enabling human progress 2022 corporate sustainability report delivering thefuture of energy Over 140.
2023-10-10
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ContentsSustainability Report 2022 Highlights.2Editorial Policy.3Top CommitmentMessage From the President.5Message From the Chairperson of theSustainability Committee .6Sustainabilty ManagementOur Approach to Sustainability and Management Framework .8Mitsui&Co.s Stakeholders .18Participation in Initiatives .24Mitsui&Co.s Materiality .30Identification and Review of Materiality .31Secure sustainable supply of essential products .33Enhance quality of life .42Create an eco-friendly society .51Develop talent leading to value creation .61Build an organization with integrity .65EnvironmentEnvironmental Management .74Climate Change .83Water Resources .129Pollution Prevention .138Circular Economy .147Biodiversity .160Environmental Performance Data .170SocialHuman Rights .178Human Resources Development .190Diversity.200Workforce Management .211Health Management,Occupational Health and Safety .228Personnel Affairs Data .242Responsibilities to Customers .252Supply Chain Management .264Local Communities .283GovernanceCorporate GovernanceCorporate Governance&Internal Controls .290Status of Corporate Governance .294Compliance and Integrity .311Tax Transparency .321Risk Management .324ESG Risk Management .327Information Risk Management.331Business Continuity Management(BCM/BCP).335Evaluation by Society.340Independent Practitioners Assurance Report .3461Sustainability Report 2022 HighlightsMajor Changes from Sustainability Report 2021Sustainability ManagementFormulation of Sustainability Policy Reorganized our Companys approach to sustainability and obtained approval from the Board of DirectorsFormulation and revision of sustainability-related policies Revised our Environmental Policy:Made additions to the existing policy including environmental issues related to business activities,construction of environmental management system,stakeholder engagement,remedy,education and training,and reporting Revised our Sustainable Supply Chain Policy:Made additions to the existing policy including initiatives to address environmental issues,remediation guidance to business partners,and reconsideration of business relationships if no improvement is made Formulated our Health Management,Occupational Health&Safety Policy:Reorganized our approach to health management,occupational health and safetyEnvironmentClimate ChangeExpansion of disclosures based on TCFD recommendations Governance Structure for Climate Change Response:Added climate change response as one of the evaluation indicators for executive remuneration from FY Mar/2023 Transition risk analysis:Expanded scope of business areas covered,expanded description of awareness of business environment and impact on businesses,and added 1.5 scenario analysisAddition of list of power generation businesses Added list of our power generation businesses(renewable energy,gas-fired,coal-fired,and oil-fired)Water ResourcesRevision of policies and basic approach Added our approach to the human rights aspects of water resourcesCircular EconomyRevision of segment goals Updated goals and progress in terms of risks and opportunities associated with the transition to a circular economy in each segmentBiodiversityParticipation in initiatives Joined TNFD Forum and 30by30 Alliance in March 2022SocialHuman Rights Published statement on the UK Modern Slavery Act in FY Mar/2022Human Resources DevelopmentIntroduction of global group talent management system Introduced a talent management system,to integrate and platform human resources databases and help to ensure that the right people are in the right places,and support employees in taking the initiative in autonomously devising their own careersExpansion of Human Resources Bulletin Board to year-round system Introduced a year-round HR Bulletin Board System for matching human resource needs,and disclosed the annual recruitment schedule internallySupply Chain ManagementCreation of Sustainable Supply Chain Management Handbook Created a handbook on supply chain issues,the backgrounds,and practical actions,to inform and raise awareness of our policies among our business partnersPublication of palm oil mill list Disclosed our list of supplier millsGovernanceCorporate GovernanceRevision of Executive Remuneration Plan Revised the executive remuneration plan for FY Mar/2023 and thereafter obtained approval at the Ordinary General Meeting of Shareholders held in June 2022Evaluation by Society Selected as a constituent stock of the FTSE Blossom Japan Sector Relative Index which has been newly established by FTSE Russell Newly selected as a constituent stock of the MSCI Japan ESG Select Leaders Index Received a Bronze Class rating in S&P Global Sustainability Award 2022 Assessed to be a Low Risk company in ESG Risk Ratings by Sustainalytics2Editorial PolicyThe Sustainability Report 2022(PDF version)is a consolidated PDF version of the sustainability-related information on our website as of the end of November 2022.The website will be updated as needed after December 2022.We provide detailed ESG information on our website with the aim of delivering an explicit message to our stakeholders that Mitsui&Cmits to creating new values through a wide range of business activities,and contributes to social and corporate sustainabilityScope of CoverageMitsui and major consolidated subsidiaries and associated companies.The scope of coverage for numerical data is provided individually in appended notes.Covered PeriodThe Sustainability Report 2022 mainly covers our initiatives carried out in the period from April 2021 to March 2022(the fiscal year ended March 2022,FY Mar/2022),as well as part of our policy and initiatives carried out in the fiscal year ending March 2023,FY Mar/2023.Independent Practitioners AssuranceThe star()indicates that the sustainability information concerned has been given limited assurance,for the purpose of increasing its reliability,by Deloitte Tohmatsu Sustainability Co.,Ltd.in its independent practitioners assurance report.Independent Practitioners Assurance ReportPublication DateDecember 2022(Previous publication date:September 2021;next publication scheduled for December 2023)Guidelines GRI(Global Reporting Initiative)Sustainability Reporting StandardsOur Sustainability Report has been prepared in accordance with the Core option of the GRI Sustainability Reporting Standards.GRI Standards Comparison Chart ISO26000(Guidance on Social Responsibility)Published bySustainability Committee,Mitsui&Co.,Ltd.Corporate ProfileAbout UsContactCorporate Sustainability Division,Mitsui&Co.,Ltd.2-1,Otemachi 1-chome,Chiyoda-ku,Tokyo 100-8631,Japan: 81(3)3285-1111: 81(3)3285- Information DisclosureReportsContentsMediaBookletPDFHTMLSustainability ReportThe Sustainability Report is issued annually and prepared for all stakeholders to cover detailed non-financial ESG-related information of Mitsui.Integrated ReportThe Integrated Report is issued annually for every stakeholder to gain an understanding of Mitsuis management strategies,business overview,and initiatives for sustainable value creation.Annual Securities ReportThe Annual Securities Report is issued pursuant to Article 24,Section 1 of the Financial Instruments and Exchange Act and is required to be submitted to the Kanto Finance Bureau.Please refer to this report for more detailed financial information.Corporate Governance ReportIn accordance with Japans Corporate Governance Code,Mitsui issues a Corporate Governance Report that provides details on Mitsuis basic corporate governance approach and structure.Mitsui is also required to submit this report to the Tokyo Stock Exchange.Please refer to the PDF link for more detailed information related to Mitsuis organizational design,operational status,and evaluation of Board of Director effectiveness.A Cautionary Note on Forward-Looking Statements:This material contains statements(including figures)regarding Mitsuis corporate strategies,objectives,and views of future developments that are forwardlooking in nature and are not simply reiterations of historical facts.These statements are presented to inform stakeholders of the views of Mitsuis management but should not be relied on solely in making investment and other decisions.You should be aware that a number of known or unknown risks,uncertainties and other factors could lead to outcomes that differ materially from those presented in such forward-looking statements.These risks,uncertainties and other factors referred to above include,but are not limited to,those contained in Mitsuis latest Annual Securities Report and Quarterly Securities Report,and Mitsui undertakes no obligation to publicly update or revise any forward-looking statements.4Top CommitmentMessage From the PresidentBy providing solutions that effectively meet the expectations of our diverse stakeholders,we will build brighter futures,everywhere.Mitsui&Co.recognizes the increasingly growing relevance of sustainability issues,such as human rights,climate change,and biodiversity,in corporate management.Meanwhile,business environments are dramatically changing as evidenced by supply chain disruptions due to COVID-19 and intensifying concerns over energy security associated with rising geopolitical risks.These social issues are interlinked with one another through a complex web of factors affecting society on a global scale.In light of this,we need to carefully blaze a path for solving said challenges while rigorously weighing variables and balancing timelines.Taking such global perspectives into account,Mitsui strives to devise workable,real solutions tailored for each industry and region.I believe that will lead to the embodiment of our corporate mission,Build brighter futures,everywhere.We pursue value creation by addressing various social issues.This is also essential for the company to achieve sustainable growth.Mitsui prides itself on having deep insights and extensive partner networks built up over years across regions and industries around the world.By connecting these invaluable assets based on our cross-industry engagement,listening sincerely to our diverse stakeholders,and pursuing optimized solutions that adeptly accommodate environmental changes,we will continue to contribute to realizing a better tomorrow for the earth and for people around the world.August 2022Kenichi HoriPresident and Chief Executive Officer5Top CommitmentMessage From the Chairperson of the Sustainability CommitteeBy resolving societal issues through our business activities,we will promote the growth of Mitsui and build brighter futures,everywhere.Society today is increasingly concerned about climate change,human rights,biodiversity and other matters of global significance.Responding to these concerns is the foundation of our management philosophy,and we have identified material issues for the sustainable growth of both society and the company as Materiality.Since 2021 we have maintained a goal of further promoting Materiality through the formulation of Materiality Action Plans,which includes the creation of policies and monitoring of progress by each organization for each material issue.We also link our Materiality with the United Nations Sustainable Development Goals(SDGs)to advance initiatives and activities that contribute to the 17 SDGs.We have also formulated our new Sustainability Policy to further clarify our approach to sustainability,along with a new Environmental Policy,Human Rights Policy,Sustainable Supply Chain Policy,Health Management,Occupational Health and Safety Policy,and Social Contribution Activities Policy,as field-specific guidelines which we have formulated and expanded in light of changes in the external environment.In addition,we have formulated specific procurement policies for natural rubber,palm oil,timber,and paper products to clarify points to be considered from the perspective of the environment and human rights,and to strive for sustainable procurement.In accordance with these principles and policies,we are working towards achieving a more sustainable business portfolio through asset replacement and the creation of diverse new businesses that will help to resolve societal issues.In our Medium-term Management Plan 2023,which concludes this fiscal year,we have identified climate change,business and human rights,and circular economies as three priority themes.In addressing climate change,we have set a goal of achieving net-zero emissions by 2050 and an interim target of halving our GHG impact by 2030.In addition,we aim to further build upon our reduction contribution business,which contributes to the reduction of greenhouse gas emissions by third parties,through business in areas such as renewable energy and the creation of emission credits.In terms of human rights initiatives,we are implementing human rights training for employees and business partners,and conduct surveys and on-site visits to suppliers to identify human rights risks in the supply chain and promote dialogue for improvement.6We are promoting PET recycle business together with the introduction of advanced recycling technologies as part of our efforts to promote circular economies.We are also making concrete efforts to conserve biodiversity as stewards of one of Japans leading company-owned forests,along with social contribution and other initiatives.As each of our employees conducts business with a heightened awareness of sustainability,we will continue to strive to achieve sustainability in business and society through dialogue and collaboration with diverse stakeholders,including local communities,government,business partners,and suppliers.June 2022Makoto SatoRepresentative Director,Executive Managing Officer,Chief Strategy Officer(CSO),Chairperson of the Sustainability Committee7Sustainabilty ManagementOur Approach to Sustainability and Management FrameworkPolicies and Basic ApproachSustainability PolicyMitsui&Co.s corporate mission as defined in its Mission,Vision,Values(MVV)is to realize a better tomorrow for earth and for people around the world and to Build brighter futures,everywhere.Based on the MVV,we regard sustainability initiatives as important management issues,and,in accordance with the Mitsui&Co.Group Conduct Guidelines With Integrity,this policy and sustainability-related policies,place a strong emphasis on sustainability in our corporate management.Our Group will take on the challenge of addressing global issues and contributing to the realization of a sustainable society and economic growth through our business activities.Identification of Materiality and Promotion of InitiativesFor the sustainable growth of both society and the company,we identify important business issues that impact the company and its stakeholders as material issues(Materiality).We put this policy into practice by formulating our business policies and strategies,including medium-term management plans and business plans,based on our Materiality,given that each material issue may become a significant source of both risks and opportunities in the medium to long term.Role of the Board of DirectorsThe Board of Directors appropriately supervises the Companys sustainability initiatives,striving to enhance the Company s corporate value in the medium to long term.Decisions on important issues related to sustainability are subject to final approval by or report to the Board of Directors,following a review by the Sustainability Committee and Corporate Management Committee.Stakeholder Engagement and Information DisclosureWe regard dialogue with stakeholders as highly important.We strive to implement appropriate disclosure of information and respond sincerely and faithfully to the trust and expectations of our stakeholders.This policy was approved by the Board of Directors.Formulated November 20218Relationship of corporate policies Corporate Mission Vision ValuesMitsui&Co.Group Conduct GuidelinesMitsui&Co.s MaterialityMedium-Term Management PlanSustainability PolicySustainability-related policies Environmental Policy Human Rights Policy Sustainable Supply Chain Policy Procurement Policies for Specific Commodities Health Management,Occupational Health&Safety Policy Social Contribution Activities PolicyOur Approach to Sustainability and Management FrameworkSustainabilty Management9Medium-term Management Plan 2023 Transform and Grow:Six Corporate Strategies1.Strengthen business management capabilities2.Evolve financial strategy and portfolio management3.Personnel strategy4.Strategic Focus5.Strengthen profitability of core businesses and take on challenges in new businesses6.Sustainability management;Evolution of ESGMitsui&Co.s Core ValuesThe former Mitsui&Co.which was established in 1876,was disbanded as part of the dissolution of Japans zaibatsu(industrial conglomerates)shortly after the end of World War II.The current Mitsui was founded by employees of the former Mitsui that shared the values of the original company:Challenge and Innovation,Open-Mindedness,and Focus on Human Resources.The Mitsui of today continues to contribute to the creation of new value for society.The way we work and the way we think are still very much based on the values espoused by Takashi Masuda,the first president of the former Mitsui,and are reflected in our stance toward our work.The principles of Mitsuis approach to sustainability as social responsibility have always reflected its founders values,a way of thinking unchanged to this day.Legally speaking,there has been no continuation between the former Mitsui&Co.and the current Mitsui&Co.Let not short term gains tempt your mind,seek only enduring prosperity by embracing grand aspirations.I started Mitsui with the goal of realizing trade on a large scale,not in pursuit of money,but from the desire to work.Mitsui has a pool of very talented individuals.This is Mitsuis most important asset.Takashi Masuda,the first president of the former MitsuiSustainabilty ManagementOur Approach to Sustainability and Management Framework10Sustainability Governance and OversightIn the fiscal year ended March 2005,Mitsui&Co.established the CSR Promotion Committee(currently the Sustainability Committee)under the Corporate Management Committee to develop Mitsuis internal framework with respect to sustainability,and to work to raise sustainability awareness among employees.We established the Sustainability Committee in May 2017,in order to further clarify our unchanging stance toward creating new value for society through business activities and to pursue further mutual sustainability between society and the company.As a subcommittee of the Corporate Management Committee,the Sustainability Committee plans,drafts and proposes basic management policies,business activities and corporate policies and strategies relating to sustainability and ESG.With the Sustainability Committee playing a central role,Mitsui promotes sustainability-related activities based on cross-organizational collaboration to meet the needs and expectations of society in relation to companies social values and initiatives.The Sustainability Committee is structured so that its activities are appropriately supervised by the Board of Directors,and matters discussed by the Sustainability Committee are regularly discussed and reported to the Corporate Management Committee and the Board of Directors.The number of cases related to management strategy,sustainability,and governance that were discussed by or presented to the Board of Directors in the fiscal year ended March 2022 was 28 out of a total of 96.In the fiscal year ended March 31,2022,the Board of Directors discussed and approved our Sustainability Policy,and increased the number of regular reports at Board of Directors meetings to twice a year.The directors and corporate auditors,including external directors,also held free discussions on the theme of Priority of Issues and Actions That Mitsui Should Tackle in the Medium to Long Term to Increase Corporate Value,which led to a lively debate that included initiatives on ESG.Sustainabilty ManagementOur Approach to Sustainability and Management Framework11Sustainability CommitteeCommittee ChairMakoto Sato(Representative Director,Executive Managing Officer,Chief Strategy Officer(CSO)Vice ChairsYoshiaki Takemasu(Representative Director,Senior Executive Managing Officer,Chief Human Resources Officer,Chief Compliance Officer)Tetsuya Shigeta(Representative Director,Executive Managing Officer,Chief Financial Officer)MembersDeputy CSO,and the GMs of the Corporate Sustainability Division,Corporate Planning&Strategy Division,Human Resources&General Affairs Division,Legal Division,Investment Administrative Division,Corporate Communication Division,Finance Division,Investor Relations Division,and other employees and officers appointed by the Committee Chair as necessary.Administrative OfficeCorporate Sustainability Div.,Corporate Planning&Strategy Div.Sustainabilty ManagementOur Approach to Sustainability and Management Framework12The committee has the following duties1.Develop basic policies on the companys sustainability management and fundamental plans for activities to promote sustainability.2.Review and make proposals on the companys management policies,business activities,as well as policies and strategies of corporate divisions from the perspective of sustainability.3.Present proposals on company-wide policies and actions related to environmental(climate change,circular economy,environmental pollution,biodiversity,etc.),social(human rights,supply chain management,social contribution activities,etc.)or governance issue.4.Make proposals on sustainability-focused business activities(understanding risks and opportunities involved in business).5.Deliberate and establish the basic policy of the effective disclosure of information to stakeholders.6.Consider and present proposals relating to progress reviews and monitoring required for management.7.Configure and establish the internal structure for promoting sustainability management of the company.8.Identify the material issues to focus on each year for promoting sustainability management of the company and ensure progress on these.9.Respond to issues related to sustainability management,both internal and external to the company.10.Approve important matters(basic policies,business plans,etc.)relating to the Mitsui&Co.Environment Fund stipulated in Basic Policy of the Mitsui&Co.Environment Fund.11.Select proposals from applicants for the Environment Fund grants.12.Decide and report whether to support an exceptional acquisition of forests or the disposal of company owned forests,which is out of the scope of the guidelines on the acquisition of a new forest and disposal of company owned forests,based on Rules on the Management of Company Owned Forests.Main Discussions at Sustainability Committee Meetings in the fiscal year ended March 2022 1st Meeting(April 14,2021)Report on Category 10&11 of GHG Scope3 Estimation Free Discussion on GHG Long-term Goal Progress Disclosure2nd Meeting(June 9,2021)Report on Enhancement of ESG Information Disclosure(Materiality Action Plans/Sustainability Report 2021)Deliberations on Human Rights&Supply Chain Management/Formulation of Individual Procurement Policies(natural rubber,palm oil,wood materials/paper products)Free Discussion on Formulating the Internal Roadmap to Halve GHG Impact by 2030Sustainabilty ManagementOur Approach to Sustainability and Management Framework133rd Meeting(August 5,2021)Deliberations on Human Rights and Supply Chain Management/Approval of the Statement under the UK Modern Slavery Act for FY Mar 2021 Deliberations on Renewal of Policy on Operation,Management,and Utilization of Mitsuis Forests Free Discussion on Results of Mitsui&Co.Environment Fund Verification and Proposal for Social Contribution Activities that Emphasize Social Impact through Participation of Employees and Officers4th Meeting(October 13,2021)Report on Development of GHG Reduction Contribution Calculation Tools Report on Circular Economy(Progress Report and Future Action Plan)Deliberations on Formulation of Sustainability Policy,Revisions to Environmental Policy,and Reestablishing Our Approach to Social Contribution Activities5th Meeting(October 21,2021)Free Discussion on Introduction of ESG Assessment in Executive Remuneration Free Discussion on ESG Day Outline of Materials for Climate Change Part6th Meeting(December 17,2021)Deliberations on Social Contribution Activities that Emphasize Social Impact through Participation of Employees and Officers Report on Climate Change/Review of Internal Systems and Policies,and Deliberations on Future Response Policy7th Meeting(February 9,2022)Deliberations on Review of the System for the Environmental and Societal Advisory Committee from Next Fiscal Year Onwards(Proposal)Report on FY Mar/2022 Assessment by ESG Rating Agencies and Deliberations on FY Mar/2023 Response Policy Report on Business&Human Rights Activities Progress Report Progress and Challenges with Human Rights Due Diligence Report on Natural Capital and Biodiversity Report on Activities to Promote Sustainability Management Activity Report for FY Mar/2022 and Action Plan for FY Mar/2023Sustainabilty ManagementOur Approach to Sustainability and Management Framework14Sustainability Advisory BoardMembers(FY Mar/2023)Honorific titles omitted Toshihiko Goto,Chief Executive Officer from NPO Sustainability Forum Japan Makoto Haraguchi,MS&AD Insurance Group SVP of Sustainability Section Daisuke Takahashi,Attorney at Law,partner at Shinwa Sohgoh Law Offices Atsushi Inaba,Director of Japan Life Cycle Assessment Facilitation Centre(LCAF)In order to address a broad range of sustainability-related issues,the Sustainability Committee decided to establish the Sustainability Advisory Board(the former Environmental&Societal Advisory Committee),made up of external experts on environmental and social themes.In the fiscal year ended March 31,2022,14 consultations and exchanges of opinions were conducted on important themes in sustainability management.Main content of consultations and exchanges of opinions and the number of times in the fiscal year ended March 2022ThemeContentsTimes conductedExternal disclosureFormulation of Sustainability Policy1Climate ChangeClimate change initiatives4Human Rights,Supply Chain ManagementFormulation of Specific Procurement PoliciesTrading Partner Human Rights Risk AssessmentSupplier QuestionnairesSupply Chain Management Handbook6Mitsui&Co.s StakeholdersResponse to NGOs2Social Contribution ActivitiesThe Mitsui&Co.Environment Fund1Corporate Sustainability Div.In April 2019,we established the Corporate Sustainability Division,whose role is to promote and drive company-wide sustainability management and to accelerate various initiatives on a global group basis.The Corporate Sustainability Division strives to raise sustainability awareness and share values at the Mitsui&Co.global group level,with the aim of contributing to the achievement of sustainable social and economic development in various countries and regions around the world,while also contributing to solving global environmental problems such as climate change.Sustainabilty ManagementOur Approach to Sustainability and Management Framework15Sustainability Promotion OfficersThe Sustainability Promotion Officers have taken the initiative in organizing various sustainability awareness-raising programs,such as in-house sustainability seminars and lectures by speakers from partner companies and external experts,as well as workshops regarding sustainability within the actual business.In the fiscal year ended March 31,2022,we held online Sustainability Promotion Officers meetings on a quarterly basis,where we shared the policies and important matters related to new sustainability initiatives discussed and formulated by the Sustainability Committee,as well as other sustainability related topics.InitiativesMateriality Action PlansEach Business Unit has a Materiality Action Plan that outlines specific initiatives to address the Materiality identified by the company and manages the progress of these initiatives.The Materiality Action Plan defines the content of each Business Units response plans,targets,and status of initiatives based on the recognition of issues and major risks and opportunities for each Materiality.It also shows how our business activities contribute to the SDGs,and identifies the SDGs that are highly relevant to each Materiality.By regularly managing the progress of this Materiality Action Plan,we will implement the PDCA cycle to promote our Materiality initiatives and our efforts to achieve the SDGs.Materiality Action PlansRaising Awareness on Sustainability ManagementSurvey of employeesTo help our employees work together to achieve our Materiality,we conduct an annual survey on Mitsuis Materiality with our employees and officers worldwide.3,553 responses were received for the year ended March 31,2022.The results of the survey confirmed that there was an increase in familiarity of the position of Mitsui s Materiality,and in particular,the Materiality Action Plan formulated for the fiscal year ended March 31,2022 has deepened the understanding of the relationship between each individual s work and Materiality,leading to action by each employee.Sustainabilty ManagementOur Approach to Sustainability and Management Framework16Sustainability MonthWe have established a Sustainability Month,and have implemented several employee programs to encourage each employee to learn and think about sustainability and put it into practice.In the fiscal year ended March 2022,we released an interview with the President on sustainability,as well as holding a lecture on climate change by international environmental NGO WWF(World Wide Fund for Nature)Japan,a seminar on ethical consumption by an outside lecturer,a briefing on sustainability-related initiatives in Mitsui s Forests,and offered a menu featuring sustainable seafood in the Head Office Cafeteria,and many employees from Japan and other parts of the world took part.Sustainability Promotion Officers play a central role in organizing other internal sustainability-related seminars and other events.Lectures on the companys sustainability management is conducted as part of introductory training for new employees,and briefing sessions on sustainability management are held for corporate departments,headquarter business units,regional business units and affiliates about 40 times a year for more than 3,600 employees in total.In this way,we have created opportunities for every employee to think about sustainability in their daily work and spread awareness.Human Rights TrainingAt Mitsui&Co.we conduct various training programs on human rights to ensure that our own human rights policy is widely disseminated in the workplace and put into practice in our business.For more information on Human Rights Training,please refer to the following link.Human Rights:Human Rights TrainingSustainabilty ManagementOur Approach to Sustainability and Management Framework17Sustainabilty ManagementMitsui&Co.s StakeholdersMitsui&Co.places emphasis on interacting with and having dialogue with society.For this reason,we closely assess the effects of our diverse and global business activities on society and identify and acknowledge stakeholders of particular interest.In particular,we are committed to the development of relationships based on mutual trust with a diverse range of stakeholders,including local communities,business associates&consumers,NPOs&NGOs,employees,shareholders&investors,and government bodies,through proactive information disclosures and continual communication with our stakeholders.Through interactive communication with stakeholders,each of Mitsuis employees and officers is endeavoring to acquire a firm understanding of what society expects from and requires of Mitsui.Based on this understanding,we strive to respond to changes in market environments,and constantly evolve to create new value through our business activities by exercising our unique capabilities,and thereby contribute to the realization of a sustainable society.18StakeholdersOverviewCommunicationLocal CommunitiesWe contribute to the sustainable growth and development of societies and economies through our wide-ranging business activities and society-centric contribution activities in countries and regions throughout the world.We also aim to achieve harmonious coexistence with local communities through contributions in such areas as local industry development,creation of employment opportunities,infrastructure development,enhancement of the quality of life of local residents,and the improvement of educational environments.Initiatives through our businessSocial Contribution Activities:Community ContributionContribution to development of local communities through overseas funds and the Mitsui&Co.Environment FundOur relief efforts in disaster affected regions in which we conduct businessBusiness Associates&ConsumersWe identify the needs and expectations of our business associates and consumers,supply safe and reliable products and services,disclose accurate corporate information,and take measures to address problems in supply chains.Mitsui&Co.websiteLibrary(Corporate Brochure/Advertisements/Corporate Video)Integrated ReportSustainability ReportActivities based on the Sustainable Supply Chain Policy,supplier engagementInitiatives that align with our policies and rules on the handling of consumer products:Consumer Product Handling Policy,Consumer Product Handling RegulationsReceipt of feedback and inquiriesMitsui&Co.s StakeholdersSustainabilty Management19StakeholdersOverviewCommunicationNPOs&NGOsWe pursue solutions for environmental and societal issues through networking and collaboration with various NPOs and NGOs.Through the Mitsui&Co.Environment Fund,we provide support for research and initiatives by NPOs and NGOs that are working to solve environmental problems.Discussions and local visits in cooperation with NPOs/NGOs Support for the Economic Independence and Greater Productivity of Small-scale Zambian Farms Through Cashew Tree Replanting and Productivity Improvement Support through an NPO for the Development of a Rainwater Reuse System to Supply Safe Drinking WaterParticipation in seminars hosted by NPOs and NGOsStakeholder Dialogue with NPOs/NGOsResponses to surveys from NPOs and NGOsExchange of opinions with an NGO on the formulation of procurement policies for specific commoditiesCollaboration with NPOs and NGOs through the Mitsui&Co.Environment FundEmployeesIn order to support our diverse group of employees to work energetically and exert their capabilities,we strive to carry out diversity management by enhancing workplace environment,developing various internal rules,providing human resources development programs,and placing the right people in the right positions.We are committed to being an organization with integrity on a global group basis with each employee possessing a high level of awareness of compliance.Mitsui Management Review（MMR）、Mitsui Engagement SurveyWork-X initiativesPromoting internal communicationDiscussions with labor unionsTraining programs and seminarsIn-house and external whistleblowing channelsWith Integrity MonthSustainability MonthIntranet/In-house newsletter of Mitsui&Co.Mitsui&Co.s StakeholdersSustainabilty Management20Mitsui&Co.s StakeholdersSustainabilty ManagementStakeholdersOverviewCommunicationShareholders&InvestorsWe strive for continuous improvement of our corporate value and appropriate market recognition by realizing transparency and accountability in management with timely and accurate disclosure of information,and by engaging in interactive communication with shareholders and investors.General meetings of shareholdersIR meetings(presentations on financial results,Investor Day,briefings for individual investorsSeparate engagement for IR and SR(departments in charge of exercising voting rights and responsible investment)Securities ReportIntegrated ReportNewsletter to ShareholdersMitsui&Co.websiteResponses to surveys from ESG research organizationsGovernment BodiesWe are committed to complying with related laws and regulations formulated by government agencies and local governments of Japan and the countries and regions where we engage in business activities.Furthermore,through cooperation with governmental agencies and local governments,we propose and promote business projects that align with their policies and make efforts to contribute to the development of nations and industries in a way unique to Mitsui.Participation in policy councilsParticipation in consultation and advisory meetings with government agencies and officesSupport for human resource development through trainee-receiving programs for staff members of local governmentsActivities through business and industry groups21Mitsui&Co.s StakeholdersSustainabilty ManagementStakeholder DialogueTo promote sustainability in our corporate management,we believe it is crucial to conduct dialogue with various stakeholders and respect their opinions regarding our business activities.To this end,we have continued to hold interactive stakeholder dialogue with external experts such as university professors and representatives of various NPOs and NGOs,as well as with the next generation of young leaders,including those representing Gen Z.Stakeholder dialogue in the fiscal year ending March 2023 Business and Natural CapitalIn September 2022,Yasushi Hibi,Vice President,Conservation International(CI),an international environmental NGO,and Managing Director,CI Japan,Makoto Haraguchi,Fellow at the MS&AD InterRisk Research&Consulting,Inc.,and members of our Sustainability Committee,held a stakeholder dialogue session regarding the relationship natural capital including biodiversity and business.During the dialogue session,VP Hibi and Fellow Haraguchi explained what natural capital is,why it is attracting attention now,and what the Taskforce on Nature-related Financial Disclosures(TNFD)aims to achieve.They also explained initiatives of leading companies as well as their expectations of Mitsui,after which there was a lively exchange of opinions.The participants discussed natural capital based on the differences from climate change,such as the existence of multiple indicators to measure natural capital,location-based characteristics including the general irreplaceability of nature that cannot be regained through protection or restoration in other places,and the difficulty of trading credits internationally for this reason,along with the importance of developing partnerships with local stakeholders on the ground.Although global targets and disclosure frameworks are still under discussion,we reaffirmed the need to keep a close eye on external trends,and for Mitsui to be prepared as well.As a global company with diverse businesses in all regions,we also reconfirmed the importance of identifying natural capital risks and impacts,including in the supply chain,as well as addressing new opportunities and businesses that will contribute positively.Titles were current at the time of the event22Mitsui&Co.s StakeholdersSustainabilty ManagementStakeholder dialogue in the fiscal year ended March 2022-Expectations for Biodiversity InitiativesIn February 2022,we facilitated a stakeholder dialogue event that was centered on the globally significant theme of biodiversity.It was attended by Mr.Yasushi Hibi,Managing Director of the Japanese arm of NGO Conservation International,Professor Mori of Yokohama National University,as well as Ms.Ichika Inaba,Ms.Arisa Kikkawa and Mr.Yutaro Aota of the Japan Youth Biodiversity Network.The focus of the stakeholder dialogue was on goal setting and initiatives necessary from both long-and short-term perspectives,as well as the biodiversity conservation activities that Mitsui&Co.can conduct on its own forestland.Mr.Hibi,Managing Director of Conservation International Japan said,Biodiversity transition-related risks constitute an urgent issue.Rather than expecting a consumer-driven change,I expect companies to work together on initiatives to effect change in consumer values.Consideration of biodiversity issues is intrinsically linked to consideration of human rights issues,and it is necessary that we address these issues from both environmental and social perspectives,he added.Professor Mori of Yokohama National University said,It would be costly to try and regenerate the biodiversity and environment that has already been destroyed.Priority should be placed on conservation,including preventative measures.In terms of biodiversity,its important to conduct diverse efforts from diverse perspectives,including with regard for people and cultures,rather than pursuing single targets such as those related to reducing GHG emissions in order to combat climate change,he added.While praising Mitsui&Co.s management of its own forestland,the members of the Japan Youth Biodiversity Network commented,We hope these lands will be utilized not only for industrial purposes,but also as places where people can learn about biodiversity.Most people lack awareness about biodiversity,and its important to identify effective approaches for solving social issues that incorporate both natural conservation considerations and collaborative efforts alongside local residents in every aspect of industry.The participants of this event all expressed the expectation that Mitsui&Co.would take the lead on this front,leveraging its unique business structure as a sogo shosha to pave the way for biodiversity initiatives,as there are few Japanese companies doing such work.Going forward,we plan to thoroughly consider the opinions expressed as part of these stakeholder dialogue events in order to incorporate them into our future initiatives.Titles were current at the time of the event 23Sustainabilty ManagementParticipation in InitiativesUnited Nations Global CompactThe United Nations Global Compact is a set of voluntary action principles for corporations proposed by former UN Secretary-General Kofi Annan at the World Economic Forum held in Davos,Switzerland in January 1999.He proposed a means to harness the creative powers of the private sector to fulfill the wishes of underprivileged people and meet the needs of future generations.It is neither a regulatory means nor a legally binding code of conduct,but rather a strategic policy initiative that encourages corporations to come together as global citizens to solve the various problems that could arise as a result of economic globalization.Participating corporations are asked to support and put into practice ten universally accepted principles in the areas of human rights,labor,environment,and anti-corruption.As of July 2022,over 20,000 corporations,labor unions,and civil society organizations from around the world are participating in the UN Global Compact.Mitsui&Co.signed and pledged its support for the UN Global Compact in October 2004.As a signatory of UN Global Compact,Mitsui complies with the Global Compact as part of its own corporate guidelines,and pursues SDGs on a global group basis.We participate in working groups of Global Compact Network Japan,such as the Human Rights Due Diligence(HRDD)Working Group.Support for the UN Global CompactIn October 2004 Mitsui&Co.signed and pledged its support for the UN Global Compact.Mitsui has been participating in this initiative as a signatory of the UN Global Compact and is complying with the principles as part of its own corporate guidelines.Currently Mitsui conducts a companywide survey every other year in order to check compliance with the UN Global Compact principles and is working to comply with and practice the principles on a global group basis.As well as engaging in activities geared toward observing“Ten Principles of the UN Global Compact”,we will advance various initiatives that contribute to realizing the UN Sustainable Development Goals(SDGs)through our business activities.Kenichi HoriRepresentative DirectorPresident and Chief Executive Officer24Ten Principles of the UN Global Compact Human Rights Businesses should support and respect the protection of internationally proclaimed human rights;and make sure that they are not complicit in human rights abuses.Labor Businesses should uphold the freedom of association and effective recognition of the right to collective bargaining;the elimination of all forms of forced and compulsory labor;the effective abolition of child labor;and the elimination of discrimination in respect of employment and occupation.Environment Businesses should support a precautionary approach to environmental challenges;undertake initiatives to promote greater environmental responsibility;and encourage the development and diffusion of environmentally friendly technologies.Anti-corruption Businesses should work against corruption in all its forms,including extortion and bribery.Participation in InitiativesSustainabilty Management25Sustainable Development Goals(SDGs)The United Nations Sustainable Development Goals(SDGs)define global sustainable development priorities and aspirations for 2030,with 17 goals and 169 targets.The SDGs call for action to end poverty and create a life of dignity and equality of opportunity for all,with consideration given to balancing sustainable growth and the limits of the Earth.As a sogo-shosha(general trading company),Mitsui&Co.group conducts a diverse range of business across nations and regions.We believe that this allows us to make a wide-ranging contribution to the achievement of all the 17,goals set out under the SDGs.With the recognition that it is increasingly important to work together with our business partners,customers,local communities,NPOs and NGOs,and other stakeholders in order to find solutions to the various issues facing society and industry,we are promoting initiatives based on Goal 17,Partnerships for the Goals.To continue promoting our business with a focus on contribution to the achievement of the SDGs,we are working to further raise awareness of the SDGs and are aligning our business and initiatives with Mitsuis Materiality and the SDGs.Mitsui&Co.s MaterialityWorld Economic ForumThe World Economic Forum is an independent international organization that engages leaders from the worlds of business,politics,academia,and other sectors of society to shape global,regional,and industry agendas in the spirit of global citizenship,through cooperation between the public and private sectors,for the improvement of the world situation.As a partner company,Mitsui attends the annual meeting of the World Economic Forum,as well as the regional meetings.Participation in InitiativesSustainabilty Management26EnvironmentClimate Change TCFD(Task Force on Climate-related Financial Disclosures)TCFD Consortium CDP(Climate Change)Maersk Mc-Kinney Moller Center for Zero Carbon Shipping International Iron Metallics Association ASI(Aluminium Stewardship Initiative)Battery Association for Supply Chain;BASC Japan Business Federation(Keidanren)Japan Foreign Trade Council GX League Basic Concept Japan Hydrogen Association Forest Stewardship Council(FSC)Carbon Recycling Fund Institute The Institute of Applied Energy,Society of Anthropogenic Carbon Cycle Technology Clean Fuel Ammonia AssociationWater Resources CDP(Water Security)Japan Business Federation(Keidanren)Pollution Prevention CLOMA(Japan Clean Ocean Material Alliance)CEFLEX(Circular economy for flexible packaging)Japan Partnership for Circular EconomySustainabilty ManagementParticipation in Initiatives27Circular Economy CLOMA(Japan Clean Ocean Material Alliance)CEFLEX(Circular economy for flexible packaging)Japan Partnership for Circular EconomyBiodiversity TNFD Forum(Taskforce on Nature-related Financial Disclosures)30by30 Alliance RSPO(Roundtable on Sustainable Palm Oil)Forest Stewardship Council(FSC)Keidanren Committee on Nature Conservation CDP(Forests)SocialHuman Rights United Nations Global Compact Forest Stewardship Council(FSC)RSPO(Roundtable on Sustainable Palm Oil)Japan Business Federation(Keidanren)Diversity Japan Business Federation(Keidanren)Responsibilities to Customers Japan Processed Foods Wholesalers Association Japan Pharmaceutical Traders AssociationParticipation in InitiativesSustainabilty Management28Participation in InitiativesSustainabilty ManagementSupply Chain Management CEFLEX(Circular economy for flexible packaging)ASI(Aluminium Stewardship Initiative)Forest Stewardship Council(FSC)Together for Sustainability(TfS)RSPO(Roundtable on Sustainable Palm Oil)EcoVadis Sedex(Supplier Ethical Data Exchange)29Mitsui&Co.s MaterialityMitsui&Co.prioritizes and focuses on sustainability in its corporate management.We have identified Mitsui s material issues(“Materiality”)for the sustainable growth of both society and the company,with the aim of meeting the expectations and trust of a variety of stakeholders and pursuing our corporate mission,“Build brighter futures,everywhere.”We link our Materiality with the United Nations Sustainable Development Goals(SDGs),in promoting our initiatives and activities,in order to work towards the SDGs 17 goals.We have established Materiality Action Plans which set out specific policies,targets,initiatives,and current status regarding each materiality for each organization and we manage and disclose progress based on these plans.Strengthen our governance and compliance as a corporate group trusted by society.Build an organization with integrityEnsure the sustainable and stable supply of resources,materials,food and manufactured products that are vital for the development of society.Secure sustainable supply of essential productsRespect diversity and develop human resources with the competence to create innovation and new value.Develop talent leading to value creationContribute to the betterment of living standards and the development of local industries to realize sustainable societies globally.Enhance quality of lifeAccelerate initiatives towards environmental issues,such as responding to climate change and water resource problems,and contributing to a circular economy.Create an eco-friendly society30Mitsui&Co.s MaterialityIdentification and Review of MaterialityIn 2015,Mitsui&Co.identified its Materiality,which consists of five key material issues in areas that are important for our stakeholders and have significant implications for our business management.As the importance of sustainability has been growing globally as expressed in the environmental,social,and governance(ESG)aspects and the SDGs,and mega-trends with the potential to impact our business activities are changing rapidly,we have reviewed our Materiality and re-identified five new material issues in 2019.We recognize societal issues related to our business activities in each material issue category,verify significant risks and opportunities for Mitsui in terms of the impact of societal issues,and disclose our approach toward each Materiality.In carrying out the revision,we took into account both the perspectives of various stakeholders in relation to the SDGs,the United Nations Global Compact,ISO26000,GRI Standards,other international frameworks,and ESG investment evaluations,as well as the impact on our business activities.In addition,we carried out questionnaire surveys of officers and employees on a global group basis,exchanged views with our external directors and outside experts,through meetings such as the Sustainability Committee,and interviews with the Sustainability Promotion Officers.After having such active discussions within and beyond Mitsui,we obtained approvals from the Corporate Management Committee and the Board of Directors,and finalized the new Materiality.The Materiality encompasses material issues that could become risks or opportunities in the context of our medium-to long-term business strategies,and will serve as the ground on which we engage in our business activities.By positioning the Materiality as a medium-to long-term key management priority,all officers and employees of Mitsui will work together to ensure the Materiality is reflected in our business activities.Mitsui will commit itself to sustainability management and strive through its diverse global business activities and the solution of global issues including climate change,pursuing both in a well-balanced long-term perspective.31We have established a Materiality Action Plan which sets out specific policies,targets,initiatives,and current status regarding each materiality for each organization and we manage and disclose progress based on this plan.Toward 2030,with a greater focus on evolution from connecting to creating,which is called for in our Long-term Management Vision 2030 that we have formulated as our future image,we will identify challenges,set targets,and find solutions to achieve the goals.Furthermore,we will create changes,trends,and new value.In order to respond to social challenges,needs,and expectations in line with changes in the times,and also to incorporate the formulation of new medium-term management plans and the resulting changes in impact on the economy,environment,and society into our sustainability management,we will review our Materiality and specific themes to work on every 3-5 years in consideration of environmental changes and other factors.Flowchart for Identification and Review of MaterialityIdentification and Review of MaterialityMitsui&Co.s Materiality32Secure sustainable supply of essential productsEnsure the sustainable and stable supply of resources,materials,food and manufactured products that are vital for the development of society.Risks Supply failures of resources,energy,raw materials,food,manufactured products,etc.caused by climate change,COVID-19,etc.Reputational damage resulting from safety and health problems affecting the final consumers of food and manufactured productsOpportunities Improvement of production and supply capacity through responding to the effects of climate change,COVID-19,etc.Enhancement of competitiveness through the establishment of traceability,responsible marketing leading to demand expansionMitsui&Co.s MaterialityRecognition of Societal Issues Population growth and expanding demand for resources,energy,raw materials,food,manufactured products,etc.Improvement of production and supply capacity to respond to climate change Safety and security of food and manufactured productsMajor Risks and OpportunitiesMateriality Action PlansSDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progressMineral&Metal ResourcesMineral&Metal ResourcesMineral and metal resources development and recyclingWe will contribute to the stable supply of mineral and metal resources that support economic growth,society and industry.Improve the stable supply system by expanding mineral and metal resources and promoting recycling businesses.Continue mining business development and improve cost competitiveness.Improve the value chain of recycling businesses.We have acquired new interests in Western Ridge iron deposits owned by BHP in the Australian iron ore business(BHP 85%,Itochu 8%,Mitsui 7%).We have acquired new interests in Grosvenor Coal Mine owned by Anglo American in the Australian coking coal business.Also,we are working to consolidate the adjacent mining areas and improve productivity(Anglo American 88%,our Company 4.75%,others).We have made additional investment in interests in the Collahuasi copper mine in Chile(a 0.97ditional interest acquisition to bring our holding to 12%).33Secure sustainable supply of essential productsMitsui&Co.s MaterialitySDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progressEnergyEnergy I,Energy IIEnergy developmentWe will contribute to the stable supply of sustainable energy.Build and enhance a stable energy production and supply portfolio that meets the expectations of customers and society.Maintain,expand and diversify energy supply by developing new projects and enhancing existing projects.We are promoting new energy development projects to steadily meet the needs of consumers around the world.In December 2020,the final investment decision was made(subject to the necessary government approvals)for the development of Stage 2 of the Waitsia Gas Field in Western Australia.Machinery&InfrastructureInfrastructure ProjectsCentralized power generation/centralized RE/distributed power generationWe will carry out business operations in consideration to the stable operation and reduction of environmental burdens,and contribute to local communities through sustainable and stable power supply optimized for each country or region.Complete construction projects and commence commercial operations.Improve operating rate and thermal efficiency.Implement environmental burden reduction measures.Expand our business base as a general energy company that meets diverse customer needs,including environmental and social aspects.Continue to implement PDCA for progress monitoring of projects under construction and improvement of project quality.Verification/demonstration/practice of environmental burden reduction measures.Develop businesses in new countries/regions.Acquire new projects by improving sales structure,promoting digital marketing,and expanding solutions.Through 88 electric power projects(Net capacity 11.9GW)in 26 countries around the world,we are working on a stable power supply that supports peoples lives(as of June 30,2022).In FY Mar/2022,Thailand gas-fired power plant projects in which we have invested were in operation following their partial completion.Machinery&InfrastructureInfrastructure ProjectsResource infrastructure(onshore/offshore)businessWe will fulfill our social mission and social responsibility for the stable supply of resources while fully considering the impact of operations on the environment,and contribute to the sustainable growth of countries and regions.Improve the supply capacity and efficiency of existing businesses.Complete construction projects and commence commercial operations.Steadily operate by utilizing DX.Reduce environmental burdens.Continue to implement PDCA to improve efficiency.Implement measures to improve utilization rates and efficiency.Off the coast of Brazil,about 20%of the total oil and gas production for the country is produced by FPSOs which are jointly owned by MODEC.Going forward,we will continue to strive to acquire new projects in the global deep-sea oil and gas field areas,mainly off the coast of Brazil,and work to maintain and expand our stable supply base.34SDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progressMachinery&InfrastructureInfrastructure ProjectsSocial environment infrastructure businessWe will contribute to the expansion of global logistics demand by developing,expanding and steadily operating our logistics bases.Expand logistics infrastructure and improve efficiency in the worlds growing logistics market.Improve the operating rate and create new added value using DX.Continue to work on improving efficiency,including maintenance.In our container terminal business in Indonesia,we have maintained the industrys highest level of operational efficiency.We have secured the countrys first direct service to the East Coast of North America,and are working to improve global logistics.We are promoting the expansion of DX functions to further improve efficiency,such as a paperless(online)fee payment process and optimization of truck transportation.At the end of 2021,a portion of the container yards under the control of Indonesias state-owned port operator were made available,and is being utilized to meet growing international logistics demand.Machinery&InfrastructureMobility IPassenger vehicle sales and leasingWe will respond to growing demand for mobility,resource transportation,and passenger vehicles,where demand is expected to increase(especially in emerging countries).Expand sales and leasing system through our global network partners.Supply vehicles that contribute to sales volume as well as sustainable growth and a reduction in environmental impact.Make more extensive efforts with global partners in each area.Sales volume(especially that of environmentally friendly vehicles),number of leases,sales area.In addition to sales in Chile,Peru,The Philippines,etc.,where demand for passenger and transportation vehicles is expanding with economic growth,we have begun a leasing business in Brazil.Machinery&InfrastructureMobility IRailway freightWe will respond to the increase in transportation demand for grains,steel products,industrial products,etc.in Brazil by developing multi-modal transportation with low environmental impact.Create and enhance efficient multi-modal transportation in Brazil.Work with our partner in Brazil to improve the quality and quantity of transportation,such as expanding the range of transportation option,expanding the target cargo,and achieve reliable transportation.We are considering the use of trucks utilizing IT to achieve efficient multi-modal transportation with low environmental impact.Secure sustainable supply of essential productsMitsui&Co.s Materiality35SDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progressMachinery&InfrastructureMobility IIShippingWe will provide high-quality,environmentally friendly,competitive ships and services to meet the ever-expanding demand for marine transportation as the world economy grows.Use DX to select the optimal shipping routes to save fuel and use new technologies such as new kinds of fuels to help reduce the environmental burden of shipping and enable sustainable growth of maritime industries.Increase our efforts with global partners in each area of the world(shipyards,shipowners,shipowners).Showcase initiatives for utilizing the technological capabilities of Japanese manufacturers.With emission reduction in the shipping industry becoming a global issue,in April 2021 we became a strategic partner of the Maersk Mc-Kinney Moller Center for Zero Carbon Shipping(MMMCZCS),a not-for-profit international research and development center dedicated to the decarbonization of the shipping industry.Machinery&InfrastructureMobility IIRailwaysWe will promote our environmentally friendly railway transportation business,which serves as a major logistics artery in Europe and the Americas.European environmental policy in the railway field promotes the shift from trucks to railways,promotion of electrification,promotion of regional integration,etc.The policy is to increase the railway modal share from 18%in 2020 to 30%by 2030.By offering electric locomotives and maintenance services that will play a part in this policy,we help to reduce the environmental burden.Phase out diesel locomotives and have only electric ones.Reduce the environmental burden of our locomotives.Mitsui Rail Capital Europe(MRCE),a subsidiary of Mitsui&Co.,Ltd.,which is the largest company in the European locomotive leasing industry,is working to reduce the environmental burden through the use of electric locomotives.ChemicalsBasic MaterialsCovering all business areas of the Business Unit(Gas Chemicals Business/Basic Chemicals Business/Performance monomer/Tank Terminal Business)We will achieve a sustainable society by supporting the steady supply of basic materials and industrial infrastructure.Solidify the production supply system through capacity expansion in the salt and methanol production businesses and tank terminal business,and expansion of trading by expanding logistics.Manage milestone of each project and expand trading based on trends in the oil-to-chemicals businesses.While the frequency of supply chain disruption due to the COVID-19 pandemic is increasing,our trading function has made it possible for us to connect chains and give them some spare capacity.We will continue to maintain and improve our functions and presence.Secure sustainable supply of essential productsMitsui&Co.s Materiality36Secure sustainable supply of essential productsMitsui&Co.s MaterialitySDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progressChemicalsChemicals SegmentComplianceWe will build a sustainable supply system in our management of chemical products by maintaining a compliance system and improving quality.Promote a legal compliance system for hazardous chemical substances,improve quality,give employee training for product safety,and participate in initiatives.Provide opportunities for employee training and improve product quality.Update,thoroughly understand,notify,and label hazard information and legal information on chemical substances.Expand specialized human resources for chemical substance management.We have updated legal information related to chemical substance management to protect the global environment through chemical substance management which is an important trade compliance along with security trade control.We regularly conduct training in the laws relating to chemical substance management to all Mitsui&Co.and group companies that handle chemical substances.ChemicalsPerformance MaterialsDetergent raw materials,oleochemical businessWe will contribute to the stable supplies in the detergent raw materials and oleochemical business areas.Establish stable supply systems.Expand manufacturing and stabilize production.We are supporting detergent raw material production in Thailand and marketing it globally.We are promoting oleochemical production in Malaysia and China.37Secure sustainable supply of essential productsMitsui&Co.s MaterialitySDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progressChemicalsNutrition&AgricultureAgri-science business/Agri-solution business/Agri-innovation businessWe will achieve sustainable agricultural production through science.Achieve a reduction of environmental burden and agricultural productivity improvement by developing and disseminating agricultural technology.Achieve a reduction of environmental burden and agricultural productivity improvement by developing and disseminating agricultural technology.Develop and disseminate bio-pesticides made from fungi and natural extracts,to reduce the environmental burden and help achieve agricultural production in harmony with the environment.Use soil analysis to help optimize the amount of chemical fertilizer applied and promote the spread of bio-stimulants.Improve the agricultural material supply base in Africa.Establish Ag-tech businesses.We are promoting IPM(Integrated Pest Management),which combines biological pesticides and chemical pesticides,to help establish highly productive and sustainable agricultural systems.We are developing a comprehensive agricultural material distribution business,mainly in Latin America.Through the ETG company we are supplying agricultural materials in Africa.We conducted an Ag-tech demonstration test in Hokkaido.We have launched a pilot project of controlled environment agriculture(CEA).ChemicalsNutrition&AgricultureAnimal solutions businessWe will achieve sustainable agricultural production through science.Achieve a reduction of the environmental burden of livestock,and an improvement of productivity by developing and popularizing feed additives/veterinary drugs/vaccines.Achieve efficient growth of livestock and a reduction of environmental emissions through establishment of a Gut Health(improvement of intestinal flora of livestock)business.Improve livestock productivity and achieve animal welfare through the spread of vaccines and veterinary drugs.We are promoting business reform in Novus,a company in which we have invested,to establish a Gut Health business.We have entered into the animal genetics business.We are pursuing synergies with existing businesses such as animal nutrition and animal health.38Secure sustainable supply of essential productsMitsui&Co.s MaterialitySDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progressIron&Steel ProductsIron&Steel ProductsGHG reduction promotion in product LCA(Life Cycle Assessment)We will work to build supply chains from the perspective of LCA,for global decarbonization.Together with partners in Japan and overseas,contribute to GHG reduction across the entire supply chain.In product LCA develop projects to help in GHG reduction.In collaboration with SuMPO(Sustainable Management Promotion Organization)which is Japans only ISO-based carbon footprint certification body,we have developed LCA Plus,a platform that enables the visualization of product LCA throughout the supply chain.LifestyleFoodTradingWe will contribute to the safe and secure procurement of food,and a sustainable and stable food supply.Thoroughly disseminate our sustainable supply chain policy and,if necessary,formulate individual procurement policies and goals based on this policy,and aim to achieve them.Monitor the implementation status of each Procurement Policy for Specific Commodities.Our Sustainable Supply Chain Policy has been sent to all suppliers and made known.We have created an individual procurement policy for palm oil,which is recognized as a product that has a significant environmental and social impact.LifestyleRetailFood retailWe will contribute to the safe and secure procurement of food,also a sustainable and stable food supply.Thoroughly disseminate our sustainable supply chain policy and,if necessary,formulate individual procurement policies and goals based on this policy,and aim to achieve them.Monitor the implementation status of each Procurement Policy for Specific Commodities.Our Sustainable Supply Chain Policy has been sent to all suppliers and been made known.We have created an individual procurement policy for palm oil,which is recognized as a product that has a significant environmental and social impact.39Secure sustainable supply of essential productsMitsui&Co.s MaterialitySDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progressLifestyleWellnessContract food servicesBased on the promotion of health management to curb domestic medical expenses and the growing awareness of peoples health,we will help people to achieve a level of health in line with their life stage,by providing a stable supply of food that will support physical and mental wellbeing.Achieve a stable supply of safe and secure food with consideration for reduction of food loss,sustainability and traceability.Actively use foods that take sustainability into consideration(sustainable foods).Increase efforts to achieve local production for local consumption,to improve supply capacity.Reduce food waste by supplying cooking plans for high-quality,traceable food.Despite the effects of the spread of COVID-19,we are helping achieve stable food supplies by providing free special menus to medical institutions.We are implementing local production for local consumption in collaboration with Miyazaki,Miyagi,and Akita prefectures to utilize ingredients that will lead to regional economic development.We have obtained MSC/ASC CoC certification1,the first for a food supply business in Japan.We also provide sustainable fishery products(sustainable seafood)at some facilities.We have obtained Rainforest Alliance certification2 for production,distribution,and processing processes at our own factory to improve traceability.We offer products using 100%coffee beans produced by certified farms.We are conducting food procurement and menu planning to control food loss using AIM Services original menu planning system.40SDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progress1 MSC certification is a certification system for sustainable fisheries that is properly managed in consideration of fishery resources and the environment.ASC certification certifies aquaculture which is approved by the Aquaculture Stewardship Council and minimizes the environmental and social burden.MSC/ASC CoC certification ensures that these certified fish products are properly managed and traceable in all processes of manufacturing,processing and distribution.2 Certification of the control standards for production,distribution,and processing at our own food preparation facilities.Secure sustainable supply of essential productsMitsui&Co.s Materiality41Enhance quality of lifeContribute to the betterment of living standards and the development of local industries to realize sustainable societies globally.Risks Reputational damage resulting from safety and health problems affecting infrastructure users Decline in competitiveness due to the diversification of information dissemination methods and fund procurement means Decline in service standards and other issues due to a shortage of healthcare personnel Reputational damage resulting from human rights violations and environmental loads in supply chainsOpportunities Development of sustainable infrastructure for improvement of living standards in developing and emerging countries Changes in disease structure due to population growth/economic development and increase in healthcare needs due to aging Creation of markets by promoting ICT-based business to build urban social infrastructure in response to the move toward developing smart cities Market expansion by meeting diversifying consumer needs Improvement of value and reliability across entire value chains through consideration for the environment,human rights,labor,and local communities in the entire supply chainMitsui&Co.s MaterialityRecognition of Societal Issues Infrastructure development in developing and emerging countries Aging infrastructure in developed countries Health maintenance,provision of healthcare,nursing,and welfare services Consideration for indigenous peoples in relation to resource development and other activities Expanding responsibility and increasing importance of consideration for human rights in supply chains(e.g.,labor practices and impact on local communities)Contribute to community revitalizationMajor Risks and OpportunitiesMateriality Action PlansSDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progressMineral&Metal ResourcesMineral&Metal ResourcesMineral and metal resources business developmentWe will contribute to the stabilization and development of local economies through sustainable resource development that takes local communities into consideration.Cooperate with our project partners and the local communities,contribute to the development of national and local economies.Conduct sustainable development by monitoring legal systems and continuing dialogue with project partners and local communities.We are continuing dialogue with local governments,project partners and local communities.42Enhance quality of lifeMitsui&Co.s MaterialitySDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progressEnergyEnergy I,Energy IIEnergy developmentWe will contribute to regional economic development through the promotion of our development projects.Through collaboration with local governments and communities,contribute to the development of national and regional economies associated with our development projects.Develop new regional infrastructure,create communities,and create local employment.We are working on infrastructure development based on the demands and potential needs of each country/region,and the creation of communities.EnergyEnergy I,Energy IIEnergy supplyThrough the supply of relatively clean and competitive energy(gas,LNG),we will assist in the development of local economies and gradual energy transitions.Supply energy that supports the sustainable economic development of each country.Provide stable LNG supply,and supply and demand adjustment functions by strengthening portfolio and logistics functions.We are working to expand our portfolio to strengthen our supply system of LNG,which has a relatively low environmental impact,to contribute to energy transitions around the world.Machinery&InfrastructureInfrastructure ProjectsCentralized renewable energy/distributed power generationWe will contribute to improve living standards in developing and emerging countries through our efforts in the distributed power generation business.Provide sustainable and clean power generation centered on solar power in India and sub-Saharan Africas non-electrified areas.Particularly in India,aim to supply electricity to 1.2 million people through OMC Power,and to expand to Africa and other countries.Build a sustainable mini-grid business business model centered on India and OMC Power.OMC Power is a leader in the distributed mini-grid business in India.In rural areas of India,where power supply is unstable,OMC Power combines solar power generation and storage batteries to provide stable,environmentally friendly,locally produced and consumed power to cell phone base stations,stores,and local communities.43Enhance quality of lifeMitsui&Co.s MaterialitySDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progressMachinery&InfrastructureInfrastructure ProjectsGeneral power/new areas/servicesWe will work on infrastructure to solve social problems such as food supply,financial services,health promotion,population growth,urbanization,and digitization.Expand production of crops in Africa and improve the quality of life for small-scale African farmers.Establish a sustainable supply chain for agricultural products using DX.Develop high-capacity communication lines.Promote demonstration projects that aim to create SDG premiums by visualizing social and environmental impacts in the production process of African agricultural products,and ensuring traceability through supply chains.Commercialize the establishment of a sustainable supply chain for agricultural products using DX(after assessing their feasibility).Lay and operate international submarine communication cable systems.We are engaged in an initiative to collect data on African agricultural products,and use that data to deliver global customers final products that come with the stories behind them,with the aim of generating value in that data and returning it to the farmers,thereby promoting the expansion of sustainable agriculture production.We are currently working on a pilot project covering 1,000 cotton farmers in Zambia.In the future,we aim to expand the project to other agricultural products such as coffee and cacao.We are currently working with NTT Group and JA Mitsui Leasing on the installation,operation and sale of a new submarine cable system between Japan and the U.S.Machinery&InfrastructureMobility ITransportation infrastructureWe will contribute to the sustainable growth of emerging countries through the development and expansion of transportation and infrastructure for daily life.Contribute to the sustainable growth of emerging countries through local employment and improvement of local living standards after completion of construction accompanying our transportation infrastructure operations.Promote projects through dialogue and harmony with local communities.Strengthen supply chain management when ordering project materials and equipment.We are working on a subway development project aimed at alleviating serious traffic congestion in Jakarta(the capital city)due to rapid economic growth in Indonesia,and are developing core infrastructure that will lead to an improvement in the investment environment.44Enhance quality of lifeMitsui&Co.s MaterialitySDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progressMachinery&InfrastructureMobility IIShippingWe will provide high-quality,environmentally friendly,competitive ships and services to meet the ever-expanding demand for marine transportation as the world economy grows.Use DX to select the optimal shipping routes to save fuel and use new technologies such as new kinds of fuels to help reduce the environmental burden of shipping and enable sustainable growth of maritime industries.Increase our efforts with global partners in each area of the world(shipyards,shipowners,shipowners).Showcase initiatives for utilizing the technological capabilities of Japanese manufacturers.With emission reduction in the shipping industry becoming a global issue,in April 2021 we became a strategic partner of the Maersk Mc-Kinney Moller Center for Zero Carbon Shipping(MMMCZCS),a not-for-profit international research and development center dedicated to the decarbonization of the shipping industry.Machinery&InfrastructureMobility IIRailwaysWe will promote our environmentally friendly railway transportation business,which serves as a major logistics artery in Europe and the Americas.European environmental policy in the railway field promotes the shift from trucks to railways,promotion of electrification,promotion of regional integration,etc.The policy is to increase the railway modal share from 18%in 2020 to 30%by 2030.By offering electric locomotives and maintenance services that will play a part in this policy,we help to reduce the environmental burden.Phase out diesel locomotives and have only electric ones.Reduce the environmental burden of our locomotives.Mitsui Rail Capital Europe(MRCE),a subsidiary of Mitsui&Co.,Ltd.,which is the largest company in the European locomotive leasing industry,is working to reduce the environmental burden through the use of electric locomotives.ChemicalsBasic MaterialsPerformance monomerWe will contribute to improve the worlds QOL by demonstrating our material design capabilities.Establish new businesses and new business groups in the specialty chemical field,as one part of the growth driver of our Basic Materials Business Unit.Promote business strategies and manage milestones for materials-related businesses such as high-performance resin raw materials and coatings,as well as cosmetics and pharmaceutical raw materials.We are expanding our business development in each area by leveraging our deepening partnerships with Honshu Chemical Industry and Kansai Paint.45Enhance quality of lifeMitsui&Co.s MaterialitySDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progressChemicalsPerformance MaterialsConsumer products businessThrough our consumer products business(personal care products,hygiene products,cosmetics,etc.)we will improve quality of life.Procure products and raw materials based on consumer needs.Conduct development and marketing in this field.Develop products utilizing unique Japanese technologies and execute overseas activities with deep market analysis and digital marketing approach.We are promoting new high-quality skincare products for U.S.consumers.We are establishing a business base aimed to promote high-quality skincare products in Brazil.ChemicalsNutrition&AgricultureWellness businessWe will respond to the increasing added value of food and health needs as the middle class grows and the population ages through science.Establish a business base that responds to wellness,mainly in Japan and Asia.Establish a food science business base in the Japanese and Asian markets.Establish a business base to provide personalized pre-illness solutions to consumers in the Japanese and Asian markets through the provision of health checks/medical forecasts/and high value-added supplements.We are enhancing and promoting the expansion of our subsidiary BFS(Bussan Food Science)and Soda Aromatic Co.,Ltd.,our investee,into Asia.Through our investment in Thorne Research of the U.S.,we are expanding into the wellness field.We have launched a business in Japan providing solutions for preventive health.Iron&Steel ProductsIron&Steel ProductsGeneral infrastructure maintenanceWe will contribute to lengthen the service life of existing infrastructure.In collaboration with partners who possess high technological abilities,contribute to spread the preventive maintenance business that uses Japans excellent maintenance technology throughout the world,to build environmentally friendly infrastructure.Expand services,products,and areas provided for in the general infrastructure maintenance business.We are currently promoting our maintenance business in Thailand together with Sho-Bond Corporation,a general infrastructure maintenance company.We will extend the life of infrastructure through preventive maintenance such as repair and reinforcement.46Enhance quality of lifeMitsui&Co.s MaterialitySDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progressIron&Steel ProductsIron&Steel ProductsStructural steel productionWe will contribute to the construction of environmentally friendly infrastructure in emerging markets.Create a recycling network through the recycling and production of environmentally friendly materials.Use new sources of energy,set up production and supply systems that have a low environmental burden,and expand the supply areas in Asia for products that are environmentally friendly.As an initiative in the electric furnace business that can reuse iron scrap to produce steel,we have invested(20%ownership)in Thai electric arc furnace steel manufacturer/Siam Yamato Steel.LifestyleFoodTradingWe will further strengthen our efforts to eradicate child labor and respect human rights in our supply chains.Make our Sustainable Supply Chain Policy gets through to our suppliers.Hold regular dialogue through supplier questionnaires and on-site inspections.Report the completion of sending the policy to all suppliers of our business units and consolidated subsidiaries and disclose monitoring implementation status.We have sent the policy to all suppliers of our business unit and consolidated subsidiaries.In addition,some suppliers have been sent questionnaires and the responses have been collected.LifestyleRetailFashion/textilesWe will carefully consider the environment and human rights throughout the business value chain in this area,and are improve the value and reliability of the entire value chain.Disseminate our Sustainable Supply Chain Policy and raise awareness for the environment and human rights in our business supply chain.Send our Sustainable Supply Chain Policy to all suppliers and make them aware of it.Work hard to improve the traceability of the products we handle.Our Sustainable Supply Chain Policy has been sent to all suppliers and been made known.47Enhance quality of lifeMitsui&Co.s MaterialitySDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progressLifestyleWellnessHospital/clinic businessTo meet the rapidly increasing demand for medical care in Asia against a backdrop of population growth,expansion of middle-income group,aging population,changes in disease patterns,etc.,we will strive to improve peoples health through improved access to medical care.By achieving value-based healthcare1,we will contribute to the sustainable development of the medical system.1 In value-based healthcare,each stakeholder aims to maximize outcomes and optimize costs to provide high-value medical care to patients.Improve access to quality medical care in Asia and achieve Value-Based Healthcare.Introduce digital technology and AI to improve medical access and efficiently allocate medical resources.Rationalize group-wide procurement to help control medical costs and improve operational efficiency.Build a healthcare data platform with the aim of maximizing outcomes and optimizing costs by utilizing data.In collaboration with the government,we are providing infrastructure for accepting new COVID-19,PCR tests,and vaccination.We have introduced an online medical care service to quickly respond to the non-contact needs of patients.Partial cost reductions have begun to be realized by rationalizing procurement across the group.We have begun the creation of a platform for patient data of about 30 million patients across Asia.Innovation&Corporate DevelopmentIT&CommunicationIT Service and Cyber SecurityWe will contribute to the creation of prosperous and safe lifestyles through the utilization of ICT in fields such as DX and cybersecurity.Expand existing businesses,including realizing DX for customer companies and providing cybersecurity services.Expand the scale of business and create new businesses.Through Mitsui Knowledge Industry Co.,Ltd.(MKI),a subsidiary,we are providing consulting,building,and operation services for CT systems,data center and cloud services,and the sale of IoT devices and manufacturing equipment.Through Mitsui Bussan Secure Directions,Inc.(MBSD),a subsidiary,we are providing diagnostic,oversight,and consulting services related to cybersecurity.48Enhance quality of lifeMitsui&Co.s MaterialitySDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progressInnovation&Corporate DevelopmentIT&CommunicationHealthcare utilizing DXWe will contribute to the creation of prosperous and safe lifestyles through healthcare IT business.Provide advanced healthcare IT services by expanding current businesses.Expand the scale of business and create new businesses.Through iMedical Inc.,an affiliated company,we are developing services that use remote medical imaging technology to provide specialist radiographic image interpretation for physicians.north star Co.,Ltd.,an affiliate company in which we invested in February 2021,operates Kids Doctor,which offers pediatric health consultation services,and appointment services of online diagnosis and home visit.Xeureka Inc.,a subsidiary of the Company established in November 2021,provides AI drug discovery support services and conducts drug discovery R&D through joint research.Innoxia Inc.,also a subsidiary of the Company,established in November 2021,is engaged in business providing various DX solutions to medical institutions,mainly hospitals.49Enhance quality of lifeMitsui&Co.s MaterialitySDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progressInnovation&Corporate DevelopmentCorporate DevelopmentReal Estate asset managementWe will provide solutions for longstanding social issues in the U.S.,where the aging and nuclearization of society is reaching an advanced stage,through the ownership and operation of senior living properties.Raise awareness of our senior living properties as an option for U.S.seniors to spend an enriching old age and contribute to build pleasant regional communities.Continue to raise the quality of the main business services and properties.Increase the scale of the business and work together with various partners to develop properties that offer high added value.We have advanced a senior living properties business for over 30 years,particularly in the west of the U.S.We currently manage 35 properties offering around 3,700 rooms.We are aiming to attract large amounts of pro-social investment from the capital markets through JV projects with Japanese investors,and the creation of private placement funds so that we can operate excellent assets and provide high-quality services.50Create an eco-friendly societyAccelerate initiatives towards environmental issues,such as responding to climate change and water resource problems,and contributing to a circular economy.Risks Impact of tighter policies and regulations as part of the transition to a low-carbon society Impact of new technologies and the creation of new markets on supply and demand in existing business areas Disruption of business operations due to the impact of cyclones,hurricanes,and other physical impacts linked to climate change Impacts on the natural environment,such as the large-scale use of water in business operations Impact of leakage of hazardous chemicals Increase of environmental costs due to the destruction/deterioration of eco-systemsOpportunities Accelerating market changes in the mobility area resulting from rising environmental awareness and the tightening of regulations Expansion of markets for environment-related business areas,such as renewable energy Demand for high-efficiency power plants Creation of new business models based on the circular economy Handling of products and services that contribute to the creation of a lowcarbon society by conserving energy and reducing greenhouse gas emissionsMitsui&Co.s MaterialityRecognition of Societal Issues Global warming,climate change Water resource shortages Circular economy Environmental pollution Loss of biodiversityMajor Risks and Opportunities51Create an eco-friendly societyMitsui&Co.s MaterialityMateriality Action PlansSDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progressMineral&Metal ResourcesMineral&Metal ResourcesMineral and metal resources business developmentWe will contribute to the achievement of a society that is in harmony with the environment by supplying mineral and metal resources that support a low-carbon society and by reducing environmental burdens in the resource industry.Promote businesses to reduce environmental impact,including greenhouse gas reduction.Contribute(from the raw materials side)to the low carbonization of the steel industry,and build value chains.Develop copper and battery raw materials that are required for EVs and electrification,and build value chains.Take low-carbon-emitting initiatives in mining operations.Together with Vale/Kobe Steel/Midrex,we are jointly considering providing low-carbon iron sources and low-carbon iron-making solutions.We are collaborating with partners to reduce Scope 1/2 GHG emissions(exhaust gas from mining equipment,accompanying methane gas,etc.)from metallurgical coal business.Also considering a possibility of collaborating with related infrastructure and technology owners.All electricity procured for the Collahuasi copper mine in Chile has been switched to renewable energy.Mineral&Metal ResourcesMineral&Metal ResourcesEnvironmental measures/metal and battery recycling businessesWe will contribute to achieve a circular economy through our metal and battery recycling businesses.Expand our metal and battery recycling businesses that contribute to the promotion of a circular economy.Promote and expand metal and battery recycling business.We are promoting scrap metal business at domestic and overseas bases and among investees(MM&Kenzai,Kyoei Recycling,Sims,etc.).We are promoting reuse and recycling business for EV waste battery cells and packs.52Create an eco-friendly societyMitsui&Co.s MaterialitySDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progressEnergyEnergy SegmentEnergy solutionsWe will contribute to the achievement of a low-carbon or no-carbon-emitting society by utilizing our accumulated knowledge inside and outside our Company in our business domains.Support our Company and our partners for their effort on Net zero emissions by providing comprehensive energy solutions that combine technologies and businesses such as distributed renewable energy,storage batteries,next-generation fuels,and emissions trading.Thoroughly disseminate our sustainable supply chain policy and,if necessary,formulate individual procurement policies and goals based on this policy,and aim to achieve them.Work in various business fields with excellent partners who possess a high degree of technical ability and a wealth of knowledge.Provide innovative solutions that utilize our comprehensive strengths.Monitor the implementation status of individual procurement policies.We participate in and promote distributed renewable energy,energy management business,carbon-free LNG/biofuel/next-generation fuel supply,and CO2 Capture and Storage(CCS)businesses.Our main projects are listed below.In November 2021,we strengthened capital ties and concluded a collaboration agreement with Forsee Power of France,through which we are promoting the electrification of mobility.In March 2022,we concluded an MOU with Storegga Limited of the U.K.,a Carbon Capture&Storage(CCS)operator in which we have invested,for the commercialization of Direct Air Capture(DAC)technology.In May 2022,we invested in Climate Friendly,an Australian company engaged in the creation and sale of carbon credits through the restoration of native forest vegetation.We have created an individual procurement policy for timber,which is recognized as a product that has a significant environmental and social impact.53Create an eco-friendly societyMitsui&Co.s MaterialitySDGstargets(s)SegmentBusiness unitBusiness fieldResponse to issuesTarget(assuming a date by 2030)Actions and performance indices for achieving the targetCurrent status/progressMachinery&InfrastructureInfrastructure ProjectsCentralized RE/distributed power generationWe will construct,develop,and operate an RE power supply that can help reduce GHG emissions through decarbonization.Achieve an RE ratio of 30%.Construct new domestic and overseas RE power sources(offshore wind power,centralized large-scale solar power,distributed solar power,DSO,etc.).Steadily operate RE power sources in Japan and overseas.Provide RE peripheral business provision.In April 2022,we invested in Mainstream Renewable Power Limited,a leading renewable energy operator engaged in onshore and offshore wind and solar power projects mainly in Latin America and Africa.The company is aiming to develop 25 GW over the next 10 years.Machinery&InfrastructureInfrastructure ProjectsSocial environment infrastructure businessWe will solve water problems and contribute to the sustainable growth of society through water production and water and sewage treatment.Improve the efficiency of existing water and sewage treatment businesses.Stably operate water production business.Acquire new water-related businesses.Construct water production projects in the Middle East.Steadily operate water and sewage treatment business in the Americas and the acquisition of new projects.Completion of water production projects in the Americas,and the commencement of operations.Through MITinfra in Mexico,we are helping to improve the living environment of local residents,solve water resource shortages,and achieve sustainable corporate activities through the water and sewage
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2022-2023Environmental,Social,and Governance ReportTABLE OF CONTENTS 3 About This Report 4 A Message From Our Chairman and CEO 5 Our Approach to Corporate Sustainability 6 Our ESG Strategy and Goals 7 Highlights of Our Progress in 2022 8 Our Corporate Sustainability Journey 9 Our Community Impact Grant Opportunities 10 Our$1 Billion Sustainability Bond 11 Awards and Recognition 12 Build Financial Confidence 13 Build Financial Confidence 14 Progress On Our Build Financial Confidence Goals 15 Strengthening the Financial Security of Small Businesses 22 Empowering Individuals to Enhance Financial Confidence 25 Protecting Our Customers with Fraud Prevention,Data Privacy and Security 28 Supporting Economic Growth and Resilience in Communities 30 Advance Climate Solutions 31 Advance Climate Solutions 32 Progress On Our Advance Climate Solutions Goals 33 Moving to Net-Zero Emissions 39 Managing Climate Risks and Opportunities 40 Supporting Our Customers in the Transition to a Low-Carbon Future 43 Building More Climate Resilient,Sustainable,and Equitable Communities46 Promote Diversity,Equity,and Inclusion 47 Promote Diversity,Equity,and Inclusion 48 Progress On Our Promote Diversity,Equity,and Inclusion Goals 49 Diversity Representation and Equal Opportunity 53 Supporting Our Colleagues 57 Supporting Underrepresented-owned Businesses 61 Backing Equal Futures in Communities63 Backing Our Colleagues 64 Backing Our Colleagues 67 Our Workplace Culture 69 Supporting Our Colleagues Holistic Health and Well-being 72 Career Growth and Development74 Governance and Operating Responsibly 75 Governance and Operating Responsibly 76 Our Corporate Governance Framework 77 ESG Governance 78 Our Executive Compensation Program 78 Our Business Ethics 79 Risk Management 79 Serving Our Customers Responsibly 81 Operating a Responsible Supply Chain Globally 82 Policy Engagement83 Supporting Data 84 Our Commitment to ESG 87 Aligning with the United Nations Sustainable Development Goals(SDGs)88 Advance Climate Solutions 92 Promote Diversity,Equity,and Inclusion 94 Governance and Operating Responsibly 95 Indexes TCFD Index SASB Index GRI Content IndexABOUT THIS REPORTThis report covers the calendar year 2022 and provides certain qualitative and quantitative information about our Environmental,Social,and Governance(ESG)objectives,goals and initiatives.In some cases,we also share highlights from initiatives that were launched in early 2023 to provide more up-to-date information.When we use the terms“American Express,”“company,”“we,”“us,”or“our”in this report,we mean the American Express Company and its subsidiaries,on a consolidated basis,unless we state,or the context implies,otherwise.The use of the term“partner”or“partnering”in this report does not mean or imply a formal legal partnership,and is not meant in any way to alter the terms of American Express relationship with any third parties.Any reference to our support of,work with,or collaboration with a third-party organization within this report does not constitute or imply an endorsement by American Express of any or all of the positions or activities of such organization.Reporting guidelines and content This report follows the Global Reporting Initiative(GRI),Sustainability Accounting Standards Board(SASB,now part of the International Sustainability Standards Board(ISSB),and Task Force on Climate-Related Financial Disclosures(TCFD)reporting guidelines with respect to our priority ESG issues.GRI,SASB,and TCFD indexes can be found in the Supporting Data section of this report.In this report,the use of the term“materiality”and other similar terms is intended to reflect our priority ESG issues.We are not using such terms as they are used under the securities or other laws of the United States or any other jurisdiction,or as these terms are used in the context of financial statements and financial reporting.We report on ESG issues that pertain to us through this ESG Report and the American Express Corporate Sustainability website.Additional information about our company can be found in our Diversity,Equity,and Inclusion(DE&I)Report,submissions to the CDP(formerly Carbon Disclosure Project),in our annual,quarterly,and current reports and our proxy statement on file with,or furnished to,the U.S.Securities and Exchange Commission and on the American Express Investor Relations website.Links and references included throughout the report provide direction on where to find additional information.This report includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 which are subject to risks and uncertainties.The forward-looking statements,including the companys aspirational ESG objectives and goals,contain words such as“believe,”“expect,”“anticipate,”“intend,”“plan,”“aim,”“will,”“may,”“should,”“could,”“would,”“likely,”“potential,”“commit,”“continue,”or other similar expressions.Actual results may differ from those set forth in the forward-looking statements due to a variety of factors,including:competition,brand perceptions and reputation;an inability to develop and market value propositions that appeal to Card Members and new customers;the amount and efficacy of investments in product innovations,resources,marketing campaigns and programs;changing customer behaviors,interest in the companys products,resources and programs,and willingness to access capital provided by the company,spend money at small businesses,and value environmentally and socially responsible products and services;managements inability to identify suitable suppliers,grantees,partners and community investments and negotiate acceptable terms;the actual amount the company spends with suppliers,on ESG initiatives and to make appropriate salary adjustments,all while implementing operating expense control initiatives;an inability to build partnerships and execute programs with other companies and of partners to meet their obligations to the company;changes in developing standards and certifications;the cost and availability of renewable energy,carbon removal and carbon offset projects,energy attribute certificates,certified paper,and green buildings,and alternatives to single-use plastic;supply chain and market disruption;regulation;potential M&A activity;severe weather conditions,natural disasters and other catastrophic events;changes in the companys real estate,technology,colleague and community engagement,and risk management strategies;an inability of waste management systems to divert waste to recycling and composting facilities;and changes in economic or business conditions and the companys ability to grow,improve its financial performance and execute on its strategies.A further description of these and other risks and uncertainties can be found in the companys Annual Report on Form 10-K for the year ended December 31,2022(the“2022 Annual Report”),the companys Quarterly Report on Form 10-Q for the quarter ended March 31,2023,and the companys other filings with the U.S.Securities and Exchange Commission.You are cautioned not to place undue reliance on these forward-looking statements,which speak only as of the date on which they are made.We undertake no obligation to update or revise any forward-looking statements and statements regarding the companys future direction and intent are subject to change or withdrawal without notice.Data in this report reflect estimates using methodologies and assumptions that may change in the future as a result of new information or subsequent developments.Amounts presented are approximate unless otherwise indicated.This report includes trademarks,such as American Express,which are protected under applicable intellectual property laws and are the property of the American Express Company or its subsidiaries.Solely for convenience,our trademarks and trade names referred to in this report may appear without the or TM symbols,but such references are not intended to indicate,in any way,that we will not assert,to the fullest extent under applicable law,our rights or the right of the applicable licensor to these trademarks and trade names.3A MESSAGE FROM OUR CHAIRMAN AND CEOAmerican Express has a long history of giving back to our communities.From our first philanthropic grant to help the victims of the Great Boston Fire of 1872 and our contributions to the American Red Cross War Fund during the World War I,to engaging our colleagues through Giving Campaigns for over 50 years,our contributions to our communities have been central to our culture and are reflected in our American Express Blue Box values.Today,American Express is continuing to build on this legacy with our community impact work through the American Express Foundation(Foundation)and our global Environmental,Social and Governance(ESG)strategy.Since the establishment of the Foundation in 1954,we have provided more than$1 billion to charitable causes,including those that back small businesses,support disaster response and recovery,and enable non-profit leaders to access career-changing opportunities.To complement these efforts,in 2021,we developed our ESG strategy and roadmap based on an ESG priority assessment to identify the key issues of importance for our stakeholders,including colleagues,customers,shareholders,communities and partners.This strategy centers around three core pillars:Build Financial Confidence,Advance Climate Solutions,and Promote Diversity Equity and Inclusion.Over the last year,we have made significant progress on our goals,which are detailed in this report.Some of the highlights include:Through our flagship Shop Small campaigns in 2021 and 2022,we helped drive an estimated$42.9 billion in reported consumer spending at small businesses in the US and UK,1 as we progress towards achieving our$100 billion goal by 2025.To support a low-carbon future,we maintained CarbonNeutral certified operations powered by 100%renewable electricity globally since 2018.After committing to net-zero emissions by 2035 in alignment with the Science Based Targets initiative(SBTi),in 2022,we submitted near-and long-term emissions reduction targets to the SBTi for validation.We maintained 100%pay equity for colleagues across genders globally and across races and ethnicities in the US for the third consecutive year in 2022.We also supported over 400,000 underrepresented-owned small and medium-sized businesses in the US from October 2020 through December 2022,exceeding our initial goal of providing access to capital and financial education to at least 250,000 businesses by 2024.We again earned a number of notable recognitions,including ranking#3 on Great Place To Works Fortune 100 Best Companies to Work For in 2023,and being named among Fast Companys Brands that Matter in 2022.We have strong momentum that gives us confidence in our ability to achieve our goals and continue to make a positive impact in the lives of our colleagues,customers and communities.STEPHEN J.SQUERI CHAIRMAN AND CHIEF EXECUTIVE OFFICER1.Refer to note 2 on p.14 for more information regarding reported spend for these campaigns.INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I4Our Approach to Corporate Sustainability In 2021,we launched our ESG strategy which is comprised of three core pillars:Build Financial Confidence,Advance Climate Solutions,and Promote Diversity,Equity,and Inclusion.OUR ESG STRATEGY AND GOALS Empower individuals to build and maintain their financial well-being through products,services,tools,and education,while providing robust account securityStrengthen the financial security and money management capacity of small businesses through products,services,campaigns,and initiativesHelp build resilient communities through grants,programs,and initiatives that support economic empowerment and equity Provide access to credit to at least 4 million individuals from underrepresented populations from 2021 through 2025 Provide at least 5 million individuals with tools,resources,and educational content to improve financial well-being from 2021 through 2025 Support small businesses,including by reaching$100 billion in spending by consumers at small,independently owned retailers or restaurants on Small Business Saturday and during other Shop Small campaigns from 2021 through 20251 Invest$500 million to build more resilient and equitable communities from 2021 through 2025Minimize our climate impact and manage our climate-related risks and opportunitiesEnable our customers and partners to transition to a low-carbon economy through the development of new capabilitiesSupport community programs and initiatives to help build more climate-resilient and equitable communities Commit to net-zero emissions by 2035 in alignment with the Science Based Targets initiative(SBTi)Enhance the management of climate-related risks and opportunities across the business Pilot low-carbon product innovations,including carbon tracking and offset solutions Provide at least$10 million to support initiatives,partnerships,and programs that address the adverse effects of climate change and pollution on communities from 2021 through 2025 Engage our colleagues in sustainability initiatives through the Green2Gether programEnhance diverse representation,equal opportunity,and an inclusive culture at all levels of the companyMeet the needs of underrepresented businesses and consumers and develop more inclusive marketing initiativesAdvance racial equality and social justice in our communities Maintain 100%pay equity across genders globally and across races and ethnicities in the US Double annual spend with underrepresented-owned suppliers in the US from a 2019 baseline to$750 million by the end of 2024,including increasing spend with Black-owned suppliers to at least$100 million annually Provide access to capital and financial education to at least 250,000 underrepresented-owned small-and medium-sized businesses in the US from late 2020 through 2024 Develop more inclusive marketing initiatives,as well as design and build product experiences and programs that better meet the needs of underrepresented consumer and business customers Provide$50 million in grants from late 2020 through 2024 to nonprofits focused on addressing inequality and promoting social justice,including those led by members of underrepresented groups 1.Based on spend as reported by consumers in surveys commissioned by American Express(not actual receipts or sales).PROMOTE DIVERSITY,EQUITY,AND INCLUSIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEINTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I6Certain goals are highlighted below.Information on the progress we have made towards all of our goals can be found throughout this report.HIGHLIGHTS OF OUR PROGRESS IN 2022in grants provided to organizations backing low-carbon communities from September 2021 through December 2022$10.4 Million$595 Millionin investments,community development loans,and grants made or to which capital was committed through the American Express Center for Community Development from 2021 through 2022 to support affordable housing,small business needs,and job creation2.American Express submitted near-and long-term company-wide emissions reductions targets in line with the SBTi Corporate Manual,Version 2.0,December 2021,and SBTi Corporate Net Zero Standard,Version 1.0,October 2021,respectively.PROMOTE DIVERSITY,EQUITY,AND INCLUSIONBUILD FINANCIAL CONFIDENCEADVANCE CLIMATE SOLUTIONSLearn more in Progress On Our Build Financial Confidence GoalsLearn more in Progress On Our Advance Climate Solutions GoalsLearn more in Progress On Our Promote DE&I GoalsEXCEEDED goal to invest$500 million to build more resilient and equitable communities from 2021 through 2025new cards(basic and supplemental)issued in the US to Card Members from underrepresented groups from 2021 through 20222.2 MillionNet-Zero by 2035Submitted near-term and long-term emissions reductions targets to the Science Based Targets initiative(SBTi)2 100%pay equity for colleagues maintained for third consecutive year across genders globally and across races and ethnicities in the USACHIEVED 100%pay equity across genders globally and across races and ethnicities in the USIN PROGRESS towards goal to provide access to credit to at least 4 million individuals from underrepresented populations from 2021 through 2025IN PROGRESS towards commitment to net-zero emissions by 2035 in alignment with SBTi$758 Millionspent with underrepresented-owned suppliers in 2022,including$60 million with Black-owned suppliersIN PROGRESS towards goal to double annual spend with underrepresented-owned suppliers to$750 million annually by the end of 2024 and increase spend with Black-owned suppliers to at least$100 million annuallyEXCEEDED goal to provide at least$10 million in grants to back low-carbon communities from 2021 through 2025INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I7186019542001201220182020202218721972191720102016201320192021Set 2025 Operational Environmental Goals to reduce energy,emissions,water,and waste across our global operationsCommitted to net-zero emissions by 2035 in alignment with the Science Based Targets initiative(SBTi)Launched first American Express Card manufactured primarily from reclaimed plastic collected from beaches and coastal communitiesLaunched a roadmap for our global ESG strategy,establishing long-term goals and objectives across three areas of importance for our company,stakeholders,and society:Build Financial Confidence,Advance Climate Solutions,Promote Diversity,Equity,and Inclusion(DE&I)Included on Bloomberg Gender Equality Index for the first time Expanded Small Business Saturday to Shop Small campaigns globallyLaunched first employee giving campaign,which evolved into our Give2Gether programIssued$1 billion of Sustainability Notes to fund eligible Social and Green ProjectsSubmitted first CDP Climate Change Response Launched Small Business Saturday in US to support economic recoveryFirst documented example of providing aid for communitiesEstablished American Express Foundation to support charitable causes Provided our first financial donation on record,which was a philanthropic grant to support victims of the Great Boston FireContributed to the American Red Cross War Fund to support emergency medical relief during World War ILaunched our Healthy Minds Program to support colleagues and their loved ones mental health and well-beingEstablished World Trade Center Disaster Relief Fund and became a founding sponsor of 9/11 Memorial MuseumPowered our operations with 100%renewable electricity for the first time3Achieved 100%pay equity across genders globally and across races and ethnicities in the US 3.Operations include all our managed facilities,field sites,and data centers.Managed facilities are individual properties operationally managed by our global real estate team and housing critical business functions.Field sites are individual properties that are not operationally managed by our global real estate team but directly by our business units.They are typically smaller sites,less than 30,000 square feet(including airport lounges,foreign exchange kiosks,and sales offices),that are owned or leased by American Express.The companys goal to remain carbon neutral covers Scope 1(direct emissions from sources owned or controlled by American Express),Scope 2(indirect location-based and market-based emissions),Scope 3 emissions(Category 5 waste generated in operations and Category 6 business travel)through onsite renewable electricity generation and renewable energy credits,carbon offsets,and reduced GHG emissions.OUR CORPORATE SUSTAINABILITY JOURNEYINTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I8OUR COMMUNITY IMPACT GRANT PRIORITIES In 2022,we announced new grant priorities that build on our legacy of community giving,drive impact through our strategy,and support meaningful change in our communities.Approximately$40 million in charitable giving globally was provided in 2022,including grants from our company,the American Express Foundation,our Center for Community Development,and gift-matching programs.Since creating the American Express Foundation in 1954,we have provided more than$1 billion to charitable causes around the world through the Foundation and our Corporate Giving Program.WE ARE FOCUSING OUR EFFORTS AND RESOURCES ACROSS THREE CORE PRIORITIES:Backing SmallGrants,mentoring support,and technical assistance supporting small business owners to build economic vitality and foster a thriving communityBacking Low-Carbon CommunitiesGrants to promote sustainability,climate resilience,equity,and recovery in cities and disaster-prone areas globallyBacking Equal FuturesGrants that advance economic and educational opportunities for future generations to ensure their long-term success and ability to thrivePlease refer to the Backing Small,Backing Low-Carbon Communities,and Backing Equal Futures sections throughout this report to learn more.INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I9OUR$1 BILLION SUSTAINABILITY BONDIn April 2022,American Express released our Sustainability Financing Framework and in May 2022 we issued$1 billion in principal amount of Sustainability Notes to invest in eligible Green and Social Projects in support of our ESG strategy.As of December 31,2022,we allocated$750 million of the$994 million net proceeds,which includes$727 million to eligible Social Projects and$23 million to eligible Green Projects.Examples of eligible Social Projects include expenditures related to the procurement of products and services from underrepresented-owned suppliers and investments through the American Express Center for Community Development in funds that contribute to the financing of affordable housing for low-and moderate-income communities.Examples of eligible Green Projects include investments and expenditures related to green buildings and the circular economy,including expenditures related to the manufacturing of recycled or reclaimed plastic cards for American Express Consumer and Business Cards.For more information,refer to our 2023 Sustainability Financing ReportThe PowerfulBacking ofAmerican Express2023 Sustainability Financing ReportINTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I10AWARDS AND RECOGNITIONSSelect awards and recognitions from 2022 and 2023#2 on American Opportunity Index(2022)Americas Most JUST Companies(2023)JUST 100 List#17 on 2023 Axios Harris Poll 100 Corporate Reputation StudyBloombergs Gender Equality Index 2023 (since 2016)90%on Disability Equality Index&Best Places to Work for People with Disabilities(2022)#3 Fortune and Great Place to Work list(2023)4th consecutive year in the top 10#4 Best Workplaces for Parents Great Places to Work(2022)#10 Fortune Worlds Most Admired Companies(2022)Fast Company Best Workplaces for Innovators(2022)Fast Company Brands that Matter (2022)100%score 2022 Human Rights Campaign Corporate Equality Index (since 2004)For more information on our Workplace Awards and Recognitions,see Backing Our Colleagues section.CDP(CLIMATE)A-FTSE4GOOD INDEX SERIESMSCI(ESG)RATINGAASUSTAINALYTICS ESG RISK RATING Low RiskTHIRD-PARTY RATINGSWe monitor our performance across several environmental,social,and governance-related ratings and rankings.2022 highlights:INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I11Build Financial ConfidenceVISIONProvide responsible,secure,and transparent products and services to help people and businesses build financial resilience.At American Express,building financial confidencefor our colleagues,customers,and communitiesis a natural extension of our role as a global payments network.We bring our vision to life by providing small businesses and individuals with products and services that enhance their ability to manage their finances and achieve financial stability and growth.We are also focused on making credit more accessible to underrepresented communities and helping build resilient communities by providing opportunities,tools,and resources to support financial well-being.BUILD FINANCIAL CONFIDENCEINTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I13STRATEGIC OBJECTIVEGOALSTATUSPROGRESSSTRENGTHEN THE FINANCIAL SECURITY AND MONEY MANAGEMENT CAPACITY OF SMALL BUSINESSES THROUGH PRODUCTS,SERVICES,CAMPAIGNS,AND INITIATIVESSupport small businesses,including by reaching$100 billion in spending by consumers at small,independently owned retailers or restaurants on Small Business Saturday and during other Shop Small campaigns from 2021 through 20251$42.9 billion in estimated reported spending by US and UK consumers at small businesses,including independent retailers and restaurants on Small Business Saturday events in 2021 and 20222EMPOWER INDIVIDUALS TO BUILD AND MAINTAIN THEIR FINANCIAL WELL-BEING THROUGH PRODUCTS,SERVICES,TOOLS,AND EDUCATION,WHILE PROVIDING ROBUST ACCOUNT SECURITYProvide access to credit to at least 4 million individuals from underrepresented populations from 2021 through 2025 2.2 million new cards(basic and supplemental)issued in the US to Card Members from underrepresented groups from 2021 through 2022Provide at least 5 million individuals with tools,resources,and educational content to improve financial well-being from 2021 through 2025 6.2 million individuals enrolled in MyCredit Guide as of December 2022HELP BUILD RESILIENT COMMUNITIES THROUGH GRANTS,PROGRAMS,AND INITIATIVES THAT SUPPORT ECONOMIC EMPOWERMENT AND EQUITYInvest$500 million to build more resilient and equitable communities from 2021 through 2025$595 million in investments,community development loans,and grants made or to which capital was committed from 2021 through 2022PROGRESS ON OUR BUILD FINANCIAL CONFIDENCE GOALSEXCEEDEDEXCEEDED1.Based on spend as reported by consumers in surveys commissioned by American Express(not actual receipts or sales).2.Consists of estimated reported spending at US and UK Small Business Saturday events in 2021 and 2022.In the US,the American Express 2021 and 2022 Small Business Saturday Consumer Insights Surveys were conducted anonymously on November 28,2021 and November 27,2022,respectively,by Teneo on behalf of American Express and the National Federation of Independent Business(NFIB).The studies are nationally representative samples of 2,426 and 2,471 US adults 18 years of age or older,respectively.The samples were collected using an email invitation and an online survey.The studies gathered self-reported data and do not reflect actual receipts or sales.The surveys have an overall margin of error of /-2.0%,at the 95%level of confidence.Projections are based on the current US Census estimates of the US adult population,age 18 years and over.In the UK,American Express commissioned research from Opinium,who polled 4,000 UK adults between 5 p.m.on Saturday,December 4,2021 and 10 p.m.on Sunday,December 5,2021 and on Sunday,December 4,2022.The overall spend figure was calculated by taking the average spend of those who shopped at small,local,independent shops and businesses and multiplying by the total number of UK adults.The estimated UK spend was converted from Global British Pound()to US Dollar($)based on the daily exchange rates when the surveys were conducted.INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&IIN PROGRESSIN PROGRESS14American Express has a long track record of backing small businesses through innovative products and services to meet our customers evolving needs.We remain focused on strengthening the financial security and money management capacity of small businesses globally through products,services,campaigns,and initiatives.Supporting small businesses worldwide through Shop Small Shop Small is a year-round,global movement that supports small,independent businesses and calls attention to the valuable and distinct contributions they make to their communities and the economy.The global Shop Small campaign encourages consumers to support their local independent businesses in Australia,Canada,Japan,India,Hong Kong,the UK,the US,and other countries.The Shop Small movement was spurred by the widespread participation in Small Business Saturday,which was created in 2010 in the US by American Express in the wake of the financial crisis.This shopping tradition is aimed to celebrate small businesses and drive more consumer spending through their doors on the Saturday after Thanksgiving.Since its launch 13 years ago,US consumers have reported spending an estimated$184 billion at small businesses on Small Business Saturday.3STRENGTHENING THE FINANCIAL SECURITY OF SMALL BUSINESSES 3.This spend statistic is an aggregate of the average spend as reported by consumers who shopped small on Small Business Saturday in surveys commissioned by American Express reporting spend habits on Small Business Saturday since 2012.It does not reflect actual receipts or sales.Each such survey was conducted online among a nationally representative sample of US adults.The data was projected from the samples based on then-current US Census estimates of the US adult population(18 ).INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I15BACKING SMALL BUSINESSES GLOBALLY THROUGH OUR SHOP SMALL CAMPAIGNSOur Shop Small campaign has global reach with programs to back small businesses around the world.Below are highlights from our global Shop Small campaigns in 2022.In 2022,we continued Shop Small campaigns globally to back small businesses across the world including in the UK,Australia,Canada,Japan,Hong Kong,and India.Local artists in Australia,Canada,Japan,Mexico,the UK,South Africa,and elsewhere designed complimentary and custom signage for merchants to proudly display in their stores,on their websites,and through social media.UK:10 Years of Shop Small 2022 marked 10 years since the American Express Shop Small campaign launched in the UK and the 10th year of Small Business Saturday in that country.In recognition of this milestone,we asked our Shop Small Ambassadors to share their insider tips on the everyday small businesses that they cant live without.The Little Blue Book helps to encourage shoppers to support their local communities.It is available for free online and features specific recommendations,and guides readers to a map of participating small businesses.AustraliaAmerican Express has provided AUD$24 million and more than 2 billion Membership Rewards points to Card Members through Shop Small offers from 2013 through 2022.4.American Express commissioned research from Opinium,who polled 4,000 UK adults on Sunday,December 4,2022.The overall spend figure was calculated by taking the average spend of those who shopped at small,local,independent shops and businesses and multiplying by the total number of UK adults,as estimated by the UK Office for National Statistics.in estimated reported spending by UK consumers at small businesses on Small Business Saturday.The total spend was up nearly 30%from 2021 as an estimated 12.8 million shoppers shopped at local small businesses.4774MILLIONCanadaAlmost 100,000 Card Members enrolled in Shop Small offers,resulting in CAD$72 million in spend at participating merchants.Japan:RISE with Shop SmallIn 2022,we provided three women-owned small businesses with grants worth approximately$15,000 for store remodeling,advertising,and other business improvements,and provided ten women-owned small businesses with mentorship from external specialists who have experience in the same fields.Additionally,we developed a variety of support programs,including free online seminars,consultation programs by senior managers,and a voucher code for purchasing promotional items.Hong KongIn 2022,Shop Small engaged approximately 30,000 local businesses and introduced new initiatives and offers to support local merchants and reward Card Members for shopping small.Shop Small participating merchants automatically received one entry to the lucky draw for every eligible transaction of an American Express Card to win HK$10,000 supermarket coupons.Card Members were automatically entered into a weekly lucky drawing upon spending at any Shop Small participating business to win 1 million Membership Rewards points.INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I16Cash flow management hub for small businesses with American Express Business Blueprint American Express Business Blueprint is one of our latest innovations to support the ever-changing needs of small business owners.Launched in January 2023,the new digital cash flow management hub is designed exclusively for small businesses to help them make financial decisions more confidently.Any US small business may access,for free,personalized cash flow insights.They may also access applications for select financial products,like a business line of credit,and use the products,if approved,to help them more efficiently manage their cash flow.5 Additionally,embedded into the platform is My Insights,a free cashflow analytics solution providing small businesses with personalized,24/7 data analysis of their American Express business products and linked external business bank accounts.My Insights will automatically aggregate data across these products and linked accounts to provide insights.