XPeng Inc.2022 ENVIRONMENTAL,SOCIAL AND GOVERNANCE REPORTE N V I R O N M E N T A L S O C I A L G O V E R N A N C E0030042022 HighlightsMessage from the Board of DirectorsAbout XPENGHeralding Low-Carbon Green GrowthSustainability ManagementAppendixPartnering with XPENG to Build an Inclusive EcosystemExploring the Future of Mobility Using Intelligent Technologies09071 51 71 93 13537394 1434555738385971051091 1 11231291371431491 5 1158163Company ProfileCorporate GovernanceHonors ReceivedTackling Climate ChangeEnvironmental Management Feature Building the Green Value ChainGovernance Structure for Sustainable DevelopmentStakeholder EngagementMateriality AssessmentKey Performance IndicatorsContent IndexFeedback FormEmployee RightsHealth and SafetySupply Chain ManagementContribution to the Society Feature Witnessing the Growth of EmployeesTechnology InnovationQuality Products Feature Premium Services for XPENG OwnersENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCETable of Contents005006ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEReporting ScopeReport confirmation and approvalDisclaimerAccess to this ReportReporting StandardsSource of InformationExplanation of referencesThis report covers XPeng Inc.and its subsidiaries.The reporting period is from January 1,2022 to December 31,2022,in line with the fiscal year.The time frame for some of its content has been extended.Unless otherwise stated,this report adopts CNY as the monetary unit.This report was confirmed by the Companys ESG Steering Committee and approved by the Board of Directors on March 17,2023.Certain statements in this report are forward-looking statements about our goals and plans for the future.These forward-looking statements are based on managements current expectations.Uncertainties and other factors may cause our actual results,performance or achievements to be materially different from those expressed or implied by the forward-looking statements.The Company is under no obligation to update any forward-looking statement contained in this report.This Report is available in simplified Chinese,traditional Chinese and English for readers reference.In case of any inconsistency,the traditional Chinese version shall prevail.This report can be viewed or downloaded on the Hong Kong Exchanges and Clearing Market website(http:/www.hkexnews.hk/),as well as on the Companys official website().For any inquiries or suggestions regarding this report,please contact us using the following address:XPeng Inc.,8 Songgang Street,Tianhe District,Guangzhou,Guangdong ProvincePhone:020-6680 6680Fax:020-6680 6689This report refers to the Environmental,Social and Governance(ESG)Reporting Guide in Appendix 27 of the Main Board Listing Rules of the Hong Kong Exchanges and Clearing Limited(HKEx)and the Global Reporting Initiative(GRI)Standards.This report was prepared in accordance with the above mentioned standard requirements,following communication with stakeholders,analysis of material issues,collection of relevant information,the corresponding written reports,as well as management verification,in order to ensure the materiality,quantization,balance and consistency of its contents.In order to comply with the consistency principle in the reporting principles and ensure meaningful comparison,there has been no material change to the methodology or key performance indicators adopted by the Company for the year ended December 31,2022 as compared to those for the year ended December 31,2021.Unless otherwise specified,the information and data cited in this report all come from the Companys official documents,statistical and financial reports,as well as other related public documents.XPeng,Inc.guarantees that this report is free from any false statements,misleading statements or major omissions,and the Board of Directors is responsible for the truthfulness and accuracy of its contents.For convenience of expression and reading,XPeng Inc.,XPENG,the Company,this company and we in this report,all refer to XPeng Inc.and its subsidiaries.Note:1.“XPeng Inc.”is provided for identification only.This report is the third Environmental,Social and Governance(ESG)report issued by XPENG(XPeng Inc.,hereafter referred to as the Company)1,which aims to showcase the management,commitment,actions and achievements of the Company and its subsidiaries in sustainable development.About the Report008ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEESG GovernanceESG Goal ManagementESG Risk ManagementOur board of directors(the Directors)of the Company(the“Board”)attaches great importance to sustainability management.In accordance with the requirements of HKExs Environmental,Social and Governance Reporting Guide,XPENG has established an effective environmental,social and governance(hereinafter“ESG”)mechanism,kept improving the ESG governance structure across the Company,and stepped up the Boards supervision and participation in ESG affairs of the Company and performed the corporate social responsibilities in a faithful manner in pursuit of long-term sustainable development.As the decision-making body of the Company,the Board assumes overall responsibilities for XPENGs ESG strategies,policies,etc.,and authorizes the ESG Steering Committee,headed by the President of the Company to assist the Board in managing and making decisions regarding ESG matters.The Companys ESG Steering Committee is responsible for reviewing,developing and approving the Companys ESG development goals,policies and strategies,regularly discussing and reviewing the Companys ESG goals and their achievement,and reporting to the Board of Directors on a periodic basis.At the implementation level,the Company has established an ESG Task Force dedicated to routine management and overall coordination of ESG-related matters as well as preparing briefing reports of the achievements of ESG work in a timely manner.XPENG sets its ESG goals and continuously keeps tracks of the progress in ESG work in accordance with HKExs Environmental,Social and Governance Reporting Guide as well as other internationally recognized principles and practices.The Board reviews and discusses the Companys ESG goals and will review the progress towards relevant goals to adapt to the latest developments of the external environment and the Companys businesses.With a keen eye on the major impact that ESG risks might have on the Company,XPENG updates the Companys ESG issues on a yearly basis in line with industry-specific ESG risks,regulatory requirements and macro-policies,as well as performs materiality assessments of the ESG issues by means of stakeholder survey,expert review and Board sessions.The Board has participated in the materiality assessments of identified the 2022 ESG issues,held regular sessions over the major ESG risks,and reviewed and confirmed the analysis results of the 2022 materiality issues.007Message from the Board of Directors009010ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE2022 Highlights01E XPLOREROF FU T URE MOBILI T Y011012ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE2022 HighlightsStriving for a green futureImproving product experienceXPENGCompared to conventional ICE vehicles,the electric vehicles delivered by XPENG in 2022 will reduce carbon emissions by approximately 1.72 million tons2 over their entire life cycle,advancing green and low-carbon travel.Annual power generation from solar PV reached 26.62 million kWh,which is equivalent to CO2 emission reduction of 14,188 tons,further promoting the clean energy adoption.In 2022,XPENGs annual charging reached 322,602,875 kWh,with a cumulative carbon emission reduction of about 577,200 tons,which delivers low-carbon living.The Company carried out internal measurement of enterprise carbon emissions and lifecycle carbon emissions of each vehicle model to formulate the carbon emission measurement system.The Company also has established a carbon footprint assessment of its mass production models,and assigned Zhaoqing Plant as a pilot unit for carbon emission status measurements,setting emission reduction targets and breakdown tasks for emission reduction.The Phase I distributed photovoltaic(PV)project located in the Zhaoqing Plant was connected to the grid in November 2021,with an installed capacity of 20.74 MW.Zhaoqing Plant was awarded the title of“Green Plant”from the Ministry of Industry and Information Technology of the Peoples Republic of China,driving the green transformation of the manufacturing.XPENG carried out active R&D and utilization of green materials.And we established a VOC(Volatile Organic Compounds)evaluation standard system and process specification covering the whole vehicle,parts and materials.The Company has been ISO 9001 certified,obtained the EU 2018/858 WVTA certificate for P5 and G3i models,and secured the first type certificate of UNECE R79 in China from TV SD for its P7 model.The Company developed the quality objective in the Supplier Quality Engineer(SQE)field,which is further divided into 30 objectives in 5 segments.The Company obtained the UN R155(UNECE Regulation No.155)certificate of compliance for its cybersecurity management system and 2 models were assigned C-NCAP 5-star rating in recognition of the products superb safety performance.The Company conducted monthly NPS3 surveys to assess customers feedback on our products and services.Such regular feedback from customers will be provided to relevant divisions to improve their respective product and enhance our customers experience.We have more than 6,000 engineers,R&D investment accounted for 19.4%of revenue.With leading software and hardware technologies at its core,the Company made major industry breakthroughs in areas such as advanced driver-assistance system and 800V high voltage platform,as it continues to strengthen technology leadership.R&D personnel accounted for 39.9%Companys total employees,and XPENGs R&D spending reached CNY 5,214.8 million during the year.In 2022,the Company was granted 694 new patents,bringing the total number of patents owned by the Company to 1,823,further enhancing XPENGs innovation capabilities.Building low carbon products：Reduce end-to-end carbon emissions：Establish the carbon emission measurement system：Green manufacturing：Green materials：Excellent product quality：Product safety：Customer satisfaction：Technology innovation：R&D capabilities：Note:2.The full lifecycle carbon emissions of conventional gasoline vehicles come from the China Automotive Low Carbon Action Plan(2022)issued by CATARC.The full lifecycle carbon emissions of different models of XPENG in 2022 come from the XPENGs carbon emission calculation models.Note:3.NPS(Net Promoter Score):also known as word-of-mouth,is a metric used to measure the possibility of a user referring an enterprise or service to others.Corporate social responsibility013014ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEXPENGCorporate governanceThe total number of employees reached 15,829 at the end of 2022,up 13.2%from one year ago,boosting employment.The Companys Board of Directors is composed of 8 members,including 1 executive Director,4 non-executive Directors and 3 independent non-executive Directors,among which there is one female Director.Among the members of the Board,the independent directors hold a majority in each of the 4 professional committees,all of which are chaired by an independent Director.The Company has established company-level ESG committee forming a 3-tier sustainability governance structure composed of the“Board of Directors-ESG Steering Committee-ESG Task Force”.The Company conducted 65 anti-corruption training sessions with participation of 11,477 people;and carried out over 70 training sessions on legal compliance covering 100%of employees to cultivate integrity across the Company culture.The Company has obtained the ISO 27001 Information Security Management System Certificate and ISO 27701 Privacy Information Management System Certificate to improve cybersecurity management.The Company has training programs such as Plan X,Plan P,Plan E,Plan N and Plan G to meet the training needs of employees at all levels.The total number of employees receiving training reached 11,786 and the training duration averaged 16.4 hours per person,supporting employees self-development.Customer satisfaction rate reached 96%,and the NPS survey was conducted on a monthly basis with the commitment to provide the customers with quality services.The Company has required suppliers to obtain third-party certification under IATF 16949,ISO 9001,environmental management system,production safety standardization,or equivalent certification.The Company evaluated the ESG performance of its suppliers,and continuously track suppliers ESG performance in the compliance,business ethics,confidentiality infringement,product quality,production safety,environmental management and other dimensions.The Company has signed the Integrity Commitment Letter with 100%of suppliers to build a high quality partnership system.Throughout the year,the Company donated CNY 5 million to the XPENG Public Welfare Foundation to help society as a whole.XPENG Public Welfare Foundation provided funding to 27 social organizations in ecological and environmental fields,contributing to the protection of the environments ecology and biodiversity.The Company has formed the XPENG Volunteer Service Task Force made up of XPENG employees and vehicle owners,which has so far extended services to over 1,000 people and dedicated 5,355.13 hours to community services.The number of disabled employees reached 114,promoting working environment equality.Boost employment：Comprehensive governance structure：Integrity management：Cybersecurity：Employee empowerment：Quality service：Responsible supply chain practices：Philanthropy：Community influence：Equal opportunity employment：015016ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE02E XPLOREROF FU T URE MOBILI T YAbout XPENG017018ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCECompany Profile2.1XPENG2015201720182019202020212022Chengxing Zhidong founded.Entered into our Series A,Series A1,and Series A2 financing arrangements.Entered into our Series B,Series B1,and Series B2 financing arrangements.Commenced delivery of XPENGs first Smart EV model,the G3,to customers.Entered into our Series C financing arrangements.长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长 长长长长长长长长长长长长长 长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长长 长长长长长长长长长长长长长Commenced delivery of XPENGs second Smart EV model,the P7,to customers.Listed on the New York Stock Exchange(NYSE)(stock code:XPEV).Listed on the Stock Exchange of Hong Kong Limited(HKEx)(stock code:9868).Commenced delivery of XPENGs third Smart EV model,the P5,to customers.Launched the first self-operated store in Europe.Commenced delivery of XPENGs fourth Smart EV model,the G9.Founded in 2015 and headquartered in Guangzhou,Guangdong Province,China,XPeng Inc.is a technology company focusing on the future of mobility.XPENG designs,develops,manufactures and sells smart electric vehicles to consumers across the globe.The Companys mission is to bring people more convenient and enjoyable mobility by leveraging technologies.Through continual investment in its full-stack in-house R&D,XPENG has actively built up its core capabilities and strives to become one of the leading smart EV companies in China.By the end of 2022,the Company had established six R&D centers,which reside in Beijing,Shanghai,Guangzhou,Shenzhen,Silicon Valley,and San Diego.Through consistent in-house R&D efforts and with leading software and hardware technologies at its core,XPENG brings innovation across autonomous driving,smart connectivity and core vehicle systems,and delivers smart electric vehicles that have become widely popular among the Chinese consumers.XPENG History 019020ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCECorporate Governance2.2Corporate Governance Structure2.2.1XPENGXPENG is committed to making consistent efforts to establish and improve a scientifically sound and robust sustainability governance system to cater to the needs of the future development of XPENG.The Company complies strictly with the requirements of relevant laws,regulations and rules,such as the Company Law of the Peoples Republic of China,NYSE Listed Company Manual and HKEx Main Board Listing Rules4 etc.,to standardize its corporate governance policies and procedures.XPENG continues its efforts in optimizing the Companys policy framework and improving the corporate governance structure according to the actual conditions of the Company and the latest regulatory requirements.The General Meeting of Shareholders retains the decision-making authority as stipulated by laws and regulations as well as the Articles of Association,and it exercises such rights to decide on significant matters such as the Companys business strategy and policies,financing,investment and profit distribution in accordance with the law.The Board is accountable to the General Meeting of Shareholders and exercises the management rights of the Company in accordance with the law.Specifically,it reviews the overall operation and development strategy of the Company,and makes decisions on operating principles and investment plans.It also supervises and gives guidance to management,including,among other functions,guidance on improvement of existing policies and guidelines,formulation of a comprehensive decision-making mechanism,standardization of work processes,establishment of strict approval procedures and build an organization structure with enhanced efficiency and quality of investment decision-making.The Board of Directors has established four professional committees in order to improve the operational efficiency of the Board:the Audit Committee,the Compensation Committee,the Nomination Committee and the Corporate Governance Committee.Shareholders MeetingBoard of DirectorsESG Steering CommitteeSales andServicesFunctionsLegalFunctionsInternalControlFunctionsProductR&DFunctionsManufac-turing FunctionsFinanceFunctionsSupplyChainFunctionsITFunctionsBrandingFunctionsHRFunctionsAdminis-trative FunctionsCapitalMarket&InvestmentCorporate GovernanceCommitteeNomination CommitteeCompensation CommitteeAudit CommitteeNote:4.Excluding rules exempted by HKEx.021022ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEOperational Compliance2.2.2XPENG315N 3 company-wide training sessions on compliance awareness,involving trademark application and use in compliance with the law,software compliance,risk prevention and data security compliance.SessionsSessionsSessions15 training sessions on compliance requirements of particular EU countries for certain departments.Multiple special compliance training sessions focusing on different businesses or scenarios.During the course of the Companys operation,XPENG has adhered to applicable national or local laws and regulations and made consistent improvement to its compliance management system by drawing on international rules and initiatives.The Company delivers compliance training to internal employees to enhance their awareness of compliance.In 2022,the Department of Legal Affairs of the Company organized over 70 internal compliance training sessions,covering the senior management and all departments of the Company,including:Compliance Training023024ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCERisk Control2.2.3XPENGThe Company refers to the internal control framework of the COSO(the Committee of Sponsoring Organizations of the Treadway Commission)and the Sarbanes-Oxley Act Section 404 to establish a risk management framework and related risk management systems to comprehensively manage operational risks.The Company manages the risks in accordance with the process of risk identification,risk assessment,risk response,problem solving,review and reflection,process improvement and additional control,and follow-up reviews,to carry out closed-loop risk management.In 2022,the Company identified several major risks,including risks related to R&D,market competition,and capital resources,by reference to national policies,changes in the market environment,internal operations and stakeholders concerns.The Company performs scenario-based analysis,sensitivity analysis and stress tests on the financial and business impact of major risks.For example,the Company assessed base-case,best-case and worst-case scenarios of major risks and evaluated the possible financial and business impact under each scenario to thoroughly conduct risk prevention and control,as well as plan for alternatives.Further,the Company carries out timely risk warnings for internal and external risks,and regularly revisits its risk management framework and internal control process.The Company has built long-term financial models,forecasting future financial performance,and conducting sensitivity tests on material business assumptions/risks,market assumptions/risks,and financial assumptions/risks,including but not limited to volume of sales,raw material costs,number of stores and charging stations,risk-free interest rates,loan rates,foreign exchange rates,industry competition,and labor market competition.The Board is the highest authority and decision-making body for the Companys risk management.In 2022,within the Board,three independent non-executive Directors and one non-executive Director have risk management expertise.Additionally,one non-executive Director and two independent non-executive Directors constitute the Audit Committee of the Company so as to ensure that risk management is carried out independently of the business lines.Moreover,we have established financial incentives for senior executives,direct managers,and others involved to develop risk management indicators,and strengthen the implementation of risk management measures.Risk Identification and Assessment025026ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEXPENG030201Risk Management and MonitoringAt XPENG,we attach great importance to the effectiveness of the Companys risk management and internal controls.On behalf of the Board,the Audit Committee reviews how management develops,implements and oversees risk management and internal controls on a quarterly basis.Additionally,an annual review is conducted to ensure the effectiveness of our risk management and internal control systems.The Company conducts quarterly operational audits and relevant assessments in order to identify the major risks faced by the Company,update the internal control policies and ensure effective operation of the internal risk management system,we have completed an overall operational audits across a full spectrum of business in 2022.To ensure the effectiveness of the risk management and internal control systems,the Company established an internal control model based on“three lines of defense”:The first line of defenseThe second line of defenseThe third line of defenseThe first line of defense is mainly composed of the Companys business and functional departments in charge of daily operations and management.These departments design and implement relevant control measures and risk responses.The second line of defense is mainly composed of finance,internal control,legal,Quality and Safety Management Center,among others.Their key responsibilities are to assist the first line of defense in establishing and improving the risk management and internal control systems,as well as to oversee and ensure its effectiveness.The third line of defense is mainly composed of the audit team and the supervision team within the internal control department.The audit team regularly carries out independent evaluations to ensure the effectiveness of the Companys risk management and internal control system.In order to ensure its independence,the audit team reports directly to the Audit Committee.The supervision team regularly assists management in promoting integrity and ethical values to all employees,as well as handling any reports of corruption.027028ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEResponsibilities of the Board of Directors2.2.4XPENGOur Board of Directors performs regular follow-up assessments of the effectiveness of the Companys internal controls in line with the requirements of the listing rules and applicable laws and regulations to protect the rights and interest of the shareholders.The senior management is responsible for the production and operation and management of the Company,as well as leading the implementation of the Board resolutions.The senior management of the Company also takes charge of implementing the annual plans and investment initiatives set out by the Board,formulating specific rules and regulations of the Company,and executing other authorities and responsibilities granted by the Companys Articles of Association or the Board of Directors.In order to standardize daily business operations,the Company has established policies,systems,and guidelines covering,R&D,procurement,production,sales,human resources,and finance etc.When nominating and appointing members of the Board of Directors,the Company gives comprehensive considerations to a wide variety of factors,including gender,age,industry experience,professional background,educational background,etc.,to ensure diversified skills and experience required by different business areas and increase the share of female in management.As of the end of 2022,the Companys Board of Directors is composed of 8 members,including 1 executive Director,4 non-executive Directors and 3 independent non-executive Directors,among which there is one female Director.The members of the Board bring a variety of experiences in industries such as Internet technology and service,smart vehicle R&D and manufacturing and strategic investment.Among them,1 non-executive Director and 2 independent non-executive Directors have experience in the consumer goods industry,while 3 independent non-executive Directors and 1 non-executive Director have corporate governance experience in risk management.Meanwhile,the Company keeps assessing and monitoring the areas where Board diversity can be improved so as to elevate corporate governance.Among the members of the Board,the independent Directors hold a majority in each of the 4 professional committees,all of which are chaired by an independent Director.Matters that fall within the scope of responsibilities of each of the professional committees are subject to the approval of the professional committees before being submitted to the Board of Directors for deliberation so as to better give play to the roles of the independent Directors in supervision and decision-making,and so on.In 2022,the Company convened 5 meetings of the Board of Directors,which were attended by all directors that were required to attend.XPENG places a high premium on information disclosure and investor relations management.We publish quarterly and annual result reports as well as circulate other announcements where necessary.The Company communicates with investors on a periodic basis and actively shares the investors suggestions and feedback about the Companys products,operations and governance with internal teams so as to maximize the protection of the investors rights.Board DiversityIndependence and Effectiveness of the BoardProtection of the Rights of the Investors029030ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEBusiness Ethics2.2.5XPENGXPENG adopts a zero-tolerance approach toward any form of corruption in conducting business.The Company complies strictly with such laws and regulations as the Anti-Money Laundering Law of the Peoples Republic of China,Supervision Law of the Peoples Republic of China,Law of the Peoples Republic of China Against Unfair Competition,formulates company-wide rules and policies including the Employee Code of Conduct,Code of Integrity and Administrative Measures of Conflict of Interests,publishes the Anti-Corruption&Sanctions Policy and Code of Business Conduct and Ethics,clearly defines such behaviors as corruption and bribery,including briberies,kickbacks,illegal gains and money laundering,and lays out relevant control measures.Moreover,our policies set forth the rules and disciplinary policies in the workplace withThe Company has made available multiple misconduct reporting channels,including email(report_),hotline and WeChat,all of which are published on its official website to allow customers,suppliers,media,investors and internal employees to report or leave complaints.While we encourage reporting using real names,we also accept anonymous reporting.We will launch a probe into any clues that are deemed worthy of investigation.The Company has established a standardized process for handling misconduct complaints,in which the internal control department will arrange designated personnel to conduct an investigation in a timely manner when a misconduct report is received,and a final investigation report will be submitted to the chairman of the Board of Directors.The Company strictly protects the personal information of complainants and whistle-blowers,so that only personnel in charge of the reported cases have access to the complainants information and make connections.It is forbidden to take retaliatory actions against employees who raise concerns or complaints.In addition,in the case of a reward being granted to an informant,the sponsor investigator shall apply for the reward being transferred into the Integrity at XPENG account or other secure non-personal account from which the money is directly transferred to the informant,keeping the transfer record sealed in the case file.At XPENG,we carry out ongoing and various training activities with regard to integrity education,values,code of conducts,and law®ulations facing Board members,management,regular employees and outsourced employees of the Company.We regularly share with the management and all staff the value of integrity and make it clear that all new hires should receive training in our code of conduct.The Company and its business departments also carry out training in the code of conduct training either regularly or from time to time,as part of our ongoing effort to promote the awareness of compliance and integrity among all staff.During the past four fiscal years,the Company had zero cases of fines or settlements with regard to anti-competitive behaviors.In 2022,3 corruption lawsuits and business ethics violations were filed and closed within the Company.The 3 cases that have been concluded involve three employees,two of whom were sentenced to bribery by non-State staff and were sentenced to six months imprisonment;one was sentenced to the crime of embezzlement and was sentenced to 8 months imprisonment.All cases did not have a significant adverse impact on the Companys operation.And the Company also took lessons from the cases and will keep strengthening and improving employees legal awareness to build a strong line of integrity.employees compliance behavior included in their performance review and evaluation.Also,we conduct business ethics related audits and have identified the ethical risks in business accurately.The Company incorporates integrity statements and confidentiality clauses into the agreements with third party partners,and requires suppliers to sign an Integrity Commitment Letter upon their bid submission.Meanwhile,we include the integrity related clauses into the contracts to be signed with the suppliers.We immediately stop working with any suppliers that violate the Companys integrity standards and pursue legal remedies for infringement.In 2022,100%of our suppliers signed the Integrity Commitment Letter.Misconduct ReportingIntegrity Education6511,47715,738.5Total length of employee anti-corruption trainingHoursSessionsPerson-timePerson-timeNumber of anti-corruption training sessionsNumber of employees participating in anti-corruption trainingNumber of Board members participating in anti-corruption training031032ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEHonors Received2.3XPENGGoogle,KANTARThe Ministry of Industry and Information TechnologyGlobal Industrial Internet Conference Smart Connected Vehicle Summit 2022J.D.Power5 ChinaThe Economic ObserverWindTop 20 Chinese Global Brand Builders 2022-XPeng Inc.Leading Innovation Enterprises 2022-XPeng Inc.Wind ESG Hong Kong-Listed Company Best Practice Award(Society)2022-XPeng Inc.“CNY 180,000-300,000 Comprehensive Excellence Award”and“less than CNY 300,000 Ecology Star”in the WICE(World Industry Council for the Environment)World Smart Cockpit Survey-XPENG P7Ranked 1 in NEV-APEAL in the mid-size BEV segment-XPENG P7stGreen Plant 2022-XPENG Zhaoqing PlantNote:5.Founded by Mr J.D.Power III in 1968,J.D.Power is world renowned for the independence and objectivity of its research and is one of the most authoritative market research companies around the world.033034ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEXPENGJ.D.Power ChinaAuto Business ReviewChina Automotive Engineering Research InstituteWIREDChina Automotive Engineering Research InstituteRanked 1 in the NEV-IQS in the small-size BEV segment-XPENG G3iTOP 10 Xuanyuan Award-Best Cars of the Year-XPENG G95-Sart Model in i-VISTA6 China Smart Vehicle Index-XPENG P5Best Electric Cars of the World 2023-XPENG G95-Star Health Car-XPENG G9stNote:6.The i-VISTA China Intelligent Vehicle Index is the worlds first consumer-oriented neutral,impartial and professional third-party testing and evaluation system for smart connected vehicles.It was established by China Automotive Engineering Research Institute in 2017,with the guidance of China Automotive Engineering Research Institute and China Association of Automobile Manufacturers.The index is based on the research results from intelligent vehicle integration system test zones,in combination with natural driving and traffic data research findings in China.035036ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE03E XPLOREROF FU T URE MOBILI T YSustainability ManagementXPENG is highly attuned to the impact of our business on the environment and society.We continue improving our ESG governance structure and actively communicate with key stakeholders to promote an orderly implementation of the Companys sustainability management work.037038ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEGovernance Structure for Sustainable Development3.1XPENGCompositionBoard of DirectorsESG Steering CommitteeESG Task ForceResponsibilitiesIn 2022,we upgraded our former ESG Leading Group into the ESG Steering Committee,forming a 3-tier sustainability governance structure composed of the“Board of Directors-ESG Steering Committee-ESG Task Force”and establishing the closed-loop management system consisting of decision-making,communication,execution,reporting and assessment to ensure effective implementation of the ESG management work.Furthermore,in response to Chinas“dual carbon”policy,we have upgraded our former Carbon Neutrality Project-based Working Group to the Carbon Neutrality Working Group in charge of the Companys carbon neutrality strategy planning and daily management to advance the Companys carbon management and achieve the“dual carbon”goals.Includes all Board members.Assumes overall responsibility for ESG work and oversees the Companys ESG direction and strategy,identifying,assessing and managing any significant ESG risks in Companys business.It regularly receives reports from the ESG Steering Committee and other relevant management teams,and it is also in charge of reviewing and approving the Companys Sustainability Report andother ESG Management policies.The ESG Steering Committee formulates the Companys ESG vision,goals,strategies,policies,etc.;monitors the implementation of the Companys ESG strategy,and reviews the progress toward the ESG goals and provides advice regarding the ESG performance;assesses the ESG related risks and opportunities,reports to the Board of Directors on ESG work and provides advice each year regularly;reviews the Companys ESG report and other ESG related information disclosures.Responsible for the daily execution of ESG strategies set forth by the Board of Directors and the ESG Steering Committee,ongoing follow-up on the ESG requirements from regulators,investors and stakeholders,timely reporting on ESG performance,preparing ESG reports,and assisting the ESG Steering Committee in carrying out supervision and assessment.Led by the Co-President of the Company,along with senior management in charge of Product planning,R&D,Manufacturing,Branding and Public Relations,Internal Controls,Legal,Financing and Investments,Administration,Finance and Operations platform and other functions.Includes key personnel from Product Planning,R&D,Battery,Quality and Safety,Procurement,Manufacturing,Charging,Branding and Public Relations,Administration,Public Welfare Foundation,Financing and Investment,Finance and Operations platform and other core functions.039040ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEStakeholder Engagement3.2XPENG Operational compliance Tax payment in accordance with laws Energy conservation and emission reduction Product quality Service and experience Information security and privacy protection Online promotion Offline showcase and promotion activities WeChat Official Account New product release conference Market research Customer satisfaction survey Legitimate interests Compensation and benefits Training and education Occupational health and safety Diversity and equal opportunities Corporate governance Return on investment Risk management and control Information transparency Supply chain management Cost control Fair competition Rural revitalization Assistance for disadvantaged groups Environmental protection Information disclosure Media interaction Contributions to NGOs Impact on sustainable development General meeting of shareholders Roadshows Regular information disclosure Email and telephone inquiries On-site investigation Supplier meetings and review Supplier contracts and agreements Supplier training Participation in community projects Public welfare activities Low-carbon promoting activities Press releases Media briefings Townhall meetings Employee training Internal and external websites Government Enterprise Seminar Information deliveryWhile placing a high premium on communications with the stakeholders,XPeng Inc.has put in place a variety of stakeholder communication channels,timely disclosing information to stakeholders on operations and production,environmental protection,technology innovation,development strategy and other relevant aspects.We protect stakeholders right to information and participation,integrate stakeholder expectations gathered into the Companys operations and work together with stakeholders to promote sustainable development.StakeholdersGovernment andsupervisory organizationsCustomersEmployeesInvestorsBusiness partnersSociety and the environmentMedia and NGOsKey ConcernsCommunication Channels/Methods041042ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEMateriality Assessment3.3XPENGBased on the original list of important issues,we will identify and classify the material issues for this year and build a database based on the following five aspects:national policies,company development plans,ESG disclosure standards,ESG rating indicators for the capital market,and peer issue bench-marking.Feedback is gathered from Directors,management,employees,customers,investors,partners,media,the public and other stakeholders in daily operation regarding the sustainable development of XPeng Inc.as the basis for screening material issues.The Board of Directors participated in the screening,evaluation and supervision processes regarding material issues,and several directors filled out materiality analysis questionnaires to provide feedback on the issues and suggestions related to ESG management.According to the principle of materiality,the survey results are statistically analyzed,and each issue is given a different weight according to the degree of risk.The issues are classified according to the two dimensions of importance to the Companys development and“importance to stakeholders.This allows us to form a materiality mapping matrix,and the results are evaluated both by the Companys management as well as external professionals.Develop and implement action plans on material issues,with focused report disclosure of relevant information.XPENGS 2022 ESG ISSUEMATERIALITY MAPPING MATRIXKey issuesEnvironmentalHighly important issuesGovernanceImportant issuesSocialIdentifying the material issuesStakeholder CommunicationsMateriality Analysis and ReviewIssue Response and Disclosure01020304Product Quality and SafetyInformation Security and Privacy Protection Resource EfficiencyTechnology Innovation andIntellectual PropertyOccupation Health and SafetyCustomer Service and SatisfactionEmplopyee Training and DevelopmentCorporate Citizen and CharityDiversity and Equal OpportunityWater Resource ManagementImportance to Companys developmentImportance to stakeholdersEmission ManagementSupply Chain ManagementGreen Technology and Product Climate ChangeRisk and Crisis ManagementCorporateGovernanceBusiness EthicsLaborManage-mentThrough active communication and research,XPeng Inc.gathers feedback from various stakeholders in order to identify important ESG issues and be able to make key disclosures in this report.Meanwhile,XPeng Inc.will continue to refine the Companys sustainability management according to the material issues identified.The materiality assessment of XPeng Inc.is mainly divided into the following stages:043044ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE04E XPLOREROF FU T URE MOBILI T Y5,214.839.9i4R&D investment.Million CNYPercentage of R&D employees.Number of newly authorized patents.Exploring the Future of Mobility Using Intelligent TechnologiesAs an explorer of future mobility,XPENG is committed to bringing people more convenient and enjoyable options for the future of mobility.Beginning with high quality products and services,we continually enhance the safety performance of our products,optimizing oursmart driving solutions and creating value for consumers leveraging technological advancements.045046ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCETechnology Innovation4.1Innovation Systems4.1.1XPENGInvestment in R&D(Million CNY)R&D investment as a percentage of revenue(%)Number of R&D positions201 9201 92,070.289.21,725.929.52,0634,114.319.65,2715,214.819.46,313202020202020202120212021202220222022XPENG stays well ahead of the industrys development trends by innovating products and services that create new momentum and benchmarks within the industry.Our“full-stack inhouse research and development capabilities,along with the rapid iteration of software and hardware integration”are core components in our strategy to drive technology innovation.Therefore,we constantly enhance the level of technology and innovation across our portfolio of assets.XPENG clearly defines its technology research and development strategy,on top of its continuous and strong R&D investment,establishing international R&D centers and R&D teams,as well as increasing incentives to innovate and improving intellectual property rights protection measures.We are committed to maintaining our leading position in smart EV technology advancement and product innovation.047048ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCER&D Strategy and Blueprint4.1.2R&D Team4.1.3XPENGSilicon ValleySan DiegoEuropeGuangzhou HeadquarterBeijingShanghaiYangzhouShenzhenZhaoqingAdhering to our full-stack inhouse research and development strategy,XPENG is committed to bringing innovation to autonomous driving,smart connectivity and core vehicle systems.Through cutting-edge software and hardware technologies,we are transforming the future of mobility with technology and providing users with a unique mobile experience.By the end of 2022,XPENG had established six R&D centers in locations such as Guangzhou,Shanghai,the Silicon Valley,San Diego,etc.,gradually forming a leading R&D system in China with a global blueprint.XPENG has a multi-level,diversified,large-scale,in-house international team of talent.Several of our founders and executives are senior technical talents from different industries,providing the Company with a solid talent foundation.By the end of 2022,our R&D team had 6,313 people,accounting for 39.9%of our total employees.XPENG considers R&D and innovation achievements in performance evaluations,linking R&D and innovation with compensation,and providing monetary rewards/incentives for employees who contribute to intellectual property rights,such as patent and software inventions,in order to promote employee innovation.At the same time,we have set up the Outstanding Inventor Award,and we publish the ranking of patent proposals along with the inventors standings each quarter.Global Footprint049050ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCELeading Technology Achievements4.1.4XPENGPermit for Autonomous Driving Public Road TestsCity NGPLeading Charging TechnologyBrand New Interaction of the Smart Cockpit010203XPENG dedicates itself to in-house R&D of smart technologies in various areas including smart cockpit and advanced driver-assistance system,in order to enable its competitive edge and maintain its technology leadership.On September 17,2022,XPENG launched the pilot program of city NGP(Navigation Guided Pilot)in Guangzhou.As the first mass-produced advanced driver-assistance system for city scenarios in China,City NGP demonstrates that XPENG is leading the world in terms of advanced driver-assistance and surpassing competitors in certain driving scenarios.City NGP not only meets the essential driving needs,but also has the ability to deal with complex scenarios,With City NGP,the passage efficiency across 90%of driving scenarios is on par with the manned driving time measured by the navigation system.The XPENG G9 was granted permission to conduct the road test for smart connected vehicles in Guangzhou,the first unmodified mass-produced commercial vehicle to qualify for autonomous driving public road tests in China.In 2022,the penetration rate of XPENG Highway NGP reached 65%.By the end of 2022,the highway-assisted driving mileage exceeded 54 million kilometers.Our new-generation 480kW ultra-fast charger adopts high-power cooling technology with 670A flow rate capacity.As the first mass-produced car based on the 800V high-voltage SiC platform in China,the XPENG G9 can replenish up to 200 kilometers in 5 minutes with the 480kW ultra-fast charger built by XPENG itself.In 2022,XPENG started to mass-produce and install these ultra-fast chargers to unleash the power of the 800V platform as far as possible.The full-scenario voice 2.0 features the MIMO multi-zone technology incorporated in the in-vehicle voice system so that the voice assistant is ready at all times,even understanding successive instructions from different passengers without needing to be continually reactivated.Even in places where the network signals are absent or weak,such as underground parking lots,highways and outdoor spaces,the new voice assistant in G9 can complete interactions and control over 600 functions of the vehicle.Powered by the mass-produced voice product featuring mill second-level response,the voice assistant in G9 truly realizes“YOU GET WHAT YOU SAY”,significantly expanding the choices of voice interaction.051052ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEXPENGIndustry-Wide Cooperation4.1.5XPENG is actively engaged in technology exchanges and cooperation with other partners,integrates leading research resources,and collaborates with partners to promote infrastructure construction so as to encourage shared growth of the industry and with our partners.In August 2022,XPENG partnered with Alibaba Cloud,a global leading cloud computing and AI technology company,to build Chinas largest autonomous driving intelligent computing center,Fuyao,in Ulanqab for training of the autonomous driving model.Once completed,the training speed of XPENGs core autonomous driving training model can increase by up to 170X.【Case】XPENG Builds the Autonomous Driving Intelligent Computing Center in Partnership with Alibaba Cloud053054ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEXPENGIntellectual Property Protection4.1.6010203To ensure sustained innovation of the Company,XPENG complies strictly with the Trademark Law of the Peoples Republic of China,the Patent Law of the Peoples Republic of China,and other applicable laws and regulations,and develops the Rules and Policy for Intellectual Property Protection,Measures for Management of Intellectual Property Work,and Measures for Management of Patent Work,among others,to standardize the intellectual property protection work in an all-round manner and enhance the market competitiveness of the Company.In 2022,we made revisions to the Measures for Management of Intellectual Property Work to further clarify the trademark application process and patent application process and many other aspects.During the reporting period,the Company had zero case of intellectual property infringement.In 2022,XPENG was awarded as“National Intellectual Property Advantageous Enterprise”.During the year,the Company was granted 694 new patents,bringing the total number of patents owned by the Company to 1,823.Strengthening the protection of rightsSafeguarding the rights of othersCarrying out special trainingwe voluntarily monitor trademark confirmation and infringements in the market by means of web search,internal feedback and collaboration with external agencies and choose suitable rights safeguarding schemes for different types of infringements to safeguard our own rights.the Company respects the intellectual property of others,and assesses innovation solutions as to the risks of infringement at the review valve points of whole vehicle development;during the development process,legal counsels assist R&D personnel in identifying the infringement risks of the technical proposals and provide design suggestions for avoiding the risk points;in cooperating with the suppliers,we avoid the risks by signing disclaimers and requiring the suppliers to provide declarations of non-infringement.throughout the year,the Company organized 11 intellectual property training sessions for internal employees,including 2 company-wide training sessions,6 training sessions for R&D personnel,and 3 training sessions for marketing and branding personnel.Moreover,we invited external partners to carry out 3 training sessions on European patents and expertise for internal patent staff to promote employee awareness of intellectual property protection.055056ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEProtection of Customers Rights1XPENGFeature Premium Services for“XPENG Owners”We do our best to provide all car owners with high quality services,keep customers expectations top-of-mind and protect customers rights.We place a high premium on customer satisfaction and strive to provide all car owners with a high quality service experience.XPENG is committed to protecting all car owners with thoughtful,best-in-class services.We continually improve our service management,protect customers rights and provide car owners with a care-free guarantee to enhance the experience of each car owner.Privacy ProtectionXPENG complies strictly with applicable laws and regulations in the places where it operates,including the Cybersecurity Law of the Peoples Republic of China,Data Security Law of the Peoples Republic of China and Personal Information Protection Law of the Peoples Republic of China and acts on the principles and guidelines contained in the General Data Protection Regulation(GDPR)with regard to the use of information and privacy protection.This allows us to protect data against unauthorized access,disclosure,use,modification,damage or loss.We have released and implemented a series of management policies and norms such as the Privacy Policy,Data Compliance Management Procedure,Measures on Data Disclosure Management to all of our employees,and continuously regulate privacy protection and information security.We also continually update our internal privacy protection policies according to the actual conditions and external policies.By doing so,the Company introduced 16 additional policies and updated 22 policies in 2022.We embed the protection of user privacy into the Companys risk compliance management and regard it as an important component of the data compliance review process.We also conduct both internal audits and third-party audits on compliance of privacy policies,and follow a zero-tolerance policy toward violations of the privacy regulations.XPENG has set up an Information Security and Data Compliance Committee,which assumes overall responsibility for information security and data compliance management It is chaired by the Deputy Chairman of XPENG and is composed of the vice presidents of various business lines.In particular Mr.Ronghai Huang previously served as the technical director at Alibaba and holds extensive experience in the field of Internet technology R&D and security management.The committee sets up two sub working groups:(1)the Information Security Working Group,which is responsible for cybersecurity,information security,and data security matters involved in the Companys business operations through the Data Intelligence Center Information Security and Cloud Technology Department;and(2)the Data Compliance Working Group,which is responsible for data compliance matters with regard to important data,personal information protection and outbound data transfer,etc.,involved in the businesses of the Company through the Legal Department.With strict information security protection measures in place,XPENG neither reported any information leakage or cybersecurity incident nor was penalized due to information security vulnerabilities or other cybersecurity incidents in the last 3 years.057058ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEISO 27001ISO 277017XPENG010203040506The Company has obtained the ISO 27001 Information Security Management System.The Company has obtained the ISO 27701 Privacy Information Management System certification.Seven of our core systems have obtained the National Level 3 Certificate in Cybersecurity Protection.Privacy risk screeningData collection proceduresSafe data storagePrivacy protection trainingEmergency responseThird party liabilityWe have integrated the principle of privacy protection into the Companys product development and system architecture while carrying out Data Protection Impact Assessment(DPIA)to identify and mitigate privacy risks before data processing.We have also launched the General Data Protection Regulation(GDPR)compliance program and released the XPENG White Paper on GDPR.We provide users with explanations pertaining to the collection,use,retention and protection of personal information through documents such as privacy policies,product/function descriptions,and service scenario guidelines,and inform users how they can exercise relevant rights.We comply with statutory requirements regarding where,how and for how long personal information shall be stored,and take appropriate encryption,de-identification and other technical measures for the storage of information.The internal use of data is subject to the minimum necessary rule,and must go through our security compliance review process to prevent risks associated with outbound data transfer and protect personal information rights.We organize online training and examinations on information security and privacy compliance awareness for all employees,and clearly disclose public feedback channels for information security and privacy protection both through training and publicity.We have formulated policies such as the Measures for Management of Information Security Emergency Response and the Contingency Plan for Information Security Incidents and relevant measures for handling emergencies,clarifying the process for handling information security incidents to safeguard against information security risks.In 2022,the Company organized 4 information security protection drills and 5 externally certified information security protection drills.We conduct annual audits on SOX listing compliance,ISO 27001&ISO 27701,GDPR compliance and European WP29 compliance,we also conduct assessment on the national information system multi-level protection each year.Additionally,we carry out third-party vulnerability analysis,including simulated hacker attacks,with each system update designed to strengthen our the information security management capabilities.All third-party cooperation is subject to relevant processes and approvals,and requires signing a confidentiality agreement that defines confidential information,confidentiality obligations,and liabilities for breaches of the agreement.059060ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE00000010203XPENGNumber of information security vulnerabilities or other cybersecurity incidents长长长长长长长长长长长长长长长长长长长长长长长pieceMillion CNYpiecepiecepersonFine paid as a result of information security vulnerabilities or other cybersecurity incidentsNumber of complaints with regard to breach of customer privacy received from regulators and other external agenciesNumber of customers and employees affected by Company data leakageNumber of data leakage incidentsCustomer Communication ChannelsCustomer Complaint ResolutionXPENG places a high premium on active communications with its customers.The Company maintains open customer communications through a diverse range of channels including XPENG Service Hotline,customer satisfaction surveys,XPENGs app service group and brick-and-mortar stores to make sure that customers opinions and suggestions are responded to in a timely and effective manner.XPENG attaches particular importance to the voice of our customers.We have actively improved customer complaint handling system and relevant processes to improve the customer experience.In 2022,the telephone customer service channel received approximately 44,000 customer complaints,and 100%of the complaints were responded and resolved.System guaranteeProcess guaranteeTechnical supportWe continue to enhance our complaint handling systems in the Management Procedures/Measures for Customer Complaint Handling,to standardize our complaint service quality and assessment mechanisms under different scenarios and optimize customer service with regard to handling complaints.We continue to optimize our closed-loop complaint handling mechanism.The department that receives the complaints is responsible for the entire complaint process and resolution,and the handling process is monitored through the system to make sure that the problems are solved in a timely manner.We take the initiative to confirm whether the complaint is resolved,and seek customer feedback on the effectiveness and efficiency,etc.,of complaint handling as important output for improving service management.With the help of advanced technologies such as vehicle self-diagnosis functions,intelligent fault diagnosis,and remote processing capabilities,we can locate and address potential faults that may cause complaints.061062ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE010203XPENGResponsible MarketingXPENG adheres to the standards of responsible marketing,signing sales contracts with customers in a transparent and fair manner.We formulated marketing-related policies,clarified responsible marketing requirements,and established a series of internal publicity compliance guidelines.In addition,we further standardized advertising and marketing content,providing consumers with complete,accurate,objective and easy-to-understand information,and strengthening our compliance control in marketing,pricing,channels and relevant operations to protect consumers rights.Marketing trainingAssessment,reward,andpunishment mechanismGuiding sustainable consumptionWe require all sales personnel to receive relevant training,inform customers of all risks as well as the proper use of our products,and ensure fair marketing throughout the entireprocess of sales,delivery,and after-sales.Any related problems and questions are dealt with and answered in a timely manner.We incorporate compliance marketing into the assessment dimensions for sales commission.If there is any infringement,the sales commission for the month will be affected accordingly.For the person directly responsible for the infringement,different degrees of disciplinary punishment will be given in accordance with the Employee Code of Conduct and other relevant rules and regulations,and according to the number and severity of violations in the store during the year,store managers will be held accountable.We provide green/healthy products,degradable goods and other eco-friendly products in our official store;we encourage on-demand consumption,and our sales staff is trained to recommend non-expensive/highest profit products according to user needs,and encourage customers to use points for purchase to the greatest extent first,allowing more rights and interests for our customers as much as possible.063064ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEProviding Quality Service20102XPENG3371,000577,200As part of shaping the future mobility experience,XPENG is committed to providing a smart service experience that is different from differentiated from that in traditional driving and building a better and smarter service system for smart electric vehicle owners.We gain insights into customer questions and their problems with vehicle use by launching the unified online/offline service interface,appointing customer service operation managers in the offline stores and talking to customers face-to-face.Meanwhile,we answer customers questions online in a timely manner through our XPENG APP knowledge bank,system query tool for customer profile and customer service live chat group,etc.XPENG takes customer real-life scenarios into consideration of the siting of charging stations so as to enable its electric vehicle owners to charge their cars at the most convenience while enjoying their lives.XPENG Energy Replenishment SystemSuper charging resourcesharing in remote areas3 km energy replenishment life circleXPENG is the industrys first electric vehicle maker with a charging network that covers all prefecture-level administrative regions and centrally-administered municipalities across China(337 cities in total).In regions where super charging resources are scarce,XPENG provides the rarely seen 180kW DC super charging services.XPENG continues to expand its energy replenishment network.The“3 km Energy Replenishment Life Circle”serves more than 83%of car owners in 10 core cities including Beijing,Shanghai,Guangzhou and Shenzhen so that the time needed for the car owners from departure to charging facility is reduced to less than 10 minutes.In more than 300 cities including Guiyang,Kunming,Huangshi and Guilin,the coverage of the“3 km Energy Replenishment Life Circle”reaches up to 71%.In 2022,XPENG super charging was made available in 337 cities across China.CitiesStationsthTonsThe 1,000 self-operated charging station of XPENG was put in use.The amount of charging of XPENG throughout the year reached 322,602,875.63kWh,which is equivalent to a cumulative carbon emission reduction of about 577,200 tons.065066ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE010102020303XPENGXPENGX-SERVICE:Smart and Fast Service for a More Pleasant ExperienceX-CERTIFIED Certified Second-hand CarsX-SERVICE is an online,easily accessible mobile smart service built for users based on the XPENG Intelligent Service Platform,and is committed to transforming the traditional service experience to XPENG owners.XPENG Inc.is committed to creating an intelligent and high-quality second-hand car trading service chain,allowing car owners to sell or replace vehicles with efficient value preservation,and allowing car buyers to choose and purchase vehicles transparently and safely,creating a new travel life for all.Online|exclusive group serviceIntelligent|Integrated smart diagnosisMobile|one-hour distance to serviceThrough an exclusive service group,the service partner meets the full-cycle service needs of users when ordering,delivering and enjoying our cars.An integrated solution to provide users with online pre-diagnosis and appointment services.Using our intelligent service platform to trigger mobile services,we offer one-hour distance to service within the core urban area,to better meet the needs of car owners.Buy with confidenceUse with confidenceSell with confidenceEstablish an intelligent assessment with an objective and reasonable official certification system,providing 199 official tests,original factory upgrades,official transaction transfers and other services to ensure efficiency and safety,and provide certified second-hand car financial solutions.We protect the rights and interests of second-hand car owners,offering the basic services of new cars;we provide a 7-day return policy and exchange services,and establish a full-cycle after-sales maintenance record tracking.Implementing the rest assured replacement service for our brand,which provides high subsidies,insures 30 days of service,and provides safe and convenient official one-stop service.067068ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEEnsuring Customers Safety 3010203XPENGXPeng Inc.attaches great importance to the users intelligent assisted driving safety education,and has launched the industrys first smart assisted-driving safety system-intelligent driving points,reminding car owners to follow the standards of use for auxiliary driving functions,helping car owners understand the safety boundaries of intelligent assisted driving,and improving their safety awareness.XPENG intelligent driving safety systems focus on intelligent assisted driving,with intelligent driving points as the core.The systems cover the two major aspects of education and assessment,including pre-use training,admission assessment,and safety reminders during use,throughout the different stages of learning-mastery-use.Safety EducationIntelligent Driving Points RemindersIntelligent Driving Points Incentive MechanismLaunch online intelligent driving classroom,develop intelligent assisted driving science cognition,operation guides and other related content,and improve users safe driving skills in three stages including introductory level to science,advanced level to science,and guidance for use.When users use assisted driving and cause frequent or long-time disengagement,fatigued driving,frequent lack of attention to road conditions,and similar risks,the system will deduct points according to different degrees of danger,and automatically push relevant safety reminders and corresponding safety learning content.High-scoring users(personal intelligent driving with a residual score greater than 90 points)can get priority XPENG OTA public beta rights in the future.069070ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEShaping the XPENG Owner Culture4XPENGX-MOMENTX-WALKERDozens of XPENG owners met at XPENG office visiting XPENGs headquarters to hold face-to-face communications with the G9 Product Manager,exploring local Cantonese culture and checking in on XPENG flying car and so on.What a wonderful time throughout 4 days and 3 nights.It is a hoot and a half.Testimony from a XPENG OwnerWe build the bridge of communication with car owners through our“XPENG Owners Club”and continue to enrich the customer experience with XPENG cars through premium car owner cultural activities such as“X-MOMENT”and“X-WALKER”to enhance the emotional resonance between XPENG and our car owners.X-walker refers to XPENG owner volunteers,made up of loyal customers who highly identify with the XPENG brand,products and culture.We invite them to participate in special activities,such as public welfare events,auto shows and store activities to increase positive interactions between car owners and XPENG.In 2022,X-walker car owner volunteers participated in public welfare volunteer activities such as the Zhanjiang Mangrove Forest Beach Cleaning and Planting,Green Home Youth Action-XPENG Owner Weaving at Panda Village as well as the delivery ceremony for the first batch of G9s.the urban welfare map refers to the exclusive welfare sharing and activity-co-creating platform for XPENG owners.Using the urban welfare map as a bridge,XPENG owners who join the urban welfare map can not only enjoy a more pleasant life,but also derive exclusive promotional traffic for their own brick-and-mortar stores,creating an exclusive welfare community together with other XPENG owners.XPENG Owners Banquet GuangzhouX-walker Activity of Mangrove Forest Beach Cleaning and Planting in ZhanjiangX-walker Panda Village Public Welfare VolunteerVisits to XPENG Users from the Midwestern Region Visited XPENG Headquarters in Guangzhou for ExchangesVisits to XPENG:We invited XPENG owners to XPENG headquarters in Guangzhou for interactive communications and for owners to gain deeper insights into the culture of XPENG,experience our products,and take part in expert seminars on products as well as for us to listen to the real feedbacks and voice of XPENG owners.XPENG Owners Banquet:We invited XPENG owners to get together for banquets,where,in addition to a lottery drawing,XPENG staff carried out in-depth communications with XPENG owners to hear first-hand from our customers and their thoughts on product technology iterations,marketing,sales and marketing.We create exclusive and high-end car owner activities for our premium customers,spreading XPENGs spirit of exploration.In 2022,X-MOMENT innovated activities for XPENG owners by organizing several visits to XPENG headquarters in Guangzhou and XPENG owners banquets in 4 cities.Urban Welfare Map071072ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEImproving Customer Satisfaction520192020202120222022 Goals84%13%N/ANote97G0203XPENGXPENG complies strictly with the Law of the Peoples Republic of China on Protection of Consumer Rights and Interests,respects the lawful rights and interests of the consumers,puts owners satisfaction first,and keeps improving the consumer experience.In 2022,the Company conducted monthly NPS7 surveys focusing on what makes users referring the XPENG products and services to others.We used the feedback from these surveys for user follow-up and to make improvement plans for relevant departments to enhance our owners product and service experience.Moreover,we continued to improve our customer evaluation indicators,utilizing customer evaluations as an important reference point for follow-up work and refinements,and continuously upgrading the quality of our products and services.In 2022,XPENGs five-star rating was 96%,exceeding our initial goal.Note:7.Net promoter score,also known as word-of-mouth,is a metric used to measure the possibility of a user referring an enterprise or service to others.XPENG NPS survey began in April 2022.Note:N/A indicates the goal of respondents as a percentage of the total number of customers is unknown.Goal setting and reviewMulti-dimensional evaluation indicatorsTimely survey deliveryPercentage of satisfied respondentsPercentage of customers who responded to our survey The achievement of the previous goals is reviewed to provide a reference for current service experience improvement and setting the current goals.Comprehensive surveys are conducted regarding indicators such as service partners,service quality,service efficiency and service environment,and we strive to obtain thorough and objective customer evaluations.After vehicle delivery,the questionnaire is sent to achieve a 100livery rate of our satisfaction survey.073074ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEQuality Products4.2Product Series4.2.1XPENGG9P7P5G3iDriven by technological evolution,XPENG continues to discover more diversified functions of its products and has built advanced theory of product evolution toward for the future.By amassing global leading technologies,we improve the product management system across the entire value chain,and strive to provide global consumers with safe,more reliable and superior quality products.Note:8.Certain features of the models may vary according to the configuration.Please refer to the actual configuration of the products.Full scenario intelligence,super computing power,comprehensive sensing800V ultra-fast charging platform with mass-produced chargersBrand-new architecture scheme,ushering in the era of brand-new centralized electrical/electronic architectureIndustry-leading ADAS&Xmart OS intelligent in-car systemAdvanced sport sedan curves&wing door designExceptional control,dual motor 4 driveIndustry-leading ADAS&Xmart OS intelligent in-car systemX Robot Face dynamic intelligent aesthetics designX-Safety comprehensive active/passive safety,X-HP smart temperature controlXmart OS in-car intelligent systemX Robot Face family design languagePanoramic space cockpit075076ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEXPENGProduct Quality4.2.2ISO 90012019201920202020202120212022202205750.025s2,321,21909250.0164,5975,844,321061,5510.2371,14026,855,11913,39932,3520.151,35120,988,131XPENG continues to improve its product quality management system.In 2022,the Company updated the Process Quality Control Procedures,and formulated and implemented the Whole Vehicle Inspection Control Procedures.Moreover,the XPENGs powertrain technology was developed in full compliance with the European Union laws and regulations as well as the WLTP(the Worldwide Harmonised Light Vehicle Test Procedure)requirements.The charging gun and charging interface designs were developed based on local real-use scenarios in the European Union to ensure the usability and safety of the products.The XPENG P5 and G3i models have obtained the(EU)2018/858 on European Whole Vehicle Type Approval(WVTA),and the XPENG P7 model has passed Chinas first type certification of UNECE R79 from TV SD.XPENG continued to refine its after-sales service quality measures such as the Management Measures for Fast Response to Market Quality Problems and the Measures for the Management of Market Quality Information,and promoted the visualization of data indicators and the efficiency of quality improvement.In order to address market quality problems identified from multiple channels,including 400 hotline complaints,store-side maintenance,back-end warnings,and others,XPENG uses quality methods and tools to analyze the problems,in accordance with the Three Reality Principle9.At the same time,it evaluates the effectiveness of our problem solving through mechanisms such as quality-focused daily meetings,director-level weekly meetings and meetings with the Company presidents.In 2022,we identified development,market and supplier problems,established a historical problem experience bank and standardized processes,and introduced an IT system to root out problems.We also created a checklist during the product development process to ensure proper spot check and confirmation upon data publishing,and perception assessment,and identified potential problems during the development process.When handling each case of quality issues,we identify the common points from multiple aspects such as design,suppliers,production logistics and sales service,etc.,to formulate countermeasures from the perspective of quality systems.In this way,we address the root causes of problems and achieve effective prevention.In 2022,the Companys SQE made special improvements including assistance to disadvantaged suppliers and guarantee of important functions and performed regular spot checks to ensure quality standards were implemented effectively.XPENG follows the requirements of the national Regulations on the Administration of Recalls of Defective Motor Vehicles and has formulated a recall management document,Administrative Measures for the Recall of Defective Vehicles,to clarify the recall implementation process.In 2022,the Company reported no recalls of products due to problems in product quality or security.As part of its ongoing effort to ensure successful product quality assessment,the Company continues to improve the product quality control system,introducing 2 more review dimensions(product safety and information security)and refining the process control.Throughout the year,the Company supplemented 30 control delivery standards,optimized 46 control delivery standards,in addition to expanding and fine-tuning the existing system/process documents to meet business needs.In 2022,XPENG formulated the Monitoring and Measuring Equipment Management Procedure to present the quality validation and assessment results data in a more intuitive manner.From R&D validation to manufacturing of the XPENG P7,quality control spans the entire processes through 18 quality gates and over 1,700 dynamic/static inspection items.The key function inspection items are subject to 200%inspection.In the meanwhile,the Company has 250 testing vehicles and 151 experimental items with cumulative test driving mileage of over 5 million kilometers.As always,XPENG remains,deeply committed to quality control in accordance with stringent quality standards.To improve target management in process control,we break down the quality objectives and enhance the system of responsibility to achieve the objectives through communication meetings and the assessment mechanism.In 2022,the Company developed the quality objective in the Supplier Quality Engineer(SQE)field,which is further divided into 30 objectives in 5 segments.Meanwhile,we formulated the 2022 Business Implementation Plan in the SQE Domain and followed up on the monthly performance.XPeng Inc.has obtained the ISO 9001 Quality Management System Certificate.Product Quality AssessmentQuality Problem Handling【Case】XPENG P7 Extreme Quality Assurance,Manifesting its Excellent QualityNumber of products recalled(unit)Balance at the start of the warranty period(unit:thousand CNY)IndicatorExpenses paid during the warranty period(unit:thousand CNY)Operating income(unit:thousand CNY)Warranty expense as a percentage of the annual revenueNote:9.The scene,the situation,and the objects,which means taking practical countermeasures according to the actual situation of the scene.XPENG077078ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE0102030405Quality Culture EnhancementXPENG has formulated the XPENG Quality Culture Manual and certified the Companys Quality Culture Ambassador to be responsible for the promotion of its culture of quality assurance.Furthermore,the Company launched QC improvement campaigns and invited XPENGs management to get involved in the event and final appraisal process for QC improvement areas.In this way,we realized company-wide involvement in quality improvement initiatives.Emergency Relief SystemHonors and AwardsTo handle emergencies,the Company has formulated an emergency contingency plan for timely emergency response for its core products.In the past 3 years,the COVID-19 pandemic had major negative impact on logistics turnover efficiency.In order to ensure the production of each model,the Company performed a dynamic parts assessment for maintaining strategic stock and implemented classified management of parts stock according to the associated risks of parts.We also assessed the material risks on a monthly basis tracking the pandemics impact on supply to adjust the quantity of stock.Meanwhile,we created stock on the VMI supplier side for certain parts and promoted multi-channel and multi-point supply of the parts and components to ensure safety of the supply chain.In March 2022,Zhaoqing High-Tech Zone Management Committee awarded the Mayors Quality Award to Zhaoqing XPeng Automobile Co.,Ltd.(Zhaoqing Plant).In November 2022,China Quality Certification Center awarded the CCC Type A Enterprise Certificate to Zhaoqing XPeng New Energy Investment Co.,Ltd.(Zhaoqing Plant).XPENG was ranked 1 in residual value among domestic BEV brands by J.D.PowerXPENG G3i was ranked 1 in new car quality in the small BEV segment by J.D.Power.XPENG P7 was ranked 1 in APEAL in the middle size BEV segment by J.D.Power.ststst079080ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEXPENGProduct Safety4.2.3XPENG P5 won i-VISTA 5-star ratingUN R1555-star rating5-star rating5-star health carC-NCAP10 rating:5-star(comprehensive score:92.2%)C-IASI11：3 indicators won China Insurance Automotive Safety Index G rating(excellent)C-NCAP rating:5-star rating(comprehensive score:89.4%)C-IASI：3 indicators won China Insurance Automotive Safety Index G rating(excellent)G3P7P5XPENG complies strictly with national requirements such as the Measures for Management of Road Motor Vehicle Production Enterprises and Product Access,Technical Specification for Remote Service and Management System for Electric Vehicles and Provisions on Management of New Energy Automobile Production Enterprises and Product Access to ensure that the products meet the technical standards for safety,environmental protection,energy saving and anti-theft.XPENG has also established a monitoring platform on new energy vehicles(NEV)enterprises to monitor the relevant information in terms of whole vehicle,power battery,driving motor,vehicle failure in real time.The platform has passed access testing by Chinas regulatory platform to ensure data consistency between testing and access.XPENG obtained UN R155(UNECE Regulation No,155)certificate of compliance for cybersecurity management systemXPENG P5 obtained C-AHI 5-star rating in the second batch of model tests 2022XPENG G9 obtained the rating of 5-star health car of 2022 from China Automotive Engineering Research InstituteNote:10.C-NCAP is the abbreviation of China-New Car Assessment Programme.C-NCAP conducts comprehensive safety performance testing of the cars,including passenger protection,pedestrian protection and active safety.11.C-IASI is the abbreviation of China Insurance Automotive Safety Index.Its test items include the damageability and repairability index,vehicle occupant safety index,pedestrian safety index and vehicle assistant safety index.081082ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEXPENGProduct Safety Performance MonitoringProduct Safety AuditsProduct Safety Risk AssessmentProduct Safety TrainingXPENG has formulated detailed handling processes for major incidents and batch quality problems and clearly defined the fast response requirements and emergency handling mechanisms.The Company conducts internal check of potential product risks,creates the warning and monitoring platform,and arranges full-time staff to monitor the operating status of the products 724.In this way,the Company is able to identify and improve any abnormal operating status to ensure vehicle safety.The Company sets management indicators with product quality safety,monitoring of safe operation,incident response and analysis,regularly monitors,measures,analyzes,assesses and improves the indicators,reports to personnel with responsibilities and powers on the results of product safety performance analysis and assessment periodically.Moreover,the Company conducts an internal audit at least once a year,at an interval of no more than 12 months,to ensure the adequacy and effectiveness of the product safety management system.The Product Safety Working Group is responsible for formulating the rules for management guidelines for product safety assessment and performs safety risks assessments.The Company determines the levels of potential safety risks identified upon assessment,prioritizes the issues with higher risk levels and keeps the full-process records for analysis.The Company actively organizes the employees to participate in various quality and safety training sessions.In 2022,the Company organized 3 product safety training sessions with regards to safety system building.083084ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE05E XPLOREROF FU T URE MOBILI T Y1.72 14,1882Heralding Low-Carbon Green GrowthAdhering to green development,XPENG implements the concept of sustainability throughout its production and operation,so as to optimize resource utilization and reduce pollutants.We actively explore low-carbon technologies to advance carbon neutrality and drive sustainable development.Full life cycle reduction of Co2 emissions from electric vehicles we delivered for year 2022,compared with conventional ICE vehicles.Million tonsTons12Participations Photovoltaic power generation helped reduce CO2 emissions.Participated in the compilation of carbon emission accounting standards for the automotive industry.Note:12.The data for CO2 emission reduction comes from the Zhaoqing Phase I PV power project and the Guangzhou base PV project.085086ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEGreen Design1XPENG Feature Building the Green Value ChainIntegrating the green concepts into the entire life cycle of automotive products,XPENG takes active measures across the whole chain of product design,raw material selection,manufacturing,logistics&transportation and resource recycling,so as to achieve a harmonious coexistence between products and the environment and build the green value chain of XPENG.At the sub-forum themed Chinas Path to Decarbonization:ESG Practice and Development of the 4th Forum for Credit System Construction of Chinese Cities,XPENG was listed among Xinhua Credit“Jinlan Cup”best cases of“carbon peak and carbon neutrality”technology innovation.XPENG actively promotes green design and R&D to improve the impact of its electric vehicle life cycle on the environment under the premise that vehicle performance and safety is ensured.Lightweight and high rigidity helped extend the vehicle product life,reduce carbon emissions during the vehicle life cycle,and improve the efficiency of the electric drive system.Through a low-wind resistance design,overall vehicle energy consumption was reduced,leading to lower carbon emissions.By improving the operating conditions of the intelligent computing center,we reduced energy consumption of intelligent computing,making it more efficient and greener.We used green,non-hazardous and recyclable materials to reduce pollution to the environment.087088ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEGreen Materials2XPENGValuing the environment-friendly characteristics of products from the source,XPENG carried out active R&D and utilization of green materials.We work diligently to use green,harmless and recyclable materials to reduce environmental pollution.We have established a comprehensive control system for banned substances and are gradually promoting the reduction and substitution of hazardous substances while ensuring that the environmental performance of the entire vehicle meets appropriate standards.The Company controls hazardous substances and recycling rate targets in products according to the Compliance Management Measures for Prohibited and Restricted Substances and Recycling.Hazardous substances must meet the Requirements for Prohibited and Limited Substances in Automobiles.While meeting the national standard GB/T 30512 of the Requirements for Prohibited Substances in Automobiles,the materials of spare parts and components have additional requirements including that asbestos substances should not be detected,and that the content of phthalates not exceed 0.1%.In 2022,we established a VOC(Volatile Organic Compounds)evaluation standard system and process specification covering the whole vehicle,parts and materials.Control and Substitution of Hazardous Substances【Case】Carbon reduction project by closed-loop recycling of aluminum plates for automobilesXPENG comprehensively recycles aluminum plates used in the stamping process of four doors and two covers(self-made components).In 2022,we completed the transformation of the production line and the closed-loop recycling of aluminum plates,realizing fine classification.We recycled 100%of the leftover stamping materials from the original production line of the plants.After the melting and rolling processes,we developed and produced aluminum plates with the same performance and reused them for automobiles,thus reducing the carbon emissions of aluminum materials for bodywork.The project has been designated as a special project for pollution control,energy saving and carbon reduction by the National Development and Reform Commission.089090ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEXPENGGreen Manufacturing3Adhering to green manufacturing,we strictly controlled the use of resources and pollutant emissions in vehicle production to reduce unnecessary waste of resources in accordance with the Environmental Protection Law of the Peoples Republic of China and the related laws and regulations on pollutant emissions in the operation sites.We promoted clean production,waste recycling and low-carbon energy solutions in our manufacturing plants through source-controlling emission reduction,in-process control and end-of-pipe treatment.The Zhaoqing manufacturing base was recognized as“Green Factory”by the Ministry of Industry and Information Technology in 2022.The Company made a number of energy saving and emission reduction efforts,and promoted the use of clean energy.The Phase I distributed photovoltaic(PV)project located in the Zhaoqing manufacturing base was connected to the grid in November 2021.Utilizing the vacant space at the plant,we constructed distributed photovoltaic systems on the roofs of final assembly and welding workshops,as well as parking lots.The project has an installed area of 170,000 m2 and an installed capacity of 20.74 MW.As of December 31,2022,the total power generation of the project reached 24,550,000 kWh,of which 11,493,000 kWh was used by XPENG.With an average PV consumption rate of 47%,we saved electricity costs of more than CNY 3.77 million and reduced CO2 emissions by 13,085.0 tons.The PV project in the Guangzhou base generated a total of 2,070,000 kWh of electric power during the reporting period,of which 2,059,000 kWh was used by XPENG.With an average PV consumption rate of 99%,we reduced 1,103.50 tons of CO2 emissions.In the future,XPENG will continue to promote the use of clean energy.We plan to build the Phase II PV project in the Zhaoqing manufacturing base,and deploy photovoltaic power generation projects at the manufacturing bases and office building headquarters.The Company recycled its air conditioning condensate water,cooling tower drained water,RO concentrated water generated by the painting pure water station in the plants,and the cooling tower also used circulating water.In 2022,the total water consumption of the Company was 987,330 m and the amount of recycled water(reuse of sewage water)was 153,066 m.Meanwhile,for production wastewater and domestic wastewater,the Company carried out physicochemical and biochemical processes at the wastewater treatment station,and commissioned qualified third parties for monitoring processes to ensure that the wastewater met the discharge standards before being discharged,so as to avoid water pollution.With municipal water as the Companys water source,there was no issue finding an applicable water source,nor were there any incidence of or fine of polluting water resources during the reporting period.In the future,we aim to reduce the use of fresh water by,for example,increasing the amount of recycled water,and reducing wastewater discharge.We are committed to reaching an industry-leading level in terms of water efficiency.Energy Saving and Green DevelopmentWater Resources Management091092ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEXPENGWaste Gas ManagementWe took measures to protect the air quality environment during the production process.We reduced the generation and emission of pollutants by adopting low VOC emission paints,building catalytic combustion and dust removal equipment,etc.In 2022,XPENG emitted 0.4 tons of sulfur oxides,2.3 tons of nitrogen oxides and 2.0 tons of particulate matter.In the future,we aim to continuously reduce the emissions of nitrogen oxides,sulfur oxides and particulate matter per unit of production to safeguard air quality.Welding workshopCoating workshopCoating plantWe adopted a high efficiency dust collector filter to adsorb fume and dust,with dust removal efficiency of 99%.We used a mobile welding fume purifier for scattered CO2 protection welding machines.The welding fume was purified by a mobile welding fume purifier to meet relevant standards before being discharged to the workshop,so as to improve the internal working environment and effectively reduce waste gas emissions.We adopted the B1B2 water-based spraying process,thus reducing VOCs emission by 15%compared with conventional process.We used the industrys latest waste gas concentration rotor incinerator(RTO device),which enabled the organic pollutants in the waste gas to be fully combusted and decomposed.With a removal rate of more than 95%,this effectively purified the organic pollutants.We reduced waste gas emissions by controlling the consumption of cleaning solvents,reducing the frequency of robotic color change cleaning,optimizing process parameters and simulation procedures,etc.093094ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCE01020304XPENGWaste ManagementFor waste management,The Company formulated internal management policies such as Environmental Protection Management Procedures and Hazardous Waste Management Procedures to control all aspects of waste such as separate collection,transfer and removal.We established a solid waste system platform for declaring the transfer of waste.Then we entrusted a qualified third party to ensure proper disposal of the waste.We carried out cement hardening and anti-seepage treatment for the waste dumping site,and installed ground leachate collection ditches.Safety measures such as a dry powder fire extinguishing system,a combustible gas monitoring system and an electrostatic discharge device were equipped to avoid environmental pollution accidents.In addition,metal scraps,waste packaging materials,hazardous wastes(paint sludge,waste organic solvents,sludge,waste paint drums,etc.)and domestic waste were sorted and recycled to minimize the negative impact of waste on the environment.In 2022,the Zhaoqing manufacturing base achieved its target of generating less than 14.28 kg of hazardous waste per vehicle as scheduled.In the future,we aim to reduce waste emission density by harmless and resourceful management of waste generated in production.Hazardous Waste Management Measures:Separate collectionRegistrationProper transferHazardous waste reductionMonthly inspection of the classification of hazardous waste in the workshop to avoid mixing with domestic and industrial waste.Weighing and recording all incoming hazardous waste;tracking and managing hazardous waste management goals for each plant.Signing hazardous waste disposal contracts with qualified third-party units,establishing a record process for hazardous waste transport and warehousing,and cleaning up hazardous waste in accordance with the Hazardous Waste Transport Management Measures.Reducing hazardous waste generation by adding liners to the glue barrel for welding,adjusting the lower limit of the glue pump,recycling empty barrels,recycling residual glue and draining paint residue.095096ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCEGreen Packaging4XPENGUnitIndicators20212022ton2662131.210-62.310-6Green Logistics5Green Recycling6We replaced the original wooden frame packaging with recyclable and reusable iron frames so as to reduce the use of disposable cartons and wooden boxes.The Company enabled a total of 3 suppliers to make packaging improvements in 2022,and 5 suppliers were involved by the end of 2022.We reduced the use of large cartons by about 55 per day,with a total reduction of about 20,000 cartons during the reporting period.In the future,we will continue to promote another 15 suppliers participation in this initiative.Amount of packaging materialsPackaging material density14ton/CNY(thousand)In transport,we improved the loading capacity of single transportation and reduced the frequency of transport by optimizing our transport strategy and increasing the full load rate of transport,thus reducing the carbon footprint of products.According to the contract structure and recent scheduling resources,we adjusted the vehicle loading order.In consideration of the estimated sales trend,we replenished the inventory in advance for transport orders without full load,thus improving the full load rate and reducing the energy consumption and carbon emission in transport.In consideration of the efficiency of water transport and railroad transport,we increased the proportion of railroad transport in inland regions,and reduced the demand for connecting transport from ports to warehouses,thus reducing unnecessary transport journeys.Increasing the Full Load RateOptimizing the Mix of Water-rail Multimodal TransportWe have established a whole-process waste power battery recycling management procedure to manage end-of-life batteries generated from prototype tests,production and after-market sales/clients.We are also exploring battery cascade utilization and recycling and reuse.For the end-of-life batteries generated by after-market sales/clients,consumers can send their vehicles to the after-sales service center for professional diagnosis by XPENG maintenance technicians.We will dismantle the batteries that meet end-of-life conditions,and enter the relevant information into the internal information management system and traceability management system.We then transport them to professional warehouses for temporary storage in accordance with relevant transport requirements,and finally we hand them over to qualified suppliers for recycling and reuse.Note:13.Including the consumption of packaging materials in the Zhaoqing manufacturing base and Guangzhou manufacturing base.14.Unless otherwise specified,density indicators such as density of packaging materials used,density of energy used,and density of emissions in this report are calculated using operating revenues in CNY(thousand)as the denominator.097098ENVIRONMENTAL SOCIAL GOVERNANCEENVIRONMENTAL SOCIAL GOVERNANCETackling Climate Change 5.1Governance5.1.1XPENGXPENG actively responds to the challenges posed by climate change.Referring to the recommendations of the Task Force on Climate-related Financial Disclosures(TCFD),we carried out climate change management and took practical actions in four areas:governance,strategy,risk management,and indicators and targets.In 2022,the Company further improved its management mechanism on tackling climate change.We upgraded the former Carbon Neutrality Project Working Group to Carbon Neutrality Working Group,which is fully responsible for the Companys strategic planning and daily management in carbon neutrality.The Carbon Neutrality Working Group,headed by the vice president of the Company,included functional leaders or key members in product planning,R&D,battery,quality and safety,project management,
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Climate Change Report 2022ContentsChief Executives statement2Our business at a glance 4Climate Action Plan-2022 progress and 2023 update6Our strategy and approach to climate change8Producing materials essential for the low-carbon transition10Reducing the carbon footprint of our operations14Partnering to reduce the carbon footprint of our value chains22Enhancing our resilience to physical climate risk28Climate policy engagement32Climate governance33Just transition34Climate disclosure35Emissions and energy data37Assurance statement by KPMG40Cover|Employee at IOC tailings in Labrador City,NL CanadaOur operations are located on land and waters that have belonged to Indigenous peoples for thousands of years.We respect their ongoing deep connection to Country and recognise their vast knowledge of the land,water and environment.We pay respects to Elders,both past and present,and acknowledge the important role Indigenous peoples play within our business and our communities.Visit to find out more2022 highlightsHigh-grade iron ore Simandou:Signed a non-binding term sheet with our partners to progress the co-development of infrastructure.Theproject will deliver high-grade ironore,suitable for the DRI-EAF2 steelmaking process.Green steel Blast furnace optimisation:Extended our collaboration with over 20 customers,such as Baowu,POSCO,Nippon Steel Corporation and Shougang,with potential carbon emissions reductions of up to30%.BioIronTM:Successfully piloted an innovative,low-carbon iron-making process on Pilbara iron ore.Hydrogen-based DRI1:Collaborated with BlueScope and Salzgitter Flachstahl to test direct reduction of our products using green hydrogen and develop cleaner processing options.Iron Ore Pilbara:Planned investment of$600 million in 230MW of solar power facilities and 200MWh of storage.This is in addition to the 34MW solar facility installed at Gudai-Darri.Pilbara:Developed partnerships with Scania,Caterpillar,Volvo and Komatsu to deploy more efficient autonomous haulage solutions and battery-powered trucks.Marine biofuels:Joined a trial with BP.Arvida:Invested in a new aluminium recycling facility and plans to replace our closing smelter with an expansion of the AP60 smelter to produce low-carbon aluminium.Alma:Committed$188 million to expand production of higher-value low-carbon billets.Laterrire Plant:Commissioned a new aluminium remelt furnace.ELYSISTM:Conducted commercial testing of direct emissions-free smelting technology with 450kA cells under construction.Low-carbon material:Partnered with organisations including Volvo,Ford and AB InBev(Corona Canada).Aluminium Queensland smelter repowering:Commenced evaluation of proposals to repower our aluminium assets with up to 4GW of wind and solar,backed up by energy firming and storagesolutions.Queensland Alumina:Progressed to a pre-feasibility study for a double digestion project to reduce emissions and operational expenditure.Oyu Tolgoi:Acquired full ownership of Turquoise Hill Resources Ltd(TRQ)for$3.1 billion,increasing our direct project ownership to 66%.Rincon:Acquired Rincon for$825 million and approved funding of$194 million for early works to develop an accelerated starter plant with plannedexpansion.NutonTM:Joined strategic partnerships to test leaching technology on legacy copper waste and sulphide orebodies.Critical minerals from waste:Began extracting tellurium concentrate at Kennecott.Achieved first production of scandium oxide and demonstration of an innovative spodumene(lithium)concentration process at our Critical Minerals and Technology Centre(RTITQuebec Operations).Copper and Minerals Rio Tinto Iron and Titanium(RTIT)Quebec Operations:Committed$537 million(C$737 million)in partnership with the Government of Canada to decarbonise RTIT Quebec Operations and boost critical mineralsprocessing.Richards Bay Minerals:Partnered with Voltalia for solar power(20-year power purchase agreement).Renewable diesel:Launched a pilot at Boron,with trials also planned forKennecott.Grow in materials enabling the energy transition Develop products and technologies that help our customers decarbonise Accelerate the decarbonisation of our assets1.Direct Reduced Iron.2.Direct Reduced Iron Electric Arc Furnace.1Climate Change Report 2022|Climate Change Report 2022Chief Executives statementOur purpose is to find better ways to provide the materials the world needs.Meeting the incremental demand of the energy transition,and ensuring local supplies of critical minerals globally,deepens our relevance to the world and ensures our long-term profitability.We are creating real momentum,and seeing early results gives me conviction that we have the right objectives,the right team,and the rightstrategy.Our Scope 1 and 2 emissions targets of 15%reductions by 2025 and 50%by 2030 are aligned with 1.5C the stretch goal of the Paris Agreement and are really challenging.In contrast to many of our peers,about 80%of our emissions are driven by processing and producing metals and minerals,which are high temperature,hard-to-abate activities.The remaining 20%are from our mining operations.The low-carbon transition is complex:developing new technologies and implementing major projects to decarbonise our business will take time.We estimate that we will invest$7.5 billion in capital between 2022 and 2030 to deliver our decarbonisation strategy.So we need to be disciplined about our capital investment and make a commercial case for each mitigation project.Our experience shows that we cannot solve this simply by allocating capital.We also need to attract the right talent,deploy new technology at scale,secure approvals from regulators and partner respectfully with local communities and Indigenous peoples.Inaddition,higher carbon prices and other government incentives are needed to drive the production and consumption of low-carbon metals and minerals.In 2022,our Scope 1 and 2 emissions were 30.3Mt CO2e(31.0Mt in 2021),a reduction of 7low our 2018 baseline.This is primarily the result of switching to renewable power at Kennecott and Escondida in prior years,aswell as lower than planned production from the Kitimat and Boyne aluminium smelters in 2022.Wedid not advance the actual implementation of our abatement projects as fast as we would have liked last year,so our capital expenditure on decarbonisation projects was$94 million,lower than we anticipated when we set our targets.Challenges have included late delivery of equipment,resourcing constraints impacting study progress,construction and commissioning delays,and project readiness.6 1 abatement programmesIn response,we established six abatement programmes,with dedicated people,to focus on the decarbonisation challenges that cut across our product groups:repowering our Pacific Aluminium Operations,renewables,ELYSISTM,alumina process heat,minerals processing and diesel transition.We are building capability and gaining a deeper understanding of our decarbonisation challenge(both constraints and opportunities),and our related operational expenditure increased to approximately$140 million in 2022.As a result,we are better placed to deliver the complex and large-scale structural changes to our energy system needed to achieve our 2030 target.Given the long lead times for some of these projects,we established one additional programme to increase our investments in nature-based solutions projects and now expect these to make a more significant contribution to our targets.Ifdone well,these projects can play a substantial role in addressing carbon emissions and biodiversity loss,while also providing benefits to local communities.Our people working on these“6 1”abatement programmes,and our substantial investments in technology,will drive the innovation and transformation needed to accelerate our low carbon transition and ensure the long-term resilience of our business.Scope 3 partnershipsOur Scope 3 emissions were 584Mt CO2e in 2022 over 1%of the global total.These are primarily from our customers in Asia,processing our iron ore into steel and bauxite into aluminium,so our level of control is limited.The best way to tackle these emissions is to work in partnerships to develop the technologies needed to produce low-carbon metals and minerals.Lastyear we increased our engagement with our customers,governments,universities and others.It is encouraging that the initial testing phase of our BioIronTM process showed great promise and demonstrated that using microwave energy and sustainable biomass as a reductant is well suited to Pilbara ores.Andweare continuing to scale up the ELYSISTM technology the worlds first carbon-free aluminium smelting process towards the demonstration of even larger commercial-size cells.In the past year,I have spent time engaging with a diverse range of stakeholders on the need to work together and address climate change with urgency.Given the structural changes we must make to our energy system,2030 is just around the corner.Our success relies on our ability to strengthen our resilience to the physical,societal and economic effects of climate change and the energy transition,while building partnerships and capabilities that enable us to secure newopportunities.Jakob StausholmChief ExecutiveOver a year ago,we put the low-carbon transition at the heart of our new strategy,setting a clear pathway to deliver long-term value as well as ambitious targets to decarbonise ourbusiness.Climate Change Report 2022|2“We will only invest in quality assets which will give robust returns under a range of economic,geopolitical and carbon scenarios,creating a resilient portfolio with significant upside to the energy transition.We are applying similar thinking to our approach to decarbonisation.”3Climate Change Report 2022|Our business at a glanceConsolidated sales revenue bydestinationConsolidated sales revenue by productOur key assets are located in close proximity to our major markets:54.3%8.8%6.5%7.4.9%7.1%$55.6bn59.0%4.8%5.6%5.8$.8%$55.6bnIron ore$32,801bnCopper$3,196bnGreater ChinaJapanAluminium2$13,790bnOther$3,098bnMinerals$2,669bnAsia1EuropeUSOtherIron ore3AluminiumCopperMinerals3Mines17436Smelters,refineries and processing plants401814Mt CO2 Scope 1 and 2 emissions3.1Mt21.1Mt1.5Mt4.0MtRioTinto share ofproductionIron ore272.9Mt(2021:266.8Mt)Bauxite54.6Mt(2021:54.3Mt)Aluminium3,009kt(2021:3,151kt)Mined copper521.1kt(2021:493.5kt)Titanium dioxide slag1,200kt(2021:1,014kt)Underlying EBITDA$18.6bn(2021:$27.6bn)$3.7bn(2021:$4.4bn)$2.4bn(2021:$4.0bn)$2.4bn(2021:$2.6bn)1.Excluding Greater China and Japan.Greater China includes China and Taiwan.2.Aluminium includes bauxite and alumina.3.Our Iron Ore product group includes our 17 iron ore mines in the Pilbara and three salt operations(Dampier,Port Hedland and Lake MacLeod).Our Minerals product group includes the Iron Ore Company of Canada(IOC).4.Covering processing plants engaged in the material transformation of input products with total Scope 1 and 2 emissions greater than 100,000 tonnes CO2.The integrated processing facilities at RTIT Quebec Operations are counted once.Climate Change Report 2022|4Materials for low-carbon transitionGlobal dataRioTinto dataDemand by sectorConstruction&infrastructurePower/electricalAuto(transport)Machinery&equipmentConsumer durablesOther14U%2%9#%85$%Finished steel 1,700MtAluminium 96MtCopper 31MtIron ore/steelAluminiumCopperTotal emissions 1,020Mt CO2e 10.4 tCO2e/tTotal emissions 3,150Mt CO2e 1.7 tCO2e/tTotal emissions 109Mt CO2e 3.5 tCO2e/t29Mt 14Mt CO2e 0.5 tCO2e/t AlSecondary aluminium650Mt 325Mt CO2e 0.5 tCO2e/t steelScrap-based steel110.6Mt 5.3Mt CO2e 0.5 tCO2e/t CuSecondary copper 12,000MtTotal material moved10,000Mt Total material moved 1,000MtTotal material moved134Mt2 7.5Mt 180Mt CO2e 1.3 tCO2e2/t Al2O35.6Mt CO2e 0.7 tCO2e/t Al2O3Alumina2t69Mt 3.0Mt 820Mt CO2e 12 tCO2e/t Al14.5Mt CO2e 4.8 tCO2e/t AlPrimary aluminium1,250Mt 2,750Mt CO2e 2.2 tCO2e/t steel Ore-based steel121Mt 0.2Mt 34Mt CO2e 1.6 tCO2e/t Cu0.2Mt CO2e 0.9 tCO2e/t CuPrimary refined copper1t1t365Mt 50%Al2O355Mt 49%Al2O34.7Mt CO2e 0.02 tCO2e/t ore0.9Mt CO2e 0.02 tCO2e/t oreBauxite4,300Mt 0.6%Cu120Mt 0.6%Cu70Mt CO2e 3.1 tCO2e/t Cu1.3Mt CO2e 2.3 tCO2e/t CuCopper ore32,450Mt 62283Mt 6170Mt CO2e 0.03 tCO2e/t ore3.7Mt CO2e4 0.01 tCO2e/t oreIron oreProductEmissions ProductEmissions ProductEmissions 200t600t15t5t1t2t8t1.Ore-and scrap-based steel are notional categories based on RioTinto estimates of raw material inputs for different steel production pathways.2.Smelter grade Alumina only.3.Copper ore product before processing.4.RioTinto total iron ore emissions include equity-basis emissions from our Pilbara operations and from IOC.Sources:RioTinto analysis and estimates,CRU,Skarn Associates,Wood Mackenzie,International Aluminium Institute.5Climate Change Report 2022|Climate Change Report 2022Our Climate Action Plan 2022 progress and 2023 updateIn 2022,our shareholders supported our Climate Action Plan(CAP)in a non-binding advisory vote on the companys ambitions,emissions targets and actions to achieve them.We will continue to publish our progress on climate change annually in line with the recommendations of the Task Force on Climate-related Financial Disclosures(TCFD).The Board is fully aligned with this action plan and believes it will deliver value for our shareholders,our customers and wider society.The table below summarises progress in 2022 and our action plan in 2023.1.Scope 1 and 2 emissions targets and roadmapWe have committed to reach net zero by 2050 and have set ambitious interim targets relative to our 2018 equity emissions baseline:to reduce greenhouse gas(GHG)emissions by 15%by 2025 and to reduce GHG emissions by 50%by 2030.1Progress in 2022 Repowering Pacific Aluminium operations:we issued arequest for proposal for more than 4GW of wind and solar projects to support repowering of the Boyne smelter.Tomago issued expression of interest seeking renewable projects to support repowering of the smelter(a non-managed joint venture).Renewables:we installed the first 34MW of solar capacity at Gudai-Darri and announced that we are planning to invest$600 million for solar,storage and transmission to deliver a further 230MW of solar power and 200MWh storage in the Pilbara from 2023-2026.We started construction for the first phase of our 30MW project at Kennecott and commenced direct market engagement for our US footprint(Boron,Resolution,Kennecott)for around 1GW of renewables.We issued expression of interest for an islanded 35MW microgrid at Amrun and signed a Solar PV 130MW power purchase agreement(PPA)for Richards Bay Minerals(RBM)with Voltalia.Construction of a 20MW hybrid project continued at QIT Madagascar Minerals.ELYSISTM:production from our pilot cell continued,as did construction of larger commercial scale cells at Alma.Alumina process heat:we developed our approach to decarbonising our refineries.Order of magnitude studies for electric steam generation and electrical infrastructure requirements are in progress.A feasibility study has been completed for the hydrogen calcination project.An order of magnitude study for double digestion has been completed with approval to proceed with the pre-feasibility study.Minerals processing:$537 million(C$737)partnership with the Government of Canada to decarbonise RTIT Quebec Operations and boost critical minerals processing.Diesel transition:we have progressed biofuel trials at Boron and Kennecott.We began trialling an underground battery electric loader and haul truck at Kennecott.Wedelivered our first road-sized haul truck into the Pilbara fortesting.Nature-based solutions(NbS):we completed pre-feasibility studies for NbS projects at five high-potential landscapes.Actions in 2023 Repowering Pacific Aluminium Operations:progress renewable supply options for the Boyne and Tomago aluminium smelters.Renewables:approve and commence construction of 100MW solar PV for the Pilbara.Progress studies on the next 130MW solar PV for the Pilbara.Sign PPA for Amrun microgrid and start construction in 2023/24.Sign a Wind PPA at RBM.Sign commercial agreements for our US operations(Kennecott,Resolution and Boron).ELYSISTM:commission 450kA ELYSISTM cells currently under construction at Alma.Alumina process heat:develop the decarbonisation energy transition strategy for the Yarwun and Queensland Alumina(QAL)refineries.Complete feasibility studies for electric steam generation and thermal storage options at QAL and Yarwun,and seek approval for electric boilers at Vaudreuil.Advance studies on double digestion,hydrogen and electric calcination.Commence construction of hydrogen calcination industrialisation demonstration at Yarwun.Minerals processing:commission Blue Smelting demonstration plant at RTIT,Quebec,to test ilmenite pre-reduction process.Commence industrial trials of biochar at RTIT Quebec Operations and RBM,and investigate options to develop a sustainable supply chain.Commission plasma burner pilot at IOC.Diesel transition:progress plans to convert the entire fleet at Boron to renewable diesel ahead of the requirement to do this in California in 2024.Develop a viable trolley assist option for the existing haul fleet to enable substantial reduction in diesel use while on trolley.Nature-based solutions:conduct feasibility studies for the development of five carbon offset projects.1.Our net zero commitment applies to our Scope 1 and 2 emissions only.For planning purposes,we define short-term as up to two years,medium-term as 2-10 years and long-term as beyond 10 years.For our analysis of physical climate risks,we define short-term as 2030,medium-term as 2050 and long-term as 2100.Climate Change Report 2022|62.Scope 3 emissions goals and customer engagementOur approach to addressing Scope 3 emissions is to engage with our customers on climate change and work with them to develop and scale up technologies to decarbonise steel and aluminium production.Progress in 2022Steel value chain Engaged with nearly all our direct iron ore sales customers(representing two thirds of our total iron-ore related Scope 3 emissions).This has led to decarbonisation collaboration and projects with customers accounting for 59%of our direct iron ore sales.Partnerships on track.We advanced 49 projects,together with over 30 partners.Aluminium value chain Initiated engagement with customers representing nearly all of our bauxite sales.Shipping 30%reduction in emissions intensity achieved(relative to 2008 baseline).On track to exceed target through energy saving initiatives and use of transitional fuels(biofuel/LNG).Accelerating development of end-state fuels(green methanol and green ammonia)via partnerships.Completed installation of energy savings devices on first vessels capable of 10-12%emissions reductions.Actions in 2023Steel value chain Progress work on a microwave lump drying pilot plant with Baowu.Develop BioIronTM at a larger scale,via a specially designed continuous pilot plant.Complete concept studies with BlueScope and determine the next phase of processing Pilbara ores with hydrogen and a melter.Aluminium value chain Agreement to hold workshops on decarbonisation confirmed with three major customers representing over half of our sales.Further engagement with other bauxite customers will depend on the level of interest.Shipping Review biofuels plan following completion of 12-month trial.Progress partnerships on end-state fuels.Advance programme to install energy savings devices on our vessels during dry-docking.Incorporate(over 2023-24)nine LNG dual-fuel chartered vessels into our fleet.Advance iron ore green corridor development in partnership with the Global Maritime Forum.3.Capital allocation alignment with our 1.5C decarbonisation strategyWe estimated that we will invest$7.5 billion in capital between 2022 and 2030 to deliver our decarbonisation strategy(approximately$1.5 billion over the period 2022 to 2024).We also expected our incremental operating expenditure to support the CAP to be in the order of$200 million per year,including research and development initiatives.For example,we planned to spend about$50 million on our iron and steel decarbonisation initiatives in2022.Progress in 2022 Our capital expenditure on decarbonisation projects in 2022 was$94 million compared to an originally estimated spend of$500 million.Our incremental operational expenditure to support the CAP including spend on steel decarbonisation initiatives,was approximately$140 million.Operational expenditure on steel decarbonisation initiatives was$24 million in 2022.Resourcing constraints,COVID-19 lockdowns and the need to develop the business case for some technologies has delayed someprojects.Actions in 2023 Depending on project planning,approvals and implementation,we estimate that our capital expenditure on decarbonisation will increase over the three years to 2025 and total$1.5 billion.Our incremental operational expenditure in 2023 is estimated to be$200 million for the six abatement programmes and offset development.4.Climate policy engagementWe continue to encourage our industry associations to align their advocacy with the goals of the Paris Agreement.We review the climate advocacy of our industry associations each year,and we publish our review on our website and consider it when we decide whether to renew our memberships.Progress in 2022 We published our review of industry associations in February 2022 and conducted an interim and year-end review of their advocacy.We engaged with four industry associations to discuss their climate advocacy.Actions in 2023 In 2023,we will publish our review of industry associations and maintain our engagement with them on climate advocacy.5.Climate governanceIn the short-term incentive plan(STIP),safety,environment,social and governance matters,including climate change,are now assigned an explicit performance weighting of 35%,of which 20%relates to safety and 15%to ESG.The“E”component is 5%of the STIP and relates entirely to climate change performance objectives.Progress in 2022 In 2022,the business approved or delivered Scope 1 and 2 abatement projects that would contribute 0.29Mt CO2 of abatement towards the 2025 target against a target of0.8Mt.Achieved specific milestones relating to steel decarbonisation,zero-carbon aluminium and shipping.Actions in 2023 Climate change performance objectives are assigned an explicit performance weighting of 10%in the STIP in 2023.We will assess progress of moving carbon abatement projects through the various stages of development all the way to execution to meet our decarbonisation ambition.6.Just transitionWe are committed to supporting a just transition to a low-carbon economy that is socially inclusive and provides decent work and livelihoods.Progress in 2022 In 2022,we established an Executive Comittee-sponsored cross-functional just transition working group,undertook an assessment of our current just transition maturity,and developed a tool to profile risks and opportunities at our assets.Actions in 2023 In 2023,our priorities include assessing just transition-related risks and opportunities across our assets;defining just transition principles;awareness-raising across the business;and continued engagement with civil society organisations,host communities,employees and others.7.TCFD disclosureWe support the TCFD recommendations and are committed to aligning our disclosures with the Climate Action 100 (CA100 )Net Zero Company Benchmark in 2023 reporting.Progress in 2022 Climate-related disclosures on governance,strategy,risk management,and metrics and targets were integrated into the 2021 Annual Report.Our CAP aligns with the CA100 Net Zero Company Benchmark.Actions in 2023 We will continue to publish our progress on climate change annually in line with the recommendations of the TCFD.7Climate Change Report 2022|Climate Change Report 2022We have positioned the low-carbon transition at the heart of our business strategy to strengthen ourlong-term resilience and pursue new growth opportunities.Inaddition tosetting ambitious 1.5C-aligned emissions targets for our operations,our strategy aims to help decarbonise our value chains and provide the materials essential for the energytransition.Our strategy and approach to climate changeOur approachTo capture new growth opportunities in materials with strong low-carbon transition-related demand:Our ambition is to increase disciplined capital growth of up to$3.0 billion annually by 2024to 2025.We will seek to grow further in copper and battery materials and bring additional tonnes of high-grade iron ore and low-carbon aluminium to market.To work with our customers to tackle full value chain emissions:We will increase research and development of cleaner products.We will partner with our customers to help them meet their Scope 1 and 2 emissions goals.To strengthen our alignment with the Paris Agreement and our long-term ambition of achieving net zero emissions by 2050:We aim to reduce our Scope 1 and 2 emissions by 15%by 2025 and by 50%by 2030.We expect to invest an estimated$7.5 billion in decarbonisation projects,predominantly in the second half of thedecade.Grow production of materials enabling theenergy transitionDevelop products and technologiesthat help our customers decarboniseAccelerate the decarbonisation ofour assetsGlobal scenariosOur scenario approach is reviewed every year as part of our Group strategy engagement with the Board.We have recently updated our scenario framework to focus on two prevailing macro-level business concerns:the speed of global economic growth and the trajectory of climate action,each heavily influenced by global geopolitics and governance.Our two core scenarios(Competitive Leadership and Fragmented Leadership)are used to generate a central reference case for commodity forecasts and valuations.Additional scenarios(including our Paris-aligned Aspirational Leadership scenario)are used to further evaluate the positive and negative effects of the energy transition across our portfolio and stress test investment decisions.We determine the approximate temperature outcome in 2100 by comparing the emissions pathways to 2050 in each of our scenarios with those set out in the Shared Socio-economic Pathways(SSP)by the Intergovernmental Panel on Climate Change(IPCC).We do not undertake climate modelling ourselves,but we are consistent with the estimates for temperature and cumulative temperature between 2020 to 2050 in the SSPs.The emissions pathway of Aspirational Leadership is most closely aligned with the IPCCs shared socio-economic pathway 1(SSP1-1.9)with emissions reaching net zero by 2050,which limits warming to 1.5C.Competitive Leadership is most closely aligned with SSP1-2.6(approximately 2C of warming)and Fragmented Leadership is aligned with emission scenarios SSP2-4.5(temperatures exceeding 2.5C by 2100).We also use the IPCCs highest emissions scenario(SSP5-8.5)when assessing the physical risks of climate change.So,when assessing risks and opportunities to the business we use a 1.5C-aligned scenario to assess a fast low-carbon transition and we use the highest emissions and high temperature outcome scenario(SSP5-8.5)to assess physical climate risks.While there are many uncertainties about how a changing climate may negatively affect gross domestic product(GDP)growth,physical impacts of climate change are integrated into the GDP growth assumptions in our three scenarios.These are most significant in Fragmented Leadership and least significant in Aspirational Leadership.Thesteel sector Our strategy and approach to climate change are informed by a deep analysis of the interplay of global megatrends,explored through the lens of plausible global scenarios.These set the context for our industry and underpin our commodity price outlooks,portfolio and capital allocation choices,and how we operate as a business.We recognise our success relies on our ability to strengthen our resilience to the physical,societal and economic effects of climate change and the energy transition while building partnerships and capabilities that enable us to secure new opportunities.Our strategy has three pillars,each backed by a series of commitments and ambitions.Our approach is supported by strong governance,with a focus on creating streamlined processes and building capabilities,including in green materials processing,renewable energy deployment and nature-based solutions,which are expected to enable us to reach net zero emissions from our operations by 2050.Thethree pillars of our strategy inform our Climate Action Plan,which aligns with the CA100 Net Zero Company Benchmark and was approved by our shareholders at our 2022 AGMs.transition scenarios in the value chain section of this report are presented to highlight the roles and timing of different low-carbon steelmaking technologies and to develop projections of our potential future Scope 3 emissions from processing our ironore.At the UN Climate Summit in late 2022(COP27),there was broad recognition that the pace of decarbonisation across the global economy is too slow to limit warming to 1.5C and that current climate policies in many countries are not yet aligned with their stated ambitions.Consequently,neither of our two core scenarios are consistent with the expectation of climate policies required to accelerate the global transition to meet the stretch goal of the Paris Agreement.Although our operational emissions reduction targets align with the goals of the Paris Agreement,ourtwo core scenarios do not.Therefore,we also assess our sensitivity and the economic performance of our business against our Aspirational Leadership scenario,which reflects our view of meeting the stretch goal of the Paris Agreement.Our approach to climate change is intrinsically linked with our four objectives:to be best operator,to achieve impeccable ESG credentials,to excel in development and to strengthen our social licence.Delivering on our climate commitments will rely on these capabilities and will also help build our reputation as a partner of choice for new growth opportunities created by the energy transition.Climate Change Report 2022|8Table 1:Key scenario metricsAspirational Leadership1.5CCompetitive Leadership2CFragmented Leadership2.5C2030 outcome2021-2050 CAGR2030 outcome2021-2050 CAGR2030 outcome2021-2050 CAGRGlobal average carbon prices1 in 2030,(2021 US$/t CO2 eq)599.3B8.0B2.9%Global emissions,Gt CO2 eq39.5-11$9.9-3.5H.3-0.8%Global energy demand,mtoe10,4800.3,9850.5,3070.2%Global GDP growth(PPP),%4.4%3.9%4.3%3.8%2.9%2.2%Energy intensity of global GDP,toe/$1000 2015 PPP0.07-3.4%0.08-3.2%0.08-2.3rbon intensity of total energy,gCO2/MJ42.1-12.7F.5-5.0F.4-1.9%Global energy from