in its Code of Conduct and Ethics and Compliance Manual.Contractors and consultants are alsorequired to act consistently with our Code of Conduct when working on our behalf.Shell has around 25,000 suppliers worldwide.We offer free training in anti-bribery and anti-corruption practices to selected suppliers andcontractors.This training is available in 14 languages.In 2023,we offered training to 131 third-party organisations in 16 countries.Read more at 2023 there were:2,134reports to the Shell Global Helpline254confirmed breaches of the Code of Conduct278employees or contractor staff subject todisciplinary action66people dismissedShell Performance FrameworkThe Shell Performance Framework is the overarching framework adopted by Shell plc to deliver on its strategy.The framework applies to all Shellcompanies and provides a consistent approach for how each company in Shell operates.It was introduced in July 2023 and replaces the ShellControl Framework.Safety,Environment and Asset Management(SEAM)StandardsOur standards and governance structure are currently defined in our Health,Safety,Security,Environment and Social Performance(HSSE&SP)Control Framework and supporting guidance documents.Sustainability atShellOur valuesAchieving net-zeroemissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 11Shell Sustainability Report 2023We are transitioning to our new Safety,Environment and Asset Management(SEAM)Standards,which come into effect from July 1,2024.Thestandards are part of the Shell Performance Framework.Implementation of migration to the SEAM Standards,pursuant to guidance onexpectations and process,will continue throughout 2024 into 2025.Protecting personal dataShell respects the privacy of individuals and recognises that personal data belong to the individual.We maintain a data privacy programme,a comprehensive governance structure and established reporting lines to ensure consistent levels ofdata protection across the Group.Our staff and contractors receive clear guidance and training on the importance of managing data privacyrisks.Whenever we acquire a company,we work to ensure they follow our privacy compliance framework and information management standards.Some of our newly acquired companies are not yet in full compliance with our Binding Corporate Rules on data privacy.Following assessmentsfor each of those companies,specific actions are planned and put in place to achieve compliance,with regular updates made on their progressto management.In 2023,we notified a number of data privacy regulators of personal data breaches.Read more about Shell data privacy rules in our 2023 Annual Report and at securityDigitalisation is a key success factor in Shells Powering Progress strategy.However,a breach of IT systems or loss of data could cause significantharm to Shell in the form of loss of productivity,loss of intellectual property,regulatory fines or reputational damage,Shell operates a multi-level defence strategy underpinned by the Shell Performance Framework.Our advanced cyber defence capabilities helpus prevent,detect,respond to and evolve as cyber security and data privacy risks become more complex.Shell employees and contract staff are required to complete mandatory training courses and participate in regular awareness campaigns aimedat protecting us against cyber threats.More in this reportLetter from the CEO|Working with our suppliers|Collaborations and stakeholder engagement|Tax transparencyMore on Shell websitesOur approach|Code of Ethics|Our valuesCollaborations and stakeholder engagementShell continues to value and recognise the importance of engagement and co-operation with its stakeholders.We work with governments,non-governmental organisations(NGOs),coalitions,industry bodies,academic institutions,national oil and gascompanies and other businesses.We do this in compliance with antitrust rules and regulations.These collaborations include individualconversations,working together on a project or areas of advocacy,or sponsoring a particular group or event.These efforts help us to learn,share best practice,achieve specific objectives,set future goals and build trust with our stakeholders.The Chair,certain Board committees and Non-executive Directors traditionally visit a number of Shell operations and overseas offices.The visitsare designed to provide them with first-hand insights into portfolio positions and opportunities to engage directly with stakeholders includingemployees,partners,communities and NGOs.Our broader businesses regularly engage with stakeholders throughout the year and in the build-up to or during many Shell projects or activities.Read more about our efforts to understand and engage with our stakeholders in our 2023 Annual Report.Learn more about our collaborations and stakeholder engagement at in this reportManaging our impact on people|Letter from the CEO|Biodiversity and ecosystems|Social investmentMore on Shell websitesOur approach|External voluntary codes|Human rightsPolitical engagementShell engages with governments,regulators and policymakers to help shape comprehensive policy,legislation and regulation.We advocate ourpositions on matters which affect us,our employees,customers,shareholders or local communities,in accordance with our values and the ShellGeneral Business Principles.Our internal governance approach to political engagement is summarised in our statement on corporate politicalengagement.In the European Union(EU)and the USA,we report expenditure associated with our lobbying activities,which includes estimated percentagesof industry association costs,in line with the requirements and guidelines set out in the EU Transparency Register and the US Lobbying DisclosureAct respectively.There are different rules for which costs should be reported in these two submissions and we are required to comply with theappropriate requirements for each jurisdiction.These submissions are publicly available:Sustainability atShellOur valuesAchieving net-zeroemissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 12Shell Sustainability Report 2023A In our 2022 Sustainability Report,we stated that Shells reported estimated annual costs related to activities covered by the register were 5,500,000 to 5,999,999 in 2022.However,we subsequently discovered an error in calculating this amount.The amount should have been reported as 4,500,000 to 4,999,999.In 2023,we continued to advocate our policy positions on climate and the energy transition.In the EU,Shell advocated policies to enablecommercial investments in the energy transition,notably the creation of demand for low-carbon solutions.We supported the Fit for 55 package,including binding targets for the use of renewable hydrogen and advanced biofuels.We supported policies to accelerate the electrification ofroad transport and frameworks that help the business case for carbon abatement and removal.In the USA,we advocated the full implementation of the Infrastructure Investment and Jobs Act of 2021 and the Inflation Reduction Act of 2022.We also advocated simplifying and streamlining the permitting process for new energy and infrastructure projects,which is crucial for thedelivery of secure and affordable energy supplies in the USA.In March 2024,we updated our global climate and energy transition policy positions,which we believe support the energy transition and theParis Agreement as we transform our business.We plan to publish our next Climate and Energy Transition Lobbying Report in April 2024.Further information on our approach to political engagement,our lobbying expenditure,our policy positions,advocacy and industry associationmemberships is provided on our website in this reportLetter from the CEO|Tax transparencyMore on Shell websitesOur approach|Corporate political engagement transparency statement and lobbying spend|Payments to governmentsTax transparencyOur tax strategy is designed to support Powering Progress through our commitment to transparency,compliance and open dialogue with ourstakeholders,from governments to civil society.Our strategy and actions reflect our values and principles.Tax revenues enable governments to pay for public services,such as education,health care and transport.In 2023,our taxes paid and collectedamounted to$67 billion:we paid$14 billion in corporate income taxes and$6 billion in government royalties,and collected$47 billion inexcise duties,sales taxes and similar levies on our fuel and other products on behalf of governments A.A Non-GAAP financial measure.See Reconciliation of non-GAAP financial measures where non-GAAP reconciliation is provided.We also made other payments to governments,including$11 billion in production entitlements,$2 billion in fees and$47 million in bonuses.Such payments to governments are derived from our Report on Payments to Governments for the year 2023.This report is prepared inaccordance with the UKs Reports on Payments to Governments Regulations 2014(amended December 2015).Shell publishes a Tax Contribution Report annually which sets out the corporate income tax that Shell companies paid in the 97 countries andlocations where we have a taxable presence.Our latest Tax Contribution Report includes a breakdown of our total tax contribution in 48countries where we have key business activities,an increase from 21 in the previous year.We regularly engage with policymakers to support the development of tax rules and regulations based on sound tax policy principles.In thisway,we hope to contribute to the development of fair,effective and stable tax systems.We also provide constructive input to industry groupsand international organisations,such as the Extractive Industries Transparency Initiative,The B Team Responsible Tax Working Group and theinternational business network Business at OECD.In 2023,we published a set of principles which we believe governments should follow when shaping their fiscal policies to advance the energytransition.These include encouraging investment in low-carbon energy,while maintaining energy security and meeting the economic and socialneeds of their countries and communities.Read our latest Tax Contribution Report and Payments to Governments report.More in this reportPolitical engagement|Social investmentMore on Shell websitesOur approach|Shells Tax Contribution Report|Payments to governmentsIn the EU,Shells reported estimated annual costs related to activities covered by the register were 4,000,000 to 4,500,000 in 2023 A.In the USA,Shells reported expenses related to lobbying practices were$7,080,000 in 2023.Sustainability atShellOur valuesAchieving net-zeroemissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 13Shell Sustainability Report 2023SafetyOur approach to safetyPowering Progress is underpinned by our core values of honesty,integrity and respect for people,and our focus on safety.Safety,along with our core values,underpins our Powering Progress strategy.We aim to do no harm to people and to have no leaks across ouroperations.We call this our Goal Zero ambition.We seek to improve safety by focusing on the three areas where the safety risks associated with our activities are highest:personal,process andtransport.We strive to reduce risks and to minimise the potential impact of any incident,with a particular emphasis on the risks with the mostserious consequences if something goes wrong.Our multi-year process of refreshing our approach to safety for all employees and contractors started in 2020.This approach is rooted in aconsistent focus on human performance.We ask people at Shell to apply a learner mindset,by which we mean the belief that we can alwaysimprove,enhance individual capabilities,learn from mistakes and successes,and speak up freely without repercussions.In practice,our refreshed approach to safety is about enhancing how we prepare for and conduct high-risk activities by,for example:It is also about capturing more insights by,for example:In 2023,we integrated this safety approach into the plans of our facilities,projects and functions.Many of our non-operated ventures andcompanies that are operated by Shell,but not integrated into our systems,have also chosen to implement elements of our refreshed approach.Read more about our approach to safety at in this reportPreparing for emergencies|Letter from the CEO|Respecting human rightsMore on Shell websitesOur approach|Safety|HSSE materials for contractorsPersonal safetyWe continue to strengthen the safety culture and leadership among our employees and contractor staff.This aligns with our focus on caring forpeople.When our employees and contractors perform tasks,we expect them to consider the hazards that could potentially cause serious harm and theeffectiveness of the barriers in place to avoid serious harm.We run safety awareness programmes and hold an annual global Safety Day to give employees and contractors time to discuss safety cultureon the frontline,reflect on how to prevent incidents and how to improve performance.In 2023,the focus was on”failing safely”,which meanswe recognise that people make mistakes and that our barriers need to be capable of managing the impact of those mistakes to prevent harm.In 2023,we achieved safe construction,commissioning and start-up of a floating production unit(FPU)for the Shell-operated Vito field(Shellinterest 63.1%)in the US Gulf of Mexico.The fabrication of another FPU,Whale(Shell interest 60%)in the Gulf of Mexico,was completed in2023 after 12 million hours without fatality or serious injury.Working with othersWe work with contractors and suppliers to help them understand our safety requirements.We strive to help improve the energy industrys safetyperformance by sharing safety standards and experience with other operators,joint-venture partners,contractors and professionalorganisations.executing frontline work:build an environment of trust and learning,strengthen team leaders coaching and engagement skills,and embedpre-start work preparations such as those developed by the International Association of Oil&Gas Producers(IOGP);applying acknowledged industry safety tools:in 2022,we moved from the Shell Life-Saving Rules to industry-wide Life-Saving Rules so thatShell staff and contractors are working on the same basis to manage risks;andusing technology and digital tools to reduce exposure,identify conditions that may lead to serious incidents and fatalities,and enhancelearning.using metrics focused on serious injuries and fatalities(SIF)and the lessons that we can derive from high-potential incidents and events thatcould have led to SIF incidents;seeking to capture underlying causes and systemic patterns through incident investigations;andaiming to embed lessons learned from the above points in training and instructions for work preparation and execution.Sustainability atShellOur valuesAchieving net-zeroemissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 14Shell Sustainability Report 2023In 2023,senior executives from Shells 23 major global contractors joined Shell executives in Norway for our annual Contractor SafetyLeadership workshop.Focus areas of discussion were worker welfare and human rights,mental health,and technology solutions for safer work atthe frontline.Also in 2023,leadership teams from 25 Shell joint ventures and companies newly acquired by Shell met in the Netherlands to discuss topicssuch as worker welfare and industry standards,and the importance of alignment on safety.Fatal accident rateSerious injuries and fatalitiesWe are deeply saddened to report that four of our contractor colleagues in Shell-operated ventures lost their lives in 2023 in the course of theirwork for Shell.An additional contractor colleague who was injured in 2023,succumbed to their injuries in February 2024.One contractorcolleague in Malaysia died during scaffolding work,and one in the Philippines died after a fall from height.Two contractor colleagues in Nigeriadied in a security incident,along with four government security agents.In Nigeria,another contractor colleague injured in a tugboat fire incidentlater passed away.These losses have a deep and far-reaching impact on families,friends and colleagues.We are determined to learn from these incidents and takesteps to prevent something similar from happening again.We continue to work closely with our contractors to help build a strong safety cultureat the frontline.The number of serious injuries and fatalities increased to 12(five fatalities A and seven serious injury cases)in 2023 from nine in 2022.A Fatalities in 2023 include one contractor colleague who was injured in a 2023 incident and unfortunately succumbed to their injuries in February 2024.Since 2021,we measure the number of serious injuries and fatalities per 100 million working hours,as well as the total recordable casefrequency,which measures injuries per million working hours.The serious injury,illness and fatality frequency(SIF-F)enables us to focus ourinvestigations on the most serious incidents.The aim is to collect and analyse relevant,high-quality data that can help us improve our efforts toprevent serious injuries and fatalities.In 2023,the SIF-F was 2.6 injuries and illnesses per 100 million working hours,compared with 2.0 in 2022.Fatal accident rate(FAR)Number per 100 million hours01223222120191817161514Serious injury and fatality frequency(SIF-F)A BNumber per 100 million hours051023222120191817161514A Defined as a serious work-related injury or illness,including those that resulted in fatality or a life-altering event.Life-altering event is defined as a long-term or permanent injury or illness with significant impact on daily activities.Examples of SIFinclude,but are not limited to,permanent total disability,amputation of a body part(full or partial),reduced bodily mobility(full or partial),third-degree burns,and impaired vision,hearing,sense of taste or smell.B Data before 2019 are not available.The number of SIF cases for 2019 and 2020 reflects the best estimate.Combinedworkforce SIF frequency for 201920 was adjusted to account for some uncertainty in the number of SIF cases.Sustainability atShellOur valuesAchieving net-zeroemissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 15Shell Sustainability Report 2023Total recordable case frequencyIn 2023,the number of injuries per million working hours the total recordable case frequency was 1.1,an increase from 1.0 in 2022.Theincrease was primarily due to incidents in new acquisitions and growth in the Downstream,Renewables and Energy Solutions business.Lost time injury frequencyThe level of injuries that led to time off work in 2023 increased to 0.5 cases per million hours compared with 0.4 in 2022.The increase wasprimarily due to incidents in new acquisitions and growth in the Downstream,Renewables and Energy Solutions business.Read more about our approach to personal safety at more about how Shells 2023 safety performance impacted the Executive Directors remuneration in the Directors Remuneration Report inour 2023 Annual Report.More in this reportPreparing for emergencies|Letter from the CEOMore on Shell websitesOur approach|Driver safety|Community road safety|Life-saving rulesProcess safetyProcess safety management is about keeping hazardous substances inside pipes,tanks and vessels,and ensuring that well fluids are containedduring construction,interventions(such as maintenance)and incidents.Our Asset Integrity and Process Safety Management principles guide ouractions from project design and construction throughout the life cycle of facilities to keep sites,employees and contractors safe.In line with industry standards,we measure and report process safety incidents according to significance.Total recordable case frequency(TRCF)Number per million hours01223222120191817161514Lost time injury frequency(LTIF)Number per million hours0.000.250.5023222120191817161514Tier 1 2 operational process safety events,excluding sabotage A01002003002023202220212020201920182017201620152014Tier 1Tier 2abab57194511694111049117358641903470386515511944A Process safety events are classified according to guidance from the International Association of Oil&Gas Producers and the American Petroleum Institute.In 2023,there were two Tier 1sabotage-related events.The classification of sabotage-related process safety events is made on the best-endeavours basis.Sustainability atShellOur valuesAchieving net-zeroemissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 16Shell Sustainability Report 2023A Tier 1 process safety event is an unplanned or uncontrolled release of any material from a process,including non-toxic and non-flammablematerials,with the greatest actual consequence resulting in harm to employees,contract staff or a neighbouring community,damage toequipment,or exceeding a defined threshold quantity.A Tier 2 process safety event is a release of lesser consequence.The number of Tier 1 and 2 operational process safety events in 2023 decreased slightly compared with 2022.There were 63 events reportedduring the year compared with 66 in 2022.This sets a new record for Shell,confirming our top-tier performance in the industry.The decreasewas in our Downstream,Renewables and Energy Solutions business,due to improvements in work processes and using data to enhance safetyplanning.Process safety events related to sabotage and theft in Nigeria are recorded separately.In Nigeria,there were two in 2023,compared with threein 2022(see Spill response and prevention in Nigeria).Read more about process safety at in this reportOur approach to safety|Letter from the CEOMore on Shell websitesOur approach|Safety|Life-saving rules|HSSE materials for contractorsPreparing for emergenciesWe prepare and practise our emergency response to incidents,such as a spill or a fire.This involves working closely with local emergencyservices and regulatory agencies to jointly test our plans and procedures.Shell requires key operating assets to test their emergency response preparedness every three years.In 2023,we held four large-scaleemergency response exercises at certain assets we operate in Trinidad and Tobago,Singapore,the UK and the USA.We also supported onelarge-scale emergency response exercise at an asset in Argentina,owned and operated by Razen,one of our joint ventures(Shell interest 44%).We have set up three regional Emergency Response Leadership Councils for the Americas;Asia-Pacific;and Europe,the Middle East and Africa.The councils bring together experts from different teams that need to be able to work together seamlessly in case of emergencies.In 2023,thecouncils annual conferences covered a variety of topics such as business continuity,cyber security,performance under stress,battery storageemergencies,use of drones and competence development.SpillsWe design,operate and maintain our facilities with the intention of avoiding spills.To minimise the risk of spills,Shell has routine programmes inplace to help reduce failures and maintain the reliability of facilities and pipelines.However,spills still occur for reasons such as operational failure,accidents or unusual corrosion.In 2023,there were 70 operational spills of more than 100 kilograms compared with 55 in 2022.The volume of operational spills of oil and oilproducts in 2023 was 0.37 thousand tonnes,compared with 0.06 thousand tonnes in 2022.In 2023,there were no Level 1 or Level 2 well-control incidents at Shell-operated ventures.Spills operational A0125250051023222120191817161514Number of spills(right axis)Volume in thousand tonnes(left axis)A All spill volumes and numbers are for hydrocarbon spills of more than 100 kilograms into the environment(land or water).We have updated some of our historical figures following a review of the data.Sustainability atShellOur valuesAchieving net-zeroemissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 17Shell Sustainability Report 2023In 2023,140 spills were caused by sabotage,compared with 75 in 2022.Of those,139 were in Nigeria and 1 in Australia.The volume of spillsalso increased to 1.4 thousand tonnes from 0.6 thousand tonnes in 2022.Read about our emergency response procedures at in this reportSpill response and prevention in Nigeria|Our approach to safety|Letter from the CEOMore on Shell websitesOur approach|Our approach to safety|Process safetySpill response and prevention in NigeriaIn the Niger Delta,over the last 13 years,the total number of operational hydrocarbon spills and the volume of oil spilled from them into theenvironment have been significantly reduced.Most oil spills in the Niger Delta continue to be caused by crude oil theft,the sabotage of oil and gas production facilities,and illegal oil refining,including the distribution of illegally refined products.In 2023,the Shell Petroleum Development Company of Nigeria Limited(SPDC),as operator of the SPDC joint venture(JV,Shell interest 30%)A,reported nine operational spill incidents of more than 100 kilograms of crude oil,compared with the 10 reported in 2022.The volume ofaround 0.005 thousand tonnes was less than the 0.01 thousand tonnes recorded in 2022.A Unless otherwise stated,all activities reported for or as relating to SPDC in this section should be understood as SPDC acting as the operator of the SPDC JV.SPDC,as the corporate entity,owns 30%of the JV.Spills caused by sabotageIn 2023,about 94%of the oil spills of more than 100 kilograms from the SPDC-operated facilities were caused by the illegal activities of thirdparties.In 2023,the volume of crude oil spills of more than 100 kilograms caused by sabotage was around 1.4 thousand tonnes(139 incidents),compared with around 0.6 thousand tonnes(75 incidents)in 2022.The increased number of incidents in 2023 can be directly attributed to an increase in third-party illegal connections to pipelines,with 119incidents reported in 2023 compared with 56 in 2022.SPDC continues to work with the government security agencies to maintain surveillanceand address illegal activities of third parties,primarily along the SPDC JV pipeline and its operational areas.Spill response and prevention in NigeriaSpills in 2023Clean-upPreventionNumber of operational spills:9Volume of operational spills:5 tonnesAverage days before joint investigationcommences:2.74 days in 2023,improvedfrom six days in 2016Illegal theft points removed:675 in 2023,2,065 in total since 2016Number of spills caused by third-partyinterference and other illegal activities:139,94%of the totalAverage days to complete the recovery ofsurface oil:around one week in 2023,improved from 13 days in 2016Steel cages installed to protect wellheads:374 as of December 31,2023Volume of spills caused by third-partyinterference and other illegal activities:lessthan 1,400 tonnes,99.7%of the total volumeNumber of sites remediated:194 in 2023,970 in total since 2016Breaches of steel cages in 2023:38 out of508 attemptsSpills sabotage A B0125250051023222120191817161514Number of spills(right axis)Volume in thousand tonnes(left axis)A All spill volumes and numbers are for hydrocarbon spills of more than 100 kilograms into the environment(land or water).We have updated some of our historical figures following a review of the data.B All sabotage-and theft-related spills occurred in Nigeria except in 2015(0.005 thousand tonnes),2016(0.001 thousandtonnes)and 2023(0.0002 thousand tonnes).Sustainability atShellOur valuesAchieving net-zeroemissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 18Shell Sustainability Report 2023PreventionIn 2023,SPDC continued on-ground surveillance of its areas of operation,including its pipeline network,to mitigate third-party interference andensure that spills are detected and responded to as quickly as possible.There are daily surveillance flights over the most vulnerable segments of the pipeline network to identify any new spills or illegal activity.SPDChas introduced anti-theft protection mechanisms for key infrastructure,including steel cages to protect wellheads.In 2023,60 new steel cages were installed around critical infrastructure nodes,bringing the total number of cages installed to 374.This includes52 cages that have been upgraded with CCTV and 28 with satellite communications.In 2023,out of 508 registered attempts to breach thecages,38 were successful.SPDC has an ongoing programme to appraise,maintain and replace key sections of pipelines and flow lines in order to reduce the number ofoperational spills.In 2023,around 54 kilometres of pipelines and flow lines were replaced.Response and remediationRegardless of the cause of a spill,SPDC cleans up and remediates areas affected by spills originating from its facilities.In 2023,the time thatSPDC needed to complete the recovery of free-phase oil oil that forms a separate layer and is not mixed with water or soil remained ataround one week.In January 2024,Shell announced the sale of SPDC.Completion of the transaction is subject to regulatory approvals and other conditions.Tolearn more visit: more detailed information on spills in Nigeria in 2023 and our response see .ng/oil-spills.Read more on spill prevention andresponse in Nigeria at .ng/environment.More in this reportContributing to Nigerias economy|Preparing for emergencies|Our approach to safetyMore on Shell websitesOur approach|Nigeria Briefing Notes|Shell Nigeria|Oil spill dataTransport safetyTransporting large numbers of people,products and equipment by road,rail,sea and air poses safety risks.We seek to reduce these risks bydeveloping best-practice standards within Shell.We also work with specialist contractors,industry bodies,non-governmental organisations andgovernments to find ways of reducing transport safety risks.Road safetyIn 2023,Shell employees and contractors drove around 464 million kilometres on work-related business.Commercial road transport accountsfor most of the kilometres,but only two of this years 18 severe motor vehicle incidents(SMVIs)happened during commercial road transport.Nine SMVIs occurred during business travel,two during commercial transport activities and the remaining seven during on-site operations.Therewere no road transport-related fatalities in 2023.In 2023,about 30,600 Shell employees and contractors were identified as driving on work-related business,and therefore required defensivedriver training(DDT).In 2023,we launched an internal virtual DDT course to align better with industry partners approaches.By the end of 2023,we had installed active fatigue and distraction detection(AFDD)devices in around 3,380 vehicles operated by Shell or ourcontractors in countries where road transport risks are highest.In 2024,we will continue to install AFDD devices in vehicles operated by Shell,including both contractor and Shell-owned vehicles.The AFDD devices have recorded and intervened in at least 130 high-risk fatigue events,preventing what could have resulted in motor vehicle incidents if the devices had not alerted the drivers.Safety at seaAt the end of 2023,we managed and operated a global fleet of 25 tankers,liquefied natural gas carriers and the worlds first liquefiedhydrogen carrier,the Suiso Frontier.We are one of the worlds largest charterers of oil and gas vessels.We work with our 500 global maritimepartners through our Maritime Partners in Safety Programme to improve the safety performance of the shipping industry.In 2023,we held 20 workshops on applying cause and effect analysis in incident investigations.Cause and effect analysis helps to identify thelikely causes of an incident so that similar occurrences can be prevented in the future.The last serious injury or fatality on a Shell-operated vesselwas in 2015.Air safetyIn 2023,for Shell-operated ventures,our owned and contracted aircraft flew more than 38,000 hours and safely carried Shell employees andcontractors on more than 281,000 passenger journeys to destinations across the world.In addition,remotely piloted aircraft safely completedalmost 3,400 flight hours on surveys,inspections,emissions surveillance,and security and incident response.More in this reportProcess safety|Our approach to safety|Letter from the CEOMore on Shell websitesOur approach|Transport safety|Community road safetySustainability atShellOur valuesAchieving net-zeroemissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 19Shell Sustainability Report 2023Product stewardshipWe work to ensure our products such as fuels,lubricants and chemicals are safe throughout their life cycle.In 2023,we carried out morethan 900 risk assessments for products and additives.We also published and distributed around 170,000 safety data sheets to customers inabout 180 countries.Read more about product stewardship at in this reportResource use and circular economy|Driving innovation|Letter from the CEOMore on Shell websitesOur approach|Shell Product Catalogue|SafetySustainability atShellOur valuesAchieving net-zeroemissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 20Shell Sustainability Report 2023Achievingnet-zeroemissionsWe aim to be a net-zero emissionsenergy business by 2050 and workwith our customers and across sectorsto help accelerate the energytransition.22Energy transition27Managing greenhouse gas emissions34Providing lower-carbon electricity37Fuelling mobility39Driving innovationSustainability atShellOur valuesAchieving net-zero emissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 21Shell Sustainability Report 2023Energy transitionOur journey to net zeroNet-zero emissions by 2050(Scope 1,2 and 3)AEmissions from our own operations(Scope 1 and 2):Emissions from products we sell(Scope 3):A Our targets for 2050 are based on mitigation activities undertaken by both Shell and our customers.B Operational control boundary.Our 2030 and 2050 targets are on a net basis(i.e.inclusive of any future use of carbon credits).C Subject to completion of the sale of SPDC.D Covers all oil and gas assets for which Shell is the operator.Measured separately for assets with marketed gas(gas,LNG and GTL available for sale)and assets without marketedgas(oil and gas assets where gas is reinjected).2023 actual performance relates to assets with marketed gas.E Customer emissions from the use of our oil products(Scope 3,Category 11)were 517 million tonnes carbon dioxide equivalent(CO2e)in 2023 and 569 million tonnes CO2e in2021.Shell recognises that greenhouse gas emissions from our operations as well as the use of hydrocarbon-based energy contribute to climatechange.The Paris Agreement aims to strengthen the global response to the threat of climate change by holding the increase in the globalaverage temperature to well below 2C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5C abovepreindustrial levels.Shell supports the more ambitious goal of the Paris Agreement,which is to limit the rise in global average temperature thiscentury to 1.5C above pre-industrial levels.Our target is to become a net-zero emissions energy business by 2050.To help us get there,we have set short-,medium-and long-term targetsto reduce the carbon intensity of the energy products we sell,measured using our net carbon intensity metric.We believe these targets arealigned with a 1.5C pathway derived from scenarios developed for the IPCCs Sixth Assessment(AR6)Report.Becoming a net-zero emissions energy business means reducing emissions from our operations and from the fuels and other energy products,such as electricity,that we sell to our customers.It also means capturing and storing any remaining emissions using technology,protectingnatural carbon sinks and providing high-quality carbon credits to our customers to compensate for hard-to-abate emissions.We follow the Greenhouse Gas Protocols Corporate Accounting and Reporting Standard,which defines three scopes of greenhouse gasemissions:Scope 3 emissions from the energy products we sell account for most of the total emissions we report.In October 2021,in support of our 2050 net-zero emissions target,we set a target to reduce Scope 1 and 2 absolute emissions from assets andactivities under our operational control(including divestments)by 50%by 2030,compared with 2016 levels on a net basis.By the end of 2023,we had achieved more than 60%of our target(see Delivering our climate targets).We have also established remuneration policies which are designed to support our short-term climate targets(see Remuneration).In March 2024,we published our Energy Transition Strategy 2024,in which we take stock of our progress since launching our PoweringProgress strategy in 2021 and look forward as we transform Shell into a net-zero emissions energy business by 2050.We are also working with governments on their climate policies to help establish regulatory frameworks that will enable society to reach thegoals of the Paris Agreement.In March 2024,we updated our global climate and energy transition policy positions.By advocating thesepositions as we transform our business,we believe we are supporting both the energy transition and the Paris Agreement.Halve Scope 1 and 2 emissions by 2030 B(2016 baseline).Eliminate routine flaring from Upstream operations by 2025 C.Maintain methane emissions intensity below 0.2%and achieve near-zero methane emissions by 2030 D.Reduce the net carbon intensity(NCI)of the energy products we sell by 912%by 2024,913%by 2025,1520%by 2030,and100%by 2050(2016 baseline).Ambition to reduce customer emissions from the use of our oil products by 1520%by 2030(Scope 3,Category 11)(2021 baseline)E.Scope 1:direct greenhouse gas emissions from sources under Shells operational control;Scope 2:indirect greenhouse gas emissions from the generation of purchased energy consumed by Shell assets under operational control;andScope 3:other indirect greenhouse gas emissions,including emissions associated with the use of energy products sold by Shell.Sustainability atShellOur valuesAchieving net-zero emissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 22Shell Sustainability Report 2023We signed up to the Oil and Gas Decarbonization Charter announced at COP28 in 2023,within which organisations have pledged to achievenear-zero methane emissions by 2030 and zero routine flaring by no later than 2030.We also intend to contribute to the World Banks GlobalFlaring and Methane Reduction Fund,which was launched at COP28.Read more about our climate targets at and in our 2023 Annual Report and Energy Transition Strategy 2024.Supporting our customersEmissions resulting from customer use of our energy products make up the largest percentage of Shells carbon emissions.We believe we canmake the greatest contribution to the energy transition by helping to enable our customers to switch to low-carbon energy products and services.This is reflected in our strategy to develop a portfolio that seeks to:Assessing climate-related risks and opportunitiesShell has identified climate change and the associated energy transition as a material risk based on societal concerns and developments relatedto climate change and managing greenhouse gas emissions.The risks could potentially result in changes to the demand for our products,supplychains and markets,and in further changes to the regulatory environment in which we operate.Overall,we mitigate climate-related risks through our Powering Progress strategy to deliver more value with less emissions.With our focus onperformance,discipline and simplification,we believe that we are in a better position to achieve both our financial and climate-related targetsand ambitions.This approach includes:In addition,we are working to effectively adapt our assets and activities to enhance our resilience to the physical risks related to climate changewhere needed.The transition to a low-carbon economy also brings significant opportunities.As the global energy mix changes,our current infrastructure,know-how and global footprint put us in an ideal position to service the changing energy demands of the market.As we work to deliver more valuewith less emissions,we are focusing on natural gas,particularly LNG;continuing the transformation of select integrated refineries into energyand chemicals parks;biofuels;and developing low-carbon products and solutions for our customers.Read more about Shells material climate-related risks and opportunities in our 2023 Annual Report.More in this reportOur Powering Progress targets|Managing greenhouse gas emissions|Letter from the CEO|Performance overviewMore on Shell websitesOur approach|Our climate target|Our climate target:frequently asked questionsdevelop low-and zero-carbon alternatives to traditional fuels,including biofuels,hydrogen and other low-and zero-carbon gases;provide more electricity to customers,while also driving a shift to renewable electricity;work with customers across different sectors to help them decarbonise their use of energy,for example by substituting the use of coal withliquefied natural gas;andaddress any remaining emissions from conventional fuels with solutions such as carbon capture and storage and carbon credits.reducing the greenhouse gas emissions from our operations(Scope 1 and 2)by improving our energy efficiency,deploying renewableelectricity,managing flaring and reducing methane emissions from our assets and projects;growing our world-leading liquefied natural gas(LNG)business while decarbonising our LNG portfolio in two main ways:by growing ourportfolio with a lower carbon intensity,and by focusing on reducing methane emissions;managing our Upstream portfolio by cutting emissions from oil and gas production,while keeping oil production stable.Oil production isincreasingly from our deep-water business which,through innovation,produces higher-margin and lower-carbon barrels;andtransforming our businesses in Downstream and Renewables and Energy Solutions to offer low-carbon solutions while reducing sales of oilproducts.Sustainability atShellOur valuesAchieving net-zero emissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 23Shell Sustainability Report 2023More in this reportOur journey to net zero|Providing lower-carbon electricity|Carbon capture and storageMore on Shell websitesOur approach|Nature-based solutions|Carbon capture and storageCanadaIndonesiaNigeriaQatarBrazilMalaysiaUnited KingdomUSAMalaysiaNigeriaChinaDenmarkGermanyIndiaNetherlandsNorwayPakistanSingaporeUnited KingdomUSALeadingLeadingIntegratedIntegratedGasGasLNG Canada T1-2Masela PSC/Abadi divestmentNLNG T7QatarEnergy LNG NFE(2)AdvantagedAdvantagedUpstreamUpstreamMero-2 start-upMero-3Mero-4Marjoram/RosmariPierce redevelopmentJackdawAera Energy divestmentSparta FIDVito start-upWhaleBaram Delta divestmentTimi start-upNigerian onshore(SPDC)divestment agreedDifferentiatedDifferentiatedDownstream,Downstream,Renewables andRenewables andEnergy SolutionsEnergy SolutionsEV growthNature Energy acquisitionFID to repurpose Energy andChemicals Park RheinlandShell home energy retail divestmentSprng Energy investment funnelCrossWind/HKNHEFA Biofuels Plant RotterdamHolland Hydrogen IEcowende/HKWNorthern Lights JV(Phase 1)Shell Pakistan Limiteddivestment agreedAspired divestment of Energyand Chemicals Park SingaporeShell home energy retail divestmentAcorn CCSThree CCS licensesVolta acquisitionSavion investment funnelRenewable natural gas investmentsAtlantic Shores-Project 1A These developments include acquisitions,investments,projects,divestments and withdrawals,at various stages of maturity and withdifferent levels of Shell interest from minority investment to full ownership.Energytransitionin actionA selection of 2023developments ACountryDevelopmentAmericasAfricaMiddle EastAsia-PacificEuropeCountryDevelopmentSustainability atShellOur valuesAchieving net-zero emissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 24Shell Sustainability Report 2023Delivering our climate targetsInvesting in the energy transitionWe help provide energy security while investing in the energy transition.In 2023,we invested$7.9 billion in low-carbon energy and non-energy products,around a third of our total cash capital expenditure A of$24.4 billion.Of this,we invested$5.6 billion in low-carbon energy solutions including biofuels,hydrogen,charging for electric vehicles,windand solar power,an increase of 30%compared with the previous year.This was mainly due to the acquisition of Nature Energy and the roll-outof electric vehicle charging.The remaining$2.3 billion was invested in non-energy products such as chemicals,lubricants and convenience retail.Our investment in non-energy products decreased by 41%compared with 2022 due to the completion of Shell Polymers Monaca in 2022 andgreater inorganic expansion in our lubricants and convenience retailing businesses in 2022.A Non-GAAP financial measure.See Reconciliation of non-GAAP financial measures where non-GAAP reconciliation is provided.Our strategy supports a balanced energy transition by responsibly delivering the oil and gas people need today,while helping to build the cleanenergy system of the future.We are prioritising slower-to-decarbonise sectors,namely transport and industry,where we believe we have thecompetitive strengths to provide our customers with the products they need through the transition.See our 2023 Annual Report to learn moreabout our investments in energy in 2023.Investing in the energy transitionTotal cash capital expenditure*of$24.4 billion in 2023A Products for which usage does not cause Scope 3,Category 11 emissions:Lubricants,Chemicals,Convenience Retailing,Agriculture&Forestry,Construction&Road.B E-Mobility and Electric Vehicle Charging Services,Low-Carbon Fuels,Renewable Power Generation,EnvironmentalSolutions,Hydrogen,CCS.We define low-carbon energy products as those that have an average carbon intensity that islower than conventional hydrocarbon products,assessed on a life-cycle basis.C LNG Production&Trading,Gas&Power Trading,and Energy Marketing.D Upstream segment,GTL,Refining&Trading,Marketing fuel and hydrocarbon sales,Shell Ventures,Corporate segment.*Non-GAAP financial measure.See Reconciliation of non-GAAP financial measures where non-GAAP reconciliation isprovided.Absolute emissions reduction performanceIn October 2021,in support of our 2050 net-zero emissions target,we set a target to reduce Scope 1 and 2 absolute emissions from assets andactivities under our operational control(including divestments)by 50%by 2030,compared with 2016 levels on a net basis.In 2023,our total combined Scope 1 and 2 absolute greenhouse gas emissions(from assets and activities under our operational control)were57 million tonnes on a CO2equivalent basis,a 2%reduction compared with 2022 and a 31%reduction compared with 2016,the base year forour target.Our Scope 3 emissions associated with our energy product sales were 1,147 million tonnes of CO2equivalent,compared with 1,174 milliontonnes of CO2equivalent in 2022.In March 2024,we set an ambition to reduce customer emissions related to the use of our oil products by 1520%by 2030,compared with2021(Scope 3,Category 11)B.This level of ambition is in line with the European Unions climate goals in the transport sector,which areamong the most progressive in the world.Read more about our climate targets in our Energy Transition Strategy 2024.B Customer emissions from the use of our oil products(Scope 3,Category 11)were 517 million tonnes carbon dioxide equivalent(CO2e)in 2023 and 569 million tonnes CO2e in 2021.Non-energy products A$2.3 billionLow-carbon energy solutions B$5.6 billionLNG,gas and power marketing andtrading C$4.0 billionOil,oil products and other D$12.5 billionSustainability atShellOur valuesAchieving net-zero emissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 25Shell Sustainability Report 2023We undertake external verification of our greenhouse gas emissions annually.Our Scope 1 and 2 greenhouse gas emissions from assets andactivities under our operational control and the emissions associated with the use of our energy products(Scope 3)included in our net carbonintensity have been verified to a level of limited assurance by LRQA.Limited assurance means nothing has come to the verifiers attention thatwould indicate the greenhouse gas data and information,as presented in the Greenhouse Gas Statement/Assertion,were not materiallycorrect.Read our most recent assurance statements at carbon intensityOur target is to reduce the net carbon intensity of the energy products we sell by the following amounts:912%by 2024,913%by 2025,1520%by 2030 and 100%by 2050.We use net carbon intensity to track our progress in reducing the overall carbon intensity of the energyproducts sold by Shell.Net carbon intensity measures emissions associated with each unit of energy we sell,compared to a 2016 baseline.Itreflects changes in sales of oil and gas products,and changes in sales of low-and zero-carbon products such as biofuels,hydrogen andrenewable electricity.Unlike Scope 1 and 2 emissions,reducing the net carbon intensity of the products we sell requires action by both Shell andour customers,with the support of governments and policymakers to create the right conditions for change.In line with our shift to prioritising value over volume in power,we are concentrating on select markets and segments.One example is our focuson commercial customers more than retail customers.Given this focus on value,we expect growth in total power sales to 2030 will be lower thanpreviously planned.This has led to an update to our net carbon intensity target.As a result,we are now targeting a 1520%reduction in the net carbon intensity of the energy products we sell by 2030,compared with 2016,against 20%previously.Read more about our climate targets in our Energy Transition Strategy 2024.Shells net carbon intensity is the average intensity,weighted by sales volume,of the energy products sold by Shell.It is tracked,measured andreported using the Net Carbon Footprint methodology.We express our net carbon intensity as the grams of CO2equivalent per megajoule(gCO2e/MJ)produced for each unit of energy delivered to,and used by,a consumer.In 2023,Shells net carbon intensity was 74 grams of carbon dioxide equivalent per megajoule of energy(gCO2e/MJ),a 2.6crease fromthe previous year and a 6.3%reduction compared with 2016,the base year.The decrease in our net carbon intensity in 2023 was mainlyachieved through a reduction in the average intensity of power sold and the use of carbon credits.The power intensity reduction was drivenmainly by progress in grid decarbonisation in key markets such as the USA and Europe and partly by increased sales of renewable powerincluding the retirement of renewable energy certificates.Scope 1 and 2 emissions under operational controlMillion tonnes CO2e02040608010020232022202120202019201820172016Scope 1 emissions direct GHG emissions A B CScope 2 emissions market-based method Dabab5077211731271117010638608517A Greenhouse gas emissions comprise carbon dioxide,methane,nitrous oxide,hydrofluorocarbons,perfluorocarbons,sulphur hexafluoride and nitrogen trifluoride.The data are calculated using locally regulated methods where they exist.Wherethere is no locally regulated method,the data are calculated using the 2021 API Compendium,which is the recognisedindustry standard under the Greenhouse Gas Protocol Corporate Accounting and Reporting Standard.There are inherentlimitations on the accuracy of such data.Oil and gas industry guidelines(Ipieca,API and IOGP)indicate that several sourcesof uncertainty can contribute to the overall uncertainty of a corporate emissions inventory.We have estimated the overalluncertainty for our direct greenhouse gas emissions to be around 4%for 2023.B Greenhouse gas emissions for 2023 were calculated using global warming potential(GWP)factors from the IPCC FifthAssessment Report.Data from previous years were calculated using GWP factors from the IPCC Fourth Assessment Report.Forcomparison,our Scope 1 emissions would still have been 50 million tonnes in 2023 if we were to use GWPs from the IPCCFourth Assessment Report.C Greenhouse gas emissions in this table do not include carbon credits.D We estimated the uncertainty of our 2023 Scope 2 greenhouse gas emissions from the market-based method to be around8%.Sustainability atShellOur valuesAchieving net-zero emissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 26Shell Sustainability Report 2023The carbon credits we retired in 2023 amounted to 20 million tonnes of emission offsets,compared with 4.1 million tonnes that were included inour 2022 net carbon intensity.Of the carbon credit retirements included in Shells net carbon intensity metric for 2023,85%were certified byVerra,9%by the American Carbon registry,6%by Gold Standard,and less than 1%via Australian Carbon Credit Units.We undertake external verification of our net carbon intensity annually,and we have received third-party limited assurance on our net carbonintensity for the period 2016 to 2023 by LRQA.Limited assurance means nothing has come to the verifiers attention that would indicate the netcarbon intensity data and information,as presented in the Net Carbon Intensity Assertion,were not materially correct.Read more about our Net Carbon Footprint methodology in our 2023 Annual Report and at in this reportManaging greenhouse gas emissions|Our Powering Progress targets|Letter from the CEO|Performance overviewMore on Shell websitesOur approach|Our climate target|Our climate target:frequently asked questionsManaging greenhouse gas emissionsGreenhouse gas emissionsGreenhouse gas emissions performanceIn 2023,our total combined Scope 1 and 2 absolute greenhouse gas emissions(from assets and activities under our operational control)were57 million tonnes on a CO2equivalent basis,a 2%reduction compared with 2022 and a 31%reduction compared with 2016,the base year forour target.Our Scope 3 emissions associated with our energy products sales were 1,147 million tonnes of CO2equivalent,compared with1,174 million tonnes of CO2equivalent in 2022.Our direct greenhouse gas emissions(Scope 1,operational control boundary)decreased from 51 million tonnes of CO2equivalent in 2022 to50 million tonnes of CO2equivalent in 2023.The reduction was achieved by divestments in 2022(including the Deer Park and Mobile refineries in the USA and Shell-operated upstreamassets in Tunisia and the Philippines);the handover of operations at OML 11 in Nigeria in 2022;reduced flaring at assets,including the ShellNigeria Exploration and Production Company(SNEPCo);and greenhouse gas abatement projects and the purchase of renewable electricity.These decreases were partly offset by bringing more units online at Shell Polymers Monaca,our new polyethylene production facility in the USA,and higher emissions due to maintenance activities at our Pearl GTL gas-to-liquids facility in Qatar and a shutdown of our Prelude floatingliquefied natural gas facility in Australia in 2022.In 2023,we implemented a variety of measures to reduce the energy use and increase the energy efficiency of our operations.Examples ofsome of the principal measures taken in 2023 are listed under Energy use in our operations in our 2023 Annual Report.Net carbon intensity A BGrams of CO2equivalent per megajoule(gCO2e/MJ)6065707580852322212019181716151413A All figures disclosed are rounded in grams of carbon dioxide equivalent per megajoule.B Acquisitions and divestments are included in the actual performance tracking with the target and baseline year unchanged.Acquisitions and divestments could have a material impact on meeting the targets.Direct greenhouse gas emissionsMillion tonnes CO2equivalent05010023222120191817161514Sustainability atShellOur valuesAchieving net-zero emissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 27Shell Sustainability Report 2023Drivers of absolute Scope 1 and 2 emissions changeOur indirect greenhouse gas emissions associated with imported energy(Scope 2,operational control boundary)remained flat at 7 milliontonnes of CO2equivalent in 2023(using the market-based method),compared with 2022.Read our most recent assurance statements at in this reportOur journey to net zero|Delivering our climate targetsMore on Shell websitesOur approach|Our climate target|Our climate target:frequently asked questionsEnergy efficiency in our operationsOne of the metrics we use to measure our performance is energy intensity:the amount of energy consumed for every unit of output.The refinery energy intensity index increased from 95.6 in 2022 to 98.7 in 2023,in part due to lower utilisation at several sites.Chemical steam cracker energy intensity in 2023 was 20.3 gigajoules per tonne(GJ/tonne)of high-value chemical(HVC)production,up from19.3 GJ/tonne HVC in 2022.The increase was due in part to economic under-utilisation and less demand across our sites.Scope 1 and Scope 2 greenhouse gas emission changes from 2016 to 2022 and from 2022 to 2023Million tonnes carbon dioxide equivalent(CO2e)Emissions AaAcquisitionsbDivestmentscReduction activities and purchased renewable electricity B C D EdChange in output FeOtherf705560655020162022202375808590835.05.7(22.9)(11.2)(1.9)580.1(1.1)1.4(0.9)(0.1)57abdecfabdecfaA Total Scope 1 and Scope 2 emissions,rounded to the nearest million tonnes.Scope 2 emissions were calculated using the market-based method.B In addition to reductions from greenhouse gas abatement and energy efficiency projects,this category also includes reductions from shutdowns and conversion of existing assets.C Excludes 6.8 million tonnes of CO2captured and sequestered by the Shell-operated Quest CCS facility in Canada between 2016 and 2022.D Excludes 1.0 million tonnes of CO2captured and sequestered by the Shell-operated Quest CCS facility in Canada in 2023.E Of the 1,081 thousand tonnes of reduction activities and purchased renewable electricity in 2023,around 200 thousand tonnes related to purchased renewable electricity.F Change in output relates to changes in production levels,including those resulting from shutdowns and turnarounds as well as production from new facilities.Energy intensity refiningRefinery Energy Index A9010011023222120191817161514A Data are indexed to 2002,based on Solomon Associates Energy Intensity Index methodology.Sustainability atShellOur valuesAchieving net-zero emissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 28Shell Sustainability Report 2023In 2023,the overall energy intensity for the production of oil and gas in our Integrated Gas and Upstream business(excluding liquefied naturalgas and gas-to-liquids)decreased from 1.19 in 2022 to 1.18.More in this reportOur journey to net zero|Sustainability at Shell|Our standards and policiesMore on Shell websitesOur approach|Our climate target|Our climate target:frequently asked questionsMethane emissionsMaintain methane emissions intensity of Shell-operated oil and gas assets(including liquefied natural gas)to below 0.2%and achievenear-zero methane emissions by 2030.Methane is a powerful greenhouse gas;its impact on climate change over 20 years is more than 80 times greater than CO2.While methane ismuch more efficient in trapping radiation,it is also a short-lived climate pollutant.Reducing emissions of methane is considered one of the mosteffective near-term actions to keep the more ambitious 1.5C goal of the Paris Agreement within reach.Our target is to maintain methane emissions intensity of Shell-operated oil and gas assets(including liquefied natural gas)to below 0.2%andachieve near-zero methane emissions by 2030.Methane emissions performanceShells methane emissions intensity target covers all Integrated Gas and Upstream oil and gas assets for which Shell is the operator.In 2023,we again met our target to keep methane emissions intensity below 0.2%.Our methane emissions intensity averaged 0.05%forfacilities with marketed gas and 0.001%for facilities without marketed gas.It ranged from less than 0.01%to 0.6%in 2023,compared with lessthan 0.01%to 0.7%in 2022.Energy intensity chemical plantsChemical energy intensity gigajoules per tonne of production0153023222120191817161514Energy intensity upstream(Excl.liquefied natural gas and gas-to-liquids)gigajoules per tonne of production01223222120191817161514Methane emissionsThousand tonnes05010015023222120191817161514Sustainability atShellOur valuesAchieving net-zero emissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 29Shell Sustainability Report 2023In 2023,Shells total methane emissions were 41 thousand tonnes compared with 40 thousand tonnes in 2022.The increase was due to venting(which includes maintenance at our Prelude floating LNG facility,Australia and operational issues at Sarawak Shell Berhad,Malaysia)andhigher reported emissions from integrated gas assets in Canada resulting from the adoption of enhanced source level measurements in line withOil and Gas Methane Partnership(OGMP)reporting requirements.Methane emissions were around 2%of Shells greenhouse gas emissions ona CO2equivalent basis in 2023.More than 65%of our reported methane emissions in 2023 came from flaring and venting in our upstream andmidstream operations.Methane reduction at Shell-operated and non-operated sitesWe continue to reduce methane emission sources across Shell-operated assets.By the end of 2023,around 80%of fugitive emission sources atour operated oil,gas and liquified natural gas production facilities used leak detection and repair programmes to tackle leaks and monitorequipment.We have reduced reported methane emissions by using multiple approaches to detect and prevent emissions,including reduced flaring andventing,as well as implementing more accurate methods for calculating emissions.At our QGC natural gas project in Australia,for instance,wehave reduced methane emissions from gas dehydration facilities by around 2,800 tonnes since 2017.We also work with our joint ventures to help them develop emission monitoring programmes.We have encouraged our non-operated ventures toadopt the voluntary UN-led OGMP 2.0 reporting framework.Many of our non-operated venture partners became signatories to the OGMPprogramme in 2023.They include Nigeria LNG,Oman LNG,Atlantic LNG and North Caspian Operating Company.Working with others to reduce methane emissionsWe encourage industry-wide action on methane emissions reduction by participating in voluntary initiatives.For example,we are a founding signatory of the OGMP 2.0 reporting framework and continue to implement enhanced methane emissionsmeasurement and reporting.In 2023,we were awarded Gold Standard status for our OGMP 2.0 reporting for the third consecutive year.We participate in other multi-stakeholder groups,such as the Methane Guiding Principles(MGP)coalition,which we initiated in 2017,the Oil&Gas Climate Initiative and the World Banks Zero Routine Flaring by 2030 initiative.In 2023,members of the MGP,including Shell,started to engage with governments and companies in 20 countries,informing them aboutmethane policies and regulations and sharing best practice on methane emissions reduction along the gas value chain.We intend to contribute to the World Banks Global Flaring and Methane Reduction Fund to help finance methane emissions detection,quantification and abatement projects in low-and middle-income countries.Shell also signed the Oil and Gas Decarbonization Charter that was launched at COP28 in 2023.The charter aims to reduce methane andgreenhouse gas emissions across the oil and gas industry as a whole,including through collaboration and sharing best practice.Read more about Shell and methane emissions at in this reportOur journey to net zero|Managing greenhouse gas emissions|Producing oil and natural gasMore on Shell websitesOur approach|Zero routine flaring by 2025|External voluntary codesMethane emissions by source in 2023Percentage53$cdFlaringVenting and processabFugitivecCombustiondSustainability atShellOur valuesAchieving net-zero emissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 30Shell Sustainability Report 2023FlaringEliminating routine flaring from Upstream operations by 2025 A.Routine flaring of gas occurs during normal oil production if it is not possible to use the gas or reinject it into a well.We are working to reduce flaring,which is inefficient and contributes to climate change.We have set a target to eliminate routine flaring fromour Upstream operations by 2025 A,challenging ourselves to move faster than the World Banks Zero Routine Flaring by 2030 initiative,towhich we are a signatory.A Subject to the completion of the sale of Shell Petroleum Development Company Limited(SPDC).We signed up to the Oil and Gas Decarbonization Charter announced at COP28,within which organisations have pledged to achieve near-zero methane emissions by 2030 and zero routine flaring by 2030.We also intend to contribute to the World Banks Global Flaring andMethane Reduction Fund,which was launched at COP28.Flaring performanceFlaring of gas in our Integrated Gas and Upstream business contributed around 6%of our overall direct greenhouse gas emissions in 2023.In 2023,0.7 million tonnes of hydrocarbons were flared in our Integrated Gas and Upstream business,down from 0.8 million tonnes in 2022.Routine hydrocarbon flaring remained relatively flat compared with 2022 at 0.1 million tonnes.Around 50%of total routine and non-routine flaring in our Integrated Gas and Upstream facilities in 2023 occurred in assets operated by ShellPetroleum Development Company of Nigeria Limited(SPDC)and Shell Nigeria Exploration and Production Company Limited(SNEPCo).OnJanuary 16,2024,Shell reached an agreement to sell SPDC to Renaissance,a consortium of five companies,subject to approvals by the FederalGovernment of Nigeria and other conditions.SPDC will continue to operate the SPDC joint venture(SPDC JV)A on behalf of all the joint-venture partners,who together will continue to make decisions relating to work programmes for the SPDC JVs assets and infrastructure.Thisincludes work programmes to eliminate routine flaring.A The SPDC JV comprises SPDC Ltd(30%),the government-owned NNPC(55%),Total Exploration and Production Nigeria Ltd(10%)and Nigeria Agip Oil Company Ltd(5%).In 2023,around 10%of our greenhouse gas emissions from flaring occurred at facilities where there was no infrastructure to capture the gas,which is similar to the percentage in 2022.Overall flaring decreased to 2.8 million tonnes of carbon dioxide equivalent(CO2e)in 2023 from3.0 million tonnes of CO2e in 2022 due to a reduction in flaring from some assets including the Shell Nigeria Exploration and ProductionCompany(SNEPCo)in 2023.Flaring upstream hydrocarbons flared AMillion tonnes03623222120191817161514A Includes the Integrated Gas and Upstream business.Flaring upstream CO2equivalent AMillion tonnes CO2e0102023222120191817161514A Includes the Integrated Gas and Upstream business.Sustainability atShellOur valuesAchieving net-zero emissionsRespecting naturePowering livesSustainability inoil and gasOur performancedata 31Shell Sustainability Report 2023Read more about our flaring reduction commitment at in this reportOur journey to net zero|Energy transition|Managing greenhouse gas emissionsMore on Shell websitesOur approach|Methane emissionsCarbon credits including from nature-based solutionsAs part of our ambition to become a net-zero emissions energy business by 2050,we are working to reduce emissions from our own operationsand from the fuels and other energy products,such as electricity,we sell to our customers.For remaining emissions,we offer and use high-qualitycarbon credits,including from nature-based solutions.To help us do that,we invest directly in natural ecosystem projects to increase the supply of carbon credits and help meet growing demand.Nature-based solutions protect and enhance natural ecosystems such as forests,grasslands,wetlands and coastal zones or improveagricultural sustainability by absorbing or preventing the release of greenhouse gases.We aim to work with or invest in nature-based projects that have robust environmental and social safeguards while also creating net-positiveimpacts on biodiversity and for local communities.We select projects that are certified under credible and independent carbon credit standards.These include the Verified Carbon Standard,Gold Standard and the American Carbon Registry.We do this to ensure that the carbon credits arereal and verifiable,and that issues such as permanence,additionality and leakage have been adequately considered.We also buy carbon credits generated by other nature-based projects and by technologies.We carefully source and screen the credits wepurchase and retire from the market.Our performanceIn 2023,which was a turbulent year for the voluntary carbon market,we continued to build a portfolio of high-quality nature-based and non-nature-based projects with long-term commitments.We deployed$86 million:$52 million for nature-based projects and$34 million fortechnology-based projects that generate carbon credits.For 2023,we retired around 21.8 million carbon credits,of which 20 million credits are included in our net carbon intensity and 1.8 million creditsare associated mainly with the sale of non-energy products and Shells business travel(one carbon credit represents the avoidance or removal of1 tonne of CO2).These numbers exclude direct carbon trading activities.In 2023,in the USA,we launched Greenline Climate with the Spatial Informatics Group to provide development services for projects generatingforest carbon credits.We also invested in carbon sequestration developer Kateri to help livestock farmers protect and restore grasslands andearn carbon credit revenues through sustainable land and grazing management.In India,Shell is providing finance for one of the largest household efficiency programmes globally.The programme aims to replace inefficientincandescent light bulbs with energy-efficient LED bulbs for more than 8 million households,generating carbon credits that Shell can offer to itscustomers.Read more about nature-based so
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Sustainability Report 2023Energising todayAdvancing tomorrowWelcome to Glencores 2023 Sustainability.