“Historically,small businesses have been underserved when it comes to smart,simple financial management tools.No longer.A few financial institutions are reinventing small business banking and delivering needed tools.American Express Business Blueprint is raising the bar in helping small businesses manage their cash flow from one place,”says Alenka Grealish,Principal Analyst,Emerging Tech at Celent.5.All American Express business products are subject to separate eligibility,applications,approvals,and fee structures.6.Between November 30,2022 and December 15,2022,Morning Consult conducted an online survey among 1100 financial decision-makers,including 500 at small businesses(90%In ProgressTarget950%In ProgressTarget594Our global operations consist of offices,field sites,and data centers,with data centers representing a large portion of our energy usage.In 2022,our data centers represented approximately 849,209 square feet of building space and used approximately 131,183 MWh,which makes up about 57%of the electricity used to power our global operations.Currently,our data centers produce 37%of our Scope 1 and Scope 2 emissions and report a power usage effectiveness(PUE)12 of 1.57 for our production data center,13 1.48 for our redundancy data center,14 and 1.70 for our testing data center.RENEWABLE ENERGY AT OUR OFFICES AND DATA CENTERS12.The PUE is the total overall utility load divided by the total load needed to support the data halls.We collect data from strategic metering devices within our building systems as well as our Energy Performance Management System(EPMS)which reports real-time PUE data.13.Primary Data Center for Daily BAU(business-as-usual)activities.14.Disaster Recovery Data Center for Production Data Center.15.Equivalent number of homes powered determined based on the US Environmental Protection Agency Greenhouse Gas Equivalencies calculator.In 2022,solar panels at our data centers in North Carolina and Brighton,UK generated approximately 533 MWh of renewable electricity in totalTo support our goal to continue to power our operations with 100%renewable electricity,we continued to generate onsite renewable electricity and purchase renewable energy credits.We produced approximately 533 MWh of renewable solar electricity in total from our North Carolina and Brighton,UK data centers,equivalent to powering approximately 70 homes electricity use for one year.15 We also purchased 229,106 MWh of Energy Attribute Certificates(EACs)in 2022,which verify the production of renewable electricity in an amount equivalent to total electricity consumption.Our EAC purchases were in alignment with the technical guidance from RE100,a global coalition of leading businesses committed to using 100%renewable electricity.=For more detailed data on our energy consumption,renewable energy,and Scope 1,2,and 3 emissions,please see the Environmental Performance Data Summary and Limited Assurance Statement of GHG Emissions in the Supporting Data Section at the end of this report.Solar panels at our UK office533 MWh of solar generated at our data centersenough to power electricity use for 70 homes for one year53370INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I35Optimizing our workspaces As we work to reduce our energy use,maintain carbon neutrality,and find ways to reduce the environmental impact of our real estate footprint,we strive to design,build,and operate facilities that consume less resources,emit fewer greenhouse gases,and improve the quality and sustainability of our office spaces.We follow sustainability best practices,which include the US Green Building Councils Leadership in Energy and Environmental Design(LEED)certification program and other international green building standards,including BREEAM,NABERS,GreenMark,HQE,and Effinergie .Green Building Certifications(%)50UVY 2120222025 GOAL20202019CELEBRATING EARTH HOURWe powered down for a good cause and celebrated Earth Hour by turning off the lights for one hour at American Express facilities around the world on March 25,2023.A total of 45 American Express facilities,representing over 6.5 million square feet of real estate participated in the event.We are pleased to report that we are close to our goal of achieving green building certifications for 60%of our operations by the end of 2025.As of year-end 2022,25 of our facilities in 13 countriesrepresenting approximately 59%of our global real estate portfoliohave achieved green building certifications.16 We are also working to improve the sustainability,comfort,quality,and flexibility of our offices to support our colleagues overall well-being.Actions we have taken towards this objective include using ergonomic furniture and sustainable construction materials that adhere to LEED standards,allocating flexible workspace,and providing remote work capabilities through Amex Flex.Learn more in the Amex Flex:A Year After Launch section in this report.American Express office building in Spain during Earth Hour16.Green building certified percentage is represented by the total year-end square footage certified out of total year-end building square footage.This includes leased or owned facilities actively occupied by American Express(excluding parking lot square footage)that have achieved certification under a global or locally recognized third-party environmental building certification system as meeting their performance criteria(LEED,BREEAM,NABERS,GreenMark,HQE,and Effinergie ).INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I36Maintaining healthy and safe workplaces globallyWe continue to promote a safe and healthy workplace for our colleagues across our global operations.Our Global Workplace Safety teams help manage risks and ensure compliance with local market requirements.We maintain an Occupational Health and Safety Management System(OHSMS)in select jurisdictions,which provides standards,procedures,and guidance designed to meet our safety objectives in alignment with the ISO 45001 framework,a globally recognized set of management practices that consider local safety requirements,industry best practices,and internal and external community expectations.Additionally,we conduct regular health and safety audits to evaluate our practices and provide training for our colleagues on health and safety.We also provide ergonomics tools and resources that can help improve comfort,safety,and productivity.Reducing and managing wasteFour of our 2025 operational environmental goals are focused on reducing and diverting landfill-bound waste and phasing out single-use plastics.In 2019,we set an operational goal to achieving zero waste certificationwhich includes a minimum requirement of 90%or greater waste diversion from landfillsfor our headquarters in New York City,and to reach a 60%waste diversion rate across our managed facilities.In 2022,the overall waste diversion rate from landfills across our managed facilities where waste data is reported was 54%.17 We continue to implement initiatives to support these goals,including recycling and composting programs and zero-waste initiatives.In 2023,we launched the Eco Exchange program to encourage upcycling of items to reduce waste sent to the landfill.In 2021,one of our offices in Gurgaon,India achieved TRUE Zero Waste Certification at the Platinum level,TRUEs highest certification level possible.The TRUE certification program rates how facilities perform in minimizing waste and maximizing their efficiency in the use of resources.In 2022,the facility diverted 93%of its waste from landfills,above the minimum requirement of 90%waste diversion rate to maintain this certification.Decreasing our water useSince 2019,weve worked to reduce water consumption through colleague engagement and education,as well as building design.In 2022,we consumed 217,497 cubic meters across our global operations.Our water consumption in 2022 was 63%lower than in 2019,due primarily to the implementation of the Amex Flex program,which has provided colleagues with flexibility in their work arrangements.Colleagues who elect to work remotely or hybrid rather than in the office full-time contribute to lower water consumption across our facilities.In 2023,three of our offices in the UK achieved WELL Health-Safety Ratings.The WELL Health-Safety Rating is an evidence-based,third-party-verified rating focused on operational policies,maintenance protocols,and emergency plans developed to address post-COVID-19 environment and broader health and safety-related issues into the future.In 2023,one of our offices in Gurgaon,India,achieved WELLTM Certified at the Gold level.WELL provides a comprehensive global certification standard focused on advancing human health and well-being in the built environment.17.The waste data is reported only for managed facilities where measured data is available.This represents approximately 72%of(4,968,933 ft2)of the globally managed facilities footprint in 2022.INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I37Operating an environmentally and socially responsible supply chain Were committed to working with suppliers who share our values regarding environmental sustainability,diversity,ethical sourcing,responsible operations,human rights,and gender equality.In 2022,we sourced 95.1%of our direct marketing,customer communications,and office paper from certified responsibly managed forests,down from 96.3%in 2021.This includes paper certified by the Forest Stewardship Council(FSC),Sustainable Forestry Initiative(SFI),and Programme for the Endorsement of Forest Certification(PEFC).95ditionally,in 2022 we launched a Paper-Off Initiative to reduce paper statements for over 100 global Corporate clients outside the US.Find more details about our responsible supply chain efforts in the Operating a Responsible Supply Chain Globally section of this report.Climate standards and frameworksWe aim to align our efforts with several standards and frameworks that have emerged for measuring climate impact and action and promoting accountability for businesses.CarbonNeutral certified operations18 CDP Supply Chain Member since 2023 EPA Green Power Partner since 2014 RE100 member since 2020 Committed to net-zero emissions in alignment with Science Based Targets initiative in 2021 TCFD Supporter since 202118.See note 6 on page 34 for more information on our CarbonNeutral certified operations American Express office in a building near Paris that achieved HQE,BREEAM,and Effinergie green building certificationsINTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I38MANAGING CLIMATE RISKS AND OPPORTUNITIESThe Advance Climate Solutions pillar of our ESG strategy includes a goal to enhance the management of climate-related risks and opportunities across our business.To that end,we have continued to make progress towards this goal,including by establishing a Climate Risk Team and conducting qualitative analyses to measure climate-related physical and transition risks and opportunities.We also formed a Climate Risk Management Working Group in 2022 comprised of senior leaders with direct accountability to our Enterprise Risk Management Committee.The Risk Committee of the Board provides oversight of the companys Enterprise Risk Management(ERM)framework,and other risk management policies and procedures established by management to identify,assess,measure,and manage key risks facing the company.It also approves our ERM policy,which governs risk governance,risk oversight,and risk appetite.ESG risks,including climate-related risks,are included in our ERM framework and climate-related risks are currently managed as part of our ERM process.To maintain resiliency and business continuity in our offices and data centers,we factor climate-related physical risks into our short-,medium-,and long-term real estate strategies.In addition,we evaluate qualitative climate-related transition risks that may impact our global operations,including current and emerging regulations.These climate-related risks influence our operational strategy,and we have identified opportunities to minimize these risks,including by maintaining carbon neutrality and continuing to invest in energy efficiency projects and renewable electricity.Our Enterprise Resilience program addresses the impact and recovery of key business operations and supporting technology in the event of an unplanned disruption.We support this program with Business Continuity Plans,along with tools,training,and guidance.For more information,refer to the TCFD Index.Albany Improved Forest Management Project supported as part of our CarbonNeutral certificationINTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I39SUPPORTING OUR CUSTOMERS IN THE TRANSITION TO A LOW-CARBON FUTUREAs climate action increases in importance to our customers and partners,were creating new products and services to help them make informed decisions,improve operations,and promote responsible travel and conscientious consumption.To reinforce this,in 2021,we set a goal to pilot low-carbon product innovations.New pilot experience for Card MembersIn February 2023,we launched a pilot digital suite for eligible US Consumer and Small Business Card Members to help them better understand their environmental impact and contribute to carbon removal efforts with the following tools:Amex Estimated Carbon Emissions Tracker:Developed in collaboration with the CoolClimate Network at University of California,Berkeley,the tool analyzes the spend made on an eligible American Express Card and estimates carbon emissions associated with those purchases.19 Contribution Services for Carbon Removal Projects:Eligible US Card Members can set up automatic monthly contributions from$5 to$100 a month20 via program partner Cloverly.These contributions are used to support a portfolio of for-profit carbon removal projects that also support local communities,which have been selected with the help of our program partner Carbon Direct.Carbon Reduction Insights:Tips and advice from Carbon Direct for informational purposes are available to Card Members to learn about ways to reduce the carbon impact of their day-to-day activities.Innovating low-carbon products for our customersEXPANDING CARBON FOOTPRINT MANAGEMENT TOOLS FOR CORPORATE CLIENTSIn February 2023,we expanded the American Express Carbon Footprint Tool to include additional categories of spend for select Corporate clients so that they can track estimated carbon emissions associated with spend across air travel,ground transportation,hotel stays,food and beverage,and retail.The Carbon Footprint Tool applies conversion factors and standards from various governmental and private organizations to a companys spend on its American Express Corporate Product Program.The Tool can be accessed when clients log in to Commercial Insights,a suite of tools offered to American Express largest Corporate clients.21 The Carbon Footprint Tool joins the Corporate Carbon Offset Referral Suite,which launched in 2022 and provides US Corporate clients with a list of carbon offset providers curated by American Express.Participating companies may elect to work with such provider(s)to purchase carbon offsets through investments in large-scale carbon projects,which can help them manage their estimated carbon footprint.Dashboard is for illustrative purposes only and does not depict actual Carbon Footprint Tool graphics19.American Express Card Members who have a primary US Consumer or Small Business Basic Card have access to the Estimated Carbon Emissions Tracker and may connect any eligible Card to the tracker.Holders of Additional Cards,Corporate Cards and American Express Cards issued outside the US are not eligible at this time.The information provided by the Estimated Carbon Emissions Tracker is for generalized informational purposes only and does not constitute financial,tax,accounting,legal or other professional advice on any subject matter.For full terms of service and information about the methodology used by the Estimated Carbon Emissions Tracker,please visit https:/ Card Members can sign up to make automatically recurring monthly contributions to select carbon removal projects in an amount that they choose,from$5 to$100 a month.Payments will continue to be made in the amount chosen until a user cancels or changes the amount of future payments.Users may cancel or change the amount of future payments at any time through their American Express Online Account at https:/ and may contact us using the telephone number on the back of their Card if they need assistance.Contributions made are not charitable contributions.The payments will be made to Cloverly,Inc.,a third party that will apply such payments(net of fees and charges)to retire carbon credits issued to certain for-profit carbon removal projects.American Express,Cloverly,and the organizations sponsoring carbon removal projects are not charities and receive financial benefits from payments made.American Express does not own,control,or manage the carbon removal projects and cannot guarantee that such projects will operate as anticipated or yield any particular results or that retired carbon credits represent a unique quantity of atmospheric carbon reduced by the relevant project.Eligible Card Members are American Express Card Members who have an active US Basic Consumer or Business Credit Card issued by American Express National Bank.For complete terms of service and information about the projects,please visit https:/ estimated information provided by the Carbon Footprint Dashboard is for generalized informational purposes only and does not constitute financial,tax,accounting,legal,or other professional advice on any subject matter.INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I40Partnering with DeltaWe also collaborate with our strategic partners to support our shared sustainability objectives.For example,we have partnered with Delta Air Lines on the Delta SkyMiles American Express Cards made from 70%reclaimed plastic that also achieved CarbonNeutral product certification in accordance with the CarbonNeutral Protocol.Expanding recycled plastic cardsAmerican Express has been working to reduce our consumption of virgin plastic,beginning in 2019 with the introduction of the first American Express Card manufactured primarily from reclaimed plastic collected from beaches and coastal communities.In 2022,we set a goal for the vast majority of plastic cards issued by American Express to be made from at least 70%recycled or reclaimed plastic by the end of 2024.By achieving this goal,we can help reduce the amount of virgin plastics being introduced into the environment.In 2022,we continued to expand cards made from recycled or reclaimed plastics globally,including approximately four million cards issued in the US,Canada,France,Germany,and Italy.Our Card Take Back Program enables US Card Members to return both plastic and non-plastic cards by mail for recycling.Since the launch of the program in 2019,weve recycled more than two million cards,including cards returned by Card Members.In 2022,96%of Card Member payments were electronic22 and 69%of statements were paperless.2322.“Electronic”includes payments received via phone,online,Auto Pay,third-party remits,and wire transfers.23.Includes Global Consumer,Global Small Business,and US Corporate Card Members.Helping Card Members Shop with PurposeFor the second year in a row,we helped Card Members Shop with Purpose with Amex Offers during Earth Month in 2023.American Express had a selection of Shop with Purpose Amex Offers available throughout Earth Month to eligible US Consumer and Small Business Card Members.These offers rewarded spending on eligible purchases from select Certified B Corporations,such as Stumptown Coffee Roasters and Hive Brands,and Climate Neutral Certified Companies like Avocado Mattress and Parachute.More than 2 million cards recycled since 2019,including cards returned by Card Members through our Card Take Back Program in the US.2 MILLIONINTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I41Supporting a sustainable,low-carbon future for travelTravel is a key part of our business and history.Our efforts start at home by offsetting our carbon footprint associated with third-party air,rail,rental car usage,and hotel stays for employee business travel.We continue to scale up our use of Sustainable Aviation Fuel(SAF)in our corporate jet fleet and pursue LEED or equivalent certifications across our facilities.Helping our colleagues and customers travel more sustainablyWhen our colleagues travel for work,we have started to display more sustainability-focused options in our business travel booking tool.Additionally,in 2022 we commenced a Green Compass assessment with Global Business Travel Group,Inc.to provide recommendations to enhance low-carbon options throughout our colleague travel booking platform,develop internal policies,and identify data tracking and reporting opportunities.78%of respondents from American Express Travels 2023 Global Travel Trends Report24 said they are interested in going on vacations that support local communities.This year,American Express introduced Stay with Purpose,a new online directory of hotels committed to initiatives such as furthering conservation,community development,and inclusive travel,which Card Members can use to plan and book their trips.Additionally,through our Global Insights and Advisory Team,we offer our large and global corporate customers data-driven insights and benchmarking that can help them consider changes to their travel policies generally,including considerations related to lower carbon travel alternatives.GREENER FOOTPRINT IN OUR LOUNGES:The American Express Centurion Lounge in San Francisco achieved LEED Platinum certification under LEED v3 Commercial Interiors by adhering to prerequisites and credits that address energy,water,waste,and indoor environmental quality.Incentivizing green travel in partnership with Uber Green:We partnered with Uber on a limited time offer to encourage eligible Corporate Card Members to take Uber Green rides in October 2022.Participating Card Members earned$10 in Uber Cash deposited directly into their Uber account during the limited time offer for taking an Uber Green or Comfort Electric ride.Uber Green is a lower-emissions ride option that connects riders with hybrid and fully electric vehicles.24.The American Express 2023 Global Travel Trends Report is based on data obtained through an online poll conducted by Morning Consult between February 3rd-11th,2023 among a sample of 1,000 travelers from Australia,Canada,India,Japan,Mexico,UK and 2,000 travelers in the US who have a household income of at least a$70k equivalent,and who typically travel by air at least once a year.Results from each markets survey have a margin of error of plus or minus 3 percentage points.INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I42We have seen the impact of extreme weather events in cities around the world and we have made it a priority to invest in initiatives that provide cities with the infrastructure and tools to help prepare for environmental disasters and become more sustainable,which can help them to remain safe and thriving centers of community,commerce,and tourism.Backing Low-Carbon Communities Our Backing Low-Carbon Communities grants support to community-led climate initiatives,disaster response,risk-reduction and resilience efforts,and nature-based solutions,particularly in urban areas.American Express set a goal to provide at least$10 million to support initiatives,partnerships,and programs that address the adverse effects of climate change and pollution on communities from 2021 through 2025.To support this goal,we launched a new Community Impact Grant theme:Backing Low-Carbon Communities in 2022.Ahead of the United Nations Climate Change Conference(COP 27)in November 2022,American Express pledged more than$5 million to organizations helping cities and coastal communities build resilience against climate-related events,including to the Ocean Conservancy,Urban Sustainability Directors Network(USDN),Resilient Cities Catalyst,and the Regional Plan Association.These grants build on our work with American Forests,Earthwatch,and the National Park Foundation announced in April 2022 designed to advance community-led climate initiatives and nature-based solutions.Some of the organizations who received our 2022-2023 Community Impact grants to back low-carbon communities include:BUILDING MORE CLIMATE RESILIENT,SUSTAINABLE,AND EQUITABLE COMMUNITIESACCELERATING SOLAR ENERGY IN ECONOMICALLY VULNERABLE COMMUNITIES We are working with the Urban Sustainability Directors Network(USDN)to help accelerate the adoption of solar solutions for people impacted by energy costs and climate change.We plan to provide$1.2 million in funding in 2022-2023 to support the installation of solar energy systems in low-and moderate-income communities homes and small businesses in Phoenix,Salt Lake City,and Sydney.These cities will also share findings with hundreds of cities via the USDN and the Carbon Neutral Cities Alliance(CNCA)networks around the world.$10.4 MILLIONin grants provided to help build more climate resilient and equitable communities from September 2021 to December 2022,exceeding our goal to provide at least$10 million by 2025.INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I43Supporting Disaster Relief,Climate Action,and Climate Resilience in Cities GloballyWe continued to support disaster relief,climate action,and resilience initiatives in cities globally.We partnered with community organizations including the American Red Cross,Feeding America,Habitat for Humanity of Florida,Resilient Cities Catalyst,Regional Plan Association,Urban Sustainability Directors Network,and others in 2022 through Q1 2023.$10.4 MILLION IN GRANTS PROVIDED TO BACKING LOW-CARBON COMMUNITIES GLOBALLYOur Backing Low-Carbon Communities Grants supported disaster relief,climate action,and resilience initiatives in 17 countries from September 2021 through March 2023.INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I44150th Tiny ForestColleagues in the UK joined community groups to plant Earthwatchs 150th UK Tiny Forest at the White Hart Lane Recreation Ground,Haringey.This effort was part of a grant issued in 2022 to fund the planting of several hundred trees in the UK to help communities connect with nature,enhance biodiversity,and mitigate the impacts of climate change.Colleagues and communities planted 600 trees in a tennis-court size plot,designed to attract over 500 animal and plant species within the first three years and provide an accessible green space and outdoor classroom for local urban communities to connect with nature.American Express colleagues will revisit the Haringey Tiny Forest in 2023 to assist with environmental data collection to help assess the benefits of the forest over time.Engaging and educating colleagues on sustainability with EarthwatchIn 2022,we partnered with Earthwatch on initiatives to help engage colleagues on sustainability and climate action.Climate Change Master Class We co-hosted two Climate Change Master Class series in the fall of 2022 and spring of 2023.The four-part interactive series was voluntary and available virtually to all colleagues globally.The classes,led by Earthwatch scientists,provided insights into the impacts of climate change and actions participants could take to reduce its effects in their personal lives.Engaging our colleagues in sustainability initiatives is an important part of our Advance Climate Solutions pillar.As part of our Green2Gether program,American Express colleagues around the world can participate in colleague-led sustainability initiatives.Green2Gether activities include volunteering with nonprofit partners,waste and energy reduction efforts,and healthy food initiatives.In 2022 and 2023,colleagues engaged in environmentally focused in-person and virtual volunteer activities and events globally with our nonprofit partners,including American Forests,the Central Park Conservancy,the Ocean Conservancy,and the Earthwatch Institute.ENGAGING COLLEAGUES THROUGH GREEN2GETHERColleagues volunteer in Phoenix during Green2Gether activity with American ForestsColleagues volunteer in the UK to plant Earthwatchs 150th UK Tiny Forest at White Hart Lane Recreation Ground,HaringeyREDUCING PLASTIC POLLUTION IN COASTAL COMMUNITIES We began working with the Ocean Conservancy in 2018 with an initiative to mobilize our colleagues to help clean up beaches in several countries.In 2022,we expanded our support to include a$2.5 million commitment in grant funding to help prevent the flow of trash and plastic pollution into the ocean and promote resilience through the Ocean Conservancys International Coastal Cleanup(ICC)and Urban Ocean programs.American Express colleagues around the world also participated in efforts to clean up marine debris in 2022.Since 2018,approximately 24,000 pounds of debris have been collected by colleagues across eight countries including Australia,Italy,Japan,Malaysia,New Zealand,the Philippines,Spain,and the US.INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I45Promote Diversity,Equity,and InclusionVISIONOur vision is to support a diverse,equitable,and inclusive workforce,marketplace,and society.We see the diversity of people and experiences as fuel for the creativity and innovation that make us better as a team and ultimately help us deliver better results.Our Blue Box Values of“We Respect People,”“We Embrace Diversity,”and“We Stand for Equity and Inclusion”bring our vision to life to back our colleagues,customers,and communities.PROMOTE DIVERSITY,EQUITY,AND INCLUSIONINTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I47PROGRESS ON OUR PROMOTE DIVERSITY,EQUITY,AND INCLUSION GOALSSTRATEGIC OBJECTIVESGOALSSTATUSPROGRESSSUPPORT DIVERSE REPRESENTATION,EQUAL OPPORTUNITY,AND AN INCLUSIVE CULTURE AT ALL LEVELS OF THE COMPANYMaintain 100%pay equity across genders globally and across races and ethnicities in the US Maintained 100%pay equity across genders globally and across races and ethnicities in the US for the third consecutive yearMEET THE NEEDS OF UNDERREPRESENTED BUSINESSES AND CONSUMERS AND DEVELOP MORE INCLUSIVE MARKETING INITIATIVESDouble annual spending with underrepresented-owned suppliers in the US from a 2019 baseline to$750 million by the end of 2024,including increasing spending with Black-owned suppliers to at least$100 million annually Spent$758 million in 2022 with underrepresented-owned suppliers in the US,including$60 million with Black-owned suppliersProvide access to capital and financial education to at least 250,000 underrepresented-owned small-and medium-sized businesses in the US from late 2020 through 2024 Supported over 400,000 underrepresented-owned small-and medium-sized businesses from October 2020 through December 2022Develop more inclusive marketing initiatives,as well as design and build product experiences and programs that better meet the needs of underrepresented consumer and business customers Launched Digital Accessibility Policy for American Express National Bank in 2022ADVANCE RACIAL EQUALITY AND SOCIAL JUSTICE IN OUR COMMUNITIESProvide$50 million in grants by the end of 2024 to nonprofits focused on addressing inequality and promoting social justice,including those led by members of underrepresented groups Provided$30.5 million in grants to nonprofits focused on addressing inequality and promoting social justice from October 2020 through December 2022ACHIEVEDEXCEEDEDIN PROGRESSIN PROGRESSIN PROGRESSINTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I48SENIOR VICE PRESIDENTS&ABOVE340.5%WOMEN(GLOBAL)8.1%BLACK/AFRICAN AMERICAN(US)17.7%ASIAN(US)7.3%HISPANIC/LATINX(US)GLOBAL WORKFORCE HIGHLIGHTS52%OF OUR EXECUTIVE COMMITTEE ARE WOMEN OR FROM DIVERSE RACES AND ETHNIC BACKGROUNDS1 55%OF OUR US WORKFORCE ARE FROM DIVERSE RACES AND ETHNIC BACKGROUNDS254%OF OUR TOTAL GLOBAL WORKFORCE ARE WOMENWe continue to work to build an inclusive and diverse workplace that values every voice,rewards teamwork,celebrates different points of view,and reflects the diversity of the communities in which we operate.Global workforce diversityWe work to create a culture built on supportive relationships and an inclusive workplace as reflected by our Blue Box Values.We regularly disclose representation data on our global workforce to provide transparency,including our EEO-1 data and other information featured in this report and our annual Proxy statement.DIVERSITY REPRESENTATION AND EQUAL OPPORTUNITY1.Based on self-identified characteristics.2.Based on data for the 2022 US Employer Information Report(EEO-1)submission for Black/African American,Hispanic/Latino,Asian,Native American or Alaskan Native,Native Hawaiian or Pacific Islander,and two or more races.3.As of year-end 2022;based on the US EEO-1 job categories.INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I49Our full US Workforce Employer Information Report(EEO-1)data can be found in the Supporting Data section.Since 2016,American Express has been included in the Bloomberg Gender-Equality Index(GEI),The GEI highlights public companies committed to disclosing their efforts to support gender equality through policy development,representation,and transparency.BOARD OF DIRECTORS DEMOGRAPHICS4Gender Diversity71) MEN 4 WOMEN 4 BLACK/AFRICAN AMERICAN 1 HISPANIC/LATINX 9 WHITERacial/EthnicDiversity29%7dW%OF OUR BOARD MEMBERS ARE WOMEN OR FROM DIVERSE RACES AND ETHNIC BACKGROUNDS2022 US WORKFORCE DIVERSITY5Gender Diversity42.3W.7%MENWOMENASIAN BLACK/AFRICAN AMERICANHISPANIC/LATINX WHITE OTHERRacial/EthnicDiversity18.7.9E.3%3.8.2d.Based on self-identified characteristics.Data is following our May 2,2023 annual meeting.5.As of year-end 2022;based on the US EEO-1 job categories.Some percentages do not sum due to rounding.6.US racially/ethnically diverse colleagues based on US EEO-1 categories including Black or African American,Hispanic or Latino,Asian,Native American,or Alaskan Native,Native Hawaiian or Pacific Islander,and two or more races.INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I50Maintaining 100%pay equityWe regularly review our compensation practices to ensure colleagues in the same job,level,and location are compensated fairly regardless of gender globally and regardless of race and ethnicity in the US.Since 2017,we have conducted annual pay equity reviews with independent experts.This analysis covers our entire global colleague base across genders globally and across races and ethnicities in the US,assessing pay on a statistical basis and considering key factors that influence compensation,including but not limited to tenure,role,level,geography,and performance.In 2022for the third consecutive yearwe maintained 100%global pay“equity,”meaning no statistical differences in pay across all genders globally,as well as across all races and ethnicities in the US,making all necessary and appropriate salary adjustments.Our pay equity achievement is supported by compensation policies,processes,and practices designed to pay colleagues in all roles and at all levels based on performance and other business-related criteria.Beginning in 2021,we began disclosing our“raw median pay gap”for women globally and for racially/ethnically diverse colleagues in the US.This metric compares differences in raw median base pay,with no adjustments for factors such as role,level,tenure,performance,or geography.In 2022,the median pay for women globally at American Express was 105.1%of the median pay for men.The median pay for racially/ethnically diverse colleagues in the US was 88.3%of that for white colleagues.7We believe our pay equity review provides a more accurate and comprehensive picture of our compensation practices overall because it provides a more granular view that considers many important factors known to affect an individuals compensation.For this reason,we use pay equity as the standard we hold ourselves accountable to.We remain committed to maintaining 100%pay equity for colleagues across genders globally and across races and ethnicities in the US by continuing our annual pay equity review process.2022 HIRING,PROMOTIONS,AND RETENTION RATESWomen GloballyMen GloballyUS Asian8US Black/African American8US Hispanic or Latinx8US Other8,9US White8New Colleague Hires56D4%50%Colleague Promotions52H%3P%Colleague Retention84aw%Hiring,promotions,and retention Our focus is on promoting an inclusive and equitable culture for all colleagues.As part of our commitment to ongoing transparency,we provide detailed disclosures on hiring,promotion and talent retention rates,including across genders globally and disaggregated data by race and ethnicity in the US.7.US racially/ethnically diverse colleagues based on US EEO-1 categories including Black or African American,Hispanic or Latino,Asian,Native American,or Alaskan Native,Native Hawaiian or Pacific Islander,and two or more races.8.Race/ethnicity based on self-identified information.Less than 1%of new colleague hires did not disclose their race or ethnicity in 2022.9.Includes colleagues that self-identify as Native American or Alaskan Native,Native Hawaiian or Pacific Islander,or two or more races.In 2022for the third consecutive yearwe maintained 100%pay equity for colleagues across genders globally and across races and ethnicities in the US.INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I51Organizations we work withWe work with organizations and develop recruitment practices that support opportunities to recruit candidates with a broad range of backgrounds and experiences.As part of this,weve leveraged insights from our work with external organizations to help inform our skills-based strategy,which places skills and competencies front and center throughout our talent processes.Altogether,weve established relationships with more than 30 organizations and signed more than 20 pledges around the globe to recruit talent,support our colleague base,and provide backing in the communities where we live and work.American Express works with various organizations that seek to emphasize the value of skills,rather than just degrees,and to improve equity,diversity,and workplace culture,including OneTen,Business Roundtable(Multiple Pathways Initiative),and New York Jobs CEO Council.Developing new talent through apprenticeships with Multiverse and Year UpIn 2022,we teamed up with Multiverse,a mission-driven organization that builds modern apprenticeship programs for people that have the skills and qualifications for a role,but who may not have a four-year degree.By working with Multiverse,American Express offers over 40 tuition-free,paid apprenticeships in the US.Apprentices join the company as a paid employee for 12-15 months and receive on-the-job learning and training.Our relationship with Multiverse complements and builds on our relationship with Year Up,an organization we have worked with since 2007 to address the need for a strong entry-level talent pipeline and increase the representation of diverse candidates across the enterprise.In 2022,American Express hosted over 120 skills-based participants via apprenticeships or internships across the US.on the inaugural American Opportunity Index for our leadership in career growth and advancement for colleagues without a college degree.#2American Express 2022 Summer InternsA milestone of meaningful work:Colleagues mark 45 years at American ExpressWe celebrate our colleagues around the world that have reached a true milestone in 2022:45 years with American Express.Through their dedicated tenure,they bring decades of powerful backing to our customers,communities,and to each other.John McHugh,a colleague on our Global Security Team in Salt Lake City,joined American Express in 1977.McHugh,who started right out of college as an Investigative Assistant,credits his longevity with American Express to the many ways the companys culture has helped him to grow and to challenge himself.“American Express has allowed me to balance both my family and my work life.My father said if you enjoy what you do,youll never have to work a day in your life.”INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I52Our Colleague NetworksBy bringing together people who share common experiences,interests,and backgrounds,our Colleague Networks are an important part of creating a culture of inclusion and community at American Express.They also serve as an important source for feedbackhelping us learn more about the colleague experience and,in turn,guiding the resources,events,and backing we provide.Our first documented Colleague Network was formed in 1920 to bring colleagues across the company closer together through recreation,athletics,and study.Colleague Networks are voluntary and continue to evolve.We have 14 dedicated Colleague Networks with more than 120 chapters worldwide.These include:Asian Network at American Express(ANA)Black Engagement Network(BEN)Christian Network(SALT)Disability Awareness Network(DAN)Families at American Express Network Generations Network(NextGen)Hispanic Origin&Latin American Network(HOLA)Jewish Network(CHAI)Muslim Network(PEACE)PRIDE Network Veterans Network(VET)Virtual Office Network Women in Technology Network(WIT)Womens Interest Network(WIN)These groups offer networking,growth opportunities,and the ability to get more involved within the company.They are also an important source of feedback,through which we learn more about our colleagues experiences and subsequently tailor the resources and support we provide accordingly.SUPPORTING OUR COLLEAGUESIn order to foster a deeper sense of belonging and community across the company,we strive to listen to our colleagues across a variety of touchpoints,while simultaneously offering opportunities for learning and growth.CELEBRATING GENERATIONAL INCLUSION THROUGH NEXTGENIn 2022,the Millennial and Generations Colleague Networks combined forces to form NextGen,which aims to understand,support,and integrate different generations within the company by amplifying their unique needs,points of view,and expectations to further drive our culture of inclusion and belonging.NextGen is comprised of chapters globally and has a mission to strengthen generational inclusion by celebrating generational differences and similarities,fostering community and collaboration,and propelling personal and professional growth.During Intergenerational Month in September 2022,NextGen hosted its first-ever global panel with members and sponsors from across the globe to discuss generational characteristics,challenges,misconceptions,and the potential shifts in the future of our workforce.Colleague led initiatives continued throughout the year,including fireside chats,personal and professional development sessions,and mentorship.INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I53Advancing disability inclusion American Express works to remove barriers by developing inclusive practices and fostering awareness with education and engagement so that all colleagues can contribute and succeed at work.The Disability Awareness Network(DAN),formed in 2004,has been instrumental in driving our disability agenda and sustaining our culture of inclusion and belonging.In 2022,they introduced the DAN Global Advisory Committee(GAC),which liaises with DANs global sponsor,local executive sponsors,and local chapter leads to further encourage colleague engagement and learning.For example,in 2022,DAN hosted an Assistive Technologies Awareness session to highlight assistive technology features and additional software that is available for download.Beyond the important work of DAN,several other impactful company initiatives also focused on disability inclusion.In February 2023,we launched our new Disability Inclusion eLearning series,a voluntary seriesdesigned in collaboration with colleaguesto build awareness and understanding of disabilities.The series featured modules with colleague stories,resources for continued learning,and a discussion guide to facilitate conversation.Through our partnership with Disability:IN and membership in the Inclusion Works community,we collaborate directly with disability inclusion experts.In 2022,we awarded a$500,000 grant over two years to Disability:IN to support workforce development for people with disabilities in the US,develop and pilot an Early Career Accelerator for young working professionals,and support advocacy for the disability community.We have also continued our membership in the Valuable 500 in the UK,which enlists companies to keep disability inclusion on the leadership agenda and make a commitment to action.For more information on our accessibility initiatives,see the Increasing Accessibility section of this report.Best Place to Work for Disability Inclusion on the Disability Equality Index in 2022Recipient of Canadian Foundation for Physically Disabled Persons Corporate Award in 2022 INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I54Backing service members and veteransWe launched the Amex Veterans Network(VET)in 2012 to support our colleagues who currently serve or have served in the military,have friends or family in the military,or just want to show their support for the military.Active in several geographies in 2022,the VET Network celebrated events like Memorial Day,National PTSD Day,Military Appreciation Month,Veterans Day,and Armed Forces Day.Our VET colleagues also hosted Operation Red,White,and Blue events in collaboration with our Reward Blue program at offices across the US,while also participating in community activations that support veterans and their families,such as Wreaths Across America.Additionally,American Express UK maintained the Silver Employer Recognition Scheme(ERS)award in 2022 from the UK Ministry of Defence recognizing our ongoing commitment to supporting veteran employees and the wider Armed Forces community.To celebrate the occasion,UK VET network colleagues attended the ERS Award Ceremony and toured the Honourable Artillery Company with blue light escort to a gun salute at the Tower of London.American Express also supports veterans in other ways throughout the year,including awarding grants to several US veteran-owned businesses with Backing Small grants,offering credit relief for eligible active-duty Card Members through the Servicemembers Civil Relief Act(SCRA)and the Military Lending Act(MLA),and partnering with the National Veterans Business Development Council(NVBDC)to support Veterans Business Enterprises(VBE)in our supply chain.For more information,see the Backing Economically Vulnerable Small Businesses section of this report and Supplier Diversity.Colleagues in our VET Network at Operation Red,White,and Blue event in NYC In early 2023,US VET colleagues attended a World War I memorial dedication for a sculpture project funded by the American Express Foundation.“The event was amazing.Saban Howard,the sculptor creating the World War I Memorial took our team through the design and production process.It was very powerful and moving.”DANIEL MCGRATH,SENIOR MANAGER AND MEMBER OF VET NETWORKColleagues and members of US World War I Centennial Commission at WWI Memorial Sculpture Colleagues in our UK VET Network accepting the Silver Employer Recognition Scheme(ERS)awardINTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I55American Express colleagues at Women in Leadership EventBacking LGTBQ colleagues We continue to back our LGBTQ colleagues by offering inclusive benefits,including gender-neutral parental leave,and partnering with our PRIDE Colleague Network to host events and open forums.We celebrate PRIDE month annually,and in June 2022,we celebrated with the theme,“Live Beyond Labels:Proudly Backing All of You.”In 2023,we celebrated Sydney WorldPride in Australia by creating a special experience for select With You&Proud recipients.Fostering inclusion for colleaguesAmerican Express has a variety of global programs designed to promote inclusion in our workforce and celebrate our colleagues,examples of which are included below.Backing women colleagues and women-owned small businesses We created the Women in Leadership event to foster networking and inspiration among senior women in business,both at American Express and other companies,including our clients and partners.In 2022,we organized the event around the US Open in New York,with Anna Marrs,Group President,Global Commercial Services and Credit&Fraud Risk,and several other American Express female Executive Committee members serving as hosts.In 2023,we also celebrated small,women-owned businesses on International Womens Day in 2023.Backing Black and African American colleagues and Black-Owned small businesses Our Black Engagement Network(BEN)hosted events for our colleagues across the US and Canada in 2022-2023.BEN works to provide an environment for colleagues to engage in meaningful dialogue,build relationships,and offer support.We also honored Black History Month in 2023 by highlighting Black-owned small businesses that received American Express-backed grants through our Backing Small grant programs.Backing Hispanic and Latinx colleagues Our global Hispanic and Latin American Colleague Network(HOLA)celebrated Hispanic and Latinx Heritage Month by hosting global events focused on Proudly Backing Hispanix and Latinx Achievement.This included organizing the first Hispanic/Latinx Leadership Summit in New York in 2022.Backing Asian,Asian American,and Pacific Islander colleagues and communities In recognition of Asian Pacific Heritage Month in 2023,we celebrated with global and local events,coordinated in partnership with our Asian Network at Amex(ANA)and organized around the theme,“Make Culture Shine:Proudly Backing All Asian Communities.”We also honored Asian Pacific American Small Business Owners and Backing Small Grant Recipients.19 Years and counting of leading LGBTQ benefits and practicesSince 2004,American Express has scored 100%on the Human Rights Campaign(HRC)Corporate Equality Index.In 2022,HRC named American Express to their list of Best Places to Work for LGBTQ Equality.Sydney WorldPride With You&Proud INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I56We exceeded our initial objective of spending$1 billion toward our DE&I Action Plan in March 2022 and in August 2022 we announced a plan to spend an additional$3 billion toward DE&I initiatives,for an ambition to spend$4 billion in total from late 2020 through the end of 2025.The majority of additional spend will continue to be allocated to underrepresented-owned suppliers.Supplier diversityAs part of our DE&I Action Plan,announced in October 2020,we set a goal to double our annual spend with under-represented-owned suppliers in the US from a 2019 baseline to$750 million by the end of 2024,including increasing spend with Black-owned suppliers to at least$100 million annually.In 2022,we spent$758 million with underrepresented-owned suppliers,including$60 million with Black-owned suppliers.In 2022,our spend with underrepresented-owned suppliers in the US also included$477 million with US women-owned suppliers,$164 million with US Asian-owned suppliers,$149 million with US Hispanic-owned suppliers,$23 million with US LGBT-owned suppliers,$6 million with US veteran-owned suppliers,and$2 million with US disability-owned suppliers.10 SUPPORTING UNDERREPRESENTED-OWNED BUSINESSESIn 2022,we introduced more than 50 new underrepresented-owned suppliers to our program and began working with select suppliers to help track their own diverse supplier spend across their supply chains.To build a more diverse and inclusive supply chain,we consider at least one diverse vendor for each request for proposal.We track and measure our annual spend with certified business enterprises run by underrepresented owners and operators,including:Minority-Owned Business Enterprises(MBE)Black-Owned Businesses Women-Owned Business Enterprises(WBE)LGBT-Owned Business Enterprises(LGBTE)Veterans Business Enterprises(VBE)Service-Disabled Veterans Business Enterprises(SDVBE)Disability-Owned Business Enterprises(DOBE)Small Business Enterprises/8(a)/HUBZone firmsAmerican Express Colleagues at Supplier Diversity Event238Underrepresented-owned Suppliers in 2022 SUPPLIER DIVERSITY BY THE NUMBERS$750M$758M2022 Actual2024 GoalUS Underrepresented-owned Annual Spend10.Certain amounts of spend are included in multiple categories,such as a supplier that is both a women-owned supplier and veteran-owned supplier.INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I57We continue to work with supplier diversity advocacy organizations to expand opportunities for diverse suppliers.In 2022,we began working with the Canadian Aboriginal and Minority Supplier Council(CAMSC)and OutBritain(UK).Supplier diversity organizations we work with include:US:Disability:IN Financial Services Roundtable for Supplier Diversity(FSRSD)National LGBT Chamber of Commerce(NGLCC)National Minority Supplier Development Council(NMSDC)National Veterans Business Development Council(NVBDC)US Black ChambersByBlack Womens Business Enterprise National Council(WBENC)Globally:Canadian Aboriginal and Minority Supplier Council(CAMSC)Minority Supplier Development UK(MSDUK)OutBritain(UK)Supply Nation(Australia)WEConnect InternationalIssa Rae joins fellow small business owners for a content shootIncreasing transparency on Supplier Diversity with Corporate ClientsAmerican Express recently launched an updated Supplier Diversity report in the work management platform,available for all Corporate Card program clients(enrollment required).The report,which identifies diverse suppliers included in US point-of-sale spend on American Express Corporate Program products,now provides improved data accuracy and expanded merchant network coverage.We have also standardized and simplified our supplier diversity categories and added additional sub-categories and certification details.Reconciliation Action Plan in Australia Our Reconciliation Action Plan in Australia is another example of our focus on responsible procurement.This action plan not only reflects,celebrates,and supports the role that Aboriginal and Torres Strait Islander people play in the country,it also communicates our desire to work with suppliers who share the same values related to supplier diversity,ethical sourcing,operating responsibly(including environmental sustainability),human rights,gender equality,and ending modern slavery.Learn more in our Australia Reconciliation Action Plan.Team Epiphany,an American Express underrepresented-owned supplierINTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I58Connecting underrepresented-owned business to capital and supportWe set a goal to provide at least 250,000 underrepresented-owned small-and medium-sized US businesses access to capital and financial education from late 2020 through 2024.In 2022,we exceeded that goaltwo years earlywith support for over 400,000 underrepresented-owned businesses by delivering educational resources,mentorship,marketing support,access to capital,and more.Programs that contributed to our progress include continuing to provide access to Business Class,our Contract Connections program,ByBlack,and ChallengeHER.Now,we have increased the goal to support 750,000 underrepresented-owned businesses with funding and resources from late 2020 through 2025.Continuing Business Class and expanding Contract ConnectionsWe continue to provide small business owners with access to Business Class,a free platform that builds a nationwide network of support by offering small business owners tailored educational resources,mentorship,and opportunities to learn from industry experts.In July 2022,over 5,000 small business owners from across the US came together for the 10th annual Business Class Live event,a complimentary program celebrating the resiliency of small businesses and the continued strength of New York City.Participants engaged in interactive panels and workshops and discussed important topics,including cashflow management,marketing strategies,and wellness in the workplace.We also continue to expand our Contract Connections matchmaking program,in partnership with National 8A,which connects small business suppliers to large corporate and government buyers and enabled over 1,000 one-on-one sessions in 2022.We also maintained our support of Minority-and Women-Owned Business Enterprises(MWBEs)as part of our capital markets funding and share repurchase programs.In 2022,we engaged six MWBEs for underwriting and share repurchases.2025 New Goal250,000409,4922022 Actual2024 GoalNew 2025 goal to support underrepresented-owned small-and medium-sized US businessesEXCEEDED750,000IN PROGRESSContinued expansion of ByBlack with the US Black Chambers,Inc.American Express and the US Black Chambers,Inc.worked together to expand the ByBlack business directory and the first national certification program exclusively for Black-owned businesses.This no-cost digital platform unlocks more ways to reach new customers and secure contracts for Black-owned businesses across the US.ByBlack makes it easier for customers to locate Black-owned businesses and learn more about their products and services.By providing certification,it allows participating companies to stand out and unlock opportunities to help secure contracts with large potential buyers.Enhancing opportunities for women-owned businessesIn 2013,American Express,along with Women Impacting Public Policy and the US Small Business Administration,launched ChallengeHER to help boost the prospects of women entrepreneurs to gain government contracts.The program continues to offer free training webinars,workshops,mentoring,and direct access to government buyers and local partner resources.ChallengeHER has hosted over 200 webinars and facilitated over 5,220 meetings between women-owned small businesses and government officials from 2013 through the end of 2022.In 2022,more than 1,475 attendees participated in ChallengeHER webinars.INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I59Extending our reach through community investment In 2021,American Express committed to provide$40 million to Accion Opportunity Fund,a nonprofit community development financial institution and small business lender,to expand access to loans for historically underfunded small businesses in the United States,including those owned by women and underrepresented groups.As of December 2022,American Express funded$30 million of the committment and in 2022 alone,Accion Opportunity Fund deployed over$16 million of capital to approximately 1,180 small-and medium-sized businesses in the US.See our Backing Small Grants section of this report to see how have supported economically vulnerable small business owners.Increasing accessibilityDigital accessibilityProviding inclusive digital experiences is part of our customer centric ethos.Our Digital Accessibility Policy outlines requirements to provide digitally accessible experiences for our public-facing US-based web and mobile experiences,including to individuals with auditory,cognitive,physical,neurological,speech,and visual disabilities.To further support this policy,we established internal technology standards for public-facing digital content and experiences that were designed in accordance with the applicable portions of the WC3s Web Content Accessibility Guidelines version 2.1(WCAG)standard that aims to help reduce barriers for people with disabilities.Global Inclusive Marketing FrameworkWe developed the Global Inclusive Marketing Framework to provide marketers with resources to help support our inclusive marketing initiatives.In particular,the Framework focuses on individuals seeing themselves reflected in the American Express brand and knowing that we understand,respect,and back them.In addition to the Framework,we:Joined the Alliance For Inclusive and Multicultural Marketing in 2021 Participated in the Digital Advertising Alliance(DAA)self-regulatory program and adhere to the DAA principles for Online Behavioral Advertising,which allows customers to opt-out of targeted advertising from American Express on websites and also opt to not receive marketing communications.Learn more about our Disability Inclusion efforts for our colleagues in Advancing Disability Inclusion section of this report.INTRODUCTIONADVANCE CLIMATE SOLUTIONSBUILD FINANCIAL CONFIDENCEGOVERNANCE&OPERATING RESPONSIBLYBACKING OUR COLLEAGUESSUPPORTING DATAOUR APPROACH TO CORPORATE SUSTAINABILITY PROMOTE DE&I60Backing Equal FuturesWe set a goal to provide$50 million in grants focused on addressing inequality and promoting social justice from late 2020 through 2024 and have provided over$30.5 million in grants from October 2020 through December 2022.Through our Backing Equal Futures grant priority,we support projects and programs that provide skills and pathways to prepare youth for opportunity and long-term success and the future of work.Notable grant recipients include the International Rescue Committee,YMCA of the USA,and the US Fund for UNICEF.Advancing economic opportunity in underrepresented communitiesIn October 2022,we announced a$2 million pledge from the American Express Foundation to United Negro College Fund(UNCF)to help advance opportunities for students in underrepresented communities.From 2023-2025,UNCF will use the funding to award 300 Building Better Futures grants of$5,000 each to students in their senior year at historically Black colleges and universities(HBCUs).These grants will support students as they look to transition into the next phase of their careers after graduation.Funding also supports UNCFs existing K-12 Initiative,which promotes college readiness by educating and empowering parents,community leaders and students across the nation.These efforts are part of the many ways American Express is delivering on its priorities to promote diversity,equity,and inclusion,as well as b
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Transparency.Trust.Alignment.Honesty.2022CorporateSustainabilityReport2Our Ethos is our defining moral character.It is what sets General Dynamics apart.Our Ethos ensures that each of us behaves according to our shared values and uses those values to guide every endeavor.Dedicated to transparency,trust,align-ment and honesty,we are unified in our commitment to act as good stewards of the investments our shareholders,customers,employees and communities make in us now and in the future.Transparency.Trust.Alignment.Honesty.O U R E T H O SGrinder at Electric BoatOur Ethos at WorkTransparency,Trust,Alignment,Honesty:Drive how we operate our business.We pursue operating excellence by anticipating customer needs;driving innovation;improving processes;and reducing waste,emissions and energy consumption.We believe in being wise stewards of capital and resources.Govern how we engage with our employees,customers,partners and suppliers.We must be forthright and open to change.We seek employees,partners and suppliers that adhere to these values in their businesses and expect them to meet the same high standards as we hold ourselves.Guide our interactions with each other.As a community of people,we are dedicated to our companys purpose and to promoting the health,welfare and safety of our employees.We treat each other with dignity and respect,celebrating our similarities as well as our differences,and making an effort to understand and support one another.Ensure fair compensation and equal employment opportunity in a principled and produc-tive work environment.Our values motivate us to promote strong workplace practices with diversity,opportunities for scholarship and training.We stand behind basic universal human rights,including that all employment must be voluntary.We unequivocally oppose human trafficking in all forms.Connect us with our communities.Fulfilling our obligation to be a good corporate citizen means that we engage in actions that further the well-being of our communities.We do this by supporting participation in social welfare organizations;promoting volunteerism;and undertaking initiatives to mitigate climate change,drive hazardous waste from our processes,and protect water resources.3Our EthosFrom Our CEODear Fellow Shareholder,The leadership and employees of our company are committed to the fundamental values of honesty,transparency,trust and alignment.Being guided in all our actions and decisions by these values creates a corporate Ethos of integrity and accountability.Our approach to sustainability is grounded in this moral foundation.We take seriously our responsibility to ensure the long-term sustainability of our company and all of our stakeholders.In this report,we provide an overview of the ways General Dynamics is striving to be a good steward of its resources.We are making steady progress toward our 2034 target of a 40%reduction in greenhouse gas emissions.Our workforce is increasingly diverse.In complete alignment with the U.S.government,we remain vigilant about protecting human rights.We embrace innovation as a means to provide superior capabilities to our customer and to achieve greater energy efficiency,reducing our carbon footprint.In these and other initiatives,we are demonstrating our robust commitment to our customers,employees and our environment.Sincerely,Phebe N.NovakovicChairman and Chief Executive Officer“Our Ethos is the compass we use to navigate as we deliver value to our shareholders,our customers and our communities.”4H I G H L I G H T S5Highlights Established a Sustainability Committee on our board of directors to oversee sustainability efforts across the company.Enhanced lead director role in providing independent oversight of the company.Published a new ethics handbook to align business practices across the company with our Ethos.G O V E R N A N C EGulfstream G800Virginia-class attack submarineH I G H L I G H T S6 Reduced C02 emissions by 24%since 2008,or 42%per dollar of revenue.Reduced Scope 1 and Scope 2 greenhouse gas emissions by 10%since 2019,consistent with our target to cut greenhouse gas emissions 40%by 2034.Introduced new sustainable products,including hybrid-electric prototypes of the AbramsX main battle tank and StrykerX armored combat vehicle,as well as new clean-sheet business jet models that have significantly improved fuel efficiency.Led the business aviation industry in the adoption and availability of sustainable aviation fuel,which can reduce greenhouse gas emissions by 80%relative to traditional petroleum Jet-A fuel.E N V I R O N M E N TGD Ordnance and Tactical Systems solar panel energy project with Todays Power,Inc.Jet Aviation fueling aircraft7HighlightsH I G H L I G H T S Increased the percentage of women and people of color in both our total workforce and management positions.Employed veterans at a rate three times that of the total U.S.civilian labor force.Operated 57 sites under ISO 45001,widely regarded as the worlds highest occupational health and safety standard.Expanded partnerships with Historically Black Colleges and Universities.S O C I A LGD Ordnance and Tactical Systems kickball tournament Military appreciation event at NASSCO 8TA B L E O F C O N T E N T SOUR ETHOS From Our CEO 4 Report Highlights 5ABOUT US 9GOVERNANCE 13 Board of Directors 14 Management 18 Ethics 20 Global Supply Chain 23ENVIRONMENTAL 26 Reducing Greenhouse Gas Emissions 29 Energy Management 33 Water and Wastewater Management 34 Solid Waste Management 34 Sustainability Products and Services 35SOCIAL 40 Human Capital 41 Diversity,Equity and Inclusion 44 Health,Wellness and Safety 47 Human Rights 50 Communities 53 Political Engagement 55 Cybersecurity and Data Privacy 56HONORS AND AWARDS 58INDEX 59Corporate Sustainability ReportA B O U T U S9General Dynamics is a publicly traded global aerospace and defense company.We offer a broad portfolio of products and services in business aviation;ship construction and repair;land combat vehicles,weapons systems,and munitions;and technology products and services.Our core competency is the design,engineering and manufacturing of complex and differentiated products and services for aerospace and defense.We understand the importance of the solutions we deliver and work to ensure quality and safety in all things we create.Gulfstream production facility10A E R O S PA C EGulfstream produces the worlds most technologically advanced business jets and offers unmatched customer support.Jet Aviation provides comprehensive busi-ness aviation services,custom completions,and a global network of facilities for aircraft owners and operators.M A R I N E S Y S T E M SBath Iron Works designs and builds guided missile destroyers for the U.S.Navy and provides repair services for multiple ship classes.Electric Boat is the premier designer and builder of nuclear-powered submarines for the U.S Navy.NASSCO specializes in the design and construction of auxiliary and support ships,oil tankers,and dry cargo carriers,and is a major provider of repair services for the U.S.Navy.C O M B AT S Y S T E M SEuropean Land Systems is a global leader in the design and manufacture of wheeled and tracked combat vehicles and bridge systems.Land Systems produces highly capable military vehicles,including the Abrams tank,Stryker combat vehicle and Light Armored Vehicle.Ordnance and Tactical Systems is a leading designer,developer and manufacturer of munitions,weapons and tactical systems.T E C H N O L O G I E SInformation Technology(GDIT)designs,builds and operates large-scale enterprise information systems for the U.S.govern-ment,its agencies and others to deliver a broad range of technical,professional and training services.Mission Systems is a leading C5ISR integrator of secure communications and command and control systems,sensors and cyber products.Our Business Units11 About Us101,700employees in 65 countries and all 50 U.S.statesOUR WORKFORCE3,000 CANADA87,000 UNITED STATES4,000 MEXICO900 UK700 SPAIN900 GERMANY2,000 SWITZERLANDCUSTOMERS(%of consolidated revenue)*70%U.S.Government12%U.S.Commercial10%Non-U.S.Government8%Non-U.S.Commercial*All data are for the year ended 12/31/21.Please refer to General Dynamics Annual Report on Form 10-K for additional information.2021FINANCIAL HIGHLIGHTS Total Revenue:$38.5 billion Operating Earnings:$4.2 billion Capital Expenditures and Company-Sponsored R&D:$1.3 billion Income Tax Expense:$616 million 12Our primary owners are the American peopleTens of millions of Americans have a stake in GD directly or indirectly through employer-sponsored pensions and 401(k)accounts,individual retirement accounts,529 college savings plans,mutual funds,index funds and other investments.We recognize that,with more than 90%of our institutional investors based in the United States,*millions of American families rely on us for sustained financial performance.In 2022,GD joined the“dividend aristocrats,”a select group of companies that consistently raised dividend payouts for each of the last 25 consecutive years.We take seriously our responsibility to return value to our investors while at the same time investing for the future.In 2021,we returned more than$3.1 billion to our investors through dividends and share repurchases,while investing more than$1.3 billion in capital expendi-tures and company-sponsored research and development.*Based upon estimates as of 12/31/21Millions of American families have a stake in General Dynamics.USS John Basilone under construction at Bath Iron Works13G O V E R N A N C E14Our board of directors is committed to the principle that good corporate governance enhances shareholder value.Through strong corporate governance practices,we promote a culture of ethics and integrity,and empower leaders at all levels to do what is right for our customers,suppliers,employees and communities.Our deeply engaged and experienced board is central to our companys culture of account-ability and continuous improvement.Our board reflects a diverse and well-qualified group of business leaders and aerospace and defense industry experts,as well as financial and strategic advisers.Other than our CEO,all of our directors are independent.Each of our board committees is chaired by an independent director.Board of DirectorsBalanced Board With Unique PerspectivesIn 2022,Gulfstream announced a$55 million investment and 200 new jobs for a 73,000-square-foot aircraft paint facility in Appleton,Wisconsin.The state-of-the-art facility will paint as many as 48 aircraft per year with reduced water usage and lower emissions.Our board includes directors who are or have:a Significant financial background or expertise a Experience in leading complex operating and manufacturing organizations a Prior top leadership posts in the military or U.S.Department of Defense a Women or racial or ethnic minorities a Current or former public company directors a Current or past CEOs of complex,global and/or public companies a Experience in corporate sustainability matters and reporting15 GovernanceThe General Dynamics corporate gover-nance guidelines provide a framework for effective governance of the board and the company.The boards commitment is demonstrated by key corporate governance practices,including:Strong board independence An independent lead director A majority voting standard for the election of directors,coupled with a director resignation policy Shareholders right to call a special meeting Shareholders right to act by written consent Shareholders ability to nominate director candidates and have those nominees included in the companys proxy statement,a process known as“proxy access”Annual board and committee self-assessments A robust shareholder engagement program Disclosure of corporate political contributions and trade association duesIn 2022,the board of directors updated the companys Corporate Governance Guidelines in response to shareholder feedback.These updates:Codified powers of the lead independent director to oversee CEO performance and compensation;to consult regularly with management regarding business matters;and to hire consultants and advisers in connection with all board functions.Established a policy to conduct a detailed study about the boards leadership structure,including whether to have a separate chairman and CEO at the time of CEO transition,in addition to its rigorous annual assessment when it elects a chair.In February 2022,General Dynamics Mission Systems earned MassEcons bronze honors for the Greater Boston region as a result of the$9.6 million capital improvements it made in the companys Dedham facility.The renovation and expansion added 45 jobs to the hundreds of previously existing jobs in Dedham.GDMS has more than 3,000 employees in Massachusetts.16Board Oversight of Sustainability The board continuously focuses on material risks and opportunities,including those related to sustainability matters.It takes these risks and opportunities into account as it exercises its duties.The Sustainability Committee is responsible for assisting the board in fulfilling its oversight duties.In 2021,the board established a Sustainability Committee to oversee sustainability man-agement and practices,including those related to environmental,health and safety,human rights,and social matters.Board Oversight of Risk Our comprehensive risk management program is conducted by senior management and overseen by the board of directors.In particular,the board oversees managements identifi-cation and prioritization of risks that are material to our business,including both existing and significant emerging risks,and corresponding risk-mitigation efforts.The full board reviews and approves a corporate policy addressing the delegation of authority and assignment of management responsibility annually.This ensures that the responsibilities and authority delegated to senior management are appropriate from an operational and risk management perspective.The following summarizes the key elements of the roles of the board,senior management and external advisers in our risk management program:The board oversees risk management,focusing on the most significant risks facing the company,including strategic,operational,financial,legal,environmental,cyber and reputational.Each board committee is integral to risk management and reports specific risk management matters as necessary to the full board.The boards Sustainability Committee oversees sustainability practices and management,including those relating to environmental,health and safety,human rights,and social matters.Senior management is responsible for day-to-day risk management and conducts a thorough assessment through internal management processes and controls.The chief executive officer and senior management team provide the board with a dedicated and comprehensive briefing of material risks at least twice per year,and the board is briefed as needed throughout the year on specific risks as they arise,allowing the board to frequently reassess the companys risk environment.External advisers provide independent advice on specific risks,and review and comment on risk management processes and procedures as necessary.17 GovernanceCOMBATAEROSPACEMARINETECHNOLOGIESSustainability CommitteeSustainability GovernanceExecutionLeadershipThe Sustainability Committee is chaired by an independent director with expertise and unique experience in the environmental,social and governance(ESG)field,including as a former board co-chair of the Value Reporting Foundation,now part of the International Financial Reporting Standards(IFRS)Foundation.Climate-related risks and opportunities are typically briefed by business unit presidents or the cognizant executive vice presidents(EVPs)for the relevant business line.They may also be briefed by the chair of our corporate functional area councils,including the Environment,Health and Safety(EHS)Committee of the Manufacturing Council.This EHS Committee,sponsored by an EVP,provides an annual briefing of EHS-related risks to the board.Senior ManagementCross-CompanyCouncilsManufacturingSupply ChainCyberEngineering&TechnologyContractsOversightWe focus our sustainability efforts on the areas that provide the greatest possible value for our stakeholders.BOARD18ManagementAccountable to the board,our management ensures that our decisions recognize the economic,environmental and social considerations in our operational strategy.Our corporate headquarters is responsible for setting the strategic direction and governance of the company,allocating and deploying capital,and ensuring a culture of ethics and integrity that defines how we engage with our employees,communities,customers and suppliers.Our operating processes and activities incorporate initiatives to improve diversity,promote inclusion,reduce emissions and waste,and adhere to standards that lower risk and drive a healthier and safer workforce and community.Each of our 10 business units(BUs)closely adheres to our corporate vision while maintaining individual responsibility for executing operating plans.This model empowers our businesses to stay close to their customers while having the agility to make wise decisions quickly.It also allows our businesses to anticipate,adapt and react to our customers rapidly changing needs.Company-Wide CouncilsGeneral Dynamics has company-wide councils that share information and best practices throughout the enterprise.These councils are made up of the most senior operational exec-utives from our BUs.These experts in their respective fields help address issues of shared importance,including those relating to climate.The chair of each council reports directly to the chairman and CEO on council matters,with mentorship from an assigned EVP.Our Manufacturing Council includes an Environment,Health and Safety(EHS)Committee that directly addresses sustainability,energy and environmental issues.Each GD business unit is represented by a senior EHS professional assigned by the BU president.This sub-committee helps each BU establish its targets and collects and assesses energy and carbon emissions data from across the corporation.The Manufacturing Council makes regular EHS reports to the board as part of the boards risk management process.Our Supply Chain Management Council also shares best practices and creates shared processes to support our supplier efforts,including those that promote socially responsible performance and environmental stewardship throughout our supply chain.Indi-vidual businesses are able to leverage resources,create shared tools and enjoy the benefit of scale.Multiple subcommittees focus on specific areas to improve and achieve cost and time savings,such as travel and transportation and use of e-tools.In 2021,General Dynamics invested more than$1.3 billion in capital expenditures and company-sponsored R&D.19 GovernanceBusiness Model ResilienceOur businesses maintain and exercise plans to ensure continuity of operations in the event of a natural disaster,accident,cyber incident or other crisis.Our decentralized business model minimizes single points of failure,with decision-making authority delegated down to the lowest competent level.During the early phases of the COVID-19 pandemic,when many businesses suspended operations and sent employees home,our designation by the federal government as “critical infrastructure”required most of our lines of business to maintain normal operations while maximizing safety for our employees.Our business model and focus on resilience enabled each facility to develop plans tailored to their unique situation,while being able to tap into resources and support from the broader company.ManufacturingSupply ChainCyberEngineering&TechnologyContractsCross-Company Councils In 2021,Gulfstream announced a$70 million investment in a new,sustainable 250,000-square-foot aircraft mainte-nance,repair and overhaul facility in Mesa,Arizona,that will make extensive use of solar energy,reducing grid energy consumption by as much as 25%.Gulfstream is partnering with Arizona State University and Chandler-Gilbert Community College to establish workforce development partnerships to support hundreds of new high-paying jobs.20Executive CompensationOur compensation program,which covers named executive officers,BU presidents and other key executives,can include operating goals that specifically encompass sustainability topics.The sustainability goals vary depending on the officers role and responsibility,but they encompass efforts to reduce greenhouse gases,initiatives to promote environmental conservation and programs targeted to bring new technologies to the market.Our executive compensation is rooted in a longstanding pay-for-performance philoso-phy.To incentivize this focus on creating long-term value,our executive compensation is tied to defined financial and nonfinancial performance metrics that align with creating shareholder value.These metrics also include a stakeholder-centric strategic and operational component,which incorporates environmental,human and social capital sustainability objectives.More information about compensation is available in our proxy statement.EthicsThe foundation of our culture is our Ethos,which shapes how General Dynamics employees act according to our shared values of transparency,trust,alignment and honesty.In all things.At all times.With approximately 70%of our revenue from the U.S.government,and with our Aerospace segment subject to rigorous FAA oversight,we operate in a highly regulated environ-ment.We are subject to regular audit and review by multiple U.S.government agencies to assess our compliance with applicable laws,regulations and standards.The U.S.government also reviews the adequacy of,and compliance with,internal control systems and policies,including our purchasing,property estimating,material,earned value management and accounting systems.Every employee is expected to uphold our high standards.Each employee hears this mes-sage from their first day on the job and throughout their careers with GD.Not only do we foster an ethical work environment,we work to create an environment where employees feel safe,empowered and equipped to speak up and do the right thing.Our board and our key financial professionals are required to follow ethics codes specific to their roles,which they commit to annually.These codes have been carefully crafted by leadership to align with our Ethos.With their signature,our chairman,board members and financial leaders promise to manage our business with the highest standards of ethical conduct.TRANSPARENCY TRUST HONESTY ALIGNMENTIn all things.At all times.21 GovernanceTools and ResourcesOur commitment to ethics is highly visible,readily available and continually reinforced.We equip our employees with the tools and resources they need to do the right thing.One such step is to require new employees to acknowledge receipt of,understanding of and compliance with our Ethos and with Our Standards of Business Ethics and Conduct,commonly known as the Blue Book.Available in 17 languages,the Blue Book establishes our standard that all employees conduct business in accordance with our Ethos,applicable law and our company policies.Our management and leadership teams and the ethics,human resources and legal depart-ments are equipped to assist and provide guidance as needed to raise questions,get advice and express concerns.They strive to foster an open and safe environment and embed our Ethos and commitment to ethics in ongoing communications.Each GD facility is equipped with prominent awareness centers that reinforce our Ethos,outline tools available to employees,and list the Ethics Help Line website and toll-free num-ber.A message from our CEO is included in each awareness center to further demonstrate our position.The GD Business Ethics Help Line is a 24-hour resource,accessible by phone or the web,and available to employees in 13 languages.Questions or concerns can be raised through the help line,anonymously or otherwise.All reported concerns are investigated promptly and in confidence.If we find that our stan-dards have been violated,we take action,including involuntary termination or disciplinary action;implementing system-wide changes;and/or notifying governmental offices or agencies,customers and/or suppliers.We strictly prohibit retaliation against anyone who raises an ethics or compliance issue in good faith,and we take action against those who are found to have retaliated.Our expectations to operate with integrity go beyond our employees.Suppliers,vendors,contractors and joint-venture partners are expected to develop effective ethics and compli-ance programs as well.In 2021,77%of fraud,waste and abuse concerns submitted were made by individuals willing to leave their name(named reporting)versus anonymous reporting.A high proportion of named reporting indicates that employees trust the integrity and effectiveness of our program.22Global Network of Ethics OfficersEach business has one senior ethics officer(EO)who has direct access to leadership and meets with the leadership team regularly to discuss trends,opportunities and com-munication strategies.These senior EOs also meet regularly as a group to discuss best practices that can be shared across our portfolio.In addition,they work with other EOs in the defense industry through the Defense Industry Initiative to share best practices,which helps us continuously improve our programs.In support of the EOs,we have more than 100 part-time local ethics officers(LEOs).Our LEOs,selected by their leadership based on proven character,are embedded in locations with our largest populations.Working side by side with other employees,LEOs are accessible resources who answer questions,provide communications and training,conduct investiga-tions,and further ingrain ethics in the everyday activities within our work environment.Ethical Business Around the WorldWe provide services and products to governments around the world.The laws and regulations relating to doing business with government customers and public officials are complex.As such,we provide our employees with the appropriate resources to comply with applicable laws and regulations.We also abide by the laws and regulations regarding the import and export of our products,information and technical data,including the U.S.International Traffic in Arms Regulations(ITAR)and Export Administration Regulations(EAR).Nearly every country has laws and regulations that control the international movement(e.g.,imports,exports,re-exports and technology transfers)of specified product information and services,and we ensure that we remain current with these laws and regulations.Our robust anti-corruption compliance program is rooted in our Ethos and tailored to poten-tial risks faced in our business.Designated anti-corruption officers and other compliance professionals at each BU help carry out the program and serve as a resource.Elements of the program include written policies and procedures,training,risk-based man-agement and third-party due diligence,multiple reporting systems,and compliance audits.We comply with the U.S.Foreign Corrupt Practices Act and other applicable anti-corruption laws around the globe.NASSCO shipyard in San Diego23 GovernanceOur suppliers are critical to our ability to deliver quality products and services to our customers.We expect them to uphold the same high standards that we uphold ourselves.Our suppliers are expected to act as good corporate citizens with sustainable business prac-tices,to treat employees and customers with respect,and to act with integrity and honesty.Supplier DiversityWe are committed to working with small and diverse businesses.More than 5,000 of our business partners are small disadvantaged businesses,women-owned small businesses,veteran-owned small businesses,service-disabled veteran-owned small businesses,Small Business Administration-certified HUBZone small businesses,Native American-owned small businesses,minority-owned companies and Ability One organizations.These businesses are vital to maintaining our competitiveness in the global marketplace.Our supplier diversity program operates under a framework based on four pillars:compli-ance,early engagement,small business innovation and community outreach.Support for Small BusinessOur small business programs facilitate the process of becoming a General Dynamics supplier.For our U.S.businesses,our supplier diversity program managers attend more than 50 regional and national events annually to meet with potential suppliers.This includes events sponsored by the National 8a Council,Procurement Technical Assistance Centers(PTACs),the National Defense Industrial Association,Women in Defense,the National Veteran Small Business Coalition and the Small Business Administration(SBA).We provide guidance and support to the thousands of small businesses that work with us.We mentor these businesses through their contract involvement,as well as through our small business and supplier diversity offices,and we sponsor and host events that allow our BUs to meet with interested small business suppliers.These initiatives help small busi-nesses expand their solution sets and marketing channels.Additionally,since the COVID-19 pandemic,we have hosted virtual training and outreach sessions for the small and diverse business community.Global Supply ChainIn 2021,more than$4.1 billion of our supplier contracts were with small businesses.24Materials SourcingWe are committed to responsible sourcing throughout our global supply chain.We take steps to vet suppliers for their sustainable labor and materials sourcing practices,purchase long-lasting products with low carbon footprints,deal only with non-embargoed countries,and act to prevent counterfeit parts from entering our supply chain.We have established mechanisms to assess risk and ensure compliance,and we continually look for new ways to reduce risk throughout our supply chain.Modern Slavery and Child Labor As a corporation with operations and suppliers around the world,we recognize the impor-tance of ensuring that respect for human rights and dignity is embedded at all levels of our business.We do not tolerate human trafficking,child labor or forced labor anywhere within our businesses or supply chains.Most of our supply base is located in the United States,which presents a far lower risk of forced labor or human trafficking.Wherever their location and whatever their role,we expect our suppliers to uphold the same high standards we uphold ourselves.More information about our management processes to meet these standards is available here.Welder at Electric Boat25Electric Boat participates in the U.S.Navys SUBSAFE program,which establishes an extremely high level of quality assurance for components used in nuclear-powered submarines.SUBSAFE has rigorous controls on systems that are essential to water-tight integrity,requiring that parts have traceable evidence of quality from the point of manufacture to the point of installation,including records of the creation of the product and its source materials.GovernanceConflict MineralsWe require our suppliers to trace potential sources of minerals such as tantalum,tin,gold or tungsten,which are known to help finance conflict.In accordance with U.S.Securities and Exchange Commission(SEC)requirements,we submit a Specialized Disclosure Report and a Conflict Minerals Report.More information about our efforts to avoid conflict minerals is available here.Counterfeit Parts PreventionWe have stringent quality-control processes in place to detect and mitigate suspected or confirmed counterfeit parts in order to prevent counterfeit parts and software from enter-ing the companys supply chain.We promptly disclose any findings to the government and the customer.E N V I R O N M E N TA L26Electric vehicle at Jet Aviation Environmental27EnvironmentWe are committed to doing our part to help sustain the global environment.Like many of our investors,employees and other stakeholders,we want to ensure that our business con-tinues to thrive even as we seek new ways to minimize our impact on the planet.This is a priority across all levels of our company.We are executing on our company-wide goal of reducing greenhouse gas emissions by 40%from our 2019 baseline by 2034 as described below.We consider sustainability objectives when reviewing sites and programs to establish goals for continuous improvement.As part of our commitment to environmental management,58 of our sites operate under ISO 14001,which is a voluntary certification of international standards that specifies requirements for an effective environmental management system(EMS).We constantly evaluate how our business strategy comports with our goals of maintaining sustainable environmental practices over the long term.We seek to protect the environ-ment by improving operating efficiency,lowering costs,minimizing waste and emissions,reducing the use of fossil fuels,and ensuring that we remain compliant with relevant environmental laws and regulations in a way that enhances long-term shareholder value.Our approach to protecting the environment is built around these objectives:Operate our facilities in compliance with applicable laws and regulations in order to protect the health and safety of our employees,surrounding communities and the environment Reduce carbon emissions in order to reach our goal Reuse,recycle and minimize the use of natural resources Drive out solid waste from our manufacturing processes Integrate environmental considerations into business planning and decisions,including design,procurement,production,facilities management and product support Promote a workplace in which employees carry a sense of personal responsibility for protecting the environment Work with our customers to meet their environmental needs and goals,and manage suppliers consistently with our environmental compliance and management programs Maintain a management system for environmental matters at each business unit that is designed to voluntarily meet international accepted standards Support existing and upcoming ISO 50001 registrations to help business units conserve resources through more efficient energy management28CollaborationEach of our businesses has professional Environment,Health and Safety(EHS)programs to ensure their facilities operate safely and in compliance with company policies to minimize environmental impacts.Each business develops annual objectives to drive continuous im-provement in EHS performance.We have an active EHS committee that includes experts from each business unit to pro-mote best practices and develop shared strategies.This group is dedicated to promoting a safety-and environment-conscious culture across the company,monitoring and continuously ensuring compliance with laws,regulations and corporate policy.We have a company-wide goal of reducing greenhouse gas emissions by 40%by 2034(from a 2019 base year).This will include the gradual reduction of both Scope 1 and Scope 2 gases,and the transition to sources of renewable power.Since 2019,we have reduced Scope 1 and Scope 2 emissions by 10%.Since 2008,we have reduced overall CO2 emissions per dollar of revenue by 42%.Shipbuilder at Bath Iron Works 29Our companys commitment to continuous improvement includes creating efficiencies and building systems that reduce our emissions output.Our decentralized business model and diverse lines of business across multiple states and countries enable each business to develop its own set of operating objectives to reduce carbon emissions.We strive to offer transparency about our environmental impact,as well as our actions to lessen those impacts.We participate in CDPs environmental disclosure system,which measures companies effects on climate change and their management of climate risks and opportunities,and we engage a third party to independently verify our emissions information.We have committed to a company-wide target to reduce Scope 1 and Scope 2 green-house gas(GHG)emissions by 40%by 2034,from a 2019 base year.We developed the target using standards articulated by the Greenhouse Gas Protocol and the Science Based Targets Initiative,consistent with international goals to limit global temperature increase to well below 2 degrees Celsius.Our target has not been submitted to the Science Based Targets Initiative for validation.In order to achieve this goal,we are actively instituting initiatives across the company.In 2021,each BU set its own target and achievement roadmap to align with the overall company-wide target.These pathways consist of initiatives like energy efficiency projects,procuring renewable energy and fuel switching where applicable.Since 2008,our GHG emissions have declined 24%,even as our company has grown and increased revenue by 31%.On a per-dollar-of-revenue basis,we have reduced total GHG emissions by 42%.As a government contractor,our ability to meet our emissions targets depends in part on our customers conduct and direction.For example,some of our contracts specify the manner,means or place of performance in ways that constrain our ability to reduce GHG emissions associated with contract performance.In other instances,we perform work at government-owned facilities,where emissions may be attributable to us under relevant disclosure protocols,but where we have limited or no ability to change relevant aspects of the facility.Reducing Greenhouse Gas Emissions EnvironmentalWelder at GD Land Systems30Revenue(in Billions of Dollars)Emissions(Thousands of Metric Tons CO2)1,000 9509008508007507006506003937 353331292725200920102011201220132014201520162017201820192020GHG EmissionsRevenue (in Billions of Dollars)2021800700600500400300200Emissions (Thousands of Metric Tons CO2)Scope 2Scope 12009201020112012201320142015201620172018201920202021Emissions by ScopeEmissions (Thousands of Metric Tons CO2)31 GD Ordnance and Tactical Systems,in conjunction with Todays Power,Inc.,invested in four renewable energy projects in Calhoun County,Arkansas.The solar sites in this project produced 3.3 million kWh of energy cumulatively in their first year and are expected to reduce the companys carbon footprint by 51,472 metric tons over 20 years.GD Land Systems purchased 100%of the power at its parts and manufacturing plants in Sterling Heights,Michigan,and Scranton,Pennsylvania,from renewable sources in 2021.In total,it purchased more than 17 million kWh of electricity generated by wind farms,resulting in a reduction of its Scope 2 greenhouse gas emissions by 7,200 metric tons.It has contracts in place to continue its purchase of renewable energy for these sites.Bath Iron Works started using ocean barges instead of trucks to deliver fuel needed by its newly constructed ships for sea trials.What used to require 26 trucks,each making a 300-mile round trip from Boston to deliver fuel for a single destroyer,can now be accom-plished with a single barge,reducing CO2 emissions by 12 metric tons.Environmental32Scope 3 EmissionsBecause we are a government contractor,many Scope 3 emissions attributable to our com-pany under relevant protocols,both upstream and downstream,are driven by policy choices made by our government customers.For example,armored fighting vehicles,which are built to specifications meant to ensure they function as intended on the battlefield,have emission consequences that are outside of our control.Similarly,government procurement requirements often prescribe certain attributes for the supply chain such as participation of small business,country of origin and other requirements that have consequences for greenhouse gas emissions from our supply base.For reasons such as these,we are currently unable to accurately measure or set a target for indirect emissions across our entire value chain.Where feasible,we apply our established continuous improvement process to reducing Scope 3 emissions.Most notable are our efforts to reduce emissions throughout the life-cycle of the business jets we manufacture,with five clean-sheet aircraft models introduced over the past five years.We do this by focusing our research and development efforts on achieving better efficiency and fuel performance,ensuring our aircraft can seamlessly use sustainable aviation fuel(SAF)in their operations,and making carbon offsets and book-and-claim services available to our customers.Gulfstream has the most fuel-efficient fleet in the industry,producing the lowest carbon emissions per passenger mile of any aircraft we have previously delivered.At multiple sites across the company,employees are offered the opportunity to participate in alternative transportation incentive programs that offer public transportation pass discounts and fuel cost subsidies for vanpool participants.Many of our BUs have codes of conduct for suppliers that specify environmental standards,among other criteria.Gulfstreams supplier code of conduct requires suppliers to have EHS systems to actively manage risk while protecting the environment and conserving natural resources.2%Aviation 10%Road1%Rail,Ships&Others26%Energy Supply19%Industry14%Agriculture17%Forestry13%Transportation8%Buildings3%Waste.04%Business Aviation Source:Business Aviation Commitment on Climate ChangeBusiness aviation accounts for 0.04%of global CO2 emissions.33 EnvironmentalSustainable Aviation FuelWe are a leader in expanding the use and availability of sustainable aviation fuel(SAF)in business aviation.SAF is a low-carbon fuel blend made from agricultural waste and petroleum-based Jet-A fuel,with less sulfur and fewer fine particle pollutants than traditional Jet-A.Both Gulfstream and Jet Aviation have made SAF a top priority for their customers.On a gallon-for-gallon basis across the lifecycle,SAF can achieve a more than 80%reduction in greenhouse gas emissions relative to petroleum Jet-A.That lifecycle begins when the agricultural source becomes waste,continues through the refining process and ends with the fuel burn.The renewable fuel meets the strict sustainability requirements of both the U.S.EPA and the internationally recognized Roundtable on Sustainable Biomaterials(RSB).Jet Aviation has led the services market in offering access to sustainable fuel for operators of Gulfstream and other business jets.It was the first supplier to offer SAF via a blended fuel option at Van Nuys Airport in 2019 and the first to offer SAF at the World Economic Forum in Switzerland in 2020.Since 2019,Jet Aviation has uplifted more than 10 million gallons of blended SAF to customers.Jet Aviation also offers a“Book&Claim”program that broadens access to SAF while avoiding the need to transport it physically.Customers can place orders for SAF,after which the volume is tracked and verified,and a certificate of credit for carbon reduction is issued.This promotes production and future availability of SAF for any customer at any time,even in locations where SAF is not yet available.Both Gulfstream and Jet Aviation are signatories to the World Economic Forums Clean Skies for Tomorrow 2030 Ambition Statement.Among the programs aims are accelerat-ing the supply and availability of SAF so it can reach 10%of the global jet aviation fuel supply by 2030.Gulfstream was the first business jet aircraft manufacturer to use SAF in daily operations.Since 2016,Gulfstream has used SAF to power its test and demon-stration aircraft,flying nearly 2 million nautical miles on the blend.Gulfstream G500 taking flight34Carbon OffsetsBoth Gulfstream and Jet Aviation offer customers the ability to reduce the impact of their carbon emissions by purchasing offsets.Gulfstream also offers its customers the ability to pay an annual fee based on aircraft utilization to fund activities that generate an equal reduction in carbon emissions.Based on customers projected annual flight hours,offsets are invested in environmentally beneficial activities such as wind energy,forest management,farm power and recovery of landfill gas.Jet Aviation also participates in the Carbon Offsetting and Reduction Scheme for International Aviation(CORSIA),EU Emissions Trading System(EU ETS),and other carbon offset and carbon reduction schemes to lower CO2 emissions for international flights to curb the aviation impact on climate change.The engines powering Gulfstream aircraft are the most modern,efficient and environ-mentally responsible in their class.Coupled with the advanced aerodynamics of the Gulfstream wing design,the G500 and G600 offer as much as 32%improvement in fuel efficiency over predecessor models.35 EnvironmentalJet Aviation employeesWe take steps at each location to mitigate the environmental effects of day-to-day operations and manufacturing processes.This includes making efforts to reduce our energy consumption.As a large industrial manufacturer,we are able to leverage both our scale and our innovative processes to drive energy efficiency and promote the transition to clean sources of energy.Energy ManagementBath Iron Works procures solar energy credits through a long-term partnership that are expected to ultimately provide 92%of the total electricity consumed at its main ship-yard.This not only reduces our carbon footprint,but also provides financial certainty for the developers constructing six new solar projects across Maine.In 2021:8,567,744 GJ Total Energy Consumed98%Grid Electricity2%Renewable36We are committed to responsible and sustainable use of water by endeavoring to obtain fresh-water and discharge treated wastewater without negatively affecting aquatic ecosystems.An example of our commitment to sustainable water management is Electric Boats process to capture,treat and reuse all of the wastewater at its facility in Quonset Point,Rhode Island.The facility recycles more than 100,000 gallons of industrial wastewater each year by treating it and using it again in manufacturing processes rather than releasing it into the sewer system or sea.To safeguard precious groundwater sources,we aggressively ensure compliance with fed-eral and state regulations,including the EPAs Resource Conservation and Recovery Act(RCRA)Corrective Action Program.Since the inception of this program in 1985,we have sampled,monitored and remediated impacted soil and groundwater at facilities throughout the United States,resulting in the remediation of tens of thousands of tons of impacted soils and millions of gallons of impacted groundwater.Solid Waste ManagementWe seek to minimize the generation of solid waste by recovering and recycling raw materials wherever possible and disposing of unrecyclable waste in a sustainable manner and in accordance with the strictest waste disposal standards.Water and Wastewater ManagementGD Ordnance and Tactical Systems uses a process to neutralize chemicals used for etching and anod-izing at its plant in Springboro,Ohio.Used chemicals from two separate places on the assembly line are combined,neutralizing each other and significantly decreasing the amount of waste generated and energy consumed.This process also reduces water usage by more than 10 million gallons per year.In 2021:240.5Total Waste Produced(million lbs.)83.8Total Disposed Waste(million lbs.)156.7Total Recycled Material(million lbs.)37 EnvironmentalMany of the products and services we deliver directly enable our government customers to better understand and manage the environment.For instance,GD Mission Systems provides climate-related product and service offerings to the Department of the Interiors U.S.Geological Survey,the National Aeronautics and Space Agency(NASA),and the National Oceanic and Atmospheric Administration(NOAA).These include specially engineered instruments and communications devices for observation satel-lites,including the Landsat constellation,which collects data on forests,farms,urban areas and freshwater on the planet.Leaders from across the globe use freely available Landsat data to better understand environmental change,manage agricultural practices,allocate scarce water resources,respond to natural disasters and more.GDITs federal portfolio includes programs supporting the EPA and other environmentally fo-cused organizations.These services include consulting in environmental sciences and public health and support of the Western Climate Initiative,the Regional Greenhouse Gas Initiative and other EPA initiatives,including its flagship energy-efficiency ENERGY STAR program.Sustainability Products and ServicesGeneral Dynamics Land Systems recently unveiled the AbramsX,a prototype next-generation main battle tank that consumes 50%less fuel than M1A2 Abrams tanks currently in service.Its reduced weight enables improved mobility and transportability while offering the same tactical range and combat capability.It is supported by a hybrid power pack that enables silent operations using an electric motor.General Dynamics Land Systems also introduced the StrykerX technology demonstrator,adding a hybrid diesel-electric power pack to the U.S.Armys primary armored combat vehicle.AbramsX(top)and StrykerX(bottom)38GD Mission Systems provides ground stations,communications links and mission operations centers for NASAs Earth Observing System(EOS),a series of polar-orbiting and low-inclination satellites for long-term global observations of the land surface,biosphere,solid Earth,atmosphere and oceans.GDIT supplies and maintains NOAAs two supercomputers,which provide the environmental data that serve as the basis of all weather forecasts in the U.S.These forecasts are critical for public safety and for the via-bility of the national economy by informing both strategic and tactical decisions about agricul-ture,transportation,energy and climate change.Gulfstream manufactured the hurricane hunter jet known as “Gonzo.”Operated by NOAA,the jet is a high-tech,high-flying and high-speed platform used for hurricane forecasting and research of the upper atmosphere.