electricity,mtoe2,8803.9%2,9363.9%2,6681.8%Global wind and solar capacity,GW9,84510.6%7,47610.0%5,7327.1%Electric vehicle(EV)sales(%)368.1.6c.9.48.8%9.5%1.Carbon prices are used as a proxy for a broader range of climate policies.2.11%p.a.decline in CO2 emissions based on 2021-49 period in net zero pathway(by 2050).Emissions in 2030 are highest in Competitive Leadership due to high GDP growth.3.2021-50 CAGR based on global electric vehicle sales.Group scenario global GHG pathways compared to IPCC scenarios(temperature outcomes in 2100)Fragmented Leadership is characterised by limited progress on policy reform with volatile low growth.The business environment is defined by weak final demand and greater uncertainty,and requires close ties with governments to manage risk.It is a world defined by geopolitical and domestic tensions,spurred by populist agendas that offer leaders little opportunity to build consensus around reform and environmental agendas.Nations eventually achieve their 2030 Nationally Determined Contributions(NDC)as agreed in Paris in 2015 but abandon further progress toward long-term carbon goals as outlined at COP26 in Glasgow.Climate policy is insufficiently ambitious to incentivise significant mitigation in industrial sectors resulting in flat global emissions post-2030;consequently global warming exceeds 2.5C and the physical impacts of climate change limit GDP growth in this scenario.Competitive Leadership reflects a world of high growth and strong climate action post-2030,with change driven by policy and competitive innovation.A proactive reform environment encourages stronger business innovation,higher investment and improved productivity.This allows global GDP to continue growing at close to recent historical levels with a growing contribution from India and other developing countries.The increasing prevalence of major climate events after 2030,and ongoing pressure from civil society organisations and businesses to provide policy certainty,continue to galvanise national and international climate action.As a result,nations drive against historical precedent toward achieving their Glasgow Climate Pact commitments,resulting in global GHG emissions falling from 54 Gt CO2e today to 21Gt in 2050.Aspirational Leadership reflects a world of high growth,significant social change and accelerated climate action with all countries setting new NDCs that collectively achieve net zero emissions by mid-century.Domestic politics is driven by demands for economic prosperity,social justice and environmental action.Despite geopolitical differences,major economies tend to work together through multilateral frameworks and proactively work towards limiting temperature change to 1.5C.This results in developed economies and China leading from the front,implementing large increases in carbon pricing,sharply lowering the material intensity of their economies and providing strong financial support to low-income economies.The Aspirational Leadership sensitivity is designed to reach net zero by 2050,and to help us better understand the world on a 1.5C pathway and what this would mean for our business.Different IPCC scenarios represented in light grey lines specific to temperature range across different scenarios-1001020304050607080200020102020203020402050200020102020203020402050200020102020203020402050Aspirational Leadership(1.5 C scenarios)Competitive Leadership(1.9 C to 2.1 C scenarios)Fragmented Leadership(2.6 C to 3.0 C scenarios)Gt CO2e9Climate Change Report 2022|Climate Change Report 2022Price range across scenariosUpperLowerFinished steelIron ore:65%finesDemandPrice ranges0.51.52025-292030-392040-50 280801001201401601802002202402602020203020402050%Producing materials essential for the low-carbon transitionThe energy transition is a key driver of commodity demand today and will continue to be so over the next two decades.This will come on top of the demand growth from continued urbanisation and industrialisation(particularly in emerging economies)and it will trigger a new phase of demand growth in developed economies,which have faced saturating demand over the past two decades.In all scenarios,Chinas steel demand growth is forecast to slow as its economy matures.This is offset by construction growth in India and Southeast Asian countries.Steel demand is strongly driven by urbanisation and GDP growth and less exposed to the green energy transition than copper and aluminium.Wind turbines have a higher steel intensity than conventional generation,but the shift to electric vehicles will reduce steel demand in the automotive sector in favour of aluminium.Even by 2050,weexpect that more than half of future crude steel production will remain based on iron ore(compared to about two-thirds today).In Fragmented Leadership,global iron ore demand remains broadly flat.Theabsence of challenging carbon targets keeps premiums for high-grade ores around their historical norms.Prices for both 62 fines and high-grade 65 fines are subdued.In Aspirational and Competitive Leadership scenarios,stronger underlying GDP and construction demand growth support prices and offset the rising use of scrap materials.In both of these scenarios,the transition to low-carbon steelmaking will be accompanied by an increase in premiums for high-grade iron ores(eg 65 fines)as current low-carbon steelmaking technologies are relatively inefficient at processing unwanted contaminants in iron ore.This is more material in Aspirational Leadership due to the higher carbon penalties imposed.Price differentials for low quality iron ores are also likely to widen.The commodities we produce have a vital role to play in the low-carbon transition.Copper demand will rise with the renewable electrification of energy,and lithium will be a fundamental ingredient in batteries and grid-firming energy storage solutions.Demand for aluminium will grow for uses like energy-efficient lightweight electric vehicles.Steel demand is primarily driven by urbanisation and industrialisation it correlates with GDP growth and is less exposed to the low-carbon transition than other commodities.It will be essential in a range of applications,from high-speed rail networks to wind and solar support structures,and green hydrogen production facilities.The production of green steel will also bolster demand for high-grade iron ore.While the low-carbon transition is expected to create additional demand for our commodities,the outlook for demand varies significantly between our scenarios as a function of GDP growth,technology uptake,and scrap supply and use.Different demand trajectories,combined with industry supply responses and global carbon policy evolution,determine the market prices for our three major commodities and implications for our Group-level and asset valuations,as shown below.Price range across scenariosUpperLowerIron ore:62%fines2025-292030-392040-50 0.51.5KeyAspirational LeadershipCompetitive LeadershipFragmented LeadershipClimate Change Report 2022|10Price range across scenariosPrice range across scenariosUpperUpperLowerLower In Aspirational Leadership and Competitive Leadership,traditional and energy transition demand in the transport and electricity sectors doubles demand for aluminium semi-fabricated products over the next three decades.Thissupports aluminium prices over all time horizons.As higher global carbon penalties materialise,the overall industry cost structure will move upwards,further supporting prices in these two scenarios.In Fragmented Leadership,constrained economic growth and limited climate action suppress growth in aluminium demand to more moderate levels.Share of secondary recycled material rises from 28%today to 45%by2050.Copper demand rises by 65-150%by 2050 across the three scenarios.Copper benefits from the rapid adoption of electric vehicles and growth in solar and wind generation,which all have higher copper intensities than conventional technologies.These are key demand drivers in Aspirational and Competitive Leadership scenarios.Copper prices are expected to be higher than historical norms over the next two decades.This is most pronounced in Aspirational and Competitive Leadership scenarios due to higher demand requirements.In the 2040s,prices decline in real terms due to moderating demand growth and greater use of scrap material,which rises from 31%today to 40%by 2050 across the scenarios.Implications for RioTintos portfolio and operationsWe aim to invest in quality assets that give robust returns under our scenarios,creating a resilient portfolio with a significant upside to the energy transition.We have continued to invest in our copper portfolio through traditional assets such as Oyu Tolgoi and Kennecott,as well as early-stage application of our Nuton copper leaching technology.Inaluminium,we continue to develop emissions-free smelting technology with ELYSISTM trials,as well as working to reduce the emissions of our existing capacity(see the section on Scope 1 and 2 below).In iron ore,Simandou will become a major supplier of high-grade iron ore that can be used in DRI-EAF steel processing and complement our existing product mix.Inother commodities,we are evaluating a range of opportunities to produce lithium(including at Rincon and Boron),as well as making demonstrable progress on various critical mineral developments that are essential for the energy transition.This alignment with the low-carbon transition is reflected in the financial resilience of our portfolio across all scenarios considered.Ourestimate for Group value in the Aspirational Leadership scenario lies between those for Fragmented and Competitive Leadership.Thisreflects higher estimated valuations for our copper and aluminium businesses in Aspirational Leadership,based on the above price profiles,offset by higher expected carbon penalties across our operating jurisdictions,and lower prices for lower-grade iron ore products.The same pattern holds for EBITDA margins at Group level.AluminiumCopperDemandDemandPrice rangesPrice ranges2025-292030-392040-50 0.51.52025-292030-392040-50 0.51.5280801001201401601802002202402602020203020402050(0801001201401601802002202402602020203020402050%Note:Real 2022 prices.We do not publish our commodity price forecasts as this would weaken our position in commercial negotiations and might give rise to concerns from regulators and market participants.11Climate Change Report 2022|Climate Change Report 2022Our portfolio risks and opportunities in the low-carbon transitionIron oreCopperAluminiumStrong GDP growth and accelerated EV penetration and global electrification(backed by renewable electricity)support demand growth and margins across the portfolioStrong GDP growth and EV penetration support demand with value upside for hydro-based smelters(more pronounced in Aspirational Leadership)Lower demand growth and poor carbon policy reduce margins and upside for low-carbon smelting and refining(Kennecott and Escondida)China slowdown and increasing self-sufficiency reduce demand for seaborne bauxitePressure to meet rapid demand growth supports growth projects(and Nuton)if they satisfy environmental and social requirementsEnvironmental and social approval hurdles for new projects including Resolution Copper and La GranjaHigher carbon penalties support ELYSISTM,hydro-based smelting assets in Quebec and repowering projects in AustraliaGeopolitical tensions could reduce joint venture partnership opportunities and create potential engineering,procurement and construction(EPC)and logistical issuesSlowing demand and low carbon penalties greatly reduce value upside of ELYSISTM and hydro-based smeltersCompetition to secure large-scale firmed renewable electricity to repower coal-based Pacific Aluminium OperationsAspirational LeadershipCompetitive LeadershipFragmented LeadershipLower medium-run demand versus Competitive Leadership due to higher scrap-use affecting Pilbara products(recovers post 2040)Strong global GDP growth and continued urbanisation support iron ore demand including for Pilbara productsSlowdown in China and global GDP growth erode demand,creating margin pressure across the portfolioMineralsAccelerated uptake of EVs and battery storage solutions supports growth projects(Rincon and Tamarack joint venture)Reduced battery material growth opportunities but resilience from operating high-grade TiO2 and borates assetsStrong outlook for battery materials but international competition for greenfield and mergers and acquisitions opportunities limit growth optionsIncreasing ESG scrutiny of new projects and more stringent regulationsCarbon penalties for downstream processing of TiO2 and battery materialsSupply disruption risks and volatility bolster demand for precious metal and critical mineral by-productsLarge increases in carbon pricing and penalties drive demand for high-grade iron ore supporting Simandou and IOCStronger customer preference for Simandou and IOC ores for lower-carbon traditional and emerging steelmakingSmall and regional increases in carbon prices help preserve longer-term margins for low-cost,Tier 1 Pilbara oresKey:risks&opportunities tableHigher opportunityHigher riskModerate opportunityModerate riskClimate Change Report 2022|12Producing materials essential for the low-carbon transition continuedClassifying our portfolio:revenue,capital expenditure(capex)and operating assetsWe classify commodities into five categories based on climate-related transition risks and growth opportunities:Type 1(highest transition-related demand):lithium,graphite,cobalt,nickel Type 2(other transition materials):copper,aluminium(including alumina and bauxite),manganese,zinc,other minerals Type 3:iron ore Type 4:metallurgical coal Type 5(highest transition-related risk):thermal coalType 1 and Type 2 materials align with a draft classification proposed by the investor coalition Climate Action 100 .Having divested the last of our coal businesses in 2018,we are orienting our growth capex towards materials that enable the energy transition,including copper,lithium and high-grade iron ore.Our ambition is to increase our growth capital to up to$3 billion per year in 2024 and 2025,developing new options and finding innovative ways of bringing projects onstream faster.Growth capex in iron ore relates to higher-grade ore from projects such as Simandou.Capex on mine development at Gudai-Darri and the Western Range is included in total capex.2022Production(Mt Cu eq)Revenue1($m)Growth capex($m)Total capex($m)Operating assets($m)Type 1(lithium,graphite,cobalt,nickel)001515835Type 2(copper,aluminium,otherminerals)2.4625,2894823,47134,264Type 3(iron ore)2.4533,11503,26519,263Type 4(metallurgical coal)00000Type 5(thermal coal)000001.Revenue includes share of equity accounted unit sales and intra-subsidiary/equity accounted unit sales.13Climate Change Report 2022|Climate Change Report 2022Reducing the carbon footprint of our operationsWe are working to decarbonise our operations to strengthen our alignment with the goals of the Paris Agreement.In 2022,we did not advance our abatement projects as fast as we would have liked;however,our Scope 1 and 2 emissions fell to 30.3Mt CO2e,which is 7low our 2018 equity emissions baseline.Ambitious targets aligned with 1.5COur targets are to reduce our Scope 1 and 2 emissions by 15%by 2025 and by 50%by 2030(relative to 2018 levels),and to reach net zero by 2050.These targets cover more than 95%of our operational emissions and are on an equity basis.We will continue to adjust the 2018 baseline to exclude reductions achieved by divesting assets in the future,and to account for acquisitions.For example,following the acquisition of TRQ in December 2022,we increased our equity in the Oyu Tolgoi copper mine from 33%to 66%,which will result in an increase in our baseline and target trajectory in our 2023 reporting(seedata tables for further detail).In the Glasgow Climate Pact adopted at COP26,governments resolved to pursue efforts to limit the global temperature increase to 1.5C.The Pact states that this“requires rapid,deep and sustained reductions in global greenhouse gas emissions,including reducing global carbon dioxide emissions by 45%by 2030 relative to the 2010 level and to net zero around mid-century,as well as deep reductions in other greenhouse gases”.This is consistent with the IPCCs Special Report on 1.5C that sets out multiple pathways to limiting warming to 1.5C,which average around net zero emissions by 2050.While there is no universal standard for determining the alignment of targets with the Paris Agreement goals,we conclude that our Scope 1 and 2 targets for 2030 are aligned with efforts to limit warming to 1.5C.In 2021,KPMG provided limited assurance over the alignment of our Scope 1 and 2 targets with efforts to limit warming to 1.5C.They also provided assurance of the roadmap to delivering those targets(asset out in our 2021 Climate Change Report).For this 2022 report,KPMG provide limited assurance over our progress reporting against our 2022 Climate Action Plan commitments(inaddition to their assurance of our Scope 1,2 and 3 emissions).Their statement is included at the end of the report.Our Scope 1 and 2 emissions in2022In 2022,our Scope 1 and 2 emissions were 30.3Mt CO2e(31.0Mt in 2021),a reduction of 7low our 2018 baseline.This is primarily the result of switching to renewable power at Kennecott and Escondida in prior years,as well as lower than planned production from the Kitimat and Boyne aluminium smelters in 2022.We purchased renewable electricity certificates at Kennecott in the US and switched to renewable electricity contracts at the Escondida mine in Chile(managed by BHP;Rio Tinto owns 30%).In contrast to many of our peers,about 80%of our emissions are driven by processing and producing metals and minerals,which are high temperature,hard-to-abate activities.The remaining 20%are from our mining operations.The four most significant sources of our operational emissions are electricity at 41%(purchased and generated),carbon anodes in aluminium-and reductants in titanium dioxide furnaces at 21%,fossil fuels for heat at our processing plants and alumina refineries at 20%,and diesel consumption in our mining equipment and rail fleet at 13%.The carbon intensity of our assets varies widely across our portfolio,and largely reflects the balance between mining and processing activities.Most of our assets already sit at the low end of their respective commodity carbon intensity curves(see charts in appendix).Operations with a predominant mining and logistics focus are less carbon intensive,while refining and smelting operations are high-temperature,energy-intensive processes.Consequently,approximately 70%of our emissions today are from our aluminium business.Largely because of the high energy intensity of the aluminium business,our Group-wide consumption of electricity is about four times that of other global diversified mining majors.However,our share of renewable electricity consumption is high and we are making investments and supply decisions to increase this.We are reviewing our Scope 2 reporting and moving towards dual location-based(using grid averages)and market-based(using supplier-specific emissions factors)reporting in 2023,at which time the percentage of renewables we consume will also be recalculated using the updated assumptions.Climate Change Report 2022|14Progress towards our 2025 target slower than plannedWe did not advance the actual implementation of our abatement projects as fast as we would have liked last year,so our capital expenditure(capex)on decarbonisation projects was$94 million,lower than we anticipated when we set our targets.Challenges have included late delivery of equipment,resourcing constraints impacting study progress,construction and commissioning,and projectreadiness.So far,we have reduced our Scope 1 and 2 emissions by 7low our 2018 baseline.Weexpect carbon emissions increases of 1.5Mt CO2 as we grow production between 2023 and 2025.Overall,we therefore estimate a need to plan,develop and implement 4.2Mt CO2 of abatement projects to meet our 15%emissions reduction target by 2025 categorised as follows:0.6Mt CO2 from projects already approved but not yet executed 0.9Mt CO2 from projects yet to be approved but in advanced planning 2.7Mt CO2 from projects in early stages of design and planning.2022 Scope 1 and 2 emissions by operations and source(equity basis)There are risks and dependencies to delivering the projects to achieve our 2025 and 2030 targets.Many of the abatement projects identified are at early stages of development and it may be months or years before they reach final investment decision,construction and operation.Others may depend on local approvals or require collaboration with a wide range of stakeholders to achieve the large-scale low-carbon transformation that we are aiming for.The breakdown of our abatement projects above assumes that the full abatement potential is delivered on schedule.However,our experience suggests that there will be delays and that we will require a more significant use of offsets to achieve our 2025 target.We still have much work to do to progress our abatement projects and we continue to aim for our 2025 target to maintain focus within the organisation and drive action across ourportfolio.Our pathway to our 2030 target:6 1 abatement programmesBetween now and 2030,the two most important decarbonisation levers are firstly,switching the electricity we generate and purchase to renewables,and,secondly,addressing emissions related to process heat at our alumina refineries and minerals processing operations.Beyond 2030,we aim to achieve deeper reductions on the pathway to net zero as we deploy ELYSISTM and phase out the use of carbon anodes at our aluminium smelters,as well as progressing low emissions trucks and mobile equipment at our miningoperations.We face continuing challenges to improve thecommercial returns and overall readiness ofmany of our abatement projects.The commercial returns of abatement projects will also be influenced by local carbon prices,which currently remain relatively low in many ofthe countries where we operate.In 2022,we established six abatement programmes,with dedicated people,to focus on the decarbonisation challenge across our product groups:repowering our Pacific Aluminium Operations,renewables,aluminium anodes ELYSISTM,alumina process heat,minerals processing and diesel transition.Weare also increasing our investment in our Nature Solutions team and now expect high integrity offsets to play a greater role in our decarbonisation strategy.As a result of the six programmes plus our investment in nature-based solutions(NbS),weare now better placed to make complex structural changes to our energy system by 2030,as we work towards our ambitious target that is aligned with the stretch goal of the ParisAgreement.Electricity1 41%Anodes and reductants21%Process heat20%Mobile dieselOther213%4%of totalAluminium 48uxite&alumina 21%Minerals 13%Iron ore1 10%Copper 5%Shipping&corporate functions 20.3MtMt CO2e1.Our Iron Ore product group is primarily our operations in the Pilbara and includes some salt production.Our Minerals product group includes the Iron Ore Company of Canada(IOC).Our 2022 equity emissions do not include the additional equity share of the Oyu Tolgoi mine that was purchased in mid-December 2022.2.Other includes perfluorocarbons and land-based emissions.Note the sum of the categories may be slightly different to the total due to rounding.15Climate Change Report 2022|Climate Change Report 2022Decarbonising electricity:repowering Pacific Aluminium OperationsA continued shift to renewables is central to meeting our 2030 targets and will remain an important area of focus beyond 2030.The Boyne smelter and Gladstone power station in Queensland,and the Tomago smelter in New South Wales,are part of our Pacific Aluminium Operations and all operate in coal-based power grids.These facilities account for 28%of our Scope 1 and 2 emissions and more than half of our emissions from electricity use.Green repowering solutions are essential to the long-term sustainability of these operations.The scale of the smelters electricity use means that their transition must take into account the impacts on the broader grid and overall system requirements.This requires complex technical,commercial and political negotiations balancing the needs of multiple stakeholders.Following the signing of a Statement of Cooperation with the Queensland Government in 2021 to work towards establishing more renewable energy in Central Queensland,we began direct market engagement.A formal market request for proposals was undertaken in June 2022 to support the development of large-scale wind and solar power to supply power to the Boyne smelter through the Queensland grid by 2030.This smelter requires 960MW capacity of reliable power to operate,which equates to at least 4GW of quality wind and solar power capacity with firming.We continue to work with the Queensland Government and energy providers to design a renewable energy solution as we approach the end of our supply contract for electricity generation to the smelter.In 2022,we impaired the remaining full value of the Boyne smelter in Queensland,Australia as a result of reduced capacity and the high cost of energy from the coal-fired power station impacting economic performance.(For further detail of the impairment,see note 4 to the Financial Statements).2030 pathway:emissions reduction potential by major abatement programmeIn September 2022,Tomago Aluminium Company released an expression of interest to develop,invest in or procure long-term traceable renewable energy and dispatchable firm power generation projects or contracts to supply its production assets,and underpin its decarbonisation strategy and net zero ambition.Decarbonising electricity:renewablesdeploymentAs we increasingly electrify our processes and mobile fleets,these will need to be supplied by green energy.In the Pilbara,we have one of the worlds largest microgrids,underpinned by 480MW of gas-based power capacity and each year we spend approximately$100-200 million on natural gas to power these operations.We are working towards a plan that will enable 1GW of renewable power capacity in the Pilbara by 2030,which will largely displace gas-fired electricity generation and could support the electrification of our mobile fleet as the technology becomes available.In 2022,we announced that we are planning to invest$600 million in the Pilbara to fund construction of two 100MW solar power facilities,one 30MW solar facility1,and 200MWh of on-grid battery storage by 2026.This is in addition to the 34MW solar farm installed at the recently commissioned Gudai-Darri iron ore mine.When these solar projects are fully operational,they will displace approximately 30%of our gas usage.Developing large-scale renewable projects in the Pilbara requires extensive stakeholder engagement to facilitate studies and approvals.We are working collaboratively with regulators,Traditional Owners and other key stakeholders about potential renewable developments.Some Traditional Owners have actively participated in planning activities including site selection for wind monitoring and ecological studies.In December,the Western Australian Government announced a new multi-pronged approach to fast-track green energyapprovals.Planning for 1GW is ongoing,and in late 2022 we signed early agreements to develop a design for a 100MW solar farm suitable for the Pilbara environment and to better understand and plan for potential project risks.Earlystudies and planning for wind farm developments also commenced in late 2022.Our planning effort is also considering our future energy needs to support further decarbonisation requirements.It makes sense for us to invest our own capital to develop renewables in the Pilbara as we own much of the infrastructure and operate the grid.In other locations,power purchase agreements may be a better option for us as other investors focused on renewables can develop large capacity solutions at a more attractive cost of capital,offering us savings in operating cost.In2022,we signed a 130MW solar power purchase agreement for Richards Bay Minerals(RBM).Further projects are being pursued to help us achieve our 100%renewable power ambition in South Africa.Since we reset our agreement with the Government of Mongolia,we approved an Electricity Supply Agreement to provide Oyu Tolgoi with a long-term source of power from the Mongolian grid.In 2022,we continued our work with the Government to support the development of long-term renewable energy generation options on the Mongolian grid and meet Oyu Tolgois commitment to sourcing power domestically.Long duration(defined as 8-150 hours)energy storage will be required as we decarbonise our businesses through the adoption of renewable power from wind and solar sources,as they become the dominant source of energy.In2021,we became an anchor member of the newly created Long Duration Energy Storage(LDES)Council that was launched at COP26.In 2022,we supported the publication of the LDES Council report on thermal storage(released at COP27)and started two parallel studies to supply green steam to our operations by integrating thermal energy storage with renewable energy.TBU2022 emissions2030 potential abatement01Pacifc Aluminium OperationsRenewablesAluminium anodes/ELYSISAlumina process heatMineral processingDiesel transition234567897.75.84.71.60.06.24.64.22.10.23.60.52018 emissions baseline32.5Emissions reduction to 2022-2.22022 emissions30.3Growth to 20301.1Abatement programmes-12.3Other required abatement(includesNbS)2.82030 emissions(50%reduction)16.2New projects will need to be carbon neutral orhave emissions mitigated elsewhere in theportfolio.Mt CO2e1.In our release dated 30th November 2022 and Capital Markets Day presentation,we announced plans for the two 100MW solar power facilities and omitted the additional 30MW facility.Climate Change Report 2022|16Reducing the carbon footprint of our operations continuedDecarbonising aluminium anodes:ELYSISTMEmissions from the use of carbon anodes,such as in our aluminium smelters,are 6.3MtCO2e today and a longer-term challenge.We established the ELYSIS partnership in 2018 with Alcoa and with support from Apple and the governments of Canada and Quebec to develop the worlds first carbon-free aluminium smelting process,using inert anodes instead ofcarbon.With the first industrial scale pilot cell smelting zero-carbon aluminium at the ELYSIS Industrial Research and Development Center,work is now focused on scaling up the ELYSISTM technology towards the demonstration of even larger commercial-size cells.Construction of these prototype cells is underway at the end of an existing potline at our Alma smelter and we expect this to be commissioned in 2023.The smelting cells will operate on an electrical current of 450kA,which is the commercial scale for many large,modern aluminium smelters.So,between now and 2030,we are deploying ELYSISTM for growth of new zero carbon aluminium smelting capacity rather than to reduce emissions from carbon anodes at existing smelters.Beyond 2030,we expect to phase out the use of carbon anodes at oursmelters.Decarbonising alumina process heatIn the alumina refining process,we use coal and gas to generate steam in boilers and gas to generate heat for calcination.In 2022,emissions from these sources were 4.6Mt CO2e.Our pathway for decarbonisation is through electrification,including the use of renewable energy to create hydrogen.In 2021,we formed two partnerships to research using hydrogen to reduce emissions in alumina refining:a study with the Australian Renewable Energy Agency to assess hydrogen use in industry and support a coordinated approach to developing a local supply chain,and a study with Sumitomo Corporation into building a hydrogen pilot plant at our Yarwun alumina refinery in Gladstone,Australia.In 2022,we continued to progress our studies and are working towards approval for an industrial demonstration of the use of hydrogen in the calcination process.In 2023,we aim to complete studies on options to electrify steam generation at our Australian refineries,while at Vaudreuil in Canada we will progress towards a financial investment decision to produce steam from electric boilers.Thermal storage options studies will be delivered in parallel,as our refineries require a continuous source of heat.Several technologies will be investigated that could allow the use of renewable electricity when available to be stored as heat and used later to generate steam for the refinery.At our Queensland Alumina refinery,our potential double digestion project improves energy efficiency,reducing steam demand for therefinery.Decarbonising minerals processingOur minerals processing programme covers titanium dioxide,iron ore pelletisation,boron and lithium.We use energy for heat and chemical reduction.We developed ilmenite smelting in Sorel-Tracy,Quebec in the 1950s and we have agreed to invest$537 million(C$737 million)to help reduce emissions by up to 70%at the RTIT Quebec Operations.We are working in partnership with the Government of Canada and trialling technological innovations,including BlueSmelting,a new ilmenite smelting technology that,if successful,would allow us to reduce and eventually eliminate the use of coal in the process.In the shorter term,we are electrifying our sources of heat.We ordered four plasma torches in 2021,and we expect to install these in 2023 to commence a trial at the pelletising plant at IOC in Canada.Weare also investigating the use of biochar as an alternative to coal and have trials testing the use and product quality,while we look at options for sourcing sustainably produced biochar.Diesel transitionEach year we use approximately 1.3 billion litres of diesel in our trucks,trains and other mobile equipment.In 2022,this contributed emissions of 3.6Mt CO2e.We are targeting battery electrification to eliminate these emissions though other technologies will also be important.We expect batteries to develop over time and have been working with heavy mobile equipment suppliers to develop large battery trucks,while working with others in the mining sector to develop charging solutions for them.The Charge On Innovation Challenge,founded by BHP,Rio Tinto and Vale,is complete.This seeks to accelerate commercialisation of effective solutions for charging large electric haul trucks and we are now working with winning vendors to develop low-carbon solutions.We are leading a sector-wide programme linked to the International Council on Mining and Metalss Innovation for Cleaner,Safer Vehicles,to establish an interoperability framework so that battery trucks and charging solutions can develop in parallel and successfully converge.We will trial the first large battery truck in the Pilbara in 2024 and 2025.We are also working with on-road truck and other equipment manufacturers to introduce smaller and more energy-efficient equipment into mine sites,including automated road-sized electric trucks.As we progress on electrification,which we expect could be mass-deployed from around 2030,we are investigating using biofuels as an interim step to accelerate our progress towards our 2030 target.In 2022,we advanced our biofuels piloting at Boron,and we are working towards transitioning the fleet to 100%biofuels in 2024.A trial of biofuels is also ongoing at Kennecott.However,a scalable global supply chain for biofuels has yet to be fully developed,and we need to use biofuels that are sustainably produced.Nature-based solutions(NbS)and offsetsGiven the high cost of emissions reductions and lack of feasible production-scale low-carbon technology solutions for parts of our business,our long-term commitment is for our operations to be net zero emissions by 2050,rather than zero emissions.While prioritising emissions reductions at mines and smelters,we are also exploring the role that NbS and offsets can play in our decarbonisation journey.Given the challenges to reduce emissions at our operations noted above,carbon offsets and removals are expected to form a significant part of our decarbonisation strategy this decade.Our connection to a large global landholding with unique and varied biodiversity provides us with the opportunity to develop and invest in high-integrity NbS.At scale,high-integrity NbS can play a substantial role in addressing carbon emissions and biodiversity loss,while also providing socio-economic and wellbeing benefits to local communities.We define high-integrity as projects that balance positive outcomes for people,nature and climate and take an integrated landscape perspective.Todo this we are working with communities to implement locally appropriate activities that provide a fair share of benefits to all stakeholders,with robust application of human rights and environmental safeguards,and to secure permanent,additional carbon emissions reductions.This high-integrity definition and associated assessment criteria are based on existing standards for the voluntary market.Together,the definition and criteria guide our two workstreams:a.Developing NbS at,or near,our assetsIn 2022,we completed pre-feasibility studies at five high-potential landscapes near our assets in Australia,Madagascar,South Africa and Guinea.These studies covered a diverse set of landscapes including forests,coastal dunes,mangroves and pastoral lands.The scale of the first-round projects is significant,with the potential for approximately 500,000 hectares of land under conservation,restoration or sustainable management,and generating up to one million tonnes of offsets per year by 2030.Core to this work is putting communities at the centre and empowering them to enhance their livelihoods through the protection,sustainable management,and restoration of nature and biodiversity.This approach helps to reduce social and environmental risks of our operations and is highly complementary to our work in theseregions.We are now progressing the first round of sites through feasibility studies including stakeholder engagement and partner identification and completing carbon and biodiversity assessments on the next set of priority sites.b.Securing high-quality carbon credits from the marketGiven the long lead times to develop our own NbS projects,in parallel we are ramping up commercial activities to secure high-quality carbon credits focusing on regions where our Scope 1 and 2 emissions are highest.Our preference is to have deeper involvement with a smaller number of projects to ensure that we are retiring high-integrity carbon credits.We anticipate that this will require us to explore a range of upstream partnership models(including long-term offtakes,co-investment and co-development)with high-quality partners and developers.17Climate Change Report 2022|Climate Change Report 2022We have developed a set of quality criteria covering the carbon integrity of the project and the social and ecological safeguards that underpin it that form the basis of our NbS project quality due-diligence process.Beyond the voluntary standards,we further test projects using our development criteria for high-integrity NbS before investmentAccelerating the creation of high integrity nature-based solutions projects in the regions where we operateOur ambitionWorkstreamsIntegrity criteriaThe recent application of these criteria on the North American carbon offset spot market led to more than 80%of projects failing our internal due diligence,reinforcing the importance of upstream partnerships.We intend to use these criteria in upstream partnership collaborations to either augment existing projects or shape new projects.In 2022,we worked with a steel producer and bank in China to trial a carbon offset iron ore cargo1.We used carbon credits sourced from aVerra-certified forest management project(conversion of logged to protected forest)inHubei province to offset the emissions associated with Scope 3 upstream activities,as well as Scope 1 and 2 emissions from mining,rail and marine shipping of the iron ore to a port in China(this represents less than approximately 5%of the emissions associated with producing steel with that cargo).Carbon capture and mineralisationWe continue to explore carbon capture and mineralisation options leveraging our exploration and geological expertise.Together with Carbfix,we are planning to permanently store carbon underground at our ISAL aluminium smelter in Iceland.Carbfix will use our land surrounding the ISAL smelter for onshore CO2 injection in the worlds first carbon mineral storage hub.Our goal is to use the Carbfix technology to further decarbonise our operations.We have also launched a partnership partly sponsored by the United States Department of Energy with climate technology and research bodies to assess the potential to store carbon dioxide as rock at the Tamarack nickel project in Minnesota.The geology of the Tamarack site holds the potential to permanently store large amounts of carbon captured from the atmosphere or from hard-to-abate industries by mineralising it through natural chemicalreactions.1.The following Voluntary Carbon Units were retired upon delivery of the cargo:9918-159315717-159318418-VCS-VCU-324-VER-CN-14-1935-01012017-31122017-19918-159415717-159423014-VCS-VCU-324-VER-CN-14-1935-01012017-31122017-1 Develop large-scale NbS projects near our assets in Australia,Madagascar,South Africa and Guinea,using local partners and communities to co-design and implement.Secure long-term quality credits via commercial deals in regions with significant Scope 1 and 2 emissions(such as Australia,North America)and explore options to move upstream into co-financing/development for long-term security.We assess:intervention viability,developer credibility and medium and long-term management plan(beyond credit period)other funding sources and their impact on additionality claims threats to permanence(buffer,leakage assumptions)and use in-region benchmarks baseline credibility and desktop geospatial reviews for NbS projects impacts of upcoming carbon methodology changes that may adversely affect credits ability to source recent and future vintage years monitoring and adaptive management practices for project efficacy and continuous improvement.We ensure that:projects meet RioTintos standards and have Climate,Community and Biodiversity(CCB)certification orequivalent developers community approach is fair.We test for Free,Prior Informed Consent(FPIC)and whether benefits distribution is fair and transparent projects do not replace intact eco-systems or introduce invasive species integrated,regenerative landscape stewardship approaches(water,biodiversity,ecosystem services)areprioritised.Social and wellbeingCreate sustainable jobs and regenerative micro-economies from NbS projects that we have developed or originatedNatureOriginate NbS projects that result in more than 500,000ha being under conservation,restoration or regeneration by 2025CarbonBuild a sustainable and long-term carbon credit portfolio generating approximately 1.7 million tonnes annually by 2030Ensuring defensible carbon baseline and accounting for real carbon reductionsPermanenceAdditionalityQuantificationEcological safeguardsSocial safeguardsEnsuring ecological and social benefitsDevelopDevelop NbS projects on or near assetsInvestSecure credits in heavy emission regionsClimate Change Report 2022|18Reducing the carbon footprint of our operations continuedCapital allocation alignment with our decarbonisation strategyIn 2022,we shifted our focus from multiple projects captured in our marginal abatement costs curve to six abatement programmes that cut across our product groups.We are prioritising investment in decarbonising electricity and process heat this decade,aswell as developing the technology such as ELYSISTM and low carbon vehicles that will deliver reductions in the longer term.Given the long lead times for these projects,we now expect offsets to make a greater contribution towards our ambitious targets.We are committed to aligning our future capital expenditure with our 2025 and 2030 Scope 1 and 2 emissions targets.We estimate that we will invest$7.5 billion in capital between 2022 and 2030 to deliver our decarbonisation strategy.Our capital expenditure on decarbonisation is expected to increase over the three years to 2025,reaching an estimated total of$1.5 billion.In 2022,our decarbonisation-related capital expenditure was$94 million compared with an original estimate of$500 million.Our capex on decarbonisation projects in the years from 2023 to 2025 mainly relates to renewables deployment in the Pilbara.Decarbonisation investment across the rest of the Group will accelerate beyond 2025.This capital expenditure includes further decarbonisation of the Pilbara electricity system and other abatement projects.These projects will deliver a range of economic outcomes but in aggregate are value accretive at a modest carbon price.Most importantly,they safeguard the integrity of our assets over the longer term and reduce the risk profile of our cash flows.We will also work with third parties through long-term contracts,which are not included in the$7.5 billion capital expenditure noted above.These decisions will of course go through the same rigorous investment process we have for all our projects,and we will remain open-minded about the right mix of direct investment and third-party contracts.In 2022,our incremental operating expenditure to support our decarbonisation work was approximately$140 million compared with an original estimate of$200 million.This includes$24 million on our steel decarbonisation initiatives.Having divested the last of our coal businesses,we are also phasing out investment in some other carbon-intensive assets.The world will need more aluminium,more copper,more high-grade iron ore and more lithium and this is where we are focusing our growth investments.However,we will only invest in quality assets that will give robust returns under a range of economic,geopolitical and carbon scenarios,creating a resilient portfolio with significant upside to the energytransition.We are applying similar thinking to our approach to decarbonisation.This aims to de-risk cash flows for the longer term while remaining very disciplined today.We will also be well positioned to benefit from any carbon incentives if these are rolled out more widely.Our framework guides our decision making.The framework has five key elements value,materiality of abatement,maturity of technology,competitiveness versus internal and external benchmarks and alignment with the net zero 2050 target.This ensures our investments in abatement projects are phased in the most logical way,prioritising near-term work around energy inputs and where we already see attractive economics.These projects can have very different technical risk profiles from tried and tested to pioneering technology and trades-offs between transitionary and long-term solutions.Many require a carbon price to compete at the challenging internal hurdle rate we set for investment.Based on our current assumptions,carbon prices below$100/tCO2e may be enough for us to decarbonise power and support our investment in renewable generation and firming infrastructure.Higher carbon prices and other forms of support are necessary to enable us toaddress harder-to-abate parts of our carbon footprint,such as process heat and carbon anodes,and remain commercially competitive in a global market.We have used a shadow carbon price of$75 per tonne as part of the investment case for large capital projects;however,we are not using this shadow price to incentivise smaller energy efficiency investments.We will reconsider the merit of using this in evaluations of abatement projects in future.19Climate Change Report 2022|Climate Change Report 2022Low-carbon technology innovation“Technology will bring changes we cannot yet imagine we need to remain open-minded and that is why we are taking a portfolio approach to R&D and not focusing on one particular technology to the exclusion of others.”Nigel StewardChief ScientistAddressing climate change requires us to replace fossil fuels with zero carbon sources of electricity,such as wind,solar,hydropower,geothermal and others.It will also require the electrification of the wider energy system.This transition will increase demand for key minerals and metals that we produce,such as copper,aluminium and iron ore for steelmaking,as well as creating demand for new materials such as lithium.Our strategy is to provide these materials,and we will have to do this with a net zero carbon footprint ourselves.Today,the key materials for the energy transition are not produced without the use of fossil fuels,so we must innovate and create new technology solutions to do so.We have built an industry-leading Technology and R&D organisation,partnering with universities,governments,companies and start-ups to accelerate technology deployment to support our strategy,and already we have delivered some breakthroughs.We are improving our battery materials capabilities,reducing our carbon footprint through biofuel deployment,andpartnering with customers and technology developers to decarbonise steelmaking.We are disciplined in our approach to R&D,with five components to our technology roadmap,aligned with our strategic priorities:health and safety,lightening our overall environmental footprint,supporting growth,decarbonising our operations and our products,and improving productivity.On the low-carbon transition we are focused on energy storage;hydrogen;and repowering our vehicles,trains and ships.And we are using new processing technology to create new growth streams.Our aim is to be the innovation leader in providing materials produced with zero carbon and superior ESG footprint to drive the energy transition.We also strive to be the fastest at translating new ideas into sustained business value.Accessing transformative innovation will require us to take risks,something best done outside the core businesses,which is why we are partnering extensively.We believe our technology innovation and development will bring competitive advantage.Its also imperative to our future success that we build new capabilities and continue to innovate.There are challenges in achieving net zero across our operations,but also opportunities.There is fierce competition and the pathway to success is uncertain.What is certain is that we wont achieve our net zero aspirations without this innovation in technologies and in our products.Over the next 10 years wind and solar deployments will help to address emissions from electricity generation.However,this needs to be firmed to support the 24/7 needs of our operations,especially at our aluminiumsmelters.In the short term,we still see the need for conventional power sources to firm renewable electricity generation.However,new zero-carbon firming or long duration energy storage solutions are being developed this is an active area with many new start up firms innovating in this field.There are four types of long duration energy storage:thermal,chemical,electrochemical and mechanical.Electro-mechanical storage methods are the only ones capable of storing the large amounts of energy required and then delivering this energy at the power required to our large processing assets and mine sites.Pumped hydropower is such an electro-mechanical storage system that is well known and used today where available.We are also tracking new liquid air and compressed air mechanical storage technologies,and pathways are being pursued to make these technologies more economically viable.Energy storageAlternatively,demand will have to be modulated,and we are developing the capability in our aluminium smelters to flex power demand as a function of renewable electricity production.Lithium-ion battery electrochemical storage is cheaper than the new mechanical storage methods,but still remains expensive,and there is insufficient storage capacity for our sites.Thefirming of electricity via electrochemical storage still requires development and there are many start ups active in the space.Weexpect breakthroughs to be deployable in the 2035-2045 timeframe.The good news is that certain thermal storage technologies can provide firm,low-cost power to our energy-intense alumina refineries and other hydrometallurgical plants that require steam,and we are actively pursuing these technologies at present.Gudai-Darri solar plant.The Pilbara,AustraliaClimate Change Report 2022|20Breakthrough technologies are opening up new revenue streams for Rio Tinto.Customers increasingly want to know the provenance of their metals and minerals.We have the ELYSISTM zero-carbon aluminium smelting,and at the Alma smelter weve implemented AP4X cell technology,which enables low carbon aluminium production leveraging the highest amperage in its class.At RTFT,we became the first producer of scandium oxide in North America,using an innovative process we developed to extract high purity scandium oxide from waste streams without the need for any additional mining.Scandium is an essential material in aluminium-scandium(Al-Sc)alloys in automotive and aerospace applications.Weve also produced spodumene,a source of lithium,in a demonstration plant at RTFT.Theprocess used was developed by researchers at our Critical Minerals and Technology Centre,and offers the environmental benefit of not using chemical products and generating only dry,inert residues.At Kennecott,weve started producing tellurium a critical mineral used in solar panels from by-product streams generated during the refining process.We expect to use hydrogen as a reductant for zero-carbon steelmaking,for ilmenite reduction at RioTinto Iron and Titanium Quebec Operations(RTIT)and Richards Bay Minerals,and as a pathway for calcination in our alumina refineries.Atthe moment,though,hydrogen is very expensive and will require a technological breakthrough to be economically viable.Hydrogen is a very energetic material to produce requiring approximately four times more energy per tonne than aluminium but it can provide a great deal of energy back to decarbonise some hard-to-abate industry sectors.There will be very high-power requirements to generate sufficient hydrogen to meet future demand;however,the electrolyser supply chain to deliver green hydrogen is not yet well established and it will take time before it will be a material contributor to decarbonisation.While competitive green hydrogen requires very low-cost green electricity at scale,it also needs lower capital costs.We have invested in Electric Hydrogen,a Californian start up that has reduced capital intensity by a factor of three relative to competitor options through better process design and system engineering,as well as a scientific breakthrough.Where possible we will always seek to electrify our processes as much as we can,for example by using electric boilers to raise steam,rather than using hydrogen as a fuel.This is a far more efficient use of the valuable renewable electricity resource.We lose energy each time we transform an energy from one source to another,and this is what makes direct electrification so compelling and capital-efficient.Therefore,we plan to use hydrogen for its chemical properties where electrification cannot play a role.Furthermore,we will consume it close to its point of generation to avoid supply chain leakage and energy transformation losses.Processing innovationHydrogenAnother technology weve advanced is copper heap leaching,called NutonTM.It offers the potential to economically unlock low-grade copper sulphide resources and copper-bearing waste,and achieve higher recoveries on oxide and transitional material.Italso has environmental benefits,including more efficient water usage,lower carbon emissions and the ability to reclaim mine sites by reprocessing waste.NutonTM technology pilot plant,Bundoora,Australia.21Climate Change Report 2022|Climate Change Report 2022Partnering to reduce the carbon footprint of our value chainsWe need to tackle our Scope 3 emissions,as we fully appreciate that to thrive in the long term we need to be part of net zero value chains.The best way for Rio Tinto to contribute to the low-carbon transition is to partner with our customers and others in our value chain to develop innovative solutions and help shape demand for low carbon metals and minerals.Our Scope 3 emissions were 584Mt CO2e in 2022 over 1%of the global total.These are primarily from our customers in Asia,processing our iron ore into steel and bauxite into aluminium,so our level of control is limited.Our approach to Scope 3 emissions balances ambition,pragmatism and our level of agency:it is focused on our most significant sources and is grounded in actions where we can have impact.Complex structural changes are needed in hard-to-abate sectors,such as steel,aluminium and shipping,to transition to net zero.While it is clear that we have a key role to play,we do not set an overall Scope 3 emissions target as we have limited ability to directly influence the production processes of our customers or their customers.In addition,reducing our Scope 3 emissions by shifting our portfolio away from fossil fuels or the natural depletion of coal mines is not an option for us.In 2022,we increased our engagement with nearly all our direct iron ore and bauxite customers and worked with them to optimise their current operations and to develop the low-carbon technologies needed to reduce emissions across our value chains.It is encouraging that this issue remains high on the agenda when we meet our customers.Two things are clear:first,success will require deep collaboration across the value chain,from iron ore producers to steel makers,as well as technology providers,universities,and industry groups;and,secondly,consistent carbon policy is critical to accelerate the transition.As we develop new capabilities across a wide variety of fields in steel,aluminium and shipping,we are learning from our experience to channel resources into the most promising areas that can have the greatest impact.Thelow-carbon technologies we need in these sectors including BioIronTM,hydrogen as a reductant and green methanol will take years or decades to develop and implement in partnerships between industries and governments.Progress wont be linear;there will be trade-offs,dilemmas and setbacks on the path to net zero.In 2023,we aim to step up our activities and partnerships to accelerate delivery of real-world outcomes.Each of our technology partnerships has individual goals and targets and our progress towards them is detailed below.Our Scope 3 emissions in 2022Our Scope 3 emissions were 584Mt CO2e in 2022(558Mt CO2e in 2021,restated to be equivalent in methods to 2022).Over 94%of this is from the downstream processing ofiron ore,bauxite and other products.Over76%of these processing emissions arise in China,which has pledged to be carbon neutral by 2060,and another 18%come from Japan,South Korea and other countries that have pledged to be carbon neutral by 2050.Estimating our Scope 3 emissions remains challenging,but we have made further improvements in accuracy and completeness in 2022,notably the inclusion of voyage-specific emissions data from chartered ships.Customer-specific emissions data from the 583.9Mt CO2e2022 Scope 3 emissions by category and source(equity basis)26.1 8.8386.6147.315.11%-DRI-EAF83%Purchasedgoods and other7%-Coke Production9%-Steel Convertor19%-Sinter Plant64%-Blast Furnace70%-Smelting(electricity)17%-Smelting(anodes and other)10%-Alumina Process heat17%Fuel3%-Refning(electricity)PurchasesIron OreDownstream Customer EmissionsBauxite and AluminiumOtherCustomersMarineFor many of our customers that policy signal is not clear enough.We have seen a significant increase in the number of our customers that are setting public targets for their Scope 1 and 2 emissions(ourScope 3)and have ambitions to reach net zero by 2050.About 50%of our total iron ore sales are to steel producers that have already set public targets to reach net zero by 2050,up from 28%in 2021.Over 40%of our bauxite sales are to customers that have set net zero emissions targets,though only approximately 5%is to companies that are aiming for net zero by 2050.As these numbers rise,so will our ability to partner through the value chain to achieve our common sustainability objectives.An inevitable structural shift toward green steel is underway.In the short to medium term,the industry is predominantly focusing on blast furnace optimisation and we are working closely with customers to support their ambitions.Inthe medium to long term,the industry will move towards cleaner processing routes such as DRI-EAF1.Steelmakers will increasingly value higher-grade ores with fewer impurities that are more energy efficient to process.Therefore,we are working in partnerships with customers,technology providers,universities and others to develop low-carbon technologies to process our iron ore into steel.This includes exploring DRI pathways using hydrogen and sustainable biomass.We are also working on options to beneficiate and upgrade our Pilbara ores to be better suited to low-carbon steelmaking technologies.1.Direct Reduced Iron.Climate Change Report 2022|22processing of our products continue to be limited in availability.We are working with a number of suppliers to understand emission factors for larger purchased goods and fuels with a focus on ensuring an equivalent cradle-to-gate boundary as the current factors.The full details of our updated approach to estimating Scope 3 emissions and our assumptions are available in our separate 2022 Scope 1,2 and 3 Emissions Calculation Methodology Report on our website.Our Scope 3 downstream processing emissions from bauxite and alumina rose from 144Mt CO2e in 2021 to 147Mt CO2e in 2022.This is due to an increase in sales to customers in countries with a higher than average emissions factor,as well as more accurate bauxite and alumina customer emissions reporting.Scope 3 processing emissions related to our iron ore rose from 365Mt CO2e in 2021 to 387Mt CO2e in 2022 primarily due to changes in product mix and an increase in iron ore sold.The steel value chainSteel is one of the most cost-efficient construction materials and is essential in low-carbon infrastructure,transportation and buildings.Steel has a similar carbon footprint to hydro-based aluminium today on a per tonne of product basis.However,with close to 2 billion tonnes of crude steel produced globally in 2022,the industry overall emits over 3 billion tonnes of CO2 annually,equivalent to around 8%of global carbon emissions.In all our scenarios,we anticipate an increase in the use of steel scrap,especially in China,as the scrap pool rises,although this will depend on quality and quantity.However,even by 2050,we expect that more than half of future crude steel production will remain based on iron ore(compared to about two-thirds today).Meanwhile,blast furnace optimisation will be driven by the use of higher-grade ores,including iron ore lumps and pellets,as well as the replacement of pulverised coal injection with hydrogen and the oxygen enrichment of the blast air enabling gas recycling.There is no proven process route at an industrial scale to produce primary net zero steel today;however,the industry is developingand scaling a range of new technologies.These include hydrogen-based DRI feeding into an electric arc furnace or into a basic oxygen furnace(BOF)via an intermediary melter step,direct smelting,theuse of sustainable biomass,and carbon capture and storage(CCS),as well as more speculativetechnologies such as electrolysis.The speed and scale of deploying these new technologies will depend on technological breakthroughs,trends in capital intensity to close the cost gap with existing production methods,customer willingness to pay and government policies,including carbon prices.The low-carbon transition pathway of the steel industry is uncertain today but can be explored and better understood through scenarios.Oneexample is the scenario analysis presented in Net-Zero Steel Sector Transition Strategy first published in 2021,and updated in September 2022,by the Net Zero Steel Initiative(NZSI).NZSI is an industry platform,part of the Mission Possible Partnership,that brings together stakeholders across the whole steel supply chain to help put the sector on a path to net zero emissions by mid-century.The two NZSI net zero-aligned scenarios result in different carbon emission pathways for the steel industry,with reductions ranging from 11%to 33%by 2030,and from 50%to 76%by 2040(in Tech Moratorium and Carbon Cost respectively,compared to the NZSI 2020 baseline).Assuming that the steel industry follows the NZSI Tech Moratorium scenario,our own analysis indicates that our iron ore-related Scope 3 emissions would fall by 44%by 2035(24%in our 2021 Climate Change Report).This projection includes expected production growth at our Pilbara operations in Western Australia and the Iron Ore Company of Canada and assumes the development of our Simandou project in Guinea.The greater forecast reduction in Scope 3 emissions versus the 2021 Climate Change Report is due to a range of factors.They include,firstly,refinements to the 2022 NZSI model resulting in increased CO2 reduction via enhanced blast furnace technologies.Secondly,expectation of a faster transition to DRI-based steelmaking via the Melter-BOF route and,thirdly,increased future lump proportion from our Pilbara mines would both have the potential to impact Scope 3 targets.Fourthly,the forecast assumes a greater role for Rhodes Ridge joint venture mines in future production.Our focus areas for iron and steel decarbonisationOur approach is to pursue and support a range of decarbonisation options aligned with the technology pathways highlighted by the NZSI analysis,through partnerships with our customers,suppliers,universities and research institutes.In 2022,we engaged with nearly all our direct steel customers(by sales volume).This represents approximately 70%of our total iron ore sales1 and two thirds of our related emissions.We have an engagement tracking framework with customer projects covering 59%of our sales volume.Wehave consolidated these initiatives under six focus areas,with coordination from a dedicated Steel Decarbonisation team2 within our Commercial team.This includes beneficiating our Pilbara ores to be better suited to green steel technologies,optimising the traditional blast furnace route to reduce emissions and innovating green solutions using hydrogen and biomass in a sustainableway.In 2022,we made progress on 49 projects,together with over 30 partners,building technical and commercial optionality for the future across the steel value chain.In 2022,wespent$24 million on our iron and steel decarbonisation initiatives,lower than our planned spend of$50 million.We are aiming to increase our investment in our steel decarbonisation initiatives in 2023 and the level of spend will depend on the speed of success of our research and development initiatives.1.The balance includes spot buyers,traders and others procuring from our China portside business.2.Steel Decarbonisation team has 16 people primarily engineers and research personnel,supported by people from our Iron Ore,Development and Technology,Commercial and Business Development teams,working in all our customer markets.NZSI Tech Moratorium scenario technology pathwaySteel production(Mt)2,5002,0001,5001,00050002020202520302035204020452050Blast Furnace(BF/BOF)Smelting Reduction with CCSScrap EAFAverage TechnologyBest Available technolgy(BAT)BAT with H2 injectionBAT with Biomass PCINatural gas based100%green hydrogenNatural gas with CCS/UNatural gas based100%green hydrogenNatural gas with CCS/U50%green hydrogenScrap EAFSmeltingReductionwith CCSDRI EAFDRI Melter BOF23Climate Change Report 2022|Climate Change Report 2022Goals2022 progress2023 objectives1.Blast furnace optimisation99%of our iron ore is processed through the blast furnace route today,the optimisation of which could result in potential carbon emissionreductions of up to 30%.We will collaborate with over 20 customers,includingBaowu,POSCO,Nippon Steel Corporation(NSC)and Shougang,to help them generate those savings as an intermediary decarbonisationstep.This includes pilot work on microwave lump drying with Baowu,and progressing our partnership with NSC on test work for lump ores and exploring a new grade of pellets.We collaborated with China Baowu on low-carbon steelmaking and research projects.The lump drying technology in Baowus Meigang subsidiary is one of the signature projects.Through the development and industrial demonstration of green and efficientdrying technology for blast furnace lump,the proporti
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?Sustainability Report 2022 Editorial Policyis reported in the chapter on“Risk countermeasures base”(P118129).Message from the President P003006We publish a message from the President on the relationship between group operations and ESG and on how we contribute through our business to society and the environment.Feature P007012This section features those particular activities undertaken during FY2021 that we would especially like to tell our stakeholders about.Implementation Report P013136 Each category of ESG,together with being outlined in“Commitment from the Executive Officer in Charge,”is also organized and systematically reported on by their respective key issues in“Policy and Concept(Approach to issues),”“Management”and“Main Approach.”Reports are offered on corporate governance and the structure that underpins the building of good relationships with stakeholders(customers,employees,business partners,community residents and shareholders)through business and contributions to the global environment.Third-Party Assessment/Data Section P137187Along with a self-assessment of results achieved with the Action Plan for the Environment and the Social Medium-Term Plan,we list third-party assessments and detailed data related to society and the environment.Reporting MediaSeparate Japanese and English editions are issued in PDF format.Target ReadersThe target readers include a wide range of stakeholders such as corporate assessment agencies,long-term investors,NGOs and experts as well as customers,business partners,employees,community residents(including NPOs/NGOs)and the government.Reporting OrganizationsThe report is centered on Daiwa House Industry and Daiwa House Group companies(421 consolidated subsidiaries,57 equity-method affiliates and 1 non-equity-method affiliate as of March 31,2022).Report PeriodThe report mainly focuses on the 2021 fiscal year(April 1,2021 to March 31,2022)but activities before and after this fiscal period are included when necessary.Referential GuidelinesGRI(Global Reporting Initiative)Sustainability Reporting Standards,International Organization for Standardization“ISO26000,”“Environmental Report Guidelines(2018 edition)”from the Japanese Ministry of the Environment,IIRC“International Integrated Reporting Framework,”“Guidance for Collaborative Value Creation”from the Japanese Ministry of Economy,Trade and Industry.IssuedJuly 2022(Issued once a year,next issue scheduled for July 2023)*English version is scheduled in September 2022Purpose of PublicationTo realize management sustainability,the Daiwa House Group has published this Sustainability Report 2022(hereafter“this report”)for the following purposes.(1)Accomplish accountability:As a group that maintains the stance of Co-creating a Brighter Future,we will take accountability for contributions to society and the environment as well as reduction in environmental impacts through business.(2)Acquire appropriate third-party evaluations:We will disclose information based on requests from stakeholders who are particularly interested in corporate ESG(environment,society and governance),including corporate assessment agencies,long-term investors,NGOs,and experts.We especially understand that ESG assessment items of corporate assessment agencies are“a collection of the expectations and demands of a global society and stakeholders,”and are aiming to acquire appropriate evaluations.(3)Utilization for improvements in management:As part of the“third-party checks”that we use in the PDCA cycle of management,we make improvements on the basis of internal feedback of the points cited in ESG evaluations and dialogues reported herein.Page Layout,Included Content This report is broadly comprised of four parts,namely“Message from the President,”“Feature,”“Implementation Report”and“Third-Party Assessment/Data Section.”The“Implementation Report”brings into focus the individual efforts taken for each element of ESG.It also reports on“Commitment from the Executive Officer in Charge”for each category,as well as the progress of initiatives for respective priority issues of the Action Plan for the Environment(P020)and the Social Medium-Term Plan(P067)that we started in fiscal 2019.The description of“Corporate Governance,”as is listed in the Contents,is limited to corporate governance(P130 136)as pertains to supervision and decision making,while internal control in this report is positioned in the social domain,and Daiwa House Group Sustainability Report 2022001 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data SectionContentsEditorial Policy 001Contents 002Message from the President 003Feature Onward!Towards fulfilling Our Hopes for the Future!007 New Co-creation and Fostering the Next Generation Designing the Society of the Future with Kotokurie 009CHAPTER 01|Implementation ReportEnvironmentManagementCommitment from the Executive Officer in Charge 014Long-Term Environmental Vision 017Action Plan for the Environment(Endless Green Program)020Action Plan for the Environment (Endless Green Program 2026)021Action Plan for the Environment (Endless Green Program 2021)022General(Expand environmental contribution business)023Reinforcing the foundation of environmental management 024Environmental management/Supply chain management(Environment)/Eco communicationFocal theme1 Mitigating and adapting to climate change 032Response to the Task Force on Climate-related Financial Disclosures(TCFD)0402 Harmony with the natural environment (Preservation of biodiversity)0453 Closed-loop resource sourcing and conservation of aquatic environments (Greater durability and waste reduction)0514 Prevention of chemical pollution 057CHAPTER 02|Implementation ReportSocietyManagementCommitment from the Executive Officer in Charge 063Long-Term Social Vision 066Social Medium-Term Plan(Endless Social Program)067CSR Management 068Human Rights Management 070Focal theme1 Innovation base 076Issue 1:Build platforms for innovating solutions to social issuesIssue 2:Promote social inclusion in real estate development2 Human resources base 083Issue 3:Work style reform for employeesIssue 4:Upgrade human resource development and recruitmentIssue 5:Promote diversity and inclusion3 Technology and manufacturing base 093Issue 6:Enforce safety/security at construction sitesIssue 7:Improve productivity in manufacturing operations with the cooperation of business partnersIssue 8:Promote and improve the efficiency of CSR procurement across the Group4 Customer base 106Issue 9:Upgrade corporate communicationsIssue 10:Promote customer support to maintain long-term relationships5 Communication base 112Issue 11:Integrate and upgrade financial and nonfinancial communicationsIssue 12:Keep pace with rapidly evolving communication environments6 Risk countermeasures base 118Issue 13:Prepare business continuity plans on the premise of natural disasters/extreme weatherIssue 14:Establish human rights due diligence at factoriesIssue 15:Establish corporate ethics and compliance rulesIssue 16:Build management base for global business development from a long-term perspective/Risk Management/Internal Control/Anti-corruptionCHAPTER 03|Implementation ReportCorporate GovernanceManagementCommitment from the Executive Officer in Charge 131Corporate Governance 133CHAPTER 04|Third-Party Assessment/Data SectionCooperating with Third Parties and Their AssessmentCooperating with Third Parties 138Main certifications and awards 140Inclusion in ESG indices 143Data SectionResults and self-assessment of the Action Plan for the Environment 145Results and self-assessment of the Social Medium-Term Plan 147Environmental Data 149Social Data 182Corporate Governance Data 187Third-Party Assurance Report 188Editorial Postscript 189Information on GHG in this report has received third-party certification,and an accompanying mark indicates all data subject to such certification.(See Third-Party Assurance Report on P188.)The following are the 12 major Group companies referred to in the Social Data section.Cosmos Initia Co.,Ltd.,Daiwa House Realty Mgt.Co.,Ltd.,Daiwa House Reform Co.,Ltd.,Daiwa Logistics Co.,Ltd.,Daiwa LifeNext Co.,Ltd.,Daiwa Lease Co.,Ltd.,Daiwa Resort Co.,Ltd.,Daiwa Living Management Co.,Ltd.,DesignArc Co.,Ltd.,Nihon Jyutaku Ryutu Co.,Ltd.,Fujita Corporation,Royal Home Center Co.,Ltd.Daiwa House Group Sustainability Report 2022002 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data Section Message from the PresidentToward a world where we live together in harmony,embracing the Joys of LifeI would like to open by expressing my gratitude to stakeholders for the encouragement and understanding they have afforded us in our running of the Daiwa House Group.Our business climate is becoming increasingly uncertain and unclear,as we face challenges posed by living with COVID-19,environmental problems,the decrease in the working population,and accelerating digitalization.Even so,the Daiwa House Group will continue to value our development as a business useful to society.As a Group that co-creates value for individuals,communities and peoples lifestyles,we will build a business model for sustainable growth into the future and aim to help create a world where all can share the Joys of Life in terms of both social and economic value.Keiichi YoshiiPresident,CEOOur Future Landscape Celebrating the Joys of LifeOur basic approach at the Daiwa House Group can be expressed as“Creating Dreams,Building Hearts”and we have worked together with our customers to achieve this through our various businesses.In the housing field,which includes single-family houses and rental housing,we have come up with a diverse range of housing styles that reflect social and lifestyle changes and provide solutions to issues faced by customers throughout their lives.In the business field,we have been proactive in addressing corporate customer needs,for example by developing advanced and cutting-edge logistics facilities or data centers,while also contributing to regional revitalization through the development of higher value commercial facilities or multi-use redevelopments and the installation of renewable power generation business to keep pace with the times.In each of our businesses,we remain focused on the spirit of“together with our customers”that is part of our“each individual orientation”that the Daiwa House Group has valued since our founding.We will work to anticipate rapidly changing social needs and build lifestyle infrastructure to support peoples way of life.Daiwa House Group Sustainability Report 2022003 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data Section Six materialities and the society we want to create by 2055Social valueEconomic valueCreatingthe fundamentalsocietalinfrastructure andlifestyle culturerooted inregenerationSociety we aspire toEnsuring a world where we live together in harmony embracing the Joys of Life*Diversity,equity and inclusionGlobalizationLocal community regenerationCircular economy and carbon neutralityGovernanceDigital transformationDE&I*Management policies and focal themes in the 7th Medium-Term Management PlanAccelerate growth ofoverseas businessIncrease the value of our human capitalEnhance governanceReinforce production systemsCentralize purchasing for the GroupStrengthen our technology and manufacturing baseEvolve supply chainIncrease customer experience valueStrengthen cost competitiveness and build a system for stable supplyAchieve growth of profts coexisting with capital effciency through portfolio optimizationEvolve revenue modelOptimize management effciencyComplete a sustainable growth modelStrengthen management baseExpand a circular value chainRealize carbon neutrality by making all buildings carbon-freeDigital transformationToward realizing a sustainable growth model,we uphold three management policies,and tackle eight focal themes under the policies(Under the 7th Medium-Term Management Plan)Message from the PresidentOur Hopes for the FutureSince our founding,the Daiwa House Group has operated in line with the key concepts spelled out by our founder Nobuo Ishibashi:“Dont do things because they will make a profit,but because they will be of service to society”and“Our Hopes for the Future enable both individual and company growth.”As we approach our 100th anniversary in 2055,the Daiwa House Group has initiated Our Hopes for the Future project that involves participation by every single employee to answer some key questions:what type of society do we want to build and what do we need to do to achieve this?Working with groups of employees,particularly younger staff members,over the course of one year,we have discussed these social issues and debated the purpose of our company.The Our Hopes for the Future elicited through this process were“creating the fundamental societal infrastructure and lifestyle culture rooted in regeneration,ensuring a world where we live together in harmony embracing the Joys of Life.”This has been defined as our purpose and we have established this concept as a new compass to guide the growth of our Group.This newly defined purpose updates the original concepts of our founder and represents our thinking today.By sharing Our Hopes for the Future(purpose)with stakeholders and realizing the ideas contained therein,we aim to develop our future as a much-loved business and increase corporate value.Towards a world where we live together in harmony embracing the Joys of LifeTo achieve a world where we can share the joys of life as proposed in Our Hopes for the Future(purpose),we have defined the actions our Group needs to take:create value premised on regeneration and circulation,use digital technology for real-world innovation,and help achieve diverse lifestyles true to peoples selves.We have also specified six materialities.With an eye on these,our Seventh Medium-Term Management Plan proposes three management policies for growth from here on out:Evolve revenue model,Optimize management efficiency,and Strengthen management base.In this way,we will work to establish a model for sustainable growth.Daiwa House Group Sustainability Report 2022004 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data Section Message from the PresidentEntire company pulling together to achieve carbon neutrality“Realize carbon neutrality by making all buildings carbon-free”is an initiative to help our childrens future and is one of our greatest duties.As a leading company in the construction industry,this is something we absolutely must achieve.In August 2021,the Daiwa House Group endorsed the Carbon Neutral Declaration by the Japanese government and we announced targets to take us to carbon neutrality by fiscal 2050.In order to achieve this,we have gone through a process of backcasting and in our recently formulated seventh Medium-Term Management Plan,we have raised our interim targets and by 2030 we aim to reduce greenhouse gas(GHG)emissions by at least 40ross the value chain compared with 2015 levels.To achieve these targets,we will work on a carbon-neutral strategy at all businesses.For carbon neutrality in our business activities,we had previously aimed to achieve our renewable energy 100%(RE100)target in 2040,but have brought this forward by 17 years to fiscal 2023.The Daiwa House Group already generates 1.3 times more renewable energy than the energy we use across the entire Group and we expect to gain value from these renewable energy supplies.We are also actively working to develop carbon neutral communities through products and services.We are enhancing our offerings for net Zero Energy Houses(ZEH)and Buildings(ZEB)in all businesses and aim for all new properties supplied by the Group by 2030 in principle to be ZEH or ZEB.In addition,we are installing solar panels on all buildings.By engaging in such a wide range of initiatives,we aim to tackle environmental issues while also generating corporate earnings.Making people happy to live in their communityOf the 17 SDGs,one(No.12)aims for“Responsible consumption and production.”As well as reflecting on the responsible production of the new communities we build,we have also considered whether their consumption is responsible.Livness Town Project is one of our businesses designed to help tackle the problems arising from an aging population and low birth rate,as well as aged buildings.With this project,we are redeveloping Neopolis suburban housing complexes originally developed by our company.Getting involved in this way in community redevelopment,we are working to address responsible consumption issues while creating dynamic,attractive communities.Various initiatives are underway:Working with local authorities and other bodies,we are looking at how to help the elderly stay healthy and families,raise their children.We intend to create communities designed for all generations to enjoy,so that people are happy to live in their community for many years and younger cohorts want to move in.Looking ahead,we will focus on revitalizing local economies,creating employment,and using renewable energy in regional cities and suburban areas.We will step up our business in multi-use developments and redevelopments that leverage Group resources,so that we can help maximize the potential of the localities outside the major urban centers.Creating a mutually stimulating environment to foster the personal growth for our diverse human resourcesWhen our Company was founded,“developing people through business”was the first statement in the Daiwa House Corporate Creed,underlining just how important human resources development is to the Group.In October 2021,we opened the new training facility the Daiwa House Group MIRAI KACHI KYOSO Center(Kotokurie)in Nara Prefecture,providing us with new facilities to develop our human resources.The center is an open space not only for Group employees,but also for the wider community,offering a venue for people of all ages to study and think together,be stimulated by those around them,and foster personal growth.We expect the center to help develop human resources capable of co-creating value for the future,which in turn will help to create a better society.Kamigo Neopolis(Yokohama City)Daiwa House Group Sustainability Report 2022005 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data Section Message from the PresidentThe Daiwa House Group has a record of employing people of many different backgrounds,including mid-career recruits,and developing human resources with varied perspectives.We have furthered the development of the Company by creating a diverse workforce with different attributes and skill sets to develop detailed solutions for our customers problems.We have also grown as a multifaceted company with a diverse business offering,spanning housing construction,real estate development,and general contracting,and this allows us to deliver solutions to customer needs and social issues that change with the times,while also valuing our connections with our stakeholders.I am of the view that we need to maintain and improve this corporate culture as we move ahead.We are also promoting diversity,equity,and inclusion(DE&I)within the organization,ensuring that we have diversity in the managerial ranks and proactively organizing staff exchanges and interactions between Group companies.Through these programs,our future leaders acquire the management skills(such as the ability to engage or draw out new value)that will allow them to make the most of the different sets of values in our organization.Future-oriented DX strategy to enrich living and working stylesDigital transformation(DX)at the Daiwa House Group focuses on maximizing value delivered to the customer and ensuring safety,productivity,and quality in our manufacturing,with the overall goal of leveraging digital technologies to transform living and working styles.We are working to develop effective systems to accommodate the difficult conditions faced by the construction industry,such as the urgent challenge posed by the decrease in the working population and how to cope with heatwaves.We want to take a leading role in construction-sector DX,deploying labor-saving and automated systems while ensuring the safety,productivity,and quality that are critical on construction sites.We are also working to create new value by leveraging digital technologies to transform operational processes.We are taking a big-data approach to the wealth of information the Group has on our many customers and buildings.This is designed to enhance the value of our information assets and allow us to deliver products and services tailored to individual customer needs and in ways that enrich living and working styles.To all our stakeholdersEyes set firmly on the future,we will be working steadily to drive these initiatives forward,guided by our new compass,Our Hopes for the Future.We will strive to support everyones lives,helping to build a world where we live together in harmony embracing the Joys of Life.We will continue to keep the spirit of the founder at the heart of everything we do,while flexibly accommodating contemporary needs in order to continue evolving as a company that meets or exceeds the expectations of customers and society.Daiwa House Group Sustainability Report 2022006 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data SectionOur Hopes for the FutureOur Future LandscapeCelebrating the Joys of LifeThe society we envision and our role in creating itCreating the fundamental societal infrastructure and lifestyle culture rooted in regeneration,ensuring a world where we live together in harmony embracing the Joys of Life.1955The beginnings of Our HopesHopes for the Future Enable both Individual and Company GrowthFounder Nobuo Ishibashi always said that pursuing hopes is the driver of personal and company growth.Ever since our founding,we at Daiwa House Group have always engaged,together with all stakeholders,in the pursuit of Our Hopes for the Future.That dedication continues to live on,even today,as the Groups grand aspiration.Refecting Our Hopes for the Future Projects conclusions in the Medium-Term Business PlanDuring fscal 2021,we defned Our Hopes for society in 2055,the Groups centennial year,after sounding out the executives and employees and outside stakeholders for their thoughts on the kind of society they would like to see created by then.The exchanges of ideas and opinions that took place under Our Hopes for the Future Project are carried over into the 7th Medium-Term Management Plan.Now translating the plan into action,we are addressing the materialities it identifes to realize the dreams laid out in our Purpose,Our Hopes for the Future.Making the dreams laid out in Our Hopes for the Future happen2021Deciding what Our Hopes for the Future are2055Realizing of Our Hopes for the FutureFocusing on six materialities,we are working to enhance social and economic value in our pursuit of turning Our Hopes for the Future into realityIn preparation for the 100th anniversary of the Daiwa House Groups founding,we formulated the Our Hopes for the Future purpose statement to serve as the Groups compass for the journey ahead.Henceforth we will advance toward realizing Our Hopes for the Future in line with its two themes,the kind of society we aspire to in 2055 and the Daiwa House Groups role in bringing it about.Feature|1 Onward!Towards fulfillingOur Hopes for the Future!*Diversity,equity and inclusionParticipants across the country used an online whiteboard app to take part in the dialogue at Our Hopes for the Future workshopsGlobalizationLocal community regenerationCircular economy and carbon neutralityGovernanceDigital transformationDE&I*Social valueEconomic valueCreatingthe fundamentalsocietalinfrastructure andlifestyle culturerooted inregenerationDaiwa House Group Sustainability Report 2022007 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data SectionSurvey 1Over 30,000 responses to survey soliciting stakeholder inputIdeas on the kind of society the Daiwa House Group should aspire to and its role in bringing it aboutGen Zers input on the world in 2055Interviews on impressions of initial Our Hopes for the Future draftDialogue with managementWorkshop 1Workshop 2Next-Generation WorkshopShareholder interviewsCollege-student interviewsStakeholder InterviewsBusiness partner interviewsSummit 2Survey 2College-Student WorkshopSummit 1Final DiscussionBoard of DirectorsThe World in 2055 as imagined at the College-Student Workshop(graphic:Yui Saito,Heart of the Earth Inc.)The process behind Our Hopes for the FutureCollege Student WorkshopsA day is coming when boundaries between the pleasurable and the routine will be blurred,and we will discover value amid the pleasuarableWe exchanged views and opinions with 22 college students at four workshops.Stakeholder commentsOur Hopes for the Future Summit 1We will take a long-term perspective in doing the work needed to bring about a social structure enabling our children and their childrens children live lives true to themselvesA diverse cohort of some 1,000 employees who responded to an open call for participants exchange ideas and opinions on the initial draft of the company purpose,particularly the parts that excited or resonated with them.Next-Generation WorkshopOnward toward a society in which not only ourselves but all those around us,all around the world,can achieve happiness!Thats the kind of society we want to createEmployees from different divisions and in different jobsmost in their 20s and 30s who will be in positions of responsibility in the runup to 2055 used scenario-planning methods to thoroughly discuss the kind of society we want achieve by 2055.Stakeholder InterviewsDaiwa House is a builder that goes beyond the confnes of just house-building.They even provide our partners with ideas to solve their problems,which underscores their capabilities as a group.If current decision-makers initiate change,their actions will have positive repercussions for the lives of future generations 40 years down the road.If theres anywhere that Daiwa House is going to grow,it will be in the social infrastructure domain.Partner:Gen Zer:Shareholder:In formulating Our Hopes for the Future,we made dialogue our highest priority.This dialogue consisted of over 30,000 responses to a survey of all Group employees,workshops involving selected employees and college students of great diversity,and managersover 1,000 participants in all,thus ensuring that stakeholders views were incorporated in the final version.Dialogue highest priorityin formulatingOur Hopes for the FutureParticipants across the country used an online whiteboard app to take part in the dialogue at Our Hopes for the Future workshopsDaiwa House Group Sustainability Report 2022008 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data SectionThe MIRAI KACHI KYOSO Center(Kotokurie)was finally completed in October 2021.What kind of future society and new value will be created in order to realize our philosophy of“Co-creating a Brighter Future”?Here,we will introduce in detail the purpose of this facility,which is human resource development and approaches to working with local communities,as well as the background behind the completion of the facility,and our future plans.Human Resources and Interpersonal Relationships Development DepartmentHead of the Daiwa House Group MIRAI KACHI KYOSO CenterMasakazu IkebataSuccessionRegional cooperation by passing on the spirit of the founderThe facility,which is focused on communication,consists of wind,sun and water zones in order to pass down the founders DNA.In addition,using the facility for new discoveries and dialogue,we are propelling efforts for it to be a place for putting employee training and training programs into practice through regional cooperation.Co-creationDiverse values create new valuesAs a co-creation platform,over and above“open innovation functions”such as industry-academia collaboration and enterprise collaboration that handle various themes,we are promoting support activities toward the formation of“living laboratory functions”in order to enable co-creation of science technology and enterprise together with the public and local activity organizations,and for regional verifcation.Co-educationFostering the people needed for the future together with societyIn order to realize“a place where all generations can learn,think and grow together”and“a place for fostering human resources that can co-create value for the future together with society,”we will collaborate with the very children who will shoulder the future,local companies and governments,and we will promote efforts to create a vision together.Three Roles of KotokurieFeature|2 Feature|2 New Co-creation and Fostering the Next GenerationDesigning the Society of the Future with KotokurieNew Co-creation and Fostering the Next GenerationDesigning the Society of the Future with Kotokurie What are the goals of Kotokurie?A place for exploring“the Joys of Life”together“Dont do things because they will make a proft,but because they will be of service to society”Based on the business philosophy of our founder,Nobuo Ishibashi,the Daiwa House Group has been pursuing projects that are aimed at working through community and societal issues.In order to inherit the founders DNA,this project was started with the aim of providing education not only as a company,but also the education required by employees.The objective of our companys human resource development is not just for company achievements,but to produce human resources that are useful to society.For that reason,we must strive to solve community and societal issues,and develop human resources that can create,utilize,and enhance new values in partnership with customers and the people of the local community,and have fulflling lives.This facility was established in order to share this way of thinking with as many people as possible,and to develop human resources that,together with society,can co-create value for the future.Daiwa House Group Sustainability Report 2022009 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data SectionWhat kind of facility do we want to build for the creation of new value and the realization of a society in which people can achieve fulflment?What elements are needed to foster human resources that are attached to local communities,embrace the concept of social contribution,and that can together move forward to the future?At every stage,from when this project started through to planning and organization,design,construction,and now,the thoughts and ideas of many people beyond the Group have been put into the construction of the center,and it is through extensive discussions and trials that we arrived at Kotokurie.At Kotokurie,based on a direction that aims toward a human-friendly facility where visitors can feel happy and positive,spaces based on the concepts that came out of the workshop and a place for learning have been implemented.At the same time,we have pursued initiatives related to the SDGs,such as environmental performance of the building and landscape,the health and comfort of users,and biodiversity.In recognition of these initiatives,our center was the frst in Japan to receive three international certifcations*,LEED(environment-related),WELL(health-related),and SITES(landscape-related).When including two domestic certifcations from BELS(energy-saving)and JHEP(biodiversity),our center has achieved a total of fve certifcations.*LEED,WELL,SITES and associated logos are registered trademarks of the U.S.Green Building Council,Green Business Certifcation Inc.and WELL Building Institute,and are used with their permission.1 Connected open spacesWith consideration for the lands connection with culture and regionality,remains that date back to when this area was the capital of Japan(1300 years ago)have been refected in the buildings exterior,making it possible to imagine what the landscape once looked like.The interior of the building has been designed so that different activities can unintentionally overlap and complement each other.This is achieved by using a foor structure in which all spaces are open,and in which they are all connected by ramps and atriums.3 Focus on“human-and environment-friendly facilities”Kotokurie was designed with consideration for D&I and the environment so that people from diverse backgrounds can come together and everyone can live comfortably.This starts with the installation of all-gender toilets with forethought for a wide range of users,including LGBTQ minorities.Entrances have been devised with signs and movement lanes,including a number of special entrances.In addition,there is a Prayer Room that can be used for people of all religions and sects,and which can also be used as a calming space through meditation.We are also focused on the use of“water,”and have adopted aquifer thermal energy storage(ATES)which utilizes the characteristics of groundwater that retains a constant temperature throughout the year as an air conditioning heat source for the building.Together with reducing electricity consumption,as exhaust heat from air conditioning isnt emitted into the atmosphere,this leads to the alleviation of the heat-island phenomenon.The landscape adopts a rain garden as green infrastructure.This controls the outfow of rainwater by enhancing the permeability and water-holding capacity of the soil,and at the same time as contributing to food control measures in the region,it also encourages the growth of plants.2 A place of learning that stimulates emergenceWe designed a training room to enable learning in various styles,such as the“Inspiration Studio”where ideas are born through video production,etc.,and the“Biophilic Studio”where visitors can concentrate even better with aromas and natural sounds.In addition,there is an“Anywhere Board”which incorporates the opinions of the workshop,easily moveable desks and chairs,and devices have been placed everywhere to create new value by letting people engage in free discussions.At Kotokurie,we are working toward 7 actions to enhance the three values of Value for Living,under which everyone can be themselves and have lively and proactive lives,Economic and Social Value,to revitalize society as a whole,regions,towns and people,and Global Environmental Value,to enable the sustainable coexistence of humans and the Earth.We are promoting the cutting-edge“provision of opportunities and environments for learning and connection”with a future mindset by integrating Daiwa House Groups employee education for the creation of new business value with activities focused on society,such as co-education activities centered around the children of local communities and co-creation activities with diverse stakeholders.Human Resources and Interpersonal Relationships Development DepartmentHead of the Daiwa House Group MIRAI KACHI KYOSO CenterMasakazu IkebataSuccessionRegional cooperation by passing on the spirit of the founderThe facility,which is focused on communication,consists of wind,sun and water zones in order to pass down the founders DNA.In addition,using the facility for new discoveries and dialogue,we are propelling efforts for it to be a place for putting employee training and training programs into practice through regional cooperation.Co-creationDiverse values create new valuesAs a co-creation platform,over and above“open innovation functions”such as industry-academia collaboration and enterprise collaboration that handle various themes,we are promoting support activities toward the formation of“living laboratory functions”in order to enable co-creation of science technology and enterprise together with the public and local activity organizations,and for regional verifcation.Co-educationFostering the people needed for the future together with societyIn order to realize“a place where all generations can learn,think and grow together”and“a place for fostering human resources that can co-create value for the future together with society,”we will collaborate with the very children who will shoulder the future,local companies and governments,and we will promote efforts to create a vision together.Three Roles of KotokurieReview phasePlanning and design phaseConstruction phaseConcept creation(April-June 2018)A total of 150 employees from various roles and positions in the Group attended and discussed what facilities are needed to train the next generation of leaders.We adopted a workshop as our planning technique in order to gather a wide range of opinions.In the discussion,a 3D model was created as needed,and discussions were able to progress by refecting different opinions in the model.Planning(October 2018)We thoroughly analyzed the opinions and thoughts that tended to be abstract when creating our concept,and careful,detailed discussions took place again and again so as to fully understand the intentions,such as the background behind our requests and the defnition of each word.We kept making adjustments while incorporating results into the drawing and the model.Comprehensive use of BIM*In order to achieve curves and space that are organic,and which connect seamlessly,it was a crucial point to have planning,a structure,equipment and construction that constantly integrated and verifed the architectural information.Excavation survey(July 2018)From here,which was once the southern tip of the capital of Japan,we found the remains of residences from that era,and out of respect for Naras history and culture,a building shape that is refective of that was born,for example with terrain that is like the raising of the ruins.Completion(June 2021)Grand opening(October 2021)Starting point and survey(November 2015)In consideration for the aging status of our three training centers in Japan,we started studying the construction of a new training facility to develop human resources who will shoulder the future.We visited a number of other training facilities.Full-scale start(March 2018)Start of construction(July 2019)Further adjustments continued to be made after the start of construction for the building of complex and organic structures,such as the“Hall of the Sun,”which has a stairwell with an evolving shape running through four foors,and the design wall for the exterior walls,which give the impression of the raising up of ruins.Steel frame model created in cooperation with FAB(steel frame manufacturing company)Wind Patio Ventilation Simulation*This stands for Building Information Modeling.This is a 3D model with building information added and digitized.It is a method that utilizes building information accumulated in the whole life cycle from design to construction maintenance management.AllGenderFeature|2 Feature|2 New Co-creation and Fostering the Next GenerationDesigning the Society of the Future with KotokurieNew Co-creation and Fostering the Next GenerationDesigning the Society of the Future with KotokurieCooperation with the local community What are the goals of Kotokurie?A place for exploring“the Joys of Life”together What led to the birth of Kotokurie?Creating a place for co-creation as an opportunity for our co-creation What are the facilities and functions that can create new value?Realization of a unique environment where people can demonstrate their abilities How will it be used in the future?As a center that is open to the community,we will creatively develop ways of utilizing it“Dont do things because they will make a proft,but because they will be of service to society”Based on the business philosophy of our founder,Nobuo Ishibashi,the Daiwa House Group has been pursuing projects that are aimed at working through community and societal issues.In order to inherit the founders DNA,this project was started with the aim of providing education not only as a company,but also the education required by employees.The objective of our companys human resource development is not just for company achievements,but to produce human resources that are useful to society.For that reason,we must strive to solve community and societal issues,and develop human resources that can create,utilize,and enhance new values in partnership with customers and the people of the local community,and have fulflling lives.This facility was established in order to share this way of thinking with as many people as possible,and to develop human resources that,together with society,can co-create value for the future.Co-creation supporter General supporter Supporters by theme(study groups,projects,etc.)Supporters by region(living laboratory activities by region,community co-creation activities,etc.)Supporters by target audience and by project such as eventsAdministrativeoffcesPlanning,surveysandcoordinationPlanning andmanagement sideDaiwa House Group Sustainability Report 2022010 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data SectionAt Kotokurie,based on a direction that aims toward a human-friendly facility where visitors can feel happy and positive,spaces based on the concepts that came out of the workshop and a place for learning have been implemented.At the same time,we have pursued initiatives related to the SDGs,such as environmental performance of the building and landscape,the health and comfort of users,and biodiversity.In recognition of these initiatives,our center was the frst in Japan to receive three international certifcations*,LEED(environment-related),WELL(health-related),and SITES(landscape-related).When including two domestic certifcations from BELS(energy-saving)and JHEP(biodiversity),our center has achieved a total of fve certifcations.*LEED,WELL,SITES and associated logos are registered trademarks of the U.S.Green Building Council,Green Business Certifcation Inc.and WELL Building Institute,and are used with their permission.1 Connected open spacesWith consideration for the lands connection with culture and regionality,remains that date back to when this area was the capital of Japan(1300 years ago)have been refected in the buildings exterior,making it possible to imagine what the landscape once looked like.The interior of the building has been designed so that different activities can unintentionally overlap and complement each other.This is achieved by using a foor structure in which all spaces are open,and in which they are all connected by ramps and atriums.3 Focus on“human-and environment-friendly facilities”Kotokurie was designed with consideration for D&I and the environment so that people from diverse backgrounds can come together and everyone can live comfortably.This starts with the installation of all-gender toilets with forethought for a wide range of users,including LGBTQ minorities.Entrances have been devised with signs and movement lanes,including a number of special entrances.In addition,there is a Prayer Room that can be used for people of all religions and sects,and which can also be used as a calming space through meditation.We are also focused on the use of“water,”and have adopted aquifer thermal energy storage(ATES)which utilizes the characteristics of groundwater that retains a constant temperature throughout the year as an air conditioning heat source for the building.Together with reducing electricity consumption,as exhaust heat from air conditioning isnt emitted into the atmosphere,this leads to the alleviation of the heat-island phenomenon.The landscape adopts a rain garden as green infrastructure.This controls the outfow of rainwater by enhancing the permeability and water-holding capacity of the soil,and at the same time as contributing to food control measures in the region,it also encourages the growth of plants.2 A place of learning that stimulates emergenceWe designed a training room to enable learning in various styles,such as the“Inspiration Studio”where ideas are born through video production,etc.,and the“Biophilic Studio”where visitors can concentrate even better with aromas and natural sounds.In addition,there is an“Anywhere Board”which incorporates the opinions of the workshop,easily moveable desks and chairs,and devices have been placed everywhere to create new value by letting people engage in free discussions.At Kotokurie,we are working toward 7 actions to enhance the three values of Value for Living,under which everyone can be themselves and have lively and proactive lives,Economic and Social Value,to revitalize society as a whole,regions,towns and people,and Global Environmental Value,to enable the sustainable coexistence of humans and the Earth.We are promoting the cutting-edge“provision of opportunities and environments for learning and connection”with a future mindset by integrating Daiwa House Groups employee education for the creation of new business value with activities focused on society,such as co-education activities centered around the children of local communities and co-creation activities with diverse stakeholders.Human Resources and Interpersonal Relationships Development DepartmentHead of the Daiwa House Group MIRAI KACHI KYOSO CenterMasakazu IkebataSuccessionRegional cooperation by passing on the spirit of the founderThe facility,which is focused on communication,consists of wind,sun and water zones in order to pass down the founders DNA.In addition,using the facility for new discoveries and dialogue,we are propelling efforts for it to be a place for putting employee training and training programs into practice through regional cooperation.Co-creationDiverse values create new valuesAs a co-creation platform,over and above“open innovation functions”such as industry-academia collaboration and enterprise collaboration that handle various themes,we are promoting support activities toward the formation of“living laboratory functions”in order to enable co-creation of science technology and enterprise together with the public and local activity organizations,and for regional verifcation.Co-educationFostering the people needed for the future together with societyIn order to realize“a place where all generations can learn,think and grow together”and“a place for fostering human resources that can co-create value for the future together with society,”we will collaborate with the very children who will shoulder the future,local companies and governments,and we will promote efforts to create a vision together.Three Roles of KotokurieReview phasePlanning and design phaseConstruction phaseConcept creation(April-June 2018)A total of 150 employees from various roles and positions in the Group attended and discussed what facilities are needed to train the next generation of leaders.We adopted a workshop as our planning technique in order to gather a wide range of opinions.In the discussion,a 3D model was created as needed,and discussions were able to progress by refecting different opinions in the model.Planning(October 2018)We thoroughly analyzed the opinions and thoughts that tended to be abstract when creating our concept,and careful,detailed discussions took place again and again so as to fully understand the intentions,such as the background behind our requests and the defnition of each word.We kept making adjustments while incorporating results into the drawing and the model.Comprehensive use of BIM*In order to achieve curves and space that are organic,and which connect seamlessly,it was a crucial point to have planning,a structure,equipment and construction that constantly integrated and verifed the architectural information.Excavation survey(July 2018)From here,which was once the southern tip of the capital of Japan,we found the remains of residences from that era,and out of respect for Naras history and culture,a building shape that is refective of that was born,for example with terrain that is like the raising of the ruins.Completion(June 2021)Grand opening(October 2021)Starting point and survey(November 2015)In consideration for the aging status of our three training centers in Japan,we started studying the construction of a new training facility to develop human resources who will shoulder the future.We visited a number of other training facilities.Full-scale start(March 2018)Start of construction(July 2019)Further adjustments continued to be made after the start of construction for the building of complex and organic structures,such as the“Hall of the Sun,”which has a stairwell with an evolving shape running through four foors,and the design wall for the exterior walls,which give the impression of the raising up of ruins.Second foor EV hallMensrestroomWomensrestroomMultipurposerestroomMultipurposerestroomIntegration with employee trainingSteel frame model created in cooperation with FAB(steel frame manufacturing company)Wind Patio Ventilation Simulation*This stands for Building Information Modeling.This is a 3D model with building information added and digitized.It is a method that utilizes building information accumulated in the whole life cycle from design to construction maintenance management.Rain garden(Left)During rain(Right)Rain water infltration after rainfallAll-gender toilets with multiple exitsExterior which refects ruins from the 8th centuryBiophilic StudioAnywhere BoardOpen spaces around the Wind PatioATESSummerAquiferHeat source water storageOnly heat is used from groundwater and condensate is returned as it is to the aquiferInternational certifcationDomestic certifcationAllGenderFeature|2 Feature|2 New Co-creation and Fostering the Next GenerationDesigning the Society of the Future with KotokurieNew Co-creation and Fostering the Next GenerationDesigning the Society of the Future with KotokurieCooperation with the local community What are the goals of Kotokurie?A place for exploring“the Joys of Life”together What led to the birth of Kotokurie?Creating a place for co-creation as an opportunity for our co-creation What are the facilities and functions that can create new value?Realization of a unique environment where people can demonstrate their abilities How will it be used in the future?As a center that is open to the community,we will creatively develop ways of utilizing it“Dont do things because they will make a proft,but because they will be of service to society”Based on the business philosophy of our founder,Nobuo Ishibashi,the Daiwa House Group has been pursuing projects that are aimed at working through community and societal issues.In order to inherit the founders DNA,this project was started with the aim of providing education not only as a company,but also the education required by employees.The objective of our companys human resource development is not just for company achievements,but to produce human resources that are useful to society.For that reason,we must strive to solve community and societal issues,and develop human resources that can create,utilize,and enhance new values in partnership with customers and the people of the local community,and have fulflling lives.This facility was established in order to share this way of thinking with as many people as possible,and to develop human resources that,together with society,can co-create value for the future.Understanding of regional,social and global issuesby diverse actorsCo-educationalactivitiesUnderstanding of regional,social and global issuesby diverse actorsCo-educationalactivitiesCreating new businessvalues for theDaiwa House GroupEmployeeeducationCreating new businessvalues for theDaiwa House GroupEmployeeeducationTogetherwith variousstakeholdersCo-creationactivities Understanding the present for the future(connections and environment)(Japanese text only)Daiwa House Group Training Center on the themes of“Wind,Sun and Water”(Japanese text only)Daiwa House Group Sustainability Report 2022011 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data SectionAt Kotokurie,we are working toward 7 actions to enhance the three values of Value for Living,under which everyone can be themselves and have lively and proactive lives,Economic and Social Value,to revitalize society as a whole,regions,towns and people,and Global Environmental Value,to enable the sustainable coexistence of humans and the Earth.We are promoting the cutting-edge“provision of opportunities and environments for learning and connection”with a future mindset by integrating Daiwa House Groups employee education for the creation of new business value with activities focused on society,such as co-education activities centered around the children of local communities and co-creation activities with diverse stakeholders.7 Actions Foster human resources that can co-create value for the future Develop co-educational activities for children who will shoulder the future Develop co-creation activities to enable the co-creation of values based on the premise of regeneration and circulation Provide opportunities for employees to learn and connect with people both inside and outside the company Provide opportunities for organizational development based on D&I Promote support,evaluation and involvement in Kotokurie activities(branding)Build the foundation for supporting activitiesCo-educationOpen projects are held roughly once a month,and programs and workshops are held which are based on various themes,with a focus on Junior Kotokurie to nurture the“power to create the future”of children and“Community Kotokurie”for learning about issues,technologies,and corporate co-creation.As a platform for co-creation activities with various entities and sectors across different industries and felds,our aim is the“co-creation of value for the future”linked to the social good and social impact through“co-creation workshops”and forums on various themes.Our aim for“cross-border activities”and program participation through co-education and co-creation for employees to cross the barriers between corporations and organizations,as a place to extract the individuality and positive feelings of participants,is to create a system that produces synergy with mutual overlapping.Under Mori no Kaisho,we are supporting exploratory learning in cooperation with elementary and junior high schools,high schools and universities in Nara prefecture from neighboring areas.We have developed a regional exchange corner for the display of local traditional crafts and for businesses to introduce themselves.Co-creationIntegration with employee trainingCooperation with the local community How will it be used in the future?As a center that is open to the community,we will creatively develop ways of utilizing itCo-creation supporter General supporter Supporters by theme(study groups,projects,etc.)Supporters by region(living laboratory activities by region,community co-creation activities,etc.)Supporters by target audience and by project such as eventsAdministrativeoffcesPlanning,surveysandcoordinationPlanning andmanagement sideCoordinatorStrategymeetingsKotokuries support functionsCo-creation management team(coordinators and advisers)This consists of coordinators,advisers and accelerators who receive planning and support for the seminars of various co-creation workshops,subcommittees,working groups and projects,etc.,that are linked to the co-creation of value for the future.Understanding of regional,social and global issuesby diverse actorsCo-educationalactivitiesUnderstanding of regional,social and global issuesby diverse actorsCo-educationalactivitiesCreating new businessvalues for theDaiwa House GroupEmployeeeducationCreating new businessvalues for theDaiwa House GroupEmployeeeducationTogetherwith variousstakeholdersCo-creationactivitiesDaiwa House Group Sustainability Report 2022012 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data SectionCHAPTERImplementation ReportMain results in fiscal 2021ContentsManagementCommitment from the Executive Officer in Charge 014Long-Term Environmental Vision 017Action Plan for the Environment(Endless Green Program)020Action Plan for the Environment(Endless Green Program 2026)021Action Plan for the Environment(Endless Green Program 2021)022General(Expand environmental contribution business)023Reinforcing the foundation of environmental management 024Environmental managementSupply chain management(Environment)Eco communicationFocal theme1 Mitigating and adapting to climate change 032 Response to the Task Force on Climate-related Financial Disclosures(TCFD)0402 Harmony with the natural environment (Preservation of biodiversity)0453 Closed-loop resource sourcing and conservation of aquatic environments(Greater durability and waste reduction)0514 Prevention of chemical pollution 057 Mitigating and adapting to climate changeGHG emissions(per unit of sales)vs FY201541.4%reduction Harmony with the natural environmentRatio of S-ranked timber in procurement94.0%Closed-loop resource sourcing and conservation of aquatic environmentsConstruction waste recycling rate97.7%Prevention of chemical pollutionRelease and transfer of PRTR-listed substances(per unit of sales)vs FY201269.3%reduction Environmental managementNumber of those who acquired the Eco Test certification19,033Environment01Daiwa House Group Sustainability Report 2022013 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data SectionCommitment from the Executive Officer in ChargeTaking up the challenge of carbon neutrality for safer communitiesProviding safe and secure buildings is an important mission for Daiwa House Group,which constructs housing and other buildings of all sizes fit for diverse purposes.In this context,it is important for us to strive to protect the joys of life enjoyed by those who live in and use those.The construction industry must always work to protect the community.It is to fulfill this responsibility that we are actively working to tackle climate change.Today,natural disasters are growing in frequency and intensity on a global scale,and the idea of protecting the environment is essential to protecting the lives of each and every individual.To that end,we formulated our long-term vision for the environment,Challenge ZERO 2055,as our ultimate goal.In that vision,we have positioned mitigating and adapting to climate change as one of our key management issues,with the aim of achieving carbon neutrality in 2050.At the same time,we have set a milestone of reducing greenhouse gas(GHG)emissions throughout our value chain by 40%(compared to fiscal 2015 levels)by 2030(see figure next page).Backcasting from the long-term target,we formulated Endless Green Program 2026,a detailed plan of what we need to do now to ensure we achieve the target.In the coming paragraphs,I explain the plans five essential points for moving forward our environmental initiatives as a unified group.The first point is carbon neutrality in community development.We will work to achieve a ZEH rate of 90%,a ZEH-M rate of 50%,and a ZEB rate of 60%in fiscal 2026,with the target that,by 2030,all our buildings will be ZEH/ZEB*1 and all newly constructed buildings will,in principle,be equipped with solar roof panels.Naturally,some customers will want to avoid installing solar panels because of the initial costs.In those cases,we will offer a plan in which we will install the solar panels instead of the customer,and the customer will use the All executives,employees,and business partners to join together to achieve our decarbonization targetsSenior Executive OfficerDeputy Head of Technology HeadquartersHead of safety(housing),Head of EnvironmentHiroshi Kono Implementation Report:EnvironmentDaiwa House Group Sustainability Report 2022014 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data Sectionrenewable electricity that is generated from those panels.In this way,we will aim for carbon neutrality in community development by flexibly proposing different methods.The second point is carbon neutrality in our business operations.In addition to making all of our newly constructed buildings ZEB as a matter of principle,we will aim to achieve RE100(100%renewable energy utilization rate)in fiscal 2023,17 years ahead of our initial schedule.This is the fastest target in the industry.Our Groups training facility,the Daiwa House Group MIRAI KACHI KYOSO Center(Kotokurie),which opened in 2021,embodies our will to be carbon neutral.In addition to saving energy through the implementation of such advanced technologies as an aquifer thermal energy storage system,which uses underground water for the buildings air conditioning,it uses renewable energy drawn from solar panels and solar thermal collector panels to achieve ZEB-Ready status.And the centers operations are also powered with 100%renewable electricity.Furthermore,the center has obtained five certifications,including two international environmental certifications,LEED and SITES.We recognize that the two points introduced above are the most crucial ones of our decarbonization plan,and we are determined to achieve them.Our next challenge:How to share our goals with our suppliersThe third of our five essential points is to strive for a more-resilient supply chain,with the environment as our starting point.Previously we have worked with our suppliers to achieve collaboration in delivery,quality,and price;going forward,we must also include an environmental perspective.We will further this effort by sharing our policies on carbon neutrality,zero deforestation,and zero emissions with suppliers.Of course,working to improve environmental issues will require a review of our existing operations,and this will also place a burden on our suppliers.We understand that it is not easy to share these high targets and move forward amid different financial conditions on each side,but environmental concerns are of immediate importance.This is a rather challenging point,so we intend to lead the way by providing support through measures such as convening a carbon-free working group and proceeding with improvements gradually.The fourth point is that we aim to expand our environmental contribution businesses in order to strengthen our initiatives aimed at meeting the expectations of society and our stakeholders.Specifically,in addition to increasing the number of ZEHs and ZEBs,we will drive order growth for renewable energy power-generating facilities and push forward with next-generation community development projects,such as the Ko“Re”kara City Project,which aims to achieve communities using 100%renewable energy.We will also continue to accelerate these activities going forward.The fifth point is that we are establishing the foundations of environmental management and implementing education to improve our employees environmental literacy.Our employees drive our day-to-day business operations.As such,if they understand what it is they must do so that corporate profitability can coexist with environmental sustainability,this will change the proposals that they make to customers in the course of day-to-day business,and the effectiveness of our plans will improve even more.Migration plan for reducing GHG emissions(by scope)on the road to carbon neutralityKey actions for achieving 2030 targetsScope 3(procurement,other)Setting SBT-level GHG reduction targets for major suppliers Helping suppliers reduce GHG emissions by offering customers ideas for saving and generating energyScope 3(Use of sold buildings)All buildings to be made ZEH/ZEB All buildings to have solar panels installedScopes 1 and 2 Upgrading to energy-saving equipment in our existing facilities Achieve RE100 through renewable energy generated by us Building all new owned facilities to be ZEB-ready and equipping them all with solar panels Electric vehicles and heavy machinery*1 Annual average of 4.2%or more*2 As reducing emissions to absolute zero is impracticable,we will achieve net zero emissions by removing the commensurate amounts of GHGs whose emissions are inevitable.GHG emissions across the entire value chain63%emissionsreduction(1.5C level)*40%emissionsreductionCarbonneutrality55968575EmissionsAmount removed*2201520302050(FY)70%emissionsreduction(1.5C level)*Implementation Report:EnvironmentDaiwa House Group Sustainability Report 2022015 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data Sectionwith many employees and external stakeholders.I personally believe that this was a very meaningful project.The project was an opportunity for each employee to paint a concrete picture of their purpose,ahead of that of the company,by thinking about the kind of future that they want and how they would be involved in society in order to realize that future.Since people change their behavior when they determine their own objectives,we can expect that this will increase their motivation to tackle the challenges they face on a daily basis,which will jump start our organization as a whole.Such a willingness on the part of each employee is crucial to implementing any plan to overcome the challenges faced by the construction industry and to solve environmental issues.Going forward,we will continue to push forward emphatically toward achieving our targets,with our Group united in our enthusiasm for the future.