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Courage tomove forwardALLIANZ GROUPSustainability Report 2023About this reportOur reporting approach.
2024-08-02
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5星级
CCencora FY23 ESG Reporting Index|1 CCencora FY23 ESG Reporting Index|2 Table of contents Independent Limited Assurance Report to Cencora Inc.3 About Cencora.7 ESG at Cencora.7 About this report.8 Cencora key company policies and resources.10 Stakeholder engagement.11 Global Reporting Initiative(GRI).14 Sustainability Accounting Standards Board(SASB).50 Task Force on Climate-related Financial Disclosures*.54 United Nations Sustainable Development Goals(SDGs).59 World Economic Forum Stakeholder Capitalism Metrics*.61 2022 Employer Information Report EEO-1.63 Cencora FY23 reporting criteria.66 Cencora FY23 ESG Reporting Index|3 Independent Limited Assurance Report to Cencora Inc.(formerly AmerisourceBergen Corporation)ERM Certification and Verification Services Incorporated(“ERM CVS”)was engaged by Cencora Inc.(“Cencora”)to provide limited assurance in relation to the selected information set out below and presented in their 2023 FY23 Environmental,Social,and Governance Report Microsite,as of 26th January 2024,and ESG Reporting Index(the“Reports”).Engagement summary Scope of our assurance engagement Whether the FY23 information and data for the specified sections and indicators of the Reports listed below are fairly presented,in all material aspects,in accordance with the reporting criteria.*Purpose-driven team members:Diversity,equity,and inclusion;Caring for team members Resilient and Sustainable Operations:Environmentally aware;Supply chain and stewardship;Supplier Diversity Healthy customers and communities:Advancing Global Health;Corporate engagement;The Cencora Impact Foundation Our approach to ESG Helping combat the opioid epidemic *Excludes information included in quotes,interviews and spotlights.Governance,Ethics&Compliance Employee acknowledgement of Code of Conduct and Anticorruption policies%Diversity&Inclusion Individuals within the organizations Board of Directors and Executive Management Committee by genderðnicity GRI 405-1a%Employees by genderðnicity GRI 405-1b%Community Impact&Investment Operations with implemented local community engagement,impact assessments,and/or development programs GRI 413-1%Operations with significant actual and potential negative impacts on local communities GRI 413-2 Employees that participated in Annual paid Volunteer Time Off program#Access to Healthcare Monetary value of OTC donations to non-profits USD Disaster Preparedness and Response/Humanitarian Relief Monetary value of donations for disaster response USD Environment Energy&Climate&Waste Management Renewable energy consumption GRI 302.1b Mwh Total waste generation GRI 306 3.a Tons Prescription Drug Safety Description of methods and technologies used to maintain traceability of products throughout the distribution chain and prevent counterfeiting SASB HC-DI-260a.1 Cencora FY23 ESG Reporting Index|4 Transportation Efficiency Description of efforts to reduce the environmental impact of logistics SASB HC-DI-110a.2 Responsible Packaging Description of strategies to reduce the environmental impact of packaging throughout its lifecycle implemented within the reporting year SASB RT0204-12 Energy&GHG Emissions Total energy consumption MWh Total Scope 1 GHG emissions(MT CO2e)Total Scope 2 GHG emissions(location-based)MT CO2e Total Scope 2 GHG emissions(market-based)MT CO2e Our assurance engagement does not extend to information in respect of earlier periods or to any other information included in the Report.Reporting period 1st October 2022 to 30th September 2023 Reporting criteria WBCSD/WRI GHG Protocol(2004,as updated January 2015)for the Scope 1,Scope 2 GHG emissions;GRI Sustainability Reporting Standard principles for reporting;SASB Healthcare distributors standard 2023;Cencoras internal reporting criteria and definitions as noted throughout the Reports and in the Cencora FY23 Reporting Criteria section of the ESG Reporting Index.Assurance standard and level of assurance We performed a limited assurance engagement,in accordance with the International Standard on Assurance Engagements ISAE 3000(Revised)Assurance Engagements other than Audits or Reviews of Historical Financial Information issued by the International Auditing and Standards Board.The procedures performed in a limited assurance engagement vary in nature and timing from and are less in extent than for a reasonable assurance engagement and consequently,the level of assurance obtained in a limited assurance engagement is substantially lower than the assurance that would have been obtained had a reasonable assurance engagement been performed.Respective responsibilities Cencora is responsible for preparing the Report and for the collection and presentation of the information within it,and for the designing,implementing and maintaining of internal controls relevant to the preparation and presentation of the Report.ERM CVS responsibility is to provide conclusions to Cencora on the agreed scope based on our engagement terms with Cencora,the assurance activities performed and exercising our professional judgement.Independent Assurance Statement Cencora FY23 ESG Reporting Index|5 Our conclusion Based on our activities,as described below,nothing has come to our attention to indicate that the FY23 data and information for the disclosures listed under Scope above are not fairly presented in the Report,in all material respects,in accordance with the reporting criteria.Emphasis of matter Without affecting our conclusion,which is not modified,we draw attention to the explanatory notes provided by Cencora in Cencora FY23 Reporting Criteria section of the ESG Index pages 39 and 78 relating to the specific exclusions in the waste reporting boundary.Our assurance activities Considering the level of assurance and our assessment of the risk of material misstatement of the Report a multi-disciplinary team of sustainability and assurance specialists performed a range of procedures that included,but was not restricted to,the following:Evaluating the appropriateness of the reporting criteria and alignment of the selected information.Performing an analysis of the external environment,including a media search,to identify sustainability risks and issues in the reporting period that may be relevant to the assurance scope.In-person and virtual interviews with management representatives responsible for managing the selected issues and indicators.Interviews and walkthroughs with relevant staff to understand and evaluate the management systems and processes(including internal review and control processes)used for collecting and reporting the selected disclosures.A review of the external third-party utility management provider system to confirm completeness of data reporting and test source data.A review at corporate level of a sample of qualitative and quantitative evidence supporting the reported information.An analytical review of the year-end data submitted by locations and market included in the consolidated 2023 group data for the selected disclosures which included testing the completeness and mathematical accuracy of conversions and calculations,and consolidation in line with the stated reporting boundary.Two in-person visits to Cencora markets(countries)in France and Spain,and one virtual visit to Netherlands to review energy related source data for the countrys market and local reporting systems and controls.Confirming conversion and emission factors and assumptions used.An evaluation of the completeness and balance of the information in the specified sections based on the assurance evidence collected and the external factors review.Reviewing the presentation of information relevant to the scope of our work in the Reports to ensure consistency with our findings.The limitations of our engagement The reliability of the assured information is subject to inherent uncertainties,given the available methods for determining,calculating or estimating the underlying information.It is important to understand our assurance conclusions in this context.Our independent assurance statement provides no assurance on the maintenance and integrity of the website,including controls used to achieve this,and in particular whether any changes may have occurred to the assured information since it was first published.Alliance Healthcare data is collected and reported at the country-level,minimizing visibility of site-level reporting.Assessment of site-level reporting was limited to the selected assurance sample.We draw attention to the possibility that if site-level reporting were available across the Alliance Healthcare portion of the business we may have identified omissions in the reported information.Our independence,integrity and quality control ERM CVS is an independent certification and verification body accredited by UKAS to ISO 17021:2015.Accordingly,we maintain a comprehensive system of quality control,including documented policies and procedures regarding compliance with ethical requirements,professional standards,and applicable legal and regulatory requirements.Our quality management system is at least as demanding as the relevant sections of ISQM-1 and ISQM-2(2022).ERM CVS applies a Code of Conduct and related policies to ensure that its employees maintain integrity,objectivity,professional competence and high ethical standards in their work.Our processes are designed and implemented to ensure that the work we undertake is objective,impartial and free from bias and conflict of interest.Our certified management system covers independence and ethical requirements that are at least as demanding as the relevant sections of the IESBA Code relating to assurance engagements.ERM CVS has extensive experience in conducting assurance on environmental,social,ethical and health and safety information,systems and processes,and provides no consultancy related services to Cencora in any respect.Independent Assurance Statement Cencora FY23 ESG Reporting Index|6 Other Matters-observations We will provide Cencora with a separate management report with our detailed(non-material)findings and recommendations.Without affecting the conclusion presented above,we have the following key observation:The reported data contains estimated GHG emissions from refrigerant leakage.Cencora intends to improve the quantity of actual data incorporated into the emissions calculations in future reporting.Cencora continues to work on evolving its data collection and reporting processes to improve consistency of governance and controls across the enterprise.Andrea Duque Partner,Corporate Assurance Services Malvern,PA 29 January 2024 ERM Certification&Verification Services Incorporated | About this report Cencora FY23 ESG Reporting Index|7 About Cencora We are a leading global pharmaceutical solutions company committed to improving the lives of people and animals everywhere.Previously known as AmerisourceBergen,we believe in the power of pharmaceuticals to improve care and well-being.By becoming Cencora,we united our 46,000 team members under one identity in pursuit of a shared purpose:We are united in our responsibility to create healthier futures.Our new name has connections to the words center,core,and heart,and it is rooted in what weve always considered most important:putting our customers,their patients,and our team members at the center of everything we do.At Cencora,we enable our customers and partners to bring their healthcare innovations,hard work,and aspirations to patients around the world.Through our distribution services,solutions,and expertise,we connect manufacturers,care providers,and patients to ensure that those who need therapies can get what they need,when and where they need it.Our comprehensive and growing portfolio includes solutions that span the full pharmaceutical product lifecycle from assisting manufacturers in navigating the complexity of the clinical trial process to helping patients gain access to their medications through our affordability and adherence services.Care providers of all kinds depend on us,including hospitals,health systems,pharmacies,physician practices,veterinarians,and more.We are the partner of choice for a global network of healthcare customers providing secure,reliable access to pharmaceuticals and healthcare products and solutions that optimize providers ability to serve patients and animals.We connect our partners to whats next across the complex and ever-changing healthcare landscape,so that together,we can achieve outcomes never thought possible.ESG at Cencora Creating healthier futures is the foundation for everything we do,and our purpose directly inspires our global environmental,social,and governance(ESG)impact strategy.When we deliver on our purpose,we enhance access to healthcare and do our part to enable better patient outcomes in communities,which is why we embed our ESG strategy across our business.Our ESG team collaborates cross-functionally with leaders throughout the enterprise to elevate ESG priorities and implement meaningful initiatives.In FY23,we incorporated an ESG metric covering 10%of the annual bonus opportunity into our executive compensation program.Our Boards Compensation Committee selected three components for the ESG metric that were objectively measurable and aligned with Cencoras ESG pillars of purpose-driven team members,resilient and sustainable operations,and healthy customers and communities.In addition,Cencora has a fully verified science-based target to reduce absolute Scope 1 and 2 greenhouse gas emissions 54.6%by FY2032 from a FY2019 base year.Cencora also commits that 82%of its suppliers by spend,covering purchased goods and services,will have science-based targets by FY2027.In addition,Cencora has a fully verified science-based target to reduce absolute Scope 1 and 2 greenhouse gas emissions 54.6%by FY2032 from a FY2019 base year.Cencora also commits that 82%of its suppliers by spend,covering purchased goods and services,will have science-based targets by FY2027.By aligning our business strategy with our purpose and ESG impact priorities,we deepen our value as a trusted partner for stakeholders across the industry,advance innovation across the pharmaceutical supply chain,and create an inclusive culture where our team members feel valued and can thrive.In FY23,we leveraged our experience,reach,and relationships to inform best practices and elevate our industrys collective impact on ESG.We shared our ESG approach through our collaboration with the International Federation of Pharmaceutical Wholesalers(IFPW)to create a new framework to support IFPW members with alignment and advancement of their key ESG activities.Susan Lorenz-Fisher,Senior Vice President,Global Sustainability,ESG Integration&Real Estate,Cencora,serves as the Chair of the IFPW ESG advisory committee,while Steve Collis,Chairman,President,and CEO,Cencora,and Juan Guerra,President,International Business Group,Cencora,sit on the IFPW Board of Directors.About this report Cencora FY23 ESG Reporting Index|8 Our approach to governance and oversight The governance and ongoing execution of our global ESG impact is the responsibility of leaders and key internal partners across Cencora.The Global ESG impact team is led by the SVP,Global Sustainability,ESG Integration,and Real Estate,and falls under the purview of the Chief Communications&Administration Officer,who reports directly into the Chairman,President,and Chief Executive Officer of Cencora.Our global ESG impact strategy,program,and goals have direct oversight and approval by the Executive Management Committee and our Board of Directors,particularly the Governance,Sustainability,and Corporate Responsibility Committee.Compliance and ethics are the cornerstone of our approach to ESG as a company,and we maintain a shared responsibility to operate at the highest levels of business ethics and integrity standards.All activities across our global ESG initiatives follow our global Code of Ethics and Business Conduct to ensure we execute our efforts aligned to these principles and uphold our standards.We are committed to continually evolving our ESG strategy and governance approach.The exciting growth of our business and brand on a global scale in FY23 presented meaningful opportunities to ensure our approach to ESG impact aligns with the organization Cencora is today and the bright future we have ahead.A key focus area in FY23 was the evolution of our global ESG Impact Council,a cross-functional group of leaders who champion the integration and coordination of Cencoras ESG strategy and practices with business strategy and policy.In addition to representing the various commercial and functional areas across our enterprise,we intentionally select leadership that reflects our expanded global footprint to ensure the way we positively impact people and the planet is shaped with an international viewpoint and broad industry perspective.Additional changes to our governance structure included the expansion of our subcommittees that align to our ESG priorities.Our efforts to meaningfully enhance our ESG strategy also involved engaging a diverse set of internal and external stakeholders to understand the primary ESG issues where Cencora has the greatest impact.Engaging these stakeholders empowers our understanding of where our organization should prioritize our ESG areas of focus and resources.To ensure consistent alignment across our business,several layers of team members and leaders had the opportunity to influence the prioritization of the most important ESG issues for our business,including our Global ESG Impact Council,our Executive Management,and our Board of Directors.In FY24 we look forward to a continued focus on global integration that will enable better data sharing,particularly for our newly acquired companies,and improve process alignment.About this report This report is based on activities in fiscal year 2023(October 1,2022 to September 30,2023),except where otherwise noted.Boundaries for data included in this report are provided on a metric-by-metric basis.We utilized the principles and practices outlined in globally accepted sustainability reporting frameworks to inform the content of this report.This report has been prepared with reference to the Global Reporting Initiative(GRI)Universal Standards 2021.This ESG Reporting Index is aligned with the Sustainability Accounting Standards Board(SASB),Task Force on Climate-related Financial Disclosures(TCFD),World Economic Forum Stakeholder Capitalism Metrics(WEF),the United Nations Sustainable Development Goals(UNSDGs),and the Investors for Opioid and Pharmaceutical Accountability(IOPA).As part of our commitment to WEF Zero Health Gaps Pledge,we have woven examples throughout this report of how we are supporting our workforce,offerings&services,community,and partners through healthcare opportunities.In addition,we have externally assured select material topics and indicators included in our web-based report and disclosure index.We continue to advance on our ESG reporting journey and are continuing to evolve as we prepare for mandatory reporting required through the upcoming European regulation,Corporate Sustainability Reporting Directive(CSRD).Our environmental data today includes actual and estimated figures from across Cencora,including Alliance Healthcare and PharmaLex where possible.As we continue to globally integrate across recently acquired businesses,we will continue to prioritize accessing and sharing more complete actual data.On June 1,2021,Cencora completed the acquisition of a majority of Walgreens Boots Alliances Alliance Healthcare businesses.Throughout FY23,we continued to integrate our businesses more fully.We have provided consolidated data for legacy Cencora and Alliance Healthcare where possible and specify where Cencora and Alliance Healthcare information is included throughout the report.In FY23,we divested our stake in the Alliance Healthcare Egypt business and therefore,have excluded that business from our FY23 reporting.About this report Cencora FY23 ESG Reporting Index|9 Additionally,on January 1,2023 Cencora completed its acquisition of PharmaLex Holding GmbH.Throughout FY23,we began to integrate the businesses,and commit to do so more fully in FY24 and beyond.Unless noted,data presented in this report does not include PharmaLex data given the partial year acquisition and the ongoing consolidation of data and systems.At publication of this report,Cencora has 1,100 locations worldwide.We plan to review and,as needed,update this Index on a quarterly basis.See below for version history details.Revision history Version Revised on date Revision description 1 January 29,2024 Original publication of FY23 ESG Index Cencora company policies Cencora FY23 ESG Reporting Index|10 Cencora key company policies and resources Cencora CDP Climate Change Disclosure California Compliance Document Code of Ethics and Business Conduct Code of Ethics for Designated Senior Officers Conflict Minerals Policy Conflict Minerals Report Corporate Governance Principles EEO-1 Disclosure Human Rights Policy Policy Statement on Political Engagement Policy Statement Regarding Securities Transactions Proxy Statement Supplier Code of Conduct Supplier Diversity Statement Supplier Engagement StatementStakeholder engagement Cencora FY23 ESG Reporting Index|11 Stakeholder engagement Stakeholder group Type and frequency of engagement Key topics raised and actions taken Team members Examples of ways we engage with our team members include the year-end performance management process,involving annual performance reviews,ongoing goal setting and development check-in conversations;quarterly live team member calls with leadership(including our CEO);daily and weekly company communications via email,newsletters,intranet,mobile communications,and digital signage;ability to recognize team members globally for outstanding work grounded in our guiding principles using our True Blue program;and the ability for team members to provide feedback on a global engagement survey.Topics:Performance,goals,recognition,engagement Actions:Encourage people managers to provide ongoing feedback to team members via continuous check-in conversations throughout the year;leverage feedback tool in the online performance management system to allow team members to request feedback from anyone across the company;encourage team members to recognize colleagues for outstanding work based on Cencoras purpose and guiding principles using our True Blue recognition program;encourage team members to provide feedback on employee satisfaction,engagement,and inclusion through employee listening and employee resource groups;employ our integrated talent framework,which includes an enhanced leadership competency model,an enterprise learning strategy,and a modern approach to performance management;and provide regular Diversity,Equity,and Inclusion updates and training across the business.Executive leadership initiatives designed to accelerate the advancement and ongoing success of high-potential Black and Hispanic/Latino team members at the director,senior director,and vice president level through dedicated development program.Business-wide leaders We engage with our business partners and leaders on a regular basis through various working groups and leadership meetings.Examples include presentations several times throughout the year to the Executive Management Committee and Executive Operating Committee,quarterly Global ESG Impact Council meetings,ESG Reporting Committee meetings,other cross-functional council and policy meetings,and various meetings and presentations with functional and commercial leaders and their teams.We also regularly reach out to our partners across the business via email or phone to touch base on various topics and projects.Topics:ESG topics related to respective leaders business function to include ESG strategy and integration throughout the business,customer collaboration and support opportunities,team member engagement,environmental sustainability,and healthier communities.Actions:We incorporated feedback and commentary into our ESG strategy and the content for this years report.We remain actively engaged with our business-wide leaders and evaluate actions on an ongoing basis.Business-wide leaders,including our CEO,participate regularly in team member-led town halls to provide perspective on topics that cut across the ESG space and align to our material topics,including ways we are advancing global public health outcomes,increasing access to affordable and quality healthcare,reducing our environmental impact,enhancing DEI,and investing in the safety,well-being,and development of our team members.Stakeholder engagement Cencora FY23 ESG Reporting Index|12 Stakeholder group Type and frequency of engagement Key topics raised and actions taken Communities and nonprofits In FY23,Cencora gave$2.7 million in corporate charitable sponsorships,and$2.5 million in product donations.The Cencora Impact Foundation awards grant funding on a quarterly basis to nonprofit organizations focusing on projects that have a goal of advancing access to care.The Cencora Impact Foundation seeks to realize this goal through three strategic areas:supporting access to healthcare for underserved populations around the globe;improving the health of service,companion,and production animals that support humans and advance disaster response efforts;and combating prescription drug misuse through safe disposal,innovative solutions,and mental health support.Within the prescription drug safety strategic pillar,the Cencora Impact Foundation granted nearly$1M funding in FY23.Many of our partner nonprofits champion diversity,equity,and inclusion,and we are proud to support these efforts.We are continuing to evaluate our Foundation partnerships to ensure that the geography of our giving is reflective of our broad global footprint.Foundation staff provide ongoing support to current and potential grantees throughout the grant process.We connect with nonprofit partners through several conference calls each year and encourage collaboration among our grantee community by hosting an annual conference for our nonprofit partners as well as making on-going connections between like-minded nonprofits.Cencora supports communities and the nonprofits that serve those communities by providing U.S.and Canada team members with 8 hours annually of paid volunteer time off1,targeted charitable event sponsorships,product donations,and offering team members matching gifts and volunteer/board service grants.In FY24,matching gifts and volunteer/board service grants will be available to all global team members,with Alliance Healthcare onboarded to the technology platform.In addition,Cencora businesses and leaders/team members share their skills with nonprofits through best practice sharing.Topics:Grant process and guidelines,funding for nonprofit programs and charitable events,volunteer needs.Actions:We evaluate our programs on an ongoing basis and adjust according to the needs of our partners.For more information,see the Healthy customers and communities section of our ESG microsite.Customers and potential customers We engage with our customers through a variety of touchpoints along their journey with Cencora,including onboarding,customer service,sales(phone,email,in-person),ordering,delivery,industry events/conferences,marketing and communications,trainings,business coaching,consulting,and surveys.The frequency of these interactions varies by customer,but touchpoints,such as ordering and delivery,often occur daily.Topics:Product access,customer onboarding,customer service,delivery services,ordering,analytics and reporting,consulting services,government affairs support.Actions:We are consistently evolving our products,solutions,and business models based on our customers needs and feedback.As an agile market leader,we understand the importance of investing in our business,our technologies,and our capabilities to meet the evolving needs of our customers,clients,and partners.Our robust business continuity planning allows us to seamlessly pivot,guide,and support our shared customers helping our communities at a moments notice.1 Outside of the US and Canada,VTO is managed in a decentralized manner.Stakeholder engagement Cencora FY23 ESG Reporting Index|13 Stakeholder group Type and frequency of engagement Key topics raised and actions taken Government and municipalities We participate in the policy making and political process to advance the interests of the company and our customers in alignment with our purpose.We advocate at the federal and state levels by educating policymakers on priority issues on behalf of Cencora and our customers,and by collaborating with industry trade groups and coalitions.Topics:Healthcare policy and other issues that directly affect our business,our customers,and the patients they serve,including pharmaceutical manufacturers,acute care hospitals and health systems,independent,specialty,and chain retail pharmacies,veterinarians,mail-order pharmacies,long-term care pharmacies and physicians,and physician group practices.Actions:We actively engage government and regulatory officials and evaluate policy actions on an ongoing basis.For more information,please see our Policy Statement on Political Engagement or visit our public policy website.Investors We engage with our investors and shareholders through several avenues.Some examples include quarterly earnings releases,conference calls,and webcasts;regular reports filed with the SEC,including annual and quarterly reports and our annual proxy statement;conference calls and webcasts related to specific developments;participation in numerous investor conferences,healthcare and/or ESG focused,with webcasted presentations;and our annual shareholders meeting.In addition,we engage with a variety of investors,stewardship teams,and rating/ranking entities.Topics:Business unit performance/company guidance,strategy/capital allocation,competitive landscape,healthcare policy,corporate governance.Actions:We remain actively engaged with our investors and shareholders and evaluate actions on an ongoing basis.Suppliers With many suppliers,we hold regular business reviews.Additionally,we have memberships with various local,national,and global diversity advocates through which we network with diverse businesses to determine potential matches for future business opportunities while fostering the inclusion of diverse suppliers.In FY24 we will host various summits in support of this work.We have developed a Supplier Code of Conduct and Supplier Engagement Statement to continue to hold suppliers accountable.Topics:Economic impacts,business activities,competitive landscape,ESG strategy and performance,new entrants,or substitutions.Actions:We remain actively engaged with many of our key and critical suppliers while also identifying suppliers to develop into a more strategic relationship.For more information,see our Supplier Code of Conduct and our Supplier Engagement Statement.Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|14 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold Global Reporting Initiative(GRI)GRI 2:General disclosures GRI disclosure number GRI disclosure title Page and source*Additional information 2-1 Organizational details N/A Cencora,Inc.;Headquartered in Conshohocken,Pennsylvania 2-2 Entities included in the organizations sustainability reporting Form 10-K:PG 3-4 Exhibit 21 to the Form 10-K PharmaLex data is not included in report unless otherwise noted 2-3 Reporting period,frequency,and contact point About this report This report is based on activities in fiscal year 2023(October 1,2022 to September 30,2023).We plan to review and update this Index on a quarterly basis,as needed.Please see the About this report section for a version history table for the latest changes.For questions regarding this report,please contact ESG 2-4 Restatements of information N/A There are no restatements of information included in this report.Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|15 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold GRI disclosure number GRI disclosure title Page and source*Additional information 2-5 External assurance Assurance Letter N/A 2-6 Activities,value chain,and other business relationships Supply chain and stewardship Supplier Engagement Statement Distribution Services webpage Supplier Code of Conduct On June 1,2021,Cencora acquired a majority of Walgreen Boots Alliances Alliance Healthcare businesses.Alliance Healthcare is one of the largest pharmaceutical wholesalers in Europe,supplying a comprehensive range of pharmaceutical,medical,and healthcare products,services,and solutions for pharmacist customers and manufacturer partners.The acquisition has expanded Cencoras reach and solutions in pharmaceutical distribution and adds to the depth and breadth of our global manufacturer services.Throughout FY23,we continued to complete transition activities with Walgreens Boots Alliance to meet key Transition Service Agreement(TSA)deadlines.With approximately 46,000 team members across more than 50 countries around the world,we recognize the need to better connect our people to enhance the work we are able to do together.As we continue to progress through the integration process,we are rethinking processes,aligning platforms,and uniting strategies.In FY23,we continued advancements on our roadmap for integrating systems and expect significant progress in FY24.In FY23,we completed the acquisition of PharmaLex Holding GmbH(PharmaLex),a leading provider of specialized services for the life sciences industry,which will expand and enhance Cencoras global portfolio of solutions to support partners across the pharmaceutical development and commercialization journey.The acquisition closed effective January 1,2023.2-7 Employees N/A At the close of FY23,our total workforce consisted of approximately 46,000 global team members.A breakdown of team members by region and by gender is included below.Total global headcount:45,809 51male Europe:23,919 45male North America:20,282 60male Rest of world:1,608 43male We continue to offer WorkSmart,a principled hybrid work flexibility program for those team members whose work does not require them to be at one of our physical locations.WorkSmart is based on our philosophy and approach to team member satisfaction and provides team members flexibility in how and where work is completed.Data boundary:Total global headcount:Cencora global team members including Alliance Healthcare and PharmaLex team members.2-8 Workers who are not employees N/A This information is not readily available for reporting.Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|16 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold GRI disclosure number GRI disclosure title Page and source*Additional information 2-9 Governance structure and composition Governance Committees Proxy:PG 5,7-8,14-19,23-26,28,31,42-43,50-51 The governance and ongoing execution of our global ESG impact is the responsibility of leaders and key internal partners across Cencora.The Global ESG impact team is led by the SVP,Global Sustainability,ESG Integration,and Real Estate,and falls under the purview of the Chief Communications&Administration Officer,who reports directly into the Chairman,President,and Chief Executive Officer of Cencora.Our global ESG impact strategy,program,and goals have direct oversight and approval by the Executive Management Committee and our Board of Directors,particularly the Governance,Sustainability,and Corporate Responsibility Committee.Compliance and ethics are the cornerstone of our approach to ESG as a company,and we maintain a shared responsibility to operate at the highest levels of business ethics and integrity standards.All activities across our global ESG initiatives follow our global Code of Ethics and Business Conduct to ensure we execute our efforts aligned to these principles and uphold our standards.We are committed to continually evolving our ESG strategy and governance approach.The exciting growth of our business and brand on a global scale in FY23 presented meaningful opportunities to ensure our approach to ESG impact aligns with the organization Cencora is today and the bright future we have ahead.A key focus area in FY23 was the evolution of our global ESG Impact Council,a cross-functional group of leaders who champion the integration and coordination of Cencoras ESG strategy and practices with business strategy and policy.In addition to representing the various commercial and functional areas across our enterprise,we intentionally select leadership that reflects our expanded global footprint to ensure the way we positively impact people and the planet is shaped with an international viewpoint and broad industry perspective.Additional changes to our governance structure included the expansion of our subcommittees that align to our ESG priorities.Our efforts to meaningfully enhance our ESG strategy also involved engaging a diverse set of internal and external stakeholders to understand the primary ESG issues where Cencora has the greatest impact.Engaging these stakeholders empowers our understanding of where our organization should prioritize our ESG areas of focus and resources.To ensure consistent alignment across our business,several layers of team members and leaders had the opportunity to influence the prioritization of the most important ESG issues for our business,including our Global ESG Impact Council,our Executive Management,and our Board of Directors.In FY23,we incorporated an ESG metric covering 10%of the annual bonus opportunity into our executive compensation program.Our Boards Compensation Committee selected three components for the ESG metric that were objectively measurable and aligned with Cencoras ESG pillars of purpose-driven team members,resilient and sustainable operations,and healthy customers and communities.Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|17 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold GRI disclosure number GRI disclosure title Page and source*Additional information 2-11 Chair of the highest governance body Governance Committees Proxy:PG 21-22 N/A 2-12 Role of the highest governance body in overseeing the management of impacts Governance Committees Stakeholder engagement Proxy:PG 23-32 Safe and Secure Distribution of Controlled Substances The Board and Executive Management Committee are the highest governing body in setting purpose,values,and strategy.Cencoras Board of Directors provides guidance and critical oversight of our governance,strategic initiatives,talent management,and risk management processes.Our Board ensures that our management team runs our business in a manner that is in accordance with business ethics and sound ethical principles and protects and advances the long-term interests of our shareholders.The Board and the Governance Committee receive updates on economic,environmental,and social topics at regularly scheduled meetings.2-13 Delegation of responsibility for managing impacts Proxy:PG 21-28,31-32 N/A 2-14 Role of the highest governance body in sustainability reporting CDP:PG 3 Proxy:PG 26,28 Safe and Secure Distribution of Controlled Substances The Governance,Sustainability,and Corporate Responsibility Committee has primary risk oversight for governance structure and processes;investor relations;ESG;political engagement;board succession planning;and diversity,equity,and inclusion strategy,practices,and performance.As a result,the Committee reviews and guides the ESG strategy,any major plans of action,risk management policies,and business plans,and monitors implementation and performance of objectives.ESG is also included on our Boards skills matrix in order to strengthen Board-level commitment to ESG-related topics.Alignment across the Board,Executive Management Committee,and senior leadership around our ESG strategy and initiatives is also present within our Global ESG Impact Council structure and processes.2-10 Nomination and selection of the highest governance body Governance Committees Proxy:PG 8,11-13 N/A Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|18 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold GRI disclosure number GRI disclosure title Page and source*Additional information 2-15 Conflicts of interest Code of Ethics:PG 20-21 N/A 2-16 Communication of critical concerns Proxy:PG 23,25,28 Code of Ethics:PG 11-15 Form 10-K:PG 19 Safe and Secure Distribution of Controlled Substances N/A 2-17 Collective knowledge of the highest governance body Corporate Officers We have regularly scheduled meetings that include presentations to the Board on issues of relevance about the company,with regard to economic,environmental,governance,and social topics.These topics are contained in our Board of Directors skills matrix.2-18 Evaluation of the performance of the highest governance body Proxy:PG 28 Safe and Secure Distribution of Controlled Substances N/A 2-19 Remuneration policies Proxy:PG 36-38,40-80 In FY23,we incorporated an ESG metric covering 10%of the annual bonus opportunity into our executive compensation program.Our Boards Compensation Committee selected three components for the ESG metric that were objectively measurable and aligned with Cencoras ESG pillars of purpose-driven team members,resilient and sustainable operations,and healthy customers and communities.2-20 Process to determine remuneration Proxy:PG 24,31-32.36-38,40-80 N/A 2-21 Annual total compensation ratio Proxy:PG 75 N/A Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|19 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold GRI disclosure number GRI disclosure title Page and source*Additional information 2-22 Statement on sustainable development strategy Message From Leadership N/A 2-23 Policy commitments Code of Ethics Human Rights Policy Supplier Code of Conduct Cencora is committed to the sound management principle that all business dealings shall be conducted with the highest level of business ethics,honesty,and integrity.Our Code of Ethics and Business Conduct reaffirms our longstanding commitment to that principle and to maintaining and promoting a culture of compliance.The Code sets forth our standards for business ethics,which have been approved and are supported by our Board of Directors and management.The Code embodies our company values of integrity and accountability and enables us to execute against our shared responsibility to create healthier futures.The Code is updated annually to reflect new developments in policies,laws,and regulations and to ensure that our Code aligns with our business activities and structure.Cencora ensures accountability for and adherence to the Code by asking team members to review and acknowledge the Code annually,conducting background checks on certain team members,reviewing contracts for compliance with the Code,investigating reports of violations,and taking disciplinary actions where appropriate.Cencora has adopted a Human Rights Policy that is aligned with the principles of several globally recognized standards,and which reaffirms the Companys commitment to prohibiting child labor and forced labor in all its forms,and to recognizing employee freedom of association,the right to collective bargaining,and protection from employment discrimination.Our commitment to human rights extends beyond our own operations throughout our entire value chain.Our suppliers must also uphold the human rights of workers and treat them with dignity and respect.Cencoras Supplier Code of Conduct sets forth the basic expectations with respect to various ethics and compliance matters that Cencora and its subsidiaries and affiliates around the world has established for its suppliers.Cencora developed the Supplier Code of Conduct based on the Pharmaceutical Supply Chain Initiatives(PSCI)Pharmaceutical Industry Principles,Cencoras Code of Ethics and Business Conduct,and with influence from various international human rights standards,including the 10 Principles of the United Nations Global Compact and UN Sustainable Development Goals.As a reflection of Cencoras policy commitments,the following are examples of major external initiatives Cencora and Alliance Healthcare engaged in during FY23:United Nations Global Compact(UNGC),United Nations Sustainable Development Goals(SDGs),Science Based Target Initiative(SBTi),The World Resources Institutes Greenhouse Gas Protocol,CDPs climate change program,Business Council for the United Nations through United Nations Foundation(UNF),U.S.Chamber of Commerce,National Health Policy Forum,Community Anti-Drug Coalitions of America(CADCA),Task Force for Climate-related Disclosures(TCFD),Sustainable Accounting Standards Board(SASB),World Economic Forum Stakeholder Capitalism Metrics(WEF),UK Climate-related Financial Disclosure(CFD)regulations,Business Roundtable,Norwegian plastic pledge,Plastlftet,the EU Green Deal in Netherlands,United Nations Womens Empowerment Principles,and the U.S.Health Sector Climate Pledge.Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|20 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold GRI disclosure number GRI disclosure title Page and source*Additional information 2-24 Embedding policy commitments Code of Ethics All company directors,officers,and team members are expected to understand and adhere to the legal standards and ethical principles established in Cencoras Code of Ethics and Business Conduct,to conduct themselves with the highest degree of integrity and honesty,and to comply with all applicable laws,regulations,and rules.Cencora expects its leadership to lead by example and to demonstrate the ethical behavior required by the Code in all facets of their work and their interaction with team members and the public.Cencora ensures accountability for and adherence to the Code by asking team members to review and acknowledge the Code annually,conducting background checks on certain team members,reviewing contracts for compliance with the Code,investigating reports of violations,and taking disciplinary actions where appropriate.Cencora requires that all significant contracts be reviewed by a company lawyer before being signed.Legal review helps to avoid contracts that are inappropriate or unlawful;identify and minimize unfavorable contract provisions;enter contracts that are appropriate for the business circumstances and in compliance with the Code of Ethics and Business Conduct.The Covered Business Partner(CBP)Program is managed by Cencoras Office of Compliance(OOC)and is designed to review domestic and international Covered Business Partners,defined as suppliers,domestic or international agents,vendors,and other partners that provide goods and services on behalf of Cencora in both domestic and global markets.This enterprise-wide program creates a centralized,automated,and consistent oversight process for all third parties identified to the OOC through the CBP Program.The OOC screens Cencoras third parties daily against more than 1,700 sites for court filings,negative media,criminal activity,politically exposed parties,sanctions,and exclusions.Any potential findings are communicated back to the business and if necessary,investigated.The process also requires our third parties to sign the Cencora Supplier Code of Conduct and respond to questionnaires.Cencora has processes in place to evaluate and select third-party vendors,with appropriate requirements,terms,and conditions established in contract negotiation.Our business,sourcing,and assurance functions work together to perform due diligence,ensure compliance,and manage and oversee vendor performance.Cencora has several initiatives underway to enhance vendor risk management efforts across assurance functions,including the establishment of a formal enterprise-wide Third-Party Risk Management(TPRM)program that aligns assurance,sourcing,and legal functions to enhance third-party assessment,oversight,and controls.This TPRM initiative is working to strengthen evaluation of vendors human rights risks and controls to provide greater assurance over social risks.In FY23,as part of the TPRM program development,a cross-functional team evaluated and selected enterprise technology that will facilitate the integrated due diligence and monitoring processes.Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|21 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold GRI disclosure number GRI disclosure title Page and source*Additional information 2-25 Processes to remediate negative impacts Code of Ethics Supplier Code of Conduct:PG 14 N/A 2-26 Mechanisms for seeking advice and raising concerns Supplier Code of Conduct:PG 14 N/A 2-27 Compliance with laws and regulations Form 10-K:PG 75-77 Safe and Secure Distribution of Controlled Substances N/A 2-28 Membership associations Policy Statement on Political Engagement N/A 2-29 Approach to stakeholder engagement Stakeholder engagement N/A 2-30 Collective bargaining agreements Form 10-K:PG 6 N/A Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|22 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold GRI 3:Material topics GRI disclosure number GRI disclosure title Page and source*Additional information 3-1 Process to determine material topics N/A In FY23,Cencora completed an engagement with a third-party consulting partner to conduct a materiality assessment to ensure our global approach to sustainability aligns with the needs of our business and expectations of our stakeholders,including investors,customers,nonprofit partners,and internal business leaders.The assessment involved the following activities:Desktop research:Our consulting partner reviewed publicly available information,including peer benchmarking,ESG rater/ranker surveys,and third-party standards(GRI,SASB,etc.)and then developed an initial list of topics that were most relevant to our industry and business.This initial list informed stakeholder interviews and an online survey.Stakeholder interviews:Interviews were conducted with a diverse set of key internal stakeholders with a global perspective and industry viewpoint to gain their insight on the initial ESG topic list,including which were most important and why.Online survey:An online survey was used to gather input on the initial topic list from a broader external audience.Respondents rated each topic on its importance to the business and the level of stakeholder interest.Survey results were compiled,and data analytics generated.Workshop:The results of the research,interviews,and survey were presented to a cross-functional team of Cencora leaders.The results were discussed,and the team aligned on a final list of material topics.This final list of material topics was then vetted and approved by the Global ESG Impact Council,the Executive Management Committee,and the Board of Directors,respectively.In FY21,as part of the Alliance Healthcare integration,we reviewed the two ESG strategies and assessed materiality through desktop research,a series of stakeholder interviews,and workshops to map out common material topics.We found strong alignment,and this is reflected in our revised and integrated strategy.Our Alliance Healthcare business was also formally included in the process for our most recent materiality assessment.In FY22,we announced our intent to acquire PharmaLex Holding GmbH(PharmaLex).The acquisition closed effective January 1,2023.We have incorporated PharmaLex into the FY23 materiality analysis.We consider materiality an ongoing exercise.In support of this approach,we organized an Emerging Issues Committee in FY23 with senior leadership from across the business to identify,elevate,and proactively mitigate current and emerging issues impacting our company and key stakeholders to support our ongoing materiality assessment.The Committee is cross-functional with participation from teams across the business,including Public Affairs,Enterprise Risk Management,Legal,DEI,and ESG.The Committee provides a structured,consistent approach to consider and evaluate issues and potential actions.Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|23 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold GRI disclosure number GRI disclosure title Page and source*Additional information 3-2 List of material topics ESG microsite The material topics identified in our most recent assessment are listed below.Individual material topics are grouped within the following five categories:Governance,Ethics&Compliance,People&Communities,Supply Chain&Customers,Environment&Stewardship,and Healthcare Landscape.Environmental GHG emissions and energy management Product and packaging sustainability Sustainable food production and biodiversity Waste management Water management Social Access to affordable and quality healthcare Advancing global public health outcomes Community impact and humanitarian work Customer welfare and prescription drug safety Human rights and labors Product quality and safety Resilient and responsible supply chain Safety,health,wellness,and mental health Talent attraction,retention,and development Workforce diversity,equity,and inclusion Governance Business continuity and climate impacts Business ethics and compliance Cybersecurity,data protection,and privacy Governance and public policy ESG reporting and transparency Indicators included within this index are considered material.Bolded indices are considered material as part of our core reporting.Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|24 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold GRI disclosure number GRI disclosure title Page and source*Additional information 3-3 Management of material topics ESG microsite Healthy customers and communities Resilient and sustainable operations Purpose-driven team members Safe and Secure Distribution of Controlled Substances Code of Ethics Cencora applies the principles contained within the Precautionary principle to our ESG programs,but we do not have a policy regarding the precautionary principle or approach.In FY23,we continued to make progress on our aspirational goals,aligned with our material issues.Bolded and shaded areas within this report indicate material topics.Material topics cover all Cencora operations and subsidiaries,unless otherwise noted.The management of our economic,environmental,and social material topics is included in disclosure 3-3 throughout this index.Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|25 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold Economic Topics GRI disclosure number GRI disclosure title Page and source*Additional information 3-3 Management of material topics Resilient and sustainable operations Healthy customers and communities Safe and Secure Distribution of Controlled Substances Our economic material topics include understanding and managing financial risks and opportunities of climate-related issues on our business and supporting the communities where we live and work.We annually assess our management approaches to our material topics to ensure we are adopting new strategies or best practices as identified through collaborations with both internal and external stakeholders,industry benchmarking,and other research.*Bolded and shaded areas indicate material economic topics 201-1 Direct economic value generated and distributed Form 10-K:PG 29-30 N/A 201-2 Financial implications and other risks and opportunities due to climate change CDP:PG 6-16 Form 10-K:PG 23 In FY20,we engaged a third party to perform a physical risk assessment on Cencoras top 100 locations.In FY22,we updated the scope of this assessment to include nearly 300 additional locations as part of the acquisition of Alliance Healthcare.The assessment quantified and scored our companys risk exposure across seven climate hazard indicators,such as heat waves,wildfires,and hurricanes.Overall,our risk exposure was found to be moderate,with wildfires the most significant risk indicator.The assessments provided valuable information to better inform our strategy and incorporate the findings into our enterprise risk management and business continuity programs.Moving forward,we plan to update this assessment on an annual or biennial basis.In FY23,we completed business impact analyses for three of our largest businesses in the U.S.This assessment incorporated the climate impact assessment results from previous years,as well as other elements across functional areas that impact business resilience,preparing us to serve customers and keep our team members safe in the event of potential business disruptions.Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|26 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold GRI disclosure number GRI disclosure title Page and source*Additional information 201-3 Defined benefit plan obligations and other retirement plans Caring for team members Team Member Benefits N/A 203-1 Infrastructure investments and services supported Healthy customers and communities In FY23,the Cencora Impact Foundation donated more than$6.9M to more than 90 nonprofit organizations.Through our matching gifts and volunteer/board service grants program,more than 800 nonprofit organizations were supported.203-2 Significant indirect economic impacts Supplier Diversity Healthy customers and communities In FY23,we continued to contract with a third party to provide us with an updated economic impact study based on our spend with diverse suppliers and geographic locations for those businesses.The study showed that Cencoras spending during FY23 with its diverse and small suppliers throughout the U.S.generated direct and indirect economic activity in our supply chain and communities in the following ways:Cencoras direct purchases of$2.3B from small and diverse businesses supported$3.8B in cumulative revenues earned by all businesses impacted by our supplier diversity program.Cencoras spending with small and diverse suppliers supported an estimated 12,123 jobs within our supply chain and in the suppliers communities.Cencoras purchases from small and diverse suppliers supported jobs throughout the supply chain that paid employees a total of$999M in wages.Cencoras small and diverse businesses generated$359.6M in FY23 in personal,business,and sales taxes.We continue to be proactive in finding ways to increase jobs in underserved communities through our supplier diversity program.We continued to support the Chamber of Commerce for Greater Philadelphia and its Diverse Procurement Collaborative.The purpose of the collaborative is to facilitate the exchange of best practices,build a community of business leaders committed to diverse procurement practices,and create accountability through benchmarking with corporations,universities,and other organizations in the Philadelphia region.We continued our partnership with the Canadian Aboriginal and Minority Supplier Council(CAMSC)in FY23 to expand our program in Canada.We assisted our team in South Africa with their support of the Broad-based Black Economic Empowerment(B-BBEE)movement to transform the South African economy.Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|27 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold GRI disclosure number GRI disclosure title Page and source*Additional information 204-1 Proportion of spending on local suppliers Supplier Diversity We are committed to promoting the success of small,diverse,minority and/or women-owned,disabled,disadvantaged,HUBZone and veteran-owned businesses.In FY23,we engaged more than 1,000 small and diverse suppliers across the United States,spending more than$2.3 billion in the U.S.on small and diverse businesses.Our FY23 spend with small businesses increased by$553 million from FY22,which was the largest increase among all diversity classifications.Spend with minority-owned businesses increased by$34.8 million from the previous fiscal year,which represented the second largest increase among all diversity classifications.Our spend with women-owned businesses decreased$35.5 million during the same period.We also realized a decrease in spend with veteran,disabled-owned,and service-disabled owned businesses.As with most recent years,the life sciences industry,which includes many of our direct suppliers,witnessed growth among small businesses.Our increase in spend with Small Business Enterprises(SBEs)was encouraging as it highlighted our efforts to increase the awareness of small and diverse businesses among our team members and customers.We will continue to launch initiatives in FY24 to bring greater awareness of our current small and diverse business partners as we seek to maintain our growth momentum.Cencora Marketplace is an example of how we are demonstrating our commitment to support and elevate small and diverse suppliers.In FY22,we piloted Cencora Marketplace,a platform to connect verified manufacturers with our independent pharmacy customers to help them secure inventory and community needs.We are proud that our efforts have resulted in 65%of the sellers on Marketplace in FY23 were diverse owned.To make it easier for our customers to identify diverse manufacturers on Marketplace,we established diversity icons and educated our sales team on the business case for supporting diversity.In addition to supporting diverse manufacturers,Marketplace allows our retail customers to source products supporting their ethnic communities.In FY24,we are launching a Marketplace Diversity Summit,where we will provide a platform for prospective diverse partners to connect with our Marketplace team.The event will allow us to educate the participating diverse suppliers about Marketplace while identifying opportunities in retail.For more information,please see Supplier Diversity page of website.Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|28 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold GRI disclosure number GRI disclosure title Page and source*Additional information 205-1 Operations assessed for risks related to corruption Supplier Code of Conduct The Office of Compliance(OOC)partners with Global Quality,Risk,and Resilience(GQRR),Internal Audit,and Enterprise Quality to conduct audits across all Cencora business groups and performs an annual compliance risk assessment which includes questions related to the risk of corruption,fraud,and strength of compliance culture.This information is then used to prioritize compliance audits for the following year.If findings are generated from an audit,the OOC works with the business group to support submission of corrective action plans and conducts follow-up audits to ensure the implemented corrective actions have been effective in correcting the finding.The Covered Business Partner(CBP)Program is managed by the OOC and is designed to review domestic and international Covered Business Partners,defined as suppliers,domestic or international agents,vendors,and other partners that provide goods and services on behalf of Cencora in both domestic and global markets.This enterprise-wide program creates a centralized,automated,and consistent oversight process for all third parties identified to the OOC through the CBP Program.The OOC screens Cencoras third parties daily against over 1,700 sites for court filings,negative media,criminal activity,politically exposed parties,sanctions,and exclusions.Any potential findings are communicated back to the business and,if necessary,investigated.The process also requires our third parties to sign our Supplier Code of Conduct and respond to questionnaires.Results of the screening,monitoring,and investigation give the OOC valuable insight to any potential risks that may arise from the relationship.It also allows us to create strategic risk mitigation plans,audits,quality agreements,and other contractual requirements.The program enables us to continue to monitor and ensure that mitigation efforts are in place for the highest risk ranked third parties and to hold those businesses accountable for these risk-reducing or controlling efforts.On July 1,2022,the Norwegian Transparency Act came into effect and requires many companies doing business in Norway,including some Cencora business units,to regularly conduct human rights due diligence;publish an annual human rights statement;and respond to third-party requests for information regarding adverse human rights impacts.In FY22,Cencoras OOC implemented a due diligence process in compliance with the Act.In FY23 the Norwegian business has been working to simplify the process and training in the local business to make sure that the supplier screening process is followed.The first public report was published in June 2023,and the next public report will be published in June 2024.Having a robust sanctions compliance program is a well-recognized mitigation strategy against risks related to illegal activities with sanctioned entities and individuals.At Cencora,the OOC implements a trade sanctions screening program based on the nature of our business,transactions and activities,and all other factors affecting our organization.As a part of the trade sanctions screening process,the OOC is collecting information for all active customers,vendors,and suppliers from all business unit databases globally to screen our third parties against the consolidated Office of Foreign Assets Control(OFAC)sanctions list.Currently,to complete the screening,we utilize the Lexis/Nexis screening tool which allows us to access more than 1,100 sanctions and watch lists.Each month,the OOC collects on average over 850,000 lines of data in collaboration with Cencoras business groups to screen all relevant parties and conduct business in a compliant manner.Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|29 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold Cencora has processes in place to evaluate and select third-party vendors,with appropriate requirements,terms,and conditions established in contract negotiation.Our business,sourcing,and assurance functions work together to perform due diligence,ensure compliance,and manage and oversee vendor performance.Cencora has several initiatives underway to enhance vendor risk management efforts across assurance functions,including the establishment of a formal enterprise-wide Third-Party Risk Management(TPRM)program that aligns assurance,sourcing,and legal functions to enhance third-party assessment,oversight,and controls.This TPRM initiative is working to strengthen evaluation of vendors human rights risks and controls to provide greater assurance over social risks.In FY23,as part of the TPRM program development,a cross-functional team evaluated and selected enterprise technology that will facilitate the integrated due diligence and monitoring processes.205-2 Communication and training about anti-corruption policies and procedures Code of Ethics:PG 48-51 During FY23,the Office of Compliance deployed mandatory General Compliance Training&Code Acknowledgement and Global Anti-Bribery and Corruption Training to all active team members and contractors.This training initiative concluded with a 100%completion rate in the US.Both training courses were provided in 22 languages.205-3 Confirmed incidents of corruption and actions taken Code of Ethics:PG 31-33 The Cencora reporting hotline,managed by a third party,is available 24 hours a day,7 days a week to employees,contractors,and third parties.The hotline allows employees and third parties to report concerns or incidents anonymously,if desired.Reports can be filed via either the telephone or internet.In FY23,Cencora compared our 2023 compliance hotline report data with the most recently available industry benchmarks from 2022.In FY23,Cencora received 0.7 compliance hotline reports per 100 employees.In comparison with industry benchmarks,we are within the industry range of 0.3 to 12.7 compliance hotline reports per 100 employees and slightly below the industry median of 1.47 reports per 100 employees.206-1 Legal actions for anti-competitive behavior,anti-trust,and monopoly practices Code of Ethics:PG 30-31 N/A Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|30 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold GRI disclosure number GRI disclosure title Page and source*Additional information 207-1 Approach to tax N/A Cencora has a longstanding commitment of adherence to sound corporate governance to ensure that Cencora is managed with the highest standards of responsibility,ethics,and integrity in accordance with its Corporate Governance Principles and Code of Ethics and Business Conduct.Consistent with the Cencora Code of Ethics requirement to comply with all applicable laws and regulations,Cencoras directors,officers,and employees operate in full compliance with all applicable tax laws and regulations in every jurisdiction where we operate,including the timely filing of all required tax returns,reports,and disclosures,and paying the appropriate amount of tax at the required time.207-2 Tax governance,control,and risk management Finance Committee United Kingdom Tax Strategy Form 10-K:PG 30,63-65 The Senior Vice President of Tax serves as the head of global taxes and is responsible for overseeing all tax risk management,tax governance and tax compliance issues for Cencora.Cencoras directors,officers,and employees exercise reasonable care and due diligence with respect to compliance and planning issues with the objective of minimizing potential tax risk.Depending on the complexity and/or the materiality of a potential transaction or compliance issue,external advice,guidance,and support is sought from qualified external advisors and subject matter tax experts in order to eliminate or minimize any tax risks that might arise in connection with that transaction or tax compliance issue where there may be a question regarding the proper interpretation or application of any tax law or regulation.207-3 Stakeholder engagement and management of concerns related to tax N/A Cencoras directors,officers,and employees are committed to fully cooperate with all tax authorities and their representatives in a transparent,collaborative,and professional manner.We track trends in tax transparency and review our tax disclosures on an annual basis.Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|31 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold Environmental Topics GRI disclosure number GRI disclosure title Page and source*Additional information 3-3 Management of material topics Environmentally aware Our environmental material topics include greenhouse gas emissions and energy management,climate change,waste management,and responsible sourcing.These material topics were determined in our most recent materiality assessment.Environmental material topics cover all Cencora operations and subsidiaries,unless otherwise noted.We annually assess our management approaches to our material topics to ensure we are adopting new strategies or best practices as identified through collaborations with both internal and external stakeholders,industry benchmarking,and other research.In the last year,we have increased engagement and awareness across the enterprise in relation to our environmental sustainability commitments and progress.As we continue to improve and streamline our data collection processes as part of the integration with Alliance Healthcare and more recently,PharmaLex,we have identified certain challenges in implementing a consistent level of data governance and controls across the enterprise.To address data availability,quality,and access challenges,Cencora has made significant investments in an environmental sustainability data management system to not only centralize where data is managed but also to increase visibility and engagement from stakeholders.We Implemented this system in FY 23 and in FY24 will have an increased focus on trainings and formalizing quality assurance/quality control and attestation.This implementation process is ongoing.Our environmental data for FY23 includes actual and estimated figures from across Cencora,including Alliance Healthcare and PharmaLex where possible.Additionally,in FY23 we initiated a Global Decarbonization Committee to convene internal stakeholders across the business to lead environmental sustainability initiatives and monitor performance against targets.We recognize that the economic,social,and physical environments in which our company operates are integral to our ability to deliver better patient outcomes.Our purpose becomes increasingly evident in the event of climate-related issues such as severe weather events or natural disasters.Through our Global Business Resilience team,we continue to be prepared to remain operational in the event of a disaster,so that we may continue to serve our customers and their patients.We are implementing a phased approach to business continuity planning to ensure that Cencoras network is equipped to handle potential disruptions from natural disasters or other aspects that may be related to climate change.From energy efficiency and GHG emissions management to responsible packaging,Cencora incorporates a sustainability mindset into all that we do.We work collaboratively across the enterprise to implement efficiency opportunities and share best practices and lessons learned to further our impact across our network.We work to deploy efficiency measures across the organization,including LED retrofits,energy audits,conveyor energy management,building automation system upgrades,and more.We also continue to assess opportunities to perform energy or re-/retro-commissioning audits at our facilities to Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|32 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold identify further efficiency measures.Our global specialty logistics provider company,World Courier,achieved recertification for both ISO 9001 and 14001 standards for quality and environmental management.Cencora is committed to recycling,as well as the reduction of waste.We are taking innovative,strategic steps to create a more sustainable footprint.We are also committed to sustainable packaging and removing single-use,petroleum-based materials like plastics and polystyrene foam from our operations and sourcing more ecological options.Cencora commits to reduce absolute scope 1 and 2 GHG emissions 54.6%by FY2032 from a FY2019 base year.Cencora also commits that 82%of its suppliers by spend,covering purchased goods and services,will have science-based targets by FY2027.Our near-term targets have been approved by the Science Based Target initiative(SBTi)(see https:/sciencebasedtargets.org/companies-taking-action).*Bolded and shaded areas indicate material environmental topics 301-2 Recycled input materials used Waste management,recycling and sustainable packaging This topic is not relevant to our business as Cencora does not manufacture products.301-3 Reclaimed products and their packaging materials Waste management,recycling and sustainable packaging This topic is not relevant to our business as Cencora does not manufacture products.302-1 Energy consumption within the organization CDP:PG 42-4 Our FY23 energy consumption was as follows:Non-renewable stationary fuel:108,196 MWH(389,507 GJ)Vehicle fuel:339,738 MWH(1,223,056 GJ)Non-renewable electricity:265,596 MWH(956,147 GJ)Renewable electricity:59,476 MWH(214,114 GJ)Heat:1,810 MWH(6,515 GJ)Total energy:774,816 MWH 2,789,339 GJ)Please see our CDP disclosure for more details on our energy consumption break down.302-3 Energy Intensity N/A Energy intensity for FY23 was 0.0000030 MWH/$Revenue 302-4 Reduction of energy consumption Climate and energy management Our FY23 energy consumption compared to our FY19 base year1 were as follows:11%increase in total stationary and vehicle fuel consumption 2%increase in non-renewable electricity 16%increase in renewable electricity 31%increase in heat 8%increase in total energy Increases in overall consumption are largely a result of the increased return of our team members to our offices and a continued uptick in product deliveries and business expansion.Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|33 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold Globally in FY23,roughly 18.3%of our electricity consumption came from renewable sources.As we continue to grow,we will strive to increase our building efficiency,expand our renewable energy portfolio,and reduce our fuel consumption.We regularly assess and explore opportunities to increase energy efficiency through lighting upgrades,HVAC,and other improvement opportunities.We achieved Leadership in Energy and Environmental Design LEED Gold certification for our headquarters building in Conshohocken,PA.Our eco-responsible building in Paris,which conducts business and operations as Alliance Healthcare,has earned a Building Research Establishment Environmental Assessment Method(BREEAM)Very Good certification,and our building in Meung sur Loire in France,which houses Alloga operations,received both BREEAM and BiodiverCity certifications.1Note:We re-baselined in FY23 due to the divestiture of our Egypt business.303-5 Water consumption N/A Cencora does not manufacture products and therefore,water consumption is a non-material topic.We estimate consumption for FY23 was approximately 1,854,365 cubic meters of water.This estimate includes additional estimated consumption for sanitary purposes for our Alliance Healthcare and PharmaLex footprint.Please note,this is an engineering estimate based on water use for sanitation purposes and locations with cooling towers.We do not manufacture products,so we do not have water associated with manufacturing processes.305-1 Direct(Scope 1)GHG emissions Climate and energy management Our Scope 1 emissions for FY23 were 108,712 MT CO2e.Our Scope 1 emissions for our FY19 base year were 98,742 MT CO2e.1 1Note:We re-baselined in FY23 due to the divestiture of our Egypt business.305-2 Energy indirect(Scope 2)GHG emissions Climate and energy management Our Scope 2 location-based emissions for FY23 were 90,652 MT CO2e.Our Scope 2 location-based emissions for our FY19 base year were 110,191 MT CO2e.1 Our Scope 2 market-based emissions for FY23 were 87,492 MT CO2e.Our Scope 2 market-based emissions for our FY19 base year were 100,593 MT CO2e.1 1Note:We re-baselined in FY23 due to the divestiture of our Egypt business.305-3 Other indirect(Scope 3)GHG emissions Climate and energy management Our total Scope 3 emissions for FY23 were 25,878,873 MT CO2e.Our total Scope 3 emissions for our FY19 base year were 19,881,916 MT CO2e.Scope 3 emissions calculations are largely based on high level estimates and some actual data as available across all 15 categories 305-4 GHG emissions intensity CDP:PG 39 Our GHG emissions intensity(scope 1&2 emissions)for FY23 is 0.0000007 MT CO2e/$Revenue.305-5 Reduction of GHG emissions Climate and energy management CDP:PG 29 In FY23,our Scope 1&2(market-based)GHG emissions were approximately 196,204 MT CO2e.In FY19,our Scope 1&2(market-based)GHG emissions were approximately 199,335 MT CO2e.1 Our total Scope 1 and 2 emissions decreased by 1.6%from our FY19 base year.Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|34 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold We realized a 10%increase in our Scope 1 emissions and a 13crease in our Scope 2 market-based emissions from our FY19 base year.Our Scope 1 increases are largely a result of the increased return of our team members to our offices and a continued uptick in product deliveries and business expansion.Our Scope 2 reductions are a result of implementation of best practices and initiatives across the enterprise to reduce emissions including increasing our renewable energy purchases and on-site systems and improving building efficiencies through lighting upgrades.Additionally,in FY22,when we initiated our return-to-office protocol,we adopted WorkSmart,a principled hybrid work flexibility program for those team members whose work does not require them to be at one of our physical locations.This program played a role in the Scope 2 emissions reductions as we adopt a more flexible work environment.As we ramp up our decarbonization efforts in line with our science-based target,we anticipate we will start to see our emissions trend downwards with our global strategies surrounding renewable energy and fleet alternative fuel adoption.With the continued growth of our business,our footprint has changed significantly over the last several years,but we have remain committed to improving our operational efficiency,investing in renewable energy,and exploring new opportunities for innovation.1Note:We re-baselined in FY23 due to the divestiture of our Egypt business 306-1 Waste generation and significant waste-related impacts Waste management,recycling and sustainable packaging Cencora strives to reduce waste by focusing first on source reduction wherever feasible,recycling what we cannot eliminate,and landfilling as a last resort.Responsible management and disposal are an important aspect of our waste management strategy.We strive to ensure we properly dispose of waste in our own operations while also considering the downstream impacts of our packaging materials we send to our customers.In most offices worldwide,we cut paper waste and look for opportunities to utilize digital communications.The majority of our waste stream consists of packaging materials,specifically cardboard boxes,polystyrene foams,and plastic films.We achieved a 70%diversion rate in FY23 for our in scope locations.We are committed to adopting sustainable packaging and removing single-use,petroleum-based materials like plastics and polystyrene foam from our operations wherever feasible.While we have control over the packaging solutions we utilize,we do not always have control over what our products arrive in from our upstream suppliers.We continue to look for alternative disposal options for hard-to-recycle plastics and utilize our third-party waste management partners to help identify opportunities.306-2 Management of significant waste-related impacts Waste management,recycling and sustainable packaging In FY23,we transitioned to a new waste partnership in the U.S.to streamline processes and allow for opportunities to expand coverage beyond our Human Health locations.We have begun to onboard our U.S.Animal Health locations in FY23.We have several specific recycling programs for totes,pallets,stock bottles,and electronics.These programs are managed by third-party vendors who track our recycling data and report to us on a quarterly basis.We continuously assess our waste portfolio to identify new opportunities for specific recycling programs.Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|35 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold Cencora is committed to operating in full compliance with all local,state,and federal laws and regulations by partnering with a regulated waste disposal company to ensure safe and proper disposal of all hazardous waste.In FY23,our animal health distribution center in Elizabethtown,PA,U.S.devised a solution to address glass bottles that were arriving broken in prepackaged boxes from manufacturers.To reduce costs associated with wasted product and the fuel required to reship new product,the team procured biodegradable packing peanuts to fill the top section of the boxes to eliminate vertical movement and breakage.Alliance Healthcare France and Alphega Pharmacy launched a program with Novo Nordisk to recycle the manufacturers disposable injection pens in France,which is estimated to be about 25 million pens per year.Known as Returpen,this is the first partnership of its kind in the country with a goal to recycle up to 85%of injection pen materials,which would otherwise end up in landfills or incinerators,to be used in chairs and lamps.306-3 Waste generated Waste management,recycling and sustainable packaging In FY23,Cencora locations generated a total of 26,614 metric tons(MT)of non-hazardous and hazardous waste.1 Of that total,25,541 MT were non-hazardous waste,disposed/recycled as follows:17,936 MT recycled 7,605 MT sent to landfills Cencora is committed to operating in full compliance with all local,state,and federal laws and regulations by partnering with a regulated waste disposal company to ensure safe and proper disposal of all hazardous waste and non-hazardous product waste.2 In FY23,we disposed of approximately 676 MT of hazardous waste.In addition,we sent roughly 398 MT of non-hazardous product waste for destruction by our hazardous waste partners.1.Waste data boundary:Our waste data is representative of approximately 65%of our locations by square footage,with the exception of Alliance Healthcare who is excluded from the waste data Based on an analysis of prior years data,we expect Alliance Healthcare data to be about 35-45%of total Cencora waste.In a future quarterly update to the ESG Reporting Index,we will include an updated figure inclusive of Alliance Healthcare data.Totes and Pallets:U.S.Human Health Distribution Centers Electronic waste:All Cencora sites that generated e-waste Plastic stock bottles:American Health Packaging(AHP)Non-hazardous product waste:U.S.Human and Animal Health Distribution Centers,Specialty,American Health Packaging(AHP),and corporate offices Hazardous waste:U.S.Human and Animal Health Distribution Centers,Specialty,AHP,corporate offices 2.Non-hazardous product waste(U.S.only)includes any product that falls under the EPAs classification of non-hazardous and does not contain any of the four characteristics of hazardous waste:ignitability,corrosivity,reactivity,and toxicity.This may include any non-saleable item that is not eligible for return to a third-party vendor.These products are handled by our hazardous waste partner,but they are not considered hazardous waste under any local,state,or federal law or regulation.In other countries where we operate,hazardous and non-hazardous waste is defined by local applicable legislation at the point of generation.3.Regarding the significant difference from FY22 to FY23 hazardous waste amounts:In the past,our vendor had included breakdowns of hazardous vs non-hazardous classifications.For FY23,we Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|36 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold have analyzed the data and included profile classifications and have determined a more accurate way of reporting these values.Historically,minor inaccuracies in EPA codes were reflecting classification of waste data which has been corrected for this year.306-4 Waste diverted from disposal Waste management,recycling and sustainable packaging In FY23,we diverted 17,936 metric tons of waste from the landfill.This was composed of:12,055 MT of cardboard 634 MT of recyclables 5,118 MT of pallets 85 MT of electronic waste 29 MT of plastic stock bottles 14 MT of plastic totes We achieved a 70%waste diversion rate in FY23.306-5 Waste directed to disposal Waste management,recycling and sustainable packaging In FY23,we generated 25,541 metric tons(MT)of non-hazardous waste.Of that total waste,7,605 MT were sent to landfill,and the remaining 17,936 MT were recycled.We achieved a 70%waste diversion rate.In FY23,we disposed of approximately 676 MT of hazardous waste.In addition,we sent roughly 398 MT of non-hazardous product waste for destruction by our hazardous waste partners.308-1 New suppliers that were screened using environmental criteria Supply Chain and Stewardship Supplier Engagement Statement Supplier Code of Conduct All Requests for Proposal(RFP)that go through our standard RFP process are screened according to ESG programs and commitments,including environmental criteria.In addition,we screen potential purchases for new buildings using LEED standards.Cencora expects all third-party suppliers,vendors,and other business partners to comply with fundamental principles.Many of our suppliers are required by contract to comply with applicable laws and provide us with written certifications that reflect their commitment to abide by the ethical principles set forth in our Code of Ethics and Business Conduct.Cencora is engaged in various initiatives to expand the number of third-party suppliers that are required to provide such contract commitments and certifications.Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|37 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold Social Topics GRI disclosure number GRI disclosure title Page and source*Additional information 3-3 Management of material topics Diversity,Equity,and Inclusion Caring for team members Healthy customers and communities Safe and Secure Distribution of Controlled Substances Our social material indicators include driving access in healthcare,diversity,equity and inclusion,health and safety,team member benefits and development,and community impact.These material topics were determined in our most recent materiality assessment.Social material topics cover all Cencora operations and subsidiaries,unless otherwise noted.Material social topics are managed by designated committees that are aligned with our purpose to create healthier futures.At the board level,our Governance,Sustainability and Corporate Responsibility Committee reviews and guides the sustainability and corporate responsibility strategy;the social strategy and practices,including with respect to diversity,equity,and inclusion;any major plans of action,risk management policies,budgets,and business plans;and monitors implementation and performance of objectives.We annually assess our management approaches to our material topics to ensure we are adopting new strategies or best practices as identified through collaborations with both internal and external stakeholders,industry benchmarking,and other research.*Bolded and shaded areas indicate material social topics 401-1 New employee hires and employee turnover N/A In FY23,we hired more than 6,600 new team members,bringing a range of new perspectives into the organization.Cencora is committed to a fair,inclusive,and equitable recruiting process to attract diverse talent.Of the new hires that joined Cencoras global employee population in FY23,53%are women.In the U.S.,70%of our new hires in FY23 are URPOC(underrepresented people of color).Utilizing a multi-faceted approach,Cencora is strengthening its candidate pipeline by deepening its partnerships with diverse organizations,colleges and universities,and professional associations;ensuring external hiring campaigns and employer branding are reflective of the various markets we serve;providing training to the recruitment and interview teams on unconscious bias;and tracking progress,including communicating data and results to leaders to provide visibility and to address areas of improvement.Cencora is committed to non-discrimination and fair and equitable processes for promotions and opportunities for advancement.In FY23,9%of our global team members received a promotion,consistent with 9%in FY22.We broadly define a promotion as any increase in responsibility and/or role scope increase that results in a change of reporting relationship,job title,compensation pay band and/or salary.Among the total global workforce,9%of active female team members were promoted in FY23.This is consistent and equal to the percentage of employees promoted regardless of gender.Among the total U.S.workforce,7%of active URPOC team members were promoted in FY23.We recognize the importance of investing in our people and cultivating diverse leaders.We Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|38 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold remain focused on increasing representation at all levels of the organization in alignment with our DEI commitments.Our overall global team member turnover rate improved for FY23 was 30%,compared to 32%in FY22.In FY23,voluntary team member turnover was 21%globally,compared to 25%in FY22.Cencoras FY23 downward trend in total and voluntary terminations is consistent with macro labor trends.Comparing Cencoras US frontline/entry level jobs against the US Bureau of Labor Statistics JOLTS transportation,warehousing and utilities industry benchmark,Cencoras voluntary termination rates were consistently lower and trended downward at a similar rate throughout the period.As of the end of FY23,we have full staffing across the U.S.distribution center system.We continue to implement progressive talent strategies to develop and retain our team members.Data boundary:Total new hires:Cencora global team members.Excludes Alliance Healthcare and PharmaLex team members.New hires and promotions women:Cencora global team members.Excludes Alliance Healthcare and PharmaLex team members.New hires and promotions URPOC:Cencora U.S.team members.Excludes Alliance Healthcare and PharmaLex team members.Overall and voluntary turnover:Cencora global team members.Excludes Alliance Healthcare and PharmaLex team members.401-2 Benefits provided to full-time employees that are not provided to temporary or part-time employees Caring for team members Team Member Benefits Cencora provides benefits to support the health and well-being of eligible full-time team members and their families.In the United States,our myWell-being program is designed to support the physical,emotional,financial,and social aspects of wellness.Team members can earn points towards a reduction in health insurance premium costs by completing activities,such as monthly challenges,financial training,and getting preventive exams and screenings.To maintain mental and physical health,Cencora provides team members with resources including online meditation and mindfulness videos,as well as access to in-person and at-home fitness activities.A backup dependent care program is also available to support work-life balance of our team members.Additionally,we offer diabetes,weight management,musculoskeletal,and neurodiverse support programs for team members and their dependents.To help team members navigate the healthcare system,we provide a navigation and advocacy service to assist in finding the right care,obtaining a medical second opinion,and understanding confusing medical bills.We also offer family building counseling services to help new and prospective parents navigate pre-conception,pregnancy,fertility,adoption,surrogacy,postpartum support,or assistance with returning to work after parental leave.For nursing mothers who travel for work,we offer a service to ship breast milk back to their homes.We offer up to 12 weeks of paid parental leave to team members following the birth,adoption or surrogacy of a team members child.We also offered up to 80 hours/10 days of paid caregiver leave in FY23.Cencora is committed to improving access to care and ensuring,to the best of our ability,that our benefit plans provide all our team members and their families access to high quality,in-network medical care regardless of where they live.We provide Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|39 *Page numbers refer to page number indicated in actual document,not PDF page count Legend Material Topics:Bold reimbursement for allowable travel and lodging expenses when a team member,or their covered dependent,must travel to access in-network,quality medical providers and facilities,including for reproductive health purposes.Gender reassignment is available through major insurance providers based upon their medical policies.401-3 Parental Leave Caring for team members Form 10-K:PG 8 Effective January 1,2023,we offer twelve weeks of paid parental leave in the United States following birth,adoption,or surrogacy for both parents.403-1 Occupational health and safety management system Caring for team members In FY23,to strengthen our commitment to team member health,safety,and well-being,Cencora evolved its regulatory oversight team into a dedicated Environmental,Health,and Safety(EHS)Department led by team members with training,experience,certification,and education in environmental Management,Safety Management,Industrial Hygiene,and Public Health.In FY23,the EHS departments focus was to continue best practices and systems across our business units to create an enterprise-wide management system.The goal of this system will always be to protect team members from job-related fatalities,injuries,and illnesses;identify and reduce the risk of physical,chemical,and biological hazards;and improve training and communications to provide team members with clear direction and understanding.As EHS has expanded their impact on the business,there was a focus for the team to prepare for the future of EHS.In FY24,there are plans for Operations and EHS to continue to partner on continuous improvement efforts.We aim for EHS to be integrated across the organization.EHS will focus on the specific areas which include but are not limited to:Policy enhancement and development EHS management systems improvement and development Effective key performance indicators Communication progression Learning,training,and development Regulatory and legal compliance 403-2 Hazard identification,risk assessment,and incident investigation Caring for team members We have internal hazard identification,risk assessment,and incident investigation processes.Throughout FY23,improvements to our Hazard and Risk Assessment Program and Incident Management Program were implemented.Also,the use of third-party EHS consultants helped identify risks and hazards within our organization.The incident management program included improvement on incident reporting and investigation,and corrective actions to reduce incident risk.In FY24,we plan to conduct a thorough evaluation of incident data,identify risks and trends,and implement EHS team/organization targets that will drive continuous improvement.Global Reporting Initiative(GRI)Cencora FY23 ESG Reporting Index|40 *Page numbers refer to page number indicated in actual documen
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Sustainability Report 2023Mercedes-Benz Group|Sustainability Report 2023 2 3 FOREWORD 5 GOVERNANCE 68 ENVIRONMENT 119 SOCIAL 179 KEY FIGURES 192 FURTHER INFORMATIONBackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONMercedes-Benz Group|Sustainability Report 2023 3 Foreword GRI 2-22 Dear Reader,The unique history of Mercedes-Benz is rich in iconic cars,ground-breaking technologies and entrepreneurial success.The one motivation that has always driven us above all others:we can and want to change our com-pany and the world around us for the better.With this in mind,we have established our sustainable business strategy in recent years.It is a prerequisite for remain-ing economically successful in the long term and thereby also fulfilling the many different external requirements regarding sustainability,social responsi-bility and good corporate governance as well as those weve established for ourselves.2023 was a year full of challenges for Mercedes-Benz and the entire automotive industry.The market environ-ment was characterised by challenging conditions,and a wide variety of external factors influenced the econ-omy.However,this does not change the necessity and urgency of decarbonisation.For this reason,we con-tinue to drive our transformation forward.In 2023,we increased sales of fully electric Mercedes-Benz passen-ger cars by 73 per cent.Electrified vehicles comprised 20 per cent of total passenger car sales.We now offer an electric alternative in every segment in which we compete.And were also continuing to take the neces-sary steps to go all-electric.For us,this also includes a well-developed charging infrastructure.We want to install our own Mercedes-Benz high-power charging network with more than 10,000 chargers in our core markets by 2030.We expect our high-power charging network to support the ramp-up of electromobility.Customers and market conditions will set the pace of the transformation.This means:on our path towards CO2 neutrality,we will remain strategically focused and tactically flexible.Our focus isnt just on sustainable products:we take a holistic approach to sustainability.Our goal is to become net carbon-neutral across the entire value chain by 2039.We will expand battery production and open a battery recycling factory to close the loop.We are investing in the training and certification of our teams,and are developing our locations into centres of excellence for future technologies.In doing so,we are ensuring a transformation that is socially just.We are developing our own operating system and are increas-ingly utilising artificial intelligence(AI)in our digital products and services.For this reason,we developed and established principles for the responsible use of AI at an early stage.Both the integration of AI and a suc-cessful,sustainable business strategy require data from a wide variety of areas and sources.For us,the respon-sible handling of data is essential for strengthening our customers trust in digitalisation.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTContentGOVERNANCEFURTHER INFORMATIONMercedes-Benz Group|Sustainability Report 2023 4 Respecting human rights along the whole of our value chains is an important and fundamental aspect of our work.For this reason,we strive continuously to further improve transparency across our supply chains,for example.The measures we have instituted exceed basic regula-tory compliance standards and are,above all,aimed at protecting human rights.In August 2023,the Supervisory Board assigned the coordination role for all Mercedes-Benz Group sustain-ability issues to the Board of Managements Integrity,Governance&Sustainability department.This will ensure an even stronger focus upon and concentration and alignment of these important topics.We have already achieved a great deal in terms of sustainability.But many challenges still lie ahead,including the pro-fessional implementation of the regulatory components imposed by European Union legislation.We are well aware that we cannot accomplish these tasks by ourselves.This is why an ongoing dialogue of equals together with relevant internal and external stakeholders is of great importance.Not only do we need good cooperation with policymakers,but we also want to continue collaborating with the many different players involved.The Advisory Board for Integrity and Sustainability is an important body for our sustainability work.Its members are independent external specialists from the areas of science and academia,civil society and business and include experts from the fields of environmental and social policy,transport and mobility development,human rights and ethics.Another impor-tant instrument for us is the exchange with stakehold-ers in the form of our“Sustainability Dialogue”.In 2023,we organised several of these dialogues in China,Ger-many,India and the USA.We understand our responsibility to both our future and our environment.This is why we are committed to mak-ing our company sustainable and economically suc-cessful in the long term.It is important for us to exer-cise full transparency in reporting on both our achievements so far and our plans for the future.We hope youll enjoy our new Sustainability Report and look forward to continuing our constructive dialogue.YoursOla Kllenius Renata Jungo BrnggerBackKEY FIGURESSOCIALFOREWORDENVIRONMENTContentGOVERNANCEFURTHER INFORMATIONMercedes-Benz Group|Sustainability Report 2023 5GOVERNANCE 6 Sustainable business strategy 6 Sustainable business strategy 10 Along the value chain 11 Sustainability management 23 EU Taxonomy 36 Integrity and compliance 36 Integrity 39 Compliance management 52 Data responsibility 60 Partnerships and political commitment 60 Trusted partnerBackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance6Sustainable business strategySustainability as a driver of change The Mercedes-Benz Group wants to create sustainable value economically,ecologically and socially.This is one of the central guiding principles.It applies not only to the Groups own products and production sites,but also encompasses the Groups upstream and down-stream value chain.The Mercedes-Benz Group trans-lates this approach into its sustainable business strat-egy and thus anchors its sustainability issues at the centre of its daily business.The aim is to fulfil expecta-tions and requirements of stakeholders,which are for example:customers,employees,investors,business partners,#E non-governmental organisations(NGOs)and society as a whole.#A Objectives and Strategy,Annual Report 2023One of the most important goals of the Mercedes-Benz Group is decarbonisation.The Group has firmly estab-lished this topic in its sustainable business strategy.In the Mercedes-Benz Groups strategy,this goal is reflected in the“Ambition 2039”.By 2039 the entire Mercedes-Benz new vehicle fleet is to be net car-bon-neutral across all stages of the value chain1.Mercedes-Benz Cars and Mercedes-Benz Vans are taking the necessary steps to go all-electric.Customers and market conditions will set the pace of the transfor-mation.Mercedes-Benz Cars and Mercedes-Benz Vans plan to be in a position to cater to different customer needs,whether its an all-electric drivetrain or a com-bustion engine,until well into the 2030s.1 Net carbon-neutral means not causing any CO2 emissions and compensating any CO2 emissions that do occur through certified projects to offset emissions.Sustainable corporate governanceThe Mercedes-Benz Group at a glance GRI 2-1/-2/-4/-6 The Mercedes-Benz Group AG is the parent company of the Mercedes-Group and has its registered office in Stuttgart(Germany).The Mercedes-Benz Group is a globally active automobile manufacturer and one of the largest suppliers of luxury vehicles and commercial vans in the premium segment.Financing and leasing products for end customers as well as dealers,fleet management,insurance brokerage,innovative and digi-tal mobility services,the provision of seamless payment methods and the expansion of the charging infrastruc-ture round off the range of services.In addition to the Mercedes-Benz Group AG,the Mercedes-Benz Group is made up of all subsidiary com-panies over which the Mercedes-Benz Group AG can exert a direct or indirect controlling influence.It decides on the Groups strategy,manages the Group and,as the Groups parent company,ensures legal,reg-ulatory and compliance functions throughout the Group.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance7The Mercedes-Benz brand is one of the most valuable brands in the world2.The following graphic provides an overview of the Groups brand world.2 Study by the US brand consultancy Interbrand in November 2023.Mercedes-Benz GroupMercedes-BenzCarsMercedes-BenzVansMercedes-BenzMobilityThe brand world of the Mercedes-Benz GroupThe operating activities of the Mercedes-Benz Group are managed by the Mercedes-Benz Cars,Mercedes-Benz Vans and Mercedes-Benz Mobility divisions.It sells vehicles and services in almost every country in the world and has over 30 production sites in Europe,North and Latin America,Asia and Africa.Global production network of the Mercedes-Benz Group*GERMANYBremenRastattSindelfingenDsseldorfLudwigsfeldeUntertrkheimHamburgBerlinKlleda/ArnstadtKamenzKuppenheimTuscaloosaCharlestonAguascalientesVitoriaBuenos AiresEast LondonUSA/MEXICOEGYPTARGENTINIAJaworSPAINPOLANDCZECH REP.HUNGARYSLOVENIAROMANIACHINATHAILAND/VIETNAM/MALAYSIAINDIASOUTH AFRICAKairoPuneMostKecskemtMariborSebeCugirBeijingFuzhouBangkokHo Chi Minh CityPekan*)including non-consolidated affiliated companies,associated companies,joint ventures and joint operationsVans plantwith EV-productionPowertrain plantwith EV-componentsBattery plantBattery-Recyclingplant(planned)grey:plannedCars plantwith EV-productionAffalterbachBackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance8Company profile20232022Employees(status as of December 31)1166,051168,797Production sites30230Unit sales(in mill.units)2.4922.456Financial key figures(in millions)Revenue153,218150,017 Research and development expenditure Mercedes-Benz Cars and Mercedes-Benz Vans9,9968,541 Personnel expenses (wages and salaries,social welfare services and pension provisions)16,63316,501 Total dividend(in)5.305.201 Active workforce(employees without holiday workers,thesis writers,interns,working students,PhD students,senior experts and trainees)of Mercedes-Benz Group.2 Incl.non-consolidated affiliated companies,associated companies,joint ventures and joint operations.Fields of action and fundamentals of sustainability GRI 3-2 The Mercedes-Benz Group acts on the basis of the sus-tainable business strategy adopted by the Board of Management of Mercedes-Benz Group AG with the approval of the Supervisory Board in 2019.Sustainabil-ity matters form an integral part of the business strat-egy.#A Objectives and Strategy,Annual Report 2023With its sustainable business strategy,the Mercedes-Benz Group takes into account the regulatory require-ments relevant to its business activities as well as rec-ognised international frameworks,the expectations of external and internal stakeholders and global trends.It regularly carries out materiality assessments in order to identify the strategic fields of action.In doing so,the Mercedes-Benz Group is also guided by the 17 Sustaina-ble Development Goals(SDGs)of the United Nations,in particular SDGs 8 and 9 as well as 11 to 13 and concen-trates on the areas where it can create added value.It discusses the key areas for action with the involvement of relevant stakeholder groups.In the reporting year,the Mercedes-Benz Group confirmed the following six areas of action in this process and,where necessary,specified the associated strategic ambitions:1.Climate protection and air quality:By 2039,the Mercedes-Benz new vehicle fleet is to become CO2-neutral in the net effect3 along the entire value chain and is no longer to have any impact on NO2 pollution in urban areas by 2025.3 Net carbon-neutral means not causing any CO2 emissions and compensating any CO2 emissions that do occur through certified projects to offset emissions.2.Resource conservation:The Mercedes-Benz Group wants to decouple resource consumption from the growth in business volume.3.More sustainable urban mobility:The Mercedes-Benz Group aspires to improve the quality of life in cities through mobility and transport solutions.4.Traffic safety:The Mercedes-Benz Group is pursu-ing the vision of accident-free driving and develop-ing automated driving in consideration of social and ethical aspects.5.Data responsibility:Customer trust and the responsible handling of customer data are the basis for sustainable digital products and services.6.Human rights:The Mercedes-Benz Group assumes responsibility and is committed to safeguarding human rights along its own automotive value chainBackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance9The Mercedes-Benz Group has defined three“enablers”which are critical for its success in these six areas of action:1.Integrity:In order to firmly anchorintegrityin all areas,the Mercedes-Benz Group considers two cru-cial aspects:for one,by establishing adequate structures with appropriate policies and processes,the organisation is able to provide the foundation for all parties to act with integrity.For another,the Group focuses on empowering each employee indi-vidually to understand the concept of integrity and thereby to act ethically and sustainably.2.People:As an attractive employer,Mercedes-Benz offers modern and flexible working conditions as well as extensive opportunities for continuing edu-cation for all employees at every stage of their lives.At the same time,the Mercedes-Benz Group is con-tinuously advancing the diversity of its workforce as the foundation of its corporate strategy and pro-moting an inclusive corporate culture.3.Partnerships:The Mercedes-Benz Group enters into partnerships with social and political players in order to achieve the goals of the sustainable busi-ness strategy against the backdrop of the ecological and social challenges of our time.The Groups prin-ciples for political dialogue and advocacy provide the basis for responsible and reliable action within these partnerships.United Nations Sustainable Development GoalsIn order to define and organise its key areas of action,the Mercedes-Benz Group is guided by the UN Sustain-able Development Goals.To this end,it concentrates on the areas in which it can create added value.The following SDGs are the focus of the work of the Mercedes-Benz Group:SDG 8 Decent work and economic growth:The Group has developed and now implements a risk-based management approach to respecting and safe-guarding human rights in its own units and in the supply chain.Through its production and large procurement volume,the Mercedes-Benz Group also creates jobs all over the world.SDG 9 Industry,innovation and infrastructure:Digitisation and electrification this is how the Mercedes-Benz Group is shaping the sustainable mobil-ity of the future and contributing to greater safety,for example.It also demonstrates the potential of digital innovations for society.SDG 11 Sustainable cities and communities:With its vehicles,data-based solutions for greater traf-fic safety for all road users or to improve traffic flow and the#E multimodal linking and mobility services,the Mercedes-Benz Group is making a contribution to more sustainable mobility in urban centres.SDG 12 Sustainable consumption and production:The Mercedes-Benz Group is working to increase the efficiency of its vehicles and significantly reduce its use of raw materials.One of the tasks here is to reinforce the closed material loops for the primary raw materials which are needed for electric vehicles.In this way,the Mercedes-Benz Group is setting the course for sustain-able production.SDG 13 Climate action:Through its sustainable business strategy and the asso-ciated measures and targets for reducing emissions from its own vehicles,plants and supply chains,the Mercedes-Benz Group aims to reduce its environmental impact on the climate.