(NOAA photo)39NASSCOs Comprehensive Environmental Management SystemGeneral Dynamics NASSCOs comprehensive environmental management system focus-es on conserving resources and preserving the environment while maintaining operating efficiency.The systems robust operating and recordkeeping procedures,environmental communication and education resources,and rigorous self-improvement evaluations ensure that NASSCO continues to reduce its environmental impacts,improves local air and water quality,and minimizes the use of hazardous materials.Air Quality NASSCO has numerous controls of its production processes to reduce airborne pollutants and protect the local air quality.NASSCO uses welding methods with lower fume generation and operates exhaust filtra-tion systems that,over time,have reduced emissions of hexavalent chromium by 95%.In addition,its Sustainable Commute Team is helping reduce emissions from employee transportation by encouraging alternative transportation methods such as vanpool,public transit and biking.Overall,NASSCO completed a total of 15 energy savings proj-ects in 2021,reducing energy consumption by 1.4 million kWh.Water QualityLocated in the San Diego Bay,NASSCO prioritizes protecting water quality by captur-ing and diverting all storm and process water for treatment and discharge to the sewer so that no stormwater flows directly into San Diego Bay.RecyclingNASSCOs reclamation line and recycling program recovers recyclables before waste shipment.In 2021,the program recycled 85%of its hazardous and solid waste leaving the shipyard.NASSCO has reduced its reliance on diesel equipment to decrease its emissions.The shipyard has more than 90 elec-tric cranes and uses exhausted treatment systems and filters for equipment with large diesel engines.Since 2004,NASSCO has reduced overall diesel emissions by 80%.In 2022,NASS-CO introduced a pilot program to use renewable diesel fuel in the shipyard that lowers particulates by 30%and reduces greenhouse gas emissions by more than 80%compared to traditional diesel fuel.NASSCO was the first commercial shipyard in the U.S.to achieve ISO certification for its comprehensive environ-mental management system.EnvironmentalS O C I A L40A shipbuilder at NASSCO41 SocialEngaging and Developing Talent.We engage and develop employees to pre-pare our workforce for the future.With our customers,local governments,colleges,technical and trade schools,and internal and external subject matter experts,we create programs that are tailored to our unique needs and offer employees development opportunities that enhance their present and future potential while delivering excellence to our customers.Onboarding and Mentoring.Meaningful and rapid assimilation into our workforce and continued engagement of our new hires is essential to our success and the success of our customers.Each business tailors onboarding to align new employees with our Ethos and our culture of continuous improvement.Onboarding includes required training and an overview of company policies and our commitment to providing a safe and ethical work environment.To further engage and develop employees,we offer mento-ring programs across our business.Our development teams use data analytics to match employees with leaders to begin the mentoring relationship.Performance and Recognition.We demand and reward actions that embody our Ethos:ethical leadership,technical innovation,creativity and proven results.Using performance management tools and succession plans,we engage and reward employees and develop future leaders to align with strategic objectives tied to company and customer needs.Wherever possible,compensation is performance-based.Expectations are transparent and are reinforced through ongoing feedback and semi-annual and annual reviews.In addition to ongoing and formal reviews,we employ recognition tools to encourage innovation,continuous improvement,creativ-ity,teamwork and commitment to our Ethos.Leaders and peers may nominate employees to recognize their achievements.By fostering a culture that celebrates and rewards excellence,we encourage employees to bring their best to work every day.Labor Relations.About 20%of our employ-ees are represented by labor unions.Our employees are free to exercise their rights of freedom of association and collective bargaining.We work to maintain positive relations with our employees representatives and to engage in good-faith negotiations on issues important to our employees,such as wages,benefits,schedules,job progression,health and safety.We have a proven track record of strong relationships with collectively bargained employees.As agreements expire or issues arise,we work closely with the bargaining units to seek mutually beneficial outcomes.Human Capital In 2021,General Dynamics offered nearly 700 internship opportunities across the company,as well as another 500 traditional apprenticeships in manufacturing or design competencies.42Veterans.We are committed to recognizing the unique contributions of those individuals who have served in defense of our nation,and providing opportunities to develop skills that will be valuable to them as civilians.We offer dedicated ERGs and mentoring programs that assist in attracting,transi-tioning and retaining this critical part of our workforce.More than 17%of our U.S.workforce are veterans.This is more than three times the percentage of veterans in the U.S.civilian labor force.*Source:Department of Labor(https:/blog.dol.gov/2021/11/9/veterans-in-the-labor-force-6-stats)Supporting Veterans.We recognize that military veterans bring unique skills and a strong work ethic to our company.We have several programs to assist service mem-bers in the transition to civilian life through programs that provide training and work experience.These include DoDs SkillBridge program,which allows service members to gain work experience through specific industry training,apprenticeships or intern-ships during their last 180 days of service.Many of the participants go on to become GD employees.At GDIT,newly hired veterans engage with other veterans in virtual discussion forums to assist with their transition to the private sector.Forums include smaller mentoring breakout sessions to allow for more hands-on exploration of relevant support tools.Support for National Guard and Reserve Employees.Many of our employees are military reservists or members of the National Guard.We proudly support them in their service to our nation.We have been recognized for our strong support of these citizen soldier employees.Bath Iron Works received the DoD Pro Patria Award and the Employer Support of the Guard and Reserve(ESGR)Extraordinary Employer Support Award for its commitment and sustained employer support of National Guard and Reserve service.Bath Iron Works annual Veteran Employee Recognition eventIn 2021,we hired 2,630 veterans of the U.S.armed forces,15%of our total new hires.U.S.Workforce17%VETERANS43Internships and Pipeline Programs.We partner with local colleges,high schools,trade schools and universities to provide internship and training opportunities,as well as to participate in job fairs.In many cases,we also provide input on curricu-lum so that schools match their programs to meet the skills students will need in the workplace.We provide hundreds of internship opportunities to expose students to real-world projects through hands-on experiences.Each year,we offer hundreds of internships across the company,as well as traditional apprenticeships in manufacturing or design competencies.We have relationships with many colleges and universities to offer internships or to participate in job hiring events.These are just a few of the schools we work with:Arizona State University Central State University Florida A&M University George Mason University George Washington University Georgia Institute of Technology Grambling State University Hampton University Howard University James Madison University Massachusetts Institute of Technology Morgan State University New York University Northeastern University North Carolina Agricultural and Technical State University Prairie View A&M University Purdue University Savannah State University Technische Universitt Kaiserslautern Tuskegee University University of the District of Columbia University of Southern California University of Texas at Austin Virginia Polytechnic Institute and State University Virginia State UniversityNearly 2,000 of our employees across our businesses participate in tuition assistance programs each year to complete formal bachelors or masters degrees.SocialInterns at GDITAt our corporate headquarters in Virginia,we recruit students from diverse backgrounds enrolled at area universities,including Historically Black Colleges and Universities.Interns complete a rigorous program that includes leadership training,multiple assessments,cohort team-building and on-the-job training.44Our competitive advantage is our workforce.The unique contributions of each employee are what drive innovation and productivity.We proudly support a culture of inclusion and encourage a work environment that respects diverse opinions,values individual skills and celebrates the unique experiences our employees bring to the workplace.We measure workforce trends to establish accountability for continuing to cultivate diverse,equitable and inclusive environments at every level of our company.Our Ethos rooted in respect guides how we engage with each other.We believe that diversity,equity and inclusion make us a better corporation and enhance the value we deliver to stakeholders.We work to continually improve representation of diverse talent at all levels of the company so that we reflect the communities in which we operate.Our ongoing efforts include devel-oping ways to attract and retain diverse talent.We gather data about overall demographics,promotions,recruitment and other processes across the employee lifecycle and use that to inform our areas of focus for continued improvement.Who We AreThe following provides the composition of our U.S.workforce,as reported on our 2021 form EEO-1 or as self-reported by our employees,with comparison to the prior year.Diversity,Equity and InclusionIn 2021,38.7%of our new U.S.hires were people of color.GenderMenWomen76.2#.8%.4pt .4ptRace/EthnicityAsianBlackHispanicNative AmericanPacific IslanderWhiteTwo or More Races5.6.8%9.1%0.4%0.4r.1%1.7%.1pt .3pt .4ptsame.1pt.6pt .1ptVeteransDisabilitySelf-ID as a veteran of the armed forcesSelf-ID as having a disability17%6hange from previous year45HBCU Partnerships.We have expanded our partnerships with Historically Black Colleges and Universities(HBCUs)and other colleges with highly diverse student bodies as part of our ongoing effort to increase diversity through internships and employment.Employee Resource Groups.Across our business units,we cultivate inclusive work environments by sponsoring ERGs and diversity councils.We have 27 ERGs that serve 10 distinct employee segments,with the formal support and sponsorship of senior leaders.Over the past two years,we have seen a marked increase in par-ticipation in established groups and have welcomed several new groups.Diversity Partnerships.We partner with several external organizations to help us recruit and develop diverse talent.SocialWe need people with talent,curiosity and passion to help us build some of the most innovative products and solutions to make our world a safer place.Pride Month event with former U.S.Womens National Soccer Team goalie Briana Scurry46Skills Training.We offer a variety of programs that enable our employees to gain additional skills so they can grow their value to the company.These include programs that grant certificates in key tech-nical areas.At our shipyards,we offer active learning centers that teach more than 200 skills,allowing shipbuilders to expand their skills in areas such as welding or pipe fitting in a realistic environment.Competency and Leadership Training.We offer various training programs to equip lead-ers with skills and competencies needed to engage technical and manufacturing employ-ees.These range from certificate-granting program management courses to leadership and management development programs that rotate future leaders through different parts of the company.Cultivating Female Talent.We have longstanding partnerships with many or-ganizations dedicated to increasing the participation of women in our indus-try,including Girls Who Code,STEM for Her,EmpowHer and Women in Aviation,among others.GDITs annual Women Tech event brings together women at different stages of their careers for an inspiring and engaging event that showcases actionable tools,insights and networking to support career growth and mobility.Electric Boats“The Boat for Women”program introduces participants to shipbuilding trades,including welding,machining and pipefitting.47 SocialHealth,Wellness and SafetyGeneral Dynamics is committed to providing our employees and their families with the means to lead healthy,productive lives.We invest in their physical,emotional,social and financial well-being to help them achieve their full potential personally and professionally.Our wellness programs provide resources,information,motivation and support to empower our employees to manage their health and make informed decisions.Benefits.Our benefits offerings include medical,dental,vision,and prescription-drug coverage;life,survivor,accidental death and dismemberment insurance;short-and long-term disability benefits;multiple tuition assistance programs;voluntary benefits,such as legal insurance;identity theft protection;critical illness insurance;accident insurance;and coverage for home,auto and pets.To assist employees with financial wellness,we offer retirement planning counselors and market-competitive 401(k)programs.In addition,we offer members access to tax-free flexible spending accounts and health savings accounts.Our Employee Assistance Program(EAP)helps employees access childcare and free counseling.Other programs vary by business and location,reflecting the distinct and diverse needs of our employees,and include everything from biometric screenings,mental wellness and fitness programs to in-person health coaches and a variety of apps that can help employees navigate dif-ficult health care decisions and life changes.Family Support.We recognize the impor-tance that families play in the well-being of our employees.We provide a wealth of resources to assist employees seeking to expand their families,such as adoption support benefits,infertility treatment cov-erage and maternity programs.We also offer paid parental leave programs and provide tools and resources for parenting support.Program availability varies by business unit but may include paid family leave,as well as backup daycare and support in locating caregivers.GDIT employees participate in a blood drive.48*Industry standard numbers are the average of the recordable cases reported by the Aircraft Manufacturing and Shipbuilding&Repairing industries to the U.S.Department of Labors Bureau of Labor Statistics.Safety Data:Industry ComparisonSafety.Maintaining a safe work environment for our employees is paramount.Our policies and standards require that we operate in a way that promotes safety and well-being.Across the business,we take measures to prevent workplace hazards,enforce a culture of continuous improvement to ensure our pro-cesses help reduce injuries and illnesses,and comply with all applicable health and safety laws.Fifty-seven of our sites operate under ISO 45001,widely regarded as the worlds highest occupational health and safety standard,and more are in the process of achieving certifi-cation.Under ISO 45001,workplace safety is not a stand alone issue but rather an integral part of the business strategy to maintain a sustainable organization.As a result of our efforts,many of our business units have been recognized for their success in promot-ing health and safety among their workers.Recordable Case RateAbsence Case RateYearIndustry StandardGeneral DynamicsIndustry StandardGeneral Dynamics20133.302.691.400.8120142.852.651.300.7920153.052.251.250.7220162.801.901.250.5820172.651.641.250.4420182.351.831.150.5420192.202.101.050.5320202.401.641.500.4720213.402.172.300.74Our safety record is consistently better than industry standards.NASSCO employee49 SocialProduct Safety.Our customers use our products from nuclear-powered subma-rines to high-speed,long-range business jets to perform no-fail missions,and we never compromise on safety.True to our Ethos,we commit to providing our customers with products that raise the bar for safety,performance and quality.Our purposeful investment in research and development propels superior design that incorporates the latest in safety solutions and includes technological advances to create a competitive edge.3,0002,5002,0001,5001,000500035,00030,00025,00020,00015,00010,0005,0000201320142015201620172018201920202021ABSENCE CASESRECORDABLE CASESLOST WORK DAYSSince 2013INJURIES-23%LOST WORK DAYS-40sesDaysJet Aviation employee50We recognize the fundamental human dignity of all people.As a company with operations and suppliers around the world,we place a high priority on respect for basic human rights in our business activities,and this core value is embedded at all levels of our business.Our corporate Ethos demands responsible and ethical practices,which include respecting the dignity of the work conducted on our behalf by business partners.We do not discrimi-nate.We value the diversity of our workforce.We respect the rule of law.Moreover,we recognize the special responsibility that comes with providing products and services with lethal capabilities,and we strive to comply rigorously with applicable laws and requirements regarding product safety and end use.In our complex and international business,some circumstances may be subject to potentially competing imperatives.In carrying out our core commitment to human rights,our North Star is U.S.law and policy.Due Diligence.Risk-based due diligence is an important part of our approach to identifying,assessing and mitigating risk.By taking prudent steps to understand the proposed parties and nature of proposed engagements or transactions,we strive to consider the implications of our business activities prior to entering into them.Human rights risks,like other risks associated with any engagement or transaction,are in-cluded within this well-established approach to addressing risks.Risks related to human rights may arise in a variety of areas of a particular engagement or transaction,from supply chain conduct to environmental implications of operations.Accordingly,our due diligence is focused on particular risks rather than human rights generally.Human RightsGiven our role as a core supplier to the U.S.government and military,we are legally,ethically and morally bound to support its foreign and defense policies.NASSCO shipyard in San Diego51 SocialThe nature and location of our business activities serve to mitigate or avoid certain risks.For example,most of our supply chain is concentrated in the United States,where there are fewer concerns about modern slavery or child labor.Our risk-based due diligence efforts scale in proportion with the degree of potential risk.For example,we do not conduct customer-based due diligence for our U.S.government sales.Following this risk-based approach,our due diligence may focus on:Identity of the party or parties involved the transaction,including potential end users of products or services Beneficial ownership of party or parties Impacts of U.S.and other applicable export laws and sanctions on the proposed party or parties,engagement or transaction,including restrictions on end use,end users or retransfers Legal structure,location of business operations,and related entities of those involved in the transaction Qualifications and ability to perform relevant obligations by relevant party or parties Supplier quality and compliance,including conflict minerals and labor practices Counterparty labor standards and compliance with occupational and health requirements Environmental impacts and compliance with environmental laws and regulations Anti-corruption or anti-money laundering risks associated with the party or parties,engagement or transaction,including relations with government officials or political candidates Financial,cyber or operational risks associated with the relevant engagement or transaction Other regulatory or reputational risks associated with the party or parties,engagement or transactionWe tailor our efforts to the particular due diligence focus area and related risks.We use a variety of tools,techniques and analyses to identify and assess the risk of a proposed engagement or transaction.For example,depending on the engagement or transaction and focus of the due diligence,we may use:Screening of relevant parties against government-issued lists of individuals,entities and countries subject to concerns,prohibitions,sanctions or regulatory enforcement End-use certifications Site visits and meetings Engagement of specialized external advisers Third party audit or investigative services Surveys,self-assessments or interviews of parties involved in the transaction Reference checks Specialized database searches Open source and web searches for adverse media Review of financial records,banking information,legal and corporate records and credit checks Anti-corruption or conflict of interest statements or certifications Financial analyses Legal assessments52Red flags regarding potential legal,policy,regulatory,reputational or operational risk are escalated within our robust risk management structure.Where appropriate,we conduct further,enhanced due diligence.The results of due diligence and potential risks are assessed by management from relevant functions such as operational management,human resources,legal,international trade compliance,finance,engineering,health and safety,manufacturing,and supply chain.Engagements or transactions presenting significant risks are escalated to senior management in accordance with our risk management framework.End-Use Risk.We are transparent and accountable regarding our commitments to human rights.Our mature and sophisticated process identifies and addresses material risks,including those related to human rights.We understand and take seriously the fact that many of our products and services have the capacity to take human life.Our principled approach to addressing end-use risk closely follows U.S.national security and foreign policy and strictly adheres to applicable export law.U.S.laws and regulations governing the export of weapons and other defense articles reflect U.S.defense and foreign policy,which includes the promotion and protection of human rights and international humanitarian law.This export regime contains express provisions addressing end-use risk of defense articles,including exacting eligibility criteria for non-U.S.purchasers,clear limits on permitted uses of exported defense articles,active end-use monitoring and reporting of transactions to Congress.We have a rigorous compliance process,including comprehensive due diligence and approval processes,to ensure that we follow these laws.End-Use Monitoring.When GD products are transferred to foreign allies,the U.S.government tracks their status and confirms their users trustworthiness throughout the products lifecycles.Responsibility for end-use monitoring of foreign military sales falls under the DoDs Golden Sentry program,while the responsibility for direct commercial sales is within the purview of the Department of States Blue Lantern program.The Department of Commerce monitors potential dual-use items.All share the following goals:to ensure that foreign nations use products for their intended purpose,that they receive U.S.approval for transfer to third-par-ties and that they provide adequate security.Specific end-use monitoring measures include quarterly inventory reports,serial number verification for particularly sensitive items and physical inspections by U.S.embassy personnel.We want our products to be used in the right way,by the right people.We fully support U.S.government laws and policies on the transfer of weapons to partner nations,which include comprehensive end-use monitoring.53 SocialThough our company spans continents,we never lose sight of the communities where we live and work.Our businesses invest in and promote involvement at the local level to make our communities better,whether that is through improving education and social services;promoting health,arts and culture;supporting policies to strengthen our national security;helping those in need;or assisting veterans and their families.Supporting our communities.Each business unit participates in community outreach and support efforts that align with local community needs.Employees choose programs and organizations to support based on what is important to them,then organize the donation of time,goods and services.These programs support places,such as local chapters of the United Way,the YMCA or organizations like Jills House in the D.C.metro area,which celebrates and provides support for children with special needs and their families.Other initiatives include:Gulfstreams cloud-based giving program,called“Gulfstream for Good,”provides a company match for donations made to the charity or nonprofit of employees choice.Between pledges and company match,the program has provided more than$1.5 million to local charities.Through the“GDIT Cares”program,employees performed more than 30,600 hours of service in 2021,including participating in an annual back-to-school drive,holiday giving campaign and STEM education.GDIT also makes a monetary donation to organizations where a GDIT employee has volunteered for 15 hours or more.Bath Iron Works provides frozen turkeys to employees and area food banks at Thanksgiving,supporting community dinners for those in need.Many employees opt to donate their turkeys to area food banks and community organizations.CommunitiesOur philanthropy and volunteer efforts focus on:1.Education&Social Services2.Arts&Culture3.Service Member Support NASSCO firefighters conduct an annual“Fill the Boot”drive to raise funds for burn survivor support services,including“Camp Beyond the Scars”for burn-injured children and burn-prevention educational activities.54Educational Outreach.A key element of our community outreach is support for ed-ucation,especially in the STEM fields.Our employees volunteer their time,talent and expertise to teach and train future mem-bers of the workforce,leading robotics clubs and rocketry competitions,and mentoring college students and interns.Facilitating strong knowledge and understanding of STEM concepts,particularly in underserved communities,is crucial to building a pipeline of talent for a productive society and our future workforce.GDMS donated 250 mixed reality smart glasses to the University of Central Florida for students to use in research pursuits.GD Land Systems employees mentor students at the Ohio State Universitys engineering technology program that introduces students to STEM-specific topics and offers visits to GD facilities to demonstrate how STEM is integrated into their jobs.Gulfstream has partnered with EAA AirVenture Oshkosh to provide more than 150 educators with workshops and presentations on ways to integrate aviation and STEM into teaching curricula.Military Outreach.We support several orga-nizations and events that honor and provide assistance to those who have served.These include:The Association of the United States Army(AUSA)Army Ten-Miler,which raises funds for the Army Family and Morale,Welfare and Recreation program The National Military Family Association,which strives to stand up for,support and enhance the quality of life for every military family The Semper Fi Fund,which provides urgently needed resources and support for combatGDIT employees lay wreaths at Arlington National Cemetery as part of the Wreaths Across America program.GD Ordnance and Tactical Systems employees pack food items,travel-size toiletries and other supplies to send overseas to deployed troops as part of Operation Military Matters.55In 2021,we engaged with members of Congress regarding the proposed federal tax credit for SAF,including in the Sustainable Skies Act.The legislation would provide a tax credit for SAF that achieves at least a 50%reduction in lifecycle GHG emissions compared to conventional jet fuel.We have also communicated our support for a federal grant program administered by the Department of Transportation to lawmakers.The program would provide funding to help stand up facilities to produce SAF and develop new aviation technologies that would reduce greenhouse gas emissions.SocialPolitical EngagementGeneral Dynamics Corporation does not make political contributions.We offer eligible employees in the U.S.the opportunity to make voluntary political con-tributions through a political action committee(PAC).The General Dynamics Employee PAC is organized and operated on a strictly voluntary,nonpartisan basis and is registered with the Federal Election Commission(FEC).The PACs political contributions are re-ported to the FEC,where they become a matter of public record and are available for review online.PAC contributions are subject to a robust internal review process to ensure they represent the best interests of General Dynamics employees.In addition,internal financial controls exist to ensure compliance with federally mandated contribution limits.Our employee PAC invests contributions in candidates based on:Support for national security and aerospace Representation in districts and states where General Dynamics facilities,suppliers or employees are located Membership on key committees legislating on issues of importance to General Dynamics Leadership positions Prior military or aerospace industry experienceAs a foundational principle,our employee PAC refrains from partisan politics,remaining focused on national security and on advocating for the success of GD and its employ-ees.That means we give to members of both parties,and we delink our support from issues unrelated to our core business.We do not contribute to presidential campaigns,“super PACs,”or other 527 or 501(c)(4)organizations.Our employee PAC will not support members of Congress who provoke or incite violence or similar unlawful conduct.To ensure compliance with all applicable laws relating to political activities and effec-tive corporate governance,we follow a strict policy governing lobbying practices.This includes tracking and reporting lobbying costs and expenses as nondeductible for tax purposes and unallowable for purposes of U.S.government contracts.56We are committed to safeguarding employee,customer,national security and third-party information entrusted to our care.We have a proactive and robust information security program.Our priority is to protect sensitive information from potential internal and external threats targeting our systems and data.Consistent with our decentralized business model,each business unit designs and oper-ates its own information security program tailored to its market,customer requirements and threats while maintaining compliance with centrally defined policies and standards.We review and update our policies and standards to address changes in federal government requirements,emerging commercial best practices and the latest evolving cyber threats.To guide our programs addressing the dynamic nature of cyber threats,the Cyber Council collaborates across the company to recommend policy updates,support executive deci-sion-making on cybersecurity matters and address strategic cyber threats to our business.Reporting directly to the chairman and CEO,the Cyber Council seeks to enhance our defenses and mitigate advanced and persistent threats to our information systems.We have experienced cyberattacks in the past and strive for continuous improvement in our policies,procedures and practices in light of evolving threats.While there is no assur-ance that our actions including the timeliness of our efforts or those of third parties on which we rely will be sufficient to detect,prevent and/or mitigate future cyberattacks,as part of our information security program,our businesses protect our company from cyber threats by:Identifying cyber threats and critical information assets Implementing cybersecurity prevention,detection and response controls Incorporating cyber risk assessment practices into program activities Integrating cyber risk management into business risk governance practices Engaging with suppliers to address supply chain cyber risks and enable their complianceCybersecurity and Data PrivacyGDIT employees57 SocialWe monitor our programs effectiveness by performing audits and leveraging commer-cial tools and outside experts to assess our cybersecurity posture and health,to include conducting cyber penetration testing.The corporate information security team makes regular reports to management and the board on the maturity and performance of our cybersecurity programs.As a large,well-known aerospace and defense contractor,we face numerous cybersecurity threats,including threats to our IT infrastructure and attempts to gain access to information in our care.We also design and manage IT systems for customers,and many of the products we manufacture contain IT systems that are subject to those same threats.Recognizing that every employee plays a critical role on the frontline of our cyber defenses,we conduct regular cybersecurity awareness training on detecting and reporting suspicious activity.We also engage with our supply chain partners to help raise their awareness of the threats facing the defense industrial base and to help increase their ability to defend against them.We leverage our experience as a leading cybersecurity provider for national defense cus-tomers to continually evolve and enhance our cyber defenses,seeking to monitor,manage and avoid risks to the information on our systems and networks.Moreover,we commit to continuously improving our cybersecurity capabilities and those of our supply chain partners.Data Privacy and Protection.Like all businesses,we handle data that may include personal and sensitive information about our employees,our customers and third parties.Safeguarding this information is a responsibility we take seriously.Our data privacy programs are designed to address the challenges of expanding national and global privacy regulation,the growth in volume and sensitivity of privacy data and the increased use of third-party vendors.Core tenets of our program include collecting minimal amounts of information necessary to meet our business needs and seeking to ensure that the information we have is used exclusively for valid business purposes in accordance with written policies and procedures.We regularly monitor and update our policy to maintain compliance with national and global data privacy laws and regulations.We also leverage the maturity of our general cybersecurity program with additional targeted privacy controls to protect privacy information against unauthorized access,use or disclosure.To protect the confidentiality and integrity of our products and services,and to ensure we do not inadvertently abet cyber attackers,we typically do not publicly disclose information about breaches that are not of a material nature.We col-laborate and share intelligence with government,suppliers and industry peers through a central hub that monitors threat activity.We report cyber incidents to our customers and in accordance with regulatory or legal requirements.58Some of our recent accolades include:American Council for Technology and Industry Advisory Council (ACT-IAC)Innovation Impact Award Clearance Jobs Top 25 Veteran-Friendly Businesses in National Security Disability Equality Index Best Places to Work Fast Company 100 Best Workplaces for Innovators Forbes Americas Best Employer for Diversity Forbes Americas Best Employers Forbes Americas Best Large Employers Forbes Americas Best Management Consulting Firms Forbes Best Employers by State:Connecticut,Massachusetts,Virginia Forbes Best Employers for Veterans Forbes Canadas Best Employers Forbes The Worlds Best Employers Fortune Blue Ribbon Companies Fortune Worlds Most Admired Companies Handshake Early Talent Award Leading Employers Top 1%of Employers in Germany Military Friendly Gold Military Friendly Employer Military Friendly Top Ten Supplier Diversity Program Military Times Best for Vets:Employers Payscale Best Gen Y Employers Professional Womens Magazine Top Employer Professional Womens Magazine Top Supplier Diversity Programs United Way Live United Award of Excellence U.S.Department of Labor HIRE Vets Gold Award U.S.Veterans Magazine Top Supplier Diversity Programs U.S.Veterans Magazine Top Veteran-Friendly Companies VETS Indexes 5-Star Employer Washington Business Journal Business of Pride Award for Advancing LGBTQ Equality Washington Business Journal Corporate Diversity Index Washington Post Top Workplaces WayUp Top 100 Internship ProgramsH O N O R S A N D A W A R D SWe are proud to be consistently recognized as a world-leading employer.59 IndexWhere practicable,we seek to follow the disclosure topics and accounting metrics established by the Sus-tainability Accounting Standards Board(SASB).Although SASB is currently being consolidated under the IFRS Foundation,through the new international Sustainability Standards Board(ISSB),SASB standards remain the standard for sustainability reporting and disclosure.Below are the SASB standards for the Aerospace&Defense sector,with links to relevant information.I N D E XMetric CodeAccounting MetricReport LocationEnergy ManagementRT-AE-130a.1(1)Total energy consumed,GJ(2)Percentage grid electricity,%(3)Percentage renewable,%(1)8,567,744 GJ(2)98%(3)2%Energy ManagementWaste ManagementRT-AE-150a.1Amount of hazardous waste generated,per-centage recycled29%of 18,199 tons of hazardous waste were recy-cled throughout the enterprise.RT-AE-150a.2Number and aggregate quantity of reportable spills,quantity recovered,kgNot centrally reported.We promptly report all suspected or confirmed spills to the appropriate environmental authority.Data SecurityRT-AE-230a.1Number of data breaches,percentage involv-ing confidential informationNone of a material natureRT-AE-230a.2Description of approach to identifying and addressing data security risks in company operations and productsCybersecurity and Data PrivacyProduct SafetyRT-AE-250a.1Number of recalls issued,total units recalledNoneRT-AE-250a.2Number of counterfeit parts detected,percent-age avoidedWe promptly report all suspected or confirmed cases to the government and/or the customer.Global Supply ChainRT-AE-250a.3Number of Airworthiness Directives received;total units affectedThe most recent information is available from the FAA.RT-AE-250a.4Total amount of monetary losses as a result of legal proceedings associated with product safetyNone of a material nature60Fuel Economy&Emissions in Use-PhaseRT-AE-410a.1Revenue from alternative energy-related prod-ucts,USDNot disclosedSustainable Products and ServicesRT-AE-410a.2Description of approach and discussion of strategy to address fuel economy and GHG emissions of productsEnvironmentalSustainable Products and ServicesMaterials SourcingRT-AE-440a.1Description of the management of risks associ-ated with the use of critical materialsMaterials SourcingBusiness EthicsRT-AE-510a.3(1)Total amount of monetary losses as a result of legal proceedings associated with incidents of corruption,bribery and/or illicit international trade(2)Revenue from countries ranked in the“E”or“F”Band of Transparency Internationals Government Defence Anti-Corruption Index(3)Discussion of processes to manage busi-ness ethics risks throughout the value chain(1)None(2)We do not have direct defense business with any of these countries outside of that overseen by the U.S.governments Foreign Military Sales or Direct Commercial Sales process,or equiva-lent allied country processes.(3)Global Supply ChainActivity MetricsRT-AE-000.AProduction by reportable segmentAircraft deliveries in units are reported in our 10-K.Deliveries of ships,combat vehicles and other sys-tems are reported as applicable by our government customers.Review of Operating Segments(10-K)RT-AE-000.BNumber of employees101,700(as of December 31,2021)About Us61 IndexIn addition to the SASB Aerospace and Defense items above,we also report on the following items.Greenhouse gas emissions (1)Scope 1 (2)Scope 2 (3)Scope 3Reducing Greenhouse Gas EmissionsSafety (1)Recordable cases (2)Absence cases (3)Lost work daysHealth,Wellness and SafetyDemographicsOur full EEO-1 report is posted online at GD.com.Diversity,Equity and InclusionIn accordance with ISO 14064,General Dynamics engages a third party to provide independent verification of our GHG emissions information.2021 data has been independently verified by Apex Companies,LLC.A copy of the verification opinion declaration is available on the General Dynamics website.We are committed to collecting,assessing and making available data about our company in order to keep inves-tors,employees,customers,suppliers,communities and other stakeholders informed.Supporting documents,to include our Annual Report,Proxy Statement,Equal Employment Opportunity report(EEO-1),CDP questionnaire and independent verification statements,are available at StatementsThis report may contain information about the companys expectations of future performance,including future financial or operating performance.This information constitutes“forward-looking statements”within the meaning of the Private Securities Litigation Reform Act of 1995,as amended.Forward-looking statements are based on managements current expectations,estimates,projections and assumptions.These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict.Therefore,actual future results and trends may differ materially from what is forecast in forward-looking statements due to a variety of factors.Additional information regarding these factors is contained in the companys filings with the Securities and Exchange Commission(SEC),including our Annual Report on Form 10-K,our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K.All forward-looking statements speak only as of the date they were made.General Dynamics does not undertake any obligation to update or publicly release any revisions to any forward-looking statements to reflect events,circumstances or changes in expectations after the date of this report.Except where otherwise noted,the information covered in this report highlights the companys performance and initiatives in fiscal year 2021.Calculations and statistics included in this report are in part dependent on the use of estimates and assumptions based on historical levels and projections and are therefore sub-ject to change.Statements regarding General Dynamics goals,commitments and objectives,including related statistics or metrics,may be based on estimates and assumptions under developing standards that may change in the future.Such goals and commitments are not intended to be promises or guarantees and actual results may differ materially.This report has not been externally assured or verified by an independent third party.The inclusion or absence of information in this report should not be con-strued to represent the companys belief regarding the materiality or financial impact of that information.This report may also contain links to internet sites of or references to third parties.Such links or references are not incorporated by reference to this report and we can provide no assurance as to their accuracy.Further,the use or inclusion of such information is not intended to represent endorsements of any products or services.The appearance of U.S.Department of Defense photos does not imply or constitute DoD endorsement.Our Commitment to TGeneral Dynamics Corporation11011 Sunset Hills RoadReston,VA 20190
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Connecting for a Healthier Future2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORTTable of ContentsIntroduction 3About This Report 4A Message from Leadership 5About The Cigna Group 8Our ESG Vision,Framework,and Strategy 9 Healthy Society 12Sustainable Health Care 13Product Service and Quality 21Health Equity 24Community Resilience 29Healthy Workforce 34Employee Health,Safety,and Vitality 35Diversity,Equity,and Inclusion(DEI)within Our Workforce 40Human Capital Development 44Healthy Environment 48Climate Change and Emissions 49Sustainable Operations 52Healthy Company 55Leadership and Accountability 56Business Ethics and Compliance 58Data Protection 61Responsible Supply Chain 65ESG Performance Tables and Reporting Indices 68Performance Tables 69Sustainability Accounting Standards Board(SASB)73Global Reporting Index(GRI)76Task Force on Climate-related Financial Disclosures(TCFD)88United Nations(UN)Global Compact 93UN Sustainable Development Goals(SDGs)95External Assurance Letter 97INTRODUCTIONTABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCEHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT 2IntroductionINTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICSTABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT INTRODUCTION3About This ReportThe Cigna GroupSM 2022 Environmental,Social,and Governance(ESG)Report,(1)which reports on our overall ESG performance,covers activities and performance in calendar-year 2022.Performance data includes combined data for The Cigna Group and its subsidiaries,unless otherwise noted.The report addresses the parent company and wholly owned subsidiaries comprising U.S.and international subsidiaries operations,including our growth platforms,Evernorth HealthSM Services and Cigna HealthcareSM.This report:Is aligned to the Sustainability Accounting Standards Board(SASB)Managed Care and Professional and Commerical Industry Standards.Is reported in accordance with the Global Reporting Initiative(GRI)Standards.Leverages the recommendations of the Task Force on Climate-related Financial Disclosures(TCFD).Serves as our Communication on Progress as a member of the United Nations(UN)Global Compact.The Cigna Group reports on our ESG performance on an annual basis.Current and past reports,along with our CDP(2)Climate Change and Water Security responses,are available here.For more information or questions,please contact ESGteamTheCignaG.Note on Forward-Looking StatementsThis report contains forward-looking statements(within the meaning of the Private Securities Litigation Reform Act of 1995)that are subject to risks and uncertainties.Forward-looking statements are based on current The Cigna Group expectations and projections about future trends,events and uncertainties.You may identify forward-looking statements by the use of words such as“believe,”“expect,”“plan,”“intend,”“anticipate,”“estimate,”“predict,”“potential,”“may,”“should,”“will”or other words or expressions of similar meaning,although not all forward-looking statements contain such terms.You should not place undue reliance on forward-looking statements,which speak only as of the date they are made,are not guarantees of future performance or results,and are subject to risks,uncertainties and assumptions that are difficult to predict or quantify.Actual results may differ from those set forth in the forward-looking statements due to a variety of factors,including those described in The Cigna Group Annual Report on Form 10-K for the year ended December 31,2022,and other The Cigna Group filings with the U.S.Securities and Exchange Commission,available on the Investor Relations section of www.TheCignaG.The Cigna Group undertakes no obligation to update or revise any forward-looking statement,whether as a result of new information,future events or otherwise,except as may be required by law.This report addresses a multitude of topics to meet the requests and interests of the wide range of The Cigna Group stakeholders.Due to the varied interests of these groups,this report includes certain information that The Cigna Group believes is not material to the company as such term is defined under applicable securities laws.Accordingly,the inclusion of information in this report should not be construed as a characterization regarding its materiality or significance for any other purpose,including for purposes of applicable securities laws.1 We previously referred to our corporate responsibility and ESG approach as Cigna Connects.We are now using the term ESG to refer to our efforts in this area.2 CDP is a not-for-profit charity that runs the global disclosure system for investors,companies,cities,states,and regions to manage their environmental impacts:HEALTHY COMPANYESG PERFORMANCE METRICSINTRODUCTION2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE4A Message from LeadershipThe Cigna Group has roots that can be traced back more than 200 yearsand has an unparalleled track record in our industry of making a positive impact in the lives of people around the world.Today,our more than 70,000 colleagues continue to work tirelessly with our customers,clients,partners,and communities to deliver on our evolved mission:to improve the health and vitality of those we serve.Its this steadfast focus on our mission that fuels The Cigna Group colleagues,by leading,partnering,innovating,and serving our stakeholders through sustained geopolitical and economic disruption.With the Public Health Emergency winding down,The Cigna Group continued efforts in 2022 to lead for those we serve.We worked closely with health care providers and hospital systems,and we partnered with local organizations in communities in need to educate individuals and help support expanded access to care.The devastating war and humanitarian tragedy in Ukraine is difficult to fathom,and The Cigna Group stands proudly with the people of Ukraine.We supported Ukraine with donations in the region,as well as crisis and counseling support for regional customers.We also partnered with the United Nations,a client we are privileged to serve,to support their employees as they worked tirelessly to help people in Ukraine.In addition,our colleague volunteers from The Cigna Group helped refugees as they fled to other countries.Our great hope is that this war will come to an end peacefully and swiftly.In last years report,we introduced you to our new ESG frameworkone that meets the needs of our many stakeholders today,and in the future.This year,with oversight by The Cigna Group Board of Directors,we have built on that framework by developing a strategic road map to deliver on our ESG vision:to transform the ecosystem of health into one that is well functioning,sustainable,accessible,and equitableadvancing better health for all.This vision guides us as we continue to push ourselves to do more in the years ahead in each of the four pillars that comprise our ESG framework:Healthy Society,Healthy Workforce,Healthy Environment,and Healthy Company.The following are a few highlights of our 2022 efforts within each pillar.HEALTHY COMPANYESG PERFORMANCE METRICSINTRODUCTION2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCEDAVID M.CORDANI Chairman and Chief Executive Officer The Cigna GroupDONNA F.ZARCONE Chair,Corporate Governance Committee The Cigna Group Board of Directors5Well-being is more than physical and mental health alone;its the pursuit of vitality.Healthy SocietyWe believe that all individuals should have access to high-quality and affordable health care,and we are committed to fostering an ecosystem of health that sustains future generations.We demonstrate that commitment through efforts such as using a digital-first mindset,working to ensure affordable access to prescription drugs,and addressing social determinants of health(SDOH)in order to reduce health disparities.For example,we are working to eliminate health disparities relative to diabetes through a multifaceted approach,including enhanced training for our clinical colleagues,patient education,monthly caps on insulin costs,and support for community health workers.In addition,our charitable giving is focused on health equity and organizations that address SDOH,helping to create more vibrant,healthier,and more equitable communities.In 2022,The Cigna Group Foundation funded more than 150 grants,and 90%supported efforts that addressed SDOH.Looking to the future,in 2022,we announced a multi-year collaboration with VillageMD,a leading provider of value-based primary care services.This partnership is aimed at better connecting our Evernorth Health Services with physicians,accelerating value-based care arrangements,and broadening access to medical and behavioral services.By doing so,we help employers save money while getting patients to the right care in the right setting at the right time.Healthy Workforce The only way we are going to further our mission is to recruit,retain,develop,and promote the best talent.The COVID-19 pandemic demonstrated that well-being is more than physical and mental health alone;its the pursuit of vitalityor dimensions of health,strength,and energy.To further support the vitality of our workforce and their families,we expanded our caregiver program in 2022 in the United States and doubled the number of employee assistance program(EAP)visits for coworkers and their families,with up to 10 free,confidential counseling sessions per year.We are also proud of the progress we have made in the last year to improve diversity,equity,and inclusion(DEI)for our workforce and workplace.We continued to deliver on our DEI goals and efforts,and we publicly shared our DEI scorecard.This data has been informing the areas where we need to invest greater time and resources.For example,we have a long-standing commitment to fair pay practices and last year,our externally conducted pay equity analysis showed that our female colleagues earned more than 99 cents for every dollar earned by our similarly situated male colleagues.We are on track to achieve our goal to reach gender parity in our leadership pipeline by 2024.Recognizing our hard work,we are encouraged by the number of awards we received for our progress in 2022,including a#14 ranking on Fair360s(formerly known as DiversityInc)Top Companies for Diversity,a 10-place jump forward over the prior year.HEALTHY COMPANYESG PERFORMANCE METRICSINTRODUCTION2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE6Healthy Environment There is an intrinsic connection between human health and environmental health,and we know our stakeholders are counting on our company to further reduce emissions and ensure long-term sustainability.In 2022,we joined RE100,a global renewable energy initiative,and committed to source 100%renewable electricity by 2030.We continued our work to achieve carbon neutrality for our operations by 2040 and to reduce Scope 1 and 2 greenhouse gas emissions by 50%by 2030.We are currently working to expand our assessment of our Scope 3 greenhouse gas emissions and a timeline for defined science-based reduction targets.These steps build on a number of environmental investments in the areas of sustainable buildings,renewable electricity,water,and other innovations across The Cigna Group.We also are making more health care services available where and when people need them.Our MDLIVE platform provides virtual primary care,mental health care,urgent care,and more from the comfort,privacy,and convenience of wherever the individual prefers.With this platform,we also recognize the growing opportunity we have to further reduce greenhouse emissions with every use,including the environmental footprint generated by individual travel to care.Healthy CompanyStrong governance and ethical business practices are a cornerstone of our company.That is why all our colleagues around the world are guided in their every action by our Code of Ethics and Principles of Conduct.Along with our values,these guide our decisions both in actual letter,as well as intention.To ensure long-term business sustainability,we have cultivated a set of businesses of different sizes and scale,maturity,and rates of growth which individuallyand by working togetherposition our company to deliver on our mission.We updated our company name to The Cigna Group,reflecting the breadth of our businesses and relationships across our two growth platforms,each leading the way in the defining health issues of our time:access to quality,affordable medical benefits with Cigna Healthcare and the provision of a range of health solutions and pharmacy benefits with Evernorth Health Services.Finally,our focus on strong governance is evident at every level.Our ESG strategy and efforts have ultimate oversight by The Cigna Group Board of Directors,and we are pleased that our commitment to diversity and governance is reflected in our Board composition.In 2022,we exceeded the S&P benchmarks on median age,tenure,gender,and ethnic diversity.At The Cigna Group,we approach the worlds health challenges with optimism,urgency,and a confidence that we will continue to make a positive impact.Our efforts throughout 2022 earned our company the#1 ranking for corporate citizenship among the health care industry by JUST Capital and CNBC,a direct reflection of the hard work of our colleagues around the world,who remain relentlessly focused on delivering on our mission every day.Our work will never be done,but with clarity of focus,we will expand on our 2022 accomplishments in the years ahead and build a healthier world for all.Sincerely,DAVID M.CORDANI Chairman and Chief Executive Officer The Cigna GroupDONNA F.ZARCONE Chair,Corporate Governance Committee The Cigna Group Board of DirectorsHEALTHY COMPANYESG PERFORMANCE METRICSINTRODUCTION2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE7About The Cigna GroupOur MissionImprove the health and vitality of those we serve.Our VisionA better future built on the vitality of every individual and every community.Our Values Our values guide how we work together;serve our customers,patients,clients,and communities;and deliver on our mission.We care deeply about our customers,patients,and coworkers.We partner,collaborate,and keep our promises.We innovate and adapt.We act with speed and purpose.We create a better futuretogether.$180.5 billion total revenues2 million relationships with health care providers,clinics,and facilities 178 million customer relationships(3)70,000 employees committed to changing peoples lives for the betterAs of December 31,202230 countries and jurisdictions served;headquartered in Bloomfield,Connecticut,U.S.A.See our 2022 Annual Report and Form 10-K for more information.3 Effective January 1,2023,the way we calculate pharmacy lives has been updated to reflect actual customer-filled prescriptions through Inside Rx.Previously,these lives had been estimated based on active customers over a period of time.The total number of customer relationships as of December 31,2022,has been updated to reflect this change.HEALTHY COMPANYESG PERFORMANCE METRICSINTRODUCTION2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE8Our ESG Vision,Framework,and Strategy Our ESG vision is to transform the ecosystem of health into one that is well functioning,sustainable,accessible,and equitable advancing better health for all.Our ESG vision underscores our enterprise mission to improve the health and vitality of those we serve and is an extension of our values(see page 8).Our commitment to this vision guides us in our multidimensional value-creation framework and strategy as we strive to meet the needs of our many stakeholders.Starting in 2021 and continuing into 2022,we evolved our ESG framework.To guide that evolution,we engaged an independent consultant to perform an updated ESG priority assessment to identify the ESG issues that matter most to The Cigna Group business and our stakeholders and that represent areas where we have the greatest capacity to take action and make a positive impact.Based on the results of that assessment,we prioritized our ESG focus areas and organized them under four connected pillars,highlighted to the right.We intend to review these focus areas annually and conduct a formal priority assessment every few years.In 2022,we continued to evolve our ESG strategy by working with subject matter experts throughout the company to develop additional programmatic initiatives to drive our ESG vision forward over the next few years.We also identified key performance indicators(KPIs)to disclose in our future reports for each of our ESG focus areas to demonstrate our progress.A summary of this work for each focus area is denoted with a compass symbol throughout this report.Our Priority ESG Focus Areas Healthy Society Sustainable health care Product service and quality Health equity Community resilienceHealthy Workforce Employee health,safety,and vitality DEI within our workforce Human capital developmentHealthy Environment Climate change and emissions Sustainable operations Healthy Company Leadership and accountability Business ethics and compliance Data protection Responsible supply chainHEALTHY COMPANYESG PERFORMANCE METRICSINTRODUCTION2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE9ESG Governance and OversightTo deliver on our ESG vision and strategy,we leverage a robust governance structure that promotes oversight and accountability.The Cigna Group Board of Directors(the Board)has ultimate oversight responsibility for the companys ESG strategy and initiatives and has delegated certain responsibilities to its committees as described below.Our ESG focus areas are aligned to the applicable board committee(s)in the table at right.Corporate Governance Committee Ensures the Board adheres to strong board governance practices generally Monitors the companys policies,practices,and initiatives related to corporate responsibility and environmental sustainability Reviews and approves our annual ESG reportAudit Committee Oversees cybersecurity Oversees our disclosure controlsCompliance Committee Oversees health care regulatory requirements governing our business operations Oversees ethics,data security,and privacyPeople Resources Committee Oversees human capital management matters,including pay equity and DEIESG Focus AreaAudit CommitteeCompliance CommitteeCorporate Governance CommitteePeople Resources CommitteeBusiness ethics and complianceNot involvedInvolvedInvolved Not involvedClimate change and emissionsNot involvedNot involvedInvolved Not involvedCommunity resilience Not involvedNot involvedInvolved Not involvedData protectionInvolved Involved Not involvedNot involvedDEI within our workforceNot involvedNot involvedNot involvedInvolved Employee health,safety,and vitalityNot involvedNot involvedNot involvedInvolved Health equityNot involvedInvolved Not involvedNot involvedHuman capital developmentNot involvedNot involvedNot involvedInvolved Leadership and accountabilityNot involvedNot involvedInvolved Involved Product service and qualityNot involvedInvolved Not involvedNot involvedResponsible supply chainNot involvedNot involvedInvolved Not involvedSustainable health careNot involvedInvolved Not involvedNot involvedSustainable operationsNot involvedNot involvedInvolved Not involvedA specific ESG focus area has not been delegated to the Finance Board Committee.However,the entire Board has oversight responsibility for our ESG strategy and initiatives.HEALTHY COMPANYESG PERFORMANCE METRICSINTRODUCTION2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE10At the management level,our ESG Advisory Committee comprises several senior leaders from across the company,including leaders from each of our growth platforms,to support our ongoing commitment to environmental stewardship,a sustainable and equitable health care system,our employees,corporate social responsibility,and corporate governance.Ultimately,this committee,with support from our ESG team,seeks to further integrate our ESG vision throughout the enterprise strategy and operations of The Cigna Group.In 2022,we expanded our ESG team to include specific environmental sustainability expertise as we mature in progressing our climate-related commitments.Our ESG Governance ModelBOARD OF DIRECTORS Oversight of strategy and initiativesPRESIDENT AND CEOCapital expenditures and investmentsESG EXECUTIVE SPONSORS(ELT)ESG ADVISORY COMMITTEEESG CORE TEAM AND KEY MATRIX PARTNERSSnapshot of Recent ESG RecognitionsMember of Dow Jones Sustainability Index for both the World and North America,marking the sixth straight year that The Cigna Group has been named to the indices Top 1%in EcoVadis,improving to a Platinum Medal sustainability rating over Gold in 2021Upgraded to AA in MSCI ESG Ratings,representing industry leadershipHonored by Business Group on Health as Best Employer for Health and Well-beingRanked#14 on Fair360s (formerly known as DiversityInc)Top 50 Companies for Diversity,a 10-place jump forward from 2022Named a 2022 Best Places to Work for LGBTQ Equality by the Human Rights Campaign Foundation Named one of Americas Most JUST Companies for the third year by JUST Capital and CNBC,including:#1 in the Health Care Providers industry#16 overall in the JUST 100#1 in our industry for living wage,human rights,customer privacy,customer treatment,transparent communication,and sustainable materials(4)4 These represent JUST Capital issues and metrics where The Cigna Group scored at the top of the Health Care Providers industry.HEALTHY COMPANYESG PERFORMANCE METRICSINTRODUCTION2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE11Healthy SocietyWe advance better health for all.Building a well-functioning,sustainable,accessible,and equitable health care system requires understanding and addressing social determinants of health(SDOH)and improving medical quality and access while lowering health risks,promoting preventive health interventions,and coordinating all aspects of care.HEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT HEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCEINTRODUCTIONTABLE OF CONTENTSHEALTHY SOCIETY12Sustainable Health Care We are committed to transforming how care is accessed,delivered,and coordinated to drive better health outcomes and affordability for our clients and customers.Core to our approach to sustainable health care is influencing how patients access care and connect to the highest-quality physicians,medications,and optimized care modalitieswith a focus on value.We work toward this commitment through our two growth platforms within The Cigna Group:Evernorth Health Services includes a broad range of coordinated and point solution health services and capabilities in pharmacy benefits,home delivery pharmacy,specialty pharmacy,distribution,and care delivery and management solutions,which are provided to health plans,employers,government organizations,and health care providers.Cigna Healthcare includes our U.S.Commercial,U.S.Government,and International Health operating segments,which provide comprehensive medical and coordinated solutions to clients and customers.Through these businesses,we are taking action to meaningfully improve affordability,access,and health outcomes by:Creating high-performing networks that drive quality and improve access(page 14)Lowering the cost of prescription and specialty drugs(page 18)Guiding customers to optimal sites of care(page 19)Tackling the most-complex,highest-cost health needs and conditions(page 20)INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE13Creating High-Performing Networks that Drive Quality and Improve Access We design medical,behavioral,and pharmacy networks that drive patients to top-performing clinicians who recommend more clinically effective treatments and medications,thereby driving affordability and value.Investing in Value-Based CareValue-based care models are health care models through which we pay health care providers based on health outcomes and quality metrics instead of based on the volume of care and services delivered.Outcome data is measured on specific interventions to highlight both clinical and cost impacts.As part of our existing value-based model,Cigna Collaborative Care,we have the following as of the end of 2022:670 collaborative care programs240 accountable care organizations(5)126K primary care providers in value-based arrangements92K specialty providers3M customers who received value-based care through these programs 75%of Medicare Advantage customers in value-based arrangementsIn 2022,we entered into a multi-year strategic collaboration with VillageMD,one of the largest independent primary care groups in the United States with excellence in value-based care.With this collaboration,we will accelerate a value-based care model that allows patients to move seamlessly between virtual,digital,and in-person physicians.It will help reduce health care costs and make sure patients receive the appropriate care in the most optimal setting and at the right time.Supporting our Medicare Advantage CustomersWe continued to expand our Medicare Advantage program geographically in 2022,adding three states and 108 counties that represent nearly 30dressable market growth over 2021.We announced that we are adding another two states and 106 counties to prepare for our 2023 plan year.Here are a couple ways we supported our Medicare Advantage customers in 2022(see also page 19):Expanded transportation benefit We provide eligible customers with a same-day transportation benefit to go to doctor appointments or the pharmacy.With the extreme heat in 2022,we expanded this to provide rides to community cooling centers for customers to safely find relief from the heat at no extra cost.In the winter,we also provided this benefit to customers experiencing heating system failures during cold weather.Meal delivery We provide 14 days of free meal delivery after a hospital stay for eligible customers.In 2022,we delivered approximately 900,000 meals to more than 45,000 people.5 As defined by the Centers for Medicare&Medicaid Services,accountable care organizations are groups of doctors,hospitals,and other health care providers that come together voluntarily to give coordinated high-quality care to their Medicare patients.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE14Expanding Access and Removing Barriers to Behavioral Health CareWe are an industry leader in recognizing the link between physical and behavioral health and viewing health holistically.In 2022,our Evernorth Research Institute findings showing lower medical and pharmacy costs associated with outpatient behavioral health treatment following a medical diagnosiswere published in the Journal of the American Medical Association Network Open.Recognizing the importance of this link,we continued to take the following approaches in behavioral health care:Increasing accessibility of behavioral health careIn 2022,our network of behavioral health providers grew by more than 30%to include more than 300,000 mental health and substance use providersdoubling over the past four years.Our virtual care network grew nearly 100%to include more than 163,000 virtual behavioral health providers.Virtual care helps customers overcome potential barriers related to mental health stigma,scheduling,privacy,and in-person accessibility.Behavioral Care Pilot with MDLIVEIn 2022,we launched a digital-first,virtual-led,data-informed behavioral care mobile app to pilot with our approximately 1,400 MDLIVE behavioral health clinicians.The app allows patients faster access to behavioral care where and when they need it.Studies show that the average total time to care for behavioral health can range from 6 weeks to 3 months.(8)During the first four months of the pilot,we observed a shorter total time to care.Refining and building upon capabilities developed through this pilot will position us to deliver more personalized,flexible,digital-first,and virtual-led experiences for additional health conditions while offering personalized recommendations for improved health outcomes.This pilot is an example of how several components of The Cigna Groupbehavioral health,digital and analytics,and care deliverywork together to serve our customers.Addressing health equity in behavioral health careWe increased our network to include providers who support cultural and race-related counseling by approximately 21%in 2022.Plus,to expand behavioral health care access,we established partnerships with several virtual ancillary providers,(6)most of whom have a focus on vulnerable populations.Using data-informed insights to improve behavioral health careIn 2022,we created and tested new predictive models,including an autism early identification model that allows us to identify and conduct proactive outreach to families with a child likely to be diagnosed with autism spectrum disorder.Through this early intervention,we provide families with education and resources during a time when they may have the most questions,and we help them navigate medical,behavioral,pharmacy,and community resources.Driving better health outcomesMental health treatment in tandem with oncology treatment can help improve cancer survival.(7)We created an oncology-specific behavioral health provider network powered by our collaborative relationship with the American Psychosocial Oncology Society.Our behavioral health providers have the opportunity to complete an on-demand,30-hour course to receive an oncology specialty designation within our behavioral health network.This designation will help us connect cancer patients to specialists who have the expertise and experience to help them achieve whole-person health and wellness.6 Ancillary providers are large virtual provider groups,typically offering services in multiple states or nationwide.Some ancillaries provide general mental health and/or substance use services,while others may specialize in condition-specific care(e.g.,eating disorders).7 Berchuck JE,Meyer CS,Zhang N,Berchuck CM,et al.Association of Mental Health Treatment With Outcomes for US Veterans Diagnosed With Non-Small Cell Lung Cancer.JAMA Oncology,2020 Jul 1;6(7):1055-1062.doi:10.1001/jamaoncol.2020.1466.https:/pubmed.ncbi.nlm.nih.gov/32496507/8 California Joins States Trying to Shorten Wait Times for Mental Health Care|HealthLeaders Media,2021-CCBHC-Impact-Report.pdf(thenationalcouncil.org)INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE15Managing Substance Use DisordersWhen it comes to managing substance use disorders,our objectives are to:Encourage customers to make behavioral changes and take the steps necessary to initiate and engage in outpatient behavioral treatment Reduce readmissions to higher levels of care Provide support to customers and family members seeking help for a substance use disorderThrough the use of predictive modeling,we identify high-complexity cases and conduct proactive outreach through our case managers who specialize in substance use disorders.The case managers coach customers throughout their recovery journey and provide support,such as exploring outpatient treatment and coordinating care with primary care doctors.We have a dedicated phone line for substance use disorders,along with 24/7 availability through our clinical after-hours crisis line.For certain patients struggling with opioid use disorder,we support medication-assisted treatment,which can include a combination of therapy and medications to help opioid use disorder and/or pain management,and cognitive behavioral therapy to reduce and manage pain with fewer or no opioids.Other program components include proactively reaching out to high-risk customers,collaborating with providers to ensure continuity of care,and engaging with customers to complete behavioral health treatment for pain management.We continue to leverage interventions as part of the Express Scripts Advanced Opioid Management program.(9)In 2022,we continued to expand our virtual opioid use disorder programs in our behavioral health network.In 2018,we set a goal to reduce opioid overdoses by 25%among customers in targeted U.S.communities(Chicago,Connecticut,Mid-Atlantic,New York/New Jersey,and Philadelphia)by 2021.(9)While we fell short of that goal,we continued to track our efforts and reached a 30%reduction in opioid overdoses by the end of 2022.Given opioid overdoses in the United States remained high in 2022,this is a noteworthy achievement.In 2023,we are continuing to scale the initiatives that took place as part of this program across additional markets throughout the enterprise.In addition to the interventions identified above,our own pharmacies,as part of the Express Scripts professional practice of pharmacy,regularly review and monitor opioids and other medications of interest.For example,all opioid prescriptions are routed to a dedicated group of trained pharmacists who review them against Centers for Disease Control and Prevention(CDC)Clinical Practice Guidelines and Drug Enforcement Administration(DEA)red flag identification protocols.This includes,where clinically indicated:Engaging prescribers and patients to ensure safe and appropriate therapy Ensuring appropriate dosing and supply Checking for medication combinations that may indicate inappropriate use Reviewing individual state prescription monitoring databases Monitoring reported prescription loss and early refill/overutilization patternsAdditionally,when we are filling a prescription for a patient who is receiving a higher dose of opioids,our pharmacists review the availability of naloxone(10)and ensures the patient has access to it.9 Please see page 24 of our 2021 Corporate Responsibility Report for more details.10 Naloxone is a medicine that rapidly reverses an opioid overdose.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCEWe reached a 30%reduction in opioid overdoses by the end of 2022.16Supporting Youth Mental Health and FamiliesAttention on the state of mental health in the United States is arguably higher than ever.A recent Evernorth analysis of commercially insured customer data shows there is reason for concernparticularly when it comes to the health and safety of children and adolescents.Suicidal ideation and suicide attempts exceed pre-pandemic levels across all age groups,but the largest increase occurred in those aged 17 and under.Our data shows a 14%increase in suicide-related diagnoses in children and adolescents,accounting for 35%of all customers with these diagnoses.(11)We saw similar concerns in a 2022 study we commissioned with Economist Impact to better understand the mental health impacts of the pandemic for teens and the ripple effect for parents,families,and communities.Nearly 80%of the 1,100 parents surveyed reported seeing new or increased signals of potential mental health issues from their teens,including anxiety,depression,behavioral issues,and/or increased problems with social interactions.Through Evernorth Health Services,we have a suite of behavioral coaching and programs to help support both youth in need of behavioral health interventions related to mental health,substance use,autism,and eating disorders and their loved ones.Through these programs,we aim to connect youth to services and educate and empower parents to navigate and access resources.As of the end of 2022,we have:172,000 behavioral health providers treating children/adolescents;27,000 providers added to the network in 2022,a growth rate of nearly 19%2,700 facilities treating children/adolescents;200 facilities added in 2022,a more than 8%growth rate138 Child and Adolescent Center of Excellence locations,providing quality,affordable careContracted with a national pediatric behavioral health provider that provides virtual support for kids,teens,and parents (and expanded nationally as of early 2023)Specific to autism,we announced a first-of-its-kind partnership in 2022 with Behavioral Health Center of Excellence,a data-driven health services accreditor.The partnership allows us to collaborate on developing quality performance measures that will help people with autism and their caregivers assess the quality of their treatment.We also invest in youth mental health through our charitable giving efforts.For example,The Cigna Group Foundation supported the Covenant House in Missouri,which welcomes LGBTQ youth who may be runaways,trafficked,or at risk or who may be experiencing homelessness.The organization has therapists trained to address traumatic situations that many LGBTQ youth face,such as bullying,discrimination,rejection,and violence.We also partnered with Bright Star Community Outreach to improve mental health for kids in Chicago.And Healthier Kids For Our Future(see page 31)prioritizes the mental health and emotional well-being of our children.Illustrating the Importance of IntegrationIn early 2023,we released a study,conducted by Aon plc,that finds triple integration of medical,pharmacy,and behavioral benefits resulted in lower health care costs for employers and improved health outcomes.We have seen this play out in our care delivery business,where we saw cost savings through our integrated health center,coaching,and case management services at$942 per member per year.(12)And we saw a 35%reduction in inpatient admissions among our patient population that used our integrated health center,coaching,and case management services.(13)11 Nemecek D.American Youth Increasingly at Risk of Suicide.Evernorth Health Services.February 8,2023.https:/ Cost savings were determined from an internal analysis of 2021 client data.13 Results from our care delivery business were obtained through an internal study conducted in 2022,which utilized 2021 data that analyzed the impact of the integrated health center,coaching,and case management clinical team.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE17Lowering the Cost of Prescription and Specialty DrugsWe increase the value of every dollar spent on pharmaceuticals by procuring drugs at the lowest price,driving appropriate clinical interventions,and moving to cost-effective,clinically appropriate alternatives when available.One way we do this is through biosimilars,which are biological products highly similar to,and with no clinically meaningful differences from,existing biologics.In 2022,we added insulin biosimilar SEMGLEE to our Express Scripts National Preferred Formulary,and in 2023,we will add preferred biosimilars for HUMIRA,one of the most widely used biologic specialty medications that treats conditions such as rheumatoid arthritis,Crohns disease,and psoriasis.We also address cost and accessibility of gene therapies with our Embarc Benefit Protection program.Gene therapies can be life-changing for patients with rare diseases but can also be incredibly expensive.Through Embarc Benefit Protection,we help shield health plans and customers from the high cost of breakthrough gene therapy drugs.In 2022,an average of approximately 5.8 million customers were included in the program,and we added two gene therapies to the program:ZYNTEGLO(betibeglogene autotemcel):Used for a blood disorder known as beta thalassemia in patients who cannot make enough beta-globin and require regular red blood cell transfusions at a one-time cost of$2.8 million.ZYNTEGLO has the potential to free patients from chronic transfusions,helping them eliminate hundreds of hours each year managing the disease.SKYSONA(elivaldogene autotemcel):With a one-time cost of$3 million,this gene therapy slows the progression of early,active cerebral adrenoleukodystrophy(CALD)in patients 417 years of age.CALD is a rare neurodegenerative disease that can lead to progressive,irreversible loss of neurologic function and death.Through our pharmacy benefits manager,Express Scripts,we negotiate with pharmaceutical manufacturers to lower the cost of drugs for our clients and patients.Overall,savings negotiated by Express Scripts in 2022 helped keep average out-of-pocket costs for a 30-day prescription to less than$15 for patients with coverage in the commercial market,less than$9 for Medicare beneficiaries,and less than$1 for Medicaid beneficiaries.(14)More specifically,Express Scripts was among the first to address costs for insulin for patients with diabetes through the Patient Assurance Program,where patients spend no more than$25 for a 30-day supply.Patients taking insulin saved more than$18 million with point-of-sale discounts in 2022 alone,part of more than$45 million in member savings on insulin since the program launched in 2020.(15)Also,as a result of successful pilots in 2022 and the years preceding,we recently announced new products and services that will be available starting in summer 2023:New Copay Assurance plan(CAP)ensures consumers pay less out of pocket by capping copays on prescription drugs:no more than$5 for generics,$25 for preferred brand drugs,and$45 for preferred specialty brand drugs.Introduction of a fully transparent pricing model,ClearCareRx,a simpler option in which employers,health plans,and government employer clients pay exactly what Express Scripts pays for drugs.Launch of IndependentRx Initiative to expand rural health care access through partnerships with independent pharmacies.The new initiative will offer increased reimbursement opportunities and additional care services to rural independent pharmaciesand create an Independent Pharmacy Advisory Committee to expand the role of rural,suburban,and urban pharmacies in the health care system.The new solutions will increase access to affordable medicines and drive greater transparency and predictability.14 Express Scripts.“Delivering Value&Affordability to Consumers.”2023.https:/express- based on Express Scripts entire book of business.15 Gilroy C.“Close Management of Diabetes Medications Lowers Medical Costs.”Evernorth Health Services.June 16,2022.https:/ COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCEThrough the Patient Assurance Program,patients taking insulin saved more than$18 million with point-of-sale discounts in 2022 alone.18Guiding Customers to Optimal Sites of CareWe are working to transform and improve how care is coordinated,accessed,and delivered.This includes navigating patients to virtual,digital,and in-home alternatives,which improve access through greater ease,speed,and trust-based interactions.This enhanced access improves identification,diagnosis,and management of critical care needs.VirtualIn 2022,MDLIVE announced the next evolution of our rapidly growing virtual primary care program to enhance support for patients with chronic conditions.The program will initially target patients with hypertension.Their MDLIVE primary care doctor will work with them to develop a personalized care plan that includes condition management and lifestyle goals,lab tests,medication management,and any necessary referrals to other health providers.In between regular visits,their care team will track their progress with remote monitoring through connected devices,such as blood pressure cuffs and blood glucose monitoring devices.In-HomeWe launched a program to offer home visits at no additional cost to Medicare Advantage customers living with multiple chronic health conditions.The new program addresses common barriers to care faced by older Americans,including chronic conditions,limited mobility,and transportation issues.Additionally,in-home care for chronic kidney conditions is now(16)available to more of our Medicare Advantage customers through Monogram Health,a The Cigna Group Ventures portfolio company.Separately,we saw 96%patient satisfaction in 2022 from our Home Health Management program,where we authorize and coordinate medically appropriate,home-based nursing and therapies.DigitalAn example of how were moving to digital care is the addition of five app-based programs to our Evernorth Digital Health Formulary to help people better manage their sleep issues,anxiety,alcohol and opioid use disorders,and inflammatory conditions.We also launched a new platform for both psoriasis and eczema from Zerigo Health,a Cigna Ventures portfolio company.Zerigos solution will be offered as a pilot program through our Digital Health Formulary.In a crowded digital health marketplace,our Digital Health Formulary is a clinically based platform of verified,credible health apps designed to help people achieve their health goals.Driving Innovation through The Cigna Group VenturesThe Cigna Group Ventures is our strategic venture fund and wholly owned subsidiary with a mission to be a catalyst for health care innovation.We committed an additional$450 million(17)to the fund in February 2022 to drive continuous health care transformation,innovation,and growth.16 As of February 7,2023.17 In 2018,The Cigna Group committed$250 million to The Cigna Group Ventures to fund investments in promising startups and growth-stage companies that are making groundbreaking progress in three strategic areas:digital health/experience,insights/analytics,and care delivery/enablement.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE19Tackling the Most-Complex,Highest-Cost Health Needs and ConditionsWe focus on conditions that account for the majority of health care spendsuch as diabetes,oncology,behavioral,musculoskeletal,and rare and orphan diseasescreating coordinated care pathways for patients that reduce waste and effectively manage the entire health care journey,supporting better health outcomes.For example,in 2022,we:Launched a new service to improve health outcomes for patients with complex cancers.The service connects patients and their community oncologists with cancer sub-specialty experts at National Cancer Institutedesignated centers.In a pilot with select Cigna Healthcare customers,85%of eligible community oncologists and their patients participated in the program by having their treatment plans reviewed by expert oncologists in the PinnacleCare network of medical centers of excellence across the country.Among the reviewed cases,40%of patients benefited from recommendations for alternative tests and therapy choices based on the newest advancements in research and treatment innovations.Unveiled Cigna PathwellSM,a concierge service that creates a personalized end-to-end health journey for patients living with high-cost health conditions and streamlines benefits management for their employers.Pathwell Specialty supports patients with complex or rare conditions,and Pathwell Bone&Joint addresses musculoskeletal conditions.Both integrate our high-performing provider networks and medical benefits management with analytics,clinical expertise,and personalized digital support.Learn more about our work in diabetes on page 27.WHERE WERE GOING IN SUSTAINABLE HEALTH CAREWe are committed to building on our momentum in sustainable health care.For example,we plan to:Continue to develop and implement targeted customer initiatives to improve health screening rates and subsequent health outcomes Positively impact oncology patients engagement,health outcomes,and costs by identifying cancer earlier and using genomic testing to avoid unnecessary,ineffective treatment Disclose our pharmacist completion rate of specialized clinical training Continue to develop and implement initiatives to engage patients through our Accredo Therapeutic Resource Centers,and report our progress of increasing average medication adherence for our integrated multiple sclerosis(MS)population and the percentage of MS patients engaged within 180 days of their first fill Demonstrate thought leadership by sharing the number of peer-reviewed studies published and/or presentations at conferences related to our Accredo specialty areasINTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE20Product Service and QualityThe Cigna Group portfolio of offerings solves diverse challenges across the health care system.We offer a differentiated set of pharmacy,medical,behavioral,dental,and supplemental products and services.The experiences of our customers and clients are critical to protecting and improving our customers health and vitality,as well as enabling our business strategy and being a source of competitive differentiation.For these reasons,we manage ongoing,real-time feedback loops across audiences,business lines,and channels.The insights we glean from these programs inform the actions we take and the investments we make in product,service,and quality improvements across the enterprise.Maintaining QualityWe are committed to providing customers with the right care at the right time in the right place.We invest substantial resources in a broad scope of quality programs,and our commitment to quality has been recognized by national external accreditation organizations and through numerous industry and community awards.Our integrated Quality Management Governing Body oversees the Quality Programs for The Cigna Group and its operating subsidiaries,and it annually evaluates the performance of Quality Programs through an assessment of relevant indicators and activities.The results of this analysis drive improvement throughout the organization.The responsibility for maintaining a robust and successful Quality Program extends beyond our National Quality team and includes collaboration and support from multiple operational areas across the enterprise.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE21We use the Healthcare Effectiveness Data and Information Set(HEDIS)(18)to evaluate performance and identify opportunities for improvement using a market-based approach.Accredo Earns URAC Rare Disease Pharmacy Center of Excellence DesignationThe URAC accreditation(19)recognizes Accredo,our specialty pharmacy,for demonstrating commitment to quality health services,patient safety,and improved outcomes for patients living with rare diseases.Customer Experience The Cigna Group uses a variety of metrics to track,evaluate,and improve customer satisfaction,including:The Relationship Net Promoter Score(rNPS),which tracks our customers overall experience with The Cigna Group products and services The Transactional Net Promoter Score(tNPS),which tracks customer satisfaction with the service experience across human-assisted and self-service channels Customer feedback generated outside of our NPS surveys,including online comment cards,social media engagement,call monitoring,app store reviews,and more Our Commitment to Quality outlines our customers rights and responsibilities,along with how to share any concerns or complaints with us.Each customer appeal or grievance that is raised with our escalated call team or through executive office complaints is reviewed by the Satisfaction Organization.This team reviews the cause of the escalation as well as all actions taken toward resolution through case reviews,call reviews,and end-to-end audits.We do this to gain a better understanding of opportunities for improvement and to prevent similar experiences for future customers.We maintain all records of formal complaints raised with the executive office to report to compliance,the state,and other legal entities for audits and examinations.The Executive Operating Committee of The Cigna Group,comprising C-suite executives and senior leaders,is responsible for oversight of our customer experience.The committee receives regular updates on our progress against a defined set of objectives in the areas of engagement,efficiency,value generation,and satisfaction.Accredo CaresFor patients with bleeding disorders,we have a dedicated website,that provides several educational resources.Topics cover treatment options,venous access,emergency care,guides for coaches and educators,and information for all stages of life,from newborn to adulthood.In addition,for more than 25 years,our Accredo teams have been including“Accredo Cares Packs”in treatment shipments to our pediatric patients with bleeding disorders.The Accredo Cares Packs started as a way to help ease anxiety for our pediatric patients who have to get poked with needles as part of their treatment and include items like cartoon character bandages,small toys,and books.18 HEDIS is a registered trademark of the National Committee for Quality Assurance(NCQA).HEDIS is one of the most widely used performance improvement tools in health care and is a standardized set of measurements for health plans that undergoes strict validation by NCQA auditors,who certify data reliability and integrity and evaluate the effectiveness of managed care clinical programs.19 Founded in 1990 as a nonprofit organization,URAC is the independent leader in promoting health care quality and patient safety through renowned accreditation programs.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICSTABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT 22Helping Customers Navigate Challenging Times In response to Russias invasion of Ukraine in 2022,many Western governments,including the United States,sanctioned Russian banks,businesses,and individuals.The necessity to fully comply with this complex matrix of legal obligations could have conflicted with our intent of always putting customers first.We quickly mobilized to understand the nuances of the various sanctions and the range of customers potentially impacted.We actively communicated with customers to ensure they could navigate the implications of the situation and to minimize any impact on access to care.For example,we implemented technology solutions to avoid inadvertently paying claims into a sanctioned bank,and we operationalized guidelines to ensure our exposure was monitored and carefully controlled.We also supported our customers through the many natural disasters that struck in 2022.For example,when Hurricane Ian hit Florida in late September,we took a number of steps to help our customers in the region access the care they needed as easily as possible,including easing prescription requirements,extending access to a toll-free help line,covering out-of-network claims as in-network,and relaxing prior authorization requirements.See page 32 to learn more about our efforts in the face of disasters.In Lee County,Florida,one of Hurricane Ians hardest hit areas,our Evernorth Direct Health colleagues,in partnership with the Lee County Sheriffs Office,set up a mobile clinic for urgent care visits in the hurricanes aftermath.In just three days,the mobile unit was fully functional as an urgent care walk-in clinic,and all Evernorth Direct team members were onsite to serve frontline workers and their families,refill medications,and provide telephonic visits.The team sent out more than 1,500 messages to patients to inform them of the mobile centers temporary hours,services,and contact information.WHERE WERE GOING IN PRODUCT SERVICE AND QUALITY Looking ahead in Product Service and Quality,we aim to maintain our URAC Rare Disease Center of Excellence designation and our Specialty Pharmacy Accreditation.Well also look to demonstrate progress through our HEDIS composite scores.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE23Health EquityOur health starts in the communities where we are born,grow,work,live,and age.Thats because SDOH,or the wider set of forces and systems shaping the conditions of daily life,play an important role in achieving optimal health and vitality.When social needs,such as food,transportation,communication,and cultural understanding and respect,are not met,they can negatively impact health status,utilization of care,and,ultimately,health outcomes.Many underrepresented segments of the population,including racial and ethnic minorities,individuals with disabilities,LGBTQ individuals,and people living in lower-income or rural communities,are disproportionately impacted by negative social conditions.This leads to health disparities,which are meaningful and preventable differences in health between members of the population.To achieve health equity,or optimal health for all people,we must address these complex societal and environmental drivers of care.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE24Our Strategy For more than 15 years,The Cigna Group has been on a mission to ensure all people have the opportunity to achieve their full health potential regardless of social,economic,or environmental circumstances.We continue to lead industry efforts,including active engagement with key stakeholders and communities,to promote the identification of health disparities and initiatives to close gaps.We take action to improve health equity through our business and our charitable giving efforts.Our Health Equity Committee,part of our DEI Council(see page 41),drives oversight and accountability for our health equity strategy,which is focused on what we refer to as the three Es of equity:1.Executing on health equity program goals2.Eliminating health disparities in diabetes 3.Embedding health equity into all that we doPlease see page 30 for more information about how we align our charitable giving efforts to SDOH.Expanding Access to Care for LGBTQ IndividualsOver the last two years,we worked with medical providers in our directory to assess whether they feel competent and confident in treating individuals who identify as LGBTQ .Now,LGBTQ individuals can search our provider directory for a physician who aligns with their values.Looking ahead,we are expanding this practice to our dental provider directory.Read more here about how health equity for the LGBTQ community starts with providers.How Data Helps Drive Health EquityOur proprietary Social Determinants Index(SDI)helps us identify communities of customer populations whose overall health status and utilization of care are negatively impacted by SDOH and where additional resources may need to be deployed to reduce barriers to optimal health.Read more about the SDI here.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE25In 2022,we expanded our maternal health pilot program into three additional markets.Executing on Our Health Equity Program Goals in 2022In 2022,we met key milestones for each of the following health equity programming goals,which focus on innovation and solution enhancements,provider collaboration,and digital equity:1.Advanced programs to address the root cause of health disparities2.Enhanced enterprise solutions to identify disparity gaps3.Influenced client planning to promote health equity4.Collaborated with providers as a partner of choice5.Progressed on commitment to expand digital solutionsThe following are some key initiatives that helped us advance our goals in 2022.Maternal Health PilotInitially launched in 2021,our maternal health pilot aims to reduce disparities in birth outcomes for Black mothers in the United States.Program elements include:Implicit bias training for providers Comprehensive risk screenings to identify those at risk for preterm birth Free home delivery of prenatal vitamins and aspirin,when prescribed for enrolled pregnant customers Prenatal and postpartum screening for depression and anxiety Nurse advocates to connect with providers and patients to remove barriers to a healthy pregnancy SDOH screenings and referrals to local resources for assistance as needed Arranged transportation to/from OB-GYN prenatal appointments as neededFollowing early signs of success in 2021,we expanded the program into three additional markets in 2022,and we are adding many elements of the pilot into our overall maternity program.Incentivizing Providers to Implement Health Equity ActionsWe include health equity performance measures as part of quality metrics for some of our contracted collaborative accountable care(CAC)providers.(20)We award these CAC provider groups shared savings for efforts to improve quality and affordability,including screening for SDOH and assessing health disparities among their patient populations and developing action plans to address an identified disparity in their patient population.As of June 2023,approximately 92%of our targeted CAC providers have implemented SDOH screening for their patient population and approximately 87%have identified a health disparity and are creating action plans to address those disparities.In honor of the 15th anniversary of our CAC program,we deepened our commitment to embedding health equity outcomes into our value-based relationships by launching the Health Equity Action Awards Challenge.The challenge celebrates and recognizes CAC provider partners who are going above and beyond to improve health equity in their communities.For example,our gold award winner,Novant Health,conducted nearly 370,000 screenings for food insecurity,provided emergency food packs,and connected nearly 60%of food insecure patients with a local community resource.MDLIVE Multicultural CampaignThrough MDLIVEs virtual care offering,we can leverage a broad and diverse provider network to expand access to care for many individuals who face SDOH,such as transportation and copay costs.To increase the use of MDLIVE for acute,episodic care in communities with a high social need,we created a multicultural marketing campaign directed to the diverse workforce of several of our clients who may benefit from virtual care.20 These measures are included for our CAC COVID Care and Total Medical Cost CAC provider groups.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE1234526Eliminating Disparities in Diabetes Diabetes is one of the most complex and costly chronic conditions,and it disproportionately affects certain populations,with SDOH contributing to the prevalence of diabetes,timeliness of diagnosis,and quality and maintenance of treatment.We aim to eliminate health disparities in the incidence,management,and progression of diabetes.In 2022,we took the following steps toward meeting this goal.Tech-Empowered Community Health Worker Pilot In late 2022,we launched a new pilot program to better identify,engage,and empower customers living with diabetes in communities at higher risk for health disparities.This virtual program leverages community health workers to engage,identify,and address participants SDOH and connect them to relevant resources to meet their needs.Condition knowledge,healthy eating,scheduling,and transportation to appointments are some common barriers being addressed through the pilot.Diabetes Support through Individual and Family Plans(21)We offer select diabetes supplies at low or no cost as part of our eligible Individual and Family Plans,as well as enhanced diabetes benefits as part of condition-specific plans,available in select markets.Were proud that our health plans help enable entrepreneurs.For example,an Indiana customer and her family were able to become restaurant owners without worrying whether monthly diabetes medications would be affordable.Focused Training for Hispanic/Latino Diabetes Management In partnership with our Juntos Enterprise Resource Group(ERG)(see page 43),we evolved our care management program by developing new training resources for our customer-facing clinical employees when working with Hispanic/Latino customers living with diabetes.More than 1,200 employees took this training,and 70%of them reported improved confidence after course completion.This training is the third installment in a series of multicultural training resources for our customer-facing clinical employees.The first two installments focus on better understanding customers of South Asian descent living with cardiovascular disease and Black customers living with diabetes.iTournament ChallengeEvery year,our Aspire ERG(see page 43)holds a “Shark Tank”style challenge to identify potential new solutions to some of the most pressing health issues that impact our business and the people we serve.In 2022,the ERG partnered with the Health Equity Committee of our DEI Council to focus on disparities in diabetes.The challenge generated nearly 100 creative submissions,and six finalists were chosen to present their projects to a panel of company leaders for consideration in our strategy planning.Ideas ranged from technology advancements to community partnerships,and finalist projects are being considered for pilots and other ways to operationalize.The iTournament Challenge is one example of how we embed health equity into our culture to drive innovation and make health equity a part of our DNA.21 Different from employer-sponsored plans,our Individual and Family Plans(IFPs)business offers both individual medical and dental plans.IFPs primarily serves people who purchase health insurance plans through the Individual Exchange,which was created as part of the Affordable Care Act in 2014.