*1 An abbreviation for Net Zero Energy House and Net Zero Energy Building,respectively,referring to a house or building whose net energy consumption is essentially zero or negative.*2 Abbreviation for Building Information Modelling,referring to a digitalized 3D model with building information added.It is a method of utilizing building information accumulated across the entire lifecycle of a building,from design to construction and management.construction,managers would frequently visit construction sites,spending some 30%of their work time travelling back and forth.Naturally,such travel entails using fuel,meaning GHGs are emitted.Establishing Smart Control Centers that enable management without the need to travel to the construction sites has resulted in improved operations and increased efficiency as well as reduced environmental impact.We currently have 12 Smart Control Centers across Japan and are also working on the industrialization of materials.We are attempting to reduce GHG emissions while also reducing workloads on construction sites by prefabricating house and building components in well-equipped factories.We have just completed a proof-of-concept demonstration of our process and now aim to roll it out gradually.In this way,we feel that improvements are even more significant when DX and GX are undertaken in tandem,an approach that has given us an even stronger push forward.Another important initiative is our plan to visualize GHG emissions by material in our BIM*2,which we use to integrate and manage construction information.This will enable us to propose to customers ideas how much GHG emissions can be reduced by according to which materials are used to build,which may drive the selection of materials with low GHG emissions.This is something that,traditionally,has been difficult to achieve.If we can pull it off,it will lead to a change in the mindset of companies that produce materials,further accelerating the transition to a carbon-free society.The number of materials input into the system is still insufficient to make this an effective measure,but we will continue to examine the efforts future viability.Giving every employee a sense of purpose to improve even moreOur efforts in 2022 and beyond look set to be even further enhanced by the strengths of each of our employees.In 2021,there was a company-wide project in which we had the opportunity to think about Our Hopes for the Future together Simultaneously resolving challenges facing the construction industry and addressing global environmental concernsAs a leading company in the construction industry,our Group has been proactively pressing forward with DX(digital transformation)to enhance the productivity of operations from the perspective of solving the serious challenges the construction sector faces,which include the aging of engineers and the shift of young people away from the industry.Going forward,we will seek synergies from combining DX and GX(green transformation),the latter of which is designed to bring about both economic growth and improvements on the environmental front.The establishment of our Smart Control Centers is an example of that.Traditionally,during housing Inside a Smart Control Center Implementation Report:EnvironmentDaiwa House Group Sustainability Report 2022016 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data SectionMitigating and adapting to climate changeWe aim for zero CO2 emissions throughout the product life cycle through uncompromising pursuit of energy saving and utilization of renewable energy in order to achieve a decarbonized society.In addition,we devise measures to avoid and minimize the negative impacts of climate change,and strive for the operation of businesses that are highly tolerant of climate change risk to realize a safe and secure society.Harmony with the natural environmentPreservation of biodiversityIn order to preserve and improve our natural capital,our Group shall prevent any net loss of biodiversity by ensuring zero deforestation through material procurement and by developing communities flled with greenery in harmony with the natural environment.Closed-loop resource sourcing and conservation of aquatic environmentsGreater durability and waste reductionWith the aim of contributing to the emergence of a society committed to recycling,our Group is pursuing the sustainable use of resources by extending the service life of houses and buildings and working toward zero emissions of waste,as well as the use of recycled materials.We also aim for sustainable utilization of water through reducing water consumption,total recycling of resources,and conservation of aquatic environments throughout our supply chain.Prevention of chemical pollutionWe shall institute appropriate management of chemical substances throughout the life cycle of houses and buildings to minimize the risk of adverse impacts on the health of people and ecosystems.Four environmental priority themesSeven Challenge ZEROPhase()()ProcurementResource extractionTransport of raw materialsMaterial productionMaterial transportOffce work/VehiclesFactories/LogisticsConstruction/RenovationDemolitionOffce buildingsSingle-family/Rental housingCondominiumsRenovationsCommercial facilities/Offce buildingsEnvironmental energyBusiness activitiesProducts and servicesChallenge ZERO for CO2 in community developmentChallenge ZERO for CO2 in business activitiesChallenge ZERO DeforestationChallenge ZERO Harm to BiodiversityChallenge ZERO Waste and ReuseChallenge ZERO Water-Associated RisksChallenge ZERO for CO2 in the supply chainLong-Term Environmental VisionLong-Term Environmental VisionThe Daiwa House Group aims to realize a sustainable society as a group that co-creates value for individuals,communities,and lifestyles and tries to make“zero”environmental impacts within our Group,globally,and through supply chains.Our Group formulated the long-term environmental vision“Challenge ZERO 2055”in fiscal 2016,focusing on 2055*,which marks the 100th anniversary of the foundation of Daiwa House Industry.We aim to realize a sustainable society and try to create“zero”environmental impacts through three stages(procurement,business activities,and products and services)with four environmental priority themes in mind(mitigating and adapting to climate change,harmony with the natural environment,closed-loop resource sourcing and conservation of aquatic environments,and prevention of chemical pollution).Among these themes,seven targets of particular importance are defined as Challenge ZERO in order to accelerate our initiatives with specific milestones for 2030.*With regard to climate change,we have set the year 2050 in light of social demands.*Prevention of chemical pollution is not defined as Challenge ZERO because it is already at the maintenance and management level.ChallengeZERO2055Daiwa House Group Sustainability Report 2022017 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data SectionThe Group upholds Challenge ZERO initiatives with a specifc year of 2055*in mind as an ultimate goal.We also defne the milestones for 2030 to increase effectiveness of the initiatives.Milestones and goals of seven Challenge ZEROChallenge ZERO for CO2 in community developmentChallenge ZERO for CO2 in business activitiesChallenge ZERO for CO2 in the supply chain(FY)(%)201520302050010080604020vs FY201570%vs FY201563hieve carbon neutralityProcurementBusiness activitiesProducts and servicesReduction target for greenhouse gas emissions from houses and buildings in useGreenhouse gas emission reduction targets in business activities(FY)(%)201520302050100806040200Achieve carbon neutralityThrough turning newly constructed buildings into net zero energy buildings and by improving energy effciency and energy-generation installation at existing buildings,as well as through supplying renewable energy,we aim to achieve carbon neutrality by 2050.We implement thorough energy-effciency measures,turn newly built facilities into ZEBs,and utilize renewable energy to achieve carbon neutrality by 2050 in all facilities and all business processes.Through collaboration with suppliers,we aim to achieve carbon neutrality in the supply chain by 2050.By 2030,we aim to reduce greenhouse gas emissions(total)from newly constructed buildings in the habitation and usage stage by 63%in comparison to FY2015.By 2030,we turn all newly constructed houses and buildings into ZEH/ZEB in principle,while also promoting the development of carbon neutral towns with 100%renewable energy by installing solar power generation systems in all buildings.We seek to complete renovation of existing buildings to turn them into ZEH/ZEB by application by 2030,while also promoting carbon neutrality through renovations to improve energy effciency or install energy-generation facilities,as well as the supply of renewable energy.By 2030,we aim to reduce greenhouse gas emissions(total)in all facilities and all business processes by 70%in comparison to FY2015.By further promoting energy saving for existing facilities and achieving ZEB for facilities to be newly constructed,we aim to double the Groupwide energy effciency(sales unit per consumed energy)by 2030 from the fscal 2015 levels.Working to expand renewable energy,we aim to attain 100%renewable energy for all the electricity used in our Group by 2023.By 2025,we share with 90%of our principal suppliers the greenhouse gas reduction targets in line with the Paris Agreement and cooperate with them in the initiatives for energy effciency and renewable energy in order for the principal suppliers to achieve the targets by 2030.Milestone for 2030Goal for 2050Long-Term Environmental Vision*The year 2050 for the item of mitigating and adapting to climate changeDaiwa House Group Sustainability Report 2022018 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data SectionMilestones and goals of seven Challenge ZEROChallenge ZERO DeforestationChallenge ZERO Harm to BiodiversityBy 2030,in all housing-and building-related businesses,we take steps to enhance the amount and quality of green space that take into consideration the protection of biodiversity,aiming to create in aggregate at least 2 million square meters of biodiversity-conducive green spaces.We will complete biodiversity assessments of all owned or managed sites and undertake ongoing conservation work at all ecologically signifcant ones*by 2030.*Factories,company-owned forest sites,hotel vicinities,commercial facilities,city parks,etc.Through reducing discarded plastics and other efforts,we aim to bring to zero the impact associated with marine plastic waste problems by 2030.Challenge ZERO Waste and ReuseBy 2030,we seek to extend the durability and increase the variability of our new buildings.Also,by promoting renovation and remodeling of existing buildings,we help create a market for trading quality housing stock at fair valuations.We aim to achieve zero waste emissions and total recycling of resources throughout supply chains at in all housing-and building-related businesses by 2030.We also promote the use of recyclable or recycled materials.Challenge ZERO Water-Associated RisksBy 2030,we aim to reduce water consumption(per unit of sales)by 45%vs fscal 2012 at all sites and properties and in all processes.By 2030,we aim to complete water risk assessments in all housing-and building-related businesses in our supply chains,and complete waster risk countermeasures at all owned locations and high-risk supplier locations.Through collaboration with suppliers,we aim to achieve zero deforestation arising from materials procurement at all segments by 2055.We aim to prevent any net loss of biodiversity by 2055 through sustainable business operation that takes into consideration the protection of biodiversity,and enhancement of the amount and quality of green space in housing,construction,and community development.We will use only recyclable or recycled materials at our housing and construction businesses by 2055.Through extending the durability of our buildings,we aim to minimize the volume of resources used and waste emissions.We also aim to achieve zero waste emissions and total recycling of resources throughout supply chains across the Group.We aim for sustainable utilization of water through reducing water consumption,total recycling of resources,and conservation of aquatic environments throughout supply chains across the Group by 2055.By 2030,we work with suppliers to eliminate from procurement at our housing and construction businesses all timber that cannot be traced to legal harvest.Milestone for 2030Goal for 2055ProcurementBusiness activitiesProducts and servicesLong-Term Environmental VisionDaiwa House Group Sustainability Report 2022019 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data SectionOverall Action Plan for the EnvironmentIn the EGP,we identify“four environmental themes(social issues),”which are of much interest to stakeholders and closely related to our business,and we work on them at three phases:procurement;business activities;and products and services.Basic policies of Endless Green Program 2026Concept and History of the Action Plan for the EnvironmentCalculating backward from the long-term environmental vision,Daiwa House Group have set 2030 as a milestone for achieving the vision.We formulate concrete targets and plans as the Endless Green Program(EGP)nearly every three-five years in accord with the period of a medium-term management plan to promote it.Action Plan for the Environment(Endless Green Program)All Group companies(domestic)All Group companies(domestic and overseas)Coexistence of environmental sustainability and corporate proftabilitySocial responsibility as a corporate citizenAll Group companies(domestic and overseas)Environmental preservationEnvironmental management13 Groupcompanies29 GroupcompaniesThree Group companiesincluding Daiwa House Industry33 Group companies1998200520082011201320152016201820212026203020552050Long-TermEnvironmentalVisionMilestoneAction Plan for the Environment 2005Achieved zero emissions at housing construction sitesEndless Green Program 2010Achieved a double score for CO2Endless Green Program 2013Created leading-edge examples of reduced CO2Endless Green Program 2015Promoted strategic environmental initiatives integrated with our business strategiesPromoting decarbonization throughout our value chain toward achieving carbon neutrality by 2050 Endless Green Program 2018Endless Green Program 2026Promoted integrated environmental management within our Group and globally based on the life cycle approachEndless Green Program 2021Promoting energy-saving,energy creation,and CO2 reduction for the achievement of SBT,EP100,and RE100Voluntary Action Plan for the EnvironmentAcquired ISO 14001 certifcationFour environmental themes(social issues)Environmental Initiatives in Three PhasesProductsand servicesBusiness activitiesProcurementEnvironmental risk managementStrengthening the foundation of environmental managementMitigating and adapting to climate changeHarmony with the natural environment(Preservation of biodiversity)Closed-loop resource sourcing/Conservation of aquatic environments(Greater durability and waste reduction)Prevention of chemical pollutionIncreasing proftability in environmental termsMinimizing environmental impacts through our business operationsMinimizing environmental risks through Group integrationCorporate proftability coexisting with environmental sustainabilitySolutions to social issuesResource extractionTransport of raw materialsMaterial productionMaterial transportOffce work/VehiclesFactories/LogisticsConstruction/RenovationDemolitionOffce buildingsSingle-family/Rental housingCondominiums RenovationsCommercial facilities/Offce buildingsEnvironmental energy Turning all buildings into ZEH/ZEB and installing solar power generation systems in all buildings in all our businesses in principle toward achieving“carbon neutrality in community development”Sharing“carbon neutrality,”“zero deforestation,”and“zero waste emissions”policies with suppliers to strengthen our supply chains with the environment as a starting point Aiming to achieve RE100 in FY2023,as well as turning all the companys newly constructed facilities into ZEBs in principle,toward achieving“carbon neutrality in business activities”Stepping up our efforts to satisfy expectations of society and stakeholders toward further improving ESG evaluation(expanding environmental contribution businesses,responding to climate change risk)Firming up the foundation of environmental management in order for us to implement faster the EGP2026(enhancing the environmental management system,developing human resources for environmental management)Daiwa House Group Sustainability Report 2022020 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data SectionChallenge ZEROMajor initiatives under EGP2026Key metricsFY2021 resultsFY2022 targetsFY2026 targetsMilestones for 2030 (long-term environmental vision)1CO2 in community development Installing solar power generation systems in all new buildings in principleGHG emissions reduction rate(vs FY2015)29.85Tc%Turning all new buildings into ZEH/ZEB in principleZEH rate/ZEH-M rate53%/5%/10%/500%,in principle/100%,in principleZEB rate380%,in principle2CO2 in business activities Turning all the companys newly constructed facilities into ZEBs and installing solar power generation systems in principleGHG emissions reduction rate(vs FY2015)20.8%Up%Replacing equipment in the companys existing facilities with the energy-efficient one and electric heavy construction equipmentEnergy efficiency(vs FY2015)Up 1.47 timesUp 1.54 timesUp 1.9 timesUp 2.0 times Achieving RE100 by using electricity generated by the company-owned renewable-energy power stationsRenewable energy utilization rate18.2000%Introducing vehicles fueled by clean energy for internal useIntroduction rate of clean energy cars0.3%10O2 in the supply chain Strengthening engagement with principal suppliers(decarbonization WG,decarbonization dialogue)Setting rate of principal suppliers SBT standard GHG reduction targets34hievement of GHG reduction targets by principal suppliers Strengthening proposals of energy-efficiency and energy-generation solutions for principal suppliersThe number of contracts for energy-efficiency and energy-generation solutions 5504Deforestation Averting timber procurement with deforestation riskRatio of C-ranked timber2.7%3%0%0%Conducting policy briefings for suppliersSetting rate of zero deforestation policy(primary suppliers)300%Promoting adoption of coniferous plywood concrete formAdoption rate of sustainable plywood concrete form200%5Harm to Biodiversity Proposing outer structures of buildings based on the Exterior Planting Guidelines and promoting acquisition of ABINC certificationEco-friendly surface area of green spaces(vs FY2021) 200,000m 1,000,000m 2,000,000m Conducting biodiversity assessments of our own sites and formulating biodiversity preservation plans for significant sitesRate of formulation of protection plans of significant sitesIdentify significant sites1000%Replacing plastic goods for distribution with plastic-free onesRate of replacement with plastic-free materials85000%6Waste and Reuse Making best use of existing buildings and extending their durability through our Livness businessNumber of assets subject to effective use3,9894,0004,500To be formulated in 2026Number of assets subject to durability extension3,2464,5004,900To be formulated in 2026 Shifting waste plastics at our factories to material recyclingRecycling rate of waste plastics material10.90%To be formulated in 2026 Reducing the use of and promoting recycling of plastic amenities used in hotelsReduction rate of items subject to the Plastic Resource Circulation Act(vs FY2021)/recycling rate/10%/3P%/50%To be formulated in 2026/100%Strengthening engagement with principal suppliers(zero waste emissions WG)Achievement of zero waste emissions targets by principal suppliers34.5Phievement of zero waste emissions targets by principal suppliers7Water-Associated Risks Thoroughly adopting water-saving devices used in housing and hotelsWater-saving device adoption rate89.90%Promoting water-saving activities in business facilitiesWater consumption reduction rate(vs FY2012,per unit of sales)46.86E%Investigating and reducing water risks by principal suppliersImplementation rate of water risk surveys600%Completing response to water risks Environmental Management Expanding opportunities and providing added values for existing businesses through seven Challenge ZEROsSales of environmental contribution businesses0.95 trillion yen1.2 trillion yen1.6 trillion yen Improving environmental literacy and awareness of employeesNumber of those who acquired the Eco Test certification19,03321,00038,000 Responding to climate change risk throughout our value chain(in supply chains,production and construction sites,facilities operated by the Company,and product development)Implementation status of measures for adopting to climate changeCompleting implementationThe Endless Green Program 2026(fiscal 2022 to 2026)was formulated by calculating backward from the milestones for 2030 in light of“seven Challenge ZERO”s.Action Plan for the Environment(Endless Green Program 2026)Daiwa House Group Sustainability Report 2022021 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data SectionIn the Endless Green Program 2021(fiscal 2019 to 2021),which expands the scope of application to all the Group companies including overseas ones,we are going to accelerate integrated environmental management within our Group and globally based on the life cycle approach to ensure that corporate profitability can coexist with environmental sustainability.In particular,we place emphasis on the carbon-free initiative,which is raised as one of the policies in our 6th Medium-Term Management Plan(fiscal 2019 to 2021).Our Group has extracted materiality(priority issues)in terms of degree of importance to our Groups business and the demands and expectations of society.The materiality was identified with reference to experts opinions and reviewed as we formulated the Action Plan for the Environment.Identification of materiality(priority issues)Key policies:Target for fiscal 2021 achieved:Target for fiscal 2021 not achieved(achieved 90%or more):Target for fiscal 2021 not achieved(achieved less than 90%)Main Targets and Results of Endless Green Program 2021Focal themesStageManagement indicatorsFY2018 results FY2021 targetsFY2021 resultsGeneral(Expand environmental contribution business)Products and services Sales of environmental contribution business1,117.2 billion yen1,400.0 billion yen1,396.9 billion yenMitigating and adapting to climate changeProcurement Setting rate of principal suppliers greenhouse gas emissions reduction targets54.7%Business activities GHG emissions(vs FY2015,per unit of sales)26.3%reduction35%reduction41.4%reductionBusiness activitiesEnergy efficiency(EP100)(vs FY2015)1.27 times1.4 times1.47 timesBusiness activities Renewable energy utilization rate(RE100)Renewable energy rate0.230.21%Products and services GHG emissions derived from use of products(vs FY2015,per area)5.1%reduction6%reduction34.9%reductionProducts and services ZEH sales rate ZEB sales rate29pcD.1%Products and services Rate of Green Building Certification obtained15.6%Harmony with the natural environmentProcurement Ratio of C-ranked timber2.1%0.0%1.1%Business activities Development of the companys facilities filled with greenery(cumulative)4910Closed-loop resource sourcingBusiness activities Construction waste emissions(per m2)/New construction19.3kg/m219kg/m220.0kg/m2Business activities Construction waste recycling rate96.6%and above97.7%Business activities Waste plastics recycling rate90.1%and above93.4%Conservation of aquatic environmentsBusiness activities Water consumption(vs FY2012,per unit of sales)28.2%reduction34%reduction46.8%reductionPrevention of chemical pollutionBusiness activities Release and transfer of PRTR(vs FY2012,per unit of sales)49.9%reduction57%reduction69.3%reductionBusiness activities VOC emission(vs FY2013,per unit of sales)20.4%reduction15%reduction36.8%reductionStrengthening the foundation of environmental managementEnvironmental education Number of those who acquired the Eco Test certification4,40215,00019,033 P145 Results and self-assessment of the Action Plan for the EnvironmentDaiwa House Industry Co.,Ltd.Environmental Department ManagerKatsuhiro KoyamaLooking back on the Endless Green Program 2021In EGP2021,we faced difficulties in promoting environmental activities amid the rapidly changing business environment caused by the COVID-19 pandemic.However,as a result of the PDCA cycle through finely tuned management,we successfully achieved most of the targets,mainly those related to climate change.This is considered the fruit of our initiatives,including those to improve the environmental literacy of employees through the acquisition of the Eco Test certification over the past three years,and to share with them the long-term environmental vision reviewed in 2020.These efforts resulted in environmental activities that were conducted autonomously at the workplace level.Meanwhile,during the period of the EGP2021 plan,the Japanese government announced the“2050 carbon neutrality”and set ambitious interim targets for 2030 as its milestones.Among those targets,household and business sectors are set as significant targets for GHG reduction,and the expansion of renewable energy is greatly expected centered on solar power generation.These are the very areas relating to the business of our Group,making us reaffirm the importance of our role and responsibility.In light of the above,under EGP2026 starting in FY2022,we will continue to accelerate our efforts with new ambitious targets covering our value chain with carbon neutrality as the most important theme.In conjunction with this,we will also focus on initiatives for a circular economy and nature positive.Action Plan for the Environment(Endless Green Program 2021)Promoting“carbon-free”in the fields of products and business activities for achieving SBT,EP100,and RE100 Promoting the development and dissemination of environmentally conscious products and services for boosting business competitiveness Promoting win-win cooperation for reducing environmental risks in supply chains Advancing strategic eco communication for improving environmental brand and ESG assessment Enhancing integrated environmental management within the Group and globally for advancing environmental managementDaiwa House Group Sustainability Report 2022022 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data Section Main approachStarting with the Environmental energy business,each company and division worked toward our fiscal 2021 target for environmental contribution business sales of 1.40 trillion,32%of Group sales.Despite the pandemic,they rose 11%from fiscal 2020 to 1.39 trillion(31.5%of sales),but fell slightly short of the target.Sales of environmental contribution business(by business)(100 mil.yen)28641,11033421OtherEnvironmentalgreeningLeasingExisting homesEnvironmentalenergyEnvironment-friendlybuildings5766624116(FY)202020212019201810,202(11,172)10,719(12,277)29641,1292291911,095(12,564)63701,4322213012,153(13,969)Single-family housing:Increasing the number of ZEHsIn fiscal 2021,we continued the promotion of ZEH homes mainly for made-to-order projects,while boosting ZEH offering for built-for-sale projects as well,covering the entire spectrum of single-family housing.We also hold ZEH seminars on a regular basis for our personnel involved in design and sales to hone their ZEH pitching skills.As a result,the share of ZEH sales rose to 63%(58%in fiscal 2020).Commercial and office buildings:Increasing the number of ZEBsWe develop and market the Ds SMART series,a package of environmentally conscious technologies for multipurpose buildings,to promote Zero Energy Buildings(ZEBs).The share of ZEBs in sales came to 44.1%(39.6%in fiscal 2020).In cooperation with the Energy Conservation Center,Japan and local governments,we regularly hold ZEB seminars to highlight their appeal to customers.We held online seminars in fiscal 2021.P038 Commercial and office buildings:Promoting understanding,take-up,and growth of ZEBs through seminars and ZEB estimated cost sheetEnvironmental energy:Promoting renewable energyThe Daiwa House Group operates 354 renewable energy power plants generating 561MW*1(as of end-March 2022).In fiscal 2021,we started operating 40 new plants,including large-scale solar power plants in Saga and Nara prefectures.We also implemented numerous projects in an onsite PPA model*2,whereby solar power generation systems are set up on the roofs of retail stores to supply tenants with renewable energy.*1 Inhouse consumption is excluded*2 A business model in which we set up renewable energy power generation facilities at free of charge on the roofs of facilities owned by clients.The generated energy is supplied directly to their facilities.Environmental greening business:Promoting Park-PFI business to improve city parks qualityDaiwa Lease Co.,Ltd.,a Group company,is engaged in Park-PFI business to improve the quality of city parks,in addition to the greening of rooftops and walls.In fiscal 2021,12 sites for a total of some 5,450,000 m2 newly came under the management of Daiwa Lease.One such example is the Kuragaike Park Mirai Project(Aichi Prefecture)headed by Daiwa Lease.The park,reopened after renovation,won the 2021 Asian Townscape Award for its extensive and beautiful nature with a field developed for outdoor experience.An image of ZEH compliant built-for-sale housesPolicy and ConceptWe aim to strike a balance between environmental stewardship and earnings by developing and promoting environmentally conscious products and services.The Daiwa House Group sees the environment as a business opportunity.We made“environmental contribution”(environmentally friendly)business sales a KPI under our approach of contributing to the environment through business and making environmental stewardship a value added aspect of what we do.Each company and division defines and sets sales targets for eco-friendly products,and does its best to achieve them using its own initiatives.P151 Environmental Data Expansion of sales of environmental contribution businesses Definition of environmental contribution business*For Endless Green Program 2021BusinessDefinitionEnvironment-friendly buildingsSingle-family housingZEH-compatible productsRental housingBuildings with a BEI of 0.85 or lessCondominiumDs SMART CondominiumsCommercial and office buildings Buildings with a BEI of 0.8 or lessEnvironmental energy businessRenewable energy,energy saving,electricity retailing businessExisting homes businessHome renovationSolar power generation systems,storage batteries,energy-efficiency renovationSale of existing housesResale of existing houses with renovationLeasing businessLeasing of energy-efficient equipment,leasing of electric vehiclesEnvironmental greening businessOverall environmental greening business,Park-Private Finance Initiative(Park-PFI)businessOther businessSales of environmentally conscious productsDREAM Solar Natsumidai III(Nara Prefecture)Kuragaike Park Mirai Project(Aichi Prefecture)GeneralExpand environmental contribution businessDaiwa House Group Sustainability Report 2022023 ContentsMessage from the PresidentFeature Our Hopes for the FutureFeature KotokurieEnvironmentSocietyCorporate GovernanceThird-Party Assessment/Data Sectionof Directors deliberated a basic plan for Endless Green Program 2026,a new Action Plan for the Environment,and decided the levels of environmental goals for fiscal 2026.Promoting Environmental ManagementEnvironmental management organizationThe Group Environmental Promotion Committee oversees our activities involving the environment.The Daiwa House Industry President and Executive Officer in charge of the Environment serve as Environment Director and Chairman,respectively.At biannual meetings,the committee examines risks and opportunities and decides which initiatives we should undertake.An autonomous management system chaired by divisional heads was set up for each of head office functional divisions.Under the system,achievement of environmental targets are reviewed quarterly and a range of other activities are conducted aimed at improvement.Twice yearly we share decisions of the Group Environmental Promotion Committee at an environmental management conference for Executive Officers in charge of the Environment at Group companies.Important matt
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SustainabilityDataBookLast update:June 2023Sustainability Data Book1 1Promoting SustainabilityEnvironmentSocialGovernanceContent IndexOverviewSustainability Data Book OverviewOverview of Toyota Motor CorporationGRI2-241 Editorial Policy2 Update History3 ContentsSustainability Data Book OverviewUpdated in June 2023The Sustainability Data Book explains Toyotas sustainability approach and policies for ESG initiatives along with practical cases and numerical data,as a medium for specialists and those who are particularly interested in sustainability issues.Since fi scal 2021,the Sustainability Data Book,which had conventionally been released annually,has been updated whenever necessary so that the information can be disclosed in a timely manner.Period CoveredFocusing mainly on the results of initiatives implemented during the previous fi scal year,the contents are updated as necessary throughout the year.For update history,please see the following page.Scope of ReportThis Book introduces the initiatives and activities of Toyota Motor Corporation and its consolidated subsidiaries etc.in Japan and overseas.The scope of data covered is described in each section.Toyota References in This DocumentToyota Motor Corporation:Information on or initiatives of Toyota Motor CorporationToyota:Information on or initiatives of Toyota Motor Corporation and its consolidated subsidiariesReference Guidelines Task Force on Climate-related Financial Disclosures(TCFD)Sustainability Accounting Standards Board(Reference code SASBTR-AU-is indicated at each applicable part.)P.119 SASB Content Index GRI Standards(Reference code GRI-is indicated at each applicable part.)P.120 GRI Content Index ISO 26000 GuidelinesThird Party AssuranceThird Party Assurance denotes data assured by an Independent PractitionerDisclaimerThis report includes not only past and current facts pertaining to Toyota Motor Corporation and other companies within the scope of coverage of the report,but also plans and projections at the time of its publication as well as forecasts based on management policies and strategies.These forecasts are assumptions or determinations based on information available at the time they are stated,and the actual results of future business activities and events may differ from the forecasts due to changes in various conditions.In cases where information provided in prior reports is corrected or restated and in cases where material changes occur,the details thereof will be indicated in this report.The readers understanding about this point would be appreciated.Editorial PolicyEditorial PolicyUpdate HistoryContentsIntegrated ReportSecurities Reports/SEC FilingsFinancial Results/Operating ResultsSustainability Data BookCorporate Governance ReportNon-fnancialFinancialIR section of Toyotas websiteSustainability section of Toyotas websiteToyota Times websiteSustainability Data Book2 2Promoting SustainabilityEnvironmentSocialGovernanceContent IndexOverviewSustainability Data Book OverviewOverview of Toyota Motor CorporationEditorial PolicyUpdate HistoryContentsJune 2023 Promoting Sustainability Environment Climate-related Financial Disclosures Based on TCFD Recommendations Social Governance SASB/GRI Content IndexDecember 2022 Promoting Sustainability Public PolicyOctober 2022 All pages updated(Review of FY2021 initiatives and layout)August 2022 Environment Climate-related Financial Disclosures Based on TCFD Recommendations SASB/GRI Content IndexJanuary 2022 Environment Strategy and Management,Environmental DataDecember 2021 Promoting Sustainability Fundamental Approach,Public policy Safety Information Security and Privacy (The content transferred from“Governance”to“Society”and expanded disclosure of more information about our contribution to the society.)Business Partners Dealers Diversity and Inclusion Social Recognition Intellectual Property(Newly added)Risk Management Fundamental ApproachNovember 2021 EnvironmentOctober 2021 Quality and Customer Social Contribution Activities Respect for Human Rights Business Partners Supply Chain Diversity and Inclusion Social Data Risk Management Business Continuity Management(BCM)Compliance Bribery/Corruption Prevention MeasuresJuly 2021 Overview of Toyota Motor Corporation Promoting Sustainability Organizational Structure Quality and Customer Quality Respect for Human Rights Health and Safety Diversity and Inclusion Human Resources Social Data Corporate Governance Risk Management Initiatives for Information Security ComplianceUpdate HistorySustainability Data Book3 3Promoting SustainabilityEnvironmentSocialGovernanceContent IndexOverviewSustainability Data Book OverviewOverview of Toyota Motor CorporationEditorial PolicyUpdate HistoryContentsOverviewSustainability Data Book Overview Editorial Policy 1 Update History 2 Contents 3Overview of Toyota Motor Corporation Company Profile 5Promoting Sustainability Fundamental Approach 6 Organizational Structure 6 Materiality(key issues)7 Toyotas SDGs 7 Stakeholder Engagement 8 Public Policy 9EnvironmentPolicy and Environmental Management Fundamental Approach 11 Environmental Management 11 Initiatives with Suppliers 13 Initiatives with Dealers and Distributors 15 Stakeholder Engagement 16Climate Change Fundamental Approach 17 Life Cycle 18 Product 22 Production 25Resource Recycling Fundamental Approach 28 Activities to Achieve Resource Recycling 28Harmony with Nature Fundamental Approach 31 Biodiversity 31 Water Environment 35Climate-related Financial Disclosures Based on TCFD Recommendations Governance 37 Strategy 38 Risk Management 43 Metrics and Targets 44Environmental Data Greenhouse Gases(GHG)47 Energy 48 Water 49 Recycling 50 Waste 51 VOC,NOx,SOx 51 Conversion Factors 51FY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)52Third-party Verification 55SocialRespect for Human Rights Fundamental Approach 58 Organizational Structure 58 Policy Development and Dissemination 58 Human Rights Due Diligence 59 Initiatives for Migrant Labor(Forced Labor)60 Initiatives for Wage 61 Initiatives for Appropriate Working Hour 61 Management and Flexible Work Styles Initiatives for Anti-harassment 62 Initiatives for Inclusion of Diverse Culture 62 Initiatives for Child Labor 62 Initiatives for Freedom of Association 63 Initiatives for Precarious Work 63 Responsible Mineral Procurement 64 Education Related to Human Rights 64Diversity,Equity,and Inclusion(DE&I)Fundamental Approach 65 Organizational Structure 65 Womens Activity 66 Childcare/Nursing Care Support 69 Inclusion of Persons with Disabilities 70 Inclusion of LGBTQ Employees 71 Initiatives Related to Race and Nationality 71 Employment for Over 60s 72Value Chain Collaboration Fundamental Approach 73 Initiative with Suppliers 73 Initiative with Dealers 75Vehicle Safety Fundamental Approach 76 Integrated Safety Management Concept 76 Active Safety 77 Passive Safety 78 Emergency Response 78 Automated Driving Technology 79 Initiatives to Improve Traffic Safety Awareness 79Quality and Service Fundamental Approach 80 Organizational Structure 81 Product Safety Initiatives 81 Quality Risk Management 81 Fostering Quality-oriented Awareness and 82 Culture Coping with Quality Problems 82 After-sales Service 83 Customer Feedback System 84ContentsSustainability Data Book4 4Promoting SustainabilityEnvironmentSocialGovernanceContent IndexOverviewSustainability Data Book OverviewOverview of Toyota Motor CorporationEditorial PolicyUpdate HistoryContentsInformation Security Fundamental Approach 85 Organizational Structure 85 Information Security Measures 86 Preparing for Information Leaks and External 86 Attacks Security for Automobiles 87Privacy Fundamental Approach 88 Organizational Structure 88 Respect for Privacy and Protection of Personal 89 InformationIntellectual Property Fundamental Approach 90 Organizational Structure 90 Intellectual Property Activities 90Human Resource Development Fundamental Approach 91 Recruitment 92 Education and Career Development 92 Evaluation of and Feedback to Employees 94 Employee Engagement Survey 94 Initiative to Promote Psychological Well-being 94Health and Safety Fundamental Approach 96 Organizational Structure 97 Health and Safety Education 97 Initiative for Health 98 Initiative for Safety 100Social Contribution Fundamental Approach 102 Organizational Structure 102 Social Contribution Activities 102Social Data Employees 103 Supply Chain 104 Quality 104 Social Contribution Activities 104GovernanceCorporate Governance Fundamental Approach 106 Corporate Governance Structure 106 Board of Directors 108 Audit&Supervisory Board 109 Executive Compensation 109 Internal Control 109Risk Management Fundamental Approach 110 Organizational Structure 110 Risk Management System 111 Business Continuity Management(BCM)111Compliance Fundamental Approach 114 Compliance Education 114 Bribery/Corruption Prevention Measures 115 Initiatives for Taxation 115 Speak-up 115 Checks to Enhance Compliance 116Governance Data Governance 117SASB/GRI Content IndexSASB Content Index 119GRI Content Index 120Sustainability Data Book5 5GRI2-1,75 Company ProfileOverview of Toyota Motor CorporationUpdated in June 2023No.of plants and manufacturing companies(as of the end of March,2023)No.of R&D centers(as of the end of March,2023)Europe63Other70Japan168North America135Asia264Excluding JapanNo.ofEmployees 375,235(as of the end ofMarch,2023)Asia66,176Europe23,730Japan203,212Other23,117North America59,000No.of vehiclesproduced8,694,032(FY 2023)Asia1,858,509Japan3,788,593Other507,186North America1,768,437Europe771,307No.ofvehicles sold 8,821,872(FY 2023)Asia1,750,773Japan2,069,133Other1,565,337Europe1,029,955North America2,406,674No.of plants and manufacturing companies(as of the end of March,2023)No.of R&D centers(as of the end of March,2023)Europe63Other70Japan168North America135Asia264Excluding JapanFinancial DataFor our major fi nancial data,please see our offi cial website.Financial DataSASBTR-AU-000.ASASBTR-AU-000.BPromoting SustainabilityEnvironmentSocialGovernanceContent IndexOverviewSustainability Data Book OverviewOverview of Toyota Motor CorporationCompany NameToyota Motor CorporationPresident and Representative DirectorKoji SatoCompany Address Head Offi ce Tokyo Head Offi ce Nagoya Offi ce1 Toyota-cho,Toyota City,Aichi Prefecture,Japan 1-4-18 Koraku,Bunkyo-ku,Tokyo,Japan4-7-1 Meieki,Nakamura-ku,Nagoya City,Aichi Prefecture,JapanFoundedAugust 28,1937Capital635.4 billion yen(as of the end of March,2023)Main Business Activities Automotive business Financial services(vehicle loans and leasing,etc.)Other operations(information technology,etc.)No.of Employees(consolidated)375,235(as of the end of March,2023)No.of Consolidated Subsidiaries569(as of the end of March,2023)No.of Associates and Joint Ventures Accounted for by the Equity Method168(as of the end of March,2023)Vision&PhilosophyFor details of our Vision&Philosophy,please see our offi cial website.Vision&PhilosophyCompany ProfileGlobal/Regional DataCompany Profi leSustainability Data Book6 6Organizational Structure Aim Addressing issues of greater importance and urgency on a priority basis while grasping,for example,changes in the external environment and social needs.Initiative Continuously promoting and improving our sustainability activities with oversight and decision-making provided by the Board of Directors.We will work in close liaison with relevant departments to carry out environmental,social,and governance-related initiatives(as indicated on the right).Toyota has appointed a Chief Sustainability Officer(CSO)to lead the engagement with external stakeholders and dissemination of information regarding sustainability activities.Sustainability MeetingSustainability SubcommitteeChairpersonExecutive PresidentDeputy Chief Offi cer,General Administration&Human Resources Group(Senior management positions responsible for sustainability)MembersMembers include 3 external offi cers,the Chief Sustainability Offi cer and the Chief Human Resources Offi cerOffi cers and General Managers from related divisions will participate in keeping with agenda topics such as the environment,fi nancial affairs,and human resourcesFrequencyTwice a year,in principleFour times a year,in principleFunction To help increase corporate value by refl ecting opinions and external advice about key sustainability-related issues in management practices to achieve sustainable growth To implement operations related to the promotion of sustainability To consult with the Sustainability Meeting about key issues and submit reports to the Board of DirectorsFundamental Approach Aim Contributing to the creation of a prosperous society through our business activities based on the Guiding Principles at Toyota while continuing to uphold the spirit of the Toyoda Principles,which we have inherited since our foundation.Aiming to be the“best company in town”that is both loved and trusted by local people to achieve the mission of“Producing Happiness for All”under the Toyota Philosophy compiled in 2020.Contributing to the sustainable development of our society and planet by promoting sustainability under the Toyota Philosophy.Toyota PhilosophyGuiding Principles at Toyota Initiative Advancing initiatives based on our Sustainability Fundamental Policy and individual policies and guidelines.Sustainability-related policies Sustainability Fundamental PolicyEnvironmentEarth CharterPolicy on Harmony with NatureInformationInformation Security PolicyToyota Privacy NoticeHuman rightsHuman Rights PolicySupply chainBasic Purchasing PoliciesPolicies and Approaches to Responsible Mineral SourcingGreen Purchasing GuidelinesSupplier Sustainability GuidelinesPolicy for Sustainable Natural Rubber ProcurementHealth and safetyDeclaration of Health CommitmentBasic Philosophy for Safety and HealthSocial contributionBasic Principles and Policies of Social Contribution ActivitiesComplianceToyota Code of ConductAnti-Bribery GuidelinesTaxationTax PolicyGRI2-1214,17,24,28,29,3-1,26 Fundamental Approach6 Organizational Structure7 Materiality(key issues)7 Toyotas SDGs8 Stakeholder Engagement9 Public PolicyPromoting SustainabilityUpdated in June 2023Management Oversightand decision-makingConsultationOperation Board of DirectorsSustainabilityMeetingSustainabilitySubcommitteeReportsConsultationOpinionsand adviceOperational ExecutionOverviewEnvironmentSocialGovernanceContent IndexPromoting SustainabilityOverviewEnvironmentSocialGovernanceContent IndexPromoting SustainabilityFundamental ApproachOrganizational StructureMateriality(key issues)Toyotas SDGsStakeholder Engagement Public PolicySustainability Data Book7 7Materiality(key issues)Aim Identifying key issues to sustainably enhance our own corporate value while contributing to society in view of the ever-changing social trends,external voices,and increasingly diversifi ed,complicated issues.Initiative Promoting initiatives to realize the six key issues(materiality).Listing issuesMajor references International guidelines,norms(GRI,SASB,SDGs,etc.)Priority items of evaluation organizations Trends inside and outside Japan Risk and opportunity perspectiveEvaluation from internal and external viewpointsExternal Priority items for investors or evaluation organizations Opinions obtained through communication with stakeholdersInternal Factors we have cultivated so far(founding spirit)Anticipated environmental changes(transformation into a mobility company)Evaluation from social viewpoints Value that Toyota can offer society Contribution to solving social issues(SDGs)Discussion Discussion at Sustainability Meeting attended by Outside Directors and Audit and Supervisory Board MembersEnhancing corporate valueContributing to society(SDGs)Respect for people,empower various human resourcesMake safe,reasonably priced,high-quality carsMaintain a stable business baseBuild a future mobility societyAddress climate change and promote the use of new energy sourcesMake the value chain resilient and sustainableProcess of identificationBasis for identificationSix materiality issuesTransformation into a mobility companyFactors that we should change or reinforceBusiness(fnancial):Adapt to CASE*Non-fnancial:Commit to ESGFounding spirit Factors that we should continue to maintainPrinciple:Five Main Principles of ToyodaStrengths:Capabilities and technologies of monozukuri(manufacturing),Toyota Production System,cost reduction,quality,many partners,etc.*CASE:Connected,Autonomous/Automated,Shared,and ElectricToyotas SDGs Aim Producing happiness for all individuals in the era of diversification,with a“YOU perspective”that sees the other side of the story.Initiative Promoting initiatives based on the desire of working for the benefi t of others,which has been passed on since our founding.Examples Initiatives for the global environmentInitiatives for a happier societyInitiatives for working peopleSDGs InitiativesOverviewEnvironmentSocialGovernanceContent IndexPromoting SustainabilityOverviewEnvironmentSocialGovernanceContent IndexPromoting SustainabilityFundamental ApproachOrganizational StructureMateriality(key issues)Toyotas SDGsStakeholder Engagement Public PolicySustainability Data Book8 8 Aim Engaging in stakeholder-oriented management to contribute to sustainable development and striving to maintain and develop sound relationships with stakeholders through open and fair communication.Initiative Holding dialogues with major stakeholders through Toyotas relevant divisions and offi ces around the world.Disseminating information about Toyotas initiatives through dialogues with external experts to examine,for example,the direction of our sustainability-related initiatives,and through speech delivery at external lecture meetings.Stakeholder EngagementCommunication methods and frequencyIncorporation into corporate activitiesCustomersToyota Customer Assistance Center(as needed)Responding to customer opinions by telephone and email formsImproving customer satisfaction activitiesOffcial website,product websites(as needed)Disseminating company information and business details,providing FAQs,etc.Information sharing through social media(as needed)Disseminating company information and business detailsDisseminating information in response to customer demandCommunication methods and frequencyIncorporation into corporate activitiesEmployeesJoint labor-management roundtable conferences/Labor-management meetings(several times a year)Discussions/negotiations,opinion exchanges and mutual understanding regarding labor-management issuesStrengthening labor-management relationshipsEmployee satisfaction survey(once or twice every two years)Surveying employees satisfaction regarding workplace culture and company lifeCommunication methods and frequencyIncorporation into corporate activitiesBusiness PartnersDealersVarious meetings,seminars,and events (as needed)Sharing corporate policiesBuilding closer,mutually benefcial relationships based on mutual trustSharing purchasing policies and strengthening mutual study and partnershipsCommunication methods and frequencyIncorporation into corporate activitiesShareholdersShareholders Meeting(once a year)Unconsolidated and consolidated fnancial statements,audit and supervisory board reports,and deliberation and decisions on resolutionsFinancial results announcement(four times a year)Press and telephone conferences to explain Toyotas fnancial status and initiativesIndividual meetings(as needed)Explanation and discussion on fnancial status,local projects,technologies,products,etc.with institutional and private investorsImproving management quality through constructive dialogueInvestor information website,etc.(as needed)Providing information on fnancial status,business details,etc.Communication methods and frequencyIncorporation into corporate activitiesLocal Communities/Global SocietyRoundtable conferences with local residents (several times a year)Explanation and discussions with local representatives on Toyotas initiatives at each plantInviting local communities to Toyotas events and participating in local events(as needed)Social gatherings with local residentsParticipating in joint projects between public and private sectors(as needed)Cooperating in progressive initiatives such as verifcation testsParticipating in economic and industry organizations (as needed)Participating in collaborative activities with NGOs and NPOs(as needed)Social contribution activities in each region around the worldRecognizing social needs in individual regionsToyotaBased on our“Customer First”policy,we take measures to incorporate the comments and opinions of customers into better products and services.Timely and appropriate disclosure of operation and fnancial results to shareholders and investors,and constructive dialogues toward sustained growth and enhancement of corporate value.Bilateral communications to build teamwork and foster a sense of unity based on a labor-management relationship founded on mutual trust and responsibility.Close communication to achieve a mutually benefcial relationship based on mutual trust.SuppliersSupplier conventions,various meetings with supplier associations,seminars,and events (as needed)Dialogue with various stakeholders to build good relationships with local communities and to solve global social and environmental issues.Improving workplace culture and evaluating and planning various labor-management and personnel policiesPromoting mutual understanding and forming stable local communitiesImproving advanced technologies and recognizing/resolving social issuesIntroducing policies to improve the vitality of the nation/industriesMajor initiative we participate inWorld Business Council for Sustainable Development(WBCSD)P.16 Stakeholder Engagement(Environment)P.59 Engagement with stakeholders(Human Right)OverviewEnvironmentSocialGovernanceContent IndexPromoting SustainabilityOverviewEnvironmentSocialGovernanceContent IndexPromoting SustainabilityFundamental ApproachOrganizational StructureMateriality(key issues)Toyotas SDGsStakeholder Engagement Public PolicySustainability Data Book9 9Public Policy Aim Carrying out Toyotas mission“Producing Happiness for All”and aiming to be the No.1 company in the community,loved and relied on by local residents.For example,in terms of climate change,it is very important to expand the use of electrified vehicles worldwide.In the process of achieving this objective,governments and the authorities concerned have a crucial role in developing energy policies and infrastructure.Working and learning together with stakeholders,Toyota will maximize its contribution to local communities and the development of public policies in consideration of policies,social needs,technological advancement,and various customer needs while always bearing transparency and compliance in mind.Initiative Building good relationships with governments and their administrative agencies,regulators,political parties,NGO,local communities,customers,and other stakeholders.Participating in economic organizations and industry associations around the world and many officers and employees are involved in and contribute to formulating policy recommendations.Disclosing Toyotas Views on Climate Public PoliciesBeing more transparent about our activities,building and increasing trust with the public,and further strengthening cooperation between all stakeholders by summarizing our views on key climate-related policies and providing an overview of the industry associations to which we belong.Toyotas Views on Climate Public Policies 2022OverviewEnvironmentSocialGovernanceContent IndexPromoting SustainabilityOverviewEnvironmentSocialGovernanceContent IndexPromoting SustainabilityFundamental ApproachOrganizational StructureMateriality(key issues)Toyotas SDGsStakeholder Engagement Public PolicySustainability Data Book101011 Policy and Environmental Management17 Climate Change28 Resource Recycling31 Harmony with Nature37 Climate-related Financial Disclosures Based on TCFD Recommendations47 Environmental Data52 FY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)55 Third-party Verif cationEnvironmentOverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationSustainability Data Book1111SDGs Contri-butionsGRI2-25,2-27,3-3,305-6,306-2,308-1,308-211 Fundamental Approach11 Environmental Management13 Initiatives with Suppliers15 Initiatives with Dealers and Distributors16 Stakeholder EngagementPolicy and Environmental ManagementUpdated in October 2022Environmental Management Aim To achieve sustainable development together with society,establish the environmental management system with consolidated subsidiaries to ensure through risk management and compliance and maximize environmental performance.Always improve the management system and quickly respond to changes in environmental issues including worsening climate change.Initiative Establish an Environmental Management SystemEstablish strategies,policies and approaches in each fi eld under the lead of the three committees of the Environmental Product Design Assessment Committee,the Production Environment Committee,and the Resource Recycling Committee,under the supervision of the Board of Directors.Share our target with the following companies and proceed with environmental managementConsolidated subsidiaries on a fi nancial accounting basis(493 companies).Unconsolidated vehicle production companies(9 companies).Set environmental affairs offi ces in the six regions(North America,Europe,China,Asia,South America,and South Africa)and proceed with global environmental efforts with consideration given to local conditions.Global Environmental Management FrameworkToyota Motor CorporationRegion Strategy/targetImplementationRegional 2025 Target ShareCooperateE.g.,various globalcommitteesToyota Environmental Challenge 2050Global 2025 TargetEnvironmental Product Design Assessment Committee,Production Environment Committee,Resource Recycling Committee,etc.E.g.,Regional Environmental CommitteeNorth America,Europe,China,Asia,South America,and South AfricaOverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationFundamental Approach Aim Reduce the environmental footprint and contribute to the sustainable development of society and the world throughout all areas of our business activities.Build close,cooperative relationships with a wide spectrum of individuals and organizations involved in environmental preservation.Initiative Toyota Earth CharterConducting continuous environmental initiatives since the 1960s.Established the Toyota Earth Charter in 1992(revised in 2000).Formulated our long-term initiatives for the global environment by 2050 as the Toyota Environmental Challenge 2050,in 2015.*Subsequently advancing various initiatives centered on this.*2015:The 21st session of the Conference of the Parties to the United Nations Framework Convention on Climate Change(COP21)was held this year.Vision&PhilosophyToyota Earth CharterP.45 Toyota Environmental Challenge 2050Fundamental ApproachEnvironmental ManagementInitiatives with SuppliersInitiatives with Dealers and DistributorsStakeholder EngagementSustainability Data Book1212Major Targets and Progress(excluding the initiatives to address climate change,recycle resources,and ensure harmony with nature)2025 Target2021 InitiativesChemical substances Implement thorough management by carefully considering legal trends in each country and region Steadily introduced vehicles that satisfy the latest legal requirements and substance regulations Continued to evaluate and improve chemical substance management structures by auditing and investigating suppliers processes in various regions on a global basisAir quality Product:Steadily introduce low-emission vehicles and boost further improvement by introducing and increasing ZEVs*Production:Continue volatile organic compound(VOC)emission reduction activities and maintain industry-leading level*Zero Emission Vehicles:Vehicles that have the potential not to emit any CO2 or nitrogen oxide(NOx)during driving,such as battery electric vehicles(BEVs)and fuel cell electric vehicles(FCEVs)Product:In response to stricter emission regulations in various countries and regions,introduced vehicles that satisfy those regulations Production:Promoted a switch to water-based paint in the bumper painting processTook measures to completely eliminate the use of ozone-depleting substances(ODS)No significant releases occurred P.51 Environmental Data TWaste Promote activities to thoroughly reduce waste globally and aim to minimize the volume of resource input and waste,with the environment and economy in balance Promoted waste reduction and efficient use of resources through measures aimed at the sources of waste P.51 Environmental Data R Production:Maintain the volume of waste per vehicle produced at each plant below 2018 levels Production:Took measures aimed at the sources of waste,developed and deployed production technologies,and implemented daily reduction activities Hazardous waste management:Ensured that end-of-life vehicle treatment was in compliance with the laws and regulations of each country at every plant Did not import or export any hazardous waste listed in Annexes I,II,III or VII of the Basel ConventionLogistics packaging Implement initiatives to reduce and recycle plastics used in packaging and recycle them Promoted kaizen with a focus on increasing use of returnable containers and reducing the weight of packaging P.51 Environmental Data SRisk management Thoroughly comply with environmental laws and regulations and strengthen proactive prevention activities for environmental risks in each country and region Two non-compliance issues(one concerning abnormal water quality and one concerning exhaust gas)in the production area Completed measures for the cases One complaint(concerning noise)in a non-production area Completed measures for the caseOverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationISO*1 14001/ISO 50001Certification as of 2021ISO 14001:All plants of Toyota Motor Corporation and consolidated subsidiaries(122 companies)ISO 50001:8 of the above companies*1 International Organization for StandardizationRisk Management and ComplianceTake the following actions at the operating bases of Toyota Motor Corporation and consolidated subsidiaries:Implement preventive measuresUndertake risk management in accordance with criteria that meet or exceed laws and regulationsHave systems in place,just in case,to respond to a violation or a complaint in a timely manner,and if such a situation occurs,work to prevent reoccurrence through identification of root causesConduct mutual learning for plants by sharing practices among Toyota Group companies Maximize PerformanceProceed with initiatives to address climate change,resource recycling,and harmony with nature based on the Toyota Environmental Challenge 2050.P.13 Initiatives with Suppliers P.17 Climate Change P.28 Resource Recycling P.31 Harmony with NatureFor chemical substances,air quality,and other compliance-related initiatives,and also for waste and logistics packaging,proceed with initiatives based on the 2025 target.Outside Evaluation for Our Commitment to Climate Change and Water SecurityCDP*2 Corporate ResearchSelected for inclusion in the A List,which is the highest evaluation for climate change and water security by the CDP(in December 2021).*2 An international NGO that encourages and assesses corporate disclosures on environmental initiative based on calls from global institutional investors with high levels of interest in environmental issuesFundamental ApproachEnvironmental ManagementInitiatives with SuppliersInitiatives with Dealers and DistributorsStakeholder EngagementSustainability Data Book1313OverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party Verification Aim Work together with suppliers toward reducing the environmental footprint throughout the product life cycle based on the concepts of mutual trust and mutual benefit,thereby contributing to accomplishing a sustainable society.Initiative Green Purchasing*PolicyImplementation of the Green Purchasing GuidelinesAsk all tier 1 suppliers,including new suppliers,to implement basic initiatives based on the TOYOTA Green Purchasing Guidelines(the“guidelines”),and also deploy and enlighten the guidelines to all tier 2 and subsequent suppliers so that the guidelines will take root.Ask through the guidelines that initiatives be taken toward reducing the environmental footprint at each companys production plants and throughout the product life cycle,and that related legal compliance be ensured.*Prioritizing the purchase of parts,materials,equipment and services with a low environmental footprint when manufacturing productsOverseas Practices related to the Green Purchasing PolicyAsk the purchasing base in each region to implement the guidelines in line with local conditions and make continuous efforts.CasesToyota Motor North America(North America)Updated the existing guidelines and issued the Green Supplier Requirements in April 2021,and reinforced environmental management by including compliance with requirements(CO2 emission reductions)in the terms and conditions.Green Purchasing Guidelines Supplier Sustainability GuidelinesCompliance with the GuidelinesReferred to the possibility that if we do not observe improvement after the occurrence of a suppliers violation of the guidelines,such as non-compliance with laws and regulations,the transactional relationship may be subject to review.Already informed tier 1 suppliers of these points by including them in the Supplier Sustainability Guidelines(revised in 2021).Supplier Sustainability GuidelinesMonitoringSelf-assessment SheetUse a self-assessment sheet to confirm the status of initiatives by each company and share the results.FY2022 ResultsReceived responses from 227 main companies in Japan and provided feedback on the scoring results.CDP Supply Chain ProgramIntroduced the CDP Supply Chain Program in 2015 to support continuous environmental initiatives conducted with suppliers,enabling us to determine the suppliers risks,opportunities and initiatives on climate change and water security.Create opportunities for environmental communication by annually holding briefing sessions and response guidance where we share information on social trends and Toyotas environmental policies,and provide feedback on response results,with the number of participating suppliers increasing every year.2021 ResultsReceived responses from suppliers accounting for approximately 83 percent of the total purchasing value by Toyota Motor Corporation.Approximately 54 percent of these suppliers reduced their CO2 intensity(per unit of net revenue)compared to the previous year.(Affected by the sluggish production due to the COVID-19 pandemic,the fluctuation rate was greater than that of the previous year.)Main Results of the CDP Supply Chain Program(2021)Climate ChangeWater SecurityNumber of responding companies133118Response rate9895Percentage responding“Yes”Governance(board-level oversight,corporate policy)9576Identifying risks8968Integrating issues into business strategy9475Setting quantitative targets9470Initiatives with SuppliersFundamental ApproachEnvironmental ManagementInitiatives with SuppliersInitiatives with Dealers and DistributorsStakeholder EngagementSustainability Data Book1414OverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationFundamental ApproachEnvironmental ManagementInitiatives with SuppliersInitiatives with Dealers and DistributorsStakeholder EngagementInitiatives toward Reducing CO2 EmissionsTowards carbon neutrality throughout the product life cycle,started to investigate concrete CO2 reduction measures by presenting CO2 reduction guidelines tailored to each supplier.2025 TargetWork with major suppliers in each country and region toward reducing CO2 emissions.Regions in scope:Regional head offices with a purchasing function(in Japan,North America,Europe,China,Asia,South America and South Africa)2021 ResultsSteadily accomplished the target set in each country or region.Risk ManagementEnsuring Compliance with Regulation Concerning REACH*1 and Other Global Regulations on Chemical SubstancesComply with laws and regulations on chemical substances in various countries and regions,such as the Chemical Substances Control Law*2 in Japan,and the Directive on ELV*3 and Regulation concerning REACH of the European Union(EU).Improve structures and undertake operational management in cooperation with all parties involved in conveying chemical substance information.Continue industry collaboration and global deployment and comprehensive implementation of action standards tailored to the cultures and industrial structures of each region.FY2022 Results Revised regulations based on the Global Automotive Declarable Substance List(GADSL)to reflect the latest laws and regulations in each country(setting content rate targets for each substance in consideration of regulatory requirements,etc.).Steadily introduced vehicles that satisfy these regulations,and also began to work in cooperation with European affiliates to address data registration regulations(WFD*4/SCIP*5)newly launched in Europe.Conducted supplier awareness activities(361 companies)using self-assessment check lists to ensure thorough management of chemical substances,and continued to expand activities to other regions.*1 Regulation concerning the Registration,Evaluation,Authorisation and Restriction of Chemicals:A regulation for managing chemical substances to protect human health and the environment*2 Act on the Regulation of Manufacture and Evaluation of Chemical Substances:An act to prevent environmental pollution caused by chemical substances that pose a risk of impairing human health and interfere with the inhabitation and growth of flora and fauna*3 Directive on End-of Life Vehicles:A directive designed to reduce the load of end-of-life vehicles on the environment*4 Waste Framework Directive:A waste framework directive in Europe*5 Database of information on Substances of Concern in articles,as such or in complex objects Products Environmental Due Diligence at the Time of PurchasingPolicies and Approaches to Responsible Mineral SourcingEstablished the Policies and Approaches to Responsible Mineral Sourcing in accordance with the OECD guidance to take into account the impact on local societies by the procurement of minerals that may cause social problems regarding human rights and environment.Due Diligence PolicyIdentify and assess risks in the supply chain together with suppliers,and if any risk is identified,implement appropriate measures that will lead to the mitigation of the risk.*6 OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-affected and High-risk Areas Policies and Approaches to Responsible Mineral Sourcing P.64 Responsible Cobalt Procurement P.30 Efforts toward Compliance with the New EU Battery Regulation P.31 Challenge of Establishing a Future Society in Harmony with NatureSupplier HotlineSet up a supplier hotline in accordance with the Toyota Code of Conduct and Toyota Basic Purchasing Policies,which call on suppliers to comply with laws and regulations and to take fair and just actions,in order to allow suppliers to report any action violating environmental laws,regulations,or business manners that may have occurred in the supply chain,while assuring anonymity.Sustainability Data Book1515OverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationInitiatives through Supplier BriefingsHold periodic supplier briefings where we share information on environmental trends and Toyotas environmental policies.Organized an explanatory session in FY2022 for promoting activities to reduce CO2 emissions from items,and shared the goal of realizing carbon neutrality by 2050,thereby accelerating our efforts toward the accomplishment.P.73 Supplier Awareness Activities Recognition of Suppliers Environmental InitiativesAnnually present the Environmental Activity Awards,established in 2017 to commend suppliers that conduct exceptional environmental initiatives.Fundamental ApproachEnvironmental ManagementInitiatives with SuppliersInitiatives with Dealers and DistributorsStakeholder EngagementInitiatives with Dealers and Distributors Aim Work together with dealers and distributers toward reducing the environmental footprint,help them earn trust from their local communities and serve as the“Best-in-Town”,and contribute to the communities and customers.Initiative Implement the Environmental Global Policy in the Sales and Service AreaContinuing to implement a strategy to reduce the environmental footprint in store operations since 2016.RegionsDealers in 54 major countries and regions,such as Japan,North America,Europe,Asia,Latin America,Oceania,and Africa(approximately 13,000 stores,accounting for 92 percent of the total in terms of the number of vehicles sold).ActionsEstablish a structure of environmental management systemMinimize environmental risksImprove environmental performance Activities to make environment better with customers and societyInitiatives to Reduce CO2 Emissions2025 Target100 percent introduction rate for CO2 reduction items at newly constructed and remodeled dealers.2021 ResultsAchieved the target in 41 countries and regions,and proceeding with initiatives toward achieving the target in other countries and regions.Awareness-raising ActivitiesTraining for Purchasing Group PersonnelProvide group training for new employees regarding sustainability including the environment.Organize periodic study groups regarding carbon neutrality for staff who communicate directly with suppliers.Training Sessions with SuppliersA variety of practical opportunities established by Toyota and its suppliers for joint training on environmental issues.Initiatives by Kyohokai*Established research groups that consider environmental topics in 2019.Organized working groups for four themes in 2021,and actively exchanged information and held discussions for mutual learning by,for example,inviting speakers from leading companies and holding on-site review meetings.Issued a final report to the entire Kyohokai in March 2022.*Voluntary organization consisting of more than 200 suppliers delivering automotive components,bodies,etc.to Toyota Motor CorporationStudy group with an invited expertSustainability Data Book1616OverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party Verification Aim Establish positive relationships with governments and their administrative agencies,regulators,political parties,non-profit organizations,local communities,customers,dealers,suppliers,and employees.Contribute and commit to public policy by participating in activities by industry and economic associations,and other initiatives.Initiative U.S.and EuropeU.S.:Participate in the Suppliers Partnership for the Environment*1 and promote environmental initiatives where suppliers,governments,NGOs and other stakeholders collaborate.Europe:Address key sustainability issues in the supply chain as a member company of CSR Europes*2 Drive Sustainability,*3 an automobile industry partnership program.Participate in the WBCSD*4 and apply what we learn through participation in a traffic flow improvement verification program in Thailand,and other projects,to our efforts to contribute to the realization of a sustainable society.*1 A U.S.-based public-private partnership program for automobile manufacturers and suppliers to promote sustainability*2 A European NPO that operates a European business network to promote corporate sustainability*3 A European partnership NPO that promotes sustainability in the automobile industry*4 World Business Council for Sustainable Development:An NGO that conducts advocacy and verification projects to realize a sustainable society with the participation of major corporations worldwide Suppliers Partnership for the Environment Drive Sustainability World Business Council for Sustainable DevelopmentJapanEngage in public relations and present recommendations by ourselves or through industry and economic associations regarding climate public policies,such as those related to the Paris Agreement,the accomplishment of carbon neutrality,and the stable supply of low-cost renewable energy.Representative Affiliation:Japan Automobile Manufacturers Association,Inc.(JAMA)Japan Business Federation(KEIDANREN)Cases JAMAReduce pollution,waste,or the use of resources.Comply with the End-of-Life Vehicle Recycling Law:Collection,recycling and appropriate treatment of CFC/HFC,airbags,and shredder residue(ASR).Proceed with the 3R efforts(reduction,reuse and recycling):Reduce weight and make even better use of raw materials at the time of the design of automobiles,and control the generation of designated byproducts or recycle such items at the manufacturing phase.Reduce in-car emissions of volatile organic compounds(VOCs).Prohibit the use of the four heavy metals(lead,mercury,hexavalent chromium,and cadmium)/public policy on considerable reduction.Public PolicyStakeholder EngagementFundamental ApproachEnvironmental ManagementInitiatives with SuppliersInitiatives with Dealers and DistributorsStakeholder EngagementOverseas InitiativesToyota Argentina S.A.(Argentina)Ensured that all dealers in Argentina were ISO 14001 certified.Launched the original environmental program“Eco Dealer Program”in 2018 with the involvement of all dealers.Gave certification to dealers in three pharases according to their status of environmental management framework,achievement levels of CO2 reductions,etc.Held a monthly meeting to share best practices,for example,for saving energy and introducing renewable energy.Reduced CO2 emissions in FY2022 by 15 percent compared to 2018 levels at the dealers in Argentina as a result of the above initiatives.Sustainability Data Book1717 Aim Through contributing to achieving carbon neutrality,aim to establish a sustainable society in harmony with nature.Initiative As an initiative to tackle climate change under the Toyota Environmental Challenge 2050,formulated“Life Cycle Zero CO2 Emissions Challenges,”“New Vehicle Zero CO2 Emissions Challenges,”and“Plant Zero CO2Emissions Challenges,”and started actions in 2015.Fundamental ApproachSDGs Contri-butionsGRI201-2,302-4,302-5,305-3,305-517 Fundamental Approach18 Life Cycle22 Product25 ProductionClimate ChangeUpdated in October 2022EquipmentmanufacturersVehiclemanufacturingLogisticsDrivingRecyclingMaterialsand partsmanufacturingPARTPartsmanufacturersMaterialsmanufacturersOthercompaniesand industriesLogisticscompaniesEnergycompaniesRecyclingcompaniesDealers anddistributorsEnergycompaniesMATERIALrenewable energyWell to Wheelrenewable energy*CO2 emissions during driving as well as CO2 emissions during the production stage of fuel and electricity(CO2 emissions vary depending on the power supply confi guration and hydrogen production method,in the case of battery electric vehicles and fuel cell electric vehicles)The bz4X,a new battery EV(BEV,)launched:with high power consumption effi ciency and practically suffi cient cruising range ensured.Aimed at a worlds highest level of battery capacity maintenance rate to develop a BEV that can be used for a long time with peace of mind.Toyota is committed to reducing CO2 emissions in each stage of the vehicle life cycleOverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationFundamental ApproachLife CycleProductProductionSustainability Data Book1818 Aim Achieve carbon neutrality by completely eliminate CO2 emissions not only during driving but throughout the entire vehicle life cycle including materials/parts manufacturing,vehicle manufacturing,logistics,energy production,disposal and recycling.Initiative Offer optimal products to minimize CO2 emissions throughout the vehicle life cycle by taking into consideration the energy situations and composition ratios of power generation sources of each country/region.Accelerate measures for the development of technologies that contribute to CO2 emissions reduction and create eco-friendly designs as we pursue“ever-better cars”.Step up efforts to reduce CO2 emissions throughout the entire vehicle life cycle while engaging in even closer communication with various stakeholders in each stage of the value chain,including suppliers and dealers.Zero CO2 Emissions Throughout the Entire Vehicle Life Cycle in the Future2013Life cycle CO2 emissions2025Reduce by 18%or more2021Reduce by 13%Life CycleLife Cycle Zero CO2 Emissions Challenge2025 Target2021 InitiativesLife cycle CO2 emissions Reduce CO2 emissions*by 18 percent or more throughout the entire vehicle life cycle compared to 2013 levels*Per vehicle Reduced CO2 emissions*by 13 percent throughout the entire vehicle life cycle compared to 2013 levels In 2021,four new models were assessed,and 45 of the total 61(74 percent coverage)models available for sale in 2021 in Japan was assessed by Eco Vehicle Assessment System(Eco-VAS).Logistics Japan:Reduce CO2 emissions by 7 percent by improving transport efficiency compared to 2018 levels(average of 1 percent reduction per year)Japan Other regions:Reduce CO2 emissions by ocean-going vessels(Switch two car carriers to liquid natural gas(LNG)powered pure car carriers)Ongoing kaizen activitiesLoading efficiency improvementJoint transportModal shifts*Switching from cargo transport by car to means of transportation with less environmental impact,such as railway and ships CO2 emissions in Japan:266,000 tons(down 8 percent compared to 2018 levels)Introduced an LNG-powered vessel(total 3 vessels)to transport completed vehicles to North AmericaSuppliers Promote CO2 emissions reduction activities among major suppliers Started and promoted communication with suppliers in each region on climate change measures P.13 Suppliers(Environmental Management)Dealers and distributors Newly constructed and remodeled dealers:achieve 100 percent introduction rate for CO2 emissions reduction items Promoted initiatives to achieve the target in 54 major countries and regions,including Japan,North America,Europe,Asia,Latin America,Oceania and Africa(which covers 92 percent of the total vehicle sales)Achieved the target in 41 countries and regions,and promoted initiatives to achieve the target in other countries P.15 Dealers(Environmental Management)OverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationFundamental ApproachLife CycleProductProductionSustainability Data Book1919Promoting Environmental Management in the Vehicle Life CycleHas been working to reduce CO2 emissions by adopting LCA*1 methods with the aim of a clean car manufacturing throughout the vehicle life cycle.Promoting the environmental management by using the Eco Vehicle Assessment System(Eco-VAS),which was introduced in 2005,that sets environmental targets during the vehicle development stage under the guidance of the chief engineer and takes steady measures to achieve those targets.Achieved life cycle CO2 emission levels in all subject models equivalent to or lower than those of reference vehicles(previous models or vehicles of the same class).Example Reduced CO2 emissions of the NX350h by 16 percent compared to the previous model*1 Life Cycle Assessment:A comprehensive assessment technique to quantify a vehicles impact on the environment(including global warming,acidification and resource depletion)in each stage from resource extraction to disposal and recycling Toyota has acquired a certification based on the ISO 14040/14044 from TV Rheinland,a third-party certification organization.Eco-VAS Activity Cases:LCA Results of CO2 Reduction in the Vehicle Life Cycle for NX350hPrevious modelMaterialsmanufacturing Parts manufacturingand vehicle assemblyDrivingDisposal and recyclingMaintenanceNew modelCO2 index16%reduction0.00.20.40.60.81.0OverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationFundamental ApproachLife CycleProductProductionConsideration in Each Stage of the Vehicle Life CycleToyota has been working,in cooperation with its stakeholders,to achieve carbon neutrality by 2050 by employing the Life Cycle Assessment(LCA)methods to measure CO2 emissions.Carbon neutrality in LCA means to achieve carbon neutrality for not only greenhouse gas(GHG)emissions during driving but all CO2 generated throughout the entire vehicle life cycle including materials,parts and vehicle manufacturing,logistics,energy production,disposal and recycling.Each Stage of the Vehicle Life CycleDisposal/recyclingEnergyRenewable energy power generationThermal power generationProductsmanufac-turingVehiclemanufac-turingWell to WheelMaterialsTank to Wheelvehicle drivingFuelmanufacturingWell to TankCO2 emissions during driving are considered in two stages.Well to Tank(WtT):From fuel extraction/production to a tank,or from power generation to filling a batteryTank to Wheel(TtW):From start of an engine or motor to driving wheelsWhile gasoline vehicles emit CO2 during fuel production(WtT)and driving(TtW),battery electric vehicles(BEVs)do not emit CO2 during driving(TtW)but if fossil fuel is used,CO2 is generated during production of electricity(WtT)and production of batteries.To reduce CO2 emissions of BEVs,conversion to renewable energy is crucial.But the progress in conversion varies among countries and regions,making it difficult to achieve complete conversion.It is therefore not easy to achieve carbon neutrality only with BEVs.So,reduction of CO2 emissions from the existing powertrains,such as gasoline vehicles and hybrid vehicles,many of which are present in market,should also be promoted by introducing low-carbon synthetic fuels,such as biofuel and e-fuel.P.23 Aiming at Carbon Neutrality through Product Development(Products)Sustainability Data Book2020Cases of Initiatives in Energy Production and UsageCO2-free hydrogen production and usage for Woven City and beyondOn March 23,2022,ENEOS and Toyota announced to jointly explore CO2-free hydrogen production and usage at Woven City,the prototype city of the future that Toyota has started to develop in Susono City,Shizuoka Prefecture,Japan.The two companies have decided to commence construction and operation of a hydrogen refueling station to produce and supply CO2-free hydrogen to Woven City and Fuel Cell Electric Vehicles(FCEVs).They are considering connecting the Community Energy Management System(CEMS*)of Woven City with the hydrogen EMS to optimize hydrogen production.*Community Energy Management System CO2-free hydrogen production and usage for Woven City and beyondDeveloping a hydrogen-based new city of the futureOn June 4,2021,Fukushima Prefecture and Toyota announced that they have commenced discussions with various partners over developing a city for a new future that makes use of hydrogen and technologies produced in Fukushima Prefecture.Creating first an implementation model for hydrogen-based deliveries at supermarkets and convenience stores,which play a role both as essential urban infrastructure and as evacuation areas in times of disaster,before embarking on a challenge to apply the model to cities nationwide.Making use of hydrogen produced at Fukushima Hydrogen Energy Research Field(FH2R).Introducing several fuel cell(FC)trucks for deliveries.Optimizing operational management and hydrogen refilling schedules through the use of connected technologies,and carrying out energy management that caters to the prevailing local conditions.Building a hydrogen-based city of the futureOverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationFundamental ApproachLife CycleProductProductionConsidering from Energy Production StageConsideration to energy policiesIn working toward achieving carbon neutrality,Toyota considers that various elements affect energy policies of individual countries/regions as described below:Individual countries/regions are promoting various initiatives appropriate for their energy situations,which vary among countries/regions depending on their degree of development of social infrastructure and industry and the presence of resources.Meanwhile,recent tight power supply and soaring energy prices are affecting energy policies of countries.Consideration to characteristics of each power generation methodIn working toward achieving carbon neutrality,Toyota considers distinctive characteristics of each power generation method,including some examples below:Renewable power generationNo CO2 emissions during power generation.With costs reduced and policy support provided,increasingly introduced.Although there are some factors that are making stable supply difficult,such as differences in the amount of power generated depending on the weather,solutions such as reinforcement of power systems and combined use of stationary batteries are being considered.Backup with other power generation methods is an issue.Thermal power generationBeing used in many countries and regions as a stable power source.To reduce CO2 emissions,co-firing of hydrogen or ammonia is being considered.Combined application of CCS(CO2 capture and storage),a process of separating and recovering CO2 in exhaust gas from plants or power stations,is expected,though there are challenges in the selection of proper locations,cost reduction and the development of laws.Sustainability Data Book2121Case 2:Making use of low-carbon technology(reducing CO2 emissions intensity)For land transportCommenced use of 25-meter tandem trailers to improve transport effi ciency and as a solution to the shortage of drivers.(From March 2022:between Tahara and Hino,from June 2022:between Mikawa and Kyushu)Considering gradually expanding the application while advancing negotiations concerning the development of the operation routes.Taking on new initiatives for the practical use of new technologies,including hydrogen fuel cell electric trucks.25-meter tandem trailerFor marine transportIntroduced LNG-powered pure car carriers*2 to transport completed vehicles from Japan to North America.Added one vessel in 2021(total three vessels).Further expansion is being discussed with shipping companies.*2 CO2 emissions per transport unit are reduced by 25 percent to 40 percent compared to earlier diesel ships.Case 1:Improving transport efficiency(reducing workload)Joint logistics across suppliers through in-house logistics arrangementsFor logistics of production parts in Japan,based on the concept of retrieval system,a principle of Toyota Production System(TPS),gradually changing the conventional delivery system,which is arranged by suppliers,to the retrieval system,which is arranged by Toyota.By managing logistics from the perspective of the overall optimization,improving loading effi ciency by combining the load of all suppliers and helps improve transport effi ciency at supplier sites,thereby contributing to reduction of CO2 emissions.Gradually increasing the regions and suppliers covered by the new system,from Kyushu to Tohoku,and to Tokai.Relay pointRelay pointPantPantPantSupplierSupplierSupplierSupplierSupplierLong lead timeLow load capacityHigh load capacityFrequent deliveryStopping by multiple relay pointsRelay pointPantPantPantSupplierSupplierSupplierSupplierSupplierDirect milk run(no relay points)Milk run*1across suppliersConcentration/reorganization of relay pointsAfter kaizen(pickup system)Before kaizen(delivery system)Loading of a truck imageAfter kaizen:Milk runBefore kaizen:transport by one supplierLow load capacityHigh load capacityCompany ACompany ACompany B Company C*1 A delivery system in which one truck makes an effi cient circular route to pick up and deliver loads from/to multiple suppliersInitiatives in LogisticsTo achieve carbon neutrality throughout the entire vehicle life cycle,working to improve transport effi ciency(reduce workload)and make use of low-carbon technologies(reduce CO2 emissions intensity)in transport of production parts,completed vehicles,and supply parts covered by in-house logistics arrangements.2021 ResultsCO2 emissions in logistics in Japan:Down 8 percent from 2018CO2 emissions in logistics overseas:CO2 reduction activities tailored to local characteristics are being promotedOverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationFundamental ApproachLife CycleProductProductionSustainability Data Book2222 Aim Toward achieving the carbon neutrality,providing optimal products according to the situation of each country/region.Providing products that inspire customers to think,“this is easy to use”and“I want to drive this”based on a sustainable and practical approach.Initiative Based on the idea that eco-friendly vehicles contribute to the environment only when they come into widespread use,enhance the lineups of electrifi ed vehicles*1 and fl ex-fuel vehicles(FFV*2)and promote their spread.Strive to reduce average CO2 emissions per vehicle during driving by 90 percent compared to 2010 levels by 2050.*1 Hybrid electric vehicles(HEVs),plug-in hybrid vehicles(PHEVs),battery EVs(BEVs)and fuel cell vehicles(FCEVs)*2 Vehicles that run on fuel mixed with plant-derived bioethanolProductNew Vehicle Zero CO2 Emissions Challenge SASBTR-AU-410a.3.2025 Target2021 InitiativesAverage CO2 emissions from new vehicles Reduce global*3 average CO2 emissions(TtW*4 g/km)from new vehicles by 30 percent or more compared to 2010 levels Reduced global*3 average CO2 emissions from new vehicles by 24 percent compared to 2010 levels by improving environmental performance and expanding vehicle lineupsThird-party Verifi cation2021 dataSales of electrifi ed vehicles Make cumulative sales of 30 million electrifi ed vehicles or more Achieved cumulative global sales of 20.3 million electrifi ed vehiclesThird-party Verifi cation2021 data P.48 Environmental Data FPromoting widespread use of electrifi ed vehicles 2021 ResultsCumulative sales:20.3 million units(as of March 31,2022)Cumulative CO2 emissions reduction effect from the widespread use of electrifi ed vehicles:162 million tonsCumulative CO2 Emissions Reduction Effects from Electrified Vehicles0510152025050100AnnualCumulative10020000.511.5232.505101520200720021997201220172022(Year)(million t-CO2)(million t-CO2)(million units)(million units)Cumulative salesAnnual sales(Cumulative)162 million t-CO2(Cumulative)20.3 millionAnnualCumulativeCumulative CO2 emissions reduction effectAnnual CO2 emissions reduction effectP.48 Environmental Data FAverage CO2 Emissions from New Vehicles:Global*32010020406080100IndexAverage CO2 emissions from new vehicles20212025 Reduce by 30%or moreReduced by 24%*3 Average fuel effi ciency values in countries and regions below(excluding vehicles in the cargo category under fuel effi ciency regulations,and trucks and buses)Japan,U.S.,Europe,China,Canada,Brazil,Saudi Arabia,India,Australia,Taiwan,Thailand and Indonesia Consolidated subsidiaries are not included.*4 Tank to Wheel:CO2 emissions during driving(CO2 emissions during the production stage of the fuel and electricity are not included;TtW emissions are zero in the case of battery electric vehicles and fuel cell electric vehicles)Third-party Verifi cation2021 dataThird-party Verifi cation2021 dataSASBTR-AU-410a.2OverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationFundamental ApproachLife CycleProductProductionSustainability Data Book2323Aiming at Carbon Neutrality through Product DevelopmentDiverse solutions for diverse situationsA wide range of vehicles,from passenger cars to commercial vehicles and from cars for peoples daily lives to luxury cars,are used in diverse situations,including not only urban areas but also countries and regions with underdeveloped infrastructure,especially in a severe environment,such as deserts and coal mines.Toyota has a variety of powertrain lineups of electrified vehicles,vehicles that convert electricity into power to move,such as HEVs,PHEVs,BEVs and FCEVs.In diversified markets of different countries and regions,there is no one-size-fits-all solution.Toyota therefore endeavors to propose various solutions and prepare as many options as possible for our customers.BEV strategiesExpand the options for achieving carbon neutrality by offering a full lineup of BEVs.Announced in December 2021 the plan to roll out 30 BEV models by 2030,globally offering a full lineup of BEVs in the passenger and commercial segments.Released the bZ4X,developed based on a dedicated platform for battery EVs,on May 12,2022.Media Briefing on Battery EV StrategiesDevelopment and supply of batteriesWhile promoting a full lineup of electrified vehicles,we have also been developing a full lineup of batteries.In line with different types of electrified vehicles,continuously evolving different types of batteries by taking advantage of their respective characteristics.Commercialized the bipolar nickel-metal hydride battery as an onboard battery for driving for the first time in the world.Used in the new Aqua announced in July 2021.Output density:doubled compared to the batteries used in the previous generation of the Aqua.The benefits of bipolar nickel-metal hydride batteriesImproved accelerator responsiveness and an exciting sensation of speed when the accelerator pedal is pressed.Being more compact,less space is required to be equipped.More batteries can be installed in the same space (enabling drivers to enjoy driving on battery power alone for a longer time).Media Briefing on Batteries and Carbon NeutralityPhoto by Noriaki MitsuhashiMedia Briefing on Battery EV StrategiesOverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationFundamental ApproachLife CycleProductProductionSustainability Data Book2424Hydrogen engine technology developmentHydrogen-engine vehicles directly burn hydrogen as fuel in a modified conventional gasoline engine setup.Using 100-percent pure hydrogen,they emit nearly no CO2 except for the combustion of minute amounts of engine oil during driving.Promoting agile development on the frontline of motorsports.The hydrogen-powered Corolla participated in the Fuji Super TEC 24 Hours Race held from May 21,2021 for the first time.The GR86,which uses carbon neutral fuel,participated in the Super Taikyu Series 2022 as an attempt to increase options of fuels using internal combustion engines.Since the first race,more and more supporters have come together with the same goal to achieve carbon neutrality.Companies and municipalities that produce,transport,and use hydrogen and carbon-neutral fuel in the Series have increased from the initial eight(as of May 22,2021)to 24(as of June 3,2022).The GR86 which uses carbon neutral fuel Challenging hydrogen engine technology development through motorsportsPlant-derived ethanol as automobile fuelEthanol produced from sugarcane or corn,which has been increasingly used for the purpose of mainly reducing oil consumption in Brazil and the U.S.,is attracting much attention as an option to achieve carbon neutrality.Plant-based bioethanol emits CO2 when it is burned.But since plants absorb CO2 to grow,it will not increase the overall amount of CO2 in the air.For gasoline vehicles in general,gasoline mixed with a maximum of around 10%ethanol can be used.In countries where ethanol is inexpensive,such as Brazil,100-percent pure ethanol fuel is sold,and in such areas,flexible-fuel vehicles(FFVs),for which high-concentration ethanol can be used,are being distributed.Toward achieving the carbon neutrality,Toyota provides vehicles that cater to different local conditions for customers.Bioethanol produced from plantsBioethanolMixed with gasolineOver 10VICE*vehiclesHEVPHEVAround 10%SugarcaneSugar beet,etc.Starchy materialsRiceWheatCornPotatoSweet potato,etc.ProductionSugar materials*Internal combustion engine vehicles Establish“Research Association of Biomass Innovation for Next Generation Automobile Fuels”Expanding use of fuel cells from passenger cars to heavy-duty vehiclesA fuel cell generates electricity through a reaction between hydrogen as a fuel and oxygen in the air.Similar to BEVs,FCEVs do not emit CO2 on a TtW basis.But the amount of CO2 emissions during fuel production(WtT)varies depending on the production method of hydrogen.The amount of CO2 emissions from production of hydrogen varies depending on the production method.There are types of hydrogen with low environmental impact,including hydrogen produced from natural gas by capturing or storing CO2 emitted in production processes(blue hydrogen)and hydrogen produced through electrolysis of water using renewable energy(green hydrogen).Use of hydrogen with few CO2 emissions enables FCEVs to achieve substantial CO2 reduction equivalent to that achieved by BEVs using renewable energy.Heavy-duty trucks are required to satisfy strict conditions,such as adequate cruising range and load capacity,as well as the ability to refuel quickly.They also account for around 70 percent of CO2 emissions from commercial vehicles in Japan.Therefore,it is highly meaningful to make them zero-emission.Application of a fuel cell system based on the FCEV MIRAI for passenger cars to heavy-duty vehicles is being considered.OverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationFundamental ApproachLife CycleProductProductionSustainability Data Book2525 Aim Achieve carbon neutrality at all global plants by 2035.Initiative Promote the energy reduction initiatives such as daily kaizen and the introduction of innovative technologies,as well as the introduction of renewable energy and utilization of hydrogen,at all plants of Toyota and consolidated subsidiaries.Daily kaizen and the introduction of innovative technologies:While the number of parts with much CO2 emissions during manufacturing is increasing due to the popularization of electrified vehicles,optimizing production equipment and improving energy reduction programs to reduce the amount of energy used per vehicle by an annual rate of 1 percent or more.Introduction of renewable energy and utilization of hydrogen:Working hand in hand widely with stakeholders both inside and outside the company to build the necessary social infrastructure to support the widespread use of these energy sources.ProductionCO2 Emissions at Global Plants 202520212013Reduce by 30%Reduce by 21%P.47 Environmental Data APlant Zero CO2 Emissions Challenge2025 Target2021 InitiativesPlant CO2 emissions Reduce CO2 emissions by implementing innovative technologies and daily kaizen and introducing renewable energy Reduce CO2 emissions from global plants by 30 percent compared to 2013 levels Introduced innovative technologies including a new type of paint atomizer(airless paint atomizer)that uses static electricity and promoted energy-saving through daily kaizen Reduced CO2 emissions by 21 percent compared to 2013 levelsRenewable electricity Achieve a 25 percent introduction rate for renewable electricity Achieved a 13 percent introduction rate for renewable electricityMaintained 100 percent renewable electricity introduction rate at all plants in EuropeInstalled solar panels at the affi liate in Thailand(3.8 MW)Hydrogen Promote proactive technological development to utilize hydrogen Continuously conduct various verifi cation tests to support the utilization of hydrogen Stationary fuel cell(FC)generator diverting on-board FC,use of hydrogen burner for sealer drying furnaces in the battery assembly process,production of water electrolysis-based hydrogen by solar power generation,use of FC forklifts*All plants of Toyota Motor Corporation and consolidated subsidiaries,and all Toyota vehicle production plants of unconsolidated subsidiaries(100%coverage)Challenging carbon neutrality at plants by 2035Baseline CO2 emissionsCO2 emissions2050CO22035Zero CO2 emissionsPlants will challenge early achievement of carbon neutralityReduction through daily kaizen and innovative technologiesReduction through utilization of renewable energy/hydrogen(including use of credits)(Compared to 2013 levels)OverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationFundamental ApproachLife CycleProductProductionSustainability Data Book2626Daily Kaizen and the Introduction of Innovative TechnologiesReducing CO2 emissions in production activitiesPlant manufacturing divisions worked with production engineering divisions and facility administration divisions to conduct energy diagnoses at production sites,propose improvements and implement measures.Continued energy-saving activities(internal ESCO*activities)and sharing of best practices internally.Expanded the introduction of innovative technologies with a focus on painting processes and promoted energy-saving by adopting steamless and airless processes and shifting to LED lighting.2021 ResultsGlobal CO2 emissions:Down 21 percent compared to 2013 levelsConducted study sessions with Toyota Group companies and suppliers to share know-how on energy-saving measures so that information can be refl ected in kaizen implemented by those companies.Also observed other industries to continuously discover new ideas for kaizen.*Energy reduction Support&CooperationP.46 Environmental Data AConcept of internal ESCO activities(Trinity of energy-saving improvements)Cut waste in energythat does not create added valueReduce costs and CO2 emissions付加価値生削減原価 CO2低減Kaizen implementMaintain operationsManufacturingsiteQuality sharing of best practicesEquipmentdevelopmentEnergy surveyKaizen proposalInfrastructureTrinity of energy-saving improvementsManufacturing-infrastructure collaboration in energy-saving activitiesEliminating steam in painting process:Steam is associated with a large amount of loss of air and less than half of its energy can be used effectively.So,all-out efforts were made to replace the equipment to the one that do not use steam and to reconstruct power sources taking into account the overall optimization and reuse of exhaust heat.A series of activities,including the one described below,were recognized and awarded the Minister of Economy,Trade and Industry Prize of the 2021 Energy Conservation Grand Prize by the Energy Conservation Center,Japan.Case:Oil-water separation system at ordinary temperature for antirust coating in production process(Takaoka Plant)To reduce energy consumption for heating water at 80C,which is necessary for oil-water separation of cleansing water,introduced a centrifuge that separates oil and water using the difference in their specifi c gravity to realize oil-water separation without heating.2021 ResultsCO2 emissions reduction effect:360 tonsFeatures of the applied systemOil content:1200 ppmOil content:2000 to 4000 ppmCentrifugeMain degreasing tankCondensation tankFurther condensing oil using the oil separation tankOverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationFundamental ApproachLife CycleProductProductionSustainability Data Book2727Introduction of Renewable Energy and Utilization of HydrogenExpanding the introduction of renewable electricityPromoting the introduction of renewable energy,taking into consideration the characteristics of each region.Actively introducing renewable energy power generation facilities at Toyota plant sites.Tahara Plant:Installed wind power generators(22 MW,operation to begin in 2023)Affi liate in Thailand Siam Toyota Manufacturing Co.,Ltd.(STM):Installed solar panels(10 MW)All plants in Europe:Maintained 100 percent renewable electricity introduction rate2020 resultsRenewable electricity introduction rate(global):13%Solar panels introduced at STMExpanding utilization of hydrogen with great promise as a means of suppressing supply and demand variation in energy and for energy storage and transportCollaboration with stakeholdersParticipating in initiatives to create mechanisms for the use of hydrogen energy throughout society,such as the Hydrogen Utilization Study Group in Chubu*(Japan),contributing to the realization of a decarbonized society.*Established in 2020 by local municipalities and business groups with the aim of creating a large-scale demand for hydrogen and building a supply chain for stable hydrogen utilization in the Chubu regionCase:Utilization of hydrogen at plants(Motomachi Plant)Conducting verification testing on FC forklifts and FC power generation(Honsha Plant).Replacing natural gas burners for the sealer drying furnace of battery cases with hydrogen burners.Conducting verifi cation testing of co-fi ring of natural gas/pure hydrogen fi ring to contribute to wide-spread use of hydrogen.Co-firing/pure hydrogen firing switchable burner for sealer drying furnacesDrying furnace main bodyCirculatory air releaseInside the combustion chamberNatural gas/hydrogen co-fringNaturalgas burnerPure hydrogen fringHydrogengas burnerMixingNatural gasHydrogenSwitchableCirculatory air supplyWind power generator under construction at Tahara PlantOverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationFundamental ApproachLife CycleProductProductionSustainability Data Book2828Challenge of Establishing a Recycling-based Society and SystemsPromote Global Deployment of End-of-life Vehicle Treatment and Resource Recycling Technologies and Systems Developed in Japan Aim Aiming to realize a recycling-based society by addressing such issues as the depletion of natural resources and increasing waste due to population growth and the accelerating pace of resource consumption,throughout the entire vehicle life cycle.Initiative Placing particular importance on the two projects below in the Challenge of Establishing a Recycling-based Society and Systems.Toyota Global 100 Dismantlers Project:To establish social systems for appropriate treatment and recycling of end-of-life vehicles with reduced environmental impact.Toyota Global Car-to-Car Recycle Project:A resource recycling initiative throughout the entire vehicle life cycle.Toward zero wasteNew vehiclesDealer/repair shopEnd-of-life vehiclesIn-house recyclingProduction plantDismantlerDevelopment siteRecycler plantRemanufactured partsBumpers replaced during repairAutomobile shredder residue(ASR)Resource inputResource inputResource inputNew materialsRecycledmaterialsSales&ServiceProductionDevelopment&DesignDisposalSupplierIn-process recyclingAir bag collection and recyclingWaste oil and fuidCFC/HFCcollectionReuse as energyASR recycling companyHEV batteriesDrive motorsResourcerecyclingResource recyclingIronNon-ferrous metalsShredding companyPressFCsMagnetsBatterymaterialsRecycledplasticpelletsSDGs Contri-butionsGRI203-1,301-3,306-228 Fundamental Approach28 Activities to Achieve Resource RecyclingOverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party Verification Aim Building a sustainable global environment and society by increasing the reuse rate of precious,limited resources.Initiative As an initiative to tackle resource-recycling issues under the Toyota Environmental Challenge 2050,formulated“Challenge of Establishing a Recycling-based Society and Systems”,and started actions in 2015.Fundamental ApproachActivities to Achieve Resource RecyclingResource RecyclingUpdated in October 2022Fundamental ApproachActivities to Achieve Resource RecyclingSustainability Data Book2929OverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationToyota Global 100 Dismantlers ProjectEstablishment of Social Systems for Appropriate Treatment and Recycling of End-of-life VehiclesInappropriate disposal and dismantlement of end-of-life vehicles may affect local environments and cause risks to the health and safety of local residents.Toyota promotes the establishment of social systems for appropriate treatment and recycling of end-of-life vehicles without environmental impact by using its long-established technologies and know-how.Establishment of Model Facilities for Appropriate Treatment and Recycling of End-of-life VehiclesIn India,due to the governments announcement of the old-car replacement policy,the number of end-of-life vehicles is expected to increase,so that such issues as the collection and appropriate treatment of end-of-life vehicles are coming up.FY2022 ResultsEstablishment of two model facilities for appropriate treatment and recycling of end-of-life vehicles in IndiaMaruti Suzuki Toyotsu India Private Limited(MSTI)financed by Toyota Tsusho Corporation commenced operations.A facility for appropriate treatment and recycling of test cars and other end-of-life vehicles that were generated in Toyota Kirloskar Motor Private Limited(TKM),was established in TKM.For model facilities established by the end of FY2021,we,in cooperation with local affi liates,check the maintenance and operational status of appropriate treatment through such means as reports made in accordance with a checklist and visual inspection of the site by using web conferencing.Part of the dismantling site in the TKM plantCollecting waste oil and fl uid at MSTIToyota Global Car-to-Car Recycle ProjectA Resource Recycling Initiative that Considers the Entire Vehicle Life CycleToyota works on reusing waste and recycling end-of-life vehicles to improve resource effi ciency while reducing the generation of waste in each of the four stages of the vehicle life cycle:development&design,production,sales&services,and disposal.Recycling of End-of-life VehiclesRecycled plasticsIn the lead up to 2050,Toyota aims to build a society that maximizes plastic recycling on a global scale.We collect and recycle bumpers replaced during repairs at dealers.To reuse automobile shredder residue(ASR)from end-of-life vehicles also as a material,which until now has been reused as heat,we are planning to use recycled plastic materials from ASR in new vehicles by utilizing crushing and sorting technologies of Toyota Metal Co.,Ltd.We adopt recycled plastics,in stages,into new models that will go on sale in 2022 and afterward,aiming to more than triple the use of recycled plastics by 2030.Maximization of Utilization of Recycled Plastics in Toyota VehiclesmaximizemaximizeOther industriesUtilization ofused partsReuse withinprocessesUse as heatReplaced bumpers,etc.Disposed partsEnd-of-lifevehiclesScrap materials,etc.Vehicle disposalVehicle useVehicleproductionShredding companyAutomobile shredderresidue(ASR)minimizeminimizeNew materialsRecycled plasticsDisposed plasticsToyota continues to use easy-to-recycle materials to promote resource recycling of end-of-life vehicles.Having directly visited and investigated dismantling companies around the world since the launch of the Raum passenger car in 2003,Toyota actively adopts vehicle structures that make it easy to dismantle and separate parts for new vehicles in order to ensure safe and speedy dismantling operations.Achieving Industry-leading Levels in Easy-to-dismantle Design for Effective Resource RecyclingVehicle models launched in FY2022 for which an easy-to-dismantle design is adopted:Aqua,Land Cruiser,Corolla Cross,Noah,Voxy,LexusNX,Lexus UX300e,Lexus LXToyota vehicles achieve a recyclability rate of 85 percent or more by calculation based on the vehicle design values.In light of recent circumstances,where many of the vehicles manufactured in the early stage of the introduction of easy-to-dismantle designs are reaching their end of life,Toyota placed advertisements in Nikkan Kogyo Shimbun(The Daily Industrial News)focusing on the ease of removing the wiring harness,a representative example,in order to make Toyotas easy-to-dismantle design known to more dismantlers.Toyota won first prize in Newspaper Category No.4 at the 2021 Japan Industrial Advertisement Award organized by Nikkan Kogyo Shimbun,Ltd.Examples of Easy-to-dismantle DesignWiring Harness:Use of Pull-tab Type Ground TerminalIt is designed to be easily dismantled by simply pulling it like the lid of a can.Wiring Harness Layout InnovationWiring harness can be separated with minimal interference to other parts.Pull-off directionSeparation from the thin-walled sectionDuring disassemblingAssembled conditionFundamental ApproachActivities to Achieve Resource RecyclingSustainability Data Book3030OverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationRare Metals and Rare Earth ElementsWith a view to curbing the use of natural resources and increasing resource input efficiency,we promote the collection of rare resources used in electrified vehicles,such as hybrid electric vehicles(HEVs),plug-in hybrid electric vehicles(PHEVs)and fuel cell electric vehicles(FCEVs),and the reuse of recycled materials,aiming to achieve the ultimate goal of closed-loop recycling.*1We are collaborating with partner companies to establish a system for collecting and recycling HEV batteries,HEV motor magnets,and FC stacks,along with tungsten carbide tools and other materials used in production.We are pressing ahead with car manufacturing that takes recycling into consideration,by feeding back results of these activities into the development and design stages.*1 Recycling in which used products are manufactured into the same type of productsRecovered end-of-life FC stacksRecovered end-of-life HEV motorsEfforts toward Compliance with the New EU Battery RegulationAt the end of 2020,the European Commission published the draft of a new EU battery regulation.This regulation embodies part of the circular economy envisaged in the European Green Deal.The scope of the regulation embraces all types of batteries and their entire life cycle,ranging from product design and production processes to reuse and recycling.While strengthening both internal and external partnerships,Toyota has started the following study in terms of major regulatory requirements:Carbon footprint measurement and information gathering.Study on building a system for measuring the carbon footprint of battery packs.Consultation with battery manufacturers regarding how they can provide carbon footprint information.Study on the use and required amount of recycled materials.Due diligence required for specific materials(Li(lithium),Ni(nickel),Co(cobalt),and natural graphite).Study on developing a battery supply chain management process.Study on examining risks of human rights infringements and environmental destruction at the time of raw material mining.Study on third-party certification.Verification of compliance under a battery passport system using digital technology.Study on building a battery traceability system.Battery 3R*2In Japan,Toyota has launched the provision of the new bZ4X BEV through the car subscription service“KINTO”or on a lease.Toyota collects all vehicle-use end-of-life bZ4X battery packs from dealers,dismantlers,etc.and reuse those usable for a second time as stationary batteries*3.Ultimately,these batteries are planned for use as materials for new batteries.*2 In this context,“rebuild,reduce and recycle”*3 Stationary storage batteries used to store renewable energy whose generation is unstableImage of Battery 3RSUSTAINABLEFundamental ApproachActivities to Achieve Resource RecyclingSustainability Data Book3131OverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationFundamental Approach Aim Aim to create a society in harmony with nature by promoting biodiversity conservation activities through collaboration with many stakeholders.Initiative As an initiative to tackle biodiversity and water issues under the Toyota Environmental Challenge 2050,formulated“Challenge of Establishing a Future Society in Harmony with Nature”and“Challenge of Minimizing and Optimizing Water Usage,”and started actions in 2015.SDGs Contri-butionsGRI303-1,303-231 Fundamental Approach31 Biodiversity35 Water EnvironmentHarmony with NatureUpdated in October 2022Fundamental ApproachBiodiversityWater EnvironmentBiodiversity Aim Promote biodiversity conservation activities based on the Toyota Policy on Harmony with Nature and the Policy for Sustainable Natural Rubber Procurement toward the building of a sustainable society in harmony with nature.Initiative Challenge of Establishing a Future Society in Harmony with NatureConnect the Reach of Nature Conservation Activities Among Communities,with the World,to the FutureToyota Green Wave ProjectPlant in Harmony with Nature “Connecting Communities”activitiesToyota Today for Tomorrow ProjectGlobal collaboration with NGOs “Connecting with the World”activitiesToyota ESD*ProjectEnvironmental education for the next generation “Connecting to the Future”activities*Education for Sustainable DevelopmentSustainability Data Book3232OverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationToyota Policy on Harmony with NatureWe renewed the Biodiversity Guidelines formulated in 2008 as the Toyota Policy on Harmony with Nature in January 2021.This policy is a guideline for promoting harmony with nature and will serve as the basis for future activities.We will expand the reach of activities promoting harmony with nature,including the conservation of biodiversity,from communities to the world in collaboration with various people throughout society.Toyota Policy on Harmony with NatureHumans enjoy prosperous and fulfilling lives by harmonizing various elements of nature such as water and air as well as conserving biodiversity.However,as environmental issues such as climate change and water shortages interact and become more severe,this harmony of natural elements is disrupted,and biodiversity is being lost.To improve the current situation,Toyota seeks to realize a sustainable society in harmony with nature by fully utilizing the tech-nology and know-how it has developed through various businesses.1.Recognizing that nature underlies our life and economy through resource supply and climate stabilization,we will promote activities that harmonize various elements of nature and conserve biodiversity.2.We will expand the reach of activities among communities and connect them with the world by not only acting spontaneously,but also collaborating strongly with society.3.We will promote environmental education to change the awareness of employees and generations based on the recognition that the biodiversity that forms the foundation of our prosperous life is facing a critical situation.At the same time,we will offer related information to society through both in-house and outside activities.Toyota Policy on Harmony with NatureFundamental ApproachBiodiversityWater EnvironmentPolicy for Sustainable Natural Rubber ProcurementToyota proceeds to eliminate deforestation and ecosystem conversion from our supply chains.Believing that protection of forests and other natural ecosystems is critical for maintaining biodiversity,combating climate change,and sustaining livelihoods,we have formulated the Policy for Sustainable Natural Rubber Procurement for natural rubber used in cars.This policy features the following:Being aligned with the Policy Framework that was adopted in a September 2020 resolution by the General Assembly of the Global Platform for Sustainable Natural Rubber(GPSNR),of which Toyota is a memberRespecting the principles and guidelines laid out in the UN Guiding Principles for Business and Human Rights and the ILO fundamental conventions Policy for Sustainable Natural Rubber Procurement Sustainability Data Book3333OverviewPromoting SustainabilitySocialGovernanceContent IndexEnvironmentPolicy and Environmental ManagementClimate ChangeResource RecyclingHarmony with NatureClimate-related Financial Disclosures Based on TCFD RecommendationsEnvironmental DataFY2022 Review of the 7th Toyota Environmental Action Plan(2025 Target)Third-party VerificationCase:Development of the Plant in Harmony with Nature(1)Toyota Motor Manufacturing(UK)Ltd.(U.K.)Located in a vast ecological park,Toyota Motor Manufacturing(UK)Ltd.realized the Plant in Harmony with Nature ahead of other global plants.More than 400 species of wildlife and plants are conserved in fi ve zones in cooperation with local experts based on conservation plans and methods established by the government.2021 ResultsObserved butterfl ies and bees that are important indicator species in the grassland area.Butterfl ies:Over 1,000 Bees:Over 200Provided observation results to national research institutes.Case:Development of the Plant in Harmony with Nature(2)Toyota Motor Thailand Co.,Ltd.(Thailand)As part of the Plant in Harmony with Nature project,Toyota Motor Thailand Co.,Ltd.promotes biodiversity conservation through monitoring of indicator species,maintenance of habitat environments,and collection of scientifi c data.2021 ResultsMaintained a growing environment for the Asian Golden Weaver,which is listed on the International Union for Conservation of Nature and Natural Resources(IUCN*1)Red List,at Cheewa Panavet(Toyota Biodiversity and Sustainable Learning Center).Through collaboration with Sango,an auto parts manufacturer located nearby,confi rmed that there were 24 nests at Cheewa Panavet and 11 at Sango.*1 International Union for Conservation of Nature and Natural ResourcesAsian Golden Weaver Red Tailed Bumble Bee Overview of the Plant in Harmony with NatureLocal experts Select indicator species Assess ecosystem statusEmployees Develop human skills in harmony with nature Enhance communications among employeesLocal residents Develop biodiversity education Promote local interactionApex species(birds,etc.)Small animals(butterfies,frogs,etc.)Quantitative assessment of ecosystems by surveying indicator speciesAdvancement of the trinity of activitiesWildlife habitat maintenanceand improvementContinuousmonitoring2025 TargetRealize“Plant in Harmony with Nature”6 in Japan and 4 in other regions.Promote activities to connect with local communities in collaboration with affiliated companies.Start activities promoting harmony with nature in collaboration with local communities and companies toward biodiversity conservation.2021 ResultsRea
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bp sustainability report 2022for people and our planetReimagining energyContentsAbout our 2022 repor.