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance10Along the value chain GRI 2-6 The automotive industry is currently undergoing a profound process of change,which the Mercedes-Benz Group would like to actively shape.It considers the entire value chain.This covers the entire vehicle life-cycle from development through the supply chain and in-house production to the use and disposal of the vehicles.It aims to avoid or minimise the negative impacts of its business activities as far as possible,and to create sustainable value economically,ecologically and socially.The diagram below shows the main stages of the Mercedes-Benz value chain in simplified form.57%of production materials that harbour an increased risk of human rights violations and54%of the product groups from service supply chains with an increased risk of human rights violations were reviewedProductdevelopmentSupply chainProductionDrivingReuse&RecyclingRenewable energies in the production of Mercedes-Benz Cars and Mercedes-Benz Vans account for 100%of external electricity consumptionPilot plant for recyclinglithium-ion battery systems at the Kuppenheim site;72%of the returnable high-voltage lithium-ion batteries are being routed to remanu-facturing for reuse in vehi-cles or in energy storage systems(2nd Life)95%of all cars and vans over 3.5 tonnes total weight are recyclableMore than50,000 tCO-reduced steel with a scrap content of at least70%will be installed annually in Mercedes-Benz models in the future including the EQS SUV and the EQE SUVCO2 emissions at Group-wide production sites worldwide reduced by 5%compared to 2022744on-site audits regarding compliance with the RSSThe average CO2 emissions of the Mercedes-Benz new car fleet in Europe(European Union,Norway and Iceland)are expected to be 111 g/km(including vans registered as passenger cars),applying the statutory regulationsThe Mercedes me Charge digital charging service has integrated over 1,500,000AC and DC charging points worldwide in 2023The share of electrified vehicles(xEV)in Group sales at Mercedes-Benz Cars is 20%worldwide The share of electrified vehicles in Group sales at Mercedes-Benz Vans is 5%worldwideEnergy consumption per vehicle at Mercedes-Benz Cars down by 12%compared to 2022,at Mercedes-Benz Vans by8%Water consumption per verhicle at Mercedes-Benz cars down by8%compared to 2022,at Mercedes-Benz Vans by6%With the DRIVE PILOT2 automated driving system,the Mercedes-Benz Group is the only manufacturer to have an SAE-Level-3-System approved and certified in accordance with the specifi-cations of the United Nations Economic Commis-sion for Europe(UNECE)on the market in Germany,Nevada and California10 billion euros spent on research and development expendituresBy 2030,the Mercedes-Benz Group intends to invest a total of more than 1.3 billion euros in the qualification and training of employees in GermanyThe proportion of women in senior management posi-tions at the Mercedes-Benz Group worldwide is 25.7%1The“Responsible Sourcing Standards”(RSS)form the basis for the responsible procurement of materials and services by defining minimum requirements for ethical,social and environ-mental standards that are mandatory as a central contractual document for all new orders from Tier-1-suppliers1 Headcounts,fully consolidated companies.2 Availability and use of the DRIVE PILOT functions on motorways depend on equipment,countries and applicable laws.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance11Product development The Mercedes-Benz Group offers a broad product port-folio of passenger cars,vans and commercial vans.The aim of the Mercedes-Benz Group is to further expand its portfolio of electric vehicles.To this end,it is strongly involved in research and development.Supply chain Mercedes-Benz vehicles consist of several thousand components raw materials such as iron,copper or aluminium,primary products such as steel,sub-prod-ucts such as seats,wiring harnesses,etc.and the supply chain is correspondingly complex:it comprises several tens of thousands of direct suppliers for pro-duction and non-production materials,primarily from the regions of Europe,Asia and North America.These in turn have sub-suppliers.Production The Mercedes-Benz Group has more than 304 own pro-duction sites worldwide on five continents.Vehicles and components including transmissions,axles,engines,electric drive systems and batteries are pro-duced there.4 Incl.non-consolidated affiliated companies,associated companies,joint ventures and joint operations.Vehicle operation With its brands and mobility services,the Mercedes-Benz Group is represented in almost every country in the world.Around 2,492 million cars and vans were delivered by the Group to customers in 2023.The Group also wants to support its customers in adopting a climate-friendly driving style and making purchasing decisions in favour of locally emission-free vehicles.Reusing and recycling The Mercedes-Benz Group follows the#E waste hierar-chy.The primary objective is to avoid waste.Only then,according to the waste hierarchy,should measures be implemented to allow reuse of various components and parts through remanufacturing,or to recover materials through recycling.The following table shows some of the significant pro-gress made by the Mercedes-Benz Group in the various areas of action and with respect to its defined enablers over the course of 2023.Sustainability managementMateriality assessment GRI 3-1/-2 To determine which sustainability topics are particularly relevant for the Mercedes-Benz Group and its stake-holders,the Group carried out a comprehensive materi-ality assessment in 2021.This was finalised in summer 2022 and will also apply to 2023 following a review of the areas of action.In addition to the six strategic fields of action,further potentially relevant sustainability topics and trends were analysed.A total of 17 topics were assessed,which are broken down into further sub-topics.In its analysis,the Mercedes-Benz Group considered two perspectives:Inside out:The positive or negative influences of the Groups business activities on the economy,the envi-ronment and society are brought into focus.Outside in:The impact of external requirements and expectations of the Groups sustainability perfor-mance on its business activities,business results and general situation is considered.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance12The analysis consisted of several components.A comprehensive desk analysis and an international online survey formed the basis for assessing the rele-vance of sustainability topics and trends.Around 15,000 people from 52 countries took part they represent rel-evant stakeholder groups such as private and business customers,interested consumers,investors,employ-ees,suppliers and business partners,representatives from politics,science and administration,as well as#E non-governmental organisations(NGOs).In addition,the Mercedes-Benz Group conducted around 20 interviews with both internal and external experts from these stakeholder groups.The aim was to evaluate the Groups sustainability performance to date,to identify sustainability trends and thereby to assess the relevance of sustainability issues.The Mercedes-Benz Group also undertook an assess-ment of the impact of its business activities on the environment and society(inside out).The results were taken into account when assessing the relevance of topics in the inside-out dimension.For the assessment of topics in the outside-in dimen-sion,the Mercedes-Benz Group analysed the reporting of relevant competitors on their business development and sustainability performance,the media reporting on selected sustainability topics over a longer time period,central NGO positions,regulatory requirements,as well as information relevant to the capital market,and had these weighted by the stakeholder groups according to their relevance.As a further step,the Mercedes-Benz Group examined the sustainability issues arising from the analysis in terms of its net assets,financial position,operating results and business performance.The topics for the non-financial declaration were defined on this basis.#A Non-financial declaration,Annual Report 2023The materiality assessment thus fulfils both the report-ing requirements of the#G Global Reporting Initiative(GRI)and of the CSR Directive Implementation Act(CSR-RUG).The Group is currently working on a materiality assess-ment that reflects the requirements of the Corporate Sustainability Reporting Directive(CSRD).It is expected to be completed at the beginning of the second quarter of 2024 and will form the basis for the Sustainability Statement 2024,among other things.At the same time together with the materiality assessment,the sustaina-ble business strategy is being revised.The results of the materiality assessment as well as regulatory and strate-gic developments,stakeholder feedback and general trends are taken into account.For the reporting year 2024,the refocused sustainable fields(“Human Rights”,“People”,“Traffic Safety”,“Decarbonisation”,“Resouce Use&Circularity”,“Digital Trust”)will be incorporated into the sustainable business strategy.Procedure for materiality analysisThe materiality matrix shows the topics according to their relevance:“Climate protection and adaptation”,“Emissions reduction”and“Resource conservation”have the highest importance based on the analysis and the stakeholder survey.The same applies to the the-matic complexes of“Respect for human rights”and“Sustainable mobility”.This confirms the Groups own strategic areas of action.The results of the materiality assessment were dis-cussed in detail with all responsible specialist depart-ments and presented to the then Group Sustainability Board(GSB)in the third quarter of 2022.They provide an important basis for the critical consideration and further development of the sustainable business strat-egy.In addition,the Mercedes-Benz Group bases its identification of sustainability-related opportunities and risks on the topics identified in the materiality assess-ment.The Mercedes-Benz Group discloses significant risks and opportunities in the areas of environment,social and governance(ESG)in the Risk and Opportu-nity Report within the Annual Report.#A Risk and Opportunity Report,Annual Report 2023BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance13Materiality matrix1 For readability,the graph shows a section of the materiality matrix.2 The marked lines on the x and y axes show the materiality threshold set by the Mercedes-Benz Group,above which topics for this Sustainability Report were classified as material.Inside outOutside inClimate protection and adaptionIntegrity and complianceResponsible corporate transformationRespecting human rightsTraffic safetySustainability-oriented corporate cultureEmissions reductionEmployee health and safetyDiversity and equal opportunityStakeholder relationsand partnershipsCorporate citizenshipData responsibility Corporate governanceSocietyEnvironmentEmployeesResource conservationSustainable mobilitySustainable corporate governanceSustainable investment Sustainable customer value proposition0.51.00.51.0Topic clusters with significantly higher rankings compared to 2020Topic clusters that include important emerging issuesBackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance14Thematic clusters and topicsThematic cluster Topics Sustainable corporate governanceAnchoring sustainability in the management of the company along the value chainConsideration of ESG risks in risk managementAnchoring sustainability in the business strategySustainability as a criterion for remunerationResponsible tax payment and use of public fundingTransparent reporting on sustainability mattersClimate protection and adaptationZero-emission vehicles/electric mobilityLow-carbon vehiclesDecarbonising production and further business activities of the Mercedes-Benz GroupClimate protection in the supply chain Green charging of electric vehiclesClimate adaptation of Mercedes-Benz sites and operationsEmissions reductionLow-pollutant vehiclesLow-pollutant productionNoise controlResource conservation Energy efficiency and renewable energiesSustainable use of waterPrevention of pollution from waste Nature conservation and biodiversityMaterial efficiency and use of sustainable materials The circular economyResource conservation in the supply chainThematic cluster Topics More sustainable mobilitySustainable mobility systemsAccess to mobilitySustainable logisticsExpansion of the charging infrastructureTraffic safetyVehicle safetySafe road trafficAutomated drivingData responsibilityData protectionCyber security Responsible use of artificial intelligenceData-based solutions for sustainable mobilityRespect for human rightsRespect for human rights in own unitsHuman rights due diligence in the supply chainHuman rights due diligence in salesIntegrity and complianceCompliance with laws and regulationsIntegrityIntegrity in business practices of suppliers and business partnersResponsible corporate transformationResponsible and sustainable employmentCorporate co-determination Vocational training and continuing educationEmployee health and safetyWorkplace health promotion Occupational health&safetySustainability-focused corporate cultureLeadership cultureModern forms of work and working timesDiversity and equal opportunitiesDiversity in the workforce Adequate remunerationConsideration of diversity in the development and marketing of products and servicesThematic cluster Topics Stakeholder relations and partnershipsPolitical dialogue at the national and interna-tional levelStakeholder dialogue at the corporate levelLocal and regional stakeholder dialogueCivic engagementCompany-run projects for the community(commitment to location)Voluntary employee engagementWorldwide promotion of projects run by non-profit organisations and foundations within the scope of the global responsibilitySustainable customer value propositionCustomer awareness of sustainabilityTransparent labelling of products and servicesSustainability of sales networkSustainable investmentMercedes-Benz as a sustainable opportunity for investmentMercedes-Benz as a sustainable investorBackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance15Managing sustainability GRI 2-1/-6/-9/-11/-12/-13/-14/-18/-19/-20 GRI 303-1 The Mercedes-Benz Group AG is responsible for the Group governance and provides services for all corpo-rate entities.As the parent company,it also defines the strategy of the Mercedes-Benz Group.It decides on strategically important matters in its operational busi-ness and ensures regulatory,legal and compliance functions throughout the Group.The Groups own governance structure consists of the Board of Management and the Supervisory Board and corresponds to the dual management structure required for a joint stock company under German law.The Board of Management manages the Mercedes-Benz Group,while the Supervisory Board monitors and advises the Board of Management.The two bodies work together very closely for the benefit of the Group.The Mercedes-Benz Group adheres to the German Corpo-rate Governance Code,as documented by the annual statement of compliance.#A Statement of Compliance 2023The remuneration of the Board of Management and managers was adjusted in 2023.This was intended to reduce the complexity of the remuneration system,cre-ate transparency and ensure holistic incentivisation of sustainable management within the Group.In addition to financial targets,the variable remuneration of the Board of Management and managers of the other#E management levels one to three,and of parts of Governance&Sustainability(formerly Integrity and Law).The previous central management body for sustainabil-ity,the Group Sustainability Board(GSB),chaired by the two Board of Management members Renata Jungo Brngger and Markus Schfer,was replaced by the Group Sustainability Committee(GSC)in the reporting year.The new committee meets quarterly chaired by Renata Jungo Brngger as Sustainability Coordinator.It is made up of representatives from top management and manages ESG issues holistically across depart-ments,divisions and regions based on targets,KPIs and responsibilities.The members of the GSC first discuss selected sustainability-related topics and issues before submitting them to the Board of Management for deci-sion-making.The members of the GSC are also respon-sible for the implementation of sustainability issues in their respective departments.With the new structure,the Mercedes-Benz Group is pursuing the goal of creat-ing a leaner committee landscape,enabling more effi-cient decision-making processes and establishing responsibility for sustainability issues even more firmly in the individual departments and divisions.level four,includes short-term transformation targets for CO2 emissions,safety innovations and ESG stake-holder management;for 2023,for the first time it also includes long-term sustainability targets for the pro-portionate sales of#E plug-in hybrids(PHEV)and#E Battery electric vehicles(BEV)5 and for the review of high-risk production materials as well as for diversity and inclusion.Furthermore,the variable remuneration continues to include non-financial targets relating to customers,employees and integrity.#A Remuneration Report 2023#A Annual Report 2023The Mercedes-Benz Group manages the work in the strategic action fields in addition to other tasks using an internal reporting process with detailed score-cards.Clearly defined responsibilities in the manage-ment and organisation structures for each of the business divisions are in place to support this process.At the end of July 2023,the Supervisory Board decided to establish a cross-departmental management and coordination function for Group-wide sustainability management at the Board of Management level.Renata Jungo Brngger took over the corresponding function of Sustainability Coordinator on 1 August 2023.Her Board of Management central division is now called Integrity,5 Further information on sales of plug-in hybrids and fully electric cars can be found in the chapter“climate protection:measures and results”.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance16Governance GRI 2-1/-6/-9/-11/-12/-13/-14/-18/-19/-20 Mercedes-Benz AGCorporate StrategyChief Technology Officer,Vice President Group Research,Sustainability&RD FunctionsTop management level:Dedicated persons,responsible for ESGGroup Sustainability Committee(GSC)External Exchange FormatsE.g.Advisory Board for Integrity&SustainabilityBusiness units&functionscoordinatescoordinatescoordinatesBoard of ManagementSupervisory BoardMercedes-Benz Group AG Central FunctionsMercedes-Benz Mobility AGChairpersons:Renata Jungo Brngger,Sustainability CoordinatorMember of the Board of Management for Integrity,Governance&Sustainability at Mercedes-Benz Group AGMembers of the Board of ManagementSustainability Competence Office(SCO)Chief Compliance Officer Legal Product&Technology/Human Rights Officer At the Sustainability Coordination Meeting(SCM),the GSC engages in dialogue with representatives from all relevant departments and specialist areas.The SCM meets regularly on a fortnightly basis under the leader-ship of the Sustainability Competence Office(SCO).This in turn advises and supports the specialist depart-ments in implementing the tasks received from the Board of Management or GSC.The SCO also monitors the progress made with respect to the six areas of action and the three enablers defined in the sustainable business strategy.The results of the work carried out during the year are reported to the GSC and the Board of Management of Mercedes-Benz Group AG at least twice a year in the form of detailed scorecards.Regular dialogue with experts from the national compa-nies in existing networks was intensified.The“Sustaina-bility Forum”dialogue format launched in 2020 is now firmly established and offers colleagues from the inter-national subsidiaries a regular opportunity to find out about and exchange information on current develop-ments at Group headquarters and in the markets.The forum focuses on information and dialogue on current developments in sustainable business strategy,includ-ing involvement in the materiality assessment,sustain-ability goals and areas of action.The international experts also discuss local best practice examples,light-house projects and other relevant topics.#A Climate protection in production More sustainable sales operationsBackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance17The Supervisory Board of Mercedes-Benz Group AG monitors the implementation of the sustainable busi-ness strategy.It is therefore important that it and its committees are appropriately informed about the rele-vant sustainability issues in the areas of environment,social affairs and governance.To ensure this,ESG top-ics are regularly addressed in the Supervisory Board meetings.ESG experts from different departments are consulted for this purpose.ESG-related topics were also discussed during the strategy meeting of the Supervisory Board.In addition,the members of the management and supervisory bodies regularly discuss the progress made in implementing the sustainable business strategy with the Advisory Board for Integrity and Sustainability.On the part of the Supervisory Board,Dame Polly Courtice,among others,contributes her extensive expertise in the field of sustainability in various areas.#A Integrity Advisory Sub-Committee for Integrity and SustainabilityPolicies,standards and principles GRI 2-23-/24 Integrity,compliance and legal responsibility are cor-nerstones of sustainable corporate governance and are obligatory for the actions of all employees of the Mercedes-Benz Group.The central requirements for this are set out in the Groups#G Integrity Code.It is supple-mented by other in-house principles and policies.Risk and opportunity management GRI 2-12/-23/-24/-25 GRI 3-3 GRI 201-2 GRI 413-2 The Mercedes-Benz Group is exposed to different risks that are directly linked with the business activities of Mercedes-Benz Group AG and its subsidiaries or that result from external influences.The Mercedes-Benz Group defines risk as the danger that events,develop-ments or actions will prevent the Group or one of its divisions from achieving its objectives.This includes monetary and non-monetary risks.At the same time,it is important to identify opportunities in order to safe-guard and enhance the competitive capability of the Mercedes-Benz Group.The Mercedes-Benz Group defines an opportunity as the possibility of securing or exceeding the planned goals of the Group or a business division as a result of events,developments or actions.In order to identify these risks and opportunities at an early stage and assess and manage them systemati-cally,adequate and effective management and control systems,which are clustered into a risk and opportunity management system,are applied.Opportunities and risks are not offset.The risk management system is intended to systemati-cally and continually identify,assess,control,monitor and report risks threatening the Mercedes-Benz Groups existence and other material risks in order to sustaina-bly support the achievement of the corporate targets and to enhance risk awareness in the Group.The risk management system is integrated into the value-based management and planning system of the The“House of Policies”is the digital platform for poli-cies.All internal policies and works agreements at the Mercedes-Benz Group are stored here in a user-friendly database,which is accessible to all employees.The policies are available in several languages.Employees can also access compact web-based training on poli-cies here,while Group companies can access advice on the local implementation of policies.The Mercedes-Benz Group also uses the ten principles of the UN Global Compact as fundamental guidelines for its business activities.As a founding member,it is particularly committed to the#E UN Global Compact(UNGC).The internal principles and policies of the Mercedes-Benz Group build on this international frame of refer-ence and other international principles.These include the core labour standards of the International Labour Organization(ILO),the Guidelines for Multinational Enterprises of the Organisation for Economic Co-opera-tion and Development(#E OECD)and the UN Guiding Principles on Business and Human Rights.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance18Mercedes-Benz Group and is also an integral part of the overall planning,management and reporting process in the legal entities,divisions and corporate functions.The opportunity management system at the Mercedes-Benz Group is based on the risk management system.The objective of opportunity management is to recog-nise the possible opportunities arising in business activities early on and to exploit them in the best possi-ble way for the benefit of the Group.This should result in planned targets being met or exceeded.As part of the planning process,risks and opportunities are recorded within an observation horizon of up to five years.Strategic risks and opportunities are also consid-ered in the risk and opportunity management process.Responsibility for operational risk management and risk management processes lies with the segments,corpo-rate functions,organisational units and companies.They report on the concrete risks and opportunities at regular intervals to their superordinate units.Unexpect-edly occurring material risks must be promptly reported.The information is passed on to Group Risk Management via the segments for reporting to the Board of Management,Audit Committee and Supervi-sory Board.The responsible divisions manage the risks and oppor-tunities in the Group through various measures.Their task is to define and,if necessary,initiate these meas-ures in order to avoid and reduce risks.Furthermore,measures must be implemented to seize identified opportunities.Whether a measure is cost-effective is assessed by the person responsible for the measure before it is implemented,with the involvement of Con-trolling.The Group Risk Management Committee(GRMC)is responsible for the continuous improvement and assessment of the appropriateness and effectiveness of the risk management system and the internal control system(including the Compliance Management Sys-tem CMS)in relation to the scope of the Groups busi-ness activities and risk situation.It is chaired by the members of the Board of Management of Mercedes-Benz Group AG responsible for Finance&Controlling,Mercedes-Benz Mobility,as well as Integrity,Govern-ance&Sustainability.Alongside these,as of 31 December 2023,the GRMC consisted of representa-tives from Mercedes-Benz Group Finance,Legal Affairs,Compliance,Group Security,Global Cyber&Informa-tion Security and the members of Mercedes-Benz Mobility AG responsible for Finance.Corporate Audit contributes significant findings regarding the internal controlling and risk management system.Firm integration of sustainability-related risks and opportunitiesSustainability-related risks and opportunities are an integral part of the Group-wide risk and opportunity management system.When identifying these risks and opportunities,the Mercedes-Benz Group is guided by the topics identified by the materiality assessment and thus includes the areas of action of the sustainable business strategy,which are assigned specific targets.Sustainability risks and opportunities are defined as conditions,events or developments relating to ESG issues whose occurrence may have an actual or poten-tial impact on the results of operations,financial posi-tion and net assets or on the reputation of the Mercedes-Benz Group or whose occurrence may have a positive or negative impact on the economy,environ-ment or society.ESG topics related to the environment include the effects of climatic conditions and changes.Risks to the transformation process of the Group could arise due to changes in the political framework,technological devel-opments and changing markets.Labour law standards,occupational and product safety as well as product liability and compliance with labour law standards at suppliers are examples of issues that fall under the heading of social affairs that could har-bour risks.The governance area deals with provisions from competition law and measures to prevent corrup-tion,for example.From todays perspective,there are no ESG-related risks and opportunities associated with the Mercedes-Benz Groups own business activities,business relation-ships or products and services that are very likely to have a serious negative impact on the non-financial aspects in accordance with Sections 315c and 289c of the German Commercial Code(HGB).Risks and oppor-tunities in connection with the recommendations of the#E Task Force on Climate-Related Financial Disclosures(TCFD)are environmental factors and are therefore also BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance19identified and assessed as part of the risk management process.#A Risk and Opportunity Report,Annual Report 2023Dialogue with stakeholders GRI 2-12/-16/-29 The Mercedes-Benz Group attaches great importance to engaging in dialogue with its interest groups.This dialogue enables the organisation to look at its sustain-ability commitment from different angles,to identify and pick up on new trends and to exchange experi-ences.The prerequisite for this is that the Mercedes-Benz Group knows its stakeholders.Stakeholders are individuals and organisations that have legal,financial,ethical or ecological claims on or expectations of a company.Based on this,the Mercedes-Benz Group has identified customers,employees,investors and suppli-ers as its primary stakeholders.In addition,the Mercedes-Benz Group regularly engages in dialogue with civic groups such as NGOs.The Group also main-tains contact with associations,trade unions,the media,analysts,local authorities,people from the sur-rounding neighbourhood of the Groups locations,and figures from the worlds of science and politics.Exemplary instruments of the stakeholder management approachIn order to implement dialogue with its stakeholders across the organisation,the Mercedes-Benz Group has defined clear responsibilities and communication chan-nels for this process and established specific forms of dialogue.The various dialogue formats are initiated by the Integrity,Governance&Sustainability central divi-sion and other areas such as External Affairs.#A Trusted partner Dialogue with stakeholders#A Further Information Memberships,associations and initiatives Mercedes-Benz Sustainability Report and regional reports Groups website Employee portal and additional internal communication channels Press and public-relations work Blogs and social media Plant tours,receptions,Mercedes-Benz Museum Environmental declarations by the plants Capital market communication“Climate Policy Report”Sustainability rankings and ratings Annual Sustainability Dialogue(Germany/regions)Local dialogue with residents and municipalities Internal dialogue sessions on integrity and compliance Supplier Portal Involvement in sustainability initiatives and networks Specialist conferences on social topics and debates Topic-and project-related discussions Dialogue formats on future-oriented questions:think tanks,hackathons,idea competitions“The Sustainability Forum”Capital market events:capital market days,investor conferences,roadshows Stakeholder consultation in topic-related working groups Advisory Board for Integrity and Sustainability Peer review within the framework of sustainability initiatives such as the UN Global Compact and the Global Reporting Initiative InformationDialogueParticipationThe Mercedes-Benz Group makes use of various forma in order to engage in dialogue with relevant stakehold-ers.Among other things,it organises annual“Sustaina-bility Dialogues”,conducts stakeholder surveys as well as specialist conferences and thematic dialogues for example in the form of workshops or via the Advisory Board for Integrity and Sustainability.In addition,it monitors current public discussions and gathers infor-mation about related expectations by participating in sector-specific and cross-sector networks and initia-tives.Studies and other scientific publications are also evaluated and internal media analyses undertaken.This helps the Group to identify developments and stake-holder expectations at an early stage in addition to the dialogue it initiates.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance20The Sustainability DialogueAn important tool for the implementation is the exchange with stakeholders in the form of the“Sustain-ability Dialogue”.It has been held once a year in Stutt-gart(Germany)since 2008 and brings together stake-holders from different areas with members of the Board of Management of Mercedes-Benz Group AG and man-agement.In addition to presentations and panel dis-cussions,the participants discuss selected sustainabil-ity topics in various workshops organised by the respective departments and work together to further develop their approaches.In the 2023 reporting year,the Mercedes-Benz Group#G“Sustainability Dialogue 2023”took place in China,Germany,India and the USA.Sustainable investment The increasing demand for ESG-oriented investment products from institutional and private investors,as well as the regulatory momentum of recent years,has led to a demand for greater transparency about how ESG factors are taken into account in asset manage-ment and investment decisions.At the same time,this offers companies an additional opportunity to differen-tiate themselves in the competition for equity and debt capital by demonstrating a sustainable business strat-egy,ambitious ESG targets and transparent ESG report-ing along the entire value chain.A large number of reporting frameworks now exist for this purpose.This includes both voluntary standards,such as the recom-mendations of the#E TCFD or the framework of the Sustainability Accounting Standards Board(#E SASB)as well as statutory disclosure requirements.Among them are included the#E EU taxonomy and the Corpo-rate Sustainability Reporting Directive(CSRD)with the European Sustainability Reporting Standards(ESRS),which will apply from the 2024 reporting year and are intended to ensure greater transparency for investors.This makes ESG reporting both more complex and more demanding.The Mercedes-Benz Groups external reporting focuses on the reporting standards relevant to the Groups investors in the reporting year(including TCFD,SASB,GRI)and on more extensive publications such as the#G Climate Transition Action Plan Report(CTAP),the#G Climate Policy Report or the#G Raw Materials Report.Meanwhile,the Mercedes-Benz Group is constantly monitoring how the requirements of its investors regarding ESG reporting are developing and,in addition to the legal requirements,is reviewing their implemen-tation in its own reporting.#A TCFD reference table#A SASB reference tableFinancing the sustainable business strategyThe implementation of the sustainable business strat-egy of the Mercedes-Benz Group requires substantial investments.One of the Groups objectives is therefore to ensure that its own securities are recognised even more strongly on the capital market as sustainable investments.To this end,the Mercedes-Benz Group maintains a continuous dialogue with capital market players on both the equity and debt capital markets.It uses various platforms for this purpose.In the 2023 reporting year,for example,the Mercedes-Benz Group informed investors and analysts about the latest devel-opments in its sustainable business strategy at its sec-ond digital ESG conference.The Investor Relations&Treasury unit of Mercedes-Benz Group AG works closely with the internal sustaina-bility departments on ESG communication and is incor-porated into the relevant committees(e.g.the GSC).The Mercedes-Benz Group is thus taking account of the fact that sustainable investing has become a key invest-ment strategy especially for institutional investors.They place particularly high demands on the transpar-ency of external reporting according to ESG criteria.#A Sustainable corporate governance Managing sustainabilityBackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance21Ratings and bondsESG rating agencies such as MSCI,Sustainalytics,ISS ESG or CDP are important players on the capital market and in the sustainability-oriented investment process;they serve as a further decision-making aid for many investors.In the disclosure of its climate-related activities in the CDP climate questionnaire,the Mercedes-Benz Group achieved an A-rating in the reporting year.In addition,it has reported on water-related activities for the sec-ond time in the separate CDP water questionnaire and subsequently achieved an A-rating.The ESG rating agencies MSCI,Sustainalytics and ISS ESG rank the Mercedes-Benz Group among the top companies rated in the automotive sector.The various specialist units of the Mercedes-Benz Group work closely together with the aim of providing the rating agencies with adequate information.The Group intends to continue the ongoing development of its external reporting,close any gaps and initiate inter-nal change processes.In order to position the Mercedes-Benz Group as a sus-tainable corporation for investments even more strongly and to utilise ESG-based capital for business development,the Group updated its#G“Green Finance Framework”.This framework makes it possible to finance investments in the development,production and customer financing of all-electric vehicles in a tar-geted manner,for example through bonds or loans.On In coordination with the Investment Committees,the Mercedes-Benz Group is paying greater attention to the consideration and transparency of sustainability aspects in the investment process as part of its sustain-ability concept.When sustainable investments are made,consideration is also given to the associated risk and profitability aspects.In relation to liquid asset classes,the Mercedes-Benz Group works exclusively with asset managers who have signed the#E UN Princi-ples for Responsible Investment(PRI).Using a negative list,investments in companies and countries that do not fulfil the Groups own core requirements should be excluded.The Mercedes-Benz Group utilises opportuni-ties arising from sustainable developments by imple-menting ESG-themed investments.It is also focussing on successively integrating sustainability aspects into its mandates,for example via benchmarks or sustaina-bility indicators.To this end,it set sustainability targets in 2023 for some of its mandates with external asset managers and anchored these accordingly in the invest-ment policies.Taking into account the available data coverage,the Group was thus able to achieve lower carbon footprint for its asset classes equities and cor-porate bonds of the German pension assets compared to the aggregated benchmark.Whereas the aggregated benchmark is determined by the indices awarded to the asset managers,the carbon footprint is calculated based on externally bought ESG data.In addition,the Mercedes-Benz Group established internal reporting on various sustainability indicators for the German pension assets.this basis,the Mercedes-Benz Group again issued bonds with terms of three and eight years in May 2023.In June 2023,it also issued another bond outside the European market as a Green Panda Bond in China.The framework is based on the Green Bond Principles,voluntary process guidelines of the International Capi-tal Market Association(ICMA),the Green Loan Princi-ples,joint voluntary guidelines of the Loan Market Association(LMA)and the Asia Pacific Loan Market Association(APLMA).The revised framework was devel-oped by the#G Centre for International Climate and Environmental Research(CICERO)and received the highest rating of“Dark Green”and an“Excellent”for its governance structure.Sustainable investment of pension assetsWhen investing pension assets,the Mercedes-Benz Group itself acts as an investor.ESG criteria also play an increasingly important role for this.For the German pension assets,the following objectives have been defined for the consideration of ESG criteria:creation of transparency in dealing with sustainability aspects,utilisation of opportunities from sustainable developments,and appropriate consideration of sus-tainability risks.The majority of the German pension assets are invested via asset managers,to whom the Group issues individual mandates.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance22The measures implemented as part of the sustainability concept are regularly reviewed and adapted to current developments.Mercedes-Benz Pensionsfonds AG takes into account adverse effects on sustainability factors within the framework of the Sustainable Finance Disclo-sure Regulation.For investing foreign pension assets,country-specific requirements regarding consideration of ESG criteria apply.Tax obligation GRI 3-3 GRI 207-1/-2/-3 The Mercedes-Benz Group sees itself as a responsible corporation that strives to comply with the tax obliga-tions applicable worldwide and to make responsible use of public subsidies.In doing so,the Group also wants to fulfil its social and ethical responsibility.The Group tax strategy is oriented to the following prin-ciples in particular:By using efficient,high-quality and reliable expertise,processes,systems,methods and controls,the Mercedes-Benz Group aims to ensure that the tax obligations of the corporate entities are met and integrity standards are maintained.In line with the principle of being a good corporate tax citizen,the Mercedes-Benz Group undertakes legal,proactive and non-aggressive tax planning activities on the basis of economic considerations(“tax follows business”).The Mercedes-Benz Group is also endeavouring to make its collaboration with the tax authorities even more cooperative,transparent and constructive.At the same time,it safeguards its legal positions and represents its interests where it deems this appropriate and legitimate.The Groups tax strategy defined by the Board of Management of Mercedes-Benz Group AG sets out the framework for action and is specified and implemented through organisational and content-related policies,specifications and instructions.The tax strategy is regu-larly checked for the need for adjustment.The tax policies regulate the responsibilities,tasks and duties of the Groups personnel entrusted with tax affairs.In addition,they provide specific implementa-tion guidelines for legal compliance and thus raise employees awareness of tax-related issues.Manage-ment is informed via monthly reports,rolling regular communications and as and when required regarding relevant tax topics,and is involved in compliance pro-cesses:regular meetings between CFO and Head of Tax Affairs regular information to the Supervisory Board covering risks and opportunities as well as current regulatory issuesAccording to the Integrity Code,intentional violations of external and/or internal tax requirements must be reported and investigated.The same applies to any fail-ure to make corrections to procedures performed in an erroneous manner,as outlined in the Groups internally applicable rule violation policy.#A Compliance management The Whistleblower System BPOWith the aim of ensuring tax compliance throughout the Group,Mercedes-Benz Group has established a Tax Compliance Management System(Tax CMS).The Tax CMS is a separate sub-unit of the Groups internal Com-pliance Management System.An integral part of the Tax CMS is active tax risk man-agement that is consistent throughout the Group.It has the task of monitoring and controlling whether tax obli-gations are met and supporting those responsible in this regard.Furthermore,it serves to identify and reduce tax risks in the Group and any associated per-sonal risks of the active employees.The system includes numerous measures for example,continuous monitoring of tax risks and the incorporation of tax risk issues into the internal control system and the Group-wide risk management process in line with its risk man-agement policy.In the 2023 reporting year,no material breaches became known.#A Compliance managementBackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance23EU TaxonomyOne of the important goals of the Commission Action Plan on Financing Sustainable Growth in the context of the European Green Deal is to divert capital flows to sustainable investments.This is also the logic behind the EU Taxonomy Regulation(EU 2020/852)that came into force in mid-2020.This regulation governs the establishment of a standardized and legally binding classification system that defines the types of eco-nomic activity in the EU that are considered to be Tax-onomy-aligned-and thus environmentally sustainable with regard to six environmental objectives established by the regulation:Climate change mitigation Climate change adaptation Sustainable use and protection of water and marine resources Transition to a circular economy Pollution prevention and control Protection and restoration of biodiversity and ecosystemsCompanies that are required to publish a Non-Financial Declaration must also comply with the Taxonomy Regu-lation.According to Article 8 of the Taxonomy Regula-tion,the Taxonomy-aligned proportions of revenue,capital expenditure and operating expenditure accounted for by environmentally sustainable economic activities are to be reported on an annual basis.Taxonomy-eligibilityTaxonomy-eligibility is assessed in an initial step.For an economic activity to be Taxonomy-eligible,that activity must be mentioned and explained in further detail in the delegated acts for the Taxonomy Regulation.The EU delegated acts(Commission Delegated Regulation(EU)2021/2139 and its supplement,Commission Delegated Regulation(EU)2023/2485),which was adopted by the European Commission in June 2023,contain descrip-tions of relevant economic activities and technical screening criteria for the environmental objectives cli-mate change mitigation and climate change adaptation.The supplement to the delegated regulation includes new technical screening criteria that refer to both the existing economic activities and to new economic activ-ities.Furthermore,a new EU delegated act(Commission Delegated Regulation(EU)2023/2486)containing eco-nomic activities and technical screening criteria rele-vant for the remaining environmental objectives,was published in 2023.The economic activities relevant to the Mercedes-Benz Group in this context are to be found under the envi-ronmental objectives climate change mitigation,climate change adaptation and transition to a circular economy.On the basis of the descriptions contained in the dele-gated acts relating to climate change mitigation,the following Taxonomy-eligible economic activities have been identified for the Group:Economic activity 3.3 encompasses manufacture of low-carbon technologies for transport in connection with the production of cars and vans Economic activity 6.5 encompasses leasing and financing of low-carbon cars and vans Economic activity 6.6 encompasses leasing and financing of low-carbon commercial vehicles Economic activity 6.15 encompasses infrastructure enabling low-carbon road transport and public trans-port(charging infrastructure)In a Commission Notice(2022/C 385/01)published by the European Commission on 6 October 2022,the Commission stated that the term“low-carbon”only relates to the assessment of Taxonomy-alignment within the framework of the technical screening crite-ria and is not relevant for reporting on the Taxono-my-eligible economic activity 3.3.With regard to car manufacturer in particular and as an example,the document shows that the activity“manufacture of low-carbon vehicles”also includes vehicles with com-bustion engines.For the Mercedes-Benz Group,this clarification by the European Commission means that the manufacture of all Group vehicles is to be classi-fied as Taxonomy-eligible.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance24Economic activity 6.5 relates to leasing and sales financing of all cars and vans purchased from third parties.Economic activity 6.6 essentially covers the remaining commercial vehicle portfolio of Mercedes-Benz Mobility after the spin-off and hive-down of the Daimler com-mercial vehicle business(see Note 3 of the Notes to the Consolidated Financial Statements).Economic activity 6.15 relates to the establishment and operation of company-owned charging infrastruc-ture by means of high-power charging stations,which are a prerequisite for zero tailpipe CO2 operation of zero-emissions road transport.The economic activities in specific energy sectors contained in the supplement to the delegated act relating to the climate goals are only present to an immaterial extent at the Mercedes-Benz Group and are performed exclusively in support of carrying out economic activity 3.3.The economic activities contained in the delegated acts relating to climate change adaptation are only present to an immaterial extent at the Mercedes-Benz Group and are reported exclusively under the environmental objective climate change mitigation.The Taxonomy-eligible economic activity 5.4 that encompasses the sale of second-hand goods,which are purchased by the Mercedes-Benz Group from third par-ties,was identified on the basis of the descriptions in the delegated act relating to the transition to a circu-lar economy.For the 2023 reporting year,simplified reporting obligations apply for economic activities newly introduced by the delegated acts.These stipulate that only reporting in relation to Taxonomy-eligibility is required.The Mercedes-Benz Group reports economic activity 5.4 as Taxonomy-eligible but not environmen-tally sustainable.An assessment of Taxonomy-align-ment has not been carried out.The individual economic activities are additionally to be classified according to enabling activities and transi-tional activities.An enabling activity is an economic activity that makes a substantial contribution to one or more environmental objectives by directly enabling fur-ther activities to also make a substantial contribution.At the Mercedes-Benz Group this mostly applies to the economic activities 3.3 and 6.15.A transitional activity,in contrast,is an economic activity for which there is no technological and economically feasible low-carbon alternative but which makes a substantial contribution to climate change mitigation by supporting the transi-tion to a climate-neutral economy.Taxonomy-alignmentIn a further step,Taxonomy-alignment must be assessed for Taxonomy-eligible economic activities.Only Taxonomy-eligible activities can be considered as environmentally sustainable activities,or as being Tax-onomy-aligned,provided they meet certain technical screening criteria.Here,the fulfilment of certain techni-cal screening criteria with regard to the relevant eco-nomic activities must make a substantial contribution to an environmental objective defined by the Taxonomy Regulation and,on the basis of defined“do no signifi-cant harm”criteria(DNSH criteria),also exclude the possibility of significant interference with another envi-ronmental objective.It must also be ensured that mini-mum standards are met with regard to issues such as upholding human rights or combating corruption(mini-mum safeguards).Fulfilment of a substantial contribution to the environmental objective climate change mitigationAccording to the delegated act,all vehicles below the current limit value of 50g CO2/km per vehicle(in accordance with the WLTP)as defined in the technical screening criteria make a substantial contribution to the climate change mitigation environmental objective.At Mercedes-Benz Group all-electric vehicles as well as the majority of plug-in hybrid vehicles are below this threshold.These vehicles are hereafter referred to as“low-carbon vehicles”.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance25Furthermore,according to the delegated act,high-power charging stations that are intended for the oper-ation of vehicles with zero tailpipe CO2 emissions make a substantial contribution to the environmental objec-tive climate change mitigation.Exclusion of the possibility of significant interference on the basis of the“do no significant harm”criteriaIn a second step,compliance with the DNSH criteria for the further environmental objectives for the respective economic activities was analysed on the basis of the defined criteria in the reporting year.With regard to economic activity 3.3,the fulfilment of these criteria was basically assessed at the level of those consolidated production sites where low-carbon vehicles or associated components are currently being manufactured or plans call for them to be manufac-tured in the future.With regard to economic activity 6.5,the analysis of the criteria is to be performed on the basis of the low-car-bon vehicles in the leasing and financing portfolio.In addition to Group-brand vehicles,the vehicle portfolio also includes vehicles from other manufacturers.The latter are reported as Taxonomy-eligible but not Taxon-omy-aligned,as it is not currently possible to carry out an adequate DNSH analysis due to the current data availability.With regard to economic activity 6.15,the fulfilment of the DNSH criteria was reviewed at the level of the oper-ational high-power charging stations.Climate change adaptation With regard to economic activity 3.3,the EU Taxonomy requires a climate risk analysis to be carried out.In accordance with the DNSH requirements,this analysis was carried out for taxonomy-relevant production sites in connection with economic activity 3.3,in order to assess potential physical climate-related risk factors on the basis of material climate risks in line with Appendix A(Annex I)of the delegated act of the EU(Delegated Regulation(EU)2021/2139).The analysis took into account climate scenarios from the Intergovernmental Panel on Climate Change(IPCC)and different time hori-zons,including 2040.Adaptation measures were ana-lysed on the basis of the results.In addition,the verificiation of the DNSH criteria for economic activity 6.5 is essentially based on the con-sideration of use and environmental conditions,such as heat and cold requirements in the context of vehicle development and testing.With regard to economic activity 6.15,potential climate risks according to Appendix A(Annex I)of the delegated act of the EU(Delegated Regulation(EU)2021/2139)were assessed by relevance for the implementation of the economic activity and manufacturers specifications for the charging stations were taken into account.Sustainable use and protection of water and marine resources With regard to economic activity 3.3,fulfilment of the DNSH criteria according to the Taxonomy Regulation is intended to be ensured mainly on the basis of estab-lished environmental management systems and the internal environmental risk assessment(environmental due diligence process).The company has established environmental management systems at its own produc-tion sites around the world in accordance with ISO 14001.In addition,all German and the two European manufacturing locations in Kecskemet(Hungary)and Vitoria(Spain)have also been validated in accordance with EMAS.As part of the internal environmental risk assessment,consolidated production sites are evalu-ated according to a number of factors,including those relating to water quality,in a five-year cycle.Recom-mendations for minimizing risks are then drawn up,pri-oritized and tracked.The Group also uses external data sources to identify sites that harbour potential risks relating to water scarcity.With regard to economic activity 6.15,the analysis shall assess that the use of the charging infrastructure does not give rise to any significant risk to the water quality and the water scarcity corresponding to the DNSH cri-teria.