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE27Embedding Health Equity in All We DoTo further advance our health equity program,we are embedding health equity into our culture,systems,policies,and practices.We empower our employees to approach their work through an equity lens in multiple ways.Digital Accessibility Policy and ProgramIn 2022,we created a Digital Accessibility Policy,which outlines our commitment to ensuring that our websites,our mobile applications,and all digital content are accessible to individuals of all abilities.Further,we formed a Digital Accessibility Steering Committee in partnership with our ABLE ERG(see page 43).The committee is made up of leaders from across the enterprise,and their mission is to strengthen the culture of inclusivity,to eliminate digital accessibility barriers,and to empower all employees to achieve their full potential within The Cigna Group.Applying a Health Equity Lens to Coverage PolicyRecognizing that risk factors for diseases and responses to therapies can vary by race and ethnicity,our Coverage Policy Unit reviewed all existing medical coverage policies to ensure that the policies account for those differences and recommended changes where needed.For example,a recent review revealed that our policies did not account for findings that people of South Asian descent often develop diabetes and cardiovascular disease at a much lower body mass index(BMI)than their counterparts of other racial and ethnic groups.Following the review,we reduced the BMI required for bariatric surgery for people of Asian descent as a means to prevent or treat diabetes and/or cardiovascular disease in this population.Read another example here.The unit is also applying this health equity lens as new policies are developed.Employees as Health Equity Advocates and AmbassadorsWe empower employees to identify and implement opportunities related to health equity through structured learning pathways and on-demand education available through our learning management system.In 2022,we established a Health Equity Community of Practicean opportunity for any employee,regardless of role,to participate in monthly conversations about health equity and how it may apply to their work.Cross Cultural Diversity Forum The Cross Cultural Diversity Forum is a dedicated group within our Care Solutions business that aims to minimize disparities in the delivery of clinical services to our diverse customers.The group meets every six weeks to learn from colleagues clinical expertise,develop materials to educate staff,and collaborate with others throughout the enterprise.Plus,see page 63 to read how were responsibly approaching the use of augmented intelligence in our work.WHERE WERE GOING IN HEALTH EQUITYLooking ahead,we plan to gauge our progress in embedding health equity throughout our enterprise and how frequently health equityrelated services are being used by our customers through the following:Direct customer race/ethnicity demographic data collected Types of collaborations with nonprofit and for-profit organizations to drive health equity initiatives with a focus on SDOH Number of employees completing cultural competency and health equity training Number of translation requests fulfilled in support of inclusivity of our customers with limited English proficiency Number of requests fulfilled for health literacy and accessibility in support of inclusivity for our deaf,hard of hearing,vision impaired,and blind customersIn 2023,were evolving our health equity strategy and continuing to identify opportunities to demonstrate progress in advancing our health equity goals and metrics.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE28Community Resilience In 2022,our charitable contributions totaled nearly$54 million.These donations reflect and magnify the positive impacts of our mission to improve the health and vitality of those we serve.The Cigna Group gives to communities in three primary ways:through The Cigna Group Foundation(Foundation),corporate giving,and employee giving and volunteerism.The Cigna Group FoundationFor more than 50 years,the Foundation has advanced the companys mission through charitable grants to nonprofit organizations that create innovative health solutions and address community needs in ways that are sustainable,scalable,and effective.The Foundation currently focuses giving on a few primary areas,including health and well-being,education and workforce development,and community and social issues.These focus areas are highlighted through community impact programs,such as Healthier Kids For Our Future,and through the Foundations support of our Building Equity and Equality Program.Our charitable giving,with a focus on health equity and access to health,helps to create more vibrant,healthier,and more equitable communities.In 2022,the Foundation funded 152 grants,90%of which supported efforts to address SDOH,as described on the next page.Total Foundation giving in 2022 amounted to more than$16.5 million.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE292022 The Cigna Group Foundation Grants and How They Aligned to SDOH 90%of our 2022 Foundation grants supported efforts to address SDOH.152 grants total80 Health Care Access grants(53%)Connecting community members to clinical and behavioral services using community health workers and culturally appropriate clinical staff28 Economic Stability grants(18%)Connecting community members to financial resources to work toward eliminating food insecurity,unemployment,and housing instability22 Education grants(14%)Supporting access to early childhood education,graduation from high school,and affordable higher education 4 Social and Community grants(3%)Supporting positive relationships at home,at work,and in the community,which can help reduce negative health impacts 3 Neighborhood and Environment grants(2%)Supporting racial/ethnic minorities and people with low incomes living in places with risk of crime,noise,inaccessible areas,and pollutants that trigger asthma attacks15 Other grants(10%)Providing disaster relief and employee engagement donationsSupporting the Building Equity and Equality ProgramThe Building Equity and Equality Program,launched in 2020,is a five-year initiative by The Cigna Group to expand and accelerate efforts to support diversity,inclusion,equity,and equality for communities of color.The Foundation has provided support for this initiative through grants to organizations that address SDOH and improve access to education and job opportunities for underserved and underrepresented groups.For example,in 2022,the Foundation provided a grant to a long-standing partner,the University of Marylands Health Advocates In-Reach and Research(HAIR)program,to further amplify important health topics in the Black community.Launched with the help of the Foundation,HAIR builds upon the rich and powerful history of barbers and beauticians as trusted entrepreneurs in Black and African American communities,working with them to reduce disparities and create a local infrastructure of public health and medical services,including health screenings and education.In 2022,HAIR developed a series of comic books featuring local settings and health facts woven throughout the stories to educate readers about important health topics.To boost the impact of HAIR,The Cigna Group,the National Football League(NFL),and the Baltimore Ravens filmed a 30-second spot featuring the program,which was televised nationally during NFL games on October 2.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE30Healthier Kids For Our Future Launched in 2019,Healthier Kids For Our Future is our five-year,$25 million global initiative focused on improving the health and well-being of children.In 2022,we entered our fourth year of the program and awarded nearly$5.5 million in financial support to innovative programs spanning communities in 19 states.See some programs we partnered with here.In honor of World Childrens Day(November 20),the Foundation also gave 14 schools in the United States each a$5,000 unrestricted gift to use as they see fit to best support the students in their communities.Foundation and Employee GivingIn addition to providing direct grants to nonprofits,the Foundation also supports employees and employee-driven giving through direct grants to employee-selected nonprofits and our matching gift program.Employees donated more than$3 million to causes of their choice in 2022,of which approximately$2.7 million was matched by the Foundation.The Foundation also continued its support of The Cigna Group Scholars Program in 2022,providing$3,000 higher-education scholarships to more than 270 dependents and grandchildren of company employees.This program helps to close the affordability gap for employees,their families,and the next generation of students.Other Foundation 2022 Highlights Funded Community Health Development Inc.in Uvalde,Texas,to provide training,in partnership with the Center for Mind-Body Medicine,to 250 first responders,teachers,and other community members in mental health and trauma-healing skills to create a network of mentorship and support.While the program benefits the entire community,it focuses on individuals impacted by the Robb Elementary School tragedy.Supported American Indian students pursuing nursing degrees by providing culturally competent academic advising,financial assistance,tutoring,and community study sessions in partnership with the Montana State University Foundation.The program aims to increase the enrollment and retention of American Indian nursing students to build a strong pipeline of nurses to serve communities,particularly in Tribal or American Indian Health Service facilities.Brave of Heart Fund RecognitionIn 2020,the Foundation,along with the New York Life Foundation,initiated the Brave of Heart Fund to support the families of health care workers and first responders who lost their life in the fight against COVID-19.Along with partner E4E Relief,The Cigna Group and New York Life Insurance Company received a 2022 Gold Halo award from Engage for Good for this important safety net for those in need.(22)22 The application period for grants from the Brave of Heart Fund officially closed in 2021.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE31Support in the Wake of DisastersFollowing the tragic school shooting in Uvalde,Texas,and with similar heartbreaking events in New York and California only days apart,the Foundation made a donation to the National Alliance on Mental Illness(NAMI)to help support mental health assistance and efforts(see also page 17).Our employees also gave their time and talent to support communities impacted by both man-made and natural disasters and societal challenges in 2022.Here are two examples:European employees,working with Ukrainian aid organizations in Brussels,organized support for Ukrainian refugees arriving in Belgium.The group helped pack hundreds of support bags containing hygiene products and baby and child care products for the refugees.In response to Hurricane Ian,hundreds of employees gave generously,and their donations were matched by the Foundation,which totaled approximately$75,000.The Cigna Group Foundation committed another$75,000 to the American Red Cross to support hurricane relief efforts.Corporate Giving In 2022,corporate giving from The Cigna Group included sponsorships,donations,and contributions to nonprofits.Our giving focused on increasing resources and services that nonprofits can offer to community members experiencing SDOH,such as food insecurity.Employee Giving In 2022,our U.S.-based employees logged approximately 57,000 hours for more than 700 causes in our company volunteer portal,or approximately$2.8 million(23)in volunteer-engagement value.We recognize employees who volunteer and log 50 hours with an eligible nonprofit with a Community Service Champion award,which is a$500 grant from the Foundation sent directly to the nonprofit.We also invite all Community Service Champions to apply to be recognized as Volunteer of the Year,earning their nonprofit a$5,000 grant from the Foundation,as well as a$2,500 personal award.The Cigna Group Wellness in Motion(formerly known as the Health Improvement Tour)mobile clinic makes stops in communities across the United States to offer free biometric health and skin cancer screenings,among other health services.In 2022,the mobile clinic engaged approximately 10,000 people,screened approximately 1,500 people,and hosted 48 events in 36 markets.23 While hours volunteered remained largely consistent with 2021,the increase in dollar value is attributable to new information in regards to the dollar value of mentoring,pro-bono,and skills-based volunteering.Our Benevity system now asks employees to distinguish the type of volunteering completed(historically,it did not).Mentoring,pro-bono,and skills-based volunteering have a much higher dollar value than traditional volunteering.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE32In addition,to further empower employee philanthropy and volunteering,we offer two distinct benefit programs:The first is volunteer time off,referred to as Use Your 8,for eligible employees to take eight hours of paid leave annually to volunteer with a nonprofit of their choice.The second is our Community Ambassador Fellowship,a program through which employees apply for up to three months of paid leave to support a specific community-based project.Selected employees also receive up to$20,000 in support of the project through a direct contribution to their nonprofit partner.Launched in 2017,47 employees have been a part of this powerful experience to date,and the collective impact of this program reflects approximately 20,000 hours in volunteerism and significant investment from The Cigna Group to support program development and execution.2022 Community Ambassador Fellows Kristal Ruiz partnered with Mind Blank to equip employers and employees in Brisbane,Australia,with skills to identify mental health issues.She helped create videos,conduct market research,develop training manuals and crisis cards,and hold pilot workshops in local workplaces customized to address specific industries struggles.Joan Gitau partnered with the Heels4Pads Foundation to provide young girls in Nairobi,Kenya,with necessities such as sanitary towels to save them from sexual exploitation.She worked with a local school to purchase,install,and fill a sanitary napkin dispenser in the school that works like an ATM.The project also provided the young girls with supplies,tools,and instructions to make reusable napkins,and she worked with their parents and caregivers to sew reusable napkins for the girls to use when they arent at school.Shu-Ju Yang partnered with the Chinese American Coalition for Compassionate Care(CACCC)to bridge easier and earlier end-of-life conversations with Chinese Americans.Shu-Ju used her knowledge and leveraged her project-management skills to support CACCCs Heart to Heart Caf,which offers compassionate communication sessions designed to make it easier for a family member,a caregiver,or a health care provider to understand and honor a loved ones last wishes.For more examples of our Community Ambassador Fellows work,see this story.Employees participated in many volunteer activities around the December holidays.In Texas,employees shared handmade caps for infants in the neonatal intensive care unit at Texoma Medical Center.The caps were delivered on World Prematurity Day to help lift spirits and share a message of support.WHERE WERE GOING IN COMMUNITY RESILIENCE As we look forward,we are further refining our charitable giving strategy and focus areas to ensure outcomes in our local communities.The Cigna Group will continue its efforts to narrow the gap on health equity and impact SDOH while enabling our employees around the world to give their time and talent.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE33Healthy Workforce We believe that employers play a vital role in the health care system,and we strive to be a model for others by prioritizing the health and vitality of employees within our own company.A healthy and diverse workforce is essential to achieving our mission,and we continually invest in our employees to support their health and vitality,to foster their growth and development,and to further cultivate diversity and inclusion.INTRODUCTIONHEALTHY COMPANY2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCEESG PERFORMANCE METRICSHEALTHY WORKFORCE34Employee Health,Safety,and VitalityHealth and VitalityVitality is the capacity to pursue life with health,strength,and energy.Higher vitality is linked to better mental and physical health,to higher levels of job satisfaction and performance,and to a more motivated,connected,and productive workforce.By better understanding vitality and the factors that impact it,we can more deeply understand the unique needs of our workforce,act on that knowledge to inform meaningful investment decisions,and grow.Helping people thrive is a competitive point of differentiation for our business,and one that we invest heavily in.There are eight dimensions of vitality:physical,emotional,occupational,spiritual,intellectual,environmental,financial,and social.A persons ability to make their own choices and be in control of their life across those dimensionsknown as ones autonomy,competency,and relatednessimpacts their vitality.Our employee well-being strategy and benefits programs(plus our DEI and learning and development efforts;see pages 40 and 46,respectively)are designed to provide holistic support for these areas for each of our 70,000 employees worldwide and their families.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE35Following is a sampling of our programs:Emotional Health Resources In 2022,we doubled the number of employee assistance program(EAP)visits that U.S.employees and members of their household can participate in:it is now up to 10 free,confidential counseling sessions per year.In addition to the traditional EAP,were introducing Confide Behavioral Health NavigatorSM,a more personalized EAP experience that offers,for example,a licensed clinician navigator working with individuals along each step of their journey.Confide is available to all U.S.employees and their family members regardless of whether they participate in our medical benefits.In the U.K.,we launched the 5%Pledge,encouraging business leaders to commit 5%of working hours to supporting mental health in the workplace.Caregiver Leave Effective as of January 1,2023,we expanded our caregiver leave program,doubling available leave from four to eight weeks.Our caregiver leave program provides paid leave to enable employees to bond with a child;care for a family member with a serious health condition,which can include care for children,spouses,parents,grandparents,and grandchildren;care for a covered military service member with a serious injury or illness;or care for qualifying exigencies.Condition Management Programs Many of our employees are our own customers and benefit from the progress we are making with respect to sustainable health care,product service and quality,and health equity.For example,we,through our Cigna Healthcare medical plan offering to employees,participated in the Tech-Empowered Community Health Worker pilot in 2022(see page 27),where we matched employees who are enrolled in a Cigna Healthcare medical plan and living with diabetes to trained individuals with shared health conditions.Other programs,like our collaboration with Omada,seek to help employees manage weight,hypertension,and diabetes by providing dedicated health coaches who work with employees on individual health and wellness goals.Support for Parents Cigna Families is a program to help new parents welcome a child into their family via birth or adoption by providing a gift such as an infant car seat,toddler play set,or,for adopted teens,a wireless headphone/speaker set.We also offer lactation consulting and support for new moms.In 2022,we continued a pilot program to offer subsidized emergency childcare at KinderCare centers for a targeted employee population.Financial Well-Being We offer our employees debt and credit counseling,student loan debt consolidation support,low-interest loans that can be repaid via payroll deduction,and one-on-one retirement counseling,in addition to a competitive 401(k)match.Were proud that approximately 90%of our U.S.-based employees participate in our 401(k)and that nearly 65%take full advantage of our company match,as of the end of 2022.In addition to these company-provided solutions,The Cigna Group offers voluntary benefits and discount programs that employees may choose to participate in to further support their well-being.Paid Time Off Depending on career level and geographic location,we offer a minimum 12 to 28 days of paid time off(PTO)per year to our employees.We also have dedicated paid sick time as part of our PTO allotment for all our employees.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE36 Global Wellness Challenge Our annual six-week wellness campaign encourages all global employees,spouses,and dependents over the age of 13 to strengthen their whole-person health through physical activities,mindfulness,and social connections.In 2022,more than 23,000 participants logged more than 60 million minutes of activity.Fitness and Nutrition Resources In 2022,we announced a new partnership with Peloton for the benefit of our employees.Our U.S.employees now have free access to the Peloton App,which offers thousands of live and on-demand classes,including cardio,strength,yoga,and meditation,with no equipment needed.In connection with the launch of this new program,The Cigna Group gave away several Peloton Bikes and Treads.Within three months of launch,30%of our U.S.population had enrolled in the program.Our international employees have access to the wellness app Wellbeats.We also offer nutrition resources,such as Foodsmart,to U.S.employees to help guide them to healthy food choices and preparation.In 2022,The Cigna Group invested approximately 18%of total payroll in health,well-being,and other benefits,including life and disability programs,401(k)contributions,and retirement-related benefits for employees in the United States.We continually work to build and reinforce a culture of health and vitality within our company and include questions on our annual employee engagement survey to assess how we are doing.In 2022,with an 83%employee response rate,(24)results showed:88%of employees believe their manager actively supports employee health and well-being76%of employees believe their job isnt a barrier to their personal health and/or the health of their family83%of employees know how to engage in the programs,resources,and tools provided by The Cigna Group to improve or maintain their health 24 Our annual employee engagement survey is distributed globally but regional markets may choose to opt out of participation.This figure represents the results of those that participated.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE37Occupational Health and SafetyOur Occupational Health and Safety Policy outlines the elements of our comprehensive occupational health and safety framework,including governance,worker participation,hazard identification and assessment,education and training,and continuous improvement.It leverages principles from the International Organization for Standardization(ISO)ISO 45001,and in 2023,we will conduct third-party pre-ISO certification audits at our high-volume fulfillment centers,which are our highest-risk locations from an occupational safety perspective.The policy applies to all of our facilities and employees in the United States and calls for coordination with contractors to provide them with the same level of health and safety protection.Our facilities in international markets and contractors are required to comply with local regulations for worker safety and health.Oversight and Risk ManagementOur Global Risk Management and Safety teams,with executive oversight from our Chief Financial Officer,lead our occupational health and safety processes across the enterprise.The teams regularly collaborate with internal and external stakeholders on safety topics.For example,the Safety team hosted a Safety Summit in 2022 to engage with key business partners on safety-related business strategies and priorities,as well as to educate and train them.In addition to the Global Risk Management and Safety teams,our Safety Committees are responsible for monitoring,communicating,and participating in occupational health and safety matters.This includes identifying hazards through safety observations and inspections,helping to prevent injury and illness,supporting emergency preparedness efforts,and raising awareness on safety topics among our employees.Safety Committees include joint management and worker team members with cross-functional representation.We regularly conduct risk assessments to review specific projects,process changes,machinery and equipment,and other safety-related initiatives to gauge the level of injury and illness risk to our employees and ensure compliance.Employee Education and TrainingAll employees are required to complete our Safety in the Workplace training,which covers basic safety and compliance topics and which is reviewed and refreshed annually.Additional safety training is required of certain employee groups based on job function and the type of work performed by those groups.Health and safety information is constantly disseminated to our employees through toolbox talks,postings on bulletin boards,digital monitors and awareness campaigns.For example,the Safety Committee at our Florence,New Jersey,fulfillment center implemented“Safety Saves,”a simple process to encourage employees to suggest health and safety improvements at their workplace.Since the programs inception two years ago,dozens of suggestions have been received and addressed.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCEIn 2023,we will conduct third-party pre-ISO certification audits at our high-volume fulfillment centersIn the last two years,Safety Saves has received and addressed dozens of suggestions.38Preventing Ergonomic ChallengesWith many of our employees working at desks,ergonomics is incredibly important to their health and safety.We provide our employees with a number of ergonomics-related tools and resources,including:An office workstation ergonomics training course through myUniversity An online office ergonomics assessment and training that allows employees to self-assess and resolve their issues Ergonomic essentials for the office environment and non-office or production environment in the required Safety in the Workplace training Information on our intranet,including how to adjust your workstation,stretching,checklists,infographics,and additional training materials on ergonomics Vocational counselors to assist employees with proper workstation setup and musculoskeletal pain and discomfortWe regularly implement ergonomic improvements throughout the company,in both office and non-office or production environments.For example,in 2022,we installed a vacuum lift system for ice boxes used for shipping pharmaceuticals at our St.Louis,Missouri,fulfillment center,resulting in zero injuries from lifting ice boxes since the system was operational.At our Whitestown,Indiana,fulfillment center,we replaced an auto-publish room printer that reduced the potential for overexertion strain injuries.The previous process required employees to pick up a heavy metal container with paper trimmings and reach overhead to dump it into a bulk bin.Plus,the new printer reduces the amount of paper used by enabling two-up vs.one-up printing.Additional information about occupational health and safety at The Cigna Group can be found in the GRI Index,page 81.As some facilities underwent renovations in 2022,we gave away ergonomic office chairs that were not regularly being used to our employees.For example,while our Warrendale,Pennsylvania,facility was under construction,we held a lottery and gave away 43 chairs that were no longer needed(pictured above is lottery winner and employee Michelle Pergal).Not only does this promote health and safety but it repurposes chairs that may otherwise end up in landfills.WHERE WERE GOING IN EMPLOYEE HEALTH,SAFETY,AND VITALITY To further demonstrate progress as it relates to our employees health,safety,and vitality,we plan to measure our employees utilization of physical health programs and mental and financial health benefits.We also plan to disclose more information about our occupational health and safety risk assessments and related metrics.INTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE39Diversity,Equity,and Inclusion (DEI)within Our WorkforceWe recognize that our continued success depends on the collective strengths of our employees.At The Cigna Group,our individual differences including race,ethnicity,nationality,military or veteran status,disability,age,religion,sexual orientation,and gender identity or expressionrepresent a mosaic of backgrounds,experiences,and perspectives that enable us to deliver on our mission and to innovate and create solutions that resonate with our customers,partners,and communities.We are committed to fostering a culture of belonging and equity among our diverse workforce that advances our ability to improve the health and vitality of those we serve.This is demonstrated through our DEI strategy;through our programs and practices to attract,retain,and reward our employees;and through the actions of our enterprise DEI Council.Our DEI strategy focuses on:Elevating the next set of diverse leaders Striving to ensure every employee feels a sense of belonging and is able to reach their fullest potential Proactively monitoring our people processes and programs to promote equitable outcomes Driving the impact of DEI with our colleagues,customers,clients,and communitiesINTRODUCTIONHEALTHY COMPANYESG PERFORMANCE METRICS2022 ENVIRONMENTAL,SOCIAL,AND GOVERNANCE REPORT TABLE OF CONTENTSHEALTHY ENVIRONMENTHEALTHY SOCIETYHEALTHY WORKFORCE40Our DEI Council is chaired by our Chairman and CEO and is composed of leaders from various areas of the company.The DEI Council includes two committees that focus on advancing health equity(see page 24)and continuing to strengthen our leadership accountability.In 2022,Dr.Luis Torres,a member of our DEI Council and Health Equity Committee,was assigned as our second fellow to the CEO Action for Racial Equity.Diversity ScorecardAs a tangible example of our commitment to DEI leadership and transparency,we publish an annual DEI Scorecard.Please visit the DEI Scorecard for details on 2022 actions and progress among our culture and coworkers,clients and customers,and communities.In 2020,we set an aspirational goal to improve gender equality in our leadership pipeline by increasing the number of women in our director and senior director roles from 45 to 50%by the end of 2024.As of the end of 2022,we have nearly 48%women in director and senior director level roles.Another way in which we measure our progress relative to our DEI commitments is through the responses to a collection of relevant questions on our annual employee engagement survey that we refer to as the DEI index.In 2022,with an 83%employee response rate,(25)responses to these questions showed:86%of employees believe their manager encourages diversity and inclusion80%of employees believe they can freely express opinions/views without fear of negative consequences85%of employees believe The Cigna Group values and promotes employee diversity To hold our leaders accountable to
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Positive ImpactPositive Legacy2022 ENVIRONMENTAL,SOCIAL&GOVERNANCE REPORTWe use the power of beauty for good to leave a positive legacy.At Ulta Beauty,expanding our environmental,social and governance(ESG)impact is a strategic priority and intentionally connected with our business.Through critical work across all four of our ESG pillarsPeople,Product,Environment and Communitywe look to maximize impact and enhance value for our stakeholders.Were encouraged that were beginning to see the positive impact of our work and the positive legacy that we are shaping.ULTABEAUTY AT A GLANCE$10.2BNet Sales 25K Products1,355Stores600 Brands53KAssociatesABOUT THIS REPORTUlta Beautys 2022 ESG Report captures our key areas of progress and impact during fiscal year 2022 in our strategic focus areas of People,Product,Environment and Community.More information is available on UltaBeautys ESG website for investors.If you have any questions about this report,please contact our General Counsel,Chief Risk&Compliance Officer,Jodi Caro,at InvestorR.CEO MessageThe power of beauty for good in actionThis past year was one for the record books at Ulta Beautyachieving more than$10 billion in revenues and surpassing 40 million active loyalty memberswhile keeping our guests and associates at the center of all we do.Our achievements are the result of our passionate associates,who execute with excellence every day as they help guests discover their own beautiful possibilities.Expanding our environmental and social impact is one of our core strategic priorities and is something we work on every day.By staying focused on our guiding ESG principles,we are able to deliver on our ambition to use the power of beauty for good and,in turn,make a positive impact on the world.This focused approach resonates strongly with guests who want to shop with purpose-driven companies;it also addresses risks facing our industry and communities and helps us attract and retain top talent.In this third annual ESG report,we are excited to share how far weve come on our journey.But make no mistake;we know there is a lot of work yet to do.A few achievements from 2022 of which we are particularly proud include:Expanding Conscious Beauty at Ulta Beauty to now offer over 300 brands Delivering on our diversity,equity and inclusion(DEI)commitments by investing$50 million across our major areas of focus,including multicultural media to amplify underrepresented voices,dedicated support for Black-owned brands and associate training to reinforce inclusivity and address unconscious bias Doubling our use of renewable energy and expanding energy-efficient LED lighting to an additional 100 stores and our Chambersburg,Pennsylvania,distribution center Providing career growth and development opportunities to our associates,with nearly 60%of open positions at the manager level and above filled by internal candidates Over 90%of our associates are women,including 78%of our executive team and 55%of our Board of Directors.Ensuring inclusivity allows for greater perspectives across our business,which is an important part of our business strategy.While 2022 was a milestone year for our company,we also faced shared environmental and societal challenges,reinforcing the need to drive positive change and collaboration.We are engaging our many partners to help the beauty industry become more sustainable,with efforts such as pilot programs featuring reusable shopping bags and recycling options for smaller beauty products.We look forward to learning from these efforts and are optimistic about how we can continue to influence positive changes in the beauty industry and in retail.We are also taking action to reduce Ulta Beautys direct impact on the environment and are proud to announce that our science-based targets to reduce Scope 1,Scope 2 and Scope 3 emissions are currently under review by the Science Based Targets initiative(SBTi),a global leader in helping companies establish these important commitments.We are already hard at work to achieve these targets and look forward to sharing our progress with you.Finally,we know many are interested in learning even more about Ulta Beauty across several dimensions,including our people,climate,risk management and more.I encourage you to explore our Appendix where you will find useful supplemental data,as well as our Annual Report,detailing more information about many aspects of our business.If you take just one thing away from this years ESG report,I hope it is that Ulta Beauty takes its responsibility as the nations leading beauty retailer seriously,operating as good stewards of our business and leaving a positive legacy as part of our daily work.We are committed to improving always and welcome your feedback on our efforts.On behalf of our Board of Directors and our dedicated associates,thank you for your support.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA22022 ESG Report2ESG at Ulta BeautyAs the leading U.S.beauty retailer,our focus is to make beauty accessible and inclusive for all.To realize that potential,we have incorporated our intention to expand our environmental and social impact as part of the strategic framework that guides our business.As we continue our journey,we are excited about our potential to shape how the world experiences beauty and create positive change.UltaBeauty Strategic FrameworkDrive breakthrough and disruptive growth through an expanded definition of ALL THINGS BEAUTYEvolve the omnichannel experience through connected physical and digital ecosystems ALL IN YOUR WORLDExpand and deepen our presence across the beauty journey,solidifying UltaBeauty at the HEART OF THE BEAUTY COMMUNITYDrive OPERATIONAL EXCELLENCE AND OPTIMIZATIONProtect and cultivate our WORLD-CLASS CULTURE AND TALENTExpand our ENVIRONMENTAL AND SOCIAL IMPACTUltaBeauty Guiding ESG PrinciplesWE USE THE POWER OF BEAUTY FOR GOODWe embrace our opportunity as a leader to drive positive impact through beautyWE PURSUE ESG AS A VALUE DRIVERESG drives business value as part of our core strategyWE TAKE A TARGETED APPROACHWe focus on the areas in which we can make the biggest impactWE BALANCE LEADING AND LEARNINGWe collaborate with others to address shared challenges WE STAY TRUE TO WHO WE AREOur ESG approach reflects our unique culture,mission and valuesINTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA32022 ESG ReportUltaBeauty ESG commitmentsBringing the possibilities to lifeWhen we make a promise,we deliver.Our goal to expand our environmental and social impact and make the world a better place for our guests,associates,communities and stakeholders is expressed through our commitments within our four pillars:People,Product,Environment and Community.Our path to continue working toward our goal can be found throughout this report.Here is the progress we made in 2022.PEOPLEInvest$50M to further DEI efforts through brand amplification,assortment growth and equitable guest and associate experienceConduct quarterly,in-store training to reinforce inclusivity and address unconscious bias for all distribution center and corporate associates,in addition to a second year of curriculum for salon and store associatesPRODUCTDedicate 15%of total brand assortment to Black-owned,Black-founded and Black-led brandsIn progressEnsure that 50%of the consumer-level packaging,by weight,will be recyclable,refillable or made from recycled or bio-sourced materials for products sold by 2025In progress1Launch a Brand Partner Accelerator Program focused on early-stage Black,Indigenous and People of Color(BIPOC)beauty brands Dedicate$3.5M to in-store merchandising support of Black-owned,-founded or-led brands2Invest$5M in New Voices fund,a venture capital firm that partners with and invests in entrepreneurs of colorENVIRONMENTSet a near-term science-based emissions reduction target with the SBTi by 2023In progress31.5%annual estimated energy reduction due to efficiency investments 100 LED lighting upgrades 16 HVAC retrofits 97 Energy ManagementSystem retrofitsDouble the percent of renewable energy credits purchased in 2021COMMUNITYFund one million hours of breast cancer research by 2024,equivalent to$50M in funding94%funded to dateDonate$2M to BIPOC-focused and lesbian,gay,bisexual,transgender,queer and/or questioning-focused nonprofits via the UltaBeauty Charitable Foundation21 We have engaged 30%of Ulta Beauty brand partners on sustainable packaging and are working on a data collection pilot for brand partners.2 Included in the$50M DEI commitment3 Our science-based targets to reduce Scope 1,2 and 3 emissions were submitted to the SBTi in the fourth quarter of 2022,and we have already begun taking important next steps to reduce our emissions.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA42022 ESG ReportPEOPLEAssociates come to UltaBeauty to celebrate the joy of beauty and do work that matters.We continuously work to build a culture in which every person can share their unique perspective,do their best work,have a meaningful career and help advance our mission.Positive Impact91%corporate associate retention in fiscal 2022Positive LegacyA place to build a meaningful career PEOPLEINTRODUCTIONPRODUCTCOMMUNITYENVIRONMENTGOVERNANCESUPPLEMENTAL DATA52022 ESG ReportThe UltaBeauty cultureBigger,better,together Across our stores,distribution centers(DCs)and offices,our culture is people-first and diversity-forward.The work we do shapes how the world experiences beauty,and while this is fun and exciting,its also a responsibility that we take seriously.We believe the passion and purpose we bring to nurturing human connections can not only unlock new possibilitiesit can make the world a better,more inclusive place.Leading with integrity,authenticity,care and inclusivity has never been more important.The strength of our culture is something that we continually nurture,invest in and cultivate.Under the leadership of our Chief Human Resources Officer,UltaBeauty has evolved our people success function in the past year and is making purposeful investments for the future of the team and culture.Much of our focus is in areas in which we seek to set ourselves apart,such as talent strategy,planning and learning and development.MissionEvery day,we use the power of beauty to bring to life the possibilities that lie within each of usinspiring every guest and enabling each associate to build a fulfilling career.VisionTo be the most loved beauty destination of our guests and the most admired retailer by our UltaBeauty associates,communities,partners and investors.Valuesgivewowexperiencesimprovealwayswintogetherlovewhat you doownwhat you dodowhatsrightchampiondiversityPEOPLEINTRODUCTIONPRODUCTCOMMUNITYENVIRONMENTGOVERNANCESUPPLEMENTAL DATA62022 ESG ReportFOSTERING CONNECTION AND ENGAGEMENTWe regularly conduct an associate engagement survey to take the pulse of associates satisfaction and measure the engagement we strive for throughout the year.In 2022,we conducted our most fulsome,enterprisewide survey since the beginning of the COVID-19 pandemic.The results show our associates are highly engaged and invested in our company and culture.With satisfaction scores that are higher than third-party benchmarks,we know that strong associate engagement,trust and connection to our purpose is key to our success.TRAINING AND DEVELOPMENT PROGRAMSCorporate associates and leaders The Way We Work Helps corporate associates work smarter and better together,empowering them with knowledge and skills such as critical thinking,navigating conflict and engaging in inclusive conversations Director Leadership Development programEmpowers director-level talent to lead with both their head and their heart,keeping UltaBeautys mission,vision and values at the forefront Mentorship programCompany leaders mentor associates,focusing on self-awareness,driving business results,agility and people developmentIn-store associates and leaders Field leadership conferenceBrings together general managers from our 1,355 stores to connect,learn,engage with our executives and brand partners and build their skills Ongoing trainingCreates continuous opportunities to learn about new product lines,enhance sales skills or discover ways to make all store guests feel welcomeCREATING INSPIRING CAREER PATHSUltaBeauty associates are always learning.We see our ability to unlock skills and capabilities in our people through relevant,in-the-moment training as one of our cultural strengths,and an area in which we continue to invest.The opportunities we offer for associates at every level is a key reason that UltaBeauty is a place where associates tend to stay for the long term and build fulfilling careers.Our retention rate for corporate associates was 91%in 2022,up from 86%the previous year.Over the past year,we had 12,000 promotions,for an overall promotion rate of 27%.1 And at the manager level and above,nearly 60%of positions were filled by internal candidates.Opportunities for advancement can take many forms:From an entry-level role in one of our stores to district manager or regional vice president From an in-store to a corporate role From one function to another within our corporate structure27%internal promotion rateNearly 60%of open positions at the manager level and above filled by internal candidates1 Calculated by taking the total number of promotions in fiscal 2022 divided by our average headcount in fiscal 2022.PEOPLEINTRODUCTIONPRODUCTCOMMUNITYENVIRONMENTGOVERNANCESUPPLEMENTAL DATA72022 ESG ReportInspiring career pathsHelping associates chart the careers they chooseWe create environments where our associates can learn,grow and influence work that matters throughout our business.BRIGID MCNEIL Regional Vice President,South Central RegionBrigid got her start as a District Manager in Miami.As a result of her hard work,passionate mentors and participation in programs like the Black Executive Leadership Program,shes risen through the ranks over the past five years to become a Regional Vice President.“I love that Ulta Beauty spends time on development and growth.Its okay to make a mistake,learn from it and move forward.Here,I am my authentic self,and I show up as who I am every single day,which is very important to me.”JACLYN KACZMAREKSenior CounselJaclyn began working at Ulta Beauty as a part-time retail associate while completing her law degree.Ten years later,she applies her knowledge of store operations and passion for guest satisfaction when providing legal advice.“I knew landing an in-house role straight out of law school was rare.I admire Ulta Beautys commitment to investing in and developing its associates.Because of this,Ive been able to grow my career in ways I never knew possible.”“Our tagline is,The possibilities are beautiful.When I joined this company,I had no clue I would end up here.Thats the great thing about working at a place where you can follow what fuels you.”PAUL DESOUSAVice President of Talent Planning,Learning and DevelopmentOver the past 16 years,Paul has led training for store managers,educating brands and serving as Executive Sponsor of our lesbian,gay,bisexual,transgender,queer and/or questioning(LGBTQ )business resource group(BRG).Now,Paul helps encourage other associates to pursue their passions.PEOPLEINTRODUCTIONPRODUCTCOMMUNITYENVIRONMENTGOVERNANCESUPPLEMENTAL DATA82022 ESG ReportDiversity,equity&inclusion Building an inclusive workplaceAs a company devoted to helping all people feel their most beautiful,diversity,equity and inclusion(DEI)are an important part of UltaBeautys DNA.At Ulta Beauty,we strive to create a workplace where everyone feels they belong and can be their true,authentic selves.We are driving a culture of connection by fostering an environment of inclusivity and belonging for our associates and seeking their valuable perspectives to propel our business forward.While we still have work to do,we are proud of our progress to date,including results driven by Project Embrace,our cross-functional approach to ensure teams remain energized and motivated to lead in this critical space.The project is chaired by our CEO and includes more than 60 associates who drive and execute our plans.In 2022,we invested in experienced and qualified leaders to own this work.Reporting to our Chief Human Resources Officer,we welcomed a new vice president of DEI and Talent Acquisition,a new senior manager of supplier diversity and promoted an existing associate to director of DEI.In 2023,we will continue to create sustainable impact across the four strategic pillars of Guest Experience,Associate Experience,Inclusive Culture and Inclusive Partnerships.of associates believe UltaBeauty is moving in the right direction with its diversity and inclusion efforts82%1 Ulta Beauty engagement survey,2022DIVERSITY AT ULTABEAUTYAs of January 28,2023UltaBeauty AssociatesIN 2022:33%of people promoted at the director level and above were people of color,enterprisewide47%of new hires,enterprisewide,were people of color51%of new hires,director level and above,were people of colorUltaBeauty leadership(director level and above)consists of:66%women 27%people of colorUltaBeauty has business resource groups(BRGs)for associates who identify as:Asian American/Pacific Islander Black Hispanic/Latine LGBTQ Women VeteranPEOPLEINTRODUCTIONPRODUCTCOMMUNITYENVIRONMENTGOVERNANCESUPPLEMENTAL DATA92022 ESG ReportCELEBRATING WHAT MAKES OUR ASSOCIATES SPECIAL To keep DEI top of mind and bring associates along on our journey,we launched a monthly newsletter in 2022 and organized events around key heritage celebrations.We were also excited to announce the formation of six BRGs organized around a particular shared background,including groups focused on Asian American/Pacific Islanders,Black associates,Hispanic/Latine associates,LGBTQ associates,women and veterans.Weve invited both identifying persons and allies to be involved.And this is just the beginning.We will continue to assess and add more communities in the future,with plans to expand to other underrepresented groups.Each BRG has at least one executive sponsor.Our strategic intent is to not only provide a safe space for associates from a shared community,but also to position these groups to have tangible business and cultural impact,including advancing key DEI initiatives and shaping UltaBeautys reputation among all communities.HELPING UNDERREPRESENTED LEADERS SUCCEEDThrough the Diverse Leaders program,UltaBeauty officers mentor high-potential managers and directors,with a specific focus on racially and ethnically diverse talent.We expanded this program in 2022,partnering with a coaching platform called GrowthSpace.Through this program,participants can identify challenges they are facing and get matched with outside coaches who can mentor and advise them.Diverse leaders also participate in peer mentoring circles where they can network with and support one another.FOSTERING INCLUSIVE GUEST EXPERIENCES Creating an inclusive shopping experience begins with training associates on how to serve our guests.Inclusion in Action,our quarterly training on inclusivity and unconscious bias,is now mandatory for all UltaBeauty associates53,000 individuals.What began as an exclusively in-store training has now been extended to our DCs and corporate workforce.The result is a minimum of 3.5 hours per year of DEI training per associate across the enterprise.For our salon teams,in particular,its important that we provide education on how to provide top-quality service for all skin shades and hair types.In 2022,we held an inaugural rally to educate services teams on working with textured hair.As we diversify our product assortment,our brand partners have been powerful resources for educating associateswho,in turn,can better serve our guests.See Product for more information about how we are curating a more diverse product assortment.PEOPLEINTRODUCTIONPRODUCTCOMMUNITYENVIRONMENTGOVERNANCESUPPLEMENTAL DATA102022 ESG ReportFostering diversity across our businessShowing the world that beauty is for all has always been part of our DNA.This work is broader than any one of our ESG focus areas and touches all areas of our business.Here are a few of the many ways that DEI was part of our culture and business in 2022.Our inclusive approach to DEI IN OUR COMMUNITIES Donating$2M to nonprofits supporting Black,Indigenous and People of Color(BIPOC)and LGBTQ individuals in our hometown and beyond Supporting legislative initiatives,like the CROWN Act Fostering discussions to expand the lens of beauty Creating advertising that inspires all to define beauty on their own termsIN OUR STORES Educating all associates on unconscious bias Strengthening textured hair education for salon associates Gathering feedback about guest experiences and acting on what we hear Launching Engagement Advocates across the field to support DEI messaging IN OUR PRODUCT ASSORTMENT Supporting eight BIPOC-founded brands who participated in the MUSE accelerator program to help them prepare for retail readiness Making progress toward dedicating 15%of total brand assortment to Black-owned,-founded and-led brands through the Fifteen Percent Pledge Uplifting Black-owned,-founded and-led brands with marketing and merchandising support Spending marketing dollars to reach BIPOC/multicultural audiencesWITHIN OUR BUSINESS Ensuring oversight and leadership of DEI at the highest levels of the company Being named to Newsweeks Greatest Workplaces for Diversity 2023 Training associates on DEI topics enterprisewide Creating career paths for high-potential,underrepresented associates Launching BRGs to drive a more inclusive culture Engraining DEI into hiring and development Celebrating and acknowledging the unique culture,heritage and community moments of associatesACROSS OUR SUPPLIER BASE Creating procurement processes that prioritize certified diverse-owned suppliers when purchasing goods and services Aiming to double our spend with diverse vendors in five years Exhibiting at supplier diversity conferences to actively seek out and engage with certified diverse-owned companies to explore new partnership opportunities Partnering with advocacy agencies that support diverse-owned companies to empower the growth of underrepresented entrepreneurs and communitiesPEOPLEINTRODUCTIONPRODUCTCOMMUNITYENVIRONMENTGOVERNANCESUPPLEMENTAL DATA112022 ESG ReportWe believe that investments in associates well-being are investments in our culture.These investments are fully integrated into our talent strategies and how we care for teams every day.We consider well-being across eight dimensions and strive to offer benefits to help associates meet their needs in each area.This holistic approach is important to our associates who appreciate our focus on ensuring they have access to a wide variety of benefits that are important to them and their loved ones.ASSOCIATE BENEFITS Our benefits affirm and support all that associates contribute every day.Beyond standard medical,dental and vision coverage and paid time off,we offer the following to full-time associates:Telemedicine and virtual care,including urgent and scheduled care options Company-provided life insurance and disability coverage Financial wellness planning and guidance Travel expense assistance for eligible reproductive health services where access to care is restricted Coverage for some gender affirmation services Annual memberships to a meditation tool for corporate associates Training on wellness,mindfulness and inclusion Flexible spending accounts(FSAs)All full-time associates are eligible for sick time,regardless of their location.Part-time associates are eligible for sick time if they work in a location that is covered by a state or local mandate that requires it.We regularly review and identify areas of associate need using a variety of resources,including data,trends and associate input,to enhance and strengthen benefits as appropriate.We also engage with our healthcare plan providers as part of our efforts to continuously improve for our associates.We offer FSAs and health spending accounts to full-time associates who work 30 or more hours per week.All associates,age 21 and older,are eligible to contribute to UltaBeautys 401(k)plan with company match.In addition,all associates have access to an Associate Assistance Plan,Associate Relief Program,training and development programs and an Ulta Beauty discount of 25%off retail products and 50%off salon services.Ulta Beauty promotes associate awareness of available benefits and policies through all of our communication channels.Associates specific benefits are shared with them as part of the hiring process and through our service center hot line.Safety and well-beingWellness at work and at homeAs a values-driven,people-first company,UltaBeauty prioritizes caring for and supporting our associates.DIMENSIONS OF WELL-BEINGEmotionalPhysicalOccupationalSocialSpiritualIntellectualEnvironmentalFinancialPEOPLEINTRODUCTIONPRODUCTCOMMUNITYENVIRONMENTGOVERNANCESUPPLEMENTAL DATA122022 ESG ReportRESOURCES FOR EXPECTANT PARENTS With an associate population that is over 90male,Ulta Beauty is proud of the comprehensive benefits we offer related to maternal and parental leave.These include benefits that associates can make use of both before and after welcoming a new child.For example:Fertility benefits that address the needs of all associates,including our single and LGBTQ associates Access to training,virtual care and other resources for pregnancy and childbirth Pregnancy accommodations aligned with the Pregnant Workers Fairness Act Health care plans that integrate the services of midwives A bereavement leave policy that covers leave for parents grieving losses caused by miscarriage or stillbirth At least 12 weeks of maternity leave,plus additional parental leave pay for full-time associates after one year of service Short-term disability coverage for full-time associates,with the option for part-time associates to purchase short-term disability benefits if desired A lactation policy that complies with federal and state regulationsKEEPING ASSOCIATES SAFE The safety of our guests and associates is always our highest priority.Within our most recent associate engagement survey,safety and well-being emerged as areas of opportunity across our workforce in parallel with our efforts to prioritize a more holistic approach,accounting for associate health,well-being and a culture of care.An unfortunate reality all of retail is facing is an increased prevalence of external theft,including organized retail crime.We proactively invest in talent,training,technology,physical security solutions and a comprehensive workplace violence prevention program to mitigate impacts of such realities.Ulta Beauty is particularly proud of its EPICenter,a 24/7 strategic support center that operates as a single point of contact for associates to report safety incidents,such as organized retail crime,and receive immediate,personalized support.In addition,trained analysts proactively assess various intelligence feeds to monitor external events such as social unrest,severe weather and other safety-related events.We notify associates and inform key stakeholders of critical events taking place in real time to help keep our associates and guests safe.All of our loss prevention practices are reviewed annually to ensure they reflect the ever-evolving retail landscape,reinforcing our people-first values and priorities.PEOPLEINTRODUCTIONPRODUCTCOMMUNITYENVIRONMENTGOVERNANCESUPPLEMENTAL DATA132022 ESG ReportPRODUCTAs the largest beauty retailer in the U.S.,UltaBeauty is a one-stop destination for all things beauty.Consumer preferences are evolving,and were with them every step of the way,offering education and products to meet their needs.Positive Impact300 brands(50%of all brands we carry)certified to one or more pillars of Conscious Beauty at UltaBeautyPositive LegacyMore choices aligned with guests valuesINTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA142022 ESG ReportUltaBeauty products and servicesShaping the future of beautyUltaBeauty was founded by visionaries and has always led through innovation.Since we began operating in 1990,we reinvented the beauty retail experience by offering a new way to shop for beautybringing together“All Things Beauty,All in Your World,At the Heart of the Beauty Community.”This unique and enduring value proposition continued to drive our success supported by our one-of-a-kind assortment,store footprint,leading digital experience,best-in-class loyalty program and focus on human connection and the guest experience.Today,our vision remains the same,to become the most loved destination for beauty enthusiasts by reimagining the end-to-end guest experience;facilitating inspiration,discovery and experimentation;and serving as a trusted guide,regardless of channel.We pride ourselves on the ever-evolving product choices we offer to all guests.Our key cross-category platforms,including Conscious Beauty at UltaBeauty,The Wellness Shop and a growing portfolio of Black,Indigenous and People of Color(BIPOC)-owned brands,reflect the product attributes and values that matter to consumers today.Recognizing that beauty is personal,we are on a multiyear journey to create stronger,more emotional connections with our guests and bring our brand purpose to life.Our latest brand equity campaign,Beauty&,launched in 2022 and is rooted in insights from cultural leaders and beauty enthusiasts.Through this campaign,we hope to show that beauty can be a force for good,move the industry forward and inspire all to reclaim beauty on their own terms.RETAIL LEADERSHIP BY THE NUMBERS40M active Ultamate Rewards membersOne of the 20fastest-growing retailers nationallyINTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA152022 ESG ReportConscious Beauty at Ulta Beauty Choices for you&for your world As champions of beauty in all its forms,we know that many consumers are looking for products that do more than just help them look and feel their best.Conscious Beauty at UltaBeauty gives guests choice and transparency,so they can purchase products that align with their values.It educates guests and highlights how brands and products are formulated,developed and packaged.Its an approach that meets guests where they are,allowing them to shop according to the attributes that matter most to them.We have deepened our communication of Conscious Beauty at UltaBeauty in-store,online and through owned and paid marketing channels:Products displayed on store Conscious Beauty at UltaBeauty dedicated endcaps are refreshed quarterlyBadges on shelves and product pages on U identify pillar(s)for which a brand is certifiedQR codes throughout stores link to a brand pillar glossaryIn all our efforts,we are guided by the Conscious Beauty Advisory Council,which brings together a diverse set of leaders at the forefront of clean beauty,product development,packaging sustainability and brand leadership.The Council advises on matters such as potential additions to our Made Without List,support for brands on sustainable packaging and engagement with industry groups.1 Ulta Beauty Consumer Insights Survey,20232 Brandessence Market Research50% of Gen Z look closely at ingredients in beauty and personal care products prior to making a purchase67%of consumers have made lifestyle changes to lessen their environmental impact,including seeking out products that use recyclable or environmentally friendly packaging90%of Gen Z/younger millennials are interested in purchasing clean beauty products in the future12%expected revenue growth in the global clean beauty market by 20272INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA162022 ESG ReportThe impact of Conscious Beauty at Ulta BeautyConscious Beauty at UltaBeauty educates guests about aspects of clean and sustainable beauty,while simplifying the shopping process.More than two years in,awareness of the programamong brands and guestsis growing.#1 rankin unaided awareness of a retailer carrying clean beauty products114%year-over-year increase in pillar certificationsThe growth of Conscious Beauty at UltaBeauty benefits guests looking for clean and sustainable beauty products at all price points.300 brands certified to one or more pillars15 ingredients added to Made Without List in fiscal 2022The five pillars of Conscious Beauty at UltaBeauty are:CLEAN INGREDIENTSExcludes parabens,phthalates and other ingredients on our Made Without ListCRUELTY FREE Not tested on animalsVEGAN Created without animal products,by-products or derivativesSUSTAINABLE PACKAGING Refillable,recyclable and/or made from recycled or bio-sourced material POSITIVE IMPACTBrands with giving back at their core1 Ulta Beauty Consumer Insights Survey,2023INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA172022 ESG ReportSEEKING BETTER PACKAGING MATERIALS While three of the five Conscious Beauty at UltaBeauty pillarsClean Ingredients,Cruelty Free and Veganconcern product formulations,the Sustainable Packaging pillar aims to address the problem of waste in the beauty industry,which produces more than 120 billion units of packaging each year.To qualify for our Sustainable Packaging pillar,at least 50%of the consumer-level packaging,by weight,for products sold at UltaBeauty must be sustainable by Ulta Beautys definition.In 2022,we strengthened our definition of sustainable packaging by incorporating weight measurement,aligning with existing industry standards.Packaging qualifies as sustainable if it meets one of the following four criteria:Recyclable(aligned with U.S.Federal Trade Commission guidelines)Refillable Made from recycled material Made from bio-sourced material As more brands meet our definition under the Sustainable Packaging pillar,we are making progress toward our own commitment that by 2025,50%of packaging sold at UltaBeauty,including both UltaBeauty Collection and other brands,will meet this standard.Self-care thats eco-awareSk*ps products for face,body and hair are designed for a generation of beauty enthusiasts who want to take care of themselves and the planet.The brand is helping tackle plastic waste by packaging its products in a fully recyclable,shower-friendly paper carton.The carton uses 95%less plastic than a bottle and is the first of its kind in the beauty industry.Its products are certified to the Clean Ingredients,Cruelty Free,Vegan and Sustainable Packaging pillars.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA182022 ESG ReportAddressing hard-to-recycle materialsMany beauty and wellness product packages cannot be recycled due to their size,their materials or their uses of mixed materials,like pumps,that need to be broken apart manuallywhich most recycling facilities dont have the ability to do.UltaBeauty is helping address the challenge of hard-to-recycle materials by piloting a packaging collection program for beauty and wellness products in partnership with Pact Collective.At a small number of select stores,guests will be able to bring back empty beauty packaging that cannot be processed by traditional recycling facilities.Pact Collective will then aim to find the highest and best use for all material types,which could include:Upcycling into another product Downcycling into a lower-value item Breaking down packaging materials for future use Burning packaging to generate energy As a member of Pact Collective,we also have the opportunity to influence this work at the industry level.Reducing single-use bags Ulta Beauty remains the Beauty Sector Lead Partner in the Consortium to Reinvent the Retail Bag.The Beyond the Bag Initiative is a multiyear collaboration with the aim of offering retail bags that are convenient for consumers while having less environmental impact.Retailers are working together by conducting research to understand consumer behavior and sharing tried and tested single-use bag solutions that can drive near-term positive environmental impact and cost savings.Solutions they are testing include:Reducing plastic bag use Encouraging reuse of existing bags Substituting single-use bags made from renewable materials when reusable bags are not an option Using lessons learned over the past two years,the Consortium plans to launch a“bring your own bag”pilot in 2023.UltaBeauty will participate in this pilot at a small number of select stores,contributing to the Consortiums base of knowledge about what factors influence consumers to bring their own bags across different shopping occasions.Pact Collective will collect hard-to-recycle beauty packaging at Ulta Beauty stores using bins like these.By collecting items that might not otherwise get recycled,we will help divert materials from the landfill and reduce packaging waste.We launched a reusable tote bag to encourage guests to practice eco-friendly behavior.The bag was made with 100%pre-consumer recycled cotton and designed by artist Steffi Lynn.It is now available at all Ulta Beauty stores.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA192022 ESG ReportUltaBeauty Collection Products were proud to put our name onUltaBeauty Collection,our private-label brand,offers essential products in key categories such as cosmetics,skincare,sun and bath.In our new store layouts,we present UltaBeauty Collection products in a single gondola,positioning it as a unified,multicategory brand.Ulta Beauty Collection aspires to be a brand of choice among Gen Z beauty enthusiasts.The brand appeals to this generation by aligning with issues they care about,like clean and sustainable beauty.UltaBeauty Collection products are 100%clean and cruelty-free,according to our Conscious Beauty at UltaBeauty definitions.ULTABEAUTY COLLECTION SUSTAINABLE PACKAGING HIGHLIGHTSGoal:Achieve 50%sustainable packaging by weight by 2025.37%sustainable packaging1Introduced bio-sourced sugarcane tubes for 44 SKUs to replace virgin plasticTransitioned to 100%post-consumer recycled bottles and jars for the lines bath productsIn 2022,Ulta Beauty Collection was recognized by the New Jersey Packaging Executives Club for a package made using Forest Stewardship Council(FSC)-certified materials;over half the items we sell with paper cartons feature FSC-certified paper,and we are working toward transitioning more SKUs every dayContinue to engage UltaBeauty Collection suppliers on our commitments to packaging and environmental sustainability1 Based on data from 45%of UltaBeautyCollection branded SKUs.The rest of the assortment has not been evaluated yet.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA202022 ESG ReportCultivating diversity in our value chainExtending DEI to our productsWe want everyone to see themselves at UltaBeauty.Over the past several years,we have taken a close look at what products we offer,where we advertise and how we connect brands and guests.By ensuring that more voices are heard and more entrepreneurs have the resources to connect with new audiences,we can create a more inclusive shopping experience.BIPOC-OWNED AND-FOUNDED As part of our diversity,equity and inclusion(DEI)commitments,UltaBeauty is working to help amplify brands that are owned,led or founded by individuals who identify as BIPOC.Our efforts include helping brands become retail ready,adding brands to our assortment and providing support to help existing brands on our shelves succeed.One of our biggest accomplishments in 2022 was completing the first cohort of our MUSE Accelerator program,a 10-week program designed to prepare early-stage BIPOC-owned and-founded brands for retail readiness.The inaugural class included eight brands across skincare,makeup,fragrance,haircare and wellness.In addition to$50,000 in financial support,each MUSE Accelerator participant had the opportunity to learn from UltaBeauty leaders,industry subject matter experts and leading BIPOC brand owners.The programs curriculum was created in partnership with Venture Noire,a nonprofit organization that specializes in accelerator programs dedicated to Black and minority entrepreneurs.“It is our responsibility to take tangible steps to create foundational industry change.As a destination where brands can learn,thrive and successfully reach uncharted heights,MUSE Accelerator helps us further nurture emerging BIPOC brands and create meaningful impact for the communities we serve,our industry and the world.”MONICA ARNAUDOChief Merchandising Officer|UltaBeautyUlta Beauty selected eight early-stage brands to participate in the first cohort of the MUSE Accelerator program.Learn more about the founders.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA212022 ESG ReportUlta Beauty continues to support New Voices Fund,a venture capital(VC)firm that partners with and invests in entrepreneurs of color to drive scalable,sustainable businesses and create generational wealth.As the VCs beauty retail partner,Ulta Beauty committed$5 million in capital and will continue to offer thought partnership in the selection process.DIVERSIFYING OUR OWN ASSORTMENTUltaBeauty is a proud signatory of the Fifteen Percent Pledge,through which we plan to devote 15%of our total brand assortment to Black-owned,Black-founded and Black-led brands.Since signing this pledge,we have increased the number of Black-owned,-founded or-led brands by 73%.To support the Black-owned brands currently in our assortment,UltaBeauty has invested$8.5 million in brand marketing support and$3.5 million in in-store merchandising and other support.We also dedicated approximately$25 million to media investments with multicultural platforms in 2022,including Black-and Hispanic-owned media outlets,to better reach Black,Hispanic and other beauty enthusiasts of color.Catalyzing the launch of these brands will undoubtedly help move the needle toward more diverse offerings in beauty.UltaBeauty is also driving inclusion by creating better guest and associate experiences and advancing positive impact in communities.See the many ways were using the power of our business to make a positive impact.Celebrating the beauty of natural hairHair discriminationthe denial of employment and educational opportunities because of hair texture or styles inherent in Black cultureis still legal in 33 U.S.states.Research shows that this form of discrimination affects Black women in the workplace.UltaBeauty is proud to support the CROWN Act,which would prohibit race-based hair discrimination.The CROWN Act was signed into state law in California in 2019,but has a long way to go to achieve federal recognition.The CROWN Coalition was co-founded by Dove,the National Urban League,the Western Center on Law&Poverty and Color of Change,and we look forward to working with these partners to raise awareness about this important legislation.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA222022 ESG ReportPROMOTING SUPPLIER DIVERSITYBeyond the products we sell,Ulta Beauty procures a range of other goods and services necessary for our business operations.Our commitment to supplier diversity extends to these vendors,as we actively seek out and engage with diverse-owned companies to create opportunities for them to work with us.Our supplier diversity objective is to foster an inclusive procurement process that recognizes and supports underrepresented entrepreneurs.To this end,we engage with certified businesses that fall into one or more of the following diversity categories:Minority-owned businesses Woman-owned businesses Lesbian,gay,bisexual,transgender-owned businesses Disability-owned businesses Veteran-owned businesses Service-disabled veteran-owned businesses Small,disadvantaged businessesWe recognize that many businesses we work with meet the criteria for certification but may not have taken steps to become certified.As part of our commitment to promoting supplier diversity,our team actively educates vendors on the importance of certification and connects them to resources that can assist them in obtaining certification,thereby enabling them to be recognized as a diverse-owned business by Ulta Beauty and other potential customers.In addition,our partnerships with advocacy agencies help us support the growth and development of our suppliers.To this end,Ulta Beauty is a member of the following groups:National Gay&Lesbian Chamber of Commerce(corporate member)National Minority Supplier Development Council(corporate member and member of Retail Industry Group)Retail Industry Leaders Association(Supplier Diversity Council member)Womens Business Enterprise National Council(corporate member)We are committed to increasing our spending with diverse-owned businesses over time,and throughout fiscal 2022,our team focused on setting an accurate baseline for diverse supplier spend and educating associates on how they can support supplier diversity.Our current spending with diverse suppliers represents 2.7%of our total spend,which is in line with industry peers.However,our goal is to nearly double this level of spending to 5.4%in the next five years.This goal reflects our ongoing dedication to promoting diversity and inclusion in our procurement process and creating more opportunities for underrepresented entrepreneurs to grow and succeed.Partnering with vendors and brands to help those in needWe believe that beauty is for all,and it is our responsibility to use the power of beauty to create meaningful impact.In collaboration with our brand partners,UltaBeauty proudly donates unused product when possible.In fiscal year 2022,we donated 500 pallets of personal care items and beauty products to those in need,as well as to first responders,nurses and doctors.By donating unused product,we provide critical personal care items when they are needed the most(such as after a natural disaster),recognize those who serve our communities and cut down on waste and emissions associated with the alternatives of disposing the items or returning them to our vendors.In addition,our Vendor Standards outline our expectations for ethical business conduct,worker safety,environmental stewardship and product quality.Our supplier relations team is dedicated to onboarding new brands and vendors,providing them with webinars and other tools to ensure that they are fully equipped to succeed in their partnerships with us.We hold all of our vendors to the highest standards and expect them not only to adhere to our requirements but also to pass them on to their own vendors that produce goods or services that we ultimately purchase.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA232022 ESG ReportENVIRONMENTResponding to the urgency of climate change matters not only to us,but also to our guests.By pursuing initiatives aligned with our strategy and influencing change across the industry,were doing our part to keep the world a beautiful place to live.Positive Impact34%electricity supplied by renewable energy,doubling our percentage from 2021A more beautiful world for allPositive LegacyINTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA242022 ESG ReportUltaBeautys environmental footprint Protecting the beauty of our world As the nations leading beauty retailer,we take seriously our responsibility to be good environmental stewards by reducing our direct and indirect emissions.Climate scientists and world leaders agree on the need to limit global temperature rise to 1.5C to avoid the worst effects of climate change.The Science Based Targets initiative(SBTi)is the gold standard for climate goal setting,requiring companies to reduce their carbon emissions in a manner backed by data and in line with science.UltaBeauty has submitted a target,covering Scope 1,2 and 3 emissions,to SBTi for approval.In the meantime,were moving forward with important next steps for emissions reduction both within and beyond our business,including investing in renewable energy and engaging with suppliers and other key stakeholders on Scope 3 emissions.Scope 1&2 same-store emissions change 2021-202219%Annual estimated energy reduction due to efficiency investments1.5RBON EMISSIONSSCOPE 1&2SCOPE 3What it is On-site fuel combustion in boilers,furnaces,air conditioners,water heaters and generators(Scope 1)and electricity to power stores,offices and distribution centers(DCs)(Scope 2)All indirect emissions in our value chain,both upstream(among our suppliers)and downstream(during transportation,product use and end of life)What were doing Drive energy efficiency through upgrades to energy management systems,HVAC and lighting Continue investing in renewable energy Engage brand partners to set their own science-based targets and collaborate on emissions-reduction initiatives Work with industry groups including The Sustainability Consortium,Personal Care Products Council,The Association of Plastic Recyclers,the Green Chemistry&Commerce Council,Retail Industry Leaders Association,the Beyond the Bag Initiative and Pact CollectiveINTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA252022 ESG ReportOur carbon footprintUlta Beauty opened 47 new stores in 2022 and continues to increase our reach.This growth inevitably expands our environmental footprint;our challenge is to grow our business while reducing that impact.While Scope 3 emissions make up the largest percentage of our footprint,Scope 1 and 2 emissions represent areas where we have more control.Over the past several years,investments in renewable energy have helped us reduce our Scope 1 and 2 emissions,and we have expanded our engagement with brand partners to address Scope 3 emissions.SCOPE 3 EMISSIONS BY CATEGORY5(%OF TOTAL SCOPE 3)1 Increase in emissions likely due to increase in purchased goods.2 MTCO2e Metric tons of carbon dioxide equivalent.3 Reflects total Scope 1 and market-based Scope 2 emissions for all locations that were operational for the entirety of both fiscal 2021 and fiscal 2022.This excludes any locations that opened or closed mid-year(includes 1,233 stores,four offices and six DCs).4 Reflects total Scope 1 and market-based Scope 2 emissions per 100 square feet for all locations that were operational for the entirety of the corresponding fiscal year.This excludes any locations that opened or closed mid-year(2020 data includes 1,228 stores,four offices and five DCs;2021 data includes 1,267 stores,four offices and six DCs;2022 data includes 1,291 stores,four offices and six DCs).5 Totals may vary from summation due to rounding.Fiscal 2022 activity data or estimations used to quantify greenhouse gas(GHG)emissions are aligned with the financial reporting year,ending January 28,2023,conditional upon data availability.GHG footprint fiscal 2020 to fiscal 2022 by EcoAct Inc.;this data has not been verified by a third party.Read more about our organizational and operational boundaries in our fact sheet.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA262022 ESG ReportEnergy efficiency and renewablesInvesting in clean energy UltaBeauty is growing responsibly through investments in energy efficiency and renewable energy to power our stores,DCs and offices.To lower Scope 1 and 2 emissions,we procure renewable energy and invest in efficiency to reduce our overall energy demand.We estimate that energy efficiency investments will allow us to reduce our energy use by 1.5%year over year.We also continually seek out new technology and upgrade equipment as needed.In 2022,we upgraded energy management systems at 97 UltaBeauty retail stores.These systems not only help our stores operate more efficiently,but also make building information available remotely so that we can troubleshoot and adjust without having to dispatch a technician.In addition to energy management systems,we retrofitted 100 stores with new LED lights and upgraded to more efficient HVAC systems at 16 stores.The performance of HVAC units can decrease significantly by the end of life,especially when compared to new high-efficiency units.Proactive replacement can result in significant energy savings,in addition to improving comfort for guests and associates.In 2023,we aim to continue investing in the energy efficiency of our stores by adding LED lighting to an additional 100 stores,updating Energy Management Systems at 50 stores and completing 30 HVAC retrofits.Renewable energy investments allow us to decrease our overall emissions,even as we open more stores.We continue to purchase renewable energy credits(RECs)and have purchased future RECs out to 2026.Every year since 2020,our annual electricity usage met through RECs has roughly doubled,totaling 34%in 2022.In addition,we are collaborating with landlords on on-site solar installations and have invested in residential solar projects that offer tax credits to homeowners.UltaBeautys energy consumption increased in fiscal 2022 as a result of new stores opened during the year.Accelerating carbon-free electricity procurement will help us offset consumption as our business continues to grow.113,902 MWhRenewable energy credits procured in 202234%Renewable energy as a percentage of total electricity use in fiscal 20221 These values represent raw electricity consumption for all buildings for which we have utility data(stores,DCs and offices).No adjustments for weather,site count or other factors have been made.Fiscal 2021 data includes six DCs,two offices and 1,303 stores;fiscal 2022 data includes six DCs,two offices and 1,329 stores.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA272022 ESG ReportA more sustainable supply chainWhether they travel from DCs to UltaBeauty stores or directly to consumers who place e-commerce orders,our products go on quite a journey.Under the leadership of our Chief Supply Chain Officer,heres how we make distribution,shipping and transportation more efficient.1EFFICIENT LIGHTINGMany of our DCs have state-of-the-art LED lighting.We upgraded an additional DC to LED in 2022.2SMART TECHNOLOGIESIn our larger DCs,we are incorporating warehouse automation and energy-efficient robotics.Robots dont need lights to see,so relying on them cuts down on our electricity needs.3SUSTAINABLE SHIPPING MATERIALSWe transitioned to eco-friendly air pillows for shipping to our e-commerce guests and retail stores.These new air pillows are made from 30%recycled materials,and we are looking to add labels with recycling instructions to all of our packaging,including bubble mailers and corrugated boxes.4MORE EFFICIENT TRUCKINGWhen possible,we prefer to use carriers certified by the EPAs SmartWay program,which helps us find the freight carriers that operate most efficiently.5INBOUND SHIPMENT CONSOLIDATIONBased on our customers locations,we are looking at opportunities to pick up product from multiple facilities at once,rather than making individual trips.INTERMODAL TRANSPORTATIONIn 2022,we began working with one of our largest brand partners to transition shipping from trucks to rail,which generates fewer emissions.6Our supply chain team donated over 500 pallets of products to support those in need in fiscal 2022.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA282022 ESG ReportWater and wasteConserving precious resourcesWhile our operations are not considered water-or waste-intensive,we recognize our responsibility to conserve water and minimize waste where we can.To manage our stores water footprint,we use instant water heaters and work to identify malfunctioning equipment as quickly as possible.As our business grows,so does the volume of waste we generate.We recently completed a pilot of single-stream recycling at a subset of UltaBeauty stores.We continue to carefully manage disposed beauty products,some of which are considered hazardous waste due to the chemicals they contain.UltaBeauty complies with all local,state and federal environmental laws for the responsible management of these materials,and items that are regulated as hazardous waste are not sent to standard landfills.We encourage guests to reduce waste by offering a reusable shopping bag and exploring a collection program for empty hard-to-recycle beauty packaging.We are also helping brand partners waste less through the fixtures they provide to UltaBeauty stores for product displays.A pilot is currently underway with one of our brand partners through which end-of-season fixtures will be sent to a recycling facility instead of going to landfill.1 Water intensity is defined as the total usage(in gallons)per square foot;represents same-store usage from nearly 400 stores that were operational throughout the 2020,2021 and 2022 fiscal years.The increase in 2021 is a result of store re-openings post the COVID-19 pandemic.2 Data correlates to Scope 3,Category 5 emissions accounting.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA292022 ESG ReportCOMMUNITYHelping others is a beautiful thing.Since 2016,the Ulta Beauty Charitable Foundation(UBCF)has been on a mission to make a difference in the communities where we live and work,particularly by improving the lives of women and families.$14Min donations in 2022Positive ImpactBetter lives for women and familiesPositive LegacyINTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA302022 ESG ReportThe UltaBeauty Charitable FoundationMaking a difference in the communities in which we live and workOver the past year,we deepened our relationships with three national nonprofit partners,which we support with a combination of monetary and in-kind donations,as well as volunteer service.UBCF has its own board made up of UltaBeauty executives who provide guidance and direction for the Foundation.Our three largest national nonprofit partners include:Breast Cancer Research Foundation(BCRF)The Foundation has set a goal to donate$50 million to BCRF by 2024,equivalent to one million hours of breast cancer research.As of the end of 2022,we contributed over$47 million,putting this goal well within reach.Nearly$6 million was raised from guests and associates during our Gorgeous Way to Give campaign,held in-store and online each October.“BCRF has been instrumental.They funded me early on when I was just getting going as an assistant professor and taking my first ideas to the lab,some of which were bold and probably would not have been funded by conventional means.Without this funding,I absolutely would not be doing the work that Im doing today and wouldnt be as close to translating it to the clinic.”DR.CHRISTINA CURTISBCRF investigator supported by UBCF since 2013Save the ChildrenEducation can provide a pathway out of poverty.Together,with partners like UBCF,Save the Children helps to ensure all children in rural America have a healthy,strong foundation to thrive as learners and in life.UBCFs support in 2022 included a“Stuff the Bus”tour,where UltaBeauty volunteers packed and distributed tote bags containing books and hygiene essentials for students in Chicago,Los Angeles and Houston,benefiting approximately 9,000 children and families.In addition,we continued our annual Mothers Day campaign,raising more than$2.3 million from guests and associates to provide brighter futures for children.Save the Children also supports children in need outside the U.S.In 2022,we made a special donation to the organizations Ukraine Crisis Relief Fund to provide a months worth of meals to 3,000 Ukrainian children caught in the middle of the countrys war crisis.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA312022 ESG ReportDress for SuccessDress for Success empowers women to achieve economic independence by providing a network of support,development tools and professional attire to thrive in work and in life.Because UltaBeauty offers products that help people look and feel their best,donating products,as well as financial support and associate volunteer time,is a great way we can support this organization.In 2022,we were excited to see a return to in-person Dress for Success programming,which meant in-person volunteer opportunities for UltaBeauty associates,as well as a continuation of virtual programming.During Womens History Month,UltaBeauty sponsored programs and experiences that included a panel discussion on authenticity,a session on beauty tips and information for women whose natural hair is an important part of their identity.More than 80 people attended the beauty tips workshop,and gave it an average satisfaction score of 90%.Said one affiliate based in Virginia,“The UltaBeauty teams talent and expertise is just what the women we serve need to feel confident.”5new cities supported in 202230volunteer events organized in 202252,000women impacted since 2017HELPING ASSOCIATES IN NEEDBeyond giving back to the communities we serve,UBCF also supports the Associate Relief Fund,which provides monetary grants to UltaBeauty associates facing personal hardship.In 2022,we expanded the criteria for receiving funding to include serious illness,injury,military deployment of an associates family member or intimate partner violence.I really appreciate the support from the Associate Relief Fund.This takes away a lot of the stress I was feeling because of my situation.”2022 GRANT RECIPIENTINTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA322022 ESG ReportSupport for our hometown and other communities Donations that make a difference With corporate headquarters just outside Chicago,its important that we positively impact our hometown.We have a longtime partnership with Skills for Chicagolands Future,and have hired 305 job seekers through the program since 2014.In 2022,we were honored with the Legacy Award from Metropolitan Family Services(MFS)in recognition of our extensive engagement with this organization,including UltaBeauty Chief Operating Officer Kecia Steelmans service on the MFS board.As our business grows,we also recognize the importance of using our resources to empower underserved individuals in communities beyond our hometown.Over the past fiscal year,UBCF donated a total of$2 million to 20 nonprofits that serve Black,Indigenous and People of Color(BIPOC)and lesbian,gay,bisexual,transgender,queer and/or questioning(LGBTQ )communities,including Chinese American Service League,Big Brothers Big Sisters of America,Step Up,It Gets Better Project,Hispanic Federation and many others.Weve planned associate volunteer opportunities with these and other organizations for the year ahead.As another example of our engagement,in early 2022 we organized an inaugural Week of Service to coincide with Martin Luther King Jr.Day.Our partners for the week included Junior Achievement,DonorsChoose and The Conscious Kid.Associates took part by contributing over 4,300 books and school supplies and funding over 470 classroom projects at schools nationwide.Volunteers also taught Junior Achievement classes that reached 875 students.Looking ahead,we are exploring ways to measure the impact of our donations and volunteer time.The beauty of empowerment Science,technology,engineering,arts and mathematics(STEAM)career paths can be found in more places than you might think.Imagine the scientific research involved in formulating a new cosmetic product,or the technical know-how necessary to manage a global supply chain.UltaBeauty and YWCA Metropolitan Chicago shared these concepts and many others with Chicago-area girls ages 9 to 14 at our“Pretty Empowered”event.The day-long program emphasized leadership and confidence-building alongside wellness and exploration of STEAM fields.Girls had the opportunity to meet UltaBeauty staff and YWCA board members,who served as mentors and inspiration for future career paths.The program was a success,reaching 100 girls from Chicagos south and west side.In 2023,we plan to take this program national in five markets,including our hometown,Chicago.In partnership with After School Matters,a Chicagoland nonprofit,UltaBeauty also sponsored our first-ever Beauty&Business program.A group of 15 teens from local schools toured an UltaBeauty store,learned about beauty careers and practiced making and marketing their own products,gaining skills in business,science and entrepreneurship.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA332022 ESG ReportGOVERNANCEPositive Impact36%Board members who identify as people of color55%Board members who identify as women9%LGBTQ 5 yearsaverage tenureDiverse perspectives to lead us into the future Positive LegacyA foundation of good corporate governance is essential for achieving our environmental,social and governance(ESG)aspirations and growing our business.In all that we do,we are guided by our mission,vision and values.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA342022 ESG ReportCorporate and ESG governanceOverseeing our prioritiesUltaBeautys Board of Directors brings a wide variety of expertise and leadership to help guide our CEO and our management team.In early 2023,we announced our intention to declassify our Board and expect our shareholders to vote on this matter at our 2023 Annual Meeting.Declassified boards require that all Board members be reelected each year and are considered to be more responsive to shareholders.1UltaBeautys Board of Directors and Executive Team have overall oversight and accountability for sustainability within the organization.Each of the Boards three committees touches these issues in a different way.The Nominating&Corporate Governance Committee is responsible for developing a diverse Board and periodically reviews company policies related to ESG.The Compensation Committee oversees human capital risks and periodically reviews the companys diversity,equity and inclusion(DEI)policies and practices.The Boards Audit Committee discusses information security,enterprise risk assessments and risk management.Our full Board discusses and provides guidance on ESG topics multiple times throughout the year.Each quarter,the Board reviews an ESG scorecard that includes:Progress toward goals within our four ESG pillars(People,Product,Environment,Community)Updates on investor engagement related to ESG Updates on ESG ratings and rankingsIn 2022,we created an ESG Disclosure Group,made up of UltaBeauty leadership and associates,that ensures accuracy and transparency in all ESG-related disclosures.RISK MANAGEMENT Our Board also provides guidance and oversight on enterprise risk management(ERM)activities and processes across the company.To ensure understanding of the risks we face as an enterprise,the Board receives regular management updates on our business operations,financial results and strategy.Our leadership team also keeps the Board informed about emerging or evolving risks as they arise.The Board then discusses and provides guidance regarding risks impacting our business.As part of our ERM strategy,we proactively seek input from associates at all levels of the company,with special emphasis on the in-store and distribution center(DC)associates who know our guests and operations best.In 2022,we added a risk management insights team to our ERM process to improve how we gather input and cultivate insights,which are communicated to the Board.11directors55%women45%men36%people of color55%joined within the last five years59average agePOLICY ON POLITICAL CONTRIBUTIONSUltaBeauty does not contribute directly or indirectly to political parties,candidates or campaigns,or religious affiliations.In 2022,we received a score of 100%from the CPA-Zicklin Index of Corporate Political Disclosure and Accountability.This index measures the strength of a companys political spending disclosure practices and oversight policies.1 Equilar,2017INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA352022 ESG ReportData stewardship Serving as good data stewardsWe take a multifaceted and a proactive approach to safeguarding the valued data of our guests,associates and business.UltaBeauty uses data to run our business,gather insights and connect with guests on e-commerce channels.We safeguard this data by monitoring and complying with privacy and consumer protection laws.While we do not sell guest data,we share aggregated and anonymized data with our brand partners and third-party vendors to enhance our business.Our Security and Network Operations Center constantly and proactively monitors our network and application landscape for threats and anomalies,and we have established processes for sharing data and performing third-party risk assessments.We manage data security and privacy at the highest levels.Our CEO keeps the Board informed on cybersecurity and privacy matters via monthly reporting,regular reports to the Audit Committee and full Board discussions throughout the year.UltaBeautys General Counsel,Chief Risk&Compliance Officer also serves as our Chief Privacy Officer and works closely with our internal data stewardship team,including our Vice President of IT Risk Management,our Data Enterprise Officer and our IT Risk Management team,to ensure we take a holistic approach to caring for guest,associate,financial as well as other proprietary data.We regularly train UltaBeauty associates on how to keep data safe.In 2022,we held a cybersecurity week that included formal training as well as informal activities that reinforced key learnings and tested associates knowledge.As a result of our holistic,proactive and diligent approach to data stewardship,Ulta Beauty has not experienced any data breaches.We know cyber threats are constantly evolving and we must remain vigilant and focused every day.NO DATA BREACHESUlta Beauty has not had a data breach since the companys founding in 1990.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA362022 ESG ReportEthics&compliance Operating with integrity The UltaBeauty Code of Business Conduct helps us work ethically and transparently in support of our mission,vision and values.The Code of Business Conduct is included in new hire materials for all associates,who must read and acknowledge this policy each year.In addition,all store managers and above in the field,DC managers,corporate associates and members of the Board of Directors take an annual course on the Code of Business Conduct and are expected to act in accordance with the Code at all times.We continually strive to improve our approach to compliance through the UltaBeauty Compliance Network,a cross-functional group of associates,led by a member of the Executive Leadership Team,who regularly focus on compliance.The group meets quarterly and allows associates to share best practices,discuss challenges and identify useful tools or resources.Members of our executive team,as well as third-party compliance experts,periodically come to share perspectives about compliance with this group.UltaBeauty Vendor Standards outline our expectations of all UltaBeauty vendors.These cover the ethical conduct and social and environmental compliance standards that are required of a responsible workplace.People Success(PS)manages our Ethics Hotline,and our General Counsel,Chief Risk&Compliance Officer reviews all concerns.UltaBeautys Board receives updates on ethics and compliance matters periodically throughout the year.Each quarter,a cross-functional team comprised of representatives from PS,Loss Prevention,Internal Audit,and Legal,Risk&Governance Services meets to discuss reporting trends and share the status of investigations and outcomes.Making it easy to speak up We encourage associates to report any violations of the Code of Business Conduct.There are several ways to report a concern,all of which are proactively communicated to associates in many ways,including training,postings and the UltaNet.Speaking with ones own manager or another manager Speaking to a People Success Business Partner Using the We Care!Lets Talk line to reach the Associate Care and Support Team Email:AssociateCareandSupportU Phone:855-HR-ULTA-1(855-478-5821)Contacting our third-party Ethics Hotline anonymously by phone or online Website: Phone:1-888-673-9271 Contacting our Chief Compliance OfficerINTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA372022 ESG ReportSUPPLEMENTAL DATALearn more through our latest Environmental,Social and Governance(ESG)data,framework disclosures and additional information on our programs and policies.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA382022 ESG ReportSustainability Accounting Standards Board(SASB)Index ACCOUNTING METRICSTOPICACCOUNTING METRICCATEGORYUNIT OF MEASURECODERESPONSE/COMMENTEnergy Managementin Retail&Distribution(1)Total energy consumed,(2)percentage grid electricity,(3)percentage renewableQuantitativeGigajoules(GJ),Percentage(%)CG-MR-130a.1(1)Electricity:335,686,723 KWh Natural Gas:1,548,821 therms(2)66%(3)34ta SecurityDescription of approach to identifying and addressing data security risksDiscussion and analysisn/aCG-MR-230a.1Governance Corporate and ESG governance(1)Number of data breaches,(2)percentage involving personally identifiable information(PII),(3)number of customers affectedQuantitativeNumber,Percentage(%)CG-MR-230a.2Ulta Beauty experienced no data breaches in the past year and has not had a data breach since the companys founding in 1990.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA392022 ESG ReportSASB Index ACCOUNTING METRICSTOPICACCOUNTING METRICCATEGORYUNIT OF MEASURECODERESPONSE/COMMENTLabor Practices(1)Average hourly wage and(2)percentage of in-store employees earning minimum wage,by regionQuantitativeReporting currency,Percentage(%)CG-MR-310a.1(1)The median hourly wage of in-store,full-time regular associates(excluding seasonal,temporary and commissioned associates as determined by employment class)as of January 28,2023,was$22.00.(2)Percentage of in-store associates earning minimum wage,by region RegionTotal AssociatesAssociates Above Minimum WageTotalove Minimum Wage within RegionTotal%at Minimum Wage within RegionSales OpsCentral 4,981 4,707 94.5%5.5%Sales OpsMid East 3,850 3,751 97.4%2.6%Sales OpsMidAtlantic 4,192 4,081 97.4%2.7%Sales Ops Mountain West Plains 4,152 3,969 95.6%4.4%Sales OpsNo Cal PNW 4,532 3,783 83.5.5%Sales OpsNortheast 4,620 4,211 91.2%8.9%Sales OpsSo Cal Arizona 4,972 4,294 86.4.6%Sales OpsSouth 5,429 5,097 93.9%6.1%Sales OpsSouth Central 4,824 4,761 98.7%1.3%Sales OpsSouthwest 5,141 5,120 99.6%0.4%Grand Total46,693 43,774 94.0%6.0%(1)Voluntary and (2)involuntary turnover rate for in-store employeesQuantitativeRateCG-MR-310a.2Full-time regular associates(excluding seasonal and temporary as determined by employment class)as of January 28,2023Annualized TurnoverAll Types:37.6%Annualized TurnoverVoluntary:33.4%Total amount of monetary losses as a result of legal proceedings associated with labor law violationsQuantitativeReporting currencyCG-MR-310a.3No material monetary losses have resulted from legal proceedings associated with labor law violations in 2022.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA402022 ESG ReportSASB Index ACCOUNTING METRICSTOPICACCOUNTING METRICCATEGORYUNIT OF MEASURECODERESPONSE/COMMENTWorkforce Diversity&InclusionPercentage of gender and racial/ethnic group representation for (1)management and (2)all other employeesQuantitativePercentage(%)CG-MR-330a.1(1)Management Director-Level Associates:73%white 27%people of color 68%women 32%menExecutive Team:70%women 30%men Ulta Beauty Leadership(director-level associates and above):66%women 27%people of color(2)All other associates Ulta Associates(below director level):91%women 9%men 53%people of colorSee Supplemental Data Appendix for EEO-1 information for regular managerial and non-managerial associates in operations.Total amount of monetary losses as a result of legal proceedings associated with employment discriminationQuantitativeReporting currencyCG-MR-330a.2No material monetary losses have resulted from legal proceedings associated with employment discrimination in 2022.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA412022 ESG ReportSASB Index ACCOUNTING METRICSTOPICACCOUNTING METRICCATEGORYUNIT OF MEASURECODERESPONSE/COMMENTProduct Sourcing,Packaging&MarketingRevenue from products third-party certified to environmental and/or social sustainability standardsQuantitativeReporting currencyCG-MR-410a.1Data unavailable for 2022.We are evaluating potential disclosure on this topic in the future.Discussion of processes to assess and manage risks and/or hazards associated with chemicals in productsDiscussion and analysisn/aCG-MR-410a.2We train associates who handle hazardous materials so they can do so safely and in compliance with applicable laws,rules and regulations.Additionally,we maintain safe indoor air for all customers even while hairsprays,dyes and other products are in use in our salons.Learn more about the Clean Ingredients pillar of Conscious Beauty at Ulta Beauty in the Product section of this report.Discussion of strategies to reduce the environmental impact of packagingDiscussion and analysisn/aCG-MR-410a.3We have set a sustainable packaging target that by 2025,50%of the consumer-level packaging,by weight,will be recyclable,refillable or made from recycled or bio-sourced materials.Learn more about our commitments and progress toward goals:Introduction Ulta Beauty ESG commitmentsProduct Choices for you&for your worldProduct Products were proud to put our name onACTIVITY METRICNumber of:(1)retail locations and (2)distribution centersQuantitativeNumberCG-MR-000.A(1)1,355 stores(2)Six distribution and fast fulfillment centersTotal area of:(1)retail space and (2)distribution centersQuantitativeSquare feet(SF)CG-MR-000.B(1)14.2M total store square feet(2)3M square feet in distribution and fast fulfillment centersINTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA422022 ESG ReportTask Force on Climate-related Financial Disclosures(TCFD)DISCLOSURE FOCUS AREARECOMMENDED DISCLOSURERESPONSE/REFERENCEGovernanceDisclose the organizations governance around climate-related risks and opportunities.a)Describe the boards oversight of climate-related risks and opportunities.Governance Corporate and ESG governanceSupplemental Data ESG program structure2023 Proxy Statement Corporate Governance Board Role in Risk Oversight,pages 34b)Describe managements role in assessing and managing climate-related risks and opportunities.Our General Counsel,Chief Risk&Compliance Officer,who reports to the Chief Executive Officer,is the executive sponsor of our ESG program and works with a cross-functional team of experts,including representatives from Growth and Development/Energy Management,Supply Chain and Procurement,People Success/HR,Finance,Corporate Strategy,and Legal,Risk&Governance.Supplemental Data ESG program structure2022 CDP Climate Change,C2.2StrategyDisclose the actual and potential impacts of climate-related risks and opportunities on the organizations businesses,strategy and financial planning.a)Describe the climate-related risks and opportunities the organization has identified over the short,medium,and long term.b)Describe the impact of climate-related risks and opportunities on the organizations businesses,strategy,and financial planning.2022 CDP Climate Change,C2.2,C2.2a,C2.3a,C2.4aLearn More:Product Conscious Beauty at UltaBeautyEnvironment Energy efficiency and renewables Environment Water and wastec)Describe the potential impact of different scenarios,including a 2C scenario,on the organizations businesses,strategy,and financial planning.Ulta Beauty has not yet undertaken climate-related scenario analysis,but we anticipate conducting qualitative and/or quantitative analysis in the next year.Learn More:Environment Ulta Beautys environmental footprint INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA432022 ESG ReportTCFD DISCLOSURE FOCUS AREARECOMMENDED DISCLOSURERESPONSE/REFERENCERisk ManagementDisclose how the organization identifies,assesses and manages climate-related risks.a)Describe the organizations processes for identifying and assessing climate-related risks.b)Describe the organizations processes for managing climate-related risks.c)Describe how processes for identifying,assessing,and managing climate-related risks are integrated into the organizations overall risk management.Governance Corporate and ESG governanceEnvironment Ulta Beautys environmental footprintEnvironment Ulta Beautys environmental footprintEnvironment Energy efficiency and renewables2023 Proxy Statement Corporate Governance Board Role in Risk Oversight,pages 34Metrics and TargetsDisclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities.a)Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process.Comparable store annual energy consumptionAnnual energy savings from investments and upgrades Grid vs.renewable energy consumption Scope 1,2 and 3 emissionsPercentage of packaging sold that is recyclable,refillable or made from recycled or bio-based sourcesb)Disclose Scope 1,Scope 2,and,if appropriate,Scope 3 greenhouse gas(GHG)emissions,and the related risks.Environment Ulta Beautys environmental footprint c)Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets.Environment Ulta Beautys environmental footprintEnvironment Energy efficiency and renewablesINTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA442022 ESG ReportAppendixTHE PERCENTAGE OF EACH GENDER CATEGORY FOR U.S.OPERATIONSU.S.Operations,Regular Employees by Gender (less seasonal and temporary employees)as of January 28,2023GENDERCOUNTPERCENTAGE1Female43,03194.4%Male2,5615.6%Unknown00.0%Grand Total45,592100.0%STANDARD EEO-1 RACIAL AND ETHNIC GROUP CATEGORIES FOR U.S.OPERATIONS FOR MANAGEMENTU.S.Operations,Regular Managerial Employees by Ethnicity&Gender (less seasonal and temporary employees)as of January 28,2023TOPICFEMALEMALEUNKNOWNGRAND TOTAL1CountPercentageCountPercentageCountPercentageCountPercentageAmerican Indian/Alaskan Native660.9.1.0r1.0%Asian1372.00.3.052.2%Black or African American5608.00.9.0b08.9%Hispanic or Latino1,56322.572.1.0%1,71024.6%Native Hawaiian or Other Pacific Island190.3.1.0#0.3%Two or More Races2323.3 0.3.0%23.6%White3,85055.374.0.0%4,12759.3%Unknown00.0.0.0.0%I do not wish to provide20.0.0.0 .0%Grand Total16,42992.4S27.6.0%6,961100.0%1 Totals may vary from summation due to rounding.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA452022 ESG ReportAppendixSTANDARD EEO-1 RACIAL AND ETHNIC GROUP CATEGORIES FOR U.S.OPERATIONS FOR NON-MANAGEMENTU.S.Operations,Regular Non-Managerial Employees by Ethnicity&Gender (less seasonal and temporary employees)as of January 28,2023TOPICFEMALEMALEUNKNOWNGRAND TOTAL1CountPercentageCountPercentageCountPercentageCountPercentageAmerican Indian/Alaskan Native3660.9$0.1.0901.0%Asian1,3323.4d0.2.0%1,3963.6%Black or African American4,82212.5#20.6.0%5,05413.1%Hispanic or Latino11,11228.8h31.8.0,79530.5%Native Hawaiian or Other Pacific Island1570.40.0.060.5%Two or More Races1,6854.420.3.0%1,7974.7%White17,12744.352.3.0,02246.7%Unknown00.0.0.0.0%I do not wish to provide10.0.0.0.0%Grand Total136,60294.7%2,0295.4.08,631100.0%1 Totals may vary from summation due to rounding.INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA462022 ESG ReportUlta Beauty ESG fact sheetREPORT SECTION2021 REPORTEDFISCAL 2022Ulta Beauty At-A-GlanceOUR FOOTPRINTStores1,300 1,355Distribution and fast fulfillment centers66States5050Associates40,000 53,000CORPORATE GOVERNANCE:BOARD DIVERSITYWomen54U%Men46E%Identify as people of color316%Identify as lesbian,gay,bisexual,transgender,queer and/or questioning(LGBTQ )10%9%People%of people of color hired at the director level and above50Q%DIVERSITY&INCLUSIONUlta Beauty AssociatesPeople of Color49S%Women90%Men10%9%Executive TeamPeople of ColorDid not report20%Women67p%Men330%Ulta Beauty LeadershipPeople of color25%Women65f%Men354%INTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA472022 ESG ReportUlta Beauty ESG fact sheetREPORT SECTION2021 REPORTEDFISCAL 2022ProductsProducts25,000 25,000 Brands600 600 Certified to one or more of the Conscious Beauty at Ulta Beauty pillars270300 CommunityDollars raised for Save the Children$2.4 million$2.3 million Dollars raised for Breast Cancer Research Foundation(cumulative since 2009)$42 million $47 million Dollars raised for Dress for Success(cumulative since 2017)$1 million$1.3 millionEnvironmentEMISSIONS SCOPE:PORTION OF OUR FOOTPRINT(AS OF JANUARY 28,2023)Organizational Boundary:The GHG Inventory organizational boundary follows the operational control approach.As defined by The GHG Protocol Corporate Accounting and Reporting Standard,“a company has operational control over an operation if the former or one of its subsidiaries has the full authority to introduce and implement its operating policies at the operation.”Scope 1 and 2 emissions are calculated for all leased or subleased sites within Ultas operational control.Emissions not within Ultas operational control are accounted for in Scope 3 emissions.Operational Boundary:During the reporting period,the organizational boundary includes Stores,Offices,DCs and Fast Fulfillment Centers(FFCs)that are fully or partially in operation during the reporting period.All sites operated by Ulta are leased or subleased.Financial reporting(10-K)reports operational boundary in terms of stores,offices,DCs and FFCs as of end of the reporting period,i.e.,sites in operation by end of the reporting period.GHG Inventory differs from financial reporting quantifying Scope 1 and 2 emissions of additional sites(e.g.,sites that were closed or relocated throughout the reporting period).Scopes 1&25%4%Scope 395%Scope 3 breakdown(percent of total scope)Category 1Purchased goods&services59etegory 3Fuel-and energy-related emissions not in Scope 1 or Scope 2 2%2tegory 4Upstream transportation and distribution 2%2tegory 5Waste generated in operations 1%1tegory 6Business travel 1ceptable Use Policy Americans with Disabilities Act Policy Confidentiality Policy Employment Policy Harassment and Discrimination Prevention Policy Identity and Access Management Policy Information Security Management Policy Insider Trading Policy IT Risk Management Policy Network Security Policy Open Door Policy Privacy Notice and Policy Records and Information Management Policy Relationships in the Workplace Policy Ulta Beauty Gratis&Gift Policy Vendor Risk Management PolicyINTRODUCTIONPRODUCTCOMMUNITYPEOPLEENVIRONMENTGOVERNANCESUPPLEMENTAL DATA512022 ESG ReportThank you for your interest in Ulta Beauty.If you have any questions about this report,please contact our General Counsel,Chief Risk&Compliance Officer,Jodi Caro,at InvestorR.Forward-Looking StatementsThis report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934,as amended,and the safe harbor provisions of the Private Securities Litigation Reform Act of 1995,which reflect our current views with respect to,among other things,future events and performance.You can identify these forward-looking statements by the use of forward-looking words such as“outlook,”“believes,”“expects,”“plans,”“estimates,”“targets,”“strategies”or other comparable words.Any forward-looking statements contained in this report are based upon our historical performance and on current plans,estimates and expectations.The inclusion of this forward-looking information should not be regarded as a representation by us or any other person that the future plans,estimates,targets,strategies or expectations contemplated by us will be achieved.There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by such forward-looking statements.For a list of factors that could cause actual results to differ materially from those discussed or implied,please see our public filings with the Securities and Exchange Commission,including risk factors contained in Item 1A,“Risk Factors”of our Annual Report on Form 10-K for the year ended January 28,2023,as such may be amended or supplemented in our subsequently filed Quarterly Reports on Form 10-Q.Except to the extent required by the federal securities laws,we undertake no obligation to publicly update or revise any forward-looking statements,whether as a result of new information,future events or otherwise.