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TSMC 2022SustainabilityReportOverview4 Letter from the ESG Steering Committee Chairperson5 Letter from the ESG Committee Chairperson6 About TSMC7 Innovation Value9 Sustainability at TSMC10 Awards,Recognitions,and RatingsAn Innovation Pioneer37 Innovation Management56 Product Quality and Safety69 Customer RelationsA Practitioner of Green Power93 Climate and Energy108 Water Stewardship116 Circular Resources126 Air Pollution ControlA Responsible Purchaser75 Sustainable Supply ChainAn Admired Employer135 Diversity and Inclusion141 Talent Attraction and Retention149 Talent Development156 Human Rights163 Occupational Safety and HealthPower to Change Society181 Social Impact183 TSMC Education and Culture Foundation192 TSMC Charity FoundationSustainable Business Practices12 ESG Implementation Framework13 ESG Management Platform17 Materiality Analysis and Stakeholder Engagement29 Sustainability Impact35 Carry Out the UN Sustainable Development GoalsOperations and Governance205 Corporate Governance210 Financial Performance212 Tax213 Information SecurityAppendix217 About this Report221 Sustainability Information Disclosure FrameworkGlobal Reporting Initiative IndexUnited Nations Global Compact IndexTask Force on Climate-related Financial Disclosures IndexSustainability Accounting Standards Board IndexWEF IBC Stakeholder Capitalism Metrics IndexContents222 Climate-related Information of Listed Companies224 Participation in Industry Associations and Non-Profit Organizations226 ESG Performance Summary233 Independent Third Party Assurance Statement234 Contact InformationSustainability RolesOverviewSustainability is like weaving,pooling peoples collective strengths and consolidating resourcesWeaving a harmonious,symbiotic world by adopting a development model focused on the common goodSustainability also connects people in rural and urban areas,fostering an exchange of mutual trust and mutual assistanceTSMC enables innovation and invites partners from all walks of life to weave a web of sustainabilityThrough technology and collaborationRealizing co-prosperity between people and nature as well the societyBuilding on the foundation of innovative vertical applications,TSMC aspires to create a horizontal expansion of the value chainEnsuring the resilience,breadth,and longevity of the sustainabilityWeaving a Sustainable Future TogetherLetter from the ESG Steering Committee ChairpersonOver the past year,the world has faced numerous economic,social and geopolitical changes,including uncertainties in globalization and free trade,lockdowns caused by the COVID-19 pandemic,the war in Ukraine,global transportation bottlenecks,and inflationary pressures.This has tested the resilience of the global supply chain and the adaptability of businesses.As a responsible global corporate citizen,TSMC has accelerated the adoption of ESG(Environmental,Social,and Governance)initiatives in its operations and industrial value chain,and continues to inject positive energy into society.Prospering with the natural environment is the cornerstone of TSMCs sustainable operations,and a green and low-carbon supply chain is an important part of our 2050 net-zero emissions blueprint.As an industry leader,TSMC uses its green influence to continuously work with suppliers to deepen overall low-carbon management.By providing suppliers with guidance on carbon inventory,energy conservation,and carbon reduction,we encourage them to adopt carbon capture equipment and reduce indirect carbon emissions in the value chain.In 2022,TSMC was again selected by the Carbon Disclosure Project(CDP)as a Supplier Engagement Leader,and we continued to drive the industry towards low-carbon sustainability.In the same year,TSMCs Southern Taiwan Science Park Industrial Reclaimed Water Plant started operations,and our Zero-Waste Manufacturing Center is expected to start operation in 2023.At our Arizona fab,we also plan to build an industrial recycled water plant to gradually achieve near zero liquid discharge,advancing toward our goal of circular economy.We continue to make every effort to minimize environmental externalities through prudent decision-making and coordinated global action on four major issues:climate and energy,water stewardship,circular resources,and air pollution control.As the leading provider of semiconductor process technology and manufacturing services,TSMC uses the power of semiconductor innovation to make products stronger,smarter,safer,more energy efficient,and more advanced to enrich peoples lives and empower society for the common good.I am very proud of TSMCs employees across the company who work hard for this mission.Guided by our Human Rights Policy,TSMC continues to create a working environment that respects human rights.This means we provide a dignified workplace that is diverse,equal,and inclusive(DEI)and promotes the integration of global talents,and we require our supply chain partners to follow the same standards.At the same time,we continue to deepen our connection with the society and wholeheartedly support global STEM education.Through the TSMC Education and Culture Foundation and the TSMC Charity Foundation,we deepen community relations,care for the disadvantaged,and preserve national art and culture,laying a solid foundation for social progress with common values.In 2022,we released the UN SDGs Action Report for the first time to disclose the companys SDGs action plan and progress.We also explained the companys management policy on major issues with our Materiality Analysis Report to enhance the transparency of sustainable information disclosure.In order to make the Board of Directors more comprehensive and transparent and achieve better corporate governance,we also prepared for the establishment of the Boards Nominating,Corporate Governance and Sustainability Committee,which was approved in February 2023,strengthening the effectiveness of its sustainability governance.The Board of Directors also decided to change the Audit Committee to the Audit and Risk Committee and the Compensation Committe to the Compensation and People Development Committee to expand and deepen its supervision and review responsibilities,making the corporate governance structure more robust.We have a deep understanding of TSMCs key position in the global semiconductor industry and its influence on many economies,and are keenly aware of our urgent responsibilities in sustainability that we shoulder as a corporate citizen.As TSMCs global business expands,we will deepen our partnership with stakeholders including employees,public associations,communities,investors and shareholders,and our supply chain and customers,listen to the voices of all parties,and open a new chapter of sustainable development together.Mark LiuChairman and ESG Steering Committee Chairperson4Sustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendix2022 Sustainability ReportLooking back on 2022,just as the COVID-19 pandemic showed signs of easing and people could see recovery on the horizon,geopolitical conflict threw the world into disarray amidst systemic risks from crises in energy,food,human rights,and environmental damage.Fortunately,substantive progress was achieved at the 27th Conference of the Parties of the UNFCCC(COP 27)and the 15th UN Biodiversity Conference(COP 15),so that we were able to continue forwards into an inclusive and sustainable future.Facing a volatile economic environment,TSMC focused on its core competitive advantages of Technology Leadership,Manufacturing Excellence,and Customer Trust.Strong demand from 5G cellular network and high-performance computing applications enabled our total wafer shipments in 2022 to reach 15.3 million 12-inch equivalent wafers,and realize 12,698 product innovations for customers.We also delivered a 13th consecutive year of record revenue,driving sustainable development through profitable growth.TSMC responded to the call to action at COP 27 by making carbon reduction initiatives our top priority.During the course of 2022,we successfully implemented 823 energy-efficiency,water conservation,and waste reduction innovation projects.A target of Net Zero Emissions by 2050 was also set with annual progress reviews planned to dynamically adjust and set even more ambitious carbon reduction pathways.We also drew up the Carbon Credits Quality Standards for Voluntary Emissions Reductions based on international guidelines and industry benchmarks to ensure that carbon credits are not obtained from sensitive regions.Furthermore,we leveraged our industry leadership to invite suppliers to participate in the CDP Supply Chain Program.The program complements suppliers existing carbon reduction actions to help us mitigate the global climate crisis together.In light of the close association between Climate Change and Biodiversity,we issued the Biodiversity Statement for the first time in 2022 as a climate citizen of the new era.The statement commits TSMC to achieving Zero Deforestation,No Net Loss of biodiversity,and Net Positive Impact.Achieving Water Positivity was also set as a future strategy to enhance our climate resilience as part of a multi-pronged approach.In addition to our environmental commitments,TSMC also works tirelessly to build a diverse,equal,and inclusive working environment.The first survey into salient human rights issues was completed in 2022,with the establishment of a trans-organizational human rights working group and due diligence scheduled for 2023.The subsequent promotion of preventive,mitigation and remedial measures as well as related education and training will ensure human rights protection from a stakeholder perspective.We also founded Womentsmc,an Employee Resource Group(ERG)primarily aimed at women,and a new dedicated ERG was set up for foreign employees to build employee cohesion and promote career development.We also completed the first safety culture investigation,and introduced free health check-ups on contractor sites to build an inclusive workplace.Upholding the spirit of Leaving No One Behind,TSMC actively works to achieve UN Sustainable Development Goals(SDGs).In addition to continuously expanding the University Collaboration Programs,cultivating semiconductor talents,and helping to meet shortfalls in emergency assistance resources,we also worked to harness the power of employee volunteers for youth and rural empowerment,promotion of the arts,and assisting the disadvantaged through the TSMC Education and Culture Foundation and TSMC Charity Foundation.Using the Business for Societal Impact(B4SI)framework as a reference,we also evaluated the overall benefits of invested resources and identified previously overlooked social needs,so that TSMC can become a force for positive change.TSMC is the only semiconductor company in the world to be included in the Dow Jones Sustainability Indices for 22 consecutive years.Nevertheless,we dont stop there.With the publication of the annual TSMC Sustainability Report along with the Environmental Profit and Loss(EP&L)Report,TCFD Report,UN SDGs Action Report,and Materiality Analysis Report,we continue to adopt global trends in sustainability management,and transparently share TSMCs sustainability journey and accomplishments with stakeholders.Looking ahead,TSMC will embrace the ESG vision of Uplift Society to bring about positive change.Letter from the ESG Committee ChairpersonLora HoSenior Vice President and ESG Committee Chairperson5Sustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendix2022 Sustainability ReportAbout TSMCIn the face of global climate change and geopolitical tensions,TSMC is committed to innovation to improve the well-being of human life.Upholding the three competitive advantages of Technology Leadership,Manufacturing Excellence,and Customer Trust,TSMC continues to fulfill its mission as a trusted technology and capacity provider to the global logic IC industry.In 2022,TSMCs consolidated income reached NT$2,263.89 billion,achieving a record high for the 13th consecutive year.In addition to seeking the greatest achievements in its core business,TSMC adheres to its philosophy of responsible business,working together with employees,shareholders/investors,customers,suppliers/contractors,government/industry associations,and society to strive for excellence in the three dimensions of economy,environment and society.TSMC is determined to be a force that uplifts society and creates sustainable value.HeadquarterHsinchu Science ParkFounded in1987Number of Employees73,677$1,016.53 BillionNet income;70.4%increase from 2021(NT$)15.3 Million12-inch equivalent wafers total wafer shipments reached532 CustomersNeeds were satisfied through 288 distinct process technologies13 Consecutive YearsRecord high revenue53%Of TSMCs wafer revenue came from advanced manufacturing processes with geometries of 7nm and smaller,up three percentage points from 2021 30%Of worldwide semiconductor output value(excluding memory)generated up four percentage points from 2021TSMC has fabs,subsidiaries or offices in Taiwan,North America,Europe,Japan,China,South Korea,and other countries to offer real-time services and technical support to customers around the worldRevenue Percentage by Customer HQ LocationRevenue Percentage by Product Platform North America Asia Pacific excluding Japan and China China Europe,Middle East,and Africa Japan High-performance Computing Smartphones Internet of Things Automotive Electronics Consumer Electronics Other Products11%5%5hA9%9%5%3%3%6Sustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendix2022 Sustainability ReportInnovation ValueTSMC continues to advance semiconductor manufacturing technologies and services,enabling customers to unleash more than 12,600 chip innovations in 2022.These innovations make products more advanced,capable,intelligent,energy-efficient,and safer,greatly increasing the quality of life and helping to build a sustainable society based on the common good.Innovations for Sustainability Continue to drive semiconductor scaling for both logic and specialty technologies Continue to expand specialty technology offerings Continue to advance and expand TSMC 3DFabric technology offeringsBenefits to Customer Product InnovationTechnology Development Focuses Boost product computing power Increase product energy efficiency Enable smaller form factors Provide greater chip design flexibilitySemiconductors power almost everything in daily life and have significantly changed the way people live and work in areas including communications,data processing,agriculture,transportation,healthcare,education,clean energy,and more.Through its five technology platforms-High Performance Computing(HPC),Smartphone,Internet of Things(IoT),Automotive,and Digital Consumer Electronics,TSMC provides customers with comprehensive and competitive logic process technologies,specialty technologies,IPs,and packaging and testing technologies to help them accelerate their product innovation and move society forward with technology.The global automotive industry focuses on the four major innovation trends of connected,autonomous,shared,and electric(CASE).Electric vehicles are powered by batteries and do not emit harmful exhaust gases on the road.This,combined with continued progress in advanced driver-assistance systems(ADAS),creates a safer and more environmentally-friendly driving experience.Continued advancement of agricultural drone technology is a key to sustainable agricultural development.GPS-fitted drones with a variety of sensors can help farmers to make timely adjustments to field management and improve farming efficiency and quality,as well as reduce waste.High-performance portable ultrasound scanners are becoming a common diagnostic tool.Unlike bulky traditional instruments,they are only the size of a mobile phone,and feature faster and sharper imaging capabilities,which can help medical professionals around the globe save time in diagnosis and treatment,and improve overall health care efficiency.Photo:Courtesy of Butterfly NetworkA smartphone is a now a PC in our pocket.It can overcome the limitations of time and distance to make work,communication,entertainment,and life more convenient,including video conferencing,online learning,banking,shopping,and travel booking,and telemedicine.Supercomputers,with powerful computing capabilities,are vital to powering digital transformation and the digital economy in the era of 5G and AI.They rapidly process and analyse vast amounts of data for a wide range of applications such as accurate weather forecasts and climate predictions,which helps protect us from the impact of increasingly severe storms,floods and snow.Photo:Courtesy of Fujitsu and RIKEN7Sustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendix2022 Sustainability ReportEnable 5G,artificial intelligence(AI),cloud,and datacenters to transfer and process vast amounts of data anywhere and anytime Central Processing Unit(CPU)Graphics Processor Unit(GPU)Field Programmable Gate Array(FPGA)Server CPU Artificial Intelligence/Machine Learning(AI/ML)Accelerator Network Processing Unit(NPU)High-speed Networking Chip,etc.Make communication more effective and work,play,and learn anytime and anywhere Application Processors(AP)Baseband RF Transceivers Wireless Local Area Networks(WLAN)CMOS Image Sensor(CIS)Near Field Communication(NFC)Bluetooth Global Positioning Systems(GPS),etc.Empower innovations for artificial intelligence of things(AIoT)and accelerate digital transformation to realize more convenient and greener living and improve health care quality Microcontroller Unit(MCU)Application Processors(AP)Baseband RF Transceivers Wireless Local Area Networks(WLAN)CMOS Image Sensors(CIS)Near Field Communication(NFC)Bluetooth Embedded Flash Memory Radio Frequency Identification,(RFID)etc.Make vehicles,including hybrid/electrical cars,safer,smarter,and greener Microcontroller Unit(MCU)Baseband RF Transceivers Wireless Local Area Networks(WLAN)CMOS Image Sensor(CIS)Near Field Communication(NFC)Radar Ethernet Switches Power Management ICs,etc.High Performance ComputingSmartphone Internet of Things(IoT)AutomotiveDigital Consumer ElectronicsEnable AI-powered smart devices Microcontroller Unit(MCU)Baseband RF Transceivers Wireless Local Area Networks(WLAN)CMOS Image Sensor(CIS)Near Field Communication(NFC)Bluetooth Embedded Flash Memory Power Management ICs Timing Controllers(T-CON)for Smart 8K/4K Digital TV(DTV),4K Streaming Set-top Box(STB)/Over-the-top(OTT)services,Digital Single-lens Reflex(DSLR)Devices,and so onCustomer Products/ApplicationsTechnology PlatformImprove Quality of Life8Sustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendix2022 Sustainability ReportSustainability at TSMC1.779 BillionInvested into social engagement(NT$)2,518,073People received employees training239.5 BillionTotal compensation and welfare for TSMC employees around the world,a 45%increase from 2021(NT$)2,291,030Beneficiaries of social engagement programs6,800Students around the world participated in TSMCs diverse industry-academia cooperation programsSocialNet Zero Emissions Overseas sites achieved net zero emissions in Scope 1 and 2 1 S.T.S.P.Reclaimed Water Plant commenced operation the worlds first industrial reclaimed water plant for advanced semiconductor processes 96Waste recycling rate achieved and only 944 wafer technologies and 129 advanced packaging technologies available to customersPlease refer to Customer Relations in this reportInnovation ManagementProduct Quality and SafetyCustomer RelationsSustainable Supply Chain202022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixLikelihood and TrendImpactUpwardsSidewaysDownwardsAlmost CertainLikelyPossibleUnlikelyRareCatastrophicMajorModerateMinorInsignificantUnstable water supplies will limit production capacity,TSMC will therefore be unable to satisfy customer demandsAnomalies in effluents will pollute the environment and negatively impact company reputationPlease refer to Water Stewardship in this reportWater shortage or suspension,and environmental impact from wastewaterImproper use or failure of air pollution control equipment could result in excess emissions,penalties from the authorities,and impact on company reputationPlease refer to Air Pollution Control in this reportEnvironmental impact from pollutant emissionsWaste management vendors failing to handle waste in compliance with regulations may subject TSMC to liabilities for waste cleanup and environmental recovery,impacting company reputationPlease refer to Circular Resources in this reportSuppliers failing to properly handle waste will pollute the environmentOperational impact from climate disasters,increasing GHG emissions,regulations against GHG emissions,and other requirementsIncreasing demands from stakeholders to increase usage of renewable energy could increase costs and,if demands are not met,fab construction progress and customer orders could be impactedPlease refer to Climate and Energy in this reportUnstable power supply will limit production capacity and impact company reputationCustomers trust could decline and result in fewer ordersPlease refer to Climate and Energy in this reportPower Shortage or OutageClimate and EnergyWater StewardshipCircular ResourcesAir Pollution ControlRisk Aspects/TypeRisk Evaluation and Mitigation MeasuresStrategyOperationHazard212022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixLikelihood and TrendImpactUpwardsSidewaysDownwardsAlmost CertainLikelyPossibleUnlikelyRareCatastrophicMajorModerateMinorInsignificantThe Companys understanding of society and grasp of various aspects of the market may suffer if the mix of employees is unable to reflect the current social landscape,further impacting the Companys competitive advantagePlease refer to Diversity and Inclusion in this reportFailure to uncover TSMC employees full potentialsCompany operations could suffer from failure to attract and retain a sufficient number of high-quality talents when neededPlease refer to Talent Attraction and Retention in this reportFailure to attract or retain a sufficient number of high-quality talents when neededThe Companys competitive advantage and growth momentum will suffer if talents fail to progress with evolving landscapesPlease refer to Talent Development in this reportTalents failing to progress with evolving landscapesOccupational injuries,occupational diseases,and chemical hazardsEarthquakes or firesEmployees could suffer from injuries and diseases due to non-compliance to safety guidelinesEarthquakes and fires could damage the Companys equipment and result in disrupted operations and financial lossesPlease refer to Occupational Safety and Health in this report and 6.3 Risk Management in the 2022 Annual ReportCluster infections of pandemic could result in disrupted operationsPandemicCompany reputation,employee morale,and talent recruitment could suffer from the lack of proper protection for the human rights of our employeesCompany reputation and customers interests could suffer from the lack of proper protection for the human rights of suppliersPlease refer to Human Rights and Sustainable Supply Chain in this reportFailure to protect the human rights of TSMC employees and suppliersDiversity and InclusionTalent Attraction and RetentionTalent DevelopmentHuman RightsOccupational Safety and HealthRisk Aspects/TypeRisk Evaluation and Mitigation MeasuresStrategyOperationHazard222022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixStakeholder CommunicationEmployeesConcerned with the continued growth and success of the Company as well as meaningful work,a safe and healthy workplace,competitive compensation and welfare,opportunities to grow,and work-life balance73Silicon Garden Meetings (Labor-management meetings)4,218Cases handled through internal communication channels Corporate intranet(myTSMC),internal emails,and other announcement channels(such as promotion posters at facilities),TSMC Newsletter eSilicon Garden/as needed Human resources team/as needed Employee training/annually Communication meetings for various levels of managers and employees;e.g.the executives communication meeting,skip levels and communication meetings in individual functions or divisions/quarterly Employee suggestion channels,such as the Fab Caring Circle,Employee Opinion Box,Wellness Center,wellness website,employee PIP&IT Security mailbox and hot line,etc./as neededEngagement Talent attraction and retention Diversity and inclusion Social impact Talent development Ethics/regulatory complianceIssuesFocus AreasResponses from TSMCTSMC provides employees with parenting resources and holds STEAM Holiday Optoelectronics,Audio,and Science Exploration CampCompany growth,success and contribution to the society Strengthen internal communication channel.Communicate with employees through 73 Silicon Garden Meetings,and 4,218 times exchange of opinions to let colleagues understand the Companys prospectsAn inclusive,diversified and friendly working environment that can unleash talents potential Organized a training program on TSMCs Human Rights Policy:Say No to Sexual Harassment and Build up a Friendly Workplace to enhance awareness of respect and communion with completion rate of 97%Held Inclusive Leadership Workshop to support senior executives in understanding the connotation of diversity and inclusion,and strengthen the awareness of unconscious bias The Research and Development organization established the Diversity and Inclusion CommitteeMore ESG activities and social participation opportunities for employees Leveraged TSMC ESG AWARD as a platform to promote sustainable thinking and action,and the event was expanded to overseas subsidiaries.A total of 1,880 sustainable innovation proposals were collected Fabs organized community engagement activities such as sending warmth to the disadvantaged,elderly care,and teaching in rural areas from time to timeWork-life balance and individual growth TSMC Child Care Benefit Program supported employees work-life balance.In 2022,TSMC had 2,368 newborns,accounting for 1.7%of Taiwans total infant population Established employee resource group Womentsmc to encourage female colleagues to pursue career goals and self-growthLatest regulatory updates and compliance guideline,i.e.,zero tolerance of corruptions,avoiding conflict of interest,etc.Provided an Annual Ethics and Compliance Training Course covering various important regulatory compliance topics and a total of 67,922 employees(including employees in subsidiaries)completed this training course,reaching 99.9%completion rateMy children learn about the profoundness of science in the Companys holiday STEAM camp,and they cherish the models made in the course.This camp has made our familys life and work more manageable during the winter and summer vacations.I am very proud of TSMC.Shou-Hau TsaiTSMC employee Ombudsman system,whistleblower reporting system,irregular business conduct reporting system,and sexual harassment investigation committee/as needed Employee Opinion Survey on Company Core Values,Employee Engagement Survey,employee pulse surveys and service satisfaction surveys,and employee welfare committee event questionnaire survey/as needed Silicon Garden Meetings(labor-management meetings)/quarterly232022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixShareholders/InvestorsConcerned with the investment value of TSMC including market prospects,growth strategy,profitability,dividend policies,shareholder returns,and sustainability performance363Institutional investors 281Conferences and meetings General shareholders meeting/annually Investor conference/quarterly Domestic and overseas brokerage conferences/as needed Face-to-face meetings,video conference calls,and telephone conference calls/as needed Annual Report,Sustainability Report,and Form 20-F with the U.S.Securities and Exchange Commission/annually Major announcements on the Market Observation Post System/as neededEngagement Financial performance Risk management Innovation management Climate and energyIssuesFocus AreasResponses from TSMC2022 TSMC Annual General MeetingFrom governance and employee engagement to climate change strategy,TSMC has always exceeded our expectations in terms of promptness,level of disclosure and receptiveness to suggestions.Overall we feel very satisfied with the discussions we have had over the years with TSMC.Guido GiammatteiPortfolio ManagerRBC Global Asset Management(UK)LimitedLong-term profitability In January 2022,TSMC raised its long-term financial targets to be gross margin of 53%and higher,and ROE of 25%and higherImpact of the international political and economic landscape on the business environment and corresponding measures Communicated the impact of international political and economic situation as well as related regulations on semiconductor demand in investor conferencesOverseas investment operation risk and its impact on long-term profitability Communicated the overseas fab construction plan and strategy in investor conferencesSupply-demand dynamics in the industry Continued to communicate with investors about TSMCs technology roadmap and mass production timeline in quarterly investor conferencesTechnology development and competitive advantage Continued to communicate with investors about recent development of technology in quarterly investor conferencesClimate change responsive measures and supplier management In 2022,TSMC achieved net zero emissions of Scope 1 and Scope 2 in overseas factories,and 100%use of carbon-neutral natural gas in Taiwan fabs.Also,required critical suppliers to join CDP,receive third-party audits,continuing to strengthen low-carbon supply chain development242022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixCustomersConcerned with TSMCs technology development and production planning,including production capacity,product quality and safety,that meets customer demands,comprehensive protection of proprietary customer information assisting customers with successful production application and gaining time-to-market advantage100Quarterly assessment meetings 1,200Customer meetings Business and technology assessment/quarterly Customer satisfaction survey/annually Customer meetings/as neededEngagement Innovation management Product quality and safety Customer relations IssuesFocus AreasResponses from TSMCTSMC adheres to the values of Integrity,Innovation,Commitment,and Customer Trust,focusing on improving the core capabilitiesA long standing partner,trusted.They are someone we can count on to keep a commitment once the commitment is made.They are extremely professional.NVIDIA Corporation Technology development schedules and plans Offered 944 process technologies and 129 advanced packaging technologies in line with the technology roadmapProduct quality Continued perfecting production technologies and product quality.Reduced engineering deficiencies per one million 12-inch wafers to 35%of 2019Capacity planning and production information In 2022,around 3,000 person-times on average made use of the upgraded TSMC-Online to access comprehensive technology and production information services engineering everydayBusiness resilience and continuity management Held Crisis Management Team Staff Training to speed up decision-making and improve decision-making quality Fabs held the tabletop emergency response drill evaluation and result sharing activities,referring to FEMA Homeland Security Exercise and Evaluation Program(HSEEP)exercise planning standards,to strengthen organizational resilience252022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixSuppliers/ContractorsConcerned with the development of new process technologies,improving product quality,ESH regulations,ethics and regulatory compliance,and information security;desire to strengthen and deepen partnerships for sustainable supply chain management178Supplier audit and communication meetings 201Suppliers participated in the Supply Chain ESH Training Forum Supply Chain ESH Training/annually Supply Online 360 Global Responsible Supply Chain Platform/as needed On-site support and audit/as needed Supplier meetings/as needed Supplier Information Security Association Meeting/monthlyEngagement Sustainable supply chain Ethics/regulatory compliance Product quality and safety Occupational health and safety Information management Climate and energyIssuesFocus AreasResponses from TSMCTSMC issues Certificate of Appreciation for the Energy Saving and Carbon Reduction Counseling Project to suppliersIn the face of drastic changes in the global climate and limited resources,we uphold the values of innovation,responsibility,commitment,and customer partnership and work together with TSMC to develop green hydrofluoric acid for sustainable circular resources and sustainable development.Jian-Wei LinGeneral ManagerSUNLIT FLUO&CHEMICAL CO.,LTD Sustainable development is the foundation of our work,the core mission of improving productivity,and the key to creating value for TSMC and society.Jhong-Ming BaoGeneral ManagerUnited Industrial Gases Co.,Ltd.Sustainable actions and consistent improvement Launched four Supplier Code of Conduct lessons on TSMC Supplier Sustainability Academy of Supply Online 360,TSMCs global supply chain management platformTSMC regulations on ethics and the supplier code of conduct All tier 1 suppliers signed the Supplier Code of Conduct and complied with business ethics(completion rate 100%)Quality of raw material 60 critical suppliers completed third-party supplier audits on sustainability risks by RBA-certified institutions;ten suppliers received consultation on process advancement and quality improvementEffective ESH management mechanisms Continued to enhance ESH and loss prevention capabilities in the supply chain and commended outstanding suppliers.In 2022,Chang Chun Group was awarded ESH Outstanding Supplier,and Jing He Science for ESH Advancement SupplierInformation security compliance,assessment results,and experience sharing Published four issues of Supply Chain Security Newsletter and reached over 350,000 person-timesManagement of carbon emissions Required 137 raw material and equipment suppliers to participate in CDP supplier carbon disclosure project262022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixGovernment/Industry AssociationsConcerned with the development of advanced process technologies,ESG actions,overseas investments,and environmental regulations revision trends;sharing of occupational safety and health management experience and discussions on regulations39Government Administrations 102Associations Official correspondences and visits/as needed Offer industry experience and advice/as needed Conferences(e.g.,briefings,public hearings,symposia,seminars,meetups)/as needed Industry association communication platforms/monthlyEngagement Innovation management Ethics/regulatory compliance Climate and energy Circular resources Water stewardship Sustainable supply chainIssuesFocus AreasResponses from TSMCTSMC,as a member of Taiwan Carbon Capture Storage and Utilization Association(TCCSUA)changes experiences with the Japanese carbon capture and reuse demonstration plantIn addition to actively reducing carbon emissions,TSMC also exerts its influence and drives the value chain to work hard to mitigate climate change.The Company is indeed a model.James C.Liao PresidentAcademia Sinica Industry specification formulation/Intellectual property/Trade secret protection Introduce the semiconductor development trend of advanced process technology and TSMCs technologies to the US Patent Office Participated in Taiwan Association for Trade Secret Protection,providing regulatory revision and implementation suggestionsCorporate governance,regulatory compliances and risk management Participated in explanatory meetings on the latest regulations of export control,and conduct practice exchanges Formulate TSMCs Risk Management Policy and corporate risk management framework with reference to relevant guidelines of risk management stipulated by the Taiwan Stock Exchange CorporationCarbon credits transactions/Circular resources/Sustainable water stewardship Established a carbon credits working group to plan long-term purchases of carbon credits,and cooperated with industry associations to propose the establishment of carbon rights transactions to the government Cooperated with Environmental Protection Agencys Resource Recycling Waste Cleanup Plan Program to submit an application for circular resource demonstration cases,assisting the government to promote the program TSMC sites in Southern Taiwan Science Park began to use recycled water,and set a 2030 target of 60%of the Companys water resources came from recycled waterResponse,suggestion and promotion of environmental protection related regulations Represented Taiwan Semiconductor Industry Association to communicate with Environmental Protection Agency to assist the revision a more reasonable and feasible Semiconductor Industry Air Pollutant Emission Standard and Stationary Pollution Sources that Should Be Regularly Tested and Reported in Public and Private Occasions to promote the industrys positive developmentSupply chain sustainability and environmental safety and health management improvement In addition to Supplier Environment,Safety and Health Forum,practical operation of fire protection equipment,observation of emergency response drills,on-site diagnosis and guidance of energy saving and carbon reduction,Environmental Safety and Health,Fire Response,Fire Protection Self-training,Greenhouse Gas Inventory,Product Carbon Footprint Inventory Workshops,etc.were added in 2022272022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixSocietyConcerned with the support for remote education and the disadvantaged,Network of Compassion,Public Welfare Green Energy Project,and Cherish Food Program provided by the TSMC Charity FoundationConcerned with the resources for education and arts offered by the TSMC Education and Culture Foundation to cultivate well-rounded talents for the new era130Charity partners 171Charity programs Volunteer services/at least once per week TSMC LinkedIn/as needed TSMC Education and Culture Foundation and TSMC Charity Foundation websites/as needed Sending Love charity platform/as needed Project cooperation and visits/as needed TSMC ESG Newsletter/monthlyEngagement Social impactIssuesFocus AreasResponses from TSMCNew Generation Talent Cultivation ForumTSMC Education and Culture Foundation inspires everyones ideals,enthusiasm and curiosity about science,so that everyone can find a stage.Chuan-Chin Chiao Director National Museum of Natural Science Thanks to TSMC Charity Foundation for co-organizing Technical and Vocational Talent Development Forum,and initiate the job matching program for vocational high school students.This endeavor garnered industry resources to initiate new thinking on talent development.Terry Tsao Global Chief Marketing Officer&President of Taiwan SEMI Young Generation Cultivation,Educational Collaboration,Arts and Culture Promotion In 2022,TSMC Education and Culture Foundation invested NT$100.2 million to expand supports for diverse education and the promotion of art and culture with three major axes:Young Generation Cultivation,Educational Collaboration,Arts and Culture Promotion.The seventh TSMC Udreamer Project themed Young and Sustainable Island encouraged young people to care about sustainability and put it into action.A total of 161 groups of students participated with an increase of 32%compared to 2021.The Foundation also held TSMC Journeys of Female Scientists Lectures to encourage high school girls to explore STEM.As of 2022,3,225 people have attended the event.Local community services,the needs of the underprivileged and education In 2022,TSMC Charity Foundation continued to committed itself to championing social causes of Care for the Elderly,Promote Filial Piety,and Protect the Environment,and renamed the focus Care for the Disadvantaged as Empower the Rural Community to strengthen their education and employment.In addition,the Foundation linked industry,government and academia resources to provide stable life and operational support for disadvantaged groups and institutions.It repaired 285 houses for Hualien and Taitung earthquake-stricken residents,and cared for 62 vulnerable households of seniors living alone.A total of 7,607 volunteers devoted in 2022,and the service hours accumulated reached 31,760 hours,with a total investment of NT$223.07 millionResponses to major incidents(e.g.,Hualien and Taitung Earthquake),volunteer services,and dedications in environmental education282022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixGenerate economic value and returns through the effective management of financial resourcesFinanceStrengthen TSMCs knowledge capital through continued investment into innovative R&D and patentsIntelligenceReduce consumption of natural resources and maintain optimal usage efficiency through source management EnvironmentProvide services that customers need and carefully maintain manufacturing resources for equipment and buildingsManufacturingRecruit like-minded talent and strengthen talent cultivation so employees may grow with the CompanyHuman ResourcesGive back to society and obtain its trust through social participation SocietySustainability ImpactThe long-term value of a company hinges on positive impacts generated and negative impacts mitigated for stakeholders,which includes driving output value from the semiconductor industry chain,helping customers leverage the competitive edge of products,protecting natural ecosystems and biodiversity,creating direct and indirect job opportunities,and preventing health or safety hazards.The Triple Bottom Line(TBL)is a sustainable impact management framework developed by TSMC.TBL is grounded in the Companys six major capitals,four core elements,six sustainable management competencies,and an Environmental Profit and Loss(EP&L)valuation model.It aims to,from an Outside-In perspective,measure changes and contributions to the well-being of humans from the Companys overall value chain and facilitate communication with stakeholders in the hopes of driving economic growth,reducing resource depletion,and further bettering the well-being of society as a whole.Six Major CapitalsProcess and MethodsOperational Impact:Employee Cohesion Operational Risks Revenue Growth Customer SatisfactionValue Chain:Procurement TSMC Operations Customer UseInnovation R&D Innovation Management Product Quality and SafetyEnvironmental Management Climate and Energy Water Stewardship Circular Resources Air Pollution ControlHuman Resource Management Diversity and Inclusion Talent Retention and Cultivation Talent Development Human Rights Occupational Safety and HealthCustomer Service Customer RelationsSupply Chain Management Sustainable Supply ChainStakeholder Engagement Social ImpactSixSustainableManagementCompetenciesIntegrityLeadershipSenior Management SupportChairman Dr.Mark Liu is personally engaged in ESG efforts and has invited senior executives to lead their functional organizations in proposing sustainable solutions based on core competencies in order to expand positive influenceESG GovernanceThe ESG Steering Committee and ESG Committee meet regularly to formulate long-term strategies,engage in interdepartmental communication and cooperation,as well as supervise program progress and performance to maintain momentum for sustainability within the organizationMid-level Management ParticipationMid-level management is the backbone of the Companys pursuit of sustainability,cooperating across organizations and departments in the face of complex sustainability issues to bring about real changeFoster an organizational culture that doesnt make commitments casually,but is fully devoted to the commitment when it does.Set long-term goals for sustainability issues,strive for change,review progress regularly,and continue to commit to doing better(continue on the next page)Four Core ElementsOrganization Culture292022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixTSMC has established a Sustainability Impact Strategy Map derived from causal relationships by converting all positive impacts(values)and negative impact(costs)into monetary values,beginning from the direct and indirect impacts of upstream procurement,TSMC operations,and customer use.Economic Impacts Environmental Impacts Social Impacts Operational Input/Output Measures to mitigate negative impacts Causal RelationshipIndirect ImpactDirect ImpactIndirect ImpactUpstream ProcurementCompany OperationsNegative Impact Positive Impact Investors:Provide reliable dividends and returns to investors Customers:Help customers realize product application and success Suppliers/Contractors:Drive output value and transformation in the semiconductor industry Government/Industry Associations:Generate tax revenue and social welfare for the government Society:Protect natural capital through EP&L Employees:Create job opportunities and employee benefitIndustry Output Value Drive by TSMCCompensationOccupational InjuryOccupational InjuryProcurementDemandEnergy-efficientSalesEnergy-efficientIndustry Supply&DemandProduction/OperationsOptimal Surface AreaResourceConsump-tionResourceConsump-tionCustomerDesignsJob Oppor-tunitiesJob Oppor-tunitiesHigh PerformancePollutantEmissionsPollutantEmissionsAdvancedProcessesSuppliers GuidanceReduction GoalsSource ReductionEnergy Efficient ProcessesReuseTerminal ControlWater ConsumptionAir PollutionWater ConsumptionAir PollutionWasteEffluentsGreenhouse GasesGreenhouse GasesEffluentsNet RevenueDepreciation/AmortizationTaxesNetIncomeR&D PatentsCashDividendCompensationCorporate VolunteerEnergy-efficientProductsInnovative ProductsCustomer UseSustainability Impact Strategy MapNote302022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixSustainable ValueImpacted Stakeholders:Shareholders/Investors Customers Suppliers Contractors Society Government/Industry Associations EmployeesESG Dimensions:Economic Environmental SocialImpact Attributions:Direct Impact Indirect ImpactHistory Data(20182022)Unit:NT$MillionMonetary ValueImpact Level1,000,000 500,000 to 1,000,000 100,000 to 500,000 50,000 to 100,000 10,000 to 50,000 1,000 to 10,000 100 to 1,000 0 to 100 IndicatorsImpact AttributionsESG DimensionsImpact LevelImpact TrendImpacted StakeholdersSupply Chain Output Value Driven by TSMC Supply Chain Employee CompensationNote 4 GHG from the Supply ChainNote 2 Air Pollution from the Supply ChainNote 2 Effluents from the Supply ChainThe methodology is developingWater Consumption from the Supply ChainThe methodology is developingContractor Employee Occupational InjuryNote 3 Cash Dividend Net Income Net Revenue Depreciation&Amortization Taxes Employee Compensation Occupational InjuryNote 3 Corporate VolunteersNote 5 GHGNote 1 Air PollutionNote 1 WasteNote 1 EffluentsNote 1 Water ConsumptionNote 1 R&D PatentsThe methodology is developingEnergy-efficient ProductsNote 6 Innovative ProductsThe methodology is developingUpstream Procurement TSMC Operations Customer Use Note 1:Environmental Profit and Loss(EP&L)presented in this section is the monetary assessment of possible external impacts from TSMCs purchasing and production.For the costs and economic benefits arising from the implementation of environmental protection projects,please refer to Environmental Cost in TSMCs 2022 annual report.For the EP&L methodology,please refer to the TSMC 2022 Environmental Profit and Loss(EP&L)ReportNote 2:EP&L of the supply chain includes only Tier 1 suppliers which had more than three transactions with TSMC per year and with amounts exceeding NT$10 million.A total of 1,050 suppliers meet the criteria.Their environmental impact is then calculated through Environmentally Extended Input Output(EEIO)analysisNote 3:Value of Occupational Injury=Cost of Occupational Injury Medical Expenses Amount TSMC is Willing to Pay to Prevent Occupational DisastersNote 4:Supply Chain Employee Compensation=Procurement amount is input into the EXIOBASE 2 database and calculated using relevant compensation coefficients based on the suppliers industry and locationNote 5:Corporate Volunteer Value=Volunteer Service Hours*Average TSMC Employee Hourly IncomeNote 6:Product energy saving data is calculated based on the research model proposed by Industry,Science and Technology International Strategy Center,ITRI in 2020.Since the model predicts future scenarios using global power usage conditions up until 2020,the estimated calculation of product energy saving is calculated since 2020312022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixIn the upstream procurement stage,TSMC leverages its leadership position in the global semiconductor industry to improve the technology and capability of local suppliers.TSMC employs an input-output model to assess output value,job opportunities,and income created from TSMCs procurement demands as well as the resulting economic growth and improvements in living conditions.To address supply chain sustainability issues,TSMC is actively promoting a responsible supply chain,using environmentally extended input-output(EEIO)analysis to identify environmental hot spots in the supply chain,and evaluating raw material suppliers with Life Cycle Assessment(LCA)to identify the environmental impact from production and service processes.TSMC aims to collaborate with suppliers to uncover opportunities for change and growth to help drive sustainable transformation.In 2022,TSMC created an output value of NT$2,070.8 billion in the supply chain through procurement,generated 309,000 job opportunities and NT$238.52 billion in payroll through the supply chain.Contractors occupational injuries resulted in NT$1.72 million in social costs.The environmental footprints and resource consumption generated from raw material supply resulted in an environmental cost of NT$16.5 billion environmental cost.Through consultation and goal setting,TSMC will cooperate with suppliers to uncover the opportunities for process optimization and environment footprint minimization.For details,please refer to the TSMC 2022 Environmental Profit and Loss(EP&L)Report.In the operation stage,TSMC uses a Gross Value Added(GVA)approach to assess the positive impact generated for stakeholders by operations.Such positive impact may include equal employment opportunities,competitive compensation and benefits,cash dividends,taxes,depreciation and amortization,and others.TSMC also applies Willingness to Pay(WTP)and Value Transfer to evaluate the social cost and benefits of occupational injury and volunteer activities.Meanwhile,the Company continues to employ environmental profit and loss(EP&L)to measure the negative impacts generated from energy/resource consumption and pollution from the production process.In 2022,TSMC generated NT$2,263.9 billion in operating revenue,booked NT$437.3 billion in depreciation and amortization,and issued NT$285.2 billion in cash dividends.TSMC not only helped customers succeed,but also offered good returns to its investors.In the social dimension,TSMC paid NT$340.9 billion in taxes and payroll,supported the government in expanding infrastructure and social welfare,improved quality of life,and drove economic growth.Volunteer services from TSMC also created NT$52.86 million in social benefits,while occupational injuries resulted in NT$9.3 million in social costs.In the environmental dimension,environmental footprints and resource consumption generated from production process or when delivering services resulted in an environmental cost of NT$17.89 billion.To mitigate the environmental impact,TSMC proactively drives green manufacturing by working on creating positive impact through source reduction,energy conservation in manufacturing process,circular economy,and terminal control.For details,please refer to the TSMC 2022 Environmental Profit and Loss(EP&L)Report.In the customer use stage,TSMC continues to develop world-leading energy-efficient semiconductor technologies to help customers produce advanced,energy-efficient products and facilitate the evolution of energy-saving ICT technologies and product applications to fulfill the commitment to green manufacturing from the inside out.The Industry,Science and Technology International Strategy Center(ISTI)conducted a model analysis based on global energy consumption,GDP,and the number of electronic products,and found that the products TSMC produces for customers will conserve 217,100 GWh in 2030,representing four times the energy consumed during production and a positive impact of NT$174.2 billion generated.TSMC effectively facilitates global energy conservation by continuing to innovate semiconductor technologies to realize smart applications for a wide range of electronic products.TSMC deployed 288 distinct process technologies,and manufactured 12,698 products for 532 customers in 2022 to continue to bring significant contributions to the advancement of modern society.For details,please refer to Innovation Management in this Report.TSMC continues to innovate in green technology and strives to reduce the environmental impact from its operations322022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixTSMC is dedicated to reducing environmental and social impacts and introduced EP&L in 2018 to evaluate environmental externalities and resulting social costs created from the production process.In 2019,TSMC further applied EP&L to the upstream supply chain,converting the environmental impact generated from product life cycles into external social costs,identifying significant environmental impact factors to formulate improvement measures and reduce the environmental externalities and social costs generated from TSMC procurement.In terms of TSMC operations,in 2022,environmental externalities were mainly derived from GHG emissions(96.5%),followed by air pollution(1.2%)and waste(1%).TSMCs overall and unit environmental externalities increased from 2021 by 10.6%and 1.3%,respectively,but unit environmental externalities decreased by 12.5%compared with 2018.To reduce GHG emissions,TSMC continues to promote low-carbon manufacturing,increase energy efficiency,and expand use of renewable energy.In 2022,overseas production locations achieved net zero emissions in Scope 1 and Scope 2 for the first time.To mitigate air pollution,TSMC adopts Best Available Technologies(CAT)to reduce emissions of two major pollutants acid&alkali gases and volatile organic gases and further develops new technologies to reduce PM2.5 and nitrous oxide emissions.To prevent and control water pollution,TSMC continues to focus on introducing new treatment technologies to lower chemical oxygen demand(COD)in wastewater and reduce the water pollution composite indicator.In terms of the supply chain,environmental hot spot analysis of the supply chain reveals the most significant externalities as particle pollutants impact on human health,followed by the social cost of carbon from GHG emissions.To reduce impacts from air pollution emitted by the supply chain,TSMC helps suppliers mitigate pollutant emissions from the source through environmental protection audit programs.For example,TSMC helps suppliers convert oil burners to natural gas burners,effectively reducing PM2.5 and GHG emissions,and this successful case study was shared with other suppliers at the TSMC Supplier Sustainability Forum.In addition,TSMC found that chemical materials account for 43.2%of environmental externalities produced by the supply chain,as such,the Company conducted audits on critical raw material suppliers.As of 2022,TSMC has audited 95 raw materials and discovered that OSAT and Substrate the largest number of environmental externalities out of all raw materials.TSMC continues to roll out a variety of green and innovative practices to reduce environmental impacts from production processes at TSMC facilities.TSMC is also asking suppliers to establish management systems as well as energy saving,water conservation,GHG emissions,and waste reduction goals.The company hopes to work with suppliers to create a green,low-carbon supply chain,reduce environmental impacts from operating activities,and create positive influence on society together.For more details,please refer to TSMC 2022 Environmental Profit&Loss(EP&L)Report.12.5crease in environmental externalities per unit product(compared with 2018)1,050Tier 1 suppliers analyzed for environment hot spot 95Accumulated critical raw material audited(22 items increased in 2022)Environmental Externalities TrendsGHGAir PollutionWater ConsumptionEffluentsWasteEP&L Intensity(NT$/12 wafer mask layer)202115.580.040.240.180.15202014.570.040.210.170.12201913.160.030.210.120.0912.430.030.250.100.092018Unit:NT$billion202217.260.05 0.220.170.18Environmental Hotspot Analysis of the Supply Chain 7.5%8.1%1.8%2.8C.2%9.0%ChemicalsOthers NotePollution ControlMetalsElectronic ComponentsConstruction EngineeringMachinery&Equipment27.6%Note:Others include:Textile products,paper products,printing and reproduction of recorded media,plastic products,computers,electronics,and optical products,electrical equipment,retail,land transport,transport auxiliaries&storage,food&beverage,communication services,telecommunication services,information services,professional,scientific,and technical services,rental,support services,medical care&healthcare,and other services26.8128.2425.1023.1823.47332022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixTSMC shares experiences on energy conservation with suppliers to strengthen sustainability actionsCase StudySupply Chain Energy Conservation and Carbon Reduction InitiativesIn 2022,TSMC leveraged EP&L analysis to compare chemical and gas suppliers against peers producing the same products and using the same raw materials to conduct variance analysis.TSMC discovered that suppliers with ISO 50001 Energy Management System certificates have significantly better energy use efficiency than those without.Given such findings,TSMC has formulated three major initiatives to help the supply chain conserve energy and reduce carbon emissions.TSMC hopes to help suppliers evaluate environmental risks and opportunities,reducing resource consumption through a series of initiatives targeting energy conservation and carbon reduction.This can further strengthen the supply chains green performance and resilience,striving towards a low-carbon economy.Three MajorInitiatives to Help the Supply Chain Conserve Energy and Reduce Carbon Emissions23Require critical energy-intensive suppliers to obtain ISO 50001 Energy Management System certificates and include ISO 50001 as a requirement in TSMC Supplier Sustainability StandardsContinue to work with Industrial Development Bureau of Ministry of Economic Affairs(MOEA)to roll out energy conservation and carbon reduction support programs targeting critical suppliers and share TSMCs energy conservation experiencesHelp critical suppliers introduce energy conservation and low-carbon concepts when designing new facilities.Main programs include adopting low-carbon raw materials and energy-efficient equipment,as well as complying with green building standards and ISO 50001 Energy Management System1342022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixCarry Out the UN Sustainable Development GoalsTo support the United Nations Sustainable Development Goals(UN SDGs)and trends in corporate disclosure,TSMC has complied with Integrating the Sustainable Development Goals into Corporate Reporting:A Practical Guide jointly published by the Global Reporting Initiative(GRI)and The United Nations Global Compact to identify SDGs relevant to the Company,and has published CSR Reports since 2017.In 2022,TSMC further adopted five disclosure categories Plans,Commitments,Actions,Progress,and Suppliers defined by GRI and Support the Goals to disclose TSMCs practices and progress toward SDGs.The Company also decided to expand the single stakeholder from supplier to also cover employees,shareholders/investors,customers,contractors,governments/industry associations,and the society to connect more resources and extend the scope of influence.Achievements in related actions have been published in TSMCs first UN SDGs Action Report.In 2023,TSMC will issue the second UN SDGs Action Report to demonstrate our support for The 2030 Agenda for Sustainable Development.Under the leadership of ESG Steering Committee Chairman Mark Liu,TSMC continued to spotlight nine SDGs:SDG 3(Good Health and Wellbeing),SDG 4(Quality Education),SDG 6(Clean Water and Sanitation),SDG 7(Affordable and Clean Energy),SDG 8(Decent Work and Economic Growth),SDG 9(Industry,Innovation and Infrastructure),SDG 12(Responsible Consumption and Production),SDG 13(Climate Action),and SDG 17(Partnership for the Goals).TSMC has initiated 23 ESG actions and set 52 measurable long-term goals for 2030 to effect change through tangible actions.An Innovation PioneerAs the worlds largest dedicated IC foundry,TSMC works with customers to accelerate and unleash innovation through its its pioneering business model and robust R&D capabilities to drive infinite possibilities in technological progress and sustainable developments through the ubiquitous semiconductorA Responsible PurchaserTSMC is committed to responsible purchasing and works closely with supply chain partners on technology,quality,delivery,human rights,and environmental protection.In the face of serious climate change challenges,the Company will further strengthen green innovation and climate resilience and strive to create a low-carbon semiconductor supply chainA Practitioner of Green PowerTSMC aspires to be a world-leading benchmark organization in environmental protection and actively integrates green management into daily operations.The Company applies innovative technologies to climate and energy,water management,circular resources,and air pollution control,promoting a comprehensive range of sustainable actions to strengthen environmental protection and act on our firm belief in prospering with the earths ecosystemAn Admired EmployerTSMC values its commitment to employees and works to foster a humanistic workplace culture with open communications.The Company is dedicated to promoting a diverse,inclusive,safe,and fun workplace where employees can continue to learn.TSMC also provides competitive compensation and welfare,striving to be a company that employees can be proud ofPower to Change SocietyCommitted to uplifting society,the TSMC Education and Culture Foundation and TSMC Charity Foundation spotlight the changing social landscape and its needs.The two foundations integrate and invest internal and external resources to empower young students of all ages,care for remote areas and the disadvantaged,elderly people living alone,and foster art and cultural literacy to lay the foundation for a society with common good,beauty,and kindnessTSMC identifies the link between SDGs,the five sustainability roles,and value chain stages through the following three steps:Understand&Prioritize SDGs,Goals&Integration,and Disclosure and Communication.Long-term goals and action plans are then formulated accordingly.TSMC Sustainability RolesProcess and Reporting23Sustainable Actions台積公司採購 原 物 料、設備及相關服務 Cooperate with stakeholdersDeclare support for SDGsSet measurable goalsTake actionsTrack progressCooperationProgressCommitmentPlanActionUpstream Procurement TSMC purchases raw materials,equipment,and related services TSMC offers wafer fabrication and packaging/testing services TSMC provides fully-produced customer productsDrive Green ManufacturingImplement green production,innovate high-efficiency semiconductor technologies to mitigate climate change,and pursue sustainable developmentBuild a Responsible Supply ChainCollaborate with suppliers and contractors to promote sustainable operations and manufacturing standardsCreate a Diverse and Inclusive WorkplaceEstablish a safe and healthy workplace that respects human rights and unleashes employees full potential Develop TalentSupport career development and collaborate with academia to develop STEAM(Science,Technology,Engineering,Art and Mathematics)programs that cultivate talent Care for the DisadvantagedAggregate resources to deploy educational,cultural and social programs that reduces inequality and uphold the common goodESG Directions52Long-term Goals9SDGsUnderstand and Prioritize SDGs1Goals and Integration2Disclosure and Communication 3TSMC OperationsCustomer Use2022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendix35Provide customers process technologies/advanced packaging technologies944/129Innovative testing methods developed for quality and reliability to enhance product,technology and quality272Patent applications globally/trade secrets registered8,500/40,000As the worlds largest dedicated IC foundry,TSMC works with customers to accelerate and unleash innovation through its pioneering business model and robust R&D capabilities to drive infinite possibilities in technological progress and sustainable developments through the ubiquitous semiconductor.An Innovation PioneerInnovation ManagementProduct Quality and SafetyCustomer Relations2022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendix36Innovation Management2030 Goals2023 Targets2022 AchievementsMaintain Technology Leadership Continuous investment in advanced technology development to maintain TSMCs technology leadership in the semiconductor industryMaintain TSMCs technology leadership and invest 8.5%of revenue into R&D expenses annuallyMaintain TSMCs technology leadership and invest 8.5%of revenue into R&D expenses annuallyInvested 7.2%of revenue into R&D Target:8.5%Note1Begin volume production of enhanced 3nm process(N3E)3nm process technology in volume production Target:3nm process technology in volume productionProtect Intellectual PropertyPatent protection:Strengthen quality and quantity driven patent management,apply early for patents on next-generation process technologies,and expand the patent protection network to maintain TSMCs technology leadershipTrade secret protection:Strengthen business operations and intellectual property innovation by recording,consolidating,and utilizing trade secrets with competitive corporate advantages through trade secret registration and managementOver 80,000 global patent applicationsExceed 7,500 global patent applicationsSubmitted over 8,500 global patent applications Target:6,600Over 200,000 trade secret registrationsExceed 40,000 trade secret registrationsRegistered over 40,000 trade secrets Target:25,000 Share TSMCs trade secret registration mechanism with eight companiesShared TSMCs trade secret registration mechanism with 17 companies Target:6Assist six companies to successfully build a trade secret registration and management systemAssisted 12 companies to successfully build a trade secret registration and management system Target:2Exceed 500 green trade secret registrationsEnhance Industry-Academia CollaborationLink academic institutions in Taiwan and overseas by investing resources in university programs based on a long-term mechanism for interaction to cultivate the next-generation semiconductor talentCultivate more than 8,000 undergraduate and graduate students globally through university programs that deepen industry-academia collaboration Note 2Cultivate more than 8,000 undergraduate and graduate students globally through university programs to enhance industry-academia collaborationLaunched a variety of industry-academia collaboration projects,reaching 6,800 undergraduate and graduate students globallyTarget:5,500Cultivate more than 35,000 undergraduate and graduate students globally through university programs that deepen industry-academia collaboration between 2021 and 2030 NEWCultivate more than 10,000 undergraduate and graduate students globally through university programs that deepen industry-academia collaboration between 2021 and 2023 NEW Exceeded Achieved Missed TargetNote 1:Since 2013,TSMC has consistently set new revenue and R&D expense records every year.The decline in R&D expenses to revenue percentage in recent years can largely be attributed to revenue growth outpacing growth in R&D expenses.In 2022,R&D expenses amounted to US$5,472 million,3.4 times more than ten years ago.For historical data on revenue and R&D expenses,please see Continuous Investment in R&DNote 2:Industry-academia collaboration projects include various academic programs,internships,cooperative education programs,etcStrategies372022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixOriginating from Dr.Morris Changs ground-breaking idea of being everyones foundry,TSMC became the worlds first dedicated IC foundry in 1987 and has since given rise to a thriving fabless IC design industry.TSMC continues to drive innovation and improve peoples lives and societies with technology.Innovation remains,to this day,a proud corporate value and integral cornerstone for technology leadership.Within the Company,TSMC encourages employees to innovate by launching innovation-sharing platforms,contests,and other incentives for different organizations.Outside of the Company,TSMC explores product innovation with customers,fosters new talent with schools and research institutes,and advocates for a green supply chain with upstream and downstream suppliers.TSMC remains consistently devoted to innovation both internally and externally.Innovation Management Framework Idea Forums with participation from organizations including Operations R&D Quality and Reliability Corporate Planning Finance Innovation Cases TSMC Enables More Than 1,500 Startup Customers Worldwide to Plant Seeds of Innovation Strengthen Yield Monitoring System with AI;Effectiveness of Auxiliary Recognition Model Reaches 98%Consistent Efforts to Optimize Energy Efficiency in EUV Tools Save 60 GWh Electricity per Year Open Innovation Platform(OIP)Collaboration with world-class R&D Institutes Industry-Academia Collaboration University Research Center Industry-Academia Joint Development Project University Shuttle Program National Academy for Key Fields of Research Technology Leadership Intellectual Property Protection Comprehensive Patent Management Mechanism Trade Secret Protection Intelligent Precision ManufacturingAccumulate Internal Innovation EnergyInnovate through Cross-Sector CollaborationEnable Innovation Course Collaboration Semiconductor Programs FinFET Academic Design Foster Package(ADFP)Career Guidance TSMC Ph.D.Scholarship TSMC High School Semiconductor Mini Courses TSMC Girls in STEM Program for High School Total Quality Excellence and Innovation Conference(TQE)ESG AWARD Technology Board Conference Corporate Research Seminar Green Energy Cycle:2.2 kWh of Green Energy from 1 Metric Ton of Organic Sludge Improve Corona Technologies in Air Pollution Control Equipment to Reduce Alkaline Gases and PM2.5 by over 90%Artificial Intelligence(AI)Job Hazard Analysis Technology Enhances Workplace Safety382022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixMaintain Technology LeadershipIn 2022,TSMC continued to increase R&D investments,with annual R&D expenses accounted for 7.2%of total revenue,a 22.5%growth from last year.The Company has expanded R&D organization which now has 8,558 employees,a 9.6%growth from last year.TSMCs R&D investments paralleled those of world-leading tech companies.To address the challenge with Moores Law,TSMCs R&D organization provides customers with advanced technologies and design solutions to help them achieve product success.In 2022,N3E,the enhanced 3nm process technology,entered risk production.In the same year,TSMC also pioneered 2nm technology development by successfully entering the stage of baseline setup and yield learning.TSMC will continue to conduct exploratory research into technology innovation beyond 2nm.In addition to CMOS logic technology,TSMC is also developing a wide range of semiconductor technologies to meet customer demands on SoCs for mobile and other applications.The existing scope of application includes integrated interconnect and packaging solution,microcontrollers,virtual reality,edge-computing,etc.In 2022,TSMC continued to work closely with world-class research institutes and world-leading universities such as the Semiconductor Research Corporation(U.S.),Interuniversity Microelectronics Centre(Belgium),etc.,to develop semiconductor materials and design transistor structures.We aim to uphold Moores Law and cultivate talent to usher in a new angstrom era for the semiconductor industry.Continuous Investment in R&DRevenue(US$1 million)R&D Expenses(US$1 million)Percentage of R&D Expenses in Consolidated Revenue(%)201217,1201,366201834,2002,850201425,1701,875202045.5103,720201629,4302,211202275,8815,472201320,1101,621201934,6302,959201526,6102,067202156,8204,465201732,1052,6517.57.97.27.88.27.48.58.18.38.08.3R&D and Revenue Growth Ratio over the YearsRevenue Growth RateR&D Expenses Growth Rate 2013201820142020201620222019201520212017146(37726520006538896360492022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendix20202021Technology Leadership and InnovationCMOS Logic TechnologiesSpecialty Technologies/Interconnect and Packaging TechnologiesReceived CoWoS-S certification for Gen-3 HBM,silicon interposer now contains sub-micron routing layers and integrated capacitors(iCap)so that various chiplets such as SoC,HBM can be placed on itSuccessfully qualified InFO-PoP Gen-8 for mobile applications with enhanced thermal performance;launched R&D for next generation InFO PoP,which will introduce backside redistribution layerSuccessfully qualified InFO-oS Gen-4,which provides more chip partition integration with larger package size and higher bandwidthOptimized quality factors of 5V components on 55nm BCD targeting power switches for portable devices;continued to expand 40nm,22nm,and 0.13 micron BDC technologies to meet automotive market demands28nm eFlash entered volume production,which can support mobile HPC and high-performance low-leakage platforms Successfully risk-produced the worlds smallest voltage domain global shutter CMOS image sensor chip with 3-wafer stack technology for near infrared and security cameras marketPrepared 22nm RRAM for volume production as a low-cost embedded non-volatile memories solution for price-sensitive IoT marketsQualified the fifth-generation chip on wafer on substrate(CoWoS)with record-breaking Si interposer area up to 2,500 mm2,which can accommodate at least two SoC logic and eight high bandwidth memory(HBM)chiplet stacksSuccessfully qualified InFO-PoP Gen-7 for mobile applications with enhanced thermal performance Initiated high-volume manufacturing of InFO-oS Gen-3,which provides more chip partition integration with larger package size and higher bandwidthExpanded the 12-inch BCD technology portfolio on 90nm,55nm,40nm,and 22nm processes,targeting diverse mobile power management ICs applications with different integration levelsMaintained stable high yield and achieved technical qualification of 28nm eFlash for consumer electronics grade and automobile electronics grade-1 applicationsAchieved 13%pixel size scaling down on Quad Phase Detection(QPD)CMOS image sensors structure for the mobile imaging market28nm and 40nm RRAM entered volume production as a low-cost solution for the price-sensitive IoT market2022Pioneered the industrys first 5nm process technology in volume productionPioneered the industrys first 3nm technology in risk productionPioneered the industrys first 3nm process technology in high volume productionN3E,the enhanced 3nm technology,successfully entered risk productionAccomplished process validation of TSMC-SoIC for both chip-on-wafer(CoW)and wafer-on-wafer(WoW)stacking using micron-level bonding-pitch processes with promising electrical yield and reliability resultsEntered high-volume manufacturing of InFO-PoP Gen-5 packaging for mobile application processors and successfully qualified InFO-PoP Gen-6 for mobile applications with enhanced thermal performanceDeveloped InFO-oS Gen-3,which provides more chip partition integration with larger package size and higher bandwidth Expanded the 12-inch Bipolar-CMOS-DMOS(BCD)technology portfolio on 90nm,55nm,and 22nm processes,targeting a variety of fast-growing applications for mobile power management ICs with various levels of integrationAchieved technical qualification of 28nm eFlash to support automobile electronics and MCU applications CMOS image sensors technology entered volume production,with shrunk sub-micron pixel size and sensors meeting automotive grade reliability complianceBegan production of 28nm RRAM technology as a low-cost solution to support the price-sensitive IoT marketAchieved technical qualification of 22nm magnetic random access memory(MRAM)technology to successfully volume produced MRAM and received the Flash Memory Summit 2020s Best of Show award for the most innovative AI application402022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendix3nm Fin Field-Effect Transistor(FinFET)(N3)technologyCustomer products in high volume production with the industry-leading yieldLed the industry by introducing the most advanced products4nm Fin Field-Effect Transistor(FinFET)(N4)technologyLed the industry to start volume production for customer productsIntroduced products with the industry-leading performance and energy efficiencyThe performance-enhanced 5nm FinFET technology N5PEntered its second year of volume production for various customers products Introduced products with the industry-leading performance and energy efficiency6nm FinFET(N6)technology Widely adopted in mobile,high performance computing,and consumer electronics productsIntroduced products with the industry-leading performance and energy efficiencyN6 radio frequency(N6 RF)technologyReceived multiple customer product tape-outs Introduce products with the industry-leading RF performance and cost-effectiveness16nm FinFET Compact(N16FFC)MRAM(Magnetoresistive Random Access Memory)TechnologyCompleted reliability qualification,with one million cycles endurance and reflow capabilityIntroduced the industry-leading high performance microcontroller unit(MCU)for automotive and industrial applicationsCMOS Image Sensor(CIS)technologyContinued to help customers gain market leadership by introducing the worlds smallest pixel size productsLed the industry by introducing the most advanced productsTSMC-SoIC(System on Integrated Chip)Chip-on-Wafer(CoW)technologyLed the industry to start volume production for customer products,with significant power and performance improvements Introduced products with the industry-leading performance and energy efficiencyIntegrated Fan-Out with local silicon interconnect(InFO_LSI)technologySuccessfully integrated 5nm SoCs with ultra-high density die-to-die interconnects and entered volume production in 2022Led the industry by introducing advanced productsProcess TechnologiesProduct ApplicationsInnovation/BreakthroughCustomer SuccessFoundry Technology Leadership and Innovation in 20225G mobile communicationsHigh performance computing Consumer electronics True wireless stereo(TWS)WiFi Digital TV/Set-Top Box(STB)Automotive zonal control used new electrical/electronic architecture(EEA)for software defined vehicle Smartphones High performance computing applications412022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixTSMC Continues to Advance Technology to Unleash Customer InnovationSemiconductors have been playing a vital role in the development of human economic civilization,lifestyle and social evolution with greater computing power and better energy efficiency through innovations and breakthroughs.As the trusted dedicated semiconductor foundry service provider,TSMC continues to deliver the industry-leading,next-generation semiconductor technologies,with higher chip density and lower power consumption.The Company also offers comprehensive specialty technologies and leading 3D chip stacking and packaging services to help customers unleash different types of innovation and deliver more advanced,more capable,more energy-efficient,and more affordable electronic products.One noteworthy example is our collaboration with AMD on building its leadership high-performance and adaptive computing products to help address the fast-growing compute demand from increasing adoption of cloud computing services,digital transformation,transition to exascale supercomputing,and the growing deployment of AI and high-speed 5G networks.In 2022,combining AMD design innovation and TSMCs industry-leading 5nm technology process,AMD brought its 4th Gen EPYC processors to market.With up to 96 cores in a single processor,the 4th Gen EPYC processors power the most energy efficient x86 servers.They offer leadership performance,energy efficiency and next-generation architecture,to accelerate data center modernization for high application throughput and more actionable insights.The 4th Gen EPYC processors can also help companies advance sustainability goals by deploying efficient,powerful servers to meet workload demands and help reduce power,energy costs,and server footprint.In addition,in the November 2022 Top500 list,Frontier supercomputer at Oak Ridge National Laboratory(ORNL)in the US,powered by AMD optimized 3rd Gen EPYC processors and AMD Instinct MI250X accelerators using TSMCs 7nm process technology,topped the list with 1.1 exaflops for the second consecutive time.Frontier is the worlds first supercomputer that breaks the exascale barrier,and it is more than twice as powerful as the next system on the list and more powerful than the next four systems combined.Comparison of Chip Die Size on Different TechnologiesNote:The logic chip/SRAM/IO(input/output)ratio,which affects die size and power consumption,was re-aligned55nm110nm0.06328nm0.255nm0.03540nm0.487nm0.04716FFC/12FFC0.113nm0.026Comparison of Chip Total Power Consumption on Different TechnologiesNote:The logic chip/SRAM/IO(input/output)ratio,which affects die size and power consumption,was re-alignedN55LP(1.2V)110nm(0.75V)0.056N28HPM(0.9V)0.35nm(0.75V)0.022N40LP(1.1V)0.67nm(0.75V)0.03416FFC/12FFC(0.8V)0.073nm(0.75V)0.015 Die size shrinks as line width shrinks More power saved as line width shrinksCollaborate with Customer to Push the Envelope in High-Performance Computing422022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixOn the energy efficiency front,the Frontier Test&Development System at ORNL,also powered by AMD optimized 3rd Gen EPYC processors and Instinct MI250X accelerators using TSMCs 7nm process technology,achieved an efficiency score of 62.68 GFlops/Watts,which was at the top of the June 2022 Green500 list and at the No.2 spot of the November 2022 list.According to the Green500 November 2022 list,AMD powers 75 percent of the top 20 most energy efficient super computers.In addition,using TSMCs process technology leadership,AMD received a 2022 SEAL Sustainable Product Award for innovative and impactful products purpose-built for a sustainable future in data centers and was honored in the Best Sustainability Innovation in HPC category in the annual HPCwire Readers and Editors Choice Awards.With the close collaboration with AMD,TSMC is glad to take part in contributing to the innovation and advancement in supercomputing to ensure scientists and researchers working on solving the worlds toughest and most complex challenges,such as climate change,health care,and transportation,have the most cutting-edge tools for their research.In total,TSMC deployed 288 distinct process technologies,and manufactured 12,698 products for 532 customers in 2022,making continuous contribution to the advancement of modern society.Customer ProductImpact on SocietyProduct Innovation and BreakthroughTSMCs Role AMD 4th Gen EPYC(codename Genoa)processor With up to 96 cores in a single processor,the 4th Gen EPYC processors power the most energy efficient x86 servers Provide industry-leading 5nm process technology with best performance and power advantages Establish a dedicated team to enable deep technology and design co-optimization(DTCO)to speed up product design and volume production Enable datacenters to deploy more efficient and powerful servers to meet workload demands Help lower power,energy costs,and server footprint to advance corporate sustainability goalsAMD collaborates with TSMC to deliver breakthrough 4th Gen EPYC(Genoa)5nm processor to power the most energy efficient x86 servers(Photo courtesy of AMD)432022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixCase StudyTSMC Enables More Than 1,500 Startup Customers Worldwide to Plant Seeds of InnovationTSMC is the worlds first dedicated semiconductor foundry,and this innovative business model has changed the landscape of the global semiconductor industry and enabled the global fabless IC companies to flourish.Todays heavyweight technology companies,including Broadcom,Marvell,and NVIDIA,have been collaborating with TSMC since their early days to continue to unleash innovation around the worldwide.In 2000,TSMC formed a dedicated Emerging Accounts team to support startup companies to accelerate their product innovation.To date,TSMC has worked with more than 1,500 startup companies to advance applications in communication,computing,healthcare,transportation,clean energy and many other new applications.Currently,over 85%of startup companies in the semiconductor industry are engaging with TSMC to develop their prototype products.TSMC strives to be a long-term important partner that customers can trust and rely on for their success.Driven by the passion to enable startup customers success,TSMC hosted a dedicated Innovation Zone for the first time at the 2021 TSMC Online Technology Symposium.In the Innovation Zone of the 2022 in-person/online Technology Symposium,a total of 37 startup customers showcased a wide range of disruptive innovations that aim to make peoples lives better and more sustainable,including cashier-less retail,high-performance computing interconnect,cloud and edge AI,power electronics,augmented reality,satellite-mobile communication,battery-free devices,in-vehicle networks,software-defined touch sensing,5G private networks,and more.Through the interactive demonstration of products,startup customers vividly showcased the splendid future of next-generation semiconductor innovations.Turning the spotlight to Kinara,which was awarded the first Innovation Zone Demo of the Year Award elected by Symposium attendees,showcased a cashier-less retail solution enabled by its edge AI platform.The platform uses a camera and AI system to identify consumers actions and their purchases in real-time with better energy efficiency.The cashier-less retail solution not only brings a convenient shopping experience to consumers but also creates meaningful work for retail cashiers,transforming them into sales consultants who provide value-added advice or retail system administrators.This inspiring story exemplifies how technology drives amazing changes.2022 Innovation Zone Customer Demo By ApplicationTSMC hosted the first in-person Innovation Zone at the 2022 Technology SymposiumU.S.company Kinara received the first Innovation Zone Award for its cashier-less retail solutionHPCSmartphoneOthersDCEAutomotiveIoT110!%3D2022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixtechnology as an example,TSMC introduced 16nm FinFET process technologies in 2013 and became the first to fabricate both 7nm and 5nm FinFET products.In the early stages of FinFET development,TSMC had already filed patent applications.Over the course of 20 years,TSMC has accumulated over 14,000 FinFET patents as it systematically built up patent protection coverage to ensure technology leadership.500 invention patent applications,thus concluding the Groundwork Era.In 1999,the Company entered the Growth Era and filed 1,000 patent applications in 2011.Starting in 2012,the IP team began setting patent application goals based on annual R&D investments,bringing TSMC into the Exponential Growth Era.As of 2022,TSMC has filed over 85,000 global patent applications and consistently reached record highs again and again.Using FinFET Protect Intellectual PropertyIP-based development strategies are increasingly important under trends of globalized economic and trade competition.To fulfill TSMCs vision of sustainable operations,the Company seeks to strengthen its three competitive advantagesTechnology Leadership,Manufacturing Excellence,and Customer Trustby protecting technological innovations and proprietary information through two approaches:patents and trade secrets.For technology leadership,TSMCs IP and R&D teams work closely throughout each step from the beginning of technology planning to risk production and volume production.Such teamwork enables TSMC to build an IP portfolio for each generations critical innovative technology ahead of schedule,including the latest 3nm and 2nm process technologies,to ensure the Companys technology leadership in the semiconductor industry.In manufacturing excellence,TSMC uses rigorous protection measures to secure critical information such as capacity planning,manufacturing process management,and information related to intelligent operations in the form of trade secrets,while also actively applying for patents for manufacturing technology with strategic value to secure the Companys competitive advantage obtained through manufacturing excellence and quality assurance.In maintaining customer trust,TSMC protects confidential information concerning the Company and its customers while maintaining strategic leadership in the global patent ranking.These efforts translate into business success,ensuring the freedom of TSMCs operations around the world and strengthening partnerships with customers.TSMC Patent HistoryThe history of TSMCs robust patent portfolio can be divided into three eras.In 1987,the Company applied for its first patent and has since increased patent applications every year.In 1998,TSMC filed Patent Achievements with Quality and Quantity in 2022Exploratory R&D Patent ApplicationsPatent Applications Patents GrantedPatent Quality8,500global patent applications5,500Worldwide patents granted and the only Taiwanese company in the U.S.top 100100%U.S.patent allowance rate and ranked first among top 10 patentees1stPlace among Taiwan Patent Applicants for seven consecutive years 3rdPlace among U.S.Patentees,setting a new company record 2ndPlace among U.S.Patent Applicants and remained the only Taiwanese company in the top 1001stPlace among Taiwan Patentees for three consecutive yearsPatent GrantsPatent ApplicationsTechnologies2001201220112003200220142013200520042016201520072006201820172009 20102008202020192022202190nm65nm28nm16nm7nm3nm10nm5nm40/45nm20nm0.13mPatent Applications85,000 Patent Grants56,000 452022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixComprehensive Patent Management MechanismTSMCs patent performance stems from its robust patent management institutions and patent management systems.The Company maps out short-,mid-,and long-term patent blueprints using innovative patent strategies and diverse risk control;monitors and evaluates competitive information by patent map navigation;hosts advanced invention workshops to uncover innovations in core technologies;expands the patent family by targeting key technological indicators;and manages patent prosecutions by invention tiers.Through managing the quality of patent applications and expanding patent protection coverage,TSMC has been able to consistently construct a global strategic patent portfolio with equal attention to quality and quantity.In 2022,TSMC was the only Taiwanese company ranked in the top 100 for U.S.patent applications and grants.The patent team has also designed a range of incentive systems including awards for patent invention submission and a big annual IP award ceremony.The Prolific Inventor Award recognizes employees that have received over 100 U.S.patents during their employment at TSMC.As of 2022,there have been 141 Prolific Inventor Award recipients,one of whom holds over 1,000 U.S.patents.A total of 360 patents have been issued from 384 employee inventors that received the New Inventor Award in 2022.In 2022,the patent team also launched a series of patent campaigns,including the Annual Patent Competition,which received 1,663 invention submissions;16 on-site education and training sessions to help employees ideate valuable patents;and the Online Patent Quiz,which saw the participation of around 2,000 employees.Widespread Recognition of Patent Success and Industry IP UpgradesTSMCs patent performance has been recognized by many international IP institutes.The Company ranked first in the semiconductor manufacturing category for IEEEs Patent Power Scorecard,became the first and only company to receive the highest Taiwan Intellectual Property Management System(TIPS)certification(AAA),and ranked in the Clarivate Global Top 100 Innovators and LexisNexis Global Top 100 Innovation Momentum for two consecutive years by index of patent portfolio size and citation strength.In addition,TSMC continues promoting technology and IP upgrades in the industry by communicating with various IP authorities and legal courts,collaborating with academic institutes to develop technology and IP indicators,and spearheading IP strategy alliances for the industrys supply chain.TSMC also helps formulate and amend IP laws and provide suggestions on industry policies to help create a robust patent protection landscape.StrategiesImplementationsDeployment StrategiesEvaluation SystemApplication StrategiesReward SystemMaintenance StrategiesEducation and PromotionUtilization StrategiesTalent Cultivation Industry-academia ExchangeInfringement CountermeasuresPatent Management GuidelineInstitute IP management-oriented operationsStrengthen IP portfolioProtect TSMCs IPs and respect others IPsEnhance IPs and technologies in the industryEnsure freedom of operations around the worldProtect R&D investment and achievementsStrengthen market competitivenessEstablish IP reputation in the industryIP Management Policies IP Management Targets462022 Sustainability ReportSustainable Business PracticesOverviewOperations and GovernanceAn Innovation PioneerA Responsible PurchaserA Practitioner of Green PowerAn Admired EmployerPower to Change SocietyAppendixIntegrated with Human Resources SystemTSMCs trade secret registration system is integrated with the Companys human resources system and automatically updates employees registration information in their personnel file.This serves to highlight employees contributions to TSMCs technological innovations and is an important indicator for supervisors to consider for performance evaluation and promotion.Intelligent Reminder FunctionThe trade secret system automatically compares employees trade secret registration records and reminds them to complete the registration process in a timely manner.Technology ClusterSystematically categorize and annotat
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2022Hitachi Sustainability ReportFiscal 2021 ResultsHitachi Sustainability Report 2022001Introductio.
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SUSTAINABILITYDATA BOOK 2022ContentsAbout the Sustainability Data BookBasic Policies of Sustainability Initiatives“GREEN CHALLENGE 2050”Seven&i Groups Environmental DeclarationStakeholder EngagementCorporate GovernanceComplianceInformation Security and Personal Information ProtectionHuman Rights InitiativesSustainability ManagementRisks and Opportunities Related to SustainabilityResponse to TCFD RecommendationsSeven&i Group Material IssuesMaterial Issues 1Create a livable society with local communities through various customer touchpointsMaterial Issues 2Provide safe,reliable,and healthier merchandise and servicesMaterial Issues 3Realize decarbonization,circular economy,and society in harmony with nature,through environmental effortsMaterial Issues 4Achieve a society in which diverse people can actively participateMaterial Issues 5Improve work engagement and environment for people working in Group businessesMaterial Issues 6Create an ethical society through dialogue and collaboration with customersMaterial Issues 7Achieve a sustainable society through partnershipsDisaster AssistanceDisaster Reconstruction SupportSocial Contribution ActivitiesOverseas InitiativesExternal Recognition and AwardsGHG Emissions Verification StatementData Section24 6101118 2125394252566784128136164179201203205210251255256This report,the Sustainability Data Book 2022,takes a comprehensive look at the principal sustainability initiatives of Seven&i Holdings,the holding company,and its operating companies,focusing on the efforts of each Group company for material issues reviewed in 2022,as well as for activities of overseas operating companies.Reports on efforts of the Seven&i Group toward achievement of the Sustainable Development Goals(SDGs),adopted at a summit of the United Nations in 2015,are accompanied by the relevant SDG logo and icons.Period of the ReportThis report covers our activities during the fiscal year ended February 28,2022(March 2021 to February 2022).Some of our activities in the fiscal year ending February 28,2023 are also included.ReferencesGRI Sustainability Reporting StandardsSASB StandardsISO 26000Date of Issue February 2023DisclaimerThe data shown in this report are based on information as of the time of writing.Actual activities and results may differ depending on future social changes.97.8%Ratio of sales of companies covered by this report to the Group total salesReport CoverageThis report mainly covers the companies listed below.Seven&i Holdings Co.,Ltd.Seven-Eleven Japan Co.,LtdIto-Yokado Co.,Ltd.York-Benimaru Co.,Ltd.York Co.,Ltd.Sogo&Seibu Co.,Ltd.Akachan Honpo Co.,Ltd.Seven&i Food Systems Co.,Ltd.Seven Bank,Ltd.7-Eleven,IncSEVEN-ELEVEN HAWAII,INC.SEVEN-ELEVEN(BEIJING)CO.,LTD.,SEVEN-ELEVEN(CHENGDU)CO.,LTD.SEVEN-ELEVEN(TIANJIN)Co.,Ltd.Chengdu Ito-Yokado Co.,Ltd.Hua Tang Yokado Commercial Co.,Ltd.Seven&i Holdings Co.,Ltd.Sustainability Data Book 20221Basic Policies of Sustainability InitiativesSeven&i Holdings conducts its business activities based on its corporate creed of aiming to be a sincere company trustedby all stakeholders.We have stated the actions for realizing that creed in our Corporate Action Guidelines.The Corporate Action Guidelines present the basic attitudes adopted by all of the Groups Directors,Audit&SupervisoryBoard Members,and employees.The Guidelines comprise the Basic Policy,which sets out the approach of the Group as awhole,and the Code of Corporate Conduct,which sets out rules for conduct.Furthermore,each Group company has established detailed guidelines and conduct rules appropriate for its business formatat the concrete action level and,together with the Guidelines,will keep all new recruits and newly appointed managerialemployees fully informed through their training.In addition,the extent of understanding of the Corporate Creed andcompliance awareness is regularly checked in the Employee Engagement Survey.Corporate CreedWe aim to be a sincere company that our customers trust.We aim to be a sincere company that our business partners,shareholders and local communities trust.We aim to be a sincere company that our employees trust.The Basic Posture of Seven&i Holdings EmployeesCorporate Action GuidelinesBasic PolicyProvision of Safe and High-Quality Products and Services1.Maintenance of Fair and Transparent Transactions2.Cooperation with Local and International Communities3.Respect for Human Rights4.Respect for Diversity and Improvement of Job Satisfaction5.Preservation of the Assets and Information of the Company6.Contribution to a Sustainable Society7.Dialogue with Stakeholders8.Efforts Regarding Social Issues9.Code of Corporate ConductCompliance(Legal Compliance)1.Relationships with Customer2.Relationships with Business Partners3.Relationships with Shareholders and Investors4.Relationships with Local and International Communities5.Relationships between the Company,and Directors,Officers,andEmployees6.Preservation of Global Environment7.Seven&i Holdings Co.,Ltd.Sustainability Data Book 20222Policies for Each MeasureSupport for the United Nations Global CompactSeven&i Holdings supports the 10 principles of the UN Global Compact,a worldwide framework for achieving sustainablegrowth,and carries out CSR activities through its core businesses to fulfill these principles.Addressing the Sustainable Development Goals(SDGs)Seven&i Holdings is working to solve social issues through its business activities,with a view to achieving the SustainableDevelopment Goals*adopted at a United Nations summit held in 2015.Seven&i Group Human Rights PolicySeven&i Group Business Partner Sustainable Action Guidelines“GREEN CHALLENGE 2050”Seven&i Groups Environmental DeclarationBasic Policy Relating to Measures to Contribute to the Prevention of Global WarmingSeven&i Group Sustainable Sourcing Principles and PoliciesQuality PolicyBasic Policy on Social and Cultural Contribution,Social and Cultural Contribution Action GuidelinesUN Global CompactThe international communitys shared goals for attaining the sustainable development of society,the economy,and the environment by 2030,in order to ensure all people enjoypeace and prosperity.*Sustainable Development GoalsSeven&i Holdings Co.,Ltd.Sustainability Data Book 20223“GREEN CHALLENGE 2050”Seven&i Groups Environmental Declaration“GREEN CHALLENGE 2050”Formulated May 2019 Partially revised December 2020 Partially revised May 2021 The Seven&i Group has strived to realize wealthy and convenient lives by responding to various changes in the socialenvironment through the provision of products and services with value.At the same time,various environmental issues andsocial issues(e.g.,external diseconomies)have come to the fore.Solutions to these issues are urgently needed for thesustainable development of society.With awareness of this current situation,our group will further promote a reduction ofour environmental footprint across our entire store network and supply chain.All employees in our group are comingtogether as one to work on preserving the healthy global environment for future generations.Vision ThemeTargets for 20302050 VisionDecarbonizedsocietyReduction of CO2emissionsReduce emissions from group store operationsby 50%(compared to FY2013).Reduce emissions from group store operations to net-zeroReduce emissions across our entire supply chain(scope 3)in addition to our own emissions(scopes 1 2).CircularEconomyMeasures againstplasticContainers used in our original products(including Seven Premium)to be made 50%with environmentally friendly materials(e.g.,biomass,biodegradable and recycled materialsand paper).Containers used in our original products(including Seven Premium)to be made 100%with environmentally friendly materials(e.g.,biomass,biodegradable and recycled materialsand paper).Zero use of plastic-made shopping bags.Shopping bags to be made of sustainablenatural materials(e.g.,paper).Measures againstfood loss and forfood recyclingReduce food waste by 50%at the amountgenerated by unit(amount generated permillion yen in sales)(compared to FY2013).Reduce food waste by 75%at the amountgenerated by unit(amount generated permillion yen in sales)(compared to FY2013)Increase food waste recycling rate to 70%.Increase food waste recycling rate to 100%.Society inharmonywith natureSustainableprocurement50%of the raw food ingredients used in ouroriginal products(including Seven Premium)tobe those that guarantee sustainability.100%of the raw food ingredients used in ouroriginal products(including Seven Premium)tobe those that guarantee sustainability.*We will review our targets in response to changes in the social environment.Identification of the Four ThemesAwareness of the Current SituationThe Seven&i Group operates diverse distribution service business lines(e.g.,convenience stores,supermarkets,department stores and specialty stores).We meet the daily living needs of our customers through these store networks.Atthe same time,we strive to provide the new value demanded by the times and society.This has allowed us to develop astore network with more than 22,700 stores in Japan.We have been able to grow into a company with 22 millioncustomers visiting us a day.(These figures are current as of the end of February 2022.)As a result,the products andservices we provide are enjoyed by many customers.On the other hand,this now has a considerable effect on the globalenvironment.Seven&i Holdings Co.,Ltd.Sustainability Data Book 20224As indicated by the Sustainable Development Goals(SDGs),the whole world is seriously seeking sustainable development.Against this backdrop,it is now essential we proactively reduce our environmental footprint so that our group can growtogether with our customers and participate in development with society.Identification of ThemesTo that end,we first strived to more specifically express our efforts to reduce our environmental impact.We did this byidentifying fields with a particularly high social effect in the environmental impact generated by our business activities.As aresult,we recognize that there are four themes with a large social impact that are especially close to our business activities:CO2 emissions generated by the use of the power necessary in our store operations(e.g.,lighting,refrigeration andfreezing);use of plastic(e.g.,various products,shopping bags and packaging materials);food loss arising from the disposalof products;and product procurement with an impact on the environment and society in the raw material,processing andmanufacturing processes.Target Value SettingWe grasped the current situation for each of these themes to respond effectively to these challenges.We then specificallyindicated our mission and responsibility in the near future of 2030 and in the next generation society of 2050 by settingtargets quantitatively.We consider the stakeholders given in our corporate creed to be a sincere company that is trusted toalso include the future generations.With this in mind,we would like to share our environmental goals“GREEN CHALLENGE2050”with each generation in the future.All Employees Working Together As OneFirst,all the employees in our group will share the purpose and targets of“GREEN CHALLENGE 2050”.We will then work toachieve this in our daily work.At the same time,it is also essential to respond to social diseconomies arising betweencompanies in the process of distribution to achieve these targets.We will expand our close cooperation structure with ourcustomers,local communities,business partners and all our other stakeholders through serious efforts with our wholegroup coming together as one.We will then promote innovation toward the creation of a sustainable society.Launch of Four Theme-based Innovation TeamsWe will work on new innovation under four themes:reduction of CO2 emissions,measures against plastic,measuresagainst food loss and for food recycling,and sustainable procurement.To that end,we will select leaders(executive officersand higher)from supervisory departments in each operating company to promote cross-group efforts to achieve ourtargets for 2030 and 2050.Efforts for reduction of CO2 emissionsMeasures against plastic usageEfforts for effective use of plasticsMeasures against Food Loss/Waste and Measures for Organic Waste RecyclingEfforts for sustainable procurementSeven&i Holdings Co.,Ltd.Sustainability Data Book 20225Stakeholder EngagementSince its foundation,Seven&i Holdings has aimed to be a sincere company,trusted by all of its stakeholders,includingcustomers,business partners,shareholders,local communities,and employees.We believe it is important to strive tounderstand the requirements and expectations that stakeholders have of Seven&i Holdings and the Group,and to respondto these.For this reason,Seven&i Holdings and its Group companies will strive to respond quickly to feedback from ourstakeholders-the opinions,desires,areas of dissatisfaction,requests,and so forth,that we receive through our dialoguewith them.We will reflect this feedback in our management decision making process and business activities.Seven&i Holdings StakeholdersEngagement with StakeholdersMain Engagement MethodsMain Response PolicyCustomersWe constantly think of thingsfrom the customers point ofview,and to earn ourcustomers trust we valuecommunication,and willcontinue to respond to theirfeedback.BusinessPartnersOur products and servicescould not be supplied withoutthe cooperation of our businesspartners.We will rigorouslyobserve laws and regulationsand internal rules relating tofair trade as well as buildrelationships of trust withbusiness partners to ensuremaintenance of safety andsecurity and accounting forhuman rights and theenvironment.We will worktogether with them to carryout our social responsibilities.Daily operationsInquiries to the customerfeedback departmentCustomer questionnairesWebsite community thatinvites customers toparticipateProvide products andservices that enrichcustomers livesImprove products andservices and ensure safetyLabel accurately in an easilyunderstandable mannerManage personalinformation appropriatelyPromote universal designProduct developmentmeetingsQuality improvementmeetingsInformal gatherings withbusiness partnersCSR audits of businesspartnersBusiness Partner Help LineBusiness partnerquestionnairesDevelopment of productsand services through teammerchandisingRigorous fair trade practicesCompliance with laws andregulations through thesupply chain andconsideration for humanrights and the environmentSeven&i Holdings Co.,Ltd.Sustainability Data Book 20226Engagement with StakeholdersMain Engagement MethodsMain Response PolicyShareholdersand InvestorsOur operations areunderpinned by theinvestments of ourshareholders and investors.Torespond to their trust,weemphasize highly transparentmanagement andcommunication and fulfill ourduty of accountability throughdisclosure.LocalCommunitiesWe aim to play anindispensable role in our localcommunities.To this end,byproviding products andservices matching the lifestylesin local communities,encouraging local productionand local consumption andcoexisting with communities,we will promote activities thatcontribute to communitydevelopment.General ShareholdersMeetingFinancial resultspresentationsMeetings with investorsInformation website forinvestors and organizationnewsletterMaximization of shareholdervalue and return profitsProper accountingprocedures and timelydisclosure of informationHighly transparentmanagementAccountability towardbeneficiariesRegional ComprehensiveEconomic Partnerships withlocal governmentsParticipation in communityactivitiesDialogue through industrygroupsProvision of products andservices matching regionalcharacteristicsConsideration for livingenvironments in regionalareasContribution to regionaldevelopmentResolution of social issues incollaboration with NGOs,NPOs,and othersSafe and reliable urbandevelopment incollaboration withadministrative authoritiesSupport for local productionand local consumption,dietary education,child-raising,the elderly,andpeople with disabilitiesProvision of products afterthe occurrence of naturaldisasters and support foraffected areasParticipation in volunteeractivitiesSeven&i Holdings Co.,Ltd.Sustainability Data Book 20227Engagement with StakeholdersMain Engagement MethodsMain Response PolicyFranchiseStore OwnersSeven-Eleven Japan(SEJ)believes that relationships oftrust with owners of franchisestores are the core of itsbusiness,and theserelationships should bemutually beneficial.Throughdialogue with Operations FieldConsultants(OFCs)we buildgood relationships based onstrong mutual trust andcontribute to realizingcomfortable and moreprosperous lives for customers.EmployeesWe aim to realize workplaceswhere employees canparticipate actively and findsatisfaction in their work.Tothis end,we will createworking environments that arefair,just,and considerate ofhuman rights.We will alsocreate environments thatprotect privacy and safety,while helping workers todevelop their capabilities andfacilitate their work./tdRegular OFC visits to storesProduct exhibitionsTraining and workshops byregionOwners organizationnewsletterOwners opinion exchangemeetingOwner consultation deskStrengthening ofmanagement structureStrengthening of storeoperation capabilitiesStrengthening ofpartnershipsConstruction and ongoingimprovement of a highlycompetitive franchisesystemManagement policy briefingsEmployee opinion surveyEmployee trainingSelf-check systems andindividual meetingsInternal portal website andGroup newsletterEmployee Help LineRespect for human rights,diversity,and individualityCreation of discrimination-free workplaces thatconsider human rightsUtilization of diverse humanresourcesOccupational health andsafety and prevention ofworkplace accidentsAchievement of work-lifebalancePreventative care for mentalhealthPromotion of employeehealthTransparent and fairevaluationsRespect for rights,such asthe right for employees toengage in collectivebargainingSupport for development ofemployee abilitiesSeven&i Holdings Co.,Ltd.Sustainability Data Book 20228Engagement with StakeholdersMain Engagement MethodsMain Response PolicyGlobalEnvironmentOur business is dependent onthe blessings of the earthsenvironment.Therefore,wewill provide products andservices taking into accountthe sustainability of theenvironment,whilecooperating with customers,business partners,andemployees to reduce theenvironmental impactthroughout the entire supplychain.Inquiries to the customerfeedback departmentDialogue with product andpackaging materialssuppliersDialogue with national andlocal governments,NPOs,and NGOs,and residents ofstore neighborhoodsDialogue with equipmentand maintenance companiesWaste disposal companiesReduced CO emissions2Reduced energyconsumptionEnvironmental awarenessamong employeesCompliance withenvironmental legislationInstallation of energy savingand environmentally friendlyequipmentWater-saving measuresReduction of waste andpromotion of recyclingReduction of packagingmaterialsPreservation of biodiversityEnvironmentally considerateproducts and servicesSeven&i Holdings Co.,Ltd.Sustainability Data Book 20229Corporate GovernanceSeven&i Holdings mission is to strengthen corporate governance and maximize the Groups corporate value as a holdingcompany that supervises the operating companies under its umbrella.Basic Views on Corporate GovernanceSeven&i Holdings considers corporate governance to be a system for sustainable growth by establishing and maintaining a sinceremanagement structure and continuously increasing the Groups corporate value over the medium and long term in both financial andnon-financial(ESG)aspects to ensure the trust and longstanding patronage of all stakeholders,including customers,business partnersand franchisees,shareholders and investors,local communities,and employees,based on the Corporate Creed.Seven&i Holdingsmission as a holding company is to strengthen corporate governance and maximize the Groups corporate value,and Seven&i Holdingswill strive to achieve this mission through the provision of support,oversight,and optimal resource allocation to its operating companies.Seven&i Holdings ensures the effectiveness of its corporate governance by coordinating audits conducted by the Audit&Supervisory Board Members(Audit&Supervisory Board),including multiple Outside Audit&Supervisory Board Memberswho maintain their independence and have specialized knowledge in such areas as legal affairs and financial accounting,through their actively cooperating with the accounting auditor and the internal audit division,and formulation ofmanagement strategies and supervision of business execution conducted by the Board of Directors,including multipleOutside Directors who maintain their independence and have advanced management knowledge and experience.Seven&iHoldings has adopted this corporate governance structure because it judges the structure to be workable for realizing andensuring Seven&i Holdings corporate governance and for conducting appropriate and efficient corporate management.Seven&i Holdings Corporate Governance System(as of December 1,2022)Details about corporate governance can be found hereSeven&i Holdings Co.,Ltd.Sustainability Data Book 202210ComplianceSeven&i Holdings places absolute priority on compliance with laws and regulations and social norms.We also strive toensure that its corporate governance is functioning soundly and secured by management.Seven&i Holdings Corporate Action GuidelinesThe Seven&i Holdings Corporate Action Guidelines present the behavior that each employee should practice in order torealize the spirit of trust and sincerity expressed in the Groups corporate creed.The guidelines call for employees tocomply with laws,regulations,and social norms,to uphold laws and regulations such as the Act on Prohibition of PrivateMonopolization and Maintenance of Fair Trade as well as internal rules,conduct business under appropriate conditions inline with sound trading practices,and not to have any contact with antisocial groups.Basic PolicyCode of Corporate ConductCompliance SystemSeven&i Holdings has a CSR Management Committee,chaired by the President,and four subcommittees-ComplianceSubcommittee,the Corporate Ethics and Culture Subcommittee,Supply chain Subcommittee,and the EnvironmentSubcommittee.These subcommittees work together with each Group company to promote the Seven&i HoldingsCorporate Action Guidelines and to rigorously enforce compliance.Details of the Seven&i Holdings Corporate Action Guidelines can be found hereProvision of Safe and High-Quality Products andServices1.Maintenance of Fair and Transparent Transactions2.Cooperation with Local and International Communities3.Respect for Human Rights4.Respect for Diversity and Improvement of Job Satisfaction5.Preservation of the Assets and Information of theCompany6.Contribution to a Sustainable Society7.Dialogue with Stakeholders8.Efforts Regarding Social Issues9.Compliance(Legal Compliance)1.Relationships with Customers2.Relationships with Business Partners3.Relationships with Shareholders and Investors4.Relationships with Local and InternationalCommunities5.Relationships between the Company,and Directors,Officers,and Employees6.Preservation of Global Environment7.Seven&i Holdings Co.,Ltd.Sustainability Data Book 202211Internal Whistleblowing SystemSeven&i Holdings has set up the Groupwide Employee Helpline,the Business Partner Helpline,and the Audit&SupervisoryBoard Hotline to prevent conduct that could result in loss of public credibility and to ensure early detection,earlyremediation,and recurrence prevention.The Groupwide Employee Helpline is for receiving reports from employees ofoperating companies in Japan,the Audit&Supervisory Board Hotline is for reports related to management,and theBusiness Partner Helpline is for reports from business partners.The three internal reporting systems have a consultation desk operated by a third party under a service contract and a non-disclosure agreement to protect the privacy of people consulting or whistleblowing,and ensure that the content of theirreports is not disclosed publicly or leaked.The consultation desk accepts reports via email,telephone,or post.(Reports viatelephone are only accepted during service hours.)Once a whistleblowing is received,the company subject to the whistleblowing quickly confirms the facts,corrects anyviolations that are found,and strives to prevent a recurrence.To create an environment that facilitates reporting,reportscan be made anonymously,and our operating regulations stipulate that whistleblowers are not to be subjected todisadvantageous treatment for having made a report.The person is contacted at the end of the month following notificationof completion of the case by the third-party consultation desk to check that they have not suffered retaliation ordisadvantageous treatment.Seven&i Holdings Sustainability Development Department keeps track of the number and nature of the reports for eachGroup company,as well as the status of responses,to ensure that the actions taken by the operating companies areappropriate.In the event of a serious violation or other such incident,a report will be provided immediately to theRepresentative Director,responses will be discussed with the relevant divisions and companies,and the necessary responsemeasures will be taken.In addition,the CSR Department reports on the operational status of the internal reporting systemto Seven&i Holdings Board of Directors.Groupwide Employee Helpline(Internal Whistleblowing System for Employees)The Groupwide Employee Helpline can be used by Group employees,Directors and Audit&Supervisory Board Members,andretirees and their families.To ensure that all employees are aware of the system and its contact points,it is explained in employeetraining and on the intranet,and posters are put up in every workplace and store.Additionally,employees awareness of theGroupwide Employee Helpline is surveyed as part of the Employee Engagement Survey administered once every two years.Procedural Flow for the Groupwide Employee HelplineSeven&i Holdings Co.,Ltd.Sustainability Data Book 202212Audit&Supervisory Board Hotline(Internal Whistleblowing System for Matters Related to the GroupExecutives and the Members of Management)The Audit&Supervisory Board Hotline has been in operation since February 2019 for the purpose of receiving reportsindependent of management related to actions that could potentially result in the loss of social trust in which the directors,members of the Audit&Supervisory Board,executive officers,and other members of management for Group companies inJapan are suspected of being involved,and investigating them.When the Company receives a report,it quickly confirmsthe facts,and the members of the Seven&i Holdings Audit&Supervisory Board work together with the members ofoperating company Audit&Supervisory Boards to correct any violations that are found and strive to prevent a recurrence.Procedural Flow for the Audit&Supervisory Boad HotlineBusiness Partner Helpline(Internal Whistleblowing System for Subcontractors)The Business Partner Helpline can be used by Directors and Audit&Supervisory Board Members,employees,and formeremployees of domestic Group companies business partners.To ensure that business partners are fully aware of thehelpline system and its points of contact,we explain it at briefings for business partners and distribute information inpamphlets.Procedural Flow for the Business Partner HelplineSeven&i Holdings Co.,Ltd.Sustainability Data Book 202213Compliance Education and Training of EmployeesSeven&i Holdings and Group companies endeavor to promote and foster understanding of the Seven&i HoldingsCorporate Action Guidelines among all employees.To this end they have prepared specific guidance for employees on howto put the guidelines into practice in line with the business characteristics of each company.In addition,when undertakingtier-specific group training for organizational levels ranging from new recruits to management,Seven&i Holdings providestraining based on the themes of the Seven&i Holdings Corporate Action Guidelines and compliance.From the fiscal yearended February 29,2016,compliance seminars have been held every year for executives,beginning with the presidents ofSeven&i Holdings and each Group company.In addition,starting in the fiscal year ended February 28,2017,training viae-learning(some employees viewed DVDs)has been periodically undertaken for Group employees in Japan.In the fiscalyear ended February 28,2022,2,818 employees took the training.Compliance Awareness SurveySeven&i Holdings prepares questions related to compliance and periodically conducts the Employee Engagement Survey,an anonymous biennial survey designed to gauge the extent of understanding of the Corporate Creed and complianceawareness among employees.The survey includes questions that measure job satisfaction and the degree of acceptance ofperformance reviews.Groupwide initiatives are implemented to address common issues across the Group that have beenidentified by the survey results.Along with this,Group companies devise measures to tackle the issues faced by eachcompany and strive to make improvements accordingly.Anti-corruptionSeven&i Holdings is a signatory to the UN Global Compact.Based on the spirit of Trust and Sincerity set forth in theCorporate Creed,the Seven&i Holdings is working on anti-corruption,including extortion and bribery,in compliance withthe laws and regulations of the regions in which it operates.The Seven&i Holdings Corporate Action Guidelines states,We conduct transactions based on appropriate conditions byfollowing sound business practices.No transactions should be made for personal gain or benefit.We prohibit the provisionof gifts,entertainment,and financial benefits to public officials or persons equivalent thereto in Japan and overseas.Wealso prohibit the receipt of private benefits from business partners,and do not engage in any form of corruption or fraud,including bribery,illegal political contributions,money laundering,and embezzlement.As a member of the internationalcommunity,we pay close attention to countries,regions,organizations,and individuals subject to international economicand trade sanctions.Each the Seven&i Group company has provided specific guidance for implementing the Seven&iHoldings Corporate Action Guidelines in accordance with its business characteristics and educates its employees.The Seven&i Group reports any suspected violation of compliance,including corruption,to its superiors,and acceptsreports from employees through the Groupwide Employee Helpline,an internal reporting system,and from businesspartners through the Business Partner Helpline.If a serious violation occurs,we report it to the Board of Directors and takedisciplinary action in accordance with internal regulations.The status of compliance with the Corporate Action Guidelines isconfirmed in the Employee Engagement Survey which is held every two years,and the Business Partner Questionnaireswhich are held every year.In addition,we ask our suppliers to prevent corruption and conduct fair transactions in the Seven&i Group BusinessFor more details of the Employee Engagement SurveySeven&i Holdings Co.,Ltd.Sustainability Data Book 202214Partner Sustainable Action Guidelines.We disseminate the guidelines at supplier briefings and confirm the progress of theguidelines through self-check sheets.In China and Southeast Asia,where CSR risks are high,we also conduct compliancetraining for suppliers of outsourced manufacturing of private-brand products.System for Prevention of Noncompliance Regarding Business PracticesSeven&i Holdings,in its Compliance Subcommittee,is working to prevent violations by sharing information on the latestlaws and regulations concerning business practices and measures to address cases of unfair business practices that haveoccurred at Group companies or other companies in the industry.If a case of an unfair business practice occurs,or is suspected,the FT Information Sharing Committee and theSustainability Development Department work together to check the facts with the department and business partnersconcerned.If any issues are found to exist,they are dealt with appropriately according to administrative guidance.Prevention of Noncompliance at Group CompaniesEach Group company has a division to rigorously ensure fair trading practices,such as the FT Committee headed by thecompany president.These divisions are responsible for training the personnel responsible for procurement as regards thelaws and regulations related to contracts,such as the Antimonopoly Act and the Subcontract Act.The status of legalcompliance at each Group company is confirmed through a monitoring survey of each Group company conducted by the FTInformation Sharing Committee.Prevention of Noncompliance Regarding Business PartnersIn the final stage of negotiations with each business partner,to ensure there are no later disagreements between thepersonnel in charge of purchasing at each company and the representative of the business partner,the matters determinedas a result of their discussions are recorded in a standardized format,with each party retaining a copy.Moreover,the Seven&i Group conducts individual employee interviews led by the employees supervisor once every sixmonths.At the individual interviews of personnel in charge of purchasing,their compliance with fair business practices isevaluated and reflected in their compensation package.From the fiscal year ended February 28,2017,the Seven&i Grouphas conducted questionnaire surveys of business partners to confirm whether the speech and behavior of employeestoward business partners follow the Seven&i Holdings Corporate Action Guidelines.In these surveys,business partnersreply to questions anonymously.In the fiscal year ended February 28,2020,a total of approximately 8,800 representativesof business partners responded to questionnaire surveys issued by Group companies.Seven&i Holdings Corporate Action Guidelines can be found hereSeven&i Group Business Partner Sustainable Action Guidelines can be found hereSeven&i Holdings Co.,Ltd.Sustainability Data Book 202215Protecting Personal Information and Appropriately Securing the Safetyof Information AssetsSeven&i Holdings aims to be a sincere company that is trusted by its stakeholders,and it positions the safeguarding ofpersonal information and the appropriate protection and security of information assets handled by the Group as animportant priority and social responsibility of its management and operations and as mandatory for all executives andemployees.Our company has established the Personal Information Protection Policy and the Basic Policy on InformationSecurity,and it has made it mandatory for all employees to comply with relevant laws and regulations such as the Act onthe Protection of Personal Information and internal rules to ensure appropriate business execution through the protection ofpersonal information and the use of information assets.Tax-Related PoliciesBased on the Seven&i Holdings Global Tax Policy,Seven&i Holdings has a tax strategy that corresponds with itsmanagement strategies,and carries out uniform Companywide tax management.Seven&i Holdings Global Tax PolicySeven&i Holdings has a basic policy of establishing high-quality corporate governance systems at the Company and itsGroup companies,including overseas subsidiaries.The systems are designed to ensure sound,sustainable growth and touphold public trust.To provide appropriate countermeasures for tax-related risks,including changes in the tax governanceenvironment in Japan and overseas,reputational risk,brand value degradation,and corporate social responsibility,we havea tax strategy that corresponds with our management strategies,and we will carry out uniform Companywide taxmanagement.In line with the above,Seven&i Holdings has adopted the following global tax policy.Information Security and Personal Information Protection can be found herePersonal Information Protection Policy can be found hereBasic Policy on Information Security can be found hereLegal ComplianceSeven&i Holdings and its Group companies,including overseas subsidiaries,always comply with the taxation laws inthe countries where they operate.Moreover,they also respect the intention of such laws by paying taxes appropriatelyas a way of contributing to the economic development of the countries.To ensure that our compliance with tax-related laws and our tax management are appropriate,we follow theguidelines for developing internal controls for financial reporting to build and develop internal control systems thatensure appropriate accounting procedures and financial reporting.We also operate these systems appropriately andhave inside and Outside Audit&Supervisory Board Members check and assess the effectiveness of the controls.1.Ensure TransparencySeven&i Holdings and its Group companies,including overseas subsidiaries,provide timely and appropriate disclosureof management data and tax payment status in accordance with the laws of each country where they have operations.Moreover,the Company and its Group companies,including overseas subsidiaries,do not engage in tax avoidancepractices(tax havens),which are excessive tax-saving activities such as transferring value to low-tax countries,andtransactions between operating companies are conducted according to the arms length principle.2.Seven&i Holdings Co.,Ltd.Sustainability Data Book 202216Tax-Related RisksSeven&i Holdings has evaluated the impact of tax obligation risks on future value creation.As a result,we recognize therisk from changes in accounting standards and tax systems,such as transfer pricing taxation as a financial risk,and the riskassociated with M&A and business reorganizations as a business risk.Financial RisksThe Group could encounter unforeseen introductions of new accounting standards or taxation systems,or changes toexisting systems,which could affect its business performance or financial position.Business RisksThe Group develops new businesses and reorganizes its Group businesses through M&As,business alliances with othercompanies,establishment of joint ventures,and so forth.However,if the Groups strategic investments do not achieve theinitially anticipated effect and cannot meet their targets,its business performance and financial position could be affected.Tax-Related ReportsOur Group is expanding new businesses and restructuring Group businesses through M&As,business tie-ups with othercompanies,the establishment of merged companies,and so on.However,if we are unable to attain the effects we originallyhoped for from strategic investments and are unable to accomplish their objectives,there is a chance that this will have anegative effect on our Groups business results and financial situation.Tax payment amount by country or region for the fiscal year ended February 28,2022(Millions of yen)JapanUSCanadaChinaRevenues from operations3,468,8404,894,211275,841110,692Income before income taxes185,892124,550307935Corporation tax62,2753,87030689Tax payment62,4354,60849292Relationship with Tax AuthoritiesSeven&i Holdings and its Group companies,including overseas subsidiaries,strive to ensure transparency andreliability with regard to their tax obligations by responding in good faith to the tax authorities in the countries wherethey operate and international tax authorities.3.Seven&i Holdings Co.,Ltd.Sustainability Data Book 202217Information Security and Personal Information ProtectionSeven&i Holdings positions the appropriate protection and security of information assets handled by the Group as animportant priority and social responsibility of its management and operations and as mandatory for all executives andemployees.We strictly manage personal information received from customers in particular and take special care to preventinformation leaks and other such incidents.Seven&i Holdings and Group companies protect customer information andother information assets possessed by the Group from various threats,including illegal access and cyberattacks.The Groupas a whole recognizes that ensuring information security is an important issue in terms of both management and business.Seven&i Group has built information security management and personal information protection systems so that allexecutives and employees and all parties,including contractors,involved in our operations handle information assetsappropriately and use them properly.These systems are disseminated to all executives and employees through educationand training.In addition,we have established a management system that responds to changes in the environment relatedto social demands,compliance,and information security.We endeavor to appropriately manage and protect personalinformation and corporate information and are making continuous improvements.Development of Information Security Management SystemSeven&i Holdings has established the Security Management Office under the direct control of the representative directoras an organization that oversees information security for the entire group.The office prepares and disseminates to all groupcompanies policies,attached rules,guidelines,and other documents related to information security and personalinformation protection.The office also supports Group companies in establishing information security management systems(ISMS),training security personnel,and developing monitoring systems,thereby strengthening overall informationmanagement.The Group Information Management Committee of Seven&i Holdings,which oversees the Group,works with theinformation management committees of each company to establish and continuously improve management systems thatrespond to changes in the environment,including the planning,promotion,and management of information security-related measures.In addition,we promote thorough implementation of technical security measures through specializedsubcommittees under our control to further ensure safety.Risks related to information security and the status of theseactivities are regularly reported to the Board of Directors for advice and instructions.Information security management systemMore details about our Basic Policy on Information Security can be found hereMore details about our Personal Information Protection Policy can be found hereSeven&i Holdings Co.,Ltd.Sustainability Data Book 202218Accident and Emergency Response Related to Information SecuritySeven&i Holdings has established a reporting line among Group companies through the Material Fact ReportingGuidelines,and has built a system to ensure the reliable communication of information and minimize damage and impact.In the unlikely event of an incident or suspicious event related to information security,we will strive to report itappropriately and without delay to the victim and all related parties in accordance with our reporting obligations under lawsand regulations.In the event of a serious incident,we promptly report it to the President and Chief Executive Officer and the ChiefInformation Management Officer.Compliance with International StandardsSeven&i Holdings has established information security rules and regulations with reference to ISO 27001,an internationalcertification standard related to information security,National Institute of Standards and Technology(NIST)Cyber SecurityFramework,Center for Internet Security(CIS)Controls,Ministry of Economy,Trade and Industry(METI)Cyber SecurityManagement Guidelines,and so on.Seven&i Holdings and its group companies have established and are operating aninformation security management system(ISMS)based on these rules to control information security risks such as leakage,falsification,and service suspension of information assets.Through continuous improvement of this management system,we strive to maintain the confidentiality,integrity,and availability of our information assets.In addition,major locations and related departments of our operating companies that deal with customers personalinformation have been assessed and certified by a third-party organization for their ISMS organizational structure,and weare in the process of expanding the scope of certification.Employee Training to Raise Awareness of Information Security and Cyber SecuritySeven&i Holdings believes that to ensure the appropriate handling of personal information and confidential information indaily work,it is necessary for every executive and employee to understand the importance of information security,to raisetheir awareness of information security,and,on top of that,to have the knowledge required for accurate judgement andconduct.Seven&i Holdings provides education several times a year about the latest trends in information security and personalinformation protection,management systems,and general information security measures through e-learning and onlinetraining programs for directors,managers,and general employees.The aims of education are responding appropriately toinformation security and cyber security threats,as well as laws and regulations concerning personal information and othermatters.These educational materials are also being rolled out to all Group companies so that all executives and employeesof the Seven&i Group can acquire the same level of knowledge.In addition,we have opened an educational portal site with materials that can be quoted in manuals,meetings,etc.oninformation security,personal information protection,and so on,as well as a security video that can be borrowed.We areendeavoring to provide enlightenment so that all executives and employees can think and act for themselves.Targeted Email Attack TrainingThe threat of cyberattacks by means of targeted email attacks is increasing day by day.Regular training is essential for allexecutives and employees to be able to respond properly if they come under attack.Seven&i Holdings sends multiplepatterns of mock email to all executives and employees of the Group and strengthen their ability to respond through actualexperience of how to discern suspicious email and how to respond should such email be received.A list of ISMS certified locations can be found here(in Japanese)Seven&i Holdings Co.,Ltd.Sustainability Data Book 202219Strengthening of Cybersecurity CountermeasuresSeven&i Holdings has positioned cyberattacks,which are becoming more advanced and more sophisticated by the day,asa serious risk in management and is endeavoring to strengthen cybersecurity countermeasures,including the building of amultitiered defense network to guard against illegal hacking into networks,conduct proper access control,etc.;theestablishment of a setup capable of responding to threats;the education and training of human resources;andcollaboration with outside professional bodies.(1)Establishment of special organizationAs a special organization to handle cybersecurity,we have set up the 7&i Computer Security Incident Response Team(7&i CSIRT)to undertake security reviews of the information system and its operation and to promote cybersecuritycountermeasures for the prevention of security incidents,such as vulnerability diagnosis by a third-party body,monitoring of illegal access,and vulnerability response.(2)Education and trainingAt least twice a year,we implement education and training supposing a cybersecurity incident or accident so that if acyberattack or the like does occur,we can respond swiftly and appropriately and minimize the damage.By thusimproving the response capability of the special organization and all executives and employees,we ensure that ourresponse setup and response measures against incidents and accidents function effectively.