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance26Transition to a circular economy With regard to economic activity 3.3,the EU Taxonomy Regulation requires an assessment and,if possible,the application of measures that promote the transition to a circular economy,including the use of secondary mate-rials,high durability of products and waste manage-ment in production.When developing products,the Mercedes-Benz Group considers the concept of circular economy from the very start and has set itself the over-arching goal of increasing its use of secondary materials in vehicles.In addition,the DNSH criteria for economic activity 6.5 are taken into account through the imple-mentation of the legal requirements on recyclability and reusability for passenger car models and light commer-cial vehicles.The Mercedes-Benz Group is intensifying its efforts to use lower volumes of raw materials and other materials in its production operations.In accordance with the waste hierarchy,the companys primary goal is to avoid waste.For its own production sites worldwide,the Mercedes-Benz Group has set reduction targets for fac-tors such as total waste volume and waste volume for disposal per vehicle.Waste management is also a com-ponent of the Groups internal environmental risk assessment.For economic activity 6.15,the applicable DNSH criteria were analysed and checked for adherence.This includes the verification of the recycling or disposal of waste generated during construction and demolition.Pollution prevention and control With regard to the DNSH criteria,for economic activity 3.3 under Appendix C(Annex I)of the delegated act of the EU(Delegated Regulation(EU)2021/2139),the Tax-onomy Regulation refers to the concept of avoiding the manufacturing,placing on the market or use of restricted and reportable substances subject to current European legislation on chemicals.The implementation of internal processes for specification,approval and control is intended to ensure compliance with European regulations(according to Appendix C)and respective national legislations.The Global Automotive Declarable Substance List(GADSL)forms the basis for the prohibi-tion and declaration requirement of substances in Mercedes-Benz products.The Mercedes-Benz Group also defines specifications for substitution analyses,and thus for the use of less critical hazardous sub-stances.With regard to economic activity 6.5,the DNSH criteria refer to compliance with various product-related Euro-pean regulations and directives.As a result,all-electric vehicles are currently considered in the Taxono-my-aligned scopes of economic activity 6.5.In due consideration of the applicable legislation and of a Notice(C/2023/267)published by the EU Commission on 20 October 2023,only tyres corresponding to the two highest classes for rolling resistance coefficients available on the market and at the same time the high-est class for external rolling noise available on the mar-ket fulfil DNSH requirements for the respective vehi-cles.For the assessment of the respective classes available on the market,the data of the European Prod-uct Database for Energy Labelling(EPREL)shall be used.The time of market placement of the vehicles in the leasing and financing portfolio was used for the analysis,and a percentage share of the vehicles with the respective highest tyre classes according to EPREL was determined on the basis of a representative time period.This proportion is applied to the leasing and financing portfolio of all-electric vehicles worldwide wherever the corresponding data is available.For economic activity 6.15,the applicable requirements from the Taxonomy Regulation on noise,vibration,dust and pollutants must be complied with.Protection and restoration of biodiversity and ecosystems To demonstrate the requirements for economic activity 3.3,ecologically sensitive or protected areas in the neighbourhood of sites are documented and taken into account as part of the internal environmental risk assessment(environmental due diligence process).Fur-thermore,environmental impact assessments or com-parable audits outside the EU are carried out in the context of a new site or the extension of an existing site,if legally required.In addition,the Group has established environmental management systems in accordance with ISO 14001 at its production sites.During the reporting year,an environmental impact assessment was not required for the charging infra-structure(economic activity 6.15)that was put into operation.Furthermore,the locally applicable BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance27requirements in the construction and approval process according to the DNSH requirements were taken as a basis.The analysis of the DNSH requirements for economic activities 3.3 and 6.15 forms the basis for considering the taxonomy-compliant shares.With regard to eco-nomic activity 6.5,the reductions due to the DNSH requirements of the environmental objective pollution prevention and control were taken into account in the Taxonomy-alignment of revenues and investments.Fulfilment of minimum safeguards An economic activity can only be classified as environ-mentally sustainable within the meaning of the Taxon-omy if it is also conducted in accordance with certain minimum standards that are based on international frameworks.Here,Article 18 of the Taxonomy Regula-tion references the OECD Guidelines for Multinational Enterprises,the United Nations Guiding Principles on Business and Human Rights(including the basic princi-ples and rights from the eight core conventions defined in the International Labour Organizations Declaration on Fundamental Principles and Rights at Work),and the International Bill of Human Rights.The Taxonomy Regu-lation itself does not further specify the standards.The report published by the Platform on Sustainable Finance in October 2022(Final Report on Minimum Safeguards)assists companies with the interpretation of the scope and application of the minimum standards.This report forms the foundation for the application of minimum standards and the associated reporting at the Mercedes-Benz Group.Key issue areas here are human rights and labour rights(see the chapters Social compli-ance and Occupational health and safety),the prevention of corruption and the promotion of fair competition(see the chapters Compliance management system,Combat-ing corruption and Promoting fair competition),and responsible tax practices(see the chapter Tax obliga-tion).The verification of compliance here basically involves demonstrating compliance with the existence of corresponding due diligence processes at the Group level and the fact that no judicial rulings relating to seri-ous violations in the aforementioned areas have been made in the final instance.Reporting on the Taxonomy-aligned proportions of environmentally sustainable economic activitiesThe sections below present information on the propor-tion of revenue,capital expenditure and operating expenditure accounted for by environmentally sustaina-ble economic activities at the Mercedes-Benz Group.The individual figures for revenue,capital expenditure and operating expenditure are precisely allocated to a specific economic activity and environmental objective.The calculations for the key figures are based on the Consolidated Financial Statements in accordance with IFRS.The provision of comparative information,except where concerning the economic activities newly introduced by the delegated acts supplement-ing the Taxonomy Regulation,was legally required in the reporting year.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance28Revenue2023Criteria for a substantial contribution2022Economic activitiesCode1Revenue2Proportion of revenue2Climate change mitigationClimate change adaptationWater Circular economyPollution BiodiversityDNSH criteria(“do no signifi-cant harm”)5Minimum safeguardsProportion of Taxono-my-aligned(A.1)or Tax-onomy-eligi-ble(A.2)revenueCategory:enabling activityCategory:transitional activity in millions of eurosin%Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y/NY/Nin%ETA.TAXONOMY-ELIGIBLE ACTIVITIESA.1 Environmentally sustainable activities(Taxonomy-aligned)Manufacture of low-carbon technologies for transportCCM 3.320,70414%YN/ELN/ELN/ELN/ELN/ELYY10%ETransport by motorbikes,passenger cars and light commercial vehiclesCCM 6.53190%YN/ELN/ELN/ELN/ELN/ELYY0%Infrastructure enabling low-carbon road transport and public transportCCM 6.15.0%YN/ELN/ELN/ELN/ELN/ELYY-ERevenue from environmentally sustainable activities(Taxono-my-aligned)(A.1)21,023140%0%0%0%0%0%YY10%of which enabling activity20,704140%0%0%0%0%0%YY10%E of which transitional activity00%0%0%TA.2 Taxonomy-eligible activities that are not environmentally sustain-able(not Taxonomy-aligned activities)EL;N/EL4EL;N/EL4EL;N/EL4EL;N/EL4EL;N/EL4EL;N/EL4Manufacture of low-carbon technologies for transportCCM 3.3107,04570%ELN/ELN/ELN/ELN/ELN/EL72%Transport by motorbikes,passenger cars and light commercial vehiclesCCM 6.521,56114%ELN/ELN/ELN/ELN/ELN/EL15%Freight transport services by roadCCM 6.61,6831%ELN/ELN/ELN/ELN/ELN/EL1%Sale of second-hand goodsCE 5.44480%N/ELN/ELN/ELELN/ELN/EL-Revenue from Taxonomy-eligible activities that are not environmentally sustainable(not Taxonomy-aligned)(A.2)130,737850%0%0%0%0%0%A.Turnover of Taxonomy-eligible activities(A.1 A.2)151,760990%0%0%0%0%0%B.TAXONOMY NON-ELIGIBLE ACTIVITIES Revenue of Taxonomy non-eligible activities 1,4581%2%Total(A B)153,2181000%1 The Code constitutes the abbreviation of the relevant environmental objective to which the economic activity is eligible to make a substantial contribution.Climate change mitigation:CCM,climate change adaptation:CCA,water and marine resources:WTR,circular economy:CE,pollution prevention and control:PPC,bio-diversity and ecosystems:BIO.2 The key figures were audited in order to obtain“limited assurance”.An exception to this is the total(total A B),which was audited with reasonable assurance as a Group key figure.3 Description:Y Yes,Taxonomy-eligible and Taxonomy-aligned activity with the relevant environmental objective,N No,Taxonomy-eligible but not Taxonomy-aligned activity with the relevant environmental objective,N/EL Not eligible,Taxonomy non-eligible activity for the relevant environmental objective.4 Description:EL Eligible,Taxonomy-eligible activity for the relevant objective,N/EL Not eligible,Taxonomy non-eligible activity for the relevant environmental objective.5 A breakdown of the DNSH criteria has not been provided here,as activities may only be designated as Taxonomy-aligned when any significant effect on the other environmental objectives has been ruled out.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance29The following table shows the scope of the Taxono-my-eligibility and the Taxonomy-alignment for the reve-nue by environmental objective:Revenue proportion/total revenue6 Taxonomy-alignment per objectiveTaxonomy-eligibility per objectiveClimate change mitigation(CCM)14%Climate change adaptation(CCA)0%0%Water and marine resources(WTR)0%0%Circular economy(CE)0%0%Pollution prevention and control(PPC)0%0%Biodiversity and ecosystems(BIO)0%0%Taxonomy-eligibility of revenue For the share of Taxonomy-eligible revenue(under A.in the table Revenue),the Taxonomy-eligible revenue is considered in relation to the total revenue of the Group.In this process,the denominator takes into account the consolidated revenue generated by Group companies that are to be included in the calculations.The revenue,as disclosed in the consolidated statement of income,amounted to 153,218 million in the reporting year(2022:150,017 million)(see Note 5 in the Notes to the Consolidated Financial Statements).The numerator was calculated by examining this reve-nue to determine how much of it was generated in con-nection with the manufacturing,the leasing or the 6 The key figures were audited in order to obtain“limited assurance”.financing of vehicles;the operation of high-power charging stations;or the sale of second hand-goods which were purchased from third parties by the Mercedes-Benz Group.This applies to almost all of the revenue generated by the Mercedes-Benz Group.In the previous year,the revenues from the sale of sec-ond-hand goods,which Mercedes-Benz Group pur-chased from third parties,were assigned to the revenue from Taxonomy non-eligible activities.Since the report-ing year,this revenue has been assigned to the eco-nomic activity 5.4.Taxonomy-alignment of revenueIn order to calculate the Taxonomy-aligned proportion of economic activities(under A.1 in the table Revenue),revenues were examined to determine whether they were generated with low-carbon vehicles in order to assess whether a substantial contribution had been made to climate change mitigation.Compliance with the DNSH criteria was also monitored.For the major proportion of the revenue,in particular from the new and used vehicle business and leasing and sales financing activities,a direct attribution was made of the revenue accounted for by low-carbon vehicles.With regard to other revenue components,especially revenue from the spare parts business and service and maintenance contracts,or attribution of discounts granted for large procurement volumes,it is not possible to directly assign revenue to low-carbon vehicles.In these cases,suitable allocations were therefore used for the various revenue components.These classifications are based on current or historical vehicle sales data for the fleet that is currently on the market and data on production volumes.In the report-ing year,the share of Taxonomy-aligned revenue increased to 14%6.The main reasons for this were an increase in unit sales of all-electric vehicles and the expansion of the product portfolio for low-carbon vehi-cles.The revenues shown below are included as an aggrega-tion across the various economic activities.Revenue 20232022Taxonomy-aligned revenue6 Total revenue Proportion of Taxonomy-aligned revenue6Taxonomy-aligned revenue6 Total revenue Proportion of Taxonomy-aligned revenue6in millions of eurosin millions of eurosin%in millions of eurosin millions of eurosin%Revenue according to IFRS 1520,223136,98715,419136,00811%Other revenue80016,2315W514,009 4%Total21,023153,21814,994150,017 10ckKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance30Capital expenditure2023Criteria for a substantial contribution2022Economic activitiesCode1Capital ex-penditure2Proportion of capital expenditure2Climate change mitigationClimate change adaptationWater Circular economyPollution BiodiversityDNSH criteria(“do no signifi-cant harm”)5Minimum safeguardsProportion of Taxono-my-aligned(A.1)or Taxon-omy-eligible(A.2)Capital expenditure Category:enabling activityCategory:transitional activity in millions of eurosin%Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y/NY/Nin%ETA.TAXONOMY-ELIGIBLE ACTIVITIESA.1 Environmentally sustainable activities(Taxonomy-aligned)Manufacture of low-carbon technologies for transportCCM 3.34,60521%YNN/ELN/ELN/ELN/ELYY20%ETransport by motorbikes,passenger cars and light commercial vehiclesCCM 6.55853%YN/ELN/ELN/ELN/ELN/ELYY2%Infrastructure enabling low-carbon road transport and public transportCCM 6.15300%YN/ELN/ELN/ELN/ELN/ELYY-ECapital expenditure of environmentally sustainable activities (Taxonomy-aligned)(A.1)5,220240%0%0%0%0%0%YY22%of which enabling activity4,635220%0%0%0%0%0%YY20%E of which transitional activity00%0%0%TA.2 Taxonomy-eligible activities that are not environmentally sustain-able(not Taxonomy-aligned activities)EL;N/EL4EL;N/EL4EL;N/EL4EL;N/EL4EL;N/EL4EL;N/EL4Manufacture of low-carbon technologies for transportCCM 3.34,06519%ELELN/ELN/ELN/ELN/EL22%Transport by motorbikes,passenger cars and light commercial vehiclesCCM 6.512,18657%ELN/ELN/ELN/ELN/ELN/EL56pital expenditure of Taxonomy-eligible but not environmentally sustainable activities(not Taxonomy-aligned activities)(A.2)16,251760%0%0%0%0%0 x%A.Capital expenditure of Taxonomy-eligible activities(A.1 A.2)21,4711000%0%0%0%0%00%B.TAXONOMY NON-ELIGIBLE ACTIVITIES Capital expenditure of Taxonomy non-eligible activities 00%0%Total(A B)21,4711000%1 The Code constitutes the abbreviation of the relevant environmental objective to which the economic activity is eligible to make a substantial contribution.Climate change mitigation:CCM,climate change adaptation:CCA,water and marine resources:WTR,circular economy:CE,pollution prevention and control:PPC,biodi-versity and ecosystems:BIO.2 The key figures were audited in order to obtain“limited assurance”.An exception to this is the total(total A B),which was audited with reasonable assurance as a Group key figure.3 Description:Y Yes,Taxonomy-eligible and Taxonomy-aligned activity with the relevant environmental objective,N No,Taxonomy-eligible but not Taxonomy-aligned activity with the relevant environmental objective,N/EL Not eligible,Taxonomy non-eligible activity for the relevant environmental objective.4 Description:EL Eligible,Taxonomy-eligible activity for the relevant objective,N/EL Not eligible,Taxonomy non-eligible activity for the relevant environmental objective.5 A breakdown of the DNSH criteria has not been provided here,as activities may only be designated as Taxonomy-aligned when any significant effect on the other environmental objectives has been ruled out.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance31The following table shows the scope of the Taxono-my-eligibility and the Taxonomy-alignment for the capi-tal expenditure by environmental objective:Proportion of capital expenditure/total capital expenditure1Taxonomy-alignment per objectiveTaxonomy-eligibility per objectiveClimate change mitigation(CCM)24v%Climate change adaptation(CCA)0%0%Water and marine resources(WTR)0%0%Circular economy(CE)0%0%Pollution prevention and control(PPC)0%0%Biodiversity and ecosystems(BIO)0%0%1 The key figures were audited in order to obtain“limited assurance”.Taxonomy-eligibility of capital expenditure For the share of Taxonomy-eligible capital expenditure(under A.in the table Capital expenditure),the Taxono-my-eligible capital expenditure is considered in relation to the total relevant capital expenditure of the Group.All additions to intangible assets,property,plant and equipment and right-of-use assets as defined in IFRS 16 in accordance with the statements of changes in non-current assets as well as additions to equipment on operating leases,including the additions to the named assets as part of company acquisitions are taken into account in the denominator.Equipment on operating leases only takes into account vehicles acquired by dealers from outside the Group.Goodwill acquired is not taken into account here.If a divestment is planned,capital expenditure on non-current assets is only taken into account until the point in time at which they were first classified as held for sale in accordance with IFRS 5.The relevant additions to the assets to be taken into account amounted to 21,471 million in the reporting year(2022:18,369 million)(see Notes 11,12 and 13 in the notes to the consolidated financial state-ments).Additions that result from a purchase in the context of a company acquisition are of secondary importance in the reporting year.According to the Commission Notice(2022/C 385/01)that the European Commission published on 6 October 2022,the definition of an economic activity is charac-terized by the achievement of an output.In line with the Mercedes-Benz Groups business model,the numerator was therefore determined by examining whether capital expenditure is made in connection with the manufacturing of vehicles,the establishment of the charging infrastructure or the implementation of trans-port solutions for people and goods.This applies to nearly all of our investments.Taxonomy-alignment of capital expenditure To calculate the Taxonomy-aligned proportion of eco-nomic activities(under A.1 in the table Capital expendi-ture),capital expenditure was examined to determine the extent to which it was associated with low-carbon vehicles(economic activities 3.3 and 6.5)and with high-power charging stations(economic activity 6.15)in order to assess whether a substantial contribution had been made to climate change mitigation.Table Capital expenditure(p.121)shows the Taxonomy-aligned capital expenditure,aggregated across all economic activities.Compliance with the DNSH criteria was also monitored.The size of the share of Taxonomy-aligned expenditure of total capital expenditure is mainly due to the dispro-portionately low share of Taxonomy-aligned vehicles in the additions to the equipment on operating leases.As a result,this share only partially reflects our invest-ments in sustainable products for the future.When looking at Taxonomy-aligned investments in intangible assets(mainly in capitalized development costs)and property,plant and equipment of the Mercedes-Benz Group shows much higher shares of Taxonomy-aligned capital expenditure(table Capital expenditure).All of the capital expenditure of the Mercedes-Benz Group during the reporting year included in the numera-tor of the economic activities 3.3 and 6.5 relates to assets or processes in the context of already existing technologies which are connected to already existing Taxonomy-aligned economic activities 3.3 and 6.5.For most of the capital expenditure relating to the industrial business,a direct attribution was made to all-electric vehicle projects.In the case of capital expenditure in low-carbon plug-in hybrids and assets that are used to produce both vehicles with combustion engines and low-carbon vehicles,suitable allocations based on planned vehicle sales figures for the respective model series or vehicle platforms were used.Capital expendi-ture that is not directly related to the manufacturing BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance32process was allocated on the basis of the planned unit sales figures for low-carbon vehicles.With regard to financial services,it is possible to match the additions to equipment on operating leases directly to low-carbon vehicles.At 24%7,the percentage of Taxonomy-aligned capital expenditure was at the prior-year level.There was a sharp addition to capitalized development costs,the effect of which was offset by the higher total capital expenditure compared to the previous year.CapEx plan for economic activity 6.15A capital expenditure(CapEx)plan that has been adopted by management must exist for capital expendi-ture that leads to an expansion of Taxonomy-aligned economic activities or enables the conversion of Taxon-omy-eligible economic activities into Taxonomy-aligned economic activities.At the Mercedes-Benz Group this affects capital expenditure for economic activity 6.15 Infrastructure enabling low-carbon road transport and public transport(charging infrastructure)that is expected to fall under the environmental objective cli-mate change mitigation.7 The key figures were audited in order to obtain“limited assurance”.The Board of Management of Mercedes-Benz Group AG has adopted the planned capital expenditure for the construction of Mercedes-Benz own high-power charg-ing stations as part of the corporate planning covering the period 2024 to 2028.The CapEx plan contains total capital expenditure in the amount of around 1.4 billion(whereof 30 million are accounted for in the reporting year).Capital expenditure20232022Taxonomy-aligned capital expenditure1 Total capital expenditure Proportion of Taxonomy-aligned capital expenditure1Taxonomy-aligned capital expenditure1 Total capital expenditure Proportion of Taxonomy-aligned capital expenditure1 in millions of eurosin millions of eurosin%in millions of eurosin millions of eurosin%Intangible assets2,7644,51361%1,874 3,480 54%Property,plant and equip-ment1,7683,71848%1,507 3,421 44%Right-of-use assets 1304692891 923 42%Equipment on operating leases55812,7714(5 10,545 3%Total5,22021,47124%4,057 18,369 22%1 The key figures were audited in order to obtain“limited assurance”.BackKEY FIGURESSOCIALFOREWORDENVIRONMENTGOVERNANCEFURTHER INFORMATIONContentMercedes-Benz Group|Sustainability Report 2023 Sustainable corporate governance33Operating expenditure2023Criteria for a substantial contribution2022Economic activitiesCode1Operating expenditure2Proportion of operating expenditure2Climate change mitigationClimate change adaptationWater Circular economyPollution BiodiversityDNSH criteria(“do no signifi-cant harm”)5Minimum safeguardsProportion of Taxono-my-aligned(A.1)or Tax-onomy-eligi-ble(A.2)operating expenditureCategory:enabling activityCategory:transitional activity in millions of eurosin%Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y;N;N/EL3Y/NY/Nin%ETA.TAXONOMY-ELIGIBLE ACTIVITIESA.1 Environmentally sustainable activities(Taxonomy-aligned)Manufacture of low-carbon technologies for transportCCM 3.32,33632%YN/ELN/ELN/ELN/ELN/ELYY35%EOperating expenditure of environmentally sustainable activities (Taxonomy-align
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Environmental,Social and Governance Report 2023Li Auto Inc.02Content04Low-Carbon Operation and Green Ambition01Compliant Operation and Responsible Governance02Innovative Pioneer and Outstanding Product03Inclusive Care and Shared GrowthIntroductionCorporate GovernanceInnovation and Development0914151720263135Risk ManagementProduct Quality and SafetyBusiness EthicsSupply Chain ManagementCybersecurityUser Service05Community Contributionfor a Better Society6769Climate Strategy Sustainable Product and TechnologyGreen Production and TransportationGreen Office52556065About the Report About UsSustainability Practices2023 ESG Highlights2023 Honorary Accolades0304050607AppendixESG Key Performance Indicators HKEX ESG Reporting Guide Content IndexGRI IndexAttracting TalentTalent GrowthEnsuring Safety and Health71808239424504Low-Carbon Operation and Green AmbitionCompliant Operation and Responsible Governance0102Innovative Pioneerand Outstanding Product03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendixIntroductionCorporate Social ResponsibilityUser KindnessAbout the ReportIntroductionReporting ScopeBasis of PreparationSources of InformationReport Approval and AccessDisclaimerThe Data is mainly collected from business entities in Beijing and Changzhou.Entities in Shanghai provide data on revenues,R&D expenditures,and employees for this report.1 23456SDGs,Sustainable Development Goals,include 17 global development goals adopted by the United Nations to guide global development from 2015 to 2030.ISSB,International Sustainability Standards Board.GRI,Global Reporting Initiative.MSCI,Morgan Stanley Capital International.S&P DJSI,S&P Dow Jones Sustainability Indices.Parts of this report are forward-looking subject to uncertainties,which could cause actual results to differ materially from those presented.The Company undertakes no obligation to update any forward-looking statements provided in this report.This report has been reviewed and approved by the Board of Directors on April 12,2024,who are responsible for the authenticity and validity of the information contained herein.This report is available on the website of HKEX(www.hkexnews.hk)and the Companys IR website(https:/)in simplified Chinese,traditional Chinese and English.This report is compiled in accordance with the Environmental,Social and Governance Reporting Guide in the Appendix C2 to the Main Board Listing Rules of The Stock Exchange of Hong Kong Limited(HKEX),as well as the principles of Materiality,Quantitative,Balance,and Consistency therein.This Report also follows the core framework of the GRI2 Sustainability Reporting Standards.Furthermore,this report draws reference from mainstream ESG rating indices such as MSCI3 and S&P DJSI4 as well as incorporates the recommendations of SDGs5 and ISSB6 into its drafting process.This is the 2023 Environmental,Social and Governance Report(“ESG Report”)released by Li Auto Inc.(a company controlled through weighted voting rights and incorporated in the Cayman Islands with limited liability).It aims to showcase the ESG strategies,management and practices of Li Auto Inc.,its main subsidiaries and consolidated affiliated entities as listed in its annual report(the“Company,”“Li Auto,”or“we”).All materials and data referred in this report are sourced from our official documents,statistical reports and financial reports,which have been collected,summarized and reviewed by relevant departments.Unless otherwise stated,the reporting currency herein is Renminbi(RMB).The materials and data disclosed in this report cover Li Auto Inc.,its main subsidiaries and consolidated affiliated entities as listed in its annual report1.The information covers the period from January 1,2023 to December 31,2023(the “reporting period,”“this year,”or“2023”),unless otherwise stated.0304Low-Carbon Operation and Green AmbitionCompliant Operation and Responsible Governance0102Innovative Pioneerand Outstanding Product03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendixIntroductionLi Auto Inc.is a leader in Chinas new energy vehicle(NEV)market.Our mission is to“Create a Mobile Home,Create Happiness”(“创造移动的家，创造幸福的家”).We design,develop,manufacture,and sell premium smart electric vehicles.Through innovations in product,technology and business model,we provide families with safe,comfortable and convenient products and services.About UsIn 2018,Li Auto launched its first extended-range electric vehicle the six-seat premium SUV Li One.In 2022,the Company launched three other extended-range electric vehicles the six-seat flagship family SUV Li L9,the six-seat premium family SUV Li L8,and the five-seat flagship family SUV Li L7.As of December 31,2023,the cumulative deliveries of Li Auto had surpassed 600,000 vehicles.In March 2024,Li Auto officially launched Li MEGA,its high-tech flagship family MPV.As the Companys first high-voltage battery electric vehicle,Li MEGA provides big families with a blend of energy replenishment experience as efficient as traditional ICE vehicle refueling,next-generation design and exceptionally low drag coefficient,roomy and comfortable space,flagship-level performance and safety features,and superior intelligent experience.0404Low-Carbon Operation and Green AmbitionCompliant Operation and Responsible Governance0102Innovative Pioneerand Outstanding Product03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendixIntroductionLi Auto has integrated sustainability practices into corporate strategies and operations.We identify risks and opportunities in business operations while implementing sustainable development strategies with actions from five fronts,namely Sustainability Practices“Compliant Operation and Responsible Governance,”“Innovative Pioneer and Outstanding Product,”“Inclusive Care and Shared Growth,”“Low-Carbon Operation and Green Ambition,”and“Community Contribution for a Better Society.”In pursuit of corporate vision and mission,we honor our social responsibilities in response to the SDGs,thus contributing to sustainable development of society as a whole.Innovative Pioneer and Outstanding ProductCompliant Operation and Responsible GovernanceLow-Carbon Operation and Green AmbitionCommunity Contribution for a Better SocietyInclusive Care and Shared GrowthAreasSDGsOur RisksOur ActionsOur OpportunitiesTechnology R&D risksIntellectual property right risksProduct quality risksUser safety risksSupply chain risksCustomer relationship management risksSmart driving technologiesInnovation layoutIndustrial resource integrationIncrease of reliability and business capacity of supply chainCoordinated user innovationStrengthening technology research and developmentPromoting industry cooperationSafeguarding intellectual property rightsImproving the quality management systemSupplier ESG managementImproving user satisfactionReview marketing contentESG governance risksBusiness ethics risksLitigation risksInformation security risksPrivacy leakage risksImproving corporate governance and ESG governance structure Enhancing communication with stakeholdersEnsuring compliant managementEnsuring system securityProtecting customers privacy securityESG strategyRisk control systemManagement model innovationPolicy and regulatory risksMarket risksEnergy risksClimate change risksCarbon emissions risks in the production processWater pollution risksWaste management risksNatural disaster risksSetting up carbon neutrality working groupPromoting research and development of green materialsImproving the environmental management systemRegulating pollutant dischargeEvaluate and calculate the carbon footprint of productsBuilding green factoriesEncouraging green officesFormulation of climate change contingency plansProduction cost reduction by using renewablesResource access and allocation optimizationMaterials recyclingGreen product R&DReputational risksPublic safety risksProviding relief for natural disastersSupporting people in straitened circumstancesOrganizing educational support activitiesSupporting charity activities initiated by usersEnhancement of social value of brandEmployment generationDedication to philanthropyIllegal employment risksTalent drain risksHuman cost risksBenefit guarantee risksEqual opportunity risksSafe production risksOccupational health risksDiverse talent teamHuman capital empowermentUse of technological toolsMulti-channel knowledge accessEHS capability enhancementEqual and diverse talent recruitmentSmooth and effective employee communicationReasonable compensation and benefitsComplete training systemEqual opportunities for promotionEHS management system building0504Low-Carbon Operation and Green AmbitionCompliant Operation and Responsible Governance0102Innovative Pioneerand Outstanding Product03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendixIntroduction06RMB10.59 billion invested in innovation and R&D2023 ESG HighlightsLow-Carbon Operation and Green AmbitionCommunity Contribution for a Better SocietyCertified to ISO 37001-Anti-Bribery Management SystemEmployees come from 15 countries and regions,and 36 ethnic minoritiesInclusive Care and Shared GrowthCompliant Operation and Responsible GovernanceInnovative Pioneer and Outstanding ProductA total philanthropy contribution of over RMB33 millionEnergy consumption of production was 0.096 tce per vehicle,with intended target accomplishedZero money laundering,insider trading,conflict of interest or any other violations of the code of business ethics casesCertified to ISO 27001-Information Security Management SystemZero user privacy data breach incidentsMore than 16,000 new hires34,729 enrollments in employee professional trainingThe construction of the ISO 45001-Occupational Health and Safety Management System completed by all manufacturing basesWater consumption of production is 2.9 tonnes per vehicle,with intended target accomplished99.9%test drive satisfaction rate,99.9%product delivery satisfaction rate,99.8ter-sales service satisfaction rateR&D workforce of over 6,700More than 2,700 quality standards met prior to delivery29,834 employee enrollments in quality and safety training,totaling 44,752 training hours93.7%of Li Autos direct suppliers have obtained the ISO 14001-Environmental Management System certification,80.9%for the ISO 45001-Occupational Health and Safety Management System certification and 99.4%for the IATF 16949/ISO 9001-Quality Management System certificationOver 95%supplier partner satisfaction rate100%of user complaints handled and resolved100%of manufacturing bases in production certified to ISO 14001-Environmental Management SystemCertified to ISO 50001-Energy Management SystemConduct carbon footprint accounting for the entire vehicle lineup and lead the industry for carbon emissions assessment in the China Green Car Assessment Programme(C-GCAP)98.8%of water resources reusedAn annual electricity saving of 723 MWhReduce carbon emissions by 762,345 kg and 622,872 kg through employees use of NEV and green flight respectivelyThe construction of the renewable energy project of Phase II of the Beijing R&D headquarters can reduce 30,272.3 tonnes of CO2 emissions in the 50-year service life,accounting for 17.6%of the total carbon emissions of the buildingZero administrative punishment related to environmental or ecological issues04Low-Carbon Operation and Green AmbitionCompliant Operation and Responsible Governance0102Innovative Pioneerand Outstanding Product03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendixIntroduction072023 Honorary AccoladesLi L8 and Li L7 achieved the highest rating(G rating)in the China Insurance Automotive Safety IndexChina Automotive Engineering Research Institute Co.,Ltd.Li L9 achieved a five-star smartstar rating in the IVISTA China Intelligent Vehicle IndexChina Automotive Engineering Research Institute Co.,Ltd.Li L9 achieved a five-star rating in the China-New Car Assessment Program(C-NCAP)with the highest scoreChina Automotive Technology and Research Center2023 Top 50 Leading Artificial Intelligence Enterprises 2023QbitAIMost Popular Listed CompaniesFUTUNew Energy Enterprise of the YearChinas Most Admired Companies 2023FortuneCSA score of 42S&P DJSIAAA MSCI ESG RatingMSCI MostIn 2023 Global Talent Attractive EmployerLinkedInProvincial-Level Leading Enterprise for Green Development Department of Ecology and Environment of Jiangsu Province and Jiangsu Federation of Industry and CommerceEnvironmental Protection Demonstration Enterprise and InstitutionBureau of Ecology and Environment of Changzhou MunicipalityLi L9 ranked first in 2023 J.D.Power China New Energy Vehicle Initial Quality Study(NEV-IQS)for Premium Plug-in Hybrid Market SegmentJ.D.PowerTop 100 ESG Best Practices among Chinas Listed Companies 2023WindExcellence Patent of the 24th China Patent AwardChina National Intellectual Property AdministrationProvincial-Level Green FactoryDepartment of Industry and Information Technology of Jiangsu Province2023 Hurun Global 500Hurun Research InstituteLi L8 and Li L7 achieved a five-star rating in the China-Automobile Health Index(C-AHI)China Automotive Engineering Research Institute Co.,Ltd.and International Traffic Medicine Association21st Century Business Herald04Low-Carbon Operation and Green AmbitionCompliant Operation and Responsible Governance0102Innovative Pioneerand Outstanding Product03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendixIntroduction08Li Auto firmly believes in the principle of compliant operations,pays attention to operational risks,strictly adheres to the bottom line of business ethics,and strengthens cybersecurity measures.Meanwhile,we actively communicate with internal and external stakeholders to learn their expectations and demands,consistently improve operational transparency and accountability to ensure the Companys stable and sustainable development.Compliant Operation and Responsible GovernanceCorporate Governance09141517Risk ManagementBusiness EthicsCybersecurityIntroductionCompliant Operation and Responsible Governance010104Low-Carbon Operation and Green Ambition02Innovative Pioneerand Outstanding Product03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendixas corporate governance and strategic direction.The Sixth Amended and Restated Memorandum of Association of Li Auto Inc.expressly requires that the quorum of directors present at a board meeting shall be a simple majority of the directors then in office,i.e.,not less than 50%of the directors shall be present.In 2023,our Board of Directors held five meetings with a 100%director attendance rate.Li Auto has a well-established procedure for electing and appointing directors.Every director shall be subject to retirement by rotation at least once every three years in compliance with the requirements of the Hong Kong Listing Rules and the Sixth Amended and Restated Memorandum of Association of Li Auto Inc.We have formulated the Director Nomination Policy to set forth the procedures for electing board members.When appointing new board members,we select candidates through a variety of channels,including but not limited to,internal promotion,reappointment,recommendation from other members of management,and external recruitment.Li Auto sets compensation policies and programs for directors and senior executives,including paying fixed compensation,as well as variable compensation adjusted for performance 1.1 Corporate GovernanceLi Auto has established a sophisticated,compliant and efficient corporate governance framework with a clear division of rights and responsibilities with the Board of Directors as the highest leadership and decision-making body under the Company Law of the Peoples Republic of China,the Nasdaq Stock Market LLC Rules,and the Rules Governing the Listing of Securities on the Stock Exchange of Hong Kong Limited,as well as other applicable laws.Our Board of Directors coordinates and supervises major matters in the Companys business activities and has established three committees,namely,the Audit Committee,the Compensation Committee,and the Nominating and Corporate Governance Committee to ensure efficient operation.More detailed information of responsibilities of each subordinate committee is available on our IR website and the website of the stock exchanges.1.1.1 Management of the Board of DirectorsBoard EffectivenessLi Auto holds regular board meetings to facilitate directors consensus and decision-making plans on key matters such targets,such as performance bonuses and share-based payment compensation,etc.,to encourage directors and senior executives to create long-term value.In addition,we have established the Clawback Policy,i.e.,the Company has the right to claw back compensation incentives paid under certain circumstances to ensure compliance and due diligence of the directors and senior executives while protecting the interests of all shareholders.Li Auto internally evaluates the performance of the Board of Directors in its structure,effectiveness and operation mechanism through questionnaires.Li Autos Evaluation Mechanisms of the Board of DirectorsLi Autos board structureBoard of DirectorsAudit CommitteeCompensation CommitteeBoard structure Procedures for electing directors Committee structure Expertise and professional background of independent directorsBoard effectiveness Board responsibilities Focus on the Companys strategies Oversee the Companys risksBoard operating mechanisms Communication channels between directors and management Board meeting resolutions Review the annual operation plans09Nominating and Corporate Governance CommitteeIntroductionCompliant Operation and Responsible Governance0104Low-Carbon Operation and Green Ambition02Innovative Pioneerand Outstanding Product03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix10Board Independence and DiversityWe believe that board independence and diversity are key pillars to safeguard shareholders interests and maintain stable corporate development.By the end of the reporting period,the Board of Directors of Li Auto consisted of eight members,including two non-executive directors and three independent non-executive directors who account for more than one-third of the members.Li Auto has a sound board independence assessment mechanism and has formulated the Li Auto Inc.Policy for Obtaining Independent Views and Opinions which requires the non-executive directors to perform their independent supervision function while providing independent opinions.The Board of Directors regularly reviews the implementation and effectiveness of this independence assessment mechanism.The independence of the independent non-executive directors is assessed by the Nominating and Corporate Governance Committee.We have formulated the Li Auto Inc.Board Diversity Policy,which stipulates that the Company shall factor into their gender,age,professional expertise,industry experience and educational background when appointing board members,and assess board diversity regularly.NameLi XiangMa DonghuiLi TieWang XingFan ZhengXiao XingZhao HongqiangJiang ZhenyuGenderMaleMaleMaleMaleMaleFemaleMaleMalePosition/ResponsibilityProfessional expertiseIndustry expertise1Risk management expertise2Financial management expertise3Directors served a company in the Automotive industry classified by the Global Industry Classification Standard(GICS).123It refers to specialized knowledge of risk management or previous experience in a position related to risk management.It refers to specialized knowledge of finance and accounting,or previous experience in a position related to finance and auditing.-Chairman of the Board and Chief Executive OfficerExecutive Director and PresidentExecutive Director,Chief Financial Officer,and Compliance Officer Independent Non-Executive DirectorNon-Executive DirectorIndependent Non-Executive DirectorNon-Executive DirectorIndependent Non-Executive DirectorLi Autos directorsIntroductionCompliant Operation and Responsible Governance0104Low-Carbon Operation and Green Ambition02Innovative Pioneerand Outstanding Product03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix11At Li Auto,we are committed to the concept of sustainable development by improving ESG management systems to promote environmental and social harmony,thus improving ESG performance,and creating sustainable corporate value.1.1.2 ESG ManagementThe Board of Directors and the Audit Committee of Li Auto are jointly tasked with reviewing and approving ESG strategies and policies.In 2023,the scope of responsibilities at all levels of the ESG management structure has been further clarified,and a number of ESG-related groups have been newly established and improved,with the governance structure and work lines gradually clarified and improved.Li Autos ESG management structureReviewing ESG strategies,policies,targets,annual plans,and mid-long-term plans together with the Board of Directors,as well as supervising their implementation.On the basis of existing responsibilities,the Audit Committee assumes additional responsibilities relating to ESG-related reviews and inspections,including developing ESG-related strategies,frameworks,principles,policies,and systems;overseeing the implementation of ESG targets,reviewing the practices and performance for legal and regulatory compliance;monitoring Key Performance Indicators(KPIs)set by the Company on ESG priorities and ESG performance;and reporting and making recommendations to the Board of Directors on the above matters.Audit CommitteeDeveloping ESG targets and working plans,improving communication with stakeholders,identifying ESG-related risks and opportunities,and reporting to the Audit Committee.Sales,Legal and Risk Management,Capital Markets,R&D,Manufacturing,Quality and Safety,Finance,Supply Chain,Human Resources,IT Systems,Administrative Management,and External Affairs,etc.Coordinating the implementation of working plans and advancing specific tasks under the guidance of the ESG Working Group.ESG Working GroupESG-Related ModulesBoard of DirectorsLeading and being responsible for ESG management,identifying ESG management framework,reviewing ESG strategies,policies,and targets,and ensuring the building of effective ESG risk management and internal control systems.ReportApprove and superviseReportApprove and superviseReportApprove and superviseIntroductionCompliant Operation and Responsible Governance0104Low-Carbon Operation and Green Ambition02Innovative Pioneerand Outstanding Product03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix121.1.3 Stakeholder Communication Li Autos stakeholder communication mechanismsStakeholdersIssues of ConcernIndustries/associationsIntellectual property rights management Innovative development Green product Cooperative developmentProject cooperationTechnological exchangesResult sharingShareholders and investorsInformation disclosureOngoing and stable business growthCorporate governanceInnovative developmentBusiness ethicsRisk managementGeneral meeting of shareholdersNon-deal roadshow and IR meetingRegular report and announcementInterim announcement and noticeCompany websiteInvestor mailboxNews releaseEmployeesLegal employmentTraining and developmentEmployee benefit guaranteeOccupational health and safetyEmployee satisfaction surveyInternal OA systemInternal meetingEmployee complaint and feedbackInternal and external trainingRegular research and feedbackAdvocating of corporate cultureEmployee care activitiesUsersUser service and satisfactionProduct quality and safetyInformation security and privacy protectionOfficial AppWeChat official accountUser satisfaction surveyProduct survey and feedbackUser complaint and handlingOnline and offline activity promotionCompany website and interactions on social mediaSuppliersHonest operationMutual benefitSupply chain managementSupply chain risk responseProduct quality and safetyProject procurementSupplier contract and agreementSupplier audit and evaluationSupplier empowerment and collaborationOther supplier communication activitiesMediaInformation transparencyCompliant operationInformation security and privacy protectionResponsible marketingNews releaseExclusive interviewPress conferenceCompany website and interactions on social mediaGovernments and regulatorsRegulatory complianceCompliant operationInformation securityBusiness ethicsJob creationGreen productInformation disclosureDaily communication and report Supervision and inspectionVisit receptionEnvironmentEnergy use and managementSustainable productGreen production and transportationWater managementEmissions managementNEV-related technology and product R&D Environmental data disclosureRegular release of ESG reportCultivation of users low-carbon awarenessCommunitiesCharity programsCommunity investmentVolunteer activitiesCommunity activitiesCharitable activitiesCompany website and interactions on social mediaCommunication FormsLi Auto fully understands the implications of stakeholders opinions and expectations on corporate operations and growth.We highly value communication and exchanges with stakeholders,put in place diverse communication channels,and accept their supervision.IntroductionCompliant Operation and Responsible Governance0104Low-Carbon Operation and Green Ambition02Innovative Pioneerand Outstanding Product03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix13Li Auto diligently identifies and manages sustainability issues,actively seeks feedback and suggestions of stakeholders.In 2023,following the three steps of“identification-screening and assessment-review and confirmation”,we reviewed and adjusted material issues,and reported the updated prioritization of material issues and the material issues matrix to the Board of Directors.1.1.4 Materiality AssessmentIdentification process of material issuesLi Autos material issues matrixThe distribution of Li Autos material issues Environmental Social GovernanceImportance to Li AutoImportance to stakeholdershighlowModerately high24367891051111213141615171819IdentificationIn accordance with HKEXs Environmental,Social and Governance(ESG)Reporting Guide and the GRI Sustainability Reporting Standards,we have comprehensively categorized material ESG issues and focuses of stakeholders.Through benchmarking practices of peers both domestically and internationally,we have identified 19 material ESG priorities.Screening and assessmentBased on the results of stakeholder questionnaire surveys,with reference to assessment requirements of ESG ratings and indices(such as MSCI,S&P DJSI,etc.)in capital markets,we prioritized the issues from both“importance to Li Auto”and“importance to stakeholders,”and produced Li Autos material issues matrix in 2023.Review and confirmationThe ESG Working Group is responsible for reviewing and confirming the material ESG issues identified in the above assessment process,reporting them to the Board,and making recommendations on the final determination of the material issues.ImportanceIssueCategoryLocationhighVery highExtremely high1.3 2.22.4 1.4 1.12.33.32.13.14.2Business EthicsProduct Quality and SafetyUser ServiceCybersecurityCorporate GovernanceSupply Chain ManagementEnsuring Safety and HealthInnovation and DevelopmentAttracting TalentSustainable Product and TechnologyGovernanceSocialSocialGovernanceGovernanceSocialSocialSocialSocialSocial1.Business ethics2.Product quality and safety3.User service and satisfaction4.Information security and privacy protection5.Corporate governance6.Sustainable supply chain management7.Occupational health and safety8.Innovative development9.Talent attraction and retention10.Sustainable product and technologyModerately highVery highExtremely highIntroductionCompliant Operation and Responsible Governance0104Low-Carbon Operation and Green Ambition02Innovative Pioneerand Outstanding Product03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix11.Risk management12.Talent training and development13.Emissions management14.Employees rights and welfare15.Climate change and carbon emissions16.Energy management17.Diversity,equity and inclusion18.Community welfare 19.Water managementGovernanceSocialEnvironmentalSocialEnvironmentalEnvironmentalSocialSocialEnvironmental1.23.24.33.14.14.33.1Risk ManagementTalent GrowthGreen Production and TransportationAttracting TalentClimate StrategyGreen Production and TransportationAttracting TalentCorporate Social ResponsibilityGreen Production and Transportation5.14.3141.2 Risk ManagementLi Auto prioritizes risk management and internal control which it considers as the core of corporate management.Li Auto has established an organizational structure for risk management with a clear division of responsibilities.The Board of Directors assumes the highest decision-making authority for establishing and implementing the risk management system as well as for developing the overall objectives of risk management.The Audit Committee reviews the establishment and implementation of the Companys risk management system.The Supervision and Management Working Group,under the Audit Committee,supervises the implementation of the Companys annual risk management plan and the major risk identification and response priority determination.The Legal Affairs and Risk Management Department coordinates the implementation of risk prevention and control measures by relevant business units.Li Auto has set a risk response and management structure featuring“three lines of defense”to ensure the execution of risk management agendas comprehensively.In 2023,Li Auto carried out the Enterprise Risk Management(ERM)project,revised the Li Auto Inc.Risk Management Policies,the Li Auto Inc.Internal Control System and other systems,and optimized the risk management and internal control system covering risk identification,risk assessment and risk response.Additionally,we carried out an annual audit program for the risk management and internal control system to ensure the effectiveness of the