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Forging a sustainableworld.SUSTAINABILITYEXTRACT FROM THE 2022 UNIVERSAL REGISTRATION DOCUMENTThis document serves as universal registration document and annual fi nancial report.Contents001 Profile002 Album010 Interview012 Governance014 Direction and strategy/Business model020 Stock market and shareholder base024 Sustainable development034 Concessions036 VINCI Autoroutes050 VINCI Airports062 VINCI Highways070 VINCI Railways072 VINCI Stadium074 Energy076 VINCI Energies088 Cobra Industrial Services094 Construction096 VINCI Construction110 VINCI Immobilier113 General and financial elements114 Report of the Board of Directors295 Report of the Lead Director of the Board of Directors296 Consolidated financial statements375 Parent company financial statements393 Special report of the Statutory Auditors on regulated agreements394 Persons responsible for the Universal Registration Document396 Cross-reference table for the Universal Registration Document410 GlossaryFORGINGA SUSTAINABLE WORLDVINCI is a world leader in concessions,energy and construction,operating in more than 120 countries.We are at the centre of the challenges facing todays world,and our ambition is to play an active part in the energy and environmental transition of living spaces,infrastructure and mobility,while fostering social progress as a humanist group that stands for inclusion and solidarity.We harness our fields of expertise,our quest for innovation,our business models strength and our teams engagement to strive towards a goal that our 272,000 employees share:serving a useful purpose and caring for the planet.V I N C I 2 0 2 2 U N I V E R S A L R E G I S T R AT I O N D O C U M E N T0 0 11Environment Daywas an opportunity to share best practices emerging from the Environment Awards,whose first edition in 2021 drew over 2,500 initiatives submitted by Group employees.Of these,190 earned distinctions as regional winners or top finishers.2 Energy efficiencyIn September 2022,amid the energy crisis,VINCI rolled out an energy savings plan that will reduce the electricity and natural gas consumption of its concession activities and offices in France by 15%in 2023.This short-term target aligns with the Groups broader environmental transition goal to shrink its direct carbon footprint(Scopes 1 and 2)by 40%by 2030.1 Environment DayVINCI employees around the world celebrated the third annual Environment Day on 22 September with collaborative games,workshops,15-minute environmental impact sessions,conferences,on-site demonstrations and more,creating many opportunities for local teams to build awareness and share their experiences with the environmental transition.Joining forces to advance the environmental transitionVINCI has made ambitious commitments to act for the climate,the circular economy and natural environments the three pillars of its environmental policy which primarily focus on reducing its own footprint.The Groups teams are playing a large part in this shift by reshaping their everyday work practices.2 Self-consumption at airportsVINCI Airports is building on-site solar power stations to reduce its carbon footprint.Three new solar farms at the Faro airport,Belgrade airport and Lyon-Saint Exupry airport(P3 car park)began operating in 2022,bringing the networks total installed capacity to 36 MWp.The Faro power plant was developed by SunMind (a specialised subsidiary of VINCI Concessions)and installed by Omexom(VINCI Energies),which now operates Portugals very first airport solar farm.Rooftop solar powerThrough its dedicated subsidiary Eliove,VINCI Energies is installing rooftop solar panels to scale up energy efficiency gains for its property assets.Elioves first mission is to inventory and audit the 160 buildings owned by VINCI Energies in France and then identify candidates for solar panel installation,in terms of technical feasibility.After that it will do the same for leased buildings.The subsidiary manages every project phase,including investment,re-roofing,operation and maintenance.Longer term,Eliove plans to put this know-how to work for the Groups external customers.V I N C I 2 0 2 2 U N I V E R S A L R E G I S T R AT I O N D O C U M E N T0 0 2FORGING A SUSTAINABLE WORLD3A cold mix asphalt recycling processdeveloped by VINCI Construction was used for the first time in 2022,for a resurfacing operation in the VINCI Autoroutes network (A20 between Souillac and Cahors-nord,in south-west France).Actions guided by VINCIs environmental policy reduced the Groups direct greenhouse gas emissions(Scopes 1 and 2)by 13tween 2018 and 2022,adjusted for the impact of acquisitions.3 Building low-carbon roadsVINCI Construction is modernising its asphalt production plants by fitting them with new energy sources,equipment and monitoring systems that are lowering both consumption and emissions.It is also stepping up the production of recycled materials,with its Granulat solutions,and the use of innovative road renovation processes to optimise the recycling rate of road operations and the carbon footprint of its worksites.Rehabilitating land around motorwaysIn 2022,VINCI Autoroutes signed a partnership agreement with Frances National Forest Office,which will help to rehabilitate 200 sites in the VINCI Autoroutes network by 2030.Its 28,000 hectares of green areas along motorways offer many opportunities for ecological regeneration by planting trees,preserving natural environments and restoring wetlands.V I N C I 2 0 2 2 U N I V E R S A L R E G I S T R AT I O N D O C U M E N T0 0 3FORGING A SUSTAINABLE WORLD211 VINCI makes strides in renewable energies With the integration of Cobra IS on 1 January 2022,VINCI has taken a leap forward in renewable energies.The Groups new energy business delivers turnkey solar PV and wind power projects,along with the development and financing for some of them.Cobra IS has also built up solid expertise in offshore windfarm energy converter platforms.Alongside Siemens Energy,Cobra IS will build four large platforms in the North Sea,for a combined capacity of close to 6 GW.2 Low-carbon concrete gains groundMore and more worksites are building with low-carbon concrete.Ultra-low-carbon concrete from the Exegy range developed by VINCI Construction has been used in France,to produce prefabricated segments for works on the Grand Paris Express,and in the United Kingdom,to build the EcoPark South energy recovery facility in London.VINCI Construction has undertaken to increase the use of low-carbon concrete in its projects to 90%by 2030.Helping to create a low-carbon economyIn addition to reducing its direct emissions,VINCI is helping customers and the users of its infrastructure reduce their own carbon footprints,with solutions that are already up and running in all its business lines.Motorways cater to electric vehiclesAt the end of 2022,125 service areas out of the 180 in the VINCI Autoroutes network were equipped with electric vehicle(EV)charging infrastructure,for a total of 604 charging points available for use.VINCI Autoroutes also launched Ulys Electric,a universal solution enabling subscribers to pay electronic tolls in four countries(France,Spain,Portugal and Italy),as well as parking fees in 500 car parks and EV charging at 60,000 points in France,regardless of the operator.Outside France,VINCI Highways is also installing charging stations across its network,such as on the PR1BINA expressway in Slovakia.Ultra-low-carbon Exegy can drive a70%reduction in emissions compared to traditional concrete.V I N C I 2 0 2 2 U N I V E R S A L R E G I S T R AT I O N D O C U M E N T0 0 4FORGING A SUSTAINABLE WORLD3453 Rewarding airlines for emissions reductionVINCI Airports has introduced an eco-modulation system in France and at London Gatwick to adjust landing fees based on aircraft emissions and thereby support the aviation sectors efforts to lower its carbon footprint.At several airports in its network,VINCI Airports also provides airlines with sustainable aviation fuelling services using biofuels produced from used cooking oil.4 Decarbonising building maintenanceVINCI Facilities(VINCI Energies)offers its building maintenance customers two decarbonising options.With its“low-carbon contract”,VINCI Facilities commits to an emissions reduction plan using the solutions initially agreed upon.With its“carbon-reducing contract”,VINCI Facilities goes further,by identifying actions to The carbon footprint of sustainable aviation fuel is 80%smaller when compared to conventional fossil kerosene.improve energy efficiency and how they can be implemented to meet the customers emissions reduction targets.A solution developed by VINCI Facilities,called P2C,calculates the carbon footprint of a maintenance contract,covering Scopes 1,2 and 3,so that the most effective low-carbon or carbon-reducing solutions over a buildings entire life cycle can be proposed to customers.5 Investing in hydrogenVINCI has co-founded the largest global fund for low-carbon hydrogen infrastructure and is expanding its initiatives in all business lines to develop this new source of energy.For example,it created a range of infrastructure construction services,under the Hyfinity brand.It also invested in Genvia,producing a pilot manufacturing line for high-temperature electrolysers at the companys facility in Bziers(southern France).The Group has built the first airport hydrogen stations for ground vehicles,while collaborating with major aviation sector players to develop liquid hydrogen for airplanes.VINCI Concessions invested 15 million in Hype,the first integrated platform for hydrogen mobility in France.VINCI Energies is Hypes exclusive partner for the construction of new hydrogen production and distribution infrastructure to fuel its fleet of hydrogen-powered taxis.V I N C I 2 0 2 2 U N I V E R S A L R E G I S T R AT I O N D O C U M E N T0 0 5FORGING A SUSTAINABLE WORLD121 Educational guidance for young people With more than 5,000 middle school students supported during the 2021-2022 academic year and close to 9,000 enrolled in 2022-2023,the Give Me Five programme is growing fast.Under the programme,in France,VINCI hosts students from priority neighbourhoods for work experience placements in Group companies.Hundreds of Group employees get involved locally by giving the students an introduction to the many varied aspects of their jobs.Another Give Me Five initiative is an innovative integration effort that helps dozens of young people at risk of exclusion to return to employment each year.2 With ,VINCI offers all employees in France free access to online tutoring and other academic support for their children,from elementary to vocational level,developed in partnership with Prof Express,the French market leader.Since September 2022,8,000 children of employees have benefited from the service.A positive socio-economic impact An in-depth study in 2022 confirmed VINCIs far-reaching impact on local social and economic environments in France.In 2021,VINCI contributed 1.5%of the countrys gross domestic product(GDP)through its direct,indirect and induced impacts across the entire value chain.For example,one VINCI job supports an additional 3.6 jobs in France.Almost all Group purchases in France are made on the domestic market,including a large share from small and medium enterprises.Priority is on working with local suppliers and subcontractors to further contribute to regional growth.Embracing its corporate social responsibility as a large groupVINCI strives to embody humanist,inclusive values,being a company that cares for its employees and its surrounding communities.Deeply connected to the regions where it works,the Group contributes to local social development through sustainable job creation,integration programmes and solidarity initiatives.More than 5,000 new apprentices joined Group companies in France in 2022.Eight recruitment fairs were held across the country to meet candidates,who could also apply through the JobIRL platform.V I N C I 2 0 2 2 U N I V E R S A L R E G I S T R AT I O N D O C U M E N T0 0 6FORGING A SUSTAINABLE WORLD43#PasChezVINCI With its hashtag“not at VINCI”,VINCI is taking action to combat everyday sexism,which has been shown to be an obstacle to gender diversity,among other adverse effects.A learning module available in five languages encourages all Group employees to self-assess their attitudes and help bring about positive change.4 Thanks to the“Ella es Astronauta”programme(She is an Astronaut)developed by the She Is Foundation and supported by the Fundacin VINCI Colombia,35 teenagers from all around the country visited NASAs space centre in Houston,in the United States,in 2022.3 Advancing gender diversityVINCI has set a goal to raise the percentage of women managers to 30%by 2030.To speed up the pace of women entering its areas of business,the Group has intensified its collaboration with the non-profit Elles Bougent.Close to 700 employees take part in events in some 20 countries to encourage female students to pursue careers in science and technology,making VINCIs network the organisations largest in the world.V I N C I 2 0 2 2 U N I V E R S A L R E G I S T R AT I O N D O C U M E N T0 0 7FORGING A SUSTAINABLE WORLD22 Putting human rights into practiceSince 2022,all Group entities have had access to the Managing Human Rights platform on VINCIs intranet,where they can assess their human rights practices,identify points to watch and build action plans to improve them.It is the operational counterpart to VINCIs Guide on Human Rights,enabling every subsidiary around the world to apply the Groups guidelines governing migrant labour,recruitment practices,working conditions,living conditions and relations with local communities.3 20th anniversary of the Fondation VINCI pour la CitIn the past 20 years,the Fondation VINCI pour la Cit has backed almost 3,500 projects led by non-profits and supported by nearly 6,300 employees in France.With this combination of financial aid from the foundation and hands-on involvement by employees,VINCI is engaging locally alongside non-profit organisations that combat exclusion.Consistent with this Women on the MoveThis web series by VINCI Concessions zooms in on the women who are working in mobility and their inspiring career stories,to encourage others to follow in their path.1 Guaranteeing universal social protectionIn September 2022,VINCI launched its new universal social protection minimum standards,giving all Group employees,regardless of the country where they work,access to the same baseline guarantees in two key areas.First,social insurance provides financial assistance for each employee and their family in the event of a serious accident,whether in professional or private circumstances.Second,parental leave,paid at full salary,is provided to improve work-life balance for employees and their co-parents during this special time when a new child arrives.1local approach,the Group has created 16 other foundations over the years,in other countries and regions where it operates.The Groups business lines,divisions and companies all join in with their own civic engagement initiatives.4 Organic farming and social integration Since the early 2010s,VINCI Autoroutes has supported Jardins de la Voie Romaine,whose first integration project turned an area alongside the A19 motorway in north-central France into an organic farm.Today,this integration and farming non-profit manages four sites,which include an apiary and shops selling local products.It currently employs close to 100 people,helping to maintain vibrant and cohesive communities in the region.Since the organisations start,close to 60%of those supported have returned to employment or entered training programmes leading to formal qualifications.V I N C I 2 0 2 2 U N I V E R S A L R E G I S T R AT I O N D O C U M E N T0 0 8FORGING A SUSTAINABLE WORLD34In 2022,VINCIs 17 foundations allocated 6.1 million to 570 projects,sponsored by almost 1,570 employees.V I N C I 2 0 2 2 U N I V E R S A L R E G I S T R AT I O N D O C U M E N T0 0 9FORGING A SUSTAINABLE WORLDPhotos:Niels Quist/Alamy Stock Photo(cover);Gal Arnaud;Jean-Franois Badias;Jrme Balleydier;Paulo Barros_Metr-DF;Luc Benevello;Aline Boros;Franois Bouriaud;Dorine Bouteiller;Yann Bouvier;Jrme Cabanel;Solne Canu;Yves Chanoit;Antoine Doyen/CAPA Pictures;Pierre-Loup Ducout(Mithra Vision);Cyrille Dupont/The Pulses;Jacques Fernandes;Sophie Garcia;Julien Gazeau;Spencer Griffiths;Philippe Guignard/Air Images;Axel Heise;Charly Hel-Stade de France-Macary,Zublena et Regembal,Costantini-Architects,ADAGP Paris 2023;HS2;Inside Out Ltd;Ipopba;iS-Nikada;LAGO Artabel:Cyrille Lallement;Thierry Lewenberg-Sturm;LMNB Studio,Art&Build Architects,Pargade Architectes,Artelia Signes Paysage;Sophie Loubaton/CAPA Pictures;ric Mercier;Olivier Merlot;Alain Montaufier;Jean-Philippe Moulet;Daniel Moulinet;Roberto Muoz/Pindaro;Pierre-Olivier/CAPA Pictures;OMA;Olicio Pelosi;Pexels;Will Recarey;Raphal Soret;E.Soudan;TenneT/Siemens Energy;Alexis Toureau;Francis Vigouroux;Jacques Wisdorff;John Zammit;Photo libraries of VINCI and subsidiaries.All rights reserved.Design and production:2210_03888 Translation:Alto International Printing:Arteprint.This document is printed using vegetable-based inks on paper produced from sustainable resources.This universal registration document was filed on 28 February 2023 with the Autorit des Marchs Financiers(AMF,the French securities regulator),as competent authority under Regulation(EU)2017/1129,without prior approval pursuant to Article 9 of the said regulation.The universal registration document may be used for the purposes of an offer to the public of securities or the admission of securities to trading on a regulated market if accompanied by a prospectus and a summary of all amendments,if any,made to the universal registration document.The set of documents thus formed is approved by the AMF in accordance with Regulation(EU)2017/1129.This is a free translation into English of a report issued in French and is provided solely for the convenience of English-speaking readers.This report should be read in conjunction with,and is construed in accordance with,French law and professional auditing standards applicable in France.1973,boulevard de la Dfense CS 1026892757 Nanterre Cedex-FranceTel: 33 1 57 98 61 VINCI.GroupVINCIVINCI
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2022 Global Impact ReportTransforming digital payments to create economic opportunityTable of Conten.
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People&Planet 2022Contents1Environment 22Bridging the digital divide46Corporate governance89About th.
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Environmental Social Governance Report 20222Netflix ESG Report 2022Table of contentsIntroductionA Letter From our co-CEOs03About Netflix04Our Approach to ESG05Our Progress06Environment09Sustainability Strategy10Sustainability in Our Operations and Value Chain13 Netting Remaining Emissions to Zero28Sustainability in Storytelling31Climate Risk33Social36Inclusion and Diversity37Responsible Products50Governance54Corporate Governance55Enterprise Risk60IP Protection and Data Piracy60Ethics and Compliance61Appendix62EnvironmentGovernanceSocialIntroductionAppendix3Netflix ESG Report 2022A letter from our co-CEOsAt Netflix,we aspire to entertain the world and to do so sustainably and responsibly.You can read the full details of how in our fourth Environmental,Social and Corporate Governance(ESG)Report published today.But we wanted to highlight three areas upfront:First,the environment:The next decade is critical if were to manage climate change sustainably.Its why Netflix has committed to halving our emissions by 2030.We will do this by optimizing our energy use,then electrifying it and decarbonizing the rest.Second,inclusion:Netflix is becoming more representative of the members we serve.We now have offices in over 25 countries.Almost half of our employees are women and,in the US,50%are from historically excluded ethnic and/or racial backgrounds.Were also seeing increased representation on and off screen with significantly more female directors and showrunners,and more people of color in leading roles.Third,governance:Our business model is well proven and Netflix is a leader in streaming entertainment in terms of engagement,revenue and profit.So were evolving to a more standard large-cap governance structure,including the phased declassification of our board,the elimination of supermajority voting provisions and changes to our executive compensation program from 2023 onwards.Over the last 25 years,weve worked hard to create long term value for our stakeholders in particular members,shareholders and the creative community.While weve made good progress,theres still more to do.For example,most of our carbon emissions come from our productions,which require a lot of power often in remote locations and are still heavily fossil fuel dependent.But were investing in the technology innovations today that can optimize and electrify this energy use tomorrow.We are excited about the great entertainment coming this year from returning favorites like our Emmy award winning series The Crown and recently released hit action sequel Extraction 2,starring Chris Hemsworth,to must-watch new films and TV shows such as Heart of Stone,Rebel Moon,Griselda and 3 Body Problem.Our north stars remain the variety and quality of our entertainment and,as always,we welcome your feedback.Ted Sarandosco-Chief Executive Officer and President of the Company and DirectorGreg Petersco-Chief Executive Officer and President of the Company and DirectorEnvironmentGovernanceSocialIntroductionAppendix4Netflix ESG Report 2022At Netflix,we aspire to entertain the world so whatever your taste,and wherever you live,well have something great to watch or play,all in one subscription.About Netflix As of December 31,2022,2022 Annual Report(Form 10-K)EnvironmentGovernanceSocialIntroductionAppendixOur Approach to ESGOur Environmental,Social and Governance(ESG)framework is informed by relevant reporting frameworks including Sustainability Accounting Standard Board(SASB),Global Reporting Initiative(GRI)and Task Force on Climate-Related Financial Disclosures(TCFD).The Netflix Board of Directors oversees the Companys ESG efforts and receives regular updates from management in these areas.For this report,we focus on the following topics:Environment,Social and Governance.EnvironmentSocialInclusion and DiversitySupporting our PeopleResponsible ProductsGovernanceCorporate GovernanceEnterprise Risk ManagementEthics and ComplianceIntellectual Property ProtectionSustainability StrategyClimate Risk Sustainability On and Off Screen5Netflix ESG Report 2022EnvironmentGovernanceSocialIntroductionAppendix6Netflix ESG Report 20222 All data points are for the 2022 calendar year unless otherwise noted.3“Value Added”is a term used by SBTi.For Netflix,this is synonymous with“Gross Profit,”derived from subtracting“Cost of Revenues”from“Total Revenue”for the business,per our public financial statements.EnvironmentWe are on track to meet our public sustainability commitments including to:(1)halve our emissions by 2030 from a 2019 baseline;and(2)bring our remaining net emissions from 2022 onwards to zero.We upgraded our Scope 3 target to reduce these emissions 55%per million USD of value added3 by 2030.Starting in 2022,weve brought net Scope 1,2 and 3 emissions to zero by investing in nature-based solutions that retain and capture carbon.We continue to focus on decarbonizing film and series production.Over the course of 2022:Weve used clean technologies on over 60%of the productions Netflix manages directly;andWeve committed to use at least one electric vehicle(EV)on screen in all of our directly managed productions,and our“Everybody In”partnership with GM will also help promote their use.We support creators who choose to incorporate sustainability into their storytelling.165 million households around the world over 70%of our members have chosen to watch one or more stories highlighting climate and/or sustainability.And we spotlight these stories during moments like Earth Month.Our ProgressSee below for a glimpse,or“highlights reel”,of our continued progress in 2022 on environmental,social and governance topics.2EnvironmentGovernanceSocialIntroductionAppendix7Netflix ESG Report 20224 More information about how the USC Annenberg Inclusion Initiative defines this term is available in their full report about the study.Our ProgressSee below for a glimpse,or“highlights reel”,of our continued progress in 2022 on environmental,social and governance topics.SocialAs our third Inclusion Report showed:In addition,we continue to invest in the Netflix Fund for Creative Equity,which helps increase opportunities within the entertainment industry.Our employee giving program provides a 2:1 match on employee donations.In 2022,Netflix and our employees donated$34 million to over 5,000 charities worldwide.We have now added disclosures about product accessibility to our ESG Report given the importance of ensuring that all of our members regardless of language,device,connectivity or ability can enjoy our entertainment.Women have the highest gender representation at Netflix;and Over 50%of our US employees are from one or more historically excluded ethnic and/or racial backgrounds.In April 2023,the USC Annenberg Inclusion Initiative published their latest study into representation behind and in front of the camera for Netflixs US films and series.It showed notable improvements for women and people from historically underrepresented racial and ethnic groups4 between 2020 and 2021.EnvironmentGovernanceSocialIntroductionAppendix8Netflix ESG Report 2022GovernanceOur ProgressSee below for a glimpse,or“highlights reel”,of our continued progress in 2022 on environmental,social and governance topics.At our 2022 annual meeting,stockholders approved a board proposal to make significant changes to our corporate governance,including:Weve also adopted a majority voting standard in uncontested director elections and evolved our co-CEO compensation program for 2023.This includes:a CEO salary cap;performance-based annual cash bonus;and a minimum 50%of compensation allocated to stock options with one year vesting.In the last year,Netflix executives have met shareholders representing around 51%of our outstanding shares to solicit their feedback.Independent directors participated in a majority of these meetings.A phased declassification of our board beginning in 2023.From 2025,our entire board will stand for annual elections;The elimination of supermajority voting provisions in our articles of incorporation and bylaws;andThe ability for shareholders to call special meetings.EnvironmentGovernanceSocialIntroductionAppendix9Netflix ESG Report 2022To entertain the world,we need a habitable planet to entertain.Were working to make our operations more sustainable,including behind the camera,and to support creators who want to highlight sustainability on screen.EnvironmentEnvironmentGovernanceSocialIntroductionAppendix10Netflix ESG Report 2022Sustainability StrategyKey is decarbonizing our operations and value chain,which includes the making of our films and series.To help us meet this challenge,we created an advisory group,including scientists and other experts.This group is unpaid and entirely independent(full list available at ).Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingThe science is clear the next decade is critical if we are to manage climate change sustainably.In March of 2021,we set two near-term climate targets aligned with consensus climate science that can be measured in years,not decades:Our Public Climate TargetsReduce our emissions by roughly half by 2030;and Bring our remaining net emissions from 2022 onwards to zero,in support of global net zero goals,by investing in nature-based solutions that retain and capture carbon.When we first set our emissions targets,we aligned to the Science Based Targets Initiative(SBTi)standard for Scope 3“supplier engagement”targets5.After working to improve our Scope 3 data,we submitted an upgraded quantitative“intensity”target6 aligned to current SBTi standards for validation in 2022.The new target,which has now been approved by the SBTi,is to reduce Scope 3 emissions 55%per million USD of value added7 by 2030.5 Netflix previously had a science-based target to engage 70%of suppliers to set their own science-based targets.6 Netflixs Intensity Scope 3 target was approved by SBTi on Feb 27,2023(see“Companies Taking Action”on the SBTi website).Our validated Scope 1 and 2 target remains unchanged from 2021.7“Value Added”is a term used by SBTi.For Netflix,this is synonymous with“Gross Profit,”derived from subtracting“Cost of Revenues”from“Total Revenue”for the business,per our public financial statements.Climate RiskEnvironmentGovernanceSocialIntroductionAppendix11Netflix ESG Report 2022Scope 1“Fuel”8Scope 2“Electricity”9 Scope 3“Value Chain”10Energy EfficiencyElectric VehiclesClean Mobile PowerEnergy EfficiencyRenewable EnergySupplier IncentivesDemand SignalingTechnology AcceleratorsEducational OfferingsNETFLIX EMISSION REDUCTION ACTIONSTARGETTERMINOLOGY46%by 2030absolute reduction55%by 2030Intensity reduction(million$value added)Our“Sphere of Control”Absolute Reduction GoalOur“Sphere of Influence”Intensity Reduction GoalDecarbonization Target8 Scope 1:fuel consumed for our self managed productions,company-owned transportation and building heating9 Scope 2:electricity we purchase for our Open Connect systems and in our facilities and self-managed productions10 Scope 3:emissions related to value chain activities such as purchased goods&services,capital goods,business travel and othersSustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix12Netflix ESG Report 2022Our sustainability strategy is aligned with the ISO Net Zero Guidelines(IWA 42:2022)developed by the International Organization for Standardization,which recently published a testimonial about Netflix.These guidelines,which are designed to be universally applicable,were developed with input from over 1,200 global experts from 100 countries11,and among other criteria,require:Alignment with ISO NetZero GuidelinesEmissions Reduction:Taking immediate action to maintain the climate at 1.5 degree celsius i.e.,approximately halving global emissions by the end of the decade and achieving global net zero by 2050 at the latest.Counterbalancing Residual Emissions:Investing in nature-based solutions that retain and capture carbon12 from the atmosphere,proportional to a companys“residual”emissions13.Learn more about how we are aligned in our carbon credit investments here.Wider Impact:Engage value chain stakeholders,collaborate and share knowledge,and participate in relevant advocacy on behalf of bringing global emissions to zero and promoting a just transition.Learn more about how we are aligned on the broader societal impact here.Netflixs Sustainability Strategy is music to our ears.We are delighted to see Netflix apply the same positive disruption to sustainability that theyve applied to their business,upping the ambition for achieving near-term net zero targets and harnessing the power of storytelling to educate and entertain citizens.Christiana Figueres,Diplomat and Architect of the U.N.Paris AgreementThe Carbon Trust,a respected think tank,found these ISO Net Zero Guidelines to be the most comprehensively aligned to to the goals of COP27.11 Including participants from the Greenhouse Gas Protocol,SBTi,UN Framework Convention on Climate Change,and UN Race to Zero teams.12 We are working with ISO to ensure understanding this element of their guidelines because of the limited volume of high quality carbon removal credits available today,and the IPCCs latest report shows that the mitigation options with the greatest potential global contribution to net emission reduction by 2030 are“avoidance”projects.13 The ISO Net Zero Guidelines define residual emissions as:Emissions that remain on an annual basis after all efforts to reduce along a 1.5 C pathway within value-chain or boundary emissions have been implemented.Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix13Netflix ESG Report 2022To meet these objectives we are focused on four key levers:Climate Transition PlanEnergy Efficiency:Identifying cost-effective efficiency improvements for energy used in our offices and studios;Vehicle Electrification:Transitioning from vehicles that use fossil fuels to fully electric and/or hydrogen powered alternatives;Clean Mobile Power:Using alternatives to diesel generators on productions;andRenewable Energy:Using renewable electricity and fuels.We approach these four levers using an OED framework i.e.,first optimizing energy use,then electrifying it and decarbonizing the rest.Optimize(O):We are conducting energy efficiency audits,including for our stages,studios and offices,so we can optimize vehicle fleet operations,right-size vehicles and mobile power and give preference to more efficient equipment.Electrify(E):We are working to electrify the equipment that uses the most fuel,like vehicles,buildings and generators.Where available,we use electric motors,which are more efficient and because electricity is more easily decarbonized.Weve successfully piloted the use of mobile batteries and hydrogen-battery powered generators in lieu of fossil-fuel powered generators in our productions.And we are also replacing fossil-fuel vehicles with electric,plug-in hybrid and hybrid vehicles.Decarbonize(D):When optimization and electrification arent possible,we decarbonize the remaining emissions by installing and purchasing renewable energy.This means matching renewable electricity to any grid-connected power that isnt carbon-free and shifting to lower-carbon or zero-carbon fuel options when that isnt possible.Last year,we procured renewable electricity to match our global electricity demand and were exploring more direct investments.Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingSustainability in Our Operations and Value ChainClimate RiskEnvironmentGovernanceSocialIntroductionAppendix14Netflix ESG Report 2022Maximizing the solutions available today,while accelerating the market for tomorrows solutions,is also imperative.While energy efficiency and renewable energy solutions are cost-effective and can be deployed at scale now,clean mobile power and EVs are more nascent technologies.As a result they will deliver most of their respective emissions reductions for Netflix in the latter half of this decade.Refer to the Energy Efficiency,Renewable Energy and Clean Mobile Power sections below.Each year,we continually develop and further refine our 2030 Science-Based Target transition strategy.The following chart illustrates our current planned path to our Scope 1 and 2 target,and the decarbonization levers that will get us there.Renewable energy:electricity and fuelElectric vehiclesClean mobile powerEnergy efficiency and behavior changeScience-based target:42,000Forecasted78,000Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix15Netflix ESG Report 2022We measured our 2022 greenhouse gas emissions(i.e.,carbon footprint)using the Greenhouse Gas Protocol14.This helps us understand our largest sources of emissions and the biggest opportunities we have to reduce them.Our independent accountants,Ernst&Young(EY),reviewed our 2022 Scope 1,2 and 3 greenhouse gas emissions(location-and market-based).Their report and assurance letter is here.Our Carbon Footprint14 Refer to the appendix for details about our greenhouse gas emissions inventory methodology,footprint boundaries and data management process.Our footprint,reductions and related data are represented in four separate tables throughout the environment section of this report:Greenhouse Gas Inventory including our corporate greenhouse gas data from 2019 through 2022.2022 Emission Reductions Summary Table shows our quantified reductions from the range of measures we have put in place to track progress towards our science-based target.2022 Carbon Credit Portfolio shows the carbon credits we purchased and retired for 2022.2022 Electricity Consumption Summary shows our electricity consumption and renewable electricity.Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix16Netflix ESG Report 2022GREENHOUSE GAS INVENTORYSCOPE 1SCOPE 2(market-based)SCOPE 2(location-based)SCOPE 2(target-based)SCOPE 1 2(market-based)SCOPE 1 2(target-based)SCOPE 3(market-based)TOTAL(market-based)CARBON CREDITS51,48756526,59426,31752,05277,8041,192,6591,244,711(35,506)30,88314128,58529,35631,02460,2391,020,5411,051,564(54,107)62,815042,29131,93762,81594,7521,466,4971,529,312(1,529,312)59,388041,41123,62259,38883,0101,086,8331,146,221(1,146,221)2019 MTCO2e2020 MTCO2e2021 MTCO2e2022 MTCO2eBIOGENIC EMISSIONSRenewable Fuels(e.g.,renewable diesel,sustainable aviation fuel)2019 MTCO2e:02020 MTCO2e:02021 MTCO2e:1,0072022 MTCO2e:2,033Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix17Netflix ESG Report 2022Over half of our emissions(all scopes)are related to the production and licensing of films,series and games(“production”).The second largest source of emissions is in our corporate operations(“corporate”),followed by our data center providers(“streaming”).CARBON FOOTPRINT COMPONENTSNetflixs 2022 Carbon Footprint by Business Activity38Y%3%StreamingProductionCorporateEmissions ReductionsWe track progress against our Scope 1 and 2 emissions target using target-based emissions figures noted in the carbon footprint table above.Target-based emissions only account for emissions reductions resulting from specific decarbonization actions and those related to direct renewable energy supply(e.g.,onsite generation,utility and landlord supply,power purchase agreements or direct investments),but not for emissions reductions resulting from our annual purchase of renewable energy certificates(or environmental attribute certificates).TRACKING PROGRESS AGAINST OUR 2030 SCIENCE-BASED TARGET2022 Scope 1 and 2 emissions are 12%lower15 year-over-year,though they remain slightly higher than our 2019 baseline year due to growth in the business.The combined impact of our emissions reductions initiatives across our four priority levers in 2022 resulted in a 30%lower Scope 1 and 2 footprint value than would have otherwise been reported.The vast majority of our emission reductions still come from renewable energy and renewable fuels.Transitioning from diesel to electric will take time to scale to a level that will have a measurable impact on emissions reductions.15 In addition to emissions reductions from our decarbonization efforts,external factors also influence the calculated emissions total,including data improvements(e.g.,improved data quality,updated emissions factors)and changes in core business activities from year to year(e.g.,number of self-managed vs.partner-managed productions which can shift the emissions representation between Scopes).Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix18Netflix ESG Report 20222022 SCOPE 1 AND 2 EMISSIONS REDUCTIONS TABLE162021003,8693,6125,7021747171071200852214,2102022162519,4525,7056,7642951,73875523149671278125,504Sub-LeverEquipment&Controls ImprovementsRight-Sizing Diesel GeneratorsUtility-Supplied Renewable EnergyLandlord-Supplied Renewable EnergyStreaming Partners Renewable EnergySustainable Aviation FuelRenewable DieselElectric VehiclesPlug-in HybridHybrid VehiclesHybrid SystemsGrid Tie-InBatteriesHydrogen SystemsTotalActionEnergy EfficiencyRenewable Energy(electricity and fuel)Electric(and other low-carbon)VehiclesClean Mobile Power16 There is no reporting guidance from the SBTi on tracking progress towards science-based targets on an annual basis,so we use standard greenhouse gas accounting methodologies per the Corporate Accounting and Reporting Standard by The Greenhouse Gas Protocol.Our Internal Audit team validates our greenhouse gas accounting methodologies and we engage EY to perform limited assurance over our greenhouse gas emissions.Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingEmission Reduction LeversEmissions Reduced and Avoided(MT C02e)Climate RiskEnvironmentGovernanceSocialIntroductionAppendix19Netflix ESG Report 2022Reducing Emissions in the WorkplaceIn 2022,we completed energy efficiency audits at our major facilities across North America.Except for Albuquerque Studios in New Mexico and the Egyptian Theater in Los Angeles,Netflix does not own the facilities in which we operate.This makes the immediate implementation of the audit recommendations more challenging.So we engaged with our landlords in the US and have begun to implement projects within our control at several of our offices and studios including:window replacements,temperature setbacks,lighting improvements and controls,heat pump installs,plug load controls,daylight sensor installs and equipment upgrades.We will replicate this approach across priority facilities in EMEA in 2023.ENERGY EFFICIENCYIn 2022,as in previous years,we have matched our global operations with 100%renewable electricity,covering all electricity consumption in our offices and for productions we directly manage.This was achieved through a range of approaches that include utility-supplied clean electricity,landlord-supplied clean electricity,and renewable energy certificates(RECs).RENEWABLE ENERGY(ELECTRICITY AND FUELS)2022 Electricity Consumption Summary TableMETRICElectricity consumed(MWh)Percentage grid electricityPercentage renewableElectricity consumed(MWh)Percentage grid electricityPercentage renewableTotal electricity consumed(MWh)202026,1961000h,0891000,285202133,40710003,14810006,555202236,11010000,85710006,967SCOPEHardware Infrastructure ElectricityRemaining Electricity Total Electricity We recognize that not all renewable energy supply is the same in terms of its positive impact.So were working to increase the proportion of onsite generation,utility and landlord-supplied clean electricity and direct sourcing from offsite projects.Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix20Netflix ESG Report 2022This year we partnered with Powertrust to bring high-impact distributed renewable energy projects to rural areas of India for the first time.This work is funded through distributed renewable energy certificates(D-RECs),a market instrument aligned to the International REC(I-REC)standard.These investments bring renewable energy to regions where it is needed most,thereby delivering maximal social and environmental benefits.Many of the projects we have invested in are bringing electricity to communities,and enabling others to rely less on small-scale fossil fuel generators.POWERTRUST PARTNERSHIPMon,Nagaland:This project has connected three villages in the state of Nagaland to solar mini-grids.These villages are the first demonstration sites of a larger plan to connect 40 villages across the province over the next three years.Dr.Shroffs Charity Eye Hospital,Uttar Pradesh:This organization operates multiple centers for high-quality,low-cost eye care serving the rural poor and low-income communities across India.The combined network sees more than 250,000 patients and performs nearly 30,000 surgeries every year.This branch in Uttar Pradesh experienced daily power cuts lasting multiple hours,and relied on diesel generators to provide backup power.Now,a photovoltaic system reduces diesel consumption by up to 70%.Vellore Institute of Technology,Andhra Pradesh:The institute is a higher educational facility in Andhra Pradesh.A 700kWp rooftop system now spreads across several buildings on the institutes campus,including several student accommodation and service buildings.Solar Irrigation Pumps,Uttar Pradesh:“Irrigation-as-a-Service”enables farmers to transition from diesel-based pumping to solar irrigation.The tariffs are set to be 20-40%cheaper than the running cost of diesel groundwater pumping(including fuel,maintenance,and rental),and users only pay for the volume of water consumed for irrigation.Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingBelow are some of the highlights of our partnership with Powertrust in 2022:Climate RiskEnvironmentGovernanceSocialIntroductionAppendixNetflix ESG Report 2022RENEWABLE FUELSWe strive to implement zero-emissions solutions where we can.But we can also achieve meaningful reductions in the near-term through the adoption of renewable fuels that have significantly Reducing Emissions in the Workplace(continued)Production-related emissions account for 60%of our overall footprint,so we are focusing our efforts on:(1)using clean mobile power equipment versus diesel generators;and(2)using EVs and other low emissions vehicles.Over the course of 2022 we implemented these clean technologies on over 60%of the productions Netflix manages.We employ sustainability experts who regularly visit production sites to identify opportunities to reduce emissions and we maintain a production resources website that contains tools and resources to introduce our productions to the latest clean technologies.This video showcases some of these technologies operating on multiple Netflix sets and partner locations,together with testimonials from crew and producers about their experience:Reducing Emissions in ProductionsSustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in Storytelling21lower emissions than conventional fuels such as diesel and Jet-A.In select markets,we fueled both production vehicles and mobile generators with over 185,000 gallons of renewable diesel,an important bridge fuel as we work towards longer-term decarbonization of these activities.Similarly,we have secured over 100,000 gallons of Sustainable Aviation Fuel(a Jet-A fuel replacement blended fuel with lower emissions)to help fuel Netflix aircraft.Climate RiskEnvironmentGovernanceSocialIntroductionAppendix22Netflix ESG Report 2022Using diesel generators has been an entertainment industry standard for a long time and effective cleaner alternatives have not been available at scale.Cleantech solutions are starting to emerge and they can replace some generators,or at least reduce the number of hours they need to run each day saving fuel and reducing air and noise pollution on set.In the past year,over 50%of the productions Netflix manages incorporated clean mobile power solutions including grid tie-ins,mobile batteries,battery-hybrid generators,and hydrogen power units,resulting in fuel reductions that lowered emissions by 1,179 MTCO2e.This included the deployment of over 100 pieces of clean mobile power equipment and battery-hybrid generators deployed for the first time.Netflix also expanded the geographic reach of these solutions,deploying solutions in and around Atlanta,Austin,Dublin,Lisbon,London,Los Angeles,New York,Paris,Toronto and Vancouver.Here are a few examples of clean mobile power in our 2022 productions.CLEAN MOBILE POWERBatteries:Virgin River Season 5 built on their experience from Season 4 to expand their use of batteries to power set and ancillary power needs,reducing the seasons diesel generator fuel use by 44%.The Union,filmed around London,leveraged batteries to power the set and lighting,resulting in generators only being needed for 5%of filming hours,saving over 1,800 gallons of fuel.Hydrogen Power Units(HPUs):Hydrogen Power Units using green hydrogen were deployed on UK productions that required supplemental power at studios or long term locations.For the filming of Damsel,two large hydrogen power units were used to provide supplemental power at a studio,replacing diesel generators,saving over 4,200 gallons of fuel and reducing emissions by 44 MTCO2e.The Diplomat Season 1 employed equipment to bring clean power to a rural location in the English countryside.We partnered with a local production equipment supplier to conduct the first mobile hydrogen pilot in France on Lupin Part 3,while filming on location outside of Paris.Hybrid Generators:Bodkin Season 1 was the first ever production in Ireland to use a hybrid generator and to use renewable diesel.We also piloted hybrid generators for the production of the films Irish Wish,Unfrosted and Rebel Moon,the latter using a hybrid generator plus solar technology to provide remote power to construction crews and wardrobe trailers.Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClean Mobile Power Spotlights:Climate RiskEnvironmentGovernanceSocialIntroductionAppendix23Netflix ESG Report 2022Film and series productions take thousands of vehicles that until recently have been universally fossil-fuel powered.In the past year,over 30%of the productions Netflix manages incorporated electric,plug-in hybrid,and hybrid vehicles,totaling more than 120 vehicles piloted in 2022(a 3X increase in vehicles from 2021),resulting in fuel reductions that lowered emissions by 158 MTCO2e(a 5X increase in reductions from 2021).These vehicles were deployed on productions in Los Angeles,London,New York,Toronto and Vancouver.From our pilots,we have learned that EV passenger vehicles can save productions money and fuel when provided to crew that have high daily mileage,and that plug-in hybrids and regular hybrids are good transition vehicles that reduce emissions without range anxiety.As we prepare to pilot larger vehicles,including electric trucks,we know that charging infrastructure,including mobile charging,is key to the successful integration of EVs into production operations.Therefore we have begun to build out charging infrastructure at studios where we frequently produce series and films.We are installing faster level 2 stations(dispensing 16-19 kW vs the standard 6-7 kW)and have purchased DC fast chargers that will be installed in Los Angeles and at our owned studio in Albuquerque in 2023.VEHICLE ELECTRIFICATIONSustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix24Netflix ESG Report 2022The film and television industry is over a century old and has been traditionally powered by fossil fuels.While we have set Netflix-specific climate targets,we cant transition entertainment to a cleaner,low carbon industry alone.This is why we partner with other studios to ensure progress made by one benefits everyone and because we believe collective actions will yield positive outcomes,faster.We do this through:INDUSTRY COLLABORATIONSustainable production industry groups:Netflix is a member of several industry groups globally(e.g.,Sustainable Production Alliance(global),BAFTAs Albert(UK and global),Reel Green/On Tourne Vert/Ontario Green Screen(Canada),Green Motion(Germany),Sustainable Screens Australia,etc.)to help bring transparency(e.g.,Close Up:Carbon Emissions of Film&Television Production)and public advocacy for sector transformation(e.g.,hydrogen hub).Clean Mobile Power Initiative:By co-founding the Clean Mobile Power Initiative(CMPI)with support from non-profit Rocky Mountain Institute and its climate accelerator,we aim to identify and deliver cost-competitive zero emissions mobile power at scale for the entertainment industry.The long term goal is to eliminate diesel generators in top production markets.Sustainable Aviation Buyers Alliance:Making a film or series requires air travel.To accelerate progress towards lowering the greenhouse gas emissions associated with burning jet fuel,Netflix co-founded the Sustainable Aviation Buyers Alliance(SABA).SABA sends market signals to producers of Sustainable Aviation Fuel(SAF)to grow supply,facilitates coordinated procurement activity,and ensures the environmental integrity of their claims.We also actively partner with other key business and non profit consortia to:(1)further our understanding of climate representation on screen,including through BAFTAs Albert,SPA and the Climate Entertainment Stakeholders Roll Call,a group organized by the Television Academy,Academy of Motion Picture Arts&Sciences,Creative Artists Agency,and PGA to connect the companies and organizations working in climate entertainment;and(2)advocate for more sustainable policy solutions,including CERES,C2ES,the Business Roundtable and Motion Picture Association.24Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix25Netflix ESG Report 2022Sustainability Across the Value ChainPurchased goods&services17(PG&S)emissions,i.e.,goods and services we buy from others,made up the majority of our 2022 Scope 3 footprint,primarily related to film and series production.The next biggest Scope 3 Category in 2022 was business travel emissions18,which includes air travel,hotel stays and travel-related transportation,and accounts for 10%of our total Scope 3 emissions.Compared to last year,our overall Scope 3 emissions decreased by about 25%.These emissions reductions can be attributed in part to a smaller volume of productions in 2022 compared to 2021,which experienced a jump as COVID shutdowns eased.The reductions were also driven by significant renewable energy consumption and procurement by AWS(refer to Data Centers and Content Distribution Network),and(to some degree)by EPA emissions factor changes19.Since a big part of these emissions are driven by the productions that other studios make on our behalf,as noted above,we partner closely with our peers and industry partners to engage our suppliers and shift the entertainment industry towards a more sustainable filmmaking approach.As we begin to track against our new Scope 3 targets,we will share our progress along the way.SCOPE 3 EMISSIONSThis is what industry leadership looks like.Netflix is raising the bar by aligning operations with science,pioneering approaches to protect nature,and sending new demand signals to suppliers that sustainability is a measurable priority.Not only do we see progress against ambitious near-term goals,Netflix is also leveraging their platform for positive change.Its clear that Netflix is taking climate action seriously.Elizabeth Sturcken,Managing Director,Environmental Defense Fund17 Scope 3 Category 1,per the Greenhouse Gas Protocol18 Scope 3 Category 6,per the Greenhouse Gas Protocol19 Dataset and description of changes.Updates to these Scope 3 emissions factors reflect ongoing improvements by the EPA,to use updated methodologies and data where possible.Netflix tracks materiality of any methodological updates to the footprint,and follows established guidelines for re-baselining as needed.Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix26Netflix ESG Report 2022Carbon Trusts white paper on the Carbon Impacts of Video Streaming determined that the use-phase emissions associated with data center and CDN operations are small(1%)compared to the rest of the video streaming value chain.Netflix partners with Amazon Web Services(AWS)for our data storage and cloud computation needs.AWS has a goal of using 100%renewable energy by 2025.In 2022,AWS reported via their customer carbon footprint tool that our carbon footprint was reduced by approximately 98%compared to last year.This is due to AWSs renewable energy usage and purchasing,and energy efficiency initiatives.This trend is consistent with research findings,which show that the energy intensity of global data centers has decreased by 20%annually since 2010.This is a notable improvement compared with recent annual efficiency gains in other major demand sectors(e.g.,aviation and industry),which are an order of magnitude lower20.DATA CENTERS AND CONTENT DISTRIBUTION NETWORK(CDN)When it comes to distributing our content to our members,Netflix invests heavily in making this process as efficient as possible with our Open Connect program.We make 18,000 servers available for free to Internet Service Providers who operate them in their data centers across 6,000 locations in over 175 countries21.So when our members press play,instead of the film or series being streamed from halfway around the world,its streamed from around the corner increasing efficiency for operators while also ensuring a high-quality,no-lag experience for consumers.On top of that,weve developed encoding technology to reduce file sizes and optimize bandwidth use while maintaining high video quality for consumers.Over the past five years,we have been able to cut our bit rates by roughly 50%.This is in addition to the significant efficiency gains the telecom industry has achieved within their own networks21.We are encouraged by the strong energy efficiency and renewable energy usage trends of both AWS and our own Open Connect program,and are committed to continually decarbonizing these processes over time.Refer to our recent blog post Energy Efficiency in Streaming:Innovation Reaping Rewards to learn more.20 E.Masanet,A.Shehabi,N.Lei,S.Smith,J.Koomey,“Recalibrating global data center energy-use estimates,”Science Magazine,202021 Co-CEO Greg Peters Keynote Address to the 2023 Mobile World CongressSustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix27Netflix ESG Report 2022Because internet infrastructure(including data centers)are so widely shared by so many consumers across so many services,the energy consumption of this infrastructure for individual video streams is relatively efficient(i.e.,10%of total use-phase streaming emissions).By contrast,the physical devices used by our members(wifi routers,streaming sticks,set top boxes,and displays)drive the most energy consumption and emissions(89%).Even so,the total carbon footprint of streaming one hour of video is approximately 55 gCO2e(grams of carbon dioxide equivalents).This equates roughly22 to the emissions associated with microwaving four bags of popcorn,or three boils in an electric kettle23.INTERNET TRANSMISSION AND USER DEVICE ENERGY USEBased on globally accepted greenhouse gas accounting standards24,internet-and device-related emissions fall outside of the formal carbon footprint boundary for Netflix.Even so,we still think it is important for us to contribute to industry-wide decarbonization efforts.Through our participation in DIMPACT,we collaborate with Internet Service Providers(ISPs),device manufacturers,and academic and industry experts to stay up-to-date on the latest research about digital service emissions and contribute to cross-sector policy suggestions that will help decarbonize video streaming globally.Weve summarized the main takeaways here.Additionally,we are part of the DIMPACT Device Manufacturers working group,where we support research related to device energy efficiency.We are also encouraged by work with the Carbon Trust,in collaboration with companies like Amazon,Meta,Microsoft,Samsung and Sky,to tackle the emissions of connected devices.22 Based on UK emissions factors,because these comparisons vary by country depending on the carbon intensity of the users national grid.23 The True Climate Impact of Streaming 24 Per the Greenhouse Gas Protocol and also validated by our auditors,indirect use-phase emissions are optional to include.The Science Based Target Initiative(SBTi)also specifies that internet-and device-related emissions are indirect use phase emissions for software and telecommunication services,therefore optional to include in our footprint and target(Target Validation Protocol for Near-term Targets,Version 3.1,pg.51).Data Center Operators1%Internet Service Providers10vice Manufacturers89%Electric Utilities100%of this value chain relies on electricity Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix28Netflix ESG Report 2022Netting Remaining Emissions to ZeroTo supplement our decarbonization work,we delivered on our promise to net all remaining emissions to zero,across all three scopes,in 2022.We did this by investing in nature to retain and remove carbon(nature-based carbon credits)and match remaining electricity use to like-for-like renewable energy credits.We align with the latest guidance from nine research,NGO and multilateral government institutions who conclude that,“in addition to cutting greenhouse gas emissions in company operations and across value chains,to help get the world on track for halving global emissions by 2030,all companies need to invest in protecting,managing and restoring nature,for example by buying high-quality nature-based carbon credits.”Relative to our work to decarbonize,purchasing carbon credits comes only after we have made efforts to reduce emissions at the speed prescribed Nature-Based Carbon Creditsby climate science.But per the science(Intergovernmental Panel on Climate Change25,Nature),this needs to be done in parallel and cannot come later26.Our 2022 carbon credit portfolio spans four continents,six countries,and 25 on-the-ground partners,with 100%third-party certification for carbon measurement.Netflix does extensive due diligence before including a project in our portfolio,using a rigorous five step evaluation process to select the highest quality credits,all of which need to demonstrate their value beyond the carbon,including social impact,community and biodiversity benefits.We review transparency and integrity work from groups like VCMI and ICV-CM,and stay abreast of methodologies from third party credit standards bodies to continually refine our vetting process.Nature-based projects make up 64%of our portfolio because of their ecosystem benefits and potential to bring economic value to the region,including indigenous people or those disproportionately affected by climate change.Short film by the makers of Our Great National Parks on how carbon credits work,illustrated using Netflixs contribution to a Kenyan forest conservation project next to Tsavo National Park(episode 3)25 All scenarios developed by the IPCC that limit climate change to 1.5C rely on increasing the ghg sequestration potential of nature coupled with the avoidance of further damage to soils,forests,peatlands,wetlands,oceans and other critical biodiverse sinks-IPCC(2022)Climate Change 2022:Mitigation of Climate Change.26A We Mean Business coalition study showed that if the worlds 1,700 biggest emitters compensated each year for just 10%of the emissions they have not yet cut,through investments in nature,it would mitigate nearly 30 gigatons of emissions and mobilize up to$1 trillion in climate finance by 2030.Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix29Netflix ESG Report 20222022 CARBON PORTFOLIOProject NameMycorrhizal Inoculation Accelerated Reforestation Carbon RemovalChyulu Hills REDD ProjectSalvador da Bahia Landfill Gas ProjectBangladesh Gas Leak ReductionScott River Improved Forest ManagementCountryChileKenyaBrazilBangladeshUSAProject TypeRemoval:ReforestationRetention:REDD Methane MitigationMethane MitigationRemoval:IFMProject BenefitsAdvances biotechnology,biodiversity,local skilled jobs,soil rehabilitationBiodiversity,drought prevention,education resources,local jobs and alternative livelihoods,strong local community governanceReduced pollution,local skilled jobsReduced pollution,local skilled jobsFire prevention,biochar production,watershed restorationVendorMikro-Tek&Climate Impact PartnersConservation InternationalClimate PartnersClimate Impact PartnersEcotrust Forest ManagementTonnes331,600338,569266,300113,87231,248Mycorrhizal Inoculation Accelerated Reforestation Carbon RemovalScott River Improved Forest ManagementSustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix30Netflix ESG Report 20222022 CARBON PORTFOLIO(CONTINUED)CountryBrazilMexicoMexicoUSAProject TypeMethane MitigationRemoval:IFMRemoval:IFMRemoval:Soil CarbonProject BenefitsReduced pollution,local skilled jobsBiodiversity,local skilled jobsBiodiversity,local skilled jobs,fire prevention and other forest health benefitsBiodiversity,local skilled jobs,soil health,fire prevention and other forest health benefitsVendorClimate Impact PartnersCool EffectCool EffectIndigo AG/Cool EffectTotalTonnes26,83219,53017,1701,1001,146,221ICOCO Community Based ReforestationProject NameCentral de Resduos do Recreio Landfill Gas Project(CRRLGP)Los Bancos Community Based Improved Forest Management ICICO Community Based ReforestationIndigo Ag Soil Carbon ProjectChyulu Hills REDD ProjectFor any electricity we werent able to decarbonize in 2022,we used like-for-like credits by retiring Energy Attribute Certificates(e.g.,Renewable Energy Certificates(RECs)in the US,Guarantees of Origin(GOs)in Europe)to cover all non-renewable electricity use in over 150 countries.RENEWABLE ELECTRICITY CREDITSSustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix31Netflix ESG Report 2022Sustainability in StorytellingIn 2022,165 million,or more than 70%of our members,chose to watch at least one story on Netflix that highlighted sustainability.Weve curated over 200 of these series,films and specials into a Netflix collection:Sustainability Stories.The collection includes comedies like Dont Look Up,documentaries like the Academy Award winning The Elephant Whisperers and Our Great National Parks,to the mystery film Glass Onion:A Knives Out Mystery,fantasy sci-fi Sweet Tooth and political drama Borgen-Power and Glory,inspiring solutions in Down to Earth with Zac Efron,and family fare like The Sea Beast and Spirit Rangers.Visit the Netflix sustainability webpage for more.The Sea BeastOur Great National ParksDown to Earth with Zac EfronSpirit RangersDont Look UpSustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix32Netflix ESG Report 2022Netflix has committed to expanding the use of EVs in shows and films we produce ourselves and announced this in a 2023 Super Bowl ad with GM starring Will Ferrell.These titles will start to hit the service in 2023,including Murder Mystery 2,Virgin River Season 5 and more that will prominently feature EVs.EVs ON SCREENYoung people like myself view Netflix as a cherished form of entertainment but also as a source of education and inspiration.As more and more of our generation recognizes the implications of the climate crisis on our daily lives we feel hopeful when shows like The Crown tackle coal pollution,or when Zac Efrons Down to Earth highlights new green technologies.Im proud of Netflix for being serious about tackling the climate crisis both in-house and on-screen.Xiye Bastida,Indigenous youth climate activist and winner of the Spirit of the UN AwardSustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix33Netflix ESG Report 2022Refer also to the TCFD index in the appendix to this reportBoard:The Netflix Board oversees the Companys ESG efforts,which includes sustainability,with the assistance of the Nominating and Governance Committee.They regularly receive updates on sustainability and enterprise risk management at Board meetings.Management:Our Chief Financial Officer(CFO)oversees management decisions related to our sustainability programs,which are led by our Netflix Sustainability Officer.Our Internal Audit team performs an annual company-wide enterprise risk assessment,in which climate risks are considered,and the findings of this assessment are shared with the Board annually.GOVERNANCEClimate RiskWe conducted an initial climate risk assessment at the end of 2021.This evaluation looked at a range of climate risks as defined by the Task Force on Climate-Related Disclosures,including physical,regulatory,reputational,market,legal,and transitional risks.We also referenced the ESG-Specific Committee of Sponsoring Organizations(COSO)framework and Intergovernmental Panel on Climate Change(IPCC)research to build a climate risk framework to assess Netflix risk.STRATEGY AND RISK MANAGEMENTSustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix34Netflix ESG Report 2022RISKSDescriptionAcute physical risks caused by disruption from wildfires,flooding and sea level rise could pose a threat to business continuity and an impact to productions in areas impacted by natural disasters.Regulatory impacts could impose additional costs and limitations on how we produce content and operate our service.Regulatory impacts on traditional energy sources could pose a risk on our license to operate and produce content(e.g.,bans on diesel generators in desirable shooting locations)if new comparable technologies arent introduced in sufficient supply in time.Time HorizonShort TermMedium TermMitigation StrategyWe produce content all around the world and can be somewhat resilient to issues related to a particular studio or filming location.As part of our planning for productions,we conduct risk assessments and develop detailed emergency response plans for each different potential scenario.During production,we regularly track adverse weather events and other situations that may impact the continuity of our productions and implement plans as needed(e.g.,halting production,moving locations,etc.).We will also continue to monitor global physical risks as a part of our enterprise wide risk management and business continuity programs,which will inform additional mitigation strategies.We partner closely with players across the industry to evaluate,develop and deploy new sustainable technologies as well as seek to operate as efficiently as possible with traditional energy sources.Along with other companies,we have partnered with DIMPACT to help better understand and assess the impact of emerging trends in our industry.Read more about these efforts in the Sustainability in Our Operations and Value Chain sectionRisk TypeAcute PhysicalEmerging RegulationWe identified the following risks and opportunities,and mapped them against current strategies:Sustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix35Netflix ESG Report 2022OPPORTUNITIESDescriptionEnergy efficiency in our operations.Optimization and electrification of our vehicle fleet across our operations,productions and in our supply chain.Supporting entertaining and scientifically-informed content that raises environmental awareness.Time HorizonShort TermShort TermMedium TermBusiness StrategyNetflix conducts energy efficiency audits across our operations and long term lease facilities in order to reduce energy costs and emissions from inefficiencies in our built environment.Learn more in our Sustainability in Our Operations and Value Chain section.Netflix is exploring various ways to optimize fleet use with our suppliers and switching from fossil fueled transportation to EVs.EVs are more efficient and many models have lower total cost of ownership versus gas-powered vehicles.We anticipate that this integration of these practices and technologies will result in net cost and operational savings over the next decade.Learn more in our Sustainability in Our Operations and Value Chain section.Learn more in our Sustainability in Storytelling section.Opportunity TypeResource Efficiency Energy SourceProducts and ServicesWhile the assessment was a useful exercise,the climate risks we identified were all mapped to risk mitigation strategies already in place or underway.The output of this climate risk assessment was also used as an input into our enterprise risk management(ERM)assessment.When evaluated using our ERM methodology,no standalone climate-related risks were identified as significant for the company.Refer to our public climate targets and Scope 1,2 and 3 greenhouse gas emissions data above.Measuring our performance against these targets over time helps to inform our climate risk assessment process,in particular our transition risks.METRICS AND TARGETSSustainability StrategySustainability in Our Operations and Value ChainNetting Remaining Emissions to ZeroSustainability in StorytellingClimate RiskEnvironmentGovernanceSocialIntroductionAppendix36Netflix ESG Report 2022SocialWe are focused on a number of areas,including diversity and inclusion within Netflix,representation both behind and in front of the camera and the accessibility of our service.EnvironmentGovernanceSocialIntroductionAppendix37Netflix ESG Report 2022Inclusion&DiversityIf we are to serve audiences globally,we want an employee base that reflects our membership and a culture that enables those employees to do the best work of their lives.Our first inclusion report,published in 2021,looked at“representation within the company,how we plan to increase it and how we cultivate a community of belonging and allyship”and weve been working to build on that over the last two years.Inclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendix0.3%0.2%1.38Netflix ESG Report 2022GENDER(GLOBAL)27Across gender identities,women make up 49.6%of our workforce and have the highest representation at Netflix,compared to 51.7%in 2021.Women leadership(Directors and above)remained steady at 51.4%(vs.51.2%in 2021).Men and additional gender identities28 remained flat at 45%and 1.3%respectively,compared to 2021.Representation Today500 %0%WomenMenAdditional Gender Identities51.7I.6E.7E.0P0 %0%WomenMenAdditional Gender Identities51.2Q.4G.8E.6%Global Gender IdentityAll Job LevelsDirector 2021202227 This data is based on a subset of our streaming employee population,representing approximately 9,500 streaming employees.Due to regional laws,we are not able to collect gender data in every region.4%of the 9,500 employees represented in the data collection process chose not to disclose a gender identity.28 Netflix acknowledges and honors that gender is non-binary,so employees can self-identify from categories outside of man or woman.SENIOR LEADERSHIPOf the 23 leaders in our senior leadership team in 2022,43.5%(10)are women.Inclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendix39Netflix ESG Report 2022RACE/ETHNICITY(US)29Over half of our US workforce(52.9%)is made up of people from one or more historically excluded ethnic and/or racial backgrounds,including Asian,Black,Hispanic or Latino/a/x,Middle Eastern or North African,Native American,and Pacific Islander30.Representation Today29 In the US where we collect and report race and ethnicity data we had approximately 7,000 employees.Previously published results will differ due to changes in data collection methods that allow employees to share multiple self-identities(e.g.,Black and Asian compared to only“multi-race”);with this change,percentages can add up to more than 100%.30 The Race&Ethnicity self-identification categories that Netflix uses are largely informed by US federal reporting requirements.The number of US employees who identify as Asian accounts for 27%of our workforce,an increase from 25.8%in 2021 and 18.4%of our leadership(directors and above),compared to 18.6%in 2021.The number of US Black employees accounts for 10.7%of our workforce,a decrease from 11.7%in 2021 and 12.9%of our leadership(directors and above),a decrease from 13.6%in 2021.The number of US Hispanic or Latino/a/x employees accounts for 11.3%of our workforce,relatively flat from last year(11.2%)and 7.3%of our leadership(directors and above),an increase from 6.8%in 2021.SENIOR LEADERSHIPOf the 23 leaders in our senior leadership team in 2022,34.8%(8)self-identify as belonging to one or more historically excluded ethnic and/or racial backgrounds.Inclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendixNative American/Alaskan NativeAsianBlackHispanic/Latino/a/xMiddle Eastern/North AfricanNative Hawaiian/Other Pacific IslanderWhite0.4.6%0.6.4.6.9%6.8%7.3%2.0%2.1%0.8%0.9Y.0X.5%0.8%0.9F.6F.6%0.6%0.7%Middle Eastern/North African2.2Netflix ESG Report 2022500 %0%Native American/Alaskan Native25.8%US Race/EthnicityAll Job Levels20212022AsianBlackHispanic/Latino/a/xNative Hawaiian/Other Pacific IslanderWhite27.0.7.7.2.3%2.3P0 %0%US Race/EthnicityDirector 20212022Refer also to our EEO-1 reports from 2014-2021 here.Inclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendix41Netflix ESG Report 2022Increased representation is only part of the journey.People need to feel included and valued within an organization if they are to stay long term and while weve made steady progress,we have much more to do.Key is building an inclusion lens so that employees at every level can move from awareness about diversity,equity and inclusion to action and impact more quickly.In the last year,over 600 of our leaders globally have participated in small group workshops on Leading Inclusively.We also have groups of inclusion advisors in all regions and functions helping to develop best practices in hiring,compensation,onboarding,feedback,growth and development.We conduct pay equity analyses at least annually.These are designed to help ensure that employees from historically underrepresented groups are not being underpaid based on gender(globally)and race(US)relative to others doing the same or similar work under comparable circumstances.We aim to rectify pay gaps that we find.In addition,we will increase transparency around employee retention and pay equity in our inclusion updates and ESG reporting starting in 2024.Deepening our Culture of Inclusion and BelongingOn recruiting and development,we have expanded the number of Hispanic Serving Institutions(HSI),Historically Black Colleges and Universities(HBCU),and Minority Serving Institutions(MSI)represented in our Pathways Bootcamp.This immersive 12-week program provides technical skills development to students from historically underrepresented groups.Since the programs inception in 2020,276 students have participated in the Pathways Bootcamp.On building a more inclusive working environment,we now have 18 Employee Resource Groups(ERGs)with over 8,000 employees in 84 chapters globally.These ERGS help to:create a positive and welcoming environment for employees from historically underrepresented communities at Netflix;raise our collective consciousness around diversity and inclusion issues;and support recruitment,retention and employee engagement.80 276ERG chapters across the globeStudents have participated in Pathways BootcampInclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendix42Netflix ESG Report 2022At Netflix,we seek excellence in everything we do our product,our entertainment and our culture.To help us succeed,weve created an employee culture thats focused on continuous improvement so we can better serve our members and build our business.Our publicly available Culture Memo outlines our approach,which we update as needed to ensure we remain flexible in our approach.And we focus on employee engagement and feedback,including through regular town halls,business reviews and memos(which we often share broadly,including comments).Culture and EngagementWe offer benefits through four pillars:physical health,mental health,family and financial.On the right are a few highlights of our offerings:Benefits and WellbeingPhysical Health:Medical benefits work differently by country.No matter what the case is in each location,we make sure our employees and their families are covered.Additionally,we focus on accommodations and workplace adjustments to enable employees with one or more disabilities to be productive and successful.Mental Health:Mental health is important to overall health so we offer various programs to support employees and their dependents.Globally,we provide access to mindfulness resources,as well as free therapy and coaching sessions.In 2022,we introduced a formal Wellbeing Resilience strategy to manage issues related to anxiety and workplace stress.Our primary goal is to enhance productivity by focusing on integrating wellbeing into our operations.Family Benefits:Netflix offers a global family forming and fertility health benefit to support employees during their fertility health,surrogacy,adoption and family forming journey.This benefit is available to employees and their spouse/domestic partner,regardless of marital status,gender identity or sexual orientation.We also recognize that one of the most important events in many of our employees lives is the birth or adoption of a child,and our parental leave policy is“take care of your baby and yourself.”Financial Benefits:We provide employees the opportunity to prepare for their futures through our retirement-savings benefits,which vary by country.Inclusion and DiversityResponsible ProductsBenefits Highlights:EnvironmentGovernanceSocialIntroductionAppendixNetflix ESG Report 2022Employee Giving ProgramPhilanthropy at Netflix is driven by employees through our Employee Giving Program.Consistent with our culture of freedom and responsibility,we enable employees to donate to causes that are meaningful to them through a 2:1 employee match.When an employee donates to a charitable organization(from over 2 million eligible charitable organizations in 200 countries),Netflix matches that with 2X the donation amount,with an upper limit of$20,000 per employee per year for all donations and matches.This democratizes giving decisions,and incentivizes employees to support causes theyre passionate about.In 2022,we expanded our giving options and ways to get involved.We added a new volunteer match program in which Netflix employees can donate time by volunteering.For every hour an employee volunteers with an eligible cause,Netflix donates$50 to the same cause as part of each employees annual match maximum.Total giving as part of the Netflix Employee Giving Program in 2022 was approximately$34 million supporting over 5,000 charities worldwide.Nearly 30%of our employees participated in the Employee Giving Program in 2022.43Inclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendix55%Netflix ESG Report 2022Better representation on-screen starts with representation behind the camera and in the office.But we know that driving real change in film and TV,not only at Netflix but industry-wide,means continuing to think about whose voices are still missing and discovering the next generation of storytellers.Progress in Film/Series and ProductionsUSC ANNENBERG INCLUSION REPORT We partner with Dr.Stacy L.Smith and the USC Annenberg Inclusion Initiative to examine several inclusion metrics(e.g.,gender,race/ethnicity,LGBTQ ,disability)in our US-commissioned films and series.In 2021,we released our first-ever study and committed to publicly releasing our progress every two years through 2026 to help keep us accountable and effect lasting change in our industry.This April we shared the latest round of research looking at Netflix US films and series from 2020 to 2021.The new findings showed notable gains year-over-year for women and people from underrepresented racial/ethnic groups.More than half of all Netflix films or series from 2018-2021 featured a girl or woman as the lead or co-lead.Gender Equality in Leading Roles47%In 2020 to 2021,nearly half of Netflix films and series featured a lead or co-lead from an underrepresented racial/ethnic group.More People of Color in Leading RolesIn 2021,26.9%of directors on Netflix films were women,compared to 12.7ross top-grossing films across the industry that same year.And 38%of show creators in 2021 were women,substantially higher than 26.9%in 2018.More Women Behind the Camera26.9%Women of color increased significantly as series directors from 5.6%in 2018 to 11.8%in 2021,with similar growth for writer and creator roles.Nearly a third of films(27.7%)and more than half of series(54.75%)in 2021 had women of color as leads/co-leads.Women of Color Behind and In Front of the Camera11.8%However,the results also reveal that gaps persist for some specific racial/ethnic groups,including Latinx,Middle Eastern/North African,Indigenous and Native Hawaiian/Pacific Islander communities,as well as characters with disabilities.Read the executive summary here and the full report here.Inclusion and DiversityResponsible Products44EnvironmentGovernanceSocialIntroductionAppendix45Netflix ESG Report 2022FUND FOR CREATIVE EQUITY From our work with USC,we have learned that more inclusion behind the camera leads to better representation on screen.So in 2021,we established the Netflix Fund for Creative Equity,a commitment of$100 million over five years towards building new opportunities for underrepresented communities within entertainment.Through the fund,Netflix supports external organizations that are committed to creating more equitable opportunities in the TV and film industries,as well as bespoke Netflix programs that help us to identify,train and provide job placement for up-and-coming talent globally.In just two years,we have committed$29 million towards these initiatives,supporting over 4,500 up-and-coming creatives and partnering with more than 80 organizations around the world.Weve also placed 395 creatives from our programs on Netflix productions in a variety of roles,ranging from line producers and associate editors to casting assistants and grips.Read the latest update on the Fund for Creative Equity here.Invested more than$29 million in programs over the past 2 yearsPartnered with over 80 organizations across the globeEstablished more than 100 programs in over 35 countries from the United Kingdom to Brazil and Spain to IndiaSupported more than 4,500 creatives including directors,producers,writers,visual effects artists and moreInclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendix46Netflix ESG Report 2022PROGRAM AND CREATOR SPOTLIGHTS Paula GarcasGraduate from the Netflix Series Directors Development Program in the US“The Netflix Series Directors Development Program helped me pivot my career-the team looked beyond my career as an actor,and saw the potential in me to grow as an artist.The program gave us access to major talent and a front row seat to the inner workings of directing.Thanks to Lauren Iungerich,I directed an episode on two Netflix shows as part of this.Training with Lauren has been invaluable to my career.She gave me all the time,tools and encouragement to truly succeed,while testing me and challenging me to grow along the way.Because of her,Im prepared to tackle any opportunity that comes my way.”Mirwais SarwaryParticipant in the New Producers Academy Fellowship in the NetherlandsThrough the NPA masterclasses and networking events,Ive had the opportunity to meet and discuss ideas with key players in the film industry.Above all,I have had the time,space,and tools to develop my vision as a producer.In a short period of only six months,the New Producers Academy has allowed me to position myself in the Dutch film industry on my terms.What has been most rewarding is to be in a position where I can work together with emerging creators that find my fresh approach as a producer valuable and essential.Korede AzeezWinner of the African Folktales,Reimagined Short Film Competition,Nigeria“I learned so much from day one.It was the most tasking project I have ever worked on,but it was also the most rewarding.I got to work with some of the best talent in my country,which was an amazing experience.They treated me with so much respect and I am grateful for the immense support I got from Netflix and my mentor.I also learned a lot about how a world class production is managed,and this is definitely something Ill be taking into future work.I have grown tremendously as a filmmaker and I feel more ready to take on the world.”Here are a few highlights of programs and creators we supported in 2022.Aditi SharmaGraduate of the Netflix x Film Companion Take Ten Initiative,India“Through the Take Ten program,I got to learn about writing a screenplay,creating characters,directing actors,along with many other filmmaking lessons.We had the opportunity to do this under the guidance of Film Companion,and being mentored by professionals who are not only good at what they do,but also truly invested in the process of teaching,was extremely helpful.There arent any grant opportunities in India to speak of,and to have a platform like Netflix to showcase your film was a huge deal for a first time filmmaker like me.For the first time,me and my team believed that we had a real shot at this.”Inclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendix47Netflix ESG Report 2022SUPPORTING BLACK BANKS AND FINANCIAL INSTITUTIONSIn 2020,we announced that we would plan to allocate 2%of our cash holdings initially up to$100 million into Black banks and similar financial institutions to help create economic opportunities for Black communities in the US.In 2021,we fulfilled our initial pledge and in 2022,we continued to expand that investment to 2%of our cash and short-term investment holdings($106 million has been committed as of December 31,2022).Progress in PartnershipsSUPPLIER DIVERSITYWere working to ensure that our suppliers and vendors come from a diversity of backgrounds.This helps create jobs and opportunities in communities where we do business for people whove often been marginalized historically.In 2022,we spent$700 million with underrepresented suppliers,a 9%year-over-year increase.Inclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendix48Netflix ESG Report 2022With a catalytic seed investment of$25 million,Netflix collaborated with LISC Fund Management(LFM)to create the Black Economic Development Fund(BEDF).The Fund launched in 2020 to address economic challenges in the Black community and to help close the racial wealth gap.Since then,BEDF has grown into a$250 million mission-driven fund investing in Black-led developers,financial institutions,anchor organizations and businesses,with the goal of growing these organizations and strengthening their contributions to the Black community.From inception to the end of 2022,Netflix contributions supported BEDFs investment of$158 million in black-led transactions:$12 million in deposits to Black-owned banks;$18 million to Black-owned businesses;and$128 million in Black-led real estate developers.Netflixs anchor investment of$25 million has been instrumental in the creation of the Black Economic Development Fund,enabling us to invest in the Black community in a bold way.Without the support of visionary partners like Netflix,this transformative initiative may have never come to fruition.We are deeply grateful for their partnership and look forward to continuing to drive positive change together.Michelle Spivak,Senior Director,LISC Fund ManagementInclusion and DiversityResponsible ProductsPARTNER SPOTLIGHTSHope Credit Union was one of the first investments in the Netflix commitment to build economic opportunity in Black communities.The investment in HOPE is supporting the financing of more than 2,500 entrepreneurs,homebuyers and consumers of color.To learn more about these investments and their impact,check out the YouTube web series“Banking On Us.”Episode 1Episode 2Episode 3EnvironmentGovernanceSocialIntroductionAppendix49Netflix ESG Report 2022As a women-led B-Corp,were delighted to collaborate with Netflix,a leader in promoting racial justice,in our shared goal of reimagining how corporations invest in Communities of Color.Hand in hand,were charting a new course for corporate responsibility.Cash Deposits:Netflix has committed$6 million to CNote Impact Cash funds to be deposited with mission-driven depository institutions(DIs).Investments from Netflix have supported collective lending for over$1.9 billion in auto loans,over$4.2 billion in commercial loans and over$1.5 billion in housing loans.Catherine Berman,CEO of CNoteInclusion and DiversityResponsible ProductsNetflix leverages CNotes technology solution to support cash management into diversified deposits targeting social impact.Deposits are deployed with a network of impact-driven depository institutions that support Black,Indigenous,People of Color(BIPOC)and low-to-moderate income communities and individuals,as well as women entrepreneurs.Racial Equity and Disability Loans:A Netflix fixed income commitment of$16 million focused on racial equity and disability has supported loans to 7 community development financial institutions(CDFIs)as of the end of 2022.These CDFIs provide funds to support individuals with physical disabilities,those suffering from mental illness,those recently released from incarceration or recovering from substance abuse issues and members of BIPOC communities that have been denied access to capital or services.PARTNER SPOTLIGHTSEnvironmentGovernanceSocialIntroductionAppendixNetflix ESG Report 202250Responsible ProductsEmpowering people to easily choose and experience films,series and games they love is critical to a members joy every time they go to Netflix.We design our products to protect the privacy and security of our members,and to be inclusive and accessible to everyone.Privacy Our service has always been subscription-based,and when members sign up for any plan,we ask for very little information:email,name and method of payment.Our Personal Information Handling Principles ensure our engineering and business teams are aligned on our approach to privacy.Our Privacy Statement provides a detailed explanation of our privacy practices to our members,including:the information Netflix collects or receives from each member;information from our partners;how we use and disclose it(including advertising that we conduct off Netflix to promote our service);and the controls each member has in relation to this information.In November of 2022,Netflix introduced an ad-supported plan which allows members to enjoy our service at a lower price with limited ads.For those signing up for our ad-supported plan,we also ask for date of birth and gender.Members have the ability to opt-out of the selection of ads based on third party behavioral advertising(i.e.,ads selected based on use and/or interactions with unaffiliated third party websites and apps over time).We offer members the ability to exercise such opt-outs through a simple in-service control and we do not share what individual members watch with advertisers.Inclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendixNetflix ESG Report 202251Government Requests Related to ContentWe offer creators the ability to reach audiences all around the world.However,our catalog varies from country to country,including for rights reasons(i.e.,we dont have the rights to every title in every country where we operate).In a few cases,weve had to remove specific titles or episodes of titles in specific countries to comply with government demands.Below are the titles we removed in 2022 three in total.We report these takedowns annually.Information and Cybersecurity We strive to protect sensitive information through various means,including:technical safeguards;procedural requirements and policies;a program of monitoring to detect and address unauthorized modification or misuse;continuous testing of aspects of our security internally and with outside experts;and a robust incident response program.We regularly assess what areas of vulnerability there are,how we detect issues,how we respond and then how we let people know.We also have a Responsible Vulnerability Disclosure program,launched in 2018,that allows security researchers around the world to find and report security vulnerabilities in Netflix products and systems in exchange for compensation.The Vice President(VP)of Security,Privacy,Assurance and Corporate Engineering oversees a team of employees dedicated to information security.Cybersecurity is discussed at every audit committee meeting and is also a board-level issue.Our VP regularly attends audit committee meetings and provides updates on cybersecurity matters.In August 2022,we complied with a written demand from the Radio and Television Supreme Council(RTUK)in Turkey by removing one episode-episode 9 of Season 5-of the series Jurassic World Camp Cretaceous in Turkey.In September 2022,we complied with a written demand from the Singapore Infocomm Media Development Authority(IMDA)to remove the series How to Change Your Mind in Singapore.In October 2022,we complied with a written demand from the Ministry of Information and Communication(MIC)in Vietnam and removed the series Little Women in Vietnam.Inclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendixNetflix ESG Report 202252Product Accessibility We believe incredible stories and games should be enjoyed by all of our members,regardless of language,device,connectivity,or ability and that accessibility is just as important as the aesthetics,speed and stability of our service.MAKING OUR SERVICE MORE ACCESSIBLE We have designed features like assistive listening systems,brightness controls,keyboard shortcuts,screen readers,larger font size and voice commands into our products.We also conduct research with current and prospective members aimed at identifying barriers to perceiving,navigating,and interacting with Netflix,and design solutions to remove those barriers.We take advantage of device-specific assistive technologies(e.g.,native features on Apple iOS and Android platforms)as much as possible.We also create our own accessibility options,such as the ability to change the font,size,shadow,and background color of closed captions and subtitles on TV,and adjust playback speed on mobile.Our catalog of titles with subtitles for the Deaf and Hard of Hearing(SDH),and audio descriptions(AD)for our members with vision needs is continually expanding.All Netflix-owned films and series support SDH for the language in which they were originally produced.We have also started expanding SDH and AD to nearly 20 languages,including Spanish,Portuguese,and French.Netflix members can browse titles with English audio descriptions in the gallery on our website,and by selecting“Audio Description”under the Categories menu in our mobile apps.We also introduced new badge icons for our shows and films that have AD and SDH on web,TV,iOS and Android so members can more easily discover stories suited to their needs,eliminating the inconvenient need to play a title first.We partner with vendors across the globe who are dedicated to working with the blind and low vision community in many different capacities,from hiring blind or low vision narrators,quality controllers and co-author/editors to working with the community and local organizations to gather feedback through focus groups.Guidelines for the creation of AD,timed text style guides,gaming accessibility and minimizing photosensitivity issues flashes or patterns that could cause ill-effects in our audiences,are also publicly available to share best practices amongst industry peers.Inclusion and DiversityResponsible ProductsEnvironmentGovernanceSocialIntroductionAppendixNetflix ESG Report 202253MAKING OUR SERVICE MORE ACCESSIBLE Over the past year,we kicked off our first tour of barrier free accessible screenings in New Orleans,Los Angeles,London,New York City,and Seoul.Audiences came together to experience the thrill of The Gray Man,Stranger Things S4,and Jung_E in theaters with open AD and SDH.There is more to be done.Thats why Netflix is committed to working with the industry,community and policymakers to deliver more inclusive and accessible entertainment to the world.Inclusion and DiversityResponsible Products53EnvironmentGovernanceSocialIntroductionAppendix54Netflix ESG Report 2022GovernanceFrom our earliest innovation of DVD-by-mail to becoming one of the worlds leading entertainment services,weve managed our business for the long term and focused on pleasing our members.This approach has served our members,employees and shareholders well over the past 25 years.EnvironmentGovernanceSocialIntroductionAppendix55Netflix ESG Report 2022Corporate GovernanceEnterprise RiskEthics and ComplianceIP Protection&Data PiracyCorporate GovernanceOur corporate governance structure31 was built to find the right balance of rights and responsibilities among shareholders,the board and management,and ensure that there are appropriate checks and balances in place.With the rapid evolution of technology and the changing media landscape,we are continually adjusting our service to meet the needs and desires of our consumers.Our governance structure has been deliberately constructed to help us to do that.Board Composition and StructureOur board is composed of 12 highly experienced,talented and qualified directors with experience as board members and executives at some of the worlds most successful companies.We believe that the board is well situated to navigate the changing competitive terrain that Netflix operates within.The board has led Netflix through its evolution from a US-only DVD business to a leading global streaming service and from a licensor of second run content to one of the biggest producers of films and series in theworld,while effectively managing risk and overseeing management performance.We believe that a diverse mix of skills,experience,perspectives and backgrounds contribute to an effective board.The composition of our board has evolved over the past several years,and when looking to fill board positions,we will continue to evaluate potential candidates who we believe complement and augment our current board.The Nominating and Governance Committee considers a number of factors,including those depicted below,as well as characteristics such as gender,ethnic or racial background,and national origin when evaluating potential board candidates.InnovationKnowledge of how to anticipate consumer and technological trendsContentExperience with the entertainment and media industryInternationalExpertise in global business cultures and consumer preferencesSTRATEGY ALIGNMENTOur board has the experience and expertise that aligns with these important facets of our long-term strategy31Netflix Approach to Governance EnvironmentGovernanceSocialIntroductionAppendix56Netflix ESG Report 2022Executive DirectorsReed HastingsExecutive Chairman of the BoardTed Sarandosco-Chief Executive Officer and President of the Company and DirectorIndependent DirectorsGreg Petersco-Chief Executive Officer and President of the Company and DirectorJay C.HoagLead Independent Director,Nominating and Governance Committee(Chair)Brad SmithIndependent Director,Nominating and Governance CommitteeTimothy Haley Independent Director,Compensation Committee(Chair)Ann MatherIndependent Director,Audit Committee(Chair)Anne SweeneyIndependent Director,Compensation CommitteeRichard BartonIndependent Director,Audit CommitteeStrive MasiyiwaIndependent Director,Nominating and Governance CommitteeMathias DpfnerIndependent Director,Compensation CommitteeLeslie KilgoreIndependent Director,Audit CommitteeAs of the end of 2022,women made up 33%of our independent directors and 27%of our overall board.One independent director comes from a historically excluded ethnic and/or racial background.We maintain our current board diversity matrix on our investor relations website32.32 Corporate GovernanceEnterprise RiskEthics and ComplianceIP Protection&Data PiracyEnvironmentGovernanceSocialIntroductionAppendix57Netflix ESG Report 2022Board Oversight The boards role in our risk oversight process includes reviewing and discussing with members of management areas of material risk to the company,including overall enterprise,strategic,operational,financial and legal risks.The board oversees the companys ESG efforts,which includes human capital management,inclusion,diversity,sustainability and other matters.The board also oversees succession planning.The board receives regular updates from management typically in the form of an interactive memo,where directors ask questions to management,and further discuss matters at meetings.Each of the committees oversee various ESG matters,depending on the specific issues.Committees report to the full board regarding their respective considerations and actions.THE BOARDThe board as a whole oversees matters related to enterprise,strategic,operational,financial and legal risk and the companys ESG efforts.NOMINATING AND GOVERNANCE COMMITTEEPrimary committee responsible for board structure,governance and director independence,as well as assisting the board in overseeing ESG mattersAUDIT COMMITTEEOversees matters of financial and legal risk,including cybersecurity riskCOMPENSATION COMMITTEEOversees risks related to compensation issuesCOMPANY MANAGEMENTThe executive team,led by our co-Chief Executive Officers,supervises day-to-day risk management processes,including identifying,assessing,monitoring,managing and mitigating significant business risks.Company management reports to the board on an annual basis,or more frequently if needed,top areas of risk.Corporate GovernanceEnterprise RiskEthics and ComplianceIP Protection&Data PiracyEnvironmentGovernanceSocialIntroductionAppendix58Netflix ESG Report 2022Governance Structure Streaming is now an established business,Netflix is self-funding and expects sustained positive free cash flow,and weve substantially scaled our revenues,operating profit and margins.As such,we have recently evolved to a more standard large-cap governance structure.At our 2022 annual meeting,the Netflix Board proposed and stockholders approved significant changes to our corporate governance structure.We implemented a phased-in declassification of our board,with directors elected at this years annual meeting serving one-year terms and the entire board standing for annual elections beginning in 2025 and beyond.We also eliminated supermajority voting provisions in our Amended and Restated Articles of Incorporation(the“Charter”)and our Amended and Restated Bylaws(the“Bylaws”),provided shareholders with the ability to call special meetings,and adopted a majority voting standard in uncontested director elections.We also adopted a market standard director resignation policy.Here is a summary of our corporate governance best practices and stockholder rights:One share,one vote:We have a single class of shares with each share entitled to one vote.Majority voting standard:We have a majority voting standard in uncontested director elections.Any incumbent director who fails to receive a majority of votes cast in an uncontested election must tender their resignation to the board.The Nominating and Governance Committee would then make a recommendation to the board about whether to accept or reject the resignation or take other action.Annual director elections(fully declassified by 2025):We have phased-in the declassification of our board with directors elected at this years annual meeting serving one-year terms and the entire board standing for annual elections beginning in 2025 and beyond.Elimination of supermajority voting:We eliminated supermajority voting provisions in our Charter and Bylaws.Proxy Access:A group of up to 20 stockholders,owning at least 3%of shares continuously for at least three years may nominate up to two directors or 20%of the Board(whichever is greater)for inclusion in our proxy statement.Stockholder right to call a special meeting:Stockholders holding a not less than 20%net-long position in the Company continuously for at least one year may call a special meeting.Corporate GovernanceEnterprise RiskEthics and ComplianceIP Protection&Data PiracyEnvironmentGovernanceSocialIntroductionAppendix59Netflix ESG Report 2022Shareholder EngagementWe strive to stay in tune with our ownership base.Our board and our management team engage directly and regularly with our shareholders,and our board and its committees consider shareholders feedback in assessing our governance structure,including our compensation program.Since our 2022 annual meeting,we have invited 26 shareholders,representing approximately 57%of our shares outstanding to participate in calls to discuss our executive compensation program and other matters that are top of mind33.We conducted two rounds of investor outreach one in the summer of 2022 and one in early 2023,to ensure we fully understood shareholder feedback,concerns and perspectives.Members of the Netflix legal and investor relations teams met with 19 shareholders,representing approximately 51%of our shares outstanding.Independent directors of the board participated in a majority of these engagements,meeting with shareholders representing approximately 45%of our shares outstanding.We also engaged with the proxy advisory firms,Glass Lewis and Institutional Shareholder Services(ISS).These engagements provide a direct opportunity to exchange information and perspectives,and the input from our shareholders will continue to inform our ongoing ESG programs as we evolve and grow.33 Percentages are based on shares outstanding as of December 31,2022.Corporate GovernanceEnterprise RiskEthics and ComplianceIP Protection&Data PiracyEnvironmentGovernanceSocialIntroductionAppendix60Netflix ESG Report 2022IP Protection&Data PiracyWe regard our trademarks,service marks,copyrights,patents,domain names,trade dress,trade secrets,proprietary technologies and similar intellectual property as important to our success.We use a combination of patent,trademark,copyright,trade secret laws and confidentiality agreements to protect our proprietary intellectual property.We employ a variety of methods to monitor potential infringement of our intellectual property,including searches conducted internally and by external vendors.A particular focus is preventing uses of our intellectual property that may lead to consumer fraud.Enterprise Risk We review enterprise risks on an ongoing basis and seek ways of managing risk to help create,preserve and realize value for our members and shareholders.Our approach to enterprise risk management(ERM)is consistent with the COSO framework which defines ERM as“the culture,capabilities,and practices,integrated with strategy-setting and performance,that organizations rely on to manage risk in creating,preserving,and realizing value”.On an annual basis,our Internal Audit team facilitates an enterprise risk assessment.We gather insights from a number of internal and external sources,including discussions with executives for their views on enterprise risks that the company is facing and compile an inventory of risks across the business.The findings of this assessment,including mitigation approaches,are presented to the board for their input and oversight.We also report these risks in our annual report.34Corporate GovernanceEnterprise RiskEthics and ComplianceIP Protection&Data Piracy34 Netflix,Inc.Annual Report on Form 10-K for the year ended December 31,2022 EnvironmentGovernanceSocialIntroductionAppendix61Netflix ESG Report 2022Ethics and Compliance We are committed to managing our business ethically and with integrity.Our Code of Ethics sets out our expectations for conduct among our employees and board members.We encourage reporting of breaches of our code or any unethical or inappropriate conduct to our Chief Legal Officer or,in the case of misconduct by a senior financial officer,to the Chair of our Audit Committee.We also provide access to a third-party operated service where reports of misconduct can be made confidentially and,if desired,anonymously,24 hours a day,seven days a week,365 days a year in local languages.Reports made through this service are elevated and investigated until they are resolved,and updates are provided annually to the Audit Committee.As part of our commitment to managing our business ethically and with integrity,we seek to identify and mitigate risks that could lead to potential legal and/or regulatory violations through an annual compliance risk assessment process.Our Global Anti-Corruption Policy requires our employees and contractors to abide by global anti-corruption and anti-bribery laws.We provide regular training on compliance with this policy,in addition to conducting regular and ongoing risk assessments.A copy of our practices and policies,which includes the Global Anti-Corruption Policy and Code of Ethics,has been translated into numerous languages and remains available to all employees throughout their employment with us.Other areas of focus include commitments to compliance with applicable government mandated sanctions regimes(with leadership provided by a designated Sanctions Compliance Officer)as well as compliance with human rights legislation(e.g.,the UK Modern Slavery Act35).35 UK Modern Slavery Act Statement Available on our IR WebsiteCorporate GovernanceEnterprise RiskEthics and ComplianceIP Protection&Data PiracyEnvironmentGovernanceSocialIntroductionAppendixAppendix62EnvironmentGovernanceSocialIntroductionAppendix1Netflix ESG Report 2022About This ReportThis report covers the calendar year 2022 and all data included in the report is from that time period unless otherwise noted.Refer to data tables in this appendix for a summary of ESG data for 2022 as well as published data from previous years.This report is also reflective of global Netflix operations unless otherwise noted.This report is informed by external ESG reporting frameworks including the Sustainability Accounting and Standard Board(SASB)“Internet Media&Services”and“Media&Entertainment”standards,as well as the Task Force on Climate-related Financial Disclosures(TCFD).SASB and TCFD indices are provided in this appendix.FORWARD-LOOKING STATEMENTSThe information covered by the report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 including,but not limited to,statements regarding our ESG programs,activities,plans,policies,goals,targets,objectives,commitments,projections,expectations and strategies that are not historical in nature.These forward-looking statements are subject to risks and uncertainties that could cause actual results and events to differ,including any failure to meet stated ESG goals and commitments,and execute our strategies in the time frame expected or at all,as a result of many factors,including changing government regulations or stakeholder expectations,and our expansion into new products,services,technologies,and geographic regions.More information on risks,uncertainties,and other potential factors that could affect our business and performance is included in our filings with the SEC,including in Item 1A:“Risk Factors”section of the companys most recently filed periodic reports on Form 10-K,Form 10-Q and subsequent filings.All forward-looking statements included in this document are based on information available to us on the date hereof,and we assume no obligation to revise or publicly release any revision to any such forward-looking statement,except as may otherwise be required by law.About This ReportESG Data TablesSASB IndexTCFD IndexResourcesGHG Inventory MethodologyCarbon Credit Project Screening CriteriaEnvironmentGovernanceSocialIntroductionAppendixData PointPaid MembershipsEmployeesRevenue(USD Millions)2019167 million8,60020,156ESG DATA TABLE2020204 million9,40024,9962021222 million11,30026,6982022231 million12,80031,616Data PointElectricity(MWH)Global Renewable Electricity(%)Scope 1 Emissions(Metric Tons C02-e)Scope 2 Emissions,Market-Based(Metrics Tons C02-e)Scope 2 Emissions,Location-Based(Metric Tons C02-e)Scope 2 Emissions,Target-Based(Metric Tons C02-e)Scope 1 Scope 2(Market-Based)Emissions(Metric Tons C02-e)Scope 1 Scope 2(Target-Based)Emissions(Metric Tons C02-e)Scope 3 Emissions(Metric Tons C02-e)Total GHG Emissions:Scope 1 Scope 2(Market-Based) Scope 3(Metric Tons C02-e)Carbon Credits201981,13610051,48756526,59426,31752,05277,8041,192,6591,244,711(36,506)202094,28510030,88314128,58529,35631,02460,2391,020,5411,0