(3)Outside collaborationIn order to be able to respond speedily to cyberattacks and so on,we collaborate with such outside organizations asthe Japan Computer Emergency Response Team Coordination Center(JPCERT/CC)and the Nippon CSIRT Association,sharing information with them on cyberattacks,countermeasure trends,etc.Seven&i Holdings Co.,Ltd.Sustainability Data Book 202220Human Rights InitiativesPromotion FrameworkThe project involves the chairpersons of each of the four subcommittees under the CSR Management Committee(CorporateEthics and Culture Subcommittee,Supply Chain Subcommittee,Compliance Subcommittee,and EnvironmentalSubcommittee),as well as the Human Rights Education Center.The project promotes human rights due diligence initiatives,including identification of business-specific human rights issues,corrective actions,regular monitoring,and informationdisclosure.Plans of human rights initiatives are developed and the progress is reviewed at meetings of the Human RightsPromotion Project.The Corporate Ethics and Culture Subcommittee under the CSR Management Committee regularly shares the progress onefforts related to human rights education.It advances activities aimed at having all employees of Group companiescorrectly understand and recognize human rights,along with fostering a corporate culture free of discrimination orprejudice.The Supply Chain Subcommittee under the CSR Management Committee requests that suppliers understand theSeven&i Groups approach to human rights and implement ongoing initiatives.In addition,Seven&i Holdings has permanently established the Human Rights Education Center as a specializeddepartment that oversees operations related to human rights enlightenment and normalization.The Human RightsEducation Center conducts various awareness-raising and educational activities in cooperation with the human resourcedepartments and CSR promotion departments of each Group company.These human rights initiatives are reported and shared at the biannual meetings of the CSR Management Committee,across-group organization.Human Rights Awareness and TrainingSeven&i Group offers a variety of educational activities and employee training with the aim of creating a corporate culturein which everyone respects the human rights of all customers,business partners,people in local communities,andcolleagues,and in which people are aware of all types of discrimination and prejudices and do not discriminate againstothers or tolerate such behavior.Since 1987,we have joined the Tokyo Human Rights Awareness Corporate Liaison Committee(name at the time of joining,“Tokyo Corporate Liaison Committee for the Dowa Issue”)which comprises of 123 companies(as of April 2022),mainlycompanies headquartered in Tokyo.Through participation in the monthly conferences,we are working to further enhancehuman rights education and our awareness-raising system while mutually studying with member companies.Further information about the activities of the Tokyo Human Rights Awareness Corporate Liaison Committee can be foundhere(Japanese)Seven&i Holdings Co.,Ltd.Sustainability Data Book 202221Conducting TrainingSeven&i Group companies provide awareness training to employees,including managers and part-time employees,on avariety of human rights issues such as basic approaches to human rights and harassment prevention.In addition,Seven&iHoldings is working to promote employee understanding through the utilization of our human rights awareness handbook“Human Rights for EveryoneLets Start by Learning”and“Normalization Support Guide”to futher support the education ofGroup companies.For example,Ito-Yokado holds level-specific human rights awareness training when employees join the company or areassigned to a new store or local store,with training content matching job responsibilities.Employees come to recognizethat human rights issues are easily happened in everyday life,and the training includes specific examples such as powerharassment and sexual harassment as well as new developments and issues so that employees can apply what they learnto their daily activities.In the fiscal year ending February 28,2022,training sessions for preventing harassment were heldfor 17 companies,and training sessions for mental health were held for 19 companies.At York,hands-on training on normalization is incorporated as part of training at the time of joining the company to provideassistance to people with visual impairments and those on wheelchairs.Sogo&Seibu provides training on how to respondto a wide range of customers,including acceptance of assistance dogs and explanations on universal design,as part oftraining at the time of joining the store for new employees and store employees of business partners.Further,Seven&i Holdings conducts compliance training for business partners and the Groups personnel in charge ofproduct development and purchasing in order to reduce and mitigate human rights risks in the supply chain.In the fiscalyear ending February 28,2022,about 2,800 employees took the compliance training.Human Rights-Lets Start by Learning handbookNormalization Support GuideHuman rights trainingFurther information about compliance training for suppliers can be found hereFurther information about compliance training for the personnel in charge of product development and purchasing can befound hereSeven&i Holdings Co.,Ltd.Sustainability Data Book 202222Human Rights Slogan ContestTo create a corporate culture in which each employees human rights are respected in accordance with the Corporate ActionGuidelines,each year the Seven&i Group solicits human rights slogans from all employees,including part-time employees,and their family members.In the process of coming up with human rights slogans,opportunities are created for employeesto think about human rights,which raises their awareness of human rights issues.The most excellent slogans selected fromamong those submitted are announced to the employees through the Groups internal newsletter and on the intranetwebsite,and are awarded prizes.The contest was held for the 31th time in the fiscal year ending February 28,2022,and24,079 slogans were received,marking yet another year with a large number of submissions.The slogans emphasizedreconsidering the importance of human rights,touching on everything from personal feelings in ones daily life to musingsfrom a broader perspective.Evaluation of Respect for Human RightsEmployee Engagement SurveysSeven&i Group conducts an employee engagement survey targeting employees of Seven&i Holdings as well as Groupcompanies.The survey includes questions asking people if they respect diversity or have seen or heard about problematicemployee behavior in the workplace,and checks whether the human rights are respected in line with the Corporate ActionGuidelines.The survey conducted in the fiscal year ending February 28,2022,targeted approximately 73,000 employeesworking at 34 Group companies in Japan.The next survey is scheduled for the second half of FY2022.Interview Surveys Targeting EmployeesThe Seven&i Group implements interview surveys of store employees conducted by the Human Rights Education Centerwith the aim of identifying human rights issues specific to its business or operating companies and for reducing andmitigating human rights risks.In March 2021,we completed interviews with all employees of Terube,Ltd.,a specialsubsidiary established to promote employment for people with severe disabilities.We plan to conduct interview surveyssequentially in the future as well.Assessment of Suppliers by Self-Check SheetTo ensure that suppliers understand the Seven&i Holdings Business Partner Action Guidelines,Seven&i Group administersa self-check sheet for suppliers that explains all of the specific requirements for compliance.The self-check sheet contains61 questions,including human rights-related questions.For example,the questions ask whether or not factory employeeshave access to consulting desks and whether or not the company requests that its own suppliers comply with the Seven&iHoldings Business Partner Action Guidelines.Responses are entered into a database,and the data are used in the processfor determining whether to continue doing business with the suppliers.More details of the Employee Engagement Survey can be found hereFurther information about the self-check sheet for suppliers can be found hereSeven&i Holdings Co.,Ltd.Sustainability Data Book 202223Questionnaire Survey for SuppliersFrom the fiscal year ended February 28,2017,the Seven&i Group has conducted questionnaire surveys of suppliers toconfirm whether the speech and behavior of employees toward suppliers follow the Seven&i Holdings Corporate ActionGuidelines.In these surveys,suppliers reply to questions anonymously.In the fiscal year ending February 28,2022,a totalof approximately 8,800 representatives of suppliers responded to questionnaire surveys issued by Group companies.CSR Audits of Suppliers Manufacturing FactoriesIn addition,Seven&i Group conducts CSR audits of end manufacturing factories of the suppliers who produce SevenPremium,groups private brand products,as well as Ito-Yokados overseas direct import suppliers.The audits ascertaintheir level of compliance with the Seven&i Group Business Partner Sustainability Action Guidelines.A third-party organization conducts the audits in line with Seven&i Holdings original audit,which covers topics such ashuman rights and the work environment(16 categories and 117 check items).This was prepared by making reference tosources such as the ISO 26000 standard,the Japanese Business Federations Charter of Corporate Behavior,and the OECDGuidelines for Multinational Enterprises.In the fiscal year ending February 28,2022,CSR audits were conducted at 357factories in 10 countries.Helplines for Human Rights IssuesSeven&i Group has established the Groupwide Helpline as a consultation service for Group employees,their familymembers,and former employees to consult about or report on any human rights problems in the workplace.In addition,the Group has also established the Business Partner Helpline.The Helpline can be used by directors and audit&supervisoryboard members,employees,and former employees of domestic Group companies business partners.The consultationservice is operated by a third party under a service contract and a non-disclosure agreement with our company to protectthe privacy of people who contact it.When a report or consultation is received,the facts are investigated as necessaryhaving obtained consent from the person who made the report.If any issues are identified,corrective measures will betaken.In addition,the rules of the consultation service stipulate that people who contact the service as well as those whocooperate with the investigation of facts shall not be subject to disadvantageous treatment.Further details about CSR audits of suppliers can be found hereFurther information about the Groupwide Helpline can be found hereFurther information about the Business Partner Helpline can be found hereSeven&i Holdings Co.,Ltd.Sustainability Data Book 202224Sustainability ManagementSeven&i Holdings works toward solving social issues in its core operations through promotion and development ofbusinesses such as products and services.At the same time,we aim for sustainable development that creates value forboth companies and society.Sustainability Promotion FrameworkSeven&i Holdings seeks to promote Group-wide sustainability activities that are effective and efficient.To this end,we holdregular,twice-yearly meetings of the CSR Management Committee,which is chaired by the President and RepresentativeDirector.At these meetings,we offer guidance and make improvements based on reports received from the fivesubcommittees.The meetings also help to strengthen the framework of collaboration between the holding company andoperating companies.Compliance SubcommitteeThe Group employees complying with laws,regulations and social norms and practicing compliance including fair trade withcustomers and business partners is absolutely essential to realizing the Groups Corporate Creed Trust and Sincerity.Inaddition to reinforcing thorough compliance at each Group company level,Seven&i Holdings established the ComplianceSubcommittee in order for Seven&i Holdings,being the shareholding company,to support each Group companystrengthen its compliance systems,as well as ensure effective supervision thereby.The Compliance Subcommittee ischaired by the head of the Corporate General Administration&Legal Division of Seven&i Holdings.The division in chargeof legal affairs at the Company manages the subcommittee to promote specific measures.Seven&i Holdings Co.,Ltd.Sustainability Data Book 202225Corporate Ethics and Culture SubcommitteeThe Group employees understanding the Groups Corporate Creed and rigorous implementation of the Corporate ActionGuidelines are an essential and important foundation to realize the Groups Corporate Creed Trust and Sincerity.TheCorporate Ethics and Culture Subcommittee conducts initiatives based on rigorous implementation of the Corporate ActionGuidelines,such as to improve Group employee awareness through education by making everyone aware of the CorporateCreed and the Corporate Action Guidelines.In addition to these initiatives,to create fulfilling workplaces,Seven&i Holdingshave been conducting an Employee Engagement Survey.We are also working to improve work environments,such as byrectifying long working hours,making progress on promoting active roles for diverse human resources including womenand people with disabilities,and helping employees balance work and family care responsibilities.Further,Seven&iHoldings is working to create an environment where all employees can work at ease,such as by encouraging employees totake days off on holidays and acquire leave.The Corporate Ethics and Culture Subcommittee is chaired by the head of theCorporate Personnel Planning Division of Seven&i Holdings.The division in charge of human resources at the Companymanages the subcommittee to promote specific measures.Supply Chain SubcommitteeIt is one of the important corporate social responsibilities for companies and also a strong demand by stakeholders topromptly respond to the United Nations Guiding Principles on Business and Human Rights and Sustainable DevelopmentGoals(SDGs),and to build a sound supply chain with human rights and the environment in mind.To improve productquality and ensure safety at each Group company,Seven&i Holdings aims to establish and strengthen the quality levelsand control systems of each Group company based on the Groups Quality Policy.Furthermore,to ensure that Seven&iHoldings meets its social responsibilities regarding products and services across the entire supply chain,Seven&i Holdingsasks business partners to understand and implement the Business Partner Sustainable Action Guidelines.Seven&i Holdingsregularly verifies and shares their compliance through CSR audits to promote education,enlightenment and correction.TheSupply Chain Subcommittee is chaired by the Managing Executive Officer and head of the Seven&i Holdings GroupMerchandise Strategy&Planning Division,and is managed by the division in charge of product strategies at the Group topromote specific measures.Environment SubcommitteeThe Group uses products,raw materials and energy efficiently to combat challenges such as climate change and resourcedepletion,and the Group is working with customers and business partners to reduce the environmental impact throughoutthe supply chain.Seven&i Holdings believes this is an important factor that contributes to the sustainable development ofsociety and will result in the sustainable growth of the Group.Therefore,based on the GREEN CHALLENGE 2050 approvedby the Board of Directors in April 2019 and announced in May 2019,the Environment Subcommittee is working to promoteinitiatives to develop a decarbonized society,a circular economy,and a society in harmony with nature.Based onrecommendations of the Task Force on Climate-related Financial Disclosures(TCFD),it is analyzing the risks andopportunities of climate change and deepening the Groups initiatives.The Environment Subcommittee is chaired by theExecutive Officer and head of the Sustainability Development Department of the Corporate Development Division of Seven&i Holdings,and is managed by the department in charge of environmental measures of the Group to promote specificmeasures.For details about the Seven&i Group Corporate Action GuidelinesFor details about the Seven&i Group Sustainable Sourcing Principles and PoliciesFor details about the Seven&i Group Business Partner Sustainable Action GuidelinesSeven&i Holdings Co.,Ltd.Sustainability Data Book 202226Social Value Creation SubcommitteeBased on an awareness that efforts to solve social issues will lead to new business opportunities as the Group expands itsbusiness domains and related social problems become increasingly varied,the Social Value Creation Subcommittee takesaction to create business that generates social and economic value(creating shared value;CSV).Aiming to realize asustainable society,the Seven&i Group has identified seven material issues that it must address through engagement withvarious stakeholders.In response,the Social Value Creation Subcommittee is working to plan and execute new businessesoriginating from social issues to be addressed through core businesses by leveraging business characteristics andmanagement resources,including the Groups business infrastructure and expertise cultivated to date.Apart from this,thesubcommittee will strive to deepen initiatives with a view to fostering external collaboration with business partners,socialentrepreneurs,NPOs,and other partners.The Social Value Creation Subcommittee is chaired by the Director,ManagingExecutive Officer,and head of the Corporate Development Division of Seven&i Holdings,and is managed by the division incharge of management planning to promote specific measures.Seven&i Holdings Co.,Ltd.Sustainability Data Book 202227Targets and Progress by Each Subcommittee:Achieved,:Almost achieved,:Far from achievedMajor Plans for FY2021Results for FY2021EvaluationMajor Plans for FY2022Compliance SubcommitteeEstablishing fair business practices（1）Confirm the status ofcompliance with theAntimonopoly Act,theSubcontract Act,the Actagainst UnjustifiablePremiums,the Act ConcerningSpecial Measures forCorrecting Practices ImpedingConsumption Tax Pass-on,etc.,and take remedial measures asnecessary FT project conference:heldtwice a yearConduct FT training(e-learning)May:General labeling training(including food labels),5,000people underwent training November:Fair trade(abuseof superior bargaining position,Subcontracting Act,),9,000people in total underwenttrainingConduct Group education(including online)First half:10 times,400people underwent training Second half:15 times,600people underwent trainingConduct business partnerquestionnairesInformation sharing at FTproject conferences First half(May):54 participantsfrom 25 Group companies Second half(November):63participants from 24 GroupcompaniesFT training(e-learning)June:General labeling training(including food labels),6,310people in total underwenttraining November:Fair trade(abuse ofsuperior bargaining position,Subcontracting Act),11,576people in totalGroup education(includingonline)First half:12 times,449 peoplein total underwent training Second half:17 times,613people in total underwenttrainingBusiness partner questionnaires Approximately 8,800 responsesConfirm the status ofcompliance with theAntimonopoly Act,theSubcontract Act,the Act againstUnjustifiable Premiums,andtake remedial measures asnecessary FT project conference:heldtwice a yearConduct FT training(e-learning)June:General labeling training(including food labels),7,000people underwent training November:Fair trade(abuse ofsuperior bargaining position,Subcontracting Act),11,000people in total underwenttrainingGroup education(includingonline)First half:15 times,500 peopleunderwent training Second half:15 times,600people underwent trainingConduct business partnerquestionnairesSeven&i Holdings Co.,Ltd.Sustainability Data Book 202228Major Plans for FY2021Results for FY2021EvaluationMajor Plans for FY2022Enforcement of compliance（2）Interview operating companieson compliance issues andresponse statusConduct compliance e-learning(SeptemberOctober)Interviews of operatingcompanies on compliance issuesand response status:25companiesCompliance e-learning Number of course takers:2,818 Number of courses:10 Total number of course takers:11,743Interview operating companieson compliance issues andresponse status:25 companiesConduct compliance e-learningEnhancement of preventive legal functions（3）Implement compliancefunction questionnaires andinterviews targeting operatingcompaniesInterviews of operatingcompanies on compliance issuesand response status:25companiesInterview operating companieson compliance issues andresponse status:25 companiesStrengthen the internal reporting system（4）Establish a system asnecessary in accordance withthe amended WhistleblowerProtection ActConduct training using anoutside instructor for Groupcompany internal reportingsystem staff(at least once ayear)Implementation of registrationrenewal of the internalreporting system(foremployees)in the ConsumerAffairs Agencys WhistleblowerCompliance ManagementSystemEstablish a system as necessaryin accordance with the amendedWhistleblower Protection Act:Meetings held 10 timesConduct training using anoutside instructor for Groupcompany internal reportingsystem staff October:80 people underwenttraining,November:60 peopleunderwent trainingImplementation of registrationrenewal of the internal reportingsystem(for employees)in theConsumer Affairs AgencysWhistleblower ComplianceManagement System(August)Establish a system as necessaryin accordance with theamended WhistleblowerProtection ActConduct training using anoutside instructor for Groupcompany internal reportingsystem staff(at least once ayear)Seven&i Holdings Co.,Ltd.Sustainability Data Book 202229Major Plans for FY2021Results for FY2021EvaluationMajor Plans for FY2022Corporate Ethics and Culture SubcommitteeThoroughly ensure compliance with Corporate Action Guidelines（1）Focus on awareness andpermeation of the CorporateCreed and Corporate ActionGuidelines when educatingemployees and help them takerootIn the Employee EngagementSurvey,regularly monitorstatus of compliance with theCorporate Action GuidelinesConfirm status of compliancewith the Corporate Creed andCorporate Action Guidelineswhen conducting EmployeeEngagement Surveys Compliance with the CorporateAction Guidelines:93%(Full-time employees)Focus on awareness andpermeation of the CorporateCreed and Corporate ActionGuidelines when educatingemployees and help them takerootIn the Employee EngagementSurvey,regularly monitor statusof compliance with theCorporate Action GuidelinesCreate fulfilling workplaces（2）Establishment of anEngagement ImprovementCommittee at each GroupcompanyIn response to the surveyresults,consider and planimprovement measuresthrough dialog with employeesConducting EmployeeEngagement SurveysEstablishment of anEngagement ImprovementCommittee at each Groupcompany and reinforcement ofimprovement activitiesEstablishment of opportunitiesfor dialogue with employees atmany Group companies andproposal and implementation ofimprovement measuresConducting EmployeeEngagement Surveys(November)Target:34 Group companies,about 73,000 peopleReinforce activities to enhanceengagement at Groupcompanies and shareinformation on case studiesIn response to the surveyresults,consider improvementmeasures through dialog withemployees and continuouslyimplement plansConducting EmployeeEngagement SurveysPromoting employment ofpeople with disabilities Promote support forrecruitment activities andretention for operatingcompanies that have notachieved statutoryemployment rateReinforce acceptance ofworkplace trainees from specialsupport schools with a focus onoperating companies that havenot met the statutoryemployment rate(Sogo&Seibu,York,and others)andIto-Yokado:17 persons hiredPromoting employment ofpeople with disabilities Promote support forrecruitment activities andretention for operatingcompanies that have notachieved statutory employmentrate(support for individualinterviews and consultations)Seven&i Holdings Co.,Ltd.Sustainability Data Book 202230Major Plans for FY2021Results for FY2021EvaluationMajor Plans for FY2022Maintain and improve thestatutory employment rate Maintain and improve thestatutory employment rate forpeople with disabilities at thefive applicable GroupcompaniesMaintain a 2.95tualemployment rate at the fiveapplicable Group companies*Seven&i Holdings,Seven-Eleven Japan,Ito-Yokado,Seven&i Food Systems,TerubeMaintain and improve thestatutory employment rate Maintain and improve thestatutory employment rate forpeople with disabilities at thefive applicable Group companiesStrengthen awareness-raisingactivities for Group companies Share laws and systemrevisions related to humanrights issues such as theemployment of people withdisabilities,as well asdiscriminatory cases andincidents that actually occurredand provide remindersPrepare Human Rights Reportsto disseminate information toGroup companies(issued seventimes annually)Promote hiring of persons withdisabilities and normalizationwhile sharing information onvarious human rights issueswith employees and conductingeducational activitiesReinforce educational activitiesfor Group companies andimplement rank-based humanrights training,hands-onnormalization training,follow-uptraining for vocational lifecounselors for employees withdisabilities,and other measuresDiversity&Inclusion Promotion Project（3）Strengthen the disseminationof information both internallyand externally on promotingdiversity and inclusionImplement training of femalecandidates for managementpositions(womenencouragement seminars)Set target for ratio of femaleexecutive officers 30%by February 28,2026(atthe six core Group companies)Join the 30%Club JapanConduct newly the womenencouragement seminars 60 participants from 19 GroupcompaniesPercentage of female managers(end of February 2022)Team leaders:30.4%Section managers:23.3%Manage KPI and progress andimplement measures at GroupCompanies each half to achievethe targets for the ratio offemale managersConduct female employeeempowerment measuresthroughout the Group(trainingfor female employees,etc.)Seven&i Holdings Co.,Ltd.Sustainability Data Book 202231Major Plans for FY2021Results for FY2021EvaluationMajor Plans for FY2022 Continue to conduct awarenessraising activities targeting theexecutives and managers ofGroup companiesPromote use of childcare leaveamong male employeesImplement unconscious biastraining 277 participantsConduct training for officers ofGroup companies:191participantsDistribute Akachan Honpodiscount coupons to eligibleemployees to encourage maleemployees to take childcareleaveContinue to conduct awarenessraising activities targeting theexecutives and managers ofGroup companiesPromote use of childcare leaveamong male employeesDisseminate basic knowledge onbalancing work and family careresponsibilitiesPromote LGBT understandingDisseminate basic knowledgeon balancing work and familycare responsibilitiesHold seminars on nursing careand distribute archives ofseminar content:185participantsContinue awareness raisingactivities related to diversityand inclusion within the GroupPromote LGBT understandingHold LGBT seminar anddistribute archives of seminarcontent:180 participantsDisseminate information relatedto diversity and inclusioninternally and externallyPromoting health management（4）Plan and implement measuresbased on Health DeclarationNEXTImplement initiatives formaintaining health,preventingillnesses,and returning tohealthRaising employee healthawarenessConduct walking events 7,941 participants from 25companiesConduct health awarenessraising seminars 900 participants from 18companiesConduct breast cancerscreening and cervical cancerrisk testing(for employees whowish)Plan and implement measuresbased on Health DeclarationNEXTImplement initiatives formaintaining health,preventingillnesses,and returning tohealthRaising employee healthawarenessSeven&i Holdings Co.,Ltd.Sustainability Data Book 202232Major Plans for FY2021Results for FY2021EvaluationMajor Plans for FY2022Supply Chain SubcommitteeEstablishment of comfortableworking environments wherepeople can work with healthyminds and bodiesImplement harassment training 17 companies participatedImplement mental healthtraining 19 companies participatedEstablishment of comfortableworking environments wherepeople can work with healthyminds and bodiesImproving product quality and ensuring safety（1）Conduct monthly meetings ofthe working group for revisingquality standardsRevise quality standards foreach operating companies andshar them with GroupcompaniesIdentify and share informationon issues to reinforce qualitycontrol systems at operatingcompaniesRequest implementation ofself-checks and submission ofpledges in cases of PB factorieswhich are difficult to auditData base compilation usingthe supply chain managementsystemRequest implementation of self-checks by business partners andcollect pledges.While on-siteaudits are difficult,conduct on-site audits at 35 factories andremote audits at three factoriesConduct ongoing auditsUse remote audit methodsbecause of the COVID-19pandemic and continuemonitoring factories thatmanufacture PB productsConstruct an educationprogram subdivided bycategory to improve theexpertise of personnel incharge of purchasingExpand training tailored to thetimes,such as training onsustainable materialsConduct training to acquirehighly specialized knowledge onapparel,household goods,andsustainable materialsA wide range of Groupemployees participate in onlinetraining,with a total of 1,287employees undergoing trainingConduct new training not justfor purchasing personnel butalso personnel in quality controldepartments so that they canacquire specialized skills andknowledge on quality controland product safetyConduct training on specificproducts so that personnel canacquire additional specializedknowledgeSupport acquisition of qualitycertification by the end ofFY2021 at the Seven Premiummanufacturing consignmentfactories98.9%of manufacturingconsignment factories acquirequality certificationContinue measures incooperation with businesspartners for all factories toobtain quality certificationSeven&i Holdings Co.,Ltd.Sustainability Data Book 202233Major Plans for FY2021Results for FY2021EvaluationMajor Plans for FY2022Confirmation of the status ofcompliance with manualthrough of HACCP by storepatrolsSharing information on theoperational status of eachcompanyContinue affirming the status ofcompliance with HACCPoperations manuals at eachstoreEmploy hazard factor analysis toprevent accidentsContinue compliance withHACCP operations manualsConduct training to acquirefundamental knowledgeconcerning sanitationmanagementPromote environmentalimprovement,includingsystem renovationEncourage introduction ofautomated identificationsystems at PB manufacturingconsignment factoriesCollect the latest industryinformation,etc.Thorough implementation of Business Partner Action Guidelines（2）Online briefings to explainSeven&i Holdings BusinessPartner Sustainable ActionGuidelines 2021 For Seven Premium domestic(February)For domestic business partnerson consignment of PB overseasmanufacturing(February)Multilingual briefings for Chinaand Southeast Asia(March)Briefings and training for in-house purchasing personnel(April,July,October,January)For Seven Premium domesticmanufacturing contractors:Viewed by 306 companies and414 persons For domestic business partnerson consignment of PB overseasmanufacturing:Viewed by 145companies and 213 persons Multilingual briefings for Chinaand southeast Asia(in English,Chinese,Thai,andVietnamese):Viewed by 66companies and 444 personsBriefings and training for in-house purchasing personnel:13companies in a total of 2,030persons participated in trainingincluding e-learningLive broadcast and on-demanddistribution of Business PartnerAction Guidelines and CSR auditbriefings(for Japan andoverseas)Live broadcast(March)On-demand distribution(MarchNovember)Conduct briefings on theBusiness Partner ActionGuidelines and CSR audits forin-house purchasing personnel(June,October,and January)Conduct compliance seminar For domestic(May,August,November)For overseas factories(June,September,December)Compliance seminars fordomestic business partners:Implement eight times with atotal of 1,982 viewersCompliance seminars foroverseas factories:Implement11 times in Chinese,Thai,andVietnamese with a total of 669viewersDivide compliance seminars into10 courses and provide on-demand distribution of morepractical content includingspecific case studiesSeven&i Holdings Co.,Ltd.Sustainability Data Book 202234Major Plans for FY2021Results for FY2021EvaluationMajor Plans for FY2022Environment SubcommitteeConduct CSR audit Overseas:500 factories inChina and Southeast Asia Domestic:500 factories thatproduce Seven Premium*May shrink due to the effectsof COVID-19*Remote auditing using onlineare also introducedCSR audits of overseasfactories:357 factories(322factories audited on-site and 35factories audited remotely)CSR audits of domesticfactories:371 factories(321factories audited on-site and 50factories audited remotely)*There is substantial impactfrom the COVID-19Conduct CSR audit Overseas:350 factories in Chinaand Southeast Asia Domestic:500 factories thatproduce Seven Premium*May shrink due to the effectsof COVID-19Initiatives for achieving a decarbonized society（1）Expand the number of third-party verification companies to15 in order to properlyevaluate and verify initiativesto reduce CO emissions2Expand installation ofrenewable energy equipmentsuch as solar panels,as well asrenewable energyprocurementExpand the scope of third-partyverification to 15 Groupcompanies by adding SevenBank,Barneys Japan,Seven&iHoldings(the target companiesaccount for approximately 98%of total Group sales revenue)Install solar power generationpanels in 8,821 Group storesStarting in April 2021,introducethe green electric powerincluding off-site PPA at somestoresApply for SBT certificationConduct third-party verificationsof CO emissions at 15companies2Install solar power generationpanels at more than 9,000Group storesExpand procurement ofrenewable energy through off-site PPAInitiatives for achieving a circular economy（2）Introduce environmentallyfriendly materials to Seven-Eleven rice balls andsandwichesExpand the use of recycled PETbottles for Seven PremiumbeveragesMake the film used to wrapSeven-Eleven hand-rolled riceballs thinner to reduce plasticusage by 20%compared topreviouslyCombine the film used for someSeven-Eleven sandwichproducts with paper materials toreduce plastic usage by 40%compared to previouslyChange containers used with 4Seven Premium tea products to100%recycled PET plasticImplement environmentalresponses at SEVEN CAFImplement environmentalresponses for Seven-Elevendairy productsSeven&i Holdings Co.,Ltd.Sustainability Data Book 202235Major Plans for FY2021Results for FY2021EvaluationMajor Plans for FY2022Promoting recycling ofresources together withcustomers by expanding theinstallation of PET bottlecollection machinesParticipation in platforms andinitiatives with new businesspartners in the recycling ofplastic resourcesNumber of PET bottle collectionmachines installed:2,098machines(an increase of 1,097machines from the previousyear);total volume collected:10,800 t(an increase of 2,100 tfrom the previous year)Make an equity investment in RPlus Japan,Ltd.,a newcompany,to recycle used plasticMake an equity investment inKyoei J&T RecyclingCorporation,one of Japanslargest PET bottle recycled resinmanufacturing companiesEncourage resource recyclingwith customers by expandinginstallation of PET bottlecollection machinesImplement demonstration testsof new in-store collectionmethods to conduct plasticresource recyclingDevelop the new awareness-raising activity,the“TemaedoriProject,”aimed at reducingfood waste at all 7-Elevenstores(cooperation amongministries,agencies,and JFA)Implement the“TemaedoriProject”at 7-Eleven stores incollaboration with governmentministries and agencies and JFAContinue the“TemaedoriProject”at 7-Eleven stores andexpand into the Groups foodsupermarket sectorImplement mottECO atDennys restaurants with theaim of reducing food lossarising from customer leftoversImplement mottECO at Dennysrestaurants in Tokyo andencourage customers to bringleftovers homeExpand mottECO implementingrestaurants nationwideSeven&i Holdings Co.,Ltd.Sustainability Data Book 202236Major Plans for FY2021Results for FY2021EvaluationMajor Plans for FY2022 -Social Value Creation SubcommitteeInitiatives for developing a society in harmony with nature（3）Development and introductionof new certified productsExpand MEL-certified fishspecies handled by Ito-Yokadoto include farm-raisedyellowtail,amberjack,red seabream,flatfish,and silversalmon as well as wild-caughtbonitoBegin handling MEL-certifiedproducts at Group companiesYork Benimaru and YorkFollowing acquisition of MELcertification,acquire ASC CoCcertification at all superstorebusiness storesConduct basic JGAP instructortraining for employees involvedin product procurement andincrease the number ofemployees with JGAP instructorqualificationsRaising employee environmental awareness（4）Number of employees whopass the Certification Test forEnvironmental Specialists:500(for a cumulative total of about10,500)*The number of people whocan take the test is decreasingwith the transition to theinternet examination methodNumber of employees who passthe Certification Test forEnvironmental Specialists:about 900(for a cumulativetotal of about 10,900)Promote understanding of social issues（1）Hold the second businessdevelopment program forsolving social issues,inaddition to the sharing of CSVuse among operatingcompaniesDesign the second businessdevelopment program forsolving social issues,in additionto the sharing of CSV useamong operating companiesHold the second businessdevelopment program forsolving social issues,in additionto the sharing of CSV useamong operating companies,Seven&i Holdings Co.,Ltd.Sustainability Data Book 202237Major Plans for FY2021Results for FY2021EvaluationMajor Plans for FY2022CSR Training for EmployeesSeven&i Holdings provides employees with CSR training via group training when they join the company or are appointedto a new position through promotion or advancement in rank,in addition to using such means as company newsletters andthe Sustainability Data Book.Study groups,seminars,and the like are held regularly for specialized fields including compliance,diversity and inclusion,and the environment,and information about volunteering is communicated to employees through the internal portal site.We have been conducting CSR training via e-learning for all employees at domestic Group companies.In the fiscal yearending February 28,2022 as well,we implemented e-learning on the Antimonopoly Act(abuse of superior bargainingposition),the Subcontracting Act,product labeling,and other topics for all employees who are associated with businesspartners.An e-learning about the Groups environmental declaration“GREEN CHALLENGE 2050”was also conducted.Create new CSV businesses（2）Verify whether a businessproposal emerging from asocial business program can beestablished as a businessConduct verification of whethera business proposal emergingfrom a social business programcan be established as a businessVerify whether a businessproposal emerging from a socialbusiness program can beestablished as a businessSeven&i Holdings Co.,Ltd.Sustainability Data Book 202238Risks and Opportunities Related to SustainabilityVarious problems and issues related to the environment and society constitute risks that threaten a companyssustainability,but the act of endeavoring to solve such issues leads to new business opportunities.Seven&i Holdingsidentifies risks and opportunities related to seven material issues,and works to reduce risk levels while striving to realize asustainable society alongside sustainable corporate growth by creating new business models for solving social issues.We have therefore created the Corporate Action Guidelines and other policies,and established the cross-group CSRManagement Committee and its subcommittees,the Compliance Subcommittee,Corporate Ethics and CultureSubcommittee,Supply Chain Subcommittee,Environment Subcommittee,and Social Value Creation Subcommittee.Specificmeasures are considered through these committees.Material Issues,and Main Risks and OpportunitiesMaterial Issue 1Create a livable society with local communities through various customer touchpointsMaterial Issue 2Provide safe,reliable,and healthier merchandise and servicesRisksDecline in sales opportunities from decrease in theinfrastructure of daily life,leading to populationdecrease,depopulation,aging populationFailure to open new stores as planned because ofinsuffi cient coordination with local communitiesresulting in inability to provide new value,etc.OpportunitiesGain stakeholder trust through expanded social roleas infrastructure for daily lifeIncrease sales opportunities through communityrevitalization,etc.RisksLoss of customers because of merchandise issuesor in-store accidentsDecline in trust due to violations of laws such asquality control and labelingLoss of customers from delayed development ofhealth-related merchandise,etc.OpportunitiesIncrease customer loyalty through rigorous safetyand quality controlExpand sales opportunities by offeringhealthoriented merchandise and other newmerchandise that matches customers needs,etc.Seven&i Holdings Co.,Ltd.Sustainability Data Book 202239Material issue 3Realize decarbonization,circular economy,and society in harmony with nature,throughenvironmental effortsMaterial Issue 4Achieve a society in which diverse people can actively participateMaterial Issue 5Improve work engagement and environment for people working in Group businessesRisksPhysical damage to stores/distribution network dueto increase in natural disasters caused by climatechangeSharp increases in purchasing prices due tochanges in demand and supply or changes in pricesof crude oil and other raw materials caused byunusual weatherLoss of customers due to corporate image with alarge environmental footprint in areas includingfood waste and greenhouse gas emissions,etc.OpportunitiesCut costs by saving energy,reducing waste,recycling,changing energy sourcesCreate brand value as a company at the forefrontof environmental measures,etc.RisksDamage to corporate image,loss of customers,decline in employee engagement from tolerance ofdiscrimination and prejudiceDifficulty in retaining human resources,outflow ofhuman resources,etc.OpportunitiesAcquire future customers and develop new servicesthrough dialogue with and development of the nextgeneration,the young generation,and people withvarious values,etc.RisksDecline in employee engagement from lack ofimprovement in work environmentsDifficulty in retaining human resources,outflow ofhuman resources,etc.OpportunitiesPromote diversity to enhance competitivenessIncrease productivity by enhancing employeesskills and autonomyDevelop new businesses and acquire talentedpersonnel,etc.Seven&i Holdings Co.,Ltd.Sustainability Data Book 202240Material Issue 6Create an ethical society through dialogue and collaboration with customersMaterial Issue 7Achieve a sustainable society through partnershipsRisksInability to offer new value through merchandiseand services from delayed response to changes inconsumer lifestyles and diversifi cation of values,etc.OpportunitiesExpand sales opportunities by offering merchandiseand services addressing ethical consumptionWork with customers to increase customer loyalty,etc.RisksInterruption of merchandise supply,deterioration ofmerchandise quality,or boycotts associated withlabor environment or human rights problems orcompliance violations in the supply chain,resultingin loss of social trust,etc.OpportunitiesIncrease resilience through sustainable rawmaterial procurementProvide new merchandise and services incooperation with business partners,otherindustries,same industry,etc.Seven&i Holdings Co.,Ltd.Sustainability Data Book 202241Response to TCFD RecommendationsAmid climate change issues becoming increasingly serious year by year,it is the responsibility of the Group to continueproviding merchandise and services that support the lifestyles of customers even as we face the impact of climate change.The Groups stores in Japan serve more than 22 million customers every day.To fulfill its responsibility to our customersand other stakeholders,the Group will align its approach to the TCFD recommendations,analyze the risks and opportunitiespresented by climate change,and utilize the analysis to achieve sustainable business management.Indicators and Targets Related to Climate ChangeIn May 2019,the Group formulated its environmental declarationGREEN CHALLENGE 2050.InGREEN CHALLENGE2050,we have set the following specific themes:reduction of CO emissions,measures against plastic,measures againstfood loss/waste and for organic waste recycling,and sustainable procurement.The goals are to achieve decarbonization,circular economy,and society in harmony with nature.Our specific numerical targets for reducing CO emissions are to reduce CO emissions from the Groups store operations by50%by 2030 compared to FY2013,and to achieve net zero emissions by 2050.We have also set detailed numerical targetsfor other themes,and we are promoting initiatives for achieving them and monitoring their progress.Our scenario analysis,in fiscal year ending February 28,2022,highlighted the severity of damages that can be caused bynatural disasters.In order to curb the risk of natural disasters caused by climate change,we have renewed ourdetermination to limit the temperature increase to 1.5 by achieving the goals ofGREEN CHALLENGE 2050incollaboration with our stakeholders.222Environmental data of the Group and operation companiesGHG emissions of scope 3Calculated based on the“the Seven&i Holdings Group-Wide CO Emissions Calculation Manua”established in accordance with the“Act on the Rational Use of Energy”/“LawConcerning the Promotion of the Measures to Cope with Global Warming.”*2Seven&i Holdings Co.,Ltd.Sustainability Data Book 202242Strategy:Implementation of Scenario AnalysisScenario analysis assumptionsThe Seven&i Group is undertaking scenario analysis to clarify risks and opportunities created by future climate change anddevelop strategies to reduce the risks and to expand the opportunities.In October 2019,the Group participated in the Project to Support Climate Risk/Opportunity Scenario Analysis inAccordance with TCFD of the Ministry of the Environment.The analysis covered the domestic store management ofSEVEN-ELEVEN JAPAN,which accounts for about 60%of the Groups operating income.We disclosed the results on ourwebsite for the first time in June 2020.In fiscal year ending February 28,2022,we further deepened our analysis bydeveloping substantive countermeasures and quantified risks and opportunities,in addition to our previous analysis.In our recent scenario analysis,we examined the impacts of two scenarios as of 2030:a decarbonization scenario(1.52.0)and a warming scenario(2.74.0).The analysis references multiple scenarios given in the InternationalEnergy Agency(IEA)s World Energy Outlook,including STEPS,SDS,and NZE2050,as well as reports and otherforward-looking forecasts published by governments and international agencies.*1*2*3STEPS:Stated Policies Scenario.It is one of the scenarios shown in the World Energy Outlook 2019 by the International Energy Agency(IEA).It reflects decarbonization policiesand targets that have been so far publicized.*1SDS:Sustainable Development Scenario.It is one of the scenarios that are used in the IEAs World Energy Outlook 2010 or later.It is a scenario assuming that clean energypolicies and investments will increase toward the achievement of the 2 C scenario targeted by the Paris Agreement,and that the energy supply system will progress smoothlytoward the achievement of the Sustainable Development Goals.*2NZE2050：Net Zero Emissions by 2050.It is one of the scenarios shown in the IEAs World Energy Outlook 2020.It is a scenario that aims at zero emission before 2050 towardthe 1.5 scenario beyond the target of the Paris Agreement.*3Analysis assumptions（fiscal year ending February 28,2022）ScenarioDecarbonization scenario(1.5C2.0C)/Warming scenario(2.7C4.0C)RelevantprojectOperation of SEVEN-ELEVEN JAPAN stores in JapanAnalysisscopeIn addition to the physical impact on stores,the analysis will covercosts in store operations and merchandise supply chain issues(raw materials,factories manufacturing merchandise,merchandise shipping)that significantly affect store operations,and customer behaviorTarget yearImpact as of 2030Seven&i Holdings Co.,Ltd.Sustainability Data Book 202243Scenario analysis structureSignificant Risks and OpportunitiesApproximately 160 risks and opportunities were submitted as a result of discussions within each department regardingspecific risks and opportunities that could affect SEVEN-ELEVEN JAPANs business.The assessment referenced each riskand opportunity presented in the TCFD recommendations as well as international standards such as SASB.We examinedthe magnitude of the impact of these risks and opportunities on financial aspects such as sales and profits,as well asstrategic aspects such as store operations and merchandise procurement.The following factors were identified as significantrisks and opportunities:carbon price,carbon emissions targets and policies in each country,changes in consumerpreferences,extreme weather,and changes in precipitation and weather patterns.Seven&i Holdings Co.,Ltd.Sustainability Data Book 202244Significant risks and opportunities:business impact assessment and countermeasuresWe evaluated qualitatively and quantitatively the impact of the five risks and opportunities that we identified on thebusiness,and developed countermeasures.Significant risks and opportunities from climate change:business impact andcountermeasures=High impact risks and opportunities =Somewhat high impact risks and opportunitiesSignificant risks and opportunitiesConcreteexamplesImpactScenarioBusinessrisksBusinessopportun-itiesMain countermeasuresTransitionrisks andopportunities (Decarboniza-tion scenario,1.5C2.0C)PoliciesandregulationCarbonpriceIntroductionof carbontaxOperatingcost A high carbon tax isintroduced and a carbontax burden is imposedin accordance with COemission volume Increased costs areexpected throughoutthe supply chain Promote the reduction ofCO emissions throughGREEN CHALLENGE2050 Support our businesspartners in their efforts tosave energy and expand theuse of renewable energyFluctuationsin retailelectricitypricesOperatingcostIncreased electricityexpenses due to higherretail electricity pricesstemming from theintroduction ofrenewable energy andother factors Develop and install energy-saving equipment at stores Enhance onsite renewableenergy installationsCarbonemissionstargets andpolicies ineachcountryFluctuationsin shippingfuel costsOperatingcost Fuel costs associatedwith deliveries decreaseamid an increasing shiftto EV as deliveryvehicles Increase adoption of EVand other environmentallyfriendly vehicles Improve fuel efficiencythrough implementation ofeco-driving training based ondata acquired from in-vehiclecomputers Reduce delivery vehiclefleets by enhancing deliveryefficiencySupportingthe adoptionof EV asdeliveryvehiclesOperatingcostCosts incurred due toconversion of deliveryvehicles to EV in linewith tighter regulationsand changes in socialenvironment Reduce delivery vehiclefleets by enhancing deliveryefficiencyReputationChanges inconsumerpreferencesChanges insales due tosales ofsustainablemerchandiseSales Cost
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Compensation Report 2022Deutsche Bank1 Deutsche Bank Compensation Report 2022 Compensation Report Introduction.2 Compensation Report for the Management Board and the Supervisory Board.2 Employee Compensation Report.2 Compensation of the Management Board.3 Principles for Management Board Compensation.3 Responsibility and procedures for setting and reviewing Management Board compensation.3 Guiding principle:Alignment of Management Board compensation to corporate strategy.3 Compensation principles.4 Compensation-related developments in 2022.4 Development of business and alignment of Management Board compensation to corporate strategy in 2022.4 Management Board Changes and Compensation Decisions in 2022.5 Approval of the Compensation Report 2021 by the Annual General Meeting 2022.6 Improvements compared to the Compensation Report 2021.6 Principles governing the determination of compensation.7 Structure of the Management Board compensation system.7 Composition of the target total compensation and maximum compensation.8 Application of the compensation system in the financial year.10 Fixed compensation.10 Variable compensation.10 Appropriateness of Management Board compensation and compliance with the set maximum compensation.25 Deferrals and holding periods.26 Backtesting,malus and clawback.27 Information on shares and fulfilling the share ownership obligation(Shareholding Guidelines).28 Benefits as of the end of the mandate.29 Benefits upon early termination.30 Other service contract provisions.30 Deviations from the compensation system.31 Management Board compensation 2022.32 Current Management Board members.32 Former members of the Management Board.36 Outlook for the 2023 financial year.37 Total target compensation and maximum compensation.37 2023 objective structure and targets.37 Compensation of members of the Supervisory Board.39 Supervisory Board Compensation for the 2022 and 2021 financial years.39 Comparative presentation of compensation and earnings trends.42 Independent auditors report.44 Responsibilities of the executive directors and the supervisory board.44 Auditors responsibility.44 Opinion.44 Other matter formal audit of the remuneration report.44 Limitation of liability.45Compensation of the employees(unaudited).46 Regulatory environment.46 Compensation governance.47 Compensation and Benefits Strategy.48 Group Compensation Framework.49 Employee groups with specific compensation structures.50 Determination of performance-based variable compensation.51 Variable compensation structure.52 Ex-post risk adjustment of variable compensation.53 Compensation decisions for 2022.54 Material Risk Taker compensation disclosure.55 2 Deutsche Bank Introduction Compensation Report 2022 Compensation Report for the Management Board and the Supervisory Board Introduction The Compensation Report for the year 2022 provides detailed information on compensation in Deutsche Bank Group.Compensation Report for the Management Board and the Supervisory Board The Compensation Report for the Management Board and the Supervisory Board for the 2022 financial year was prepared jointly by the Management Board and the Supervisory Board of Deutsche Bank Aktiengesellschaft(hereinafter:Deutsche Bank AG or the bank)in accordance with Section 162 of the German Stock Corporation Act.The Compensation Report describes the fundamental features of the compensation systems for Deutsche Banks Management Board and Supervisory Board and provides information on the compensation granted and owed by Deutsche Bank in the 2022 financial year to each incumbent or former member of the Management Board and Supervisory Board.The Compensation Report fulfills the current legal and regulatory requirements,in particular of Section 162 of the German Stock Corporation Act and the Remuneration Ordinance for Institutions(InstitutsVergV)and takes into account the recommendations set out in the German Corporate Governance Code(GCGC).It is also in compliance with the applicable requirements of the accounting rules for capital market-oriented companies(German Commercial Code(HGB),International Financial Reporting Standards(IFRS)as well as the guidelines issued by the working group Guidelines for Sustainable Management Board Remuneration Systems.Employee Compensation Report This part of the compensation report discloses information with regard to the compensation system and structure that applies to the employees in Deutsche Bank Group.The report provides details on the Group Compensation Framework and it outlines the decisions on Variable Compensation for 2022.Furthermore,this part contains quantitative disclosures specific to employees identified as Material Risk Takers(MRTs)in accordance with the Remuneration Ordinance for Institutions(Institutsvergtungsverordnung InstVV).3 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Principles for Management Board Compensation Compensation of the Management Board Principles for Management Board Compensation Responsibility and procedures for setting and reviewing Management Board compensation The Supervisory Board as a whole is responsible for the decisions on the design of the compensation system as well as for setting the individual compensation amounts and procedures for awarding the compensation.The Compensation Control Committee supports the Supervisory Board in its tasks of designing and monitoring the implementation of the system and prepares proposals for resolutions for the Supervisory Board.As necessary,the Compensation Control Committee issues recommendations for the Supervisory Board to make adjustments to the system.In the case of significant changes,but at least every four years,the compensation system for the Management Board is submitted to the General Meeting for approval in accordance with Section 120a(1)of the German Stock Corporation Act.The compensation system was last approved by the General Meeting 2021 by a majority of 97.76%.On the basis of the approved compensation system,the Supervisory Board sets the target total compensation for each Management Board member for the respective financial year,while taking into account the scope and complexity of the respective Management Board members functional responsibilities,the length of service of the Management Board member on the Management Board as well as the companys financial situation.In the process,the Supervisory Board also considers the customary market compensation,also based on both horizontal and vertical comparisons,and sets the upper limit for total compensation(maximum compensation)(additional information is provided in the section“Appropriateness of Management Board compensation and compliance with the set maximum compensation”).Guiding principle:Alignment of Management Board compensation to corporate strategy Deutsche Bank aims to make a positive contribution to its clients,employees,investors and society in general by fostering economic growth and social progress.Deutsche Bank would like to offer its clients solutions and provide an active contribution to foster the creation of value by its clients.This approach is also intended to ensure that Deutsche Bank is competitive and profitable and can operate on the basis of a strong capital and liquidity position.Deutsche Bank is committed to a corporate culture that appropriately aligns risks and revenues.Building on a stable and promising foundation with a balanced business model,prudent risk management and a strong balance sheet,Deutsche Bank has outlined its strategy for the Group for the period up to 2025 at the Investor Deep Dive in March 2022 aiming for sustainable profitable growth.The aim is an average annual revenue growth of 3.5 to 4.5%.At the same time,there is a commitment to remain disciplined on costs to free up capacity for investments and improving the operational leverage.The aim is to push the cost/income ratio below 62.5%by 2025 while at the same time generating an attractive return on tangible equity above 10%.The capital distribution objectives are to be achieved through a combination of dividends and share repurchases,with a payout ratio of 50%from 2025 onwards.The bank will continue to focus on conduct and controls and follow a clear management agenda to change the way of working,to become even more innovative and to remain an employer of choice.In the interests of the shareholders,the Management Board compensation system is aligned to the business strategy as well as the sustainable and long-term development of Deutsche Bank and provides suitable incentives for a consistent achievement of the set targets.Through the composition of total compensation comprising fixed and variable compensation components,through the assessment of performance across short-term and long-term periods and through the consideration of relevant,challenging performance parameters,the implementation of the Group strategy and the alignment with the sustainable and long-term performance of the Group are rewarded in a clear and understandable manner.The structure of the targets and objectives therefore comprises a balanced mix of both financial and non-financial parameters and indicators.Through the structuring of the compensation system,the members of the Management Board are motivated to achieve the targets and objectives linked to Deutsche Banks strategy,to work individually and as a team continually towards the long-term positive development of Deutsche Bank,without taking on disproportionately high risks.The Supervisory Board thus ensures there is always a strong link between compensation and performance in line with shareholder interests(“pay for performance connection”).4 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Compensation-related developments in 2022 Compensation principles The design of the compensation system and thus the assessment of individual compensation amounts are based on the compensation principles outlined below.The Supervisory Board takes them into consideration when adopting its resolutions in this context:Corporate strategy The compensation system for the Management Board members is closely linked to Deutsche Banks strategy,thereby focusing their work on its implementation and the long-term positive development of the Group,without taking disproportionate risks.Shareholders interests The interests of shareholders are always taken into account when designing the specific structure of the compensation system,determining individual compensation amounts and structuring the means of compensation allocation and delivery.Individual and collective objectives Setting individual,divisional and collective objectives fosters not only the sustainable and long-term development of each of the business divisions,infrastructure areas or regions the Management Board members are responsible for,but also the performance of the Management Board as a collective management body.Long-term perspective A long-term link to Deutsche Banks performance is secured by setting a greater percentage of long-term objectives in comparison to short-term objectives and by granting variable compensation exclusively in deferred form and mostly as share-based compensation with vesting and holding periods of up to seven years.Sustainability Objectives in accordance with Deutsche Banks Environmental,Social and Governance(ESG)strategy provide incentives for acting responsibly,also in the context of sustainability,and thus make an important contribution to Deutsche Banks long-term performance.Appropriateness and upper limits(caps)The appropriateness of the compensation amounts is ensured through the review of the compensation based on a horizontal comparison with peers and a vertical comparison with the workforce as well as suitable compensation caps on the achievable variable compensation and maximum compensation.Transparency By avoiding unnecessary complexity in the structures and through clear and understandable reporting,the transparency of the compensation system is increased in accordance with the expectations of investors and the public as well as the regulatory requirements.Governance The structuring of the compensation system and the assessment to determine the individual compensation take place within the framework of the statutory and regulatory requirements.Compensation-related developments in 2022 Development of business and alignment of Management Board compensation to corporate strategy in 2022 Management Board compensation is closely aligned to Deutsche Banks strategic targets.All the individual and collective objectives agreed with the Management Board members as well as their assessment parameters for the 2022 financial year were discussed by the Compensation Control Committee at the beginning of the year and subsequently resolved on by the Supervisory Board.The objectives serve overall in fostering the strategic transformation of the Group.The achievement levels determined for the objectives for the 2022 financial year at the beginning of the year 2023 reflect the extent to which the individual objectives were achieved and thus contributed to the Banks performance.Over the past three and a half years Deutsche Bank has managed to transform itself under the management team.By refocusing the business around core strengths,the bank has become significantly more profitable,better balanced and more cost-efficient.Thanks to disciplined execution of the strategy,the bank has been able to support its clients through highly challenging conditions,proving its resilience with strong risk discipline and sound capital management.Profit before tax amounted to 5.6 billion at the end of 2022.This is an increase of 65%over the previous year and the highest result for fifteen years.Post-tax return on tangible equity rose to 9.4%.Revenues increased by 7%to 27.2 billion on the back of increased client business.At the same time,Deutsche Bank has further reduced costs by 5%to 20.4 billion.The cost/income ratio fell from 85 to 75%for the full year.Reflecting the profitability of all business segments in 2022,the Corporate Bank and the Private Bank were the most important growth drivers with revenue increases of 23%and 11%respectively.Both divisions also achieved record profits.Corporate Bank net revenues were 6.3 billion in 2022,up 23%year on year,with 39%growth in net interest income and 7%growth in commission and fee income.Private Bank net revenues were 9.2 billion,up 11%year on year.The Investment Banks continued success in Fixed Income and Currencies more than compensated for the slowdown in Origination&Advisory last year,and revenues increased by 4%.In Asset Management,revenues fell by 4%to 2.6 billion,less sharply than in almost all major markets.5 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Compensation-related developments in 2022 The 2022 results demonstrate the benefits of Deutsche Banks transformation efforts.The bank delivered revenue growth in its core businesses and continued cost reductions.The risk provisions are in line with guidance,despite challenging conditions.Focused de-risking of the balance sheet has contributed to the solid capital ratio and the completion of the Capital Release Units journey marks a major milestone in its transformation execution.The individual objectives are bundled in the short-term component(Short-Term Award(STA)and account for a share of 40%of the target total variable compensation.The Supervisory Board determined an achievement level for these components for the 2022 financial year of between 105.69%and 127.54%.The performance of the Management Board as a collective body is reflected in the long-term component(Long-Term Award(LTA),which accounts for a share of 60%of the target total variable compensation.Overall,the achievement level of the collective objectives based solely on the 2022 financial year was 86.29%.This achievement level accounts for 60%of the Long-Term Award to be granted for the 2022 financial year.30%will be for the 2023 financial year and 10%for the 2024 financial year.As achievement levels for prior years(at 30%from 2021 and 10%from 2020)also affected the Long-Term Award for the 2022 financial year,the achievement level of this component for the 2022 financial year was 79.60sed on the weighted achievement levels of the three financial years.Details on the individual achievement levels are presented as an overview in this report under the heading“Application of the compensation system in the financial year”.Management Board Changes and Compensation Decisions in 2022 Stuart Lewis resigned as member of the Management Board and Chief Risk Officer with effect from the day of the General Meeting on May 19,2022.The appointment of his successor,Olivier Vigneron,took place with effect from May 20,2022.Olivier Vigneron initially worked for Deutsche Bank as Senior Group Director(Generalbevollmchtigter),starting as of March 1,2022.As a result,a smooth transition of tasks and responsibilities of the Chief Risk Officer could be ensured.The Management Board comprised 10 members throughout 2022 with a proportion of women of 20%.The Supervisory Board reviews the compensation levels of the members of the Management Board annually and regularly engages external compensation advisors to support the review,while assuring that these advisors are independent from the Management Board and Deutsche Bank.In 2022,the Supervisory Board conducted a review of the compensation levels taking into account comparable companies(peer groups)with the support of the external compensation advisor.On the basis of the results of this review and taking into account other aspects such as the duration of membership in the Management Board or changes in the area of responsibility within the Management Board,the Supervisory Board has taken the following compensation decisions in 2022:The overall target compensation for Olivier Vigneron in his capacity as member of the Management Board and Chief Risk Officer was set at the level of compensation of other Management Board members with responsibly for an infrastructure area or a region.This corresponds to a target value of 6.5 million p.a.The total target compensation is therefore 7.14low the total target compensation of his predecessor.In March 2022,James von Moltke was appointed President of Deutsche Bank AG in addition to his duties as Chief Financial Officer(CFO).This appointment leads to an extension in his area of responsibility within the Management Board and additional tasks.Taking into account the extended area of responsibility and his senior membership in the Management Board already in the sixth year,the Supervisory Board decided to increase his total target compensation by 400k p.a.to 7.4 million p.a.with effect from 1 July 2022.This represents an increase of 5.71%.Fabrizio Campelli successfully took over responsibility for the Corporate Bank and the Investment Bank from Christian Sewing on 1 May 2021 in a smooth takeover.The review of the compensation levels by the external compensation advisor showed that his positioning within the two peer groups of the International and European Banks with an overall target compensation of 6.5 million p.a.is lower compared to the positioning of the other Management Board members.In addition,his appointment as a member of the Management Board was extended for a further three years.For these reasons,the Supervisory Board decided to increase the total target compensation to 7 million p.a.which represents an increase of 7.69%.The increase took effect at the same time as the extension of his appointment with effect from 1 November 2022.In 2022 the Management Board acknowledged that the use of non-authorized communication channels among staff represents a cultural shortcoming at Deutsche Bank.Therefore,the Management Board wanted so set a cultural signal and proposed to the Supervisory Board that,as part of performance management,this should have an impact on individual compensation.Thus,all Management Board members active on 31 December 2021 agreed to reduce variable compensation for the financial year 2021 by each EUR 75,000.The reduction will be achieved through the reduction of the Restricted Incentive Awards due on 1 March 2023 in the amount above.6 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Compensation-related developments in 2022 When determining the variable compensation for the financial year 2022,the Supervisory Board took positive account of the financial milestones achieved and the contributions of the individual members of the Management Board to this success in their performance evaluation.In addition,the Management Board has continued its remediation activities with strong commitment and with various measures taken to meet the high expectations of the regulators;however,despite recent progress,the Supervisory Board believes that the overall extended timeline on which the remediation has taken place and the re-planning and/or missed milestones in certain areas need to be recognized in the Management Boards compensation.For this reason,the Supervisory Board,acting on a proposal from the Compensation Control Committee,reduced the individual achievement level with regards to the Short-Term Award calculated on the basis of the individual performances by 5%for all members of the Management Board active in the financial year.Details on how to calculate the Short-Term Award are presented in this report under the heading“Application of the compensation system in the financial year”.Approval of the Compensation Report 2021 by the Annual General Meeting 2022 The Compensation Report 2021 for members of the Management Board and Supervisory Board of Deutsche Bank as published on March 11,2022,was submitted to the ordinary General Meeting on May 19,2022,for approval in accordance with Section 120a(4)of the German Stock Corporation Act.The General Meeting approved the Compensation Report with a majority of 88.03%.Improvements compared to the Compensation Report 2021 While last years Compensation Report was in principle well received by shareholders,we constantly strive to improve the quality of the Groups reporting.In the interests of our shareholders,the bank provides more information this year and thus increases transparency by Providing further comprehensive rationale for decisions on changes related to Management Board compensation Enhancing information on individual objectives including the overall achievement levels for each Management Boardmember Disclosing Balanced Scorecard Key Performance Indicators(KPIs)for the Chief Executive Officer(CEO)and the ChiefFinancial Officer(CFO)including overall achievement levels Introducing summaries of the performance assessment for the CEO and CFO for the Short-Term Award(STA)componentsof the individual objectives and the annual priorities Extending the Long-Term Award(LTA)table for the Group Component to include target/actual values and achievementlevels Providing a detailed overview of the 3-year assessment period showing the individual achievement grades to evaluate theoverall achievement level for each LTA component Providing an outlook on objectives to be set for 2023,including improvements on the compensation structures for theManagement Board with effect from 20237 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Principles governing the determination of compensation Principles governing the determination of compensation Structure of the Management Board compensation system The compensation system consists of fixed and variable compensation components.The fixed compensation and variable compensation together form the total compensation for a Management Board member.The Supervisory Board defines target and maximum amounts(caps)for all compensation components.Management Board Compensation System 2022 Components Objective Implementation Fixed Compensation Base salary The base salary rewards the Management Board member for performing the respective role and responsibilities.The fixed compensation is intended to ensure a fair and market-oriented income and to ensure that undue risks are avoided.In addition,Management Board members are granted recurrent,fringe benefits and contributions for pension benefits.-Monthly payment;Annual base salary of between 2.4 million and 3.6 million Fringe benefits-Company car and driver services as well,if applicable moving expenses,housingallowance,insurance premiums and reimbursement of business representationexpensesPension-A single and contractually agreed annually pension plan contribution or allowance of 650,000 for adequate pension provision Variable Compensation Short Term Award(STA)The STA rewards the individual value contribution of each member of the Management Board to achieving short-and medium-term objectives in accordance with the corporate strategy.It consists of three elements,which are tailored to the role and responsibilities of the Management Board member and can be individually influenced by the level of achievement by the Management Board member.-40%of the total variable compensation with 3elements related to individual performance(1)Individual objectives(20%);(2)Individual Balanced Scorecard(10%);(3)Annual priorities(10%)-Maximum target level 150%-Assessment period 1 year-Earliest possible disbursement in 4 tranches in Restricted Incentive Awards(cash-based)-1,3,5 and 7 years after being granted-Target amount for 100hievement level:Between 1.640 million and 2.160 millionLong Term Award(LTA)Within the determination of the variable compensation,the focus is on achieving long-term objectives linked to the strategy.To underline this,the Supervisory Board has set the focus on this component with a share of the LTA of 60%of the total variable target compensation.For the LTA,the Supervisory Board sets collective objectives for the members of the Management Board.An important part of the LTA is the ESG factor.Since its implementation in 2021 and further development,Deutsche Banks sustainability strategy has been systematically linked to the Management Board compensation-60%of total variable compensation with 4 group targets(1)ESG factor(20%);(2)Relative total shareholder return(15%);(3)Organic capital growth(15%);(4)Group component(10%)-Maximum target level 150%-Assessment period of 3 years with weightingsof 60%(Financial Year(FY),30%(FY 1),10%(FY 2)-Disbursement in 4 tranches exclusively in Restricted Equity Awards(share-based)earliest possible delivery after 2,3,4,5 yearsplus a holding period in each case of 1 yearafter grant-Target amount for 100hievement level:Between 2.460 million and 3.240 million 8 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Principles governing the determination of compensation Overview Detailed information on the compensation system for members of the Management Board of Deutsche Bank AG is available on the companys website:Compensation system for the Management Board Members from January 2021 onwards.Composition of the target total compensation and maximum compensation The Supervisory Board determines for each Management Board member a target(reference)total compensation on the basis of the compensation system approved by the General Meeting.It also determines,in accordance with the recommendation of the German Corporate Governance Code,what relative proportions the fixed compensation on the one hand and short-term and long-term variable compensation on the other hand have in the target total compensation.In this context,the Supervisory Board ensures in particular that the variable compensation linked to achieving long-term objectives exceeds the portion of variable compensation linked to short-term objectives.When setting the target total compensation for each member of the Management Board,the Supervisory Board takes into account the scope and complexity of the respective Management Board members functional responsibility as well as the experience and length of service of the member on the Management Board.Furthermore,the compensation amounts are reviewed for their appropriateness on the basis of market data for suitable peer groups.On the basis of these criteria,the Supervisory Board set the relative percentages for the compensation components within the target total compensation as follows:Relative shares of the total annual target compensation allocated to the different compensation components(%)Compensation components Relative share of total compensation inse Salary 33-37%Regular fringe benefits 1%Pension service costs/pension allowance 7-9%Short-Term Award 22-23%Long-Term Award 33-34%Reference total compensation 100%The compensation of the Management Board members is limited(capped)in several ways(maximum compensation).Pursuant to Section 25a(5)of the German Banking Act(Kreditwesengesetz KWG),the ratio of fixed to variable compensation is generally limited to 1:1(cap regulation),i.e.the amount of variable compensation must not exceed that of fixed compensation,unless the shareholders of a bank resolve to increase the ratio of fixed to variable compensation to up to 1:2.The General Meeting in May 2014 made use of this possibility and increased the ratio to 1:2.9 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Principles governing the determination of compensation The Supervisory Board additionally limited the maximum possible achievement levels for the short-term objectives(STA)and long-term objectives(LTA)consistently to 150%of the target variable compensation.Furthermore,it specified an additional amount limit(cap)for the aggregate amount of base salary,STA and LTA of 9.85 million.This means that even with target achievement levels that would lead to higher compensation amounts,compensation is capped at a maximum of 9.85 million.After the target achievement level is assessed,if the calculation should result in variable compensation or total compensation that exceeds one of the specified caps,the variable compensation is to be reduced.This is to take place through a pro rata reduction of the STA and LTA.Target and maximum amounts of base salary and variable compensation 2022 2021 in Base salary Short-Term Award Long-Term Award Total compensation1 Total compensation1 CEO Target value 3,600,000 2,160,000 3,240,000 9,000,000 9,000,000 Maximum value 3,600,000 3,240,000 4,860,000 9,850,000 9,850,000 Presidents2,3 Target value 3,000,000 1,760,000 2,640,000 7,400,000 7,400,000 Maximum value 3,000,000 2,640,000 3,960,000 9,600,000 9,600,000 Ordinary Board Member responsible for Corporate Bank and Investment Bank(CB&IB)3 Target value 2,800,000 1,680,000 2,520,000 7,000,000 6,500,000 Maximum value 2,800,000 2,520,000 3,780,000 9,100,000 8,550,000 All other Ordinary Board Members3 Target value 2,400,000 1,640,000 2,460,000 6,500,000 6,500,000 Maximum value 2,400,000 2,460,000 3,690,000 8,550,000 8,550,000 1 Limit the maximum total amount of basic salary and variable compensation to the upper limit set by the Supervisory Board.2 Presidents and Ordinary Board members responsible for Private Bank(PB)/Asset Management(AM)and Finance(CFO).3 For further details on compensation decision,please refer to chapter Management Board Changes and Compensation Decisions in 2022 in this report.In addition,in accordance with Section 87a(1)sentence 2 No.1 of the German Stock Corporation Act,the Supervisory Board also set an upper limit for the maximum total compensation of 12 million for each Management Board member(Maximum Compensation).The Maximum Compensation is set consistently for all Management Board members.The Maximum Compensation corresponds to the sum of all compensation components for any financial year.This comprises not only the base salary,STA and LTA,but also the fringe benefits and service costs for the company pension plan or pension allowances.10 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year Application of the compensation system in the financial year Fixed compensation The fixed compensation components in the form of base salary,fringe benefits and contributions to the pension plan or pension allowances were granted in the financial year as fixed compensation and in accordance with the individual agreements in the service contracts.Due to the requirements of Section 25a(5)of the German Banking Act and in accordance with the decision of the Annual General Meeting in May 2014,the ratio of fixed to variable compensation is generally limited to 1:2(cap rule).Therefore,when determining the amount of base salary as part of the target compensation,it must be taken into account that the variable compensation may not exceed the maximum value of 200%of the fixed compensation.The expenses for fringe benefits and pension service costs vary in their annual amounts.Although the contribution to Deutsche Banks pension plan is defined consistently for all Management Board members,the amounts to be contributed by Deutsche Bank during the year in the form of pension service cost accruals vary,however,based on the length of service on the Management Board within the financial year,the age of the Management Board member and actuarial figures(additional information is provided in the section“Benefits upon regular contract termination”).Variable compensationThe Supervisory Board,based on the proposal of the Compensation Control Committee,determined the variable compensation for the Management Board members for the 2022 financial year.Variable compensation comprises two components,a short-term component(Short-Term Award(STA)with a weighting of 40%and a long-term component(Long-Term Award(LTA)with a weighting of 60%in relation to the target variable compensation.All objectives,measurements and assessment criteria that were used for the assessment of performance for the 2022 financial year are derived from Deutsche Banks strategy and are in line with the compensation system approved by the General Meeting.The objectives were selected to set suitable incentives for the Management Board members,to promote the development of Deutsche Banks earnings and the alignment to the interests of shareholders as well as to fulfill Deutsche Banks social responsibility through the inclusion of sustainability aspects and climate protection.The challenging objectives reflect the Banks ambitions.If the objectives are not achieved,the variable compensation can be zero;in the case of over-achievement,the maximum achievement level is limited to 150%of the target value.Balance of financial and non-financial objectives Financial and non-financial objectives are considered in a balanced way when setting the objectives.In relation to the total variable compensation,there was a greater focus on financial objectives in the 2022 financial year,with a weighting of around 68%.Both the financial and non-financial objectives were chosen in such a way that they are quantitatively or qualitatively measurable at the end of the financial year.Around 75%of the targets are quantitatively measurable and a portion of around 25%is measured qualitatively.Short-Term Award(STA)The amount of the Short-Term Award for the 2022 financial year is based on the achievement level during the assessment period of the short-term individual and divisional objectives.The assessment period coincides with the financial year and is one year.The Short-Term Award comprises the following three elements with different weightings:Individual Objectives(50%)Individual Balanced Scorecards(25%)Annual Priorities(25%)For each of these components,the Supervisory Board determines the achievement level based on a clearly structured year-end assessment process at the beginning of the following year.The achievement of the three components determines the overall achievement level for each Management Board member which in turn determines the amount of the short-term component for the preceding financial year.11 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year Determination of the cash value of the Short-Term Award Short-Term Award(40%)Individual Objectives(50%)Balanced Scorecard(25%)Annual Priorities(25%)Target Amount1 820,000-1,080,000 410,000-540,000 410,000-540,000 Target Achievement Level 0%-150%0%-150%0%-150%Overall Target Amount per STA component 0-1,620,000 0-810,000 0-810,000 Overall Target Amount STA 0-3,240,000 1 Target amount differs depending on the Management Board members functional responsibility.On the basis of 100%.Pro rata temporis upon joining or leaving during the year.Individual objectives The Supervisory Board sets personal and divisional objectives(Individual Objectives)for each member of the Management Board at the beginning of the year.The weightings of each of these objectives as well as relevant quantitatively or qualitatively measurable performance criteria for their assessment are defined as well.The objectives are chosen so that they are challenging,ambitious and sufficiently concrete in order to ensure there is an appropriate alignment of performance and compensation and that the“pay-for-performance”principle is taken into account.The Individual Objectives are derived from the corporate strategy and foster its implementation.They are set for each Management Board member in consideration of her or his respective area of functional responsibility and the contribution of this area of functional responsibility to advancing Deutsche Banks overall strategy.ESG objectives such as the further development of the sustainability strategy or the promotion of measures to improve regulatory remediation are also included as individual objectives.Individual Objectives can also be defined as project or regional targets.Besides operational measures,the implementation of strategic projects and initiatives can be agreed as objectives as well,if they are directly instrumental in the implementation of the strategy,by contributing to,for example,the structure,organization and sustainable development of Deutsche Bank.At the beginning of the 2022 financial year,between 4 and 7 Individual Objectives were set with different weightings for each Management Board member.For these objectives,the Supervisory Board has assigned clear expectations and financial and/or non-financial performance criteria at the beginning of the year,such as financial Key Performance Indicators(KPIs),achievements of milestones,Chief Executive Officer(CEO)and/or Supervisory Board feedback,stakeholder Feedback and qualitative assessments.These enable the Supervisory Board to objectively assess the performance contribution of the respective Management Board member towards the concrete execution of the objectives.At year-end,the determination of the achievement levels follows a pre-defined process.In a first step,all members of the Management Board perform an initial self-assessment of the achievement levels of their objectives.The self-assessed achievement levels are then discussed in conversations with the Chief Executive Officer(CEO)and the Chairman of the Compensation Control Committee.Based on the feedback from these conversations,the Compensation Control Committee prepares a proposal for the Supervisory Board for its decision.For this purpose the achievement levels are combined into an average for each Management Board member according to pre-defined weightings.The following overview shows the objectives as well as the achievement levels as resolved on by the Supervisory Board for each Management Board member.12 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year Management Board Member Weighting(in%)Individual objectives Achievement Level(in%)Christian Sewing 25%Further develop Deutsche Banks long-term vision&positioning 131.50 liver on Deutsche Bank Group short-term strategy execution and milestones 15%Further evolve Deutsche Bank culture 15%Provide oversight to Human Resources transformation including Real Estate 15%Further develop Bank-wide ESG&Sustainable Banking Strategy 10%Strengthen positioning with key political stakeholders James von Moltke 30%Ensure execution of Group financial plan through Group Performance Management 126.75%Drive development of new strategy 15%Drive investor and Rating Agencies engagement 10liver Balance Sheet&Liquidity Optimization 10liver Liquidity Remediation Program 10%Execute Group Finance strategy,incl.Financial&Analytics enhancement 10%Support CEO in further evolution of DB culture,with a focus on integrity and conduct.Karl von Rohr 30liver on strategy execution for the division Private Bank incl.efficiency,growth and sustainable profitability 131.75%Support CEO in developing new strategy and achieving Group financial targets 15%Ensure delivery on critical remediation activities within the area of financial crime 20%Support DWS strategy through oversight role 15%Provide oversight for Regions Germany&EMEA 10%Support CEO in further evolution of DB culture,with a focus on integrity and conduct Fabrizio Campelli 30liver on strategy execution and sustainable profitability for the divisions Corporate Bank and Investment Bank 130.00 %Improve controls and demonstrate their effectiveness to regulators for Corporate Bank and Investment Bank 20%Drive development of new strategy for Corporate Bank and Investment Bank 10%Drive stronger F2B alignment for Corporate Bank and Investment Bank 10%Provide oversight to Region UK and Ireland 10%Support CEO in further evolution of DB culture,with a focus on integrity and conduct Bernd Leukert 35%Execute strategy for the division Technology,Data&Innovation(TDI)and evolve TDI priorities in line with the 25 strategy 122.00 %Technology:Continue improvement of estate 20ta:Drive quality enhancements 15%Innovation:Drive client-centric technology approach across DB 10%Support CEO in further evolution of DB culture,with a focus on integrity and conduct Alexander von zur Mhlen 40%Execute and evolve APAC strategy in line with the 2025 strategy 123.500%Strengthen APAC franchise and client focus 20%Foster control culture and deliver on critical remediation activities within the area of financial crime for the APAC region 10%Support CEO in further evolution of DB culture,with a focus on integrity and conduct Christiana Riley 40%US regulatory remediation and engagement including delivery on critical remediation activities within the area of financial crime for the Americas and 2022 Comprehensive Capital Analysis and Review(CCAR)119.000%Execute and evolve Americas strategy in line with the 2025 strategy 20%Strengthen client engagement 10%Support CEO in further evolution of DB culture,with a focus on integrity and conduct Rebecca Short 25%Execute transformation agenda 120.00 %Drive CRU reductions 20%Drive global cost reduction 15%Drive Procurement excellence 10%Support development of new strategy and financial aspiration 10%Support CEO in further evolution of DB culture,with a focus on integrity and conduct 13 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year Management Board Member Weighting(in%)Individual objectives Achievement Level(in%)Professor Dr.Stefan Simon 40%Drive delivery on critical remediation activities within the area of financial crime 122.50%Drive strategic engagement with regulatory authorities 15%Further drive down bank-wide litigation portfolio 10%Drive build out and operationalize CAO Controls Framework 10%Drive overhaul of CAO policy setting and implementation 10%Support CEO in further evolution of Deutsche Bank culture,with a focus on integrity and conduct Olivier Vigneron 50%Foster a strong risk-return culture and continue to strengthen the risk organization 105.00%(Member since 20%Strengthen Non-Financial Risk Management May 20,2022)20%Further address regulatory and internal audit findings 10%Support CEO in further evolution of DB culture,with a focus on integrity and conduct Stuart Lewis 25%Foster a strong risk-return culture throughout the organization 121.25%(Member until 20%Handover to successor May 19,2022)20%Further address regulatory and internal audit findings 15%Continue to develop and strengthen the risk organization 10%Vendor Management remediation 10%Support CEO in further evolution of DB culture,with a focus on integrity and conduct For the qualitative objectives,the Supervisory Board has formulated expectations and financial and/or non-financial performance criteria at the beginning of the year,which enable it to objectively assess the performance contribution of the respective Management Board members with regard to the concrete implementation of an objective for the performance year at the beginning of the following year.The degrees of achievement thus determined for the individual objectives are consolidated into an average for each Management Board member according to the weightings defined in advance.The degree of target achievement determined accordingly is multiplied by the target amount of 50%of the variable target remuneration of the STA.This results in the calculated payout amount for the component of the individual objectives.14 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year Pay-for-performance summary for CEO and CFO for the STA Individual objectives Individual Balanced Scorecard Balanced Scorecards make it possible to have an overview of key performance indicators and transform strategic objectives into operating practices through concrete actions and consequent cascading into the organization.With the Balanced Scorecards,the Bank has an appropriate tool for the steering and control of key performance indicators that can be used to check the achievement level of financial and non-financial objectives against pre-defined measurement parameters at any time and to measure them transparently for the performance year at the beginning of the following year.At the same time,the Balanced Scorecards provide an overview of the priorities of the individual divisions across the entire Group.Based on the functional responsibilities according to the Business Allocation Plan for the Management Board,each Management Board member is assigned at least one individual Balanced Scorecard and a maximum of 4 Balanced Scorecards.If more than one Balanced Scorecard is assigned to a Management Board member,these are weighted to each other based on the size of the activities.Four Management Board members have more than one Balanced Scorecard due to their multiple functional and/or divisional responsibilities.The table below shows the number of Balanced Scorecards and their respective weightings.15 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year Balanced Scorecards for Management Board Members in 2022 Management Board Member Weightings Balanced Scorecard Christian Sewing 60%Group/Chairman 40%Human Resources/Corporate Real Estate James von Moltke 100%Chief Financial Office Karl von Rohr 40%Private Bank 40%Asset Management 10%Region Germany 10%Region Europe,the Middle East and Africa(EMEA)Fabrizio Campelli 35%Corporate Bank 35%Investment Bank 20%Corporate Bank&Investment Bank Operations and Control 10%Region UKI Bernd Leukert 100%Technology,Digitalization&Innovation Alexander von zur Mhlen 100%Region APAC Christiana Riley 100%Region Americas Rebecca Short 50%Chief Transformation Office including Global Procurement 50pital Release Unit Professor Dr.Stefan Simon 100%Chief Administrative Office Olivier Vigneron1 100%Chief Risk Office Stuart Lewis 2 1 Member since May 20,2022 2 Member until May 19,2022 The respective Management Board members functional responsibilities are linked with pre-defined key financial figures and non-financial targets from up to three categories.The three categories are:A total of 56 Key Performance Indicators(KPIs)are assigned to these categories,of which a set of 8 to 21 KPIs are embedded in each individual Balanced Scorecard depending on the Management Board members area of functional responsibility.The methodology for the Balanced Scorecards has been further developed since their introduction in 2018 and adjusted to meet the developing focus.For example,in order to foster aspects of Environmental,Social and Governance(ESG)aspects in the compensation system,since 2021 ESG topics have been given an even greater consideration in the Balanced Scorecards and also in the Long-Term Award(LTA).The KPIs within the individual categories are set at the beginning of the year for each Management Board member individually along with corresponding target,thresholds and corresponding assessment parameters.In addition,a weighting is set for each category.The weightings that the individual categories have within the overall Balanced Scorecard can be up to 65pending on the functional responsibility of the Management Board member.The KPIs of the Balanced Scorecards are measured continuously throughout the year,but the overall assessment is made at the end of the year.The calculation logic for determining the final levels of achievement for each Management Board member is as follows:In a first step,the achievement band of each KPI is determined.If a minimum threshold value is not reached,the achievement level for this KPI is set at zero.Once a maximum limit for a KPI has been reached,the achievement level is set at 150%.For a clear overview,the Balanced Scorecard shows if each individual KPI was fulfilled or exceeded based on the defined assessment criteria(“green”),or only achieved to less than 100%(“amber”)or not achieved(“red”).In a second step,the achievement level for each category is calculated taking into account the assessment of the KPIs from the first step and the resulting bands applicable to the respective category.When all objectives of a category are exceeded,the achievement level for a category can be up to 150%.However,if none of the minimum threshold values of a category is met,the achievement level is 0%.In a third step,an overall achievement level for the individual Balanced Scorecard is derived from the achievement levels of the categories and their weightings.16 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year Individual Chairman Balanced Scorecard for Christian Sewing1 1 The Group/Chairman Balanced Scorecard represents one of the two Balanced Scorecards for the CEO(Group/Chairman and Human Resources/Corporate Real Estate).The overall Balanced Scorecard achievement level is determined based on a combination of both Balanced Scorecards.Individual CFO Balanced Scorecard for James von Moltke 17 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year Balanced Scorecard(illustrative functioning of the internal tracking tool)1 Resulting bands of KPI categories:Green(100-150%);Green to amber(75-125%),Green to red(50-100%),Amber to red(25%-75%),Red(0%).If a Management Board member has more than one Balanced Scorecard,an additional fourth step is carried out to determine a final overall achievement level based on the pre-defined weightings of the Balanced Scorecards.Balanced Scorecard Achievement levels per Management Board Member Management Board member Balanced Scorecard achievement level(in%)Christian Sewing 129.00%James von Moltke 128.00%Karl von Rohr 117.00brizio Campelli 125.00rnd Leukert 116.00%Alexander von zur Mhlen 116.00%Christiana Riley 100.00%Rebecca Short 140.00%Professor Dr.Stefan Simon 118.00%Olivier Vigneron1 115.00%Stuart Lewis2 115.00%1 Member since May 20,2022 2 Member until May 19,2022 Annual PrioritiesUniform Annual Priorities are set for all Management Board members.The Supervisory Board assesses the profitability and performance-related contributions of each Management Board member towards pre-defined focus topics for the year.These focus topics are derived from,and intended to further support,Deutsche Banks strategy.This component of the Short-Term Award(STA)provides the possibility to set operational focal points annually depending on the current priorities.The performance criteria to be used for the assessment can be of both a financial and non-financial nature.For the 2022 financial year,the Supervisory Board specified the following focus topics as Annual Priorities:Constructive flexible responses to events/developments occurring during the performance year Key deliverables from the Balanced Scorecard that have not already been assessed under another objectiveThe Supervisory Board assesses how each individual member of the Management Board reacted to certain and sometimes unforeseen events and developments that occurred during the financial year,particularly from the risk management perspective.At the end of the year,the achievement level is assessed qualitatively.18 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year Within the corporate strategy,the Supervisory Board assesses the achievement levels of Key Deliverables,such as One Bank Client Centricity,Decarbonization and Transformation Targets,Workforce Management and Optimization and Global Reporting that are related to the corporate strategy in the“Book of Work”assigned to the individual Management Board members and measured throughout the year.Each activity is in turn linked to measurement criteria,such as delivery of milestones on time versus plan,financial benefit thresholds and enhanced revenues over baseline that enable a quantitative measurement.Based on this,an individual level of achievement for the performance of each individual Management Board member can be derived at the end of the financial year.Annual Priorities Achievement levels per Management Board Member Management Board Member Weighting(in%)Annual Priorities Achievement Level(in%)Christian Sewing 50%Constructive flexible responses to events/developments occurring in 2022 145.00P%Key deliverables from the Balanced Scorecards James von Moltke 50%Constructive flexible responses to events/developments occurring in 2022 137.50P%Key deliverables from the Balanced Scorecards Karl von Rohr 50%Constructive flexible responses to events/developments occurring in 2022 137.50P%Key deliverables from the Balanced Scorecards Fabrizio Campelli 50%Constructive flexible responses to events/developments occurring in 2022 140.00P%Key deliverables from the Balanced Scorecards Bernd Leukert 50%Constructive flexible responses to events/developments occurring in 2022 130.00P%Key deliverables from the Balanced Scorecards Alexander von zur Mhlen1 100%Constructive flexible responses to events/developments occurring in 2022 122.50%Christiana Riley 50%Constructive flexible responses to events/developments occurring in 2022 125.00P%Key deliverables from the Balanced Scorecards Rebecca Short 50%Constructive flexible responses to events/developments occurring in 2022 125.00P%Key deliverables from the Balanced Scorecards Professor Dr.Stefan Simon 50%Constructive flexible responses to events/developments occurring in 2022 125.00P%Key deliverables from the Balanced Scorecards Olivier Vigneron 50%Constructive flexible responses to events/developments occurring in 2022 120.00%(Member since May 20,2022)50%Key deliverables from the Balanced Scorecards Stuart Lewis 50%Constructive flexible responses to events/developments occurring in 2022 122.50%(Member until May 19,2022)50%Key deliverables from the Balanced Scorecards 1 Balanced Scorecard key deliverables were not agreed for 2022.19 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year Pay-for-performance summary for CEO and CFO for the STA Annual Priorities Overall achievement of the Short-Term AwardFor the 2022 financial year,the following overall levels of achievement were determined for the members of the Management Board based on the level of achievement of the objectives linked to the three components defined by the Supervisory Board in the Short-Term Award:Short-Term Award overall achievement Individual Achievement Level(in%)Overall STA Achievement Individual Objectives(50%)Balanced Scorecard(25%)Annual Priorities(25%)Achievement level(in%)Achievement level incl.5%reduction(in%)1 Achievement level(in)Christian Sewing 131.509.005.004.257.54%2,754,810 James von Moltke 126.758.007.509.753.26%2,120,115 Karl von Rohr 131.757.007.509.503.03%2,165,240 Fabrizio Campelli 130.005.000.001.254.69%2,053,188 Bernd Leukert 122.006.000.002.506.38%1,908,550 Alexander von zur Mhlen 123.506.002.501.385.31%1,891,023 Christiana Riley 119.000.005.005.759.96%1,803,385 Rebecca Short 120.000.005.006.259.94%1,966,975 Professor Dr.Stefan Simon 122.508.005.002.005.90%1,900,760 Olivier Vigneron2 105.005.000.001.255.69%1,064,039 Stuart Lewis3 121.255.002.500.004.00y8,000 1 Reduction of the individual achievement levels for the short-term component by 5%for all Management Board members active in the financial year(see chapter“Management Board Changes and Compensation Decisions in 2022).2 Member since May 20,2022 3 Member until May 19,2022,Pro-rata to the duration of the service contract until 31 May 2022.20 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year Long-Term Award(LTA)When determining variable compensation,a significant focus is placed on the achievement of long-term objectives linked to Deutsche Banks strategy.To emphasize this,the Supervisory Board decided that the Long-Term Award(LTA)will account for 60%of the total target variable compensation.At the beginning of each financial year,the Supervisory Board specifies the collective long-term objectives for the Management Board members for the LTA.The objectives and their weightings in the LTA for 2022 are:ESG Factor(33.33%)Relative Total Shareholder Return of the Deutsche Bank share(25%)Organic Capital Growth(25%)Group Component(16.67%)All LTA objectives are assessed over a period of three years.60%of the target compensation for each objective is multiplied by the target level achieved in the performance year and thus makes up the largest share for that respective financial year.30%of the applicable objective target compensation is based on the achievement level for the preceding financial year and 10%is determined based on the achievement level for the financial year before that.This results in a weighted overall achievement level for the performance year.Assessment period of three years ESG Deutsche Bank has set for itself the aim of spearheading sustainability initiatives such as decarbonization and thus contributing to a more environmentally,socially and financially well-governed economy.To link Management Board compensation closely and consistently to the Banks sustainability strategy,the Supervisory Board resolved to combine the Banks strategic sustainability targets in an Environmental,Social and Governance(ESG)component and to implement the results as one of the collective objectives within the LTA(ESG component).The ESG component accounts for the largest portion of the LTA with a share of 33.33%.This corresponds to 20%of the total variable compensation and emphasizes the importance of the ESG agenda for Deutsche Bank.At the beginning of each financial year,the Supervisory Board sets targets as well as upper limits and lower limits for all the objectives bundled in the ESG component.The assessment of the achievement levels for the financial year takes place retrospectively.A linear calculation methodology is used to assess the achievement levels for the quantitative measurable KPIs(all except AML/KYC remediation activities)in the categories of 0%and 100%,100%and 100%to 150%.The following table shows the target amounts,the results as of the end of the year and the resulting achievement level for the 2022 financial year:21 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year 1 The target( 103 billion for the ESG KPI)for Sustainable Finance and Investment was set at the beginning of the year 2022.Gross volume growth of 74.20 billion was offset by a negative impact of new regulatory requirements(MiFiD),resulting in 58 billion reported at year-end 2022.However,this negative effect was not taken into account for the determination of target achievement.ESG overall achievement level Year Weighted achievement levels over 3 years 2020 10%x 37.50%=3.75 21 30%x 89.38%=26.81 22 60%x 64.38%=38.63%An overall achievement level for the ESG component for the 2022 financial year was calculated based on the weighted achievement levels for the seven sub-objectives and set at 64.38%.This results in a weighted overall achievement level of 69.19%for the three-year period for the portion of the LTA attributable to the ESG component.Relative Total Shareholder Return(RTSR)A key strategic target of the Bank is the performance of the Deutsche Bank share in comparison to the performance of the shares of its competitors(Relative Total Shareholder Return(RTSR).The target for the RTSR for the Deutsche Bank share in comparison to selected financial institutions is intended to strengthen the sustainable performance of the Deutsche Bank share.The RTSR links the interests of the Management Board with those of shareholders.In addition,the RTSR provides a relative measurement of performance,creating an incentive to outperform the relevant peers.The total shareholder return is defined as the share price performance plus theoretically reinvested gross dividends.The RTSR is derived and calculated based on the total shareholder return of the Deutsche Bank share in relation to the average total shareholder returns of the peer group.If the RTSR is greater than 100%,then the target achievement level increases proportionally to an upper limit of 150%of the target figure,i.e.,the target achievement level increases by 1%for each percentage point above 100%.If the RTSR average is less than 100%,the target achievement level declines disproportionately.For each percentage point decline of the RTSR in the range of less than 100%and 80%,the target achievement level declines by two percentage points.For each percentage point decline of the RTSR in the range between less than 80%and 60%,the target achievement level declines by three percentage points.If the RTSR does not exceed 60%over the entire assessment period,the target achievement level is zero.22 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year The peer group used as the basis for calculating the RTSR is selected from among the companies with generally comparable business activities as well as a comparable size and international presence.The Supervisory Board reviews the composition of the peer group regularly.Since 2021 the peer group for the RTSR has comprised the following 11 banks:Banco Santander,Bank of America,Barclays,BNP Paribas,Citigroup,Credit Suisse,HSBC,JP Morgan Chase,Socit Gnrale,UBS and UniCredit.RTSR overall achievement level Year Weighted achievement levels over 3 years 2020 10%x 160.00%=16.00 21 30%x 88.00%=26.40 22 60%x 113.00%=67.80%In 2022,Deutsche Banks total shareholder return was higher compared to 8 out of 11 competitors in the peer group.The achievement level for the 2022 financial year came to 113%.This results in a weighted overall achievement level of 110.20%for the overall period of three years for the granting of the portion of the LTA attributable to the RTSR.Increase of RTSR and level of achievement150%Level of achievement14000 %0%Increase of RTSR2000000 00 22 113.00 20-2022110.20hievement level23 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year Organic Capital Growth Another key objective of Deutsche Bank is its growth.As an incentive for the Management Board members to promote growth,the Supervisory Board defined Organic Capital Growth on a net basis as a long-term objective for the LTA.Organic Capital Growth is defined as the balance of the following changes(which are reported in the Consolidated Statement of Changes in Equity)occurring during the financial year,divided by total shareholders equity as of December 31 of the preceding financial year:Total comprehensive income,net of tax Coupon on additional equity components,net of tax Remeasurement gains(losses)related to defined benefit pension plans,net of tax Option premiums and other effects from options on Deutsche Bank shares Net gains(losses)on treasury shares soldTherefore,“inorganic”changes in equity,in particular the payment of a dividend or a capital increase,are of no relevance to the achievement of the objective.Starting from an average Organic Capital Growth of 2.5%(lower limit),the target achievement level increases by 1%for each 0.05%of growth up to the 150p,which will be reached upon an Organic Capital Growth of 10%or more(upper limit cap).If capital growth does not exceed 2.5%in the assessment period,the target achievement level is zero.Organic Capital Growth and level of achievement150%Level of achievement14000 %0%Organic Capital Growth2.5%5%7.5 2293.00 20-202263.60hievement level24 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year Organic Capital Growth overall achievement level Year Weighted achievement levels over 3 years 2020 10%x 0%=0 21 30%x 26.00%=7.80 22 60%x 93.00%=55.80%Organic Capital Growth pursuant to the definition specified above developed positively in 2022 at 7.16%and thus exceeded the threshold of the lower limit of 2.5%.This results in an achievement level of 93%for 2022 and in a weighted overall achievement level of 63.60%for the overall three-year period for the portion of the LTA attributable to Organic Capital Growth.Group Component Through the Group Component,the Supervisory Board links the key financial figures supporting the corporate strategy with the Management Boards compensation and thus establishes an incentive to sustainably foster the Banks capital,risk,costs and earnings profile.The Group Component also provides a link to the compensation for employees,as this is an employee compensation system component.Group Component Target Actuals Achievement level Common Equity Tier 1 capital ratio(in%)The banks Common Equity Tier 1 capital,as a percentage of the risk weighted assets for credit,market and operational risk.=13.00.4.00%Return on tangible equity(in%)Net income(or loss)attributable to shareholders as a percentage of average tangible shareholders equity.The latter is determined by deducting goodwill and other intangible assets from shareholders equity 8%9.4%Cost/Income Ratio(CIR)(in%)Noninterest expenses as a percentage of total net revenues,which are defined as net interest income before provision for credit losses plus noninterest income.70u%Sustainable Finance Volume1(in bn)Volume of new financing,capital markets issuance and investments facilitated across Corporate Bank,Investment Bank and Private Bank in 2022,as defined under the Sustainable Finance Framework Deutsche Bank Group 80.00 74.20 1 The target( 80 billion for the GVC KPI)for Sustainable Finance and Investment was set at the beginning of the year 2022.Gross volume growth of 74.20 billion was offset by a negative impact of new regulatory requirements(MiFiD),resulting in 58 billion reported at year-end 2022.However,this negative effect was not taken into account for the determination of target achievement.Group component overall achievement level Year Weighted achievement levels over 3 years 2020 10%x 72.50%=7.25 21 30%x 77.50%=23.25 22 60%x 80.00%=48.00%The achievement levels of all four equally weighted objectives of the Group Component was 80%in 2022.This results in a weighted overall achievement level of 78.50%for the overall three-year period for the portion of the LTA attributable to the Group Component.25 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year Long-Term Award overall achievement Achievement Levels(%)Overall LTA Achievement ESG-Factor(33.33%)RTSR(25%)Organic Capital Growth(25%)Group component(16.67%)Achievement level(in%)Achievement level(in)Christian Sewing 69.190.20c.60 x.50y.60%2,578,932 James von Moltke 2,053,594 Karl von Rohr 2,101,352 Fabrizio Campelli 1,966,038 Bernd Leukert 1,958,078 Alexander von zur Mhlen 1,958,078 Christiana Riley 1,958,078 Rebecca Short 1,958,078 Professor Dr.Stefan Simon 1,958,078 Olivier Vigneron1 64.383.00.00.00.29%1,303,173 Stuart Lewis2 69.190.20c.60 x.50y.605,765 1 Member since May 20,2022.Long-term achievement level based on 1-year assessment period as the MB member joined Deutsche Bank on 1 March 2022.2 Member until May 19,2022,duration of the service contract until 31 May 2022.Appropriateness of Management Board compensation and compliance with the set maximum compensation The Supervisory Board regularly reviews the appropriateness of the individual compensation components as well as the amount of total compensation.The review of the appropriateness of Management Board compensation concluded that the Management Board compensation resulting from the achievement levels for the 2022 financial year is appropriate.Horizontal appropriateness Through the horizontal comparison,the Supervisory Board ensures that the target total compensation is appropriate in relation to the tasks and achievements of the Management Board as well as the companys situation and is also customary in the market.In this context,the level and structure of compensation,in particular,are examined at comparable companies(peer groups).Suitable companies in consideration of Deutsche Banks market position(in particular with regard to business sector,size and country)are used as the basis for this comparison.The assessment of horizontal appropriateness takes place in comparison with the following three peer groups.Peer Group 1:This group consists of 11 global banks with a comparable business model;and a comparable size(measured by balance sheet total,number of employees and market capitalization).The 11 institutions in this Peer Group are identical to the banks used to measure the Relative Total Shareholder Return(see Chapter Relative return on shares).These are the following:Banco Santander,Bank of America,Barclays,BNP Paribas,Citigroup,Credit Suisse,HSBC,JP Morgan Chase,Socit Gnrale,UBS and UniCredit.Peer Group 2:This group consists of 16 European banks with a comparable business model;and a comparable size(measured by balance sheet total,number of employees and market capitalization).These are the following banks:Banco Bilbao Vizcaya Argentaria,Banco Santander,Barclays,BNP Paribas,BPCE,Rabobank,Crdit Agricole,Crdit Mutuel,Credit Suisse,HSBC Holdings,ING Bank,Intesa Sanpaolo,Nordea Bank,Socit Gnrale,UBS Group and UniCredit.26 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year Peer Group 3:This group includes the companies of the German Stock Index(DAX).The horizontal appropriateness of the Management Board compensation is reviewed annually by the Supervisory Board.The Supervisory Board regularly engages external compensation advisors for the review of horizontal appropriateness,while assuring itself that these advisors are independent from the Management Board and Deutsche Bank.The Supervisory Board takes the results of the review into consideration when setting the target total compensation for the Management Board members.Vertical appropriateness In addition to the horizontal comparison,the Supervisory Board considers a vertical comparison,which compares the compensation of the Management Board and the compensation of the workforce.Within the vertical comparison,the Supervisory Board considers in particular,in accordance with the German Corporate Governance Code,the development of the compensation over time.This involves a comparison of the Management Board compensation and the compensation of two groups of employees.Taken into account are,on the one hand,the compensation of the senior management,which comprises the first management level below the Management Board and members of the top executive committees of the divisions,as well as of management board members of significant institutions within Deutsche Bank Group and of corresponding management board-1 level positions with management responsibility.The Management Board compensation is compared to,on the other hand,the compensation of all other employees of Deutsche Bank Group worldwide(tariff and non-tariff employees).Compliance with the set maximum compensation(cap)The maximum compensation limit(cap)is set at 12 million for each Management Board member.This is based on the actual expense and/or actual disbursement of the compensation awarded for a financial year.The base salaries are fixed amounts.The expenses for fringe benefits vary from Management Board member to Management Board member in any given year.The contribution to Deutsche Banks pension plan or pension allowance is set at the same amount for all Management Board members.However,the amount to be recognized by the Bank during the year for Deutsche Banks pension service costs fluctuates based on actuarial variables.As the expense amount for the multi-year variable compensation components of the Short-Term Award(STA)and Long-Term Award(LTA)are not determined until up to seven years due to the deferral periods,compliance with the maximum compensation set for the 2022 financial year can only be conclusively reported within the framework of the Compensation Reports for the financial years up to 2030.Compliance with the maximum compensation limit as defined under Section 87a of the German Stock Corporation Act is,however,already ensured for the 2022 financial year.Deferrals and holding periodsThe Remuneration Ordinance for Institutions(InstitutsVergV)generally stipulates a three-year assessment period for the determination of the variable compensation for Management Board members.Deutsche Bank complies with this requirement by assessing each of the objectives of the Long-Term Award(LTA)over a three-year period.If the relevant three years cannot be attributed to a member of the Management Board because the member joined the Bank only recently,the achievement level for the objectives will be determined for the period that can be attributed to the member.The deferral period for the LTA is in principle five years.If the assessment period is shorter than the prescribed minimum,the deferral period of the variable compensation to be granted is extended by the number of years missing for the minimum assessment period.The Short-Term Award(STA)has an assessment period of one year.The deferral period for the STA is in principle seven years.The Long-Term Award(LTA)is granted in the form of a share-based instrument(Restricted Equity Awards(REAs).The disbursement takes place over a deferral period of 5 years in 4 tranches,beginning with a tranche of 40%in year 2 after the end of the performance period and 3 tranches of 20%in years 3,4,and 5 after the end of the performance period.After the deferral period,the REAs of each tranche are also subject to an additional holding period of one year.Accordingly,the Management Board members cannot dispose of the shares underlying the REAs until after 3 years,at the earliest,and in full until after 6 years.During the deferral and holding periods,the value of the REAs is linked to the performance of the Deutsche Bank share and is therefore tied to the long-term performance of the Bank,and thereby strengthens the alignment of the Management Board members incentives to Deutsche Banks performance.The Short-Term Award(STA)is generally granted in the form of deferred cash compensation(Restricted Incentive Awards-RIAs).The STA is paid out in four tranches of 25ch over a total period of seven years after 1,3,5 and 7 years following the end of the assessment period.However,if the STA accounts for more than 50%of the total variable compensation,the portion exceeding 50%is also granted in the form of Restricted Equity Awards(REAs).This ensures that at least 50%of the total variable compensation is always granted in a share-based form in accordance with the regulatory requirements.The portion exceeding 50%is subject to the same deferral rules as the share-based compensation from the LTA.27 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year Instead of receiving Restricted Equity Awards(REAs)and Restricted Incentive Awards(RIAs)as described above,holders of specific functions at certain Deutsche Bank U.S.entities are required by applicable regulation to be compensated under different plans.Restricted compensation for these persons consists of restricted share awards and restricted cash awards.The recipient becomes the beneficial owner of the awards as of the Award Date and the awards are held on the recipients behalf.These awards are restricted for a period of time(subject to the applicable plan rules and award statements,including performance conditions and forfeiture provisions).The restriction period is aligned to the retention periods applicable to Deutsche Banks usual deferred awards.With regard to the Management Board members,these rules apply to Christiana Riley due to her role as CEO of Deutsche Bank USA Corp.For the RIAs and REAs,specific forfeiture conditions apply during the deferral and holding periods(additional information is provided in the section“Backtesting,malus and clawback).Backtesting,malus and clawbackBy granting compensation components in a deferred form spread out over several years,a long-term incentive is created.In addition,the individual tranches are subject to specific forfeiture conditions until they vest.The Supervisory Board regularly reviews whether the results achieved by the Management Board members in the past are sustainable(backtesting).If the outcome is that the achievements underlying the granting of the variable compensation were not sustainable,the awards may be partially or fully forfeited.Also,if the Groups results are negative,previously granted variable compensation may be declared fully or partially forfeited during the deferral period.In addition,the awards may be fully or partially forfeited if specific solvency or liquidity conditions are not met.Furthermore,awards may be forfeited in whole or in part in the event of individual misconduct(including breaches of regulations),dismissal for cause or negative individual contributions to performance(malus).In addition,the contracts of the Management Board members also enable the Supervisory Board to reclaim already paid or delivered compensation components due to certain individual negative performance contributions by the Management Board member(clawback)in accordance with the provisions pursuant to Sections 18(5)and 20(6)of the Remuneration Ordinance for Institutions(InstitutsVergV).The clawback is possible for the entire variable compensation for a financial year until the end of two years after the end of the deferral period of the last tranche of the compensation elements awarded on a deferred basis for the respective financial year.The Supervisory Board regularly reviews in due time before the respective due dates the possibility of a full or partial forfeiture(malus)or reclaiming(clawback)of the Management Board members variable compensation components.There was no forfeiture or clawback of awards in 2022.28 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year Information on shares and fulfilling the share ownership obligation(Shareholding Guidelines)All members of the Management Board are required to acquire a significant amount of Deutsche Bank shares and to hold them on a long-term basis.This requirement is meant to foster the identification of the Management Board members with Deutsche Bank and its shareholders and to ensure a long-term link to the development of the Deutsche Banks business.For the Chief Executive Officer,the number of shares to be held is equivalent to 200%of his annual gross base salary,and for the other Management Board members,100%of their annual gross base salary.The requirements of the shareholding obligation must first be fulfilled as of the date on which the share-based variable compensation that has been granted to the Management Board member since his or her appointment to the Management Board(waiting period)in total corresponds to 1.33 times the shareholding obligation.Compliance with the requirements is reviewed semi-annually.If the required number of shares is not met,the Management Board members must correct any deficiencies by the next review.In the context of granting variable compensation,the Supervisory Board can resolve on an individual basis that not only the Long-Term Award(LTA)but also parts of the Short-Term Award(STA)or the STA as a whole may be awarded in shares until the shareholding obligation is fulfilled.This is intended to ensure faster compliance with the shareholding obligation.Members of the Management Board The following table shows the number of outstanding share awards of the current Management Board members as of February 11,2022 and February 10,2023 as well as the number of share awards newly granted,delivered or forfeited in this period.Members of the Management Board Balance as of Feb 11,2022 Granted Delivered Forfeited Balance as of Feb 10,2023 Christian Sewing 693,230 202,143 895,373 James von Moltke 564,465 153,123 717,588 Karl von Rohr 519,839 160,670 680,509 Fabrizio Campelli 338,899 149,265 32,994 455,170Bernd Leukert 151,300 147,039 3,037 295,302Alexander von zur Mhlen 278,282 145,900 46,275 377,906Christiana Riley 248,345 147,0921 102,8102 292,6273 Rebecca Short 92,754 106,0284 26,517 172,265Professor Dr.Stefan Simon 149,373 145,979 29,574 265,778Olivier Vigneron5 130,539 1 Under the underlying plan,the 147,092 restricted shares originally granted were taxed at the time of grant,with 74,278 shares remaining on an after-tax basis.We refer to the corresponding presentation in the chapter Deferral and retention periods.2 Included are 72,814 share awards delivered to cover the amount of tax due under the underlying plan(see footnote 1).3 Includes a net number of 74,278 share entitlements under the underlying plan(see footnote 1).4 Includes 8,020 shares granted in 2022 for her pre-Board role.5 Member since 20 May 2022.29 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year The table below shows the total number of Deutsche Bank shares held by the incumbent Management Board members as of the reporting dates February 11,2022,and February 10,2023 as well as the number of share-based awards and the fulfillment level for the shareholding obligation.as of February 10,2023 Members of the Management Board Number of Deutsche Bank shares(in Units)as of Feb 11,2022 Number of Deutsche Bank shares(in Units)Restricted Equity Award(s)/Outstanding Equity Units(deferred with additional retention period)(in Units)thereof 75%of Restricted Equity Award(s)/Outstanding Equity Units chargeable to share obligation(deferred with additional retention period)(in Units)Total value of Deutsche Bank shares and Restricted Equity Award(s)/Outstanding Equity Units chargeable to share obligation(in Units)Share retention obligation must be fulfilled Yes/No Level of required shareholding obligation(in Units)1 Fulfillment ratio(in%)Christian Sewing 192,000 222,171 895,373 671,530 893,701 No 635,257 141%James von Moltke 74,753 74,753 717,588 538,191 612,944 Yes 264,690 232%Karl von Rohr 30,058 30,058 680,509 510,382 540,440 Yes 264,690 204brizio Campelli 132,010 149,473 455,170 341,377 490,850 No 247,044 199rnd Leukert 7,882 9,477 295,302 221,477 230,954 Yes 211,752 109%Alexander von zur Mhlen 320,829 359,655 377,906 283,430 643,085 No 211,752 304%Christiana Riley 82,504 100,620 292,627 219,470 320,090 Yes 211,752 151%Rebecca Short 36,451 51,299 172,265 129,199 180,498 No 211,752 85%Prof.Dr.Stefan Simon 0 0 265,778 199,334 199,334 No 211,752 94%Olivier Vigneron2 0 130,539 97,904 97,904 No 211,752 46%Total 876,487 997,506 4,283,058 3,212,294 4,209,800 1 The calculation of the total value of the Deutsche Bank shares and share awards/outstanding shares eligible for the shareholding requirements is based on the share price 11.338(Xetra closing price on February 10,2023).2 Member since May 20,2022.All Management Board members fulfilled the shareholding obligations in 2022 or are currently in the waiting period.The Chairman of the Management Board,Mr.Sewing,voluntarily committed to invest 15%of his monthly net salary in Deutsche Bank shares from September 2019 until the end of December 2022.In each case,purchases take place on the 22nd day of each month or on the following trading day.Benefits as of the end of the mandateBenefits upon regular contract termination The Supervisory Board allocates an entitlement to pension plan benefits to the Management Board members.These entitlements involve a pension plan with predefined contributions.Under this pension plan,a personal pension account is set up for each participating member of the Management Board with effect from the start of office as a Management Board member.The members of the Management Board,including the Management Board Chairman,receive a uniform,contractually defined,fixed annual contribution amount of 650,000.The contribution accrues interest that is credited in advance and determined by means of an age-related factor,up to the age of 60.For entitlements from a first-time or renewed appointment starting from the 2021 financial year,interest accrues at an average rate of 2%per annum,for legacy entitlements 4%.From the age of 61 onwards,an additional contribution equal to the amount resulting from applying the above interest rate to the balance of the pension account as of December 31 of the previous year will be credited to the pension account.The annual contributions,taken together,form the pension capital amount available to pay the future pension benefits upon the occurrence of a pension event(retirement age,disability or death).The pension account balance is vested from the start.If a Management Board member is subject to non-German income tax,the granting of an annual pension cash allowance of 650,000 may be selected as an alternative to the pension plan entitlement.This is subject to the precondition that receiving the customary pension plan contributions entails not insignificant tax-related disadvantages for the Management Board member compared to receiving a pension allowance.This option can be exercised once and from then on applies to the entire term of office of the Management Board member.30 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year The following table shows the annual contributions,the interest credits,the account balances and the annual service costs for the years 2022 and 2021 as well as the corresponding defined benefit obligations for each member of the Management Board in office in 2022 as of December 31,2021 and December 31,2022.The different balances are attributable to the different lengths of service on the Management Board,the respective age-related factors,and the different contribution rates.Members of the Management Board Annual contribution,in the year Interest credit,in the year Account balance,end of year Service cost(IFRS),in the year Present value of the defined benefit obligation(IFRS),end of year in 2022 2021 2022 2021 2022 2021 2022 2021 2022 2021 Christian Sewing 760,500 773,500 0 0 7,276,500 6,516,000 529,109 701,494 5,422,875 6,263,328 James von Moltke 845,000 871,000 0 0 5,034,250 4,189,250 638,068 820,820 3,945,284 4,095,605 Karl von Rohr 728,000 754,000 0 0 5,449,001 4,721,001 652,035 772,131 4,864,821 4,866,754 Fabrizio Campelli 946,836 1,007,500 0 0 3,181,754 2,234,918 605,376 906,767 2,148,218 2,091,609 Bernd Leukert 786,500 812,500 0 0 2,734,334 1,947,834 637,939 785,526 2,317,651 1,957,432 Alexander von zur Mhlen1 0 0 0 0 0 0 0 0 0 0 Christiana Riley1 0 0 0 0 0 0 0 0 0 0 Rebecca Short 819,000 554,668 0 0 1,373,668 554,668 475,091 476,303 826,548 496,829 Prof.Dr.Stefan Simon 845,000 871,000 0 0 3,009,501 2,164,501 629,482 824,015 2,311,957 2,128,664 Olivier Vigneron2 644,584 0 0 0 644,584 0 423,955 0 446,932 0 Stuart Lewis3 303,335 754,000 0 0 6,715,273 6,411,938 258,440 756,618 6,115,579 6,919,079 1 The Management Board member receives a pension allowance,which is shown in the chapter Compensation granted and owed(inflow table)”.2 Member since May 20,2022 3 Member until May 19,2022 Benefits upon early termination The Management Board members are in principle entitled to receive a severance payment upon an early termination of their appointment,provided the Bank is not entitled to revoke the appointment or give notice under the contractual agreement for cause.In accordance with the recommendation of the German Corporate Governance Code,the severance payment amounts to up to a maximum of two times the annual compensation at the maximum and must not exceed the amount that would be payable as compensation for the remaining term of the service contract.The calculation of the severance payment is based on the annual compensation for the previous financial year and,if applicable,on the expected annual compensation for the current financial year.The severance payment is determined and granted in accordance with the statutory and regulatory requirements,in particular with the provisions of the Remuneration Ordinance for Institutions(InstitutsVergV).In the event of a change of control,Management Board members have a special right to termination of their service contract.However,in such case,there is no entitlement to a severance payment.Other service contract provisionsTerm of the service contract The term of the Management Board service contracts is linked to the duration of the appointment and is a maximum of five years in accordance with Section 84 of the German Stock Corporation Act.The Supervisory Board shall decide at an early stage,no later than six months before the expiry of the appointment period,on a renewed appointment.In the case of the Management Board members reappointment,the service contract is extended for the duration of a renewed appointment.For first-time appointments,a contract term of three years is not to be exceeded.The Management Board service contract ends automatically with the expiry of the appointment period without requiring the express notice of termination.31 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Application of the compensation system in the financial year Reduction of base salary regarding compensation from other mandates The service contracts of the Management Board members contain an obligation of the members to ensure that they will not receive any compensation to which they would otherwise be entitled in their capacity as a member of any corporate body,in particular a supervisory board,advisory board or similar body of any group entity of the Bank pursuant to Section 18 of the German Stock Corporation Act.Accordingly,Management Board members do not receive any compensation for mandates on boards of Deutsche Bank subsidiaries.A Management Board members base salary will be reduced in an amount equal to 50%of the compensation from a mandate in particular supervisory board or advisory board mandates at a company that does not belong to Deutsche Bank Group.There is no such deduction of any compensation that does not exceed 100,000 per mandate and calendar year.In the 2022 financial year,the base salary of one member of the Management Board was reduced by the amount of the compensation from one mandate at a company that does not belong to Deutsche Bank Group,since the compensation exceeded the threshold amount.Post-contractual non-compete clause After leaving the Management Board,the members are as a general rule subject to a one-year non-compete clause.During the non-compete period,Deutsche Bank pays the Management Board member compensation(waiting allowance“Karenzentschdigung”)amounting to 65%of his or her annual base salary.The waiting allowance shall be credited against any claim for severance pay.In addition,the waiting allowance will be reduced by any income that the Management Board member earns during the non-compete period from self-employed,salaried or other paid activities that are not subject to the non-compete clause.Deutsche Bank may waive a Management Board members compliance with the post-contractual non-compete clause.From the date of the waiver,if and when such waiver is granted,Deutsche Banks obligation to pay the waiting allowance(“Karenzentschdigung”)ends.Stuart Lewis left the Management Board with effect of the end of May 19th,2022.The Service Contract was terminated amicably with effect as of the end of the May 31st,2022.As foreseen and In line with his service contract,compensation for a post-contractual non-compete clause(“Karenzentschdigung”)in the amount of 1,820,000 corresponding to 65%of his fixed base salary p.a.was agreed.The post-contractual non-compete clause applies from June 1st,2022 until May 31st,2023 in the scope set forth of the Service Contract.Deviations from the compensation system There were no deviations from the compensation system in the 2022 financial year.32 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Management Board compensation 2022 Management Board compensation 2022 Current Management Board members Total compensation 2022 The Supervisory Board determined the aforementioned compensation on an individual basis for 2022 and 2021 as follows:2022 2021 in Base salary1 Short Term Award Long Term Award Total compensation Target Total compensation Ratio to Target Total compensation Christian Sewing 3,600,000 2,754,810 2,578,932 8,933,742 9,000,000 99%8,812,448 James von Moltke 2,900,000 2,120,115 2,053,594 7,073,709 7,200,000 98%6,748,426 Karl von Rohr 3,000,000 2,165,240 2,101,352 7,266,592 7,400,000 98%7,143,047 Fabrizio Campelli 2,466,667 2,053,188 1,966,038 6,485,893 6,583,334 99%6,248,949 Bernd Leukert 2,400,000 1,908,550 1,958,078 6,266,628 6,500,000 96%6,191,549 Alexander von zur Mhlen 2,400,000 1,891,023 1,958,078 6,249,101 6,500,000 96%6,162,166 Christiana Riley 2,400,000 1,803,385 1,958,078 6,161,463 6,500,000 95%6,192,916 Rebecca Short 2,400,000 1,966,975 1,958,078 6,325,053 6,500,000 97%4,127,244 Professor Dr.Stefan Simon 2,400,000 1,900,760 1,958,078 6,258,838 6,500,000 96%6,164,216 Olivier Vigneron2 1,473,333 1,064,039 1,303,173 3,840,545 3,990,278 96%Stuart Lewis3 1,166,667 798,000 835,765 2,800,432 2,916,667 96%6,728,126 Total 26,606,667 20,426,085 20,629,244 67,661,996 69,590,279 97d,519,087 1 In the column Basic salary,the target values set by the Supervisory Board are shown in EUR for reasons of comparability.The actual inflow differs from this target value for Management Board members Alexander von zur Mhlen and Christiana Riley due to currency fluctuations and for Bernd Leukert due to the offsetting of compensation from mandates.The inflow is shown in the chapter Compensation granted and owed(inflow table).2 Member since May 20,2022.3 Member until May 19,2022.Pro-rata to the duration of the service contract until 31 May 2022.The number of share awards granted to the members of the Management Board in the form of Restricted Equity Awards(REA)in 2023 for the 2022 financial year was calculated by dividing the respective amounts in euro by the higher of either the average Xetra closing price of the Deutsche Bank share during the last ten trading days in February 2023 or the Xetra closing price on February 28,2023(11.800).Members of the Management Board Restricted Equity Award(s)(deferred with additional retention period)(in Units)1 Christian Sewing 226,006 James von Moltke 176,852 Karl von Rohr 180,788 Fabrizio Campelli 170,306 Bernd Leukert 165,939 Alexander von zur Mhlen 165,939 Christiana Riley 165,939 Rebecca Short 166,316 Prof.Dr.Stefan Simon 165,939 Olivier Vigneron2 110,438 Stuart Lewis3 70,828 Total 1,765,289 1 The Restricted Equity Awards are commercially rounded for presentation purposes.2 Member since May 20,2022.3 Member until May 19,2022 33 Deutsche Bank Compensation of the Management Board Compensation Report 2022 Management Board compensation 2022 Granted and owed compensation(inflow table)The following table shows the compensation paid and owed in the 2022 and 2021 financial years to incumbent members of the Management Board in the 2021 financial year,pursuant to Section 162(1)sentence 1 of the German Stock Corporation Act.This involves the compensation components that were either actually paid or delivered to the individual Management Board members within the reporting period(“paid”)or were already legally due during the reporting period but not yet delivered(“owed”).Besides the compensation amounts,the table additionally shows the relative proportions of fixed and variable compensation within the total compensation pursuant to Section 162(1)sentence 2 of the German Stock Corporation Act.Christian Sewing James von Moltke 2022 2021 2022 2021 in t.in%in t.in%in t.in%in t.in%Fixed compensation components:Base salary 3,600 82%3,600 93%2,9002 77%2,800 70%Pension allowance 0 0%0 0%0 0%0 0%Fringe benefits 216 5%(8.0)1 0 2R 1%Total fixed compensation 3,816 87%3,592 93%2,984 79%2,852 71%Variable compensation components:Deferred variable compensation thereof Restricted Incentive Awards:2017 Restricted Incentive Award:Buyout 0 0%0 0%0 00 3 17 Restricted Incentive Award:Sign On 0 0%0 0g 2g 2 19 Restricted Incentive Award for 2018 232 5#2 69 49 4 20 Restricted Incentive Award for 2019 43 1C 1C 1C 1 21 Restricted Incentive Award for 2020 304 7%0 0!3 6%0 0%thereof Equity Awards:2017 Restricted Equity Award:Buyout 0 0%0 0%0 04 3 15 DB Equity Plan for 2014 0 0%0 0%0 0%0 0%Fringe benefits 0 0%0 0083 8a63 15%Total variable compensation 579 135 7y9 21%1,157 29%Total compensation 4,394 100%3,867 100%3,783 100%4,009 100%1 Due to the economic participation in the costs of a company car provided,which exceeds the amount of the other fringe benefits,a negative balance is to be shown for the financial year 2021.2 For further details on compensation decision,please refer to chapter Management Board Changes and Compensation Decisions in 2022 in this report.3 The variable fringe benefits represent a housing allowance which was granted until June 30,2022.Karl von Roh
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2022 China Merchants Bank Sustainability Report H Share Stock Code:03968 Preference Share Stock Cod.