system.As of the end of the reporting period,Li Auto had listed the risks in five major areas,including strategic risks,compliance risks,operational risks,financial risks and corruption risks.We have incorporated a number of ESG risks into our risk management system,including product quality,information security,occupational health and safety,and climate change risks.We manage them in a unified way and effectively improve our capability to address ESG risks.We carry out continuous risk management training for all employees,including publicizing risk management concepts and methods and sharing typical risk cases,to improve employees sensitivity to risks and participation in risk responses.Li Autos risk response and management structureList of Li Autos major risks in 2023The risk management and internal control systemRisk identificationRisk assessmentRisk responseDraw up a list of corporate-level risks by regularly carrying out risk identifications.Assess the impact of risks,identify key risks of the year and analyze causes for the risks.Develop targeted risk response programs and follow-up plans.Risk categoriesRisks Strategic management risks R&D and technology risks Organizational and cultural risks Climate change risksStrategic risks Information security risks Intellectual property rights risks Trade secret risksCompliance risks Investment risks Procurement risks Human resource risks Product quality risks Occupational health and safety risksOperational risks Financial risks Tax risks Financial accounting and reporting risks Budget management riskFinancial risks Litigation and dispute risks Operational fraud risks Job misappropriation risksCorruption risksThe first line of defenseThe second line of defenseThe third line of defenseBusiness departments ranging from R&D,procurement,production,and manufacturing to sales and user servicesInternal control and compliance teamsInternal audit and supervisory teams Undertake the responsibility of controlling business risks;Implement specific work relating to risk management;Participate in the annual corporate risk assessments;Report regularly to the Supervision and Management Working Group on risk management and control.Independently supervise risk management and control performance across all departments and business areas of the Company;Timely investigate and deal with employee violations.Coordinate the establishment of the risk management system;Manage major risks at the corporate level;Review internal systems and processes to control risks by establishing internal control systems;Organize,coordinate and promote the establishment of compliance management systems;Conduct compliance review of major issues.IntroductionCompliant Operation and Responsible Governance0104Low-Carbon Operation and Green Ambition02Innovative Pioneerand Outstanding Product03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix151.3 Business EthicsLi Auto constantly strengthens its business ethics governance,with zero tolerance for all misconducts that violate business ethics,and actively fosters the culture of integrity.Li Auto upholds business ethics with high standards and has formulated the Li Auto Inc.Code of Business Conduct and Ethics,the Li Auto Inc.Anti-bribery and Anti-corruption Compliance Policies,the Li Auto Inc.Whistle-blowing Policies and Procedures,the Li Auto Inc.Gift Giving and Hospitality Compliance Management System,the Li Auto Inc.Commercial Sponsorship Compliance Management System,the Li Auto Inc.Business Partner Anti-bribery Compliance Management System,and other business ethics management systems,1.3.1 Business Ethics Governancedrawing on the Company Law of the Peoples Republic of China,the Anti-Unfair Competition Law of the Peoples Republic of China,the Anti-monopoly Law of the Peoples Republic of China,the Foreign Corrupt Practices Act,the Sarbanes-Oxley Act 2002,and other advanced international laws and regulations.Meanwhile,Li Auto has established a business ethics governance system comprising the Board of Directors,the Strategic Management Committee,and the Legal Affairs and Risk Management Department.The Board of Directors fully supervises and reviews the building of business ethics systems and practices in this regard.In addition,the Working Group for Clean Workplace under the Strategic Management Committee is responsible for guiding,supervising and inspecting the Companys business ethics and code of conduct,improving business ethics systems,fostering a culture of honesty,and investigating and punishing any violations of discipline.Li Auto adopts a zero-tolerance policy for business ethics misconducts.We have defined all violations,potential violations and punishment mechanisms,including bribery,corruption,unfair competition,and conflicts of interest.Li Auto carries out special anti-bribery audits within the Company every year and realizes closed-loop management by promoting reforms through investigation in response to problems found in the audits.During the reporting period,Li Auto was certified to the ISO 37001-Anti-Bribery Management Systems.In 2023,we further clarified our code of business ethics and requirements for all employees and suppliers.We signed integrity and compliance terms with all employees and required all suppliers to sign the General Procurement Rules,which contains integrity compliance clauses.IntroductionCompliant Operation and Responsible Governance0104Low-Carbon Operation and Green Ambition02Innovative Pioneerand Outstanding Product03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix16We insist on conducting business ethics training programs for all employees by means of information notification,as well as a combination of online and offline approaches.We provide compliance training sessions for all new hires during orientation,covering training on business conduct and ethics code.All regular employees are required to participate in at least one compliance training session every year.In addition,we carry out specialized anti-corruption and anti-bribery training for employees in key departments.Under applicable laws and regulations,Li Auto has updated and published the Li Auto Inc.Whistle-blowing Policies and Procedures to clarify the reporting channels and standardize the rights and responsibilities of departments for handling complaints from stakeholders as well as the operation process.We encourage employees,suppliers,users and other stakeholders to report any known or potential misconduct that may violate laws or business ethics standards.We provide publicly accessible and diverse reporting channels,including mail,email,in-person reporting and hotline.After receiving a credible whistle-blowing report,we will promptly formulate a plan,conduct an investigation,and take serious actions on reported case after confirming a violation.To safeguard the basic rights and interests of whistleblowers,we have developed protection policies for whistleblowers.Without the consent of a whistleblower,the Company shall not disclose or divulge the whistleblowers personal information and the reported content in any way.In addition,we accept anonymous reports and protect whistleblowers from any form of retaliation.In 2023,there were no confirmed cases of violating the code of business ethics involving Li Auto,such as money laundering,insider trading and conflict of interest.During the reporting period,there was one lawsuit case of corruption and bribery concluded.1.3.2 Business Ethics Training1.3.3 Reporting ManagementLi Autos business ethics and compliance training systemCase Study:Li Autos anti-corruption and integrity training for senior executivesIn June 2023,Li Auto organized anti-corruption and anti-bribery compliance training for senior executives.We introduced and shared the U.S.Foreign Corrupt Practices Act and cases,Li Autos new anti-commercial bribery compliance systems and requirements,the progress and expectations of the anti-commercial bribery compliance certification programs,and the compliance matters needing attention and cooperation by each business department,so as to strengthen the senior executives awareness of compliance in an all-round way.Members of the Board of Directors and senior executivesReceiving specialized anti-corruption and anti-bribery training to strengthen compliance awareness.Receiving compliance training and take compliance courses.All employees(including regular employees,interns,etc.)Finishing the code of business conduct and ethics and other compliance training during orientation and sign the integrity compliance terms.New hiresReceiving specialized training on integrity compliance and publicity education on business in daily work.Employees in key departmentsLi Autos business ethics reporting 001 877-249-8611Legal Affairs and Risk Management Department,Li Auto Inc.,11 Wenliang Street,Shunyi District,BeijingEmail:Hotline:Mail:with employee coverage rate of 100%employee compliance training sessions(including business ethics,anti-bribery and anti-corruption training)48 anti-corruption and anti-bribery training sessions for senior executives2In 2023,Li Auto conductedtotaling17,000 hours120totalinghoursIntroductionCompliant Operation and Responsible Governance0104Low-Carbon Operation and Green Ambition02Innovative Pioneerand Outstanding Product03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix171.4 CybersecurityLi Auto adheres to the protection of information security and user privacy as the bottom line,relentlessly strengthens the building of information security management and privacy protection,improves the process management ability of secure operations,and effectively avoids network security risks.Li Auto has established an information security management framework with a clear division of rights and responsibilities.The Company has set up an Information and Data Security Team,led by the vice president of Li Auto.The vice president is responsible for planning and implementing information security measures,overseeing and analyzing security management practices and reporting of important matters to the Board of Directors for decision-making.1.4.1 Information SecurityLi Autos structure of the Information and Data Security TeamOn January 11,2023,Li Auto organized an emergency drill to ensure the success of the Li L7 press conference.During the drill,the security operation personnel deployed the Web Application Firewall(WAF)to troubleshoot simulated attacks and initiate security emergency response.They effectively detected and intercepted the network attack,promptly pinpointed the IP address,and implemented a block.The drills objective was met within the targeted 20-minute timeframe,spanning from detection to prevention,with the entire emergency response process lasting for 24 minutes.The repercussions of the attack were effectively managed and contained.Information and Data Security TeamInformation Security DepartmentBusiness Unit RepresentativesCorporate System Administrative Management and External AffairsLegal Affairs and ComplianceR&DCapital MarketsFinanceLi Auto strictly complies with relevant laws and regulations including the Cybersecurity Law of the Peoples Republic of China,the Data Security Law of the Peoples Republic of China,the Personal Information Protection Law of the Peoples Republic of China,and the Provisions on the Administration of Automotive Data Security(Trial).The Company has revised a series of management systems,including the Li Auto Inc.Data Security Management System,the Li Auto Inc.Data Classification and Grading Management System,and the Li Auto Inc.Information Security Vulnerability Management System to further standardize information security management requirements across the entire data life cycle,clarify data classification and grading standards,and corresponding protection mechanisms.The Company has also established an information security emergency response mechanism that outlines incident levels,response measures,reporting procedures,and other necessary steps to ensure prompt reactions to information security incidents like network attacks and data breaches.Multiple security tests and emergency drills are conducted annually.Additionally,any vulnerability identified are reviewed and addressed to proactively prevent and mitigate different types of information security incidents.In 2023,Li Auto conducted three emergency drills in total.Li Auto consistently enhances its data information security protection system,which spans the entire software life cycle,from demand and design to development,testing,launch,operation,and maintenance.We classify the data access authority of relevant staff members,recording the time and data access operations.Additionally,we actively monitor data storage devices in real time,strictly forbidding any unauthorized device usage by employees.Furthermore,information security is integrated into employee performance evaluations,and appropriate penalties are enforced for violations of information security requirements.All employees and users are strongly encouraged to promptly report network security vulnerabilities through official channels.We have established the Li Auto Emergency Response Center to gather external feedback on network security issues.In addition,we have implemented measures such as an Information Security Mailbox and Information Security Robot to collect feedback on information security incidents from relevant staff.Li Auto routinely performs internal audits across business operations and engages third-party entities in external inspections and data security audits,aming to proactively identify issues and implement management and technical strategies to mitigate security risks.In 2023,Li Auto significantly improved information security automated detection capabilities and completed 29,423 automated internal inspections,with 159 internal specialized security inspections and four external tests.During the reporting period,we obtained the ISO 27001-Information Security Management System certification and passed the Network Security Level Protection Evaluation for critical systems,satisfying international authoritative standards in information security.Li Auto highly values employee training on information security awareness.We have established a robust network security training mechanism and actively conducted information security training for all employees as well as specializing training for data-related personnel.Ultimately,this proactive approach enhances both security awareness and protection skills across the organization.In 2023,Li Auto conducted a total of four employee information security training sessions,achieving a coverage rate of 100%among employees.The total duration of the training amounted to 14,883 hours.Case Study:Li Autos emergency drill before the Li L7 press conferenceIntroductionCompliant Operation and Responsible Governance0104Low-Carbon Operation and Green Ambition02Innovative Pioneerand Outstanding Product03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix18Li Auto adheres to personal data protection laws and prioritizes protection covering the entire life cycle of data to prevent breaches of privacy information and personal data.Li Auto diligently complies with relevant laws and industry standards such as the Personal Information Protection Law of the Peoples Republic of China.In 2023,the Company formulated various guidelines including the Li Auto Inc.Privacy Policy for Users and the Li Auto Inc.Management System for Personal Information Protection.We developed a user information protection mechanism that spans the entire life cycle and integrates into the Companys overall risk management system.Further efforts were made to regulate the collection,storage and use of personal information as well as identify,evaluate,and manage risks related to the processing of personal information.We also insisted on reducing the risk of data breaches or improper data usage.1.4.2 Privacy ProtectionLi Autos protection mechanism for user informationLi Autos privacy protection training system for employeesLi Auto regularly conducts personal information protection impact assessments to identify privacy risks that may adversely affect users personal information.We evaluate the effectiveness of measures adopted to protect this information and conduct regular work with respect to personal information protection and privacy security.In addition to promptly identifying and resolving issues,we report to the Information and Data Security Team in a timely manner.At present,Li Auto has achieved ISO 27701-Privacy Information Management System certification with a coverage rate of 100%.Li Auto offers privacy and security education to all employees to raise their awareness of data protection.During the reporting period,the Company organized seven employee training sessions focused on privacy protection,with a total of 15,051 enrollments and 7,816 hours.Additionally,we recommended articles on privacy protection on a monthly basis,reaching an annual reading audience of 420,000.100%of our employees received privacy training.In 2023,Li Auto received three complaints regarding personal information and privacy.100%of the complaints were promptly addressed and fully resolved in accordance with relevant procedures,and no user privacy data breaches occurred.Li Auto fully respects and protects users rights to their personal information.In 2023,the Company released the Li Auto Inc.Code of Personal Information Protection and Privacy Security.Additionally,all employees and suppliers were mandated to adhere to privacy protection laws and company regulations to ensure comprehensive privacy protection to the lagest extent.The Company has established a robust framework for managing the protection of user personal information.As the top responsible body,the Information and Data Security Team oversees decision-making,guidance,and supervision of personal information protection activities.Additionally,we have implemented a process for handling personal information complaints.In the event of any compliant concerning user personal information,we promptly conduct internal investigations and verification to ensure users privacy security.We clearly require obtaining the users consent before collecting personal information.We detail the purpose,use,basis,etc.of collecting personal information.We promise not to use the information for any purposes not specified in the Li Auto Inc.Privacy Policy for Users.Collection We adopt security protection measures that meet industry standards to protect users personal information against unauthorized access,public disclosure,use,modification,damage,and loss.We take reasonable measures to ensure the accurate and safe storage of users personal information,such as access control,encrypted transmission,encrypted storage,and displaying sensitive information after desensitization.We use trusted protection mechanisms to prevent malicious attacks on data.Storage We adopt a strict internal plan to prohibit providing user data to other personal information processors without the users consent or legal basis.We take necessary measures to protect the rights of users when the transfer of personal information involves entrusted processing,sharing,transfer,and public disclosure.This includes signing strict confidentiality agreements or privacy agreements with third parties,terminating cooperation with partners who abuse or leak user data,as well as promptly implementing protection measures.Transfer and disclosure Users have the right to query,copy,correct,supplement,or delete personal information in accordance with laws and regulations and the Li Auto Inc.Privacy Policy for Users.If the user revokes their authority,the authorization shall be cancelled.When the user cancels the authorization,the forced collection and use of the users personal information is prohibited.We provide various feedback channels,including hotline,privacy email,and mailing address,to promptly address users privacy complaints or requests for rights.ProtectionTraining on personal information protectionTraining on the publicity of personal information protection management systems Training on the Manual of Personal Information Protection Impact AssessmentTraining on retail personal information protectionTraining on after-sale personal information protectionPersonal information protection for service expertsTraining on privacy compliance of the Product DepartmentTraining on administrative personal information protectionIntroductionCompliant Operation and Responsible Governance0104Low-Carbon Operation and Green Ambition02Innovative Pioneerand Outstanding Product03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendixLi Auto places product quality,technological innovation,and user satisfaction at the forefront.We collaborate closely with our supply chain partners to embody our core value,“to exceed the needs of users by creating superior products and services.”Innovative Pioneer and Outstanding Product021902Innovative Pioneerand Outstanding ProductCompliant Operation and Responsible Governance01Innovation and Development20263135Product Quality and SafetySupply Chain ManagementUser ServiceIntroduction04Low-Carbon Operation and Green Ambition03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendixLi Auto is dedicated to continuous exploration in areas such as electrification technology,autonomous driving,and smart space.Our unwavering commitment is to deliver competitive products and services that cater to user needs while enhancing their quality of life through technology.2.1 Innovation and Development2.1.1 Innovation and R&D LayoutElectrification TechnologyInnovation serves as an inexhaustible wellspring of strength,propelling Li Auto towards sustainable development.We have meticulously crafted an innovation and R&D framework with a clear division of rights and responsibilities.The Product Development and Technology Committee assumes the role of the top management and decision-making body for innovation and R&D.The Technology Planning Team orchestrates the full-process management of various innovation projects.The Quality Operation Team provides process support and quality control and assists R&D experts in implementing innovation projects.Li Autos innovation and R&D management structureLi Auto is dedicated to advancing R&D breakthroughs in power battery technology,with a focus on battery performance improvement and safety inspection.In collaboration with suppliers and through optimization of cell subcomponents such as cathode,electrolyte,and separator,we have significantly reduced impedance and improved conductivity.Additionally,we have achieved 5C charging capabilities,thereby enhancing battery performance remarkably.Meanwhile,we have developed an 800V high-voltage electric platform and conducted full-stack self-development of core subsystems and sub-components of electric drive system,covering power chips,power modules,electronic control,motors,and powertrain systems.We also pioneered the introduction of the“Qilin”battery solution.As the Companys first high-voltage battery electric vehicle,Li MEGA is built on an 800-volt battery electric platform and is equipped with the joint-developed Li Auto-CATL Qilin 5C battery.Li MEGA delivers a maximum charging power of over 520kW and a driving range of 500 kilometers within a 12-minute charge,assuring big families of a superior energy replenishment experience,enabling them to travel without range anxiety.20Technology PlanningQuality OperationProduct Development and Technology CommitteeElectrificationTechnologyAutonomous DrivingSmart SpaceMaterial TechnologyOther R&D SegmentsSmart ManufacturingCompliant Operation and Responsible Governance01Introduction04Low-Carbon Operation and Green Ambition03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix02Innovative Pioneerand Outstanding Product21Autonomous DrivingIn 2023,Li Auto accelerated the rollout of AD Max 3.0 through the upgrade of OTA 5.0.With this upgrade,AD Max 3.0 will provide full scenario autonomous driving(Navigation on ADAS)and assisted driving(lane change control)functions,as well as the industry-leading active safety system(AEB)and automated parking system,which significantly enhanced the user experience.The AD Max 3.0 assisted driving system,based on 4D Birds Eye View perception model,provides real-time analysis of dynamic and static situations on most road sections,and generates precise evaluation of the surrounding environment in a stable manner.We proposed an innovative method,Neural Prior Net(NPN),to enhance the road reconstruction of complex Case Study:Li Auto develops the TIN model to overcome the technological challenges of all-scenario NOAThe R&D team has successfully trained and developed the TIN model to make driving decisions at intersections with traffic lights by incorporating various types of data such as video footages,brake and throttle inputs,and steering wheel angles from human drivers when passing through intersections.After deployed,the TIN model relies solely on video footages as direct input to determine the vehicle maneuvers like starting,stopping,and turning,which improves the generalization ability handling different types and specifications of traffic lights.This methodology resolves the challenges encountered by NOA and LCC when driving through intersections,and significantly improves the reliability,smoothness,and user experience of corresponding autonomous driving functions.intersections,and proposed an end-to-end Traffic Intention Net(TIN)to improve the generalization ability of traffic light cognition.Moreover,utilizing deep learning capabilities of large models,the AD Max 3.0 assisted driving system achieves decision-making and planning abilities comparable to human drivers.By the end of 2023,the full-scenario NOA function had been deployed on highways,city expressways,and urban roads in over 110 cities nationwide.Li Auto places paramount importance on establishing a robust R&D platform for autonomous driving.By the end of 2023,we pioneered the domestic industry in terms of cloud computing power,and provided a solid foundation for the training and rapid updating of algorithms and models.Compliant Operation and Responsible Governance01Introduction04Low-Carbon Operation and Green Ambition03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix02Innovative Pioneerand Outstanding ProductSmart SpaceMVS-NET,Multi-View Stereo Vision Network.MIMO-NET,Multiple-Input Multiple-Output Neural Network.MSE-NE,Multilingual and Multi-Accent ASR End-to-end Network.C-Eval is a comprehensive language model test assessment tool jointly developed by Tsinghua University,Shanghai Jiao Tong University,and the University of Edinburgh,covering 52 disciplines in various fields such as humanities,social sciences,and natural sciences.CMMLU is a multi-task language understanding and evaluation benchmark jointly constructed by MBZUAI,Shanghai Jiao Tong University,Microsoft Research Asia,and the University of Melbourne,including basic and advanced evaluation for 67 areas.1 2345Case Study:Mind GPT empowers”Li Xiang Tong Xue“In 2023,Li Autos Mind GPT initiated internal testing through OTA 5.0.Tailored for key scenarios and featuring over 1,000 capabilities across 111 areas,Mind GPT empowers”Li Xiang Tong Xue“to serve as a versatile assistant for driving,travel,entertainment,and knowledge dissemination among all family members.With the introduction of new features such as full-time activation,instruction mode,simple mode,and enhanced dialect mode,it completely transforms the interactive experience in the cabin.In 2023,Mind GPT topped the comprehensive evaluation rankings for Chinese language models C-Eval4 and CMMLU5,showcasing Li Autos leading position in natural language processing technologies in China.22Li Auto is committed to delivering users with a natural and efficient spatial interaction experience in the cabin.We aim to create a new-generation multimodal human-machine interaction technology system.With multimodal perception and recognition capabilities,”Li Xiang Tong Xue,“the smart in-car voice assistant,can clearly hear every passengers voice in the cabin and cater to the needs of every family member considerately.Relying on self-developed 3M technologies(MVS-NET1,MIMO-NET2 and MSE-NET3),”Li Xiang Tong Xue“can fully perceive multimodal information in the cabin.This includes localized three-dimensional visual perception,voice zone localization,and precise human voice separation.Additionally,it features multilingual,multi-dialect,and multi-task speech perception capabilities.A multi-modal omnidirectional audio-visual instruction technology has been also developed.In 2023,Li Auto successfully developed the multi-modal cognitive model,Mind GPT.The model adopts self-developed TaskFormer neural network architecture.It is trained on scenarios such as driving,entertainment,and travel by using technologies such as Supervised FineTuning(SFT)and Reinforcement Learning fromHuman Feedback(RLHF).With the ability of understanding,generating,knowledge memory and reasoning,users can use it without any instruction words.Compliant Operation and Responsible Governance01Introduction04Low-Carbon Operation and Green Ambition03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix02Innovative Pioneerand Outstanding ProductLi Autos smart manufacturing R&D cases in 2023Smart ManufacturingLi Auto is dedicated to advancing R&D innovation within the smart manufacturing and consistently explores smart manufacturing solutions.Through the large-scale adoption of self-developed Material TechnologyWe are dedicated to utilizing high-quality and high-performance material solutions.We explore material technology innovation in areas such as lightweight design,low-carbon development,standardization,modularization,and localization to enhance the growth and progress of the automotive industry.We actively develop and utilize renewable,recyclable,and eco-friendly materials.While ensuring performance requirements,we promote the application of low-carbon materials to reduce reliance on exhaustible resources and reduce carbon emissions during production and use.In 2023,Li Auto successfully developed a new type of integrated die-casting material.By optimizing the melting,refining,and degassing processes of aluminum alloys,30%of the raw materials used in parts were recycled materials.For more information,please refer to the subsection“4.2.2 Green Materials.”23technologies such as automation equipment,and machine vision,our goal is to improve production efficiency and quality,thus ultimately empowering intelligent manufacturing.BDC automatic storage&retrieval system An independent welding BDC automatic storage&retrieval system is applied in the production line.Along with the self-developed Manufacturing Execution order control system,it can adjust the production mode in real time based on production volume to achieve 100%customized production.The Warehouse Management intelligent sorting system is utilized to significantly improve sorting capabilities,maintaining a quality rate of over 99%for completely flexible order sequences.Intelligent analysis system of manual actions Algorithm-based video comprehension action analysis can realize the digitization of operator actions,analysis of personnel action beat,analysis of operation standardization,to ensure stable quality of the assembly process.Automatic stamping system The self-developed automatic boxing system for stamped parts,based on vision guidance,enables autonomous trajectory planning,resulting in cost reduction and efficiency improvement at all posts.The self-developed box imaging system,empowered by 3D-point-cloud technology,enables robots to plan trajectories automatically online.This system lowers the precision requirements for tools while increasing equipment uptime and reducing maintenance costs.Compliant Operation and Responsible Governance01Introduction04Low-Carbon Operation and Green Ambition03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix02Innovative Pioneerand Outstanding Product24Li Auto has a strong R&D innovation team and actively recruits top-notch technological talent in the industry.We closely collaborate with research institutes,universities,and industry organizations.In addition to leading industry-university-research cooperation,we actively contribute to the development of industry standards and share technological advancements with society.We have assembled R&D teams and set up R&D centers in Beijing,Shanghai,and other locations to constantly explore cutting-edge technologies and deliver exceptional products.As of the end of the reporting period,Li Auto had had a R&D workforce of over 6,700,with the annual investment in innovative R&D reaching RMB10.59 billion.We collaborate with Tsinghua University,Beihang University,and Shanghai Jiaotong University to jointly train postdoctoral talents to provide both sides with research and development and practice cooperation opportunities,and jointly promote technological progress and industry development.As of the end of 2023,Li Autos postdoctoral workstation had housed 16 postdoctoral fellows involved in research projects such as battery safety algorithms,advanced thermal management,and vehicle control,resulting in over 30 invention patents filed.2.1.2 Technology Opening-Up LeadershipCase Study:Li Auto participates in the“Young Science and Technology Leaders Training and Funding Program”Li Auto has actively participated in the Young Science and Technology Leaders Training and Funding Program.Guided by strategic plans such as The New-Generation Artificial Intelligence Development Plan issued by the State Council and The White Paper for Digital Twin Application released by the Ministry of Industry and Information Technology of China,Li Auto focuses on applied research in swarm intelligence and digital twin.This initiative aims to cultivate and reserve talent for Li Autos self-developed high-performance computing platform.Case Study:Li Auto cooperates with Tongji University to conduct the“Research on Localization and Mapping Technology in Autonomous Parking”In 2023,Li Auto partnered with a team led by Professor Zhao Junqiao from Tongji University to work on the“Research on Localization and Mapping Technology in Autonomous Parking.”The researchers have made several achievements in key technological areas such as visual relocalization,localization and mapping framework,and occupancy grid networks.These achievements effectively enhanced the generalization ability of autonomous parking in the self-driving scenario.Case Study:Li Auto participates informulating automotive industry standards Li Auto was invited to participate in the formulation of the Mandatory National Standard Technical Requirements for Vehicle Cybersecurity.Li Auto actively shared viewpoints and suggestions during the drafting process.The standard was submitted to the Standardization Administration of the Peoples Republic of China for approval in September 2023.Li Auto deeply engaged in the drafting of two energy industry standards,namely NB/T 11305.1-2023 Two-Way Interaction Between Charging and Discharging of Electric Vehicles Part 1:General Principles and NB/T 11305.2-2023 Two-Way Interaction Between Charging and Discharging of Electric Vehicles Part 2:Orderly Charging.We actively participate in the development of industry standards with various standard setting organizations,including the National Technical Committee of Auto Standardization and the China Society of Automotive Engineers,contributing to the building of the automotive industry standard system.As of the end of 2023,Li Auto had participated in 46 research projects for standard formulation and joined over 13 special working groups.Compliant Operation and Responsible Governance01Introduction04Low-Carbon Operation and Green Ambition03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix02Innovative Pioneerand Outstanding Product25Li Autos IPRs at domestic and international levels in 2023Case Study:Li Autos IPRs highlights in 2023 Li Auto actively invests in the R&D of battery electric vehicles(BEVs).As of the end of the reporting period,the Company had obtained 313 patents related to electrification technology1.The“Li L9 Sculpture Model”and“Li ONE Sculpture Model”have been selected as excellent copyright works by the Copyright Protection Center of China.Li Autos invention patent titled A Method and Apparatus for Vehicle Vibration Control,Drive Control System,and Vehicle won the Excellence Patent at the 24th China Patent Award sponsored by the China National Intellectual Property Administration.Case Study:Li Autos Intellectual Property Promotion MonthIn April 2023,Li Auto held the Intellectual Property Promotion Month across various regions.During this event,we recognized and awarded exceptional individuals and departments for their efforts in patent protection throughout 2022.Li Autos Changzhou Manufacturing Base conducted training sessions on basics of patents and trademarks,and trademark usage specifications for parts and packaging,with over 300 participants.Li Auto places a high emphasis on the management and protection of intellectual property rights(IPRs).The Company adheres strictly to applicable laws and regulations,including the Copyright Law of the Peoples Republic of China and the Rules for the Implementation of the Patent Law of the Peoples Republic of China.To strengthen IPR management,Li Auto has established policies such as the Li Auto Inc.Patent Application Administration Measures and the Li Auto Inc.Patent Guidelines.These efforts aim to enhance the management of patents and other IPRs continuously.In accordance with relevant laws,regulations,and normative documents such as the Trademark Law of the Peoples Republic of China,we have formulated internal systems,including the Li Auto Inc.Trademark Authorization Management Process,the Li Auto Inc.Standard Process of Trademark Registration Application,and the Li Auto Inc.Standardized Process System for Trademark Protection.We continually improve our trademark registration management system to safeguard our reputation and brand image.2.1.3 Protecting Intellectual PropertyLi Autos whole-process monitoring mechanism for patent risksCertificate of Excellent Patent of the 24th China Patent AwardIPRDataCumulative number of patent licenses in China3,335Cumulative number of international patent licenses33Cumulative number of trademarks acquired in China1,003Cumulative number of international trademarks acquired666Risk monitoringDeveloping a patent information analysis mechanism and regularly updating the R&D Department on industry development.Risk responseFormulating response plans based on conclusions regarding patent risks.Identification and evaluationIdentifying potential patent risks during product development and evaluating technical solutions to effectively identify potentialpatent infringement risks.The electrification technology patents cover four technical fields:vehicle control,charging system(including on-board charging system),high voltage system and thermal management.1To effectively motivate employees enthusiasm for technological innovation,we have developed clear incentive mechanisms,including the Li Auto Inc.Detailed Rules for the Implementation of the Patent Application Administration Measures and the Li Auto Inc.Intellectual Property Incentives Management Measures.Li Auto has strategically built a comprehensive patent portfolio centered on key technical fields of our products.We actively manage patent risks during the product development phase.By the end of 2023,Li Auto had obtained 3,368 authorized patents,1,669 registered and approved trademarks,as well as 98 copyrights.Li Auto places a high emphasis on intellectual property(IP)training,aiming to enhance the Companys awareness of IP while conducting diverse activities to strengthen employees understanding of IP protection.By the end of 2023,Li Auto had carried out a total of 34 IP protection training sessions,with the participation reaching 2,905 attendees.Compliant Operation and Responsible Governance01Introduction04Low-Carbon Operation and Green Ambition03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix02Innovative Pioneerand Outstanding ProductLi Auto has established rigorous product quality and safety standards and systems.We pay close attention to every aspect of our vehicles,from design and development,to production,testing,and after-sales service.Our goal is to deliver vehicles that are not only safer but also more comfortable for all family members.2.2 Product Quality and Safety26Li Auto adheres to international standards such as ISO 9001-and IATF 16949.We have established a quality management system covering R&D,supply chain,manufacturing,and after-sales service.We also regularly invite professional third parties to audit and certify our quality management system.In 2023,Li Auto renewed its IATF 16949-Quality Management System certification and conducted audit certification for newly built manufacturing bases.In 2023,we updated our quality management system covering product design and R&D quality,supply chain quality,manufacturing quality,and after-sales quality.We also updated nearly 200 process documents.2.2.1 Quality Management SystemProduct R&D QualitySupply Chain QualityLi Auto incorporates safety into the product design and R&D processes.Based on the Plan,Do,Check,and Act(PDCA)management model,we have formulated and implemented the Li Auto Inc.Quality Manual and other quality procedures,such as the Li Auto Inc.Vehicle Development Control Procedures and the Li Auto ensures the quality compliance of various materials through means such as in-house R&D,vertical integration of the supply chain,and close collaboration with suppliers.We refine procedures such as the Li Auto Inc.Production Parts Procurement Control Procedures and the Li Auto Inc.Advanced Product Quality Planning(APQP)Management Control Procedures to further standardize the management of parts procurement.We set clear quality and progress standards for parts development in new product project to ensure consistent product quality across the entire supply chain.For further information,please see subsection“2.3 Supply Chain Management.”Li Autos quality management systemProduct R&D qualitySupply chain qualityManufacturing qualityAfter-sales qualityLi Auto Inc.Process Design and Development Control Procedures in accordance with the requirements of the quality management system.Furthermore,we standardize the management of functional safety during the design phase to guarantee that the product design aligns with our quality objectives.Compliant Operation and Responsible Governance01Introduction04Low-Carbon Operation and Green Ambition03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix02Innovative Pioneerand Outstanding ProductManufacturing QualityLi Auto continuously improves quality management requirements throughout the entire vehicle manufacturing process.We have optimized the Li Auto Inc.Audit and Control Procedures and detailed the frequency of manufacturing process audits at all manufacturing bases.By doing so,we have enhanced the management of system audits,process audits,and product audits.Li Auto focuses on building a product verification system featuring software and hardware collaboration,which fully combines external strategic partnership test resources with internal capabilities to update mature verification standards.27Li Autos intelligent inspection projectsThis system consists of hardware tests for materials,parts,systems,and vehicles,as well as software tests for autonomous driving,Human Machine Interface(HMI),and whole vehicle E/E.This approach effectively ensures the quality and performance of Li Autos products.Prior to delivery,we conduct rigorous quality standard checks on the vehicles appearance,functionality,sealing,safety compliance,and road test performance.The total number of pre-delivery quality standard checks exceeds 2,700.In line with our smart manufacturing strategy,Li Auto proactively incorporates cutting-edge algorithms,automated machinery,By using 2D cameras and visual algorithms to capture images of vehicle lighting,the system is able to determine whether there are any defects such as lights being on or off,dimming,flickering,or uneven brightness.This ensures the reliable functionality of the headlights before shipment.Automatic inspection of lighting defectsRobotic arms and temperature sensors are used to automatically collect temperature-related data,enabling the digitized automatic measurement and data traceability of temperature for air conditioning systems,seats,rear windshields,and external rearview mirrors.Automatic thermal imaging inspectionWith 3D cameras,robots,and intelligent electrical inspection systems,users can automatically connect the charging gun with the vehicle.This enables monitoring and diagnosis of the battery system,charging current,and voltage to ensure the stable operation of both fast and slow charging.Automatic inspection of fast and slow charging Using image algorithms,the system can automatically detect defects such as misalignment and missing of the“Li”logo,“Li Auto”logo and“model”logo.This process reduces inspection time and significantly improves inspection accuracy.Automatic inspection of Logo defectsWe have introduced a full-stack self-developed intelligent wireless electrical inspection and interconnected vehicle-equipment system.This also enables intelligent wireless interconnection between inspection equipment,electrical inspection programs,and the Manufacturing Execution System(MES),thus achieving unmanned inspections.Vehicle-equipment interconnectionBy utilizing in-car microphones to collect vehicle acoustic data and embedding our self-developed NVH analysis algorithm into the eXchangeable Control(XCU)module,we have achieved noise testing during dynamic road tests and static tests of vehicle.This approach effectively ensures the NVH performance of the vehicle.Noise,Vibration,Harshness(NVH)intelligent inspectionand intelligent driving technologies into the production and manufacturing processes.This integration facilitates automated,intelligent,and unmanned quality inspections across various scenarios.By implementing intelligent inspection projects,we aim to enhance inspection consistency and accuracy while achieving cost reduction and efficiency improvement.In 2023,Li Auto rolled out several intelligent inspection projects at the Changzhou Manufacturing Base.Compliant Operation and Responsible Governance01Introduction04Low-Carbon Operation and Green Ambition03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix02Innovative Pioneerand Outstanding Product28Li Auto promotes quality awareness among all employees through various forms and channels to strengthen their sense of quality res-ponsibility,cultivate quality habits,and foster a quality-oriented working environment.2.2.2 Fostering Quality CultureCase Study:Li Auto continuously advances quality-themed trainingIn 2023,we made sure that all employees received quality awareness training right from the start,during their induction and pre-job training,as well as throughout their on-the-job training.Additionally,we created specific quality education and training plans tailored to the needs of employees in various positions within the Company.Training for front-line inspectors:After new employees join the team,we organize training sessions such as the Quality Basic Knowledge,the Definition of Quality Defects,and the Quality Awareness.Pre-job training involves theoretical and practical training on quality standards,job inspection procedures,and other related topics based on the content and requirements of the inspection positions.Training for reserve talents through on-campus recruitment:To cultivate reserve talents and establish a talent pool for quality and safety,we have developed 38 training courses covering various departments,positions,and professional technologies.These courses aim to comprehensively enhance the expertise and skills of fresh graduates in quality and safety.After-sales QualityIn full compliance with the Regulation on the Administration of Recall of Defective Auto Products of the Peoples Republic of China and other relevant laws and regulations,Li Auto has developed the Li Auto Inc.Recall Management Procedures.In 2023,we refined the work processes and delineating responsibilities for each department involved in the recall management system.The refinement aims to improve the efficiency and quality of our recall management efforts.Upon receiving any feedback about production or product defects,the decision-making team responsible for handling major quality issues will immediately hold a meeting.According to GB/T 34402-2017 Safety of Motor Vehicle Product-Guidelines for Risk Assessment and Risk Control,we will carry out defect analysis and demonstration on target products,decide whether to initiate the recall and report the incident to relevant government authorities as required.Once the defect is confirmed,we immediately halt the production and sale of defective vehicles.We actively communicate with vehicle owners about the defect and response measures.Furthermore,we submit recall plans,periodic recall reports,and recall summary reports to relevant government authorities as mandated to effectively address product quality issues.In 2023,there were no product recall incidents involving Li Auto,including those caused by health or safety hazards.29,834 employee enrollments in quality and safety training44,752hours totalingIn 2023,Li Auto recordedCompliant Operation and Responsible Governance01Introduction04Low-Carbon Operation and Green Ambition03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix02Innovative Pioneerand Outstanding ProductLi Auto is committed to building a safety system by consistently improving and applying vehicle safety technologies.We also strive to enhance the health coefficient of vehicle materials,aiming to bring safe travel experience to all family members.Li Auto has established an enterprise-level safety system in accordance with the Guidelines on Strengthening the Construction of Safety Systems for New Energy Vehicle Enterprises jointly issued by five ministries and commissions including the Ministry of Industry and Information Technology of the Peoples Republic of China.This system covers product safety design,operational monitoring,after-sales service,emergency response,accident handling,and cybersecurity.In July 2023,Li Autos safety system underwent an assessment by the China Automotive Engineering Research InstituteCo.,Ltd.and received an A rating.2.2.3 User Safety Assurance29Driving SafetyTo ensure safe driving,Li Auto focuses on enhancing system safety,battery safety,vehicle body safety,and usage safety.Li Autos full-stack self-developed autonomous driving(AD)system is equipped with a powerful Birds Eye View perception architecture and LiDAR,thus ensuring accurate recognition even in rainy or nighttime conditions.During the reporting period,we optimized high-frequency accident scenarios on Chinese roads.Specifically,we enhanced recognition capabilities for pedestrians,bicycles,tricycles,and vehicles.Under the autonomous emergency braking(AEB)mode,we can achieve a working speed of 4-135 kilometers per hour and a maximum stopping speed of 120 kilometers per hour.System safetyLi Auto safeguards battery safety throughout the entire life cycle focusing on battery design safety,production safety,and operation safety.To mitigate thermal runaway even under the most stringent conditions,we employ the state-of-the-art heat insulation and flame-retardant technology,as well as super-large exhaust and cooling solutions.This strategy effectively prevents thermal diffusion following the failure of a single cell.Additionally,we employ LiA,our self-developed early-warning system,to continuously monitor battery health.We recorded zero incidents of thermal runaway or self-ignition due to safety reasons for over 550,000 batteries.Battery safetyWe distribute the pre-use instructions of the driving assistance system to users to publicize our safe driving operation specifications.Moreover,in order to help owners cultivate safety awareness,we have added the safety education function to the driving assistance system.When the system is first activated,the safety education video will be automatically played through the pop-up window.Usage safetyThe“Fortress Protection System”is a self-developed defensive vehicle body structure of Li Auto.Over 75%of the white cage-style body is comprised of high-strength steel.The battery design incorporates flame retardant materials to prevent thermal diffusion and fire propagation in the entire battery pack.Dual longitudinal beams provide double protection for the battery modules,while the safety airbags and curtains protect all occupants in the vehicle.This method ensures 360-degree protection for every passenger.Li Auto conducts over 40 crash tests under various non-standard safety scenarios,which has surpassed the standards C-IAS and C-NCAP.Our products have achieved top ratings for C-IASI,C-NCAP,C-AHI,and IVISTA.In C-IASI testing,Li L9,Li L8,and Li L7 obtained a G rating,the highest rating,in the 25%small overlap crash test for both the driver and passenger side.Vehicle body safetyCompliant Operation and Responsible Governance01Introduction04Low-Carbon Operation and Green Ambition03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix02Innovative Pioneerand Outstanding Product30Healthy ProductLi Auto is devoted to providing a healthy and high-quality in-car experience for every family member.We have set up a materials library to carefully choose healthy and environmentally friendly by conducting assessments on odor,Volatile Organic Compounds(VOC)levels,performance evaluation,and other criteria.Our goal is to eliminate any potential negative impacts of harmful substances on users right from the source.Furthermore,we conduct strict quality control at every stage of quality testing as well as monitor and evaluate the Vehicle Odor Intensity(VOI)and the in-car concentration of VOC.Our manufacturing bases have set up professional vehicle/part VOC test cabins which are equipped with high-efficiency analytical equipment.Every batch of vehicles undergoes the VOC inspection to ensure that each vehicle delivered should comply with national VOC standards.In terms of vehicle electromagnetic radiation prevention,Li Auto adopts strict standards to control the Electro Magnetic Compatibility(EMC)performance of parts and components.We conduct EMC verification and virtual simulation verification of vehicle electrical systems in the process of vehicle R&D.We also establish industry-leading EMC laboratories to conduct testing and verification for the vehicle and parts.This approach ensures that the electromagnetic radiation impact of our vehicle models is far lower than national standards.Li Auto has won high recognition of the industry for VOC/VOI evaluation and obtained professional certifications.From March to July 2023 Li L9,Li L8 and Li L7 obtained the full five-star certification of the four tests,namely in-car VOC&VOI,particulate matter,and sensitization risk,in the China-Automobile Health Index(C-AHI)health evaluation for mass-produced vehicles.In September 2023,Li L9,Li L8 and Li L7 were awarded the“Zero-Formaldehyde”certificate by the China Automotive Technology and Research Center Co.,Ltd.Compliant Operation and Responsible Governance01Introduction04Low-Carbon Operation and Green Ambition03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix02Innovative Pioneerand Outstanding Product31Li Auto continuously upgrades its supply chain management system to ensure stable supply.We also bolster our ESG management and risk response within the supply chain.Through empowering our suppliers and partners,we effectively drive the sustainable development of the upstream and downstream industry.2.3 Supply Chain ManagementLi Auto has established a robust supply chain management system.The Strategic Management Committee consists of the 2.3.1 Category ManagementSupplier ManagementLi Auto classifies materials into strategic materials,leverage materials,bottleneck