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Scaling Impact2022 Corporate Sustainability ReportContents3CEO Statement5About ADM5About the Report6Awards7Goals and Key Performance Indicators13Our Core Business14Food Quality and Safety15Innovation16Reducing Food Waste17Concern Worldwide20Land27Climate32Freshwater 38Community Engagement39Human Rights41Diversity,Equity,and Inclusion43Health and Safety45Strategy and Oversight46Risk and Opportunity Management47Key Topic Assessment and Stakeholder Engagement48Commitments and Policies49Compliance and Ethics52Data Tables53Verification Statements56GRI Content Index60SASB Standards61TCFD IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices24Introduction11Feed the World18Protect Nature36Enrich Lives44Governance51Data Tables and IndicesCEO StatementDear Stakeholders,IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices3ADM is committed to sustainability as a foundation of our purpose and a pillar of our growth strategy.With global scale and a value chain that stretches from more than 200,000 farmers to customers ranging from multinational CPGs to startups,we have a unique opportunity to lead,supporting the production of more sustainable solutions in categories encompassing food,fuel,and industrial and consumer products.And our efforts to advance this critical work were central to our priorities and accomplishments in 2022.As much of the world emerged from COVID restrictions,the global food supply system came under pressure once again last year,threatened by severe weather events and Russias invasion of Ukraine.We believe that everyone has the right to the food they need to sustain their lives and we demonstrated our commitment to that belief throughout 2022 as we continued to FeedtheWorld.Our team used our irreplaceable global asset base,as well as our unparalleled product portfolio and expertise,to respond to global events,remaining agile as we procured and delivered products to meet global nutritional needs.We advanced production expansions across our footprint,from Illinois,to Serbia,to Germany;began work on our Decatur Nutrition Protein Solutions Center;and continued to advance construction of our North Dakota soybean processing facility.We did all of this while continuing to ProtectNature and the value chains in which we operate.We firmly believe that we can meet the worlds needs both for food security and sustainability and were doing that in multiple ways.First,were continuing to set ambitious goals for ourselves:In 2022,we announced our aspiration to reach net-zero by 2050,and committed to working with the Science-Based Targets Initiative to align our sustainability targets with ambitious goals to limit the average rise of global temperatures to 1.5 degrees Celsius.And as we drive the use of low-carbon energy globally across ADM,weve set a Strive 35 goal of 25%of our total energy usage coming from low-carbon sources by 2035.We also continued to advance a comprehensive set of initiatives such as our growing regenerative agriculture program,our unique carbon capture and storage capabilities,and energy and efficiency improvements across our operational footprint,to achieve significant carbon-intensity reductions across a broad array of feedstocks.Our sustainable agriculture program,branded as re:generations,enrolled 1.2 million unique regenerative agriculture acres in 2022,and continued to connect partners across the value chain,including our groundbreaking multi-year agreement with PepsiCo.Were expanding the use of our first-of-its-kind commercial carbon capture and storage facility,increasing capacity and working with partners to expand carbon capture to additional U.S.facilities.From enhancing efficiency and biofuels use in our transportation fleet,to our work to replace coal-fired boilers at key facilities,to expanding procurement of renewable energy,were exploring every viable option to decarbonize our operations and value chain and empower the industries we serve to usher in a bold new era.Everything we do comes back to our purpose and our work to EnrichLives of our colleagues,the people in our supply chains and the communities in which we operate,and the countless consumers around the globe who depend on our products every day.We use our capabilities for the greater good paving the way through practices that make a positive impact on the world.Nothing demonstrated that more in 2022 than our actions to support the people of Ukraine,ranging from millions of dollars in financial support,to colleagues who packed food and even made their homes available to team members who were forced to leave Ukraine.Those actions truly demonstrate the best of ADM,and they werent the only demonstrations of our culture in 2022.We were proud to be recognized as a Financial Times Diversity Leader,featured on Newsweeks Most Loved Workplaces list,and named for the fourth straight year in Ethispheres Worlds Most Ethical Companies list.This report details many more ways in which we advanced our work to Feed the World,Protect Nature,and Enrich Lives in 2022.But what is most exciting to me is our future,as we continue to scale up our efforts.This is who ADM is,and Ive never been more proud of our company and our team.Sincerely,JuanR.LucianoCHAIRMANANDCEO“We firmly believe that we can meet the worlds needs for both food security and sustainability.”Introduction5About ADM5About the Report6Awards7Goals and Key Performance Indicators IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices4IntroductionAbout ADMAt ADM,we unlock the power of nature to enrich the quality of life.Were a premier global human and animal nutrition company,delivering solutions today with an eye to the future.Were blazing new trails in health and well-being as our scientists develop groundbreaking products to support healthier living.Were a cutting-edge innovator,leading the way to a new future of plant-based consumer and industrial solutions to replace petroleum-based products.Were an unmatched agricultural supply chain manager and processor,providing food security by connecting local needs with global capabilities.And were a leader in sustainability,scaling across entire value chains to help decarbonize our industry and safeguard our planet.From the seed of the idea to the outcome of the solution,we give customers an edge in solving the nutritional and sustainability challenges of today and tomorrow.Learn more at .About the ReportWe are committed to reporting on our Environmental,Social,and Governance(ESG)activities on an annual basis.This report highlights our activities and progress toward addressing key ESG topics from January 1,2022,to December 31,2022,as well as the opportunities and challenges in our journey to help create a more resilient and sustainable global food system.Our purpose as a company is to unlock the power of nature to enrich the quality of life;therefore,our report is organized into three main sections:Feed the World,Protect Nature,and Enrich Lives.We have aligned our disclosures with three key sustainability reporting standards:the Global Reporting Initiative(GRI)Standards,the Task Force on Climate-Related Financial Disclosures(TCFD),and the Sustainability Accounting Standards Board(SASB).The content indices for these standards are included at the end of the report.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices5AwardsSEAL Business Sustainability awardField to Market Collaboration oftheYear awardEnvironment Energy Leader carboncapture recognitionEthisphere Worlds MostEthicalCompanyMost Sustainable Trading Company Award IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices6Goals and Key Performance IndicatorsStrive 35KEYTOPICGOALPROGRESSTARGETDATESDGALIGNMENT25solute reduction in Scope 1 2 GHG emissions over 2019 baseline by 2035In progress7.8%reduction12/31/2035GHG Emissions25solute reduction in Scope 3 GHG emissions over 2021 baseline by 2035In progress0%reduction12/31/2035Energy15%reduction in energy intensity over 2019 baseline by 2035In progress0%reduction12/31/2035Increase low-carbon energy usage to 25%of total energy use0%increase12/31/2035Water10%reduction in water intensity over 2019 baseline by 2035In progress0%reduction12/31/203510solute reduction in water withdrawal over 2019 baseline by 20351.0%reduction12/31/2035Waste90%diverted from landfillIn progress82.4%diverted12/31/2035 IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices7BiodiversityKEYTOPICGOALPROGRESSTARGETDATESDGALIGNMENT100forestation-free across all supply chains12/31/2025No-Deforestation100forestation-free soyIn progress86/31/2025100forestation-free palmIn progress62/31/2025Traceability100%direct and indirect soybean suppliers in Argentina,Brazil,and Paraguay Achieved100/31/2022Maintain at least 98%traceability to palm oil mill Achieved99.9%OngoingIncrease traceability to palm plantationIn progress54.5%OngoingSupplier Engagement100%of palm volumes sourced from direct supplierswho have a publicly available NDPE policy,implementation plan,grievance management system,grievance log,deforestation monitoring,and publicly report progress against their time-bound implementation plan.In progress99.9/31/2022100%of palm oil volumes in the IRF“Delivering”categoryIn progress53.9/31/2025100%of palm kernel oil volumes in the IRF“Delivering”categoryIn progress43.8/31/2025 IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices8BiodiversityKEYTOPICGOALPROGRESSTARGETDATESDGALIGNMENTLand Use ChangeDisclose emissions from land use change Achieved100%7/1/2024Land Conversion Risk AssessmentComplete soy sector global assessment of the risk of conversion of natural ecosystems to soy productionIn progress12/31/2023Regenerative AgricultureEnroll 4,000,000 acres in regenerative agriculture programs globallyIn progress30/31/2025Tree PlantingEngage with local organizations to plant native tree speciesIn progress93,500treesOngoingReduction TargetsSubmit emissions reduction targets to SBTi or publish third-party validated LUC emissions reduction targetsIn progress7/1/2024Biodiversity MappingDevelop a global biodiversity mapping strategyIn progress7/1/2024Priority WatershedsDevelop a global water strategy focused on improving community well-being in priority watersheds,including water-stressed areasIn progress12/31/2025 IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices9Enrich LivesKEYTOPICGOALPROGRESSTARGETDATESDGALIGNMENTWorkplace Safety50%reduction in Total Recordable Incident Rate(TRIR)from 2020 resultsIn progress0%reduction12/31/202550%reduction in Lost Workday Incident Rate(LWIR)from 2020 resultsIn progress4.5%reduction12/31/2025Gender ParityAchieve 50%gender parity among ADMs senior leadership structureIn progress28/31/2030Human RightsAssess and disclose salient human rightsIn progress12/31/2023100%of palm volumes sourced from direct suppliers with ahuman rights policy that is fully aligned with ADM HumanRights PolicyIn progress98.65%Ongoing100%of palm volumes sourced from direct suppliers conducting human rights due diligenceIn progress99.48%Ongoing IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices10Feed the World13Our Core Business14Food Quality and Safety15Innovation16Reducing Food Waste17Concern Worldwide IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices11Feed the WorldFood is fundamental.It sustains us,fulfills us,and fuels our well-being.Its the most basic need with the most critical impact.ADM is devoted to that impact every single day.We believe everyone has the right to the food they need to sustain their lives.In addition to our core business of providing access to nutrition worldwide,weve identified the following key levers that allow us to contribute to the global goal of zero hunger by 2030:Land use efficiencyInnovating products like biostimulants that can increase yields allowing farmers to produce more crops on the same footprintAlternative proteinsDeveloping and mainstreaming new and innovative ways to increase availability of proteinPost-harvest lossSupporting initiatives that reduce the amount of crops that are lost before reaching consumersStrategic partnershipsWorking with NGOs to combat chronic malnutrition and hungerFood safety and qualityEnsuring the products and ingredients we create meet our strict standards IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices12Our Core BusinessEvery day,our 42,000 employees work to transform agricultural commodities into ingredients and products for food,feed,fuel,and industrial and consumer products.We purchase millions of metric tons of agricultural commodities and transport them whole or processed to customers in more than 200 countries.We operate around 300 processing facilities,440 procurement centers,and 64 innovation centers in 47 countries.Operating our own transportation fleet of 30,000 rail cars,2,500 barges,620 trucks,1,700 trailers,144 boats,and 27 oceangoing vessels allows us to move grain as needed in the event of weather or political disasters that may jeopardize food security.In 2022,we processed 18.6 million metric tons of corn and 33.0 million metric tons of oilseeds.Origination Of CropsProcessingSpecialtiesAg ServicesOilseedsNutritionCarbohydrate SolutionsTransportationCustomerFood Feed Fuel Industrial IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices13Procure/Store GrainLocal SalesExportsDestination MarketingMealVegetable OilOther ProductsStarches&SweetenersFlourBioSolutionsOther ProductsFlavorsSpecialty IngredientsAnimal Nutrition IngredientsHealth&Wellness IngredientsFood Quality and SafetyWe believe food is fundamental to quality of life,and expanding access to nutrition is a foundational piece of how we fulfill our purpose.The safety and security of our worlds food and feed supply chain is of critical importance to that work.Thats why at ADM,we continually review and improve our food safety systems and procedures,including good manufacturing practices for human and animal food and the development and implementation of risk-based preventive controls or critical control points for human food based on hazard analysis.Our facilities,processes,and procedures undergo regular evaluation to assess the risk of product contamination,and we implement a variety of safeguards and security concepts to reduce those risks.Weve built our Food Safety and Quality program around three pillars:achieving best in class food safety,maintaining a culture of quality,and leveraging innovation and technology.BestinClassFoodSafetyUtilizing our customized“Integrated Risk Metric”(IRM)assessment application,we are able to proactively monitor and provide focused support across the organization through subject matter expertise,resources,and global verification procedures to ensure conformity to strict food safety standards.CultureofQualityEvery year,food safety and quality training is performed with plans to expand this program in 2023.In September 2022,we held our third annual Global Food Safety Week for our colleagues around the globe to provide a dedicated time to refresh and refocus.We completed trainings and other activities to reinforce and educate our team on the critical roles we all play and how to improve our Quality&Food Safety culture.InnovationandTechnologyBecause food safety has always been a critical priority,we are constantly looking for improvement opportunities to move from safe to safer.We leverage new technologies and process innovations to improve food safety through:Increased ability to detect food safety risks Improved identification of food safety concerns Innovative safety controls Technology enhancements to drive predictive qualityFood Safety Conference in NigeriaOur Quality and Food Safety Center of Excellence,in collaboration with Human Nutrition colleagues in Nigeria,hosted our first food safety conference in Nigeria.The conference theme was”Unlocking Nature and Enriching Lives Through Food Safety”.The event hosted participants from the government,regulatory agencies,and academia,as well as key players in the food and beverage industry in Nigeria.The conference provided the opportunity to showcase the ADM product portfolio introducing our new and changing product offerings available to the Nigerian market.We also had the opportunity to collaborate with influencers in the Nigerian food sphere and showcase the best-in-class food safety culture of ADM to the Nigerian market.Overall,the conference helped our enterprise vision of building meaningful relationships with the food and beverage sector of Nigeria.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices142022HIGHLIGHTSREDUCTION227GFSI Certified Sites 6.96KReduction in Liters of Lab Waste43%Reduction in Number of High-Risk Sites per IRMInnovationBiostimulantsImproving crop yields is vital to enhancing food security and improving agricultural sustainability.As the global population and resulting demand for food continue to grow,increasing yield defined as the amount of food or grain produced from a given amount of land continues to be a vital tool.Biostimulants are a new and promising innovation,with some focusing on crop yield improvements.According to The Fertilizer Institute and U.S.Department of Agriculture,“a plant biostimulant is a substance(s),microorganism(s),or mixture(s)thereof,that,when applied to seeds,plants,the rhizosphere,soil or other growth media,act(s)to support a plants natural nutrition processes independently of the plant biostimulants nutrient content.The plant biostimulant thereby improves nutrient availability,uptake or use efficiency,tolerance to abiotic stress,and consequent growth,development,quality or yield.”ADM has introduced a new agricultural biostimulant,NeoVita 43TM,that boosts corn yields by improving nutrient use efficiency.We collaborated with the University of Illinois to design,implement,and analyze research trials to evaluate the performance of NeoVita 43.In most trials across multiple years and locations,NeoVita 43 boosted yields over the control when used alone or with starter fertilizer.Following this consistently positive performance,ADM expanded testing efforts to precommercial on-farm trials with ADM fertilizer customers in 2022.NeoVita 43 is formulated to closely mimic the plant root exudate that supports soil microbial activity to promote nutrient availability and uptake by the plant.By increasing the availability of these key nutrients to the soil microbiome early in the growing season,developing plants can increase nutrient uptake and get off to a stronger start,which can lead to higher yields.Alternative ProteinsAt ADM,we believe alternative proteins have a fundamental role to play in the wider protein ecosystem,helping to build a sustainable food future for our growing population.If we can augment and diversify the worlds existing protein sources with a range of alternative options,we will have more nutritious food options available and more solutions for tackling challenges like hunger,food security,and sustainability.This is why ADM continues to expand and evolve our robust array of traditional plant-based protein offerings,while also investing and partnering with startups that are pioneering leading-edge protein technology innovations.In 2022,we announced several significant projects planned to increase our capabilities to deliver alternative proteins to our customers.First,a significant enhancement of our Decatur,Illinois,alternative protein production facility will increase our soy protein concentrate capacity and extrusion capacity of the site.Also in Decatur,we are creating a new,state-of-the-art Protein Innovation Center,which will bring together labs,test kitchens,and pilot-scale production capabilities to power new innovation,from novel and diversified ingredients,to more sustainable and efficient processing,to unique and differentiated texture,taste,appearance,and nutrition solutions.We also opened a new facility in Serbia that extends our production of non-GMO textured soy to include origination and extrusion capabilities in Europe.Radical collaboration will be vital to our ability to sustainably feed our growing population.At ADM,were investing in and partnering with food technology companies creating new and expanding existing alternative protein sources such as insects,cultured meat,fermentation,legumes,and more.These companies and their technologies are important pieces of the puzzle in building pioneering protein sources that can help with food security and sustainably feed a growing population and bring more and better choices for consumers.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices15Reducing Food WasteAs a leader in meeting global food demand for an ever-growing population and advancing the cutting edge of health and nutrition,ADM is playing a pivotal role in not only powering nature to enrich the quality of life but delivering solutions,especially on the issue of post-harvest loss.Post-harvest loss is food that does not get eaten for reasons that occur between the field and the consumer.Those reasons include environmental conditions,such as spoilage due to temperature or humidity;mechanical issues,such as leaving grain behind in the field or improper storage;and microbial action,such as bacteria/fungi contamination.For over 10 years,the ADM Institute for the Prevention of Post-Harvest Loss(ADMI),in collaboration with the University of Illinois,has been working to improve post-harvest management of grains and oilseeds to reduce poverty and food insecurity by generating knowledge,scaling improved technologies,and building institutional capacity.The organization has worked with a wide variety of public and private sector partners on post-harvest reduction initiatives,including non-profit organizations,private industry,NGOs,governments,research institutes,and international universities.In 2022,ADM Cares contributed$120,000 in additional grant funding to ADMI to support three different projects in Bangladesh and Indonesia.The first project addresses the post-harvest losses with farmer producer organizations in India by providing access to storage solutions.The second supports a partnership between ADMI and Bangladesh Agricultural University to train rural youth entrepreneurs to start service provision businesses with BAU-STR grain dryers and provide entrepreneurial training for rural youth who can become service providers during harvest seasons.The third project supports a public-private partnership in Indonesias agricultural sector that will support the development of programs to help farmers gain better access to markets.Implementing important projects like these,as well as the Institutes efforts,from improving efficiencies and increasing production,to converting byproduct streams into value-added products,and aligning on strategic partnerships,demonstrate that ADMI is an important leader in alleviating food waste and extending its capabilities to improve hunger for communities around the globe.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices16Concern WorldwideIn 2019,ADM Cares announced a$1 million contribution to Concern Worldwide to create the Lifesaving Education and Assistance to Farmers program,or LEAF,a comprehensive,dual-phased initiative to address malnutrition in Kenya and Ethiopia.Concern Worldwide believes that no human potential should go unfulfilled due to poverty,disaster,or crisis.Its programs are designed to address the specific causes of extreme poverty in each community.LEAF prevents malnutrition through the promotion of sustainable agricultural techniques for poor and vulnerable people to generate long-term income.Also,the program increases the adoption of nutrition-sensitive and climate-smart agricultural production to promote longevity.Through the LEAF program,Concern specifically implemented activities to alleviate high malnutrition levels by working with 60 community health volunteers on early detection and referral for malnutrition cases.In addition,Concern provided further programmatic support to the community through farmingAcommunitymemberandmother,Aisha,explains,“Hunger has now reduced,and we are able to eat at least three times a day withmy family.My child is healthy tooand out of the nutrition program sinceSeptember.We no longer relyonone type of food.”inputs,such as tractor subsidies,certified seeds,fuels subsidies,and water pumping sets,and facilitated irrigation canal access for 300 farmers to increase crop production.Outreach to smallholder farmers to provide training and access to financing and equitable business opportunities has enhanced overall community livelihoods.Farmers enrolled in LEAF have increased production capacities through programs,reducing produce losses from 60%to 20%,and through enhanced irrigation,which helped farmers move from the river basins to higher ground,providing better opportunities for crops to thrive.Whats more,roughly two-thirds of the total seeds planted in Tana River,Kenya,were drought-resistant,increasing yields and incomes to the community.Farmer training,access to financial services,and implementation of vegetable planting in home gardens all provided additional support for local farmers to enhance well-being.In the first 18 months(Phase I)of our partnership,LEAF directly impacted almost 50,000 individuals through lifesaving treatment of acutely malnourished children,and developed sustainable livelihoods for poor and vulnerable people to generate long-term income.Building on the success of Phase I,ADM Cares approved an additional$400,000 contribution to build LEAF Phase II in Kenya in 2021 and 2022.The contribution reached close to 10,000 farmers and impacted over 60,000 individuals.The LEAF Phase II program has significantly contributed to the communities ability to maintain a basic level of food security,seeing approximately half of the farmers reach self-sustainability without inputs from Concern,a massive achievement.Target communities can be completely self-sufficient through irrigation systems,crop rotations,and nutritional education.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices17Protect Nature20Land27Climate32Freshwater IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices18Protect NatureNature sustains us,and we must protect it.Nature provides us with many essential services,including the air we breathe,the food we eat,and the water we drink,as well as medicines and recreational opportunities.Biodiversity is a critical element of our nature.Around the world,the soil microbiome supports plant growth while insects,birds,and bats pollinate those plants.Scientists continue to discover new species,but alarmingly,biodiversity loss is greatly outpacing those discoveries.At ADM,we have an unwavering commitment to global sustainability to create positive impact on the world and contribute to the greater good.With our vast supply chains,direct connections with growers,and ambitious environmental goals,we are in a position to make meaningful change to support global biodiversity through our efforts in land,climate,and fresh water.We have identified the following key levers:Biodiversity managementWorking with local organizations to restore and reforest ecosystems and monitor animal activityNo-DeforestationImproving traceability and supplier engagement to ensure our supply chains are deforestation freeRegenerative agricultureCollaborating across the supply chain to increase the use of practices that improve soil health,biodiversity,water quality,and GHG emissionsGHG emissions reductionImplementing projects that reduce our carbon footprint,improve our energy intensity,and increase our low-carbon energy usageInnovationDeveloping and improving products and processes to lower our environmental footprint,including plant-based alternatives to traditional petroleum-derived productsWater reductionReducing water withdrawals at our facilities IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices19 IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices20LandOur global food system feeds eight billion people,employs almost a third of the global workforce,and supports the livelihoods of more than 600 million farmers.As the global population has expanded,so too has agricultural production,with significant expansion in the past two decades making it possible for more people to have access to affordable and safe food.However,this expansion came at the cost of natural ecosystems.Our sector is at high risk from the impacts of climate change,but it is also the largest emitting sector after energy,responsible for 23%of global greenhouse gas(GHG)emissions,with much of this resulting from the conversion of forests and other ecosystems to agricultural use.To keep the 1.5C target in the Paris Agreement within reach,tackle food crisis risks,and enable the transformation to a global net-zero future,we must focus on limiting impacts from land use change,reducing emissions at the field level,leveraging the lands ability to sequester carbon,and improving productivity of existing agricultural land.26.744.95943.354.512.725.940Q3-Q42019Q1-Q22020Q3-Q42020Q1-Q22021Q3-Q42021No-DeforestationADM has set a goal to be deforestation-free in all of our supply chains by 2025.Improving traceability allows us to monitor our supply chain for deforestation.In palm,we have consistently maintained high traceability to the mill level(over 98%for palm oil and palm kernel oil),and we are working with our direct suppliers to increase traceability to plantation of origin.VOLUMETRACEABLETOPLANTATION(%)In 2021,we started reporting traceability for palm oil and palm kernel oil combined.Moving forward,we are working with our direct suppliers to implement satellite monitoring in our palm supply chain.Additional information about our no-deforestation efforts in our palm supply chain can be found here.For soy in South America,we achieved 100%traceability in 2022.We have mapped the field boundaries(polygons)of our direct suppliers to the farm.Indirect suppliers are traced to the first aggregation point.We then assess the location of the aggregation point for deforestation within a 50 km radius.Satellite monitoring of the polygons and engagement with growers in our supply chains enable identification of deforestation incidences as well as opportunities for reforestation efforts.Additional information about our no-deforestation efforts in our South American soy supply chains can be found here.Using our map of direct suppliers farms and satellite imaging,we measured our deforestation-free volumes in Brazil and priority regions of the Cerrado at 99%using a 2015 baseline,the year we launched our No-Deforestation Policy.To increase transparency and credibility,the results were verified by a third party.By the end of 2023,we will complete this exercise for our indirect suppliers in Brazil and all suppliers in Argentina and Paraguay.SOYBEANSOURCINGDEFORESTATIONRISKMITIGATION65!hv2$%LowRiskVerifiedDeforestation-FreeInProgressGlobal43.75MMTBrazil13.37MMTPriorityRegionsoftheCerrado6.02MMTIn the U.S.,as part of our regenerative agriculture program,we map field boundaries of participating growers in our corn,soy,wheat,and peanut supply chains and use satellite monitoring to screen for deforestation.In 2022,our program engaged over 1 million acres.Using 2015 as a cut-off date to match our South America soy methodology and align with the publication of our policy,we identified 1,617 acres of deforestation in the seven year look-back period,with none of it occurring in the most recent year.This analysis shows our sourcing from these acres is 99.99forestation-free.To meet our 2025 deforestation-free goal,we identified four key actions:Conduct a comprehensive deforestation risk assessment for all commodity and ingredient supply chains.For high-risk supply chains,identify direct and indirect volumes and determine a method for traceability.Develop monitoring protocols and supplier engagement plans to measure deforestation-free volumes.Engage a third party to verify results.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices21PalmOilPalmKernelOilCombined1.5 RoadmapIn 2022,ADM and 11 other agricultural trading and processing companies signed a joint statement at COP26 committing to“lay out a shared roadmap for enhanced supply chain action consistent with a 1.5 degrees Celsius pathway,that supports achievement of our goals,and increases collaboration and implementation in areas including:enabling policy environments,transparency on scope 3 emissions and indirect supply chains,and improving livelihoods for farmers.”Throughout the rest of the year,the Tropical Forest Alliance(TFA)and World Business Council for Sustainable Development(WBCSD),along with 14 of the worlds largest agricultural trading and processing companies,worked diligently to complete the Agriculture Sector Roadmap to 1.5C.We are working collaboratively to transform the agriculture sector.As a signatory of the Roadmap,we are developing company-specific implementation plans for our sourcing of palm oil and soy,which will include time-bound targets,a detailed scope,supply chain mapping and traceability,monitoring and response,and verification.Specifically,the Roadmap requires disclosure of land use change emissions and submission of emissions reduction targets to the Science-based Targets initiative(SBTi)or another credible third-party for validation by July 1,2024.Last year,ADM committed to submit targets to SBTi,and began the process of completing a full Scope 3 GHG emissions screening and inventory,including land use change,enabling our disclosure of land use change more than a year in advance of the deadline.Land use change emissions can be found in the Scope 3 section of this report.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices22Regenerative AgricultureRegenerative agriculture is a system of farming that helps to rebuild the health of our soils while producing food to feed the world.The principles of regenerative agriculture system are based in Indigenous ways of land management and are adaptive to local physical conditions and culture and include:Maintaining living roots in soil Maximizing diversity crops,soil,pollinators Minimizing soil disturbance Continuously covering soil Responsibly managing inputs fertilizers,pesticides For several years,ADM has partnered with farmers to implement sustainable and regenerative agriculture programs.These ranged from educational events to pay-for-practice to helping farmers achieve certifications and purchasing certified volumes.We gained valuable experience through these pilot projects,and in 2022,we launched our re:generations program with a goal of engaging over 1,000,000 acres in North America in regenerative agriculture projects,and exceeded that goal,engaging 1,900 farmers and 1.2 million acres in our inaugural year.Our regenerative agriculture program works to identify and implement customized and targeted projects focusing on outreach,education,and continuous improvement to drive adoption of practices.We have identified five key advanced agricultural practices that have multiple positive outcomes such as reducing GHG emissions,improving soil health,and protecting water quality.These practices include cover crops,reduced or no-tillage,nitrogen reduction and efficiency programs,integrated pest management,and diverse crop rotations.Our program involves partnering with local conservation agronomy groups,including American Farmland Trust,Ducks Unlimited,Flint River Soil and Water Conservation Districts,Kansas Association of Conservation Districts,Minnesota Soil Health Coalition,and Practical Farmers of Iowa.These groups work with growers to select the practices that are fit for purpose for their specific farms,taking into account variances in soil types and weather.In addition to covering the cost of education and technical support,we also provide financial incentives to participating growers.By partnering with Farmers Business Network(FBN)to expand availability of their Gradable platform to our network of farmers,we are able to collect and aggregate data with a focus on security and privacy while expediting calculation and analysis of results through a linkage to Field to Markets Fieldprint Calculator.Our customers are excited about this program,too.Last year,we entered into collaborations with several customers to increase the funding pool,allowing us to reach more farmers with the program.Leveraging Scope 3 inventory accounting principles,we allocate emissions,reductions,and removals to those customers,as well as use Field to Market metrics to measure additional impacts including biodiversity,water quality,soil conservation,irrigation water use efficiency,and land use efficiency.For example,ADM and PepsiCo signed a groundbreaking,7.5 year agreement to support regenerative agriculture practices on up to 2 million acres of farmland.In 2022,across 19 different projects we saw positive results in GHG metrics:Our regenerative agriculture acres emitted253,000MTlessCO2e than the benchmark.According to the U.S.Department of Agricultures COMET-Planner,participating acres sequestered115,500MTofCO2.When looking at individual projects,additional metrics provided valuable insight:Using the Field to Market BiodiversityIndex a metric designed to measure the capacity of a farm to support a diverse community of plants and animals our corn project acres in Nebraska scored 86%,which is better than the local non-cover crop benchmark of 76%.Another project(multi-state and multi-crop)had a similar result with a BiodiversityIndex score of84%.A soy project in Iowa used the Iowa Soybean Associations tile monitoring program to monitor WaterQuality,whichshoweda26%improvementthroughreducednitratepollutionthanfieldswithoutcovercrops.Using the Illinois Nutrient Loss Reduction Strategy county-based load numbers,our Illinois project acres planting cover crops showed20,200lbslessnitrogen and1,400lbslessphosphorusrun-off to waterways.Encouraged by our learnings and success in North America,we have expanded the program to Europe and South America and set a goal to increase enrollment to 4,000,000 acres globally by 2025.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices23Responsible Pesticide ManagementIn addition to our regenerative agriculture efforts,we also participate in several certification and rating programs,including ADM Responsible Soy,2BSvs,Round Table for Responsible Soy(RTRS),International Sustainability and Carbon Certification(ISCC),Roundtable on Sustainable Palm Oil(RSPO),Sustainable Agriculture Initiative Farm Sustainability Assessment(SAI-FSA),Red Tractor,Food Alliance,and Fair Trade.These programs allow us to provide certified products to our customers based on their goals and program focus areas.We recognize that pesticide use in the agricultural sector has led to concerns regarding the potential for unintended environmental and health impacts.We also recognize that an estimated 45%of crop production worldwide is lost to pests annually.While we do not own farms and cannot mandate practices,we do strive to work with growers across our diverse global supply chains to support sustainable practices that substitute natural controls for some agrochemicals,foster ecosystem balance,reduce GHG emissions,and mitigate crop losses.We engage with growers around the world on implementing sustainable and regenerative agricultural practices,including integrated pest management(IPM)and cover crops.IPM is designed to reduce risks to health and the environment through the design and implementation of a plan to prevent and manage pest damage by the most economical means with the least possible hazard to people,property,and the environment.Cover crops improve soil health,improving natural pest control mechanisms.Some species,such as cover rye,can even control some diseases.We source commodities from several programs with components that specifically impact pesticide usage.Through Field to Market,we are incentivizing adoption of cover crops,in addition to other regenerative agriculture practices.The ADM Responsible Soy,Doing It Right,Food Alliance,ISCC,RSPO,and RTRS programs all require the development,implementation,and monitoring of IPM plans.Organic farming prohibits the use of synthetic pesticides.In 2022,we sourced volumes from programs that specifically focus on pesticide management techniques and practices as follows:MetricTonsWheat 177,200 Peanuts 86,200 Fruits,Flavors,Colors,etc.23,400 Sunflower 69,900 Corn 1,922,900 Soybeans4,153,000Canola 3,646,000 Palm 196,100 Other Crops 11,300 IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices24TransformationSpotlight:BiodiversityBiodiversity is a hot topic globally,and especially in South America where,according to the International Union for Conservation of Nature(IUCN),40%of the planets biodiversity,25%of forests,and 26%of freshwater resources are concentrated.We have two important and exciting programs in the region dedicated to preserving and enhancing biodiversity.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices25Tree PlantingA critical part of environmental conservation,planting trees helps to rehabilitate degraded areas,create corridors to reconnect isolated pockets of forests,and support plant and animal biodiversity.Specifically,planting native saplings trees that are a few years old and have already developed a root system allows local biodiversity to recover by improving water quality,providing habitat for wildlife,preventing soil erosion,and sequestering CO2 from the atmosphere.In 2022,our colleagues in Paraguay partnered with A Todo Pulmn to plant native tree saplings.Through an ADM Cares grant,the group was able to plant an additional 8,500 trees,bringing their annual total to 203,000.In Brazil,we work with Parque Vida e Cerrado,a local NGO focusing on reforestation,scientific ideation,and environmental education.Their efforts have resulted in the planting of over 75,000 native seedlings,helping to restore natural corridors along streams and other degraded land within farms in our supply chain.Check out a video of our colleagues in action.Animal TrackingAs part of the second phase of our efforts with Parque Vida e Cerrado,ADM Cares sponsored a study to monitor and track large animal movement through soybean farms in our supply chain to see the impact on apex species.Two maned wolves were fitted with radio collars to observe their movement patterns.The red line shows the male wolf,and the yellow line shows the female.In addition,trail cameras have been set up to monitor for other species.So far,the cameras have identified 31 different species of mammal,including five species listed as threatened by the IUCN:marsh deer,oncilla,giant anteater,South American tapir,and the Brazilian three-banded armadillo.WasteAs a part of our Strive 35 goals,we have a target to reach a landfill diversion rate of 90%by 2035.In 2022,we continued to implement initiatives with the aim of reducing our waste generation and increasing the amount that is diverted to beneficial reuse.Our efforts in this space have a multitude of environmental benefits from improving resource efficiency through recycling to generating soil amending compost.We also view waste-related issues through the lens of land preservation.Waste that is not diverted will ultimately require space within an existing landfill or the establishment of new land solely dedicated to retaining trash.By addressing our waste generation and expanding diversion strategies,we can not only conserve resources but also mitigate the footprint associated with landfills.Our efforts in 2022 include the following:Our wet mill in Clinton,Iowa,worked with a third-party waste management vendor to find a beneficial reuse option for previously landfilled organics,including biomass from our wastewater treatment operation.In August 2022,the site began shipping the organic materials for land application,returning important nutrients to agricultural fields in our supply shed.We estimate this project will divert over 11,000 metric tons per year from landfill.In June 2022,we broke ground on our new soybean processing facility in Spiritwood,North Dakota.Green Bison Soy Processing,a joint venture between ADM and Marathon Petroleum,is a brownfield development building a new facility on an existing footprint.Repurposing an existing industrial site has benefits,but it also generates a lot of construction debris.Rather than demolishing and landfilling the existing infrastructure,the ADM team recycled and reused approximately 73,000 metric tons of concrete,preventing that material from being sent to a landfill.Much of the material has been used to grade the site and become part of the new plants foundation.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices26TARGETWaste90%diverted from landfill81.2.4 19(Baseline)20220%Pu0%LANDFILLDIVERSION1.2%Increase IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices27ClimateRecently,the Intergovernmental Panel on Climate Change(IPCC)released their sixth synthesis report with straightforward statements and dire warnings.The evidence is clear:if we do not act now,the planet will experience irreversible and catastrophic changes to ecosystems around the world,jeopardizing the people and wildlife depending on them.But there is also hope promising low-carbon technologies,carbon removal through photosynthesis,ambitious national commitments,and support for community adaptations,as well as increased funding,can impact the degree to which the Earth experiences warming and climate change impacts.“Climate change is a threat to human well-being and planetary health.There is a rapidly closing window of opportunity to secure a livable and sustainable future for allThe choices and actions implemented in this decade will have impacts now and for thousands of years.”IPCC AR6 SYRScope 1 2 Carbon ReductionIn 2022,ADM committed to working with the Science-based Targets Initiative(SBTi)to align our sustainability targets with ambitious goals to limit the average rise of global temperatures to 1.5 degrees Celsius.We also announced our aspiration to reach net-zero by 2050,and published a roadmap of current and future technologies that may help us to achieve our short-,medium-,and long-term carbon reduction targets.Potential projects being evaluated include:Purchasing and developing renewable energy through renewable energy certificates,power purchase agreements,and ADM projects.An example is our first wind project,which is expected to be operational mid-2023,and should provide our Brazilian operations with renewable power and reduce our Scope 2 footprint by more than 19,000 metric tons of CO2e per year.Discontinuing coal usage at our Mankato,Minnesota;Lincoln,Nebraska;and Des Moines,Iowa oilseeds facilities,with an estimated reduction of around 180,000 metric tons of CO2e per year.Exploring innovative technologies for reducing point source GHG emissions at three of our largest cogeneration facilities,which could provide ADM a method to reduce Scope 1 and Scope 2 emissions by approximately 3,000,000 metric tons when fully implemented.Expanding our carbon capture and sequestration capabilities.Following development of technologies and infrastructure to support next generation thermal energy generation,including hydrogen,renewable natural gas,small modular reactors,and post-combustion carbon capture and sequestration.While we continue to assess our pathway to achieve net zero,were diligently working to ensure we meet our Strive 35 targets.In 2022,39 projects were completed that are expected to reduce our Scope 1 2 footprint by around 135,000 MT per year.Two examples of projects completed include:Combustion controls improvements in Cedar Rapids,Iowa expected to reduce CO2e by 62,000 MT per year.Reverse Steam Tube Germ Dryer Airflow in Decatur,Illinois expected to reduce CO2e by 45,000 MT per year.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices28TARGETGHG Emissions25solutereductionin scope 1 2 GHG emissions over 2019 baseline by 2035SCOPE1 2EMISSIONS7.8%Reduction2019(Baseline)2022Total16.4MTotal15.2MScope22.86MScope22.13MScope114.1MScope113.5MCCS429kCCS520kScope 3The past year saw the release of enhanced GHG accounting guidance,the most substantive for ADM being the GHG Protocols Land Sector and Removals Guidance.In accordance with these proposed best practices,we have recalculated our Scope 3 inventory and have incorporated the emissions associated with land use change.While this methodology change resulted in a higher emissions total for 2022 when compared to our previous disclosures,it paints a clearer picture and is aligned with global accounting protocols.It also allows us to meet the disclosure requirements of the 1.5C Roadmap more than a year ahead of the target.We remain committed to and confident in achieving our Strive 35 reduction target.When implemented across our sector,we believe this new guidance will provide stakeholders greater insight into the climate impact of agricultural supply chains and will demonstrate the carbon removal and sequestration potential of regenerative farming practices.Stakeholder collaboration is crucial when addressing Scope 3 emissions,especially as GHG accounting guidance continues to evolve.ADM is actively engaging NGOs,suppliers,customers,and third-party experts to continuously improve the accuracy and transparency of our Scope 3 inventory and uncover opportunities for emissions reductions.As part of our commitment to pursue an SBTi approved target,we began evaluating and calculating all categories of Scope 3,and expect to have the full inventory complete in the second quarter of 2023.Last year,we established a new baseline using 2021 data because it was the most recent year and the highest quality of data available under the new GHG accounting protocols.Also aligning with SBTi,we are disclosing our Scope 3 footprint in two pieces FLAG and non-FLAG.Emissions from Forests,Land,and Agriculture(FLAG)are relevant to our sector and will require specific mitigation and sequestration activities that differ from other types of Scope 3 emissions.Emissions from purchased goods and services make up the largest portion of our Scope 3 inventory.This category includes farm-level emissions from fertilizers,fuels,and other direct emissions sources,as well as emissions from land use change,which we currently calculate using statistical land use change(sLUC)methodology.Our Scope 3 inventory currently includes categories 1-5 and 10:Purchased Goods and Services;Capital Goods;Fuel and Energy Related Activities;Upstream Transportation;Waste from Operations;and Processing of Sold Products.As we work to reduce our Scope 3 footprint,key objectives include:Increasing traceability and satellite monitoring to calculate actual land use change emissions.Working with farmers in our supply chains to implement regenerative agriculture practices to reduce on-farm emissions and sequester carbon in the soil.Collaborating with transportation providers to reduce emissions through initiatives such as Sea Cargo Charter,Green Shipping Corridors,and increased biofuel usage.Engaging with downstream customers to gain insight to emissions from the processing of ADM ingredients into their products.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices29TARGETGHG Emissions25solutereductionin Scope 3 GHG emissions over 2021 baseline by 2035SCOPE3EMISSIONS(in millions)FLAGEmissionsFLAGLandUseChangeEmissionsNon-FLAGEmissions2021(Baseline)20220501001501.3%Increase25.939.251.424.343.949.9116.6118.1EnergyIn 2020 when we announced our Strive 35 targets,we included a goal on energy intensity to ensure we continue to drive energy efficiency within our facilities as a way to support our GHG reduction goals.We have discovered that the diversity of our operations and energy portfolio across our global footprint does not allow for a meaningful roll-up of energy intensity on a per unit of production basis.The variation between a corn wet mill and an oilseeds processing facility is significant,and even the difference in energy needs between two different oilseeds can affect progress toward the goal.In addition,the lack of distinction between energy types(fossil,renewable,etc.)means that we lack insight into the true impact on the environment.Taking this into consideration,we will continue to track energy intensity to drive efficiencies and will report our progress against our existing goal,and we are adding a new goal to increase the use of low-carbon energy sources.Because of our use of onsite cogeneration,our overall energy purchase is less than 10%of our total energy usage,so we have set a more ambitious goal that includes onsite energy generation,as well.After review and vetting by the Utilities Center of Excellence(CoE),Strive 35 committee,and Sustainability and Corporate Responsibility Committee of the Board,we have added a renewable energy use goal.By 2035,we will increase our usage of low-carbon energy to 25%of our total energy use.Low-carbon energy includes renewable energy sources such as wind,hydro,and solar,as well as zero or extremely low emission energy sources such as biofuels,nuclear,natural gas with carbon capture and storage,and low-carbon hydrogen and ammonia.To achieve the goal of 25%low-carbon energy,we will explore new and existing technologies,increase the use of biofuels in our mobile and stationary equipment,and increase our procurement of renewable energy purchases through renewable energy certificates(RECs)and power purchase agreements(PPAs).IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices30In 2022,ADM implemented 64projects with energy savings benefits that are estimated to save over 488,000 MWh.TARGETEnergy increase low-carbonenergyuseto25%of total energy usage by 2035ENERGYINTENSITY(MWh/ton of product produced)1.061.082019(baseline)20220.00.30.60.91.21.6%Increase7.6%5.7 19(Baseline)20220%3%5%8%1.9%ReductionLOW-CARBONENERGY(%of total energy usage)InnovationOur eyes are always toward the future to new ways,new formulas,and new possibilities.Were at our best when were on the cusp.And we thrive as partners,co-creators,and instigators,using technical ingenuity to spark game-changing ideas and ground-breaking solutions.We have developed a broad portfolio of solutions in polymers,packaging,and home and personal care.Plant-based Insulation BindingThe buildings where we live and work every day make up a large segment of GHG emissions.According to the International Energy Agency(IEA)September 2022 tracking report,these structures accounted for over 30%of global energy consumption in 2021.As the global population continues to grow,energy consumption in buildings continues to increase.As governments,companies,and people across the world work toward a 1.5C future,improving the energy usage in buildings globally is critical to meet the goal.One of the most impactful ways to improve building performance is by increasing insulation in both new and existing structures.The most common insulating materials today are mineral wool and fiberglass wool.Producers of insulating wool batts create thin fibers that are held together with a formulated binder.Historically,these binder systems used a petrochemical-based phenol-formaldehyde resin that was highly effective in bonding the fibers together.Many producers who are actively working to reduce formaldehyde in their insulation are discovering the power of biobased materials.ADM has partnered with major insulation producers to implement new binder formulations derived from corn materials.These plant-based binders help provide the same insulating performance while eliminating the usage of formaldehyde resins.This solution not only improves the health aspects of the insulation,but a key producer reported needing less energy to produce the binder.LG ChemADM and LG Chem,a leading global diversified chemical company,launched two new joint ventures in 2022 that will leverage our fermentation expertise to meet the growing demand for lactic and polylactic acid(PLA).The two joint ventures,GreenWise Lactic and LG Chem Illinois Biochem,are slated to have production facilities built in Decatur,Illinois,with a projected annual capacity of 150,000 tons of high-purity corn-based lactic acid and 75,000 tons of PLA,respectively.Lactic acid has applications across many industries,ranging from food and feed to cosmetics,and will also be used as a precursor for the production of PLA,a bioplastic.PLA is a proven solution that allows us to transform a renewable resource into an alternative to the petroleum-derived plastics dominating the market.Unlike typical plastics,the feedstock for PLA are crops that can be grown each year which also means that the bioplastic has the potential to be compostable under industrial conditions.This project follows the previous announcement of our companies collaboration,currently in the development stage,to use lactic acid to produce acrylic acid,another common component of consumer products that traditionally relies on petrochemical raw materials.The announcement of these joint ventures marks another step forward in ADMs partnership with LG Chem and further demonstrates how we see sustainability as both a key principle in how we operate as well as an opportunity for growth.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices31 IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices32FreshwaterWater has become an increasingly scarce commodity in many regions of the world,and lack of water threatens to become one of the leading challenges we all face globally.Water is critical to biodiversity,healthy communities,and to our operations,and we must do our part to protect it,which is why ADM included a two-part water goal in its Strive 35 plan.The first goal is designed to maximize water use efficiency and minimize water consumption across our global operations.The second goal is to develop a strategy to improve community well-being in priority watersheds,including water-stressed areas.Operational Water Efficiency and ReductionIn 2022,although we continued our work to reduce our water intensity,we faced significant headwinds.Specifically,a promising new recapture technology that was scheduled to be piloted was put on hold due to supply chain interruptions.In addition,our production value,which we use as the normalizing factor in our intensity calculation,was down by 10%this year at our Major Water Users Group(MWUG)facilities.These two factors combined for a disappointing result in our 2022 water intensity number even though our water withdrawal was lower than the baseline.This discrepancy between absolute reductions and increased water intensity,as well as a lack of alignment with how we disclose our water data via CDP,led us to re-evaluate our water goal.After review and vetting by the Utilities CoE,Strive 35 committee,and Sustainability and Corporate Responsibility Committee of the Board,we have decided to refocus our water goal as an absolute reduction of water withdrawal.By 2035,we will reduce our absolute water consumption 10%over a 2019 baseline.Water withdrawal consists of municipal water,surface water,well water,rain water,and wastewater purchased from third parties.For our reduction goal,focusing on reuse,recycle,and reclaim within our operations will allow us to make progress toward our goals and reduce our freshwater intake needs.In 2022 we implemented several projects that resulted in reduced water withdrawal.In Decatur,Illinois,we implemented steam condensate system improvements expected to result in a water savings of nearly 180,000 m3,energy reduction of around 16,000 MWh,and operating cost savings of over$440,000 annually.At our biodiesel facility in Rondonpolis,Mato Grosso,Brazil,we focused on process optimization with a resulting water savings of around 40,000 m3 per year.At our oilseeds facility in Spyck,Germany,we installed an additional gravel filter for our cooling water,which allows us to save approximately 138,000m3 of water per year.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices33TARGETWater 10solutereductionin water withdrawal over 2019 baseline by 20352019(baseline)20220.00.61.21.82.43.02.332.56WATERINTENSITY(m3/ton of product produced)9.9%Increase2019(Baseline)20220306090120WATERWITHDRAWAL(million cubic meters)112.8114.01.0%ReductionWater ReplenishmentAs part of our Strive 35 water goals,we committed to develop a global strategy focused on improving community well-being in priority watersheds,including water-stressed areas,by 2025.Over the past two years,with the support of a knowledgeablethird party,we organized a broad group of internal stakeholders to work toward developing the strategic vision and framework for a Water Scarcity Program.The team includes representatives from sustainability,Utilities CoE,operations,and EHS from North America,South America,Europe,and APAC.The overall strategic goals within the framework include:Maximize water use efficiency across global operations.Practice the three Rs(reduce,reuse,and reclaim)at all of our facilities and consistently adopt the best management practices for minimizing use,maximizing returns,and maximizing the reuse potential of fresh water.Track and report consumptive water loss.Develop a consistent methodology for measuring water withdrawal and return and water lost through evaporation or into final products.Additionally,measure water-related risk at each of our facilities.Establish community focused partnerships.Develop relationships with partners performing water replenishment projects that benefit communities in the locations in which we operate.The use of community-based partnerships increases the local relevance of future projects while giving the community a voice in the decision-making process.Develop a Global Water Replenishment Program.Develop a global water replenishment program within the overall Water Scarcity Program to balance ADMs consumptive water use with a portfolio of community-based water replenish projects implemented with partner organizations.Integrate program into existing operations and processes.Integrate the new water stewardship strategies into ADMs existing operations to ensure the programs efficiency,credibility,and longevity.In the coming year,the team will work to define our water replenishment goal,lay out project requirements,prioritize implementation locations,and begin to identify projects and partnerships.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices34 IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices35TransformationSpotlight:ARTCO Supports Living Lands&Waters with Tugboat Donation|ADMThe American River Transportation Company(ARTCO),an ADM subsidiary,is helping support Living Lands&Waters(LL&W)efforts to protect,preserve,and restore the nations inland waterways by donating a used tugboat through ADM Cares.The donation of a 750-horsepower vessel dubbed“Nancy S.”will serve as an upgrade to LL&Ws equipment and help the organization allocate funds to other projects that meet their mission.The LL&W crew spends up to nine months of the year living and traveling on their barge,hosting river cleanups,watershed conservation initiatives,workshops,tree plantings,and other impactful restoration work.Our relationship with LL&W dates back to 2004 and throughout our partnership,ADM teams have volunteered their time to support programs including environmental restoration projects,invasive species removal,and free educational programming in communities along the Mississippi,Illinois,Tennessee,and Ohio Rivers.Through these efforts,we hope to strengthen and sustain these communities and support initiatives that drive meaningful social,economic,and environmental progress.Enrich Lives38Community Engagement39Human Rights41Diversity,Equity,and Inclusion43Health and Safety IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices36Enrich LivesWe believe that a skilled workforce and strong relationships with communities are core to our success and growth,and we can make a lasting impact on the world.We offer our people the opportunity to contribute to something greater than themselves,and we support the well-being of the communities in which we serve and operate.Weve identified the following key levers that allow us to enrich the lives of our colleagues and the communities where we operate:ADM CaresUsing philanthropic spending to support our communitiesHuman RightsIdentifying and mitigating risks related to our supply chain and operationsSafetyEnsuring a safe working environment for our colleagues and contractorsCulturePromoting a diverse,equitable,and inclusive work place IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices37Community EngagementADM Cares At ADM,we believe in the concept of shared value creation.Our corporate social investment program,ADM Cares,aligns corporate giving with our business strategies and sustainability objectives.Through the program,we work to sustain and strengthen our commitment to communities where we work,live,and operate by directing funding to initiatives and organizations driving meaningful social,economic,and environmental progress.In 2022,ADM Cares grants targeted three focus areas aligned with our purpose of unlocking nature to enrich lives:education,food security,and sustainable agriculture.Moving into 2023,we have refined our focus areas to complement ADMs growth strategy and business priorities to be:sustainability,food security,and health and well-being.The ADM Cares team evaluates potential projects to ensure they meet eligibility criteria and further our work toward our goals in these focus areas.The impacts from projects receiving ADM Cares support are measured through annual outcome reports to allow for ongoing community needs assessments and to ensure critical issues are addressed.By focusing on these areas,ADM Cares programs advance our sustainability goals,with special attention to partnerships that advance the United Nations Sustainable Development Goals(SDGs)aligned with our sustainability and business objectives.Specifically,we work to support Goal 2:Zero Hunger;Goal 6:Clean Water and Sanitation;Goal 8:Decent Work and Economic Growth;Goal 13:Climate Action,and Goal 15:Life on Land.We strive to sustain and strengthen communities where ADM colleagues work,live,and operate by directing funding,volunteerism,and industry knowledge to initiatives and organizations that drive meaningful social,economic,and environmental progress worldwide.ADM Cares optimizes our social impacts around the world,and through these partnerships,we are able to exponentially leverage our philanthropy to make a meaningful impact in the lives of many around the world.UkraineWith a number of operations based in Ukraine and surrounding areas,ADM understands its responsibility to aid those impacted by the war there.Currently,ADM has contributed$13 million to support Ukrainian colleagues and those affected by the war.The contributions come from a mix of ADM Cares funding,corporate support,and colleague contributions.ADM has donated to various NGOs,including the World Food Programme,Doctors without Borders,and the Red Cross.We have also donated directly to hospitals and medical centers in Ukraine,with colleagues taking action to hand deliver medical equipment and meet with hospital representatives.ADM also supported individual colleagues through emergency support such as lodging and relocation aid.Portable power stations for Ukrainian colleagues,donated by ADM,provided critical electricity to colleagues in need.With attacks on Ukraines energy infrastructure,many people in the country have experienced power outages,making the devices much needed sources of emergency power.Through ADM Cares,we have a program that matches colleagues personal donations.The generous outpouring of support from our colleagues resulted in a matching fund contribution of over$3.3M to ADMs Rebuilding Lives Fund,which helps Ukrainian colleagues and their families with future rebuilding opportunities,illustrating the giving spirit of the ADM family in supporting our colleagues in need.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices382022ADMCaresspending$17.0millionlEducationlFoodSecuritylSustainableAgriculturelColleagueGivinglOtherHuman RightsAt ADM,we are committed to doing business with integrity.We believe in paving the way with good business practices,progressive solutions,and mindful actions that make a positive impact.We actively work to protect human rights in our operations and supply chains,taking actions that make a measurable,sustainable difference for communities and ecosystems around the world.While governments have the primary duty to protect and ensure the fulfillment of human rights,we have a role to play in protecting human rights in our operations,our supply chains,and the communities where we operate.We have the opportunity to enact change globally,and our 2022 efforts demonstrate our commitment to protect human rights throughout our supply chains.Supply Chain Due DiligenceWorking with our suppliers to assess and address risks increases transparency and enables collaboration to protect human rights throughout our supply chain.Supply chain due diligence is a critical component of our Human Rights program,and strategically engaging with our supply chain takes three steps:mapping,risk assessment,and mitigation strategies.For more detailed information,please view our most recent Human Rights Report.Supply Chain MappingADM has vast and varied supply chains.Our origination team procures raw commodities,such as corn,soybeans,wheat,and softseeds from all over the world.Our procurement team sources ingredients and indirect supplies needed to run our operations.We have been working for several years to assess our origination footprint and the risks associated with those commodities and geographies.Our dashboard contains KPIs related to traceability.In 2022,we began mapping our ingredient supply chains to country of origin,successfully mapping over 90%of our Human Nutrition business ingredient procurement.That number continues to grow as we work diligently to assess our supply chains and continue engaging with our suppliers.Risk AssessmentWe use many tools to assess the risks in our supply chains.Using knowledge of origin of supply,we can calculate commodity-geography specific risk ratings to identify our highest risk sourcing.Using industry-leading tools and platforms,we are able to standardize risk ranking and scoring mechanisms,evaluate specific risks within different supply chains,monitor news and press,and ensure proper focus on salient human rights risks.A combination of internal and third-party tools allows us to comprehensively assess risk across business units.Risk MitigationA successful supply chain due diligence program requires effective risk mitigation strategies.We are working to engage with our strategic suppliers on their sustainability programs,as well as ensure compliance with our policies and future due diligence regulatory requirements.Our mitigation strategies are based on a suppliers risk rating and can include the use of sustainability self-assessment questionnaires,contractual assurances,and social compliance auditing.We have developed sourcing protocols for some high-risk goods and materials.For example,we require all of our direct palm suppliers to have a human rights policy aligned with ours and to implement a human rights due diligence program to ensure compliance with the policy.In addition,over the past year,we have been working with our legal team to include language in supply contracts that suppliers must abide by our Supplier Expectations,including our Human Rights Policy.These suppliers have the understanding that business relationships can be terminated upon discovery of human rights violations.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices39SEDEXIn addition to working with suppliers and other key stakeholders to ensure we are sourcing in ways that protect human rights,we participate in an auditing program to verify to ourselves and interested customers that we are upholding our core beliefs within our operations.ADM is a member of Sedex,the worlds largest online platform for supply chain assessment,and we use the organizations audit program to assess,improve,and report on sustainability practices.Each year,selected facilities host responsible sourcing audits conducted by third-party auditors.In addition to noting potential risks and opportunities for improvement,the audits also allow us to monitor for egregious violations of rights.When findings are identified,our sustainability,legal,operations,and compliance teams work with the location to identify and implement corrective actions.In 2022,ADM hosted 28 Sedex audits across all business units and in nine countries.At the ADM facilities visited in 2022,there were no fees charged to job-seekers in exchange for employment,and no collateral was taken in the form of money,identification,or other personal belongings without workers consent as a condition of employment by ADM or contracted companies.No human trafficking or forced labor of any kind was observed.We continue to explore ways to leverage Sedex risk tools and audits in our supply chains to gain this level of insight and work with suppliers to mitigate risks.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices40Diversity,Equity,and InclusionStrategic Pillars:How We Will Achieve Our Vision LEADERSHIPENGAGEMENT,TRAINING,&COMMUNICATIONRECRUITINGADVANCEMENT&RETENTIONNETWORKS&SPONSORSHIPHaving an inclusive culture allows us to cultivate innovation.We believe that true innovation arises from having many different perspectives and backgrounds at the highest levels of an organization,and we have a comprehensive plan in place to promote inclusion and equity at ADM.Each region has a Diversity,Equity,&Inclusion(DE&I)Council with leaders who manage the strategic pillars that will help us achieve our vision.In 2022,to hold ourselves accountable to our DE&I commitments and monitor our progress as we work to create a more equitable,inclusive environment for our colleagues,we chose to publicly disclose our annual U.S.Equal Employment Opportunity(EEO-1)report data.Globally,we support Employee Resource Groups(ERGs).These voluntary,employee-led groups allow colleagues with shared experiences,interests,or goals to come together in a safe space to offer support,build a sense of community,and promote personal and professional development.Our ERGs have continued to grow both in the number of active members in our Womens ERGs and with the introduction of four new groups:ERG de Afrodescendentes(Brazil),LGBTQIA ERG(Mexico),Multi-cultural ERG(EMEA),and Black Colleague Alliance(North America).“I would say one of the best things I have seen from the ERG in 2022 is the ability to have open conversations and support from each other regarding challenges women experience in the workplace.Whether dealing with work life balance,imposter syndrome,or selecting the right mentor.it has become evident that we are all in this together and regardless of your role in the organization many of us have this in common and are willing to support each other to overcome our challenges.The Womens ERG has become a community within ADM,and I am looking forward to the continued outreach in 2023.”MollyStraderFruit,LeaderoftheNAWomensERGParadigm for ParityParadigm for Parity is a coalition of business leaders dedicated to addressing the corporate leadership gender gap.Our commitment through Paradigm for Parity focuses on improving gender balance in global leadership by 2030.In 2018,we made a pledge to reach gender parity in our senior leadership by 2030 and have been working diligently toward that goal.Senior LeadershipSalaried Colleagues20182019202020212022 IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices4121y7c6d5e4f&ts9a&t(r%MALEFEMALEFEMALEMALESupplier DiversityWe have a Supplier Diversity program that encourages the use of diverse suppliers,defined as businesses that are 51% owned by women,veterans,Hub-zoned,people with disabilities,LGBTQIA ,and minorities.Our initiative provides the opportunity for us to access diverse talent in some of the most dynamic emerging market segments in our global footprint.Supplier diversity promotes supplier participation that reflects our diverse customer base and business community.ADM has expanded its Supplier Diversity program globally.This initiative has enabled us to have internal global champions to oversee the program in their regions,including EMEA,LATAM,and APAC.To identify potential diverse suppliers,we work with third-party organizations such as the National Minority Supplier Development Council(NMSDC),Womens Business Enterprise National Council(WBENC),and WeConnect International to assist in finding the best diverse talent for our sourcing opportunities.In addition to fulfilling customer requirements,diverse suppliers bring a variety of advantages to the table,including innovation,customer service,and competitive edge.One of our internal platforms,Power BI,allows us to track our KPIs for diverse spend reporting to our external customers and internal stakeholders.As ADMs Supplier Diversity program grows and seeks to become best in class,we are continuing to add new initiatives in the near future,such as the implementation of our Tier 2 Diverse Spend Reporting and Diverse Supplier Development/Mentor Protg Program.We continue to work with our global teams to identify what supplier diversity looks like in each of our regions where we have a presence.As the worlds leader in agriculture processing,we continue to serve the vital needs of the world by creating opportunities to feed it better and bring awareness to supplier diversity being good business at ADM.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices42Health and SafetyOur people are our lifeblood they innovate,create,and deliver.They are the ones who make our company great,and they are our future.We invest in our people and strive to create a workplace where they can thrive.This includes building a safety culture so everyone goes home safely to their families and the things that are most important to them.And this also includes investing in our people to maximize their potential.SafetyOccupational health and safety is paramount at ADM,and we are committed to fostering a safe working environment for all of our employees and contractors.Our team has embraced the vision of SafeorWeDontDoit.Our safety and health management system is built on a robust list of policies,standards,and supporting documentation including life-critical standards that govern our high-risk work.We have improved our investigation work processes with a goal to prevent repeat incidents.Our internal audit program for Environmental,Health and Safety,and Process Safety has completely transformed over the last three years to provide essential governance and identify opportunities for improvement,reduce risk,support our compliance commitments,and share lessons learned.In 2022,approximately 80%of our sites completed the year without recordable injuries and about 90%without lost workday injuries.Sadly,we mourn two fatalities,one ADM colleague in Germany and one contractor in Brazil.We remain committed to our ambitious goal of reducing our Total Recordable Incident Rate and Lost Workday Incident rate by 50%in 2025 compared to a 2020 baseline.We have taken additional steps to meet these goals by launching or enhancing efforts to improve occupational safety,including:Cut Resistant Gloves Clock-to-Clock Safe Work Permit program for all maintenance activities Working Safely for Supervisors Program Contractors remain a crucial aspect of our safety system and since 2021,they have been fully integrated into our KPIs and the incident rates published in this report.Employee Health ProgramsIn 2022,ADM launched a pilot program with Medcor/Work Right at its site in Decatur,Illinois,that can not only assess and treat minor injuries onsite,but also provide injury prevention resources to colleagues.The program includes ergonomic assessments and recommendations for our colleagues workspaces,suggested stretching and rehabilitation exercises to prevent injuries related to repetitive movements or poor posture,and even massages.Employees can make appointments with the Medcor/Work Right team for advice and treatment at no cost.We provide access to several virtual health support programs for our colleagues.For example,access to Hinge Health can help employees suffering from muscle or joint pain to work with a virtual care team to assess and develop a personalized exercise plan,reduce pain,find physical therapists,and more.We also provide weight management support through Wondr Health,diabetes and blood pressure management through Livongo,and a smoking cessation program in partnership with the American Cancer Society Quit for Life program.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices430.730.732020(baseline)20220.00.20.40.60.81.00.220.212020(baseline)20220.00.20.40.60.81.0TOTALRECORDABLEINCIDENTRATE(TRIR)LOSTWORKDAYINCIDENTRATE(LWIR)Governance45Strategy and Oversight46Risk and Opportunity Management47Key Topic Assessment and Stakeholder Engagement48Commitments and Policies49Compliance and Ethics IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices44Strategy and OversightOur commitment to change and growth goes beyond our products and services.At ADM,sustainable practices and a focus on environmental responsibility are not separate from our primary business:they are integral to the work we do every day to serve customers and create value for shareholders.We are committed to being a force for change in developing innovative,sustainable solutions in agriculture,food and nutrition,energy,and packaging materials while pursuing ways to continually improve our efforts in both protecting the environment and enhancing environmental and social sustainability.That is why our current strategic plan is called“Sustainable Growth”.We believe sustainability is critical to our future growth strategy.Our strategic plan of sustainable growth leverages the trends and technologies in sustainability to help us grow and create value for our stakeholders.Our Ag Services and Oilseeds business unit is focused on traceability of sourcing and differentiation and engaging growers in our re:generations program.Carbohydrate Solutions is focused on decarbonizing its footprint,so as to become the partner of choice for lower-carbon intensity BioSolutions and biomaterials,including fuel solutions from agricultural products,to replace petroleum-based products.Nutrition is focused on developing alternative proteins,from sources such as fermentation,plants,fungi,and insects,increasing protein options for human and animal nutrition.The growth of these projects and businesses will be integral to supporting the objective of helping the planet limit total global warming to the 1.5C threshold indicated by the IPCC.Our sustainability efforts are overseen by our Board of Directors,including a dedicated Sustainability and Corporate Responsibility Committee,and led by our Chief Sustainability Officer(CSO),who is supported by regional sustainability teams.The Sustainability and Corporate Responsibility Committee actively oversees our objectives,goals,strategies,and activities relating to sustainability and corporate responsibility matters,including safety and DE&I,and assists the Board in ensuring that we operate as a sustainable organization and responsible corporate citizen.The Executive Council of ADM,our highest strategic and operational body,provides close supervision of our ESG efforts and in-depth review of sustainability issues.Because we consider sustainability critical to our strategic planning and growth efforts,the CSO reports to the Chief Strategy Officer and is an important part of the strategy team.Furthermore,regional sustainability teams,along with the corporate sustainability team,support the CSO to drive sustainability efforts in our facilities and supply chains around the world.Our sustainability efforts are also supported by our Centers of Excellence,which drive efficiency programs in areas of focus such as Procurement;Supply Chain;Utilities;Diversity,Equity,and Inclusion;and Environmental,Health,and Safety.Sustainability and Corporate Responsibility Committee of theBoard Has direct oversight responsibility of objectives,goals,strategies,risks,and activities related to sustainabilityExecutive Council ofADM Highest strategic and operational body Provides close supervision of our ESG efforts and an in-depth review of sustainability issuesVice President,Chief Sustainability Officer(CSO)Leads ADMs sustainability efforts Reports metrics quarterly to ADM Board of Directors Meets quarterly with ADM Sustainability and Corporate Social Responsibility Committee of the Board Reports regularly to ADM leadershipRegional and Corporate Sustainability Teams Support business units to drive transformation and help create value across the supply chain Support sustainability initiatives and implementation on the ground Engage and interact with stakeholders Located in North America,South America,and EMEA IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices45Transition Risks Emerging regulation and carbon pricing mechanisms could result in increased operational costs in the short to medium term.Changes in policy or introduction of new policies could introduce additional tax requirements at our facilities.For example,in South America,introduction of the national legislation on biomass-based power generation units,which requires additional certification and taxes,could limit our ability to operate our assets and increase our operating costs.Market demand has a direct effect on production,as well as demand for certified sustainable commodities.Changes in consumer demand could result in additional cost of implementation that may not be overcome by product sales.ADM uses coal-fired cogeneration technology to meet a portion of its energy demand.We are working to reduce the carbon footprint of our operations,but transitions can be time intensive and costly.Physical Risks Increased severity and frequency of extreme weather events such as cyclones and floods could lead to increased direct costs from the disruption of supply chains and impair our ability to deliver products to customers in a timely manner.Increased severity and frequency of extreme weather events such as cyclones and floods could lead to increased sourcing costs due to limited availability of agricultural commodities and impact ADMs ability to produce goods,which would directly affect sales and revenue.Increased calls for preserving and enhancing biodiversity by taking acres out of productionat a time when the worlds supply of raw materials is in great demandmay challenge ADMs sourcing of raw materials.As the global population grows,and producers in many areas of the world must plant more to feed more people,a balance must be appropriately struck,or raw material shortages may result.Opportunities Developing enhanced transportation and warehousing scheduling,routing,and tracking technologies can reduce carbon footprint and costs while improving customer delivery satisfaction.Development and expansion of low-emission goods and services could lead to increased revenues resulting from increased demand.As various renewable fuel standards are implemented around the world,ADM has an opportunity to capitalize through the production and sale of ethanol,biodiesel,and renewable diesel.As demand for renewable products grows,development of new products or services from R&D and innovation could lead to increased revenues through access to new and emerging markets.Risk and Opportunity ManagementSustainability risk management,including climate change and deforestation,is integrated into our multi-disciplinary,company-wide enterprise risk management(ERM)process.Each quarter,the ERM Sustainability subgroup reviews and reports sustainability risks and the related mitigation actions with the ERM team.The review includes previously identified risks to ensure proper focus of our initiatives,as well as the identification and assessment of emerging risks.The team uses a risk matrix which includes a quantitative assessment of impact,mitigation,and residual risk as well as qualitative information about risk categories,warning periods,mitigation strategies,and effectiveness.Scenario Analysis In 2021,we began the process of conducting a Scenario Analysis following the TCFD guidelines.The analysis looked at the potential impact of three warming scenarios:1.5C(latest recommendation from IPCC to prevent the worst effects of global warming),2C(aligned with the Paris Climate Accords),and 2.6C(status quo).The first scenario assumes a rapid transition to a low carbon world in the next decade,limiting temperature increase to 1.5C.This involves a high degree of transformation across the economy.Under this scenario,the worst anticipated physical impacts of climate change are avoided.The second scenario involves ambitious actions to mitigate climate change,limiting temperature increase to 2C.This scenario requires greater policy action;however,there is still an increase in physical climate-related impacts.The third scenario is based on the current status quo with no changes to policies or actions and an anticipated increase in global temperature by 2.6C resulting in increased physical impacts of climate change.ADM used these scenarios as written by the sources,except in the case of the third,status quo scenario,where transition risks were evaluated based on our existing Strive 35 commitments and implementation plan.In each of the scenarios,we identified potential sourcing shifts and limitations,operational changes,physical impacts,and opportunities.The primary risks identified fall into two categories:physical risks and transition risks.Key opportunities are related to products and services offerings.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices46Key Topic Assessment and Stakeholder EngagementFollowing the guidelines from the Global Reporting Initiative(GRI),we use a third party to conduct a formal assessment to identify and prioritize key sustainability topics that reflect our most significant impacts to the economy,environment,and people,including human rights.Because these impacts may change over time as our activities,business relationships,and assets evolve,we update this assessment on a regular basis.During our most recent assessment,the firm interviewed,surveyed,and researched publicly available information from a variety of internal and external stakeholders,including ADM leadership,investors,customers,employees,and NGOs.The assessment indicated several key topics that are consistent across all stakeholder groups as critically important:“GHG Emissions,”“Deforestation&Conversion,”“Governance,”and“Water Management.”Although these are critical to manage,the other topics on the matrix are also important to ADM and our stakeholders.Ongoing Stakeholder EngagementWe have established direct and easy-to-access channels for engagement with different types of stakeholders.These engagements provide valuable insights on stakeholder concerns and topics that they consider important.In 2022,we engaged with stakeholders via customer feedback,NGO inquiries,and dialogue with shareholders.We also met with several customers and entered into partnerships on regenerative agriculture and environmental topics.As part of our supply chain efforts in palm and soy,specifically on the 1.5C Roadmap,additional emphasis was placed on engaging with key stakeholders.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices47Commitments and PoliciesADM has set forth several key social and environmental commitments and policies that collectively outline our expectations for our colleagues,business partners and contractors,and our organization as a whole,with respect to our sourcing operations.They establish clear standards that govern our approach to raw material sourcing,environmental stewardship,and employee conduct,among other areas,and they state our positions on issues of widespread public interest.These standards were developed with input from our operations,law,compliance,and EHS teams,and were approved by Chairman and CEO Juan Luciano:Policy to Protect Forests,Biodiversity,and Communities Code of Conduct Environmental,Health,&Safety(EHS)Policy Human Rights Policy Statement on Genetically Modified Organisms Statement on Animal Testing Commitment to Anti-Corruption Compliance ADM Supplier Expectations ADM Tax Policy Managing Supplier Non-Compliance ProcedureIn a world that is becoming increasingly interconnected and transparent,we strive to match that clarity and provide means to facilitate conversation and feedback.We invite all stakeholders who have concerns related to the implementation of our policies to email us at or use The ADM Way Helpline.Our Human Rights Policy protects human rights defenders,whistleblowers,complainants,and community spokespersons from any form of retaliation.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices48Compliance and EthicsAt ADM,we believe in leading by example,setting a global standard for“good business”that other companies in our industry will follow.In March 2023,we were recognized by Ethisphere,a global leader in advancing the standards of ethical business practices,as one of the Worlds Most Ethical Companies and one of only nine honorees in the Food,Beverage,&Agriculture category.This honor marks the fourth consecutive year we have received this recognition for our deep commitment to ethical business practices,transparency,and corporate citizenship.We maintain high ethical standards across our global workforce.We expect employees to take responsibility for their actions and adhere to our values of honesty and integrity,consistent with our commitment to always conduct business fairly and ethically.Our Code of Conduct guides us on how to make sound decisions and illustrates proper actions for conducting our businesses.Our Code promotes a shared understanding of what achieving the right results the right way means.By knowing and following our Code,each of us does our part to maintain and further build trust with our various stakeholdersincluding our colleagues,customers,business partners,shareholders,and communities.We prohibit all forms of corruption,including bribery,and we abide by all anti-corruption laws in every country we do business.We have a robust anti-corruption program that includes a global Anti-Corruption Policy and other compliance procedures and controls designed to minimize the potential for corruption in ADMs global business dealings,such as enhanced due diligence,screening,monitoring of high-risk third parties,and pre-approvals before hosting or entertaining government officials.We train employees and third parties to raise awareness of corruption risks and applicable anti-corruption laws in order to both avoid inadvertent violations of the law and enable early recognition and handling of potential issues.Our Anti-Corruption Program and Policy are updated periodically to address new risks and incorporate continuous enhancements.In 2022 we published an Anti-Fraud Policy to increase awareness of ADMs anti-fraud procedures and expectations for colleagues to speak up when they see something suspicious.We have a strong“Speak Up”culture at ADM,which helps us handle issues and address problems in a timely manner,building trust with one another and with our customers,suppliers,and business partners and protecting the company from legal,financial,and reputational risks.We encourage employees to voice concerns or ask questions through multiple channels,including by talking with their supervisors,Human Resources,or Compliance,or at any time through additional reporting channels such as The ADM Way Helpline,which is available by phone or web in more than 30 languages and accessible using a QR Code.Reporting via the Helpline can be done anonymously,where permitted by law.We do not tolerate any form of retaliation for making a good-faith report of actual or potential misconduct.The ADM Way Helpline may also be used by stakeholders outside of ADM to raise questions or voice concerns.IntroductionFeed the WorldProtect NatureEnrich LivesGovernanceData Tables and Indices49Our helpline is available by phone or web in more than 30languages.We feel a deep and genuine regard for the safety and well-being of all people,communities,and resources,and we treat them with care and consideration.We demonstrate trust and openness.And we are good stewards of the environment.Our Human Rights Policy protects human rights defenders,whistleblowers,complainants,and community spokespersons from any form of retaliation.In 2022,we received a total of 1,181 reports concerning topics such as employee relations,EHS,diversity,equal opportunity,and respect in the workplace,and misuse or misappropriation of assets or information.We log and track all reports we receive.Each is classified by type and then assigned to an investigator to conduct an independent and objective review into the concerns raised.If an allegation is substantiated,we implement corrective and disciplinary actions which can include coaching and counseling,process or control improvement,verbal or written warnings,financial penalties,or termination.Training is a key component of our compliance program.In 2022,employees completed required training on topics such as conflicts of interest,trade sanctions,and antiboycott regulations.Above and beyond our global annual required training,Compliance also led more than 100 trainings sessions for targeted employee populations.We published over 90 global and regional compliance communications in 2022 to improve employee understanding of ethics and compliance expectations,enhance awareness of compliance risks,provide guidance on courses of action,and increase transparency into how ADM investigates and remediates issues of concern.The communications covered topics such as anti-corruption,data privacy and records retention,conflicts of interest,trade sanctions,speaking up,and more.Compliance Compass is our internal bi-monthly awareness campaign that features case stu