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Corporate Governance Statement according to sections 289f and 315d of the German Commercial Code/Corporate Governance Report 2022Deutsche Bank1 Deutsche Bank Corporate Governance Report 2022 Corporate Governance Statement according to sections 289f and 315d of the German Commercial Code/Corporate Governance Report 2 Management Board and Supervisory Board 16 Reporting and Transparency 16 Related Party Transactions 17 Auditing and Controlling 20 Compliance with the German Corporate Governance Code 2 Deutsche Bank Management Board and Supervisory Board Corporate Governance Report 2022 Management Board All information presented in this Corporate Governance Statement according to Sections 289f and 315d of the German Commercial Code is as of February 10,2023.Management Board and Supervisory Board Management Board Deutsche Banks Management Board is responsible for the management of the company in accordance with the law,its Articles of Association and the Terms of Reference for the Management Board with the objective of creating sustainable value in the interests of the company.It considers the interests of shareholders,employees and other company-related stakeholders.The members of the Management Board are collectively responsible for managing the banks business.The Management Board,as the Group Management Board,manages Deutsche Bank Group in accordance with uniform guidelines;it exercises general control over all Group companies.The Management Board decides on all matters prescribed by law and the Articles of Association and ensures compliance with the legal requirements and internal guidelines(compliance).It also takes the necessary measures to ensure that adequate internal guidelines are developed and implemented.The Management Boards responsibilities include,in particular,the banks strategic management and direction,the allocation of resources,financial accounting and reporting,control and risk management,the proper functioning of the business organization,the systematic identification and assessment of the environmental and social impacts of the companys operations as well as corporate control.The Management Board decides on the appointments to the senior management level below the Management Board and,in particular,on the appointment of Global Key Function Holders.In appointing people to management functions in the Group,the Management Board takes diversity into account and strives,in particular,to achieve an appropriate representation of women(more detailed information in section“Targets for the proportion of women in management positions/gender quota“in this Corporate Governance Statement).The Management Board works closely together with the Supervisory Board in a cooperative relationship of trust and for the benefit of the company.The Management Board reports to the Supervisory Board at a minimum within the scope prescribed by law or administrative guidelines,in particular on all issues with relevance for the Group concerning strategy,the intended business policy,planning,business development,risk situation,risk management,staff development,reputation and compliance.A comprehensive presentation of the duties,responsibilities and procedures of our Management Board is specified in its Terms of Reference,the current version of which is available on our website( changes to the Management Board and the current members of the Management Board The following member of the Management Board was appointed for a three-year period:Olivier Vigneron with effect from May 20,2022The following member left the Management Board:Stuart Lewis as of May 19,2022The following information is provided on the current members of the Management Board on the year in which they were born,year in which they were first appointed and year in which their term expires as well as their current positions and area of responsibility according to the current Business Allocation Plan for the Management Board.Also specified are their other board mandates or directorships outside of Deutsche Bank Group as well as all memberships in legally prescribed supervisory boards or other comparable domestic or foreign supervisory bodies of commercial enterprises.Listed companies are marked with an“*”.The Terms of Reference for the Management Board specify that the members of our Management Board generally should not accept the chair of supervisory boards of companies outside Deutsche Bank Group.3 Deutsche Bank Management Board and Supervisory Board Corporate Governance Report 2022 Management Board Christian Sewing Year of birth:1970 First appointed:2015 Term expires:2026 Christian Sewing became a member of the Management Board on January 1,2015,and is Chief Executive Officer with effect from April 8,2018.He is responsible on the Management Board for Communications&Corporate Social Responsibility(CSR),Research,Group Audit and Human Resources.Prior to assuming his role on the Management Board,Mr.Sewing was Global Head of Group Audit and held a number of positions before that in Risk,including Deputy Chief Risk Officer(from 2012 to 2013)and Chief Credit Officer(from 2010 to 2012)of Deutsche Bank.From 2005 until 2007,Mr.Sewing was a member of the Management Board of Deutsche Genossenschafts-Hypothekenbank.Before graduating with a diploma from the Bankakademie Bielefeld and Hamburg,Mr.Sewing completed a bank apprenticeship at Deutsche Bank in 1989.Mr.Sewing does not have any external directorships subject to disclosure.James von Moltke Year of birth:1969 First appointed:2017 Term expires:2026 James von Moltke became a member of the Management Board on July 1,2017,and President as of March 25,2022.He is Chief Financial Officer and in this function he is responsible for,among other things,Finance,Group Tax,Treasury and Investor Relations.Before Mr.von Moltke joined Deutsche Bank he served as Treasurer of Citigroup.He started his career at the investment bank Credit Suisse First Boston in London in 1992.In 1995,he joined J.P.Morgan,working at the bank for 10 years in New York and Hong Kong.After next working at Morgan Stanley in New York for four years,where he led the Financial Technology advisory team globally,Mr.von Moltke joined Citigroup as Head of Corporate Mergers and Acquisitions(M&A)in 2009 and three years later became the Global Head of Financial Planning.He holds a Bachelor of Arts degree from New College,University of Oxford.Mr.von Moltke does not have any external directorships subject to disclosure.Karl von Rohr Year of birth:1965 First appointed:2015 Term expires:2023 Karl von Rohr became a member of the Management Board on November 1,2015,and President as of April 8,2018.He is responsible on the Management Board for the Private Bank and Asset Management.He is also Regional Chief Executive Officer(CEO)for Germany,as well as for the EMEA Region(Europe,Middle East and Africa).Mr.von Rohr joined Deutsche Bank in 1997.From November 2015 to November 2019,he was the Management Board member responsible for Human Resources and until July 2020,he was responsible for Legal,Group Governance and Government&Regulatory Affairs.From 2013 to 2015 he was Global Chief Operating Officer,Regional Management.Prior to this,he was Head of Human Resources for Deutsche Bank in Germany and member of the Management Board of Deutsche Bank Privat-und Geschftskunden AG.During his time at Deutsche Bank,he has held various senior management positions in other divisions in Germany and Belgium.He studied law at the universities of Bonn(Germany),Kiel(Germany),Lausanne(Switzerland)and at Cornell University(U.S.A.).Mr.von Rohr does not have any external directorships subject to disclosure.He is Chairman of the Supervisory Board of DWS Group GmbH&Co.KGaA*.4 Deutsche Bank Management Board and Supervisory Board Corporate Governance Report 2022 Management Board Fabrizio Campelli Year of birth:1973 First appointed:2019 Term expires:2025 Fabrizio Campelli became a member of the Management Board on November 1,2019.He is responsible for the Corporate Bank and the Investment Bank and also for the banks UK&Ireland region.From November 2019 to April 2021,he was the Management Board member responsible for transformation,as Chief Transformation Officer,and for Human Resources.He previously spent four years as the Global Head of Deutsche Bank Wealth Management.Before that,he was Head of Strategy&Organizational Development as well as Deputy Chief Operating Officer for Deutsche Bank Group.He joined Deutsche Bank in 2004 after working at McKinsey&Company in the firms London and Milan offices,focusing on strategic assignments mainly for global financial institutions.He holds an MBA from MIT Sloan School of Management and a Business Administration degree from Bocconi University in Milan.Mr.Campelli has been a member of the following Supervisory Boards:BVV Versicherungsverein des Bankgewerbes a.G.and BVV Versorgungskasse des Bankgewerbes e.V.Bernd Leukert Year of birth:1967 First appointed:2020 Term expires:2025 Bernd Leukert became a member of the Management Board on January 1,2020.He is Chief Technology,Data and Innovation Officer and is responsible for the Chief Information Office for the Infrastructure areas and the business divisions,as well as for the Chief Technology Office and the Chief Security Office.He is also responsible for Data Governance and Oversight and Trade Settlement as well as for Cloud and Innovation.He joined Deutsche Bank on September 1,2019.He previously worked for many years at SAP SE,the global software company.He joined SAP in 1994 and held various management positions.From 2014 to 2019,he was responsible for product development and innovations as well as the Digital Business Services division on the Executive Board.Mr.Leukert studied Industrial Engineering and Management at the University of Karlsruhe and at Trinity College Dublin,graduating in 1994 with a Masters Degree in Business Administration.He is member of the Supervisory Board of Bertelsmann SE&Co.KGaA.He is a member of the Supervisory Board of DWS Group GmbH&Co.KGaA*.Alexander von zur Mhlen Year of birth:1975 First appointed:2020 Term expires:2026 Alexander von zur Mhlen became a member of the Management Board on August 1,2020.He is Regional CEO Asia Pacific.Mr.von zur Mhlen joined Deutsche Bank in 1998 and over the years has held a range of management roles in London and Frankfurt across infrastructure and business divisions.From 2018 to 2020 he was responsible for the Groups strategic development and was the advisor to the Chief Executive Officer(CEO).Before that,he served as Co-Head of Global Capital Markets,with a regional focus on Asia-Pacific and Europe,the Middle East and Africa(EMEA).From 2009 to 2017,he was Group Treasurer.Alexander von zur Mhlen holds a Diploma in Business Administration from the Berlin School of Economics and Law in Berlin.Mr.von zur Mhlen does not have any external directorships subject to disclosure.5 Deutsche Bank Management Board and Supervisory Board Corporate Governance Report 2022 Management Board Christiana Riley Year of birth:1978 First appointed:2020 Term expires:2025 Christiana Riley became a member of the Management Board on January 1,2020.She is Regional CEO Americas.Ms.Riley joined Deutsche Bank in 2006 where she was recently the Chief Financial Officer of the Corporate&Investment Bank.She previously spent nine years in Group Strategy&Planning,which she led from 2011 to 2015.Prior to this Ms.Riley worked at the management consultancy McKinsey&Company and at the investment bank Greenhill&Co.She graduated cum laude in 2000 from Princeton University in America where she studied Romance Languages,Literature and Linguistics.She also studied at London Business School in the UK,where she gained a Master of Business Administration in 2005.Ms.Riley is a member of the Supervisory Board of The Clearing House Payments Company LLC.She is Chief Executive Officer of DB USA Corporation.Rebecca Short Year of birth:1974 First appointed:2021 Term expires:2024 Rebecca Short became a member of the Management Board on May 1,2021.She is Chief Transformation Officer and the Management Board member responsible for Transformation and Global Procurement.She was responsible for the Capital Release Unit until January 31,2023 and continues to retain oversight for the remaining activities in this regard.She previously spent almost six years within Finance as Head of Group Planning&Performance Management.She joined Deutsche Bank on its graduate program in Auckland in 1998.She moved to London in 2000 with Credit Risk Management,where she spent 12 years,formerly as European Head of Corporates.She then set up a new Risk-wide team,Strategic Risk Analysis&Reporting in 2012 before moving to a senior central management role in Audit in 2013,where she spent two years.She has a BCom(Honours)degree in Finance&Accounting from the University of Otago,Dunedin,New Zealand.Ms.Short does not have any external directorships subject to disclosure.Professor Dr.Stefan Simon Year of birth:1969 First appointed:2020 Term expires:2026 Professor Dr.Stefan Simon became a member of the Management Board on August 1,2020.He is Chief Administrative Officer(CAO)and is responsible for Government and Regulatory Affairs as well as for Legal and Governance.Additionally,he is responsible for Compliance,Anti-Financial-Crime(AFC)and the Business Selection and Conflicts Office,as well as for Controls Testing&Assurance.Professor Dr.Simon joined Deutsche Bank on August 1,2019.He was a member of the Supervisory Board from August 2016 until July 2019 and was Chairman of its Integrity Committee.He is a lawyer and tax consultant and between 1997 and 2016 worked at the law firm Flick Gocke Schaumburg,where he became a partner in 2002.Since 2008 he has also been an Honorary Professor of the University of Cologne.He studied law at the University of Cologne and received his doctorate there in 1998.Professor Dr.Simon is Chairman of the Advisory Council of Leop.Krawinkel GmbH&Co.KG.6 Deutsche Bank Management Board and Supervisory Board Corporate Governance Report 2022 Management Board Olivier Vigneron Year of birth:1971 First appointed:2022 Term expires:2025 Olivier Vigneron became a member of the Management Board on May 20,2022.He is Chief Risk Officer responsible for the functions managing Credit Risk,Market Risk and Liquidity Risk as well as for other Risk-Infrastructure units.Mr.Vigneron re-joined Deutsche Bank on March 1,2022.From January 2020 until re-joining Deutsche Bank in 2022,Olivier Vigneron was Chief Risk Officer of Natixis,where he also served on the Senior Management Committee.From 2008 to 2020,he worked at J.P.Morgan,where he served as Chief Risk Officer for Europe,Middle East and Africa and Firmwide Risk Executive for Market Risk.Prior to this,he worked for BNP Paribas,UniCredit,and Goldman Sachs.Between 2002 and 2005 he worked in Structured Credit Trading for Deutsche Bank in London.He has also served on the Supervisory Board of J.P.Morgan Germany and on the board of Natixis Assurances.Olivier Vigneron studied at the Lyce Louis-le-Grand in Paris and holds a Diplme dIngnieur(degree in Engineering)from Frances cole Polytechnique.He also holds a PhD in Economics from the University of Chicago.Mr.Vigneron does not have any external directorships subject to disclosure.7 Deutsche Bank Management Board and Supervisory Board Corporate Governance Report 2022 Supervisory Board Supervisory Board The Supervisory Board of Deutsche Bank AG appoints and dismisses the members of the Management Board,supervises and advises the Management Board and is directly involved in decisions of fundamental importance to the bank.Supervison and advice also include in particular,sustainability issues.The Supervisory Board works together closely with the Management Board in a cooperative relationship of trust and for the benefit of the company.The internal organization of the Supervisory Board and its committees as well as the requirements for its members are subject to specific supervisory requirements that further supplement the corporate-law regulations concerning corporate governance.Such requirements are founded on,among other things,the German Banking Act(Kreditwesengesetz),the Remuneration Ordinance for Institutions(Institutsvergtungsverordnung),the guidelines of the European Banking Authority(EBA)and European Securities and Markets Authority(ESMA)and the administrative practices of the European Central Bank as our prudential supervisory authority.In individual cases,these may diverge from the recommendations of the German Corporate Governance Code(GCGC)for listed companies.The tasks of the Supervisory Boards committees,the basic principles for the meeting preparations and follow-ups,as well as general rules for the internal procedures of the Supervisory Board including its committees are set out in the Terms of Reference for the Supervisory Board and for its committees.The current versions are published on the Deutsche Bank website( number of meetings held during the financial year,along with a specification of the meeting conducted per telephone,through video conference and with physical attendance,is specified in the Report of the Supervisory Board.In addition,the representatives of the employees and the representatives of the shareholders regularly conduct preliminary discussions separately.Together with the Management Board,the Supervisory Board arranges for a long-term succession planning:The Nomination Committee supports the Chairmans Committee and the Supervisory Board in identifying candidates to fill a position on the banks Management Board.In doing so,the Committee prepares a position description with a candidate profile and states the expected time commitment.Suitable candidates are identified,in some cases in collaboration with external recruiting consultants,and structured interviews are conducted.Besides this succession planning with external candidates,the Management Board and Supervisory Board maintain a list of internal candidates.The Nomination Committee and Supervisory Board regularly receive reports from the Management Board on internal candidates for succession planning and the process from the perspective of the Management Board.For the selection of suitable candidates,external and internal,the Nomination Committee takes into account the balance and diversity of the knowledge,skills and experience of all members of the Management Board.It also seeks to foster diversity on the Management Board,for example,with regard to gender,nationality and age.The Supervisory Board ensures compliance with the legally required minimum gender participation pursuant to Section 76(3a)of the Stock Corporation Act(AktG).In 2017,based on the legal regulation applicable at the time under Section 111(5)of the Stock Corporation Act(AktG),the Supervisory Board had set the minimum target of at least 20%women on the Management Board by June 30,2022.This target was met,as two women are members of the Management Board:Christiana Riley and Rebecca Short.Building on the work of the Nomination Committee,the Chairmans Committee submits a recommendation for the Supervisory Boards resolution.Based on this,the Supervisory Board decides on the appointment of Management Board members.The first appointment period is for a maximum of three years.Management Board members can be reappointed for one or several terms of office,which may be for a maximum of five years pursuant to the law,whereby at Deutsche Bank such reappointments should generally also be for a maximum of three years.Besides proposals for the appointment of members of the Management Board,the Chairmans Committee also submits proposals for the dismissal of Management Board members,which the Supervisory Board decides on.Based on proposals of the Compensation Control Committee,the Supervisory Board determines the total compensation of the individual members of the Management Board and also regularly reviews and resolves on the compensation system for the Management Board.The Supervisory Board receives reports from the Management Board at least within the scope prescribed by law or administrative guidelines,in particular on all issues of relevance for the Group concerning strategy,intended business policy,planning,business development,risk situation,risk management,staff development,reputation and compliance.Furthermore,Group Audit informs the Audit Committee of any deficiencies identified regularly and in the case of severe deficiencies without undue delay.The Chairman of the Supervisory Board is informed accordingly of any serious findings relating to the members of the Management Board.The Supervisory Board and Management Board adopted an Information Regime,a general engagement(interaction)protocol and a specific engagement(interaction)protocol for regulatory topics.These regulate not only the reporting to the Supervisory Board,but also,among other things the Supervisory Boards enquiries and requests for information from employees of the company as well as the exchange of information in connection with preparations for the meetings and between the meetings.8 Deutsche Bank Management Board and Supervisory Board Corporate Governance Report 2022 Supervisory Board The Chairman of the Supervisory Board plays a crucial role in the proper functioning of the Supervisory Board and has a leadership role in this.He can issue internal guidelines and principles concerning the Supervisory Boards internal organization and communications,the coordination of the work within the Supervisory Board and the Supervisory Boards interaction with the Management Board.Between meetings,the Chairman of the Supervisory Board and,to the extent expedient,the chairpersons of the Supervisory Board committees maintain regular contact with the members of the Management Board,especially with the Chairperson of the Management Board,and deliberate with them,among other things,on issues of Deutsche Bank Groups strategy,planning,the development of its business,risk situation,risk management,risk controlling,governance,compliance,compensation systems,IT,data and digitalization as well as material litigation cases.The Chairman of the Supervisory Board and within their respective functional responsibility the chairpersons of the Supervisory Board committees are informed without delay by the Chairman of the Management Board or by the respectively responsible Management Board member about important events of material significance for the assessment of the situation,development and management of Deutsche Bank Group.The Chairman of the Supervisory Board engages in investor discussions on Supervisory Board-related topics when necessary and regularly informs the Supervisory Board of the substance of such discussions.These also cover Environmental,Social and Governance(ESG)topics.The Chairperson of the Audit Committee furthermore conducts regular discussions with the auditor outside the meetings.The types of business that require the approval of the Supervisory Board to be transacted are specified in the Articles of Association of Deutsche Bank AG.Furthermore,the Supervisory Board may specify additional transactions that require its approval.The Supervisory Board meets regularly also without the Management Board.After due consideration and insofar as materially appropriate,the Supervisory Board,or any of its committees,may,in order to perform their tasks,consult auditors,legal advisors and other internal or external advisors.In performing their tasks,the Chairman of the Supervisory Board,the chairpersons of the committees and the Supervisory Board members are supported by the Office of the Supervisory Board,which is independent of the Management Board.At several meetings,the Nomination Committee and Supervisory Board addressed the assessment of the Supervisory Board which is to be conducted at least annually as prescribed by law pursuant to Section 25d of the German Banking Act(KWG),and which is also the self-assessment of the Supervisory Board pursuant to Section D.12 of the German Corporate Governance Code(GCGC).The concrete implementation of and the schedule for the assessment were deliberated on and set out at the meetings of the Nomination Committee on July 26,2022,and October 25,2022.Services of an external advisor were not mandated in this context.The assessment was performed essentially on the basis of extensive questionnaires regarding the work of the Supervisory Board,of the Supervisory Board committees and of the Management Board,individual interviews conducted by members of the Nomination Committee with the members of the Management Board,and an assessment of the individual members of both the Management Board and Supervisory Board.The final discussion and approval of the results of the assessment took place at the Supervisory Board meeting in plenum on February 1,2023,and the results were set out in a written final report.The Supervisory Board continues to hold the opinion that the Supervisory Board and Management Board have achieved a high standard and that there are no reservations,in particular,regarding the professional qualifications,personal reliability and time availability of the members of the Management Board and of the Supervisory Board.9 Deutsche Bank Management Board and Supervisory Board Corporate Governance Report 2022 Supervisory Board Members of the Supervisory Board The Supervisory Board has 20 members.In accordance with the German Co-Determination Act(Mitbestimmungsgesetz),it comprises an equal number of shareholder representatives and employee representatives.In accordance with the Articles of Association,the members of the Supervisory Board are elected for the period until the conclusion of the General Meeting which adopts the resolutions concerning the ratification of the acts of management for the fourth financial year following the beginning of the term of office.For the election of shareholder representatives,the General Meeting may establish that the terms of office of individual members may begin or end on differing dates.In accordance with the Terms of Reference for the Supervisory Board since July 2020,shareholder representatives are proposed to the General Meeting for election for a maximum of approximately four years,i.e.until the conclusion of the General Meeting which adopts the resolutions concerning the ratification of the acts of management for the third financial year following the beginning of the term of office,whereby the financial year in which the term of office begins is not taken into account.The following table shows information on the current members of our Supervisory Board.Member Principal occupation Supervisory board memberships and other directorships Alexander Wynaendts Year of birth:1960 First elected:May 19,2022 Term expires:2026 Chairman of the Supervisory Board,Deutsche Bank AG Air France-KLM Group S.A.2(Member of the Board of Directors);Uber Technologies,Inc.2(Member of the Board of Directors);Puissance Holding B.V.(Non-Executive Director,Chairman)Ludwig Blomeyer-Bartenstein1 Year of birth:1957 First elected:May 24,2018 Term expires:2023 Spokesperson of the Management Bremen,Deutsche Bank AG Frowein&Co.Beteiligungs AG;Brgschaftsbank Bremen GmbH(Member of the Board of Directors)(until December 2022)Mayree Clark Year of birth:1957 First elected:May 24,2018 Term expires:2023 Supervisory Board member Ally Financial,Inc.2(Member of the Board of Directors);Allvue Systems Holdings,Inc.(Member of the Board of Directors)Jan Duscheck1 Year of birth:1984 Appointed by the court:August 2,2016 Term expires:2023 Head of National Working Group Banking,trade union ver.di(Vereinte Dienstleistungsgewerkschaft)No memberships or directorships subject to disclosure Manja Eifert1 Year of birth:1971 Appointed by the court:April 7,2022 Term expires:2023 Staff Council member No memberships or directorships subject to disclosure Sigmar Gabriel Year of birth:1959 Appointed by the court:March 11,2020 Term expires:2025 Former German Federal Government Minister GP Gnter Papenburg AG(until April 2022);Siemens Energy AG2;ThyssenKrupp Steel Europe AG(Chairman of the Supervisory Board)(since April 2022)Timo Heider1 Year of birth:1975 First elected:May 23,2013 Term expires:2023 Staff Council member BHW Bausparkasse AG3(Deputy Chairman);PCC Services GmbH der Deutschen Bank3(Deputy Chairman);Pensionskasse der BHW Bausparkasse AG VvaG3(Deputy Chairman)Martina Klee1 Year of birth:1962 First elected:May 29,2008 Term expires:2023 Staff Council member Sterbekasse fr die Angestellten der Deutsche Bank-Gruppe VvaG3 Gabriele Platscher1 Year of birth:1957 First elected:June 10,2003 Term expires:2023 Bank employee BVV Versicherungsverein des Bankgewerbes a.G.(Deputy Chairperson)(until July 2022);BVV Versorgungskasse des Bankgewerbes e.V.(Deputy Chairperson)(until July 2022);BVV Pensionsfonds des Bankgewerbes AG(Deputy Chairperson)(until July 2022)10 Deutsche Bank Management Board and Supervisory Board Corporate Governance Report 2022 Supervisory Board Detlef Polaschek1 Year of birth:1960 First elected:May 24,2018 Term expires:2023 Deputy Chairman of the Supervisory Board of Deutsche Bank AG;Staff Council member No memberships or directorships subject to disclosure Bernd Rose1 Year of birth:1967 First elected:May 23,2013 Term expires:2023 Staff Council member Postbank Filialvertrieb AG3;ver.di Vermgensverwaltungsgesellschaft m.b.H.(Deputy Chairperson)Yngve Slyngstad Year of birth:1962 First elected:May 19,2022 Term expires:2026 Chief Executive Officer of Aker Asset Management AS No memberships or directorships subject to disclosure John Alexander Thain Year of birth:1955 First elected:May 24,2018 Term expires:2023 Supervisory Board member Uber Technologies,Inc.2(Member of the Board of Directors);Aperture Investors LLC(Member of the Board of Directors);Pine Island Capital Partners LLC(Chairman);Pine Island Acquisition Corp.2(Chairman of the Board of Directors)(until October 2022)Michele Trogni Year of birth:1965 First elected:May 24,2018 Term expires:2023 Operating Partner Eldridge Zinnia Corporate Holdings LLC(formerly SE2 LLC)(Chief Executive Officer since May 2022 and Chairperson of the Board of Directors)Dr.Dagmar Valcrcel Year of birth:1966 Appointed by the court:August 1,2019 Term expires:2025 Supervisory Board member amedes Holding GmbH;Antin Infrastructure Partners S.A.2(Member of the Board of Directors)Stefan Viertel1 Year of birth:1964 Succession as substitute member:January 1,20214 Term expires:2023 Staff Council member No memberships or directorships subject to disclosure Dr.Theodor Weimer Year of birth:1959 First elected:May 20,2020 Term expires:2025 Chief Executive Officer,Deutsche Brse AG Knorr Bremse AG2 Frank Werneke1 Year of birth:1967 Appointed by the court:November 25,2021 Term expires:2023 Chairman of the trade union ver.di(Vereinte Dienstleistungsgewerkschaft)ZDF Studios GmbH(formerly ZDF Enterprises GmbH);Member of the Television Council of the Zweites Deutsches Fernsehen(ZDF);ver.di Vermgensgesellschaft m.b.H.Professor Dr.Norbert Winkeljohann Year of birth:1957 First elected:August 1,2018 Term expires:2023 Deputy Chairman of the Supervisory Board of Deutsche Bank AG;Self-Employed Corporate Consultant Norbert Winkeljohann Advisory&Investment Bayer AG2(Chairman);Georgsmarienhtte Holding GmbH;Sievert SE(Chairman);Bohnenkamp AG(Chairman)Frank Witter Year of birth:1959 First elected:May 27,2021 Term expires:2025 Supervisory Board member Traton SE2;Vfl Wolfsburg-Fuball GmbH(Chairman);CGI Inc.2(Member of the Board of Directors)1 Employee representatives 2 Listed company 3 Group-internal mandate 4 Mr.Viertel already was a member of the Supervisory Board from August 1,2010 to May 23,2013 11 Deutsche Bank Management Board and Supervisory Board Corporate Governance Report 2022 Supervisory Board Objectives for the composition of the Supervisory Board,Profile of Requirements,diversity concept and status of implementation The composition of the Supervisory Board should ensure the effective and qualified control of and advice for the Management Board of an internationally operating,broadly positioned bank.In this connection,its members as a whole must possess the knowledge,abilities and expert experience to properly complete its tasks,and the members in their entirety of the Supervisory Board and the Audit Committee must be familiar with the banking sector.Attention should be placed,in particular,on the integrity,personality,willingness to perform,professionalism and independence of the individuals proposed for election.Furthermore,the members must be able to devote sufficient time to performing their mandates.The objective is for the Supervisory Board as a whole to possess all of the knowledge and experience considered to be essential while taking into account the activities of Deutsche Bank Group,also with regard to the observance of the relevant bank supervisory regulations.At its meeting on December 15,2022,the Supervisory Board discussed and approved a restructuring of its Profile of Requirements in order to be able to report on its skills and expertise in a qualifications matrix.The Supervisory Board specified general fields of expertise and expanded fields of expertise.General fields of expertise:Ideally,every member of the Supervisory Board possesses these individual qualifications.Understanding of commercial business issues Analytical and strategic mindset Understanding of the German corporate governance system,and as a result an understanding of a Supervisory Board members responsibilities Understanding of the business model and the structure of Deutsche Bank AG Basic understanding of the financial services sector,e.g.(i)knowledge in the areas of banking,financial services,financial markets,financial industry,including the banks home market as well as Europe and the banks key markets outside Europe,and(ii)knowledge of the relevant clients for the bank,the markets expectations and the operational environment.The fulfillment of these fields of expertise is reported on in summary in the qualification matrix in the line“General fields of expertise”.Expanded fields of expertise:These fields of expertise refer to the Supervisory Board in its entirety(collective suitability).The Supervisory Board,as a whole,must have an understanding of the specified fields of expertise that is appropriate for the size and complexity of Deutsche Bank AG.They are derived from the banks business model and from specific laws and regulations that apply to the bank.The fields of expertise are:Accounting,including sustainability reporting:Accounting(International Financial Reporting Standards(IFRS)and German Commercial Code(HGB)and auditing of annual financial statements Taxation Regulatory framework and legal requirements:Understanding of the key legal framework conditions in the countries in which the company has its main operations Understanding of the key relevant legal systems for the bank Experience in the executive management/supervisory board of large enterprises Regulatory framework and legal requirements,in particular,knowledge of the legal systems relevant for the bank Knowledge of the social,political and regulatory expectations in the home market Human capital,compensation and corporate culture:Human resources and staff management Compensation and compensation systems Selection procedure for management body members and assessment of their suitability Corporate culture 12 Deutsche Bank Management Board and Supervisory Board Corporate Governance Report 2022 Supervisory Board Risk management:Risk management(investigation,assessment,mitigation,management and control of financial and non-financial risks,capital and liquidity management,shareholdings)Combating money laundering and prevention of financial crime and the financing of terrorism Information technology,data and digitalization:Digitalization,including digital banking Data,including data governance Information technology(IT),IT systems and IT security,including cyber risks Strategy,transformation and Environmental,Social and Governance(ESG)issues:Strategic planning of business models and risk strategies as well as their implementation Climate and other environmental aspects Knowledge of social and political expectations(in particular in the home market)and their impacts on corporate social responsibility Companys purpose Organizational structure and control of a financial institution:Governance Management of a large,international regulated company Internal organization of the bank Internal audit Compliance and internal controls In order to adequately reflect the banks business model,the Supervisory Board shall demonstrate not only these professional qualifications but also qualifications and experience in the various client segments and different sales markets.Client segments:Private Banking and Wealth Management Corporate Banking Investment Banking Asset Management Regional expertise:Germany Europe Americas Asia-Pacific(APAC)The suitability of each individual member to perform their mandate is assessed,determined and continuously monitored both internally and externally by the Nomination Committee and the Supervisory Board as well as by the regulatory authorities.The suitability assessment covers the expertise,reliability and time available of the individual members.In addition,there is an assessment of the knowledge,skills and experience of the Supervisory Board in its entirety that are necessary for it to perform its control function(collective suitability).Passing the suitability assessment of the European Central Bank(ECB)and the continual suitability of the Supervisory Board member during the entire mandate with Deutsche Bank AG are mandatory regulatory prerequisites for the performance of his or her work.The Supervisory Board believes that it complies with the specified concrete objectives regarding its composition and the Profile of Requirements as shown in the following qualifications matrix.The members of the Supervisory Board as a whole possess the knowledge,ability and expert experience to properly complete their tasks.The Supervisory Board shall be composed such that the number of independent members among the shareholder representatives will be at least six.The matrix also provides information on this.All members act with independence of mind,i.e.all members of the Supervisory Board engage actively in their duties and are able to make their own sound,objective and independent decisions and judgements when performing their functions and responsibilities.In the preceding financial year,there were no former members of the Management Board on the Supervisory Board.13 Deutsche Bank Management Board and Supervisory Board Corporate Governance Report 2022 Supervisory Board Alexander Wynaendts Ludwig Blomeyer-Bartenstein Mayree Clark Jan Duscheck Manja Eifert Sigmar Gabriel Timo Heider Martina Klee Gabriele Platscher Detlef Polaschek Bernd Rose Yngve Slyngstad John Alexander Thain Michele Trogni Dr.Dagmar Valcrcel Stefan Viertel Dr.Theodor Weimer Frank Werneke Prof.Dr.Norbert Winkeljohann Frank Witter Member-ship No Overboarding*Independent*ER ER ER ER ER ER ER ER ER ER Professional expertise General fields of expertise Accounting and reporting,incl.sustainability reporting Audit Committee Financial Experts*Expertise in the area of accounting*Expertise in the area of auditing*Regulatory framework and Legal requirements Human Capital,Compensation and Corporate Culture Compensation Control Committee Compensation Experts*Risk Management Information technology,data and digitalization Strategy,Transformation and ESG Organizational structure and control of a financial institution Client/business expertise Private Banking and Wealth Management Corporate Banking Investment Banking Asset Management Regional Expertise Germany Europe Americas APAC Profound and professional knowledge/expert Regulatory expert/expertise required by law and/or supervisory regulation ER Employees representatives*Definition of no overboarding:All Supervisory Board members hold an admissible number of board directorships in various companies in addition to Deutsche Bank AG.Overboarding,i.e.holding an inadmissible number of board directorships in different companies,is determined on the basis of the statutory regulation in Section 25d(3)of the German Banking Act(KWG).A Supervisory Board member may concurrently be a member of the supervisory body of a maximum of five companies(including Deutsche Bank AG).If a Supervisory Board member is also an executive director of a company,this Supervisory Board member may concurrently be a member of the supervisory body of a maximum of three companies(including Deutsche Bank AG).The decisive factors for determining if this is the case are the supervisory authoritys regulatory requirements in consideration of the local laws.Compliance with this statutory regulation is continually monitored by the regulatory authorities.In the event of directorship overboarding,the supervisory authorities may require that Deutsche Bank AG revoke a Supervisory Board members appointment and prohibit this Supervisory Board member from performing his or her work.*Definition of independence:A Supervisory Board member is independent when there are no personal or business relations with Deutsche Bank or its Management Board that may cause a substantial and not merely temporary conflict of interest.Back in 2017,the Supervisory Board issued guidelines for the consistent assessment of the independence of its members,and these also take into account the regulatory requirements on independence.The bank has no controlling shareholder at present.*Definition of experts given in the section“Auditing and Controlling”on page 17.14 Deutsche Bank Management Board and Supervisory Board Corporate Governance Report 2022 Supervisory Board There is a regular maximum age limit of 70.In well-founded,individual cases,a Supervisory Board member may be elected or appointed for a period that extends at the latest until the end of the fourth Annual General Meeting that takes place after he or she has reached the age of 70.This age limit was taken into account in the election proposals to the General Meeting and shall also be taken into account for the next Supervisory Board elections or subsequent appointments for Supervisory Board positions that become vacant.For shareholder representatives on the Supervisory Board elected or appointed since July 2020,the length of Supervisory Board membership shall not,as a rule,exceed 12 years.The Supervisory Board respects diversity when proposing its members for appointment.In light of the international operations of Deutsche Bank,care should be taken that the Supervisory Board has an appropriate number of members with long-term international experience.Currently,the professional careers or private lives of six members of the Supervisory Board are centered outside Germany.Furthermore,all of the shareholder representatives on the Supervisory Board have many years of international experience from their current or former activities,for example,as management board members or chief executive officers or in a comparable executive function of corporations or organizations with international operations.In these two ways,the Supervisory Board believes the international activities of the company are sufficiently taken into account.The objective is to retain the currently existing international profile.Special importance has already been attached to an appropriate consideration of women in the selection process since the Supervisory Board elections in 2008.For the election proposals to the General Meeting,the Supervisory Board takes into account the recommendations of the Nomination Committee and the legal requirements according to which the Supervisory Board shall be composed of at least 30%women and at least 30%men.In reviewing potential candidates for a new election or subsequent appointments to Supervisory Board positions that have become vacant,qualified women are included in the selection process and appropriately considered in the election proposals.At the end of the financial year,three women and seven men were members of the Supervisory Board on both the employee representatives side and shareholder representatives side.The statutory minimum quota of 30%has thus been fulfilled for many years now.The age structure is diverse,ranging from 38 to 67 years of age at the end of the financial year and spanning three generations,according to the general definition of the term.The length of membership on the Supervisory Board of Deutsche Bank ranged from under one year to around 20 years at the end of the financial year.The diverse range of the members educational and professional backgrounds includes banking,business administration,economics,auditing,law,German studies,political science,electrical engineering and healthcare.The resumes of the members of the Supervisory Board are published on Deutsche Banks website( members of the Supervisory Board do not exercise functions on a management body of,or perform advisory duties at,major competitors.Material conflicts of interest involving a member of the Supervisory Board that are not merely temporary will result in the termination of that members Supervisory Board mandate.Members of the Supervisory Board may not,according to Section 25d of the German Banking Act(KWG),and shall not,according to the recommendations under C.4 and C.5 of the German Corporate Governance Code(GCGC),hold more than the allowed number of supervisory board mandates or mandates in supervisory bodies of companies which have similar requirements.These requirements were met in the preceding financial year.Some members of the Supervisory Board are,or were last year,in high-ranking positions at other companies that Deutsche Bank has business relations with.Business transactions with these companies were conducted under the same conditions as those between unrelated third parties.In the opinion of the Management Board and the Supervisory Board,these transactions did not affect the independence of the Supervisory Board members involved.15 Deutsche Bank Management Board and Supervisory Board Corporate Governance Report 2022 Committees of the Supervisory Board Committees of the Supervisory Board The Supervisory Board has established the following eight standing committees:Chairmans Committee,Nomination Committee,Audit Committee,Risk Committee,Regulatory Oversight Committee(formerly Integrity Committee),Compensation Control Committee,Strategy and Sustainability Committee(formerly Strategy Committee),and Technology,Data and Innovation Committee.To the extent required,the committees coordinate their work and consult each other on an ad hoc basis.The committee chairpersons report regularly to the Supervisory Board on the work of the committees.The tasks and further details of the standing committees are regulated in separate Terms of Reference.The current versions are available on the Deutsche Bank website( members of the committees are or were:Chairmans Committee:Alexander Wynaendts,Chairman(since May 19,2022),Dr.Paul Achleitner Chairman(until May 19,2022),Detlef Polaschek,Frank Werneke,Professor Dr.Norbert Winkeljohann Nomination Committee:Alexander Wynaendts,Chairman(since July 28,2022),member(from May 19,2022 to July 28,2022),Mayree Clark,Chairperson(until July 28,2022),member(since July 28,2022),Dr.Paul Achleitner(until May 19,2022),Detlef Polaschek,Frank Werneke,Professor Dr.Norbert Winkeljohann Audit Committee:Frank Witter,Chairman(since July 28,2022),member(until July 28,2022),Professor Dr.Norbert Winkeljohann,Chairman(until July 28,2022),member(since July 28,2022),Dr.Paul Achleitner(until May 19,2022),Manja Eifert(since July 28,2022),Henriette Mark(until March 31,2022),Gabriele Platscher,Detlef Polaschek,Bernd Rose,Dr.Dagmar Valcrcel,Stefan Viertel,Dr.Theodor Weimer,Alexander Wynaendts(since May 19,2022)Risk Committee:Mayree Clark,Chairperson,Dr.Paul Achleitner(until May 19,2022),Ludwig Blomeyer-Bartenstein,Jan Duscheck,Michele Trogni,Stefan Viertel,Professor Dr.Norbert Winkeljohann,Alexander Wynaendts(since May 19,2022)Regulatory Oversight Committee(since July 28,2022,formerly Integrity Committee):Dr.Dagmar Valcrcel,Chairperson,Dr.Paul Achleitner(until May 19,2022),Ludwig Blomeyer-Bartenstein,Sigmar Gabriel,Timo Heider,Gabriele Platscher,Alexander Wynaendts(since May 19,2022)Compensation Control Committee:Professor Dr.Norbert Winkeljohann,Chairman(since July 28,2022),Alexander Wynaendts,Chairman(from May 19,2022 to July 28,2022),member(since July 28,2022),Dr.Paul Achleitner,Chairman(until May 19,2022),Dr.Gerhard Eschelbeck(until May 19,2022),Detlef Polaschek,Bernd Rose,Dr.Dagmar Valcrcel,Frank Werneke Strategy and Sustainability Committee(since December 15,2022,formerly Strategy Committee):John Alexander Thain,Chairman,Dr.Paul Achleitner(until May 19,2022),Mayree Clark,Timo Heider,Henriette Mark(until March 31,2022),Detlef Polaschek,Michele Trogni,Stefan Viertel(since July 28,2022),Frank Werneke,Alexander Wynaendts(since May 19,2022)Technology,Data and Innovation Committee:Michele Trogni,Chairperson,Dr.Paul Achleitner(until May 19,2022),Jan Duscheck,Dr.Gerhard Eschelbeck(until May 19,2022),Timo Heider(until July 28,2022),Martina Klee,Bernd Rose,Yngve Slyngstad(since July 28,2022),Frank Witter(until July 28,2022),Alexander Wynaendts(since May 19,2022)The Report of the Supervisory Board provides information on the concrete work of the committees over the preceding financial year.In addition to the eight standing committees,the Mediation Committee,which is required by German law,makes proposals to the Supervisory Board on the appointment or dismissal of members of the Management Board in cases where the Supervisory Board is unable to reach a two-thirds majority decision.The Mediation Committee only meets if necessary.Its members are or were:Alexander Wynaendts,Chairman(since May 19,2022),Dr.Paul Achleitner,Chairman(until May 19,2022),Detlef Polaschek,Frank Werneke and Professor Dr.Norbert Winkeljohann.Share Plans For information on the employee share plans,please refer to the additional Note 33“Employee Benefits”to the Consolidated Financial Statements.16 Deutsche Bank Corporate Governance Report 2022 Reporting and Transparency Directors Share Ownership Reporting and Transparency Directors Share Ownership Management Board:For information on the share ownership of the Management Board,please refer to our detailed Compensation Report in the Management Report.Supervisory Board:The members of our Supervisory Board held the following numbers of our shares and share awards under our employee share plans.Members of the Supervisory Board Number of shares Number of share awards Alexander Wynaendts 0 0 Ludwig Blomeyer-Bartenstein 5,490 4,7351 Mayree Clark 109,444 0 Jan Duscheck 0 0 Manja Eifert 103 10 Sigmar Gabriel 0 0 Timo Heider 0 0 Martina Klee 2,781 10 Gabriele Platscher 1,684 10 Detlef Polaschek 1,934 10 Bernd Rose 0 0 Yngve Slyngstad 0 0 John Alexander Thain 100,000 0 Michele Trogni 15,000 0 Dr.Dagmar Valcrcel 0 0 Stefan Viertel 1,007 0 Dr.Theodor Weimer 108,000 0 Frank Werneke 0 0 Professor Dr.Norbert Winkeljohann 0 0 Frank Witter 0 0 Total 345,443 4,775 1 Restricted Equity Awards.Mr.Blomeyer-Bartenstein has an entitlement linked to 4,735 shares through Restricted Equity Awards as part of his variable compensation.These become due for disbursal from 2023 to 2027.As of February 10,2023,the members of the Supervisory Board held 345,443 shares,which is less than 0.02%of the shares issued as of the reporting day.The“Number of share awards”column in the table lists share awards granted under the Global Share Purchase Plan to Supervisory Board members who are employees of Deutsche Bank(“Matching Awards”),which are scheduled to be delivered to them on November 1,2023,as well as Restricted Equity Awards(deferred share awards),which are granted to employees with deferred variable compensation.The Restricted Equity Awards are indicated with a footnote in the table,and further details on them as a compensation instrument are provided in the“Employee compensation report”.As described in the“Management Report:Compensation Report:Compensation system for Supervisory Board members”,25%of each members compensation for services as a member of the Supervisory Board for a given prior year is,rather than being paid in cash,converted into notional shares of Deutsche Bank AG in February of the following year.The cash value of the notional shares is paid to the members in February of the year following their departure from the Supervisory Board or the expiration of their term of office,based on the market price of the Deutsche Bank share near the payment date.The Compensation Report on the preceding financial year and the auditors report pursuant to Section 162 of the German Stock Corporation Act(AktG),the currently applicable compensation system pursuant to Section 87a(1)and(2)sentence 1 AktG as well as the last resolution on compensation pursuant to Section 113(3)AktG are available from the banks website (under the Investor Relations headings“Reports and Events”,“Annual Reports”).Related Party Transactions For information on related party transactions please refer to Note 36“Related party transactions“.17 Deutsche Bank Auditing and Controlling Corporate Governance Report 2022 Audit Committee Financial Expert Auditing and Controlling Audit Committee Financial Expert The Supervisory Board determined that the following members of the Audit Committee are“Audit Committee Financial Experts*,as such term is defined by the implementation rules of the U.S.Securities and Exchange Commission issued pursuant to Section 407 of the Sarbanes-Oxley Act of 2002:Dr.Dagmar Valcrcel,Dr.Theodor Weimer,Professor Dr.Norbert Winkeljohann,Frank Witter and Alexander Wynaendts.These Audit Committee Financial Experts are“independent”of the bank,as defined in Rule 10A-3 under the U.S.Securities Exchange Act of 1934.Furthermore,the Supervisory Board determined in accordance with Sections 107(4)and 100(5)of the Stock Corporation Act(AktG)and Section 25d(9)of the German Banking Act(KWG)that Dr.Dagmar Valcrcel,Dr.Theodor Weimer,Professor Dr.Norbert Winkeljohann,Frank Witter and Alexander Wynaendts have expert knowledge in financial accounting and the auditing of financial statements.Dr.Dagmar Valcrcel has expertise in the areas of accounting and auditing through her many years of experience as Chair of the Management Board of Andbank Asset Management Luxembourg S.A.and Barclays Vida y Pensiones,S.A.U.and through her current work as member of the Board of Directors of Antin Infrastructure Partners S.A.Dr.Theodor Weimer has expertise in the areas of accounting and auditing through his many years of experience as Chief Executive Officer of HypoVereinsbank/UniCredit AG and as a former member of the Audit Committee of ERGO Gruppe AG as well as through his current work as Chairman of the Executive Board of Deutsche Brse AG.Professor Dr.Norbert Winkeljohann has expertise in the areas of accounting and auditing through his education and training as an auditor and his many years of experience as an auditor at various auditing firms and as Chairman of the Management Board of PwC Europe SE.Frank Witter has expertise in the areas of accounting and auditing through his many years of experience as Chief Financial Officer of Volkswagen AG and as Chairman of the Board of Management of Volkswagen Financial Services AG.Alexander Wynaendts has expertise in the areas of accounting and auditing through his many years of experience as Chief Executive Officer and Chairman of the Management and Executive Boards of Aegon N.V.Compensation Control Committee Compensation Expert Pursuant to Section 25d(12)of the German Banking Act(KWG),at least one member of the Compensation Control Committee must have sufficient expertise and professional experience in the field of risk management and risk controlling,in particular,with regard to the mechanisms to align compensation systems to the companys overall risk appetite and strategy and the banks capital base.Based on the recommendation of the Compensation Control Committee,the Supervisory Board resolved to specify by name Dr.Dagmar Valcrcel,Alexander Wynaendts and Professor Dr.Norbert Winkeljohann as Compensation Control Committee Compensation Experts.All of them have expertise and professional experience in the field of risk management and risk controlling,in particular with regard to mechanisms to align the compensation systems to the companys overall risk appetite and strategy and its capital base.They therefore fulfill the requirements of Section 25d(12)of the German Banking Act(KWG).Dr Valcrcel has comprehensive legal experience with compensation frameworks,including reputational risks,from her time as,among other things,Head of the Legal Department of Barclays PLC for Western Europe.Based on their years of experience as Management Board Chairman and/or Chief Executive Officer,Alexander Wynaendts and Professor Dr.Norbert Winkeljohann have sufficient expertise and professional experience in the area of risk management and risk controlling.18 Deutsche Bank Auditing and Controlling Corporate Governance Report 2022 Values and leadership principles of Deutsche Bank AG and Deutsche Bank Group Values and leadership principles of Deutsche Bank AG and Deutsche Bank Group Deutsche Bank Group Code of Conduct and Code of Ethics for Senior Financial Officers Deutsche Bank Groups Code of Conduct sets out Deutsche Bankss purpose,values and beliefs and minimum standards of conduct that we expect all members of our Management Board and employees to follow.These values and standards govern employee interactions with our clients,competitors,business partners,government and regulatory authorities,and shareholders,as well as with other employees.In addition,the Code forms the cornerstone of our policies,which provide guidance on compliance with applicable laws and regulations.In accordance with Section 406 of the Sarbanes-Oxley Act of 2002,the bank adopted a Code of Ethics for Senior Financial Officers of Deutsche Bank AG and Deutsche Bank Group with special obligations that apply to the“Senior Financial Officers”,which currently consist of Deutsche Banks Chairman of the Management Board and the Chief Financial Officer as well as certain other Senior Financial Officers.There were no amendments or waivers to this Code of Ethics in 2022.The current versions of the Code of Conduct as well as the Code of Ethics for Senior Financial Officers of Deutsche Bank AG and Deutsche Bank Group are available from Deutsche Banks website: Governance at Deutsche Bank AG and Deutsche Bank Group Deutsche Bank established a Group Governance function to define,implement and monitor the corporate governance framework of Deutsche Bank AG and Deutsche Bank Group and to perform this governance function throughout the Group.Group Governance addresses corporate governance issues in Deutsche Bank AG and Deutsche Bank Group,while focusing closely on clear organizational structures aligned to the key elements of good corporate governance.Deutsche Bank AG and Deutsche Bank Group are committed to ensuring a corporate governance framework in accordance with international standards and statutory provisions.In support of this objective,Deutsche Bank AG and Deutsche Bank Group have instituted clear corporate governance principles.Further details on corporate governance are published on Deutsche Banks website( Deutsche Bank Auditing and Controlling Corporate Governance Report 2022 Principal accountant fees and services Principal accountant fees and services In accordance with German law,our principal accountant is appointed at our Annual General Meeting based on a recommendation of our Supervisory Board.The Audit Committee of our Supervisory Board prepares such a recommendation.Subsequent to the principal accountants appointment,the Audit Committee awards the contract and in its sole authority approves the terms and scope of the audit and all audit engagement fees as well as monitors the principal accountants independence.Ernst&Young GmbH Wirtschaftsprfungsgesellschaft(EY“)was our principal accountant for the 2021 and 2022 fiscal years,respectively.The tables set forth below contain the aggregate fees billed for each of the last two fiscal years by EY in each of the following categories:(1)Audit fees,which are fees for professional services for the audit of our annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years,(2)Audit-related fees,which are fees for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported as Audit fees,(3)Tax-related fees,which are fees for professional services rendered for tax compliance,tax consulting and tax planning,and(4)All other fees,which are fees for products and services other than Audit fees,Audit-related fees and Tax-related fees.These amounts include expenses and exclude Value Added Tax(VAT).Fees billed by EY Fee category in m.2022 2021 Audit fees 59 54 Audit-related fees 8 8 Tax-related fees 0 1 All other fees 1 1 Total fees 1 68 64 The Audit fees include fees for professional services for the audit of our annual financial statements and consolidated financial statements and do not include audit fees for DWS and its subsidiaries that are not audited by EY.The Audit-related fees include fees for other assurance services required by law or regulations,in particular for financial service specific attestation,for quarterly reviews,for spin-off audits and for merger audits,as well as fees for voluntary assurance services,like voluntary audits for internal management purposes and the issuance of comfort letters.Our Tax-related fees include fees for services relating to the preparation and review of tax returns and related compliance assistance and advice,tax consultation and advice relating to Group tax planning strategies and initiatives and assistance with assessing compliance with tax regulations.Under SEC regulations,the principal accountant fees are required to be presented as follows:audit fees were 61 million in 2022 compared to 56 million in 2021,audit-related fees were 6 million in 2022 compared to 6 million in 2021,tax-related fees were 0 million in 2022 compared to 1 million in 2021,and all other fees were 1 million in 2022 compared to 1 million in 2021.United States law and regulations,and our own policies,generally require that all engagements of our principal accountant be pre-approved by our Audit Committee or pursuant to policies and procedures adopted by it.Our Audit Committee has adopted the following policies and procedures for consideration and approval of requests to engage our principal accountant to perform non-audit services.Engagement requests must in the first instance be submitted to the Accounting Engagement Team.If the request relates to services that would impair the independence of our principal accountant,the request must be rejected.Our Audit Committee has given its pre-approval for specified assurance,financial advisory and tax services,provided the expected fees for any such service do not exceed 1 million.If the engagement request relates to such specified pre-approved services,it may be approved by the Accounting Engagement Team and must thereafter be reported to the Audit Committee.If the engagement request relates neither to prohibited non-audit services nor to pre-approved non-audit services,it must be forwarded to the Audit Committee for consideration.In addition,to facilitate the consideration of engagement requests between its meetings,the Audit Committee has delegated approval authority to several of its members who are“independent”as defined by the Securities and Exchange Commission and the New York Stock Exchange.Such members are required to report any approvals made by them to the Audit Committee at its next meeting.Additionally,United States law and regulations permit the pre-approval requirement to be waived with respect to engagements for non-audit services aggregating to no more than five percent of the total amount of revenues we paid to our principal accountant,if such engagements were not recognized by us at the time of engagement and were promptly brought to the attention of our Audit Committee or a designated member thereof and approved prior to the completion of the audit.In 2021 and 2022,the percentage of the total amount of revenues we paid to our principal accountant for non-audit services that was subject to such a waiver was less than 5%for each year.20 Deutsche Bank Compliance with the German Corporate Governance Code Corporate Governance Report 2022 Declaration pursuant to Section 161 German Stock Corporation Act(AktG)(Declaration of Conformity 2022)Compliance with the German Corporate Governance Code Declaration pursuant to Section 161 German Stock Corporation Act(AktG)(Declaration of Conformity 2022)In updating the Declaration of Conformity issued on October 28,2021,the Management Board and Supervisory Board of Deutsche Bank AG approved the following Declaration of Conformity on October 26,2022.“The Management Board and Supervisory Board of Deutsche Bank Aktiengesellschaft state pursuant to Section 161 German Stock Corporation Act(AktG):1.The last Declaration of Conformity was issued on October 28,2021.As of this date on,Deutsche Bank Aktiengesellschaft complied with the recommendations of the“Government Commission on the German Corporate Governance Code”in the version of the Code dated December 16,2019,and published in the Federal Gazette(Bundesanzeiger)on March 20,2020,without deviations.The German Corporate Governance Code limits the applicability of the Codes recommendations to credit institutions and insurance companies to the extent that the recommendations apply to them insofar as there are no statutory provisions to the contrary.Deutsche Bank Aktiengesellschaft last reported these statutory regulations and the effects for the Declaration of Conformity in its Corporate Governance Statement in the Annual Report 2021.2.On April 28,2022,the“Government Commission on the German Corporate Governance Code”submitted a new version of the Code,which was published in the Federal Gazette(Bundesanzeiger)on June 27,2022.Deutsche Bank Aktiengesellschaft complies with all of the recommendations applicable to it and will comply with them in the future,with the following deviation:With regard to recommendation G.10,second sentence,according to which long-term variable remuneration components shall be accessible to a Management Board member only after a period of four years.The compensation system for the Management Board provides that the long-term components of variable compensation vest over a deferral period of five years.As this involves share-based compensation elements,these are subject to an additional holding period of one year after their vesting.With regard to the structure of the deferral period,the Supervisory Board resolved in February 2022 that Management Board members will in future already be able to dispose over a first part after three years and over the last part of the long-term component after six years.The Supervisory Board thus remains within the requirements for financial institutions set out in the Remuneration Ordinance for Institutions(Institutsvergtungsverordnung).We do not consider a further tightening of the bank-specific regulatory requirements to be appropriate.Although the Management Board members will not be able to dispose over the first part of the long-term component granted for the 2021 financial year until 2025,we already today declare an exception to the recommendation.Frankfurt am Main,in October 2022 The Management Board The Supervisory Board of Deutsche Bank Aktiengesellschaft of Deutsche Bank Aktiengesellschaft”21 Deutsche Bank Compliance with the German Corporate Governance Code Corporate Governance Report 2022 Inapplicable Code recommendations due to the precedence of statutory provisions Inapplicable Code recommendations due to the precedence of statutory provisions Pursuant to the recommendation in Section F.4 of the German Corporate Governance Code in the version of April 28,2022,companies subject to special legal regulations shall specify in the Corporate Governance Statement which Code recommendations were not applicable due to over-riding legal stipulations.For Deutsche Bank Aktiengesellschaft,this currently applies to the recommendation in Section D.5 of the German Corporate Governance Code in the version of April 28,2022,which states that the Supervisory Board shall form a Nomination Committee which is composed exclusively of shareholder representatives.Deutsche Bank Aktiengesellschaft,as a supervised credit institution,is subject to the special legal regulations of the German Banking Act(KWG).The Supervisory Board of Deutsche Bank Aktiengesellschaft established a Nomination Committee in accordance with Section 25d(11)of the German Banking Act(KWG)whose tasks are to support the Supervisory Board in the following tasks:identifying candidates to fill a position on the Management Board and preparing proposals for the election of members of the Supervisory Board drawing up an objective to promote the representation of the under-represented gender on the Supervisory Board as well as a strategy for achieving this the regular assessment,to be performed at least once a year,of the structure,size,composition and performance of the Management Board and of the Supervisory Board and making recommendations regarding this to the Supervisory Board the regular assessment,to be performed at least once a year,of the knowledge,skills and experience of the individual members of the Management Board and of the Supervisory Board as well as of the respective body collectively and the review of the Management Boards principles for selecting and appointing persons to the upper management level and the recommendations made to the Management Board in this respect The Nomination Committee to be established in accordance with the German Banking Act(KWG)therefore has numerous tasks that go beyond the preparation of the election proposals for the shareholder representatives on the Supervisory Board.A general exclusion of a supervisory boards employee representatives from a membership on a committee is only admissible,according to prevailing opinion,if there is a material reason for this.Whereas such a material reason can exist for a committee that solely handles the preparation of the proposals to the General Meeting for the election of shareholder representatives,a justification for the exclusion of employee representatives is lacking for a nomination committee with the range of tasks assigned to it by the German Banking Act(KWG).Due to the Nomination Committees range of mandatory tasks stipulated by the German Banking Act(KWG)and the inadmissibility of discriminating against employee representatives in the composition of the committees,the recommendation in Section D.4 of the German Corporate Governance Code is therefore not applicable to Deutsche Bank Aktiengesellschaft.Nonetheless,in order to take this recommendation into account,Section 2(3)of the Terms of Reference for the Nomination Committee provides that the election proposals to the General Meeting are prepared only by the shareholder representatives on the Nomination Committee.22 Deutsche Bank Compliance with the German Corporate Governance Code Corporate Governance Report 2022 Goals for the proportion of women in management positions/gender quota Goals for the proportion of women in management positions/gender quota As of the date of this Corporate Governance Statement,the percentage of women on the Supervisory Board of Deutsche Bank AG is 30%.The statutory minimum of 30%pursuant to Section 96(2)of the German Stock Corporation Act(AktG)is thereby fulfilled.On July 27,2017,the Supervisory Board set a goal of at least 20%for the percentage of female members of the Management Board as of June 30,2022.For a Management Board size of between eight and 12 members,this corresponds to two women.With Christiana Riley and Rebecca Short on the Management Board this goal has already been met since May 1,2021.The current German Act to Supplement and Amed Regulations on the Equal Participation of Women and Men in Management Positions in the Private and Public Sectors(Equal Participation Act II(FPoG II)requires that at least one woman and one man be appointed to a management board with more than three members however no additional goals must be set.With two women on the Management Board the bank exceeded this requirement as of December 31,2022.Deutsche Bank is firmly convinced that an improved gender balance in leadership roles will meaningfully contribute to its future success.In accordance with the legal framework conditions and based on the banks own strategy on diversity,equity and inclusion the bank is working on making progress on its ambitious goals of the“35 by 25”program that the Management Board set on May 4,2021.The goals for the representation of women on the two management levels below the Management Board are now for at least 30%women on the first management level and at least 30%women on the second management level below the Management Board.These goals are to be reached by December 31,2025.The population of staff on the first management level below the Management Board comprises Managing Directors and Directors who report directly to the Management Board and managers with comparable responsibilities.The population of staff on the second management level comprises Managing Directors and Directors who report to the first management level.Implementing German gender quota legislation at Deutsche Bank AG Dec 31,2022 Dec 31,2021 Dec 31,2020 Goal Result Result Result Level(headcount,in%)1 Supervisory Board 30.0 30.0 30.0 30.0 Management Board2 20.0 20.0 20.0 10.0 Management Board level-13 30.0 17.1 20.0 20.0 Management Board level-23 30.0 29.6 27.5 23.9 1 Pursuant to Germanys Act on the Equal Participation of Women and Men in Management Positions in the Private and Public Sectors.2 Goal reflects June 2022.3 Goal reflects December 2025.As of December 31,2022,the proportion of women was 17,1%(2021:20%)on the first management level below the Management Board and 29,6%(2021:27,5%)on the second management level below the Management Board.While the Groups commitment to increase the representation of women in senior management positions is global,the Groups implementation is local.Each region,each business has its own diversity and inclusion needs because cultures and current social challenges differ from nation to nation and from business area to business area.However,the Management Board remains committed to these goals and focused initiatives are put in place to accelerate change.These initiatives impact the full lifecycle of people spanning across talent attraction,talent development,talent retention and promotion.Within this framework,the banks decisions on promotions and appointments are aligned,in particular,to the suitability of the candidates for the respective roles,their demonstrated performance and their future potential.In line with our basic diversity concept,the bank also take into account the knowledge and skills required for the proper performance of tasks and the necessary experience of the employees for the composition of the two levels below the Management Board.23 Deutsche Bank Compliance with the German Corporate Governance Code Corporate Governance Report 2022 Diversity concept Diversity concept As an integral part of our strategy as a leading European bank with a global reach and a strong home market in Germany,Diversity is a decisive factor for our success.Diversity,equity and inclusion help Deutsche Bank in forming and strengthening relationships with our clients and partners in the societies where we do business.Age and gender as well as educational and professional backgrounds have long been accepted as key aspects of our far more comprehensive understanding of diversity at Deutsche Bank.The bank were convinced that diversity,equity and inclusion stimulate innovation,for example,and help us to take more balanced decisions and thus play a decisive role for the success of Deutsche Bank.diversity and Inclusion are therefore integral components of the banks values and beliefs and its Code of Conduct.The Supervisory Board and Management Board strive to and should serve as role models for the bank regarding diversity,equity and inclusion.In accordance with our values and beliefs specified above,diversity in the composition of the Supervisory Board and the Management Board also facilitates the proper performance of the tasks and duties assigned to them by law,Articles of Association and Terms of Reference.Based on Deutsche Banks understanding of diversity,equity and inclusion,the values and beliefs and the measures described in the following for their implementation also apply to the extent legally admissible to the Supervisory Board and the Management Board of Deutsche Bank AG.The Supervisory Board considers diversity in the company,in particular,when filling positions on the Management Board and Supervisory Board.On December 15,2022,the Supervisory Board of Deutsche Bank AG updated the Suitability Guideline for selecting members of the Supervisory Board and Management Board of Deutsche Bank AG,which also continues to comprise diversity principles.This Suitability Guideline implements the“Guidelines on the assessment of the suitability of members of the management body and key function holders”issued jointly by the European Banking Authority and European Securities and Markets Authority.Diversity concept for the Supervisory Board The diversity concept for the Supervisory Board and its implementation are described above in the section“Objectives for the composition of the Supervisory Board,Profile of Requirements,diversity concept and status of implementation”.Diversity concept and succession planning for the Management Board Through the composition of the Management Board,it is to be ensured that its members have,at all times,the required knowledge,skills and experience necessary to properly perform their tasks.Accordingly,when selecting members for the Management Board,care is to be taken that they collectively have sufficient expertise and diversity within the meaning of our objectives specified above.Furthermore,the Supervisory Board and the Management Board should ensure long-term succession planning.The current German Act to Supplement and Amend Regulations on the Equal Participation of Women and Men in Management Positions in the Private and Public Sectors(Equal Participation Act II(FPoG II)requires that at least one woman and one man be appointed to a management board with more than three members;however,no additional goals must be set.The bank exceeded this requirement as of December 31,2022.In general,a Management Board member should not be older at the end of his or her appointment period than the regular retirement age according to the rules of the statutory pension insurance scheme applicable in Germany for the long-term insured to claim an early retirement pension.24 Deutsche Bank Compliance with the German Corporate Governance Code Corporate Governance Report 2022 Diversity concept Implementation In accordance with the law,the Articles of Association and Terms of Reference,the Supervisory Board adopted one candidate profile for the members of the Management Board,based on a proposal from the Nomination Committee.This profile take into account an“Expertise and Capabilities Matrix”,specifying,among other things,the required knowledge,skills and experience to perform the tasks as Management Board member,in order to successfully develop and implement the banks strategy in the respective market or the respective division and as a management body collectively.The Management Board reviews succession plans for Management Board positions,both individually and as a group.Individual succession plans are reviewed and internal succession candidates are discussed in detail based on potential,leadership,fit and proper suitability.As gender diversity is a key focus of Deutsche Bank respective succession metrics and data analytics support this process.After approval by the Management Board these plans are submitted to the Nomination Committee and the Supervisory Board in principle at a meeting for extensive deliberation.In identifying candidates to fill a position on the banks Management Board,the Supervisory Boards Nomination Committee takes into account the appropriate diversity balance of all Management Board members collectively.Furthermore,it also considers the targets set by the Supervisory Board in accordance with statutory requirements for the percentage of women on the Management Board.The Nomination Committee supports the Supervisory Board with the periodic assessment,to be performed at least once a year,of the knowledge,skills and experience of the individual members of the Management Board and of the Management Board in its entirety.Results achieved in the 2022 financial year At the end of the financial year,the Management Board comprised two women(20%)and eight men.The target of 20%of the members or two women adopted for June 30,2022,for the Management Board was met.As of the date of this Corporate Governance Statement,the Management Board of Deutsche Bank AG comprised two women and eight men.The age structure is diverse,ranging from 44 to 57 years of age as of the date of this Corporate Governance Statement.As The length of experience as member of the Management Board of Deutsche Bank of the date of this Corporate Governance Statement ranged from less than one year to around ten years.Also with our strategy in mind of being a leading European bank with a global reach and a strong home market in Germany,six of the ten Management Board members as of the date of this Corporate Governance Statement have a German background.Furthermore,in the Management Board Italy,the United Kingdom,France,Australia,New Zealand and the USA are represented as nationalities.However,the ethnic diversity of the Management Board does not currently reflect the full diversity of the markets where we do business or the diversity of our employees.The diverse range of the members educational and professional backgrounds includes banking,business administration,economics,law,linguistics and engineering.The bank transparently reports on Management Board diversity in addition to the information presented above in this Corporate Governance Report in the section“Management Board and Supervisory Board:Management Board”as well as on the banks website:(Heading:Investor Relations,“Corporate Governance”,“Management Board”).
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Sustainability Report 20222Munich Re Sustainability Report 20221.Introduction1.1 CEO statement1.2 Portrait of Munich Re2.Approach to sustainability2.1 Sustainability strategy2.2 Goals and ambitions2.3 ESG governance2.4 Board remuneration2.5 Stakeholder dialogue2.6 Materiality assessment3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management4.1 Strategic environmental management4.2 Own emissions5.Employees5.1 HR strategy and governance5.2 Development and talent management5.3 Diversity,equity and inclusion(DEI)5.4 Employee engagement and wellbeing6.Society6.1 Our main commitments 6.2 Further engagement7.Good corporate governance7.1 Code of conduct7.2 Compliance governance7.3 Procurement7.4 Human rights7.5 Data privacy and information security7.6 Digitalisation and cyber7.7 Tax7.8 Advocacy and political involvement8.Annex8.1 About the report8.2 Key figures8.3 Standards8.4 Contact and imprint3Munich Re Sustainability Report 20221.Introduction1.1 CEO statement1.2 Portrait of Munich Re2.Approach to sustainability3.Sustainability in business4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex1.IntroductionIntroduction1.4Munich Re Sustainability Report 20221.Introduction1.1 CEO statement1.2 Portrait of Munich Re2.Approach to sustainability3.Sustainability in business4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex1.1 CEO statement GRI 2-22Ladies and Gentlemen,Economic prosperity,resilience and technological progress are inseparable components that are necessary to create a just,sustainable society.To address these challenges,rather than focus on a single topic,we take a holistic approach to sustainability at Munich Re,one that factors in all aspects of ESG as we work together for a sustainable tomorrow.Munich Res commitment to acting responsibly continues to serve as the cornerstone of our value creation for and with all our stakeholders,as outlined in our Group Ambition 2025.To achieve a sustainable tomorrow,we utilise all our experience and expertise,and cooperate with external stakeholders to accelerate an effective transformation.The need and strength to come together became very clear in the early months of 2022,when Russia attacked Ukraine,causing immense human suffering.Munich Re acted swiftly.The company and its staff around the globe started numerous aid initiatives.To mention just one example:We have been providing rent-free premises to the Ukrainian Free University in Munich.The University in exile is teaching more than 450 students,but has also started initiatives to support women and children who have had to flee the war in their country.Our employees further increased our social impact with the help of our “Social Engagement Awards”.This Group-wide initiative provided employees with the opportunity to receive funding for charitable projects of their choice.More than 100 projects were submitted and evaluated,25 of which were ultimately approved,with funding amounts of between 5,000 and 250,000 being allocated.The projects ranged from day trips for Ukrainian children Joachim Wenning CEO Munich Re5Munich Re Sustainability Report 20221.Introduction1.1 CEO statement1.2 Portrait of Munich Re2.Approach to sustainability3.Sustainability in business4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex1.1 CEO statementaffected by the war to solar-powered night schools for girls in rural India,and the implementation of sustainable agriculture practices to combat hunger and climate change.As an employer,our aim is to foster a culture of togetherness and social cohesion.This is mirrored in our approach to new ways of working.We have started to realise workplace concepts that provide flexibility,while at the same time maintaining personal connections between colleagues.This empowers our employees to excel at their jobs,and serves our clients in the best way possible.And we aim to do this with a diverse workforce:2022 saw the appointment of Clarisse Kopff,Mari-Lizette Malherbe and Michael Kerner to the Board of Management,which means that the Board is now more diverse and international than before.In addition,the proportion of women in management positions rose to 38.5%Group-wide,well on track to meet our 40 percent target by 2025.In the environmental sphere,climate change and biodiversity loss are topics that require clear action,especially in times of global crises.Our Net-Zero commitment builds on our climate ambition,which is currently well on track.For example,we have already reduced the GHG emissions of our property(re-)insurance business in oil and gas production by 40 percent.We also support the transition to more renewable energy,and in 2022 we issued a further green bond,this time in US dollars,with a volume of US$1.25bn.Our commitment to working together for a sustainable tomorrow is clear and points the way to an increasingly sustainable future across all ESG areas relevant to our organisation.The above examples cover only a small part of our ESG activities.This Sustainability Report shows you the whole picture.I wish you an enjoyable read and hope you find the contents of this report informative.Best regards,Joachim Wenning6Munich Re Sustainability Report 20221.Introduction1.1 CEO statement1.2 Portrait of Munich Re2.Approach to sustainability3.Sustainability in business4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex1.2 Portrait of Munich Re GRI 2-1;2-6Munich Re(Mnchener Rckversicherungs-Gesellschaft Aktiengesellschaft)is a stock corporation with its registered office in Munich,Germany.Our business model is based on the combination of primary insurance and reinsurance under one roof.An overview of the countries and sectors where Munich Re operates can be found in our Annual Report.3.4bn Munich Re profit 2022We take on risks of many types and complexities worldwide.Munich Re stands for exceptional solution-based expertise,consistent risk management and financial stability.We attach great importance to maintaining close and trusting relations with our clients.One of Munich Res guiding principles has always been to act with forward-looking responsibility,creating value with and for our stakeholders.7Munich Re Sustainability Report 20221.Introduction1.1 CEO statement1.2 Portrait of Munich Re2.Approach to sustainability3.Sustainability in business4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex1.2 Portrait of Munich ReOur uniform Group-wide strategy,Ambition 2025,also focuses on sustainability and aims to create long-term value for shareholders,clients and employees alike,and for society as a whole.In the 2022 financial year,the Group achieved a profit of 3.4bn on premium income of 67.1bn.It operates in all lines of insurance,with some 41,000 employees and offices across more than 50 countries.Reinsurance offers innovative solutions for complex risksWith gross premiums written of 48.1bn from reinsurance,Munich Re is one of the worlds leading reinsurers,operating in life,health and property-casualty business.As a reinsurer,Munich Re writes business in direct collaboration with primary insurers,but also via brokers,and increasingly within the framework of exclusive strategic partnerships.Munich Re offers a wide range of specialised products and customised insurance solutions and services for clients handling industrial and major project business.As a reinsurer,Munich Re does business with over 4,000 corporate clients in more than 160 countries.4,000 corporate clients Munich Res employees provide extensive underwriting experience,global and local market insight,and cross-segment expertise to the customers they serve a strength that has repeatedly earned Munich Re top rankings in client surveys.Primary insurance under the ERGO brandWith approximately 25,000 employees worldwide,ERGO Group AG offers customers a comprehensive spectrum of insurance.German,international,direct and digital business is bundled under the umbrella of ERGO Group AG.ERGO Deutschland AG concentrates on traditional insurance business in Germany,while ERGO International AG manages the Groups international business.The third pillar,ERGO Digital Ventures AG,is responsible for digitalisation,while ERGO Technology&Services Management AG manages all of the technology activities.Via ERGO,Munich Re offers products in all main classes of insurance:life insurance,health insurance,and in nearly all lines of property-casualty insurance,as well as travel insurance and legal protection insurance.With these products in combination with consultancy and support services Munich Re meets the needs of private and corporate clients.With gross premiums written amounting to 19.1bn,the ERGO Group generated nearly one third of Munich Res total gross premiums in FY 2022.InvestmentsMEAG manages a large part of Munich Res investments worldwide and also offers its expertise to private and institutional investors outside the Group.MEAG handles all the main asset classes.These include interest-bearing securities,equities,real estate,renewable energy,and infrastructure.As at 31 December 2022,total investment by the Group(excluding insurance-related investment)decreased compared with the 2021 figure,with the carrying amount decreased to 219.8bn and the market value to 223.5bn.The volume of assets managed for third parties amounted to 55.6bn.2.Approach to sustainability8Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability2.1 Sustainability strategy2.2 Goals and ambitions2.3 ESG governance2.4 Board remuneration2.5 Stakeholder dialogue2.6 Materiality assessment3.Sustainability in business4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex2.Approach to sustainability9Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability2.1 Sustainability strategy2.2 Goals and ambitions2.3 ESG governance2.4 Board remuneration2.5 Stakeholder dialogue2.6 Materiality assessment3.Sustainability in business4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex2.1 Sustainability strategy GRI 2-23Munich Re adopts a forward-looking,prudent,and responsible approach to business.For more than 140 years,we have created long-term value by assuming a diverse range of risks around the world.We are convinced that this business concept will continue to be successful in the future through sustainable action.Our environmental,social,and governance(ESG)activities lie at the heart of this approach and reconcile economic,environmental,and social requirements.In this context,we rely on dialogue with our stakeholders and the establishment of global partnerships for sustainable development.Ambition 2025 Munich Res Group Ambition 2025 programme specifies several sustainability targets that will be realised over the coming years.These objectives are built around the three guiding principles of our Ambition 2025:Scale,Shape,and Succeed.“Scale”refers to the Groups determination to retain and expand its core business,while“Shape”represents the intention to create additional business and new strategies,which will transform the organisation through the adoption of new business models.“Succeed”calls for greater focus on the added value Munich Re creates for and with all its stakeholders.This translates into increased earnings for Munich Re shareholders and bespoke,increasingly superior products for clients from a reliable partner that really understands them.We provide long-term employment for our staff,along with excellent career prospects in a skill-driven,digital,and highly flexible work environment.Last but not least,we meet our responsibility to the wider communities in which we are active,through initiatives such as the Groups ambitious climate targets for its asset management,(re)insurance business,and own business operations.ScaleShapeSucceedExpansion of coreCreate additional businessShareholders Growing earnings and RoEPreference for organic growthMonetise digital business investmentsClients Long-term partner superior products,experience and capacityLeverage superior underwritingCreate new strategic optionsEmployees Employer of choice:skill-driven,fostering digital culture,risk entrepreneursUplift asset performanceCommunities Comprehensive climate strategy matching Paris Agreement10Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability2.1 Sustainability strategy2.2 Goals and ambitions2.3 ESG governance2.4 Board remuneration2.5 Stakeholder dialogue2.6 Materiality assessment3.Sustainability in business4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex2.1 Sustainability strategyHolistic sustainability strategyAs described in our Ambition 2025,Munich Re aims to create value for all its stakeholders our sustainability strategy systematically integrates this ambition across our activities.We address social challenges by making the best use of our strengths and abilities,and by sharing knowledge with our stakeholders.Our risk expertise,in particular,allows us to develop powerful new perspectives and sustainable solutions.We focus on the following fields of action:-Responsible governance Responsible corporate governance is only possible if it is based on ethical and legal conduct.-Sustainable approach to business We proactively consider ESG aspects along the value chain in our business activities.-Environmental and climate protection We have an ambitious climate strategy across liabilities,investments,and our own operations.-Responsible employer As an employer,we attach the utmost importance to treating our staff in a responsible and respectful way.We create conditions to promote personal and professional development,and diversity.-Societal responsibility Stemming from our sense of social responsibility,we support a large number of initiatives and projects that aim to promote social cohesion.Meeting voluntary commitments Voluntary commitments,such as those we made to the UN Global Compact(UNGC),the Principles for Responsible Investment(PRI),the UNEP FI Principles for Sustainable Insurance(PSI)and since 2020 our membership of the Net-Zero Asset Owner Alliance(NZAOA),represent a key element of our sustainability strategy.Munich Re also joined the Taskforce on Nature-related Disclosures(TNFD)as a forum member(2022).Our recognition of these guidelines and our membership in the above initiatives are testimony to our dedication to sustainability.Our risk expertise,products,solutions,and actions as a responsible employer have the potential to contribute to the achievement of several of the UN Sustainable Development Goals(SDGs).The UN Sustainable Development Goals consist of 17 interrelated goals aiming to achieve a more sustainable future by 2030.11Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability2.1 Sustainability strategy2.2 Goals and ambitions2.3 ESG governance2.4 Board remuneration2.5 Stakeholder dialogue2.6 Materiality assessment3.Sustainability in business4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex2.2 Goals and ambitions GRI 3-3 We work continuously to refine and implement our corporate responsibilities,and as part of this we have set ourselves the following goals and ambitions.Sustainability in businessOur focus is the integration of ESG aspects into our business overall and the development of sustainable solutions for(re)insurance and investment business.We focus on the topics of major impact:climate change (liabilities and investment)across our entire business.Goals and ambitions for liabilities Status1Progress in 2022Decarbonisation of our(re)insurance business ongoing-First quantitative reporting on decarbonisation from fossil-fuel-related insurance activities-New underwriting guidelines restrict involvement in new oil and gas projects-Reinforced guidelines regarding insurance of Arctic drilling and related infrastructure Thermal coal facultative,primary and direct insurance:By 2025:thermal coal:35%GHG emissions2;By 2040:full exitongoing-Monitoring system for our reduction targets implementedDecarbonisation achievements in GHG emissions(compared to 2019)3:Coal-fired power plants 29%Thermal coal mining 37%Operational oil and gas production facultative,primary and direct property insurance:By 2025:5%GHG emissions2;By 2050:net-zero emissions ongoing-Monitoring system for our reduction targets implemented Decarbonisation achievements in GHG emissions(compared to 2019)3:Oil and gas 40%Further integration of ESG aspects in underwriting processesongoingcompleted-Use of RepRisk and MSCI database-Extending the offering of advanced ESG training for specific user groups(e.g.underwriters in core business)at Munich Re-New Group-wide ESG awareness-raising measure“ESG Basics”aimed at all employees rolled out in spring 202212Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability2.1 Sustainability strategy2.2 Goals and ambitions2.3 ESG governance2.4 Board remuneration2.5 Stakeholder dialogue2.6 Materiality assessment3.Sustainability in business4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex2.2 Goals and ambitionsGoals and ambitions for investmentStatus1Progress in 2022Decarbonisation of our investments:net-zero ambition by 2050ongoing-Active Member of the Net-Zero Asset Owner Alliance(NZAOA)since beginning of 2020-Participation in various workstreams as well as active support in updating the Target Setting ProtocolDecarbonisation of listed equities,corporate bonds,direct real estate by 2025:GHG emission reduction of 25-29%2ongoing-Regular disclosure of financed GHG emissions from listed equities,corporate bonds and direct real estate-Development of GHG emissions(scope 1 and 2)compared to the 2019 base year(Munich Re Group Ambition 2025)achieved by end of 2022:46%4 Thermal coal(in particular mining and/or power generation)for listed equities and corporate bonds:by 2025:35%GHG emissions2by 2040:full exit ongoing-Regular disclosure of financed GHG emissions from equities and corporate bonds-Development of GHG emissions(scope 1 and 2)compared to the 2019 base year(Munich Re Group Ambition 2025)achieved by end of 2022:48%Oil and gas(in particular drilling and production,refining and distribution)for listed equities and corporate bonds:by 2025:25%GHG emissions2ongoing-Regular disclosure of financed GHG emissions from equities and corporate bonds-Development of GHG emissions(scope 1 and 2)compared to the 2019 base year(Munich Re Group Ambition 2025)achieved by end of 2022:29%Increase volume of green bonds issuedcompleted-Munich Re issued its third green bond,this time in US dollars,with a volume of US$1.25bnIncrease renewables portfolio to 3bnongoing-Increase of investments(equity and debt)in renewable energies to approximately 2.4bnIncrease ESG-focus investmentsongoing-Definition of ESG-focus investments as investments with positive contribution to our ESG investment strategyESG-focus investments as at 31.12.2022:-Renewables:2.4bn-Certified real estate:2.6bn-Certified forestry management:1.5bn-Green bonds(investment portfolio):2.3bn Enhancement of ESG integration in investment managementongoing-Review of Responsible Investment Guideline in December 2022-Implementation of emission steering in investment processes with instruments like CO budgets-Strengthening of restrictions to controversial weapons,new oil and gas,biodiversity and human rights-Definition of Key Performance Indicator(KPI)“Rating coverage of liquid asset classes”,which amounted to 95.4%by the end of 2022Continuous enhancement of stewardship activitiesongoing-Further developed engagement process:increased number of CA100 engagements,monitoring through a specific engagement report-Proxy voting process strengthened,voting records disclosed since 2021(for 2020)13Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability2.1 Sustainability strategy2.2 Goals and ambitions2.3 ESG governance2.4 Board remuneration2.5 Stakeholder dialogue2.6 Materiality assessment3.Sustainability in business4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex2.2 Goals and ambitionsEnvironmental management We take responsibility for environmental protection in our own operations and get involved wherever we can to make a positive and tangible impact.Goals and ambitionsStatus1Progress in 2022Operational emissions-12%GHG emission reduction per employee by 2025-own GHG emissions ambition to achieve carbon net-zero by 2030ongoing-Reduction of 22%per employee(2019 to 2022)-Munich Re Munich headquarters is carbon net-zero,with ongoing GHG neutrality at other sites of Munich Re100%green electricity purchased Group-wide by 20252not yet achieved-90%green electricity purchased Group-wide in 2022Employees The main goals of our human resources strategy are attracting,developing and retaining outstanding staff.Promoting diversity and inclusion in all aspects is a strategic focus of our Group-wide human resources strategy.Goals and ambitionsStatus1Progress in 2022DiversityGroup-wide 40male managers by 2025ongoing-Proportion of women in management positions worldwide at 38.5%-Proportion of women in management positions at Munich Re in Germany increased to 28.8%-123 different nationalities at more than 50 locations,creating the basis for the implementation of a Group-wide DEI governance,which will consist of the DEI Management Team,the DEI Council,the Strategy Committee and the Munich Re Board of Management14Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability2.1 Sustainability strategy2.2 Goals and ambitions2.3 ESG governance2.4 Board remuneration2.5 Stakeholder dialogue2.6 Materiality assessment3.Sustainability in business4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex2.2 Goals and ambitionsDevelopment and Talent ManagementongoingongoingTargeted,needs-based training for all staff,particularly on the subject of digitalisation:-LinkedIn Learning for reinsurance in 2022:approx.7,500 activated licences,more than 172,000 completed learning videos Identification and development of staff with leadership potential-The RISE trainee programme was launched at ERGO-53.6%of all open management positions globally and 77.7%in Germany were filled with internal candidatesMeasuring employee satisfaction and commitment ongoing-In 2022,a Group-wide Sustainable Engagement Index was introduced,to be included in the annual surveys of the business fields:Response rate:72%Employee engagement index:79%SocietyStemming from our sense of social responsibility,we support a large number of initiatives and projects that are close to our core business and aim to promote social cohesion.Goals and ambitionsStatus1Progress in 2022Enabling staff in Munich Re to contribute,with the aim of stimulating and promoting social commitment of employees.ongoing-13,800 hours of corporate volunteering-Group-wide Social Engagement Awards to encourage and honour our employees contributions to society with the following success factors:25 of 114 social impact projects were supported with grants of between 5,000 and 250,000Support for charitable organisations Group-wide by supporting projects fitting Munich Res Social Impact Strategy ongoingMore than 900 organisations supported,e.g.:-Ongoing and long-term sponsorship of start-ups with carbon removal solutions in partnership with EIT Climate-KIC,ETH Zurich and TU Delft,with the target of accelerating start-ups working on solutions for carbon dioxide removal-Continuing ongoing and long-term partnerships with GIZ and OroVerde-Ongoing and long-term partnership with Save the Children with the aim of providing rapid assistance to those in need after a natural disaster-Emergency donations in connection with disasters in the Horn of Africa,Pakistan,Afghanistan,Indonesia-Emergency donations related to the war in Ukraine-FY 2023:emergency donations to support aid measures after earthquake in Turkey/Syria15Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability2.1 Sustainability strategy2.2 Goals and ambitions2.3 ESG governance2.4 Board remuneration2.5 Stakeholder dialogue2.6 Materiality assessment3.Sustainability in business4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex2.2 Goals and ambitionsGood corporate governance A prerequisite for sustainable business practice is to ensure a fair and trusting relationship with our stakeholders.Aligning our actions to high ethical and social standards enables us to make responsible decisions and protect the reputation of the company and the Group.Goals and ambitionsStatus1Progress in 2022Strengthen ESG Governance across the Groupongoing-Standing Committee of the Supervisory Board responsible for regularly addressing sustainability topics since 2021,renamed“Praesidium and Sustainability Committee”in 2022-In the DVFA analysis of DAX and MDAX indices,Munich Re again achieved the highest category with the rating“excellent”and was ranked first Assessment and update of materiality matrixcompleted-Extensive materiality analysis in 2021 to identify the significant and material topics to be reported on.In 2022,we comprehensively reviewed and reassessed the materiality analysisEfficient and comprehensive alignment to compliance requirements,avoidance of violations and enhanced transparencyongoing-Munich Re Code of Conduct updated in 2022.Roll-out will start in 2023-The web-based training on anti-corruption was fundamentally revised and rolled out Group-wide.As part of the implementation of the German Supply Chain Due Diligence Act,Munich Re introduced a new Supplier Code of Conduct at the beginning of 2023 including the 10 principles of the UNGC as an essential part.We estimate that approximately 80%of our contracts in 2022 contained the corporate responsibility clause-Increased transparency on reporting of compliance incidents in 2022-No material data protection events as defined in the Solvency II Group Compliance Policy occurred anywhere in our Group worldwide,nor were any material proceedings for breaches of data protection regulations initiated1Explanation of status:completed Quantitative target was reached within defined timeframe exceeded Quantitative target was overachieved within defined timeframenot achieved Target was not achieved qualitatively,quantitatively and/or within defined timeframeongoing Ongoing progress or continuous target without end date enhanced target Previous target has been strengthened in the past year 2 Base year 2019.|3“Tonnes of thermal coal”and“installed operational capacity in MW”of insureds used as proxy for coal emissions;liabilities comprise primary insurance,direct and facultative business;oil and gas comprises operational property business for exploration and production with self-calculated scope 13 GHG emissions linked to the insurance policy.|4 If we were to use the nominal value instead of the market value for debt instruments,the reduction would have been 38%(instead of 46%)relative to the 2019 base year.16Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability2.1 Sustainability strategy2.2 Goals and ambitions2.3 ESG governance2.4 Board remuneration2.5 Stakeholder dialogue2.6 Materiality assessment3.Sustainability in business4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex2.3 ESG governance GRI 2-9;2-11;2-12;2-13;3-3For us,good corporate governance requires the Board of Management and Supervisory Board to work together efficiently and with a spirit of trusting cooperation between the two bodies and staff with everyone collaborating within an effective organisational structure.These parameters help secure the confidence in our corporate activities of investors,clients,employees,and the public.It is of particular relevance here that corporate and Board of Management objectives are aligned with both financial and sustainability considerations.As of 2022,for example,specific ESG targets will account for 20%of the Board of Management members multi-year bonuses.More broadly,we ensure responsible and sustainable management at Munich Re through a robust governance framework that includes corporate governance,compliance systems,and sustainable risk management.In addition to the above,Munich Re regulates organisational accountability for sustainability criteria in a transparent manner.Fundamental strategic decisions are taken by the Board of Management,or,more specifically,by the ESG Committee,a subcommittee of the Strategy Committee,which comprises the Group CEO(chair),the Group Chief Financial Officer(CFO),the Reinsurance CEO,the CEO of ERGO,the Chief Investment Officer(CIO),and the Head of Economics,Sustainability and Public Affairs(ESP).For its part,the ESG Committee aims to strengthen ESG and highlight the strategic importance of ESG issues for the Group.The ESG Committee is supported by the ESG Management Team,which is made up of the heads of the central divisions and departments responsible for important ESG topics,and also includes the Chief Underwriting Officers of the reinsurance group and the ERGO Group.The ESG Management Team is responsible for the implementation and monitoring of the Group-wide ESG strategy.The Groups sustainability department supports the two bodies and coordinates sustainability efforts across the Group.It is part of the central division,ESP,and reports directly to the CEO.The two ESG bodies are complemented by specialised ESG committees for areas such as investment and primary insurance,as well as for specific topics like diversity,equity and inclusion.The specialised governance bodies are described,where relevant,in the respective chapters of our Sustainability Report.At least three times a year,the Supervisory Board addresses material topics relating to sustainability based on the summarised non-financial statement,as well as on regular updates on the ESG strategy and implementation measures,and the annual personnel report.Several members of the Supervisory Board have Sustainability knowledge and are thus qualified to assess the information.One of the key tasks of the Audit Committee is to monitor the Groups risk situation and risk management(including potential ESG risks)on an ongoing basis and to discuss its risk strategy.Furthermore,since 2021,the Praesidium and Sustainability Committee(previously known as the Standing Committee until 2022)regularly addresses ESG issues in detail as part of its general responsibilities.More about the Committees of our Supervisory Board17Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability2.1 Sustainability strategy2.2 Goals and ambitions2.3 ESG governance2.4 Board remuneration2.5 Stakeholder dialogue2.6 Materiality assessment3.Sustainability in business4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex2.3 ESG governanceTasks:Overall responsibility for ESG-related strategic decisionsAudit CommitteeStanding CommitteeSupervisory BoardGroup Sustainability departmentESG Management TeamTasks:Ensuring Group-wide ESG strategy implementationTasks:Monitoring ESG risksTasks:Regularly adresses sustainability-related issuesMembers:Members are heads of the central divisions and departments responsible for strategic ESG topics as well as the Chief Underwriting Oficers of the reinsurance and ERGO Group1 Chair|2 non-voting-Sustainability Teams in business fields,investment and central functions-Specialised governance bodiesTasks:Ensuring implementation of Group-wide ESG strategyMembers:ESG Committee-Group CEO1-Group CFO-Reinsurance CEO-ERGO CEO-Chief Investment Oficer-Head of ESP218Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability2.1 Sustainability strategy2.2 Goals and ambitions2.3 ESG governance2.4 Board remuneration2.5 Stakeholder dialogue2.6 Materiality assessment3.Sustainability in business4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex2.4 Board remunerationGRI 2-9Since 2012,we have integrated ESG criteria into the remuneration system for the Board of Management.As part of the annual bonus,ESG criteria are assessed by the Supervisory Board and influence the loading factor by /-10 percentage points.In addition,in 2021,ESG was given even greater weighting in the remuneration system.Quantitative ESG assessment criteria were implemented to account for 20%of the multi-year bonus.This gives the Supervisory Board the opportunity to take sustainability aspects into account as part of a discretionary component.Starting with the 2022 financial year,at least one specific ESG target will also be agreed for the multi-year bonus.The following goals have been applied for the 20232026 multi-year bonus:-Environmental:Define a climate ambition for 2030 in line with the2050 net-zero target and deliver on climate commitments-Social:40%share of women in management positions atall levels across the Group until end of the financial year 2026-Governance:The average share of audit findings notimplemented in a timely manner in relation to thetotal number of open audit findings is to be nohigher than 5%Group-wide at the end of quartersin the assessment period.Senior Leaders within the Group ensure throughregular tone-from-the-top activities within theirareas of accountability that the complianceculture continues to be on a high level.19Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability2.1 Sustainability strategy2.2 Goals and ambitions2.3 ESG governance2.4 Board remuneration2.5 Stakeholder dialogue2.6 Materiality assessment3.Sustainability in business4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex2.5 Stakeholder dialogue GRI 2-29;3-1Engaging in dialogue with our stakeholdersMunich Re values an open and ongoing dialogue with its various stakeholders,as defined below.This form of proactive engagement enables us to identify the topics that are material for us now and in the future from our stakeholders perspectives.We analyse the outcomes of our stakeholder dialogue at regular intervals and incorporate these into our sustainability strategy.Politics,NGOs,interest groupsWe keep in close contact with interest groups,NGOs,UN institutions and public authorities at both national and international level.In addition,we are an active member of many insurance industry initiatives and associations,including the Principles for Sustainable Insurance(PSI),the Principles for Responsible Investment(PRI),the UN Asset Owner Alliance(NZAOA).Society and scienceOur experts engage in ongoing dialogue with scientists,associations,and organisations around the world,and are involved in a large number of national and international research and development projects.These include the Global Earthquake Model(GEM),the German Research Center for Artificial Intelligence(DFKI),and the German Data Science Society(GDS).We also regularly seek exchange with wider society,e.g.via public dialogue forums and panel discussions.Shareholders,analysts,and investorsProfessional communication with players in the financial markets features regular dialogue and proactive provision of information by Munich Re.We provide key,detailed information on the general opportunities and risks attached to our business through frequent personal investor calls and at roadshows in addition to regular scheduled investor and analyst events.We also specifically inform these groups about our sustainability activities and industry trends.EmployeesWe engage in continuous dialogue with our employees worldwide.We encourage a culture of feedback and transparent communication across a wide range of platforms,such as Group-wide surveys,our intranet,Yammer,and other dialogue forums.Events such as town hall meetings,strategy talks with members of the Board of Management and management conferences also promote exchange across all levels of management.We serve our clients as a reliable and solution-oriented business partner.To this end,we regularly evaluate their satisfaction with our services by conducting analyses and surveys tailored to the diferent client structures in insurance and reinsurance.Our client managers in reinsurance also regularly interact with clients regarding potential needs,trends,and challenges,at trade fairs,events,and client training seminars.In addition,we actively request feedback from our insurance customers,for instance via the“ERGO Kundenwerkstatt”and regular surveys,e.g.,on their satisfaction.Clients20Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability2.1 Sustainability strategy2.2 Goals and ambitions2.3 ESG governance2.4 Board remuneration2.5 Stakeholder dialogue2.6 Materiality assessment3.Sustainability in business4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex GRI 2-29;3-1;3-2The materiality analysis determines which sustainability topics are of special importance to Munich Re and its stakeholders and,therefore,which topics should be the focus of our sustainability management and transparent communication.The materiality analysis carried out is based on the materiality concept of Section 289c of the German Commercial Code(HGB)and also considers the standards of the Global Reporting Initiative(GRI Standards).In 2021,we comprehensively reviewed and reassessed topics in terms of their materiality for Munich Re.The analysis was carried out using a standardised online survey for external stakeholders and through internal management workshops.Stakeholders evaluated the individual topics based on two dimensions:(1)Munich Res impact on the sustainability criteria and(2)the impact of the sustainability criteria on Munich Re as a company.Changes from the previous materiality assessment included the addition of biodiversity as a new topic and the reframing or combining of several topics into one(e.g.Responsible Digital Transformation and Cyber Security).The most significant changes included the increased business relevance and impact of human rights,along with the increased impact and stakeholder relevance of diversity,equity and inclusion.2.6 Materiality assessment21Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability2.1 Sustainability strategy2.2 Goals and ambitions2.3 ESG governance2.4 Board remuneration2.5 Stakeholder dialogue2.6 Materiality assessment3.Sustainability in business4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex2.6 Materiality assessmentBusiness relevanceImpactMediumHighLowMediumHighClimateChangeNatural DisastersCustomer Orientation and Customer SatisfactionDiversity,Equity and InclusionTraining&EducationEmployer AttractivenessComplianceResponsible Management StructuresResponsible Digital Transformation&Cyber SecurityBiodiversityHuman RightsSustainable Services&ProductsEnvironmental ManagementSustainable Procurementand Supply/Value ChainsSocial EngagementStakeholder relevance:Very highHighMateriality matrixESG IntegrationIn 2022 we verified the topicality of the results.No significant changes were identified,while minor changes,such as the rising relevance of“Employer attractiveness”,were adopted in our materiality matrix.The results were validated through discussions with an external expert and with experts within the Company,and duly approved by the ESG Committee.The following stakeholder groups were included in the analysis:-Clients-Employees-Investors-Representatives of wider societyOur materiality matrix shows the results of our materiality analysis.The relevance of Munich Res impact on the featured criteria is shown horizontally,while the business relevance of the individual topics for Munich Re is shown vertically.The size or colouring of the circles indicates the external stakeholders assessment of the extent to which the topics are relevant to the respondents.3.Sustainability in business22Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex3.Sustainability in business23Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex3.Sustainability in business GRI 3-3The focus of our sustainability efforts lies on our business which involves the assumption and diversification of risks in primary insurance and reinsurance as well as investment.We know that we can only achieve long-term economic success through responsible action,which is why the objective of sustainable economic value creation is anchored in the core principles of our corporate strategy.The fact that we have signed the Principles for Sustainable Insurance(PSI),the Principles for Responsible Investment(PRI)and,in 2020,joined the Net-Zero Asset Owner Alliance(NZAOA)highlights our commitment to responsible action.Our actions are guided by the key topics we have identified in our materiality analysis for reinsurance,primary insurance and investment.In addition to committing to a strong client focus and the integration of ESG aspects into our business,we attach importance to offering responsible products,services,and sustainable investment.We place a special focus on climate change and the related risk management approach and report based on the Task Force on Climate-related Financial Disclosures(TCFD)recommendations.Furthermore,we acknowledge the intrinsic link between climate change and biodiversity,as is reflected by our joining the Taskforce on Nature-related Financial Disclosures(TNFD)as a forum member in 2022.24Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex3.Sustainability in businessESG aspectsSensitive issues(covered by policies,guidelines and position papers)ESG aspects and sensitive issues for Munich ReEnvironmental-Pollution-Natural resources and biodiversity-GHG emissionsSocial-Political context and public awareness-Labour and working conditions-Human rights-Health,safety and security for the community-Displacement of people-Cultural heritageGovernance-Responsible and correct planning and evaluation-Compliance-Consultation and transparencyThe ESG Committee decides on the refinement of the framework and processes,taking regulatory developments and industry-wide standards into consideration.Controversial weaponsThermal coalArctic drillingOil sandsFrackingMiningInvestment in farmlandOil and gas productionWe have also set ourselves a series of sustainability targets.More specifically,our aim is the consistent integration of ESG aspects into all relevant processes at Munich Re in the fields of both(re)insurance and investment.In consultation with our Board of Management,we have identified universally applicable ESG aspects for application in our insurance business risk assessment and investment transactions.We have also defined sensitive topics or sectors that are relevant to our business activities(see figure ESG aspects and sensitive issues of Munich Re).Binding guidelines or best-practice recommendations have been drawn up for these topics and serve as the basis for ESG-related processes where relevant in our business fields of reinsurance,primary insurance,and investment.These are regularly reviewed and updated in the light of new developments,such as the New Oil and Gas Guideline,adopted in 2022 and applicable from 1 April 2023.As communicated in a press release in March 2022,Munich Re condemns Russias attack on Ukraine and supports the sanctions that have been imposed.Munich Re will not renew existing contracts in Russia or Belarus,and new business in these countries has been suspended.The Group will take the same approach with its investments in the region.Munich Re will only make exceptions to this rule sanctions regulations permitting if the suspension of business negatively affects persons or companies in need of protection.25Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex GRI 3-3 Our business is the acceptance and diversification of risks in primary insurance and reinsurance.We find leverage for sustainable action by combining economic success with added value for society.In our insurance business,we principally achieve this through having a strong client focus,by offering responsible products and services,and through the integration of relevant ESG aspects into our insurance and reinsurance products and services.In addition to implementing ESG aspects in our underwriting guidelines,we aim to support achievement of the Paris climate targets e.g.by insuring new,climate-friendly technologies and by making these technologies more attractive and financially viable for investors.As of 31 March 2023,we have discontinued our membership in the Net-Zero Insurance Alliance(NZIA).In the view of Munich Re,the opportunities to pursue decarbonisation goals in a collective approach among insurers worldwide without exposing ourselves to material antitrust risks are so limited that it is more effective to pursue our climate ambition to reduce global warming individually.However,our climate commitment is unwavering,while we follow scientific recommendations.ESG governance and strategy in our insurance business GRI 3-3 The goal of sustainable economic value creation is anchored in the core principles of our Group-wide corporate strategy,in our Ambition 2025,and in our sustainability strategy.We have also underlined our commitment to responsible action through signing the Principles for Sustainable Insurance(PSI)and the UN Global Compact.Strategic sustainability targets are decided at Group level in the ESG Committee.Implementation of these targets and responsibility for achieving them lies with the individual business units,which is also reflected in our Code of Conduct.This is monitored by the ESG Management Team.We have developed approaches and procedures to analyse and manage the impact of ESG aspects that are material for our insurance business(see the topics mentioned in our materiality analysis).The following sections outline how we manage ESG aspects in our underwriting business and describe how we aim to create a positive impact with our risk transfer solutions.Managing ESG aspects GRI 3-3 We take the following ESG aspects into account in our insurance business.This approach applies both to our internal underwriting processes and to our products and services(see figure ESG aspects and sensitive issues of Munich Re).Our ESG Management in underwriting focuses on several topics.On the subject of climate change,please see the specific chapter Climate-related disclosure.Human rights is a further focus topic.More information on this can be found in the chapter Human rights.Munich Re is also aware of the crucial role of natural resources and biodiversity in 3.1 Sustainability in insurance26Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.Annexmaintaining the balance between human,ecological and climatic ecosystems.In 2022,we started to examine how we could further integrate biodiversity aspects into our core business processes,while considering general developments and recommendations(such as the Taskforce on Nature-related Financial Disclosures).Many industries and projects can have a major impact on the environment and local communities.Munich Re takes its responsibility as a global insurer seriously and has measures and processes in place which aim to manage these potential impacts.These include guidelines,ESG advisory,due diligence processes for underwriting and Group-wide ESG aspects(see figure ESG aspects and sensitive issues of Munich Re),all of which are communicated to our underwriters.In addition,we integrate ESG aspects into product development.For example,at ERGO,a check must be completed for each product development to determine the extent to which the product supports the global and local product strategy in terms of sustainability.Guidelines,processes,and tools have been developed and introduced for the practical implementation of ESG aspects in insurance business.These include the Group-wide ESG aspects that are communicated to our underwriters.Binding underwriting guidelines regulate the handling of sensitive issues(see figure ESG aspects and sensitive issues for Munich Re)throughout the Group in all business units that underwrite relevant risks.These are described in detail in the section Underwriting restrictions.For other sensitive issues,such as mining and fracking,we issue guidance to underwriters in the form of Group-wide position papers.An ESG tool specifically tailored to the topics described above helps our reinsurance underwriters to systematically factor ESG aspects into their risk assessments.We also draw on the expertise of better renowned external ESG databases,such as RepRisk,for ESG assessments.For information on our decarbonisation targets and monitoring,please refer to the chapter Climate-related disclosure.We hold regular information events and training courses on the responsible handling of ESG aspects.In the 2022 financial year in reinsurance alone,we provided information on current climate and sustainability aspects to more than 2,600(1,700)employees and over 600(600)clients at seminars and client events.In spring 2022,we rolled out“ESG Basics”,a new Group-wide ESG awareness-raising measure aimed at all employees.It includes the ESG aspects that are relevant to our business success,for example climate and environmental aspects,social criteria such as working conditions and human rights,and compliance and governance requirements.We are continuously developing our information and training formats.We strengthened our ESG training formats for employees in our core insurance business,for example,to provide our underwriters with support when underwriting risks.A further example is the introduction of new ESG frameworks,such as the Low-Carbon Solution Framework,which is accompanied by communication strategies including presentations to,and discussion rounds with,relevant internal stakeholder groups.In 2023,we also plan to further expand our offering,in particular the range of advanced training courses for specific user groups within the Group.Dedicated sustainability teams in primary insurance and reinsurance support the business units by providing tailored ESG advice.In addition,employees in the underwriting units function as multipliers,actively sharing their knowledge of ESG integration within their own departments,for ESG assessments,in client discussions and in exchanges with other divisions.We also collaborate with partners,institutions,and non-governmental organisations(NGOs).Our ambition to manage ESG aspects in our business is also reflected in our commitment to the PSI initiative on ESG integration.We are represented on the PSI Board and report annually on our progress with integrating the principles.3.1 Sustainability in insurance27Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.AnnexUnderwriting restrictions GRI 3-3Mandatory underwriting guidelines govern the handling of certain business categories.They include guidelines on:-thermal coal activities in connection with new thermal coal mines/power plants/infrastructure;-oil and gas activities in connection with new oil and gas fields,new oil infrastructure or oil-fired power plants;-oil sands;-Arctic oil and gas activities;and-controversial weapons.Since September 2018,in our facultative and direct(re)insurance business,we no longer insure single location stand-alone risks in the planning,financing,construction or operation of new thermal coal mines,coal-fired power plants or the related infrastructure,in cases where construction or preparatory works for extraction or operation were not started before 1 September 2018.Multi-location covers are treated like single location risks if the majority of locations or insured values qualify as new.In primary insurance,we have not insured individual risks of this kind since 2018.This decision was implemented in formal underwriting policies in 2021 to completely exclude this type of new coal business from underwriting.As of 1 April 2023,Munich Re will no longer insure contracts or projects on a single-risk,single-location basis exclusively covering the planning,financing,construction or operation of:-new oil and gas fields,in cases where no prior production had taken place as at 31 December 2022,or-new midstream infrastructure related to oil that was not yet under construction or in operation as at 31 December 2022,and-new oil-fired power plants that were not yet under construction or in operation as at 31 December 2022.This applies to our primary insurance and facultative and direct(re)insurance business.The same exclusions apply where such risks are contained or bundled with other risks under a single cover(e.g.existing oil or gas fields),but where the cover is mainly designed to protect against one or more of the new risks.With regard to unconventional oil,Munich Re extended its fossil fuel exit strategy to oil sands already in 2019 on both the insurance and asset side:It is no longer allowed to sign facultative reinsurance and primary insurance business(direct and via fronting)of new and existing oil sand sites and new and existing oil sand-related infrastructure.Our guideline applies to single-location and stand-alone risks,for mixed policies we defined a threshold,provided that whole share of sum insured/direct revenue from the exploration exceeds 20%.In the case of Arctic exposures,we will not accept stand-alone covers for Arctic oil and gas drilling activities,including related infrastructure and installations.This has also applied to mixed covers and reinsurance treaty business that contain exposures to the above activities exceeding a defined minimal threshold,as of 1 January 2022 (for renewals of existing reinsurance treaty business as of 1 January 2023).Munich Res definition of the Arctic region is based on the internationally accepted definition of the Arctic by the Arctic Monitoring and Assessment Programme(AMAP).Our policy allows minor exceptions in the Norwegian region south of the Arctic Circle,as Arctic conditions do not prevail there.This underlines once again the fact that Munich Re is aware of and aims to meet its responsibility for protecting the environment.These exclusion policies for fossil-based energy are complemented by our Group-wide climate strategy.More detailed information on this can be found in the Climate-related disclosure section of this report.3.1 Sustainability in insurance28Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.AnnexMunich Re also has a Group-wide policy in place that regulates business transactions with firms that produce landmines and cluster bombs.The Mine Ban Treaty(Ottawa Convention)of 1999 prohibits the use,production,stockpiling and transfer of anti-personnel mines.In like manner,the Convention on Cluster Munitions(CCM)of 2010 bans the use of cluster munitions.Munich Re supports the international condemnation of these controversial weapons.Our policy prohibits Munich Re from insuring,or investing in,companies that produce,deal in or transport controversial weapons,insofar as such transactions or operations are known.The policy also regulates business with corporate conglomerates.Any exceptions to underwriting policies can only be granted by a committee on Board level.Clear escalation processes GRI 3-3In addition to the above exclusion criteria,underwriters are required to assess ESG aspects in relevant business transactions.Underwriters identify,analyse,assess,and manage reputational risks using qualitative procedures.Specific guidelines and process descriptions regulate the handling of reputational and sustainability risks.Employee communication measures on reputational and ESG aspects are aimed at prevention and raising awareness.Reputational Risk Committees(RRCs or,at ERGO,the Reputation and Integrity Committee RIC)have been established for the business fields of reinsurance,primary insurance and investment.These committees analyse and assess specific reputational issues and ESG risks relating to individual transactions,and make recommendations on whether to accept or reject a particular risk.Should the business unit and the RRC disagree on a decision,the case can be escalated to Board level.The cases examined are documented in writing.At the end of 2021,we standardised the processes for dealing with reputational risks in the individual RRCs of the business fields across the Group and,at the beginning of 2022,set up a new RRC in the Group Investment Management division.Outcome of assessment by RRC of transactions submitted for review of critical reputational risks2022Denied due to critical reputational risk4Accepted,no critical reputational risk identified8Accepted under specific terms2We regularly detail any significant reputational risks for Munich Re in our internal risk report.Due to the continuous review process followed by the respective business units,numerous offers were declined on ESG grounds without being submitted to the RRCs.Aiming for positive impact through insurance solutions GRI 201-2;203-1;203-2Munich Re is positioned to develop innovative insurance solutions for ESG risks,which,in turn,enables us to create a potential positive impact for society and the environment,while simultaneously opening up new business opportunities.For instance,the Sustainable Development Goals(SDGs)are used as a framework to map and assess the impact of our insurance solutions.As an insurer,we also make insurance coverage possible for people who are exposed to particularly heavy burdens due to their financial situation or life circumstances.Some examples where we are fostering potential for positive impact through our insurance solutions are highlighted below.Further information on various products including the range of our public sector business products can be found on our website.3.1 Sustainability in insurance29Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.AnnexInclusive insurance supports livelihoods in India HDFC ERGO in India markets a wide range of microinsurance policies in the rural sector,including weather-indexed,health,personal accident,and fire products,as well as special coverages for farmers.HDFC ERGO supports customers by developing innovative distribution solutions,partnering with entities that focus on customers at the bottom of the pyramid.The insurance products are easy to understand and aim at standardisation to generate economies of scale.One example is the Group Hospital Cash Policy in India,in partnership with the HDFC BANK Sustainable Livelihood Initiative.This policy covers all microfinance loan customers for a nominal premium(less than 4),and offers the customer a fixed benefit per day in the event of hospitalisation.In the year under review,the company underwrote a total of 5.13m,covering 1,500,000 people.During the 2021/2022 financial year,under its crop and weather portfolio,the company insured a total of 8.45m farmers,with gross written premiums(GWP)of 309.6m.Help for UkrainiansFollowing the Russian attack on Ukraine in February 2022,we helped provide temporary motor liability cover for motorists from Ukraine in Poland and Germany.In Germany,refugees who found private hosts through the#UnterkunftUkraine portal were offered free liability insurance by ERGO.Ukrainians were also able to use ERGOs legal advice service free of charge.In 2022,we provided insurance coverage for more than 52,000 refugees and were able to assist around 1,300 times with legal advice.Innovation solutions supporting the financial inclusion and resilience of MSMEsMunich Re supports micro-,small-and medium-sized enterprises(MSMEs)in Southeast Asia through innovative insurance solutions.These solutions seek to strengthen the financial resilience against unforeseen loss events.By doing so,Munich Re aims to bridge the protection gap for MSMEs,and to promote sustainable lending and financial inclusion of such companies.For instance,Munich Re partnered with digital lenders and supply chain platforms in Southeast Asia to offer wholesale insurance protection.This protection covers both MSMEs and the ecosystem against accidental death,natural catastrophe,and specific credit default scenarios.Another example is related to the Cianjur earthquake in November 2022,which killed hundreds of people and affected numerous households and businesses.While few MSMEs in Cianjur would have purchased standalone insurance to protect their properties and businesses,our solutions provided MSMEs with financial relief depending on the estimated earthquake impact at their registered locations,to support them to rebuild their businesses after the natural disaster.So far over 3,000 MSMEs across Indonesia are being supported by these solutions.Caribbean Catastrophe Risk Insurance FacilityThe Caribbean Catastrophe Risk Insurance Facility(CCRIF)was formed as the first multi-country risk pool in the world.Munich Re helped to set up the facility in 2007.Based on parametric triggers,it guarantees payments to participating countries within 14 days of a natural catastrophe,who can then use the money for recovery efforts.Since its inception,CCRIF has paid out over USD 260m,benefiting 3.5 million people.Munich Re is one of the CCRIFs most important reinsurers.Low-Carbon Solutions FrameworkWe apply a Low-Carbon Solutions Framework to both insurance and reinsurance to assess non-life/non-health insurance activities that have the potential to contribute to the low-carbon transition.The focus lies on specific reinsurance and primary insurance solutions*that directly and exclusively cover activities that have the potential to contribute to climate change mitigation.*motor coverages from primary insurance written out of the reinsurance segment are not included3.1 Sustainability in insurance30Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.AnnexTo qualify as low-carbon solutions in the environmental dimension,the solution must cover directly and exclusively,for example,one of the following current activities:-Generating,transmitting,storing,distributing,or using renewable energy-Increasing clean or climate-neutral mobility-Establishing energy infrastructure required to enable the decarbonisation of energy systems-Use of environmentally safe carbon capture and utilisation(CCU)and carbon capture and storage(CCS)technologiesIn 2022,we generated premium of more than 300m with solutions that fall under our Low-Carbon Solutions Framework.300m premium by low carbon solutionsExamples include:-Insurance solutions for e-Bikes ERGO offers e-bike insurance with worldwide coverage.The policy includes,for example,electronics protection in the event of damage caused by short circuit,induction,overvoltage,or moisture.In 2022,ERGO provided coverage for more than 200,000 e-bikes in Germany alone.-Green-Tech Solutions for Solar Energy Green-Tech Solutions aims to support the energy transition by absorbing the technical risks involved,motivating investors to provide funding and manufacturers to grow on a global level.For the solar industry,for example,we established what is now a widely recognised standard for warranty insurance in 2009.This protects manufacturers from excessive warranty claims on modules for a period of up to 30 years.The perils we cover include excessive material aging,manufacturing defects,and material defects.In the event of the manufacturers insolvency,the policy is seamlessly transferred to a registered buyer,ensuring that the warranty claims remain covered.Another product is helping to de-risk large-scale green hydrogen projects.An innovative guarantee cover,it relieves manufacturers and operators of,or investors in,hydrogen plants from availability and performance risks.This considerably eases the financial burden on businesses as it enables them to plough capital that is no longer needed for guarantee reserves into scaling,while at the same time attesting to the quality of their technology.3.1 Sustainability in insurance31Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.AnnexAll established and emerging technologies can be insured by Munich Re Green Tech SolutionsOver 900 projects in green tech55 GW insuredProjects in 80 countriesFor manufacturers,projects and investorsEstablishedEmergingSolar EnergyPV Warranty Insurance backing your solar investmentWind EnergyOfshore EPC cover mitigating contractual warrantiesEnergy StorageLong-term performance guarantee insurancesHydrogenSecuring the power of Green Hydrogen(Electrolyzers Fuel Cells)New deals in 2022 dynamic market growthE-MobilityEnabling the e-mobility transitionWaste2PowerBioenergy Plant Performance Insurance2009200920192022202220223.1 Sustainability in insurance32Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.AnnexClient satisfaction GRI 2-29;3-3 Maintaining a close relationship of trust with our clients is a key element towards the success of our business.That is why we continuously strive to understand our clients needs and develop the best possible solutions for them,in a joint dialogue.We apply a differentiated management approach under our business model,which applies both to our reinsurance clients and to our primary-insurance customers and reflects their different demands and needs accordingly.Responsibilities lie with the respective Board members and/or executives,as well as within the various international companies.The topics importance is reflected,among other things,in its having been enshrined in our Munich Re Group Ambition 2025.At Munich Re,we manage the dialogue with our clients,and the solutions we correspondingly offer,on the basis of our clients needs and growth ambitions.The process includes an analysis of the market and the most important players,as well as the implementation of tailored insurance solutions,products and services for our clients.Client managers in reinsurance are supported by a central sales unit that ensures transparency in our Group-wide product and service palette.This unit is also responsible for event formats that take place annually as a platform for in-depth dialogue with representatives of our key clients.ERGO particularly supports its tied agents with various offers,for example advisory tools and concepts,and professional development training.The local companies individually tailor these offers to their respective needs.At Munich Re,we have defined numerous monitoring processes to measure our performance in terms of customer satisfaction and orientation.We apply the Net Promoter Score(NPS)to measure customer satisfaction both in primary insurance and in reinsurance business.Every two years,we undertake a global customer-satisfaction survey among all of our reinsurance business partners.The survey measures the NPS and customer satisfaction in various aspects of the business relationship.Our goal is to maintain a stable,positive NPS in reinsurance.Our last global customer satisfaction survey of reinsurance clients was conducted in May 2022.In addition,data is entered into a reputation management system which regularly tracks our reputation among various stakeholders.This allows us to identify any changes in how our reinsurance products are perceived,at an early stage,and make any adjustments accordingly.In addition to our regular customer satisfaction surveys,we have implemented a number of measures aimed at consolidating our client relationships in reinsurance.And our operational units regularly request feedback from their clients to complement the centrally organised survey.In order to better respond to our clients suggestions for improvement,we offer a comprehensive training programme to all staff who have direct contact with clients.The aim is for them to develop an understanding of our clients strategies and needs so that we can develop solutions together.In primary insurance,we measure the NPS continuously throughout the year,both at the transactional level(bottom-up)and the relationship level(top-down).When measuring the NPS at the relationship level,we also benchmark against our peers and the market.We express the result in terms of the number of countries in which the relationship NPS meets or exceeds the market average.The results of our monitoring identify any potential for both improvement and differentiation in the specific divisions,platforms,services,products and customer groups.In the form of initiatives,this information is then input into our strategy to meet our Munich Re Group Ambition 2025,i.e.to remain a long-term partner for our clients.Our advice to primary insurance customers of our tied agents in Germany is provided using 3.1 Sustainability in insurance33Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.Annexa standardised approach(ERGO Kompass)to ensure that quality is consistently high.ERGO also uses a variety of tools to obtain direct feedback about new products and services,but also about overarching strategic issues.The main focus is its in-house market research panel(ERGO Kundenwerkstatt)of around 6,800 customers.Alone in 2022,ERGO conducted 36 projects and/or surveys among the panel members.ERGO also handles and analyses customer complaints.The feedback is used as a basis for improvements in the various areas.ERGOs goal is to become one of the leading digital insurers by 2025 both in Germany and in its core international markets.This reflects our customers desire to purchase insurance and receive customer service digitally.ERGO is driving topics such as robotics,artificial intelligence and voice technology in Germany and internationally,and is expanding its digital business models and ecosystems,as well as its annex business.It has already established numerous customer-oriented services and digital processes that help customers contact ERGO,and more are planned.For example,ERGOs customers in Germany can use its“EasyClaim”web app to receive a calculation of the loss amount within two hours after uploading their images and vehicle information.Another example is online claims notification in property insurance(such as third-party liability,personal belongings,motor,etc.),which allows customers to record their losses online and,for example in motor insurance,choose their garage and order the repairs directly from the online claims notification system.We offer health insurance customers the option of submitting their invoices directly online as well and,in Germany,provide them access to the nationwide network of medical professionals.ERGO also regularly examines social issues with its study series,ERGO Blickpunkt.As an example,over 2,000 people were surveyed online on behalf of ERGO about what consumers think about insurers and sustainability.The study results were communicated externally.Furthermore,in 2022,ERGO published various consumer information publications containing tips for a more climate and environmentally friendly approach to societal issues(e.g.Buy more sustainable gifts;Delete data for more climate protection;Save water in daily life,etc.).The NPS of 60 for reinsurance is very high even higher than the 2020 figure.In terms of primary insurance,ERGOs customer orientation is illustrated by the fact that its score meets or exceeds the market average in six out of ten countries surveyed.Metrics|Net promoter score2022Prev.year3Reinsurance(absolute)16056ERGO(number of countries at or above country average)2In 6 of the 10 considered countriesIn 8 of the 10 considered countries1 The NPS has a scale of 100 to 100.|2 To reduce the susceptibility to random fluctuations,a significance test was integrated into the calculation system and the disclosure logic was adjusted.The previous years figure was adjusted accordingly.|3 For reinsurance,the NPS is only measured every two years;accordingly,the previous years figure here refers to 2020.3.1 Sustainability in insurance34Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.AnnexNet Promotor Score 60Scale from-100 to 100The NPS provides information about the satisfaction of our clients with our services and performance.We strive to continuously improve our NPS to ensure we are a valuable partner for our clients.For this reason,we are very grateful to have again achieved such a high NPS.In the overall assessment of our service quality(considering 15 dimensions),our clients rated us higher than the Best in Class Competitor.Employee skill set 8.83on a scale of 10Our employees are our greatest and most valuable asset.Their performance and skills are key to Munich Res quality and success as well as the key to offering our clients the best services and products for their future business development.Claims settlement 8.53on a scale of 10Munich Res fundamental position as a reinsurer is guaranteeing our clients rapid claims processing and payment as well as the highest level of reliability.Fast and customer-oriented claims settlement is the foundation on which we build our long-standing and trusting client relationships.Business understanding 8.38on a scale of 10We firmly believe that,in order to deliver the very best solutions and services for our clients,it is essential to have a deep understanding of their objectives,target customers and underwriting strategy.We are very pleased that our clients have placed a high value and trust in our insight into their business and our ability to support their further success.Key facts and figures from our reinsurance client survey 20223.1 Sustainability in insuranceNew business development 8.10on a scale of 10Our customers continuously need to develop new products and services in order to meet the expectations and stay relevant to their clients.As a powerful and reliable partner to our customers,Munich Re uses its extensive experience and know-how to create real added value in new product propositions in all lines of business.ESG practices 8.02on a scale of 10Munich Re is fully committed to the creation of long-term,sustainable value for our stakeholders while at the same time proactively considering environmental,social and responsible corporate governance aspects all along the value chain of our core business activities.35Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex3.2 Responsible investment GRI 3-3;201-2;203-1;203-2Our business model as an insurer has a long-term focus.Sustainability criteria therefore play a key strategic role in investments.As a large asset owner and investor,Munich Re is aware of its responsibility and its impact on sustainability.We are obligated to invest our clients money sensibly and profitably in a manner that adheres to strict security and return requirements,which is why we integrate environmental,social and governance(ESG)criteria into our investment decisions.The majority of Munich Res investments worldwide are managed by its asset manager MEAG.In addition,Munich Re Investment Partners was established as an asset management boutique with a dedicated focus on sustainable investment.Munich Re also works with third-party asset managers for selected asset classes.Sustainable investment strategyStrategy development and implementationMunich Res sustainable investment strategy is anchored in two fundamental frameworks:Munich Re was one of the first signatories of The Principles for Responsible Investment(PRI)and is an active member of the Net-Zero Asset Owner Alliance(NZAOA).The climate commitment to net-zero by 2050 in accordance with the NZAOA has become an integral part of the Group Ambition 2025,which was made public in 2020.Our Group-internal asset managers,MEAG and Munich Re Investment Partners,have also been PRI signatories since 2021.We are constantly developing our sustainable investment strategy in line with the latest scientific insights and through active dialogue with the ESG community,the NZAOA and PRI.2022 saw key enhancements to our ESG approach as we have further integrated human rights and biodiversity considerations across various asset classes.In addition,we comprehensively updated our approach to oil and gas investments in October 2022.These new developments were integrated into the annual update of the Responsible Investment Guideline(RIG).Our sustainable investment strategy is enforced and developed through an impactful governance structure,detailed in the RIG,and implemented based on four key activities:-ESG integration-ESG stewardship-ESG exclusions-ESG-focus investmentsAs part of the constant development of our sustainable investment strategy,we amended these core activities in 2022,placing greater emphasis on ESG stewardship.ESG integration helps us identify further risks and opportunities by going beyond standard financial analysis.We are convinced that consideration of ESG aspects across our investment processes will lead to better investment decisions in the long term.ESG stewardship means that we engage with selected companies we have invested in to promote higher sustainability standards.We have constantly expanded our respective activities throughout 2022 and we will strive to continue this growth path through additional corporate engagement via Climate Action 100 (CA100 )and increased proxy voting activities.ESG exclusions form part of our RIG,which guides and mandates the implementation of our sustainable investment strategy.The RIG covers PRI and ESG requirements that affect the Groups investment management,including exclusion criteria for investments.ESG-focus investments aim to contribute positively to our ESG strategy.In the spirit of creating shared value,Munich Re identifies and uses economically sound investment opportunities to create a potential positive impact.36Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.AnnexDecarbonisation strategy for investmentsAs part of Ambition 2025,the Group adopted a climate strategy for investments that includes ambitious targets to decarbonise its asset portfolio by 2050 in line with its active membership in the NZAOA.Munich Re set financed greenhouse gas(GHG)emissions targets related to investments in the asset classes of listed equities,corporate bonds and direct real estate based on the NZAOAs target-setting framework.We will endeavour to reduce net financed GHG emissions in the asset classes mentioned above by 2529%by 2025(base year:2019)as an intermediate step to achieving our ambition of net-zero emissions by 2050.Furthermore,specific sector reduction targets were set for listed equities and corporate bonds:-for thermal coal investments in particular mining and/or power generation we aim to reduce financed GHG emissions by more than 35%by 2025(base year:2019).We plan to phase out thermal coal completely by 2040.-for oil and gas investments(in particular drilling and production,refining and distribution),we aim to achieve a reduction in financed GHG emissions of more than 25%(base year:2019).3.2 Responsible investmentTransition of investment portfolioAssets|Financed GHG emissionsNext steps until 2025No direct investment in companies with:15%revenue from thermal coal110%revenue from oil sandsNew Oil and Gas Guideline(as of April 2023):Revised approach to no longer invest in projects and companies21 Exceptions for companies with revenues in thermal coal between 15%and 30%are possible in individual cases,where an active engagement dialogue has been established with the company.|2 Direct illiquid investments in projects exclusively covering the planning,financing,construction,or operation of a)new oil and gas fields in cases where,as at 31 December 2022,no production had taken place;or b)new midstream infrastructure related to oil,which had not been under construction or in operation as at 31 December 2022;and c)new oil-fired power plants,which were not yet under construction or in operation as at 31 December 2022.Furthermore,in its own listed equities and corporates portfolio,as of 1 April 2023,Munich Re will cease to conduct new direct investments in pure-play oil and gas companies.|3 Based on sub-portfolio of listed equities,corporate bonds and direct real estate.Compared to base year 2019.|4 Based on sub-portfolio of listed equities and corporate bonds.Compared to base year 2019.Total3-25%to-29%emissionsThermal coal4-35%emissionsOil and gas4-25%emissionsRequired commitment from listed integrated oil and gas companies with the highest relative and absolute emissions to achieving net-zero greenhouse gas emissions by 2050Today20252050Sector targetsWe set specific emission reduction targets for listed equities and corporate bonds for thermal coal(-35%)and oil and gas(-25%).Aiming for positive impactWe will endeavour to double our renewable portfolio(equity and debt)up to 3bn.Initiating dialogueWe concentrate on and engage with our large contributors of financed emissions within our listed equities and corporate bond portfolio.Asset class targetsWe aim to reduce the financed emissions of our listed equities,corporate bond and direct real estate portfolio by 25-29%(scope 1 2 emissions of investee companies).Total Net-zero by 2050Thermal coal Full exit by 204037Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.AnnexAchievement of the financed GHG emission reductions targets is measured by corresponding Key Performance Indicators(KPIs).The financed GHG emissions of listed equities and corporate bonds are calculated using data from the external ESG data provider,Institutional Shareholder Services Inc.(ISS).For the direct real estate portfolio,the consumption for all major energy sources is determined by our asset manager,MEAG,divided into Scope 1 and 2 and then aggregated based on a model.The total Scope 1 and 2 financed GHG emissions of listed equities,corporate bonds and direct real estate in our portfolio was reduced by 45.7%compared to the 2019 baseline,which indicates that we are on track to meet the corresponding reduction targets.The reported reductions in total absolute financed GHG emissions include the following factors:Regarding total absolute financed GHG emissions,0.5%points of the reduction compared with the previous year stem from updated emissions data provided by our data provider.Interest rate increases on the markets led to a reduction in the market values of debt instruments and thus in total absolute financed GHG emissions.If we were to use the nominal value instead of the market value for debt instruments,this would result in a reduction of 37.7%(instead of 45.7%)compared to the base year 2019.Another metric used to assess investment in listed equities,corporate bonds and direct real estate in our Ambition 2025 is the relative carbon footprint (t COe/m invested).The financed GHG emissions of this portfolio are expressed in relation to the market value of our investments.The amount was 76(t COe/m invested)on 31 December 2021;as at 31 December 2022,it was 75(t COe/m invested).3.2 Responsible investmentAbsolute financed GHG emissions(scope 1 and 2)1t COe31.12.2022Prev.yearListed equities,corporate bonds,and direct real estate3,113,0933,963,799Listed equities and corporate bonds from companies in the thermal coal segment in particular mining and/or power generation269,179272,660Listed equities and corporate bonds from companies in the oil and gas segment in particular drilling and production,refining and distributing734,197890,016Development of GHG emissions(scope 1 and 2)compared to the 2019 base year(Munich Re Group Ambition 2025)11.12.2022Prev.yearListed equities,corporate bonds,and direct real estate-45.7-30.8Listed equities and corporate bonds from companies in the thermal coal segment in particular mining and/or power generation-47.5-46.8Listed equities and corporate bonds from companies in the oil and gas segment in particular drilling and production,refining and distributing-28.9-13.81 For listed equities,corporate bonds based on the available COe emissions from the data provider ISS ESG(usually COe emissions from the previous year).For direct real estate,COe emissions for the 2022 financial year are approximated due to a lack of available data at the time of publication.They are based on available COe emissions from last year and COe emission reductions as a result of implemented savings measures,provided they can be verified and measured.38Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex3.2 Responsible investment(MEAG)(GIM)ESG Management TeamESG CommitteeESG Investment CommitteeESG TeamESG TeamESG MultipliersESG MultipliersSustainable investment governanceResponsibility for the operational implementation of the ESG strategy in the investment as Asset Owner(GIM)and Asset Manager(primarily MEAG).ESG teams and ESG multipliers contribute to a further integration of the Munich Re ESG strategy into the investment processes.They also promote innovations in the field of sustainable investment and in ESG-focus investments.Responsible for implementation of the ESG strategy in asset management.Members include senior management of GIM,MEAG,Munich Re Investment Partners and various corporate functions.=Committees dealing with reputational riskAsset OwnerAsset ManagerESG investment governanceRelevant committeesStrategic decisions on sustainable investment are taken by the ESG Committee at Board level,which is a sub-committee of the Strategy Committee of Munich Res Board of Management.To help achieve the ambitious climate targets,specific KPIs related to the Climate Ambition initiative are linked to Board remuneration at Munich Re.The ESG Management Team supports the ESG Committee with the preparation of strategic topics and discussions and is responsible for implementing the strategic decisions taken.These two committees are complemented by the ESG Investment Committee,which focuses on implementation of the ESG investment strategy.The latter includes members from Group Investment Management(GIM),MEAG,Munich Re Investment Partners,and central divisions of Munich Re.Overall responsibility for the Groups investment management lies with the Chief Investment Officer(CIO).The GIM unit is responsible for the sustainable investment strategy of the Group as asset owner and has a dedicated ESG team.A Reputational Risk Committee was established within GIM to address any reputational risks,complementing the existing committees throughout the Group.39Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex3.2 Responsible investmentAsset manager specificsMunich Res investments are largely managed by MEAG,the global asset manager of Munich Re and ERGO.MEAG takes care that the Groups investments are managed in conformity with uniform policies and principles.MEAGs sustainability specialists focus on the continuous strengthening of ESG integration and stewardship activities across all major asset classes.Additionally,MEAGs Board has adopted a sustainability strategy that underlines its commitment to further strengthening its ESG approach.MEAGs specialised ESG team has a direct reporting line to the Management Board of MEAG and is supported by ESG multipliers across different asset classes.In 2022,MEAGs own ESG governance structure was streamlined,at both executive and operative levels.Our specialised asset manager,Munich Re Investment Partners,is a climate-driven investment manager that leverages the climate and investment expertise of Munich Re.Specific assets are also outsourced to external asset managers.A dedicated team within GIM is responsible for the selection process and verifies that ESG-specific issues are included in this process.Munich Re requires new asset managers to be UN PRI signatories.After the onboarding process,all selected asset managers are regularly monitored on their ESG commitments.The monitoring includes overall portfolio steering and GHG criteria.GIM reviews the ESG strengths and weaknesses of asset managers on a regular basis and checks their compliance with defined Munich Re aspects.40Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.AnnexSteering of ESG activitiesIn principle,the management of our investments is based on four pillars:systematic ESG integration into the investment process,ESG stewardship,defined exclusion criteria within the framework of our guidelines,and investment focus areas,such as renewable energy and green bonds.The RIG is the overall steering instrument as it sets out requirements for MEAG and all of Munich Res asset managers.Enhancements in the annual update of the RIG in late 2022 included the new oil and gas measures(effective April 2023),as well as strengthened consideration of human rights and biodiversity.3.2 Responsible investmentEquities and bondsESG criteria as an important component of our investment strategyAlternative investmentsEquities and corporate bonds-Defined exclusion criteria-Availability of MSCI ESG ratings-Impact through engagement dialogues and proxy voting-Defined exclusion criteria-Availability of MSCI ESG country ratingsAssessment of ESG aspects(prior to submission of a binding ofer)Consideration of-Eco-labels-Certificates-Energy eficiency and building materials on new investmentsPRI commitment by funds manager or adherence to ESG principles and guidelines(required for the majority of new investments),if possible inclusion of additional restrictions in agreementsGovernment bondsInfrastructure(incl.renewable energy)and forestryReal Estate acquired as direct investmentsPrivate equity,private debt and infrastructure fundsAsset classesESG criteria41Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.Annex3.2 Responsible investmentESG integrationThe systematic integration of ESG aspects is an elementary component of our investment strategy.Defined ESG criteria are incorporated into the investment processes for our asset classes.It is Munich Res conviction that integrating ESG criteria into investment decisions contributes to better,more holistic risk management of the assets we own.Munich Re is convinced that ESG integration leads to higher risk-adjusted returns over a market cycle.Furthermore,Munich Re combines various approaches to ESG integration across our investment value chain,from strategic asset allocation through to asset management.This helps identify risks and opportunities beyond standard financial analysis.Besides the dedicated ESG teams,there are also ESG multipliers throughout GIM and MEAG to further integrate sustainability across the investment value chain.The ESG multipliers continuously build asset-class-specific ESG expertise and are responsible for the implementation of ESG in the investment process.Dedicated ESG multipliers have also received ESG certification from external institutes.In addition,Munich Re and MEAG both use several external ESG data providers,including MSCI ESG and ISS.Munich Re is also an active participant in the various NZAOA working groups.For example,as co-lead in the real estate working group,our experts shaped reporting and target standards for real estate investments.In 2022,the focus within the NZAOA was on establishing a carbon footprint methodology for sovereign bonds and indirect real estate.In 2022,Munich Re devoted its annual internal Group Investment Conference to ESG.The theme was“ESG Our Impact”,and some 160 attendees from GIM,MEAG,ERGO,Capital Partners,Munich Re Investment Partners,Group functions and other units explored the slogan“Awareness Education Future”from different perspectives throughout the conference.Group Investment Conference 2022 42Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.AnnexPublic marketsESG risks are considered in the asset allocation process for public markets.We screen the vast majority of assets for ESG risks in direct liquid asset classes,such as equities,corporates,government and covered bonds.The ESG rating is designed to measure a companys resilience to long-term environmental risks(climate and biodiversity),social risks(human and worker rights)and governance risks.ESG screening aims to identify ESG leaders and laggards in direct listed asset portfolios.The KPI“Rating coverage of liquid asset classes”represents the ratio of the liquid asset classes equities,corporate bonds,covered and government bonds with an MSCI ESG rating to the total of these liquid investments.Calculation of the ratio is based on market values.Rating coverage of liquid asset classes1.12.2022Prev.yearRating coverage of liquid asset classes 95.496.1To evaluate the return/risk profile of various investments in equities and corporate bonds,MEAGs portfolio managers and credit analysts make systematic use,among other data sources,of available ESG analyses,including research from investment banks.This allows risks and opportunities arising from sustainability issues to be integrated into Munich Res investment decisions.Specific government ratings aim to complement traditional sovereign debt analysis when analysing a countrys creditworthiness,by providing a long-term view on ESG criteria and risks.These ratings identify the countrys exposure to and management of ESG risks,as these factors have an important bearing on the long-term competitiveness and sustainability of a countrys economy and,in turn,on the attractiveness of the country as an investment destination.In cases where countries fail to satisfy MEAGs criteria,MEAG refrains from investing in their government bonds or the bonds of quasi-governmental organisations.Alternative assetsESG factors are of particular importance due to the long-term nature of alternative investments.MEAG and Munich Re therefore take ESG criteria into account during the selection of investment opportunities and in investment and asset management processes.Experts from both MEAG and Munich Re work closely together to leverage Group-wide ESG know-how.Munich Re has implemented its proprietary processes for assessing sustainability for alternative investments and uses external advisors to complement its internal expertise.Real estateTogether,Munich Re and MEAG consider sustainability in the purchase,construction,and renovation of real estate and implement ESG criteria when performing due diligence for new investments.This can include,for example,examining the geographic properties of a site,analysing energy consumption and GHG emissions,looking at the technical facilities used,and considering the social aspects of the investment project.With the management of existing properties,this includes continuously evaluating energy optimisation measures,as well as encouraging tenants to use their buildings in a sustainable way.Furthermore,Munich Re is aiming for net-zero emissions from its real estate portfolio by 2050 as part of its NZAOA commitment.Measures taken so far include the sourcing of green electricity and an in-depth analysis of the energy efficiency of properties.Since 2020,MEAG MUNICH ERGO Asset Management GmbH has been a member of the ESG Circle of Real Estate(ECORE)initiative,which advocates for a sustainable real estate industry.With more than 150 members,the initiative offers a new ESG scoring model that provides a holistic view on different aspects of ESG and makes them more transparent.In 2022 MEAG started using the ECORE score for selected real estate assets.3.2 Responsible investment43Munich Re Sustainability Report 20221.Introduction2.Approach to sustainability3.Sustainability in business3.1 Sustainability in insurance3.2 Responsible investment3.3 Climate-related disclosure4.Environmental management5.Employees6.Society7.Good corporate governance8.AnnexInfrastructure equity and debtMEAG