materials,and conventional materials based on their risk level and importance.Taking into account their characteristics and demand,we carefully manage these materials properly to guarantee a stable supply.Additionally,we also take into account factors such as the country of production and product characteristics to effectively mitigate supply chain risks related to national/regional regulatory requirements,supply chain structure,energy consumption,emissions,material toxicity,or potential pollution.To improve supplier management efficiency,Li Auto categorizes suppliers into strategic suppliers,preferred suppliers,qualified suppliers,restricted suppliers,and eliminated suppliers based on their importance and performance evaluations.We conduct quarterly performance evaluations of suppliers using measurable assessment criteria and performance outcomes.Additionally,we regularly update the performance evaluation criteria for suppliers.Li Auto continuously deepens its cooperation with strategic and preferred suppliers.We provide rectification suggestions for suppliers with identified problems and dynamically monitor the progress of their corrective actions.This approach drives ongoing improvement among our partners of the supply chain,enhances quality and efficiency,as well as meets the demands of upstream and downstream businesses.As a result,a resilient supply chain has been established.As of the end of 2023,Li Auto had a total of 434 direct suppliers1.Direct suppliers provide parts,components,and auxiliary materials for vehicle production,including all kinds of parts,mold and tooling and they represent the largest procurement share of Li Auto.1Supply Management Committee and the Production-Supply-Sale Joint Commitment.The Supply Management Committee is responsible for supplier and material management,and makes daily supply chain decisions.The Production-Supply-Sale Joint Committee focuses on fostering collaboration among the supply chain,R&D,product,sales,and service.In 2023,Li Auto shifted from passive supply chain management to active management.We implemented Integrated Supply Chain(ISC)architecture and built closed-loop capabilities by introducing a top-level design plan for the supply chain.This plan includes category management and supplier management,aiming to enhance the stability of the supply chain comprehensively and systematically.Integrated Supply Chain ManagementCategory managementSupplier managementLowHighMaterial importance levelHighSupply chain risk levelBottleneck materialConventional materialStrategic materialLeverage materialClassificationEvaluationCollaborationSourcingCertificationExitDevelopmentNomination Supplier full life cycleSupply Chain Management SystemCompliant Operation and Responsible Governance01Introduction04Low-Carbon Operation and Green Ambition03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix02Innovative Pioneerand Outstanding ProductLi Auto always upholds high standards of ESG management in its supply chain management.We continuously track the ESG performances of our suppliers.In 2023,we updated a series of internal policies,including the Li Auto Inc.General Procurement Rules,the Li Auto Inc.General Rules for the Procurement of Parts and Raw Materials,and the Confidentiality Agreement.These efforts have further regulated our partnership with suppliers,improved the transparency and traceability of our supply chain,and safeguarded intellectual property rights and business secrets.Furthermore,we conducted comprehensive risk assessments on candidate suppliers in key aspects such as product quality,production safety,business ethics,environmental impact,and labor rights.2.3.2 Supplier ESG Management32Li Autos supply chain ESG access audit scoreCase Study:Li Auto urges suppliers to resolve environmental compliance hazardsIn April 2023,during a routine on-site audit,Li Auto identified environmental compliance hazards with one of its suppliers.Immediate action was taken to urge the supplier to rectify the problems in accordance with the latest environmental regulations.With guidance from Li Auto,the supplier developed and implemented a comprehensive improvement plan,which included installing efficient waste gas recovery devices.By June 2023,the supplier had completed the equipment upgrades,ensuring compliance with the new environmental regulation requirements and successfully passing the inspection carried out by the environmental authority.As of December 31,2023of Li Autos direct suppliers obtained the ISO 14001-Environmental Management System certification93.7%of Li Autos direct suppliers obtained the ISO 45001-Occupational Health and Safety Management System certification80.9%of Li Autos direct suppliers obtained the IATF 16494/ISO 9001-Quality Management System certification99.4%We integrate ESG assessments into the access criteria for potential suppliers.During the stage of industrialized product development,we thoroughly consider the impacts of ESG factors such as professional certifications,compliance,energy efficiency,and waste.We also conduct rigorous inspections and management of suppliers to ensure compliance with relevant standards.Through annual supplier audits,we continually monitor and encourage suppliers to improve their environmental protection and safety practices.This collaborative approach is aimed at fostering sustainable development with our suppliers.Suppliers found to have serious integrity issues,concealment,or safety incidents will be subject to an exit mechanism and will be identified as eliminated suppliers.ESG aspectRequirement Establish effective quality management systems Obtain IATF 16949 or equivalent third-party certificationsQuality Inspect product quality and issue relevant reports Set quality goals and take improvement actions Abide by national and regional environmental laws and regulations Obtain environmental management system certifications,such as ISO 14001 Assess the environmental impact of production and products Promote energy-saving and emission-reduction production methodsEnvironment Recycle vehicles and auto parts whenever possible Encourage suppliers to produce products that satisfy recyclable standards Prioritize purchasing eco-friendly,recyclable materials with low pollution and emissions Comply with national labor lawsLabor Stay in compliance with employment laws and prevent child labor or forced laborBusiness ethics Establish internal anti-corruption compliance management systems Prohibit all illegal acts of corruption,unfair competition,fraud,bribery,and other crimes among employees Sign integrity and compliance with employees,suppliers and other stakeholders Comply with national laws and regulations on building safety and fire safety Obtain health and safety management system certifications,such as ISO 45001 Establish safety production organizations,such as safety production committees Meet the requirements regarding the production,storage,and transportation of flammable and explosive dangerous goods Meet information security requirementsSafetyCompliant Operation and Responsible Governance01Introduction04Low-Carbon Operation and Green Ambition03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendixLi Auto has established a comprehensive risk analysis and emergency response mechanism,conducting thorough assessments of potential risks within the supply chain.We have also implemented early warning systems and robust risk prevention and control frameworks in key areas such as quality,production capacity,delivery,and ESG.Through daily early warnings and regular updates on risk incidents,we ensure that all stakeholders can promptly respond to risks,ensuring the stability and reliability of the supply chain.In 2023,Li Auto optimized its supply chain risk model by adding processes such as category strategic management and financial risk assessment during supplier admission.We also strengthened the full life-cycle risk monitoring and refined our risk response mechanisms.2.3.3 Supply Chain Risk Response Li Autos risk response model of supply chainLi Auto has established comprehensive supplier capacity management guidelines and information tools.We have also conducted systematic assessments and monitoring of potential capacity risks among suppliers.This approach facilitates real-time and effective reporting of risks.Additionally,we adopt localized and dual sourcing solutions of the supply chain so as to effectively address capacity and supply risks among suppliers.As a result,we have enhanced the resilience,safety,and stability of our supply chain.In 2023,Li Autos Supply Chain Management Department conducted risk assessments and management for key auto parts,resulting in a significant increase in production capacity through timely intervention and adjustments.Case Study:Response to the risks of supply chain production capacity In September 2023,a lighting equipment supplier for Li Auto was flagged as having a high-level production capacity risk by the risk monitoring system following the completion of an urgent supply task.To guarantee the stable supply of critical parts,we devised a special supply assurance plan.Within one month,we successfully maintained an adequate stock,effectively ensuring the steady supply of lighting equipment.Case Study:Li Auto establishes an electric drive manufacturing base in ChangzhouIn 2023,Li Auto set up its electric drive manufacturing base in Changzhou to secure the production and supply of two core components,namely motor controllers and motor rotors.With an annual production capacity of over 600,000 units,we have gained the technological edge in the manufacturing of the 5-in-1 electric drive assembly.Conflict Minerals ManagementLi Auto is dedicated to enhancing the traceability of raw materials in the supply chain and adhering to responsible procurement principles.We urge strategic suppliers and key suppliers to perform due diligence on conflict minerals to verify that the raw materials and components supplied do not involve conflict minerals.Supplier admittanceProduct developmentSuppliers manufacturingManufacturing at Li AutoUser usageResponse measures On-site audits Capability assessments Category strategic management Financial risk assessments ESG performance assessments Quality assessments Key supplier management Key procedures Controlling key quality control points Quality control Quality improvements Independent production of core parts Big-data tracking and task order generation Full-process quality controlQuality risksCapacity risksDelivery risksESG risks33Compliant Operation and Responsible Governance01Introduction04Low-Carbon Operation and Green Ambition03Inclusive Careand Shared Growth05Community Contribution for a Better SocietyAppendix02Innovative Pioneerand Outstanding ProductLi Auto cooperates closely with partners in both the upstream and downstream sectors of the supply chain.Through diversified interactions,our goal is to establish a stable,efficient,and high-quality industrial supply chain.Li Auto actively engages in product R&D as well as production lines with its suppliers.We collaborate closely with supplier teams to collectively overcome technological barriers.2.3.4 Empowering SuppliersCase Study:2023 Li Auto Global Partners ConferenceFrom October 12 to 13,2023,we organized the 2023 Li Auto Global Partners Conference in Changzhou,Jiangsu under the theme“Move Forward and Break Through.”Following the principle of“Pursuing Excellence Together with Li Auto,”the conference drew over 400 supplier partners.In-depth discussions took place on enhancing and innovating the supply chain.Additionally,we conducted a satisfaction survey among the suppliers,achieving a satisfaction rate exceeding 95%.Case Study:Li Auto cooperates with the supply chain to ensure the successful mass production of key componentsDuring the development of key components,Li Autos engineering and procurement teams proactively engaged in overcoming production technological barriers and bottlenecks.Together with tier-2 suppliers Li Auto was,they were fully involved in product development and quality control.To solve problems occurring during the component testing,Li Auto,along with the tier-1 supplier,set up an expert team.We conducted thorough investigations,verification,and problem identification at the site of the tier-2 suppliers.Additionally,we developed effective solutions to ensure the successful mass production of the vehicle model.34Case Study:Li Auto conducts quality training for range extender suppliersFrom May to October 2023,Li Auto conducted a targeted 6-month training program for a range extender supplier.The program covered Toyota Business Practi
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2023ANNUAL SUSTAINABILITY REPORT1Sustainability Report 2022|Wilmar International Limited2Sustainability Report 2022|Wilmar International Limited PROTECTING THE ENVIRONMENT.20Biodiversity and Conservation.22Climate Change.38Environmental Footprint of Operations.48Sustainable Packaging.62LOOKING AFTER PEOPLE AND COMMUNITIES.68 Talent Management.70 Human Rights and Labour Standards.80Diversity and Inclusion.94Employee Health,Safety and Well-being.104 Economic and Community Contribution.122DELIVERING PRODUCT EXCELLENCE.132 Innovation and Technology.134Consumer Health and Well-being.144Product Marketing and Labelling.152Product Quality and Safety.162TRANSFORMING OUR SUPPLY CHAIN.166Responsible Sourcing and Supply Chain Transformation.168RESPONSIBLE BUSINESS PRACTICES.174Business Ethics and Compliance.176Data Security and Privacy.184APPENDIX.186Materiality.188External Assurance from Ernst&Young LLP.192External Assurance from Control Union Certifications.196Internal Assurance Statement .200Aligning with the Recommendations from the Task Force on Climate-related Financial Disclosures(TCFD).202Glossary of Terms.204Glossary of Measurement Units.213BOARDSTATEMENT06ABOUT THIS REPORT03BOARD SUSTAINABILITY COMMITTEE STATEMENT08ABOUT WILMAR1012OUR APPROACH TO SUSTAINABILITYTABLE OF CONTENTS3Sustainability Report 2023|Wilmar International Limited2Sustainability Report 2023|Wilmar International Limited2-3,2-5At Wilmar,we continuously refine our reporting practices to ensure that we provide decision-useful and transparent information that is relevant,data-driven and timely to our stakeholders.To do so,we align closely with global best practices on reporting and apply the GRI Reporting Principles of accuracy,balance,clarity,comparability,completeness,sustainability context,timeliness and verifiability,which are fundamental to high-quality sustainability reporting.Women workers in one of Wilmars oil palm plantations in Sabah,Malaysia.ABOUT THIS REPORT12EDITIONTHWilmar International Limited(the“Company”or“Wilmar”,together with its subsidiaries,the“Group”)is proud to present our 2023 Sustainability Report.Since 2007,we have demonstrated a firm commitment to high quality sustainability disclosures and this Report marks the 12th edition of our Sustainability Report.THIS REPORT IS MEANT TO BE READ IN CONJUNCTION WITH OUR SUITE OF REPORTING MATERIALS:ANNUAL REPORT 2023ANNUALREPORTPALM NDPE IMPLEMENTATION ANNUAL REPORT 2023PALMNDPESUMMARY OF PROGRESSSUPPORTING THE UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALS(SDGs)iMATERIALITYAll content within this Report is based on material topics identified through our materiality assessment and are reviewed annually by our third-party sustainability consultants.For more information on our material topics and materiality assessment,please refer to2SUSTAINABILITY DASHBOARDBASE DATA TABLESiAll photos of people and places used in this Sustainability Report are photographs of Wilmar sites and of past or present Wilmar employees and stakeholders.5Sustainability Report 2023|Wilmar International Limited4Sustainability Report 2023|Wilmar International LimitedAligned with our financial reporting cycle,this Report contains data and information in respect of the financial year(FY)ended 31 December 2023.Unless otherwise stated,this Report covers all subsidiaries across our business segments.The Groups business segments include the following:(1)Plantation and Sugar Milling;(2)Feed and Industrial Products;and (3)Food Products.Performance data on social(S)and governance(G)cover all subsidiaries.Data on environmental(E)indicators cover all subsidiaries including joint ventures (JVs)and associates where we have operational control.With a proactive approach to data consolidation amid a rapidly expanding business,we continue to onboard recently acquired businesses and commissioned sites into our global safety and environmental data reporting platform and strive to complete these additions within six months of acquisition or commissioning.This platform centralises the approach towards consolidating information across our material topics.Ernst&Young LLP(EY)has provided independent and limited assurance for selected disclosures in this Report.To ensure accountability,Wilmars Board of Directors,through the Board Sustainability Committee(BSC),has oversight of the subject matter covered by the assured figures and statements in this Report.Material disclosures pertaining to our palm value chain have undergone assurance by Control Union Certifications(CU).Additional details can be found in the Assurance Statements on pages 192199.In line with the enhanced sustainability reporting regime by the Singapore Exchange(SGX),Wilmars Internal Audit Department will progressively conduct internal assurance on the Groups sustainability reporting process.The internal audit is complementary to our external assurance,by assessing material topics that are not externally assured.For more details on the internal assurance conducted for this reporting cycle,please refer to the Internal Assurance Statement on pages 200-201 of this Report.To ensure high-quality sustainability reporting,we have adopted leading standards and frameworks that are among the most widely used and trusted.Aligned with best practices and comprehensive in their coverage across a range of pertinent environmental,social,and governance(ESG)topics,these standards guide our reporting process and have industry-specific relevance to Wilmars business,where applicable.SCOPE AND BOUNDARY EXTERNAL ASSURANCEINTERNAL ASSURANCE2-3,2-2 2-5 GRI 1REPORTING FRAMEWORKSCONTACT 2-3We fully appreciate and acknowledge that meaningful advancements in our sustainability journey and reporting are fostered through being aware,responsive and inclusive in our stakeholder engagements.We therefore welcome and value any comments,questions or suggestions regarding this Report and our sustainability performance.Wilmar International Limited 28 Biopolis Road Singapore 138568 Attention:Sustainability Department .sgE-MAILPOSTSTANDARDAPPLICATION OF STANDARDLINK TO CONTENT/DISCLOSURE INDEXGRIWilmar has reported in accordance with the Global Reporting Initiative(GRI)Sustainability Reporting Standards 2021 for this Report References to the GRI disclosures are denoted throughout this Report using the notation:XX-XX GRI CONTENT INDEX SASBWilmar has adopted the industry-specific standards of the Sustainability Accounting Standards Board(SASB):Agricultural Products Sustainability Accounting Standard(Industry Standard,Version 2018-10)Processed Food Sustainability Accounting Standard (Industry Standard,Version 2018-10)These disclosures are denoted throughout this Report using the notations:FB-AG-XXXX.X and FB-PF-XXXX.X SASB DISCLOSURE INDEX UN GUIDING PRINCIPLES REPORTING FRAMEWORKSince our Sustainability Report 2021,we continue to report based on the UN Guiding Principles Reporting Framework UN GUIDING PRINCIPLES REPORTING FRAMEWORK INDEXSTANDARDAPPLICATION OF STANDARDLINK TO CONTENT/DISCLOSURE INDEXTCFDOur climate change disclosures are based on Task Force on Climate-Related Financial Disclosures(TCFD)recommendationsTCFD DISCLOSURE INDEXSGXThis Report complies with the requirements of the Singapore Exchange Securities Trading Limiteds Listing Rules 711A,711B and Practice Note 7.6(Sustainability Reporting Guide)-67Sustainability Report 2023|Wilmar International LimitedSustainability Report 2023|Wilmar International LimitedWith the world counting on this pivotal decade of action to address the escalating climate emergency,businesses are facing increasing pressure to play a larger role in addressing our urgent environmental and societal challenges.Concurrently,amid the mainstreaming and streamlining of ESG reporting standards,there is a growing expectation for businesses to raise the level of their disclosures on climate and nature-related commitments and actions.This also comes at a time when the agrifood sector is facing new regulatory requirements on deforestation-free supply chains.At Wilmar,we welcome these developments as necessary guidance for the industry to contribute towards a more sustainable future.Wilmar has been a long-time adopter and advocate of sustainability and no-deforestation commitments through our No Deforestation,No Peat,No Exploitation(NDPE)Policy,implemented in 2013.We were the first company in the industry to implement such a policy across the entire supply chain.Sustainability is entrenched in our business and influences every decision we make.This is reflected across every level of our organisation,from strategic reviews and guidance from the Board of Directors,to the running of our global operations.Taking a sustainable and responsible approach not only improves BOARD STATEMENT We will continue to monitor the Groups sustainability strategy and performance,focusing on four priority areas:protecting the environment,looking after people and communities,delivering product excellence and transforming our supply chain.Cognisant of the significant global impact that Wilmar has on people and planet,the Board of Directors(Board),working hand-in-hand with the Chairman and Chief Executive Officer(CEO),continues to oversee the Groups approach to sustainability.With the guidance and support of the BSC,the Board identifies and determines the ESG factors material to our Group,as well as related policies and practices that are vital to managing our business performance and impact.Despite the short-term challenges,we remain unwavering in our sustainability commitments.We firmly believe that sustainability is an ongoing effort that demands dedication,perseverance and diligence,and is necessary for creating long-term value for society.Last but not least,we would like to take this opportunity to thank our business associates,partners and stakeholders for your support on this journey.17YEARS OF SUSTAINABILITY DISCLOSURESOur Sustainability Report 2023 is published against the backdrop of a world grappling with geopolitical conflict and accelerating climate change.At the same time,economic uncertainty and cost-of-living pressures continue to pose challenges for governments,business and society at large.BOARD OF DIRECTORS,WILMAR INTERNATIONAL LIMITED 30 MAY 2024 KUOK KHOON HONGChairman and Chief Executive Officerthe resilience of our business,but also positions us for long-term success amid changing market and operating conditions.We will persevere in delivering our sustainability commitments while adapting to evolving trends and requirements,including those related to disclosures.We continue to align this Report with the updated GRI Standards 2021,including the sector standard GRI 13:Agriculture,Aquaculture and Fishing Sectors 2022;the SASB Standards;and the TCFD recommendations,to enhance the comparability and quality of ESG disclosures for different stakeholder groups.Concurrently,we are preparing to meet the International Sustainability Standards Board(ISSB)Standards and assess the requirements of the Taskforce on Nature-related Financial Disclosures(TNFD)for our future reports.We also conducted an internal review of our sustainability reporting process,in accordance with the International Standards for the Professional Practice of Internal Auditing,to ensure that our reporting framework remains robust and our disclosures continue to meet our stakeholders needs.GREGORY MORRISKISHORE MAHBUBANINon-Executive and Non-Independent DirectorNon-Executive and Independent DirectorLIM SIONG GUANNon-Executive and Lead Independent DirectorSOH GIM TEIKNon-Executive and Independent DirectorKUOK KHOON EANKUOK KHOON HUANon-Executive and Non-Independent DirectorNon-Executive and Non-Independent DirectorPUA SECK GUANTEO LA-MEIExecutive Director andChief Operating Officer(Part-Time)Executive Director,Group Legal Counsel and Company SecretaryDR CHONG YOKE SINNon-Executive and Independent DirectorJESSICA CHEAMNon-Executive and Independent Director GEORGE YONG-BOON YEONon-Executive and Independent DirectorDR LOUIS CHEUNGNon-Executive and Independent DirectorJUAN RICARDO LUCIANOTONG SHAO MINGAlternate Director to Mr Gregory MorrisAlternate Director to Mr Kuok Khoon Hua7Sustainability Report 2023|Wilmar International Limited89Sustainability Report 2023|Wilmar International LimitedSustainability Report 2023|Wilmar International LimitedDear Stakeholders,We are pleased to present the 2023 edition of our Sustainability Report.BOARD SUSTAINABILITY COMMITTEE STATEMENTBILLIONTOTAL AMOUNT OF SUSTAINABLE FINANCING SECURED SINCE 2017THE ONLY SINGAPORE COMPANY IN THE DJSI WORLD INDEX UNDER THE FOOD PRODUCTS CATEGORYUS$3.37Our people are our greatest assets,especially for a multi-national organisation like Wilmar.In 2023,through the adoption and implementation of strategic shifts in our talent attraction programmes,we successfully expanded our pool of permanent staff across China,Malaysia and Indonesia by 20.2%,12.5%and 2.2%respectively.The improvements in talent acquisition attest to Wilmars adaptability to remain attractive to highly qualified candidates across our global workforce.Wilmar also formally adopted an updated Board Diversity Policy in 2023.This Policy includes quantitative gender diversity targets for increasing female representation on the Board of Directors,as we fully appreciate the varied skill sets and insightful perspectives a diverse Board can offer.In relation to gender diversity,the Board of Directors ensures that there is always a mix of male and female candidates put up for consideration when identifying suitable candidates for new appointments to the Board.SAFEGUARDING AND EMPOWERING OUR PEOPLESustainability Report 2023|Wilmar International Limited2023 PERFORMANCEIn 2022,we signed up to the Science Based Target initiative(SBTi)and committed to setting both near-term and net-zero emission targets in line with a 1.5-degree Celsius pathway under the Paris Agreement as part of the palm oil sectoral roadmap launched at the United Nations COP27 meeting.To meet these commitments,we have made significant progress on analysing our emissions footprint,including the completion of a mapping of the Groups Scope 1 and 2 greenhouse gas(GHG)emissions to determine our total GHG emissions for the new baseline year of 2022.We are also undertaking a process to identify the key categories in our Scope 3 GHG emissions for inclusion in our SBTi commitment.We are pleased to report that we have successfully achieved our target of reducing water intensity in our palm oil mills in Indonesia and Nigeria in 2023.Water is a crucial resource for the agriculture industry and its usage is one that we diligently track and monitor,especially in water-stressed areas.Through constant monitoring and the implementation of water efficiency measures,we were able to meet our target of below 1.30 m3/MT Fresh Fruit Bunch(FFB)for water usage intensity across these mills.ACTION ON CLIMATE AND ENVIRONMENTIn line with growing expectations and requirements on corporate disclosures,we will not only ensure that our disclosures are transparent and of a high quality,but also work on reporting more comprehensively across our businesses.We expanded the scope and coverage of our Sustainability Report to include all our key business segments in 2020.Since then,concurrent with the introduction of more stringent disclosure requirements,we have been conducting the relevant assessments and are preparing to further meet new sustainability disclosure requirements such as the ISSBs International Financial Reporting Standards(IFRS)Sustainability Disclosure Standards(IFRS S1 and IFRS S2)and the TNFD recommendations,amongst others.In 2024,we will continue to strengthen the implementation of our sustainability endeavours,with a focus on initiatives related to conservation,climate and community,including empowering women,safeguarding children and supporting smallholders.While we are motivated by the progress we have made,we recognise that our achievements are only possible with the support from our key stakeholders such as our implementation partners,industry peers,researchers,civil society organisations(CSOs)and the broader industry.We look forward to continuing our partnerships and close collaborations with our stakeholders as we pursue our goal of achieving commercial success and growth,built upon a strong foundation of sustainable business operations and practices.BOARD SUSTAINABILITY COMMITTEE,WILMAR INTERNATIONAL LIMITED 30 MAY 2024LOOKING AHEAD 9At Wilmar,we recognise and embrace the opportunities that corporates have in upholding ESG responsibilities.As a leading global agribusiness group,we demonstrate stewardship by conducting our business through a sustainability lens,as well as establishing and implementing robust corporate governance practices to ensure these responsibilities are fulfilled throughout our operations and business partnerships.Taking a steadfast and data-driven approach,we strive not only to advocate sustainability values,but also to integrate them into our business ethos and decision-making processes in a meaningful manner.As a reflection of our unwavering commitment,we have consistently invested in building and strengthening our sustainability initiatives across our global footprint.We are proud to share that we made strides in establishing a more sustainable supply chain in our sugar business in 2023.Our efforts have been well-received by the industry and gained formal recognition from the Sustainable Agriculture Initiative Platform(SAI Platform)for the alignment of our No Deforestation and No People Exploitation Sugar(NDPE Sugar)Policy with the Gold Level Equivalent in the Farm Sustainability Assessment(FSA)3.0.In addition,we were awarded a perfect score of 10 in the Global Benchmark 2023 Food,Beverage&Personal Care sector category of the Global Child Forum for our efforts in safeguarding children and advancing their rights,and we also topped the Global Benchmark 2023 Leaderboard.Wilmar continues to be the only Singapore company under the Food Products category included in the Dow Jones Sustainability Indices(DJSI)World Index our third consecutive inclusion.2023 also marked our fourth straight year on the DJSI Asia Pacific Index.Our sustainability track record has positioned us well to secure sustainability-linked financing.Wilmar successfully secured an additional US$200 million sustainability-linked trade finance facility from Standard Chartered Bank in January 2023,bringing the aggregate amount of sustainability-linked financing secured from various financial institutions such as Oversea-Chinese Banking Corporation Limited,United Overseas Bank Limited and The Bank of East Asia,Limited since our first sustainability-linked loan in 2017 to approximately US$3.37 billion as at December 2023.On the community front,we continue to support key stakeholders such as smallholders who are an integral part of the palm oil supply chain.In addition to providing financial aid and planting materials,our programmes across Asia,Latin America and Africa aim to empower smallholders by sharing knowledge on best management practices(BMPs)as well as providing resources to improve their yields and livelihoods,as well as meet sustainability regulatory requirements.11Sustainability Report 2023|Wilmar International Limited10Sustainability Report 2023|Wilmar International LimitedThrough scale,integration and the logistical advantages of our business model,Wilmar is able to reap operational synergies and cost efficiencies,while embracing sustainability in every aspect of our business.Our diverse global portfolio of consumer products includes edible oils,rice,wheat flour,noodles,sauces,condiments,margarine,sugar and plant-based protein.At the core of Wilmars strategy is an integrated agribusiness model encompassing the entire agricultural commodity value chain.The Groups business activities include oil palm cultivation,oilseed crushing,edible oils refining,flour and rice milling,sugar milling and refining,manufacturing of consumer products,ready-to-eat meals,central kitchen products,specialty fats,oleochemicals,biodiesel and fertilisers as well as food park operations.ABOUT WILMAROVERVIEW OF WILMAR 2-1,2-6,FB-PF-000.B,FB-AG-000.BFounded in 1991 and headquartered in Singapore,Wilmar is Asias leading agribusiness group with a global presence and ranked amongst the largest listed companies by market capitalisation on the SGX.THE SCALE OF OUR OPERATIONS OVERVIEW OF OUR VALUE CHAINTRADING,MERCHANDISING&DISTRIBUTIONORIGINATIONCUSTOMERSPRODUCTSRaw&refined sugarBulk edible oilsConsumer pack edible oilsOilseed mealRice&flourOleo-chemicalsNoodlesSnacksReady-to-eat mealsBakery&dairy productsCentral kitchen productsPlant-based proteinSauces&condimentsBiodieselSpecialty fatsother countries and regionsMANUFACTURING PLANTS IN 32 COUNTRIES AND REGIONS11,000MULTINATIONAL WORKFORCE OF ABOUT 50IN REVENUEUS$1.52BEXTENSIVE DISTRIBUTION NETWORK IN CHINA,INDIA,INDONESIA AND SOMEUS$67.16BIncludes subsidiaries,JVs and associates1IN NET PROFIT100,000STAFF GLOBALLY For more information about Wilmars activities,countries and regions of operation,value chain and business relationships,consumer products and brands,please refer to our Annual Report 2023 and corporate website.iPROCESSING13Sustainability Report 2023|Wilmar International Limited12Sustainability Report 2023|Wilmar International LimitedAs a responsible corporate citizen,we are dedicated to delivering meaningful progress towards our sustainability commitments,which are embedded into our business model.These initiatives contribute positively to the environment,people and the economy.OUR APPROACH TO SUSTAINABILITYSekar Imej Conservation Area in Sabah,Malaysia.These key areas are determined based on our material ESG topics,which are reviewed annually to account for changing external contexts.OUR OVERALL SUSTAINABILITY AGENDA REMAINS FOCUSED ON FOUR KEY AREAS WHERE WE CAN MAKE THE GREATEST IMPACT:PROTECTING THE ENVIRONMENTLOOKING AFTER PEOPLE AND COMMUNITIESDELIVERING PRODUCT EXCELLENCETRANSFORMING OUR SUPPLY CHAINFor more information on our materiality assessment process,please see pages 188-189iOver the years,we have continued to lead the broader industry through our NDPE commitment.2023 marked the 10th anniversary of Wilmars NDPE Policy.As the first company to launch a NDPE Policy across the entire palm oil supply chain,we have witnessed the positive impact of this Policy and have established similar responsible sourcing guidelines for the other commodities that we are involved in.In 2021,Wilmar launched our NDPE Sugar Policy which focuses on promoting sustainability in our sugar supply chain.In 2023,we established the Coconut Responsible Sourcing Policy which aims to establish a transparent,ethical and responsible coconut supply chain that supports resilient livelihoods in the rural communities where we operate.LEADING AND EXPANDING NDPE COMMITMENTS ACROSS THE BUSINESSAs a global agribusiness player,Wilmar recognises the impact of our operations and the role we play in contributing to bold climate action.In October 2022,Wilmar signed up to the SBTi and committed to setting near-term and net-zero emission reduction targets in line with a 1.5-degree Celsius pathway.Work is currently underway to develop time-bound plans that outline our strategy to achieving these targets.We also recognise the importance of advocating and committing to climate action beyond our own operations.Following COP27,we worked closely with our peers to develop the Palm Oil Sectoral Roadmap which serves as a blueprint for the industry to collectively achieve emission reduction goals and enhance supply chain actions consistent with a 1.5-degree Celsius pathway.OUR COMMITMENT TOCORPORATE CLIMATE ACTIONWilmars commitments to the Palm Oil Sectoral Roadmap are detailed in ourPALM NDPE IMPLEMENTATION ANNUAL REPORT 2023i15Sustainability Report 2023|Wilmar International Limited14Sustainability Report 2023|Wilmar International LimitedWe proactively engage our stakeholders to gather their feedback and this enables us to have a deeper understanding of their evolving needs and expectations.Wilmar welcomes the new EU Deforestation Regulation(EUDR)as a positive step that aligns with our deforestation-free commitments.We have worked extensively to meet our commitment to zero deforestation over the years and have implemented various initiatives including engagement programmes and monitoring systems that proactively track any potential deforestation and peatland development in our supply chain.As we transition towards deforestation-free supply chains,in alignment with the EUDR,we remain committed to advocating for and embracing zero deforestation as outlined in our NDPE Policy.Wilmar also supports the SDGs,as reflected in our overall approach to sustainability.We are committed to the shared global agenda of achieving a sustainable future by 2030.While we recognise that our global operations touch on all 17 interrelated SDGs,we have narrowed our focus to six priority goals where we can pursue the greatest impact by leveraging our core business operations,products and services,as well as collaborations and partnerships.The six priority goals are:SDG 4:Quality Education SDG 8:Decent Work and Economic Growth SDG 12:Responsible Consumption and Production SDG 13:Climate Action SDG 15:Life on Land SDG 17:Partnerships for the GoalsSUPPORTING PROGRESS WITHINTHE INDUSTRY LANDSCAPEFor more information on how we engage with different stakeholder groups,their interests and key concerns,and the frequency and outcome of these engagements,please refer to theSTAKEHOLDER ENGAGEMENTStakeholders have been identified as those whom our operations have a significant impact on,those with a vested interest in our sustainability performance and those in public positions who can influence our activities.They include:GOVERNMENTSEMPLOYEESCUSTOMERSSHAREHOLDERS AND THE INVESTING PUBLICLOCAL COMMUNITIESCIVIL SOCIETY ORGANISATIONSFINANCIAL INSTITUTIONSSUPPLIERSSMALLHOLDERSCERTIFICATION BODIES INDUSTRY BODIESSUSTAINABILITY PARTNERS AND COLLABORATORS STAKEHOLDER ENGAGEMENT We proactively engage our stakeholders to gather their feedback and this enables us to have a deeper understanding of their evolving needs and expectations.These insights can then be translated into updated goals and processes that form the basis of an effective sustainability strategy that adapts to the external environment.To ensure meaningful interactions with our stakeholders,Wilmar has established a Grievance Procedure where stakeholders can raise any sustainability-related grievances through a rigorous and transparent resolution process.Further details on our Grievance Procedure can be found in the Responsible Sourcing and Supply Chain Transformation section and our Palm NDPE Implementation Annual Report 2023.2-28,2-29section of our Sustainability DashboardFor more information on our efforts and initiatives,please refer to theiSUPPORTING THE UNITED NATIONS SUSTAINABLE DEVELOPMENT GOALSsection of our Sustainability DashboardOur stakeholdersiFFB grading process in Sabah,Malaysia.17Sustainability Report 2023|Wilmar International Limited16Sustainability Report 2023|Wilmar International Limited16RSPO Complaints and Appeals Procedures Review Steering GroupWE ARE AN ACTIVE CONTRIBUTING MEMBER OF THE ROUNDTABLE ON SUSTAINABLE PALM OIL(RSPO)SINCE ITS FORMATION IN 2004.Over the years,we have been participating in various RSPO working groups and have representation in:PARTNERSHIPS AND MULTI-STAKEHOLDER INITIATIVES Through actively collaborating within the industry and participating in working groups,we strive to make progress collectively on sustainability issues such as upholding human rights,ensuring traceability and transparency within supply chains,biodiversity conservation,promoting sustainable packaging and more.WE ARE ALSO A MEMBER OF:RSPO Board of Governors2Palm Oil Collaboration GroupSabah Jurisdictional Certification Steering CommitteeTropical Forest Alliance(TFA)Pongo Alliance4Biodiversity and High Conservation Value Working GroupBSRRound Table on Responsible Soy Through our consumer product businesses,we are also part of:Soft Plastic Recycling Scheme in New Zealand Australian Packaging Covenant OrganisationNational Plastics Recycling Scheme(NPRS)BonsucroHuman Rights Working Group3 Shared Responsibility Working GroupCompensation Task Force 2Supply Chain and Traceability Working GroupRSPO Greenhouse Gas Working Group 2Living Wage(LW)Task ForceRSPO Standard Revision 2022-2023 Task ForceSustainability Report 2023|Wilmar International LimitedWilmar is honoured to have served on the RSPO Board of Governors since 2017 and had voluntarily stepped down and not sought re-election in November 2023.Nonetheless,we remain highly committed to the RSPO and continue to participate in existing and new working groups.This working group also includes the Labour and Free,Prior and Informed Consent(FPIC)sub-groups.2023 marked the final year of Wilmars participation in the Pongo Alliance as its Steering Committee have decided to conclude the operations of the organisation.2 34SUSTAINABILITY GOVERNANCE 2-9,2-12,2-13,2-14,2-16 BOARD SUSTAINABILITY COMMITTEEBOARD OF DIRECTORSSUSTAINABILITY MANAGEMENT TEAM(SMT)WILMAR BUSINESS UNITSINDEPENDENT SUSTAINABILITY ADVISORS(EXTERNAL)FINANCE&ACCOUNTSINVESTOR RELATIONSINTERNAL AUDITTRADINGRESEARCH&DEVELOPMENTOPERATIONSENVIRONMENT,HEALTH&SAFETYHUMAN RESOURCESLEGAL&CORPORATE SECRETARIALCOMMUNITY DEVELOPMENT Provides oversight of Wilmars approach to sustainability Considers and approves material topics and impacts Supports the Board in Wilmars approach to sustainability Oversees sustainability strategy,impacts,risks,performance,targets,policies and practices Advises the SMT and provides on-the-ground support to execute ESG policies Oversees the day-to-day management of sustainability-related mattersThe BSC plays a crucial role in ensuring the effective integration and implementation of sustainability initiatives across the Group.The BSCs primary responsibilities include overseeing Wilmars sustainability strategy and impact,identifying ESG-related risks and opportunities,evaluating ESG targets and performance as well as monitoring the implementation of ESG-related policies and practices.The BSC meets quarterly to review sustainability matters and receives periodic reports and advisories from the Sustainability Management Team(SMT)with BOARD SUSTAINABILITY COMMITTEEBOARD OF DIRECTORSWilmars approach to sustainability is overseen by the Chairman and CEO and the Board of Directors,with the support of the BSC.The BSC sets strategic goals for sustainability and considers sustainability issues in the formulation of business strategies and corporate policies of the Group.This includes approving material topics and impacts identified through the materiality assessment and stakeholder engagement process.The Board is kept abreast of the BSCs decisions and proceedings.This Report has been reviewed and approved by the BSC and the Board.19Sustainability Report 2023|Wilmar International Limited18Sustainability Report 2023|Wilmar International Limitedsupport from the Independent Sustainability Advisors(ISA).The BSC provides input to the Board on ESG issues as well as Wilmars sustainability performance and governance,including identifying and addressing relevant sustainability risks and concerns.These can range from operational matters to critical concerns where“critical concerns”are defined as risks that have potential immediate and catastrophic impact on our business,operations and people.Issues of critical concern are disclosed in the Risk Management section of our Annual Report 2023.In the spirit of upholding transparency and good corporate governance,all Directors are invited to attend meetings held by the Board Committees,including the BSC.Additionally,to ensure that the Board remains updated,all written resolutions which have been passed and minutes of Board Committee meetings are circulated to the Board for information and review.As part of the Groups continuous efforts to create sustainable value for stakeholders,we have taken into consideration relevant key ESG targets in the annual performance review of Executive Directors and key management personnel.The key ESG targets which were incorporated in the performance review for FY2023 include Climate Change,Responsible Sourcing and Supply,Health and Safety,Business Ethics and Compliance as well as Talent Retention.These targets form part of a larger set of ESG topics that have been identified as being material to the Group.iFor more details,please refer to the Corporate Governance section of our Annual Report 2023ESG TARGETSiFor more information on the Boards composition,independence and tenure,please refer to the section onANNUALREPORTBOARD OF DIRECTORSin our Annual Report 2023The ISA comprises external experts and eminent individuals.They work with the SMT to provide on-the-ground support to execute and evaluate the implementation of our ESG policies.The ISA also provides advice and recommendations related to external stakeholder expectations and global sustainability trends.INDEPENDENT SUSTAINABILITY ADVISORSThe SMT is led by the Chief Sustainability Officer,Jeremy Goon.He is assisted by the General Manager Group Sustainability,General Manager Sustainability-External Engagement and Assistant General Manager Upstream in the day-to-day management of sustainability-related matters.Staffed by over 80 employees across our global offices and sites,the Sustainability Department supports the SMT in collaborating with all business and operational units to implement the Groups sustainability strategies and initiatives.A combination of local and technical expertise throughout Asia,Africa and Europe enables the department to oversee the implementation of the NDPE and other sustainability-related policies,sustainability certification,traceability and supply chain monitoring,supplier compliance,human rights,grievances,conservation efforts,research and development(R&D),climate change,stakeholder engagement and reporting.SUSTAINABILITY MANAGEMENT TEAMAND SUSTAINABILITY DEPARTMENTSmallholder training in Indonesia conducted by the Sustainability team.Elementary school children in one of Wilmars schools in Central Kalimantan,Indonesia.BIODIVERSITY AND CONSERVATIONSUSTAINABLE PACKAGINGENVIRONMENTAL FOOTPRINT OF OPERATIONSCLIMATE CHANGEPROTECTING THE ENVIRONMENTREDUCTION IN ENERGY INTENSITY FROM 2022 TO 2023TOTAL INSTALLED CAPACITY OF PV PLANTS IN CHINA AS OF 20234.8%4.1.0MWpREDUCTION IN GHG EMISSIONS INTENSITY ACROSS THE GROUP FROM 2022 TO 2023IN THE PROCESS OF SETTING BOTH NEAR-TERMAND NET-ZERO EMISSION TARGETS IN LINEWITH A 1.5-DEGREE CELSIUS PATHWAY FOR32,000HACONSERVATION AREAS IN WILMARS OIL PALM AND SUGAR OPERATIONS21202111,447MTPACKAGING WASTE REDUCED,REACHING 76.3%OF YIHAI KERRY ARAWANAS(YKA)TARGETZERO DEFORESTATIONIN HCS FORESTS AND HCV AREASZERO NEW DEVELOPMENTON PEATLAND IN WILMARS LANDBANKROADMAPINDONESIA AND NIGERIAACHIEVED WATER CONSUMPTION INTENSITY TARGETS52.2%OF GLOBAL ENERGY CONSUMPTION FROM RENEWABLE SOURCESOF TOTAL WASTE GENERATED DIVERTED FROM LANDFILLING65.8%SUBMISSION TO SBTI BY 202423Sustainability Report 2023|Wilmar International Limited22Sustainability Report 2023|Wilmar International LimitedWilmar is committed to biodiversity conservation in our operations and supply chain which extends from our overarching NDPE Policy.As a leading agribusiness group operating in some of the worlds richest biodiversity hotspots,we recognise our role in conserving and retaining the rich variety of biodiversity.BIODIVERSITY ANDCONSERVATION3-3,304-1,304-2,304-3,304-4 23Sustainability Report 2023|Wilmar International Limited2222As part of our approach,we aim to support the industry,including local communities and government agencies,in promoting sustainable practices and forest stewardship through multi-stakeholder collaborations and initiatives.We continue to uphold our commitment to a deforestation-free supply chain and channel significant resources towards identifying,protecting and restoring High Carbon Stock(HCS)forests,High Conservation Value(HCV)areas and other ecologically and culturally important lands.5The total conservation area has decreased slightly from 32,544 ha in 2022 due to operational boundary changes.OUR TARGETS2023 PERFORMANCE NO DEFORESTATION No development in HCS forests and HCV areas No burning in the preparation of new planting and re-planting of any other development NO NEW DEVELOPMENT ON PEATLAND,regardless of depth MAINTAIN BMPs for existing plantations on peat ZERO DEFORESTATION in HCS forests and HCV areas ZERO NEW DEVELOPMENT on peatland in Wilmars landbank SAFEGUARD BIODIVERSITY in Wilmars operational areas 31,799 HA5 of HCV areas and HCS forests set aside as conservation areas in our oil palm plantations in Indonesia,Malaysia,Ghana and Nigeria(10.4%of our total landbank)835 HA of additional conservation areas in our sugarcane plantations and mills in Australia and India REGULAR MONITORING OF CONSERVATION AREAS AND ZERO DEFORESTATION in Wilmars operational areas RESTORE,REHABILITATE AND MAINTAIN 1,000 HA of riparian zones by 2050 A TOTAL OF 531 HA OF RIPARIAN ZONES RESTORED AND REHABILITATED with over 228,000 trees from 52 species in Indonesia,Malaysia and West Africa as of December 2023.103 HA were restored and rehabilitated in 2023 PROTECT RARE,THREATENED AND ENDANGERED(RTE)SPECIES of wildlife for long-term viability of the species:Increase the siamang(Symphalangus syndactylus)population in PT Kencana Sawit Indonesia(KSI)to 30 by 2050 Maintain proboscis monkey(Nasalis larvatus)population in Sabahmas Plantation in Malaysia,by 2050 PROTECT RTE SPECIES OF WILDLIFE in Wilmars operational areas through conservation monitoring,awareness raising programmes and stakeholder engagement AS OF 2023,A TOTAL OF 22 SIAMANGS have been reintroduced into the wild through the gibbon rehabilitation and reintroduction programme and are protected in PT KSI A TOTAL OF 25 PROBOSCIS MONKEYS are monitored and protected in Sabahmas Plantation in Malaysia ENGAGE 10,000 EXTERNAL STAKEHOLDERS AND LOCAL COMMUNITIES ON BMPs to raise awareness of and promote conservation by 2050 A TOTAL OF 2,916 EXTERNAL STAKEHOLDERS AND LOCAL COMMUNITIES PARTICIPATED in the BMPs and awareness programme in Indonesia,Malaysia and West Africa as of 2023.736 stakeholders were engaged in 202325Sustainability Report 2023|Wilmar International Limited24Sustainability Report 2023|Wilmar International LimitedIDENTIFYING AND CONSERVINGHCS FORESTS AND HCV AREAS Our NDPE Policy has been instrumental in ensuring sustainable practices across our palm operations and supply chain.Since introducing our NDPE Policy in 2013,we have upheld our commitment to not develop in HCS forests and HCV areas.This commitment similarly extends to our sugar operations as outlined in our NDPE Sugar Policy launched in 2021,which prohibits the conversion of legally protected or HCV areas as well as preserves and enhances biodiversity and ecosystem services.We also recognise the important role played by our workers,as well as local and indigenous communities,hence we developed a range of programmes to raise awareness while building capacity to further strengthen our conservation efforts.Our NDPE Policy requires all new oil palm land developments by Wilmar and our suppliers to identify and protect HCV areas and HCS forests using international best practice guidance from the:RSPO Principles and Criteria(P&C)High Conservation Value Resource Network(HCVRN)High Carbon Stock Approach(HCSA)A total of 31,799 ha in Wilmars oil palm plantations are conservation areas.Recognising the presence of wildlife species including birds and mammals from the International Union for Conservation of Nature(IUCN)Red List of Threatened Species in these areas,we monitor and manage all HCS forests and HCV areas within our oil palm operations as conservation areas.To encourage biodiversity conservation throughout the plantation landscape,we have released a publication titled“A Practical Guide to Conservation Area Monitoring”in two local languages to provide guidance to our suppliers in setting up monitoring systems for identified conservation areas.We are working on the English edition of the guide.CONSERVATION AREASIN OUR PALM OPERATIONSA fundamental part of our conservation work is the monitoring of both our own concessions and those of our suppliers to detect any instances of non-compliant deforestation and fires.To further our commitment to sustainability,Wilmar has been a member of the NDPE Implementation Reporting Framework(NDPE IRF)initiative since 2019 and reports annually on our progress.OUR CONSERVATION AND BIODIVERSITY MANAGEMENT EFFORTS ARE GUIDED BY FIVE KEY STRATEGIES:SAFEGUARDING BIODIVERSITY BUILDING ECOSYSTEM RESILIENCE ENGAGEMENT AND CAPACITY BUILDING SMART PARTNERSHIPS AND COLLABORATIONSEFFECTIVE MANAGEMENT24Sustainability Report 2023|Wilmar International LimitedCONSERVATION AREASIN OUR SUGAR OPERATIONS We require all sugarcane land development within our own and our suppliers operations to demonstrate that they do not operate in HCV areas or areas that are defined internationally or nationally as legally protected.Where protected areas or ecological areas of importance have not yet been identified,we encourage plantation owners to identify biodiversity resources and ecosystem services that may be impacted by their operations.As of December 2023,Wilmar has 835 ha of conservation areas in our sugar operations in Australia and India.HATOTAL CONSERVATION AREAS IN WILMARS OIL PALM PLANTATIONS31,799HATOTAL CONSERVATION AREAS IN WILMARS SUGARCANE PLANTATIONS AND MILLS835OUR TARGETS(CONTINUATION)2023 PERFORMANCE(CONTINUATION)CONDUCT ENVIRONMENTAL EDUCATION AND AWARENESS PROGRAMMES FOR 10,000 STUDENTS by 2030 A TOTAL OF 1,670 STUDENTS PARTICIPATED IN THE ENVIRONMENTAL EDUCATION AND AWARENESS PROGRAMMES in Indonesia,Malaysia and West Africa as of December 2023.1,463 students participated in 2023 IMPLEMENT CONSERVATION AND BIODIVERSITY INITIATIVES IN 3,000 HA outside of Wilmars concessions by 2050 A LANDSCAPE PROJECT OF 2,783 HA BEYOND WILMARS CONCESSIONS IN INDONESIA AND GHANA has been initiated to support biodiversity and community-based conservation PUBLISH BMPs GUIDELINES on conservation for Indonesia,Malaysia and West Africa by 2024 PUBLISH EDUCATIONAL SERIES AND MATERIALS to promote biodiversity conservation in the plantation landscape by 2030 PUBLISHED:BMPs Manual for Growers on Forest Conservation and Community Collaboration in Bahasa Indonesia and English A Practical Guidance to Conservation Area Monitoring in Bahasa Melayu and Bahasa Indonesia Bukit Durang:Hidden Jewel of Ulu Suai,Sarawak Newsletter series on conservation efforts in Wilmars operational areas in Malaysia volumes 5 and 6 Guidance on Development of Recovery Plans27Sustainability Report 2023|Wilmar International Limited26Sustainability Report 2023|Wilmar International LimitedINDIA160NIGERIA3,954SUMATRA,INDONESIA2,988GHANA83AUSTRALIA675SABAH,MALAYSIA6,792Conservation areas(ha)by regionTOTAL32,633 haRiparian zones20.2%6,605 haConservation areas by typeHCV/HCS(excluding riparian zones)77.2%,194 haOther conservation areas2.65 haWEST KALIMANTAN,INDONESIA927SARAWAK,MALAYSIA1,725CENTRAL KALIMANTAN,INDONESIA15,330TOTAL NUMBER OF BIRD SPECIESTOTAL NUMBER OF MAMMAL SPECIESTOTAL RECORDED IUCN RED LIST SPECIESLEAST CONCERNNEARTHREATENEDVULNERABLEENDANGEREDCRITICALLY ENDANGERED44 16167220622103TOTAL NUMBER OF BIRD SPECIESTOTAL NUMBER OF MAMMAL SPECIES85 61Total number of IUCN Red List