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Aeon Report 2022 Sustainability EditionEnriching Peoples Lives andLocal Communities for TomorrowAeon Report 2022 Management Edition(Separate Section)Aeon Report 2022 Sustainability Edition(This Edition)ContentsThe word AEON has its origins in a Latin root meaning“eternity.”The Aeon Groups eternal mission is to benefit its customers.By fulfilling this mission,we hope to sustain the Groups development and prosperity forever.The word AEON has its origins in a Latin root meaning“eternity.”The customers beliefs and desires comprise the central core of our philosophy.At Aeon,our eternal mission as a corporate group is to benefit our customers,and our operations are thus customer-focused to the highest degree.“Peace”Aeon is a corporate group whose operations are dedicated to thepursuit of peace through prosperity.“People”Aeon is a corporate group that respects human dignity and valuespersonal relationships.“Community”Aeon is a corporate group rooted in local community life anddedicated to making a continuing contribution to the community.AEON creates a future of limitless promise an aeon by transforming daily life with our open,dynamic approach.AEONs Corporate CommitmentOn the basis of the Aeon Basic Principles,Aeon practices its“Customer-First”philosophy with its everlasting innovative spirit.PeacePeopleCommunityThe CustomerEditorial PolicyAeon Basic PrinciplesSince its founding,Aeon has put its“Customer-First”policy into practice and maintained the belief that the eternal mission of a retail business is to contribute to customers and communities without limit while achieving happiness for its employees.Based on its basic philosophy rooted in these values,Aeon continues to innovate and works to create a corporate culture that anticipates and adapts to change.Aeon produced Aeon Report 2022,its integrated report,as an important tool facilitating constructive dialogue with stakeholders.The report is divided into two parts,the Sustainability Edition(this section),detailing Aeons environmental and social initiatives,and the Management Edition(separeate edition),describing Aeons medium and long-term value creation story.Pursuing peace,respecting humanity,and contributing to local communities,always with the customers point of view as its core.Based on the“Five Reforms”set forth in the FY2021 FY2025 Medium-term Management Plan aimed at achieving Aeons 2030 vision of sustainable,circular economy-focused management,sustainable value creation at the Aeon group is described using both financial and non-financial information in an easy-to-understand manner.In preparing this report,we referenced the disclosure framework of the International Integrated Reporting Council(IIRC),placing a particular focus on the value that Aeon creates in the areas of the economy,society,and the environment.https:/www.aeon.info/en/ir/library/aeon-report/Reporting Period Fiscal 2021(March 1,2021,to February 28,2022)*For the initiatives of some operating companies whose financial reporting periods differ,the applicable periods are specified for each reporting item.Reporting Scope Pure holding company Aeon Co.,Ltd.,its 286 consolidated subsidiaries,and 26 equity method affiliates(as of February 28,2022)*When the scope of reporting differs from the above,it will be so stated for each reporting item.In addition,major group companies contribute 1%of profit before income taxes to the AEON 1%Club Foundation,which develops various social contribution activities,and various activities to protect the global environment and support and grants to each group.We also report on the efforts of the AEON Environmental Foundation,which conducts environmental activities for the public interest.Target Audience Customers,shareholders,investors,business partners,NPOs,NGOs,governments,and Aeon employeesGuidelines Used Global Reporting Initiative(GRI)Environmental Reporting Guidelines(2018 version),Ministry of the Environment of Japan Guidance on Social Responsibility,ISO 26000Disclaimer This report includes plans for the future of the Aeon Group,as well as predictions and forecasts about business results.These statements are based on the Groups judgments and opinions based on the information available at the current time.Due to various future issues,results may differ greatly from those published in this report.Month of Publication January 2023Publication Corporate Communications Department,Aeon Co.,LtdThe Sustainability Edition reports on the environmental and social activities of the pure holding company Aeon Co.,Ltd.and each of its operating companies,using the Aeon Sustainability Compass(see page 7),which summaries the 14 areas of activity Aeon addresses with the keyword“life,”as a basis.The report covers the activities Aeon pursues together with customers and through its products and in-store services based on social concerns and perspectives important to Aeon.The Sustainability Edition also highlights feedback regarding Aeons sustainability activities,the role Aeon is to play as a retailer seeking medium-to-longterm growth,and the expectations placed upon Aeon.Aeons SustainabilityPage 3 Aeons Sustainability Efforts in KeywordsPage 5 Aeons Sustainable ManagementPage 7 Aeons Vision for SustainabilityPage 8 History of SustainabilityPage 11 MaterialityPage 15 Dialogue Chief Sustainability Officer Dr.Taikan Oki,Professor at The University of TokyoSustainable PlanetPage 20 Decarbonization and Climate ChangePage 27 Resource Circulation(Plastics and Food Waste)Page 37 Biodiversity and Environmental ConservationPage 43 Sustainable ProcurementPage 49 Fair Business with Consideration for Human RightsHeartful CommunityPage 60 Urban Development and Forming BondsPage 67 Providing Disaster Prevention and a Lifeline in Times of DisasterPage 73 Supporting and Nurturing the Next GenerationHealthy&Empowered PeoplePage 76 Food Safety and SecurityPage 81 Health&WellnessPage 82 Society Where People Live 100-Year LivesPage 83 Diversity&InclusionPage 87 Employment,Work Styles,and Work SatisfactionInitiatives of Public Interest Incorporated FoundationsPage 96 AEON Environmental FoundationPage 102 AEON 1%Club FoundationData SectionPage 108 Environmental ManagementPage 113 GRI Standards IndicatorsPage 124 List of External AwardsPage 125 Business OperationPage 126 Corporate DataFront Cover of the Sustainability EditionThe front cover depicts a biotope set up in a forest at Aeon Mall Hamamatsuichino.A survey of living creatures was conducted with the local community to affirm the value of biodiversity through forest development.12AEON REPORT 2022/Sustainability EditionAEON REPORT 2022/Sustainability EditionRaise the ratio of female managers to 50%by FY2025Reduce the number of smokers by 25%compared with the previous yearApproximately 4.62 Approximately 420 clubs with 5,206 Approximately 69 clubswith 2,314 members28 clubs with797membersApproximately 2.32 Approximately 64.44Total of 426 schools679 studentsApproximately 3,250 groups*2Approximately 2.96 billion JPY130 local municipalities21 products26%More than 760Approximately 81,000 supporters115Aeons Sustainability Efforts in KeywordsSustainable PlanetRegional revitalization Supporting and Nurturing the Next GenerationRegional revitalization Supporting and Nurturing the Next GenerationFood Safety and Security Diversity&InclusionHealth Management Society Where People Live 100-Year LivesHeartful Community Healthy&Empowered People Biodiversity Sustainable ProcurementDisaster prevention and disaster relief assistanceTotal Funds Raised through the Aeon Happy Yellow Receipt CampaignAeon Cheers Club DomesticApproved facilities certified in accordance with the Barrier Free Law:Largest number of Dementia Supporters in JapanService Care Workers ChinaGotouchi(Regional)Waon cardsAmount donatedLaunch of the Aeon Childrens Cafeteria Cheering Party Total funds raisedSchool Construction Support Project Five countries in AsiaAsian Students Environment Platform:10 countries in total Sustainable procurement of agricultural produce Sustainable procurement of fishery products Sustainable procurement of paper,pulp,and wood products Sustainable procurement of palm oilCumulative number of trees planted:Approximately Cumulative number of environmental activities supported through grants and subsidiesComprehensive Partnership AgreementsRoll out of Vegetive productsRatio of female managers:Implemented bans on smoking during working hours and on premises(162 varieties)(Cambodia,Nepal,Laos,Vietnam,Myanmar)(11 countries)CoverageTargetTargetFY2021 ResultsFY2021 ResultsFY2021 ResultsFY2021 ResultsFY2021 ResultsFY2021 ResultsFY2021 ResultsFY2021 ResultsP.98P.103P.73P.74P.61P.60P.62P.81P.97P.37P.85P.82P.87P.43Power Japanese shopping centers and general merchandise stores(GMS)operated by Aeon with 100%renewable energy by FY20301,049stores73,234 kW29stores2,718 stations at 259stores Renewable EnergySolar panels installed atElectricity generation capacity of approximatelyPPA Model installed atThe number of electric vehicle recharging stations in Japan and overseas(total up to FY2021)(output capacity of 7,672 kW)(as of the end of February 2022)TargetFY2021 ResultsP.21Approximately 11,000 workers*1 Total number of trees planted by the Aeon Hometown Forests Program,by the Aeon Environmental Foundation,and by the Aeon Tohoku Reconstruction Hometown Forests Program from 1991 to the end of February 2022*2 Cumulative total from 1991 to the end of February 2022*1 Cumulative total between 2001 and the end of February 2022*2 Total amount between April 2009 and the end of February 202212,417,737*1MalaysiaReduce the total emissions of CO2 and other GHGs in our stores to net zero by 2040141carbonization and Climate ChangeDecarbonization and Climate ChangeReduction in CO2 emissionsEnergy use(unit basis)(compared with FY2010 levels)(compared with FY2010 levels)TargetFY2021 ResultsP.21Down by approximatelyEnergy consumption expected to be reduced by approximately Halve the use of disposable plastics compared with 2018 levels by 2030Halve food waste generated compared with FY2015 levels by 2025Approx.3.2 billion bags27.0 Reducing plastic Food loss and food recyclingNumber of plastic shopping bags reducedAmount of food waste generated(Amount of CO2 reduction:99,164 t-CO2)(per million JPY of food production):TargetTargetFY2021 ResultsFY2021 ResultsP.29P.34kg/million JPYbillion JPY*1billion JPY*2members throughout Japanmillion JPYGroup companiesAeons SustainabilitySustainable PlanetHeartful CommunityHealthy&Empowered PeopleInitiatives of Public InterestIncorporated FoundationsData Section3AEON REPORT 2022/Sustainability Edition4AEON REPORT 2022/Sustainability EditionAEON Suggestion box Bulletin board for opinions and responses Inquiries by telephone,via the Internet,and by letter Dedicated call center(Topvalu)Participation in many different events(tree planting ceremonies,etc.)Shareholdersand investorsBusinesspartnersEmployeesLocalcommunities Participation in many different initiatives Information exchanges with experts,NPOs,and NGOs Many different symposiums Shareholders Meeting Results briefing Briefing for investors(Sustainable Management Briefing)Interviews with individual shareholders and investors Education and training Aeon Code of Conduct Employee awareness survey Helpline system(“Number 110”on Aeon Code of Conduct)Labor-management consultation Participation in community activities Cooperation in business Business Partner Hotline Policy briefing Aeon Supplier Code of Conduct(CoC)CustomersCivic groups Information exchange with national and local governments Participation in many different events and volunteer activities Participation in community activities Communication with recipients of donationsThriving with CommunitiesPursuing Sustainable Management to Solve Environmental and Social Issues through BusinessAeon has a motto “Give the Central Pillar Wheels”passed down from Okadaya,one of Aeons predecessors.This means that the Company should do business in response to changes in the needs of the times,the environment,society,and customers.The environment surrounding the retail industry in Japan is changing at an unprecedented pace.Environmental issues such as climate change,resource depletion,and the loss of biodiversity,as well as social issues such as the reduced working population due to the declining birthrate and aging population and the decline of communities,are expanding.Each of those issues is important for Aeon,whose roots are established in peo-ples everyday lives,with support from local residents.One of Aeons missions is the pursuit of sustainable management,with the goals of contributing to the achievement of a sustainable society and the achieve-ment of the growth of the Group in response to the growing importance of corporate responsibility.Under the Aeon Sustainability Principle,Aeon has set medium-to long-term global-standard goals and works with stake-holders to achieve a sustainable society.Opportunities and Methods for Dialogue with Key ShareholdersAeon interacts with a diverse range of stakeholders as it conducts business activities.To continue to be a company that contributes to the achievement of a sustainable society,we clearly state our responsibilities to our stakeholders and communicate with them in many different ways.To continue to listen to customers opinions and fulfill the expectations of society,the entire Group will promote sustainability activities in collaboration with our stakeholders.Management CommitteeChief Officer for CSRCorporate Citizenship Department of Aeon Co.,Ltd.GroupCompanyEach WGEach WGCorporate Citizenship Leaders meetingsBoard of DirectorsGroupCompanyGroupCompanyGroupCompanyAcceleration and Evolution of the Digital ShiftFurther Acceleration ofthe Shift to Asian MarketsEstablishment of Unique Value by Supply ChainAchievement of a Sustainable SocietyAeon Sustainability PrincipleAeon strives to ensure Group growth while helpingto realize a sustainable society in accordance with the basic principle of“pursuing peace,respecting humanity,and contributing to local communities,always with the customers point of view at its core.”We aim to think globally and advance activities locally as we actively promote initiatives involving both environmental and social aspects with our many stakeholders.(Revised September 2018)PeacePeopleCommunityThe CustomerAeon Basic PrinciplesGroup GrowthRealizing a Sustainable SocietyMedium-Term InitiativesCreation of the Aeon Living ZoneAdvancement of Health&Wellness for a New EraNew Medium-term Management Plan(FY2021-FY2025)Five ReformsSystem for Sustainable ManagementAs a member of the Board of Directors,the Chairman and Representative Executive Officer is responsible for deci-sion-making regarding the direction and execution of the Companys business.Based on authority delegated by the Board of Directors,the Chairman and Representative Executive Officer assume the highest level of responsibil-ity,including responsibility for decision-making regarding sustainability issues.The Chief Officer for CSR is responsi-ble for the execution of business related to sustainability.The Chief Officer for CSR proposes and reports important matters related to risks and opportunities and addresses issues related to sustainability to the Aeon Management Committee(MC),which is chaired by the Chairman and Representative Executive Officer and is comprised of all of the executive officers.The results of deliberations at MC meetings are put into action after the Board of Directors,the highest decision-making body,passes resolutions supporting them.The resolutions are made known to and shared by the Group companies.We have established the Corporate Citizenship Department of Aeon Co.,Ltd.as a department responsi-ble for promoting sustainability at Aeon.As an adminis-tration office for enhancing sustainability,the Corporate Citizenship Department submits reports to the Chief Officer for CSR and is responsible for providing informa-tion,guidance,and support to the Group companies.The department also regularly holds Corporate Citizenship Leaders meetings to discuss measures to address issues at the Group-wide and individual company levels.The department promotes initiatives using the plan,do,check,act(PDCA)cycle in cooperation with Group com-panies.As an ISO 14001 administration office,it also works to establish and operate an environmental man-agement system for the entire Group.The system above will operate from March 1,2021.Enriching Peoples Lives and Local Communities for TomorrowAeons Sustainable ManagementInitiatives of Public InterestIncorporated FoundationsAeons SustainabilitySustainable PlanetHeartful CommunityHealthy&Empowered PeopleData Section5AEON REPORT 2022/Sustainability EditionAEON REPORT 2022/Sustainability Edition6HEALTHY&EMPOWERED PEOPLETogether with a peopleHEARTFUL COMMUNITYTogether with people from local communitiesSUSTAINABLE PLANETTogether with our partners(Business partners,NPOs,and others)Sustainableprocurement policyDecarbonization visionPlastic usage policyFood waste reduction targetsBiodiversity principleComprehensive partnership agreementsBCM Project,Disaster prevention agreementsCOVID-19 Protocol for Infectious Disease ControlBasic humanrights policiesInformationsecurity policyHealth managementstatementDiversity managementOver-the-countercollection/recyclingMSC/ASC/FSC-certified productsOnline Store“Regi-Go”Work-life balanceReplaced with vegetableingredients“Vegetive”Happy yellowreceipt campaignFairtrade-certifiedproductsGotouchi(Regional)Waon cardsTraceabilityAeon HometownForests ProgramBarrier-freeWalking for healthReduction ofdisposableshopping bagsCheers ClubTopvalu GurinaiSmart AeonUniversal designChildrens cafeteria supportTohokureconstructionprogramBiodiversityEnvironmentalconservationResourcecirculationFood wasteDecarbonizationand climate changeFairbusiness withconsiderationfor humanrightsDisasterpreventionand disasterlifelineUrbandevelopment,creatingbondsSupportingand nurturingthe nextgenerationEmploymentand jobsatisfactionPeople-friendlydigitalizedsocietyThe eraof cheerful100-yearlifespansHealth&WellnessFood safetyand securityDiversity&inclusionA joyful lifeconnected bymutual supportand bondsbetween peoplePeaceful andTranquil Lifestyles,Now and inthe FutureLifestyles inwhich each personcan be cheerfuland shine intheir own wayThe CustomerSustainableprocurementContinuously innovating in response to customer changesAeons Vision for SustainabilityHistory of SustainabilityBuilding a Sustainability Management Structure and Launching New InitiativesStarting with Trees-Planting on Many Activities Leading to Todays Sustainability InitiativesTo carry out corporate activities befitting of a retailer representing Japan as well as Asia,and to continue to be a retailer that consistently delivers vital value in the form of“richness,”Aeon has proceeded to build a framework for engaging in CSR activities as an organization since the late 1980s.In 1990,the Aeon Group 1%Club(the pres-ent Aeon 1%Club Foundation)was established,followed by the JUSCO Earth-Friendly Committee and the Aeon Group Environmental Foundation(the present Aeon Environmental Foundation).In 1991 we launched the Aeon Hometown Forests Program,the Bring Your Own Shopping Bag Campaign,and the Collecting Recyclable Resources at Stores Campaign.In addition to receiving the international standard ISO 14001 certification for our environmental management system in 2000,we have launched many activities leading up to todays sus-tainability initiatives,including the Aeon Happy Yellow Receipt Campaign upon the change of our company name in 2001 and to designate the 11th day of each month as“Aeon Day.”Expanding Activities from a Global PerspectiveLaunching Initiatives Incorporating the Ten Principles of the United Nations Global CompactTo reinforce its global perspective on sustainability,in 2004,Aeon became Japans first retailer to sign the United Nations Global Compact.The Aeon Supplier Code of Conduct(CoC),for-mulated in the previous year in 2003,is based on the Ten Principles outlined in the United Nations Global Compact and the requirements of the SA8000 Standard.Building on these activities,Aeon and three labor organizations,including the inter-national labor body UNI Global Union,signed the Global Framework Agreement on labor practices,human rights,and the environment in 2014.In light of the changing times and social conditions,Aeon has again revised the responsibilities it is expected to fulfill,as well as the environmental and social issues it can solve through its business activities.We believe that the direction in which Aeons sustainability should proceed will contribute to the happiness of our customers now and in the future.Aeons raison detre is to continue proposing“better living”that will lead to the future,and we define it as the vision of Aeons sustainability and express the overall picture with an“Aeon Sustainability Compass.”We will adopt ESG perspectives and strive over the long term to solve environmental and social issues at the global level.Under its basic principles,“Pursuing peace,respecting humanity,and contributing to local communities,always with the customers point of view as its core,”Aeon engages in sustainability activities to continuously innovate in response to customer changes and pass on the root for peoples enhanced lives in the future.Sustainability Activity Areas and Specific Actions That Aeon Takes through Its Business Activities with “Living”as a KeywordInitiatives from 1989-2001Initiatives from 2003-2007Started Aeon Happy Yellow Receipt Campaign to give back to the local communityBecame the first chain store operated nationwide in Japan to cease the provision of free shopping bagsBring Your Own Shopping Bag Campaign,which Aeon has been running with its custom-ers to reduce the use of plastic shopping bagsBegan handling MSC-certified products1991-2006-2001-2007-1989 Announced establishment of the Aeon Group 1%Club Foundation1990 Established the JUSCO Earth-Friendly CommitteeEstablished the Aeon Group Environmental Foundation(public name:Aeon Environmental Foundation)Established the Aeon Group 1%Club Foundation(current public name:Aeon 1%Club)1991 Initiated the Aeon Hometown Forests ProgramStarted Clean&Green ActivitiesCommenced the Bring Your Own Shopping Bag Campaign on a trial basis and launched the experimental Collecting Recyclable Resources at Stores Campaign1993 Started development of organic and other agricultural produce for Gurinai(now Topvalu Gurinai)private label1994 Formulated the independent Aeon Heart Building Design Standards based on the Heart Building Law(the New Barrier Free Law from December 2006)Opened JUSCO Minamikata Store as the first building in Japan certified under the Heart Building Law1995 Introduced returnable food containers and reusable hanger systems1996 Launched the Environment CommitteeFounded JUSCO Childrens Eco Club(currently Aeon Cheers Club)2000 Acquired ISO 14001 certification,the international standard for environmental management2001 Changed company name to Aeon Co.,Ltd.and started Aeon DayStarted the Aeon Happy Yellow Receipt Campaign2003 Formulated the Aeon Supplier Code of Conduct(CoC)Began use of biomass packaging materials2004 Formulated Basic Policy for the Prevention of Global WarmingEndorsed the United Nations Global CompactAcquired SA8000 certification,an international standard related to human rights and labor conditionsAchieved SA8000 certification for TOPVALU supplier management and Aeon headquarters operationsCommenced sales of Fairtrade Coffee under the Topvalu label2005 Opened first Eco Store,Aeon Chikusa SC(currently Aeon Town Chikusa)2006 Acquired chain of custody certification at stores and shopping centers for processing and distribution of MSC-certified products(MSC-CoC),becoming the first general retailer in Japan to receive such certificationBegan selling MSC-certified seafood2007 Began Stop Free Plastic Shopping Bag Program at JUSCO Higashiyamanijou Store(currently Aeon Higashiyamanijou Store)Initiatives of Public InterestIncorporated FoundationsAeons SustainabilitySustainable PlanetHeartful CommunityHealthy&Empowered PeopleData Section7AEON REPORT 2022/Sustainability EditionAEON REPORT 2022/Sustainability Edition8Became Japans first retailer to Set a CO2 emissions reduction goalFormulating the Aeon Group Principles with Regard for Biodiversity and the Prevention of Global WarmingIn 2008,we announced the Aeon Manifesto on the Prevention of Global Warming,becoming the first Japanese retailer to set specific targets for reducing CO2 emissions.Through initiatives related to our stores(developing Eco Stores,etc.),products(conserving resources used in pack-aging materials and changing transportation methods),and with our customers(planting trees at Aeon stores),we were able to surpass the 30%(1.85 million tons-CO2)reduction target for FY2012,in comparison with FY2006 levels,one year early by achieving a 2.08 million tons-CO2 reduction in FY2011.In response to this achievement,since 2012,we have not only been reducing CO2 emissions but have also added the Aeon Eco Project as part of our efforts for stores to act as emergency lifeline centers.Furthermore,we formulated the Aeon Biodiversity Principle in 2010,the year that COP10(the 10th meeting of the Conference of the Parties to the Convention on Biological Diversity)was held in Japan.Aeon continues to develop and sell marine and other biodiversity-responsive products with MSC(Marine Stewardship Council)and FSC,and create stores while protecting ecosystems.Putting Sustainability Management into Practice(1)Revising 2020 Materiality Targets and Activity CategoriesAeon classified the results of its sustainability activities into three stages in 2014 to further advance sustainable management.At Stage I,social,environmental,and eco-nomic risks are controlled.At Stage II,growth opportu-nities function as a process for resolving social issues.At Stage III,sustainability activities and business activities combine to realize CSV*.Having self-assessed Aeon as being at Stage II,we aim to engage in further efforts to reach Stage III by 2020.In 2015,the United Nations General Assembly adopted the Sustainable Development Goals(SDGs),and the United Nations Framework Convention on Climate Change(COP21)agreed on the Paris Agreement.Based on global trends and opinions gathered through dia-logues,we conducted another materiality assessment from the perspectives of the“environment”and“soci-ety,and in April 2017,we revised Aeons Basic Policy on Sustainability and identified four priority issues from a societal perspective.In terms of the environment,we formulated the Aeon Sustainable Procurement Policy and 2020 Sustainable Procurement Goals,and the Aeon Group Food Waste Reduction Targets.*CSV:Creating shared valuePutting Sustainability Management into Practice(2)Formulated a new Medium-to Long-Term Environmental Policy to Realize a Sustainable SocietyIn 2018,we revised the social priority issues within the Aeon Sustainability Principle,setting three priorities.We also enhanced our activities.In terms of the environment,we formulated and announced the Aeon Decarbonization Vision 2050 in 2018.Aeon announced that it would aim to achieve zero CO2 emissions from its stores.In 2020,we announced the new goal of ensuring that 50%of the power consumed at the domestic stores is from renewable energy sources by FY2030.We aim to achieve this goal ahead of sched-ule,around 2040.For 30 years since 1991,we have been running the Bring Your Own Shopping Bag Campaign with customers.Before introducing fees for plastic shopping bags in July 2020,we ended the free distribution of plastic and paper shopping bags at all directly managed GMS Aeon stores nationwide,which we had started on April 1,2020.We formulated an Aeon Plastic Use Policy and announced a plan to strengthen our efforts to move away from plastics.Going forward,we will make an effort to establish medium to long-term numerical targets and work together as a Group to achieve them,contributing to the realization of a sustainable society through our business activities.Started Aeon Eco Project,Setting New Environmental TargetsStriving for Group-Wide Growth and Societal Development through the Aeon Groups Four Key Issues for Sustainable ManagementAs the globalization of our business continues to make great strides and our impact on the environment and society rises to new levels,we are more actively pro-moting sustainability initiatives throughout the Group.We formulated and announced the Aeon Sustainability Principle in March 2011,seeking to achieve sustainable management by combining both growth of the Group and the development of society as a whole.In formulating the principle,we took into account worldwide megatrends,the changing values of peo-ple,social issues addressed in the UN Millennium Development Goals(MDGs),guidelines regarding social responsibility such as ISO 26000,and the basic content of our new Medium-term Management Plan.Deliberations were made by stakeholders inside and outside the Company,such as our Environmental Advisory Board,out-side directors,and Aeon People involved with sustainabil-ity activities.Along with determining the Four Key Issues for the Aeon Group,we set medium-and long-term key performance indicators(KPIs)for each key issue and pub-licize our progress every year in our Sustainability Data Book(currently the AEON Report Sustainability Edition)and Aeons corporate website.Initiatives from 2008-2010Initiatives from 2014-2017Initiatives from 2011-2013Initiatives from 2018Development of an infrastructure to support the balance between work life and child raisingLaunched the Aeon Eco Project as an environmental targetOpened the first FSC-certified convenience store in Japan(Ministop Co.,Ltd.)Began handling ASC-certified productsPromoting the use of natural refrigerant equipment2009-2014-2011-2015-2012-2008 Formulated the Aeon Manifesto on the Prevention of Global Warming.2009 Commenced trial sales of Carbon Footprint product labeling for nine varieties across seven TOPVALU productsParticipated in Japan Climate Leaders Partnership(Japan-CLP)as a founding memberOpened the first FSC-certified convenience store in Japan2010 Formulated the Aeon Biodiversity Principle2011 Formulated the Aeon Sustainability PrincipleAnnounced the Aeon Natural Refrigerants Declaration2012 Established the Sustainable Management CommitteeStarted the Aeon Eco Project2018 Formulated the Aeon Decarbonization Vision 2050Revised the Aeon Basic Policy on Human RightsRevised the Aeon Sustainability Principle2019 Concluded“Collaborative Agreement on Disaster Response”with the Cabinet OfficeLaunched the“10 x 20 x 30 Initiative to Reduce Food Loss and Waste”Japan ProgramParticipated in planning of“Loop,”the first sustainable reuse container product shopping system in the Japanese retail industry2020 Opened the first Aeon store using 100%renewable energyEnded free provision of plastic shopping bagsFormulated the Aeon COVID-19 Outbreak Prevention Protocol to prevent the spread of infectionFormulated the Aeon plastic usage policy2021 Established the Sustainability Compass serving as a compass for Aeons sustainability activitiesAeon Sustainability PrincipleAeon aims to realize a sustainable societywith its stakeholders based on its basic principle of pursuing peace,respecting humanity,and contributing to local communities,always with the customers point of view as its core.”With“realization of a low-carbon society,”“conservation of biodiversity,”“better use of resources,”and“addressing social issues”as our core principles,we will think globally and advance activities locally.Formulated in 2011Better use of ResourcesRealizationof a low-carbonsocietyAddressingsocialissuesConservationofbiodiversityAchievinga decarbonized societyConservationofbiodiversityPromotionof resourcerecyclingCreatingproducts andstores thatmeet socialexpectationsEngaging infair businessactivities thatrespect humanrightsWorking incooperationwith thecommunityAeon Sustainability PrincipleAeon strives to ensure Group growth while helping to realize a sustainable society in accordance with the basic principle of“pursuing peace,respecting humanity,and contributing to local communities,always with the customers point of view as its core.”We aim to think globally and advance activities locally as we actively promote initiatives involving both environmental and social aspects with our many stakeholders.(Revised in September 2018)AeonProjectReducestrategyCreatestrategyProtectstrategyCreate strategyEnergy usage50%reductionRenewable energy200,000 kW100 emergencylifeline centersnationwide2014 Formulated the Aeon Sustainable Procurement PrincipleConcluded the Global Framework AgreementStarted sales of Aquaculture Stewardship Council(ASC)certified products2015 Aeon Yumemirai Nursery School in Aeon Mall Makuhari New City acquired certification in Chiba CityCommenced sales of first completely farm-raised Bluefin Tuna Japanese private brand product2016 Launched sales of Topvalu Gurinai“Organic,”“Natural,”and “Free From”products2017 Formulated the Aeon Sustainable Procurement Policy and 2020 GoalsFormulated the Aeon Food Waste Reduction TargetsInitiatives of Public InterestIncorporated FoundationsAeons SustainabilitySustainable PlanetHeartful CommunityHealthy&Empowered PeopleData Section9AEON REPORT 2022/Sustainability EditionAEON REPORT 2022/Sustainability Edition10Among the many environmental and social issues in promoting sustainable management,Aeon has identified key areas(material issues)for which it will pursue solutions on a priority basis through its business activities,and has continued to strengthen its efforts in those areas.Key Areas of Sustainability(Material Issues)ApproachTo continue to be a company that revitalizes local economies and solves social issues,we believe it is important to respond to the demands and expectations of stakeholders while adapting to changes in society.To realize this vision,we have implemented materiality mapping from two perspectives,specifically the impact on soci-ety and the relationship with Aeons business.For the targets and KPIs set for each material issue,we iterate on the PDCA cycle based on our sustainability promotion structure,continually implement more effective sustainability activities,and strive to make further improvements.Climate change/Resource conservation and environmental resources(including plastics)/Food waste/Loss of biodiversity(destruction of forests)Water risks and water resourcesPoverty/Welfare/Child labor/Immigrant laborSoil pollution/Wastewater/Noise/Foul odors/Exhaust gasesProtection of personal information and privacy/Wages/Work-life balance/Harassment/Recovery and reconstruction of disaster-stricken regions Nuclear power and radioactivityBribery/AbuseWaste productsJob creation/DiversityEducation/Declining birthrate/Children on the waiting list for childcareHealth/Hygiene/Product safety and disaster prevention/Urban development/Aging society/People with poor access to shopping/Human rightsDiscrimination and disparities(gender,LGBT,indigenous peoples,people with disabilities,minorities,etc.)/Job fulfillment/Labor environment/Animal welfare/Nursing careEnvironmental Issues/Social IssuesRelationship with Aeons BusinessImpact on SocietyHighHighAeons Management ApproachRecognition of IssuesIn addition to the waste generated from its business activities,since Aeon is also involved with the waste gen-erated when customers use plastic bags,containers,and packaging,it recognizes the Promotion of Resource Recycling as a material issue and undertakes a number of initiatives to address it.Aeons ApproachAeon has continued to promote various initiatives to further the better use of resources,including the Bring Your Own Shopping Bag Campaign and over-the-counter resource recovery.In 2020,we formulated the Aeon Plastic Usage Policy,through which we work to reduce the use of disposable plastics,transition to better materials,and develop a resource recycling model based at our stores.As a retailer that deals with food,in 2017,Aeons Food Waste Reduction Targets were also estab-lished,and we announced plans to halve food waste by 2025.Additionally,in 2019 Aeon became the only retailer in Asia to participate in the World Resources Institutes(WRI)food waste reduction initiative to reduce waste throughout its supply chain.Aeon Decarbonization VisionAeon Plastic Usage PolicyTargetsu Switch 50%of electricity used in stores to renewable energy by 2030u Achieve zero aggregate CO2 emissions from stores by 2040TargetsBy 2030,we willu Halve the amount of disposable plastics used compared with 2018 levelsu Use eco-friendly and socially considerate materials in all private brand productsu Switch to 100%renewable or plant-derived materials for the PET bottles of private brand productsP.27Promoting Sustainable Management Group-WideIn its Medium-term Management Plan(FY2021-FY2025),Aeon regards sustainability as the center of its business and has positioned it as the core of its growth strategy.Aeon will continue to take on the challenges of the Five Reforms and accel-erate initiatives aimed at achieving its medium-and long-term goals dealing with environmental and social issues.Recognition of IssuesAeon operates 20,008 stores in 15 countries around the world.One of the biggest effects our business activities have on global warming is the release of greenhouse gases due to the use of energy such as gas and electricity at our stores and business sites,as well as the use of CFC refrigerant substitutes for air conditioning equipment and refrigerated cases.For this reason,we have declared the realization of a decarbonized society,one that does not release greenhouse gases,as a material issue and we are pursuing various initiatives to reduce our greenhouse gas emissions.Aeons ApproachWith regard to the prevention of global warming,Aeon has steadily cleared its goals announced in the Aeon Prevention of Global Warming Declaration made in 2008 and the Aeon Eco Project launched in 2012 and has endeavored to reduce its greenhouse gas emissions.In 2011,Aeon announced the Aeon Natural Refrigerant Declaration and has made progress with the introduction of refrigerated and frozen goods cases that use natural refrigerants(CO2)with a small global warming potential.In the Aeon Decarbonization Vision formulated in 2018,we aim to achieve net-zero emissions of CO2 at our stores from the three perspectives of stores,products,and logistics,and hand in hand with customers.In 2020,we set the new goal of switching 50%of the electricity used at our stores in Japan to renewable energy by 2030 and announced that we would aim to achieve our 2050 goal ahead of schedule in around 2040.The Group will leverage all of its resources to accelerate initiatives directed at realizing a decarbonized society.Achieving a Decarbonized SocietyPromotion of Resource RecyclingP.20Six Priority Fields for Aeonu Achieving a Decarbonized Societyu Promotion of Resource Recycling(Reducing plastics and food waste)u Preservation of Biodiversityu Sustainable Procurementu Engaging in Fair Business Activities That Respect Human Rightsu Collaborating with the CommunityInitiatives of Public InterestIncorporated FoundationsAeons SustainabilitySustainable PlanetHeartful CommunityHealthy&Empowered PeopleData Section11AEON REPORT 2022/Sustainability EditionAEON REPORT 2022/Sustainability Edition12Aeon Biodiversity PrincipleAeon Sustainable Procurement PrincipleAeon Human Rights PolicyAeons BCP(Business Continuity Plan)Aeon Sustainable Seafood Procurement PolicyAeon Supplier Code of Conduct(CoC)Aeon BCM ProjectAeon Forest Resources Procurement Principle(Paper/Pulp/Timber)Aeon Health Management DeclarationP.37P.43P.50P.67P.46P.54P.67P.47P.87Recognition of IssuesFrom the destruction of ecosystems due to overfishing and overhunting and abnormal weather events caused by global warming,the gifts of nature we use as resources are under critical threat.The land area taken up by for-ests,tropical rainforests,in particular,continues to decline,and the number of animals classified as endan-gered species is also on the rise.Based on the recognition that Aeons businesses would not be possible without ecosystem services such as agricultural,fishery,and for-estry products,we regard the conservation of biodiversity as a material issue.Aeons ApproachTo advance sustainable resource utilization while conserv-ing biodiversity,we promote a range of initiatives in keeping with the action guidelines set forth in the Aeon Biodiversity Principle.n Sustainable Procurement We formulated the Aeon Sustainable Procurement Principle,intending to balance the sustainability of natural resources with the continual development of business activities.We procure marine products,agri-cultural products,livestock products,as well as paper,pulp,wood,and palm oil products based on Aeons Sustainable Procurement Policy,which was announced in 2017.n Aeon Hometown Forests Program As activities embodying the Aeon Hometown Forests Program and the Aeon Basic Principles,we have been conducting tree-planting activities with customers since 1991.Recognition of IssuesThe safety and security of customers will always be an issue of the highest priority.In recent years,with sup-ply chains expanding globally,ensuring product quality and safety has become a growing social issue.In addi-tion,the quality expected by customers can vary signifi-cantly depending on the country or region concerned.To continually respond to such feedback,it is essential to develop mechanisms to proactively engage in dia-logue with customers while creating systems to develop products,services,and stores that reflect the wishes of customers.Aeons ApproachTo put into practice our Customer-First approach and make good on Our Promise to Customers established in the AEON Code of Conduct,we have pursued the devel-opment of safe and secure products in conjunction with suppliers in Japan and overseas through the TOPVALU brand.In addition,through initiatives that include the devel-opment of a traceability system and the creation of rules concerning ingredient labeling,we make every effort to ensure that customers can use our products with peace of mind.In terms of store facilities,we strive to develop safe and comfortable stores in terms of both physical and qualitative terms.Additionally,to reflect the diverse feedback from society as it changes over time,we have developed systems to periodically gather customer feed-back,and in recent years,we have focused on product,service,and store development focused on keywords such as the elderly,health,and local products.Recognition of IssuesEnormous supply chains have been built along with the globalization of corporate activities.To engage in sus-tainable business across many countries and regions,it is necessary to comply with local laws while promoting fair business activities in light of the United Nations Guiding Principles on Business and Human Rights and other initiatives.Additionally,respecting the human rights of peo-ple from a range of backgrounds while utilizing their diversity to create new value has taken root as a human resources strategy essential to corporate growth.Aeons ApproachTo put into practice one of the basic principles of respect-ing humanity,we have established the Aeon Basic Policy on Human Rights,which is applied to all stakeholders involved with Aeons business activities.We place importance on our relationship with our suppliers,who are important partners for our business activities,and along with engaging in fair trade in accor-dance with the Aeon Supplier Code of Conduct(CoC),we undertake procurement in consideration of our social responsibility.In January 2021,we established the Supplier Hotline,which receives consultations and reports from TOPVALU product suppliers and their employees.We have also established Basic Principles on Human Resources that reflect our approach to human resource matters for our own employees.We place importance on diverse values regardless of gender,age,nationality,or other attributes and conduct human rights awareness training globally to put into practice our policies and principles concerning human rights.Recognition of IssuesWith each region facing unique social issues,we strive to solve issues in partnership with local governments,NPOs,NGOs,and international organizations.In recent years,there has been a growing trend for companies to make effective use of their resources,including technologies,knowledge,information,funding,and even management expertise to demonstrate an even greater impact sustain-ably.Meanwhile,companies have also gained a strong appreciation for how working with local communities is essential for sustainable growth.Aeons ApproachAeon espouses the basic principles of being a corporate group rooted in local community life and dedicated to making a continuing contribution to the community and has tackled solutions to social issues in various regions through engagement with people in Japan,China,and the ASEAN region for many years.We also focus on building value chains designed to vitalize industries in the regions where we operate,including the proactive development and marketing of products geared toward the local food culture.As a corporate citizen,we aim to be a company that helps develop society and enhances lifestyle and culture in conjunction with the local community.Preservation of BiodiversitySustainable ProcurementEngaging in Fair Business Activities That Respect Human RightsCollaborating with the CommunityInitiatives of Public InterestIncorporated FoundationsAeons SustainabilitySustainable PlanetHeartful CommunityHealthy&Empowered PeopleData Section13AEON REPORT 2022/Sustainability EditionAEON REPORT 2022/Sustainability Edition14Chief Sustainability Officer,Aeon Co.,Ltd.Professor at The University of Tokyo Department of Civil Engineering Graduate School of EngineeringShuichi KogoSustainability at Aeon Interweaves Management With Peace,People,and CommunityDr.Taikan OkiDialogueThe importance of being trusted by customersKogo Aeons Basic Principles are to pursue peace,respect humanity,and contribute to local communities,always with the customers point of view as its core.On that basis,we are striving to practice sustainability management that seeks to shape a sustainable society while solving environmental and social issues.Leveraging our characteristics as a retailer that enjoys points of contact with customers,our highest priority is to work with customers in pursuing sustainability in the global community.Oki Aeons Basic Principles advocate the practice of a“Customer-First”philosophy with an everlasting innovative spirit.What is meant by“innovation”here?Kogo The world is currently undergoing unprecedented environmental changes,and Aeon sees that as an opportu-nity for exponential growth.Rather than protecting our exist-ing businesses,that means responding to change in every instance and tackling bold reforms to our business structure.Oki I see.The Medium-term Management Plan also states that Aeon will practice sustainable management through a cycle of its own growth and enrichment of local communities.This management strategy is based on long-term perspectives that reflect the kind of role I want to see companies play.Kogo Thank you.Aeon has embodied the idea of“hand in hand with customers”in a variety of ways,and just the other day we engaged in the Aeon Ukrainian Children Relief Fundraising effort in response to recent events around the world.The 466,656,366 yen we collected as donations from customers was matched by Aeon,resulting in the fund donat-ing a total of 933,312,732 yen to the Japan Committee for UNICEF.Oki I get a sense that donating culture has not really taken root in Japan,but collecting this amount in donations speaks to the high degree of trust that Aeon enjoys from its custom-ers.Part of the Aeon Basic Principles is the pursuit of peace and with these donation drives,you have made your stance against war clear.Kogo Yes.When we called upon customers to help with donations,we clearly communicated that Aeons stance is to oppose all wars,and we received a great deal of support in response.There was a strong sense of solidarity and high expectations from customers.Oki Perhaps that suggests Aeons basic principle of “hand in hand with customers”has taken root with custom-ers.I think we should assess the value of a companys prod-ucts and services not based on the company alone but from the perspective of the pursuit of sustainability,including the supply chain.Kogo For example,with Aeons Topvalu brand,we have made every effort to limit price increases,with some excep-tions,even in the recent market environment of sharply rising prices.Rather than simply raising prices,we are exercising our corporate efforts to the fullest to ensure that customers can lead enriched lives.At the same time,we have been focused on appealing to value elements other than price more than before.We clearly identify products that are eco-friendly or geared toward Health&Wellness,and by publishing detailed product information on our website,we respond to customer concerns over safety and security in an effort to provide value in various ways.Oki However,consumers have an impression of eco-friendly products being relatively expensive.I look forward to seeing Aeon change the lifestyles of society as a whole in those ways.Kogo Based on customer surveys and since a certain num-ber of customers have a strong environmental awareness,I think there is potential there as a market,but when it comes to purchasing a product,the fact is that more people still place an emphasis on price.At Aeon,we want to pursue environmental activities that can be easily tackled in daily shopping and customers ordinary lives.That is why these products need to be familiar things that customers choose for their daily meals,not something special,and in principle,they should be priced so that customers can easily incorporate them into their daily lives.Oki Since you are closely associated with the daily lives of many people,your business activities and corporate stances can have a significant impact on society.What kinds of eco-friendly products do you think can gain support from customers?Kogo For example,since 2006,Aeon has been retailing products with international certification indicating that they are resource-and environmentally-friendly marine products.Most of these are varieties of seafood that are familiar parts of peoples diets,such as skipjack tuna,mackerel,oysters,salmon,and Japanese amberjack,and they are priced the same as their counterparts.Since we started selling these products without an announcement,there might be people Shuichi Kogo/Joined The Daiei,Inc.in 1996 and became the General Manager of the Merchandising Strategy Department and then General Manager of the Operations Strategy Department before being appointed Executive Division Manager of the Management Division in 2018.He assumed the position of Director,Executive Officer,Division Manager of the Business Management Division,and General Manager of the Strategy Planning Department in 2020.He became the General Manager of the Strategy Department at Aeon Co.,Ltd.in 2021,a position he remains in today.Taikan Oki/Served as Senior Vice-Rector at United Nations University and Assistant Secretary-General at the United Nations from 2016 to 2021.He researches global hydrology and the sustainability of world water resources and was one of the coordinating lead authorities on the Fifth Assessment Report issued by the Intergovernmental Panel on Climate Change(IPCC).In 2021 he was awarded the International Hydrology Prize,also known as the Dooge Medal.Initiatives of Public InterestIncorporated FoundationsAeons SustainabilitySustainable PlanetHeartful CommunityHealthy&Empowered PeopleData Section15AEON REPORT 2022/Sustainability EditionAEON REPORT 2022/Sustainability Edition16who dont even realize that they are eco-friendly.I think com-municating the appeal of these products is another challenge we face.As to how future lifestyles will change by having custom-ers choose these products,what issues we will face,and how we will solve them,those are questions we still cannot fully answer.Oki Even if,as consumers,we want to purchase things that are beneficial to the environment or society,we lead busy daily lives,and the fact is that many people still dont think of these issues as their own.Despite this,the trust of custom-ers,where they place confidence in Aeons products,with the conviction that Aeon will never do something untrustworthy,is our strength.Its rather easy for a customer to use a prod-uct when they are convinced that Aeon is actively carrying products designed to reduce negative effects on the environ-ment or that take proper work environments into account.I hope you value that trust.The roots of Aeons sustainability activities in tree planting effortsKogo The roots of Aeons sustainability efforts date back to tree-planting activities that have been ongoing for more than three decades.When we open a new store,we plant trees with customers to ensure trees grow in that area.Combined with the trees planted by the Aeon Environmental Foundation and trees planted in disaster-affected areas such as the Tohoku region,we have planted approximately 12.4 million trees to date.These activities are not only aimed at reducing CO2 emissions but also to create the multi-faceted functions forests demonstrate and contribute to Aeons Basic Principles:peace,people,and community.Through these activities,the members of the local community develop a love for the trees they have planted and become fans of Aeon for the forests it brings to life.Going forward,we are also going to work on community-based forest initiatives integrated with local com-munity lives.Oki Aeons tree planting activities are based on planting the trees that grow naturally in each local area,and I have heard that those decisions are left up to the local communi-ties.In the 6th Assessment Report,the latest output from the Intergovernmental Panel on Climate Chante(IPCC),it was also noted how halting the destruction of forests and preserv-ing natural ecosystems is effective in reducing greenhouse gas emissions.The situation is now being referred to as a“climate crisis,”and swift and concrete action is being demanded even more than before.I notice that in its decar-bonization initiatives,Aeon has set goals with deadlines.Kogo We have set the goal of net zero CO2 emissions from our stores by the year 2040.We are currently aiming for 50%of the electricity used at our stores to be from renewable energy by 2030,and I think we need to thoroughly promote energy conservation while raising the percentage of renew-able energy we use.For example,we have begun a trial to have customers supply(discharge)the excess renewable energy generated by the solar panels at their homes to our stores via electric vehicles.Rather than having Aeon pursue decarbonization alone,we aim to decarbonize entire local communities by sharing renewable energy within them.Oki Efforts deeply rooted in communities is a unique approach of Aeon.And its not just environmental issues;the issues that need to be solved differ from region to region,such as the declining birthrate,aging population,shrinking labor force,or declining of regional communities.Kogo I think the basic approach of“contributing to local communities through our business activities”is a common one,but just as we plant trees that occur naturally in a par-ticular area,we also set a specific action to take in our social contribution activities on a regional basis.Oki Even so,Aeon operates businesses in various regions,both in Japan and abroad.It seems quite difficult to tailor your approach individually.Kogo Over the past decade since 2012,Aeon has been run-ning Project Aeon Joining Hands to support the recovery after the Great East Japan Earthquake.This is an effort to utilize the diverse resources gained through Aeons management activities to have employees themselves think autonomously about what they can do and want to do to contribute.Employees have taken part in many reconstruction support activities in which they can demonstrate their creativity to act,and those activities are then utilized in other regions as well.In the Aeon Heartful Volunteer program launched in FY2022,we are promoting ongoing support activities that are even more deeply rooted in the communities we serve to shape sustainable local communities.Oki It is also crucial for HR training to instill Aeons princi-ples in employees.I think having human resources who can think and act for themselves is an invaluable asset.Kogo I also believe that one of the factors in Aeons long history of development lies in the attention paid to training human resources.Expectations and role as an industry leaderOki It appears that Aeon has focused on directly engaging with consumers and fostering a relationship with customers,but am I being too greedy if I say that you should take action a step further,such as encouraging customers to take the initiative in choosing things that have a high environmental or social value to change their behavior.For example,local retail stores may lack the ability to work on environmental issues or social contributions,and I wonder if Aeon could serve a role as a think tank for the community.Kogo Indeed.I have experienced being seconded to a local government for two years,and I gained various insights and learned a lot of things by deepening relationships with the local people and engaging in dialogue with them.I think active engagement revitalizes local economies and has the potential to bring about a prosperous co-existence.Oki Since Aeon has accumulated a vast array of manage-ment resources,including expertise,human resources,and information to date,I think it is fully capable of playing a pub-lic role.Local communities develop through collaborative cre-ation,and when a living zone is enhanced,the effects extend to the sustainable development of the local community.Having spoken with you today,I have gotten a feel for the sense of mission that Aeon has.Developing an environment in which employees feel autonomy and job fulfillment plays a big role in a company.And I believe behind that is the fact that Aeon has adopted a long-term perspective in practicing management based on environmental,social,regional,and sustainable development themes and has shared that senti-ment not only among top management,but throughout the Aeon Group.Kogo Thats right.At the management level,we have taken a leading role in sharing our goals,and we work energetically toward them.The junior employees who see that will move forward,looking ten or twenty years into the future.I think that sort of positive cycle is at play at Aeon.Oki Aeon commands a valuable and influential presence in society as a whole.Particularly the basic principle of peace and the theme of living zones are extremely interest-ing.Before long,consumers will be choosing products and services that are eco-friendly and socially just,and without realizing it,society will be working together toward carbon neutrality.Along the road to a world where every person can experience happiness,I hope that Aeon continues to collabo-rate in various fields and lead society.The ultimate goal is not to create a sustainable society but to increase the well-being of everyone in the world.The word“Aeon”means“eternity”in Latin.I hope you continue to do your best so that everyone is glad to have Aeon around.Kogo Thank you so much for sharing your insight today.It has been extremely helpful in terms of our responsibility as a retailer that maintains points of contact with customers and in relation to the role of messaging.We will continue to pur-sue initiatives to build a prosperous future with customers,with a story and strategy that helps them realize that“shop-ping at Aeon changes the future.”July 2022Initiatives of Public InterestIncorporated FoundationsAeons SustainabilitySustainable PlanetHeartful CommunityHealthy&Empowered PeopleData Section17AEON REPORT 2022/Sustainability EditionAEON REPORT 2022/Sustainability Edition18Sustainable PlanetAeons three-pronged approach of Stores,Products and Logistics,and Hand in Hand with Customers aims to reduce the total greenhouse gas emissions of its stores to zero through energy savings and energy generation and realize a decarbonized society.Decarbonization and Climate ChangeBased on Aeon Decarbonization Vision 2050 formulated in 2018,Aeon has been making Group-wide efforts to achieve net-zero greenhouse gas(“CO2,”hereafter)emissions from its stores through energy savings and energy generation as part of a three-pronged approach of Stores,Products and Logistics,and Hand in Hand with Customers.In 2021,to bring the achievement of this goal for-ward,Aeon added the target of switching 50%of the electricity used at its stores in Japan to renewables by 2030 and aims to around net-zero CO2 emissions Groupwide by 2040.As approximately 90%of the CO2 produced at Aeon stores is from electricity use,switching the electricity used at stores to renewables will also contribute to nationwide CO2 emission reductions in Japan.Going forward,Aeon will continue to pursue sustainability throughout its busi-ness activities and mobilize all of the Groups resources to accelerate initiatives for region-wide decarbonization.Our initiatives focus primarily on improving energy effi-ciency,which promotes efficient energy use and reducing energy consumption.In addition to targets aimed at energy conservation and solar-centric energy production These mid-term targets are based on scientific foun-dations geared towards achieving the 1.5C target in the Paris Agreement,are certified SBT(Science Based Targets)initiatives*,and have been scientifically recognized.*These are common initiatives established by the CDP(formerly the Carbon Disclosure Project),the United Nations Global Compact(UNGC),the World Resources Institute(WRI),and the World Wildlife Fund for Nature(WWF)to address the issue of rising greenhouse gases.They promote having companies set reduction targets consistent with scientific knowledge to keep the average global temperature from rising more than 1.5C compared with pre-industrial levels.under our renewable energy generation initiatives,we are also establishing stores as disaster-prevention facili-ties,enabling them to operate as lifeline sites during emergencies.2018 during formulationInterim TargetAchievement TargetWe will reduce the total CO2 emissions from our stores by 35%by 2030(compared with 2010)Net-zero CO2 emissions from stores by 20502021 revisionInterim TargetAchievement TargetSource 50%of energy used by stores from renewable energy sources by 2030Zero aggregate CO2 emissions from stores by 2040Revised July 2021The targets in the Aeon Decarbonization Vision have been revised to accelerate the creation of a decarbonized societySustainable PlanetPeaceful Living for Today and TomorrowWe value living peacefully and work to support lifestyles that protect vibrant communities.Aeon Decarbonization VisionStoresAeon will work to reduce CO2 and other greenhouse gas emissions(hereinafter”GHG”)by taking the following three-pronged approach,thereby contributing to the realization of a decarbonized society.Products and LogisticsHand in Hand with CustomersInterim TargetMeans forachieving the targetHow our initiatives have developedWe will reduce the total CO2 emissionsfrom our stores to zero.About 90%of Aeons CO2 emissions are attributable to electricityReduce energy consumption at storesand switch to renewable energyWe will continue our efforts to achieve zeroGHC emissions from our business operations.We will cooperate with our customers forthe realization of a decarbonized society.Switch 50%of electricity used in stores to renewable energy by 2030(in Japan)2008201120122018202020302040ReductionstrategyGenerationstrategyProtectionstrategyAeon Manifesto on the Prevention of Global Warming(2008-2011)Aeons eco project(2012-2020)Aeon Decarbonization VisionRevised July 2021Energy conservationRenewable energyFor the realization of a“decarbonized society,”Aeon has established“Aeon Decarbonization Vision”as well as an interim greenhouse gas emission reduction target to be achieved by 2030Sustainable PlanetHeartful CommunityHealthy&Empowered PeopleData SectionAeons SustainabilityInitiatives of Public InterestIncorporated Foundations1920AEON REPORT 2022/Sustainability EditionAEON REPORT 2022/Sustainability EditionSustainable Planet*Energy support service:A service to enable visualization of the energy operation status of a building and to analyze and evaluate energy conservation.*1 Implementation locations,periods,and length of switch-off times vary by company.Lighting may not be switched off for some facilities where it is difficult due to security reasons.For stores operating 24 hours a day,signage will be switched off from 19:00 to 23:00.At other locations,lighting will be switched off until the stores open the following day.*2 This is an estimate based on the regular outdoor signage lighting used in the Aeon Group.Specific reduction amounts will vary by store.*3 CO2 emission coefficient for FY2020 of 0.439 kg/kWh(based on materials published by the Electric Power Council for a Low Carbon Society on September 10,2021)is used.Participation in RE100 Along with the announcement of Aeon Decarbonization Vision,we have participated in RE100 since 2018,intend-ing to use renewable energy for all Company power con-sumption by 2040.Obtaining the highest supplier engagement rating for two consecutive yearsFor two years running,Aeon has been designated a Supplier Engagement Layer,the highest Supplier Engagement Rating(SER)offered by CDP,an international NPO engaged in environmental survey and dis-closure activities.Reducing CO2 Emissions and Improving Energy EfficiencyAeon stores consume a large volume of energy for air-conditioning and lighting to offer a comfortable shopping environment and for operating refrigerator and freezer cases.Because electricity use accounts for approximately 90%of store CO2 emissions,we believe powering stores from renewable energy sources will contribute to reduc-ing CO2 emissions throughout Japan.Plans to Incorporate Renewable Energy into Stores by 2030We plan to power the Japanese shopping centers and general merchandise stores(GMS)managed by Aeon with 100%renewable energy by 2030 to continue our pursuit of sustainability across all operations and will engage every Group resource to promote the realization of a decarbonized society throughout the community.We are focusing on reducing store CO2 emissions because while initiatives like installing and expanding solar generation systems on store rooftops,using the PPA model*1,fortifying gradate FIT purchasing,promoting direct renewable energy agreements within each commu-nity,and other such actions will reduce the CO2 emissions of store energy sources,they will also significantly reduce greenhouse gas emissions for Aeon as a whole.*1 PPA model stands for“Power Purchase Agreement”and is a business model where a PPA operator rents a site or roof space from a power consumer,installs solar generation systems,and then sells the power generated there to the consumer.As of the end of February 2022,29 stores use this system.FY2021 ResultsTotal annual CO2 emissions per unit(CO2 emissions/total floor area)Total energy use factor(Amount of heat/total floor area)201020182019202020210.102t/m20.0783t/m20.0764t/m20.0705t/m2(expected)0.0723t/m21.999GJ/m21.950GJ/m2(expected)2.776GJ/m22.092GJ/m22.027GJ/m2In addition to these actions,we are replacing store light-ing,spotlights,common area lighting,etc.,with LED lights,introducing or upgrading systems with energy-efficient equipment,verifying efficient total energy man-agement systems,and more.Installation of Recharging Stations for Electric VehiclesIn response to the increasing use of electric and plug-in hybrid vehicles,we have installed recharging stations at most of the new shopping centers opened since 2008.We are actively working to establish WAON authen-tication and billing services and to install recharging stations at existing stores,and as of the end of February 2022,there were 2,718 stations installed at stores in Japan and overseas.Furthermore,Aeon Mall Co.,Ltd.joined the global initiative EV100*2 to coincide with the completion of installations at all of its shopping centers across Japan.*2 EV100 is a global initiative for the promotion of electric vehicles undertaken by the international NGO The Climate Group since 2017.This initiative is aimed at increasing the use of electric vehicles by companies and improving the Environment.*Energy usage breakdowns show that approximately 95%of emissions came from elec-tricity,with the rest from city gas,propane,fuel oil,etc.*New businesses added to the group from reorganizations,etc.,were recalculated using values dating back to 2010.*Among total CO2 emissions from store energy use,direct emissions(Scope1)from burning city gas,propane,fuel oil,etc.accounted for approximately 7%,and indirect emissions(Scope2)from electricity use comprised approximately 93%.CO2 emission calculations for electricity employed calculation standards and emission coefficients consistent with the Act on Promotion of Global Warming Countermeasures.Reducing CO2 Emissions and Improving Energy EfficiencyGenerating Renewable EnergyFY2021 ResultsReduction in CO2 emissionsExpected to be down by approximately 14%(compared with FY2010 levels)Energy use(unit basis)Energy consumption expected to be reduced by approximately 31%(compared with FY2010 levels)Solar panels Installed at 1,049 storesElectricity generation capacity of approximately73,234 kW(total up to FY2021)Adoption of the PPA modelAdopted at 29 stores (capacity of 7,672 kW)Example initiativesSwitching to 100%renewable energy at storesAs of the end of February 2022,13 stores and other locations nation-wide have been developed to use 100%renewable energyAdoption of the PPA modelBusinessPrimary nameTarget period for renewable energy introductionSCAeon MallBy 2025Aeon TownGMSAeon,Aeon StyleBy 2030Participating locations*1Over 1,000 Aeon Group commercial facilitiesMain brandsAeon,Aeon Style,Aeon Mall,Aeon Town,Maxvalu,The Big,etc.Implementation Period*1As needed from Wednesday,June 1,2022Implementation DetailsSwitching off outdoor lighting,including outdoor signage and store signsThe number of electric vehicle recharging stations globally2,718 stations at 259 stores(2,147 in Japan,570 overseas)(as of the end of February 2022)TO PICSTO PICSAeon uses the PPA model to introduce its first large-scale next-generation online market and solar power generation facilitiesImplementing the Aeon Light Down Campaign at over 1,000 facilities as an initiative to prevent global warming Aeon Next will install a solar power generating system with a maximum generating capacity of over 3 giga-watts on the roof of the Honda Customer Fulfillment Center(CFC),Aeons first CFC being constructed in Honda-cho in Midori-ku,Chiba.The Honda CFC is the core part of Aeons next-generation online grocery operation being prepared by Aeon Next ahead of its opening in 2023 and will operate as a large state-of-the-art automated warehouse using the latest AI and robots.Combined with a sophisticated home delivery system,the CFC will enable services to promptly deliver a wide selection of fresh foods and daily necessities.Electricity generated with the solar power generating system installed using a PPA model will be used for facility The Aeon Light Down Campaign aimed at reducing CO2 emissions was implemented starting in Environment Month(June)and will continue for the time being at more than 1,000 of the commercial facilities*1 operated by Aeon Group com-panies in Japan.The initiative involves turning off outdoor signage at Aeons commercial facilities to decrease electricity consumption to reduce CO2 emissions that impact global warming.Aeon believes the initiative is also an opportunity for customers to experience the issue of climate change and protect the global environment in their daily lives.As around 90%of the CO2 emissions produced in the operation of Aeons stores and offices are from the use of electricity for air conditioning,lighting,and so on,Aeon is pursuing several initiatives toward the goal of achieving net-zero CO2 emissions from its stores by 2040.For example,by turning off outdoor signage four hours after sunset,Aeon expects to reduce power consumption by around 64 kWh*2 operation and make maximum use of renewable energy with the installation of large-scale storage batteries.Additionally,there are plans to conduct demonstration testing with the parallel installation of an energy support service*utilizing AI to develop technologies for general-purpose storage batteries.per store.If 1,000 stores switch off signage for four hours each day for ten days,it will lead to a reduction*3 of approxi-mately 280 t-CO2.(achieved)Sustainable PlanetHeartful CommunityHealthy&Empowered PeopleData SectionAeons SustainabilityInitiatives of Public InterestIncorporated Foundations2122AEON REPORT 2022/Sustainability EditionAEON REPORT 2022/Sustainability EditionSustainable PlanetDecarbonization initiatives by Group companiesAeon is a corporate group centered on businesses that enrich the lives of our customers and what each of us can do in our daily lives to achieve the big goal of“decarbon-ization.”We would like to think and work together with our customers.l Using Financial Services to Transition to Decarbonized LifestylesIn September 2021,Aeon Product Finance Co.,Ltd.,and Aeon Bank,Ltd.partnered with businesses in the housing industry and car dealerships to start offering services that help customers transition to a decarbonized lifestyle.An example is loan packages that combine loans for new con-struction and renovation towards a decarbonized house(ZEH)with those for electric vehicles(EV).l Developing Products for Energy-Efficient HomesAeon Retail,Co.,Ltd.deployed household energy-saving products that can contribute to decarbonization at 124 of its stores in Honshu(except for the Tohoku region)and Shikoku.Along with the October 2021 introduction of the Decarbonization Flat-Rate Reform,which set a flat fee*for a package solution that might include installing a solar generation system,the storage batteries that are vital for efficient consumption of residential solar power,and exterior coatings with insulation performance to make air conditioning more efficient,some stores offered Decarbonization Reform Consultation Meetings to address any questions and concerns from customers.We also intro-duced an option to waive fees for the first sixty payments to minimize the financial burden for customers.*Flat fee:Additional fees may apply depending on the construction needs and the condi-tion of roofs,exterior walls,areas,and other considerations.l Supporting the regeneration of the entire region with surplus electricity from households using EVsAeon Mall Co.,Ltd.plans to introduce a service in 2022 that will use excess residential energy from both a custom-ers solar system and EV as a new initiative for renewable energy lending within the community.The system uses customer EVs that have been fully charged with residen-tial-generated renewable energy to discharge excess energy via on-site V2H equipment in exchange for points relative to the amount of power generated.There are plans to introduce this system at Aeon Mall Sakaiteppocho(Osaka Prefecture)and expand it systematically through-out the Kansai area.Store Development Using 100%Renewable EnergyFollowing the opening of Aeon Fujiidera Shopping Center in 2019,which operates on 100%renewable energy,Aeon has actively accelerated the roll-out of 100%renewable energy stores.The Aeon Fujiidera Shopping Center uses an open network system that integrates management of all the equipment necessary for the facilitys operation,allowing both on-site and remote monitoring.This system allows data on the facilitys operation to be gathered and analyzed to achieve greater energy sav-ings.Under the PPA model,some of the electricity used by the facility is provided by solar panels on the facilitys roof,which is in line with Aeons efforts to expand the use of renewable energy.In FY2021,more stores using 100%renewables were newly developed,including mozo WONDER CITY,Aeon Mall Fukuoka,Aeon Mall Kawaguchi,Aeon Style Chiba Minato,Aeon Shinonome Store,Aeon Town Makuharinishi,and Aeon Mall Nagoya Noritake Garden.Among these,Aeon Mall Kawaguchi uses carbon-neutral municipal gas to power the facilitys air conditioning.Going forward,Aeon will continue with proactive efforts to develop stores using 100%renewable energy.Open Network System OperationAeon Delight Co.,Ltd.,in charge of Aeon facilities man-agement,introduced an open network system(building automation)that integrates and manages equipment required for facilities operation and remotely controls var-ious equipment inside and outside the facility.In addition to meticulous and efficient management by equipment managers,cleaners,and security guards,we promote further energy conservation by collecting and analyzing various equipment data.Adopting the PPA model to utilize electricity generated with solar power(creation of renewable energy)Aeon proactively engages in the generation of renewable energy,using solar panels installed at shopping centers,general supermarkets,supermarkets,and convenience stores.Up to FY2021,we have installed the units at a cumulative 1,049 stores,with a total generating capacity of 73,234 kW*.In addition to contributing to reductions in electricity use through self-consumption,we will sell the electricity generated by solar panels to power companies through a feed-in tariff system.Aeon Mall Kawaguchi operates on 100%renewable energySolar power generation at Aeon Town KonanSolar panels at Aeon Mall TsuminamiAeon Honda CFC,scheduled to begin receiving power from 2023Aeon Fujiidera SC Generation of enough electricity to power around 30 households for a year The profit we earn from electricity sales offsets electricity rate hikes,contributes to our business continuity planning(BCP),and enables us to make environmental investments.Building upon the previous year,we installed solar panel equipment via the PPA model at 25 additional stores in FY2021 to expand our use of renewable energy.Under this model,stores provide rooftop space for PPA operators to install solar panels and both parties sign an agreement where the store purchases and uses the energy as a part of its energy consumption.With these advances,a cumulative 29 stores have introduced the PPA model,with total generating capacity rising to 7,672 kW.To work towards the realization of a decarbonized society,Aeon will continue to further reduce its CO2 emis-sions by advancing a variety of methods to produce renew-able energy,transitioning to external energy sources that use renewable energy,and through other efforts.*Approximately 73,234 kW is enough energy to power around 16,600 homes for one year.Improving Energy Management PracticesAeon Retail Co.,Ltd.has systematized an in-house Energy Advisor Program aimed at leveraging its Aeon Decarbonization Vision to further develop human resources at its retail stores.Through the acquisition of knowledge about equipment and energy saving,legal regulations and compliance issues,energy-saving promo-tion systems and methods,and store energy management know-how,Energy Advisors help assess the status of energy use in stores and work to propose and promote ideas toward more efficient usage.As of the end of February 2022,a cumulative total of 793 Energy Advisors had been certified.In the future,we will continue to develop more certi-fied Energy Advisors,enhance the capabilities of current Energy Advisors,and work to expand the program to Group companies,including those outside of Japan.Preventing Leakage of Fluorocarbons and Promoting Use of Natural Refrigerant EquipmentMore and more freezing and refrigeration units started using non-ozone-depleting alternatives to chlorofluo-rocarbons(CFCs)as refrigerants following the abolition of the production and use of ozone-depleting CFCs under the Montreal Protocol adopted in 1987.However,these alternatives have extremely high global warming potential(GWP)*1 and the problem of leaking into the atmosphere,which prompted calls to switch to natural refrigerants with low GWP.Under the Kigali Amendment adopted in October 2016,alternative fluorocarbons are newly subject to the provisions of the Montreal Protocol,and clear reduction targets have been established for the production and consumption of alternative fluorocarbons,which need to be addressed.In 2009,Aeon became Japans first retailer to start introducing refrigerators and freezers that use a low-GWP natural refrigerant*2(CO2).Following this,we announced the Aeon Natural Refrigerant Declaration in 2011 and have been installing natural refrigerant-based refrigera-tors and freezers in every new store.As of the end of February 2022,we have installed nat-ural refrigerant-based refrigerators and freezers at 1,224 stores,including new GMSs,supermarkets,convenience stores,drugstores,and others.We are also switching to natural refrigerants on a gradual basis at existing stores.*1 Coefficient indicating the degree of impact on global warming.If CO2 is 1,the alternative fluorocarbons being used in refrigerator cases are several thousand times that amount.*2 Substances known as natural refrigerants include ammonia,carbon hydride,and CO2.Business company nameStart timeContentsAeon Product Finance Co.,Ltd.September 2021Aeon Card holders who are considering the introduction of V2H(Vehicle to Home)to apply for a decarbonized housing(housing/remod-eling loan)and EV(private car loan)purchase funds at the same time through a partner company.We plan to provide it sequentially from some areas.Aeon Bank,Ltd.Aeon Retail Co.,LtdOctober 2021A total of 124 stores sell solar power genera-tion systems,storage batteries,exterior wall coatings with heat shielding performance,etc.at a flat rate.Allows up to 60 fee-free install-ments to reduce the financial burden.In addition,some stores hold“decarbonization reform consultation meetings.”Sustainable PlanetHeartful CommunityHealthy&Empowered PeopleData SectionAeons SustainabilityInitiatives of Public InterestIncorporated Foundations2324AEON REPORT 2022/Sustainability EditionAEON REPORT 2022/Sustainability EditionSustainable PlanetTO PICSVerification of Greenhouse Gas Emissions by Third Party 1Verification of Greenhouse Gas Emissions by Third Party 2Between April and July 2022,we conducted third-party verifications at 32 consolidated Group companies,including Aeon Co.,Ltd.We will continue to improve data reliability and reduce greenhouse gas emissions.1.Scope of Verification Energy-derived CO2 emissions(Scope 1 and Scope 2)between April 1,2020,and March 31,2021,by 32 Group companies,including Aeon Co.,Ltd.2.Methodology ISO14064-3 We received third-party verification based on the requirements of ISO 14064-3 Greenhouse gases-Part 3:Specification with guidance for the validation and verification of green-house gas assertions.In FY2021,we conducted a third-party verification of greenhouse gas emissions associated with the transportation activities of Aeon Global SCM Co.,Ltd.,which plays a central role in Aeon Group logistics.1.Scope of Verification A portion of greenhouse gases associated with the domestic transportation of products handled by Aeon Global SCM Co.,Ltd.,from April 1,2019,to March 31,2020.2.Methodology We received third-party verification based on the requirements of ISO 14064-3(2006):Greenhouse gases-Part 3:Specification with guidance for the validation and verification of greenhouse gas assertions.FY2021 ResultsFully understood Freon replenishment levels in air conditioning and freezer/refrigeration equipment and prevented leaksIntroduced freezers and refrigerators that use natural refrigerants20212021ResultResultAeon Delight Co.,Ltd.used historical data aggregation,form management,etc.,to implement Freon leak man-agement for our partner companies and provided legal support and data management assistance.Implemented at 109 GMS and super-markets and 82 drug stores for a total of 191 stores.(Deployed in 1,224 stores in total)Natural refrigeration at Aeon Style HakusanVerified greenhouse gas emissionsScope 1 category 212,755 t-CO2eScope 2 category 2,195,266 t-CO2eVerified greenhouse gas emissionsScope 3 category4229,394 t-CO2eTabulating CO2 Emissions across the Entire Supply ChainIn addition to managing greenhouse gas emissions they generate directly(Scope 1)and indirect emissions from the use of electricity(Scope 2),companies must now man-age emissions across their entire supply chain(Scope 3).In response to this development,Aeon has been calculat-ing Scope 3 CO2 emissions,and priority areas have been subjected to regular third-party verification since FY2012.Aeon has calculated Scope 3 emissions*1 from FY2012,and locations in priority areas periodically send results to a third party for verification*2.*1 For calculations,we reference the Emissions Rate Index Database for Calculating GHG Emissions,etc.,in an Organizations Supply Chain(Ver.2.6).*2 In FY2021,we received third-party verification for Scope 3 emissions from transportation and shipment(upstream)(category 4).This arrangement will continue in the future.Promoting visualization in logisticsAeon Global Scm Co.,Ltd.handles Aeons worldwide sup-ply chains and works towards the decarbonized society Aeon sets forth in the Aeon Decarbonization Vision.In FY2021,we continued to visualize the CO2 emissions produced in transporting one case from logistics centers to stores.By(1)reorganizing the stores served by logis-tics centers to reduce delivery distances,(2)reviewing store delivery times to improve vehicle dispatch rates and reduce the number of vehicles dispatched,(3)consoli-dating deliveries in procurement and logistics,and other initiatives,CO2 emissions fell to 102.1g-CO2,a 4.3%reduc-tion over FY2020 store delivery emissions.Logistics centers have also strengthened and intro-duced new labor-saving,decarbonization,and low-car-bonization initiatives,such as automated forklifts and automated conveyor equipment to reduce energy con-sumption from lighting and air conditioning,arm robots to address labor shortages caused by a declining and aging population,and other initiatives.In April 2021,Aeon Global Scm Co.,Ltd.and Toyota Motor Corporation partnered to examine actions that would solve a variety of issues facing the field of logistics.While working to address the common problems of labor shortages and carbon neutrality facing the logistics indus-try,this partnership will make strides toward building the future of the logistics industry and supporting human life*White logistics:Creating a“white”(non-toxic)working environment that improves the productivity of truck-based transportation and streamlines logistics,and makes it easier for women and those over 60 years old to operate trucks.Instituting Management and Reductions for Scope 3 EmissionsAeon is beginning to take specific actions to manage and reduce its Scope 3 emissions to increase cooperation,reduce CO2,etc.,in its supply chain to realize a decarbon-ized society.Of the fifteen categories that comprise Scope 3 emis-sions,roughly half of Aeons scope 3 emissions fall under Category 1(Purchased Goods and Services)due to activ-ities including the procurement of raw materials,out-sourcing of packaging,and purchase of consumables.For this reason,starting in FY2021,Aeon began surveying its major contract manufacturers in the food and HBC cate-gories of its own TOPVALU brand regarding their climate change initiatives to gain insight into the policies and efforts being made by each company on climate-related issues and to learn about their expectations of Aeon.In FY2022,Aeon will classify its suppliers in greater detail based on the data obtained the previous year,pursuing approaches tailored to each supplier to develop closer engagement.In the future,Aeon hopes to calculate the GHG emissions generated in the manufacturing process of Topvalu products with greater precision,formulate concrete reduction plans covering the entire supply chain,and promote inter-company coordination on the promo-tion of decarbonization.Developing and Selling Products That Help Reduce CO2 EmissionsAeon is working to develop and sell products that help reduce CO2 emissions under its Topvalu brand.Our Topvalu“Less is More”organic Yukigura potatoes from Toya,Hokkaido Prefecture,are one example of our efforts.These potatoes use the cooling power of snow for preservation after har-vest,which reduces electricity use and helps reduce CO2 emissions.Aeon handled 25%of all Yukigura potatoes shipped by JA-Toyako,and CO2 emissions have been reduced by about 31 tons through this initiative.by making the entire supply chain system more efficient and building connected systems.Scope 3 Emissions CategoriesEmissions(t-CO2e)Component(%)10Processing of products sold00.0Use of products sold136,7932.1Disposal of products sold75,1051.1Investment leased assets(downstream)760,12811.6Franchises00.0Investments15,4500.2%Total6,567,878100.0%FY2021 Scope 3 EmissionsScope 3 Emissions CategoriesEmissions(t-CO2e)Component(%)1Purchased products and services3,627,05455.2,apital goods1,253,97519.1?uels and energy-related activities not included in Scope 1 and Scope2313,2734.8%4Transport and shipments(upstream)219,6963.3%5Waste from business activities119,5021.8kusiness travel470.0mployee commutes46,8560.7%8Leased assets00.0%9Transport and shipments(downstream)00.0%Topvalu“Less is More”organic Yukigura potatoes from Toya,HokkaidoAeon Global Scm Co.,Ltd.works to promote modal shifts,but rail container use dropped primarily from a decrease in the volume of clothing and home-fashion products due to the COVID-19 pandemic.Aeon Global Scm Co.,Ltd.will continue expanding its actions towards a modal shift with more than 28,000 railroad and container shipments annu-ally.As we strive to address problems in the transportation industry,such as a lack of drivers and improvements to working conditions for long-haul transportation,we will add one day to lead times for mainline long-haul trans-portation and promote initiatives towards white logistics*while simultaneously proactively advancing a modal shift and working to reduce CO2 emissions.Undertaking White Logistics and Promoting Modal ShiftsNumber of JR 12ft conversions used in FY202128,95683%compared with the previous yearSustainable PlanetHeartful CommunityHealthy&Empowered PeopleData SectionAeons SustainabilityInitiatives of Public InterestIncorporated Foundations2526AEON REPORT 2022/Sustainability EditionAEON REPORT 2022/Sustainability EditionWeight of packaging materials:28%reductionWeight of packaging materials:9%reductionSustainable PlanetTo use our resources as efficiently as possible,Aeon works towards realizing a recycling-oriented society by offering products with minimal environmental burden,reducing waste from business activities,and more.Resource Circulation(Plastics and Food Waste)Initiatives to Realize a Resource Recycling-Oriented SocietySince we introduced the Bring Your Own Shopping Bag Campaign in 1991,Aeon has spent more than thirty years promoting activities that reduce and reuse resources,like reducing product packaging and working hand in hand with customers to eliminate shopping bags and collect materials at stores.Among those initiatives,Aeon declared its aim to achieve zero waste by eliminating the Efforts to Reduce Disposable Plastic MaterialsAeon continues advancing its environmental efforts as part of our responsibility as a retailer selling products closely related to everyday life,such as reducing the mate-rials used in packaging and halting the free distribution of plastic shopping bags before it became law.In September Reducing the usage of plastic containers and packaging materialsAeon is working to reduce plastic usage and switch to alternative materials for product containers and packag-ing,particularly its private TOPVALU brand,as well as for the materials used in the sales process,such as plastic shop-ping bags and disposable trays.In FY2021,we achieved a reduction of 8.5%compared with FY2018 levels.We are also pursuing resource recycling initiatives in conjunction with customers and local communities.Efforts to reduce plastic useTopvalu initiativesWhen developing Topvalu products,we closely examine the packaging and containers,and after careful consider-ation of their impact on the quality of product contents and safety during shipment,we attempt to make product containers lighter and thinner and switch to recyclable materials.Additionally,we are striving to develop refill-able containers and change packaging materials based on customer feedback.For four Topvalu Course-ground Pork Sausage prod-ucts that went on sale in June 2022,the shape of the outer plastic packaging material was reduced in size with-out changing the volume of contents,thereby reducing the weight of the packaging materials.This is expected to lead to the reduction of roughly 22 tons of disposable direct disposal,incineration,and landfill of waste and established the Aeon“Zero Waste”Initiative Concept.Today,we continue to work towards promoting better use of resources.While promoting our 3R approach of“Reduce,”“Reuse,”and“Recycle,”we are working to create a decarbonized and recycling-oriented society by replacing products with more environmentally conscious options,creating a recycling model for used plastics,and more.2020,we announced the Aeon Plastic Usage Policy,under which we have since been making Groupwide efforts.We continue to transition away from fossil fuels and towards more environmentally friendly materials,intro-duce initiatives that create store-point recycling models,and establish new recycling-based lifestyles with our cus-tomers through our stores,products,and services.Initiatives to achieve our targetsAeon“Zero Waste”Initiative ConceptWe will continue our efforts to eliminate waste through disposal/burning and landfills with our 3R approach of“Reduce,”“Reuse,”and“Recycle.”We will collaborate with our stakeholders and custom-ers toward realizing a recycling-oriented society.Through stores/productsThrough communication with customersTogether with local communitiesAeon Plastic Usage Policy1.We will review the waste of resources and the use of disposable types in our business activities and aim for zero disposable plastics.2.The necessary plastics will be converted from fossil-derived materials to environmentally and socially friendly materials.3.We will build a resource recycling model that col-lects,reuses,and recycles used plastics from our stores and work with our customers on sustainable resource use.GoalAiming for sustainable use of plastics with zero CO2 emissions By 2030,we will halve the amount of disposable plastic used compared to 2018.By 2030,all PB products will use environmentally and socially friendly materials.By 2030,we will convert PET bottles of PB prod-ucts to 100%recycled or plant-derived materials.Formulated in September 2020FY2021 ResultsAmount of disposable plastics used per 100 million yen sales(Recycling Commission fee based on the Containers and Packaging Recycling Law for plastic containers and packaging,including PET bottles)2018 (Base year)202020212030Approx.980kg Approx.877kgApprox.897kgApprox.490kg(Target)plastics a year.Additionally,by reducing the size of the packaging,more units can be placed in cardboard boxes during delivery,improving logistics efficiency.Label-free beverages that first went on sale in February 2021 now number 11 products.This not only leads to less plastic waste but also eliminates the hassle of removing labels when sorting garbage and is welcomed by customers.We have also gradually replaced toilet paper and kitchen towel products with rolls that are between 1.5 times and twice as long by making all products more com-pact.This has resulted in a two-thirds reduction in volume,reducing waste such as roll core and packaging materials,and improving transportation efficiency to reduce CO2 emissions.Reducing Plastic Cutlery and StrawsWorking with customers to promote lifestyles that avoid the use of disposable items,Aeon is gradually phasing in wooden and paper-based versions of the spoons,forks,and other items it provides to customers.At stores,we also value wood and paper as a limited resource at call upon customers to only take what they need.Aeon has completed the introduc-tion or is currently phasing in these items is complete at 32 Aeon Group com-panies,including general supermarkets,supermar-kets,and convenience stores,and expects to reduce plastic use by around 470 tons a year as a result.Sustainable PlanetHeartful CommunityHealthy&Empowered PeopleData SectionAeons SustainabilityInitiatives of Public InterestIncorporated Foundations2728AEON REPORT 2022/Sustainability EditionAEON REPORT 2022/Sustainability EditionRetail store system1.Attach a stickerwith a QR code Carry the container to the store Purchase the product Return the container Inspect,separate,and clean Fill the container with productTransportTransportProduct transported to store Take home Use the product2.Scan the QR codewith the Loop app3.Place the containerin the return boxCustomerStoreContainer fees are refunded to customers through the Loop app Go to the storewarehousewarehouseManufacturer factoryCleaning facilityPurchaseProductLoop containerTransportationcompanyLoop-affiliated warehouse companyLoop-affiliated cleaning facilitySustainable PlanetT OP IC SProviding“Edible Spoons”for Soft-serve Ice CreamTo reduce the use of disposable plastics,Ministop has launched an initiative to phase out the plastic spoons it provides when selling soft-serve ice cream in favor of“edible spoons.”Advance trials started at the end of May 2022 at two directly operated branches in Chiba Prefecture,and in June,the trials were gradually expanded to the Kyushu and Shikoku areas,in response to feedback from customers and franchisees.The intro-duction of edible spoons at all stores would reduce the amount of disposable plastic by approximately 47 tons per year.Reducing disposable plastic shopping bagsStarting with the introduction of the Bring Your Own Shopping Bag Campaign that asked customers to bring their own shopping bags in 1991,Aeon has been work-ing hand in hand with customers to reduce the use of disposable plastic shopping bags.In 2007,we were the first national retailer to stop distributing free plastic shopping bags at the food section,and in April 2020,we stopped providing free plastic bags for all sections,including clothing and daily necessities,before it became law.In FY2021,to further conserve petroleum resources and reduce CO2 emissions generated during production,the use of plastic shopping bags was phased out at some Group specialty stores,including COX Co.,Ltd.,and R.O.U CO.,LTD.,with the introduction of paper bags.Promoting Green PurchasingAeon has been pursuing its Green Purchasing initiative since 1996.When purchasing stationery and other office supplies,we adequately consider their necessity and make purchasing decisions by prioritizing products with low environmental impacts.We are also proactively expanding the scope of green purchasing to include display cases,shelving,and other fixtures used on sa