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Environmental,Social and Governance Report 2022Sustaining Healthier,Longer,Better LivesAIAs Purpose is to help people live Healthier,Longer,Better Lives.It underpins everything we do.Sustaining Healthier,Longer,Better Lives is about delivering on our Purpose,creating value for all stakeholders and futureproofing our business through making our Environmental,Social and Governance(ESG)philosophy integral to how we do business.As the largest pan-Asian life and health insurer and a significant asset owner and investor,we recognise the scale of positive transformation we can make to create a healthier,sustainable future for Asia.Our ESG Report 2022 showcases the actions we are taking to create this future.Sustaining Healthier,Longer,Better LivesAIA GROUP LIMITED|Environmental,Social and Governance Report 202222022 ESG Highlights.2About AIA Group.4Chairmans Statement.6Statement from the Group Chief Executive and President.8Our Approach to ESGOur ESG Strategy.12ESG Governance at AIA.13Engaging Our Stakeholders.15Materiality:Focusing on What Matters.17Delivering on Our Strategy.20AIAs Net-Zero 2050 and Science Based Targets.25Health&WellnessOur Health&Wellness Pillar.29Summary of Strategic Priorities and Progress.30Our Strategic Priorities in Detail.31Bringing Health&Wellness to Life.43Sustainable InvestmentOur Sustainable Investment Pillar.45Summary of Strategic Priorities and Progress.46Our Strategic Priorities in Detail.49Bringing Sustainable Investment to Life.61Sustainable OperationsOur Sustainable Operations Pillar.63Summary of Strategic Priorities and Progress.64Our Strategic Priorities in Detail.65Bringing Sustainable Operations to Life.71People&CultureOur People&Culture Pillar.74Summary of Strategic Priorities and Progress.75Our Strategic Priorities in Detail.77Bringing People&Culture to Life.88Effective GovernanceOur Effective Governance Pillar.91Summary of Strategic Priorities and Progress.92Our Strategic Priorities in Detail.93Bringing Effective Governance to Life.108Internal Engagement&External Advocacy.110Our TCFD Report.114Independent Practitioners Limited Assurance Report.131Regulatory and Mandatory Disclosures.133ESG Data Book Supplement.140About this Report.149Feedback.150CONTENTSAIA GROUP LIMITED|Environmental,Social and Governance Report 20221Near-term Science Based Targets(SBTs)are being created for disclosure in our ESG Report 2023.2022 ESG HighlightsSustainable OperationsPeople&CultureEffective Governance100%of all new buildings and redevelopments to be green certified87%DIGITAL SUBMISSIONSachieved from our buy,service and claims transactions,reducing paper usage across our operations98%of our buy submission journey is paperlessReceived the GALLUP EXCEPTIONAL WORKPLACE AWARD from GallupInclusion in the BLOOMBERG GENDER-EQUALITY INDEXTOP QUARTILE In Gallups global finance and insurance industry benchmark of employee engagement for a sixth consecutive year100%of the Group Board is comprised of Independent Non-executive Directors(INEDs)*TOP RATED ESG PERFORMERby Sustainalytics in our industry and region and a sustained rating of AA in MSCI ESG ratings100%of Group Board committees are chaired by and composed of Independent Non-executive Directors*ESG RecognitionSustainable InvestmentESG Rating Scorecard FULLY IMPLEMENTED in our directly managed fixed income and equity asset classes across our research-covered issuer universe US$6.3 BILLION&$4.3 BILLIONInvestments in Healthcare&ESG bonds,respectivelyLaunch of theSUSTAINABLE MULTI-THEMATIC FUNDby AIA SingaporeRANKED NO.1 FOR BEST ESGin Asia(ex-Japan)by Institutional Investor Research,reflecting the results of their survey of over 4,500 investment professionals and over 1,000 financial services firmsRANKED IN THE TOP 10 OF FORTUNES 2022CHANGE THE WORLD LISTof global companies addressing societys biggest challenges,citing our complete divestment from coalHealth&WellnessOverUS$2 TRILLION total sum assured providedUS$16 BILLIONin total benefits&claimsHolders of More than 41 MILLION&OVER 17 MILLIONindividual policies and participating members of group insurance schemes served,respectively*Aside from Group Chief Executive and President.INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKAbout AIA GroupChairmans StatementStatement from the Group Chief Executive&President2022 ESG Highlights2AIA GROUP LIMITED|Environmental,Social and Governance Report 2022Key Index Inclusions and Ratings2022 ESG HIGHLIGHTSSustaining Healthier,Longer,Better Lives is ultimately about delivering on AIAs Purpose through contributing to the building of an equitable,healthy society that allows opportunities for all to grow and thrive while protecting future generations.Key ESG Memberships and Supporting CommitmentsMITCH NEWGROUP GENERAL COUNSEL ANDCHAIRMAN OF THE ESG COMMITTEEMember 2022/2023ESG Leaders IndicesAIA GROUP LIMITED|Environmental,Social and Governance Report 20223INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKAbout AIA GroupChairmans StatementStatement from the Group Chief Executive&President2022 ESG HighlightsAIA Group Limited and its subsidiaries (collectively“AIA”or the“Group”)comprise the largest independent publicly listed pan-Asian life insurance group.It has a presence in 18 markets wholly-owned branches and subsidiaries in Mainland China,Hong Kong SAR1,Thailand,Singapore,Malaysia,Australia,Cambodia,Indonesia,Myanmar,New Zealand,the Philippines,South Korea,Sri Lanka,Taiwan(China),Vietnam,Brunei and Macau SAR2,and a 49 per cent joint venture in India.The business that is now AIA was first established in Shanghai more than a century ago in 1919.It is a market leader in Asia(ex-Japan)based on life insurance premiums and holds leading positions across the majority of its markets.It had total assets of US$303 billion as of 31 December 2022.AIA meets the long-term savings and protection needs of individuals by offering a range of products and services including life insurance,accident and health insurance and savings plans.The Group also provides employee benefits,credit life and pension services to corporate clients.Through an extensive network of agents,partners and employees across Asia,AIA serves the holders of more than 41 million individual policies and over 17 million participating members of group insurance schemes.AIA Group Limited is listed on the Main Board of The Stock Exchange of Hong Kong Limited under the stock code“1299”with American Depositary Receipts(Level 1)traded on the over-the-counter market(ticker symbol:“AAGIY”).About AIA Group1 Hong Kong SAR refers to Hong Kong Special Administrative Region.2 Macau SAR refers to Macau Special Administrative Region.AIA GROUP LIMITED|Environmental,Social and Governance Report 20224INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACK2022 ESG HighlightsChairmans StatementStatement from the Group Chief Executive&PresidentAbout AIA Group151612133691011121451841778ABOUT AIA GROUP11919Mainland China21931Hong Kong SAR31931Singapore41938Thailand51947Philippines61948Malaysia182015Cambodia172013Myanmar162012Sri Lanka152001India142000Vietnam131990Taiwan(China)71957Brunei81972Australia91981New Zealand121987South Korea111984Indonesia101982Macau SAROverUS$2 TRILLIONtotal sum assured providedCommitted to engagingONE BILLION PEOPLE BY 2030to live Healthier,Longer,Better LivesMore than100 YEARSprotecting and serving AsiaOver25,000 EMPLOYEESacross AsiaBuilding Healthier Communities Across Asia as a Leading InsurerServing the holders of more than41 MILLIONindividual policiesCommitted to achievingNET-ZEROgreenhouse gas(GHG)emissions by 2050,in line with the latest climate scienceUS$303 BILLIONin total assetsTHE LARGEST LISTED COMPANY ON THE HONG KONG STOCK EXCHANGEincorporated and headquartered in Hong Kong,based on market capitalisation as at 31 December 2022OVER 17 MILLIONparticipating members of group insurance schemesPresence in 18 MARKETSacross Asia AIA GROUP LIMITED|Environmental,Social and Governance Report 20225INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACK2022 ESG HighlightsChairmans StatementStatement from the Group Chief Executive&PresidentAbout AIA GroupCHAIRMANS STATEMENTWe are proud to contribute to the sustainable economic and social development of Asia.EDMUND SZE-WING TSEINDEPENDENT NON-EXECUTIVE CHAIRMANINTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACK2022 ESG HighlightsAbout AIA GroupStatement from the Group Chief Executive&PresidentChairmans StatementAIA GROUP LIMITED|Environmental,Social and Governance Report 20226relevant ESG practices.We rate our investments in line with leading international ESG rating approaches and actively engage with investee companies to promote,develop and enhance business practices.Following our announcement at the end of 2021 of our commitment to achieve net-zero greenhouse gas(GHG)emissions by 2050,our Climate and Net-Zero Steering Committee has developed a robust framework for governance and transparency in support of this goal.We are on track to have our near-term targets validated by the Science Based Targets Initiative(SBTi)by the end of 2023.As you will read from our ESG Report 2022,we have made meaningful progress in addressing the challenges our region faces.I am inspired by the commitment I see across our organisation,and I am excited about the momentum in our business as we continue to support our communities in the pursuit of Healthier,Longer,Better Lives.Thank you for your continuing support on our journey.Sincerely,Edmund Sze-Wing TseIndependent Non-executive ChairmanI am pleased to have the opportunity to share with you the substantial progress we have made in embedding environmental,social and governance considerations into our business.Our latest annual Environmental,Social and Governance(ESG)Report is released as the effects of the Covid-19 pandemic are receding but challenges to human and environmental health remain a concern globally.Asia is home to 60 per cent of the worlds population,contributing almost half of global gross domestic product(GDP).As Asias population grows and demographics shift,social and public health challenges continue to evolve.Non-communicable diseases already cause 74 per cent of all deaths globally1,and their prevalence in the form of cardiovascular diseases,diabetes and cancer is expected to increase.Annual healthcare expenditure across AIAs markets is expected to grow by 10 per cent per annum from 2020 to 2030.This burden is exacerbated by climate change and environmental degradation,which is already threatening sustainable access to clean water,food and clean air in communities around the world.As the largest provider of life and health insurance with operations across 18 markets in Asia,we have a responsibility to use our unparalleled scale and reach to help manage and address the health and mortality risks faced by our customers and communities.We also strive to contribute meaningfully to the sustainable economic and social development of the region,one of the most vulnerable geographies to climate change.By doing so we can deliver our Purpose of helping millions of people live Healthier,Longer,Better Lives.Our communities are exposed to the effects of climate change,and many people within our communities are vulnerable to ill-health with limited access to quality healthcare.AIA is committed to playing a role in addressing these gaps to enable better health outcomes and more resilient communities in the region.Across AIAs markets,access to healthcare varies significantly;healthcare costs are rising with little insurance coverage and there is significant variance in the quality of care across different markets and socioeconomic groups.Our ESG Strategy is designed to help AIA play a major role in addressing these gaps.Our focus on Health&Wellness,Sustainable Investment,Sustainable Operations,People&Culture,and Effective Governance,aligns our actions to our Purpose and is integrated within our businesses.Our ESG governance framework and strategy have been embedded deep into the organisation.This enables us to effectively manage ESG-related risks and opportunities across our businesses and champion the promotion of ESG best practices in our local markets.Our sound governance and commitment to environmental and societal progress are also central to our major role as an asset owner.Our investment decisions are grounded in Chairmans Statement1 WHO(2022)AIA GROUP LIMITED|Environmental,Social and Governance Report 20227INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACK2022 ESG HighlightsAbout AIA GroupStatement from the Group Chief Executive&PresidentChairmans StatementSTATEMENT FROM THE GROUP CHIEF EXECUTIVE AND PRESIDENTAIA has a substantial opportunity and an important responsibility to address the critical societal and environmental challenges impacting our local communities.LEE YUAN SIONGGROUP CHIEF EXECUTIVE AND PRESIDENTINTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACK2022 ESG HighlightsAbout AIA GroupChairmans StatementStatement from the Group Chief Executive&President8AIA GROUP LIMITED|Environmental,Social and Governance Report 2022Statement from the Group Chief Executive and Presidentembedding ESG considerations into our investment portfolio,investing in companies whose business models and operational practices are aligned with environmental,social and governance best practices.This is exemplified by our complete divestment from directly-managed listed equity and fixed income exposures to coal mining and coal-fired power businesses.This supported AIAs ranking in the global top 10 of Fortune“2022 Change the World”list of global companies addressing societys biggest challenges.As a leading employer,locally and regionally,we are guided by our Operating Philosophy of“Doing the Right Thing,in the Right Way,with the Right People.and the Right Results will come.”AIA was one of only five Hong Kong-listed companies to be included in the international 2023 Bloomberg Gender-Equality Index,demonstrating our progress toward a more equal and inclusive workplace.We have exceeded our target of 40 per cent of women in senior leadership,and will continue to prioritise developing leaders who are fully representative of the communities in which we operate.Our Purpose of helping people live Healthier,Longer,Better Lives continues to guide everything that we do at AIA.Our purpose-driven focus on ESG reflects our belief that healthier communities are inextricably linked to a healthier environment.As the leading provider of life and health insurance across Asia,we take an active role in addressing the critical societal challenges impacting our local communities.Health and environmental issues remain prominent across our region,and this makes us more convinced than ever of the importance of delivering on AIAs Purpose.I am heartened by the role our purpose-driven ESG Strategy is playing in working to address some of these challenges,adopting best practices,while promoting them throughout the region through engagement with a range of organisations across the breadth of our operations.We are actively engaging with the United Nations Global Compact,the CDP(formerly Carbon Disclosure Project)and the United Nations Environment Programme Finance Initiative(UNEP FI).Meaningful progress in 2022 I am proud of our ESG achievements in 2022 across our strategic pillars:Health&Wellness,Sustainable Investment,Sustainable Operations,People&Culture,and Effective Governance.We are reaching beyond our existing customer base to engage our communities further with the launch of“AIA One Billion”last year.We have set an ambitious goal to engage one billion people to help them live Healthier,Longer,Better Lives by 2030,through health advocacy,advice,partnerships,events,community programmes and campaigns.Our commitment to achieve net-zero by 2050 will aim to decarbonise our operations and engage our investee companies on the journey to a low-carbon future.We are also working at pace to continue AIA GROUP LIMITED|Environmental,Social and Governance Report 20229INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACK2022 ESG HighlightsAbout AIA GroupChairmans StatementStatement from the Group Chief Executive&PresidentSTATEMENT FROM THE GROUP CHIEF EXECUTIVE AND PRESIDENTUnderpinning our progress as a sustainable business is our governance,the culmination of a legacy of trust spanning more than 100 years of operation.Recognition of our efforts in the form of strong ratings from organisations like MSCI and Sustainalytics is encouraging,and it validates our determination to build on our enduring legacy of trust.Our ESG governance structure also leverages cross-functional expertise to ensure our ESG Strategy is being fully integrated within our businesses and allows us to track our progress against our goals across our markets.Confidence in the futureAIA has successfully navigated through many periods of uncertainty and change over the last century,earning our company a reputation which is synonymous with trust,resilience and doing the right thing for our customers.I remain convinced that AIA operates in the most dynamic region in the world and I am excited about the leading role that AIA will continue to play in charting the path forward for ESG.In doing so,we will continue to integrate our ESG practices further into our business,holding ourselves to account and aiming for continuous improvement.In this way,we will continue to build a sustainable and resilient business that creates value for shareholders while responding to the needs of society and contributing to a healthier planet.I am most grateful to our people who live our Purpose every day in their communities.It is that passion that gives me both hope and confidence in our future.I hope you find our ESG Report 2022 informative and inspiring.Thank you for your continued support towards all of us as we work together to help the people of Asia live Healthier,Longer,Better Lives.With warmest regards,Lee Yuan SiongGroup Chief Executive and PresidentAIA GROUP LIMITED|Environmental,Social and Governance Report 202210INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACK2022 ESG HighlightsAbout AIA GroupChairmans StatementStatement from the Group Chief Executive&PresidentOur Approach to ESGWe create value for our stakeholders when we take action on our most material Environmental,Social and Governance factors.AMITA CHAUDHURYGROUP HEAD OF SUSTAINABILITYINTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur ESG StrategyEngaging Our StakeholdersESG Governance at AIAMateriality:Focusing on What MattersAIAs Net-Zero 2050 and Science Based TargetsDelivering on Our StrategyAIA GROUP LIMITED|Environmental,Social and Governance Report 202211Our ESG StrategyOUR APPROACH TO ESGHealth&Wellness focuses on engaging,inspiring and delivering better health outcomes,championing financial inclusion and expanding access to quality care,producing a wider positive impact on society.Sustainable Investment delivers long-term value by allocating capital to companies that commit to sustainable outcomes,investing for the future and lowering our exposure to the risk of stranded assets in a future low-carbon economy.Sustainable Operations aims to improve the environmental performance of AIAs operations as well as to incorporate ESG factors in sourcing considerations.People&Culture empowers our people to succeed through fostering a learning environment,ensuring equitable and fair processes for employment and progression and a diverse,inclusive and supportive culture.Effective Governance ensures that AIA continues to operate to the highest standards of business practices,both in terms of its engagement with stakeholders and how we manage risks.This provides the necessary management oversight,incentives,organisational accountability,data governance systems and transparent reporting to enable us to succeed.Our ESG Strategy has evolved from our Operating Philosophy of“Doing the Right Thing,in the Right Way,with the Right People.and the Right Results will come.”It is built around five pillars:Health&Wellness,Sustainable Investment,Sustainable Operations,People&Culture and Effective Governance.Together,we believe that the integration of these pillars contributes to sustainable and healthier development for the people in our communities,for Asia and ultimately for the planet.AIA GROUP LIMITED|Environmental,Social and Governance Report 202212INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKEngaging Our StakeholdersESG Governance at AIAMateriality:Focusing on What MattersAIAs Net-Zero 2050 and Science Based TargetsDelivering on Our StrategyOur ESG StrategyESG Governance at AIAOUR APPROACH TO ESGExecuting on AIAs ESG Strategy and achieving our sustainability goals requires oversight from the Board and focused dedication from leaders across the organisation.Our ESG governance structure leverages cross-functional expertise,senior management and Group Board oversight to ensure our Strategy addresses relevant and material topics in a way that is aligned with business objectives.Through this structure we aim to ensure accountability for the delivery of our ESG Strategy in an integrated and coordinated manner across the breadth of our operations.The BoardAIAs Board retains ultimate responsibility for the oversight of the Groups risk management activities and will continue to monitor material Group-wide risks,including ESG-related risks such as those relating to climate change.Supporting this ESG effort are numerous functional bodies namely the ESG Committee,Climate and Net-Zero Steering Committee,and the Group ESG function.To learn more about the role of our Board,please see the Effective Governance section of this report.ESG CommitteeThe ESG Committee includes two of the Groups Independent Non-executive Directors(INEDs)as well as the following executives:Group General Counsel(Chairman)Group Chief Financial Officer Group Chief Risk Officer Group Chief Investment Officer Group Chief Human Resources Officer Group Chief Marketing Officer Group Head of SustainabilityThe ESG Committee is the overarching governance body responsible for providing guidance and oversight to the Companys ESG Strategy,targets,policies and disclosure.It is also responsible for updating the Board on ESG matters and providing biannual updates on material issues.ESG risks are also discussed and escalated to the Board through the Board Risk Committee.The ESG Committee also considers ESG research,regulatory developments,international sustainability best practices,feedback raised by key stakeholders and reports by rating agencies to provide input on specific ESG issues relevant to the Group to advance our ESG Strategy.Climate and Net-Zero Steering CommitteeIn 2022,the Group formalised its Climate and Net-Zero Steering Committee to support our transition to net-zero.This Committee has a specific focus on overseeing AIAs SBTi commitment,including the development and approvals of specific targets,implementation strategies and ongoing monitoring of progress towards our net-zero 2050 targets.This Committee is supported by the newly established Net-Zero and SBTi Working Group composed of senior operating specialists spanning the Groups operations.To learn more about the membership and structure of our Climate and Net-Zero Steering Committee,please see AIAs Net-Zero 2050 and Science Based Targets section of this Report here.Group ESG functionOur Group ESG function plays a key role in delivering on our Group-wide ESG ambition;supporting the development of ESG initiatives aligned with the Groups commercial ambitions,coordinating the various cross-functional programmes required to carry out our ESG Strategy and providing effective disclosures to key stakeholders.The ESG function,in collaboration with the other functional areas such as Group Investment,Group Finance,Group Risk,Group Human Resources and Group Marketing,engages with our business units on raising capacity and understanding of ESG issues among the leadership team and across the organisation.The Group ESG function is led by the Group Head of Sustainability,who is tasked with further embedding the companys ESG Strategy across AIAs operations and driving the organisations overall sustainability efforts.Supporting these activities are ESG workstreams leads who are responsible for driving critical elements of operationalising AIAs ESG Strategy across reporting,ESG integration,climate and the environment,as well as partnerships and advocacy.AIA GROUP LIMITED|Environmental,Social and Governance Report 202213INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur ESG StrategyEngaging Our StakeholdersMateriality:Focusing on What MattersAIAs Net-Zero 2050 and Science Based TargetsDelivering on Our StrategyESG Governance at AIAOUR APPROACH TO ESGESG Governance at AIABusiness unit ESG representationIn 2022,AIA has continued to strengthen its ESG governance and reporting structure to further embed a robust management framework into our local markets.All of our local business units have ESG representatives who are senior officers with the responsibility to drive the execution of the ESG Strategy in their respective markets.Most of our business units have also established local ESG committees,with the remainder expanding the mandate of existing committees to include supporting the delivery of AIAs ESG Strategy.The Group ESG Function maintains regular and robust engagement with business unit ESG representatives and other local business unit stakeholders to ensure alignment on the application of ESG best practices,the launch of new initiatives,capacity building and localisation of our overall ESG Strategy.To this end,in 2022 AIA brought together ESG Representatives from most of our markets and virtually all of our largest markets with the Group ESG Function in a bespoke conference and strategy session designed to deepen Group-wide commitment to support the development of a broad range of specific initiatives to drive progress.Embedding ESG into executive compensationAIA is committed to responsible remuneration practices to attract,motivate and retain employees at all levels across the Group.Our remuneration programmes aim to reward all individuals competitively and fairly,irrespective of gender,ethnicity,age,disability or other non-performance related factors,based on impact and contribution delivered and balanced against sound risk management.AIAs performance and rewards approach supports the achievement of AIAs business strategy,which includes rewarding employees for the achievement of strategic objectives by taking into consideration the Groups capital position and long-term performance whilst not inducing excessive risk-taking behaviours or violations of applicable laws,guidelines or regulations.Our remuneration policy serves to support the above objectives through appropriate governance,design,implementation and monitoring of AIAs remuneration and risk management framework.This framework applies across the Group and is implemented consistently across our business units,subject to local rules and regulations,as deemed necessary and appropriate for the Group.A robust Group-wide performance management framework is applied,assessing employees and executives contributions and behaviours based on individual goals established at the beginning of the year.This ensures that reward outcomes reflect both results achieved and behaviours demonstrated,balancing the financial and non-financial aspects.In delivering our ESG Strategy,initiatives are assigned to relevant senior management members based on their functional portfolios.ESG goals are further cascaded to the relevant teams and individuals,which are then supported by continuous check-ins and guidance from our leaders to ensure we remain on track to deliver effectively against expectations.Further details on the Companys remuneration framework are set out in the Remuneration Report as part of the Annual Report 2022,to be published in April 2023.AIA GROUP LIMITED|Environmental,Social and Governance Report 202214INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur ESG StrategyEngaging Our StakeholdersMateriality:Focusing on What MattersAIAs Net-Zero 2050 and Science Based TargetsDelivering on Our StrategyESG Governance at AIAEngaging Our StakeholdersOUR APPROACH TO ESGKEY STAKEHOLDER GROUPSWHY WE ENGAGEHOW WE ENGAGETOPICS OF DISCUSSIONCustomers Listening to our customers is crucial as they provide feedback to facilitate the ongoing improvement of our products,services,operations and offerings.Regional wellness research that employs research instruments such as Online Diary In-depth Interviews,Quantitative Survey and Expert Interviews Consumer Trends Research Customer Relationship Survey(CRS)Real-time Customer Survey(RCS)Physical Health Mental Health and Wellness Social Wellness Finance Environment Customer Experience Customer JourneyEmployees&Agents Our people are fundamental to our performance and sustainable growth.We regularly solicit feedback from our employees and agents to identify the right actions to cultivate an engaging and inclusive place to work.Employee surveys Townhalls and other forums led by our senior leaders Employee networks,focus groups and other discussion forums Conferences,training and talent development programmes VOD(Voice of Distribution)survey AIA Culture,employee engagement and the employee experience Employee well-being Career development and professional growth Agent Journey Experience Agent training,communication,recruitment and retention supportGovernments&Regulators We work closely with government agencies and regulators in the markets where we operate in order to elevate sustainable business practices and to drive change through advocacy and partnerships.Periodic discussions with regulators,governments and agencies Advising agencies,sharing insights and providing thought leadership in support of their respective efforts within our communities Active participation in local,regional and international industry forums Memberships of advisory boards of various standards Regulatory developments towards a low-carbon economy Advocating ESG integration into financial reportingThe success of our ESG Strategy hinges on our ability to engage with our stakeholders.Effective engagement is key to understanding how stakeholders behave or are impacted by various material topics,enabling us to better identify and address significant sustainability challenges and opportunities.This year,we continued to deepen our comprehensive engagement across various platforms.AIA GROUP LIMITED|Environmental,Social and Governance Report 202215INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur ESG StrategyESG Governance at AIAMateriality:Focusing on What MattersAIAs Net-Zero 2050 and Science Based TargetsDelivering on Our StrategyEngaging Our StakeholdersOUR APPROACH TO ESGEngaging Our StakeholdersKEY STAKEHOLDER GROUPSWHY WE ENGAGEHOW WE ENGAGETOPICS OF DISCUSSIONInvestors We focus on strengthening investor trust and regularly engage with investors to communicate our ESG Strategy and progress.This two-way communication between the company and the investment community allows analysts to make informed decisions about AIA.Annual general meeting Earnings results and analyst briefings Investor roadshows Ratings and inclusions in indices including Institutional Shareholder Services(ISS),Moodys,CSA,MSCI,Sustainalytics,CDP,BGEI Investor conferences,meetings,calls and correspondence ESG materiality study survey Climate Change Sustainable investment Metrics and targets Strategy Governance Diversity&InclusionCommunities Given the breadth and impact of our businesses across Asia,we regularly seek interactions with the public at large in our collective pursuit to contribute to positive change.Engagement initiatives as a part of AIA One Billion,such as the AIA Healthiest Schools Programme,AIA Voices and local CSR initiatives Corporate website and other correspondence In-person interactions at corporate locations and hosted events Industry body conferences and other forums Ongoing social media interaction Physical Health Mental Health Environmental Health and Financial InclusionRobust stakeholder engagement supports our efforts to integrate our ESG Strategy into our operations in ways that are relevant to the delivery of long-term value for all our stakeholders.AIA GROUP LIMITED|Environmental,Social and Governance Report 202216INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur ESG StrategyESG Governance at AIAMateriality:Focusing on What MattersAIAs Net-Zero 2050 and Science Based TargetsDelivering on Our StrategyEngaging Our StakeholdersMateriality:Focusing on What MattersOUR APPROACH TO ESGEach year,we follow a robust materiality process that helps us reinforce our understanding of topics important to our stakeholders.This process supports our development of short-,medium-and long-term action plans.Through these annual materiality assessments,we are better positioned to address emerging ESG-related risks facing the Group while identifying opportunities to create positive change and deliver on our Purpose.A robust approach to materialityIn 2022,we continued to build on our earlier work by applying a double materiality lens to our review to foster a more robust analysis of each material topic.This involves evaluating the impact of each topic on the economy,environment and people(impact materiality),and assessing whether the topic could reasonably be expected to influence assessments of AIAs enterprise value(financial materiality).This approach enables us to identify and understand those areas where AIA can have a significant impact as well as areas with the greatest impact on our stakeholders.Context Review and IdentificationUndertaking research to identify potentially material topics using internal information,periodic stakeholder engagements,desktop research of sustainability trends,benchmarking against selected peers and sustainability standards together with the criteria of investors and certain ESG rating indices.Stakeholder EngagementEngaging with a broader range of internal and external stakeholders through surveys and interviews spread across our business units and markets to ensure inclusion of relevant considerations from across the breadth of our operations.3.AnalysisApplying a double materiality lens to the shortlisted topics and determining the list of topics that are material to AIA.4.ValidationValidating our shortlisted topics with senior leadership to ensure continuing alignment of the ESG areas of focus with the Groups strategic direction and business strategy.Our Materiality Assessment Comprised The Following Steps:Adopting a double materiality approach reflects international standards and frameworks including the Global Reporting Initiative(GRI)and the International Sustainability Standards Board(ISSB).2.1.AIA GROUP LIMITED|Environmental,Social and Governance Report 202217INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur ESG StrategyEngaging Our StakeholdersESG Governance at AIAAIAs Net-Zero 2050 and Science Based TargetsDelivering on Our StrategyMateriality:Focusing on What MattersOUR APPROACH TO ESGMateriality:Focusing on What MattersOur material topicsThe five topics identified as most material,which are set out below,significantly contribute to our ability to operate sustainably while supporting our communities and the environment.We have also outlined seven other topics that help us continue to refine our focus.Risk ManagementData Privacy and Cyber SecurityCommunity Engagement and InvestmentDiversity,Equity and InclusionBusiness Ethics Products and Service Digitalisation and Innovation Responsible Marketing and Selling Practices Other Material IssuesTop ESG Material IssuesEnvironmental Responsibility and Climate ActionHealth,Well-being,and Financial InclusivitySustainable InvestmentHuman CapitalCorporate GovernanceAIA GROUP LIMITED|Environmental,Social and Governance Report 202218INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur ESG StrategyEngaging Our StakeholdersESG Governance at AIAAIAs Net-Zero 2050 and Science Based TargetsDelivering on Our StrategyMateriality:Focusing on What MattersOUR APPROACH TO ESGMateriality:Focusing on What MattersThe areas identified as material illustrate the natural maturation and refinement of ESG priorities as we continue to integrate our ESG approach with our overall business strategy.There was strong alignment across the stakeholder groups on the key ESG priorities for AIA,with all groups identifying Environmental Responsibility and Climate Action as a top priority.Senior management emphasised the importance of Sustainable Investment as an opportunity for AIA,while Health&Well-being and Financial Inclusivity was an important topic among our internal and external stakeholders.The natural evolution in our approach is reflected in refinement in several areas.For example,Climate Change in 2021 has evolved into Environmental Responsibility and Climate Action this year.This builds on the urgency of addressing climate action while better reflecting the Groups desire to approach this issue comprehensively across our operations,to include for example,biodiversity and waste and water management.Similarly,our focus on Health&Wellness has evolved in 2022 to Health&Well-being and Financial Inclusivity in 2022,as we look for ways to help our policyholders address physical,mental and financial well-being,and clearly reflect that the growing protection gap relates to all components of this topic.The importance of these issues continued to be powerfully illustrated with the lingering impact of Covid-19 in our communities.The strain on existing public services and infrastructure brought on by the Covid-19 pandemic exacerbated existing social and demographic challenges like the rise in non-communicable diseases(NCDs)and widening income inequality.In this context,the importance of addressing the protection gap by providing greater,more inclusive access to quality health care,and helping develop solutions for underserved populations will continue to be key priorities for the Group.The continuing refinement of our approach to materiality will support our efforts to build on our strong ESG foundations and improve the alignment of our resources,enhance our decision-making and support the delivery of our Purpose.AIA GROUP LIMITED|Environmental,Social and Governance Report 202219INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur ESG StrategyEngaging Our StakeholdersESG Governance at AIAAIAs Net-Zero 2050 and Science Based TargetsDelivering on Our StrategyMateriality:Focusing on What MattersDelivering on Our StrategyOUR APPROACH TO ESGThe following table summarises how the five pillars of our ESG Strategy align with our material topics and strategic priorities.It also highlights the progress made in 2022,linked to the various United Nations Sustainable Development Goals(UN SDGs).HEALTH&WELLNESSMATERIAL TOPICSSTRATEGIC PRIORITIESINITIATIVETARGETS/PROOF POINTSPROGRESSUN SDGS20212022 Health,Well-being,and Financial inclusivityEngaging Communities across Asia Engage communities across Asia to improve their physical,mental and environmental wellness while championing financial inclusionAIA One BillionNumber of people engaged(cumulative)125m258mImproving Access to Quality HealthcareProvide greater access to quality care,relevant and timely information,diagnoses,treatment and rehabilitationAIA Vitality and AIA China WellnessNumber of live markets1112Number of AIA Vitality and AIA China Wellness customers1.9m2.6mTelemedicineTelemedicine eligible lives2.6m5.7mYear-on-year increase in the number of consults73#8%Personal Case Management(PCM)Number of eligible lives2.9m3.7mYear-on-year increase in the number of PCM cases65%Diagnosis change(%)21%Refined treatment plan(%)56S%Customer satisfaction rate(%)94%Regional Health PassportTop 100 upper-tier hospitals in AsiaYesYesNumber of providers globally10,00010,000Building Better Integrated Healthand Wellness OutcomesBuild on our leading integrated health and wellness solutions and reward customers for behavioural improvementsHealth and Wellness Solutions%of at-risk AIA Vitality members who have moved to a healthy BMI range29(%of at-risk AIA Vitality members who have seen their blood pressure levels improve54R%of at-risk AIA Vitality members who have seen their cholesterol levels decline375%of at-risk members who have seen their glucose levels reduce 78r%AIA GROUP LIMITED|Environmental,Social and Governance Report 202220INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur ESG StrategyEngaging Our StakeholdersESG Governance at AIAMateriality:Focusing on What MattersAIAs Net-Zero 2050 and Science Based TargetsDelivering on Our StrategySUSTAINABLE INVESTMENTMATERIAL TOPICSSTRATEGIC PRIORITIESTARGETS/PROOF POINTSPROGRESSUN SDGS20212022 Sustainable Investment Environmental Responsibility and Climate ActionDeepening ESG EngagementDeepen ESG engagement with investee companiesThematic engagementTheme of corporate governance;engaged 1,000 investee companiesTheme of labour standards;engaged 1,000 investee companiesPercentage of general account investments directly managed scored against in-house ESG Rating ScorecardN/AImplemented fully(100%)in directly managed fixed income and equity asset classes,across our research-covered issuer universeAugmenting ESG Training and CapacityAugment knowledge and capacity among our investment analysts through dedicated training initiativesESG trainingN/AComplete formal ESG training by end of 2023 for in-scope Investment function employeesBroadening Portfolio InclusionsBroaden portfolio inclusions by specific considerations of green bonds,sustainability bonds,renewable and alternative energy and infrastructureInvestment and disclosure of green bonds,sustainability bonds,renewable energy,infrastructure etcUS$3.6 billion invested in ESG bonds in our general account assets US$4.3 billion invested in ESG bonds in our general account assetsEnhancing Portfolio ExclusionsEnhance portfolio exclusions in consideration of our objective to secure long-term investment outcomesDisclosure of portfolio exclusionsAdded exclusion on coal mining and coal-fired power generation in relation to our general account investment portfolioExclusions remain on tobacco,cluster munitions and coal in relation to our general account investment portfolioOur Portfolio and Climate Disclosures Continue to report annual climate disclosures and develop emission reduction targets for our portfolio aligned to our net-zero commitmentClimate disclosure of our investment portfolio Disclosed Disclosed;enhanced and aligned with SBTi scopeOUR APPROACH TO ESGDelivering on Our StrategyAIA GROUP LIMITED|Environmental,Social and Governance Report 202221INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur ESG StrategyEngaging Our StakeholdersESG Governance at AIAMateriality:Focusing on What MattersAIAs Net-Zero 2050 and Science Based TargetsDelivering on Our StrategySUSTAINABLE OPERATIONSMATERIAL TOPICSSTRATEGIC PRIORITIESTARGETS/PROOF POINTSPROGRESSUN SDGS20212022 Environmental Responsibility and Climate Action Risk Management Products and Service Digitalisation and InnovationEnsuring Greener BuildingsEnsure that all new buildings and any redevelopments adhere to industry-recognised green building standardsNumber of green certified buildings611Improving Our Environmental PerformanceReduce our carbon footprint,while also measuring and managing the amount of waste produced from our operations.Operational carbon emissions produced1.3 tonnes/employee2.0 tonnes/employeeWaste measurement expected to begin in 2022N/AMeasured;674 tonnesAdvancing Digital TransformationIncrease digitalisation and automation to reduce the usage of paper%of our buy,service and claims transactions were submitted digitally77%of electronic submissions for claims75ross the Group the amount of paper saved through digitalisation1,200 tonnes(240 million pieces of paper)1,750 tonnes(more than 350 million pieces of paper)Encouraging Good ESG PracticeEncourage improvements in ESG performance with vendorsThe supplier Code of Conduct applies to all suppliersYesYesPlan to assess Tier 1 suppliers on their ESG performanceN/AAssessed OUR APPROACH TO ESGDelivering on Our StrategyAIA GROUP LIMITED|Environmental,Social and Governance Report 202222INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur ESG StrategyEngaging Our StakeholdersESG Governance at AIAMateriality:Focusing on What MattersAIAs Net-Zero 2050 and Science Based TargetsDelivering on Our StrategyPEOPLE&CULTUREMATERIAL TOPICSSTRATEGIC PRIORITIESTARGETS/PROOF POINTSPROGRESSUN SDGS20212022 Human Capital Diversity,Equity and inclusion Business EthicsOverallEmployee engagement levels against Gallup global F&I database (Target:min 75th percentile)90th percentile94th percentileSupporting Development and Career ProgressionFoster a learning culture that supports the development of our peopleNumber of hours of training per employee(Target:24 hours per employee by end 2023)17 hours24 hours%of employees who took part in at least one training session/year(Target:100%)1000celerating Progress in Diversity and InclusionPromote workplace diversity and advance our culture of innovation and inclusion%of women employees in workforce 58X%of women in senior management (Target:40%women in senior management)42B%of women in programmes for leadership development (Target:45%by end 2026)25%Number of nationalities in AIA Group7075Launched D&I training for all employees by end 2022 followed by annual refreshersN/ALaunchedStrengthening Risk AwarenessEmbed a culture of ethical decision-making and strong risk management100%of employees acknowledged compliance with the AIA Group Code of Conduct on an annual basis(Target:100%)1000%Enriching and RewardingOpportunities for AllEnsure fair,accountable and equitableprocesses for employment,progression and rewardsAIA Workforce Well-being available to employees in all markets by end 2023N/ALaunched in key marketsOUR APPROACH TO ESGDelivering on Our StrategyAIA GROUP LIMITED|Environmental,Social and Governance Report 202223INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur ESG StrategyEngaging Our StakeholdersESG Governance at AIAMateriality:Focusing on What MattersAIAs Net-Zero 2050 and Science Based TargetsDelivering on Our StrategyEFFECTIVE GOVERNANCEMATERIAL TOPICSSTRATEGIC PRIORITIESTARGETS/PROOF POINTSPROGRESSUN SDGS20212022 Corporate Governance Risk Management Business Ethics Marketing and Selling Practices Data Privacy and CybersecurityBoard GovernanceFoster business integrity and sound decision-making through a diverse and highly qualified BoardBoard members broadly reflects a cross-section of the jurisdictions in which we operateYesYesAll Non-executive Directors on the AIA Group Limited Board are independent1000%Board committees are chaired by and comprised almost entirely of INEDs1000%Annual updates on ESG best practices and progress against KPIsYesYesEnsuring Effective Risk Management and Responsible Business Practices Effectively manage ESG-related risks and opportunities throughout our businessAt least once a year,identify and refresh key ESG-related risks and risk toleranceYesYesPromoting ESG Best PracticesLead the promotion of ESG best practices across the regionESG partnershipsSigned up to the UNEP FIs Principles for Sustainable Insurance(PSI)Committed to the SBTiParticipated in the UNGC Think Lab on Just Transition;Became a member of the Asia Investor Group on Climate Change(AIGCC)ESG Ratings and Index InclusionsEstablish AIA as a global leader on key ESG indices,ratings and benchmarksWork towards improved performance on ratings and inclusion in ESG indicesSustainalytics Top Rated Hang Seng Sustainability Index InclusionRated AA by MSCIs ESG Rating Sustainalytics Top Rated Hang Seng Sustainability Index InclusionRated AA by MSCIs ESG Rating Bloomberg Gender-Equality Index inclusionOUR APPROACH TO ESGDelivering on Our StrategyAIA GROUP LIMITED|Environmental,Social and Governance Report 202224INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur ESG StrategyEngaging Our StakeholdersESG Governance at AIAMateriality:Focusing on What MattersAIAs Net-Zero 2050 and Science Based TargetsDelivering on Our StrategyAIAs Net-Zero 2050 and Science Based TargetsThe health of the planet is inextricably linked to the health of our communities.For AIA to deliver on our Purpose of helping people live Healthier,Longer,Better Lives,it is critical for us to support efforts to address climate change,the impacts of which continue to be deeply felt in our communities,and globally.Our Net-Zero 2050 commitment and Science Based TargetsIn December 2021,AIA committed to achieving net-zero GHG emissions by 2050.AIA has also committed to the SBTi,which is a collaboration between United Nations Global Compact(UNGC),World Wide Fund for Nature(WWF),The World Resources Institute(WRI)and CDP,supporting businesses to set ambitious emissions reduction targets in line with the latest climate science deemed necessary to meet the goals of the Paris Agreement.Since announcing our commitment in 2021,AIA has set up a Climate and Net-Zero Steering Committee and a Net-Zero and SBTi Working Group to bring together expertise and leadership from across the Group to provide a robust framework for governance and transparency.This is sponsored by our Group Chief Executive and President and brings together a cross-section of senior internal stakeholders.OUR APPROACH TO ESGOUR WORKING FRAMEWORKAIA GROUP BOARDESG COMMITTEEBUSINESS UNIT CEOsPROJECT SPONSORPROJECT-SPECIFIC STEERING COMMITTEEPROJECT-SPECIFIC TECHNICAL COMMITTEE(Working Group)PROJECT MANAGERCROSS-FUNCTIONAL WORKING TEAMGROUP CHIEF EXECUTIVE AND PRESIDENTLee Yuan SiongCLIMATE&NET-ZERO STEERING COMMITTEEGroup General Counsel(Chair),Group Chief Financial Officer,Group Chief Investment Officer,Group Chief Technology and Life Operations Officer,Group Head of Internal Audit,Group Head of Sustainability,Rotating Regional Chief Executives(RCEs)NET-ZERO&SBTI WORKING GROUPGroup ESG function,Group Investment,Finance,Facilities Management,IT nominee,Risk nomineePROGRAMME DIRECTORHead of Climate and EnvironmentFINANCED EMISSIONSCross-Functional Working Team including members of Group Invesment and Group ESG functionsOPERATIONAL EMISSIONSCross-Functional Working Team including members of Group ESG functionAIA GROUP LIMITED|Environmental,Social and Governance Report 202225INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur ESG StrategyEngaging Our StakeholdersESG Governance at AIAMateriality:Focusing on What MattersDelivering on Our StrategyAIAs Net-Zero 2050 and Science Based TargetsIn 2022,in line with our commitment,we have undertaken a number of steps to progress towards achieving validation for our targets by the SBTi by December 2023.These include:Identifying boundaries for SBTi target-setting for Scope 1,Scope 2,Scope 3;Computing baseline emissions from our operations and investments to set demonstrably robust targets to reduce GHG emissions in line with the SBTi methodology;Aligning with various stakeholders internally,including the Group Board,the Group Executive Committee,business unit CEOs,members of key Group Functions(including Investments,Finance,Risk and Technology),business unit ESG leads,and real estate and facility managers to share the methodology and advance toward sign offs for baselines and targets;and Evaluating the levers that will help us achieve both near and long-term Science Based Targets.We will also continue to invest in building the capacity of our ESG leads in each Group function and each market through knowledge sharing and education,and where appropriate,through external recruitment.The details on emissions baseline for operations and investments and near-term Science Based Targets together with our approach to deliver on the targets will be included in our ESG Report 2023 to be published in March 2024.You can find more information about AIAs climate-related disclosures in our Task Force on Climate-related Financial Disclosures(TCFD)report on pages 114 to 130.OUR APPROACH TO ESGAIAs Net-Zero 2050 and Science Based TargetsAIA has established a legacy of responsible business practices and trust over more than 100 years of growth across the region,where we have led the industry by example with transparency,robust governance and significant scale.We have applied these same long-standing principles to driving our sustainability transition and promoting ESG adoption across the industry.These initiatives build on AIAs long-term commitment to sustainability,including engagements with the UNGC since 2016,the CDP since 2017,and Climate Action 100 since 2019.AIA GROUP LIMITED|Environmental,Social and Governance Report 202226INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur ESG StrategyEngaging Our StakeholdersESG Governance at AIAMateriality:Focusing on What MattersDelivering on Our StrategyAIAs Net-Zero 2050 and Science Based TargetsInitiated portfolio analysis and engagement on climate change.One of the first Asian asset owners to carbon footprint listed equity investment portfolio.Joined the Principles for Responsible Investment(PRI).Joined the Climate Action 100 .Became a signatory to the UNEP Principles for Sustainable Insurance(PSI).Completely divested entire directly-managed listed equity and fixed-income exposure to coal mining and coal-fired power businesses.Committed to net-zero emissions by 2050 and signed up to the SBTi.100%of in-scope investee companies have validated Science Based Targets for their organisations.Set initial near-term Science Based Targets for validation by SBTi.Participant of the United Nations Global Compacts Think Lab on Just Transition.Became a member of the Asia Investor Group on Climate Change(AIGCC).201620192021202220172018Became a signatory to the UNGC.Began reporting on the emissions and energy use arising from our direct operations.Engaged with CDP.Confirmed support for the Paris Agreement and launched first Climate Statement.Endorsed the TCFD.20232040Net-zero2050OUR APPROACH TO ESGAIAs Net-Zero 2050 and Science Based TargetsAIA GROUP LIMITED|Environmental,Social and Governance Report 202227INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur ESG StrategyEngaging Our StakeholdersESG Governance at AIAMateriality:Focusing on What MattersDelivering on Our StrategyAIAs Net-Zero 2050 and Science Based TargetsHealth&WellnessIn this section29 Our Health&Wellness Pillar30 Summary of Strategic Priorities and Progress31 Our Strategic Priorities in Detail43 Bringing Health&Wellness to LifeINTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur Health&Wellness PillarSummary of Strategic Priorities and ProgressOur Strategic Priorities in DetailBringing Health&Wellness to Life28AIA GROUP LIMITED|Environmental,Social and Governance Report 2022As the largest independent publicly listed pan-Asian life insurance group,we are committed to our Purpose of helping people across Asia live Healthier,Longer,Better Lives.Our wide range of protection and long-term savings propositions can be packaged with health and wellness coverage solutions and services tailored to each customers needs to ensure they can afford this protection both now and as they get older when health costs escalate.We believe that achieving Healthier,Longer,Better Lives for individuals is inextricably linked to ESG considerations and that a better future requires engaging communities across Asia,improving access to quality healthcare and building better integrated health and wellness outcomes.AIAs Integrated Health Strategy aims to improve the health and wellness of people and communities across Asia by transforming how individuals,corporates,payors and providers experience and Our Health&Wellness Pillarmanage health insurance and healthcare delivery,powered by Amplify Health,our Health InsurTech player.This comprises of AIAs personalised health insurance with innovative solutions that cater to our customers needs,through strategic partnerships with outpatient clinics and more effective care management programmes with simpler healthcare journeys that deliver better health outcomes at lower cost,making healthcare more accessible,more affordable and more effective.STUART SPENCERGROUP CHIEF MARKETNG OFFICERIt has never been more critical for us to transform health insurance and healthcare delivery across Asia.AIAs Integrated Health Strategy significantly enhances our business and creates greater value for our customers,distributors and shareholders,making health insurance and healthcare delivery more accessible,more affordable and more effective across the communities in which we operate.This enables us to deliver on our Purpose of helping people live Healthier,Longer,Better Lives.INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKSummary of Strategic Priorities and ProgressOur Strategic Priorities in DetailBringing Health&Wellness to LifeOur Health&Wellness Pillar29AIA GROUP LIMITED|Environmental,Social and Governance Report 2022Summary of Strategic Priorities and ProgressStrategic Priorities2022 Progress1.Engaging Communities Across Asia Engage communities across Asia to improve their physical,mental and environmental wellness while championing financial inclusionWe have continued to drive focus and activity across all areas of health and wellness and championed financial inclusion through AIA One Billion.We have reinforced our commitment to communities across Asia by setting ourselves a target to engage one billion people by 2030 to live Healthier,Longer,Better Lives.258 million people engaged through AIA One Billion by the end of 2022.2.Improving Access to Quality Healthcare Provide greater access to quality care,relevant and timely information,diagnoses,treatment and rehabilitationAIA Vitality and AIA China Wellness Number of AIA Vitality and AIA China Wellness customers=2.6mTelemedicine Telemedicine eligible lives=5.7m Year-on-year increase in the number of consults=238%Personal Case Management Eligible lives=3.7m Year-on-year increase in the number of Personal Case Management(PCM)cases=13%diagnosis change 53%refined treatment plan 94%customer satisfaction rate Regional Health Passport Top 100 upper-tier hospitals in Asia 10,000 providers globally3.Building Better Integrated Health and Wellness Outcomes Build on our leading integrated health and wellness solutions and reward customers for behavioural improvementsBased on AIA Vitality members who have reported their data:28%of at-risk AIA Vitality members have moved to a healthy BMI range 52%of at-risk AIA Vitality members have seen their blood pressure levels improve 35%of at-risk AIA Vitality members have seen their cholesterol levels decline 72%of at-risk members have seen their glucose levels reduceAIA GROUP LIMITED|Environmental,Social and Governance Report 202230INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur Health&Wellness PillarOur Strategic Priorities in DetailBringing Health&Wellness to LifeSummary of Strategic Priorities and ProgressOur Strategic Priorities in DetailStrategic Priority 1Engaging Communities Across AsiaEngage communities across Asia to improve their physical,mental and environmental wellness while championing financial inclusionOur AIA family our employees,agency network,ambassadors and partners help individual and corporate customers to improve their health and wellness while engaging millions of others in communities throughout the region to improve their physical,mental and environmental well-being while championing financial inclusion.Through our AIA One Billion commitment we drive engagement across our markets.We have established an initiative to establish healthier habits in Asias children through the AIA Healthiest Schools Programme,and our partnership with Tottenham Hotspur Football Club promotes the key role of sport in helping people live healthier lives.This year we introduced AIA Voices,our new thought leadership platform that disseminates content from changemakers and experts on physical,mental,environmental and financial wellness to audiences across Asia,providing them with information and inspiration on how to live Healthier,Longer,Better Lives.AIA GROUP LIMITED|Environmental,Social and Governance Report 202231INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur Health&Wellness PillarSummary of Strategic Priorities and ProgressBringing Health&Wellness to LifeOur Strategic Priorities in DetailAIA One BillionOUR STRATEGIC PRIORITIES IN DETAILProgress Towards Our Goal258 millionPeople engaged through AIA One Billion by the end of 2022By 31 December 2022,AIA has engaged 258 million people1 towards our AIA One Billion goal.PricewaterhouseCoopers(PwC)has undertaken a limited assurance engagement in accordance with the International Standard on Assurance Engagements(ISAE)3000 Revised,Assurance Engagements Other than Audits or Reviews of Historical Financial Information in respect of the selected AOB performance metrics.For details and the basis of preparation,see number of people engaged through AIA One Billion has been rounded down to the nearest million.IntroductionWe have set ourselves an ambitious and clear goal:By 2030,we will have engaged one billion people to help them live Healthier,Longer,Better Lives.To deliver this,we have begun to reach out far beyond our existing customer base with the goal of driving societal engagement,creating a Healthier,Longer,Better Lives movement across Asia.With our AIA One Billion ambition,we are embarking on a journey which begins with engaging and inspiring people across Asia to take steps towards living Healthier,Longer,Better Lives.Through the creation of an ecosystem of engagement touchpoints,our journey will evolve over time towards delivering and demonstrating real impact on the health and wellness of millions of people in our communities across Asia.We are inviting people across Asia to join us on this journey and this is only possible with the combined efforts of the entire AIA family.ActionsIn February 2022,we publicly announced our AIA One Billion ambition,and since then,we have delivered and measured a wide range of purpose-led initiatives across all of our 18 markets.We committed to engage,educate,inspire and support communities,employees,individuals and business customers across Asia to improve their physical,mental,environmental and financial health and wellness through advice,partnerships,events,community programmes and campaigns.MeasurementWe are following a principles-based methodology to measure the breadth and depth of our engagement.We define an engagement as“a positive action by an individual”.This covers all AIA touchpoints with customers,clients and communities across Asia.We are measuring the cumulative year-on-year number of people engaged,and we will review,evolve and enhance our measurement each year,adjusting our approach as required to ensure robust processes and alignment to any changes in our activities that may be necessary.We have sought independent verification where appropriate.1 Read more in the Disclosure and Data section.AIA GROUP LIMITED|Environmental,Social and Governance Report 202232INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur Health&Wellness PillarSummary of Strategic Priorities and ProgressBringing Health&Wellness to LifeOur Strategic Priorities in DetailOUR STRATEGIC PRIORITIES IN DETAILIn the following section,we have selected key Group-wide programmes and highlights of the local engagement activities across our markets which have contributed to our AIA One Billion ambition.These activities demonstrate how we are engaging individuals to live Healthier,Longer,Better Lives by improving physical,mental and environmental health and championing financial inclusion.The AIA Healthiest Schools Programme In June 2022,we launched the AIA Healthiest Schools Programme,which aims to encourage and drive healthier habits among students aged 5 to 16 across the themes of Healthy Eating,Active Lifestyles,Mental Well-being and Health,and Sustainability.We have partnered with education experts EVERFI to develop bespoke teaching resources:a suite of holistic and flexible lessons and activities that can be easily integrated into every classroom all accessible on one digital platform.Each school has the opportunity to enter into the AIA Healthiest Schools Challenge,demonstrating the potential impact of their innovative ideas to make their students and community healthier,with a chance to win exclusive health and wellness experiences and prizes.We have launched our programme in four pilot markets so far,including Australia,Hong Kong,Vietnam and Thailand,and we will be expanding this regional programme to other locations in the coming year.Partnership with Tottenham Hotspur Football ClubAIA is proud to be the Global Principal Partner of the Tottenham Hotspur Football Club.Active participation in sports promotes a healthy lifestyle.With football,we hope to positively impact lives through values such as teamwork,discipline and sportsmanship.We hold football clinics across AIA markets to help people to live Healthier,Longer,Better Lives.Since 2017,we have had Spurs coaches on the ground in Asia,and over 90,000 participants(virtually all of them children)have taken part in these physical sessions.We have also created a digital Coaching Corner and share content on our social channels to continue the conversation on a variety of topics such as healthy cooking and mental health.AIA VoicesThis year,we were proud to launch AIA Voices,a content-led thought leadership platform that brings together knowledge experts from across Asia to educate,motivate and inspire people along their journey towards living Healthier,Longer,Better Lives.AIA Voices brings together subject matter experts,pioneers and agents of change,who will address important topics related to physical,mental,environmental and financial wellness.The first episode of the programme,“Sleep&Mental Health”,delves into the importance of sleep and its impact on mental wellness.It is a continuation of the#OneMoreHour campaign launched in 2019 on the impact of sleep,and features sleep expert Olivia Arezzolo,psychotherapist Kate Yan Yijia,and former No.1 squash player Nicol David,among others.Over the coming months and years,AIA Voices will also spotlight financial literacy and inclusion,as well as the connection between a healthy planet and our own wellness.MENTAL HEALTHSIGNATURE PROGRAMMESSIGNATURE PROGRAMMESPHYSICAL HEALTHENVIRONMENTAL HEALTHFINANCIAL INCLUSIONAIA One Billion Engagement ActivitiesAIA GROUP LIMITED|Environmental,Social and Governance Report 202233INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur Health&Wellness PillarSummary of Strategic Priorities and ProgressBringing Health&Wellness to LifeOur Strategic Priorities in DetailOUR STRATEGIC PRIORITIES IN DETAILWe support,motivate and engage people to take steps to prevent illness and disease and provide them with the access to quality healthcare services that improves their health outcomes.Tackling stereotypes and promoting physical health with women in Malaysia In conjunction with the 2022 theme for International Womens Day#BreakTheBias,AIA Malaysia launched#AIASquashTheStereotypes,a campaign to shed light on how gender stereotypes remain a constant battle for every woman in Malaysia and to promote the importance of physical well-being through sport and movement.The campaign spotlighted AIA Malaysia ambassador and 8-time World Squash Champion Nicol David and asked women to submit inspiring stories about how they challenge gender stereotypes in their daily lives.20 lucky participants were awarded a chance to join an exclusive,all-female squash clinic with Nicol herself.Living with Vitality in MalaysiaThroughout the months of April to June 2022,AIA Malaysia offered free health checks to all Malaysians as part of its ongoing efforts to engage people to help them live Healthier,Longer,Better Lives.Members of the public were invited to walk into any outlets of the supporting pharmacy,Alpro Pharmacy,to claim a basic health screening,free of charge.The screening included tests for blood cholesterol,blood pressure,blood glucose,as well as calculations of Body Mass Index(BMI).PHYSICAL HEALTHTRISTAN KNOWLESADVICE MANAGER,AIA AUSTRALIA FINANCIAL WELL-BEINGAIA One Billion StoryAIA Australias recent brand campaign#allorsomething,deeply resonated with Tristan Knowles,Advice Manager at AIA Australia Financial Well-being.Tristan learnt very early on that life does not always follow a script.Diagnosed with bone cancer at the age of nine,at a young age he underwent intensive treatment and had his right leg amputated.Despite the darkness of childhood cancer,Tristan developed a resilience and a glass-half-full approach that has led him to become one of the best wheelchair basketball players in the world and to represent Australia at five Paralympic Games,with Paris 2024 on the horizon.Tristan is passionate about ensuring Australians have safety nets in place in case life throws a curveball.He believes doing something,however small,can make a real difference.For Tristan,this is taking his dog,Carlos,for a lunchtime walk to get outside and move a little with no mobile phone so he can completely be present in the moment.Tristan continues to encourage others to see the relationship between physical,mental and financial well-being,educating others to set small goals to help make confident decisions and leading a healthier,longer,better life.This was supported by a series of campaigns across the year in conjunction with World Health Day and A Healthier Malaysia campaign,where AIA Vitality members were offered free Vitality Health Checks(VHC)and Vitality points upgrade,pharmacy vouchers and discounts on healthy food.The initiative is part of AIAs#LiveWithVitality campaign which aims to raise awareness on the importance of regular health screenings.Over 2,000 people walked in to do the health checks,51 per cent of whom were aged 40 years and below,which is an encouraging outcome considering that health checks are generally not top of mind for young adults.This led to a 7 per cent increase in VHC take-up over a 12-month period.The#LiveWithVitality campaign is part of AIAs efforts to encourage and motivate Malaysians to understand their health better.Instead of only seeing a doctor when something is wrong,AIA wants to raise awareness on the importance of periodic health checks in preventing late-stage NCDs and the diagnose of critical illnesses.AIA GROUP LIMITED|Environmental,Social and Governance Report 202234INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur Health&Wellness PillarSummary of Strategic Priorities and ProgressBringing Health&Wellness to LifeOur Strategic Priorities in DetailOUR STRATEGIC PRIORITIES IN DETAILMENTAL HEALTHAcross Asia,the Covid-19 pandemic has caused accelerated growth in the number of people experiencing anxiety,depression and other mental illnesses.AIA is committed to raising awareness of the importance of emotional and mental well-being and the tools and techniques that help develop enduring resilience.Promoting positivity in IndonesiaAIA Indonesia launched a campaign designed to share positivity,by highlighting stories of happiness from AIA employees,customers and advisors in collaboration with prominent musicians and influencers.The campaign,titled BahagiAIA(Happiness),encouraged people to share positive stories with insurance which were transformed into the BahagiAIA song.Through the BahagiAIA video manifesto,we highlighted AIAs role in helping Indonesians to improve their mental health,physical health,environmental health and financial health.SHERLYN LAI SHILINPERSONAL WEALTH MANAGER,ADVISORS ALLIANCE GROUP(AAG)REPRESENTING AIA FINANCIAL ADVISORS,AIA SINGAPOREAIA One Billion StoryAt 12 years old,Sherlyn Lai Shilin was diagnosed with idiopathic scoliosis,a spinal deformity.The condition deteriorated through age 17 when the function of her right lung was affected in addition to not being able to grip a pen properly or to compete in sports.In 2003,she underwent a six-figure spinal surgery to have two rods,more than 20 screws and hooks implanted to support and realign her spine.“The medical bills that my parents had to pay then made me understand the importance of insurance,”she said.For the last 10 years,Sherlyn has dedicated her time to show others how they could love themselves,despite the challenges they may face.She now works with underprivileged children,tutoring them and helping their families.AIA GROUP LIMITED|Environmental,Social and Governance Report 202235INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur Health&Wellness PillarSummary of Strategic Priorities and ProgressBringing Health&Wellness to LifeOur Strategic Priorities in DetailOUR STRATEGIC PRIORITIES IN DETAILGlobally,23 per cent of deaths could be prevented through healthier environments1.Human health and well-being are intimately linked to the state of the environment,which is why environmental health and well-being are a part of AIA One Billion.Across Asia,our markets are committed to raising awareness of the importance of environmental health,providing relief to those who are affected by the environment and proactively getting involved in improving the environment for the next generation.AIA Thailand raises awareness of sharing life with nature Asia is bearing the brunt of climate change.237 million people in Mainland China,Bangladesh,India,Vietnam,Indonesia and Thailand are at risk of annual flooding by 2050 according to a study by US non-profit,Climate Central.Thailand is already facing annual flooding and AIA Thailand has worked to provide relief for communities during these difficult times.In addition to flood relief,AIA Thailand gathered employees,agents,customers and business partners to plant 20,000 trees as part of“AIA Sharing A Life 9”in 2022.At nine locations ANGELA BUSBYCHIEF CUSTOMER OFFICER,AIA NEW ZEALANDAIA One Billion StoryAngela Busby,AIA New Zealands Chief Customer Officer,was appointed to the Sustainable Business Council NZ Advisory Board in August 2022.Angela has taken up the challenge with a focus on promoting sustainable business practices,particularly within the NZ financial services sector.“As a proud wahine toa Mori,my vision for the Sustainable Business Council is to use the power ENVIRONMENTAL HEALTH1 WHO(2019)of the collective to drive positive change for all New Zealanders and our environment,”says Angela.“Our behaviours and activities have an impact on the environment,which in turn significantly impact the health and well-being of individuals,whnau and communities.We cannot thrive in an unhealthy environment and the environment cannot thrive when our behaviours are unhealthy.”across the country,the project created green spaces and filter walls against dust and air pollution to emphasise AIAs commitment.The project also aligns with the Bangkok Metropolitan Administrations One Million Trees Planting Campaign.AIA GROUP LIMITED|Environmental,Social and Governance Report 202236INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur Health&Wellness PillarSummary of Strategic Priorities and ProgressBringing Health&Wellness to LifeOur Strategic Priorities in DetailOUR STRATEGIC PRIORITIES IN DETAILThrough AIA One Billion,we are also committed to championing financial inclusion.As we seek to understand our individual and corporate customers and the diverse communities we serve,we intend to provide education,resources and products that support the physical,mental and financial well-being of individuals and families,with inclusive offerings and innovative products and solutions to support their needs.Supporting financial literacy with AIAPediaAIA Indonesia launched AIAPedia,a digital-based education programme to increase financial and insurance literacy.The programme has evolved from a campaign originating on Instagram to a dynamic platform of videos,webinars and talk shows available on Twitter,YouTube and TikTok.AIAPedia collaborates with thought leaders and traditional and digital media influencers to provide education to the general public,and invites customers to share their experience with insurance to a wider audience.AIAPedia also addresses financial topics circulating on social media to raise awareness of the importance of insurance.Meeting retirement needs in Mainland ChinaThe World Health Organization projects that by 20402,28 per cent of the population of Mainland China will be aged.In 2021,AIA China launched the AIA Retirement Concierge with enhancements over 2022 to enable customers to access innovative and high quality home-based Retirement Services,Retirement Institution services,such as online tools to help customers choose suitable retirement institutions conveniently and confidently,and Medical Care and Assistance,to provide customers care in mental and body health management at the“early elderly”age,meaning those aged sixty and above.AIA China also launched JADE Total Solution,a deferred annuity product that supplements future pension funds through saving insurance.Together with Retirement Concierge,this helps customers identify and plan for gaps in their future pension funds with the annuity period covering customers retirement stage and JADE Saving in retirement stage offering customers the flexibility to manage emergency capital needs through partial surrender or policy loans.Making insurance accessible to rural people in IndiaAccording to the World Bank,Indias rural populace makes up 65 per cent of its total population.Life insurance coverage in rural India,however,stands at a mere 8-10 per cent with awareness regarding health insurance in the rural population being very low.With the government focused on increasing financial inclusion,Tata AIA Life has brought to market POS Saat Saath,a micro insurance product with benefits that include protection,savings and assured returns on maturity.This product joins other offerings designed to support lower income consumers,including:Saral Jeevan Bima,a simple and affordable term plan Insta Protect,which provides comprehensive protection for Life,Critical Illness,Disability and Hospitalisation for the low-income segment Fortune Guarantee Pension,an affordable,retail pension plan with systematic investment options offering pensions/annuity for life POS Smart Income Plus,a systematic investment savings plan with dual advantage of life cover plus savings To broaden reach into rural and remote areas of India,all products are available on a mobile app.Tata AIA Life has also partnered with the Common Service Centres Scheme(CSC)in April 2022,a pan-India network of access points for public services,healthcare and social welfare services across the country.This gives AIA the opportunity to leverage 400,000 centres for reach into 95 per cent of the rural governing bodies in India,ensuring that more of the rural populace in India have access to insurance.2 WHO(2015)FINANCIAL INCLUSIONAIA GROUP LIMITED|Environmental,Social and Governance Report 202237INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur Health&Wellness PillarSummary of Strategic Priorities and ProgressBringing Health&Wellness to LifeOur Strategic Priorities in DetailOUR STRATEGIC PRIORITIES IN DETAILIn addition to these products,Tata AIA Life Insurance,together with the Central Bank of India,sponsored cataract surgeries for the underprivileged senior citizens across India.Blindness in India is known to increase rapidly after 50 years of age,with 66.2 per cent due to cataracts,and the prevalence of blindness being higher among people of lower socio-economic status.Cataracts are treatable and,yet,financial constraints remain a major barrier in accessing cataract surgery.Through the initiative Netrajyoti,Tata AIA Life partnered with the NGO-HelpAge India to sponsor cataract surgeries.INR6.2 million was contributed for the cause which funded over 2,300 cataract surgeries for underprivileged senior citizens across India.One-stop health protection solution in Hong KongAIA Hong Kong launched Health Journey Guardian,providing comprehensive medical cover across the entire health journey from prevention,prediction,diagnosis,treatment and recovery support.For example,with pre-emptive health assessments through which customers are diagnosed early,are able to seek support through diagnosis with tests and second opinions(including outpatient cover for doctors visits and diagnosis benefits),and seek telemedicine services,to ensure adequate support throughout the treatment process.Health Journey Guardian also provides rehabilitation and hospice cover,with personal case management during treatment and rehabilitation management.Addressing significant coverage gaps in Sri LankaTo support an increasingly influential female population that is growing in economic significance and decision-making,AIA Sri Lanka launched a comprehensive life insurance product tailored for women.She Protect is a pure protection personalised solution that can be customised with seven optional benefits.It forms a key part of Aya Surakina AIA,a womens programme that supports and empowers women across the country.AIA GROUP LIMITED|Environmental,Social and Governance Report 202238INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur Health&Wellness PillarSummary of Strategic Priorities and ProgressBringing Health&Wellness to LifeOur Strategic Priorities in DetailStrategic Priority 2Improving Access to Quality HealthcareProvide greater access to quality care,relevant and timely information,diagnoses,treatment and rehabilitationOUR STRATEGIC PRIORITIES IN DETAILAcross Asia,access to healthcare varies significantly,with fragmented and complex healthcare journeys that are difficult to navigate,and rising medical cost inflation.AIAs Integrated Health Strategy provides customers with more accessible,affordable and effective healthcare.Integration with high-quality physical and virtual outpatient clinics enables AIA to fully support our customers with more effective care management and simpler healthcare journeys through our healthcare administration and management capabilities,with personalised health insurance advice and innovative solutions.Expanding our health offerings across AsiaAIA announced the acquisition of Blue Cross(Asia-Pacific)Insurance Limited and Blue Care JV(BVI)Holdings Limited from The Bank of East Asia,Limited(BEA)in March 2022.The acquisition brings extensive operating experience and specialist expertise in health insurance including Blue Cares medical centres and large medical network in Hong Kong.AIA and BEA also extended the scope of their exclusive bancassurance partnership to cover personal lines general insurance,including health insurance to BEAs personal banking customers,enabling AIA Hong Kong to deliver leading propositions across its multi-channel distribution platform.AIA also acquired MediCard Philippines,Inc.(“MediCard”),a leading Health Maintenance Organisation(HMO)in the Philippines providing health insurance and healthcare services to more than 920,000 members across corporate and individual plans.MediCard has an extensive medical service network of over 1,000 partner hospitals and clinics and 26 high-quality MediCard-owned clinics located in key cities across the Philippines,offering primary care,diagnostics,laboratory tests and minor surgeries.AIAs acquisitions bring new products,customer segments and distribution capabilities,with opportunities to deliver more personalised health insurance,building assets and capabilities across healthcare provision,administration and management,thereby accelerating AIAs Integrated Health Strategy across the region.Transforming AIA through world class technology AIA launched Amplify Health,a joint venture with Discovery Group Limited,a South Africa-based global innovator in wellness,health analytics and insurance.Amplify Health provides a range of HealthTech assets,proprietary data analytics and extensive health expertise partnering with businesses and organisations in the healthcare system to transform healthcare delivery and health insurance to make the people of Asia healthier by improving their health and wellness.The recent acquisition of AI-powered data analytics firm AiDA Technologies brings commercially proven and multi award-winning proprietary machine learning technologies for automated underwriting,claims processing,and fraud,waste and abuse detection,which enable companies to use data better to accelerate processes,increase revenue,drive cost reductions and anticipate evolving risk.These capabilities complement and build on the existing Amplify Health integrated health technology solutions stack which offers chronic disease management programmes,claims processing and administration systems,as well as private medical insurance product development capabilities and bolsters its team of regional data scientists.AIA GROUP LIMITED|Environmental,Social and Governance Report 202239INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur Health&Wellness PillarSummary of Strategic Priorities and ProgressBringing Health&Wellness to LifeOur Strategic Priorities in DetailOUR STRATEGIC PRIORITIES IN DETAILGrowing wellness regionallyBringing AIA Groups best practice and innovation across the region,Tata AIA Life Insurance has enhanced its life insurance solutions with the launch of Tata AIA Vitality,helping customers lead Healthier,Longer,Better Lives.Like AIA Vitality customers in other established markets,Tata AIA Vitality policyholders can now access health check-ups,engage in wellness activities and health challenges,access upfront discounts and renewals on their premiums,or additional coverage when they achieve fitness milestones.Including Tata AIA Vitality,AIA Vitality and AIA China Wellness programmes are now available in 12 AIA markets Mainland China,Hong Kong,Macau,Malaysia,Philippines,Singapore,Thailand,Indonesia,Australia,New Zealand and South Korea.AIA Thailand launched its health-tracking super app enabling users to access a range of services that include digital policy servicing,healthcare trackers and rewards for a healthier lifestyle.The app also offers a new facial recognition feature,powered by artificial intelligence,that tracks body mass index,blood pressure,pulse and stress levels,further enhancing our digital real-time delivery of health and wellness services to customers.TelemedicineTelemedicine emerged as a primary digital healthcare support tool during the Covid-19 pandemic,allowing customers access to video consultation services,prescription,delivery of medication when required and onward referral to AIAs health provider networks where necessary.Telemedicine services are currently available in 10 AIA markets Mainland China,Hong Kong,India,Indonesia,Malaysia,Myanmar,the Philippines,Singapore,Sri Lanka and Thailand.Personal Case ManagementPersonal Case Management(PCM)is a medical support service to help customers with serious medical conditions.Customers have access to care and advice delivered via teleconsultation or in-person consultation,based on prevailing market conditions and patient needs.It is available in a total of 12 AIA markets Cambodia,Mainland China,Hong Kong,India,Indonesia,Malaysia,Myanmar,Australia,New Zealand,Singapore,Vietnam and Thailand.Regional Health PassportThe AIA Regional Health Passport leverages our pan-Asian presence to provide our customers access to quality providers in other countries,enabling cross-border cashless access to treatment.The regional health passport is available in nine AIA markets Mainland China,Hong Kong,Macau,Malaysia,Singapore,Thailand,Indonesia,Sri Lanka and Cambodia.Strategic Priority 3Building Better Integrated Health and Wellness OutcomesBuild on our leading integrated health and wellness solutions and reward customers for behavioural improvementsAcross Asia,people are reporting higher levels of burnout and depression3 with problems arising from mental health the second largest contributor to time lost to disability,in part due to pressures of life,poor nutrition,lack of exercise,increased time on digital media,social isolation and lack of contact with nature.Tackling mental health in Asia is a difficult challenge,compounded by the surrounding stigma associated with mental health disorders.A wellness study commissioned by AIA covering Mainland China,Hong Kong,Singapore,Thailand and Malaysia,sought to understand the extent of the issue.AIAs health and wellness offerings through AIA Vitality and WorkWell with AIA play a crucial role in beginning to address the problem.3 McKinsey(2022)AIA GROUP LIMITED|Environmental,Social and Governance Report 202240INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur Health&Wellness PillarSummary of Strategic Priorities and ProgressBringing Health&Wellness to LifeOur Strategic Priorities in DetailOUR STRATEGIC PRIORITIES IN DETAILMore effective care management for mental well-beingTo improve mental well-being in companies across Malaysia and to create a safe space at work to foster mental health discussions,AIA Malaysia introduced a first-in-market Mental Health Solution in collaboration with ThoughtFull,a Southeast Asian-based digital mental health platform.This provides corporate customers with mental health support,stress,anxiety and depression management,unlocking new avenues for users to proactively engage with their mental health and well-being.AIA Wellness Study The wellness study revealed that:Physical Health 23%of people rated themselves as having a positive/healthy physical healthSleeping Habits&Quality 19%of people think that they have good sleeping habits&sleep qualityMental Health&Wellness(incl.spiritual well-being)21%of people rated themselves as having positive/healthy mental health and wellnessDiet/Eating Habits 19%of the people think they have positive/healthy diet/eating habitsFamily/Social Relationships 24%think they have positive family/social relationshipsFinancial Health 76lieve financial health is important as it can impact mental well-beingPart of WorkWell with AIA,a proposition under AIA Malaysias Total Health Solutions for Corporate Solutions,employers(through ThoughtFull)are able to provide better care and end-to-end support for their peoples mental well-being.Better health outcomes with rehabilitation Rehabilitation can effectively assist in prevention of and recovery from various health conditions.AIA Australia together with CancerAid enabled customers undergoing cancer treatment to benefit from the CancerAid Coaching programme,which consists of an online e-health app,a series of weekly messages,via email and text,and telephone health coaching sessions delivered over a 12-week period.The programme takes a holistic view and reinforces key health messages on appropriate symptom tracking,exercise,diet,mindfulness and sleep strategies,and allows patients to monitor their condition.In an industry first,AIA Australia and CancerAid published leading research conducted over three years,demonstrating CancerAid Coach Programme participants were 73 per cent more likely to return to work.Raising awareness post pandemicAIA Hong Kong launched a campaign to encourage members to avail themselves of Vitality Health Check(VHC).The campaign started with agents to embed the experience in their offerings and help connect with their customers over a shared experience.The VHC Campaign and various support promotion offers have resulted in encouraging numbers in terms of member response,deepened engagement,call to action and click-through rates from electronic direct mailers.Similarly,AIA New Zealand launched a campaign in collaboration with an AIA Vitality programme partner to increase member awareness and engagement with VHCs.The 31-day period campaign resulted in a five-fold increase in the average monthly VHC completions compared to the months preceding the campaign period.AIA Malaysia took similar steps to help Malaysians improve their health and well-being through activities in partnership with Guardian and Jaya Grocer,offering rewards for completion of VHC including increasing reward points.AIA GROUP LIMITED|Environmental,Social and Governance Report 202241INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur Health&Wellness PillarSummary of Strategic Priorities and ProgressBringing Health&Wellness to LifeOur Strategic Priorities in DetailOUR STRATEGIC PRIORITIES IN DETAILLive Well in action AIA working with a logistics company in Hong Kong identified musculoskeletal disorders as a priority for intervention.With the companys employees based across both office and warehouse locations,AIA carried out a musculoskeletal intervention programme over the course of a year,consisting of education,physical interventions,ergonomic analysis,gamification and even psychological education on pain management.Physiotherapists visited the offices to observe sitting and working postures as well as desk and working arrangements.There were education sessions and gamified activities for staff,with line managers also being advised on how to coach and encourage their teams to take breaks,stretch,sit and work properly.The intervention contributed to a reduction in claims utilisation as well as the amount of claims paid.WorkWell with AIAWorkWell with AIA offers guidance and support to organisations who are seeking to nurture and improve their employees well-being.Built upon the four dimensions of Live Well,Think Well,Plan Well and Feel Well,WorkWell empowers organisations to care for every aspect of their employees well-being.AIA consultants and service representatives assist corporate customers with planning a bespoke calendar of WorkWell events that is appropriate for their organisations,thereby helping employees improve their health and increase their engagement,in turn lowering claims and increasing productivity.Live Well Focuses on Physical WellnessScreenings,physical activity,good nutrition and access to quality health services throughout employees health and wellness journey.Think Well Focuses on Mental WellnessTailored solutions in the form of education,self-help tools,coaching,counselling,and access to preferred mental health providers.Plan Well Focuses on Financial WellnessFinancial literacy,self-help tools and solutions,and professional help for planning and managing finances across different life stages.Feel Well Focuses on Social WellnessInclusive work environment and supportive network to promote purpose and resilience among employees.WorkWell with AIA offers outcomes-driven corporate health and wellness programmes without geographic boundaries,and serves as a map on our members journey towards total health and well-being.AIA GROUP LIMITED|Environmental,Social and Governance Report 202242INTROOUR APPROACHHEALTH&WELLNESSSUSTAINABLE INVESTMENTSUSTAINABLE OPERATIONSPEOPLE&CULTUREEFFECTIVE GOVERNANCEENGAGEMENT&ADVOCACYTCFDDISCLOSURE&DATAAPPENDIX&FEEDBACKOur Health&Wellness PillarSummary of Strategic Priorities and ProgressBringing Health&Wellness to LifeOur Strategic Priorities in DetailRINA CUSTODIOINTEGRATED MARKETING COMMUNICATIONS PRINCIPAL/ESG-CSR LEAD,AIA PHILIPPINES“AIAs promise of helping people liv
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Advancingour impact2023 Global Impact Report2About reportSite spotlightsWhat we createHow we workWho we areOn the coverCover image of Battery Park in New York City,site of Climate Week NYC,September 2022.We hosted the 3M Climate Innovation Center to showcase some of our recent solutions that help combat climate change and advance our ambitious carbon neutrality goal.3M innovations for decarbonization,electrification,waste reduction,and more were presented in an interactive display.Watch attendees interact with our solutions(video,0:59)reduction in Scope 1 and 2 location-based GHG emissions since 200278.8%3M 2023 Global Impact ReportOur carbon neutrality goalReduce Scope 1 and 2 market-based GHG emissions by at least 50%by 2030,80%by 2040,and achieve carbon neutrality in our operations by 2050since 201937.8%ReducedVisit our Global Impact website to access digital content.3About reportSite spotlightsWhat we createHow we workWho we areContents3M 2023 Global Impact ReportLeadership messagesMike Roman,Chief Executive Officer 4Gayle Schueller,Chief Sustainability Officer 4Who we are3M at a glance 7 Leading with purpose 8 Sustainability goals and progress 12Communities 26Diversity,equity,and inclusion 33How we workCorporate governance 37Enterprise risk 41Corporate Code of Conduct 43Human rights 50Compensation 56Employee programs 59Environmental,health,and safety management 65Circular materials 74Climate and energy 82Suppliers 94What we createInnovation management 101Customer-inspired innovation 109Site spotlightsBrownwood,Texas 115Sagamihara,Japan 117Ranjangaon,India 119About reportAbout report,scope,and boundaries 122GRI index 126SASB index 140Assurance statement 143Metric tables 1474About reportSite spotlightsWhat we createHow we workWho we areLeadership messagesMike Roman Chairman of the Board and Chief Executive Officer Last year marked the 120-year anniversary of 3M.Many successful companies are founded on one big idea:for us,it was the power of material science to change the world.Thats our purpose as an enterprise,and it continues to drive us today.Read the rest of Mike Romans letter.Gayle Schueller Senior Vice President and Chief Sustainability Officer Looking back on 2022,Im proud of the strides 3M made toward our sustainability commitments.We hit major milestones,strengthened important collaborations,engaged meaningfully with the public,and sharpened our focus for the future.Having set several ambitious goals the prior year,in 2022 we pursued them with urgency and intent.In collaboration with internal and external partners,we made progress on multiple fronts for our carbon,water,and waste footprints.Among our accomplishments,we achieved 50%renewable energy across our global operations two years ahead of our 2025 timeline.We also made substantial reductions in our carbon footprint:a 37.8%reduction of our greenhouse gas emissions since 2019,building on our 78.8%reduction since 2002.We reduced our use of virgin fossil-based plastic by 35.7 million pounds and further affirmed our commitment to plastics reduction by endorsing the Business Coalition for a Global Plastics Treaty.Were ahead of our 2022 water usage goal with a reduction of more than 10%,and we continue to engage with the Water Resilience Coalition to help define net water positive and drive progress as a member of the leadership committee.To advance our social commitments,we created the position of director of environmental justice.With a dedicated leader in this important area,we now have a full complement of equity-based community initiatives,which include programs for STEM education,workforce upskilling,social justice,and giving and volunteering.At the same time,we press forward with our diversity goals for 3Ms workforce through our recruitment,hiring,and retention processes.As we expand research and development into emerging technologies,were creating new climate-focused innovations,including for green hydrogen production and low-carbon-intensity energy separations.We were delighted to introduce some of these new technologies at Climate Week NYC in September 2022.At the 3M Climate Innovation Center,participants had the opportunity to interact with our latest solutions for decarbonization,electrification,energy efficiency,waste reduction,and sustainable infrastructure.Leadership messages|3M 2023 Global Impact Report5About reportSite spotlightsWhat we createHow we workWho we areLeadership messages|3M 2023 Global Impact ReportIn November we had a robust presence at COP27.Along with a variety of 3M stakeholders,I participated in several sessions through our partnerships with the United Nations Framework Convention on Climate Change(UNFCCC)and other industry groups and nongovernmental organizations.It was also my pleasure to speak on clean energy,energy security,and collaborating for climate solutions.Climate Week NYC and COP27 represent two of many engagements we participated in last year.We know that 3Ms impact is best amplified when we work with others,sharing knowledge and resources to strengthen our collective action toward a more sustainable future.While we celebrate our progress,we continue to act with urgency.3M has the capability and responsibility to create positive impact well beyond our own footprint.Well partner with customers,nongovernmental organizations,and other thought leaders to design and lead an equitable and sustainable tomorrow.With science at our heart,were positioned to leverage innovation,technology,and collaboration with our customers and other stakeholders to create solutions not yet imagined as we strive to solve the worlds greatest challenges.2023 will be a transformative year for 3M.Were preparing for the spinoff of our Health Care business and the emergence of two world-class public companies poised for continued growth.Were evaluating the sustainability contexts for both companies and preparing them to advance along their respective paths for the greatest possible impact.Its never been more important for 3M to focus on our sustainability commitments and take action.In this transformational moment,the foundation we build going forward will be critically important.For the future of 3M,for the future of our planet,and for future generations,we must continually reimagine whats possible.Achieved over 50%renewable energy across our global operations two years ahead of our 2025 timeline6About reportSite spotlightsWhat we createWho we are3M 2023 Global Impact Report Who we are3M at a glance 7Leading with purpose 8Sustainability goals and progress 12Communities 26Diversity,equity,and inclusion 33How we work73M at a glance$34.2Bin salesSales in200countries100 straight years of dividends$1.7Bin capital investments200sites51Technology Platforms92Kemployees globallyOne of30companies on the Dow Jones Industrial Average132KpatentsMore than800brands and trademarksOver55Kproducts$1.9Bin R&D spendOur purpose:Unlock the power of people,ideas,and science to reimagine whats possible3M at a glance|3M 2023 Global Impact ReportAbout reportSite spotlightsWhat we createWho we areHow we work8Leading with purpose|3M 2023 Global Impact ReportLeading with purposeOur commitmentWe use a science-based approach to reimagine whats possible as we rise to the challenges that are most material to 3M and critical to our planet and its people.Our goals and environmental,social,and governance(ESG)metrics reflect a heightened commitment to thinking holistically about how our people,products,and operations can all contribute to a better and brighter future.Our impactIn 2022,we continued to build momentum around science and collaboration in our operations and our communities.We acted with urgency to implement solutions that help us achieve our sustainability goals for the environment,our communities,and most importantly the people they impact.For over 120 years,3M has been dedicated to science and exploration,taking on global challenges and developing solutions for our customers.As a company,were guided by our Purpose,Promise,and Principles as we create unique and differentiated value for our customers,shareholders,and stakeholders.Our PurposeUnlock the power of people,ideas,and science to reimagine whats possibleOur PromiseImprove lives by helping solve the worlds greatest challengesOur PrinciplesScience-based performanceUnparalleled expertise,extraordinary outcomesMakers of whats nextStrength in collaborationChange for goodThese bind us together as one 3M,unified in our ambitions and empowered to drive long-term growth,reputation,and impact with every action.These collective ideals correspond to expectations from our customers,investors,and employees.About reportSite spotlightsWhat we createWho we areHow we work9Leading with purpose|3M 2023 Global Impact ReportUnique and differentiated valueThe power of 3M is in the way we connect our fundamental strengths of technology,manufacturing,global capabilities,and brand to our customers.These strengths define us as an enterprise and combine to build a business greater than the sum of its parts.We possess a deep understanding of what differentiates us in our performance across every business in our enterprise.It truly reflects how were linked together in our portfolio,even while operating in multiple industries and countries.Robust intellectual property supports our technology,positioning us to do unique things with and for our customers.Read about 3Ms four business groups on pages 4 5 of our 2022 Annual Report on Form 10-K.3M is also about manufacturing capability.We have a competitive advantage through in-house manufacturing site ownership.A quarter of our intellectual property sits in manufacturing,much of it in trade secrets,allowing us to deliver higher-quality,better-performing,and more competitive products to the marketplace.True global capabilities require more than just presence in markets around the world.They require the skills of our global organization to execute our business models so we can enter those markets successfully and take our fundamental strengths almost anywhere in the world as we apply science to improve every life.2022 global capabilitiesSales in200countries/regionsManufacturing&converting in29countries/regionsLaboratory&application engineering in47countries/regionsSales&marketing operations in 66countries/regionsSwitzerlandFinlandKenyaSouth AfricaNigeriaIsraelSaudi Arabia3M Gulf1IndiaJapanSouth KoreaChinaUkraineKazakhstanTaiwanPhilippinesVietnamAustraliaMalaysiaIndonesiaSingaporeNew ZealandNorwayItalySpainPortugalDenmarkMoroccoEgyptTurkeyGreeceUK/GermanyBelgiumNetherlandsIrelandFranceUnited StatesCanadaMexicoGuatemalaEl SalvadorCosta RicaTrinidad&TobagoColombiaPanamaPeruArgentinaUruguayJamaicaEcuadorBrazilPuerto Rico KeyPakistanTechnical capabilitiesManufacturing&convertingSales&marketing operationsHondurasChileBoliviaParaguayDominicanRepublicSwedenAustriaLithuaniaLatviaEstoniaCzechiaHungarySlovakiaRomaniaPolandThailandSales in 200 countries/regionsManufacturing&converting in Laboratory&application engineering in 47 countries/regions Sales and marketing operations in 67 countries/regions13M Gulf consists of UAE,Qatar,Lebanon,Egypt,Oman,Kuwait,and Bahrain SwitzerlandFinlandKenyaSouth AfricaNigeriaIsraelSaudi Arabia3M Gulf1IndiaJapanSouth KoreaChinaUkraineKazakhstanTaiwanPhilippinesVietnamAustraliaMalaysiaIndonesiaSingaporeNew ZealandNorwayItalySpainPortugalDenmarkMoroccoEgyptTurkeyGreeceUK/GermanyBelgiumNetherlandsIrelandFranceUnited StatesCanadaMexicoGuatemalaEl SalvadorCosta RicaTrinidad&TobagoColombiaPanamaPeruArgentinaUruguayJamaicaEcuadorBrazilPuerto Rico KeyTechnical capabilitiesManufacturing&convertingSales&marketing operationsHondurasChileBoliviaParaguayDominicanRepublicSwedenAustriaLithuaniaLatviaEstoniaCzechiaHungarySlovakiaRomaniaPolandThailandSales in 200 countries/regionsManufacturing&converting in 13M Gulf consists of UAE,Qatar,Lebanon,Egypt,Oman,Kuwait,and Bahrain Connected fundamental strengths:Technology|Manufacturing|Global capabilities|BrandAbout reportSite spotlightsWhat we createWho we areHow we work10Our Strategic Sustainability Framework3Ms corporate Purpose expresses our ambition to leverage our passion for science to reimagine whats possible.Together with our Promise and Principles,it drives and informs our approach to sustainability.As we build on our global capabilities and diverse technologies,we have clear commitments and bold ambitions to shape a sustainable future within our Strategic Sustainability Framework and its three organizing pillars:Science for Circular,Science for Climate,and Science for Community.Within these pillars,we build partnerships,implement projects,and develop processes that move us forward in the areas where we can make the greatest impact.Science for CircularDesign solutions that do more with less material,advancing a global circular economy.We must reimagine our traditional global economys linear business model that strains ecosystems by depleting natural resources faster than they can be replenished.In its place,a circular model uses these essential resources only while having a net positive impact on supply,and it eliminates reliance on nonrenewable finite resources altogether.It measures business success in large part on the ability to do more with less,keeps products and materials in use,designs out waste and pollution,and restores and regenerates natural systems and biodiversity.At 3M,we understand the urgency of this issue,and we see the circular economy as an opportunity to create impactful solutions,inspire leadership,and implement disruptive change across all industries.For more information,see the Circular materials section.Science for ClimateInnovate to decarbonize industry,accelerate global climate solutions and improve our environmental footprint.The impacts of global climate change on our planet and its people have never been clearer.Extreme weather events,rising sea levels,urban heat islands,elevated pollution levels,poor air quality,and scarce resources have underscored how urgently corporations must act to try to slow these harmful effects to both our natural and built ecosystems.At 3M,were advancing our impact through more significant intermediate and long-term goals and actions that align with the latest findings by the Intergovernmental Panel on Climate Change(IPCC).We expect to invest heavily both in our efforts to meet our environmental goals,which include achieving carbon neutrality by 2050,and in our innovation,adapting our business to grow in sectors that support decarbonization.We believe that by working together with our employees,customers,suppliers,government,and communities,we can help drive systemic change.For more information,see the Climate and energy section.Science for CommunityCreate a more positive world through science and inspire people to join us.Leveraging science,innovation,and collaboration,we help solve global challenges like climate change,public health and safety,health care inequality,and other inequities in communities around the world.We recognize the importance of equal access to science,technology,engineering,and mathematics(STEM)education and careers.Equitable opportunities in STEM lead to stronger communities,a stronger 3M,and a brighter collective future.We also commit to advancing diversity,equity,inclusion,and social and environmental justice within our company and community.Together with our partners,we will advance an equitable and sustainable future for all.For more information,see the Communities section.Leading with purpose|3M 2023 Global Impact ReportAbout reportSite spotlightsWhat we createWho we areHow we work11Leading with purpose|3M 2023 Global Impact ReportTransforming aspirations into actionWhile we began our environmental and social efforts decades ago,our goals and ambitions grow and gain momentum as we recognize how much remains to be done to make the world more sustainable for future generations.1932 3Ms short-term and long-term disability coverage,pension plan,and unemployment insurance plan begin1975 Pollution Prevention Pays(3P)program starts.Weve completed more than 16,300 3P projects,preventing more than 2.88 million short tons of pollution and saving over$2.37 billion1987 3M Air Emission Reduction Program launches,driving an 88%reduction in volatile organic compounds air emissions by 20011996 With formalization of our Life Cycle Management System,we embed environmental,health,and safety considerations into new product development2002 Completion of first greenhouse gas(GHG)emission inventory(Scope 1 and 2)20192021 We accelerate our ambitions by announcing 12 new or expanded goals across all three pillars,including requiring a Sustainability Value Commitment for 100%of new products,achieving carbon neutrality in our operations,and investing$50 million toward equitable workforce development and STEM education in the U.S.Our sustainability goals reflect our deepened commitment to going beyond compliance and thinking holistically about how our operations and products affect the world and every life in it.We see the opportunity to drive systemic change within our Strategic Sustainability Framework,its three pillars,and their corresponding goals.1930s1970s1980s1990s2000s2020sAbout reportSite spotlightsWhat we createWho we areHow we work12Science for CircularDesign solutions that do more with less material,advancing a global circular economy2022 goal resultsLeading with purpose|3M 2023 Global Impact Report44.9%of sites achieved zero landfillOutpacing Achieve zero landfill status at more than 30%of manufacturing sitesLearn more2025 goal2015457completed supplier assessmentsOn pace Drive supply chain sustainability through targeted raw material traceability and supplier performance assuranceLearn more2025 goal201554.2 million pounds of plastic reducedOn pace Reduce dependence on virgin fossil-based plastic by 125 million pounds by the end of 2025Learn more2025 goal202117identified manufacturing sitesOn pace Engage 100%of water-stressed/scarce communities where 3M manufactures on communitywide approaches to water managementLearn more2025 goal2015100%Sustainability Value Commitment for new productsOn pace Require a Sustainability Value Commitment(SVC)for every new product1Learn more2025 goal20190.58%manufacturing waste reducedBehind Reduce manufacturing waste by an additional 10%,indexed to salesLearn more2025 goal201516.8%increased water efficiencyOn pace Reduce global water usage by the following amounts:10%by 2022,20%by 2025,and 25%by 2030,indexed to sales2Learn more2025 goal2019We are ahead of schedule in installing state-of-the-art filtration technologies On pace For 3Ms global manufacturing operations,enhance the quality of water returned to the environment from industrial processes by 2030.3,4 Our initial focus is on implementing state-of-the-art water purification technology at the largest water use locations globally and having them fully operational by 2024Learn more2024 goal20191 For projects passing a gate in our new product commercialization process;an SVC describes how the product drives positive impact for our stakeholders in alignment with our Strategic Sustainability Framework.2 Expands our previous commitment,which aimed to reduce water use by 10tween 2015 and 2025.2019 is the baseline measurement year.3 By improving the weighted average of priority constituents,including select metals,biochemical oxygen demand(BOD),chemical oxygen demand(COD),cyanide compounds,fluoride,total nitrogen,oil&grease,fluorochemicals(PFAS),total dissolved solids(TDS),total suspended solids(TSS),sulfate,and others.4 Water used by manufacturing or industrial processes,including all water use not defined as domestic(sanitary,cafeteria,etc.).About reportSite spotlightsWhat we createWho we areHow we work13Science for ClimateInnovate to decarbonize industry,accelerate global climate solutions and improve our environmental footprint2022 goal results78.8%reduction in Scope 1 and 2 location-based GHG emissions since 2002Leading with purpose|3M 2023 Global Impact Report121M metric tons CO2equivalentOn pace Help our customers reduce their GHGs by 250 million tons of CO equivalent emissions through the use of our productsLearn more2025 goal201513.1%improved energy efficiencyBehind Improve energy efficiency,indexed to net sales,by 30%Learn more2025 goal201537.8%Scope 1 and 2 GHG emissions reducedOn pace Reduce Scope 1 and 2 market-based GHG emissions by at least 50%by 2030,80%by 2040,and achieve carbon neutrality in our operations by 20501Learn more2030 goal201951.9%renewable energyOutpacing Increase renewable energy to 50%of total electricity use by 2025 and to 100%by 2050Learn more2025 goal20151 Expands our previous 2025 goal to stay below 50%of our 2002 baseline,meaning 3Ms 2030 Scope 1 and 2 emissions will now be reduced by more than 85%from 2002 levels.2019 is the baseline measurement year.About reportSite spotlightsWhat we createWho we areHow we work14Science for CommunityCreate a more positive world through science and inspire people to join us2022 goal resultsLeading with purpose|3M 2023 Global Impact Report45.1%diverse talent in managementOn pace Double the pipeline of diverse talent in management globally to build a diverse workforce by 20301Learn more2030 goal20159.02%workforce diversityOn pace Double the representation of underrepresented groups from entry-level through management in our U.S.workforce2Learn moreOngoing goal2020100%pay equity globallyOn pace Maintain or achieve 100%pay equity globallyLearn moreworkforce development and STEM investmentOngoing goal2020$23.6M On pace Invest$50 million to address racial opportunity gaps in the U.S.through workforce development and STEM education initiatives by the end of 2025Learn more2025 goal2021$82.1Minvested in cash and productsOn pace Invest cash and products for education,community,and environmental programsLearn more2025 goal201581.8Kskills-based work hoursOn pace Provide 300,000 work hours of skills-based volunteerism by 3M employees to improve lives and help solve societys toughest challenges by the end of 20254Learn more2025 goal20191.04M learning experiencesOn pace Advance economic equity by creating 5 million unique STEM and skilled trades learning experiences for underrepresented individuals by the end of the 2025-26 school year3Learn more2025 goal20216.39%workforce diversityOn pace Double the representation of underrepresented groups in management positions in our U.S.workforce2Learn moreOngoing goal20204.91Mtraining instancesOutpacing Provide training to 5 million people globally on worker and patient safetyLearn more2025 goal20151 In 2021,3M updated the goal maturity date to 2030 from 2025.See 3Ms 2021 Global Diversity,Equity&Inclusion Report for more details.2 Underrepresented groups in our 3M U.S.workforce include Black/African American and Hispanic/Latino employees.3 3M defines underrepresented individuals in the U.S.using National Science Foundation research.For global definitions,we rely on gender diversity and local context for marginalized populations.4 Goal was initiated in 2019.Skills-based volunteering is primarily delivered through the 3M Impact program.About reportSite spotlightsWhat we createWho we areHow we work15Leading with purpose|3M 2023 Global Impact ReportStakeholder engagementStakeholder engagement and collaborative efforts on our priority topics are core to how we drive our strategy and actions within our Strategic Sustainability Framework.We continually look to our stakeholders to help us increase our understanding and awareness,seek technical input and expertise,and evaluate possible collaborations and strategic relationships.We believe stakeholder engagement should be based on candid and authentic dialogue grounded in 3Ms Principles and should help us evolve our strategic priorities.Stakeholder engagement varies greatly by geography,type,and function.For example,we frequently engage 3M employees globally through sustainability communications and events with diverse content based on our priority topics.How we work with stakeholdersStakeholderHow we engageMore informationEmployees and job seekers Respecting human rights and diversity,equity,and inclusion Providing a safe and healthy work environment Providing competitive compensation and benefits Attracting and retaining the highest talent by being a company employees are proud to work forEmployee programsDiversity,equity,and inclusionCommunitiesHuman rightsInvestors and shareholders Delivering profitable returns on investment Disclosing timely,concise,and relevant information(related to economic,environmental,and social issues)Responding to inquiries Upholding corporate valuesInvestor relations webpageESG metricsCustomers and partners Providing diverse innovative product solutions that help our customers deliver on their promises Offering a diversified portfolio of high-quality products Providing products with sustainability attributes to address and help solve global challengesInnovation managementCustomer-inspired innovationGovernment/regulators,nonprofit organizations,NGOs and experts Complying with laws,regulations,and policies Supporting and engaging on development and modification changes Providing support to advance and solve global issues Partnering to understand societal concernsCorporate governanceClimate and energyDiversity,equity,and inclusionCommunitiesCircular materialsSuppliersLocal communities and consumers Supporting and engaging in citizenship activities across our value chain Providing economic and social value to communities while minimizing environmental impact Supporting communities to help them thriveCommunitiesEnvironmental,health,and safety managementAcademic/scientific organizations Engaging on technical scientific research to develop innovative solutions for societyCircular materialsClimate and energyInnovation managementCustomer-inspired innovationSuppliers Partnering with suppliers and contractors that meet or exceed expectations Supporting collective efforts to deliver business results Collaborating to identify,resource,and amplify sustainability initiatives Respecting human rights for workersSuppliersHuman rightsCircular materialsClimate and energyAbout reportSite spotlightsWhat we createWho we areHow we work16Leading with purpose|3M 2023 Global Impact ReportMateriality assessmentEvery other year starting in 2014,3M has commissioned an independent research consultancy to help us better understand our stakeholders perspectives on key issues and assess our corporate reputation and leadership opportunities.The 2022 materiality assessment defined our current priority topics from two angles,called“double materiality.”It assessed how environmental and social issues impact 3Ms financial performance and value,as well as how 3Ms activities impact a broad range of stakeholders.The materiality assessment also explored stakeholder perceptions of our sustainability strategy and its three pillars:Science for Circular,Science for Climate,and Science for Community.Stakeholders included customers,employees,suppliers,nongovernmental organizations,corporate/private sector,academics,consultants,government,media,finance,trade associations,and think tanks,and they represented 3Ms four business groups and all areas of operation.Following the 2022 assessment,we analyzed the insights and inputs from stakeholders and developed our Sustainability Priority Matrix.The matrix shows our priority topics and demonstrates how our sustainability goals align with the United Nations 2030 Agenda for Sustainable Development,which includes 17 Sustainable Development Goals(SDGs).The matrix categorizes topics into three priority tiers:Tier 1 Greatest potential for 3M to have impactTier 2 High potential for 3M to have impactTier 3 Moderate potential for 3M to have impact2022 priority tiers at a glanceTierTopic Product innovation to solve climate,health,and safety challenges1 Sustainable products and services Climate change and GHG emissions Energy usage and use of renewables Ethical and transparent business practices Chemical management2 Safety of products and services1 Health and safety of employees and contractors Employee diversity,equity,and inclusion Infectious disease and public health issues Plastic and packaging waste Water quality Designing products and packaging with less or no waste1 Manufacturing waste Community health,safety,and well-being1 Responsible sourcing and supplier sustainability1 Human rights and labor practices in the supply chain1 R&D investment1 STEM education,training,and workforce development Employee training,development,and well-being1 Collaboration and partnerships1 Biodiversity and ecosystems1 Water usage and availability Employment and reskilling for underresourced or marginalized communities2 Access to safe and affordable drinking water1 Racial justice and inequality1 Air quality Advocacy,public policy,and engagement to support and promote social justice,science,health,environment,and safety Supplier diversity11 New topic for 2022.2 Topic modified from 2020 materiality assessment.123About reportSite spotlightsWhat we createWho we areHow we work17Leading with purpose|3M 2023 Global Impact Report3M Sustainability Priority Matrix:Science for CircularPriority topic&tierOur actionsAdditional informationGoals&commitmentsRelated SDGProduct innovation to solve climate,health,and safety challengesSustainable products and servicesR&D investmentDesigning products and packaging with less or no wasteSince 2019,weve required every product entering our new product commercialization process to have a Sustainability Value Commitment(SVC),which embeds sustainability into the pipeline that produces 3Ms diverse global products.Considerations include reusability,recyclability,waste reduction,energy and water savings,and responsible sourcing or use of renewable materials appropriate to the specific product throughout its life cycle.In 2022,R&D developed SVC training materials to empower product development teams to account for social equity in their process.We serve our customers through a wide range of innovative products that help them improve energy efficiency and reduce their GHG emissions.3M is at the forefront of the global effort to bring science and innovation to workplace safety.In 2022,3M invested$1.9 billion in research and development.Circular materialsClimate and energyCustomer-inspired innovationInnovation management3M Sustainability Value CommitmentRequire a Sustainability Value Commitment(SVC)for every new product1Help our customers reduce their GHGs by 250 million tons of CO equivalent emissions through the use of 3M products by 202512.2,12.58.49.4Safety of products and services Chemical management Product safety,quality,and stewardship must always be primary considerations during the design,manufacturing,marketing,and sale of 3M products,as outlined by our Product Safety,Quality,and Stewardship Principle.3Ms Chemicals Management Policy reflects the values of 3M and our stakeholders.To continually improve the environmental,health,and safety attributes of our products,3M has identified specific chemicals whose use in products and manufacturing processes is subject to restrictions or specific management actions.Innovation managementCircular materialsProduct Safety,Quality,and Stewardship PrincipleChemicals Management PolicyRequire a Sustainability Value Commitment(SVC)for every new product13.9111122About reportSite spotlightsWhat we createWho we areHow we work18Leading with purpose|3M 2023 Global Impact Report3M Sustainability Priority Matrix:Science for Circular(cont.)Priority topic&tierOur actionsAdditional informationGoals&commitmentsRelated SDGWater qualityWater usage and availabilityAccess to safe and affordable drinking waterIn 2021,3M became a leadership member of the Water Resilience Coalition to join a CEO-led network of over 25 companies committed to collectively accelerating the scale of proven solutions to global water challenges including water quality.We know we can make a difference by creating systems to promote a future of water circularity,a future where water stress is eliminated,resources are circulated,and nature is regenerated.We will continue to build on our strong foundation,advance our strategy,and invest in science-based commitments toward our water reduction goal.Through collaboration and application of 3M technology,we are improving the availability of water globally,including a 16.8%reduction in our water usage,indexed to sales,since 2019.Circular materials3M commits to achieving carbon neutrality,reducing water use,and improving water quality3M joins Water Resilience Coalition,CEO Water MandateReduce global water usage by the following amounts:10%by 2022,20%by 2025,and 25%by 2030,indexed to sales2For 3Ms global manufacturing operations,enhance the quality of water returned to the environment from industrial processes by 2030.3,4 Our initial focus is on implementing state-of-the-art water purification technology at the largest water use locations globally and having them fully operational in 2024Engage 100%of water-stressed/scarce communities where 3M manufactures on communitywide approaches to water management by 20256.3,6.4,6.bPlastic and packaging waste To support our circularity efforts,we work to select packaging materials on the front end so they can be recycled after use rather than discarded on land or in waterways.We also continue to increase recycled content,make our packaging easier to recycle,encourage reusable packaging where appropriate,and increase the use of renewable materials.Circular materials3M Sustainable Packaging SolutionsRequire a Sustainability Value Commitment(SVC)for every new product1Reduce manufacturing waste by 10%,indexed to sales,by 2025Reduce dependence on virgin fossil-based plastic by 125 million pounds by the end of 2025512.5Manufacturing wasteWe believe it is our responsibility to carefully assess renewable and recycled materials,water,packaging,and waste as we focus on designing solutions that do more with less material,advancing a global circular economy.We reduce,recover,reuse,and recycle byproducts and other surplus material in our operations whenever feasible.When not feasible,we responsibly dispose of waste materials.Circular materialsReduce manufacturing waste by 10%,indexed to sales,by 2025Achieve zero landfill status at more than 30%of manufacturing sites by 202512.522233About reportSite spotlightsWhat we createWho we areHow we work19Leading with purpose|3M 2023 Global Impact Report3M Sustainability Priority Matrix:Science for Circular(cont.)Priority topic&tierOur actionsAdditional informationGoals&commitmentsRelated SDGBiodiversity and ecosystemsIn our supply chain,we prioritize forest products for additional formal expectations because of potential environmental risks such as deforestation and habitat loss.As a global paper purchaser and sustainability leader,were well-positioned to positively influence practices throughout the forest products supply chain.Within our operations,we focus on incorporating circularity across all our business decisions.We have a role to play in carefully integrating renewable and recycled materials and enhancing the circularity of water,packaging,and waste.3M and 3M Foundation help build sustainable communities through strategic investments aimed at restoring natural ecosystems.Environmental,health,and safety managementCircular materialsSuppliersSustainable ForestryReduce Scope 1 and 2 market-based GHG emissions by at least 50%by 2030,80%by 2040,and achieve carbon neutrality in our operations by 20507Reduce global water usage by the following amounts:10%by 2022,20%by 2025,and 25%by 2030,indexed to sales2Reduce manufacturing waste by 10%,indexed to sales,by 2025Reduce dependence on virgin fossil-based plastic by 125 million pounds by the end of 20255Engage 100%of water-stressed/scarce communities where 3M manufactures on communitywide approaches to water management by 2025Invest cash and products for education,community,and environmental programs by 2025Drive supply chain sustainability through targeted raw material traceability and supplier performance assurance by 20256.4,6.b8.49.412.2,12.513.115.23About reportSite spotlightsWhat we createWho we areHow we work203M Sustainability Priority Matrix:Science for ClimatePriority topic&tierOur actionsAdditional informationGoals&commitmentsRelated SDGClimate change and GHG emissionsWe are committed to innovate to decarbonize industry,accelerate climate solutions,and improve our environmental footprint.In 2021,3M announced that we expect to invest approximately$1 billion over the next 20 years to support environmental goals,including achieving carbon neutrality in our operations by 2050.Climate and energy3M commits to achieving carbon neutrality,reducing water use,and improving water quality3M and UN Climate Change start new strategic partnership3M Invests in TPG Rise Climate FundInnovating to address climate change Reduce Scope 1 and 2 market-based GHG emissions by at least 50%by 2030,80%by 2040,and achieve carbon neutrality in our operations by 20507Help our customers reduce their GHGs by 250 million tons of CO equivalent emissions through the use of 3M products by 202513.1Energy usage and use of renewable energyWe are committed to continually improving energy efficiency,leveraging engineering expertise and advances,driving site-level efficiency improvements,maintaining top management support,and protecting 3Ms reputation.We serve our customers through a wide range of innovative products that help them improve energy efficiency and reduce their GHG emissions.Climate and energyInnovating to address climate change Improve energy efficiency,indexed to net sales,by 30%by 2025Increase renewable energy to 50%of total electricity use by 2025 and to 100%by 2050Help our customers reduce their GHGs by 250 million tons of CO equivalent emissions through the use of 3M products by 20257.3Air qualityAn important component of 3Ms sustainability strategy is our commitment to improving air quality globally while delivering on our customers needs and expectations for high-performance products.3M has developed internal programs to minimize our air emissions.We collaborate with the international nongovernmental organization Clean Air Asia on science-based air quality solutions for New Delhi,India,and metro Manila,Philippines.Climate and energyOur partnership with Clean Air AsiaRequire a Sustainability Value Commitment(SVC)for every new product13.911.6Leading with purpose|3M 2023 Global Impact Report113About reportSite spotlightsWhat we createWho we areHow we work21Leading with purpose|3M 2023 Global Impact Report3M Sustainability Priority Matrix:Science for CommunityPriority topic&tierOur actionsAdditional informationGoals&commitmentsRelated SDGHealth and safety of employees and contractorsHuman rights and labor practices in the supply chainResponsible sourcing and supplier sustainabilitySupplier diversity3Ms approach to managing and assuring human rights,workplace safety,and well-being within our workplace and supply chain is derived from the 3M Code of Conduct.We implement these programs through our global policies,management system,assessments,audits,training,and metrics tracking.At 3M,we set a high bar for environmental and social governance,and we expect the same from our suppliers.We expect our suppliers to be transparent about their social practices including labor,health,safety,environmental,ethics,and management systems;provide improvement ideas;and work with us to transform our shared value chain as stated in our Supplier Responsibility Code.Environmental,health,and safety managementHuman rightsSuppliers3Ms Code of ConductResponsible MineralsSupplier Responsibility CodeSupplier DiversitySustainable Forestry3M named as one of the Worlds Most Ethical Companies by Ethisphere Institute for 10th consecutive yearDrive supply chain sustainability through targeted raw material traceability and supplier performance assurance by 2025Provide training to 5 million people globally on worker and patient safety by 20258.7,8.816.5,16.7Community health,safety,and well-beingInfectious disease and public health issuesEmployee training,development,and well-beingWe identify potential risks to the environment and to the health and safety of our employees and communities,and we take steps to update processes,product design,and standards to address these risks.For the global health care industry,we take a patient-centered approach to innovation and develop reliable,quality products and solutions.In 2020,we launched 3M Impact Health Care to use our health care expertise to help address health care inequities.3M is committed to developing employees and building a purpose-driven culture.Throughout the organization,we reinforce behaviors that foster an inclusive workplace,and we provide competitive benefits and recognition programs to support employees throughout their career.Work Your Way is our trust-based flexible work model that drives well-being and productivity in ways that enable our business and performance goals.3M promotes a culture of health and well-being for our employees through disease prevention programs,on-site clinical services,employee assistance programs,and comprehensive health care benefits.CommunitiesCustomer-inspired innovationEnvironmental,health,and safety managementEmployee programsInnovation managementOur partnership with Clean Air Asia3MSM Health Care AcademyHelping the world respond to COVID-19Mitigating the Risk of Infectious Disease Spread Through Contamination PreventionInvest cash and products for education,community,and environmental programs by 2025Provide training to 5 million people globally on worker and patient safety by 2025Provide 300,000 work hours of skills-based volunteerism by 3M employees to improve lives and help solve societys toughest challenges by the end of 202563.c,3.81223223About reportSite spotlightsWhat we createWho we areHow we work223M Sustainability Priority Matrix:Science for Community(cont.)Leading with purpose|3M 2023 Global Impact ReportPriority topic&tierOur actionsAdditional informationGoals&commitmentsRelated SDGEmployee diversity,equity,and inclusionSTEM education,training,and workforce developmentEmployment and reskilling for under-resourced or marginalized communitiesRacial justice and inequalityWe advance meaningful actions toward a more equitable future for our global employee base,including training,development,and recruitment efforts focused on underrepresented populations.We foster an inclusive culture that supports and appreciates differences and provides fair and equal opportunities for everyone.And we continue our efforts toward building a diverse workforce around the world.3M empowers the next generation of scientists and engineers by supporting education initiatives that advance equitable outcomes in STEM for underrepresented students globally.As a science-based manufacturing company,were motivated to support a more equitable pathway to science,manufacturing,and skilled trades jobs.Diversity,equity,and inclusionCommunities3M Diversity,Equity&Inclusion(DEI)ReportEquity&Community website3M helps industrial athletes chase their skilled trade dreamsNot the Science Type spotlights STEM equity at Brand Storytelling 2022Young Scientist ChallengeScience at HomeInvest$50 million to address racial opportunity gaps in the U.S.through workforce development and STEM education initiatives by the end of 20255Double the pipeline of diverse talent in management globally to build a diverse workforce by 20308Double the representation of underrepresented groups from entry-level through management in our U.S.workforce9,10Double the representation of underrepresented groups in management positions in our U.S.workforce9,10Advance economic equity by creating 5 million unique STEM and skilled trades learning experiences for underrepresented individuals by the end of the 2025-26 school year11Invest cash and products for education,community,and environmental programs by 20254.4,4.5,4.c5.510.2Advocacy,public policy,and engagement to support and promote social justice,science,health,environment,and safetyAt 3M,we believe in fair treatment,access,and opportunity for all individuals,and were committed to removing barriers to equity.3M advocates for environmental,health,and safety policies and regulations that are guided by science-based decision-making and encourages the adoption and implementation of innovative solutions.CommunitiesDiversity,equity,and inclusionCorporate governanceClimate and energyEnvironmental,health,and safety managementInnovation managementLobbying and Political Activities GovernanceEquity&Community websiteState of Science Index Survey17.1422333About reportSite spotlightsWhat we createWho we areHow we work23Leading with purpose|3M 2023 Global Impact Report3M Sustainability Priority MatrixPriority topic&tierOur actionsAdditional informationGoals&commitmentsRelated SDGCollaboration and partnerships In collaboration with our employees,customers,partners,government,and communities,we apply our expertise and technology to help solve shared global challenges.We continually look to our stakeholders to help us increase our understanding,broaden our awareness,seek technical input and expertise,and evaluate possible collaborations and strategic relationships.We rely on their counsel and expertise to help guide us.We focus on advocacy,support,and collaboration in our efforts to inspire leadership,innovation,and disruptive change,all driving impact for a more sustainable future.CommunitiesCircular materialsClimate and energyCustomer-inspired innovationDiversity,equity,and inclusionClimate and energyEnvironmental,health,and safety managementInnovation managementEquity&Community website17.16Ethical and transparent business practicesActing with unwavering integrity and transparency is core to who we are.Our commitment to transparency is evident in many ways,including the publication of this annual Global Impact Report and our Diversity,Equity&Inclusion(DEI)Report;and by providing annual communication on progress as part of our commitment to the UN Global Compact.About reportCorporate Code of Conduct3Ms Code of Conduct3M Diversity,Equity&Inclusion(DEI)Report3M named as one of the Worlds Most Ethical Companies by Ethisphere Institute for 10th consecutive year16.61 For projects passing a gate in our new product commercialization process;an SVC describes how the product drives positive impact for our stakeholders in alignment with our Strategic Sustainability Framework.2 Expands our previous commitment,which aimed to reduce water use by 10tween 2015 and 2025.2019 is the baseline measurement year.3 By improving the weighted average of priority constituents,including select metals,BOD,COD,cyanide compounds,fluoride,total nitrogen,oil&grease,PFAS,TDS,TSS,sulfate,and others.4 Water used by manufacturing or industrial processes,including all water use not defined as domestic(sanitary,cafeteria,etc.).5 Established in 2021.6 Goal was initiated in 2019.Skills-based volunteering is primarily delivered through the 3M Impact program.7 Expands our previous 2025 goal to stay below 50%of our 2002 baseline,meaning 3Ms 2030 Scope 1 and 2 emissions will now be reduced by more than 85%from 2002 levels.2019 is the baseline measurement year.8 In 2021,3M updated the goal maturity date to 2030 from 2025.See 3Ms 2021 Global Diversity,Equity&Inclusion Report for more details.9 Established in 2020 to drive trend and trajectory progress over time.2020 is the baseline measurement year.10Underrepresented groups in our 3M U.S.workforce include Black/African American and Hispanic/Latino employees.11 2021 is the baseline measurement year.3M defines underrepresented individuals in the U.S.using National Science Foundation research.For global definitions,we rely on gender diversity and local context for marginalized populations.31About reportSite spotlightsWhat we createWho we areHow we work24Leading with purpose|3M 2023 Global Impact ReportPast,present,and future ESG priority topicsFrom 2014 to 2022,weve seen stakeholder priorities shift in the following ways:From 2014 to 2022,climate-related issues have increased in importance for 3M,with a new topic of product innovation to solve climate,health,and safety challenges being the most material to 3M Emerging issues new to 2022 include product innovation to solve climate,health,and safety challenges;safety of products and services;R&D;designing products with less or no waste;employee training,development,and well-being;collaboration and partnerships;biodiversity and ecosystems;access to safe and affordable drinking water;racial justice and inequality;and supplier diversity Health and safety of employees and contractors and ethical business moved from Tier 2 to Tier 1 in 2022 Employee diversity moved from Tier 3 to Tier 2 in 2022 Plastic and packaging waste,water quality,human and labor rights moved from Tier 1 to Tier 2 in 2022 Air quality moved from Tier 1 to Tier 3 in 2022 Water usage and availability moved from Tier 2 to Tier 3 in 2022The emergence of biodiversity and ecosystems as a new priority topic in 2022 has validated a category of work weve engaged in for years across all three pillars.For example,some of our water and carbon projects have revolved around restoring natural ecosystems and many of our partnerships have been a channel for us to support and invest in similar nature-based solutions.In our communities,projects have been funded by 3M and 3M Foundation,while weve partnered with Earthworm Foundation to implement projects in our supply chain.Stakeholder feedbackThe materiality assessment also gave us a broad and deep range of stakeholder feedback that will help us refine our goals and efforts.In-depth qualitative interviews with external stakeholders were conducted to vet the priority topics that emerged from the survey analysis.They generally agreed with the placement of Tier 1 issues but felt that the following Tier 2 and 3 issues were worthy of higher priority:Biodiversity and ecosystems Social issues like:racial justice and inequality,supplier diversity,human and labor rights,reskilling of marginalized communities,and STEM education Plastic packaging and waste Air and water qualityThe interviewed stakeholders further suggested that the priorities validated the importance of all three pillars.Beyond the priority tiers,a common theme we heard is a desire to see 3M leverage our history and culture of innovation to help move the needle on sustainability.This can be seen in the placement of“product innovation to solve climate,health,and safety challenges”as the most material issue for 3M and“sustainable products and services”as the next most material issue.While were always engaged in product innovation and have achieved notable milestones in innovating for sustainability,were positioned to advance our impact significantly in the coming months and years.We see opportunities across all three pillars of our Strategic Sustainability Framework,and external stakeholder feedback will continue to help inform our strategy.Risk management3Ms Enterprise Risk Management(ERM)process addresses priority topics from our materiality assessment.This process provides recognition and ownership of the most significant potential risks to the companys shareholder value and our communities.For example,climate change is one of the most important topics stakeholders think 3M should address.Within the ERM process,climate change risk was previously integrated as part of several existing high-risk areas,such as material vulnerability,product stewardship,and operating safety,but in 2022 we added it as a discrete risk to proactively monitor,measure,and manage.Learn more about 3Ms overall risk management in the Enterprise risk section and more about how we mitigate climate risk,including TCFD(Task Force on Climate-Related Financial Disclosures)recommendations,in the Climate and energy section.About reportSite spotlightsWhat we createWho we areHow we work25Sustainability governanceData provided in this Global Impact Report includes information focusing on items with high potential to impact 3Ms reputation and items that are of the greatest importance to internal and external stakeholders as defined by the materiality assessment.Because we are a diversified company,several other ESG-related topics and performance indicators relevant to various sectors of the company are also included in the report.3Ms executive-level Corporate Environmental Responsibility and Sustainability Committee reviews and approves priority topics covered in this Global Impact Report.In addition,the 3M Science,Technology&Sustainability Committee of the Board of Directors annually reviews the companys Global Impact Report.Priority topics defined within this report apply to each entity within 3M.Prioritization for the different aspects may vary within 3M operations and geographies,but theyre still a priority.Insights from the 2022 materiality assessment have informed 3Ms long-term strategies and helped direct our efforts to areas where we can have a significant impact across our value chain.Learn more about 3Ms overall governance in the Corporate governance section.As a global science,technology,and manufacturing company,we believe 3M is positioned to bring our full capabilities to bear in advancing meaningful impact.Looking forwardWe need science now more than ever,and our sustainability pillars Science for Circular,Science for Climate,and Science for Community will continue to shape our actions as we pursue a sustainable future one in which ecosystems thrive,communities are safe and healthy,and opportunities are equitable and accessible to all.In 2023,our stakeholders priorities will help guide us as we work to reinvent the products,processes,and systems that will help solve the worlds greatest challenges.As we continue to integrate insights into our strategy,well be responding to the most critical concerns of our employees,customers,suppliers,and investors.In late 2023,we anticipate the planned spinoff of our Health Care Business Group,which 3M announced in July 2022.This will establish two strong independent enterprises focused on their respective business areas.Were currently assessing how this will affect our sustainability strategy and goals.We look forward to sharing details in future communications.As a global science,technology,and manufacturing company,we believe 3M is positioned to bring our full capabilities to bear in advancing meaningful impact.As we act with urgency,we know systemic change requires resources and long-term dedication.Our customers,employees,and communities deserve it.People around the world are motivated by it and our future will be better for it.Leading with purpose|3M 2023 Global Impact ReportAbout reportSite spotlightsWhat we createWho we areHow we work26Communities|3M 2023 Global Impact ReportCommunitiesOur commitmentBuilding and nurturing meaningful connections with our local communities is fundamental to our sustainability strategy.Were committed to leveraging our people,products,and philanthropy to support communities through science,technology,engineering,and mathematics(STEM)education,workforce development,and community and environmental programs with a focus on underrepresented populations and underserved communities.Our impact3M listens to and engages with communities to understand and identify ways to maximize our impact.In our multifaceted approach to community support,we identify key areas where were uniquely positioned to have the most impact through cash and product donations,research and development investments,volunteerism and skills sharing,and more.Our sustainability goalsInvest$50 million to address racial opportunity gaps in the U.S.through workforce development and STEM education initiatives by the end of 20251Invested$23.6MProvide 300,000 work hours of skills-based volunteerism by 3M employees to improve lives and help solve societys toughest challenges by the end of 20253Provided81.8KhoursInvest cash and products for education,community,and environmental programs by 2025Invested$82.1MAdvance economic equity by creating 5 million unique STEM and skilled trades learning experiences for underrepresented individuals by the end of 20252Created1.04Mexperiences1 Established in 2021.2 2021 is the baseline measurement year.3M defines underrepresented individuals in the U.S.using National Science Foundation research.For global definitions,we rely on gender diversity and local context for marginalized populations.3 Goal was initiated in 2019.Skills-based volunteering is primarily delivered through the 3M Impact program.About reportSite spotlightsWhat we createWho we areHow we work27Communities|3M 2023 Global Impact ReportAs part of our Science for Community pillar of 3Ms Strategic Sustainability Framework,we help address social and economic disparities around the world.Through a variety of new and existing programs,we invest to build a strong foundation for equitable outcomes far into the future.To optimize our actions,we leverage research on social impact to inform investment decisions and collaborate with our community partners to track outcomes,minimize barriers,and expand future opportunities for 3M engagement.In addition to the below,more information about our efforts to support equitable communities,including key highlights and actions taken in 2022,can be found by visiting our Diversity,Equity&Inclusion (DEI)Report.Investing in more equitable communitiesThrough the work of 3M and 3M Foundation,we help build sustainable communities through strategic investments and the thoughtful involvement of 3M employees worldwide who volunteer to make a difference.Since 1953,3M and 3M Foundation have invested$1.98 billion in cash and product contributions in communities where 3M operates.3M and 3M Foundation develop and implement strategies and partnerships with leading community organizations committed to advancing equitable outcomes in our community.The 3M Foundation Board of Directors and Corporate Contributions Committee govern this work and are comprised of a diverse set of senior-level company executives.To assure our support benefits the communities being served,3M and 3M Foundation provide financial support to key partners and initiatives to help evaluate the outcomes of prospective grants and employee engagement initiatives.