species potentially found in Wilmars conservation areasOur conservation areas are monitored closely as part of our commitment to biodiversity conservation in our operations and supply chain.A notable example is the Spatial Monitoring and Reporting Tool(SMART)which is used to monitor and patrol our protected landscapes as well as for data analysis in Central Kalimantan,Indonesia,since 2013.CONSERVATION MONITORING SMART provides four main data retrieval components:LOCATION SPATIAL DATADATE AND TIME OF PATROLOBSERVATION OF WILDLIFE IN HCV AREASHUMAN ACTIVITIES IN HCV AREASsuch as encroachment and illegal loggingIUCN RATING29Sustainability Report 2023|Wilmar International Limited28Sustainability Report 2023|Wilmar International LimitedSince adopting the SMART system,we have logged more than 15,189 PATROLS,32,512 FIELD PHOTOS and 27,626 DIRECT AND INDIRECT6 wildlife sightings where 14,965 LOGS WERE OF RTE SPECIES.For more conservation monitoring examples,please see the CONSERVATION STORIES on pages 30-33.6Indirect wildlife sightings include images caught on camera traps and the spotting of footprints,among others.number of patrols that were conducted by our field team field photos taken during patrols findings from each patrolCollecting the following data from our field team:Entering data into the systemReporting and evaluation with plantation managementData processing and mappingDevelop plans to manage HCV areas based on the findingsSTEP 1STEP 2STEP 4STEP 3STEP 5To quantify the progress and success of our management plans for each plantation and identify areas for improvement,data on our HCV management programmes,including restorations,signboard installations,marking poles,boreholes and socialisation efforts,is also collated on our internal HCV Management Implementation Dashboard.Data collected from our field teams,including the number of patrols conducted,field photos and findings,is logged into the system to help us identify HCV areas and encroachment within our plantation operations.With this information,we are able to evaluate and adapt our management and monitoring plan for conservation activities in Indonesia.A black-backed dwarf kingfisher(Ceyx erithaca)in Central Kalimantan,Indonesia.30Sustainability Report 2023|Wilmar International LimitedWe work with local communities,CSOs,government departments and suppliers to ensure the effective management and conservation of Wilmars operations and the surrounding landscapes.CONSERVATION STORIES 3130 Wilmar has designated parts of our conservation areas as a learning ground for students in Indonesia.Spanning over 20,000 ha,the dedicated area is home to a diverse range of wild animals and plants,such as the red leaf monkey(Presbytis rubicunda),Bornean white-bearded gibbon(Hylobates albibarbis),siamangs(Symphalangus syndactylus)and many more.We aim to provide children with an opportunity to experience the forest and its biodiversity up close,while raising awareness and fostering an interest in the stewardship of nature among future generations.Wilmar has been spearheading this concept in Indonesia since 2022 by constructing walking paths connecting three jungle trekking routes that cut across several conservation areas.As of 2023,616 students have participated in this programme.EDUCATIONAL PROGRAMME FOSTERING FUTURE STEWARDSWe established the Adum Smallholder Oil Palm Project(ASHOPP)in Ghana to build a unique model that integrates biodiversity conservation with sustainable palm oil production.ASHOPP adheres to RSPO standards and actively protects nearby forests through community engagement and restoration efforts.This win-win approach empowers local communities by ensuring land rights,offering income diversification opportunities and providing training in sustainable practices.To achieve this,ASHOPP has implemented a Production-Protection Agreement sponsored by Partnerships for Forests.This agreement involves the communities directly in protecting the nearby Neung South forest and participating in forest restoration activities.One key aspect of this collaboration is the planting of native forest tree species in riparian buffer zones to safeguard the health of nearby rivers.Since 2022,approximately 3,000 trees comprising 12 species were planted under a dedicated forest restoration project to revitalise a degraded portion of the forest.ASHOPPs success has inspired neighbouring communities and served as a model for responsible palm oil production.Read more about ASHOPP in the Economic and Community Contribution section.INTEGRATING BIODIVERSITY CONSERVATION WITH SUSTAINABLE PALM OIL PRODUCTION IN GHANAA siamang(Symphalangus syndactylus)after it was released into the wild in Central Kalimantan,Indonesia.Elementary school children from SD Bina Bangsa in our Nature School located in Central Kalimantan,Indonesia.Engagement with smallholders in Ghana.AFRICAINDONESIACASE STUDYCASE STUDYiCONSERVATION AND RESEARCH PARTNERSHIPSVisit our Sustainability Dashboard to read more on Wilmars33Sustainability Report 2023|Wilmar International Limited32Sustainability Report 2023|Wilmar International Limited3332SEKAR IMEJCONSERVATION AREA MALAYSIAWilmar has been collaborating with the University of Malaysia Sarawak(UNIMAS)since 2014 to study the diversity and abundance of flora and fauna in HCV areas within our plantation operations in Sarawak.As of 2023,over 20 undergraduate and postgraduate students have conducted research in our HCV areas.In 2023,we published a book titled“Bukit Durang:The Hidden Jewel of Ulu Suai,Sarawak”jointly with UNIMAS.It details research conducted on the Bukit Durang Conservation Area,a 994-ha site located inside Wilmars oil palm operations that is home to a significant number of species,including the critically endangered pangolin(Manis javanica)as well as the Malayan sun bear(Helarctos malayanus)and marbled cat(Pardofelis mamorata).This collaboration is a significant milestone in the conservation of biodiversity in Sarawak,demonstrating Wilmars commitment to sustainability and the preservation of natural resources.RESEARCH PARTNERSHIP WITHUNIVERSITY OF MALAYSIA SARAWAK CASE STUDYThe Sekar Imej Conservation Area(SICA)is the largest conservation area in Wilmars operations in Malaysia.The SICA project is an ongoing joint effort between Wilmar and our stakeholders,including the surrounding local communities,to protect and preserve the areas unique biodiversity.As part of our plan to develop SICA as a Biodiversity and Carbon Research Centre,Wilmar partnered with the South East Asia Rainforest Research Partnership to carry out the first expedition of the area in 2022.Preliminary findings from the expedition highlighted the importance of SICA for local wildlife and provided valuable baseline data of SICA for biodiversity conservation.To promote the rehabilitation and restoration of these vital HCV areas and the protection of wildlife habitats,we established a forest nursery to serve as a seed propagation and distribution centre for forest tree seedlings.The nursery will support our forest rehabilitation efforts and the Remediation and Compensation Procedure project which will help to restore carbon stocks and the ecological function of SICA.Recognising that local communities play an important role in biodiversity conservation,we also place significant emphasis on capacity building and community-based conservation.In addition to our Wildlife Awareness Outreach Programme and Junior Ranger Programme,we conducted various training sessions for SICA Rangers.These sessions included technical visits to conservation sites and organisations to further develop their field monitoring skills and improve their understanding of conservation efforts.Drone and camera trap trainings were part of the efforts to introduce the SICA team to new tools and technologies for better monitoring and detection.Read our SICA Newsletter volumes 5 and 6 to learn more about the progress made in 2023.Wilmars Conservation and Operations teams at SICA in Sabah,Malaysia.iBIODIVERSITY section on our Sustainability DashboardApart from the SICA project,we have implemented other conservation initiatives such as the gibbon rehabilitation and reintroduction efforts and the Riparian Rehabilitation Project.For more information,please visit the“Bukit Durang:The Hidden Jewel of Ulu Suai,Sarawak”book launch at the 2023 East Malaysia Palm and Lauric Oils Price Outlook Conference held in Sarawak,Malaysia.35Sustainability Report 2023|Wilmar International Limited34Sustainability Report 2023|Wilmar International LimitedPEATLANDSPeatlands play an important role in climate change by storing almost a third of the worlds total carbon.7 To protect these vital stores of carbon,Wilmar prohibits any new development on peat regardless of depth and collaborates with partners to restore peatlands.0.74%of the total planted area in our oil palm plantations across Indonesia and Malaysia,approximately 1,702 ha*,is classified as peat.In these areas,we apply BMPs defined by experts and the RSPO,including measures to ensure water tables remain at optimal levels to minimise peat subsidence and the release of CO2.We encourage our suppliers to implement similar measures and promote BMPs in peatland management via the publication of our Best Management Practices Manual for Growers on Forest Conversation and Community Collaboration to support peatland conservation efforts in their own estates.We also have 0.74 ha of peatlands in our conservation areas.Where feasible,we participate and contribute towards peatland conservation targets and efforts in these areas under the supervision of and support from the Indonesian Ministry of Environment and Forestry,as well as deforestation-free supply chain initiatives and knowledge-sharing platforms such as the TFA.PLANTED PEAT AREACONSERVED PEAT AREASUMATRA1,593*0.74SARAWAK84*0SABAH10*0WEST KALIMANTAN15*0Conserved and planted peat area by region(ha)35Sustainability Report 2023|Wilmar International Limited34*7Limited assurance conducted by CU.Global assessment reveals huge potential of peatlands as a climate solution(unep.org).Oil palm plantation in Sabah,Malaysia.37Sustainability Report 2023|Wilmar International Limited36Sustainability Report 2023|Wilmar International LimitedAs one of the most efficient oil crops in terms of land use8,we believe that palm oil has the greatest potential to meet the growing global demand for vegetable oil without putting additional pressure on land resources.Through ongoing efforts to improve our yield and extraction rates,we are continuously exploring opportunities to increase our palm oil production without expanding onto or developing new land areas.FIRE AND HAZE FIRE MONITORING,DETECTION AND SUPPRESSION We adhere to a strict no burning policy in land development and preparation by Wilmar and our suppliers.We achieve this by using mechanical methods that allow woody debris to remain in situ to decompose and enhance soil fertility.This approach also reduces our reliance on inorganic fertilisers and decreases our GHG emissions.In special situations where burning is necessary and permissible under local laws,it is carried out under strict supervision and prescribed circumstances.In the Burdekin region of Queensland,Australia,we carefully carry out controlled burning to remove cane trash from leafy sugarcane,which can block water flow and result in poor irrigation if left in situ during harvesting.We implement robust fire standard operating procedures(SOPs)and adhere to all applicable local laws and regulations.In 2023,controlled burning methods were used to burn a total of 3,113 ha within our sugar plantations.We take active measures to mitigate the risk of fires in our operations and the surrounding areas.We have in place a 24/7 fire monitoring system which alerts us to any fires in addition to a protocol for land and forest fire management and mitigation across our global operations.The protocol covers planning,prevention,suppression,post-fire reporting and management as well as firefighting coordination.It also includes readiness and preventive measures for all concessions and their surroundings.We use satellite imagery to monitor and identify fires within and up to five kilometres outside our boundaries.Our integrated fire monitoring system automatically captures and relays hotspot alerts to field managers and onto our dashboard system.Monitoring and detection efforts are supplemented with daily on-the-ground fire monitoring and verification of all identified hotspots.This proactive approach helps detect and suppress fires even before they are detected by the satellite and rules out temperature fluctuations that could be incorrectly identified as fires.All our concessions are staffed with on-site response teams who are immediately dispatched once fires are confirmed.Personnel are regularly evaluated to ensure the effective implementation of SOPs and are trained to be prepared and to respond to fires quickly and decisively.We also work closely with the RSPO through the RSPO Hotspot Monitoring Programme to share fire-related data and verify hotspot notifications.Our response teams are immediately dispatched to extinguish fires when there are confirmed incidences.YIELD AND EXTRACTION RATES AVERAGE RAINFALL(MM)TOTAL AFFECTED AREA(HA)NO.OF ACTUAL FIRESHOTSPOTS DETECTEDACTUAL FIRESCentral KalimantanWest KalimantanSumatraTotal6636481516037195Central KalimantanWest KalimantanSumatraTotal5072.096521.2823.8853531822,95642395464601662771785150942,4903,4293,0772,8133,2972018201920202021202220232,9562,8139616,9626,9393901,0091612,4903,4293,0773,297201820192020202120222023981231921163532148 https:/palmoilalliance.eu/facts-on-palm-oil/Hotspots vs actual fires in Wilmars concessions by region in Indonesia(no.)Fires in Wilmars concessions in IndonesiaHotspots vs actual fires within a five-kilometre radius outside of Wilmars concessions by region in Indonesia(no.)Fires within a five-kilometre radius outside of Wilmars concessions in Indonesia37Sustainability Report 2023|Wilmar International Limited119PALM NDPE IMPLEMENTATION ANNUAL REPORT 2023More information on our fire prevention and management initiatives can be found in ouriINNOVATION AND TECHNOLOGYFor more information on our R&D work,please refer toPreventing forest fires involves increasing public awareness about responsible land management,strengthening law enforcement against unauthorised burning,addressing difficulties in remote or inaccessible areas through early detection and specialised firefighting teams and adapting to prolonged dry seasons exacerbated by climate change.As such,we supplement our monitoring efforts with community education,awareness campaigns and multi-stakeholder partnerships to entrench sustainable practices throughout the industry.These include socialising land and forest fire prevention programmes and supporting local communities and smallholders in managing fires that occur within a five-kilometre radius of our concessions.We regularly monitor for fires in our suppliers concessions through our Supplier Group Compliance Programme.Upon receiving alerts,we seek clarification and work with community leaders and local governments to routinely conduct awareness campaigns and basic fire management training at the grassroots level.i2439Sustainability Report 2023|Wilmar International Limited38Sustainability Report 2023|Wilmar International LimitedCLIMATE CHANGE 3-3,201-2,FB-AG-110A.2,FB-AG-440A.1 Wilmar is committed to progressively reduce GHG emissions from our operations while supporting global efforts in mitigating the impacts of climate change.Emissions from land use change,effluent generation and fossil fuel use across estates,mills and refineries contribute to a rise in global temperatures which can in turn pose risks to food production and food security.To build resilience of our business and key stakeholders,we seek to shift towards responsibly and sustainably produced commodities while continuing to identify and assess the risks and opportunities that climate change presents.As the world transitions to a low-carbon economy,we seek to expand our mitigation efforts throughout the wider landscape.Following COP26,Wilmar worked closely with some of the worlds biggest agricultural commodity companies to develop a roadmap to accelerate supply chain action and reduce emissions from our value chain.We will continue to advocate for the recognition and adoption of the Palm Oil Sectoral Roadmap launched at COP27.To ensure we play our part in championing the shift towards sustainable production,Wilmar signed up to the SBTi in 2022,committing to set both near-term and net-zero emission targets in line with a 1.5-degree Celsius pathway.We plan to submit our targets to the SBTi for validation in late 2024.We use climate-related scenario analysis to evaluate our climate-related risks and opportunities(R&Os).The assessment is based on a 2-degree Celsius scenario over the short term(two years),medium term(two to 10 years)and long term(more than 10 years).The results of this assessment are summarised in the table on the following page.CLIMATE-RELATED RISKS AND OPPORTUNITIES For more information on how we assess our climate-related R&Os,please refer toALIGNING WITH THE RECOMMENDATIONS FROM THE TASK FORCE ON CLIMATE-RELATED FINANCIAL DISCLOSURES(TCFD)38i201-239Sustainability Report 2023|Wilmar International LimitedOUR TARGETS2023 PERFORMANCE DEVELOP COMPREHENSIVE TARGETS consistent with a 1.5-degree Celsius pathway and aligned with the SBTi.These targets will also be linked to our energy and water efficiency programmes Ensure ALL SUPPLIERS PALM OIL VOLUMES ARE IN THE“DELIVERING CATEGORY OF THE NDPE IRF by 2025 and the progress is reported annually COMPLETED THE MAPPING OF THE GROUPS SCOPE 1 AND 2 GHG EMISSIONS for the new baseline year of 2022 We have IDENTIFIED THE TOP FIVE GEOGRAPHIES THAT CONTRIBUTE TO OUR GHG EMISSIONS AND ARE ESTABLISHING AN IMPLEMENTATION ROADMAP which will outline our progress and the initiatives we will implement to meet our targets IDENTIFIED THE KEY CATEGORIES IN OUR SCOPE 3 GHG EMISSIONS for inclusion in our target submission to the SBTi Our progress on supply chain performance is detailed in the section on RESPONSIBLE SOURCING AND SUPPLY CHAIN TRANSFORMATION and in the PALM NDPE IMPLEMENTATION ANNUAL REPORT 2023 REDUCE OUR GHG EMISSIONS INTENSITY BY 15.0%for all our palm oil mills in Indonesia,Malaysia,Ghana and Nigeria,regardless of RSPO certification status by 2023,against a 2016 baseline of 0.82 tCO2e PER MT CPO REDUCED OUR GHG EMISSIONS INTENSITY BY 17.3%for our palm oil mills41Sustainability Report 2023|Wilmar International Limited40Sustainability Report 2023|Wilmar International LimitedCATEGORYACUTE PHYSICAL RISKCHRONIC PHYSICAL RISKCURRENT REGULATIONSEMERGING REGULATIONSTECHNOLOGY LEGALMARKETREPUTATIONTIMEFRAMEMEDIUMLONGSHORTSHORTLONGMEDIUMSHORTSHORTDESCRIPTIONIncreasing temperatures and frequency of extreme weather events,such as floods and droughts,which can increase the volatility of crop production and spread new diseases and pests causing disruptions to the wider ecosystemIncreasing pressure on fertile soils which can lead to long-term damage to crops and impact the feasibility of continual planting of crops,which in turn poses risks to land use,food production and food securityExisting rules and regulations on emissions or climate change mitigation such as the Paris Agreement and regulations mandating the incorporation of methane capture systems by operatorsNew regulations which restrict emissions or promote adaptation to climate change such as carbon tax,EUDR or Nationally Determined Contributions(NDCs)Disruptive new technologies such as alternatives for commodity productsLitigation claims such as failure to meet our customers climate-related terms in procurement contractsIncreasing consumer awareness of climate change and expectations on businesses to manage climate-related impacts such as deforestation and emissionsReputational risk can lead to boycotts by stakeholders such as consumers,banks and investorsIMPACTDecreased revenue due to lower yields and productivityDecreased revenue due to lower yields and productivityIncreased investments required to meet requirementsIncreased investments required to meet requirements and restrictions in expansion of production landsDecreased revenue due to lower customer demand for products Increased operating costs from litigationsReduced supplier pool due to non-compliance and reduced demand for commodities not aligned to market expectationsDecreased demand and disrupted access to financingMANAGEMENT APPROACHInvest in the R&D of palm seedlings that are more resilient to extreme weather patternsImplement sustainable agronomic practices,including the proper application of fertiliser and analyse the health of the soil for optimum growing conditionsContinue to focus on finding and implementing initiatives to reduce our operational GHG emissionsContinue to focus on finding and implementing initiatives to reduce our operational GHG emissions and maximising crop yield on existing production landsInvest in R&D to stay abreast of technological developments and ensure our strategic plans can pivot to turn potential technology risks into opportunitiesCommit to science-based targets and ensure we put in place plans to meet our commitmentsContinue working closely with our suppliers to implement our NDPE commitmentsClose monitoring of changes and continuing good performance in key sustainability ratings and rankings through transparent disclosuresCOST OF RESPONSE TO RISKThe total cost to implement sustainable management and production practices and improve our infrastructure to make it resistant against negative climate impacts is estimated to be US$34.0 millionThe total cost to implement sustainable management and production practices and improve our infrastructure to make it resistant against negative climate impacts is estimated to be US$34.0 millionThe total capital cost to implement the system in all mills in Malaysia,Indonesia,Nigeria and Ghana is estimated to be around US$90.0 millionThe total capital cost to implement the system in all mills in Malaysia,Indonesia,Nigeria and Ghana is estimated to be around US$90.0 millionThe financial impact of this risk has not yet been quantifiedThe financial impact of this risk has not yet been quantifiedThe financial impact of this risk has not yet been quantifiedThe financial impact of this risk has not yet been quantifiedTRANSITION RISKSPHYSICAL RISKSPhysical and Transition R&Os4140Sustainability Report 2023|Wilmar International Limited43Sustainability Report 2023|Wilmar International Limited42Sustainability Report 2023|Wilmar International LimitedOPPORTUNITIES42Sustainability Report 2023|Wilmar International LimitedCLIMATE CHANGE ADAPTATION CLIMATE CHANGE MITIGATION 305-5 The food and agriculture sectors are especially vulnerable to climate change which can negatively affect crop yields as a result of increasingly extreme weather patterns,including prolonged droughts or periods of heavy rainfall.As such,we invest substantially in the R&D of palm seedlings that are resilient to extreme weather patterns.To ensure the reliability and resilience of our future suppliers,these seedlings are also sold to smallholders and smaller plantation companies across our supply chain.As the world transitions to a low-carbon economy and customers increasingly favour responsibly and sustainably produced commodities,we are also exploring other environmental friendly solutions.These include plant-based proteins to reduce our reliance on animal-based proteins and producing soaps and detergents using vegetable-based surfactants which are more consumer and environmental friendly.In 2023,we revised our baseline year from 2020 to 2022 to better reflect the recent increase in emissions as a result of delayed projects earmarked for execution in 2020 as well as to better align our data with the Forest,Land and Agriculture(FLAG)guidance that was launched in September 2022.Having completed our Scope 1 and 2 inventory for our new baseline year,we are now working on completing our Scope 3 baseline.Nonetheless,our 2020 baseline has helped us identify the key categories in our Scope 3 GHG emissions for SBTi target setting.A summary can be found in theBASE DATA TABLESFor more information on our R&D initiatives,please refer toINNOVATION AND TECHNOLOGYiiFor more information on reusing biomass,please refer toENVIRONMENTAL FOOTPRINT OF OPERATIONSiREDUCING GHG EMISSIONS IN OUR UPSTREAM PALM OIL OPERATIONS GHG emission reduction in our palm oil business is primarily achieved by generating electricity from biomass,treating palm oil mill effluent(POME),halting deforestation and employing best practices on cultivated peatland to reduce our carbon footprint.Methane capture is an important element of our strategy to reduce our GHG emissions.It enables us to minimise the amount of methane directly released into the atmosphere by reusing biogas to generate electricity and flaring off the excess.As of 2023,we have built 25 methane capture facilities across our Indonesia and Malaysia operations.With all methane capture plants in operation,we managed to avoid a total of 0.5 million tCO2e9 of GHG emissions in 2023.In addition to biogas,we use biomass,including by-products from the milling process such as empty fruit bunches(EFB),palm kernel shells(PKS)and mesocarp fibre to generate electricity in our palm oil mills.Our commitment to minimising our climate impacts similarly extends to our value chain.Suppliers are expected to adopt climate change mitigation practices in line with our NDPE commitments and the Agriculture Sectoral Roadmap to 1.5-degree Celsius:Palm Oil Sectoral Roadmap Commitment Index.Physical and Transition R&Os(continuation)iBIODIVERSITY AND CONSERVATIONFor more information on how we protect forests and manage peatlands to mitigate climate change,please refer to9CATEGORYMARKETSENERGY SOURCEPRODUCTS AND SERVICESTIMEFRAMESHORTSHORTLONGDESCRIPTIONAccess to new markets due to regulatory requirements for renewable energy to be part of the energy mix.An example would be using sustainable biofuel to replace fossil fuelUtilisation of lower-emission sources of energy available in our operations.For example,biogas,which is mainly generated during palm oil milling and has a high proportion of methane,can be used as an alternative energy source to non-renewable fuelsDevelopment through R&D and innovation to meet growing consumer demand for products and services with a reduced negative environmental and social footprintIMPACTIncreased revenue through access to new and emerging marketsDecreased operating costs through the reuse of biomass and biogas to generate electricity and steamIncreased revenue through access to new and emerging marketsMANAGEMENT APPROACHContinue to ensure supply to markets such as the European Union(EU)are certified accordinglyContinue building methane capture plants in palm oil mills and modify/replace facilities and equipment to provide flexibility to use more biomass-based fuels(fuel switching)Continue to collaborate widely and invest in scientific research to create new and innovative productsCOST TO REALISE OPPORTUNITYThe total cost to certify all our relevant sites against International Sustainability and Carbon Certification(ISCC)is estimated to be US$40,500The estimated cost to construct a new methane capture plant with biogas utilisation is US$2.0 millionOur R&D Centre in China have pledged over RMB100.0 million(approximately US$14.0 million)to support scientific R&DThese avoided emissions directly contribute to a reduction in our Scope 1 emissions.Emissions are calculated based on the GHG Protocol,the worlds most widely used GHG accounting standards for companies and include the following gases:CO2,CH4 and N2O.The global warming potential(GWP)rates used are from the Intergovernmental Panel on Climate Change(IPCC)Sixth Assessment Report(AR6).The operational control approach is used to consolidate GHG emissions.45Sustainability Report 2023|Wilmar International Limited44Sustainability Report 2023|Wilmar International LimitedREDUCING GHG EMISSIONS IN OUR SUGAR OPERATIONS We also implement energy and resource initiatives in our sugar operations,including reusing biomass and water where possible and adopting BMPs in fertiliser and chemical usage.Our sugar operations in Australia and India rely primarily on bagasse,a by-product of crushing sugarcane,to power our mills.As part of continued efforts to ensure efficient energy use in our sugar operations,our refineries are developing an Energy and GHG Reduction Pathway towards a low-emissions future.To this end,Wilmar is currently in the process of modifying our plants and processes and introducing more energy efficient equipment such as mechanical vapour recompression evaporators and process heat recovery systems.Wilmars palm oil and sugar mills rely mostly on renewable energy that is generated from biomass.For more information on these initiatives,please refer toENVIRONMENTAL FOOTPRINT OF OPERATIONSiREDUCING GHG EMISSIONS IN OUR FACTORIES POTENTIAL COMBINED SOLAR PV GENERATION CAPACITY IDENTIFIED117MWpRecognising that our factories contribute to a significant portion of our total energy consumption,we focus on reducing our reliance on electricity from the grid and non-renewable sources.We continue to roll out solar photovoltaic(PV)installations across our sites in Asia.While initially focused on our operations in China,we have now identified solar projects with a potential combined generation capacity of 117 MWp which are under construction or proposed for implementation across our global operations over the next five years.The focus in 2023 was on our Indonesian and Malaysian operations,which contribute materially to the Groups overall emissions due to the scale of our operations in these countries.As some of our sites rely primarily on coal to generate electricity,we also seek opportunities to replace coal with cleaner alternatives.Our operations in China,Indonesia and Vietnam continue to reuse rice husks to generate electricity and steam.Our China subsidiary,YKA,has converted two coal boilers to rice husk firing.In Indonesia,we have commissioned a new and more efficient biomass-fired boiler in 2023 to support expanded energy demands.In addition,another two biomass co-fired boilers and a 100%biomass boiler are expected to be operational in 2024.We also invest in renewable energy certificates(RECs)to reduce our emissions where our electricity requirements are greater than our potential for renewable energy generation.Our subsidiary,Goodman Fielder,has maintained 100%reliance on renewable electricity across its operations in New Zealand through the purchase of RECs since January 2021 and achieved a similar feat through the purchase of RECs across its Australian operations between July 2021and December 2023.Goodman Fielder is currently in the process of reviewing its approach to renewables,focusing on how it can transition its own operations via insetting instead of offsetting where possible in Australia.We look forward to sharing the finalised plan in 2024.In the meantime,we are pursuing energy efficiency improvement measures such as compressed air heat recovery and heat pumps to reduce emissions.Apart from lowering emissions,we view renewable energy as a fundamental component of our strategy to achieve net-zero emissions across our factories and seek opportunities to electrify our operations to further reduce emissions.Since its electric truck trial in 2021,Goodman Fielder continues to explore the feasibility of electric trucks and their applicability in its operations.In addition,it has achieved a full fleet of hybrid leased sales vehicles in Australia and New Zealand.As a company operating an extensive national food distribution business,Goodman Fielder is aware of the impact of its supply chain and logistics network.It is constantly assessing opportunities to optimise its network in New Zealand and to reduce the total distance travelled to deliver its products across its baking and grocery networks in Australia.We focus on reducing our reliance on electricity from the grid and non-renewable sources.47Sustainability Report 2023|Wilmar International Limited46Sustainability Report 2023|Wilmar International LimitedOUR GHG EMISSIONS 305-1,305-2,305-4,FB-AG-110A.1The majority of our emissions come from our factories and palm oil operations.In 2023,our total Scope 1 and Scope 2(market-based)GHG emissions10 were 13.9 million tCO2e(2022:13.7 million tCO2e11),including 0.6 million tCO2e(2022:0.7 million tCO2e12)due to land use change.Despite a slight increase in absolute emissions in 2023,our GHG emissions intensity was 139 kgCO2e per MT of product,excluding shipping(2022:145 kgCO2e per MT of product13).The 4.1%reduction in overall GHG emissions intensity was mainly attributable to the improved energy efficiency across our key business units such as sugar,oleochemicals,soy protein and tropical oil refining.Our biogenic14 emissions were 10.9 million tCO2e.Our target is to reduce our GHG emissions intensity by 15.0%for all our palm oil mills by 2023,against a 2016 baseline of 0.82 tCO2e per MT CPO.This target applies to all our mills in Indonesia,Malaysia,Ghana and Nigeria,regardless of RSPO certification status.Our GHG emissions intensity in 2023 was 0.68 tCO2e per MT CPO which is a reduction of 17.3%against the 2016 baseline.This is the result of our continued efforts to increase the use of biomass as fuel and operating our methane capture plants at maximum efficiency.1.2m1.0m0.9mOIL PALM PLANTATIONS151.2m1.3m1.3mPALM OIL MILLS7,7008,4003,200SUGAR PLANTATIONS0.2m0.2m0.2mSUGAR MILLS4.6m5.2m5.2mFACTORIES1.1m1.1m1.1mSHIPPINGOIL PALM PLANTATIONS9,2006,1006,800PALM OIL MILLS2,9005,1002,200SUGAR PLANTATIONS8009401,100SUGAR MILLS33,00033,00033,000FACTORIES4.3m4.8m5.2mSHIPPING000TOTAL4.4m4.9m5.2mScope 1 and 2 emissions are included in the scope and are calculated based on the GHG Protocol which includes the following gases:CO2,CH4 and N2O.The GWP rates used are from the IPCC AR6.The operational control approach is used to consolidate GHG emissions.16Scope 1 emissions(tCO2e)by business activity from 2021 to 2023Market-based Scope 2 emissions(tCO2e)by business activity from 2021 to 20232021202220232021202220234746Sustainability Report 2023|Wilmar International LimitedSustainability Report 2023|Wilmar International LimitedScope 1 and 2 emissions are calculated based on the GHG Protocol,the worlds most widely used GHG accounting standards for companies and include the following gases:CO2,CH4 and N2O.The GWP rates used are from the IPCC AR6.The operational control approach is used to consolidate GHG emissions.Non-manufacturing sites such as headquarters/offices are excluded.Land use change emissions under oil palm plantations in 2021 and 2022 have been restated to ensure consistency with the latest SBTis FLAG criteria.As a result,total Scope 1 emissions and emissions intensity have changed accordingly.Biogenic emissions are to be reported separately from Scope 1 and 2 according to the GHG Protocol which include CO2 fluxes during land use management,land use change and CO2 emissions from biofuel combustion.As indicated in the Net-Zero Standard,energy generated from the combustion of biomass in certain cases is considered“carbon neutral”because combustion-related CO2 emissions are balanced by CO2 that is sequestered during the growth of bioenergy feedstock.1011,12,13,15148.3m8.8m8.7mTOTAL20172018201920202021202220232023(target)12.224.419.516.617.315.0 7.36.1Percentage(%)of GHG emissions intensity16 reduction for all palm oil mills against 2016 baseline49Sustainability Report 2023|Wilmar International Limited48Sustainability Report 2023|Wilmar International LimitedENVIRONMENTAL FOOTPRINT OF OPERATIONS3-3Wilmar recognises the value,importance and necessity of managing our operations sustainably.We strive to minimise our environmental footprint and support sustainable production through the efficient use of resources.4848Business activities within the agriculture industry can directly and indirectly impact the environment.Improper management of chemicals and waste generated can lead to pollution of land and water bodies,harming surrounding communities and ecosystems.Additionally,we actively track and monitor water usage in water-stressed regions.Our Environmental Policy sets out actions we take to tackle these challenges across our operations.It focuses on reducing chemical use,ensuring proper waste disposal and minimising resource consumption.To ensure our processes and policies are effective,we track our progress through measurable targets.These targets focus on energy and water use,waste generated and adhering to relevant environmental standards across all our activities.We believe in working together for a better environment.We regularly consult with partners and others involved in our business about environmental matters.This includes training our employees on environmental topics and encouraging our business partners and suppliers to be environmentally responsible.Their feedback has helped shape many of our initiatives and targets.49Sustainability Report 2023|Wilmar International Limited#Limited assurance procedures have been performed by EY.OUR TARGETS2023 PERFORMANCE REDUCE WATER CONSUMPTION INTENSITY(m/MT FFB processed)for palm oil mills from a 2016 baseline with the following targets by 2023:Indonesia:1.20 m/MT FFB Malaysia,Ghana and Nigeria:1.30 m/MT FFB ACHIEVED WATER CONSUMPTION INTENSITY TARGETS:Indonesia:0.91 m3/MT FFB#in Sumatra,1.04 m3/MT FFB#in Central Kalimantan and 1.13 m3/MT FFB#in West Kalimantan Nigeria:1.13 m/MT FFB#REDUCE ENERGY INTENSITY across our Australia and New Zealand sugar refinery operations from a 2020 baseline by 20%by 2030 ACHIEVED 2.9%REDUCTION IN ENERGY INTENSITY from 2020 baseline through the installation of more energy-efficient Mechanical Vapor Recompression evaporator systems INCREASE INSTALLED CAPACITY OF PV POWER PLANTS across China factories to 200 MWp by 2030 INCREASED THE TOTAL INSTALLED POWER CAPACITY of PV power plants in China to 81.0 MWp as of 2023 ACHIEVE 100%RENEWABLE ELECTRICITY across Goodman Fielders operations by 2025 GOODMAN FIELDER HAS MAINTAINED 100%RELIANCE ON RENEWABLE ELECTRICITY across its operations in New Zealand through the purchase of RECs since January 2021 and achieved a similar feat through the purchase of RECs across its Australian operations between July 2021 and December 2023 HALVE FOOD WASTE in Goodman Fielders operations by 2030 COMPLETED OUR SECOND YEAR OF REPORTING UNDER OUR COMMITMENT to the Australian Food Pact which brings together organisations to tackle food waste across the food supply chain COMPLETED MAPPING OUR FOOD WASTE FOR BASELINE YEAR 2022 across New Zealand and Fiji which will be used to identify and develop action plans to deliver on our 2030 target51Sustainability Report 2023|Wilmar International Limited50Sustainability Report 2023|Wilmar International Limited17 ENERGY ENERGY USE IN OUR UPSTREAM OPERATIONS 302-1,302-3,FB-AG-130A.1,FB-PF-130A.1 Our programmes prioritise generating and utilising renewable energy where possible.This approach minimises our reliance on the grid and non-renewable energy,leading to significant emission reductions across our operations.To empower our employees to be part of the solution,we conducted a Group-wide training programme on energy management awareness in 2022 to foster a culture of energy efficiency across our global operations.We regularly engage external consultants to provide training on steam engineering and have completed audits on steam and condensate management to identify further improvements.Where feasible,we reuse biomass produced as a by-product of our milling process,including EFB,PKS mill fibre and bagasse,to power our palm oil and sugar mills.All of Wilmars sugar mills in Australia and India are equipped with cogeneration plants to generate both electricity and heat simultaneously.While we primarily use this energy for our own mills,some mills have been designed to generate renewable electricity for export.To ensure a readily available source of renewable energy outside of the traditional crushing season,we stockpile surplus bagasse in specially designed pads at one of our mills.In 2023,we exported a total of 478,676 MWh to the national grid from our mills in Australia and India.We also implement initiatives to reduce our energy use from water pumps which represents a large amount of energy consumption in our plantations.These include more focused irrigation scheduling,upgrading to more efficient motors and using Variable Speed Drives to adjust pump flows.TOTAL ELECTRICITY EXPORTED TO THE NATIONAL GRID FROM OUR SUGAR MILLS IN AUSTRALIA AND INDIA IN 2023478,676MWHOur commitment to minimising our environmental impact is guided by our Environmental Policy and complemented by environmental standards17 covering our factories,mills and crushing plants.The Policy is implemented by various teams at every level of the organisation,with the Enviroment,Health and Safety(EHS)teams focusing on environmental compliance and the Environmental Management System(EMS)while the industrial and plantation sustainability teams drive performance improvements.To further embrace environmental sustainability across our global operations,we have established the Industrial Sustainability Programme.This programme identifies opportunities for efficiency improvement and develops energy and water reduction targets.We monitor our energy,water and waste performance through the Wilmar Integrated Management System(WIMS).WIMS provides a clear framework to ensure compliance with all applicable environmental regulations where we operate.This system adheres to the ISO 14001 standards and incorporates other relevant environmental guidelines.To address potential environmental risks,we have implemented a robust incident reporting system.Hazards,incidents and breaches are reported and investigated through our global EHS reporting platform,Enablon.For significant incidents,we generate detailed Critical Incident Investigation Reports.These reports involve thorough investigations into the root causes and contributing factors,and include the development of short-and long-term actions to prevent similar occurrences.Recognising the importance of employee engagement in environmental protection,we conduct local training sessions for our employees.These sessions aim to raise awareness of environmental issues and encourage employees to take action.Topics covered include energy and water efficiency.We also leverage the expertise of experienced external consultants for specialised training.In 2023,there were no significant fines or non-monetary sanctions for non-compliance with environmental regulations.ENVIRONMENTAL MANAGEMENT SYSTEM These environmental standards include our Environmental Programme Standard,Stormwater and Wastewater Standard,Spill Prevention,Control and Countermeasure Standard,and Environmental Inspection and Reporting Standard.Bagasse stockpiles during sugarcane harvest and milling season in Queensland,Australia.Our programmes prioritise generating and utilising renewable energy where possible.This approach minimises our reliance on the grid and non-renewable energy,leading to significant emission reductions across our operations.EMPLOYEE HEALTH,SAFETY AND WELL-BEINGFor more information on WIMS and Enablon,please refer toWASTEFor more information on our initiatives to reuse biomass,please refer toii53Sustainability Report 2023|Wilmar International Limited52Sustainability Report 2023|Wilmar International LimitedENERGY USE IN OUR FACTORIES We adopt a wide range of technologies across our factories to reduce energy use and improve energy efficiency,focusing on heat recovery and energy efficiency upgrades.Some initiatives include installing cascading heat pumps for waste heat recovery and high efficiency magnetic levitation compressors that improve condensate recovery to generate electricity and steam/condensate savings as well as carrying out steam and condensate energy audits.As part of our commitment to set science-based targets aligned to the SBTi,we are developing comprehensive targets linked to our energy programmes consistent with a 1.5-degree Celsius pathway.Total energy consumption(MWh)by business activity from 2021 to 2023Percentage(%)of energy consumption from renewable sources by business activity from 2021 to 2023202120222023202120222023Energy intensities for 2021 and 2022 have been restated due to the removal of double-counted volumes for products sold internally.ABCDEFGHIJKTOTAL75,344109,93820,5169065,3511021,7581,995000208,200247,179166,678243,126OIL PALM PLANTATIONS8.524.917.0OIL PALM PLANTATIONS5,432,4005,751,0315,171,865PALM OIL MILLS98.898.615.151.899.098.912.053.198.698.516.152.2PALM OIL MILLS11,33913,03811,617SUGAR PLANTATIONS000000SUGAR PLANTATIONS3,959,9663,915,5773,960,391SHIPPINGSHIPPINGTOTAL50,490,62357,866,04957,833,419TOTALSUGAR MILLS17,476,09922,081,24520,935,280SUGAR MILLSFACTORIES23,363,63825,939,90127,509,720FACTORIESTotal energy consumption(TJ)in 20235253GROUP ENERGY PERFORMANCE In 2023,we consumed 57,833,419 MWh of energy,of which 52.2%was from renewable sources.This is driven largely by our palm oil mills and sugar mills,which collectively sourced more than 98.4%of their energy needs from renewable sources.At the Group level,our energy intensity in 2023 was 0.59 MWh per MT of product excluding shipping,which was 4.8%lower than in 2022.This decrease was mainly driven by improved energy efficiency across our key business units such as sugar,oleochemicals,soy protein and tropical oil refining.TOTAL ENERGY CONSUMED IN 202357,833,419 MWHFROM RENEWABLE SOURCES52.2ENERGY INTENSITY18 (MWH PER MT OF PRODUCT)0.550.620.59 ELECTRICITY,HEATING AND STEAM SOLDHElectricity sold(non-renewable)IElectricity sold(renewable)JHeating sold KSteam soldFUEL CONSUMPTION19GROUP 1GROUP 2GROUP 3ATotal fuel consumption from non-renewable sources BTotal fuel consumption from renewable sourcesELECTRICITY,HEATING AND STEAM CONSUMPTIONCElectricity consumption from non-renewable sources DElectricity consumption from renewable sourcesEHeating consumption from non-renewable sources FHeating consumption from renewable sources GSteam consumption18The energy intensity figures include energy from fuel,electricity,heating and steam.Energy consumption from shipping has been excluded due to the different basis of products and services.CLIMATE CHANGEFor more information on these initiatives,please refer toi19Types of fuel from non-renewable sources used include diesel,natural gas,lignite coal,sub-bituminous coal,other bituminous coal,lubricants,motor gasoline,liquefied petroleum gas,heavy fuel oil,anthracite coal and acetylene.Types of fuel from renewable sources include biogas,wood,other solid biomass fuels,biodiesel and bioethanol.The energy conversion factors used are from IPCC 2006 Guidelines for National Greenhouse Gas Inventories.%TJ208,20055Sustainability Report 2023|Wilmar International Limited54Sustainability Report 2023|Wilmar International LimitedWATER AND EFFLUENT MANAGEMENT IN OUR PALM OIL OPERATIONS Wilmar diligently tracks and monitors water metrics associated with usage and discharge across our operations.These include managing water supply and use,particularly in water-stressed areas,and ensuring discharge limits are in line with local regulations.To complement our water saving initiatives,we launched a Group-wide campaign in 2023 to encourage employees to identify and report water wastage around our operations via a water saving checklist.As of December 2023,a total of 482 checklists were submitted with 785 observations recorded,of which 31.1%have been resolved.We apply a life cycle approach to effectively manage water usage throughout the entire life cycle of our mills and plantations.While regular monitoring of rainfall patterns suggests that water stress is not a significant risk in our oil palm plantation geographies,we continue to implement water efficiency measures especially at our most water intensive sites.To alleviate impacts during the drier seasons,we use POME to irrigate land.Effluent is treated prior to both land application and local waterway discharge.POME from FFB processing is treated via anaerobic and aerobic biological digestion.Palm oil refinery effluent(PORE)from the refining of crude palm oil(CPO)is treated using chemical processes to remove oil,grease and other inorganic substances,followed by aerobic biological digestion.All our operations are subject to and regulated by local discharge limits.We strive to meet all discharge limits specified by local regulations and maintain effluent discharge levels well within local thresholds for palm oil mills and refineries waterway discharge.We regularly monitor biological oxygen demand(BOD)and chemical oxygen demand(COD)levels for both land application and river discharge#,as well as other parameters stated in the legislative permits.There were no significant fines or prosecutions related to incidents of non-compliance with discharge limits in 2023.We target to reduce our water usage intensity for our palm oil mills to 1.20 m/MT FFB processed for Indonesia and 1.30 m3/MT FFB processed for Malaysia,Ghana and Nigeria by 2023.In 2023,these targets were achieved by our palm oil mills in Central and West Kalimantan,Sumatra and Nigeria with 1.04#,1.13#,0.91#and 1.13#m3/MT FFB processed,respectively.Water treatment plant in Wilmars Sapi Plantation in Sabah,Malaysia.WATER AND EFFLUENT 303-1,303-2,303-3,303-4,303-5,FB-AG-140A.1,FB-AG-140A.2,FB-AG-140A.3 We apply a life cycle approach to effectively manage water usage throughout the entire life cycle of our mills and SABAHSARAWAKSUMATRA NIGERIA CENTRAL KALIMANTANWEST KALIMANTAN1.40 1.431.31#1.84 1.42 1.36#0.98 0.93 0.91#1.32 1.16 1.13#GHANA1.78 1.68 1.33#1.17 1.04 1.04#1.52 1.31 1.13#Water consumption intensity(m3/MT FFB processed)in palm oil mills from 2021 to 202355Sustainability Report 2023|Wilmar International Limited202220212023#Limited assurance procedures have been performed by EY.Please refer to the Base Data Tables.#Limited assurance procedures have been performed by EY.57Sustainability Report 2023|Wilmar International Limited56Sustainability Report 2023|Wilmar International Limited TOTAL WITHDRAWALTOTAL DISCHARGETOTAL CONSUMPTION20ALL AREAS(excluding water stress areas)AREAS WITH WATER STRESS TOTALWATER AND EFFLUENT MANAGEMENT IN OURSUGAR OPERATIONS We also aim to ensure efficient water use in our sugarcane plantations and regularly monitor net water consumed per unit mass of product for our sugarcane plantations and mills.In 2023,water consumption in our sugarcane plantations and mills were within Bonsucros water usage limits.We use the World Resources Institutes Aqueduct tool to identify water-stressed regions in our operations.Our assessment has found that our sugar mills and refineries in India and Australia are exposed to extremely high or high water stress risk.In these locations,we focus on applying a circular approach and reusing water.We primarily use water sourced from rainfall and rivers as well as treated mill effluent to irrigate our plantations.We have also implemented water stewardship initiatives in extremely high or high water-stressed areas.Our refinery in Gujarat,India,is a zero-discharge facility where all water withdrawn is treated and reused in our operations and eventually returned to its source.WATER AND EFFLUENT MANAGEMENT IN OUR FACTORY OPERATIONS We conduct Environmental Impact Assessments or similar assessments in line with local environmental requirements to identify potential relevant risks prior to starting any new plants or significant projects.These include all water risks to the natural ecosystem and local communities relying on the water source for their livelihoods.Once operational,we regularly track and monitor the water usage and discharge of the new plant and work with local authorities to ensure our operations are aligned with future water availability strategies.Where possible,we seek to recover and reuse effluent to manage water use in the most water-stressed areas.This involves diverting rejected water from reverse osmosis plants for reuse in plant processes such as cooling and wastewater treatment that can use water with higher dissolved solid concentration and exploring the use of electrical processes to replace chemicals in order to prevent scaling and biological growth in cooling tower water,making such water easier to recycle and reuse.These initiatives enable us to supplement our water needs while minimising the amount of water we withdraw.OF TOTAL WATER WITHDRAWN WASRECYCLED IN 20233.7%ALL AREASAREAS WITH WATER STRESS168,97660,31383,52844,17685,44716,137FRESHWATER (1,000 mg/Ltotal dissolved solids)OTHER WATER (1,000 mg/L total dissolved solids)TOTAL15,66323,69039,3531,99842,17844,17617,66165,86883,528 GROUP WATER PERFORMANCE In 2023,our operations consumed a total of 85,447 ML of water.To reduce the amount of water needed to be withdrawn,a total of 6,323 ML of wastewater from our operations was recycled from our operations,which is equivalent to 3.7%of the total water withdrawn.EFFLUENT TREATMENT PLANTS Wastewater recycling is an important element of our sustainability strategy.We launched new wastewater recycling programmes across Indonesia and China and commenced building wastewater recycling plants in early 2023 which are expected to be operational by 2024.To ensure the effectiveness of our internal management systems,we conduct regular site audits related to safety,SOPs and compliance-related issues specific to effluent treatment.Dedicated persons-in-charge(PIC)in each region are responsible for Effluent Treatment Plants(ETPs)and provide monthly update reports on effluent quality and project status,among others.Critical ETP data is also monitored online via our Production Information Management Systems.Water discharged(ML)in 2023Water consumption(ML)in 20235756Sustainability Report 2023|Wilmar International LimitedSustainability Report 2023|Wilmar International Limited20Total consumption is calculated by subtracting the total discharge from total withdrawal.59Sustainability Report 2023|Wilmar International Limited58Sustainability Report 2023|Wilmar International LimitedEmpty fruit bunch.BiomassGlassMetalPaper/cardboardPlasticResidual wasteOthersTOTALWASTE GENERATEDWASTE DIVERTEDFROM LANDFILLWASTE DIRECTED TO DISPOSAL1,925,1721,837,35887,8144242017,14417,144011,65711,65709,8379,837035,418035,4181,597,323490,5611,106,7623,596,5922,366,5981,229,995Mesocarp fibre.Palm kernel shells.We are committed to reducing the amount of waste produced across our operations.This includes applying circular economy principles and maximising the recovery,reuse and recycling of waste where possible.Waste generated from our upstream operations mainly consists of biomass including EFB,mesocarp fibre and PKS from palm oil operations as well as bagasse,filter press mud,ash and dunder(vinasse)from sugarcane operations.Where feasible,we recover and reuse this waste as fuel or fertiliser.Hazardous waste,such as chemicals that cannot be recovered or reused,is safely collected and disposed of by licensed contractors who manage the waste in accordance with local legislation.We are guided by the waste management hierarchy and seek to reduce,reuse and recycle as the first step to divert waste from our factory operations away from landfills.We implement production modifications and innovative recycling partnerships across our Pampas Pastry and Yoplait factories in Australia and New Zealand respectively to reduce the amount of waste generated and subsequently sent to landfills.We also installed sludge dryers in our effluent treatment plants in China to reduce the volume of sludge needed to be treated and disposed of.In addition,we are currently exploring opportunities to reuse steam condensate generated from the sludge drying process.While b
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Sustainable Impact Report2023Table of contents Introduction3 Letter from our president and CEO4 Welc.
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