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LULULEMON 2021 IMPACT REPORTWelcomeThis is lululemons 2021 Impact Report,a detailed account of the progress we are making in our commitments to support the wellbeing of people and restore a healthier planet.Our ambition is to be a brand leader in creating a positive impact for our planet and its people.Our transformative role is to help our industry accelerate wellbeing for all by celebrating our interconnectedness,relentlessly pursuing progress,and advancing collective action.This report lays out our growth throughout 2021 on our path to realizing this vision.Front Cover Illustration“We begin our breathing journey at the point when we become aware with the intensity of our emotions.We feel compressed,rhythm is short,fast movement.Lines are tighter with focus on the colour red(power,makes heartbeat faster,commands attention).”Jacquie Comrie,report illustrator2 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet Supplement CONTENTS Introduction4 A note from our CEO5 A note from our impact leadership 6 Who we are 7 Our enterprise strategy8 How we create value 9 Our Impact Agenda10 How we govern impact11 A year of progress and learning13 16 goals for a healthier future Be Human17 Inclusion,Diversity,Equity,and Action 20 Employee empowerment22 People who make our products Be Well29 Our approach to wellbeing31 Global wellbeing33 Community wellbeing35 Maker wellbeing37 Frontline wellbeing Be Planet 40 Climate action45 Sustainable product and material innovation51 Circularity and new guest models 53 Water and chemistry 55 Packaging and waste Supplement 58 Partnering for change60 Stakeholder engagement 61 Material topics62 Responsible supply chain data63 Climate data 68 SASB Disclosures 70 GRI Standards 74 Glossary75 Assurance statement 77 Forward-looking statements 78 Artist statement ABOUT THIS REPORTThis report serves as a platform to share lululemons enterprise impact strategy.It discloses our progress against publicly stated goals as well as performance related to environmental,social,and governance(ESG)topics under the three pillars of our Impact AgendaBe Human,Be Well,and Be Planet.It covers global business activity performance for our direct operations(including offices,retail locations,e-commerce,guest education centres,and distribution centres)and supply chain(including manufacturing suppliers and distribution logistics).Were reporting for the fiscal year ending January 31,2022(referred to throughout this report as“2021”),unless otherwise noted.Except for greenhouse gas(GHG)emissions data in the Climate Action section,our report does not include information on MIRROR,which we acquired in 2020 and represents a small portion of our business.As our business evolves,we will continue to assess our reporting approach.Our Supplement includes detailed performance information.It was developed in line with the Sustainable Accounting Standards Board(SASB)framework and references select Global Reporting Initiative(GRI)Standards.We have obtained limited external assurance on select reported metrics,including energy consumption and renewable electricity use inownedand operated facilities,Scope 1 and 2 GHG emissions,and Scope 3 emissions from business travel.3 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementA note from our CEOThank you for taking the time to read our second annual Impact Report.This report represents our commitment to transparently sharing our impact journey progress and details our work in implementing and further developing innovative solutions to accelerate lasting,positive change for our people,communities,and environment.The world continues to face many challengesfrom the ongoing COVID-19 pandemic to challenges related to mental wellbeing,from racial injustice to the impacts of climate change.At lululemon,we are guided by our three Impact Agenda pillars:Be Human,Be Well,and Be Planet.This holistic approach enables us to drive our actions in support of our people,the wellbeing of our communities,and a healthier planet for us all.Earlier this year,we evolved our purpose at lululemon to elevate human potential by helping people feel their best.I am pleased to see how our purpose is reflected throughout this report,as we embed our impact into our day-to-day practices in order to underpin our company growth strategy and to inspire innovation and progress across our entire organization.To preview our report,here are just a few examples of our actions to help drive change.In support of our people and communities,we have continued to deliver against our Inclusion,Diversity,Equity,and Action(IDEA)commitments.We increased the diversity of our employees to better reflect the communities we serve,broadened our inclusive design programs,maintained gender pay equity for the fifth year in a row,and maintained full pay equity for 100 percent of all US employees.In addition,through the launch of the lululemon Centre for Social Impact,we invested US$11.9 million in support of our goal to provide access to wellbeing tools to 10 million people by 2025.To help create a healthier planet,and as part of our climate action plan,lululemon procures 100 percent renewable electricity to power all our owned and operated facilities.In our mens business,our products are now made with more than 75 percent sustainable materials,and we are almost a third of the way toward our goal of 100 percent sustainable products by 2030.And in our work toward a circular ecosystem,on Earth Day,we expanded our lululemon Like New resale program to all stores within the United States to keep our products in use longer,which is one of many actions that helped us earn recognition by Fast Company as the#1 retailer for corporate responsibility.To take our actions even further,we recognize that we cannot do this alone,and we have continued to invest in strategic partnerships to accelerate innovation.We partnered with Genomatica to take a leadership role in raw material innovation,developing the first plant-based nylon in the world.And we were especially proud to be one of the two lead investors in the creation of the Apparel Impact Institute Fashion Climate Fund,a US$250 million fund to decarbonize the fashion value chain.On behalf of everyone at lululemon,I am proud of the contributions we have made over the past year to create a healthier world.Our progress reinforces the importance of the impact we can continue to make in the years ahead.While we remain early in our journey,one thing is clearwe are more focused than ever on bringing about thoughtful,more sustainable innovation and design,creating ways to connect and inspire,and seizing the opportunity to disrupt and lead our industry for people and planet.I want to close by thanking our teams around the world for their continued passion and commitment to advancing wellbeing for all.It is the hard work and creativity of our people that makes all of this possible,and enables all that we have yet to achieve.Sincerely,CA LV I N M C D O N A L D Chief Executive Officer4 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementA note from our impact leadershipAs a global business rooted in wellbeing and mindfulness,wehave a responsibility and opportunity to contribute to the wellbeing of people and our planet.Since setting lululemons Impact Agenda two years ago,we have continued to accelerate our pace toward achieving our social and environmental ambitions.In the last year,we have continued to build our foundation and move toward more transformational and collective initiatives.Through our Centre for Social Impact,we have engaged with both local and global social impact organizationssuch as The Trevor Project,the Girls Opportunity Alliance,and The Resilience Fund for Women in Global Value Chainsthat help scale solutions to deeply rooted systemic issues around mental health,wellbeing,and empowerment.Our roots in materials innovation lead us to help unlock new technologies for our products and planet,with industry leaders such as LanzaTech and Genomatica.Recognizing the importance of collaboration,we are especially proud of being a lead investor in the Apparel Impact Institute Fashion Climate Fund,to help decarbonize apparel manufacturing and supply chains.Our employees and partners around the world are creating conditions that help us move toward a more equitable,sustainable,and healthy future.We know the goals in our Impact Agenda are bold,and require courage,energy,and learning.We are thrilled toshare our second annual Impact Report with you,celebrating and reflecting on our progress and path,and will continue toshare the successes and challenges along the way.Join us on our journey to achieve our impact goals.E ST H E R S P E C K Vice President,Sustainable Business and ImpactOur IDEA mission at lululemon is to expand being well to encompass a culture of inclusion where diversity is celebrated,equity is the norm,and action is the commitment.At the heart of that mission is expanding our definition of wellbeing and our commitment to action.This second annual report highlights the strides we have made by listening,learning,and,most importantly,acting.We have integrated IDEA throughout the business and established targeted programs that advance accessibility,address systemic barriers,promote career development for all,including traditionally underserved groups,and positively impact our broader communities.For everything we create whether it be employment policies,how we design our stores,how we interact with business partners,or how we engage with our guests and communitieswe strive to approach it from a place of inclusive design.We centre those most impacted and those who may be currently experiencing the greatest barriers so that we generate delightful and equitable experiences for all.Together,we are building an ecosystem of inclusion that results in increased representation and a healthier work-andmarketplace.We know that the path forward is together and that it will not be a sprint.It will require endurance,courage,integrity,and mutual care.I invite you to celebrate and reflect on our progress and fuel upfor the journey we have ahead of us.5 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementSTAC I A J O N E S Vice President,Inclusion,Diversity,Equity,and ActionWho we areWe are lululemon.Our vision is to create transformative products and experiences that build meaningful connections,unlocking greater possibility and wellbeing for all.We are a business rooted in purpose:we elevate human potential by helping people feel their best.With a company history that dates back nearly a quarter century,we are working to leverage our passion for product innovation,wellbeing,and mindfulness into platforms from which we can inspire and accelerate positive change.We are using our expanding global presence to support people and communities,develop innovative products and services for our varied markets,and engage partners toward achieving a sustainable,healthy,and inclusive future,together.1 Included within the Peoples Republic of China as of January 31,2022,there were nine stores in Hong Kong Special Administrative Region,five stores in Taiwan,and two stores in Macao Special Administrative Region.Europe 37storesPeoples Republic of China1 86storesAsia-Pacific 64storesNorth America387storeslululemon in 2021 numbers53new stores opened574stores29,000 employees17countries where we have retail stores240,000 workers of suppliers who make our products 6 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementOur visionWe create transformative products and experiences that build meaningful connections,unlocking greater possibility and wellbeing for allBe HumanOur people succeed because we create an environment that is equitable,inclusive,and fosters growthBe WellOur communities thrive because we contribute to conditions that support physical,mental,and social wellbeingBe PlanetOur products and actions avoid environmental harm and contribute to restoring a healthy planetProduct innovationCreate ongoing“Oh shit!”moments in the industry and for our guests“Double Mens”Guest experienceA guest-centric experience that creates connection,celebrates product,and cultivates community“Double Digital”Market expansionA truly global brand that expands lululemon to new guests and communities around the world“Quadrupole International”The Power of Three 2 is our enterprise growth plan to 2026.It builds on the success of our achievements and speaks to the priorities that will drive revenue over the next five years.It is underpinned by our Impact Agenda.Our Impact Agenda is our strategy toward a sustainable,equitable,healthy future.It guides the goals we have set to advance positive social and environmental impact as part of enacting our enterprise growth plan.Together,the Power of Three 2 and our Impact Agenda form our enterprise strategy,a comprehensive and strategic roadmap for delivering on our purpose as a business.Our enterprise strategy Our valuesPersonal responsibility We act with honesty and integrity,taking full accountability for our choices and their impact.InclusionWe remove barriers to equity so that everyone has a sense of belonging.ConnectionWe build trusting relationships by valuing and celebrating each humans uniqueness.CourageWe have the heart and strength to do big,challenging,and important things for each other and our planet.FunWe infuse fun and laughter into all we do,which allows us to turn work into play.Our purposeWe elevate human potential by helping people feel their bestPeopleTo develop inclusive leaders who enable growth and wellbeing for allPlanetLead the way in reducing environmental harm and contribute to restoring a healthy planet7 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementHow we create valueValue creation modelWe create societal,environmental,and economic value throughout our value chain.Below are key examples of value creation and how we track progress.SELECT 2021 METRICSInnovation and designWe advance more sustainable materials and circular,inclusive product design,innovate manufacturing processes,and deliver guest opportunities that extend product life and divert product from landfill.3 innovative partnerships(Mylo Consortium,Genomatica,LanzaTech)38%more sustainable materials in products60 cross-functional leaders certified in inclusive designpracticeManufacturing and supplierecosystemManufacturing and supplier ecosystems contribute to economic value and job creation in countries around the world.We prioritize our work with suppliers to foster more sustainable and equitable initiatives.These include safe and respectful working conditions,as well as wellbeing and empowerment initiatives.We also work with our suppliers to improve manufacturing processes that use less water and energy,better chemistry,and more sustainable packaging solutions.240k makers 20k makers with access to wellbeing tools and resources US$2.4M on maker wellbeing programsLogistics and distributionWe have six owned distribution centres and operate a global system of logistics and transportation.While pandemic supply chain challenges make this difficult,we are working to advance more carbon-efficient ways to get our products from factory to retail.We are maintaining zero waste status in our owned distribution centres and have shifted to renewable electricity by purchasing Energy Attributes Certificates(EACs)for our owned and operated facilities.100%renewable electricity 6 zero waste distribution centresLeadership and employeesWe are a team of committed people who care deeply for each other,believe anything is possible,and relentlessly pursue our growth together.We employ over 29,000 people globally.Our highest focus is on employee growth and development.Our inclusive leadership programs support employees in developing their skills and growing as leaders in the world.5,500 employees attended leadership training programs,including a new 1x1 coaching program429 mentees and mentors participated in our Mentorship program Omni-channel guest experienceOur products and experiences support physical,mental,and social wellbeing.Through our omni-channel strategy,we deliver product options that meet the diverse needs of our guests,as well as experiences that strengthen community connections around the world.400 new styles launched 10k classes on demand through MIRRORCommunity engagementWith our Educators,ambassadors,and events,our ecosystems support thriving studios and livelihoods,as well as more equitable access to wellbeing through social impact grants and partnerships with local non-profit organizations.Globally,we build large-scale partnerships and support organizations that offer tools and resources for physical,mental,and social wellbeing.750 organizations collaborated with Centre for Social Impact since 20161.4M people accessed tools and resources for wellbeing550 global and store ambassadorsBe HumanBe WellBe PlanetK E Y8 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementOur Impact AgendaOur Impact Agenda guidesand is integrated intoour business strategy and operations,helping to accelerate inclusive and more sustainable progress and advance a shared culture of positive impact throughout lululemon.We recognize that the wellbeing of people,communities,and the planet are connected.This holistic approach is reflected through the three pillars of our Impact Agenda:Be Human,Be Well,and Be Planet.We created our Impact Agenda in response to the need for businesses to deliver end-to-end impact,accelerating a step change in how our companyand the wider industryoperates.Refining our focusTo drive positive change,we must understand the global sustainability context as well as the landscape of our industry today,including the social and environmental topics that matter most to our business and stakeholders.In 2019,we conducted a materiality assessment to define key issues that would inform our strategy,laying the groundwork for meaningful,measurable action.In 2022,we conducted research and interviewed select stakeholders,including academics,non-governmental organizations(NGOs),and industry associations,to review and refresh the issues that matter most.Our analysis did not change our Impact Agenda focus areas or goals but did highlight emerging topics such as biodiversity.Detailed results of this strategic refresh can be found in the Supplement.We map each key issue to focus areas within our Impact Agenda and relevant sections of our Impact Report,ensuring our strategy and efforts target and positively impact these critical areas.To ensure alignment of our impact with global requirements,we align our three pillars with relevant United Nations Sustainable Development Goals(SDGs).We then activate them by:Embedding the pillars in our culture and building accountability foractioning goalsLeading by example and partnering to innovate for the futureCommunicating with and engaging our collectiveCollaborating and advocating for systems changeBe PlanetClimate actionSustainable product and material innovationCircularity and new guest modelsWater and chemistry Packaging and waste7.Affordable and Clean Energy12.Responsible Consumption and Production13.Climate ActionSDGs supportedBe WellEquitable access to wellbeing tools and resourcesResearch,advocacy,andinclusive innovation3.Good Health andWell-beingSDGs supportedBe HumanInclusion,diversity,equity,and actionEmployee empowermentFair labour practices and wellbeing of people who make our products 5.Gender Equality8.Decent Work and Economic Growth10.Reduced InequalitiesSDGs supported25.Gender Equality10.Reduced Inequalities2 Numbers tied to UN Sustainable Development Goals9 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementHow we govern impactGROUPRESPONSIBILITYBoard of DirectorsIncluding:Corporate Responsibility,Sustainability,and Governance(CRS&G)Committee People,Culture,and Compensation(PC&C)Committee Audit CommitteeActs as a fiduciary to:CRS&G:Oversees our Impact Agenda.Reviews stakeholder engagements,reviews goals and policies,and monitors progress and ESG reporting.PC&C:Oversees compensation,talent management,succession planning,and diversity and inclusion,as well as risk monitoring,compliance,and related activities.Audit:Oversees risk assessments,including compliance risks to our business and supply chain,and monitoring and complying with disclosure requirements.Executive Impact CouncilInclusion,Diversity,Equity,and Action(IDEA)Advisory Council CEO and Senior Leadership team,as well as members from supply chain,product,legal,brand,finance,and people and culture,led by VP Sustainable Business and Impact and VP,IDEA.Oversees,executes,and reports on Impact Agenda and IDEA commitments.Integrates the Impact Agenda into our business strategy.IDEA Function Sets global IDEA goals and supports a culture of inclusion to expand inclusion,diversity,and equity across the organization.Oversees People Networks and task forces for regions and specific business functions.Sustainable Business and Impact (SBI)Function Drives social,environmental,and governance strategy across the organization.Sets Impact Agenda strategy,goals and commitments,enterprise integration,and stakeholder management.Works cross-functionally to advance a culture of impact and delivers progress in key areas.Steering Committees and Advisory GroupsIncludes:IDEA External Advisory Council:Provides expertise on programs.Responsible Supply Chain Council:Oversees key programs for a responsible supply chain and current public developments.Centre for Social Impact Advisory Board:Advises and provides input to strategy and key program areas.Climate Activation Council:Drives strategy and collaboration to identify and execute a pathway to science-based targets.Select Strategic Initiative Steering Committees:Oversee initiatives that require global cross-functional engagement,including lululemon Like New and more sustainable packaging.Collaboration invites change and accelerates progress.With this in mind,we developed a governance structure that brings together diverse people who have accountability as business leaders and are passionate about transforming the current social and environmental status.We have developed a multi-level governance structure to foster collective progress against our Impact Agenda as part of our enterprise strategy.This includes activating meaningful,company-wide practices that deliver on our commitments and evolve our ambitions to stay relevant in a changing world.RESPONSIBLE BUSINESS CONDUCT Ethical conduct Ethical conduct is the foundation of how we do business.To root integrity and respect for everyone in our company culture,we maintain a Global Code of Business Conduct and Ethicsa blueprint for responsible business.At the same time,our Vendor Code of Ethics(VCoE)establishes expectations of our suppliers.Data privacy protectionPeople trust us with their personal information.It is our responsibility to protect that data with strict company security policies.We also follow applicable data protection and privacy laws to ensure employees,guests,and business partners know their information is in safe hands.This is overseen by the Audit Committee,our Chief Information and Security Officer,Data Privacy Officer,and Chief Compliance Officer.Performance-related compensationWe believe in rewarding exceptional performance.The PC&C Committee sets competitive levels of compensation to attract,retain,and motivate the most qualified directors and executive officers who contribute to success and align with our culture.As we evolve our Impact Agenda,we continue to monitor the future role ESG metrics could play in our compensation program.10 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementWe maintained gender pay equity across our entire global employee population and full pay equity in the United States for the fifth year in a row.We implemented ZDHC Manufacturing Restricted Substances List(MRSL)at 100%of priority suppliers in 2021,one year ahead of our target date.We procured 100%renewable electricity to power our owned and operated facilities.We launched the lululemon Centre for Social Impact in 2021,which aims to break barriers that prevent access to wellbeing.We met our Scope 1 and2 science-based target to achieve a 60solute reduction of GHG emissions in all owned and operated facilities.A year of progress and learning 2021 represents the first full year of implementing our Impact Agenda,building on years of previous impact work.lululemon is committed to continuous learning to evolve and improve how we contribute to wellbeing for people and our planet.We achieved several impact goals,demonstrating our commitment to action.Here is some of the progress we have made over the past year.11 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementIt is important to celebrate our shared wins and build on these,and to recognize progress is ongoing,with significant industry-wide challenges ahead of us.To achieve our vision,we are always innovatingbuilding on our successes,learning from our failures,and taking every new challenge as an opportunity to learn and grow.We appreciate the connectedness of our business to the wider global context and acknowledge our impact on the future and those around us,as well as the effect that changes in important areas can have for others.The global business environment presents challenges that can negatively impact lululemon and our ability to deliver on our Impact Agenda commitments.We approach these dynamic,complex challenges by listening,engaging with a variety of stakeholders,taking intentional steps to make change,and continuously adjusting as we learn more.In 2021,we identified our most pressing challenges,and have taken steps to address them,ensuring the best path forward.Increasing global inequities in wellbeing.Shifting consumer and employee expectations and preferences(e.g.,options for pre-owned products).Evolution in product and value chain traceability expectations.Interconnectedness of global context and events,and our business and industry operations(e.g.,supply chain complexity).Legislation and regulatory changes.Regional and national regulating bodies continue to evolve legislation on environmental,social,and due diligence topics.A year of progress and learning Global challenges we are addressing:12 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementThe wellbeing of people,communities,and the planet are intricately intertwined.We developed our Impact Agenda with these connections at the forefront:three distinct pillars designed to work together to achieve a rapid,equitable,and more sustainable transition.Driving our actions are 16 targeted goals that,together,will deliver progress toward shared wellbeing.16 goals for a healthier future TopicGoalMetricBaseline YearBaseline2021 Results3GoalGoal YearStatusInclusion,Diversity,Equity,&ActionReflect the diversity of communities we serve and operate in%of racial diversity of assistant store managers and directors4 202021#0 23%of racial diversity of all employees in global stores42020317 23Employee EmpowermentBe the place where people come to develop and grow as inclusive leaders for the world#of hours of paid training and volunteer time for all full-time employees5202113.513.5402025Expand full pay equity%of employees with full pay equity 2020100a000 22People Who Make Our ProductsMake wellbeing programs available to makers7#of cumulative makers in our supply chain who participate in wellbeing programs202120,00020,000100,0002025Achieve Fair Labor Association(FLA)accreditationQualitative2020Updated Vendor Code of EthicsCompleted onboarding stageAchieve FLA accreditation2024TopicGoalMetricBaseline YearBaseline2021 Results3GoalGoal YearStatusInclusive Access to Wellbeing&AdvocacyProvide access to wellbeing tools and resources#of cumulative people reached 20211.4M 1.4M10M2025Invest to advance equity in wellbeing through the lululemon Centre for Social Impact Total amount invested2021$13.7M8$13.7M$75M2025Launch the lululemon Centre for Social Impact QualitativeNANACentre launchedLaunch Centre2021Be WellBe HumanPERFORMANCE DASHBOARDK E YGetting startedMaking progressCompleteOff track,plans in place3 For more information on our 2021 results,please refer to the relevant sections of the Impact Report.4 Includes stores in North America,Australia,New Zealand,Europe,and Middle East.5 Beyond onboarding training and mandatory compliance training.6 We maintain 100%gender pay equity within our entire global employee population,meaning equal pay for equal work across genders.We have achieved pay equity across all areas of diversity in the United States and are seeking,to the extent permitted under local law and regulation,to collect the data necessary to confirm complete pay equity globally.7 In 2021,we updated the language of this goal from“maker empowerment programs”to“maker wellbeing programs”as we further refined our strategy.Our goal to reach 100,000 makers is included within our goal to provide tools and resources to 10 million people.8 lululemon made a US$13.7 million contribution to the Centre for Social Impact,$11.9 million of which has been contributed directly to social impact organizations.The remaining$1.8 million includes$1 million toward a Donor-Advised Fund to be advised for future grantmaking as well as operational costs.13 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet Supplement16 goals for a healthier future TopicGoalMetricBaseline Year Baseline2021 Results3GoalGoal YearStatusClimate ActionMeet our 2030 science-based climate targets%of absolute reduction in GHGs in all owned and operated facilities(Scope 1 and 2)201818,248 tCO2e-82%-60 30%of intensity reduction in GHGs in purchased goods and services,and upstream transportation and distribution(Scope 3)201899.2 tCO2e/net revenue from operations 4%-60 30Source renewable electricity to power our owned and operated facilities9%of renewable electricity 2018100 21Sustainable Product&Material InnovationMake our products with sustainable materials and end of-use solutions%of products made with sustainable materials202027)0 30Achieve sustainable materials for our products%of total sustainable materials procured for our products2020308u 25Circularity&New Guest ModelsOffer our guests new business models that extend the life of products%of stores in North America piloting internationally 2021 220 25Water&ChemistryReduce freshwater use intensity with our priority wet process suppliers%of reduction in freshwater use intensity2021126 l/kgBaseline year-20 25Implement ZDHC MRSL at priority suppliers%of compliance from priority suppliers with the ZDHC MRSL202110000 22Packaging&WasteReduce single-use plastic packaging per unit%of intensity reduction of single-use plastic packaging20210.016kg/unitBaseline year-50 25Be PlanetPERFORMANCE DASHBOARD9 We procured 100%renewable electricity to power our owned and operated facilities,with 99%sourced in compliance with the RE100 technical criteria.However,due to unavailability of an Energy Attribute Certificate(EAC)program,lululemon was unable to source renewable electricity in South Korea.Consequently,renewable energy credits were procured from a nearby geography.14 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementK E YGetting startedMaking progressCompleteOff track,plans in placeIN THIS SECTION17 Inclusion,Diversity,Equity,and Action 20 Employee empowerment22 People who make our productsBe Human15 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementWe envision an equitable world.We are taking thoughtful steps toward a more equitable future so our guests,employees,ambassadors,and business partners,including the people who make our products(our makers)feel represented,welcome,respected,and valued.We actively create an inclusive work environment that reflects the global communities we serve.We support the safety and wellbeing of our makers,collaborating with partners and stakeholders to advance positive impact.Be Human Chapter Illustration“Humans are a spectrum of colours.Every human being is different,yet we all have the same point of originour first breath.Through energy we live,grow,and nurture our bodies.We sustain ourselves to continue the cycle of life handed down from our ancestors.”Jacquie Comrie,report illustrator16 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementWHAT WERE DOINGInclusion,Diversity,Equity,and Action(IDEA)is complex and transformative.To have maximum impact on people,culture,and business performance,we are deliberately integrating IDEA beyond human resources into every part of our organization.This requires intentional pursuit at our most senior levels,with clear ownership and commitment to creating accountability across the business.In 2021,we refined our approach to focus on five key areas:Listening&Advocacy,Policy&Process,Programming&Initiatives,Learning&Development,and Strategy&Partnering.By listening to employees and acting on their feedback,we make business decisions that positively impact our IDEA targets.Our CEO,as well as many of our senior leaders,continue to participate in intimate listening forums and discussions with employees,with a focus on underserved groups,and act based on what they learn.In 2021,we held nearly 50 listening and connection sessions throughout our global Store Support Centres(SSCs),retail operations,and distribution centres.We have 10 People Networks(formerly known as Employee Resource Groups)to represent employees who have marginalized and historically underrepresented identities.Our global advisory board is made up of lululemon ambassadors who bring diverse knowledge and skills to inform our actions,hold us accountable,and drive meaningful change.We also integrate IDEA into training including IDEA toolkits to help build actionable,inclusive behaviours.Where possible,we partner with other organizations to strengthen our approaches and broaden our influence.Inclusive designWhen we design with inclusion in mind,we design for as many people as possible and honour human diversity.We strive to use inclusive design across our business,including future physical and digital workspaces,creation of employment policies and programs,marketing,and delivery of product and guest interactions.In 2021,we launched the Inclusive Design Certification program with OCAD(Ontario College of Art&Design)Universitys Inclusive Design Research Centre(IDRC).This 12-week program supports employees in applying inclusive design principles in their roles.Following the course,94 percent of participants reported being able to articulate the business and social impact of inclusive design,and 97 percent were able to identify and mitigate common design errors that create barriers for usability.Diverse representationCompanies traditionally focus on diverse representation,which is important but doesnt always provide an accurate picture of the nuances of inclusion.We use a comprehensive Demographic Survey Inclusion Index,an annual,voluntary global employee survey.This helps us understand the demographics of our employee base and assess our inclusion performance.Our 2021 survey had a 78 percent participation rate.Results indicate we have made meaningful progress toward our representation goals of racial diversity.As of 2021,our global workforce is 38 percent racially diverse,a three percent increase from 2020.In 2021,racial diversity of employees at our global stores saw the largest increase of all functions,at six percent.Building diverse leadership is important,and we increased racial diversity of assistant store managers,directors and above,by two percent in 2021.WHY IT MATTERSInclusion,diversity,and equity are foundational for shaping and building our company,industry,and communities,and for creating a shared sense of respect and belonging.This is particularly important when it comes to underrepresented groups.As an organization committed to wellbeing,we work to understand actual and perceived inequities and take action at all levels.We must widen our lens,work collaboratively,and be in a constant state of learning,unlearning,and relearning.Taking action requires us to think differently,listen intently,and understand that a“one size fits all”approach doesnt work.By continuously developing toward an inclusive,diverse,and equitable organization,we reflect a variety of perspectives and meet the needs of the global communities we serve.SDG 5.Gender EqualitySDG 10.Reduced InequalitiesOUR GOALSReflect the diversity of communities we serve and operate in by 2025.To reach that ambition,we will increase representation of racially diverse backgrounds to at least:30%of assistant store managers(ASMs),directors,and above by 202310 40%of all employees in our global stores by 202310Inclusion,Diversity,Equity,and Action 10 Includes stores in North America,Australia,New Zealand,Europe,and Middle East.17 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementInclusion,Diversity,Equity,and Action EMPLOYEE RACIAL DIVERSITY DATADirector and ASM or aboveStore employees Store Support Centre(SSC)employees 2021:23%Racially diverse2021:37%Racially diverse2021:41%Racially diverseEquitable solutionsCreating a culture of inclusion requires us to address inequitable systems and processes.To this end,we launched ongoing,cyclical reviews of our policies and practices in 2021.This process,in addition to our Demographic Survey Inclusion Index,uncovered key opportunities to address systemic barriers experienced by women of colour,and by individuals who live with mental and physical disabilities.Supplier inclusion and diversityWe are expanding our IDEA initiatives to our suppliers to support diverse and inclusive business growth that positively impacts our communities.In 2021,we developed a Supplier Inclusion and Diversity Strategy,with a focus on indirect suppliers(i.e.,companies that provide non-product goods and services to our stores and offices).To start,we will concentrate on US suppliers and expand globally over time.This program intends to grow engagement with companies that are at least 51 percent owned,operated,and controlled by women,underrepresented racial groups,veterans,persons with disabilities,or those who identify as LGBTQ2IA .Our goal is to launch the program by the end of 2022.We also learned that our inclusion scores increased slightly.To further this work,in 2021,we worked closely with our senior leaders to discuss inclusion opportunities and held our senior leaders accountable through function-specific objectives and key results.We also continued to roll out our company-wide IDEA education toolkits,conducted regular store and DC visits to meet with and listen to employees,and further evolved our listening channels.We acknowledge diversity and inclusion can take on different meanings depending on the region or country,so we are working on evolving our goals to better serve each community.2020:21%Racially diverse2020:31%Racially diverse2020:38%Racially diverse18 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementThrough inclusive design,we foster innovation that promotes access to all.Inclusive design enables us to develop digital and physical products,policies,and services by,with,and for historically marginalized communities.And we build solutions that affirm and support our people globally.When we design for inclusion,we generate resilient solutions so we can adapt with changes to culture,technology,and emerging needs.The impacts of our Inclusive Design Pilot program stretch across functions,portfolios,and global markets.For instance,last year the Futures Innovation team created an inclusive scoring matrix to select research agencies that centre on marginalized communities and use equitable design practices.Our Product and IDEA teams engaged an Inclusive Sizing Advisory Board to ensure the many identities and lived experiences of our diverse collective are represented in our approach to product size assortment and stance on body neutrality.Our Product team applied these learnings to outfit Team Canadas Olympic and Paralympic athletes in lululemons first Olympic Games as the official outfitter.Inclusive design also propels our partnership with the Adaptive Training Foundation(ATF),a training facility in Texas for people with disabilities.They are participating in a field-testing program developed and launched by our Product Design team and are providing feedback on how to adapt our gear to people with disabilities.Internally,our People and Culture team co-designed key aspects of our evolved talent development philosophy with employees from underserved communities.By centering their voices through the creation of the processes and policies used to manage performance and develop talent,we work to ensure any unique barriers they experience are addressed and lifted.We are committed to being in a community of practice that designs inclusively through participatory approaches and building relationships to get to community-driven solutions that bring joy and equity to all.In the coming years,we will be deepening our learning and practice of inclusive and equitable design.SpotlightInclusive design for a better world19 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementWHAT WERE DOINGWe have an essential role in supporting our employees in their unique journey to realize their full potential.We believe in cultivating leaders within lululemon who also promote betterment in the world.We foster an environment where our employees have equitable access to opportunities,are paid equitably,and feel their wellbeing is supported.We are striving to create an inclusive work environment so everyone feels respected and valued.Through our employee leadership programs and support programs,we are creating an organization where each leader has the power to find and fulfill their unique purpose and contribute to a healthy future.LeadershipWe invest in people to uncover and appreciate their unique strengths.We offer many types of learning that are accessible to all full-time,part-time,and fixed-term employees.Below are a few of the highlights from 2021:Through the lululemon Mentorship program,were supportingour people,building their knowledge,growing their careers,and strengthening inclusive leadership skills.In 2021,429mentees and mentors signed up for the program.55 percentof mentees and 25 percent of mentors self-identified as partof an underrepresented group.We offered a new Leader Series to nurture and grow inclusiveleaders for a better world.Cohorts were delivered in sixlanguages.In 2021,over 1,200 employees(representing89percent of our people managers)attended theLeaderSeries.In 2021,over 5,500 employees attended leadership trainingprograms,including a new 1x1 coaching program,anExecOnline Learning Platform,a Business Acumenprogram,and our global lululemon Leadership Summit.We continue to provide ongoing culture offerings,whichinclude monthly skill-builders tied to our Values in Action,Purpose,Vision&Goals,and Practice of Leadership.Its challenging to measure the exact number of hours of paid training for all our employees.We do know that as of 2021,our Educators in North America(representing approximately 17,000out of our 29,000 global workforce)received a minimum of 13.5hours of training.This included an eight-hour paid VALUES Day(Volunteer,Awareness,Life,Unity,Empowerment,Support),so they can take time off for activities such as volunteering,observance,and self-reflection.Educators also got a minimum of 5.5 hours per year dedicated to personal and professional development.While many other employees may receive more training,we are using 13.5 hours as our conservative 2021 baseline.In 2022,we launched lululemonU,an online learning portal for allemployees.This will expand training for all employees,helping us meet our 2025 goal of 40 hours.Movingforward,wewill continue to improve our measurement and monitoring of globaldevelopmentopportunities.WHY IT MATTERSEmpowered employees are central to our culture,values,and business success.They help us achieve sustainable,inclusive business growth and stay resilient to change.They also help us ensure we remain innovative and at the forefront of our industry to best support our guests and future generations.When we invest in leadership and develop opportunities for ouremployees,we are investing in our business success.SDG 5.Gender EqualitySDG 8.Decent Work and Economic GrowthOUR GOALSBe the place where people come to develop and grow as inclusive leaders for the world.To reach that ambition,we will:Provide at least 40 hours of paid training andvolunteer time to all full-time employees by2025 per year11 Expand gender pay equity to full pay equity for100%of employees in all markets that permitcollection of that data by 202212EMPLOYEE LEADERSHIP GOALEmployee empowerment11 Paid learning and volunteer time is in addition to onboarding training and mandatory compliance training.12 We follow local laws and regulations and where we are able to collect the data necessary to confirm complete pay equity,we will do so.Full pay equity includes gender and race and our reporting scope is currently limited to US only.#hours of paid training and volunteer time for all full-time employees 40 hours2021 baseline13.5 hoursTarget year:202520 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementEMPLOYEE WELLBEINGTo foster the wellbeing of our employees,we provide a range of benefits,including health and dental,retirement savings plans,an employee share purchase plan,and yoga and fitness.We also work to support work-life balance and personal goals.We continue to provide an annual paid VALUES Day(Volunteer,Awareness,Life,Unity,Empowerment,Support)globally,so employees can take time off for activities such as volunteering,observance,and self-reflection.We also offer competitive paid time off and sick leave,as well as a Sweaty Pursuits benefit,which provides$200 in local currency for full-time employees to participate in wellbeing and fitness activities.We know mental wellbeing is imperativelululemon resources include a mental wellbeing toolkit and Employee Assistance program.Weve also expanded mental health training to reach store managers and people leaders,as well as our employees.In 2021,275 employees participated in the program,bringing the total number of trained people to just over 400.By the end of 2022,we will offer mental health training to all people leaders globally and by the end of 2023,to all employees.To advance our culture of impact for employees and build our collective capacity for positive social change,we will launch an Impact Fellowship program in 2022.These paid,application-based fellowships will provide the opportunity for employees to take time away from their current role to develop valuable career experience working directly with the Centre for Social Impacts non-profit partners.We Stand Together FundThe We Stand Together Fund was originally created to provide support to employees experiencing additional financial hardship during COVID-19.In 2021,we expanded the fund to assist employees who face other challenges,such as natural disasters,humanitarian issues,and personal hardship.At the end of 2021,over US$250,000 had been contributed to the fund by lululemon and employees,and 107 applicants were awarded a total of US$107,373.Remaining funds will continue to support beneficiaries in future years.Employee empowermentWe maintain 100 percent gender pay equity within our entire global employee population,meaning equal pay for equal work across genders.We have achieved full pay equity in the United States,and are seeking,to the extent permitted under local laws and regulations,to collect the data necessary to confirm complete pay equity globally.Compensation and pay equity lululemon is committed to being in the top quartile of global retailers for store compensation.As part of this commitment,in 2021,we raised starting base pay for Educators in North America to US$15$17 per hour,depending on store location.Our starting base pay for Key Leaders in North America is now US$17$19.50 per hour,depending on store location.As a result,93percent of Educators and 78 percent of Key Leaders received a base pay increase.This increase is on top of our team-based bonus program,which remains unchanged and provides our people with the potential to earn up to an additional US$3perhour on average,and up to an additional US$6perhour,depending on store-based goals and results achieved.Increases in compensation improve our ability to attract and retain talent to maintain our high-caliber store experience for our guests.Morning warm-up at our Distribution Centre21 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementWHAT WERE DOINGTo create a responsible supply chain,and effect lasting,positive change,we are actively leaning into our commitment to safeguard the working and living conditions of people who make our products.In 2021,we worked with 90 finished goods facilities(Tier 1)in 17 countries and approximately 65 raw material suppliers(Tier 2)in 14 countries.13 Our suppliers employ over 240,000 people in the factories that make our products,and approximately 74 percent are women.We expect all suppliers to uphold the strict responsible supply chain and labour practices outlined in our Vendor Code of Ethics(VCoE).We disclose our facilities twice per year,and report to the Open Apparel Registry.Refer to our public Supplier Declaration List for more information about the suppliers we work with.WHY IT MATTERSPeople have the right to safe,healthy working conditions.Challenges in working conditions and labour rights have been well documented across the apparel industry.As a global brand,we take our responsibility for supporting the safety and wellbeing of suppliers employees(our makers)seriously.Because we dont own our manufacturing facilities,we take great care in selecting our suppliers through a screening process that helps identify suppliers who share our company values.We believe a strong,resilient supply chain that retains and empowers its workers is critical to the success of our business and industry,and is the foundation for a more equitable,sustainable future for all.SDG 5.Gender EqualitySDG 8.Decent Work and Economic GrowthSDG 10.Reduced InequalitiesOUR GOALS Make wellbeing programs available to more than 100,000 makers across our supply chain by 2025.Achieve Fair Labor Association(FLA)accreditation by 2024.13 We disclose the facilities for our Top 10 raw material suppliers,which account for approximately 80%of our fabric mills.See Supplier Declaration List for details.People who make our products Makers at Tan De facility,Vietnam22 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet Supplement14 Includes all facilities on our Supplier Declaration List.This includes all Tier 1 finished good facilities,the subcontractors of our Top 10 finished goods facilities,and our Top 10 strategic raw material suppliers,which represent about 80%of our total fabric mills.We work with suppliers who share our values and collaborate with us to uphold robust standards,address systemic challenges,and improve the wellbeing of our makers.We are a participating company of the Fair Labor Association(FLA)and are pursuing FLA accreditation.This provides us with an industry-leading framework for responsible supply chain practices,and the opportunity to help advance progress within the industry.Beyond labour compliance,we support maker wellbeing,building on years of collaboration with our suppliers on workplace practices and community support initiatives.Our responsible supply chain approach is built on three pillars,and supported by a foundation of global standards and best practices,management systems,and data analytics:Monitoring:Conduct supplier monitoring and risk analysis,work with suppliers to remediate issues to meet or exceed VCoE expectations,support their capacity to address root causes,and elevate suppliers to go beyond compliance for more sustainable development.Internal Practices:Integrate responsible sourcing and maker wellbeing practices throughout our company,including responsible purchasing practices and internal training.Building Better:Collaborate to address industry-wide systems challenges,such as fair compensation and maker wellbeing,and offer supplier training.People who make our products Location of disclosed suppliers14North AmericaEl Salvador 1Haiti1Mexico1United States2South AmericaColombia1Peru7Europe,Middle East,and AfricaEgypt1Turkey2Asia-PacificBangladesh3Cambodia10China Mainland30Indonesia7Japan2Philippines4South Korea2Sri Lanka16Taiwan22Thailand1Vietnam33Maker at Tan De facility,Vietnam23 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementIn 2021,we enhanced our data collection and performance monitoring processes to ensure detailed compliance and facility monitoring aligns with our updated VCoE.We are implementing a new responsible supply chain data management system to better identify trends in working conditions and remediation processes.In 2021,we ranked#1 on the KnowTheChain benchmark,which focuses on eliminating forced labour in global supply chains.For more information,refer to our KnowTheChain disclosure and Supplement.Fair compensation in our supply chainWe believe that every maker in our supply chain should earn a wage that allows them to have a decent standard of living.However,due to the structure of the global apparel industry,garment workers wages remain low in many regions.The COVID-19 pandemic has further intensified this issue.Achieving fair compensation in supply chains is a global challenge that must be approached in collaboration with governments,industry,and civil society.As a participating company in FLA,our definition of fair compensation is aligned with the FLA Workplace Code of Conduct.Through our VCoE facility assessments,we verify that all makers in our suppliers facilities are consistently paid,at a minimum,in compliance with legal requirements for regular work and overtime.Many of our suppliers already pay above legal minimum wage.We work with the FLA to collect and analyze worker wage data to benchmark progress and will develop a fair compensation blueprint as part of our accreditation journey.In 2022,we are collecting wage data from key suppliers to carry out a fair compensation gap analysis and further develop our fair compensation roadmap.Monitoring,Vendor Code of Ethics,and our responsible supply chain Building innovative products requires many hands and considerable expertise.Our Responsible Supply Chain team prioritizes the wellbeing of our makers by helping our suppliers address systemic challenges to workplace standards,including support with best practices and resources throughout the COVID-19 pandemic.Our Vendor Code of Ethics(VCoE)outlines our unwavering commitment to respect human and labour rights and promote safe and fair working conditions for people in our supply chain.In 2021,we published our evolved VCoE and Compliance Benchmarks,which align with international standards and FLA requirements.We also updated our facility assessment methodology and will be implementing these new tools in 2022 to meet continuously evolving industry standards.We completed the onboarding stage of the FLA accreditation process and the FLA Sustainable Compliance Initiative(SCI)assessments in three of our facilities.Were supporting facilities to complete remediations as required.These assessment results and corrective action plans are publicly available on the FLA website.In 2021,we monitored our active suppliers through annual assessments and self-assessments,as well as follow-up assessments where required.We also onboarded new suppliers through our new supplier approval process.183 total VCoE assessments were completed in 2021,with 128 conducted by lululemon,38 by an accredited third party,and 17 as supplier self-assessments.Two percent of our active facilities did not pass their assessments.In all cases,we worked with our suppliers to implement Corrective and Preventative Action Plans(CAPAs).As a last resort,if more sustainable resolutions cannot be achieved,we responsibly exit the business relationship.We did not exit any suppliers in 2021 due to VCoE performance.See our Supplement for more details on our findings.People who make our products Maker at RSI facility,Vietnam24 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementSupply chain evolution In the apparel industry,the pandemic has resulted in numerous factory closures,unstable production demand,and reduced or lost wages for many makers.Since the beginning of COVID-19,we have been committed to responsible purchasing practices,including not cancelling orders in production or completion,and providing flexibility in purchasing agreements.We maintain close contact with our suppliers to support safe conditions and adequate wage payment for makers.We have publicly endorsed the International Labour Organizations Call to Action to support robust global social safety measures.lululemon has worked in collaboration with our suppliers to support payment to makers throughout the pandemic.For example,in 2021,we worked with our Vietnam suppliers to encourage payment of at least 50 percent of worker wages,despite government-mandated factory closures that did not legally require wage payment.Our supply chain continues to grow to support our business,with new countries and facilities added to our portfolio to allow for production risk diversification and added capacity.We use industry tools to assess human rights,and environmental and business continuity risk before entering new countries.Maker wellbeingWe collaborate on existing industry partnerships and work directly with our suppliers through training as well as grants to support community wellbeing projects.In 2021,we contributed US$160,000 toward maker wellbeing through our annual Supplier Grant program,reaching 20,000 makers in service of our 2025 goal to reach 100,000 makers.We supported 16projects with 12 different suppliers across 10 countries.Thisprogram supports projects that offer health,education,yoga,and meditation initiatives for factory workers and their localcommunities.We share costs with the supplier by paying up to 50 percent of each project.We also supported our suppliers in pivoting the use of supplier wellbeing grants for COVID-19 reliefinstead.Some examples of recent initiatives include:Far Eastern Apparel(Suzhou)Co.,Ltd.,Vietnam A Womens Healthcare project to provide training on health and wellness and financial management for female workers.Sintex International Ltd.,PhilippinesA Food Gardens Movement project to provide capacity training on setting up,creating,and maintaining food gardens.Textil del Valle S.A.,BIC,PeruMakes bicycles available to employees to provide access to movement as alternative transportation,and to reduce their carbon footprint.Textil delValle also provided harvested organic vegetables from their farm to their employees.MAS Active Trading Pvt.Ltd.,Sri LankaRenovation support for the Manikhinna Divisional Hospital,focusing on the womens and pediatric wards.MAS also funded a project to provide employees and families with all-inclusive access to healthcare.In 2021,we also engaged Women Win,a non-profit organization focusing on strengthening womens economic resilience through impactful partnerships and holistic approaches.They supported us to conduct industry benchmarking and an expanded multi-year plan for wellbeing programs that will start in 2022.For more information on maker wellbeing,please refer to the Spotlight Story and Be Well section in thisreport.Makers rights Were partnering for real,lasting change in our supply chain.Through our Foreign Migrant Worker Standard and program,we are helping to raise standards and build shared approaches that benefit garment workers.Our Foreign Migrant Worker Standard outlines our expectations with respect to foreign migrant workers,including a commitment to ensuring that workers will no longer pay hiring fees,a long-standing practice in theapparelindustry.Through our supply chain traceability work,we are focusing on the rights and treatment of makers in Tiers 3 and 4 in the supply chain,more sustainable fibres and materials,and animal welfare in alignment with current and future certification standards.This work helps us gain visibility and develop strategic programs to improve rights deeper into our extended supply chain.In 2021,we also participated in the Better Buying Partnership Index.This will deepen our understanding of our suppliers perceptions of lululemon and help us learn about ways to continuously improve our program.In 2022,we will participate in the Better Buying Purchasing Practices Index,which will help us go into greater detail and find out how our suppliers are rating us across a range of purchasing practices.People who make our products 25 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementIn Thai Binh City,Vietnam,near Hanoi,surrounded by acres of green space and on-site gardens sits Tan De 6,one of lululemons newer manufacturing partner facilities.It is here that cut and sew specialists create some of the lululemon gear we love.lululemon has been partnering with Tan De since 2017,bringing the Tan De 6 facility on board in March 2021.Well-trained hands and keen eyes for detail have kept Tan De as one of our top finished goods vendors.lululemon and the manufacturing facilities we choose to have as partners help our industry build a healthier world.In 2022,Tan De was selected as one of lululemons 2022 Vendor Here to Be grant recipients,for a project that aims to provide more than 1,000 female employees with access to information and services for sexual and reproductive health.Throughout the past year,Tan De 6 worked hard to create a better community for both the employees and the neighbours of the facility.Using the company-owned garden,they grow fresh food for makers and their families.Leftover strips of fabric are ingeniously reused as ties to give support to the growing plants.They also provide summer holiday activities for makers children,offer assistance for the elders in the surrounding communities,and help flood victims in the central areas of Vietnam.We will continue recognizing,celebrating,and nurturing our interconnected wellbeing.SpotlightTightly knitMaker at Tan De facility,Vietnam26 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementIN THIS SECTION29 Our approach to wellbeing 31 Global wellbeing33 Community wellbeing35 Maker wellbeing37 Frontline wellbeingBe Well27 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementWe believe that everyone has the right to be well.In recent years,there has been increasing awareness of the importance and complexity of mental wellbeing,and research shows that wellbeing is strongest among those who focus on all three dimensionsphysical,mental,and social.15 We also recognize that planetary health is a fundamental condition for wellbeingfor humanity and for business.As a global company committed to helping people feel their best,we have a unique opportunity to advance physical,mental,and social wellbeing for all.What we can envision,we can create.15 lululemon 2022 Global Wellbeing ReportBe Well Chapter Illustration“We begin to find balance,connection within one selfmind,body,and soul.Movement becomes broader,more intentional,grounded.Warmth and vibrancy hold us in yellow(happiness,optimism,joy,energy).Hold for the count of four.”Jacquie Comrie,report illustrator28 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementWHY IT MATTERSWe are experiencing a global decline in physical,social,and mental wellbeing.This has been worsened by events such as the COVID-19 pandemic,the climate emergency and related natural disasters,geopolitical instability,and uncertainty about the future.According to Gallup,16 nearly 4 in 10 people report they have been affected by depression and anxiety.Far too many people are unable to access the tools and resources necessary to face and overcome challenges.This is especially true for those experiencing disproportionate rates of stress and trauma due to systemic inequities.Wellbeing is also directly linked to planetary health;negative impacts on the environment and eco-systems directly and indirectly affect people and communities.As a company dedicated to achieving a healthier and more inclusive world for all,we have a responsibility to provide access to the right tools,support,and resources,and to disrupt inequity in wellbeing through movement,mindfulness,and connection.OUR GOALS Launch the lululemon Centre for Social Impact by 2021(complete).Provide access to wellbeing tools and resources to more than 10 million people by 2025.Invest at least US$75 million to advance equity in wellbeing through the lululemon Centre for Social Impact by 2025.WHAT DOES IT MEAN TO BE WELL?We understand wellbeing as a lifetime practice of three interconnected elements.Physical wellbeingFeeling healthy and capable.I can perform the activities I want or need to do.Mental wellbeingFeeling emotionally prepared.I am able to handle what the future holds for me.Social wellbeingFeeling connected to others.I am part of something larger than myself and contribute to a supportive community.This definition,framed by planetary wellbeing,aligns our focus on global wellbeing throughout the business,informs the Centre for Social Impact framework,and allows us to advance wellbeing across our collective.We recognize that our lives are interconnected with the health of the planet.As our business grows and our work progresses,we are evolving our definition of wellbeing to explicitly integrate our dependence on a healthy planet and the transformative power of thriving environments.WHAT WERE DOINGWe are breaking down the barriers that prevent access to wellbeing tools and resources.Through the lululemon Centre for Social Impact,which launched in 2021 with a commitment of US$75 million by 2025,we are leveraging our business,expertise,resources,and communities to invest in and advocate for the wellbeing of those most impacted by systemic inequity around the world.The Centre is led and managed by a global internal team of experts in social impact,innovation,and wellbeing.In 2021,lululemon contributed US$11.9 million to social impact organizations,and an additional US$758,000 toward crisis response.Our integrated strategy advances this work within the communities where we operate and across the globe,and we are engaged in a set of extensive and inclusive partnerships to collectively realize this ambition.For example,for over five years we have collaborated with the United Nations Foundation to co-create the Peace on Purpose program,which proactively cares for the wellbeing of UN humanitarian workers around the world and aids in crisis response.Through our work with the Girls Opportunity Alliance,an initiative of the Obama Foundation,we are empowering adolescent girls around the world through education and wellbeing,allowing them to achieve their full potential and transform their families,communities,and countries.In early 2022,we released our second annual Global Wellbeing Index.The findings from this report guide us to define where and how we support further research and advocacy efforts.We also evolved our collaboration with the National Alliance on Mental Illness(NAMI),powering their work to reimagine crisis response in the United States,through the establishment of 9-8-8 as a nationwide mental health crisis and suicide prevention number.16 Wellcome Global Monitor ProjectOur approach to wellbeingSDG 3.Good Health and Well-beingSDG 5.Gender EqualitySDG 10.Reduced Inequalities29 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementInvest in localcommunity resilience.Pursue impact at scale throughpartnerships,philanthropy,research,andadvocacy.Build internalcapacity.CENTRE FOR SOCIAL IMPACT FRAMEWORKOur purpose is todisrupt inequity in wellbeingthrough movement,mindfulness,and advocacy.Our goal is to positively impact 10 million people globally by 2025.Community WellbeingGrants and partnerships that increase access to wellbeing opportunities.Global WellbeingLarge grants and partnerships that advance the wellbeing of those experiencing systemic inequity trauma.Research&AdvocacyGrants,partnerships,and publications that explore solutions for systemic barriers to wellbeing.Maker WellbeingIndustry grants and programs that care for those who make our products.Frontline Wellbeing&Crisis ResponseGrants and programs that support aid workers globally.Culture of ImpactSolutions that create a culture of impact for our people,communities,and guests.Be Well visionOur communities thrive because we contribute to conditions that support physical,mental,and social wellbeing.Our approach to wellbeing30 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementCommunity Wellbeing$2,827,000 Research&Advocacy$500,000 Crisis Response17$758,000 Frontline Wellbeing$2,000,000 Maker Wellbeing$2,411,000 2021 CONTRIBUTIONS17 Crisis response is not included in our US$75 million commitment;this is an additional contribution.18 We measure the number of people reached by collecting impact reports from our global and community partners,which include both expected and realized reach numbers.This number includes recipients of grants and donations,participants in free activities run by lululemon such as yoga and meditation classes,our employees,and makers.Global Wellbeing$4,151,000 2021 NUMBER OF PEOPLE REACHED18We are nurturing global wellbeing through collaborations and innovations that advance the wellbeing of people experiencing disproportionate rates of stress and trauma.Global initiatives include support for the Girls Opportunity Alliance,a program of the Obama Foundation that empowers girls through wellbeing and education,and The Trevor Project,the worlds largest suicide prevention and mental health organization for LGBTQ young people.We invested US$1.5 million and$1 million in these partnerships respectively,and as importantly,are bringing forward access to lululemon resources,platforms,support,and communities.Indigenous wellbeing We continue our commitment to amplifying Indigenous voices,supporting Indigenous communities,and sustaining ongoing partnerships with First Nations,Indigenous-led organizations,and ambassadors.As a full member of The Circle on Philanthropy(The Circle),we work to contribute to Indigenous Peoples in meaningful ways.In the past two years,we worked with The Circle to donate CAD$250,000 each to the Musqueam,Tsleil-Waututh,and Squamish Nations and support the following organizations:Matriarch Movement,which is shifting the mainstream narrative around Indigenous women by amplifying their voices through podcasts,social media,and interviews.Rising Hearts,an Indigenous-led grassroots organization working to elevate Indigenous voices and promote intersectional collaborative efforts.Mtis Nation Columbia River Society,which acts as the advocate,voice,representative,and protectors of the traditional values of the Mtis People(s),and acts as a friendship centre to all Indigenous peoples in the Golden,British Columbia area.Finding Our Power Together,whose primary goal is to end preventable death by suicide in Indigenous communities and support young people to thrive.Saskatchewan Indigenous Yoga Association,which facilitates the training of First Nations and Mtis people to be yoga teachers,with the goal of embedding the healing benefits of yoga within Indigenous communities.Global wellbeingOther business activities 21,000 lululemon employees 29,000 Makers in our supply chain 20,000Centre for Social Impact 1,355,000Total people reached1.4MTotal wellbeing contributions US$11.9MTotal crisis response contributionsUS$758k31 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet Supplement2021 World Mental Health Day activation with The Trevor ProjectWe believe everyone has the right to be well and recognize the opportunities we must address to bring this belief to life.Last year,lululemon launched the Centre for Social Impact with the mission to disrupt inequity in wellbeing through movement,mindfulness,and advocacy.We leverage our expertise,resources,and global community networks to advance wellbeing for those most impacted by systemic inequity.At launch,the Centre invested US$5 million with new and long-term local grassroots partners through global and national non-profits,as well as lululemons Here to Be grant program,which supports organizations around the globe that create inclusive access to movement and mindfulness,and/or advocate for civil and human rights.For World Mental Health Day 2021,we highlighted the work of three collaborators with the Centre through an awareness campaign:Girls Opportunity Alliance,which aims to empower girls through education,the National Alliance on Mental Illness(NAMI),which promotes better mental health and has established a 9-8-8 crisis number with lululemon,and The Trevor Project,which works to end suicide among LGBTQ youth.This campaign created wide-reaching positive impact by amplifying calls to action and building awareness of much-needed wellbeing tools,resources,and support alongside our co-creators.For more information on social impact organizations we contribute to,refer to Partnering for change.SpotlightWellbeing is for everyone32 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementThrough our annual application-based Here to Be grant program,we invest in community resilience and support local organizations around the globe that create inclusive access to movement,mindfulness,and connection.Grant recipients advance equity in wellbeing in many ways,including financial accessibility,culturally sensitive programming,and local community needs.Our goal is that through this partnership with our Here to Be grantees,communities will experience improved mental,physical,and/or social wellbeing.In 2021,80 organizations across the UnitedStates,Canada,United Kingdom,New Zealand,Australia,China,and Asia comprised the Here to Be cohort,including:the Run Beyond Project,Women in Sport Empowered,and the Prison Yoga Project.Our 2021 Here to Be cohort received a combined US$2.3 million in grants,with an average grant size of US$28,650 impacting more than 250,000 people around the world.lululemon accelerated the growth of these organizations through capacity building,leadership development,mentorship,skills-building,and storytelling trainings.THE RUN BEYOND PROJECTCountry:AustraliaThe Run Beyond Project empowersyoung people beyondthe finish line.It uses a program based around running,to develop personal and social capabilities in high school students from marginalized backgrounds.The project prepares students for a challenging but achievable Goal Race and empowers these young people beyond the finish line.Shogufa,an immigrant from Afghanistan,became the first woman in the Run Beyond Project to complete a half marathon.With limited access to sports in Afghanistan,she had never run long distance before.Her mantra,“I learned to never be scared,”helped drive her dedication and resilience.Shogufa is now training to be a doctor and is applying the skills she learned in running to her studies and beyond.Watch her story here.WOMEN IN SPORT EMPOWERED Country:Hong KongWomen in Sport Empowered uses sports as a way to empower,educate,and connect women and girls to realize their aspirations.Their vision is a world where women and girls can thrive without limitations.While completing our S.H.E Mentoring program,Rabia was proud to wear a hijab during all her workouts.She wanted to break stereotypes and be brave enough to be herself while maintaining her identity.Her efforts set an important example for women who may otherwise feel discouraged from doing sports.Community wellbeingPRISON YOGA PROJECTCountry:United StatesPYP supports incarcerated people with trauma-informed yoga and mindfulness practices to promote rehabilitation,reduce recidivism,and improve public safety.After participating in the Prison Yoga Project(PYP)Yoga Teacher Training program,Deva said,“This course literally opened new dimensions of awareness and healing on a level that is beyond anything I thought possible.As a social security disability recipient,I am so aware of the challenges with finances while living on disability checks.Noone should have to juggle food,rent,and then yoga classes if they already live in impoverishment.My desire is to use my certification to reach people in my community.”33 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementThe lululemon Playmaker program,first piloted in 2021,complements our Team Canada partnership,19 with a mission to accelerate equitable access to wellbeing through sport.This work ladders into our shared purpose with the Canadian Olympic and Paralympic Committees to realize the full potential in every Canadian to inspire,unite,and transform the world through sport.Playmaker is a four-month pilot program that supports leaders from four Canadian non-profit or charitable organizations:Spirit North,Cruisers Sports,Fast and Female,and Swim Ontario.lululemon provided CAD$200,000 total in funding for mentorship,coaching,and community building.lululemon also matched the funding of the Canadian Olympic Committees 2021 Olympic Legacy Grant Program,which supports 10 community projects led by Canadian Olympic alumni.In addition to the funding,Playmaker organizations received meaningful skill-building opportunities,including leadership and development,purpose and values,brand consulting,and community partnership building,enabling them to create impact.Spotlight19 Official Outfitter of Team Canada through 2028Play it forwardFast and Female organization in Calgary,Alberta.Photographer:Dave Holland34 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementMaker wellbeingThe people who make our products are one of our most important communities.While global trade brings opportunities for many in global garment supply chains,we are aware that makers in these supply chains,who are primarily women,face many challenges,such as earning low wages,working excessive hours,and experiencing workplace harassment.The COVID-19 pandemic and the tangible effects of the climate emergency have increased these struggles.Over the past several years,we have developed programs that benefit our makers,their families,and communities.In 2021,we funded 16 wellbeing projects in supplier communities,contributing US$160,000 and reaching over 20,000 makers.See Be Human section for more information.In 2021,we contributed US$2.25 million to fund womens initiatives at local grassroots organizations and global non-profits.The fund recipients include CAREs Made by Women,to support programs ranging from violence prevention to leadership,as well as Women Win,which aims to economically empower girls and women through impactful partnerships and holistic approaches.We also made contributions to The Resilience Fund for Women in Global Value Chains.The first of its kind,The Resilience Fund for Women is a funding initiative that invests in the long-term health,safety,and economic resilience of women in global value chains.Our funding will help enable them to expand grantmaking to support locally driven solutions to systemic problems.Makers in Tan De facility,Vietnam35 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementOur culture is grounded in the importance of fostering wellbeing and instilling the ability to pursue choice.This is an important time in history for us to use our voice externally to share our perspectives on reproductive rights.In 2022,through our Centre for Social Impact and our Public Affairs team,we made a US$500,000 contribution to the Center for Reproductive Rights,a non-partisan legal and non-profit advocacy group.Additionally,our US benefits plan allows lululemon employees to receive treatment regardless of where they live,including comprehensive reproductive healthcare and family planning.Our actions reflect our commitment to ensuring access to reproductive healthcare.This is not about partisan politics.It is about using our voice to advocate for wellbeing and the importance of having choice.SpotlightAccess to reproductive healthcare36 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementWe are committed to supporting frontline workers to care for their physical and mental wellbeing,so they can effectively care for others.In 2019,we launched Peace on Purpose in partnership with the United Nations Foundation.Through evidence-based practices,this initiative supports the wellbeing of UN development and humanitarian workers on and off the front lines of global conflicts and challenges.In 2020,with the UN Foundation,we radically accelerated this program for online delivery.Our shared work in 2021 will have an even deeper impact.We awarded the UN Foundation an additional US$1.25 million for Peace on Purpose,to accelerate program reach and increase crisis response over the next two years.As the largest funding commitment Peace on Purpose has received to date,this will help build a multidisciplinary approach to support staff during times of crisis.Crisis responseCrisis response is an important part of our direct support of frontline workers,communities,and individuals affected by natural or other disasters and events.We prioritize community-led organizations that support collaborative community solutions wherever possible,working with our regions to identify what basic needs have to be met.In 2021,we provided over US$750,000 to crisis response initiatives.This included US$250,000 for COVID-19 relief in India and Bangladesh,and over US$500,000 toward relief efforts for natural disasters around the world.Frontline wellbeingUnited Nations Foundation Peace on Purpose program37 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementIN THIS SECTION40 Climate action45 Sustainable product and material innovation51 Circularity and new guest models 53 Water and chemistry 55 Packaging and wasteBe Planet38 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementOur lives are interconnected with the health of the planet.Weve set science-based targets that are the foundation for our climate action goals.We seek to lead in innovating more sustainable materials and working toward a circular ecosystem by designing out waste and keeping materials in use for as long as possibleeventually integrating end-of-life products into new products.We work across our value chain to reduce our carbon,waste,and water footprint,improve chemicals management,develop and sell products that reflect the values of our guests,and contribute to a healthier world.Be Planet Chapter Illustration“We feel the tension dissipating,the lines begin to loosen,relax.There is transformation here.Rebirth,renewal,connection to Mother Earth in the colour green(safety,love,support).Exhale for the count of four.”Jacquie Comrie,report illustrator39 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementWHAT WERE DOINGAs signatories of the UN Fashion Industry Charter for Climate Action,we committed to achieve net zero carbon by 2050 or earlier.We take a science-based approach.Our climate targets,approved by the Science Based Targets initiative,help us align our goals with the Paris Climate Agreementto limit global warming to well below 2C above pre-industrial levels and pursue efforts to limit warming to 1.5C.Achieving a net zero future requires ambitious strides for cutting emissions across our value chain and within our industry.We started where we have the most controlin our owned and operated facilities.We are proud to have achieved our goals of 100 percent renewable electricity and a 60 percent absolute reduction of GHGs in our owned and operated facilities.As our business grows,we will also continue our focus on reducing our Scope 1 and 2 emissions.However,our biggest challenge lies in our value chain,which represents 99.7percent of our emissions(Scope 3).In 2021,we launched our Climate Activation Council,a cross-functional team with participation from the Product,Transportation,Fulfillment,Manufacturing,Materials,Quality,and Sustainable Business teams,which are accountable for contributing to enterprise shifts and enacting change in their respective functions.Moving forward,we are embedding sub-targets into specific business areas in line with our science-based emissions targets to track performance.WHY IT MATTERSThere is an ever-growing awareness of climate change,and a pressing urgency for solutions.Climate change threatens our living environments,as well as food and water supplies.Itaccelerates biodiversity impacts,and contributes to increased inequities and economic disruptions.Mental health is also affected.More than two-thirds of Americans report feeling anxious about how climate change is affecting the planet.20 In addition,estimates show that climate change impacts such as rising sea levels,extreme weather events,and failed crop yields could decrease global economic output by 10 percent by 2050.21 Most likely,these impacts will disproportionately impact under-resourced people and countries.As a contributor to climate change,the apparel industry must be part of the solution.OUR GOALSAchieve 100%renewable electricity to power our owned and operated facilities by 2021(complete).Meet our 2030 science-based targets by achieving:60solute reduction of GHG emissionsin allowned and operated facilities(Scope1and2)(complete)60%intensity reduction of GHG emissions acrossour global supply chain22(Scope 3)20 American Psychiatric Association21 Swiss Re Institute22 Includes purchased goods and services,and upstream transportation and distribution only.Intensity reduction is per net revenue from operations.For more information on our science-based target,refer to the Supplement.23 For a breakdown of our Scope 1 and 2 emissions and science-based target,please refer to our Supplement.24 Our science-based target for Scope 3 emissions is a subset of our total Scope 3 emissions.For a breakdown of total Scope 3 and science-based target,please refer to our Supplement.Climate action19,852 1,604( 9%)20193,203-15,045(-82%)20202021Total Scope 1 and 2(tCO2e)23 Absolute emissions change from 2018 baseline2018 baseline18,24812,927-5,321(-29%)0123456780.00000064285.714286128571.428571192857.142857257142.857143321428.571429385714.285714Total Scope 3 within science-based target24Net revenue from operations(000s)Emissions intensity(tCO2e per million US dollars of revenue from operations)Scope 3 emissions intensity change from 2018 baseline351,365US$3,979,296-11 18 baseline326,114 2018 baselineUS$3,288,3192019201920192019414,565US$4,401,879-5d3,478US$6,256,617 4 202020202020202021202120212021Scope 3 science-based target(tCO2e)0204060801000.012.525.0 2018 baseline99.294.288.3102.840 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementRenewable electricityIn achieving our 100 percent renewable electricity goal,our Scope 1 and 2 emissions decreased by 82 percent from our 2018 baseline.This was due to the purchase of Energy Attributes Certificates(EACs).We purchase EACs from accredited tracking agencies and,where possible,from wind and solar energy sources.In 2021,we signed a 10-year Virtual Power Purchase Agreement(VPPA)with renewable energy company Enel Green Power(see Spotlight Story).Energy efficiencyWe continue to improve energy efficiency in our owned and operated facilities.In 2021,we expanded our pilot of Energy Management Systems(EMS)in stores to better control our HVAC systems,reduce energy use,and improve guest and employee comfort.In total,we have installed EMS in 38 stores,with plans to continue expanding across our stores in North America in 2022.Transportation and logisticsTransportation and logistics currently make up approximately 22 percent of our total carbon footprint.During the COVID-19 pandemic,we experienced longer lead times and delivery challenges due to factory closures and pressure on ocean freight and seaports.This meant we increased our use of air freight,significantly impacting our Scope 3 target performance.We see these challenges continuing into 2022 and are working on rebalancing transportation modes as we emerge from the pandemic.In 2021,we focused on three logistics initiatives to reduce emissions:Choosing emissions-friendly transportation modesWe saw a 104 percent increase in emissions fromtransportation between 2020 and 2021.We launchedan Air Freight Management Task Force and are shiftingtransportation methods where possible from air freight toocean,truck,or train.Using more sustainable logistics service providers(LSPs)Currently,all inbound LSPs have an approvedscience-based target or are working toward setting a target.Selecting more sustainable fuelsIn 2021,we exploredusing more sustainable fuels as part of our broader strategy,including more sustainable aviation fuel(SAF),electricvehicles,and biofuels for ocean freight.We are working onsecuring an SAF supplier to conduct pilot work in 2022.25 We procured 100%renewable electricity to power our owned and operated facilities,with 99%sourced in compliance with the RE100 technical criteria.However,due to unavailability of an Energy Attribute Certificate(EAC)program,lululemon was unable to source renewable electricity in South Korea.Consequently,renewable energy credits were procured from a nearby geography.Total renewable electricity purchased25(MWh)Total purchased electricity(MWh)Total renewable electricity(%)201920192019202020202020202120212021Renewable electricity in our owned and operated facilities 0.0000005714.28571411428.57142917142.85714322857.14285728571.42857134285.7142860150003000045000600005672018 baseline 2821,56062,5652018 baseline42,68951,11748,49962,5651 18 baseline50%sustainable materials(units,000s)14,33724,837Products made with 2550%sustainable materials(units,000s)11,66816,867Products made with 50%sustainable materials 15%Products made with 2550%sustainable materials12%Products made with sustainable materials 27)%Disclosure20202021Total materials procured30(kg,000s)27,26037,727Total sustainable materials31 procured(kg,000s)8,27914,265Sustainable materials procured308%Our teams transform practices at every stage of the process,including design,merchandising,raw materials,product development,colour,and printing.By working together with cutting-edge technology organizations such as LanzaTech and Genomatica,we help create and scale solutions that deliver more sustainable products to our guests.With our Textile Exchange,we participate in expanding our use of more sustainable materials across the industry,for collective benefit.See the Supplement for a full list of partnerships.Sustainable material innovation requires years of investment in research,development,and partnership.While working toward scalable,permanent solutions,we also need to integrate temporary measures that are commercially available.For example,recycled polyester made from post-consumer single-use packaging(e.g.,plastic bottles)isnt an ultimate solution,but is an improvement over traditional polyester.In 2022,we are building our strategy to enhance our existing traceability system.This will allow greater visibility into our supply chain,including our more sustainable fibres and materials.This traceability strategy will also help us identify opportunities in lululemons overall supply chain visibility as we move toward our 2025 and 2030 goals.46 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementSUSTAINABLE MATERIALS PROCURED BY TYPESustainable product and material innovationMaterialTypeUnit*20202021NylonTotal kg10,64614,066Recycledkg241819%2%6%Renewable kg00%0%0%PolyesterTotalkg6,0569,362Recycledkg2,3574,6559P%CottonTotalkg4,1245,580Sustainably sourced cottonkg1,4982,05067%DownTotalkg91109Responsible Down Standardkg9110900%Animal-derived materialsTotalkg245216Responsible/traceablekg911097P%Forest-based materialsTotalkg1,5751,857Forest Stewardship Council(FSC)-certified natural rubber kg65498%4%Responsible regenerated cellulosics kg7481,185Hd%NYLONSource 100 percent renewable or recycled content nylon for our products by 2030.Our nylon goal is ambitious and challenging.Nylon makes up the biggest portion of our materials and provides lululemon products with the characteristically unique performance,feel,and quality we have become known for.Our goal is to transition from virgin nylon fibre to 100 percent renewable,recycled,or net new fibres that reduce our dependence on fossil fuels while maintaining uncompromising feel and performance.Our initial approach is to innovate into renewable bio-nylon at scale.We have a multi-year collaboration with Genomatica,aleader in biotech innovation and materials,to bring renewably sourced,biobased materials into our product lines,including lower-impact,plant-based nylon.We are collaborating with Genomatica on plant source and traceability to optimize the overall environmental benefits from plant-based nylon.We are developing the technology and working toward commercialization at scale,to help achieve our 2030 product goals.Recycled nylon(generally made from post-industrial material waste)is another option.However,recycled alternatives that align with our product performance standards are currently only available in limited quantities.We will scale through existing and emerging solutions,such as textile-to-textile recycling.We are exploring environmental impact reductions in other areas of the nylon value chain,including solution dye finishes,manufacturing,and facility improvements.Baseline Year Baseline2021 Results GoalGoal Year20202%60 30%renewable or recycled content nylon*kgs in 000s47 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementWhile we are proud of the work weve done with more sustainable materials,we must continue to elevate our practices to build the sustainable future we envision.We committed to meeting our ambitious sustainable product targets and are making strides.In 2019,we set a goal of achieving 75 percent sustainable materials for all our products by 2025.In 2021,our mens apparel line hit that goal early.Sustainable materials innovation is a galvanizing focus across our design teams.Recycled polyester was incorporated into one of our most beloved products the Metal Vent Tech 2.0 shirtssetting the groundwork for scaling to our Swiftly womens products.In 2021,we developed a 100 percent recycled polyester fabric and used it for the pockets of our mens apparel.Warpstremethe fabric for our bestselling ABC and Commission pants and shortsalso uses recycled polyester.The Always In Motion boxers underwent a complete redesign,using a responsibly regenerated cellulosic fabric that doesnt sacrifice performance.We will continue to grow our mens apparel business and play our part to reset sustainability as the industry standard.SpotlightRaising the bar on product48 LULULEMON 2021 IMPACT REPORTIntroduction Be Human Be Well Be Planet SupplementPOLYESTERSource at least 75 percent recycled polyester by 2025.In 2021,50 percent of our total procured polyester was made of recycled content(mostly post-consumer recycled PET from plastic bottles).Over the last year,we continued to drive the transition to recycled polyester across all our assortments.We are also participating in the 2025 Recycled Polyester Challenge,a joint initiative between Textile Exchange and the United Nations Fashion Industry Charter for Climate Action,supporting the industrys ambition to increase the global recycled polyester uptake from 14 percent to 45 percent by 2025.However,relying on plastic bottles for recycled polyester supply is a stop-gap measure,and not a long-term solution.With our partners LanzaTech,Far Eastern New Century,and India Glycols,we have developed a successful proof of concept for a polyester yarn and fabric partially made with recycled carbon emissions.We are currently working on the feasibility of a variety of yarn sizes,while optimizing the supply chain to scale the technology.We are also looking at feedstock sources such as post-consumer textiles.COTTONSource 100 percent of cotton from more sustainable sources by 2025.We take a portfolio approach to achieving more sustainable cotton that includes organic,recycled,regenerative,and other third-party certified platforms.Most of our Pima cotton is sourced from Peru.We are working to make meaningful and rapid progress,as we approach our 2025 goal.Sustainable product and material innovation32 The root system of mushroomsANIMAL-DERIVED MATERIALSTrace or certify as sourced responsibly 100 percent of our animal-derived materials by 2025.Animal-derived fibresdown,wool,cashmere,and silkrepresent a small amount of our overall material portfolio (one percent by weight).In 2021,55 percent of our animal-derived materials were traced or certified as responsibly sourced.All down has been fully traced and certified to meet the Responsible Down Standard for many years.We are at the initial stages of sourcing more sustainable,third-party certified wool,and will continue with the assessment of responsible sources for our cashmere and silk.FOREST-BASED MATERIALSCertify or assess by a third party 100 percent of our forest-based materials are sourced responsibly by 2023.Of our forest-based materials,64 percent of our volume consists of regenerated cellulosic fibres,while 27 percent is natural rubber.Almost 100 percent of our regenerated cellulosic fibres have been sourced responsibly since 2018.They are assessed through CanopyStyle Audits to verify producers are at low risk of sourcing from ancient or endangered forests,or controversial sources.In 2021,we celebrated transitioning all our core yoga mats to Forest Stewardship Council(FSC)-certified natural rubber,representing 74 percent of the natural rubber we procured this year(FSC N002716).We continue innovating materials in our yoga mats and are exploring further use of Mylo,a material made of renewable mycelium.32 We are expanding our current program of better cotton sourcing by enrolling the balance of our short-staple suppliers.We are also expanding our commitment to precision farming programs(e.g.,US Cotton Trust Protocol)and planning regenerative agriculture sourcing projects in our existing supply chains.These two techniques help capture more environmental impact data from our cotton supply chain.They also support farmers in transitioning to not only minimize but eventually restore the local environment through regenerative farming techniques.In addition,they ensure greater visibility into social and animal welfare as a direct or indirect result of cotton farming.Baseline Year Baseline2021 Results GoalGoal Year202039Pu 25%recycled polyesterBaseline Year Baseline2021 Results GoalGoal Year20203670 25%sustainably sourced cottonBaseline Year Baseline2021 Results GoalGoal Year202037P0 25%traceable or certifi
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