$50 million commitment over five years In 2022,3M continued to work toward our goal to invest$50 million to address racial opportunity gaps in the U.S.through workforce development and STEM education initiatives by the end of 2025.This investment is in addition to our existing corporate philanthropy.Contributions for 2022 totaled$11.6 million.To measure our impact and inform future investments,we worked with Ecotone Analytics to capture our social return on investment(SROI)using data from evidence-based research.This analysis demonstrated that every$1 we invest in our community generates nearly$3 worth of social impact exceeding our initial internal target of$2.50 return for every dollar invested.This amplifies our estimated impact from$12 million invested to a projected$35 million in social value returns(increased wages,additional taxes paid,avoided justice system costs,etc.).As a science-based manufacturing company,were motivated to support a more equitable pathway to science,manufacturing,and skilled trades jobs.Education and workforce development are key to broadening access to these careers for all students,especially those from underrepresented groups.But we also help fulfill basic needs that must be met for educational experiences to gain traction.Students need a foundation of stable housing,consistent nourishment,and necessary school supplies if theyre to truly benefit from learning opportunities.In 2021,we dedicated$10 million to create the 3M Community Fund,which is invested through the Greater Twin Cities United Way and the Saint Paul&Minnesota Foundation,to provide culturally specific holistic support for diverse families in the community surrounding our headquarters.Since 1953,3M and 3M Foundation have invested$1.98Bin cash and product contributions in communities where 3M operatesEvery$1we invest in our community generates nearly$3worth of social impact About reportSite spotlightsWhat we createWho we areHow we work28Community outreachNo organization can advance social justice and create racial equity on its own.At 3M,we believe those closest to a communitys challenges are best equipped to design and inform the most equitable solutions.Championing the voices and perspectives of community members and leaders helps us offer solutions that are truly community-focused.Among our most significant partnerships:The 3M Community Coalition is a group of diverse leaders from across Minneapolis and St.Paul.Formed in 2020,it helps guide our$50 million investment with a focus on racial equity challenges in St.Paul.The coalitions input guided our decision to invest in students basic needs,expand our internal equity initiatives,and leverage 3Ms assets and competencies to advance equity.Youthprise,a Twin Cities-based nonprofit,focuses on increasing access to career development opportunities for Indigenous,low-income,and racially diverse youth in Minnesota.We work with Youthprise to bring student voices into our STEM support and programs.Globally,each business group at 3M works in partnership with community-led nonprofit organizations to address inequities related to their markets.The business groups focus on addressing gaps in homeownership rates(Consumer),increasing access to health care for underserved individuals(Health Care),improving school zone safety(Transportation&Electronics),and diversifying the pipeline for skilled trades workers(Safety&Industrial).Our business leaders continue to inform ways our philanthropy can bolster both community outcomes and business objectives.3M was a founding member of the Minnesota Business Coalition for Racial Equity(MBCRE)in 2020,and our involvement continues across multiple pillars of the program.MBCRE works with the business community across Minnesota to help build an equitable,inclusive,and prosperous community for Black residents.The coalition continues to inform our equity practices at 3M.Environmental justiceThroughout 2021 we accelerated our efforts around environmental justice,building our expertise and our relevant responsibilities as an organization.In 2022 we created the new role of director of environmental justice to develop and elevate a global environmental justice program.Weve advanced a cohesive strategy for working alongside underserved communities and are starting to implement it at initial sites.3M leverages philanthropy to supplement our commitment to operational change for environmental justice.For example,since 2020 weve supported the American Forest Foundations Sustainable Forestry and African American Land Retention(SFLR)Program,which helps African American families generate income from their land.This can turn land into an asset to be shared across generations while also keeping forests as forests.Learn more at Sustainable Forestry.3M uses the Environmental Protection Agencys definition of environmental justice:“Environmental justice is the fair treatment and meaningful involvement of all people regardless of race,color,national origin,or income,with respect to the development,implementation,and enforcement of environmental laws,regulations,and policies.This goal will be achieved when everyone enjoys:The samedegree of protection from environmental and health hazards Equal access to the decision-making process to have a healthy environment in which to live,learn,and work”Empowering the next generation3M empowers the next generation of scientists and engineers by supporting education initiatives that advance equitable outcomes in STEM for underrepresented students globally.This will help lead to economic equity,especially for individuals from marginalized populations.Since 2021,weve supported over 1 million unique STEM and skilled trades learning experiences,putting us well on track to deliver on our goal to create 5 million such experiences by the end of the 2025-26 school year.Data from 3Ms State of Science Index helps guide our strategic STEM investments with insights from across the globe.Learn more by watching A More Equitable Future:Inspiring New STEM and Skilled Trades Talent(video,1:54).In December 2022,Dr.Jayshree Seth,3Ms chief science advocate and a corporate scientist,represented 3M at the White House Summit on Equity and Excellence in STEMM(science,technology engineering,mathematics and medicine).The summit kicked off a partnership between The White House Office of Science and Technology,the American Association for the Advancement of Science,and the STEMM Opportunity Alliance.These entities will form an Advisory Council to help create a national strategy for increasing equity in STEMM.James Momon,3Ms chief equity officer,will represent 3M as an advisor on the council.Communities|3M 2023 Global Impact ReportAbout reportSite spotlightsWhat we createWho we areHow we work293,800 girls attended summer STEM lab camps across the U.S.Supporting STEM experiencesScience at Home The COVID-19 pandemic continues to affect our communities,including the learning loss thats been experienced by many students.Existing learning gaps only widened during the pandemic.In 2022,our Science at Home online program,created in partnership with the Bakken Museum in Minneapolis in April 2020,continued to provide accessible hands-on science-related content.3M also continues to provide grant funding for participating teachers through the Donors Choose platform,which provides school supplies to help support STEM education.Science Encouragement Programs Weve reinvigorated this set of volunteer programs designed to connect students with 3M scientists and engineers and inspire them to pursue science careers.3M TWIST(Teachers Working in Science and Technology),a six-week paid summer research program for teachers 3M STEP(Science Training Encouragement Program)for St.Paul public high school juniors and seniors from diverse backgrounds pairs students with a 3M mentor and offers hands-on experience in a 3M lab over the summer 3M Visiting Wizards,in partnership with the Bakken Museum,where volunteers provide science demonstrations and hands-on experiments to K-12 students 3M Tech Talks,a program connecting students,especially women and minorities,with 3M role models from a variety of technical job positions,degree levels,and backgroundsIn 2022,we increased program expectations and due diligence by standardizing our processes,making the programs more robust and replicable.3M Visiting Wizards,traditionally a Minnesota-based program,has expanded globally,and 3M Tech Talks is set to expand in 2023.National Society of Black Engineers(NSBE)In 2022,we supported NSBEs SEEK program,a hands-on summer engineering experience for African American students in grades 3 to 5.Project Scientist In 2022,3M supported over 3,800 learning experiences for girls participating for free in summer STEM lab camps across the U.S.3M Young Scientist Challenge The premier U.S.science competition for students in grades 5 to 8,this one-of-a-kind competition seeks to spark curiosity in students and empower them to solve real-world problems that help improve lives.The winner receives a$25,000 scholarship and the annual title of“Americas Top Young Scientist.”STEM programs around the world Our global teams actively foster diversity and equity in STEM careers through programs including:FIRST Robotics This program helps young people discover and develop a passion for STEM through team sponsorship with the support of 3M volunteers,FIRST LEGO League,and FIRST Robotics competition teams.3M also makes significant product donations to support high-performing robots in the competitions.Local STEM initiatives 3M sites in countries around the world build partnerships for STEM education with schools and nonprofit organizations in their local community.Learn more about these initiatives at 3Ms Diversity,Equity&Inclusion(DEI)Report.Communities|3M 2023 Global Impact ReportAbout reportSite spotlightsWhat we createWho we areHow we work30$Communities|3M 2023 Global Impact ReportOpening doors to the skilled tradesCommunity training resources As manufacturing evolves and companies like 3M invest in facilities of the future,its essential to help our local technical schools and high schools access appropriate technologies and training.To keep the workforce pipeline flowing,we continue to invest in programs including the 3M Manufacturing and Academic Partnership,Skills USA and WorldSkills,and Teach For America.St.Paul Public Schools career pathway In collaboration with the Minnesota State College and University system and St.Paul Public Schools,3M has helped ease the way toward a rewarding career in the skilled trades for St.Paul Public School students.A new program now gives students college or certification credits and sometimes certifications for skilled trades classes.With the growing need for skilled trades in manufacturing,this helps build out 3Ms hiring pipeline and gives more students a path to a well-paying job.National Coalition of Certification Centers(NC3)3M and NC3 awarded 50$1,000 scholarships to students who participated in the NC3 National Career and Technical Education Letter of Intent Signing Day.Learn more at 3M and the National Coalition of Certification Centers award national scholarships.Inspiring employees to change the world3M ImpactOur portfolio of skills-based volunteer programs allows employees to use their business skills,experience,and energy to make a difference in local and global communities while also developing critical professional skills like empathy,problem-solving,and interpersonal communications.Focused on working with social enterprises and nonprofit organizations that are addressing the worlds toughest challenges,we invest in volunteer programs that promote a circular economy,fight against climate change,and create a more positive world through science to inspire and empower our employees to drive change.In 2022,we resumed our global activity after a two-year hiatus due to COVID-19.We provided 30,100 work hours of skills-based volunteerism by 3M employees in 2022.Programs include:3M Impact Global Employees are sent to communities around the world to work on-site with local nonprofit organizations and social enterprises for two weeks.3M Impact Local Employees work with a nonprofit organization or social enterprise in their own community.3M Impact Health Care Employees use health care expertise to address health care inequities and build the capacity of nonprofit and community health organizations that serve historically disadvantaged populations.A national study conducted by 3M in 2022 highlights the pervasiveness of health care inequities and the importance of this work.Big hearts,matchedWith the 3M Volunteer Match program,3M donates money to eligible nonprofit organizations when a U.S.-based 3M employee or retiree volunteers in our community.In 2022,3M offered a$20 volunteer match for each hour of service,up to$500.Since 2000,3M and 3M Foundation have donated$12.2 million in 3M Volunteer Match dollars,and in 2022 Volunteer Match grants supported 1,350 unique schools and nonprofit organizations throughout the U.S.In addition,3M expanded its support of 3M employees serving on nonprofit boards of directors with a new 3M Board Service Match program in 2022.3M and NC3 awarded 50$1,000scholarships to students in the skilled tradesAbout reportSite spotlightsWhat we createWho we areHow we work31Giving that starts at home3M amplifies employees philanthropic impact through relevant matching gift programs.In the United States,the 3M Community Giving Match and College&University Match programs matched up to$1,000 per employee gift in 2022 plus an added level of matching gifts to higher education institutions.In 2022,global employees contributed$3.25 million in donations and pledges through the 3M matching gift programs.When combined with the match,this totaled more than$5.5 million in donations to help solve our communities greatest needs,supporting more than 4,020 organizations.Product donationsWe work to provide 3M products to a multitude of U.S.nonprofit organizations,from hospitals to schools to shelters.A large part of this effort involves donating excess inventory to leverage life-improving products in meaningful ways.In 2022,3M donated$31.4 million in products globally.For example,our strategic partnership with the Kids in Need Foundation helped to provide 3M products to under-resourced K-12 teachers and students across the U.S.Humanitarian aid3M works with strategic community partners Direct Relief,MAP International,and American Red Cross to provide financial support and product donations to communities in times of need.For an example of our efforts,see 3Mers push Ukraine giving past$2M.Looking forwardWe believe 3M is positioned to bring our full capabilities to advance equity and inclusion in our communities.Were continuing to deliver on our$50 million community commitment and to partner with organizations dedicated to assuring justice and equity.In the next year,well continue to monitor and measure the impact of our initiatives to advance equity in STEM and skilled trades.Our focus will be to build closer relationships with our partners and continue to expand and invest in areas where we can lend our unique expertise and technologies.Were committed to advancing environmental justice by working alongside marginalized communities to co-create sustainable solutions.And well continue to leverage the skills and passion of our people to meet the needs of our communities in new ways in 2023.Communities|3M 2023 Global Impact ReportAbout reportSite spotlightsWhat we createWho we areHow we work32Communities|3M 2023 Global Impact Report2022 giving in reviewTotal giving:2022$82.1Mcompared with 2021 corporate median of$25.8M1 0.78%in cash giving as a percentage of pre-tax profit,compared to 2021 corporate median of 0.62%1$23.9Minvested in education73%U.S.giving27%international givingSupporting 3M communities in all 50 states,Puerto Rico,the U.S.Virgin Islands,and over 28 countries3M and 3M Foundation work to improve lives in 3M communities with investments that drive equity in STEM and skilled trades,volunteer activities that leverage the skills and talents of 3M employees,and the deployment of 3M products for social impact.Advance economic equity We help advance economic and racial equity by supporting increased participation of underrepresented populations in STEM and skilled trades careers.1,040,000 learning experiences for underrepresented groups Since 2021,weve supported over 1 million unique STEM and skilled trades learning experiences,putting us well on track to deliver on our goal to create 5 million learning experiences by the end of the 2025-2026 school year.3M Manufacturing and Academic Partnership program(MAP)To build a pipeline of diverse talent in advanced manufacturing,3Ms MAP program helps our local technical schools and high schools access relevant technologies and training.$1$3 amplified impact toward our$50M goalAn external analysis demonstrated that every$1 we invest in the community generates nearly$3 in social impact.This amplifies our actions as we work toward our goal to increase racial equity in STEM education and the workforce.Employee empowerment We empower employees to support our communities through philanthropy and volunteer service.192,000volunteer hours globally81,800 skills-based volunteer hours since 2019Our employees shared their skills,experience,and energy to make a difference in our global communities.$3.98M total employee contributions and 3M community giving match Together,our employees supported over 3,020 community organizations throughout the U.S.4,020schools and nonprofits 3M employees and retirees volunteer in alignment with their passions,and we support them through 3Ms Matching Gifts programs in the U.S.3M product deployment We make strategic financial and product donations in response to community needs.$9.4MNAEIR and Kids in Need We donated product to nonprofit organizations and schools in the U.S.$1.3MFIRST RoboticsOur donation of products for robotics kits enhanced student experiences.$12.2Mfor humanitarian aid We made product donations for humanitarian aid throughout the world.1 Chief Executives for Corporate Purpose.Giving in Numbers:2022 Edition:cecp.co/home/resources/giving-in-numbers/About reportSite spotlightsWhat we createWho we areHow we work33Diversity,equity,and inclusion|3M 2023 Global Impact ReportDiversity,equity,and inclusionOur commitmentRecruiting and retaining a diverse global workforce is a core part of 3Ms sustainability strategy.We recognize that different countries and cultures have different definitions of diversity.3M aims to reflect the diversity of our customers,suppliers,and community partners.In addition,were committed to advancing equity across our organization at all levels and to creating an inclusive culture where all feel welcome.Our impactWe advance meaningful actions toward a more equitable future for our global employee base,including training,development,and recruitment efforts focused on underrepresented populations.We foster an inclusive culture that supports and appreciates differences and provides fair and equal opportunities for everyone.And we continue our efforts toward building a diverse workforce around the world.Our sustainability goalsDouble the pipeline of diverse talent in management globally to build a diverse workforce by 20301Increased to45.1%Double the representation of underrepresented groups in management positions in our U.S.workforce2,3Increased to6.39%Maintain or achieve 100%pay equity globally2Achieved100%equityDouble the representation of under-represented groups from entry-level through management in our U.S.workforce2,3Increased to9.02%1 In 2021,3M updated the goal maturity date to 2030 from 2025.2 Established in 2020 to drive trend and trajectory progress over time.3 Underrepresented groups in our 3M U.S.workforce include Black/African American and Hispanic/Latino employees.2020 is the baseline measurement year.About reportSite spotlightsWhat we createWho we areHow we work34Diversity,equity,and inclusion|3M 2023 Global Impact ReportAs a science-based company with a promise to help solve some of the worlds greatest challenges,its our imperative to become the most inclusive enterprise we can be.Inclusion leads to engagement,engagement fosters creativity,creativity sparks innovation,and innovation produces growth.In addition to the below,learn more about our diversity,equity,and inclusion efforts,including key highlights and actions taken in 2022,at 3Ms Diversity,Equity&Inclusion(DEI)Report.Diversity,equity,and inclusion governanceTo foster a workplace that reflects the 3M Respectful Work Environment Principle,we follow U.S.Equal Employment Opportunity(EEO)policies,which prohibit all forms of discrimination or harassment against applicants,employees,vendors,contractors,or customers on the basis of race,color,creed,religion,sex,national origin,age,disability,veteran status,pregnancy,genetic information,sexual orientation,marital status,citizenship status,status with regard to public assistance,gender identity/expression,or any other reason prohibited by law.To advance our social justice and impact agenda,we created a 3M Equity&Community organization to support our goals and commitments to progress equity in our workplaces,business practices,and communities globally.This holistic cross-functional organization connects our teams and strategies across the areas of diversity and inclusion in our workforce.We also support our values with an internal CEO Inclusion Council,chaired by CEO Mike Roman,to advance diversity,equity,and inclusion initiatives.A diverse and inclusive workplaceWe know that people with different experiences,racial and ethnic backgrounds,ages,gender identities,sexual orientations,abilities,personalities,styles,and ways of thinking help us better understand the needs of 3M customers,suppliers,and community partners around the world.Our diverse workforceWere building on our foundation by taking steps to advance the representation of underrepresented groups at 3M.We continue to work toward bringing the demographics of 3Ms workforce in line with broader workforce availability.To measure progress against our goal to double the pipeline of diverse talent in management globally by 2030,we use 3Ms global Diversity Index,which measures the percentage of 3M management that is diverse across a wide spectrum of dimensions,including gender,nationality,race/ethnicity,disability,U.S.military veterans,and LGBTQI .Since 2015,weve improved our global Diversity Index by 12.5 points,moving from 32.6%to 45.1%as we progress toward our 2030 goal of 65.2%or double our 2015 percentage.To see historical progress,view our metric tables.In addition,weve made good progress on our goal to double the representation of underrepresented employees in the U.S.Since 2020,weve improved our U.S.representation of underrepresented groups from entry-level through management by 0.92 points,moving from 8.13%to 9.02%.At the same time,weve improved our U.S.representation of underrepresented groups in management positions by 0.79 points,moving from 5.55%to 6.39%.We anticipate even more progress in the coming year as we continue to advance our efforts in hiring,retaining,and developing talent.Indeed,nurturing a talent acquisition pipeline is critical to achieving and maintaining our representation goals.To strengthen that pipeline,3M has several programs that provide valuable research,work,and professional development opportunities to underserved STEM students in higher education.Learn more about these programs in the Innovation management section.To help us monitor our progress and provide transparency,we share an internal quarterly scorecard of our progress on the global Diversity Index and hiring metrics,as well as data on supplier diversity and community investments.Learn more about 3Ms diverse workforce at our Diversity,Equity&Inclusion(DEI)Report.Support for LGBTQI peopleAt 3M,we believe in fair treatment,access,and opportunity for all individuals,and were committed to advocating for human rights and removing barriers to equity.3M has signed the Human Rights Campaigns Business Coalition for the Equality Act,joining other leading U.S.employers in declaring support for U.S.federal legislation that would provide the same basic protections to LGBTQI people that are provided to other protected groups under federal law.Improved our global diversity index by12.5pointsAbout reportSite spotlightsWhat we createWho we areHow we work353M is also a signatory to a national Business Statement Opposing Anti-LGBTQ State Legislation,organized by the Human Rights Campaign and the Freedom for All Americans Education Fund.By signing,3M and other companies are expressing support for LGBTQI employees and their need to feel safe and included both in the workplace and in the surrounding community.The companies are also expressing concern over state bills that single out LGBTQI individuals for exclusion or different treatment.In support of the United Nations LGBTI Standards of Conduct for Business,3M has joined other companies in committing to processes,policies,and programs that promote equality and safety,prevent harassment and discrimination,and advance LGBTQI individuals in the workplace and the community.Hear the stories of two 3M employees whose personal experiences make 3Ms support especially meaningful.Pay equity 3Ms global pay philosophy,principles,and consistent implementation result in fair and equitable pay for our employees.We analyze pay equity by comparing employees in the same job category,job grade,and location,a process thats produced excellent results.In 2022,we continued to have 100%gender pay equity globally and 100%pay equity for racial/ethnic groups in the U.S.Learn more in the Compensation section.Diversity,equity,and inclusion|3M 2023 Global Impact ReportLooking forwardAs we advance our diversity,equity,and inclusion initiatives,we know systemic change requires resources and long-term dedication.Well continue to focus on moving the needle on our representation goals and partnering with organizations dedicated to inclusion and equity.Well keep building our recruitment and hiring pipeline by supporting programs that provide research,development,and work experience to underrepresented STEM students in higher education.We stand with 3Ms LGBTQI community and will continue to support initiatives that aim to include and protect LGBTQI individuals,both within 3M and in our operating communities.All of these actions move us closer to being an enterprise where people are respected for exactly who they are and everyone feels a sense of belonging both within and outside of our walls.About reportSite spotlightsWhat we createWho we areHow we work36About reportSite spotlightsWhat we createHow we workWho we are3M 2023 Global Impact ReportHow we workCorporate governance 37Enterprise risk 41Corporate Code of Conduct 43Human rights 50Compensation 56Employee programs 59Environmental,health,and safety management 65Circular materials 74Climate and energy 82Suppliers 9437Who we areHow we workWhat we createSite spotlightsAbout reportCorporate governance|3M 2023 Global Impact ReportCorporate governanceOur commitment 3M believes that good corporate governance practices serve the long-term interests of shareholders,strengthen the Board and management,and further enhance the trust 3M has earned from the public over more than a century of operating with uncompromising integrity and doing business the right way.Our impactOur corporate governance principles govern how 3M does business daily,enabling us to outperform and lead the way to sustainable growth.Our corporate governance principles define the roles,rights,and responsibilities of different groups within 3M as well as of our Board of Directors.Governance oversight3Ms Board of Directors is comprised of a diverse group of experienced leaders that possess deep expertise in areas important to 3M.Shareholders,who have several options to nominate individuals to serve as 3M directors,choose those directors on an annual basis.The Board consists entirely of independent directors and 3Ms CEO.3Ms Board serves as elected representatives of the shareholders,acts as an advisor and counselor to the CEO and senior management,and oversees management performance on behalf of shareholders.The Board also oversees 3Ms strategic and business planning process;has general oversight responsibilities for our overall environmental,social and governance(ESG)and human resources strategies,goals,and results,including sustainability,environmental stewardship,and diversity,equity,and inclusion;and reviews and assesses managements approach to addressing significant risks facing the company.3Ms Board of Directors has adopted Corporate Governance Guidelines that provide a framework for the effective governance of the company.The guidelines address matters such as the respective roles and responsibilities of the Board and management,the Boards leadership structure,the responsibilities of the lead independent director,director independence,Board membership criteria,Board committees,succession planning,and the annual Board and committee evaluation process.Corporate Governance Guidelines provide a framework for the effective governance of the company38About reportSite spotlightsWhat we createHow we workWho we areCorporate governance|3M 2023 Global Impact Report3Ms Proxy Statement provides annual updates on governance topics,including:Qualifications,experiences,and diversity of our Board members Director independence Board and committee leadership structure,Board refreshment,and Board committee composition and responsibilities Shareholder outreach and engagement Board oversight activities,including with respect to strategy,risk management,management succession planning,human capital(including diversity,equity,and inclusion),and ESG(including sustainability)Executive compensation,including as it relates to environmental and social goalsMore information on 3Ms corporate governance can be found at:Corporate Officers Board of Directors Committee Composition Governance Documents Certificate of Incorporation and Bylaws Committee Charters Corporate Governance Guidelines Board of Directors Code of Conduct Director Independence Guidelines Annual Reports&Proxy StatementsSustainability governanceOur robust sustainability governance structure includes oversight by our Board of Directors,which receives regular sustainability updates and reviews related risks as part of 3Ms enterprise risk management.The Science,Technology&Sustainability Committee of the Board of Directors has primary oversight responsibility of 3Ms sustainability and stewardship activities,including environmental and product stewardship efforts,environmental,health,and safety,and legal and regulatory compliance,among others.3Ms Environmental Responsibility and Sustainability Committee,comprising top 3M executive management,provides leadership,oversight,and strategy for sustainability and develops and monitors adherence with related policies and procedures.GroupFunctionBoard of Directors Receives regular sustainability updates at Board meetings Reviews sustainability-related risks as part of 3Ms enterprise risk programScience,Technology&Sustainability Committee of the Board of Directors Provides primary oversight of 3Ms sustainability and stewardship activities Reviews 3Ms sustainability policies and program to identify and analyze significant sustainability,materials-vulnerability,and geopolitical issues that may impact 3Ms overall business strategy,global business continuity,and financial resultsEnvironmental Responsibility and Sustainability Committee Provides leadership,oversight,and strategy to encourage and ensure sustainability opportunities are recognized Develops and monitors adherence with strong sustainability-related policies and procedures Includes 3Ms CEO,CFO,CTO&EVP Environmental Responsibility,Group President Enterprise Operations,EVP&Chief HR Officer,EVP&Chief Legal Affairs Officer,SVP&Chief Strategy Officer,and EVP Country Governance&ServicesChief Sustainability Officer Leads 3Ms sustainability activities Reports to the Environmental Responsibility and Sustainability Committee and other internal and external groupsSustainability leaders in business groups,areas,and enterprisewide Drives Strategic Sustainability Framework priorities and initiatives consistent with the scope of their role Leads customer relationships to solve shared global challenges39About reportSite spotlightsWhat we createHow we workWho we areThrough engagement with our Board of Directors,executive leadership team,and business units,were working across 3Ms Strategic Sustainability Framework to advance progress toward our sustainability goals.Learn more in our 2023 Proxy Statement,Boards role in sustainability.Public policy engagementAs a concerned member of our communities,3M actively participates in public policy and legislative advocacy,or“lobbying.”We believe that transparency with respect to the consideration,process,and oversight of our engagement with lawmakers is important to our shareholders,and we continually make efforts to give our shareholders useful information about our public policy engagement.See details in our 2023 Proxy Statement,our Lobbying and Political Activities Principle,and our Lobbying and Political Activities Governance document.3Ms approach to taxation3M is committed to complying with all applicable tax laws,rules,regulations,and reporting and disclosure requirements through the implementation of standardized,simplified,cost-effective,and automated compliance processes.This means paying the right amount of tax in the right place at the right time and involves disclosing all relevant facts and circumstances to the tax authorities and claiming reliefs,incentives,and exemptions in line with and in the spirit of the applicable tax legislation.In addition,3Ms tax strategy is consistent with the principles set forth in 3Ms Code of Conduct.Approach to risk management and tax governanceAt the highest level,responsibility for taxes resides with 3Ms Global Tax Department based in our headquarters in the United States.The senior vice president for tax reports to 3Ms executive vice president and chief financial and transformation officer and is a member of 3Ms Finance Committee.The Tax Operating Committee,under the leadership and direction of the senior vice president for tax,has oversight over the material tax matters of 3Ms worldwide business and supply chain.3M assures the appropriateness of our accounting and tax records on an ongoing basis to enable us to meet our compliance obligations.In countries where we operate,we document and confirm with the respective authorities.Where required,3M assures public disclosures are published according to the regulations.Day-to-day management of 3Ms taxes is overseen by the tax management responsible for the respective region and area of taxation.Processes relating to various taxes are allocated to the relevant process owners responsible for executing tax compliance controls.Appropriate training is carried out for staff who manage or process matters with tax implications.Transactions between 3M companies are conducted on an arms-length basis in accordance with appropriate transfer pricing rules.This assures 3Ms profits are taxed where economic activities are performed.Where there are any areas of uncertainty,3M engages its external professional advisors to provide specialist advice as and when needed.Reporting tax concernsAs with all instances of unethical or unlawful behavior,we encourage our employees to ask questions or report concerns about tax matters to management,3Ms Ethics&Compliance Department,3M legal counsel,3ME,their assigned human resources manager,3Ms Corporate Audit Department,or the Audit Committee of the Board of Directors.Learn more about reporting concerns about unethical or unlawful behavior in the Corporate Code of Conduct section.3Ms attitude to tax planning3M engages in tax planning thats aligned with its commercial business activities or supply chain needs and in compliance with tax rules and regulations.3M may engage in tax planning or other activities potentially perceived as tax planning.We do not engage in artificial tax arrangements that lack economic substance,one of the main purposes of which would be to obtain a tax advantage.We may,however,evaluate potential economic options resulting from business transactions with consideration of tax efficiency.Corporate governance|3M 2023 Global Impact Report40About reportSite spotlightsWhat we createHow we workWho we areRisk management in relation to taxationOur approach to tax risk follows principles similar to those that apply to our management of legal,compliance,and other business risks.Our internal framework supports compliance with tax laws and regulations to assure we identify,assess,and mitigate tax risks,including consideration of both internal and external stakeholders.Approach toward engagement with tax authoritiesWe strive to have an open,honest,and collaborative working relationship with tax authorities.3M assures that specific tax authorities are kept aware of significant transactions and changes in the business and seeks to discuss at an early stage any tax issues that arise.When submitting tax computations and returns to country tax authorities,3M discloses all relevant facts and identifies any transactions or issues that we consider to have potential for uncertain tax treatment.We recognize there could be areas of differing legal interpretations between 3M and tax authorities,and where appropriate well engage in proactive discussion to conclude matters as quickly as possible.Any inadvertent errors in the submission of tax returns and tax computations are fully disclosed as soon as reasonably practicable after they have been identified.Corporate governance|3M 2023 Global Impact ReportLooking forwardWe regularly post governance news,events,and presentation information on the Events&Presentations page of our Investor Relations website.41About reportSite spotlightsWhat we createHow we workWho we areEnterprise riskOur commitment To assure 3Ms long-term success,were committed to identifying and preparing for material opportunities and threats impacting our ability to deliver on stakeholder expectations.Our impact3Ms general auditor conducts an annual review of the major risks facing the company and works with executives to assess those risks and develop appropriate mitigation plans.To assure business continuity through global economic and geopolitical challenges,we prioritize the well-being of our workforce,resiliency of our global supply chain,environmental stewardship,and efficiency in our operations.3M believes that good corporate governance practices serve the long-term interests of our stakeholders,strengthen 3Ms Board of Directors and management,and further enhance the public trust weve earned from more than a century of operating with unwavering integrity.Risk oversightThe concept of risk appetite and tolerance is an essential component of our strategic planning.The Board delegates primary responsibility for the oversight of risks facing the company to the Audit Committee of the Board of Directors.The Audit Committee Charter states that the committee will discuss policies and procedures with respect to risk assessment and risk management,the companys major risk exposures,and the steps management has taken to mitigate and monitor such exposures.The Audit Committee has direct oversight of the work of two senior vice president positions,the general auditor and the chief ethics&compliance officer,that both report to the chair of the Audit Committee.The general auditor,Corporate Audit,is responsible for leading the formal risk assessment and management process within the company and annually reports the results to the full Board.Enterprise risk|3M 2023 Global Impact Report.we prioritized the well-being of our workforce,resiliency of our global supply chain,environmental stewardship,and efficiency in our operations.42About reportSite spotlightsWhat we createHow we workWho we areEnterprise risk|3M 2023 Global Impact ReportConsulting with the companys senior management and the Board,the general auditor annually leads the assessment of the major risks facing the company and works with the executives responsible for managing each risk to develop appropriate mitigation and monitoring plans.The general auditor periodically reviews with the Audit Committee its findings and results from this work.3Ms 2022 Annual Report on Form 10-K,Item 1A summarizes risk factors applicable to the company.In addition,3Ms 2023 Proxy Statement provides details on Board oversight committees and members.See our 2022 Annual Report and 2023 Proxy Statement.1:1 risk management meetingsIn 2022,the general auditor met individually with each independent 3M Board member and each member of the executive-level Corporate Operating Committee(COC)to discuss risk management in general,as well as specific risk-related topics facing the company.These meetings provided the COC and Board members the opportunity to share what risk issues were top of mind for the
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Our Mission in Action2022 Sustainability ReportIntroductionOur people and cultureHealthy environment22022 Sustainability ReportA modern,high-performing health systemResponsible business practicesPerformance dataIntroductionA message from our Chief Executive Officer(CEO)A message from our Chief Sustainability Officer(CSO)About UnitedHealth Group Sustainability at UnitedHealth Group 2022 sustainability highlights Our commitmentsBuilding a modern,high-performing health system Advancing health equity Accelerating the transition to value-based careExpanding in-home clinical careExpanding access to care by lowering the cost of prescription drugsEnhancing consumer-oriented benefits Personalized care coordination when it matters mostBuilding healthier communities Healthy environmentCharting our path to net-zeroManaging weather-related risksReducing waste,water and paperOur people and culture Advancing diversity,equity and inclusionEmployee health and well-beingDeveloping and growing our talentResponsible business practices Corporate governanceData privacy and securityResponsible use of artificial intelligence and machine learningSupply chain management Supplier diversity Public policy Compliance and ethicsAppendices Performance dataSustainability Accounting Standards Board IndexAbout this reportContents3 4 57 111213 1618 2023 2527 29343641424446515659616366677072747987 90IntroductionOur people and cultureHealthy environment32022 Sustainability ReportA modern,high-performing health systemResponsible business practicesPerformance dataA message from our CEOBut that alone,is not enough.As youll see throughout this report,we believe we have a greater leadership role to play.We understand the linkage between a healthy society and a healthy planet.We are making real progress toward reducing our carbon footprint,identifying alternative energy sources and transitioning to net-zero.We are reimagining our processes to take as much paper as possible out of our system helping to minimize resource consumption,while improving the consumer experience.We know one of the first steps to creating a more equitable system is to help build a health workforce that not only understands,but reflects the people and communities it serves a challenge we are addressing head on,both within and beyond our walls.And we are doubling down on our most valuable resource our people by investing in new opportunities for training,skill-building and leadership development at every level of the company,providing new benefits,creating greater workplace flexibility and building a culture of inclusion where diversity is not only celebrated and embraced,but considered one of the greatest strengths of our company.My colleagues the people of UnitedHealth Group are incredibly proud of the work reflected in this report.But we also know just how much more is still undone.We feel a profound responsibility to strive each day to make our health system work better for everyone.Andrew Witty Chief Executive Officer,UnitedHealth GroupUnitedHealth Group was founded on the simple premise that consumers deserved better options for their health care.As weve grown to serve the needs of more than 150 million people around the world,so has the scale of our mission:To help people live healthier lives and help make the health system work better for everyone.Across Optum and UnitedHealthcare,were working to fulfill that mission by integrating our deep clinical expertise with data and analytics capabilities to build health benefits,pharmacy,technology and financial services businesses that drive innovation in the system.Our comprehensive,value-based care delivery network connecting primary,specialty and surgical care with behavioral and pharmacy services now reaches more than 100 million people.Yet as far as weve come,we recognize we have more to do.Consumers deserve even better.More choice.More simplicity.More value.Better outcomes.Lower costs.Greater value for everyone.We often say sustainability is core to our mission,to our culture and our strategy.In fact,in looking across each of our five growth priorities,its inextricable from our long-term ambitions.A systemwide transition to value-based care provides higher-quality outcomes for patients,more fulfilling experiences for physicians and lower costs throughout the system.Making health benefits simpler,more accessible and affordable includes expanding coverage to more people and looking after the unique social needs of our most vulnerable.Integrating pharmacy care with behavioral health improves outcomes for people with complex conditions.Advancements in health technology and financial services strengthen trust between care providers and payers,creating greater ease and convenience for consumers.IntroductionOur people and cultureHealthy environment42022 Sustainability ReportA modern,high-performing health systemResponsible business practicesPerformance dataA message from our CSOoutcomes for complex chronic conditions and behavioral health patients.A$100 million investment is building a pipeline of diverse health care talent over the next decade,helping more people across the country access culturally competent care.Our impact shows up in the daily interactions we have with real people in the rural home of someone on the verge of a heart attack or the person whose health depends on a meal and a ride to their next medical appointment.Our opportunity lies in those single interactions,multiplied millions of times each day,to help close the gaps we see today and anticipate the challenges of tomorrow.Our mission in action,benefiting real peopleOur persistent commitment to sustainability serves as the foundation of our strategic growth priorities,designed to not just serve more people,but serve them better,more comprehensively and with higher-quality,more affordable care.While we have plenty of work ahead of us,the progress weve made to date will form the bedrock for the future.Our mission comes to life in the pages of this report with real words from real members,patients and employees who have joined this company because they are drawn to our mission and the opportunity to make a difference in peoples lives.I am proud to be a part of this endeavor each day,and Im excited for the progress we can make in the years to come.Patricia L.Lewis Chief Sustainability Officer,UnitedHealth GroupThe mark of any sustainable company is progress an unwavering focus on addressing societys most complex challenges with a steadfast adherence to a core mission.As one of the worlds leading health care companies,we have a long history of operating with one objective:to help people live healthier lives and help make the health system work better for everyone.A path to a healthier futureOur company has made significant progress to advance our sustainability priorities by continuing to deliver on our long-term commitments,supported by decades of strong and effective corporate governance.We carried our momentum into 2023 by closing 141 million gaps in care and connecting 862,000 people to services to address social determinants of health.We provided in-home clinical assessments to more than 2.2 million people,a quarter of whom had a condition they didnt know about.We are building a workforce reflective of the diverse people and communities we serve.Women now represent 40%of top management positions at our company and 33%of our Board of Directors,and we remain dedicated to increasing racial and ethnic representation in our companys leadership.Last year we saw an 81%membership increase in our Employee Resource Groups.The U.S.health care sector accounts for 8.5%of national carbon emissions.By establishing a roadmap to decrease our scope 1,2 and 3 emissions,we are charting a path to dramatically reduce our carbon footprint over the next several decades to positively impact human health.Progress rooted in equityHealth equity remains one of the great challenges facing health care,and one of the most significant opportunities we have as a company.We are addressing health disparities every day across our company.Community pharmacies are delivering better IntroductionOur people and cultureHealthy environment52022 Sustainability ReportA modern,high-performing health systemResponsible business practicesPerformance dataOur core valuesIntegrity Honor commitments.Never compromise ethics.Compassion Walk in the shoes of the people we serve and those with whom we work.Relationships Build trust through collaboration.Innovation Invent the future and learn from the past.Performance Demonstrate excellence in everything we do.Who we serve Consumers Employers Governments Care providers Patients Health plansAbout UnitedHealth GroupOur missionHelp people live healthier lives and help make the health system work better for everyone.Combines clinical expertise,technology and data to empower people,partners and providers with the guidance and tools they need to achieve better health.A health care and well-being company with two distinct and complementary businesses working to help build a modern,high-performing health system.Offering a full range of health benefits,enabling affordable coverage,simplifying the health care experience and delivering access to high-quality care.Employer&IndividualConsumer-oriented benefit offeringsMedicare&RetirementServing older peopleCommunity&StateCaring for medically underservedOptum HealthValue-based careOptum RxPharmacy care servicesOptum InsightTechnology-enabled services400Kemployees worldwide.150Munique individuals served.$320Btotal revenues.IntroductionOur people and cultureHealthy environment62022 Sustainability ReportA modern,high-performing health systemResponsible business practicesPerformance dataOur strategic growth prioritiesValue-based care With more than 70,000 employed or aligned physicians serving over 20 million people including more than 3 million in fully accountable value-based arrangements our integrated care delivery capabilities are strongly positioned to help providers and payers transition from fee-for-service to more effective models helping to achieve higher-quality outcomes and better experiences,at lower costs.We continue to integrate and broaden our in-clinic,in-home,behavioral,virtual and other capabilities to serve more people,more comprehensively.Health benefits We serve more than 51 million people in commercial and government health benefit programs.We continue to look for opportunities to deliver better care and outcomes for all customers and consumers.We are building on proven coverage offerings with new simple,affordable and innovative benefits.We continue to prioritize coverage facilitating high-quality care at a lower cost,which in turn drives growth in the number of people we are able to serve.Health technology We are uniquely positioned to continue to bring greater transparency,efficiency and quality to health care.We use clinical data and intelligence to help redesign,automate and deploy new technologies and approaches to simplify administrative processes and clinical decision-making thus enabling physicians and health systems to operate more efficiently and effectively,as well as better serve their patients.We are continuing to expand our portfolio of comprehensive market-level health system partnerships with tools to improve claims accuracy and administrative efficiency.Health financial services Streamlining payment processes to provide greater convenience and reliability for consumers and providers is essential to modernizing the health system.Our work to integrate the end-to-end health banking and payments experience will help care providers get paid more accurately,faster and with less administrative burden making payments simpler,more convenient and affordable for consumers.Pharmacy services As the most common touch point in health care,pharmacy services are vital to improving patient outcomes and reducing total cost of care throughout the health system.We continue to innovate as a care provider and pharmacy benefit manager,strengthening our direct-to-consumer offerings,capturing greater share of the growing life sciences market and seamlessly integrating our medical,pharmacy,behavioral and community health capabilities.IntroductionOur people and cultureHealthy environment72022 Sustainability ReportA modern,high-performing health systemResponsible business practicesPerformance dataSustainability at UnitedHealth GroupOur missionOur strategic growth prioritiesOur sustainability prioritiesSustainability is an inspiration for growth a foundation to fulfill our mission and deepen our societal impact by improving the health and well-being of the people we serve.At UnitedHealth Group,sustainability is our ambition for strategic,long-term growth,embedded in our businesses and intrinsically linked by a common mission to help people live healthier lives and help make the health system work better for everyone.Our four sustainability priorities are informed by our stakeholders and reflect contemporary challenges,including social inequities,climate change and access to affordable,high-quality medical care.These priorities align with our five growth pillars value-based care;health benefits;health technology;health financial services;and pharmacy services representing the ways we can seek to help every person who interacts with the health care system every day.The ultimate success of our company is the creation of enduring,long-term value for both our shareholders and society at large.Its an ambition influenced by the people who work here,the workplace culture we build,our impact on the planet,strong corporate governance and our ability to help build a health system capable of responding to the needs of the people it serves.Helping to build a modern,high-performing health system Healthy environment Our people and culture Responsible business practicesOur sustainability priorities Value-based care Health benefits Health technology Health financial services Pharmacy servicesOur strategic growth prioritiesIntroductionOur people and cultureHealthy environment82022 Sustainability ReportA modern,high-performing health systemResponsible business practicesPerformance dataHealthy environmentRecognizing the impact climate change has on human health,we are working to minimize our footprint to help people live healthier lives.Our commitment to net-zero reflects our belief in a healthy planet as the foundation of a healthy society.Helping to build a modern,high-performing health systemOur core business is committed to building a simpler,more consumer-oriented health system to help ensure everyone has access to high-quality,affordable health care.Through partnerships and our core growth strategies,we are working to deliver a more sustainable health system for this generation and the next.Our people and cultureThe people who come to work at UnitedHealth Group are drawn to our mission and dedicated to building a modern,high-performing health system to better serve society.Our ability to build a diverse,equitable and inclusive culture is critical to our success as a company where innovation and compassion fuel our impact on the people and communities we serve.Responsible business practicesOur more than 40-year history of strong and effective corporate governance is foundational to our ability to grow and operate ethically as we work to improve the health and well-being of those we serve.Our ability to protect data and privacy,effectively manage our supply chain and help ensure the responsible use of artificial intelligence and machine learning are foundational to our ambitions as a leading health care company.Our sustainability prioritiesIntroductionOur people and cultureHealthy environment92022 Sustainability ReportA modern,high-performing health systemResponsible business practicesPerformance dataSustainability governanceUnitedHealth Group has a long-standing commitment to sustainability supported by our senior leaders and Board of Directors.Our Board of Directors including its four committees provides formal oversight and strategic direction for our environmental,social and governance(ESG)agenda,including review and approval of key sustainability priorities,policies,performance and annual reports.Our Governance Committee oversees overall strategy of the companys ESG policies and practices,including overseeing the process of identifying key ESG topics,ensuring appropriate board or committee oversight of key ESG topics,and reviewing the companys ESG and sustainability reports.Other committees provide subject matter expertise.For example,the Audit and Finance Committee participates in oversight of investment criteria,the Health and Clinical Practice Policies Committee oversees efforts to expand access to health care and related matters,and the Compensation and Human Resources Committee reviews programs related to people management and diversity,equity,and inclusion.The CEO and executive team,including the chief sustainability officer,functions as a decision-making body,approving sustainability priorities,policies and practices,and monitoring performance.The CSO is accountable for ESG initiatives and performance and provides regular updates to the CEO and the board.In 2022,we established an ESG Steering Committee,a cross-enterprise group chaired by the CSO and composed of key business and functional leaders.The ESG Steering Committee serves in an advisory role regarding ESG strategy and objectives,supports execution and results,and disseminates information.Sustainability working groups have a special focus on specific ESG focus areas,with representation across business and functional areas.Additionally,ESG priorities are supported by teams across the enterprise,including Optum,UnitedHealthcare,Operations and Facilities Management,Sourcing and Procurement,Clinical,the People Organization,Finance,Compliance and Privacy,Legal and Risk Management,Compliance and Regulatory Affairs,Communications,and Enterprise Resiliency and Response.OversightAccountabilityImplementationBoard of DirectorsBoard CommitteesChief Sustainability OfficerESG Steering CommitteeESG Business Partners and FunctionsCEOSustainability TeamExecutive TeamSustainability Working GroupsIntroductionOur people and cultureHealthy environment102022 Sustainability ReportA modern,high-performing health systemResponsible business practicesPerformance dataStakeholder engagementWe continued to proactively engage with stakeholders in 2022 through various forums,one-on-one discussions,surveys,active listening and regular touch points.These engagements provide a diverse group of key stakeholders the opportunity to provide direct and indirect feedback and engage in robust dialogue on our ongoing efforts to achieve our commitments.We value each stakeholders unique perspective and use them to inform our evolving sustainability strategy.We continue to enhance our engagement efforts to meet the needs and expectations of our stakeholders and integrate feedback into the way we operate.StakeholderOur engagementConsumers and patients Active listening with a broad and diverse mix of consumers to improve our products and meet emerging needs.Net Promoter Score,including broad and targeted surveys.Ongoing tracking to understand brand awareness and affinity,and sentiments on key consumer health care needs.Ethnographic research,including in-person interviews,social media listening and focused listening with key diverse audiences.Employees Recurring employee sentiment analysis.Formal surveys to understand employee work experience.Regular all-company forums.Customers Recurring outreach with key customers to understand how to work together more effectively.One-on-one meetings with leaders from UnitedHealth Group,Optum and UnitedHealthcare.Periodic customer forums and advisory councils.Health care professionals External conferences and local advisory councils.Recurring engagement through nearly 50 medical,specialty and industry societies.Monthly forums on health plan topics.Peer companies Ongoing collaboration through trade associations and industry partnerships.Recurring engagement through the National Academy of Medicines Action Collaborative on Decarbonizing the U.S.Health Sector.Suppliers Annual Supplier ESG Summit to facilitate discussions and collaboration with suppliers.Supplier benchmarking sessions to share best practices and key learnings.Annual ESG assessments.Policy stakeholders Meetings with federal,state and international policymakers and their staff.Advocacy activities.Participation in key trade associations.Shareholders Annual Investor Conference,including ESG seminar and published materials.Quarterly financial updates and earnings reports.Investor conferences and events attended by management.Recurring one-on-one engagement meetings attended by management and board members.Community-based partners Recurring one-on-one and small group meetings with partners.Grant-making.Volunteer efforts.IntroductionOur people and cultureHealthy environment112022 Sustainability ReportA modern,high-performing health systemResponsible business practicesPerformance data2022 sustainability highlightsHealthy environmentResponsible business practicesBuilding a modern,high-performing health system$0copays initiated for five lifesaving drugs for fully insured commercial plan members.Completedour first assessment of scope 3 emissions.2.2Min-home health assessments provided to older adults,including 670,000 in low-income communities.24%reduction in inbound paper.Our people and culture40%of top management positions are held by women.Conductedour first Human Rights Impact Assessment.39Kemployees participated in Employee Resource Groups,up 17,500 from 2021.$569Min employee wages supported through our supplier diversity program.75%positive employee experience score,up from 72%in 2021.Recognition*Named to the Dow Jones Sustainability World and North America Indices since 1999.Named to Fortunes 2023“Worlds Most Admired Companies”list for the 13th consecutive year.One of Fortunes Most Innovative Companies for 2023.Named to Forbes list of Americas 500 Best Large Employers for 2022.*More recognition$100Mscholarship program launched to help build a diverse health workforce.33male independent directors on our board.Committedto the Science Based Targets initiative(SBTi)Net-Zero Standard.IntroductionOur people and cultureHealthy environment122022 Sustainability ReportA modern,high-performing health systemResponsible business practicesPerformance dataOur commitmentsSupported by our strategic growth priorities,our long-term commitments represent specific,measurable targets within our broader efforts to help build a modern,high-performing health system,advance health equity and contribute toward a healthy environment.As we measure and report our progress on each specific commitment,we are continuously evaluating new commitments that can further support our sustainability priorities and advance our mission.$100M20332022 program launchHealthy environmentBuilding a modern,high-performing health systemInvest and source 100%of our global electricity demand with renewable sources by 2030.Release approved targetsJune 2022 commitDeveloping targetsCommit to the Science Based Targets initiative(SBTi)Net-Zero Standard.Achieve a 60%reduction in scope 1 and scope 2 emissions by 2030.Reach operational net-zero by 2035.Invest$100 million to create a new philanthropic program and partnerships that will measurably advance a diverse health workforce by 2033.100%-4.7 3560 3020222030100%0 2249UU% of our outpatient surgeries and radiology services will be delivered at high-quality,cost-efficient sites of care by 2030.70%of our members will receive preventive care services annually by 2030.600M251M2021202520302030600 million gaps in care will be closed for our members by the end of 2025.Introduction132022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance dataBuilding a modern,high-performing health systemIntroductionA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance dataIntroduction142022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance dataUnitedHealth Group and our distinct and complementary businesses of Optum and UnitedHealthcare are helping to create a consumer-first health system,connecting people to high-quality,affordable care to deliver the best possible outcomes.3Mpeople served under fully accountable value-based care arrangements in 2022.8Mpeople served by Medicaid and Dual Special Needs Plans.2.2MHouseCalls completed in 2022.43Mpeople access behavioral health services through our network.Introduction152022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance dataBuilding a modern,high-performing health system is the foundation of our business a system that is more connected,personal and equitable,revolving around the consumer.We have made significant strides by expanding access to high-quality,affordable care.In 2022,we served approximately 1 million more members in fully accountable value-based care models,delivering better outcomes for patients with chronic conditions and older adults in Medicare Advantage.New innovative health benefits,like our Surest health plans,eliminated deductibles and reduced out-of-pocket costs.Our clinical decision support tools seamlessly integrated health technology for providers at the point of care,allowing them to spend more time with their patients.We accelerated our investment in health financial services,introducing an integrated benefits card to help older adults pay for prescriptions,food or utilities.And we expanded the number of community pharmacies helping to improve outcomes for people with HIV and behavioral health conditions.At the same time,we also know people accessing the health system face high costs,wide disparities and for many a fragmented,disjointed experience impacting their ability to live a healthy,fulfilling life.We can reach more people by creating an equitable system of care and delivering on our mission to help people live healthier lives and help make the health system work better for everyone for the 150 million people our company serves and anyone else who touches it.What were focused on Advancing health equity by focusing on six core areas where we can reduce widespread health disparities.Accelerating the transition to value-based care that delivers better health outcomes at a lower overall cost.Expanding in-home clinical care to better support people with complex medical,behavioral and social needs.Expanding access to care by lowering the cost of prescription drugs,including lifesaving medications like insulin.Enhancing consumer-oriented benefits with transparent pricing,choice and simplicity.Personalized care coordination that helps people navigate the health system and deliver higher satisfaction,particularly for those with specialized or rare diseases.Building healthier communities across the U.S.through grant-making,commercial programs,employee volunteering and charitable contributions.Introduction162022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance dataAdvancing health equityFrom our clinical policies,to the organizations we partner with across the country,to a more diverse and inclusive health workforce well beyond our own walls our commitment to health equity is part of who we are and how we operate.Our commitmentAbout our commitment In 2022,the United Health Foundation committed to investing$100 million over 10 years to deepen and scale our efforts in health workforce diversity.Through this commitment,we will provide scholarships and support to 10,000 underrepresented current and future clinicians,which will help support meaningful and sustained progress in addressing health disparities and advancing health equity.Invest$100 million to create a new philanthropic program and partnerships that will measurably advance a diverse health workforce by 2033Our progress We are on track to welcome more than 1,000 current and future health professionals into the program in 2023 and expect to commit more than$12 million by the end of 2023.Why this is important to us Research shows care provided by culturally competent clinicians who understand diverse languages,beliefs and attitudes builds trusting patient-provider relationships and helps reduce disparities in health conditions,experience and outcomes.How were delivering on our commitment Since announcing our commitment,the United Health Foundation has formally launched the Diversity in Health Care Scholarship program and provided scholarships to an initial cohort of diverse health professionals who are working to advance their clinical skills and credentials.We have initiated partnerships with eight nonprofit organizations to provide scholarships and support to future clinicians seeking careers as doctors,nurses and other clinical professionals.Introduction172022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance dataOur six focus areas Care experience and workforceEmphasis on increasing workforce diversity and reducing institutional bias in the delivery of careThe U.S.health care system is facing a shortage of health care professionals over the next decade.Furthermore,racial bias and a lack of culturally competent care leads to poorer experiences and outcomes.In 2022,we committed$100 million to accelerate this effort to help build a pipeline ofdiverse health care talent and address the projected health workforce shortage.Socioeconomic challengesEmphasis on social determinants of health and health literacy As much as 80%of health outcomes are tied to social and economic conditions.In 2022,we screened nearly 5 million members for social services and connected more than 862,000 people to better support their social needs.We are using data and analytics to proactively identify those who need support,as well as in-home clinical assessments to connect older adults and those with multiple chronic conditions to needed social services like housing or transportation.Since 2011,we have invested about$800 million to create 19,000 new homes,while targeted investments like Invest Appalachia are focused on supporting community-specific issues related to housing,poverty and food insecurity.Care access and affordabilityEmphasis on rural and underserved populationsAbout 40%of Americans say they or a family member have delayed recommended medical care due to costs.Our HouseCalls program provides more than 2 million in-home clinical services each year to address the medical,pharmacy,behavioral and social needs of older adults,leading to 6%more specialist visits.In 2022,we provided in-home assessments to nearly 670,000 people in low-income communities and nearly 400,000 in rural counties.Meanwhile,11 of our state Medicaid health plans have achieved a Health Equity Accreditation from the National Committee for Quality Assurance(NCQA).Behavioral and mental healthEmphasis on youth,older adults and LGBTQ communities Nearly 1 in 5 adults live with a mental health condition.Our integrated approach combines pharmacy,behavioral and medical care to treat the whole person both in person and virtually.We care for millions of people with behavioral health conditions through a network of 375,000 behavioral care professionals,a staff of nearly 4,500 employed clinicians and about 700 community pharmacies.Chronic condition managementEmphasis on asthma,hypertension,obesity,diabetes,sickle cell disease,breast cancer and colon cancerFour in 10 American adults have two or more chronic conditions,and wide disparities exist within specific conditions.With more than 140,000 clinical professionals and more than 70,000 aligned,contracted or employed physicians serving patients in nearly 3,000 sites of care across Optum,from ambulatory surgical centers to community pharmacies our deep breadth of clinical knowledge helps drive evidence-based decision-making toward better overall care.Our value-based care models emphasize coordinated,comprehensive care while connecting patients with chronic disease to the right specialists to address conditions early.Mortality and life expectancyEmphasis on maternal care Maternal mortality in the U.S.reached its highest level in 60 years and Black women are still three times more likely to die during childbirth compared to white women.For people in Medicaid who represent nearly half of all births in the U.S.we are working to expand access to doulas,a professional labor assistant for the mother,which has been shown to be one of the most effective ways to improve labor and delivery outcomes.We are also identifying home-based and digital tools to enhance maternal care,including a partnership with the Morehouse School of Medicine to research“near miss”maternal care experiences.In 2022,we deepened our focus on connecting resources and expertise across the enterprise,aligning around six strategichealth equity focus areas based on national public health trends and listening sessions with patients and care providers.These areas address the widest health disparities influenced by deep societal challenges where we see the biggest opportunity to make a difference in peoples lives.In 2023,we are working to identify measurements of success to evaluate the impact of ongoing programs and scale promising new solutions in each area.Introduction182022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance dataAccelerating the transition to value-based careTransitioning to a value-based system in which health care providers are paid to deliver high-quality,coordinated care can help identify and close gaps in care and deliver preventive services,leading to better patient outcomes at a lower overall cost.Our commitmentAbout our commitment Gaps in care occur when there is a discrepancy between clinically recommended care and the actual care delivered.Common gaps include missed wellness visits,vaccinations or screenings,and medication non-adherence.1 Our progress In 2022,we closed approximately 141 million gaps in care toward our commitment to close 600 million gaps from 2021 through 2025.We have closed 251 million gaps in care since making our commitment in 2021.Close 600 million gaps in care for our members by the end of 2025Why this is important to us Nearly 900,000 Americans die prematurely each year from causes like heart disease,cancer and chronic lower respiratory disease,but up to 40%of those deaths could be prevented.While preventable deaths are attributed to a number of behavioral and social factors,research also shows closing gaps in care can lead to better health outcomes and lower health care costs by reducing the risk of hospitalization and improving early identification of potentially fatal disease.How were delivering on our commitment Gaps in care can manifest in a variety of ways including missed screenings and annual wellness visits,medication adherence and access to food or transportation.We are working to close gaps in care through in-home assessments delivered to older adults through our HouseCalls program,value-based payment models helping to deliver timely,high-quality care,and care coordination models providing patients with complex illnesses with a single point of contact to help navigate the health system.1.The 600 million gap closure target was based on the 2019 Healthcare Effectiveness Data and Information Set(HEDIS)measures established by the National Committee for Quality Assurance(NCQA).Introduction192022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance data3Mpeople served under fully accountable value-based care arrangements in 2022.24%higher rates of annual wellness visits among Medicare Advantage patients in Optum value-based care vs.fee-for-service.44wer inpatient admissions for COPD and asthma among Medicare Advantage patients in Optum value-based care vs.Medicare fee-for-service patients.For more than a decade,UnitedHealth Group has been a national leader in driving the expansion and adoption of value-based care models,which incentivize care coordination instead of traditional fee-for-service arrangements focused on the volume of services provided.We reach people through more than 2,200 sites of care and serve more than 3 million people in fully accountable value-based care models2 the most comprehensive and effective type of value-based arrangement.Supported by value-based care arrangements,Medicare Advantage plans help more than half of older adults in the U.S.save 40%on out-of-pocket costs or$2,000 a year on average.Lower costs are particularly meaningful to an increasingly diverse,clinically complex population,nearly half of whom live on less than$25,000 a year.Serving more than 7 million Medicare Advantage members,we foster cost-effective,high-quality health care through care coordination,in-home care delivery and innovative consumer products to help those members pay for healthy food and utility bills.Optum Medicare Advantage patients experience better outcomes than people in Medicare Advantage plans who receive care from other providers.Optum patients are 14%more likely to control their hypertension and 7%more likely to control their diabetes compared to those who receive care from other providers.Optum Kelsey-Seybold Clinic in Houston has been integrating value-based accountable care into its practice for the last 15 years.With more than 65 specialties and nearly 700 providers,the clinic delivers personalized,high-quality care to meet patients needs.For example,we are helping diabetes patients who need to avoid complications related to higher A1c levels,which measures average blood sugar levels.Through a coordinated approach to patient care,73%of diabetes patients in KelseyCares accountable care health plans have good control of their A1c,compared to a national health plan average of 51%.2.Fully accountable value-based care models are payment arrangements in which care providers assume full clinical and financial risk,and are responsible for the quality and total cost of care for each patient.This usually results in better health outcomes and lower costs for individuals,while giving providers more time to understand the holistic health needs of their patients.40wer bed days.30%lower emergency department utilization.“With complex patients,weve seen quality go up and the cost come down.Thats our textbook definition of what weve all been searching for in value-based care.”Tony Lin,CEO,Kelsey-SeyboldKelsey-Seybold outcomesIntroduction202022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance dataExpanding in-home clinical careOur commitmentAbout our commitment Increasing the number of members receiving preventive care services including wellness visits,health screenings and vaccinations can help improve long-term health by detecting and preventing diseases and health risks.Our progress In 2022,70%of our members received preventative care services,compared to 69%in 2021.85%of our members will receive preventive care services annually by 2030Why this is important to us Research shows access to preventive care can help identify and prevent diseases,including cancer,diabetes and cardiovascular disease.Preventive care is critical to the shift toward value-based care models where care teams are incentivized to prioritize early disease treatment.How were delivering on our commitment Following disruptions caused by the COVID-19 pandemic,we are working to ensure members are able to access preventive services through home screenings and virtual care,and by increasing incentive payments,particularly for Medicaid providers.Many of our commercial benefit offerings provide no-or low-cost preventive care coverage and our fully accountable value-based care models prioritize preventive care.Our in-home care team is essential to delivering more equitable and accessible health care for patients with complex medical,behavioral and social needs particularly for the 85%of older adults with at least one chronic condition who benefit from preventive care.Introduction212022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance dataThrough our HouseCalls program,we are connecting people in Medicare Advantage to social services and providing vaccines and screenings for under-diagnosed conditions.In 2022,nearly 1 in 4 people screened by a HouseCalls clinician had a condition they didnt know about including diabetes,prediabetes,hepatitis C and colon cancer.By identifying those conditions,we are able to help connect people to the right services to get the care they need sooner.For low-income Americans enrolled in both Medicare and Medicaid who often have disabilities or multiple health conditions,our Dual Special Needs Plans(D-SNPs)provide holistic in-home care through Optum at Home.A team of clinicians and dedicated care experts support our most complex members based on individualized care plans.Our coordinated approach to caring for D-SNP patients is helping reduce hospitalizations by 12%,with an NPS of nearly 80.Convenient tools like medication home delivery,home infusions and virtual care further expand our ability to care for people in their home.Our home delivery services include multi-dose packaging capabilities for people with multiple conditions,providing a safe,convenient and cost-effective alternative to a retail pharmacy for consumers to receive their medications,as well as better medication adherence compared to retail pharmacies.3.Includes an adjustment to convert 90-day prescriptions to three 30-day prescriptions.2.2MHouseCalls completed in 2022.1Mmembers tested in 2022 for under-diagnosed conditions;approximately 25%screened positive.75%of members had an in-office visit within 90 days of a HouseCalls visit.190M adjusted prescriptions3 delivered to consumers homes annually.“We view home health as one of the new frontiers of value-based health care because it improves access while providing a more convenient experience for people,like special needs patients and those in rural areas who often have a very difficult time leaving their home to get care.”Kristy Duffey,MS,APRN-BC,FAAN Chief Nursing Officer,Optum Health Chief Operating Officer,Optum Home&Community CareIntroduction222022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance data“If it wasnt for my guardian angel,the doctor said I wouldnt be here.”The UnitedHealthcare HouseCalls program is designed to meet older adults in their homes to assess and address their medical,social and behavioral health needs in an hour-long annual in-home visit with a licensed health care practitioner.During one routine HouseCalls visit,nurse practitioner Heather found her patient Jacks blood pressure was dangerously high and took swift action to get him to an emergency department,resulting in Jack having a stent placed in his heart to help prevent a massive heart attack.“I live in a little country town and I have approximately 11 deer.I get up every morning and feed those deer.“One day,I got through feeding the deer and I was breathing a little hard,and when I got in,thats when it all started.My blood pressure was 217 over 110.“When Heather came,she said,Theres something going on.And she said,Im going to treat you like my daddy;if my daddy was like this,he would go to the emergency room.“If Heather hadnt come all the way out here,I wouldnt have gone to the doctor.She knew what she was doing,and if she thought I needed to go,I was going to go.They found my widow-maker was 97%stopped up.“By her coming all the way out here and checking me that day,it saved my life.”Meeting older adults at homeJacks storyIntroduction232022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance dataResearch shows as many as 1.3 million people ration insulin each year due to high costs,with higher rates among Black Americans and those without health coverage.Affordability challenges often extend to other lifesaving drugs,including epinephrine for severe allergic attacks and albuterol used to treat acute asthma attacks.For those who rely on these critical drugs,high costs can have life-threatening consequences.We are taking action to help ensure patients have reliable,consistent and affordable access to medications,including insulin,allowing them to adhere to their medications as prescribed.$22average monthly cost of insulin for 1.7 million customers.8M UnitedHealthcare members have access to$0 copays for five lifesaving drugs throughout 2023.$0 copay drugs Insulin diabetes management Epinephrine severe allergic reactions Glucagon hypoglycemia Naloxone opioid overdoses Albuterol acute asthma attacksBeginning in 2023,UnitedHealthcare members in fully insured commercial plans including UnitedHealth Group employees will pay$0 for five lifesaving medications.By eliminating all out-of-pocket expenses for these critical medications,members are less burdened by medical costs and are better equipped to take their medications as prescribed,reducing the risk of complications and expensive hospitalizations.For uninsured patients,we also made low-cost insulin available through the Optum Store,including an option for home delivery.Expanding access to care by lowering the cost of prescription drugs Introduction242022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance dataBeyond improving the affordability of lifesaving medications,we are working to reduce the cost of biologic drugs,which are sometimes the only treatment option for debilitating,chronic illnesses such as cancers or autoimmune disorders.But this comes at a significant cost to patients and the health care system.Specialty biologics represent less than 2%of prescriptions,yet they account for about 43%of drug spend,with continued growth anticipated.We are leading the way in embracing biosimilar medications,which are lower-cost functionally equivalent alternative versions of brand-name biologic medications that could save an estimated$42 billion over the next several years.In 2023,UnitedHealthcare began covering three anti-inflammatory biosimilars(adalimumab)as part of our commitment to further drive competition,improve choice for providers and patients,and lower net and out-of-pocket drug costs.“For people like me,insulin is lifesaving.If youre trying to get by without it because you cant afford it,your life is at risk.Thats why this change is so important.”Kimberly Clark was 19 when she was first diagnosed with Type 1 diabetes.Over the next five years,as she tried to manage her health,she would go into diabetic ketoacidosis a serious and sometimes life-threatening complication more than 10 times.At the same time,she and her husband often stressed about managing the rising and sometimes out-of-reach cost of insulin she needed to survive.“Early in my marriage,money was tight,and we were paying hundreds of dollars for this drug I needed to live.I remember begging physicians to give us sample vials just to get by.“And I knew I wasnt the only one in a situation like this.More than 34 million Americans have diabetes,and 1.5 million more are diagnosed every year.When UnitedHealthcare announced it was eliminating out-of-pocket costs for insulin,it was a game-changer for my family.And it also just makes me so happy for the people who are in the situation I was in not that long ago.”A weight liftedKimberlys story41%average savings for employers using UnitedHealthcare biosimilar management strategies.Introduction252022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance dataEnhancing consumer-oriented benefits Rising health care costs have left Americans spending more than$433 billion out of pocket on health care each year.Consumers want simple,transparent health benefits and the ability to easily access high-quality,cost-efficient sites of care.Our commitmentAbout our commitment Care provided at high-quality,cost-efficient sites including ambulatory surgery centers and stand-alone imaging centers can lead to better outcomes at a lower overall cost to the consumer and the health system.Our progress In 2022,we delivered approximately 49%of outpatient surgeries and radiology services at high-quality,cost-efficient sites of care.55% of outpatient surgeries and radiology services among our members will be delivered at high-quality,cost-efficient sites of care by 2030Why this is important to us Medical care costs vary widely depending on where it is delivered.Total costs for orthopedic surgeries at ambulatory surgery centers(ASCs)are about 25%less than hospitals.Moving half of joint replacement surgeries from hospitals to ASCs would save the health system$3 billion per year.Similarly,shifting routine diagnostic testing from a hospital to a stand-alone imaging center or a physicians office could save consumers more than$300 per test.How were delivering on our commitment We are focused on reducing cost barriers for our members by providing geographic-specific site of care information to providers as they are making patient referrals,including data identifying which ASCs and stand-alone imaging centers meet quality and efficiency standards.Through Point of Care Assist,providers can access cost and quality information directly in their electronic medical record,helping them make informed patient care recommendations.Introduction262022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance dataServing more than 150 employers in the U.S.,the UnitedHealthcare Surest plan is among the fastest growing commercial plans due to its transparency and simplicity,allowing members to easily search for care and see clear,upfront pricing information.Members with Surest plans dont have a deductible or coinsurance and they have the option to add coverage for a planned medical procedure.A digital app lets members search the broad UnitedHealthcare network by provider,specialty,procedure or geography and compare their all-in costs for more than 490 services,ranging from primary care to specialty care and behavioral health visits.Clear pricing,choice and affordable benefits help remove financial barriers,meaning fewer people delay necessary care.As a result,Surest members are 23%less likely to have inpatient hospital surgery and 10 times more likely to access virtual care compared to 2021 commercial benchmarks,and Surest members NPS4 is 56 points higher than those with alternative plans.In addition to innovative benefits,we are helping the 4 in 10 Americans who forgo medical treatment due to cost by helping them manage drug and medical expenses through financial support and transparency tools,including a preloaded fee-free debit card that helps consumers pay for certain out-of-pocket medical expenses.Our capabilities are designed to help people pay for care with health savings and spending accounts,advanced financial education tools and consumer engagement and payment services,along with self-service tools to make it easier to manage and save money.Launched in 2022,the UnitedHealthcare integrated benefits card simplifies care for older adults by linking their health plan,pharmacy benefits,rewards and gym memberships to a single ID card.Because the benefits card can identify items at the SKU level,older adults can easily pay for items covered by their health benefits,including groceries,over-the-counter medications,and even utility bills,without using cash or saving a receipt.More than 12 million people across multiple health plans will have access to the integrated card in 2023.4.The Net Promoter System(NPS)is a proven operating discipline used by most Fortune 1,000 companies that enables us to measure affinity for our products and services,indicating consumer,broker,employer,provider and employee loyalty.It is based on a single survey question asking respondents to rate the likelihood they would recommend a company,product,or a service,and measured on a scale from-100 to 100.Top performing NPS companies range from 40 to 70.70%of Surest members spend less than$500 in out-of-pocket costs annually.82%of the time,Surest members choose the most cost-effective treatment option.46%lower monthly out-of-pocket costs for Surest members compared to other commercial plans.92%of Americans live within 5 miles of a participating integrated benefits card store.$1.7Bspent by D-SNP members on food and over-the-counter products.Introduction272022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance dataPersonalized care coordination when it matters most Advocates across UnitedHealthcare help members navigate the health system every day using personalized member information,social determinants of health,point-of-care support,custom management for high-needs patients and real-time guidance to help patients and physicians make the right choices to optimize patient care,lower the cost of care and deliver higher satisfaction.Working with more than 875 hospitals and 16,000 providers across the U.S.,our care coordinators help patients and caregivers navigate the post-acute care journey from hospital admission to discharge,averaging fewer admissions to post-acute care facilities by helping to identify,address and close gaps in care.Those who are admitted spend about 2.5 fewer days in post-acute facilities,trading higher-cost and less-comfortable inpatient stays for high-quality virtual and in-home care instead.The cost and complexity of the health system can be especially challenging for those with a rare disease or a special need,which often require coordination with multiple specialists.Nearly 30 million Americans are affected by more than 7,000 rare diseases,90%of which currently do not have an FDA-approved treatment.Many people with a rare disease face challenges in diagnosing and treating their illness,often seeing multiple doctors over the course of several years and spending nearly$29,000 more than those without a rare disease.Our rare disease pharmacy business is one of three entities to hold both distinctions:the Accreditation Commission for Health Care(ACHC)Distinction in Orphan Drugs and the URAC Rare Disease Pharmacy Center of Excellence,and in 2022,we doubled the number of orphan drugs we manage.Optum rare disease pharmacists work with patients directly,partner collaboratively with clinical care teams,and educate stakeholders who participate in supporting care delivery and therapy access to address the complex challenges within the rare disease community.10MMedicare Advantage lives served by care coordinators.10%improvement in NPS with UnitedHealthcare advocacy programs for employers,providers and members.10Kpatients served in 7 rare disease programs since December 2020.Introduction282022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance dataNavigating the complexities of the health system is particularly challenging for the 1 in 5 children in the U.S.who have a special health care need requiring six times more care with 12 times higher costs than children without special needs.Since 2017,the UnitedHealthcare Special Needs Initiative(SNI)has provided families and children with special needs with personalized one-on-one assistance from an advisor who can help the family access the care they need while tracking the associated costs.By providing payment assistance,care coordination,social needs assessments and access to specialty care,the SNI program has helped more than 150,000 families ease the stress of tracking claims and facilitating medical care.$1.5Kreduction in out-of-pocket costs per child for families in SNI.76point average NPS improvement for SNI families.“Adelyn gets what she needs when she needs it because the teams are working together.”For her first 18 months of life,Adelyn Merchant was like any other happy,healthy baby.Then it became clear something was wrong.Her parents Spencer and Erin noticed she was falling more and was no longer able to say the words she once knew.Soon,she was unable to eat.Eventually,they turned to the UnitedHealthcare Special Needs Initiative,which connected the family to specialists who helped diagnose Adelyn with the rare disease NMDA anti-receptor encephalitis.Following the diagnosis,UnitedHealthcare helped the Merchant family develop a treatment plan and connected them to transportation,support groups and a family advisor to assist with day-to-day needs.“Adelyn was a healthy little girl.She was meeting all her milestones.Then at 18 months,she got very,very sick.We saw her decline very quickly.Within about a month she had lost just about all of her abilities.“It is the hardest journey weve ever been on.You follow the doctors the best you can.They suggest something and you go with that,you chase something else.You get to the point where you say,I hope thats it.“One day we got a phone call from a nurse who talked about something called the diagnostic odyssey.We were connected with a team that just swarmed around us and we knew we were going to get an answer.It took very little time.“Adelyn is now fully disabled and requires 24/7 care.But its a relief to know we dont have to take care of it all by ourselves.The mentality of it takes a village becomes tenfold when you have a special needs kid.Having the multiple programs offered through UnitedHealthcare has been integral to the success of our parenting.“Even though she cant talk anymore,she still smiles;she still laughs.Every day for Adelyn is a new challenge and it pushes our family to be the best we can be.”Navigating a diagnostic odysseyThe Merchant familys storyIntroduction292022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance dataBuilding healthier communitiesPartnering with leading organizations to support communities around the world.To build healthier communities,we are:Providing philanthropic grants and support to communities and employees in need.Publishing public health insights to better understand emerging health trends.Supporting employees who volunteer their time and resources to important causes.Achieving better health outcomes requires a deep understanding of the diverse health needs of communities and breaking down barriers to help ensure care is provided to those who need it most.Through our foundations and our businesses,we combine our knowledge,experience and passion to improve health quality and outcomes in the communities where we live and work.RecognitionNamed one of Americas most community-minded companies by Points of Light,based on the Civic 50 survey,every year since 2012,and the sector leader for health care for three consecutive years.The United Health Foundation is recognized as a Healthy People 2030 ChampionSM by the U.S.Department of Health and Human Services Office of Disease Prevention and Health Promotion.5$95.8Mcontributed in 2022.4.1M*employee volunteer hours in 2022.$1.3Bin charitable donations since 2000.20Kcharitable organizations supported globally in 2022.*Volunteer hours are calculated using employee survey responses and giving site participation data.5.Healthy People 2030 Champion is a service mark of the U.S.Department of Health and Human Services.Used with permission.Participation by the United Health Foundation does not imply endorsement by HHS/ODPHP.Introduction302022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance dataOur impact on communitiesOur social responsibility efforts in 2022 continued to enhance the well-being of our communities by increasing access to integrated behavioral and medical care,addressing key health disparities and social needs for mothers,infants and older adults,and building a diverse and dynamic health workforce.Together with our grant partners,we are investing in solutions to address some of the nations most pressing health challenges.2Kstudents in the greater Phoenix metro area received health services.Valle del Sol Community Health(Arizona)A$3 million grant over three years has helped mobile medical teams provide primary care,psychiatry and behavioral health services to middle and high school-age children in underserved communities throughout Phoenix,leading to an 8crease in anxiety symptoms.Improving behavioral health care for our nations youth Todays youth are facing an unprecedented mental health crisis with a growing rate of depression and anxiety.To address this alarming trend,we are investing in programs and partnerships in 19 states,connecting over 32,000 young people and their families with care and services to increase access and improve behavioral health outcomes.Some specific examples include Florida,Minnesota,North Carolina and Wisconsin and the District of Columbia.Reducing disparities to achieve better health outcomes Americans continue to face wide health disparities,contributing to the sharpest increase in premature deaths over a single year between 2019 and 2020.For example,the prevalence of Americans with multiple chronic health conditions has worsened since prior to the pandemic and frequent mental distress is 2.5 times higher among those with incomes less than$25,000.In 2022,we invested in partnerships in 25 states and the District of Columbia,serving over 50,000 people with programs designed to reduce health disparities.90%of Native American patients enrolled in programs in Tulsa,Oklahoma,report controlled blood sugar.Indian Health Care Resource Center of Tulsa(Oklahoma)A$1.8 million investment over three years has helped build a comprehensive,culturally competent program addressing the unique health needs of more than 5,400 Native Americans age 65 and over.Introduction312022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance dataImproving maternal and infant health outcomes Long-standing disparities in maternal mortality and morbidity continue to disproportionately affect Black and American Indian/Alaska Native mothers,according to Americas Health Rankings 2022 Health of Women and Children Report.To address maternal and infant health issues,we are investing in programs in 13 states,including Indiana and Texas,to help improve maternal and infant health outcomes by targeting at-risk populations,with a focus on prenatal and perinatal health,infant health,workforce development,and mental and behavioral health.More than 5,200 women have received support through these programs.64%of women enrolled in the program have been connected to a doula or midwife.CAMBA(New York)A$3 million investment over three years has helped improve access to prenatal care for underserved and homeless women in Brooklyn,including screenings,food and nutrition referrals,breastfeeding support and newborn care services.Building and shaping the health workforce An aging population and growing rates of clinician burnout are contributing to a projected health workforce shortage in the coming years.Additionally,the current health workforce lacks the diversity to better serve an increasingly diverse patient population.Beyond our 10-year,$100 million investment to build a pipeline of diverse health talent,we are investing in multiple initiatives nationwide to advance diversity and cultural competency,support provider health and well-being and improve existing workforce capacity.80%of patients at diabetes management clinics showed improvement in diabetes scores.Health Care Center for the Homeless(Florida)We invested$1.7 million over three years to support a new clinical fellowship program that provides on-the-job training for post-graduate nurse practitioners with a focus on complex care management,providing care to 4,500 patients.Introduction322022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance dataAmericas Health Rankings,produced by the United Health Foundation,is the longest-running state-by-state analysis of the nations health,providing important insights into the health of various populations,including older adults,women and children,and veterans.In partnership with the American Public Health Association and the CDC Foundation,this distinctive online platform engaged with nearly 1.3 million users in 2022.Policymakers,health officials and researchers use these reports to better understand the specific health concerns in their communities.The data also informs UnitedHealth Groups own programs and community investments.The 2022 Annual Report represents the platforms broadest portrait to date of the COVID-19 pandemics impact,including findings from an in-depth survey on COVID-19,which identified concerning health disparities by race and ethnicity across nearly all areas of health and well-being.Insights to improve our nations health“Health is like the foundation of your house.When its cracked,everything else is in jeopardy.What Americas Health Rankings gives us is the landscape of those cracks in our foundation;where they are,how bad they are,and then what we need to do to fix them.”Brian Castrucci,President and CEO,de Beaumont FoundationIntroduction332022 Sustainability ReportA modern,high-performing health systemOur people and cultureHealthy environmentResponsible business practicesPerformance dataWe support our employees by providing dedicated opportunities for team members to make a tangible impact,either through employee giving or volunteering.We match employee contributions dollar for dollar to the eligible community organizations of their choice,and we reward employee community volunteer service by awarding employees who volunteer 30 hours per year with a$500 grant to the community organizations of their choice.We are also dedicated to supporting communities around the world during times of need.The United Health Foundation donated$1 million to help residents of Florida recover and rebuild following Hurricane Ian,and$200,000 to help residents of Puerto Rico by providing emergency medical supplies and supporting health clinics following Hurricane Fiona.Making a difference in communities around the world“I was taken aback by the generosity and felt extremely proud to work for such a caring organization.”Through our employee assistance fund,United for Each Other,our employees helped over 400 of their colleagues,like Optum employee Kim Donato,recover from a natural disaster or other qualifying catastrophic event in 2022.Kim received support after Hurricane Ian struck Florida in September,forcing her to evacuate due to significant flooding.“Thehurricaneforcedourfamilyoffiveandallofouranimalstoevacuateforamonth.Whenwefinallyreturned,ourhomeneededmajorrepairs.Thewalls,windows,doors,flooring,bathrooms,kitchen,appliances,roofing,airconditioning,fencingandelectricalwiringallhadsignificantdamageandneeded to be repaired or replaced.We slept on air mattresses while our home was repaired.“At a time when we needed support the most,United for Each Other helped us with immediate and emergency needs like clothing,pillows,blankets,foodandfinancialassistance.“The good news is our home will be completed soon hopefully before the next hurricane season which will be a dream come true for the entire family.”Recovering from Hurricane IanKims storyHealthy environment342022 Sustainability ReportIntroductionOur people and cultureResponsible business practicesPerformance dataA modern,high-performing health systemHealthy environmentHealthy environmentIntroductionOur people and cultureResponsible business practicesPerformance dataA modern,high-performing health systemHealthy environment352022 Sustainability ReportIntroductionOur people and cultureResponsible business practicesPerformance dataA modern,high-performing health systemA healthy planet is the foundation for a healthy society.We are working to keep the communities around us sustainable,viable and healthy.Climate change has clear public health implications.Research shows a changing climate heightens exposure to extreme heat,poor air quality and extreme weather events.Such environmental conditions increase health risks like respiratory infections,heart disease and mental health disorders.While every person is impacted by the health of our environment,communities of color,low-income populations,children and older adults are among those most likely to live in poor environmental conditions,which cause or worsen negative health effects exacerbating existing health inequities.Our companys strategic growth priorities are intrinsically tied to the well-being of the population and the planet.Preventing disease and improving health outcomes can help reduce energy,waste and water-intensive hospital care.Deploying technologies to modernize,streamline and simplify the health system can reduce the use of paper and improve efficiency.We strive to build a modern,high-performing health system for the benefit of not only the people we care for but also the world we live in.What were focused on Accelerating our path to net-zero.Managing weather-related risks.Reducing waste,water and paper.Healthy environment362022 Sustainability ReportIntroductionOur people and cultureResponsible business practicesPerformance dataA modern,high-performing health systemCharting our path to net-zeroRecognizing the effect climate change has on human health,we are minimizing our environmental impact with long-term commitments designed to reduce our carbon footprint over the next several decades.In 2022,our overall emissions increased,due largely to the operations and square footage of acquired businesses.We also saw an increase in employees returning to work sites,which drove on-site electricity usage.We are considering both areas as we implement our decarbonization strategy.As part of our net-zero commitment,we intend to support the development of additional renewable energy sources,as well as directly generate renewable energy to power our operations,when possible.Simultaneously,we are initiating energy efficiency improvements at key sites within our footprint.We expect gradual reductions in total emissions while these actions are being implemented.Our commitmentAbout our commitment We are committed to reducing scope 1(direct emissions;e.g.,fuel burned from company vehicles)and scope 2(indirect emissions;e.g.,purchased electricity)emissions by 60%against our 2021 baseline by 2030.Operational net-zero involves reducing these emissions to as close to zero as possible,with minimal use of offsets.Achieving 100%renewable energy involves implementing solutions to source renewable energy for our entire operations.Operational net-zero by 2035,with 60%scope 1 and 2 reduction and 100%renewable energy by 2030Our commitmentOur progress We have seen a 4.7%increase in emissions in 2022 due to growth,largely through mergers and acquisitions,and increased site occupancy post-pandemic.We have focused on building a roadmap to increase energy efficiency and pursue generation of new renewable energy.Why this is important to us Rising levels of greenhouse gas(GHG)emissions can cause or exacerbate a wide range of health problems,including heart and kidney disease,respiratory illness,injuries and premature death related to extreme weather events,threats to mental health,changes in the distribution of food and infectious disease.These health effects disproportionately affect those who are most vulnerable and disadvantaged.How were delivering on our commitment Our strategy relies on direct mitigation of global emissions.This approach prioritizes reducing energy consumption within our operations while improving energy efficiency and transitioning to renewable energy sources.Healthy environment372022 Sustainability ReportIntroductionOur people and cultureResponsible business practicesPerformance dataA modern,high-performing health systemThe growing threat of climate change drives our focus on reducing our carbon footprint as we work toward net-zero.In June 2022,we committed to the Science Based Targets initiative(SBTi)Net-Zero Standard,a set of criteria based on the need to limit global warming to 1.5 degrees Celsius.As part of our commitment(including our scope 1,2 and 3 emissions),we are assessing carbon sources and measuring the most significant emissions contributors,identifying opportunities and strategies to increase energy efficiency,shifting to renewable energy sources,and addressing emissions in our value chain.The full impact of any organizations GHG footprint goes beyond what the organization itself produces.This is now reflected in our scope 3 assessment,which measures emissions from upstream sources such as purchased goods and services and downstream sources such as our investments.Measuring scope 3 emissions provides a more complete picture of our GHG emissions across the full scope of our business and informs our approach to net-zero emissions through our external partnerships as well as our internal operations.Though numerous energy efficiency,renewable energy and other emissions reduction efforts are underway,our primary focus areas in 2022 were:1.Completing measurement of the most significant contributors to our value chain emissions(scope 3)for the first time.2.Developing plans to strategically enable us to achieve our goals.Our efforts focused on laying the groundwork for major reductions in our emissions and use of resources in the years ahead.This includes assessing the full breadth of our direct and indirect emissions,supporting the global energy transition,developing new contracting standards,and completing other formative work.While we expect to see increases across many of our environmental metrics over the short term as our company grows,the approaches we are formulating today are being designed to dramatically reduce our environmental footprint over the next seven to 20 years.Healthy environment382022 Sustainability ReportIntroductionOur people and cultureResponsible business practicesPerformance dataA modern,high-performing health systemIn 2022,we honed our roadmap for identifying and scaling our transition to renewable energy sources so we could most effectively decrease our GHG emissions and help improve the health of the communities where we operate.Transitioning to renewable energyAdvancing energy efficiencyAt our Optum headquarters in Minnesota,we are installing on-site solar panels,with project completion expected in summer 2024.Once operational,this project is expected to meet approximately 50%of the sites energy needs.To introduce renewable energy across our broader portfolio,we have actively been exploring virtual power purchase agreements(VPPAs),which would allow us to apply renewable energy credits across our portfolio while also supporting the generation of new sources of renewable energy.Our companys ability to guarantee demand for renewable energy makes it possible to justify the construction of additional renewable energy projects that can begin operating quickly,which in turn helps accelerate development of the green energy industry and increases the availability of renewable energy on the grid.We are considering the use of VPPAs as a key component of our zero-carbon strategy,since a significant portion of our real estate is leased and therefore cannot be retrofitted.After our initial work to optimize energy efficiency,generate renewable power on-site and execute our first VPPAs in the U.S.,we plan to continue exploring other renewable energy procurement options globally.Our first step to net-zero is reducing our energy use,recognizing the cleanest energy is the energy we dont use.This in turn reduces the volume of energy we require.We are scaling solutions that reduce energy consumption in our entire real estate footprint ranging from data centers and pharmaceutical distribution centers to clinical care facilities.This approach includes new construction projects,renovations,collaboration with landlords and employee behavior programs.In 2022:We initiated a Building Management System(BMS)pilot to support the diverse and extensive network of properties in our portfolio.Where deployed,this BMS has the potential to reduce energy consumption by up to 20%over previous systems and provide enhanced operational reporting to drive future energy reduction.In San Antonio,we are pursuing WELL certification for our two-building,352,000-square-foot WellMed campus,where the first building is now complete.WELL is a performance-based system for measuring,certifying and monitoring features of the built environment that impact human health and well-being.In our Ireland office,we decreased internal nighttime lighting,which is expected to save 5,000 kWh per year.We continued to invest in energy efficiency projects,including LED fixture upgrades and HVAC system replacements.We are working to establish global sustainability standards,which can be used to guide leasing,renovation and new builds.Although our fleet is a small part of our overall emissions footprint,we are working to identify and support opportunities for electrification wherever possible.Our vehicles are commonly used to deliver medications,conduct wellness visits with Medicare members,transport members to medical appointments and maintain our facilities.As a first step,we initiated a pilot study to test the feasibility of issuing electric vehicles to clinicians who travel to patient homes as part of their work.Learnings from this study will help us clarify infrastructure needs,procurement considerations,operational impacts and additional expansion opportunities as we move forward.Piloting electric vehiclesHealthy environment392022 Sustainability ReportIntroductionOur people and cultureResponsible business practicesPerformance dataA modern,high-performing health systemBecause scope 3 emissions represent the bulk of our emissions,it is imperative for us to better understand and evaluate the emissions in this category.In 2022,we completed our first-ever scope 3 assessment,which identified the most significant categories of emissions from both upstream sources such as purchased goods and services,waste generated in operations and employee commuting and downstream sources,such as investments.Our assessment showed two areas of emissions account for the vast majority of our GHG footprint:Purchased goods and services InvestmentsWith this scope 3 assessment,we are now better able to prioritize opportunities for action and work toward an SBTi-approved emissions target,which will be reviewed by SBTi and shared in our 2023 Sustainability Report.To see our complete inventory of emissions,please see our Performance Data,starting on page 83.Assessing value chain emissions“Our work in 2022 paves the way for us to deliver on our net-zero commitment and transition our company to renewable sources of energy setting us on a path to better protect our environment and promote the health of communities where we live and do business.Dave Black,VP of Facilities and Operations,Real Estate Services,UnitedHealth GroupScope 1:Direct emissions 1%Scope 2:Purchased electricity 3%Scope 3:All other measured 7%Scope 3:Investments 44%Scope 3:Purchased goods and services 45%1%3%7DE%GHG emissionsHealthy environment402022 Sustainability ReportIntroductionOur people and cultureResponsible business practicesPerformance dataA modern,high-performing health systemTo better understand the emissions impact of our purchased goods and services,we piloted the CDP Supply Chain program(formerly Carbon Disclosure Project),which supports companies disclosure of their environmental impact.We requested CDP Climate Change Assessments from some of our largest suppliers to learn more about their sustainability efforts.We had an overall response rate of 83%,with 81%reporting emissions-related goals.In 2023,we will be:Requesting select suppliers(representing 80%of our 2021 baseline supply chain emissions)complete the CDP Climate Change Assessment,which will help us improve our emissions calculation and assess supplier performance when making procurement decisions.Engaging targeted suppliers to track,report and commit to reducing their carbon footprint.Updating procurement policies,employee and supplier trainings,and other procurement practices to reflect our ambitions.See the supply chain management section for more information on risk management and strategy development.We recognize the critical need to reduce the carbon footprint of the U.S.health care system,which is responsible for 8.5%of U.S.carbon emissions.We are helping to lead collective action through the National Academy of Medicines Action Collaborative on Decarbonizing the U.S.Health Sector,which is co-chaired by our CEO.This public-private collaborative seeks to address the health sectors environmental impact while strengthening its sustainability and resilience.Engaging our suppliersLeading collective action to decarbonize the health systemUsing the Partnership for Carbon Accounting Financials(PCAF)methodology,we measured our financed emissions for certain asset classes such as corporate bonds,loans,equities and sovereign debt.Generally,the PCAF methodology aims to derive a financial attribution factor for each in-scope investment in UnitedHealth Groups portfolio.The attribution factor is then multiplied by the specific in-scope investees reported or estimated emissions to determine UnitedHealth Groups financed emissions.Our financed emissions are largely tied to holdings in the energy,industrials and utilities sectors.Our diverse,high-quality investment portfolio is well-positioned to see declines in our financed emissions in the coming years.Assessing our financed emissionsIn 2023,we will be:Developing temperature rating targets and a power intensity target for in-scope assets aimed to achieve a glide path to net-zero,including determining a specific target year.Reducing financed emissions guided by an active approach with investment managers to invest in companies committed to emission reductions without compromising portfolio diversification,liquidity and performance.We do not intend to adopt exclusionary provisions limiting investments in sectors.Identifying attractive direct investments in renewable energy projects to supplement our investment portfolio and to more directly support renewable energy projects on a larger scale.Reviewing and updating our investment policy guidelines.The target-setting process will combine multiple strategies to achieve net-zero in a balanced way as we continue to prioritize the preservation of capital and earn appropriate risk-adjusted returns.Healthy environment412022 Sustainability ReportIntroductionOur people and cultureResponsible business practicesPerformance dataA modern,high-performing health systemOur integrated,multidisciplinary process helps us to identify,assess and manage risk and ultimately minimize disruption for the people who count on us.In 2023,we aim to deepen our analysis of climate risks and develop scenarios to assess the impact of risks over the short,medium and long term.Managing weather-related risksExtreme weather events can directly impact our customers,members,employees and providers.Depending on the event,our response may include:Allowing early refills of prescription medication.Easing restrictions on use of out-of-network providers.Facilitating early replacement of durable medical equipment.Making the Optum Crisis Counseling line available to the community.Arranging for evacuation of members who are especially vulnerable due to disease or frailty.Providing support during extreme weather eventsWhen Hurricane Ian struck in late September 2022,we took immediate action to help ensure the safety and well-being of affected communities.Within 96 hours of the event,we coordinated with state and local partners to stand up nine mobile response units in the hardest-hit,lowest-resourced communities.These trailers provided medical care,distributed food and water,and offered Wi-Fi access,which was otherwise unavailable.Thanks to support from the WellMed Charitable Foundation,these services were open to anyone at no cost.To further improve access to medication,we also provided Genoa Pharmacy with an additional unit for use as a mobile pharmacy after their facility incurred damage during the storm.Our clinicians and nurses went door to door to provide care for those who were unable to get to a care center.Employees who experienced personal hardship received financial support through the companys United for Each Other program.Managing operational impacts Our weather risk mitigation plan stretches across all our businesses and includes operational redundancies to help ensure continuity of our business operations.We have also identified critical sites most susceptible to utility outages and weather-related impacts and have put in place backup emergency systems.Healthy environment422022 Sustainability ReportIntroductionOur people and cultureResponsible business practicesPerformance dataA modern,high-performing health systemMinimizing our resource utilization and waste production is a fundamental aspect of good environmental stewardship.We are working to reduce our footprint by transitioning to a digital-first health system with less paper usage,piloting new and innovative approaches to long-term waste management and prevention,and reducing our water usage in water-stressed regions of the world.Reducing waste,water and paperReducing paper through modernizationAs we continue to modernize our processes and technologies to create simple,seamless consumer experiences,we have made significant progress toward our goal of reducing paper usage across the health system.We started by identifying simple changes with an immediate impact,such as shifting provider groups to digital rather than paper-based communications for activities like prior authorizations and claims decisions,as well as eliminating unnecessary print marketing materials.As one example,we have typically included an envelope with every pharmacy order we sent out.A newly developed system automatically identifies and includes an envelope only on orders where there is an invoice with a balance due.The result:more than a 90%reduction in the volume of envelopes used,which is estimated to save more than 35 million envelopes in 2023.Beyond the environmental impact,reducing paper usage has also improved the speed and simplicity of our communications with consumers and providers by replacing paper-based communications with digital tools.In 2022,91 types of member and provider transactions were digitized or enhanced,leading to faster turnaround times and reductions in wait times for some claims reimbursements from 10 days to 24 hours.In addition,provider digital document delivery was up 200%over 2021,with over 1.6 million providers enrolled in e-delivery.About 98%of total claims on our core platforms were submitted digitally.We will continue to build on these efforts in the years ahead and work with a diverse set of stakeholders,including employers,consumers,providers,health equity advocates and other players in the health care industry.We are focused on addressing regulatory requirements,which currently account for roughly 40%of our paper use.We are working toward providing even more(and better)paperless experiences for consumers and providers a dual-purpose goal designed to minimize use of energy,water and raw materials while creating a better consumer experience.1B pieces of paper saved in 2022.24M envelopes saved in 2022.24%reduction in inbound paper volume (e.g.,claims appeals,payments,etc.).Healthy environment432022 Sustainability ReportIntroductionOur people and cultureResponsible business practicesPerformance dataA modern,high-performing health systemReducing wasteConserving water We are dedicated to managing and preventing waste by piloting new,innovative solutions designed for long-term waste reduction.We take a multidimensional approach to minimizing our environmental impact through ongoing management of our various waste streams,including municipal,construction,electronic,hazardous and regulated medical and pharmaceutical waste.Our 2022 scope 3 assessment included an enterprise-wide,waste-associated inventory,which will help inform our waste management and reduction strategy in 2023 and beyond.In 2022,we implemented several new pilots to reduce waste and improve patient care.We converted prescriptions to larger pack sizes,which reduced our plastic bottle usage by approximately 546,000 bottles in 2022.We used insulated mailers to ship medications requiring refrigeration,which in turn reduced our gel pack usage by eliminating 489,000 unnecessary coolers.Eight sites in India established on-site composting of organic material,which has diverted 129,254 pounds of waste so far.We established a zero-landfill project in two 150-bed hospitals in Brazil.In 2023,we plan to implement new solutions to improve efficiency and reduce waste,including reducing single-use plastic,exploring opportunities to expand composting and recycling services,evaluating design and construction processes,and continuing to improve waste data collection.We are working to reduce excess water consumption a critical and increasingly worrisome global health issue by taking steps to help ensure our facilities use water as efficiently as possible,which is particularly important for water-stressed and water-sensitive locations across the globe.We continue to advance plumbing and irrigation projects and sustainable landscape projects aimed at reducing our water usage.After implementing a holistic water-tracking program for our India real estate portfolio in 2021 to remotely measure,monitor and influence water usage,we found about 47%of total water usage is currently treated/recycled water instead of fresh water.In 2022,we expanded this effort to add water meters in our five sites in the Philippines.In 2023,we plan to create a holistic approach to water conservation across the enterprise,including creating design guidelines for water efficiency and water quality.6.Includes integrated sites where water is tracked on utility bills.1.2M gel packs eliminated in 2022 through the use of insulated mailers.68%of sites6 have a Water Use Intensity rating below EPA guidelines.1.7M lbs of waste diverted by recycling electronics like laptops and PCs.Our people and culture442022 Sustainability ReportIntroductionHealthy environmentA modern,high-performing health systemResponsible business practicesPerformance dataOur people and cultureOur people and cultureIntroductionHealthy environmentA modern,high-performing health systemResponsible business practicesPerformance dataOur people and culture452022 Sustainability ReportIntroductionHealthy environmentA modern,high-performing health systemResponsible business practicesPerformance dataBuilding an innovative,diverse and inclusive culture to support our people and attract the best talent.100%rating in the Human Rights Campaign Foundations 2022 Corporate Equality Index.39Kemployees participating in Employee Resource Groups(an increase of 17,500 from 2021).We are a global team including doctors,nurses,technologists,data scientists,care advocates,administrators,researchers and more united in our collective power to make an impact and focused on caring,connecting and growing together.We know the extraordinary happens when we value,include and learn from diverse people and perspectives.To help ensure our people flourish,in 2022 we advanced our approach to attracting,developing and retaining the worlds best diverse talent to effectively support our strategic growth priorities.Our ability to expand value-based care models and build innovative health benefits relies on diverse clinical perspectives to help address health disparities in underserved populations.Supporting the well-being of our workforce builds a culture where people feel empowered to innovate,creating new health technology solutions to drive a modern,high-performing health system and a healthier environment.Advancing an inclusive culture where team members are empowered to do their best work,where diversity fuels performance,and where we leverage our collective power to create greater impact.Enabling employees to be their best in an office,a clinic or at home by offering robust resources and programs designed to improve holistic well-being through a unified enterprise approach.Developing and growing our talent through a human-centered approach by incorporating employee listening,leader development learning,and career growth and mobility.What were focused onRecognitionForbes list of Americas 500 Best Large Employers for 2022.Named one of the best places to work for disability inclusion in 2022 by the Disability Equality Index (three consecutive years).2022 Military Friendly Employers list(seventh in the U.S.)and a Top Ten 2022 Military Spouse Friendly Employer.2022 Business Group on Health Best Employers Award for Excellence in Health and Well-being (11 consecutive years).Our people and culture462022 Sustainability ReportIntroductionHealthy environmentA modern,high-performing health systemResponsible business practicesPerformance dataAdvancing diversity,equity and inclusionCreating an inclusive culture that celebrates our people,ideas and experiences.Our team must reflect the diverse communities we serve,and our commitment to diversity,equity and inclusion(DEI)is inspired by and grounded in our company values.By hiring and retaining the best talent with diverse and innovative perspectives and creating a culture of belonging and inclusion,we can grow our business and better serve our customers needs.In 2022,we focused on three strategic objectives to advance DEI in our leadership,systems and culture:Increasing the diversity of our workforce,especially among the senior levels of our organization.Understanding the lived experiences of our employees,particularly where there are differences,so we can learn how to better support their work and experience.Equipping and educating leaders and employees with tools to create and contribute to a more inclusive environment.“DEI is business critical.When we embrace a range of people and perspectives,our individual and collective contributions are magnified.Joy Fitzgerald,Chief DEI Officer,UnitedHealth GroupOur people and culture472022 Sustainability ReportIntroductionHealthy environmentA modern,high-performing health systemResponsible business practicesPerformance dataIncreasing the diversity of our workforceWe approach diversity,equity and inclusion as a business priority.To date,we have achieved 40%representation for women in top management and are working to increase racial representation in leadership.Black/African American,Hispanic/Latino and Asian employees are key areas of focus in our future talent strategies as we work toward increasing racial representation.We engaged in an independent third-party assessment of our workforce policies,practices,leadership and systems to help us better understand the experiences of women,Black,Asian and Latino employees within the organization,identify potential gaps,and provide recommendations to better serve these groups.While we have more to do,2022 employment data show people of color constitute 45%of our workforce and 31%of our management positions.The Global Diversity,Equity and Inclusion Office leads the enterprise DEI strategies,prioritizing diversity,understanding employee experiences,educating leaders,engaging employees and increasing psychological safety.To increase diversity in our workforce,we established a dedicated DEI recruiting function to help ensure women,people of color and members of other underrepresented groups including LGBTQ individuals,military members and veterans,and persons with disabilities are represented in candidate talent pools,the selection process and interview panels.These and other cross-functional DEI efforts helped us achieve our highest recruiting numbers for diverse demographics,with 1,500 interested individuals joining UnitedHealth Group.We also launched the Diversity,Equity and Inclusion Executive Sponsorship program,an effort to increase the diversity of our underrepresented groups by offering experiential learning opportunities and help them build relationships in the organization.Achieving a 96%retention rate in its first year,the program gives participants the opportunity to learn and shadow how executives make decisions and lead.Our people and culture482022 Sustainability ReportIntroductionHealthy environmentA modern,high-performing health systemResponsible business practicesPerformance dataMaintaining pay equityUnderstanding employee experiencesWe are committed to and continue to prioritize pay equity for all employees.Fair and equitable compensation practices within a pay-for-performance framework support our culture and are critical to achieving our mission.We continue to work with independent,third-party experts to perform reviews of our compensation practices and evaluate pay equity in several respects,including by gender,ethnicity and race.The most recent review of our integrated workforce completed in 2022 including our global operations continues to indicate women earn$1 for every$1 men earn when performing similar work at similar levels.In addition,employees of color in the U.S.continue to earn$1 for every$1 white employees earn when performing similar work at similar levels.To prevent pay inequities at hire,we do not ask candidates in the U.S.about salary history during the hiring process.This practice helps us remove any bias that can come from crafting initial compensation packages based on salary history.We strive to understand the lived experiences of our employees to better support their work experience.Our DEI Employee Experience Research Initiative partners with a research think tank to provide a deeper understanding of employee experiences and insights as well as identify meaningful solutions to advance DEI through stakeholder interviews,focus groups,employee journaling,and quantitative and qualitative surveys.In June 2022,we hosted our first-ever DEI Innovation Lab,an enterprise-wide,design-thinking experience seeking to better understand the experiences of our employees.More than 100 employees participated in this opportunity to provide insights and create solutions.The event resulted in ideas for increasing leadership accountability,improving psychological safety in the workplace,making talent management work for everyone,and adding enhancements to help our employees feel valued,seen and rewarded
2023-07-06
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